Editorial

Even though we have been hearing that business has been spotty in certain areas of the country this year, when you look at the performance of most publicly owned RV companies you have to know that overall business is good -- very good. There is a steady incline over the last year on most stock market charts.

Let's take a look at some examples of how RV companies are performing. Coachmen Industries (COA) may be the biggest winner. Coachmen's stock price rose 168% from $8 a share to around $20. Rexhall (REXL) is another big winner with the value of stock more than doubling (103%). Fleetwood, a company that has proved over the years that its generals continually come up with winning strategies, saw its fortunes increase by about 62%. And SMC Corporation (SMCC) saw the value of its stock jumping up more than 66%. Companies such as Skyline Corporation (SKY) and National RV Holdings, Inc., (NRVH) have posted respectable gains during the past year also.

Amid all this positive news from the front there is one public company that is not enjoying the success of the companies mentioned above. One company is heading rather dramatically in the opposite direction. Coast Distribution (CRV), the industry's largest wholesale distributor of aftermarket products, has seen its stock price fall from a high of $8.75 in late April to a mid-September low of $4.88 per share. That's a drop of more than 40%. It may be premature to get your mourning shroud out, however; Coast has a dynamic, innovative general who is credited by some as having a gift of genius when it comes to business.

That company's general is Tim McGuire, Coast's chairman and chief executive officer. Not a follower, McGuire marches to the beat of his own drum. So it wasn't too surprising to learn that this past February, he told RV dealers at the Annual Coast Show that Coast was a company in transition, a wholesale distribution company that was in transition to becoming a supplier.

Regular readers of these editorials can attest that RV News has not always agreed with some of the business decisions that Coast Distribution has made. Our primary objection was and continues to be that a company should not take someone else's ideas and investment and develop a product based on that history to compete with the original company -- especially, if you are the distributor for that company's products. It's no secret that Coast has alienated several of their vendors, major supplier- manufacturers believe that Coast "knocked off" their products. Coast calls it manufacturing proprietary products and has built a large list of CP branded products which are marketed as a generic competitor of the name brand products.

As a result companies such as ADCO, BAL, Reese, Thetford, Barker and others have chosen not to do business with Coast. Suddenly Coast found itself without many of the name brand products that made up a significant portion of the company's sales.

Whether it is a direct result of losing the brand name products or the failure of the proprietary products to catch on with the RV consumer, the bottom line is that Coast's sales took a nose dive during the second quarter.

As a result sales for the six months ended June 30 fell to $79.5 million over last year's figures, a drop of 19%. Net income decreased 36% to $1.9 million during the same period.

In a public statement released along with Coast's second quarter results, McGuire said, "Our sales continue to be affected by our strategy to increase the percentage of proprietary branded products and products sold under exclusive supplier relationships. Delays in the timing of new product introductions, limited availability of popular products, the continuation of adverse weather conditions early in the quarter and soft OEM sales contributed to the decline in sales for the quarter."

Five years ago, Coast's ranks were made up of the top names in the industry, and the company was prospering and growing. And while many top companies still distribute their products through Coast, many of the larger volume manufacturers with high ticket products have found other means to get their products to dealers. If Coast made a mistake, and only time will reveal that, it might be that rather than doing battle with competitors in the market place, the company took loyal soldiers and made them the enemy. A good general knows who his enemy is.

So we have to ask ourselves, is this a company whose strategy failed and is on the brink of annihilation as a result of poor business decisions or is it that inevitable lull in the battle before the push on to final victory. With a creative leader like Tim McGuire planning his next move, RV News believes it would be premature to call a victor in this war. In any case, by the time you read this, Coast's third quarter will be history and whatever the results, it could have a significant bearing on where the company is going. And whether you are a Coast fan or not, the next few months are going to be intriguing as this drama continues to unfold.