Cybex International, Inc. saw net sales for the fourth quarter increase 6.1% to $38.2 million $36.0 million in the year-ago quarter. For the same period, net income increased 13.8% to $2.8 million, or 16 cents per diluted share from $2.4 million, or 16 cents per diluted share, for the corresponding period of 2005. Excluding a fourth quarter 2005 litigation-related charge, and after an adjustment to the tax provision for the period as described below, the company's fourth quarter 2005 non-GAAP net income was $1.8 million, or 11 cents per diluted share.
For the fiscal year, net sales were $126.9 million, compared to $114.6 million for 2005, an increase of 11%. The company reported net income for the year of $20.4 million, or $1.19 per diluted share, compared to net income of $61,000, or $.00 per diluted share last year. Excluding 2005 litigation-related charges, and after adjustments to the company's tax provision for each period as described below, the company's non-GAAP net income for 2006 was $5.1 million, or 30 cents per diluted share, compared to non-GAAP net income of $2.9 million, or 18 cents per diluted share, for 2005.
Actual results for the year ended December 31, 2006 include a reduction in the company's deferred tax valuation allowance, resulting in a net tax benefit of $11.8 million for the year ended December 31, 2006. Actual results for the fourth quarter and year ended December 31, 2005 included increases in the company's litigation reserve resulting in pre-tax charges of $504,000 and $4.6 million, respectively. As previously announced, two of the litigation matters included within the litigation reserve were resolved after the end of 2006.
The company's deferred tax valuation allowance was reduced effective July 1, 2006, and the results for the quarter and year ended December 31, 2006 include a tax provision reflecting an effective tax rate of approximately 41% calculated for the quarter and six-month period ended December 31, 2006. The 2006 non-GAAP results include a tax provision calculated as though the company's effective tax rate for the six -month period ended December 31, 2006 was applicable for all of 2006, and the 2005 non-GAAP results include a tax provision at approximately the same effective rate. The non-GAAP adjustments have been made to provide a basis for reviewing the company's operating performance on a consistent basis for all of the periods presented.
John Aglialoro, chairman and CEO, stated, “2006 was a very satisfying year. Most importantly, the Company increased new product development capacity and pace which has resulted in a promising pipeline of new products for 2007 and beyond. We launched our entry back into the high-end home market during Q4, and increased operating margins while growing the business and making investments to best position Cybex for the future.”
John Aglialoro continued: “In 2004, we announced that our corporate goals included double digit revenue growth and increases in net income at least on pace with growth in revenue. These corporate goals continue in effect and serve as a guide for our Company. We are proud that our performance in the intervening time period has met these goals stated in 2004. Our results have shown consistent improvement, including 18 quarters of year-over-year sales growth. Both revenue and net income growth have met our goal for each of the last three years (excluding the effect of litigation charges, the reduction to the valuation allowance for deferred taxes and related tax adjustments, as described above).
“Simultaneous with improved operating performance, we are also proud that Cybex has achieved a stronger balance sheet. Long-term debt was reduced by $23,324,000 from the end of 2003 to the end of 2006 and working capital increased over the same period from a negative $4,882,000 to a positive $14,061,000.
“For 2007 and beyond, an additional goal is to continue to improve operating margins. We expect the capital investments we are making in manufacturing facilities and processes to lower production costs as well as provide for increased capacity. In Q3 2007, the Cybex strength lines will move into our new Owatonna manufacturing facility which will house additional robotic welding, a computerized powder coat paint system, and other automation designed to lower costs and improve throughput. In addition, we have begun implementing 'lean manufacturing' systems and improved sourcing capabilities including global suppliers for certain parts to improve margins. Higher volumes levels are also expected to result in higher margin percentages over time. The Cybex management team will continue to focus on its corporate goals as we look to the future.”
CYBEX INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three Months Ended Year Ended
------------------- -------------------
December December December December
31, 31, 31, 31,
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $ 38,212 $ 36,000 $126,924 $114,646
Cost of sales 23,522 22,576 80,241 73,169
--------- --------- --------- ---------
Gross profit 14,690 13,424 46,683 41,477
As a percentage of sales 38.4% 37.3% 36.8% 36.2%
Selling, general and
administrative expenses 9,784 9,583 36,757 33,908
Litigation charges - 504 - 4,605
--------- --------- --------- ---------
Operating income 4,906 3,337 9,926 2,964
Interest expense, net 170 758 1,333 2,652
--------- --------- --------- ---------
Income before income taxes 4,736 2,579 8,593 312
Income tax provision (benefit) 1,960 140 (11,775) 251
--------- --------- --------- ---------
Net income $ 2,776 $ 2,439 $ 20,368 $ 61
========= ========= ========= =========
Basic net income per share $ .16 $ .16 $ 1.24 $ .00
========= ========= ========= =========
Diluted net income per share $ .16 $ .16 $ 1.19 $ .00
========= ========= ========= =========
Shares used in computing basic
net income per share 17,195 15,131 16,397 15,122
========= ========= ========= =========
Shares used in computing
diluted net income per share 17,824 15,701 17,053 15,708
========= ========= ========= ========
