NEWS RELEASE
CONTACT:
Robert R. Friedl, Vice President - Finance
and Chief Financial Officer
716.689.5479
bob.freidl@cmworks.com
COLUMBUS MCKINNON ANNOUNCES 19% INCREASE IN SALES
FOR FOURTH QUARTER FISCAL YEAR 2005
o FOURTH QUARTER EARNINGS PER SHARE UP $0.66
o FIFTH CONSECUTIVE QUARTER OF DOUBLE DIGIT SALES GROWTH
o FISCAL YEAR 2005 SALES UP 15.8%
o EARNINGS PER SHARE FOR FULL YEAR $1.13, INCREASED OVER 14X PRIOR YEAR
o FUNDED DEBT REDUCED $22.5 MILLION FOR THE YEAR
AMHERST, N.Y., June 7, 2005 -- Columbus McKinnon Corporation (NASDAQ: CMCO), a
leading designer and manufacturer of material handling products, today reported
net sales increased $23.3 million to $144.5 million for its fiscal 2005 fourth
quarter, which ended March 31, 2005. Fourth quarter fiscal 2005 net sales were
19.2% higher than net sales of $121.2 million in last year's fourth quarter and
represented the fifth consecutive quarter of year-over-year double-digit growth.
Increases in sales were driven by a stronger industrial economy in the U.S.,
increased international sales, new products and a growing distribution system.
Columbus McKinnon's net income for the fourth quarter of fiscal 2005 was $8.3
million, an increase of $9.9 million from a loss of $1.5 million in the prior
year. On a diluted basis, earnings per share were $0.56 in the fourth quarter
2005 compared with a loss of $(0.10) in the fourth quarter of fiscal 2004.
Included in this year's fourth quarter net income was $3.9 million ($3.9 million
pre-tax), or $0.26 per share, from the sale of under utilized real estate. This
gain more than offset a one-time, non-cash after-tax charge of $1.1 million
($2.0 million pre-tax), or $.07 per share, related to an increase to the pension
reserve in the Company's German operations. The increased reserve was required
due to a lower actuarial discount rate used in determining the required amount
for U.S. GAAP versus German GAAP. Also offsetting the net income impact of the
gain from the three real estate sales were $1.3 million ($1.3 million pre-tax)
in higher health care costs and $0.5 million ($0.5 million pre-tax) in costs
associated with implementing Section 404 of the Sarbanes-Oxley Act, totaling
approximately $0.12 per share, both before and after tax. The before and after
tax amounts noted are the same due to the utilization of U.S. Federal income tax
net operating loss carry-forward benefits and the allowance recorded offsetting
this benefit on our balance sheet.
Sales for fiscal 2005 were $514.8 million, up $70.2 million, or 15.8%, over the
prior year in spite of having two fewer shipping days. Net income for fiscal
2005 of $16.7 million, or $1.13 per diluted share, was over 14 times greater
than net income of $1.2 million, or $0.08 per share, for the previous fiscal
year. Gross margin for 2005 was 24.5%, a 90 basis point improvement over 2004,
while income from operations was $40.7 million, up $10.8 million. Income from
operations, as a percent of sales for fiscal 2005, improved 120 basis points to
7.9% from 6.7% in fiscal 2004 as a result of operational leverage on higher
volume.
Available cash from operations and from the sale of properties was used to
reduce funded debt by $22.5 million. Capital expenditures for fiscal 2005 were
$5.9 million compared with $3.6 million in 2004. Higher capital expenditures
were the result of new product development and productivity-enhancing equipment
along with normal maintenance items. Inventory turns improved to 5.7 times in
fiscal 2005 compared with 5.3 and 4.6 times at the end of fiscal 2004 and 2003,
respectively. Working capital, excluding cash and funded debt, as a percent of
full-year revenue was 20.2% at the end of this fiscal year, improved from 22.0%
and 24.7% at the end of fiscal 2004 and 2003, respectively.
Timothy T. Tevens, President and Chief Executive Officer of Columbus McKinnon,
noted, "We have benefited from the improved economic environment in fiscal 2005
and were able to capitalize on higher sales with our reduced cost structure.
Debt reduction remains a priority. We have paid down nearly $150 million in debt
in five years through strong cash management and facility rationalization.
He continued, "Importantly, bookings, or orders received, have remained strong.
We continue the double digit pace above last year's rate of bookings. Although
this is in part driven by the economy, we see solid indications of market
acceptance in the U.S. and Europe of our new products. In fiscal 2005, we had
$20.1 million in sales for new products and $10.2 million in sales for
cross-branded products. We believe a continued focus on innovation and service
will help to maintain our leading U.S. market share while growing our presence
in the international marketplace." International sales in fiscal 2005 were $191
million compared with $159 million in the prior year, a 20% increase. Products
segment sales accounted for approximately 76% of international sales for fiscal
2005.
The Company's availability on its line of credit with its bank group at March
31, 2005 was approximately $39.4 million. On April 29, 2005, the Company amended
and expanded its revolving line of credit from $50 million to $65 million and
transferred its $5.3 million term loan balance onto its revolving loan. The new
lending arrangement increases the financial flexibility of the Company with
respect to its capital structure and improves its cost of borrowing relative to
the term loan balance and the revolving line of credit by reducing the spread
over LIBOR by 100 and 50 basis points, respectively.
FOURTH QUARTER REVIEW
- ---------------------
Compared with the fourth quarter in fiscal 2004, sales increased 19.2%, or $23.3
million, in the fourth quarter of fiscal 2005, driven by continued improvements
in the industrial economy and increasing demand through the Company's broad and
diverse distribution network. This growth more than offset the 4.5% negative
impact of three fewer shipping days in the quarter compared with last year's
fourth quarter. Approximately $7.7 million of this year's fourth quarter
increase was due to our surcharges for steel and price increases. Currency
translation had a $2.2 million positive effect on sales in the quarter.
Gross margin in the fourth quarter of fiscal 2005 was 23.9% as higher sales and
improved operating efficiencies were offset by the German pension reserve
increase. The gross margin compares with 24.2% and 23.8% in the prior year
quarter and the third quarter of fiscal 2005, respectively. Compared with the
fourth quarter of last year, average costs for steel, which comprise
approximately 10% of our cost of sales, increased approximately 25%. We have
offset these steel cost increases with price and surcharge increases. We have
seen average steel costs remain relatively flat in the fiscal 2005 fourth
quarter compared with the third quarter.
General and administrative expense (G&A) increased $2.9 million from last year's
fourth quarter and was 6.8% of sales, compared with 5.7% in the prior year.
Higher G&A as a percent of sales was the result of previously mentioned
increases in provisions for German pension costs of $1.0 million, $0.1 million
due to foreign currency translation differences, $0.5 million in costs
associated with implementation of Sarbanes-Oxley requirements, and $0.5 million
for an increase in bad debt reserves based on increased accounts receivable
levels.
The effective tax rate for the fourth quarter of fiscal 2005 was unusually low
primarily due to the high proportion of U.S. taxable income where the Company's
effective tax rate is lower. The quarter's effective tax rate was measurably
impacted by the use of fully-reserved U.S. Federal income tax net operating loss
carry-forward benefits against U.S. taxable income, which includes the gains on
property sales. Approximately $98 million of such carry-forwards remain for
future use. Our quarterly effective tax rate is dependent upon the mix of income
among the U.S. and non-U.S. operations.
Inventory decreased $3.6 million in the fourth quarter of fiscal 2005 compared
with a $6.4 million increase in the third quarter of fiscal 2005.
Debt to total capitalization was 76.8% at March 31, 2005. The ratio improved 550
basis points from 82.3% a year ago.
PRODUCTS SEGMENT
- ----------------
Products segment sales for the fourth quarter of fiscal 2005 represented 87.4%
of our consolidated net sales, increasing 13.6% to $126.3 million. Gross margin
for this segment was 25.7% including $0.7 million of the German pension charge,
compared with 26.2% in last year's fourth quarter and 25.2% in the third quarter
of fiscal 2005. Income from operations, as a percent of sales, was 8.1% for this
period, which includes $2.0 million associated with the German pension charge,
down from 10.4% in the fiscal 2004 fourth quarter.
For fiscal year 2005, sales for the Products segment were $453.1 million, up
15.0% from the prior year, and represented 88% of total sales. This segment's
gross and operating margins for fiscal year 2005 were 25.8% and 8.7%,
respectively. Gross and operating margins for fiscal 2004 for the Products
segment were 25.2% and 8.2%, respectively.
Backlog for the Products segment was $42.3 million at March 31, 2005. Backlog at
the end of the fiscal 2004 fourth quarter and fiscal 2005 third quarter was
$45.3 million and $46.0 million, respectively. Typically, the time to convert
Products segment backlog to sales averages a few days to just a few weeks.
SOLUTIONS SEGMENT
- -----------------
Net sales for the Solutions segment were $18.2 million in the fiscal 2005 fourth
quarter, up $8.1 million, or 80.8%, from sales of $10.1 million in the same
period last year as industrial markets improved and capital expenditures
increased. Gross margin was 11.0% compared with 2.3% last year, and loss from
operations as a percent of sales was 0.2% for this period compared with 17.8% in
last year's fourth quarter. For fiscal year 2005 sales for the Solutions segment
were $61.6 million, up 22.2% from the prior year and represented 12.0% of total
sales. Solutions segment gross and operating margins for fiscal year 2005 were
14.3% and 2.1% respectively.
Backlog for the Solutions segment at March 31, 2005 was $9.6 million, up from
backlog of $9.2 million at the end of the fiscal 2004 fourth quarter and down
from $19.6 million at the end of the fiscal 2005 third quarter. For this
segment, the cycle time for backlog to convert to sales can range from one to
six months, on average.
FISCAL 2005 REVIEW
- ------------------
On an additional $70.2 million in sales, gross margin in fiscal 2005 improved to
24.5% compared with 23.6% in the prior year. Included in cost of goods sold for
2005 was $0.7 million associated with the German pension reserve. General &
administrative expense (G&A) for the full year was $31.7 million, or 6.2% of
sales, compared with G&A in fiscal 2004 of $25.0 million, or 5.6% of sales.
Included in G&A for 2005, and not included in fiscal 2004, were $1.4 million in
costs for Sarbanes Oxley Section 404 implementation, $1.0 million for the German
operations pension reserve, $0.2 million in higher health care costs, $0.7
million resulting from the translation of foreign currencies into the weaker
U.S. dollar for reporting purposes, and $0.5 million for the increased bad debt
reserve due to higher accounts receivable levels. Income from operations
improved to $40.7 million, or 7.9% of sales, in fiscal 2005 from $29.9 million,
or 6.7% of sales in fiscal 2004.
Interest and debt expense declined $1.2 million to $27.6 million on lower levels
of debt. The higher level of reportable U.S. income in 2005 and the application
of U.S. tax loss carry-forward benefits, reduced income taxes by $1.8 million
and resulted in a lower effective tax rate compared to fiscal 2004.
OUTLOOK
- -------
Mr. Tevens concluded, "The high level of growth we saw in the fourth quarter,
which is typically our strongest quarter, continued the trend we have been
experiencing for the last five quarters. Based on our current visibility, we
expect this trend to continue and believe that steady revenue growth will
continue over the next year. Our efforts continue to remain focused on
generating cash to pay down debt, maintaining our leading market share in the
U.S. and growing our presence in Europe and Asia through new products and an
expanding distribution system.
He concluded, "We have completed the Section 404 review and have received solid
marks from our auditors. Going forward, we hope to reduce the costs associated
with this process by one-third to one-half."
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 June 7, 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 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 5, 2005 by dialing 1-866-431-5851. Alternatively, you may
access an archive of the call until August 5, 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 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
(In thousands, except per share data and percentages)
Three Months Ended
------------------
March 31, 2005 March 31, 2004 Change
--------------------------------------- --------
Net sales $ 144,470 $ 121,179 19.2%
Cost of products sold 109,955 91,856 19.7%
---------------------------------------
Gross profit 34,515 29,323 17.7%
Gross profit margin 23.9% 24.2%
Selling expense 13,965 12,931 8.0%
General and administrative expense 9,810 6,937 41.4%
Restructuring charges 502 (411) -222.1%
Amortization 81 83 -2.4%
---------------------------------------
Income from operations 10,157 9,783 3.8%
---------------------------------------
Interest and debt expense 6,594 6,916 -4.7%
Gain on sale of real estate (3,928) - #DIV/0!
Other 54 2,468 -97.8%
---------------------------------------
Income from cont. ops. before income tax expense 7,437 399 1763.9%
Income tax expense (697) 1,911 -136.5%
---------------------------------------
Income from cont. ops. 8,134 (1,512) -638.0%
Income from disc. ops. 215 -
---------------------------------------
Net income $ 8,349 $ (1,512) -652.2%
=======================================
Selling, general and administrative expense
Average basic shares outstanding 14,623 14,567 0.4%
Basic income per share:
Continuing operations $ 0.56 $ (0.10) -660.0%
Discontinued operations 0.01 -
---------------------------------------
Net Income $ 0.57 $ (0.10) -670.0%
=======================================
Average diluted shares outstanding
15,026 14,567 3.2%
Diluted income per share:
Continuing operations $ 0.55 $ (0.10) -650.0%
Discontinued operations 0.01 -
---------------------------------------
Net Income $ 0.56 $ (0.10) -660.0%
=======================================
COLUMBUS McKINNON CORPORATION
Consolidated Income Statements
(In thousands, except per share data and percentages)
Year Ended
----------
March 31, 2005 March 31, 2004 Change
-------------------------------------- --------
Net sales $ 514,752 $ 444,591 15.8%
Cost of products sold 388,844 339,745 14.5%
--------------------------------------
Gross profit 125,908 104,846 20.1%
Gross profit margin 24.5% 23.6%
Selling expense 52,291 48,331 8.2%
General and administrative expense 31,730 25,026 26.8%
Restructuring charges 910 1,239 -26.6%
Amortization 312 383 -18.5%
--------------------------------------
Income from operations 40,665 29,867 36.2%
--------------------------------------
Interest and debt expense 27,620 28,856 -4.3%
Gain on sale of real estate (3,928) (3,062) 28.3%
Other (1,290) (1,129) 14.3%
--------------------------------------
Income from cont. ops. before income tax expense 18,263 5,202 251.1%
Income tax expense 2,196 4,010 -45.2%
--------------------------------------
Income from cont. ops. 16,067 1,192 1247.9%
Income from disc. ops. 643 -
--------------------------------------
Net income $ 16,710 $ 1,192 1301.8%
======================================
Average basic shares outstanding
14,594 14,554 0.3%
Basic income per share:
Continuing operations $ 1.10 $ 0.08 1275.0%
Discontinued operations 0.04 -
--------------------------------------
Net Income $ 1.14 $ 0.08 1325.0%
======================================
Average diluted shares outstanding
14,803 14,554 1.7%
Diluted income per share:
Continuing operations $ 1.09 $ 0.08 1262.5%
Discontinued operations 0.04 -
--------------------------------------
Net Income $ 1.13 $ 0.08 1312.5%
======================================
COLUMBUS McKINNON CORPORATION
Consolidated Balance Sheets
(In thousands)
March 31, 2005 March 31, 2004
-------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 9,479 $ 11,101
Trade accounts receivable 88,974 84,374
Unbilled revenues 8,848 5,160
Inventories 77,626 69,119
Net assets held for sale - 2,790
Prepaid expenses 14,198 15,486
------------------------------------------------------------
Total current assets 199,125 188,030
------------------------------------------------------------
Net property, plant, and equipment 57,237 58,773
Goodwill and other intangibles, net 187,285 186,742
Marketable securities 24,615 25,355
Deferred taxes on income 6,122 6,388
Other assets 6,487 8,075
-------------------------------------------------------------
Total assets $ 480,871 $ 473,363
=============================================================
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Notes payable to banks $ 4,839 $ 5,471
Trade accounts payable 33,688 30,076
Accrued liabilities 51,962 48,416
Restructuring reserve 144 561
Current portion of long-term debt 5,819 2,205
------------------------------------------------------------
Total current liabilities 96,452 86,729
------------------------------------------------------------
Senior debt, less current portion 115,735 121,603
Subordinated debt 144,548 164,131
Other non-current liabilities 42,369 37,922
------------------------------------------------------------
Total liabilities 399,104 410,385
------------------------------------------------------------
Shareholders equity:
Common stock 149 149
Additional paid-in capital 104,078 103,914
Accumulated deficit (8,644) (25,354)
ESOP debt guarantee (4,554) (5,116)
Unearned restricted stock (6) (39)
Accumulated other comprehensive loss (9,256) (10,576)
------------------------------------------------------------
Total shareholders equity 81,767 62,978
------------------------------------------------------------
Total liabilities and shareholders equity $ 480,871 $ 473,363
============================================================
COLUMBUS McKINNON CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
Year Ended
----------
March 31, 2005 March 31, 2004
----------------------------------------
Operating activities:
Income from continuing operations $ 16,067 $ 1,193
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities:
Depreciation and amortization 9,171 10,126
Deferred income taxes (971) 6,413
Gain on sale of real estate/investments (4,632) (5,076)
Loss on Divestitures 330 3,875
Loss (gain) on early retirement of 2008 bonds 40 (5,590)
Amortization/Write-off of deferred financing costs 1,575 6,613
Changes in operating assets and liabilities:
Trade accounts receivable (3,563) (2,985)
Unbilled revenues and excess billings (3,333) 4,125
Inventories (6,834) 8,351
Prepaid expenses 1,796 (1,332)
Other assets 10 (181)
Trade accounts payable 3,192 (976)
Accrued and non-current liabilities 4,313 1,813
----------------------------------------
Net cash provided by operating activities 17,161 26,369
----------------------------------------
Investing activities:
Sale (purchase) of marketable securities, net 1,314 110
Capital expenditures (5,925) (3,619)
Proceeds from sale of PPE 6,742 4,402
Proceeds from net assets held for sale 375 3,376
----------------------------------------
Net cash (used in) provided by investing activities 2,506 4,269
----------------------------------------
Financing activities:
Proceeds from issuance of stock 428 -
Net borrowings (payments) under revolving line-of-credit agreements (219) (7,220)
Repayment of debt (22,649) (125,436)
Proceeds from issuance of long-term debt - 115,000
Deferred financing costs incurred (24) (4,432)
Other 562 593
----------------------------------------
Net cash used in financing activities (21,902) (21,495)
----------------------------------------
Effect of exchange rate changes on cash (30) 15
----------------------------------------
Net cash (used in) provided by continuing operations (2,265) 9,158
Net cash provided by discontinued operations 643 -
Net change in cash and cash equivalents (1,622) 9,158
Cash and cash equivalents at beginning of year 11,101 1,943
----------------------------------------
Cash and cash equivalents at end of period $ 9,479 $ 11,101
========================================
COLUMBUS McKINNON CORPORATION
Business Segment Data
($ in thousands)
Products Solutions Consolidated
---------- ---------- -------------
Quarter ended March 31, 2005
Net sales $126,258 $ 18,212 $ 144,470
Gross profit 32,505 2,010 34,515
Margin 25.7% 11.0% 23.9%
Income from operations 10,197 (40) 10,157
Margin 8.1% (0.2)% 7.0%
Quarter ended March 31, 2004
Net sales $111,108 $ 10,071 $ 121,179
Gross profit 29,091 232 29,323
Margin 26.2% 2.3% 24.2%
Income from operations 11,572 (1,789) 9,783
Margin 10.4% (17.8)% 8.1%
Year ended March 31, 2005
Net sales $453,105 $ 61,647 $ 514,752
Gross profit 117,088 8,820 125,908
Margin 25.8% 14.3% 24.5%
Income from operations 39,392 1,273 40,665
Margin 8.7% 2.1% 7.9%
Year ended March 31, 2004
Net sales $394,160 $ 50,431 $ 444,591
Gross profit 99,255 5,591 104,846
Margin 25.2% 11.1% 23.6%
Income from operations 32,326 (2,459) 29,867
Margin 8.2% (4.9)% 6.7%
COLUMBUS McKINNON CORPORATION
Additional Data
March 31, 2005 March 31, 2004 March 31, 2003
-------------- --------------- --------------
Backlog (in millions)
Products segment $ 42,285 $ 45,297 $ 41,670
Solutions segment $ 9,589 $ 9,183 $ 12,872
Trade accounts receivable
days sales outstanding 56.7 days 62.9 days 61.3 days
Inventory turns per year
(based on cost of products sold) 5.7 turns 5.3 turns 4.6 turns
Days' Inventory 64.0 days 68.9 days 79.3 days
Trade accounts payable
days payables outstanding 27.9 days 29.6 days 28.7 days
Working capital as a % of Sales 20.2% 22.0% 24.7%
Debt to total capitalization percentage 76.8% 82.3% 85.7%
Shipping Days by Quarter
Q1 Q2 Q3 Q4
-- -- -- --
FY05 65 63 58 63
FY04 62 63 60 66