NEWS RELEASE
CONTACT:
Robert R. Friedl, Vice President - Finance
and Chief Financial Officer
716-689-5479
COLUMBUS MCKINNON THIRD QUARTER FISCAL 2005 NET INCOME MORE THAN TRIPLES ON 14%
INCREASE IN SALES
o GROWTH IN SALES SEEN ACROSS MAJORITY OF PRODUCT LINES AND MARKETS
o CONTINUED PRODUCTIVITY IMPROVEMENT TREND DRIVING INCOME FROM OPERATIONS UP
67%
o QUARTERLY EARNINGS PER SHARE UP OVER 220% TO $0.16
AMHERST, N.Y., January 25, 2005 -- Columbus McKinnon Corporation (NASDAQ: CMCO),
a leading designer and manufacturer of material handling products, today
reported that net sales increased $15.7 million to $125.9 million for its fiscal
2005 third quarter, which ended January 2, 2005. Third quarter fiscal 2005 net
sales were 14.2% higher than net sales of $110.2 million in last year's third
quarter, and represented the third consecutive quarter of double digit growth
driven by the recovering U.S. industrial economy and increased international
sales.
Columbus McKinnon's net income for the third quarter of fiscal 2005 more than
tripled to $2.4 million, or $0.16 per diluted share, up $1.7 million, or $0.11
per diluted share, from the same period last year. Net income for the third
quarter of fiscal 2004 was $0.7 million, or $0.05 per diluted share.
For the fiscal 2005 nine-month period, sales were $370.3 million, a 14.5%
increase over the first nine months of fiscal 2004 net sales of $323.4 million.
Net income for the first nine months of fiscal 2005 of $8.4 million, or $0.57
per diluted share, was up three times over net income of $2.7 million, or $0.19
per share, for the first nine months of the previous fiscal year.
THIRD QUARTER HIGHLIGHTS
- ------------------------
o Majority of growth in sales is from unit volume, supported by higher prices,
surcharges and currency translation
o Gross margin improved to 23.8% compared with 22.3% in the prior year
o Selling, general and administrative expenses declined 70 basis points as a
percent of sales
o Debt to total capitalization improved to 78.6% from 82.2%
o Cash flow from operations improved to $11.2 million from negative $6.9
million
Timothy T. Tevens, President and Chief Executive Officer of Columbus McKinnon,
commented, "The strengthening sales environment, combined with our lean
manufacturing activities, continues to support our efforts to improve financial
performance and generate cash to pay down debt. Despite increases in compliance
and insurance costs, we tripled our third quarter net income over last year.
Importantly, even with facility closures over the past several years, we still
have more than sufficient capacity to continue to serve growing market demand
while maintaining low annual capital expenditures, which we anticipate at levels
less than annual depreciation in the foreseeable future."
Tevens added, "We have reduced our debt by more than $130 million, or over 30%,
in the last five years and will continue to focus on further debt reduction. The
January sale of our Chicago area property and upcoming sale/leaseback of our
Amherst, New York headquarters property will also contribute to our efforts to
reduce debt."
THIRD QUARTER REVIEW
- --------------------
The $15.7 million growth in sales for the third quarter of fiscal 2005 was
driven by continued improvements in the industrial economy, resulting in higher
end-user demand for Columbus McKinnon products worldwide, which more than offset
the impact of two fewer shipping days and last year's third quarter benefit of
$2.3 million in sales from previously owned businesses. Approximately $6.2
million of this year's third quarter increase was due to higher prices and
surcharges for steel. Currency translation had a $3.1 million positive effect on
sales in the quarter.
As a result of higher sales and improved operating efficiencies, gross margin
improved in the third quarter of fiscal 2005 to 23.8% from 22.3% in the prior
year quarter. On a sequential basis, gross margin declined from 24.4% in the
second quarter of fiscal 2005, primarily due to a $0.9 million increase in
product liability reserves driven by a change in actuarial parameters used to
calculate required asbestos liability reserve levels, as opposed to changes in
CM's claims activity. Average costs for steel, which comprise approximately 10%
of the cost of sales, increased year-over-year by approximately 45%. On a
sequential basis, average steel costs are up approximately 10% in the fiscal
2005 third quarter compared with the second quarter. Steel costs not passed on
as surcharges did not materially impact the gross margin.
Selling, general and administrative expenses increased $1.7 million from last
year's third quarter as a result of an approximate $1.0 million increase in
commissions from higher sales, approximately $0.6 million due to foreign
currency translation differences and approximately $0.4 million in costs
associated with implementation of Sarbanes-Oxley requirements.
The effective tax rate for the third quarter of fiscal 2005 was 35.1%, compared
with 46.8% last year and 29.2% in the fiscal 2005 second quarter. This quarter's
effective tax rate was marginally impacted by the use of U.S. Federal income tax
net operating loss carryforward benefits. Because predominantly all interest
expense is U.S. based, substantially all of the pretax income was non-U.S.
sourced for this quarter. Approximately $107.6 million of such carryforwards
remain for future use. The quarterly effective tax rate is dependent upon the
mix of income among the U.S. and non-U.S. operations.
Net income for this quarter included $0.2 million of income from discontinued
operations. This income 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.
Inventory increased $12.0 million in the third quarter of fiscal 2005 over the
third quarter of fiscal 2004, while inventory turns improved to 4.7x from 4.5x,
respectively. Inventory balances increased $6.4 million from the second quarter
of fiscal 2005 which had inventory turns of 5.0x. The sequentially higher
inventory and lower level of turns reflect a combination of $1.7 million
resulting from changes in foreign currency translation, higher inventories of
steel and higher production of hand pallet trucks transferred from the Company's
Chinese to its European operations in anticipation of new European tariffs.
Debt to total capitalization was 78.6% at January 2, 2005. The ratio improved
360 basis points from 82.2% a year ago. The Company's available line of credit
at the end of the fiscal 2005 third quarter was approximately $35.0 million.
OUTLOOK
- -------
Mr. Tevens commented, "We are encouraged as bookings continued to be strong in
the third quarter, growing at about a 10% pace over last year. Although we see
the pace of sales growth moderating from recent levels, we look for continued
year-over-year improvement in sales for the fourth quarter and for operational
leverage to again have a favorable effect on our bottom line results."
He concluded, "We remain optimistic about the future given continued end-user
demand for our product, tempered by increased costs. We are seeing additional
costs partially offsetting our higher level of operational efficiency. Thus far
this year we expensed $0.9 million in outside service costs for meeting the
compliance requirements of Section 404 of the Sarbanes-Oxley Act. Additionally,
we have seen health care costs increase $1.3 million year-to-date, about 10%
over last year. Notably, we have effectively managed the rising price impact of
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raw materials, especially steel, on our profitability. We also continue to
manage our less synergistic businesses to improve their performance and
marketability."
PRODUCTS SEGMENT
- ----------------
Products segment sales, which represent 87% of Columbus McKinnon's consolidated
net sales, increased 13.2% in the third quarter of fiscal 2005 to $109.3
million, compared with $96.5 million in the same period last year. Gross margin
for this segment was 25.2% in the reported period, compared with 23.6% in last
year's third quarter and 25.5% in the second quarter of fiscal 2005. The second
quarter of fiscal 2005 had higher gross margins due to the higher costs this
quarter as described above. The operating margin before amortization and
restructuring charges was 8.4% for this period, up from 6.3% in the fiscal 2004
third quarter and down from 8.9% in the second quarter this year for the
previously noted reason.
Backlog for the Products segment was $46.0 million at January 2, 2005. This
level is comparable with backlog of $45.3 million at the end of the fiscal 2004
third quarter and $47.2 million at the end of the fiscal 2005 second quarter.
Excluding the backlog associated with divested businesses from the fiscal 2004
third quarter backlog, the Products segment backlog was up $8.9 million from
last year, or 24.1%. The cycle time for this segment to convert backlog to sales
can range from days to several months.
SOLUTIONS SEGMENT
- -----------------
Net sales for the Solutions segment were $16.6 million in the fiscal 2005 third
quarter, up $2.9 million, or 21%, from sales of $13.7 million in the same period
last year. Gross margin was 14.9% compared with 12.9% last year, and operating
margin before amortization and restructuring charges was 3.5% for this period
compared with a 0.5% loss in last year's third quarter.
Backlog for the Solutions segment at January 2, 2005 was $19.6 million, up from
backlog of $6.9 million at the end of the fiscal 2004 third quarter and down
from $20.6 million at the end of the fiscal 2005 second quarter. 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 HTTP://WWW.CMWORKS.COM.
TELECONFERENCE/WEBCAST
- ----------------------
A teleconference and webcast have been scheduled for January 25, 2005 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, 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 toll number for parties outside
the United States and Canada is 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 March 25, 2005 by dialing 1-866-416-1187. Alternatively, you may
access an archive of the call until March 25, 2005 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
likelihood that the Company can utilize its NOLs, the effect of
3
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.
4
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
THREE MONTHS ENDED
------------------
JANUARY 2, DECEMBER 28,
2005 2003 CHANGE
---- ---- ------
NET SALES $ 125,913 $ 110,253 14.2%
Cost of products sold 95,914 85,695 11.9%
---------------------------------
Gross profit 29,999 24,558 22.2%
Gross profit margin 23.8% 22.3%
Selling, general and administrative expense 20,274 18,552 9.3%
Restructuring charges 191 275 -30.5%
Amortization 78 80 -2.5%
---------------------------------
INCOME FROM OPERATIONS 9,456 5,651 67.3%
---------------------------------
Interest and debt expense 6,837 6,538 4.6%
Other (755) (2,212) -65.9%
---------------------------------
Income from cont. ops. before income tax expense 3,374 1,325 154.6%
Income tax expense 1,183 620 90.8%
---------------------------------
Income from cont. ops. 2,191 705 210.8%
Income from disc. ops. 214 -
---------------------------------
NET INCOME $ 2,405 $ 705 241.1%
=================================
Average basic shares outstanding 14,594 14,558 0.2%
Basic income per share:
Continuing operations $ 0.15 $ 0.05 200.0%
Discontinued operations 0.01 -
--------------------------------
Net Income $ 0.16 $ 0.05 220.0%
=================================
Average diluted shares outstanding 14,803 14,558 1.7%
Diluted income per share:
Continuing operations $ 0.15 $ 0.05 200.0%
Discontinued operations 0.01 -
---------------------------------
Net Income $ 0.16 $ 0.05 220.0%
=================================
5
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
NINE MONTHS ENDED
-----------------
JANUARY 2, DECEMBER 28,
2005 2003 CHANGE
---- ---- ------
NET SALES $ 370,282 $ 323,412 14.5%
Cost of products sold 278,889 247,889 12.5%
---------------------------------
Gross profit 91,393 75,523 21.0%
Gross profit margin 24.7% 23.4%
Selling, general and administrative expense 60,246 53,489 12.6%
Restructuring charges 408 1,650 -75.3%
Amortization 231 300 -23.0%
---------------------------------
INCOME FROM OPERATIONS 30,508 20,084 51.9%
---------------------------------
Interest and debt expense 21,026 21,940 -4.2%
Gain on sale of real estate - (3,062) -100.0%
Other (1,344) (3,597) -62.6%
---------------------------------
Income from cont. ops. before income tax expense 10,826 4,803 125.4%
Income tax expense 2,893 2,099 37.8%
---------------------------------
Income from cont. ops. 7,933 2,704 193.4%
Income from disc. ops. 428 -
---------------------------------
NET INCOME $ 8,361 $ 2,704 209.2%
=================================
Average basic shares outstanding 14,585 14,549 0.2%
Basic income per share:
Continuing operations $ 0.54 $ 0.19 184.2%
Discontinued operations 0.03 -
---------------------------------
Net Income $ 0.57 $ 0.19 200.0%
=================================
Average diluted shares outstanding
14,733 14,549 1.3%
Diluted income per share:
Continuing operations $ 0.54 $ 0.19 184.2%
Discontinued operations 0.03 -
---------------------------------
Net Income $ 0.57 $ 0.19 200.0%
=================================
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COLUMBUS MCKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(AUDITED)
JANUARY 2, 2005 MARCH 31, 2004
--------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,624 $ 11,101
Trade accounts receivable 83,551 84,374
Unbilled revenues 8,699 5,160
Inventories 81,246 69,119
Net assets held for sale 2,415 2,790
Prepaid expenses 12,741 15,486
--------------------------------------------------
Total current assets 197,276 188,030
--------------------------------------------------
Net property, plant, and equipment 56,350 58,773
Goodwill and other intangibles, net 192,790 192,963
Marketable securities 24,725 25,355
Deferred taxes on income 4,565 6,388
Other assets 1,955 1,854
--------------------------------------------------
TOTAL ASSETS $ 477,661 $ 473,363
==================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 3,732 $ 5,471
Trade accounts payable 30,537 30,076
Accrued liabilities 49,260 48,416
Restructuring reserve 358 561
Current portion of long-term debt 5,608 2,205
--------------------------------------------------
Total current liabilities 89,495 86,729
--------------------------------------------------
Senior debt, less current portion 119,568 121,603
Subordinated debt 154,563 164,131
Other non-current liabilities 37,068 37,922
--------------------------------------------------
Total liabilities 400,694 410,385
--------------------------------------------------
Shareholders' equity:
Common stock 149 149
Additional paid-in capital 103,690 103,914
Accumulated deficit (16,993) (25,354)
ESOP debt guarantee (4,689) (5,116)
Unearned restricted stock (15) (39)
Accumulated other comprehensive loss (5,175) (10,576)
--------------------------------------------------
Total shareholders' equity 76,967 62,978
--------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 477,661 $ 473,363
==================================================
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COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
-----------------
JANUARY 2, 2005 DECEMBER 28, 2003
-----------------------------------
OPERATING ACTIVITIES:
Income from continuing operations $ 7,933 $ 2,704
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 7,201 7,979
Deferred income taxes 1,823 1,251
Gain on sale of real estate/investments - (4,505)
Other 936 761
Changes in operating assets
and liabilities:
Trade accounts receivable 2,529 2,140
Unbilled revenues and excess billings (2,701) 1,920
Inventories (9,937) 5,184
Prepaid expenses 1,990 (1,340)
Other assets (220) (1,354)
Trade accounts payable (447) (4,012)
Accrued and non-current liabilities (694) 6,921
-----------------------------------
Net cash provided by operating activities 8,413 17,649
-----------------------------------
INVESTING ACTIVITIES:
Sale (purchase) of marketable securities, net 957 (530)
Capital expenditures (3,169) (3,096)
Proceeds from sale of PPE - 387
Proceeds from net assets held for sale 375 3,380
-----------------------------------
Net cash (used in) provided by investing activities (1,837) 141
-----------------------------------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving line-of-credit agreements 2,906 (3,103)
Repayment of debt (13,244) (125,264)
Proceeds from issuance of long-term debt - 115,000
Deferred financing costs incurred (24) (4,361)
Other 427 441
-----------------------------------
Net cash used in financing activities (9,935) (17,287)
-----------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 454 616
-----------------------------------
Net cash (used in) provided by continuing operations (2,905) 1,119
NET CASH PROVIDED BY DISCONTINUED OPERATIONS 428 -
Net change in cash and cash equivalents (2,477) 1,119
Cash and cash equivalents at beginning of year 11,101 1,943
-----------------------------------
Cash and cash equivalents at end of period $ 8,624 $ 3,062
===================================
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COLUMBUS MCKINNON CORPORATION
BUSINESS SEGMENT DATA
($ IN THOUSANDS)
PRODUCTS SOLUTIONS CONSOLIDATED
-------- --------- ------------
QUARTER ENDED JANUARY 2, 2005
Net sales $109,309 $ 16,604 $ 125,913
Gross profit 27,533 2,466 29,999
Margin 25.2% 14.9% 23.8%
Income from operations before amortization
and restructuring charges 9,142 583 9,725
Margin 8.4% 3.5% 7.7%
QUARTER ENDED DECEMBER 28, 2003
Net sales $ 96,524 $ 13,729 $ 110,253
Gross profit 22,791 1,767 24,558
Margin 23.6% 12.9% 22.3%
Income from operations before amortization
and restructuring charges 6,081 (75) 6,006
Margin 6.3% (0.5)% 5.4%
NINE MONTHS ENDED JANUARY 2, 2005
Net sales $326,847 $ 43,435 $ 370,282
Gross profit 84,583 6,810 91,393
Margin 25.9% 15.7% 24.7%
Income from operations before amortization
and restructuring charges 29,746 1,401 31,147
Margin 9.1% 3.2% 8.4%
NINE MONTHS ENDED DECEMBER 28, 2003
Net sales $283,052 $ 40,360 $ 323,412
Gross profit 70,164 5,359 75,523
Margin 24.8% 13.3% 23.4%
Income from operations before amortization
and restructuring charges 22,280 (246) 22,034
Margin 7.9% (0.6)% 6.8%
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COLUMBUS MCKINNON CORPORATION
ADDITIONAL DATA
JANUARY 2, 2005 DECEMBER 28, 2003
--------------- -----------------
BACKLOG (IN MILLIONS)
Products segment $ 46.0 $ 45.3
Solutions segment $ 19.6 $ 6.9
TRADE ACCOUNTS RECEIVABLE
days sales outstanding 60.4 65.7
INVENTORY TURNS PER YEAR
(based on cost of products sold) 4.7x 4.5x
TRADE ACCOUNTS PAYABLE
days payables outstanding 29.0 28.0
DEBT TO TOTAL CAPITALIZATION PERCENTAGE 78.6% 82.2%
SHIPPING DAYS BY QUARTER
Q1 Q2 Q3 Q4
-- -- -- --
FY05 65 63 58 63
FY04 62 63 60 66
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