Cybex International, Inc. saw a 9% increase in third quarter net sales to $32.6 million from $29.9 million for the same period last year. The company attributed the sales increase to “strong sales” of cardio products and continued growth in the commercial equipment market. The company reported net income for the third quarter of 2007 of $4.6 million, or 25 cents per diluted share, compared to net income of $0.5 million, or 3 cents per diluted share, reported for the third quarter of 2006.
During the third quarter of 2007, the company reevaluated, in accordance with SFAS 109, the need for the remaining deferred tax valuation reserve originally established in 2002 and, based on this review, substantially reduced the reserve as of September 29, 2007. The reduction of the tax valuation reserve increased net income by $5.2 million, or 29 cents per diluted share, for the quarter and nine months ended September 29, 2007. The 2007 results also include third quarter pre-tax charges of approximately $1.7 million, or 5 cents per diluted share, for the relocation of the Owatonna facility (about $550,000 included in Cost of Sales), the estimated cost to repair certain treadmills built prior to 2002, and asset write-downs, including charges relating to the companys decision to produce a new Home Arc Trainer model. The 2007 selling, general and administrative costs include continuing costs relating to the eNova new product development and the hospitality and home market sales initiatives, as noted previously. The 2006 third quarter results reflect the effects of an interest rate swap agreement, which increased interest expense for the third quarter of 2006 by $506,000 or, approximately, 2 cents per diluted share. Prior to June 27, 2007, the change in the fair value of the interest rate swap was included as a component of interest expense, which resulted in a decrease in interest expense of $289,000, or a penny per diluted share for 2007. Effective June 27, 2007, the company determined the interest rate swap qualified as a derivative hedging instrument; and, accordingly, changes in the fair value of the swap after such date are recorded as a component of accumulated other comprehensive income.
John Aglialoro, chairman and CEO of CYBEX, commented, “Although Q3 sales were negatively impacted by production delays caused by the relocation of our manufacturing facility, our backlog is double the year-ago level and the general health of our business is strong. The move is complete and we expect the new facility to accommodate growth and present opportunities to gain manufacturing efficiencies over time. While we are optimizing our position as a leader in the commercial market, we are also preparing for a more robust entry into the light commercial and premium home products market segments. We believe this balanced approach to growth is the best method to create value for our shareholders over the long-term.”
For the nine months ended September 29, 2007, net sales increased by 15% to $102.0 million compared to $88.7 million for 2006. Net income for the nine months ended September 29, 2007 was $6.8 million, or 38 cents per diluted share, compared to net income of $17.3 million, or $1.03 per diluted share for 2006. In addition to the interest rate swap described above, the 2006 results include the second quarter reduction in the tax valuation reserve which impacted the 2006 nine month results by $14.4 million or 86 cents per diluted share. The difference between the 2007 and 2006 effective tax rates would equate to additional tax expense of $820,000 or 5 cents per diluted share for the 2006 period.
CYBEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
|Three Months Ended||Nine Months Ended|
|September 29,||September 30,||September 29,||September 30,|
|Net sales||$||32,585||$ 29,849||$||102,001||$ 88,712|
|Cost of sales||22,083||19,269||66,400||56,719|
|As a percentage of sales||32.2||%||35.4||%||34.9||%||36.1||%|
|Selling, general and administrative expenses||11,354||9,052||32,530||26,973|
|Operating income (loss)||(852||)||1,528||3,071||5,020|
|Interest expense, net||422||656||584||1,669|
|Income (loss) before income taxes||(1,274||)||872||2,487||3,351|
|Income tax provision (benefit)||(5,833||)||369||(4,271||)||(13,927||)|
|Net income||$||4,559||$ 503||$||6,758||$ 17,278|
|Basic net income per share||$||0.26||$ 0.03||$||0.39||$ 1.07|
|Diluted net income per share||$||0.25||$ 0.03||$||0.38||$ 1.03|
Shares used in computing basic net income per share
Shares used in computing diluted net income per share