“We believe we have great opportunities to improve our operating performance. Although tangible results of our efforts likely will not be visible in the shorter term, we are committed to implementing improvements that we are confident will contribute to the longer-term health of the business,” Borick added.
Full Year Results
Wheel sales in 2011 increased $103.5 million, or 15 percent, to $813.0 million from $709.5 million in 2010, as unit shipments increased by 6 percent compared with 2010. A change in average aluminum price, which generally is passed through to customers, contributed approximately $55.4 million to the sales increase and was the primary driver of a 7 percent increase in the average selling price of the company’s wheels.
Consolidated gross profit decreased $22.1 million in 2011 to $67.1 million, or 8 percent of net sales, compared with $89.2 million, or 12 percent of net sales, in 2010. The decline in gross profit and margin percentage reflects a weaker product mix and higher manufacturing costs, principally increased labor expense. While continuing to operate at full capacity to meet customer demand, inefficiencies while commercializing certain new product programs, equipment reliability problems and other manufacturing process issues resulted in manufacturing cost per wheel increasing.
Selling, general and administrative expenses were $25.9 million, or 3 percent of net sales, in 2011 compared with $28.3 million, or 4 percent of net sales, in 2010. Compared with 2011, the 2010 expenses were higher by $1.3 million due to costs to implement a new enterprise resource planning (ERP) system and $900,000 in higher legal fees, while the 2011 results include a $1.5 million reduction in our deferred compensation liability, offset partially by $700,000 higher medical self-insurance costs.
Income before income taxes and equity earnings was $41.9 million in 2011, compared with $57.5 million for 2010, which included the $4.1 million loss on sale of the company's joint venture investment in Hungary. The company's share of the Hungarian joint venture's losses in 2010 was $2.8 million.