Coast Distribution System Inc (CRV, Financial) filed Quarterly Report for the period ended 2012-06-30.
The Coast Distribution System, Inc. has a market cap of $9.2 million; its shares were traded at around $1.83 with and P/S ratio of 0.1.
The decline in our net earnings in this years second quarter and the increase in the net loss for the first six months of this year were due primarily to declines in our gross profits in both those periods. Those declines were primarily attributable to (i) selected price reductions which we made in response to aggressive price competition in our markets that was due to weak consumer demand primarily as a result of the continued weakness of the economic recovery, (ii) a weakening of the Canadian dollar, as compared to the U.S. dollar, in the second quarter of 2012, which increased the costs to our Canadian subsidiary of purchasing products from suppliers in the United States, and (iii) an increase in shipping costs. Also contributing to our decline in net earnings in the second quarter of 2012 was an increase in selling, general and administrative expenses of $194,000, which was largely due to increased marketing and promotion costs for our propriety products.
Stock-Based Compensation. We account for stock-based compensation in accordance with ASC 718, Stock Compensation, which requires the recognition of the fair value of compensation paid in stock or other equity instruments as an expense in the calculation of net earnings (loss). We recognize stock-based compensation expense in the period in which the employee is required to provide service, which is generally over the vesting period of the individual equity instruments. Stock options issued in lieu of cash to non-employees for services performed are recorded at the fair value of the options at the time they are issued and are expensed as service is provided. Stock-based compensation expense for the quarters ended June 30, 2012 and 2011, totaled $120,000 and $102,000, respectively, and $219,000 and $225,000 for the six months ended June 30, 2012 and 2011, respectively.
As the above table indicates, selling, general and administrative (SG&A) expenses increased by $194,000, or 4.2%, and as a percentage of net sales to 14.0%, in the quarter ended June 30, 2012, as compared to the same quarter of 2011. Those increases were due largely to increased marketing and promotional costs for our proprietary products. For the six months ended June 30, 2012, SG&A expenses declined by $79,000, or 0.8%, to $9,776,000, and as a percentage of net sales to 16.8%, from 17.0% in the same six month of 2011, primarily due to lower promotional costs and rent expense in the first quarter of the current year as compared to the first quarter of 2011.
Net Cash Used in Investing Activities. In the six months ended June 30, 2012, we used net cash of $280,000 in investing activities, consisting of $209,000 of capital expenditures, primarily for purchases of computer and office equipment, and $89,000 of increases in other assets. By comparison, we used $162,000 in investing activities in the first six months of 2011, consisting of capital expenditures of $171,000, partially offset by $6,000 from sales of equipment and a $3,000 decrease in other assets.
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The Coast Distribution System, Inc. has a market cap of $9.2 million; its shares were traded at around $1.83 with and P/S ratio of 0.1.
Highlight of Business Operations:
As indicated in the table above, our net earnings declined by $476,000 or 48.6%, to $504,000, or $0.11 per diluted share, in this years second quarter from approximately $980,000, or $0.21 per diluted share, in the second quarter of 2011. In this six months ended June 30, 2012, we incurred a net loss of $841,000, or ($0.18) per diluted share, as compared to a net loss of $59,000, or ($0.01) per diluted share, in the first six months of 2011.The decline in our net earnings in this years second quarter and the increase in the net loss for the first six months of this year were due primarily to declines in our gross profits in both those periods. Those declines were primarily attributable to (i) selected price reductions which we made in response to aggressive price competition in our markets that was due to weak consumer demand primarily as a result of the continued weakness of the economic recovery, (ii) a weakening of the Canadian dollar, as compared to the U.S. dollar, in the second quarter of 2012, which increased the costs to our Canadian subsidiary of purchasing products from suppliers in the United States, and (iii) an increase in shipping costs. Also contributing to our decline in net earnings in the second quarter of 2012 was an increase in selling, general and administrative expenses of $194,000, which was largely due to increased marketing and promotion costs for our propriety products.
Stock-Based Compensation. We account for stock-based compensation in accordance with ASC 718, Stock Compensation, which requires the recognition of the fair value of compensation paid in stock or other equity instruments as an expense in the calculation of net earnings (loss). We recognize stock-based compensation expense in the period in which the employee is required to provide service, which is generally over the vesting period of the individual equity instruments. Stock options issued in lieu of cash to non-employees for services performed are recorded at the fair value of the options at the time they are issued and are expensed as service is provided. Stock-based compensation expense for the quarters ended June 30, 2012 and 2011, totaled $120,000 and $102,000, respectively, and $219,000 and $225,000 for the six months ended June 30, 2012 and 2011, respectively.
As the above table indicates, selling, general and administrative (SG&A) expenses increased by $194,000, or 4.2%, and as a percentage of net sales to 14.0%, in the quarter ended June 30, 2012, as compared to the same quarter of 2011. Those increases were due largely to increased marketing and promotional costs for our proprietary products. For the six months ended June 30, 2012, SG&A expenses declined by $79,000, or 0.8%, to $9,776,000, and as a percentage of net sales to 16.8%, from 17.0% in the same six month of 2011, primarily due to lower promotional costs and rent expense in the first quarter of the current year as compared to the first quarter of 2011.
Net Cash Used in Investing Activities. In the six months ended June 30, 2012, we used net cash of $280,000 in investing activities, consisting of $209,000 of capital expenditures, primarily for purchases of computer and office equipment, and $89,000 of increases in other assets. By comparison, we used $162,000 in investing activities in the first six months of 2011, consisting of capital expenditures of $171,000, partially offset by $6,000 from sales of equipment and a $3,000 decrease in other assets.
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