The decline in sales reflects the company’s industry-wide economic slowdown, and also the decline in new residential construction and in residential and commercial renovations.
Gross profit decreased by 18%, or $962,407, to $4,393,179 for the quarter ended March 31, 2009 from $5,355,586 for the same period in 2008. Gross profit expressed as a percentage of sales decreased by 1.3% to 28.1% in 2009 compared to 29.4% for the comparable period in 2008. The decline in gross profit and the decrease in gross margins expressed as a percentage of sales were primarily caused by decreasing sales, price reductions, lower earned volume rebates, and reduced cash discounts taken on purchases.
The increase in net loss is primarily the result of the above noted decrease in gross margins, partially offset by a $678,398 decrease in selling, general and administrative expense and a $229,393 decrease in interest expense.
William Pagano, chief executive officer of the company, stated, “We continue to be negatively impacted by the general economic downturn, the significant decline in new construction, and continued decline in consumer spending. The seasonality of our business makes the first quarter our weakest quarter, and, hence, may not be a fair indication of our total year expectations. We continue to review and monitor our cost structure to increase our operating efficiency and have reduced our selling, general and administrative expense by approximately 10.3% in the first quarter of 2009 compared to the same period in 2008. Simultaneously, we have broadened our product offerings in the commercial HVAC market and high efficiency residential market.”
