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    The Coast Distribution System Reports Full 2011 Results

    The Coast Distribution System, Inc., one of North America’s largest aftermarket suppliers of replacement parts, accessories and supplies for the recreational vehicle (RV), boating and outdoor recreation industries, today reported financial results for the fourth quarter and full year ended December 31, 2011.

    Year Ended December 31, 2011 vs. 2010

    Coast reported a net loss of $0.9 million, or ($0.20) per diluted share, in 2011 compared to net earnings of $0.2 million, or $0.03 per diluted share, in 2010.  Net sales decreased by $0.4 million, or 0.4 percent, to $108.2 million in 2011, from $108.6 million in 2010, while a shift in sales mix, together with price reductions on selected products in response to increased price competition in our markets, resulted in a $1.6 million decrease in gross profits for the full year.

    The decrease in net sales was driven principally by an industry-wide reduction in total purchases and usage of RVs and boats in 2011, resulting from continuing economic uncertainties and relatively high unemployment, which led consumers to limit discretionary spending.  Also contributing to the decline in net sales were unusually severe weather conditions in the Northeastern United States and Canada in the first half of 2011.  Gross margin declined to 16.7 percent in 2011, compared to 18.1 percent in 2010, primarily due to a shift in the Company’s product mix to include a larger number of air conditioners and other products, which typically carry lower margins, as well as selected price reductions implemented in response to increased price competition in the Company’s end-markets.  SG&A expenses increased by $243,000 in 2011, to $18.6 million from $18.3 million in 2010, primarily due to increased compensation expense resulting from a partial restoration, beginning at July 1, 2010, of salary and wage reductions implemented as cost-saving measures in 2008 and 2009.  The decreases in net sales and gross profits, combined with the increase in SG&A, resulted in a pre-tax loss of $1.1 million in 2011 compared to pre-tax income of $0.6 million in 2010.

    On the balance sheet, accounts receivable totaled $10.9 million at December 31, 2011, which was approximately$1 million higher than at the end of 2010. Inventories at December 31, 2011 were $25.9 million, a small decrease of $60,000 compared with $25.9 million at December 31, 2010. Borrowings on our line of credit increased to $10.9 million at December 31, 2011 from $10.1 million a year ago, reflecting increased investments in working capital.

    Fourth Quarter 2011 vs. 2010

    Coast reported a net loss of $1.4 million, or $0.32 per diluted share, on net sales of $18.7 million in the fourth quarter of 2011, an improvement compared to the net loss of $1.7 million, or $0.38 per diluted share, on net sales of $17.6 million in the same quarter of 2010.  The reduction in net loss was primarily the result of increased net sales in the quarter along with slight reductions in operating expenses, which were partially offset by a lower gross margin, which decreased to 11.4 percent in the 2011 fourth quarter from 11.9 percent in the same quarter of 2010.  That decrease was primarily the result of a shift in the mix of products sold to a higher proportion of lower-margin products, principally air conditioners, and selected price reductions in response to increased price competition.

    “Even as we continued to face pockets of softness within our core markets, we were pleased with the growth in our revenues and improvements in our bottom line during our seasonally weakest quarter,” said Coast’s Chief Executive Officer Jim Musbach.  “As we look ahead into 2012, we see reasons for caution as well as encouraging signs of growth in our markets and the broader economy.  The recent volatility of gas prices remains a concern among consumers that may affect the sales and use of RVs and boats, which could in turn affect our revenues and earnings.  However, we see reasons for cautious optimism in the broader economy as recent trends in employment are starting to translate into improved consumer sentiment and an uptick in spending.  Our strategic goals for 2012 are to capture additional market share and improve gross margins by focusing on growing sales of our higher-margin proprietary products.  We expect that the combination of broader trends supporting growth in net sales and our ongoing efforts to control operating costs, should enable Coast to generate improved results in 2012.”

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