Advanced Environmental Recycling Technologies (AERT) reported today its net loss improved in the first quarter to $397,000 from $1.6 million in the year-earlier period on a 2% drop in sales to $16.4 million.

The replacement of a new ChoiceDek handrail system in Lowe's stores led to an unusually large amount of returns and was the primary reason for the dip in sales, Springdale, Ark.-based AERT said. Excluding that discontinued line, net sales rose 5%.

The cost of goods sold dropped to $12.24 million from $14 million in the January-March 2009 period, which AERT attributed to cost-cutting measures implemented last year that, among other things, trimmed sales, general, and administrative costs by $600,000. The gross margin as a percentage of sales in the first quarter climbed to 19% from 16% a year ago.

Operating income swung to a $507,000 profit from a $525,000 loss last year.

AERA uses recycled polyethylene plastic in the manufacture of composite building materials. It makes outdoor decking systems, fence systems, and door and window components.It also makes Weyerhaeuser ChoiceDek decking sold in Lowe's stores.