Coast logoThe Coast Distribution System Inc. today (Nov. 16) reported financial results for the third quarter ended Sept. 30, highlighted by net earnings despite lower sales, driven by improved margins and a leaner operating structure.

Coast, one of North America’s largest aftermarket suppliers of replacement parts, accessories and supplies for the RV, boat and outdoor recreation industries, reported net earnings of $900,000 on net sales of $29.6 million for the quarter, compared to a net loss of $300,000 on net sales of $34.7 million a year ago, the Morgan Hill, Calif.-based company stated in a news release.

Gross margin as a percentage of sales increased to 20.7% in the quarter, compared to 17.9% in the same quarter of 2008. The increase was a result of reduced freight costs, discounts and volume rebates, work force reductions in its warehouses and the introduction of additional higher-margin Coast branded products.

In the quarter, Coast reduced selling, general and administrative (SG&A) expenses by $2.1 million, or 30.9% as compared to the 2008 third quarter. The company attributed the decrease in SG&A to an aggressive cost-control program, which has included reducing staffing levels and companywide reductions in salaries. Coast reduced its borrowings under its bank line of credit by $11.2 million, or 55.2% year-over-year and reduced inventory year-over-year by $10.2 million, or 28.8% to $25.3 million.

For the nine-month period ended Sept. 30, Coast reported net earnings of $1.2 million on net sales of $85.9 million, compared with net earnings of $400,000, on net sales of $115.4 million in the same period of 2008.

“Given the difficult industry conditions, we are pleased with our results in the quarter,” said Jim Musbach, Coast CEO. “Driving our profits were improved margins, which for a large part were the result of several important yet painful steps we have taken in the past 18 months to create a leaner, stronger company. Looking ahead, our focus is on new product introductions to capture market share and increase volume beginning in 2010. We are also encouraged as we are seeing our customers restocking inventory in anticipation of an upturn in our industry. We will continue to reduce costs wherever practicable to improve our operations and effectively position ourselves for the eventual industry recovery, while expanding our customer base for Coast-branded and partnered distribution products.”

Net sales in the 2009 third quarter declined 14.7% year-over-year, which management attributed to lower retail traffic at RV and marine dealerships, Coast’s primary customers, reflecting the continuing effects of the recession and credit crisis. Industry associations for both the RV and boating industries reported double-digit declines in industry shipments for the first nine months of the year. 

As in past years, the company expects a loss in the fourth quarter due to the traditional, seasonal slowdown in the quarter, as customers typically wait until the first quarter to begin placing orders for the upcoming season, which commences in the spring.