Karen L. Howard
Vice President – Finance and Chief Financial Officer
Columbus McKinnon Corporation
716-689-5550
karen.howard@cmworks.com
Immediate Release
Columbus McKinnon Reports Fiscal 2010 First Quarter Results
| · | Strong balance sheet with 33.8% net debt to total capitalization; $4.9 million cash generated from operating activities |
| · | Global recession impacts sales: revenue down 21% to $119 million, including October 2008 Pfaff acquisition |
| · | Restructuring, facility consolidations and spending discipline help to offset impact of revenue decline: expected annual savings of $16 to $19 million |
| · | Net loss in first quarter was $2.4 million, $0.13 loss per diluted share; $0.06 income per diluted share on a non-GAAP basis |
AMHERST, N.Y., July 23, 2009 – Columbus McKinnon Corporation (NASDAQ: CMCO), a leading designer, manufacturer and marketer of material handling products, today announced financial results for its first quarter of fiscal 2010 that ended on June 30, 2009. Current quarter results include the Company’s Pfaff-silberblau (Pfaff) business which was acquired on October 1, 2008.
Net sales for the first quarter of fiscal 2010 were $119.0 million, including $17.6 million from the Pfaff business, down $32.2 million, or 21.3%, from the same period in the prior year, and down 32.9% excluding the Pfaff business. Continued weakness in the global economy, combined with the tendency for the Company’s bookings to lag general industrial production and utilization trends by one to two quarters, caused the significant decline in revenue. U.S. industrial capacity utilization, which the Company uses as a leading market indicator, was 64.7% in June 2009, down from 66.0% in March 2009 and 76.3% in June 2008. Foreign currency translation also negatively impacted sales by approximately $4.1 million.
The Company reported a fiscal 2010 first quarter net loss of $2.4 million, or $0.13 per diluted share, compared with net income of $9.7 million, or $0.50 per diluted share, for the same period last year. Restructuring charges of $5.8 million, associated with a broad reorganization combined with the consolidation of the Company’s North American hoist and rigging sales and marketing functions, were recorded during the first quarter of fiscal 2010.
On a non-GAAP basis excluding restructuring charges, first quarter 2010 net income from continuing operations was $1.1 million, or $0.06 per diluted share, compared with $11.8 million, or $0.61 per diluted share, in the same period of the year prior, summarized on the following table.
Columbus McKinnon Reports Fiscal 2010 First Quarter Results
July 23, 2009
| (in millions, except per diluted share data) | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | Three Months Ended | | | | | |
| | | June 30, 2009 | | | | June 29, 2008 | | |
| Net (loss) income | | $ | (2.4 | ) | | $ | (0.13 | ) | per share | | $ | 9.7 | | | $ | 0.50 | | per share |
| Restructuring charges, net of 38% tax | | | 3.6 | | | | 0.19 | | | | | - | | | | - | | |
| Discontinued operations | | | (0.1 | ) | | | (0.01 | ) | | | | 2.1 | | | | 0.11 | | |
| Non-GAAP net income | | $ | 1.1 | | | $ | 0.06 | | per share | | $ | 11.8 | | | $ | 0.61 | | per share |
Timothy T. Tevens, President and Chief Executive Officer, commented, “As expected, our first quarter sales reflect the full impact of the decline in industrial activity around the world. We are reducing our manufacturing footprint, improving efficiencies and implementing a new go-to-market strategy in our key North American hoist and rigging businesses to even better serve our customers. Additionally, we have successfully reduced expenses across the board and are evaluating further adjustments as necessary. This quarter reflected some of these activities, which we expect to drive approximately $7 million to $8 million in annualized cost savings, beginning in the second quarter. In addition, another $9 million to $11 million in annualized savings is anticipated from the consolidation of our North American hoist and rigging manufacturing operations, beginning in the third and fourth quarters of this fiscal year.”
He added, “Our reorganization and consolidation activities go well beyond standard tactics applied in a declining sales environment. We are implementing strategic changes that will greatly improve productivity, reduce our operating footprint and focus our sales and marketing activities. We expect that we will be creating additional capacity and improving customer service, thereby enabling us to further increase market penetration and expand in emerging markets when the time is right.”
The results of operations of the Company’s former material handling conveyor systems business, Univeyor, are reflected as discontinued operations. The Univeyor divestiture was announced on July 25, 2008. Except where noted, Company financial results reported for the comparative prior periods reflect continuing operations.
The fluctuation in sales compared with last year’s quarter is summarized as follows, in millions:
Decreased volume $(47.9) (31.7%)
Improved pricing 2.2 1.5%
Pfaff-silberblau acquisition 17.6 11.6%
Foreign currency translation (4.1) (2.7%)
Total $ (32.2) (21.3%)
International sales, which included $17.6 million associated with the Pfaff acquisition, were $52.6 million, or 44% of total net sales, up $3.3 million, or approximately 6.6% from the first quarter of fiscal 2009.
Gross margin declined to 24.7% for the quarter compared with 32.1% in last year’s first quarter due mostly to lower volume in all markets and currently lower margins at Pfaff.
Selling expenses were $16.5 million, down 9.5%, or $1.7 million, when compared with the first quarter of fiscal 2009. This reflects aggressive efforts to reduce or eliminate costs as well as lower commissions on lower sales volume, despite the addition of expenses associated with the Pfaff business and continued investments in emerging markets. Additionally, foreign currency translation had a $0.8 million favorable impact on selling expenses. As a percent of revenue, selling expenses were 13.8% on measurably lower sales compared with 12.0% in the same period last year.
General and administrative (G&A) expenses were $8.5 million in the first quarter of fiscal 2010, down 14.5%, from the previous fiscal year’s first quarter, as additional expenses associated with the Pfaff business and continuation of investments in new product development were more than offset by benefits from aggressive cost reduction activities. Additionally, foreign currency translation had a $0.3 million favorable impact on G&A expense. As a percent of revenue, G&A expenses were 7.1% for this year’s first quarter, compared with 6.5% for the same period last year, due to the decline in revenue.
Columbus McKinnon Reports Fiscal 2010 First Quarter Results
July 23, 2009
Restructuring charges in the fiscal 2010 first quarter were $5.8 million and were primarily related to severance charges associated with broad reorganization combined with the consolidation of the Company’s North American hoist and rigging sales and marketing functions. The Company expects restructuring charges for the full year to be in the range of $12.5 million to $13.5 million with the remaining charges more evenly dispersed through the remaining three quarters of the year.
Operating loss for the first quarter of fiscal 2010 was $1.8 million. Excluding restructuring charges, non-GAAP operating income for the fiscal 2010 first quarter was $4.1 million compared with $20.4 million in the same period of the prior year. The related non-GAAP operating margin excluding restructuring charges was 3.4% in the first quarter of fiscal 2010 compared with 13.5% in the first quarter of fiscal 2009, negatively impacted by the lower global sales volume and the inclusion of lower Pfaff margins.
Interest and debt expense increased 4.5% in this year’s first quarter due primarily to interest related to the debt assumed upon the acquisition of Pfaff.
The effective tax rate for the quarter was 41.9% compared with 35.6% for the prior year’s quarter, with the increase due to the mix of income or loss by taxing jurisdictions. The Company expects the rate to be in the 41% to 42% range for fiscal 2010.
Working capital as a percentage of sales was 20.3% at the end of the first quarter of fiscal 2010 compared with 20.7% at the end of last fiscal year’s first quarter. The decrease was primarily due to reduced inventory and lower receivables related to the decline in revenue.
Solid balance sheet; excellent liquidity and financial flexibility
Debt, net of cash, at June 30, 2009 was $95.3 million, or 33.8% of total capitalization, compared with $98.7 million, or 35.2% of total capitalization, at March 31, 2009, within the Company’s long-term goal of 30%, flexing to 50% to accommodate acquisitions. Gross debt at the end of this year’s first quarter was $139.5 million, or 42.7% of total capitalization, compared with 43.1% of total capitalization, at March 31, 2009. At the end of the first quarter, the Company had $44.2 million of cash on hand. Availability on its $75 million line of credit was $66.1 million, with $8.9 million used for outstanding letters of credit. The Company is in full compliance with the financial covenants under its credit agreement.
Cash provided by continuing operations in the first three months of fiscal 2010 was $4.9 million, or $0.26 per diluted share, compared with $12.0 million, or $0.63 per diluted share, during the first three months of fiscal 2009. Columbus McKinnon continues to generate cash even with measurable declines in revenue and ongoing restructuring activities.
Capital expenditures for the first quarter of fiscal 2010 were $1.3 million compared with $2.1 million in the first quarter of fiscal 2009. In general, capital spending, while being carefully monitored, is focused on new product development, the purchase of productivity-enhancing equipment, capital maintenance items at various facilities and some additional capital for the facility rationalization projects we have underway. Accordingly, the Company anticipates capital spending for fiscal 2010 will be approximately $10 million to $12 million.
Mr. Tevens noted, “It is important that we continue to prudently invest in our future, even through this difficult industrial cycle. We believe that product innovation, productivity enhancements and fixed cost reductions will drive our future performance.”
Outlook
Backlog was $68.6 million at the end of the first quarter of fiscal 2010 compared with backlog of $63.9 million from continuing operations at the end of the fiscal 2009 first quarter and $70.1 million at the end of the trailing fiscal 2009 fourth quarter. The current year’s backlog includes $27.7 million associated with Pfaff, which more than offset declines in the organic business. The time to convert the majority of backlog to sales averages from one day to a few weeks, and backlog normally represents four to five weeks of shipments.
Columbus McKinnon Reports Fiscal 2010 First Quarter Results
July 23, 2009
Mr. Tevens commented, “Because our revenue tends to lag the general economy by a couple of quarters both on the downside and the upside, we have not realized any recovery related to the more positive recent economic news, although it appears as though the rate of decline has significantly slowed. We are taking advantage of this global economic demise to redefine many of our operations, expanding our capabilities and reaching more directly into markets where our brands are very well respected. We believe our strong position in U.S. markets and strengthened exposure to international markets, including Asia, will enable us to rebound from this recession with even greater success in the market than we have had historically.”
He concluded, “We expect that as the full force of our reorganization takes effect by the fourth quarter of fiscal 2010, we should be able to achieve our goal of operating margins in the higher end of the single digit range on measurably lower sales. In the meantime, we expect we will continue to generate cash as well as return to profitability.”
About Columbus McKinnon
Columbus McKinnon is a leading worldwide designer, manufacturer and marketer of material handling products, systems and services, which efficiently and ergonomically move, lift, position or secure material. Key products include hoists, cranes, actuators, chain and forged attachments. The Company is focused on commercial and industrial applications that require the safety and quality provided by its superior design and engineering know-how. Columbus McKinnon routinely posts news and other comprehensive information on its web site at http://www.cmworks.com.
Teleconference/webcast
A teleconference and webcast have been scheduled for July 23, 2009 at 10:00 AM Eastern Time at which the management of Columbus McKinnon will discuss the Company's financial results and strategy. Interested parties in the United States and Canada can participate in the teleconference by dialing 1-888-459-1579, asking to be placed in the "Columbus McKinnon First Quarter Fiscal 2010 Conference Call," providing the password "Columbus McKinnon," and identifying conference leader "Tim Tevens" when asked. The toll number for parties outside the United States and Canada is 1-210-234-7695.
The webcast will be accessible at Columbus McKinnon's web site: http://www.cmworks.com.
An audio recording of the call will be available two hours after its completion and until August 23, 2009 by dialing 1-866-511-5002 or the toll number for parties outside the United States and Canada, 1-203-369-1952. Alternatively, you may access an archive of the call and its transcript until September 23, 2009 on Columbus McKinnon's web site at: http://www.cmworks.com/news/presentations.aspx.
Safe Harbor Statement
This news release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning future revenue and earnings, involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the effect of operating leverage, the pace of bookings relative to shipments, the ability to expand into new markets and geographic regions, the success in acquiring new business, the speed at which shipments improve, and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update the forward-looking information contained in this release.
Columbus McKinnon Reports Fiscal 2010 First Quarter Results
July 23, 2009
| | | |
| Condensed Consolidated Income Statements - UNAUDITED | | | |
| | | | |
| (In thousands, except per share and percentage data) | | | | | | | | | |
| | | Three Months Ended | | | |
| | | June 30, 2009 | | | June 29, 2008 | | | Change | |
| | | | | | | | | | |
| Net sales | | $ | 119,008 | | | $ | 151,164 | | | | -21.3 | % |
| Cost of products sold | | | 89,578 | | | | 102,639 | | | | -12.7 | % |
| Gross profit | | | 29,430 | | | | 48,525 | | | | -39.4 | % |
| Gross profit margin | | | 24.7 | % | | | 32.1 | | % | |
| Selling expense | | | 16,477 | | | | 18,202 | | | | -9.5 | % |
| General and administrative expense | | | 8,461 | | | | 9,901 | | | | -14.5 | % |
| Restructuring charges | | | 5,838 | | | | - | | | | - | |
| Amortization | | | 440 | | | | 27 | | | | 1529.6 | % |
| (Loss) income from operations | | | (1,786 | ) | | | 20,395 | | | | -108.8 | % |
| Operating margin | | | -1.5 | % | | | 13.5 | | % | |
| Interest and debt expense | | | 3,337 | | | | 3,193 | | | | 4.5 | % |
| Investment income | | | (319 | ) | | | (291 | ) | | | 9.6 | % |
| Foreign currency exchange (gain) loss | | | (408 | ) | | | 50 | | | | -916.0 | % |
| Other income | | | (41 | ) | | | (822 | ) | | | -95.0 | % |
| (Loss) income from continuing operations before | | | | | | | | | | | | |
| income tax expense | | | (4,355 | ) | | | 18,265 | | | | -123.8 | % |
| Income tax (benefit) expense | | | (1,824 | ) | | | 6,499 | | | | -128.1 | % |
| (Loss) income from continuing operations | | | (2,531 | ) | | | 11,766 | | | | -121.5 | % |
| Income (loss) from discontinued operations, net of tax | | | 133 | | | | (2,096 | ) | | | -106.3 | % |
| Net (loss) income | | $ | (2,398 | ) | | $ | 9,670 | | | | -124.8 | % |
| | | | | | | | | | | | | |
| Average basic shares outstanding | | | 18,915 | | | | 18,819 | | | | 0.5 | % |
| Basic (loss) income per share: | | | | | | | | | | | | |
| Continuing operations | | $ | (0.14 | ) | | $ | 0.62 | | | | -122.6 | % |
| Discontinued operations | | | 0.01 | | | | (0.11 | ) | | | | |
| Net (loss) income | | $ | (0.13 | ) | | $ | 0.51 | | | | -125.5 | % |
| | | | | | | | | | | | | |
| Average diluted shares outstanding | | | 18,915 | | | | 19,222 | | | | -1.6 | % |
| Diluted (loss) income per share: | | | | | | | | | | | | |
| Continuing operations | | $ | (0.14 | ) | | $ | 0.61 | | | | -123.0 | % |
| Discontinued operations | | | 0.01 | | | | (0.11 | ) | | | | |
| Net (loss) income | | $ | (0.13 | ) | | $ | 0.50 | | | | -126.0 | % |
Columbus McKinnon Reports Fiscal 2010 First Quarter Results
July 23, 2009
| COLUMBUS McKINNON CORPORATION | |
| Condensed Consolidated Balance Sheets - UNAUDITED | |
| (In thousands) | | | | | | |
| | | June 30, 2009 | | | March 31, 2009 | |
| | | | | | | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 44,198 | | | $ | 39,236 | |
| Trade accounts receivable | | | 73,309 | | | | 80,168 | |
| Inventories | | | 94,943 | | | | 100,621 | |
| Prepaid expenses | | | 21,076 | | | | 18,115 | |
| Total current assets | | | 233,526 | | | | 238,140 | |
| | | | | | | | | |
| Net property, plant, and equipment | | | 61,913 | | | | 62,102 | |
| Goodwill and other intangibles, net | | | 127,800 | | | | 125,080 | |
| Marketable securities | | | 30,589 | | | | 28,828 | |
| Deferred taxes on income | | | 31,695 | | | | 32,521 | |
| Other assets | | | 5,583 | | | | 4,993 | |
| Total assets | | $ | 491,106 | | | $ | 491,664 | |
| | | | | | | | | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Notes payable to banks | | $ | 6,327 | | | $ | 4,787 | |
| Trade accounts payable | | | 25,171 | | | | 33,298 | |
| Accrued liabilities | | | 43,589 | | | | 50,443 | |
| Restructuring reserve | | | 3,995 | | | | 1,302 | |
| Current portion of long-term debt | | | 1,182 | | | | 1,171 | |
| Total current liabilities | | | 80,264 | | | | 91,001 | |
| | | | | | | | | |
| Senior debt, less current portion | | | 7,086 | | | | 7,073 | |
| Subordinated debt | | | 124,855 | | | | 124,855 | |
| Other non-current liabilities | | | 92,013 | | | | 86,881 | |
| Total liabilities | | | 304,218 | | | | 309,810 | |
| | | | | | | | | |
| Shareholders’ equity: | | | | | | | | |
| Common stock | | | 190 | | | | 190 | |
| Additional paid-in capital | | | 180,979 | | | | 180,327 | |
| Retained earnings | | | 39,493 | | | | 41,891 | |
| ESOP debt guarantee | | | (2,193 | ) | | | (2,309 | ) |
| Accumulated other comprehensive loss | | | (31,581 | ) | | | (38,245 | ) |
| Total shareholders’ equity | | | 186,888 | | | | 181,854 | |
| Total liabilities and shareholders’ equity | | $ | 491,106 | | | $ | 491,664 | |
Columbus McKinnon Reports Fiscal 2010 First Quarter Results
July 23, 2009
| COLUMBUS McKINNON CORPORATION | |
| Condensed Consolidated Statements of Cash Flows - UNAUDITED | |
| | |
| (In thousands) | | | | | | |
| | | Three Months Ended | |
| | | June 30, 2009 | | | June 28, 2008 | |
| | | | | | | |
| Operating activities: | | | | | | |
| Net (loss) income | | $ | (2,398 | ) | | $ | 9,670 | |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | | | | |
| (Gain) loss from discontinued operations | | | (133 | ) | | | 2,096 | |
| Depreciation and amortization | | | 3,059 | | | | 2,172 | |
| Deferred income taxes | | | (1,534 | ) | | | 1,180 | |
| Gain on sale of investments/real estate | | | (49 | ) | | | (48 | ) |
| Stock option expense | | | 501 | | | | 408 | |
| Amortization/write-off of deferred financing costs | | | 148 | | | | 133 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Trade accounts receivable | | | 7,163 | | | | 247 | |
| Inventories | | | 6,434 | | | | (4,613 | ) |
| Prepaid expenses | | | (556 | ) | | | (1,236 | ) |
| Other assets | | | (584 | ) | | | 1,244 | |
| Trade accounts payable | | | (8,069 | ) | | | (551 | ) |
| Accrued and non-current liabilities | | | 889 | | | | 1,347 | |
| Net cash provided by operating activities from continuing operations | | | 4,871 | | | | 12,049 | |
| Net cash used by operating activities from discontinued operations | | | - | | | | (2,218 | ) |
| Net cash provided by operating activities | | | 4,871 | | | | 9,831 | |
| | | | | | | | | |
| Investing activities: | | | | | | | | |
| Purchase of marketable securities, net | | | (987 | ) | | | (497 | ) |
| Capital expenditures | | | (1,250 | ) | | | (2,118 | ) |
| Net cash used by investing activities from continuing operations | | | (2,237 | ) | | | (2,615 | ) |
| Net cash provided by investing activities from discontinued operations | | | 133 | | | | 139 | |
| Net cash used by investing activities | | | (2,104 | ) | | | (2,476 | ) |
| | | | | | | | | |
| Financing activities: | | | | | | | | |
| Proceeds from stock options exercised | | | 176 | | | | 221 | |
| Net borrowings (payments) under revolving line-of-credit agreements | | | 1,552 | | | | (8 | ) |
| Repayment of debt | | | - | | | | (74 | ) |
| Other | | | (72 | ) | | | 317 | |
| Net cash provided by financing activities from continuing operations | | | 1,656 | | | | 456 | |
| Net cash provided by financing activities from discontinued operations | | | - | | | | 579 | |
| Net cash provided by financing activities | | | 1,656 | | | | 1,035 | |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | 539 | | | | 450 | |
| | | | | | | | | |
| Net change in cash and cash equivalents | | | 4,962 | | | | 8,840 | |
| Cash and cash equivalents at beginning of year | | | 39,236 | | | | 75,994 | |
| Cash and cash equivalents at end of period | | $ | 44,198 | | | $ | 84,834 | |
Columbus McKinnon Reports Fiscal 2010 First Quarter Results
July 23, 2009
| COLUMBUS McKINNON CORPORATION |
| Additional Data - UNAUDITED |
| | | | | | | | | | | | | | |
| | | | June 30, 2009 | | | | June 29, 2008 | | | | March 31, 2009 | | |
| | | | | | | | | | | | | | |
| Backlog (in millions) | | | $ | 68.6 | | | | $ | 63.9 | | | | $ | 70.1 | | |
| | | | | | | | | | | | | | | | | |
| Trade accounts receivable | | | | | | | | | | | | | | | | |
| days sales outstanding | | | | 56.1 | | days | | | 56.4 | | days | | | 53.7 | | days |
| | | | | | | | | | | | | | | | | |
| Inventory turns per year | | | | | | | | | | | | | | | | |
| (based on cost of products sold) | | | | 3.8 | | turns | | | 4.6 | | turns | | | 4.0 | | turns |
| Days' inventory | | | | 96.7 | | days | | | 79.2 | | days | | | 90.9 | | days |
| | | | | | | | | | | | | | | | | |
| Trade accounts payable | | | | | | | | | | | | | | | | |
| days payables outstanding | | | | 25.6 | | days | | | 30.7 | | days | | | 30.0 | | days |
| | | | | | | | | | | | | | | | | |
| Working capital as a % of sales | | | | 20.3 | | % | | | 20.7 | | % | | | 18.8 | | % |
| | | | | | | | | | | | | | | | | |
| Debt to total capitalization percentage | | | 42.7 | | % | | | 30.3 | | % | | | 43.1 | | % |
| Debt, net of cash, to total capitalization | | | 33.8 | | % | | | 13.6 | | % | | | 35.2 | | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Shipping Days by Quarter |
| | | | | | | | | | | | | | | | | |
| | Q1 | | | Q2 | | Q3 | | | Q4 | | Total | | | | | |
| | | | | | | | | | | | | | | | | |
| FY10 | 63 | | | 64 | | 60 | | | 63 | | 250 | | | | | |
| | | | | | | | | | | | | | | | | |
| FY09 | 63 | | | 63 | | 60 | | | 65 | | 251 | | | | | |
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