Coast Distribution System Inc Reports Operating Results (10-Q)
Coast Distribution System has a market cap of $10.2 million; its shares were traded at around $1.94 with and P/S ratio of 0.1.
Highlight of Business Operations:As indicated in the table above, our net earnings declined by $305,000 or 49.8%, to $307,000, or $0.07 per diluted share, in this years third quarter from approximately $612,000, or $0.13 per diluted share, in the third quarter of 2011. In the nine months ended September 30, 2012, we incurred a net loss of $534,000, or ($0.12) per diluted share, as compared to net earnings of $553,000, or $0.12 per diluted share, in the first nine months of 2011.
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 and restricted shares issued to employees and directors for services performed are recorded at their respective fair values at the time they are issued and are expensed as service is provided. Stock-based compensation expense for the quarters ended September 30, 2012 and 2011, totaled $114,000 and $105,000, respectively, and $333,000 and $330,000 for the nine months ended September 30, 2012 and 2011, respectively.
As the above table indicates, selling, general and administrative (SG&A) expenses increased by $425,000, or 9.0%, in the quarter ended September 30, 2012, as compared to the same quarter of 2011. As a percentage of sales, those expenses remained stable at 14.9% for both of those periods. For the nine months ended September 30, 2012, SG&A expenses increased by $346,000, or 2.4%, to $14,904,000 from $14,558,000 in 2011. As a percentage of net sales, SG&A expenses decreased to 16.1% in the nine months ended September 30, 2012 from 16.3% for the same nine months of 2011.The increases in SG&A expenses were due largely to increased marketing and promotional costs for our proprietary products in the second and third quarters of 2012, as compared to the same respective periods of 2011.
During the nine months ended September 30, 2012, we used $62,000 of cash in our operations, primarily to fund $4.8 million of inventories, which was largely offset by reductions of $1.9 million and $300,000 of accounts receivable and other currents assets, respectively, and increases of $1.8 million and $300,000 in accounts payable and accrued liabilities and non-cash expenses of $800,000, respectively. By comparison, in the nine months ended September 30, 2011, we generated $1.1 million of cash from our operations, primarily attributable to net earnings of $600,000, non-cash expenses of $900,000, and decreases in accounts receivable and other currents assets of $1.0 million and $900,000, respectively, partially offset by a $2.3 million increase in inventories. At September 30, 2012, inventories totaled $30.7 million, accounts receivable totaled $9.0 million, and accounts payable totaled $5.2 million, respectively, as compared to $28.2 million, $8.9 million, and $3.3 million, respectively, at September 30, 2011.
Net Cash Used in Investing Activities. In the nine months ended September 30, 2012, we used net cash of $415,000 in investing activities, consisting of $288,000 of capital expenditures, primarily for purchases of computer and office equipment, and $145,000 of increases in other assets. By comparison, we used $233,000 in investing activities in the first nine months of 2011, consisting of capital expenditures of $270,000, partially offset by $19,000 from sales of equipment and a $18,000 decrease in other assets.
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