Newspaper article THE JOURNAL RECORD

CMI Expects Strong Profits, Revenues to Continue

Newspaper article THE JOURNAL RECORD

CMI Expects Strong Profits, Revenues to Continue

Article excerpt

OKLAHOMA CITY (JR) -- CMI's earnings and revenues advanced during the second quarter and the company expects strong sales to continue in the third quarter.

The manufacturer of road building equipment on Wednesday said net income for the second quarter totaled $2.2 million, or 11 cents per share, up from $1.78 million, or 9 cents per share, for the second quarter of 1996.

Revenues for the second quarter grew 19 percent to $46.11 million from $38.76 million in the second quarter the prior year. For the first six months of 1997, revenues increased 17 percent to $87.81 million from $75.25 million in the same period of 1996. Net earnings for the first six months of the year totaled $3.65 million, or 17 cents a share, slightly lower than $3.88 million, or 18 cents a share, in the first six months of 1996. CMI's outlook for the third quarter is good, said Jim Holland, senior vice president and chief financial officer. "We expect sales to continue strong in our domestic core business and international sales to pick up in the third quarter," said Holland. "It looks as if 1997 will be a good year for CMI, as improved efficiencies begin to kick in giving a little boost to gross margin." Marketing and administrative expenses were a little lower in the quarter at $6.08 million versus $6.16 million in the year ago quarter. For the six months, marketing and administrative expenses increased to $12.23 million from $11.83 million for the first half of 1996. Engineering and product development costs increased in the quarter to $1.7 million from $1.43 million and in the six months to $3.14 million from $3.06 million. Gross margin for the quarter was still depressed at 25.5 percent, up slightly from 24.9 percent in the first quarter of 1997 but below the 25.9 percent gross margin reported at the end of 1996 and the 28.2 percent for the second quarter of 1996. "Business is strong. However, we are still suffering from gross margin pressure," said Holland. "We told investors earlier this year that we expected some low-margin orders to continue being filled into the second quarter and that has indeed happened. "Additionally, we have had a continuation of fewer `bread-and- butter' deals and more specialized equipment orders, along with the transaction discounting that was required to remain competitive. Our cost of revenues, and specifically the cost of labor, has remained higher than normal as we continue the changes in our very large Oklahoma City plant operations to make manufacturing more productive and our equipment more efficient. "This latter factor should have a steadily diminishing effect, therefore, there is some reason to believe we can see a positive result in gross margin beginning during the second half of the year." Holland noted that marketing and administrative operating expenses were lower as a percentage of sales at 13. …

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