The company’s consolidated gross profit margin improved 400 basis points to 27.9% in the fourth quarter and 210 basis points to 26.6% for the full year. Consolidated operating margins improved 450 basis points to 11.5% in the quarter and 250 basis points to 10.4% for the full year.
The products segment realised double-digit growth in several major core product groups, including hoists and forged attachments, which was partially offset by reductions from strategic activities in less profitable product groups.
Timothy Tevens, president and CEO, said: “We achieved our near term goal of 50% debt to total capitalisation and made headway in growing our markets outside the US.”
He added: “We also realised significant margin and bottom-line benefits of operating leverage. Over several years, our focus has been on generating cash to reduce debt, maintaining our leading US market position and growing our presence in international markets.”
The $2.6m or 1.8% increase in consolidated net sales in the fiscal 2006 fourth quarter to $147.1m included a $5.2m or 4.1% increase in products segment net sales partially offset by a $2.6m decline in net sales for the solutions segment.
CM explained that the increase in products segment sales to $131.6m reflected expanding market penetration into international markets and the strength of the US industrial economy.
The solutions segment was adversely affected by $1m of currency translation and $1.6m from lower contract revenues, resulting in net sales of $15.6m for the quarter. CM said that on a consolidated basis, both gross and operating margins improved on higher volumes, improved product mix and reduced costs.
Net income for the fourth quarter of fiscal 2006 was $47.8m, an increase of $39.4m from $8.3m the previous year. On a diluted basis, earnings per share were $2.53 on 18.9m average shares outstanding in the fourth quarter of fiscal 2006 compared with $0.56 on 15m average shares outstanding in the fourth quarter of fiscal 2005.
Gross margin in the fourth quarter of fiscal 2006 increased to 27.9%, primarily due to improved operational leverage on increased sales volume. The gross margin compares with 23.9% and 26.2% in the previous fourth quarter and the third quarter of fiscal 2006, respectively.
Selling, general and administrative expenses were $22.8m or 15.5% of revenues in the fiscal 2006 fourth quarter, compared with $23.8m or 16.5% of revenues a year ago.
External costs for Sarbanes-Oxley Section 404 compliance were $0.5m lower than last year’s fourth quarter. Last year’s fourth quarter included a $1.3m charge in these categories for the company’s German operations pension reserve.
During the fiscal 2006 fourth quarter, the company incurred $1.3m in restructuring costs as a result of exiting a non-profitable product line and for environmental charges at an inactive facility.
As a result of reduced debt levels, interest and debt expense for the fourth quarter of fiscal 2006 was down $1.5m to $5.1m from $6.6m in the fiscal 2005 fourth quarter.
Working capital, excluding cash and funded debt, as a percentage of full-year revenue was 17.4% at the end of this fiscal year, improved from 20.2% and 22.0% at the end of fiscal years 2005 and 2004, respectively.
Cash from operations and from refinancing activities was used to reduce funded debt by $61.2m during fiscal 2006 to $209.8m at March 31 2006, resulting in a year-end funded debt to total capitalisation ratio of 50.6%. Debt net of cash was reduced $97.3m for the year to $164.2m at March 31 2006, representing a net debt to total capitalisation ratio of 44.5% compared with 76.2% and 81.8% at March 31 2005 and 2004, respectively.
Subsequent to March 31 2006, the company applied available cash and further reduced funded debt by $32.1m, to $177.7m.
CM’s availability on its line of credit with its bank group at March 31 2006 was approximately $64.8m. As previously announced on March 16 2006, the company amended its credit facility and expanded its borrowing availability from $65m to $75m, with the ability to further expand its borrowing availability to $125m.
The new facility improves the company’s capital structure, reduces its cost of capital and provides financial flexibility to execute its strategic growth plans.
Capital expenditures for fiscal 2006 were $8.4m compared with $5.9m in 2005. Higher capital expenditures were the result of new product development and productivity-enhancing equipment along with normal maintenance items.
