NEWS RELEASE
CONTACT:
Robert R. Friedl
Vice President - Finance and Chief Financial Officer
Columbus McKinnon Corporation
716-689-5479
COLUMBUS MCKINNON REPORTS STRONG IMPROVEMENT IN MARGINS
ON 14% INCREASE IN SALES
o GROSS MARGIN IMPROVES 160 BASIS POINTS
o NET INCOME INCREASES OVER 500%
o REPORTED EPS FOR THE FIRST QUARTER FY2005 OF $.23 VS. $.03
o OPERATIONAL LEVERAGE GAINS REALIZED THROUGH RATIONALIZATION AND LEAN
MANUFACTURING
AMHERST, N.Y., July 27, 2004 -- Columbus McKinnon Corporation (NASDAQ: CMCO), a
leading designer and manufacturer of material handling products, today reported
net sales of $121.7 million for its fiscal 2005 first quarter, which ended July
4, 2004. This is an increase of $15.1 million, or 14.2%, over last year's first
quarter net sales of $106.6 million. Last year's first quarter included sales of
$2.3 million from operations that have since been divested. Adjusting for
divestitures and currency translation, sales increased by 14.8% over last year's
first quarter. Driving the improvement in sales was the core Products segment
which produces the Company's leading products of hoists, chain, forged
attachments and cranes. Most of the growth occurred in the U.S. supported by the
strengthening economy, increase in industrial activity and improving industrial
capacity utilization. This year's first quarter also included three additional
shipping days compared with the same period last year.
Columbus McKinnon's net income for the first quarter of fiscal 2005 grew 573.7%
to $3.4 million, or $0.23 per diluted share, an improvement of $2.9 million, or
$0.20 per diluted share, from net income of $0.5 million, or $0.03 per diluted
share, in the year-ago quarter. Contributing to the growth in net income was an
improvement in margins. Gross profit margin for the first quarter this year was
25.9%, up from 24.3% in last year's first quarter reflecting the effects of
operational leverage from higher sales and improved operational efficiencies.
Selling, general and administrative expenses were 16.6% of sales for both first
quarters. Also contributing to higher net income is reduced interest and debt
expense of $2.6 million due to refinancing of debentures in 2004.
Timothy T. Tevens, President and Chief Executive Officer, commented, "Columbus
McKinnon's leading market position in the U.S. for hoists and chain enabled us
to achieve sales in the first quarter that were our highest in almost three
years. We have had double-digit volume improvements in most of our major product
lines."
He went on to say, "More significantly, we were able to leverage the efforts we
have made over the last two years to measurably improve our operational
efficiency and reduce our cost structure through facility rationalization and
lean manufacturing initiatives. The strong margins in our Products segment
clearly demonstrate the success of our efforts."
Results for this reported period reflect an effective tax rate of 17.8% due to
the use of $1.6 million, or $0.04 per diluted share, in U.S. Federal tax net
operating loss carryforward benefits in the quarter that had been fully
- MORE -
Columbus McKinnon Reports String Improvement on Margins
July 27, 2004
Page 2
reserved. At July 4, 2004, the Company had deferred tax assets of approximately
$39.2 million that are related to net operating loss carryforwards of $112.0
million which expire in fiscal 2023 and 2024. These deferred tax assets were
recorded and fully reserved in fiscal 2004 as the result of a deduction taken on
the Company's March 31, 2003 federal tax return. The deduction was associated
with the loss on the sale of a systems business, ASI, in May 2002.
Results for the first quarter of last year included a net $3.3 million pre-tax
gain related to the sale of real estate recorded as interest and other income
and expense, a $1.2 million pre-tax charge for credit agreement amendments
recorded in interest and debt expense and pre-tax restructuring charges of $0.8
million.
Mr. Tevens added, "Our core Products segment, which contributed 89% to net
sales, had a strong quarter with sales up 18% and a gross profit margin of 27%,
and the profitability of our Solutions segment improved on higher margins and
flat sales after adjusting for divestitures."
Funded debt, net of $12.1 million of cash at July 4, 2004, was $281.5 million, a
$0.8 million reduction from $282.3 million at March 31, 2004, and a $23.8
million reduction from $305.3 million a year ago. The percentage of debt to
total capitalization has improved 270 basis points and 70 basis points when
compared with the end of last year's first quarter and March 31, 2004,
respectively.
Net cash provided by operations was $1.1 million for the fiscal 2005 first
quarter compared with $7.0 million in the fiscal 2004 first quarter. Inventory
turns have improved to over 5 times inventory despite the increase in inventory
balances due to higher steel prices. Net cash provided by operations in last
year's first quarter included a $10.6 million cash tax refund related to the May
2002 sale of the former ASI business.
Mr. Tevens concluded, "We remain focused on cost control and debt reduction
while we continue to work toward the sale of less synergistic divisions and
surplus real estate. Looking forward, the combination of a recovering industrial
economy, new product introductions and geographic expansion, a lower cost
structure and a more favorable tax situation are positive trends for Columbus
McKinnon. These are offset by some negative global and domestic trends,
including continued steel price increases, rising interest rates and uncertainty
in end-user markets around the globe. On the whole, we are encouraged, remaining
cautiously optimistic for the future."
PRODUCTS SEGMENT
Products segment sales, which represent 89% of Columbus McKinnon's consolidated
net sales, increased 18% in the first quarter of fiscal 2005 to $108.6 million
compared with the same period last year. Gross margin for this segment improved
to 26.9% in the reported period compared with 25.8% reflecting the operating
leverage gained through higher sales. Operating margin before amortization and
restructuring charges was 10.1% for this reported period, up 120 basis points
from the fiscal 2004 first quarter.
Backlog for the Products segment was $45.4 million at July 4, 2004. This is
relatively flat with backlog of $45.3 million at March 31, 2004 and down $0.9
million from backlog at June 29, 2003. If the backlog associated with businesses
that have been divested are excluded from the June 29, 2003 backlog, the
Products segment backlog was up $5.7 million from last year.
SOLUTIONS SEGMENT
Net sales for this segment were $13.1 million in the fiscal 2005 first quarter,
down 10.3% from sales of $14.6 million in the same period last year. Profit
margins were much improved despite lower sales. Gross margin was 16.8% and
operating margin (before amortization and restructuring charges) was 2.6% for
Columbus McKinnon Reports String Improvement on Margins
July 27, 2004
Page 3
this reported period, up 190 and 220 basis points, respectively from margins in
the same period last year.
Backlog for the Solutions segment at July 4, 2004 was $18.2 million, up from
backlog of $9.2 million at March 31, 2004 and $9.4 million at June 29, 2003. The
higher backlog includes a new contract recently awarded to Univeyor in the first
quarter. For this segment, the time cycle for backlog to convert to sales can
range from one to six months, on average.
ABOUT COLUMBUS MCKINNON
Columbus McKinnon is a leading worldwide designer and manufacturer of material
handling products, systems and services, which efficiently and ergonomically
move, lift, position or secure material. Key products include hoists, cranes,
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. Comprehensive information on Columbus
McKinnon is available on its web site at HTTP://WWW.CMWORKS.COM.
TELECONFERENCE/WEBCAST
A teleconference/webcast has been scheduled for July 27, 2004 at 10:00 AM
Eastern Time at which the executive officers 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 and asking to be placed in the "Columbus McKinnon Quarterly
Conference Call" and identifying conference leader, "Tim Tevens" when asked. The
webcast will be accessible at Columbus McKinnon's web site:
HTTP://WWW.CMWORKS.COM. It will also be broadcast over the FirstCall Events web
site at: Thomson Financial Network at:
HTTP://PHX.CORPORATE-IR.NET/PLAYERLINK.ZHTML?C=118001&S=WM&E=916781.
- -------------------------------------------------------------------
You must have Windows Media Player or RealPlayer's audio software on your
computer to listen to the call. Both are available for downloading on the
Columbus McKinnon web site and the FirstCall Events web site at no charge.
An audio recording of the call will be available two hours after its completion
and until September 27, 2004 by dialing 1-800-925-0870. Alternatively, you may
access an archive of the call until September 27, 2004 on Columbus McKinnon's
web site at: HTTP://WWW.CMWORKS.COM/INVREL/PRESENTATION.ASP. The call will also
be archived on the FirstCall Events web site until September 27, 2004.
SAFE HARBOR STATEMENT
This press 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 ability of the Company to sell
less synergistic assets and surplus real estate, the likelihood that the Company
can utilize its NOLs, the effect of operating leverage, 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 String Improvement on Margins
July 27, 2004
Page 4
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
-------------------------------
JULY 4, 2004 JUNE 29, 2003
------------ -------------
NET SALES $ 121,658 $ 106,575
Cost of products sold 90,207 80,677
-----------------------------
Gross profit 31,451 25,898
Gross profit margin 25.9% 24.3%
Selling, general and administrative expense 20,185 17,689
Restructuring charges 33 801
Amortization 77 142
-----------------------------
INCOME FROM OPERATIONS 11,156 7,266
-----------------------------
Interest and debt expense 7,048 9,672
Gain on sale of real estate - 3,282
Other (18) (188)
-----------------------------
Interest and other income (expense) net (18) 3,094
-----------------------------
Income before income taxes 4,090 688
Income tax expense 728 189
-----------------------------
NET INCOME $ 3,362 $ 499
=============================
Average basic shares outstanding 14,576 14,539
Average diluted shares outstanding 14,600 14,539
BASIC AND DILUTED INCOME PER SHARE $ 0.23 $ 0.03
Columbus McKinnon Reports String Improvement on Margins
July 27, 2004
Page 5
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) (AUDITED)
JULY 4, 2004 MARCH 31, 2004
------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 12,064 $ 11,101
Trade accounts receivable 81,802 84,374
Unbilled revenues 5,136 5,160
Inventories 71,161 69,119
Net assets held for sale 2,570 2,790
Prepaid expenses 16,605 15,486
-----------------------------
Total current assets 189,338 188,030
-----------------------------
Net property, plant, and equipment 57,392 58,773
Goodwill and other intangibles, net 192,621 192,963
Marketable securities 25,066 25,355
Deferred taxes on income 4,933 6,388
Other assets 1,931 1,854
-----------------------------
TOTAL ASSETS $ 471,281 $ 473,363
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 5,437 $ 5,471
Trade accounts payable 24,928 30,076
Accrued liabilities 50,578 48,416
Restructuring reserve 370 561
Current portion of long-term debt 3,386 2,205
-----------------------------
Total current liabilities 84,699 86,729
-----------------------------
Senior debt, less current portion 120,613 121,603
Subordinated debt 164,141 164,131
Other non-current liabilities 35,512 37,922
------------------------------
Total liabilities 404,965 410,385
------------------------------
Shareholders' equity:
Common stock 149 149
Additional paid-in capital 103,827 103,914
Accumulated deficit (21,992) (25,354)
ESOP debt guarantee (4,973) (5,116)
Unearned restricted stock (31) (39)
Accumulated other comprehensive loss (10,664) (10,576)
------------------------------
Total shareholders' equity 66,316 62,978
------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 471,281 $ 473,363
==============================
Columbus McKinnon Reports String Improvement on Margins
July 27, 2004
Page 6
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
THREE MONTHS ENDED
------------------------------
JULY 4, 2004 JUNE 29, 2003
------------ ------------
OPERATING ACTIVITIES:
Net income $ 3,362 $ 499
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,325 2,735
Deferred income taxes 1,455 498
Gain on sale of real estate/investments - (3,282)
Other 369 496
Changes in operating assets and liabilities:
Trade accounts receivable 2,582 2,286
Unbilled revenues and excess billings 92 (1,152)
Inventories (2,080) 4,827
Prepaid expenses (1,118) (1,717)
Other assets (129) (66)
Trade accounts payable (5,207) (6,030)
Accrued and non-current liabilities (519) 7,885
------------------------------
Net cash provided by operating activities 1,132 6,979
------------------------------
INVESTING ACTIVITIES:
(Purchase) sale of marketable securities, net 208 (415)
Capital expenditures (838) (1,499)
Proceeds from net assets held for sale 220 3,282
------------------------------
Net cash (used in) provided by investing activities (410) 1,368
------------------------------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving
line-of-credit agreements 1,175 16,602
Repayment of debt (1,078) (21,867)
Deferred financing costs incurred (11) (205)
Other 143 147
------------------------------
Net cash provided by (used in) financing activities 229 (5,323)
------------------------------
Effect of exchange rate changes on cash 12 259
------------------------------
Net change in cash and cash equivalents 963 3,283
Cash and cash equivalents at beginning of year 11,101 1,943
------------------------------
Cash and cash equivalents at end of period $ 12,064 $ 5,226
==============================
Columbus McKinnon Reports String Improvement on Margins
July 27, 2004
Page 7
COLUMBUS MCKINNON CORPORATION
BUSINESS SEGMENT DATA
($ IN THOUSANDS)
PRODUCTS SOLUTIONS CONSOLIDATED
-------- --------- ------------
QUARTER ENDED JULY 4, 2004
Net sales $108,557 $ 13,101 $ 121,658
Gross profit 29,245 2,206 31,451
Margin 26.9% 16.8% 25.9%
Income from operations before
amortization and restructuring charges 10,921 345 11,266
Margin 10.1% 2.6% 9.3%
QUARTER ENDED JUNE 29, 2003
Net sales $91,957 $ 14,618 $ 106,575
Gross profit 23,719 2,179 25,898
Margin 25.8% 14.9% 24.3%
Income from operations before
amortization and restructuring charges 8,148 61 8,209
Margin 8.9% 0.4% 7.7%
ADDITIONAL DATA
JULY 4, 2004 JUNE 29, 2003
------------ -------------
BACKLOG (IN MILLIONS)
Products segment $ 45.4 $ 46.3
Solutions segment $ 18.2 $ 9.4
TRADE ACCOUNTS RECEIVABLE
days sales outstanding 60.5 65.8
INVENTORY TURNS PER YEAR
(based on cost of products sold) 5.1x 4.3x
TRADE ACCOUNTS PAYABLE
days payables outstanding 24.9 26.1
DEBT TO TOTAL CAPITALIZATION PERCENTAGE 81.6% 84.3%
#####