NEWS RELEASE
CONTACT:
Robert R. Friedl
Vice President - Finance and Chief Financial Officer
Columbus McKinnon Corporation
716-689-5479
COLUMBUS MCKINNON REPORTS 73% GROWTH IN NET INCOME ON 15% INCREASE IN SALES FOR
SECOND QUARTER FISCAL 2005, INCOME FROM OPERATIONS INCREASES 38%
AMHERST, N.Y., October 26, 2004 -- Columbus McKinnon Corporation (NASDAQ: CMCO),
a leading designer and manufacturer of material handling products, today
reported net sales increased $16.1 million, or 15% to $122.7 million for its
fiscal 2005 second quarter, which ended October 3, 2004. Net sales were $106.6
million in last year's second quarter.
Columbus McKinnon's net income for the second quarter of fiscal 2005 increased
73% to $2.6 million, or $0.18 per diluted share, up $1.1 million, or $0.08 per
diluted share, from the same period last year. Net income for the second quarter
fiscal year 2004 was $1.5 million, or $0.10 per diluted share.
HIGHLIGHTS OF THE QUARTER
- -------------------------
o Both business segments, Products and Solutions, had mid-teen growth in
sales
o Gross margin improved to 24.4% compared with 23.5% in the prior year
o Selling, general and administrative expenses held at 16% of sales
o Net income benefited from a lower tax rate and income from discontinued
operations
o Inventory turns improved to 5.0X from 4.4X in the prior year's second
quarter
o Debt to total capitalization improved to 80.9% from 83.5%
Timothy T. Tevens, President and Chief Executive Officer of Columbus McKinnon,
commented, "We continue to see strengthening demand for our products and
services as U.S. industrial capacity utilization has trended upward from a low
of 72% in May of 2003 to its current level of 76%. Columbus McKinnon's improved
operating leverage is evident as a result of our strengthened sales. Our efforts
to reduce costs, effect lean manufacturing techniques and rationalize operations
are paying off. Continued growth in sales should translate to even greater
margin improvement over time."
Net income for this quarter included $0.2 million of income from discontinued
operations. This was cash received as principal repayments on a note receivable
held by the Company from the sale of our Automatic Systems, Inc. business
recorded in March 2002. The note is fully reserved, and principal payments of
$0.2 million are due quarterly through May 2012.
SECOND QUARTER REVIEW
- ---------------------
Growth in sales of $16.1 million for the second quarter of fiscal 2005 compared
with the second quarter of 2004 was driven by the improving industrial economy
and higher end-user demand for CM products world-wide. Currency translation
provided a $2.2 million positive adjustment to this year's second quarter, while
last year's second quarter had the benefit of $1.9 million in sales from
previously owned businesses. When adjusted for both currency and divestitures,
net sales grew 14.8%.
Gross margin improved in the second quarter of 2005 to 24.4% when compared with
23.5% in the prior year as a result of higher sales and improved operating
efficiencies. On a sequential basis, gross margin declined from 25.9% in the
first quarter of fiscal 2005 primarily because of product and service contract
mix in certain businesses, which had lower margins and, to a lesser extent, due
to an increased reserve for product liability. Increased steel costs were mostly
passed on to customers in the form of price increases or surcharges. Any steel
costs that were not passed on did not materially impact the gross margin.
Selling, general and administrative (SG&A) expenses increased $2.5 million from
last year's second quarter as a result of increased costs associated with
currency translations of approximately $0.5 million, implementation of Sarbanes
Oxley requirements, higher incentive compensation accruals related to improved
performance, and higher commissions on higher sales. Sequentially from the first
quarter of fiscal 2005, SG&A expenses were relatively flat.
Lower interest expense in last year's second quarter reflects the reversal of
$1.1 million in previously accrued payment-in-kind interest charges, upon our
July 2003 refinancing. The current quarter's interest charges, in line with the
first quarter of fiscal 2005, are more reflective of the expected levels of
interest expense for fiscal 2005.
The effective tax rate for the second quarter of 2005 was 29.2% compared with
46.2% last year. This quarter's income tax expense was favorably impacted by the
use of $1.1 million in U.S. Federal income tax net operating loss carryforward
benefits in the quarter, or $0.03 per diluted share. Compared with the first
quarter of fiscal 2005, the effective tax rate increased from 17.8% because of
the higher proportion of non-U.S. taxable income to U.S. taxable income.
Working capital requirements in the second quarter of fiscal 2005 were higher
when compared with 2004 as a result of the timing of payments on accrued
liabilities and increased inventory. Higher inventory levels reflect the
combination of an increased level of sales and expanded safety stock of raw
materials, specifically steel.
During the quarter, we repurchased approximately $5.6 million in subordinated
debt with excess cash from operations. Certain covenants restrict our
flexibility to make such repurchases.
SIX-MONTH REVIEW
- ----------------
Net sales for the first six months of fiscal 2005 were $244.4 million, an
increase of 14.6% reflecting an improved industrial economy and price increases,
as previously mentioned for the three-month period. Net income for the first
half of fiscal 2005 of $6.0 million, or $0.41 per diluted share, was up almost
three-fold as a result of stronger margins, lower interest and debt expense and
reduced restructuring charges. Year-to-date income tax expense was favorably
impacted by the use of $2.7 million in U.S. Federal income tax net operating
loss carryforward benefits, or $0.06 per diluted share.
OUTLOOK
- -------
Mr. Tevens commented, "The combination of improving demand and increased prices
should result in continued comparable growth although its magnitude may be less
as we move into the latter half of fiscal 2005 given the trend in strengthened
sales that began in the last half of fiscal 2004. We have seen bookings growth
in excess of 20% through August and September and high single digit growth thus
far in October."
He continued, "We believe we are effectively handling the rising price
environment of raw materials, especially steel, which makes up about 10% of our
cost of products sold. We are strengthening our non-strategic operations to
improve their value for sale and are employing continuous improvements within
all of our operations. As revenue continues to grow, our operating leverage
should continue to expand our operating margins closer to historical levels.
However, we continue to remain cautious as external forces, including the price
of oil and potentially increasing interest rates, may negatively affect the
general domestic and international industrial economies."
PRODUCTS SEGMENT
- ----------------
Products segment sales, which represent 89% of Columbus McKinnon's consolidated
net sales, increased 15% in the second quarter of fiscal 2005 to $109.0 million
compared with $94.6 million in the same period last year. Gross margin for this
segment was 25.5% in the reported period compared with 25.0% in last year's
second quarter and compared with 26.9% in the first quarter of fiscal 2005. The
first quarter of fiscal 2005 had higher gross margins than the second quarter
due to the mix in products and contracts, the variance in vacation days from
quarter to quarter and additional costs for product liability in the second
quarter. The operating margin before amortization and restructuring charges was
8.9% for this reporting period, up from 8.5% in the fiscal 2004 second quarter
and down from 10.1% in the first quarter this year for the previously noted
reasons.
Backlog for the Products segment was $47.2 million at October 3, 2004. This
level is relatively flat with backlog of $46.8 million at September 28, 2003,
but up $1.8 million from backlog at July 4, 2004. Excluding the backlog
associated with divested business from the September 28, 2003 backlog, the
Products segment backlog was up $7.1 million from last year, or 18%. The cycle
time for this segment to convert backlog to sales can range from days to several
months.
SOLUTIONS SEGMENT
- -----------------
Net sales for this segment were $13.7 million in the fiscal 2005 second quarter,
up $1.7 million, or 14%, from sales of $12.0 million in the same period last
year. Gross margin was 15.6% compared with 11.8% last year, and operating margin
before amortization and restructuring charges was 3.4% for this reported period
compared with a 1.9% loss in last year's second quarter. Compared with the first
quarter of fiscal 2005, gross margin declined from 16.8% because of the normal
summer shutdown of our European conveyor business, while operating margin
improved from 2.6%.
Backlog for the Solutions segment at October 3, 2004 was $20.6 million, up from
backlog of $10.3 million at September 28, 2003 and $18.2 million at July 4,
2004. The higher backlog includes additional contracts at our European conveyor
business. For this segment, the cycle time 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 .
TELECONFERENCE/WEBCAST
- ----------------------
A teleconference and webcast have been scheduled for October 26, 2004 at 10:00
AM Eastern Time at which the management of Columbus McKinnon will discuss the
Company's financial results and strategy. Interested parties can participate in
the teleconference by dialing 1-888-459-1579, and asking to be placed in the
"Columbus McKinnon Quarterly Conference Call" and providing the password
"Columbus McKinnon" and identifying conference leader "Tim Tevens" when asked.
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 December 27, 2004 by dialing 1-866-442-2093.
Alternatively, you may access an archive of the call until December 27, 2004 on
Columbus McKinnon's web site at: HTTP://WWW.CMWORKS.COM/INVREL/PRESENTATION.ASP.
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, the likelihood that the Company can utilize its NOLs,
the effect of operating leverage, the pace of bookings relative to shipments,
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 CORPORATION
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
THREE MONTHS ENDED
OCTOBER 3, SEPTEMBER 28,
2004 2003 CHANGE
---- ---- ------
NET SALES $ 122,711 $ 106,584 15.1%
Cost of products sold 92,768 81,517 13.8%
---------------------------------
Gross profit 29,943 25,067 19.5%
Gross profit margin 24.4% 23.5%
Selling, general and administrative expense 19,787 17,248 14.7%
Restructuring charges 184 574 -67.9%
Amortization 76 78 -2.6%
---------------------------------
INCOME FROM OPERATIONS 9,896 7,167 38.1%
---------------------------------
Interest and debt expense 7,141 5,730 24.6%
Other (607) (1,353) -55.1%
---------------------------------
Interest and other (income) expense net 6,534 4,377 49.3%
---------------------------------
Income from cont. ops. before income tax expense 3,362 2,790 20.5%
Income tax expense 982 1,290 -23.9%
---------------------------------
Income from cont. ops. 2,380 1,500 58.7%
Income from disc. ops. 214 -
---------------------------------
NET INCOME $ 2,594 $ 1,500 72.9%
=================================
Average basic shares outstanding 14,585 14,549 0.2%
Basic income per share:
Continuing operations $ 0.17 $ 0.10 70.0%
Discontinued operations 0.01 -
---------------------------------
Net Income $ 0.18 $ 0.10 80.0%
=================================
Average diluted shares outstanding
14,800 14,549 1.7%
Diluted income per share:
Continuing operations $ 0.17 $ 0.10 70.0%
Discontinued operations 0.01 -
---------------------------------
Net Income $ 0.18 $ 0.10 80.0%
=================================
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
SIX MONTHS ENDED
----------------
OCTOBER 3, SEPTEMBER 28,
2004 2003 CHANGE
---- ---- ------
NET SALES $ 244,369 $ 213,159 14.6%
Cost of products sold 182,975 162,194 12.8%
---------------------------------
Gross profit 61,394 50,965 20.5%
Gross profit margin 25.1% 23.9%
Selling, general and administrative expense 39,972 34,937 14.4%
Restructuring charges 217 1,375 -84.2%
Amortization 153 220 -30.5%
---------------------------------
INCOME FROM OPERATIONS 21,052 14,433 45.9%
---------------------------------
Interest and debt expense 14,189 15,402 -7.9%
Gain on sale of real estate - (3,062) -100.0%
Other (589) (1,385) -57.5%
---------------------------------
Interest and other (income) expense net 13,600 10,955 24.1%
---------------------------------
Income from cont. ops. before income tax expense 7,452 3,478 114.3%
Income tax expense 1,710 1,479 15.6%
---------------------------------
Income from cont. ops. 5,742 1,999 187.2%
Income from disc. ops. 214 -
---------------------------------
NET INCOME $ 5,956 $ 1,999 197.9%
=================================
Average basic shares outstanding
14,581 14,544 0.3%
Basic income per share:
Continuing operations $ 0.40 $ 0.14 185.7%
Discontinued operations 0.01 -
---------------------------------
Net Income $ 0.41 $ 0.14 192.9%
=================================
Average diluted shares outstanding
14,698 14,544 1.1%
Diluted income per share:
Continuing operations $ 0.40 $ 0.14 185.7%
Discontinued operations 0.01 -
---------------------------------
Net Income $ 0.41 $ 0.14 192.9%
=================================
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) (AUDITED)
OCTOBER 3, 2004 MARCH 31, 2004
---------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 9,883 $ 11,101
Trade accounts receivable 84,464 84,374
Unbilled revenues 7,477 5,160
Inventories 74,850 69,119
Net assets held for sale 2,490 2,790
Prepaid expenses 14,156 15,486
---------------------------------------
Total current assets 193,320 188,030
---------------------------------------
Net property, plant, and equipment 56,447 58,773
Goodwill and other intangibles, net 192,355 192,963
Marketable securities 22,982 25,355
Deferred taxes on income 5,113 6,388
Other assets 1,902 1,854
---------------------------------------
TOTAL ASSETS $ 472,119 $ 473,363
=======================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 5,125 $ 5,471
Trade accounts payable 25,534 30,076
Accrued liabilities 47,617 48,416
Restructuring reserve 361 561
Current portion of long-term debt 10,595 2,205
---------------------------------------
Total current liabilities 89,232 86,729
---------------------------------------
Senior debt, less current portion 120,075 121,603
Subordinated debt 158,552 164,131
Other non-current liabilities 34,622 37,922
---------------------------------------
Total liabilities 402,481 410,385
---------------------------------------
Shareholders' equity:
Common stock 149 149
Additional paid-in capital 103,760 103,914
Accumulated deficit (19,398) (25,354)
ESOP debt guarantee (4,830) (5,116)
Unearned restricted stock (23) (39)
Accumulated other comprehensive loss (10,020) (10,576)
---------------------------------------
Total shareholders' equity 69,638 62,978
---------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 472,119 $ 473,363
=======================================
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
SIX MONTHS ENDED
----------------------------------------
OCTOBER 3, 2004 SEPTEMBER 28, 2003
---------------------------------------
OPERATING ACTIVITIES:
Income from continuing operations $ 5,742 $ 1,999
Adjustments to reconcile income from continuing
operations to net cash (used in)
provided by operating activities:
Depreciation and amortization 4,652 5,375
Deferred income taxes 1,275 626
Gain on sale of real estate/investments - (3,282)
Other 655 192
Changes in operating assets and liabilities:
Trade accounts receivable 578 5,225
Unbilled revenues and excess billings (2,175) (970)
Inventories (5,257) 6,863
Prepaid expenses 1,342 (1,596)
Other assets (135) (241)
Trade accounts payable (4,718) (3,469)
Accrued and non-current liabilities (4,781) 13,843
-------------------------------------
Net cash (used in) provided by operating activities (2,822) 24,565
-------------------------------------
INVESTING ACTIVITIES:
Sale (purchase) of marketable securities, net 1,991 (811)
Capital expenditures (1,948) (2,094)
Proceeds from net assets held for sale 300 3,282
-------------------------------------
Net cash provided by investing activities 343 377
-------------------------------------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving
line-of-credit agreements 8,036 (1,418)
Repayment of debt (7,173) (123,878)
Proceeds from issuance of long-term debt - 115,000
Deferred financing costs incurred (11) (4,011)
Other 286 294
-------------------------------------
Net cash provided by (used in) financing activities 1,138 (14,013)
-------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (91) 298
-------------------------------------
Net cash (used in) provided by continuing operations (1,432) 11,227
NET CASH PROVIDED BY DISCONTINUED OPERATIONS 214 -
Net change in cash and cash equivalents (1,218) 11,227
Cash and cash equivalents at beginning of year 11,101 1,943
-------------------------------------
Cash and cash equivalents at end of period $ 9,883 $ 13,170
=====================================
COLUMBUS MCKINNON CORPORATION
BUSINESS SEGMENT DATA
($ IN THOUSANDS)
PRODUCTS SOLUTIONS CONSOLIDATED
-------- --------- ------------
QUARTER ENDED OCTOBER 3, 2004
Net sales $108,981 $ 13,730 $ 122,711
Gross profit 27,805 2,138 29,943
Margin 25.5% 15.6% 24.4%
Income from operations before amortization
and restructuring charges 9,683 473 10,156
Margin 8.9% 3.4% 8.3%
QUARTER ENDED SEPTEMBER 28, 2003
Net sales $ 94,571 $ 12,013 $ 106,584
Gross profit 23,654 1,413 25,067
Margin 25.0% 11.8% 23.5%
Income from operations before amortization
and restructuring charges 8,051 (232) 7,819
Margin 8.5% (1.9)% 7.3%
SIX MONTHS ENDED OCTOBER 3, 2004
Net sales $217,538 $ 26,831 $ 244,369
Gross profit 57,050 4,344 61,394
Margin 26.2% 16.2% 25.1%
Income from operations before amortization
and restructuring charges 20,604 818 21,422
Margin 9.5% 3.0% 8.8%
SIX MONTHS ENDED SEPTEMBER 28, 2003
Net sales $186,528 $ 26,631 $ 213,159
Gross profit 47,373 3,592 50,965
Margin 25.4% 13.5% 23.9%
Income from operations before amortization
and restructuring charges 16,199 (171) 16,028
Margin 8.7% (0.6)% 7.5%
COLUMBUS MCKINNON CORPORATION
ADDITIONAL DATA
OCTOBER 3, 2004 SEPTEMBER 28, 2003
--------------- ------------------
BACKLOG (IN MILLIONS)
Products segment $ 47,194 $ 46,793
Solutions segment $ 20,647 $ 10,262
TRADE ACCOUNTS RECEIVABLE
days sales outstanding 62.7 64.5
INVENTORY TURNS PER YEAR
(based on cost of products sold) 5.0x 4.4x
TRADE ACCOUNTS PAYABLE
days payables outstanding 25.0 29.1
DEBT TO TOTAL CAPITALIZATION PERCENTAGE 80.9% 83.5%
SHIPPING DAYS BY QUARTER
Q1 Q2 Q3 Q4
-- -- -- --
FY05 65 63 58 63
FY04 62 63 60 66
#####