-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WjLxzI0VCTf/THAQjKfGVbj+MXuVRHw+kDQuH/YGekDdEFacII782t8QYPdFCDO6 IFHFHNWTQwekVSj4ZIRF7Q== 0001095811-00-001417.txt : 20000515 0001095811-00-001417.hdr.sgml : 20000515 ACCESSION NUMBER: 0001095811-00-001417 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COAST DISTRIBUTION SYSTEM INC CENTRAL INDEX KEY: 0000728303 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MOTOR VEHICLE SUPPLIES & NEW PARTS [5013] IRS NUMBER: 942490990 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09511 FILM NUMBER: 629270 BUSINESS ADDRESS: STREET 1: 1982 ZANKER RD CITY: SAN JOSE STATE: CA ZIP: 95112 BUSINESS PHONE: 4084368611 MAIL ADDRESS: STREET 1: 1982 ZANKER RD CITY: SAN JOSE STATE: CA ZIP: 95112 FORMER COMPANY: FORMER CONFORMED NAME: COAST RV INC DATE OF NAME CHANGE: 19880619 10-Q 1 FORM 10-Q QUARTER ENDED 3/31/2000 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 -------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- ------------------- Commission File Number 1-9511 ------ THE COAST DISTRIBUTION SYSTEM, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 94-2490990 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 350 Woodview Avenue, Morgan Hill, California 95037 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (408) 782-6686 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed, since last year) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. YES XX NO -- -- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 4,330,654 shares of Common Stock as of May 8, 2000 2 THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) March 31, 2000 and December 31, 1999
MARCH 31, DECEMBER 31, 2000 1999 -------- -------- (UNAUDITED) (AUDITED) ASSETS CURRENT ASSETS Cash $ 530 $ 641 Accounts receivable - net 38,328 12,981 Inventories 41,444 38,655 Other current assets 3,818 3,462 -------- -------- Total current assets 84,120 55,739 PROPERTY, PLANT, AND EQUIPMENT - NET 4,543 4,364 OTHER ASSETS 9,368 9,584 -------- -------- $ 98,031 $ 69,687 ======== ======== LIABILITIES CURRENT LIABILITIES Current maturities of long-term obligations $ 257 $ 288 Accounts payable - trade 19,697 7,748 Other current liabilities 2,451 2,050 -------- -------- Total current liabilities 22,405 10,086 LONG-TERM OBLIGATIONS Secured note payable to bank 42,010 26,340 Other long-term liabilities 1,816 1,867 -------- -------- 43,826 28,207 REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 99 151 SHAREHOLDERS' EQUITY Preferred stock, $.001 par value; authorized: 5,000,000 shares; none issued and outstanding: -- -- Common stock, $.001 par value; authorized: 20,000,000 shares; 4,330,654 and 4,302,846 issued as of March 31, 2000 and December 31, 1999, respectively: 16,800 16,751 Accumulated other comprehensive income (loss) (371) (367) Retained earnings 15,272 14,859 -------- -------- 31,701 31,243 -------- -------- $ 98,031 $ 69,687 ======== ========
The accompanying notes are an integral part of these statements. 2 3 THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited)
THREE MONTHS ENDED MARCH 31, ----------------------- 2000 1999 -------- -------- Net sales $ 43,872 $ 41,129 Cost of sales, including distribution costs 35,758 33,999 -------- -------- Gross profit 8,114 7,130 Selling, general and administrative expenses 6,598 5,717 -------- -------- Operating income 1,516 1,413 Other income (expense) Interest (722) (623) Other (9) (13) -------- -------- (731) (636) -------- -------- Earnings before income taxes 785 777 Income tax provision 372 437 -------- -------- NET EARNINGS $ 413 $ 340 ======== ======== Earnings per common share: Basic $ .10 $ .07 ======== ======== Diluted $ .10 $ .07 ======== ========
The accompanying notes are an integral part of these statements. 3 4 THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Three months ended March 31, ----------------------- 2000 1999 -------- -------- (Unaudited) Cash flows from operating activities: Net income $ 413 $ 340 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 333 359 Changes in assets and liabilities: Increase in accounts receivable (25,347) (21,684) Increase in inventories (2,789) (2,154) Increase in prepaids and other current assets (356) (239) Increase in accounts payable 11,949 11,352 Increase in other current liabilities 370 312 -------- -------- Total adjustments (15,840) (12,054) -------- -------- Net cash used in operating activities (15,427) (11,714) Cash flows from investing activities: Capital expenditures (385) (300) Decrease in other assets 89 953 -------- -------- Net cash provided by (used in) investing activities (296) 653 Cash flows from financing activities: Net borrowings under line-of-credit agreement 15,670 12,259 Net repayments of other long-term debt (51) (25) Issuance of Common Stock pursuant to Employee Stock Option and Stock Purchase Plans 49 86 Redemption of redeemable preferred stock of subsidiary (52) (47) Dividends on preferred stock of subsidiary -- (2) Retirement of common stock -- (1,441) -------- -------- Net cash provided by financing activities 15,616 10,830 Effect of exchange rate changes on cash (4) 54 -------- -------- NET DECREASE IN CASH (111) (177) Cash beginning of period 641 435 -------- -------- Cash end of period $ 530 $ 258 ======== ========
The accompanying notes are an integral part of these statements. 4 5 THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present the Company's financial position as of March 31, 2000 and the results of its operations and cash flows for the three months ended March 31, 2000 and 1999. The accounting policies followed by the Company are set forth in Note A to the Company's financial statements in its Annual Report on Form 10-K for its fiscal year ended December 31, 1999. 2. The Company's business is seasonal and its results of operations for the three months ended March 31, 2000 and 1999 are not necessarily indicative of the results to be expected for the full year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" elsewhere in this Report. 3. Basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed using the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method). Common equivalent shares are excluded from the computation if their effect is anti-dilutive. A total of 548,500 options in the quarter ended March 31, 2000 were excluded from the computation of diluted earnings per share because the option exercise price was greater than the average per share market price of our common stock. 4. The Company leases its corporate offices, warehouse facilities and data processing equipment. Those leases are classified as operating leases as they do not meet the capitalization criteria of FASB Statement No. 13. The office and warehouse leases expire over the next ten years and the equipment leases expire over the next five years. The minimum future rental commitments under noncancellable operating leases having an initial or remaining term in excess of one year as of December 31, 1999 are as follows:
YEAR ENDING DECEMBER 31, EQUIPMENT FACILITIES TOTAL ------------ --------- ---------- ----- (DOLLARS IN THOUSANDS) 2000 $ 332 $ 2,766 $ 3,098 2001 325 2,673 2,998 2002 317 2,414 2,731 2003 300 2,341 2,641 2004 50 1,581 1,631 Thereafter -- 4,418 4,418 ------ ------- ------- $1,324 $16,193 $17,517 ====== ======= =======
5. The Company has one operating segment, the distribution of replacement parts, accessories and supplies for recreational vehicles and boats. Geographic net sales for the three months ended March 31, 2000 are as follows: USA..................................... $34,673,000 Canada ................................. 9,199,000 ----------- $43,872,000 ===========
6. Comprehensive income for the quarter ended March 31, 2000 was $409,000. 5 6 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Factors Generally Affecting Sales of RV and Boating Products We believe that the Company is the largest wholesale distributor of replacement parts, accessories and supplies for recreational vehicles ("RVs"), and one of the largest distributors of replacement parts, accessories and supplies for boats, in North America. Sales are made by the Company to retail parts and supplies stores, service and repair establishments and new and used RV and boat dealers ("After-Market Customers"). The Company's sales are affected primarily by (i) usage of RVs and boats and (ii) sales of new RVs and boats, because consumers often "accessorize" their RVs and boats at the time of purchase. The usage and the purchase, by consumers, of RVs and boats depend, in large measure, upon the extent of discretionary income available to consumers and their confidence about economic conditions. Weather conditions also affect the usage of RVs and boats. As a result, the Company's sales and operating results can be, and in the past have been, adversely affected by recessionary economic conditions, increases in interest rates, which affect the availability and affordability of financing for purchases of RVs and boats, increases in gasoline prices which adversely affect the costs of using RVs and boats, and unusually adverse weather conditions. RESULTS OF OPERATIONS Net Sales. Net sales increased 7% to $43,872,000 in the first quarter of 2000 as compared to $41,129,000 for the same quarter in 1999. This increase was a result of an increase in customer orders, for both RV and marine products, during the first part of the quarter ended March 31, 2000. Gross Margin. Our gross margin increased to 18.5% of net sales in the three months ended March 31, 2000 from 17.3% for the same period of 1999. This increase was due primarily to the strengthening of the Canadian dollar which reduced the costs of products sold by our Canadian subsidiary in the quarter ended March 31, 2000, as compared to the corresponding quarter of 1999 and the margin associated with our proprietary products that we purchased through our Taiwanese subsidiary, during the quarter ended March 31, 2000. Selling, General and Administrative Expenses. As a percentage of net sales, selling, general and administrative expenses increased to 15.0% for the first quarter of 2000 from 13.9% in the comparable quarter of 1999. This increase was primarily the result of increased selling expenses during the quarter ended March 31, 2000. Operating Income. Due to the combined effects of the increase in sales and gross margin, which more than offset the increase in selling, general and administrative expenses, operating income during the quarter ended March 31, 2000 increased by 7.3% to $1,516,000 from $1,413,000 in the first quarter of 1999. Interest Expense. Interest expense increased by $99,000 or 16% in the quarter ended March 31, 2000, as compared to the same quarter of 1999, largely due to an increase in outstanding borrowings under our revolving credit facility to fund increases in working capital requirements in the first quarter of 2000 and borrowings under a term credit facility that we used to purchase shares of our common stock in the second half of 1999. We will continue to rely on borrowings to fund a substantial portion of our working capital requirements and future growth and, as a result, we anticipate that interest will continue to be a significant expense in future periods. 6 7 Income Taxes. The Company's effective income tax rate was 47% in the first quarter of 2000 and 56% in the first quarter of 1999. The effective tax rate is affected by the amount of our expenses that are not deductible for income tax purposes and by varying tax rates on income generated by our foreign subsidiaries. LIQUIDITY AND CAPITAL RESOURCES We finance our working capital requirements primarily with borrowings under a long-term revolving bank credit facility and internally generated funds. We also have obtained a $5,000,000 term loan from the same bank from which we obtained our revolving credit facility. Under the terms of the revolving credit facility and the term note, which expire in May 2001, we may borrow up to the lesser of (i) $35,000,000 with a seasonal increase to $45,000,000 between March 1 and June 20 of each year, or (ii) an amount equal to 80% of eligible accounts receivable and 50% of eligible inventory (the "borrowing base") plus $5,000,000. Interest on the revolving credit facility is payable at the bank's prime rate plus 50 basis points or, at the Company's option but subject to certain limitations, borrowings will bear interest at the bank's LIBOR rate, plus 225 basis points. Interest on the $5,000,000 term loan is payable at the bank's prime rate plus 100 basis points or at the bank's LIBOR rate, plus 275 basis points. At May 8, 2000, outstanding borrowings under the revolving credit facility and the term loan totaled $40,710,000. Borrowings under the credit facility and term loan are secured by substantially all of the Company's assets and rank senior in priority to other indebtedness of the Company. We believe that available credit under the revolving credit facility, together with internally generated funds, will be sufficient to enable us to meet our working capital and other cash requirements over the next twelve months. We do not presently anticipate any material increases in our cash requirements or material changes in our sources of funds in the foreseeable future. We generally use cash for, rather than generating cash from, operations in the first half of the year, because we build inventories, and accounts receivables increase, as our customers begin increasing their product purchases for the spring and summer selling seasons. See "Seasonality and Inflation" below. Capital expenditures, primarily for enhancements to our computer system, were $385,000 in the first quarter of 2000 and $300,000 in the corresponding quarter of 1999. In early 1999 we adopted an open market and private stock repurchase program. During 1999, we purchased 1,012,304 shares of our common stock for an aggregate of $2,975,000 under this program. We funded those purchases with proceeds of the term loan we obtained from our bank lender. We do not currently expect to make any purchases of shares during 2000, unless we have opportunities to acquire additional shares on favorable terms. We lease the majority of our facilities and certain of our equipment under non-cancelable operating leases. Our future lease commitments are described in Note 4 of Notes to the our Interim Condensed Consolidated Financial Statements included elsewhere in this report. SEASONALITY AND INFLATION Seasonality. Sales of recreational vehicle and boating parts, supplies and accessories are seasonal. We have significantly higher sales during the seven-month period from March through September than we do during the remainder of the year. Because a substantial portion of our expenses are fixed, operating income declines and we sometimes incurs losses and must rely more heavily on borrowings to fund operating requirements in the months when sales are lower. Inflation. Generally, we have been able to pass inflationary price increases on to customers. However, inflation also may cause or may be accompanied by increases in gasoline prices and interest rates. Such increases, or even the prospect of increase in the price or shortages in the supply of gasoline, can adversely affect the purchase and usage of RVs and boats, which can result in a decline in the demand for the our products. 7 8 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to market risk with respect to financial instruments is primarily related to changes in interest rates with respect to borrowing activities, which may adversely affect our financial position, results of operations and cash flows. To a lesser degree, we are exposed to market risk from foreign currency fluctuations associated with our Canadian operations and our Canadian currency denominated debt. We do not use financial instruments for trading or other speculative purposes and we are not a party to any derivative financial instruments. In seeking to minimize the risks from interest rate fluctuations, we manage exposures through our regular operating and financing activities. As of March 31, 2000, we had outstanding $42.0 million under our revolving credit facility. At March 31, 2000 a hypothetical 100 basis point increase in interest rates would result in a reduction of approximately $215,000 in 2000 pretax earnings. The fair value of borrowings under our revolving credit facility approximate the carrying value of those obligations. We sometimes enter into forward exchange agreements to reduce the effect of foreign currency fluctuations on a portion of our inventory purchases in Canada for our Canadian operations. The gains and losses on these contracts are reflected in earnings in the period during which the transactions being hedged are recognized. We believe that these agreements do not subject us to significant market risk from exchange rate movements because the agreements offset gains and losses on the balances and transactions being hedged. As of March 31, 2000, there were no such agreements outstanding. Approximately 20% of our debt is denominated in Canadian currency, which also exposes us to market risk associated with exchange rate movements. Historically, we have not used derivative financial instruments to manage our exposure to foreign currency rate fluctuations since the market risk associated with our foreign currency denominated debt has not been considered significant. -------------------------- FORWARD-LOOKING INFORMATION This Report contains forward-looking information which reflects Management's current views of future financial performance. The forward-looking information is subject to certain risks and uncertainties, including, but not limited to, the effect on future performance of changing product supply relationships in our industry and the uncertainties created by those changes; the potential for increased price competition; possible changes in economic conditions, prevailing interest rates or gasoline prices, or the occurrence of unusually severe weather conditions, that can affect both the purchase and usage of RVs and boats and which, in turn, affects purchases by consumers of the products that we sell. For information concerning such factors and risks, see the foregoing discussion in this section of this Report entitled, "Management's Discussion and Analysis of Financial Condition and Results of Operation" and the Section entitled "Certain Factors That Could Affect Future Performance" in our Annual Report on Form 10K for the fiscal year ended December 31, 1999 that was filed with the Securities and Exchange Commission in March 2000. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of this Report. 8 9 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K AND EXHIBITS (a) Exhibits. Exhibit 11.1 Computation of Earnings (Loss) Per Share for the quarter ended March 31, 2000 and 1999. Exhibit 27. Financial Data Schedule. (b) Reports on Form 8-K: None 9 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: May 12, 2000 THE COAST DISTRIBUTION SYSTEM, INC. By: /s/ SANDRA A. KNELL ------------------------------ Sandra A. Knell Executive Vice President and Chief Financial Officer S-1 11 INDEX TO EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED PAGE ------- ------------- 11.1 Computation of Income (Loss) Per Share for the Quarter ended March 31, 2000 and 1999 27. Financial Data Schedule
E-1 EX-11.1 2 EXHIBIT 11.1 1 EXHIBIT 11.1 THE COAST DISTRIBUTION SYSTEM, INC. Computation of Earnings Per Share Quarter Ended March 31,
2000 ---- Income Shares Per-Share (Numerator) (Denominator) Amount ----------- ----------------- ---------------- Net earnings $413,000 -------- Net earnings available to common shareholders $413,000 ======== Basic and diluted earnings per share $413,000 4,314,804 $0.10 ======== ========= ===== 1999 ---- Income Shares Per-Share (Numerator) (Denominator) Amount ----------- ----------------- ---------------- Net earnings $340,000 Dividends paid on preferred stock of subsidiary (2,000) -------- Net earnings available to common shareholders $338,000 ======== Basic and diluted earnings per share $338,000 5,143,526 $0.07 ======== ========= =====
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF, AND THE STATEMENT OF INCOME FOR THE PERIOD ENDED MARCH 31, 2000 INCLUDED IN REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH BALANCE SHEET AND STATEMENT OF INCOME AND THE NOTES THERETO. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 530 0 38,328 0 41,444 84,120 4,543 0 98,031 22,405 43,826 99 0 16,800 14,901 98,031 43,872 43,872 35,758 6,598 9 0 722 785 372 413 0 0 0 413 .10 .10 FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
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