NEWS RELEASE
CONTACT:
Karen L. Howard
Vice President, Treasurer and Interim Chief Financial Officer
Columbus McKinnon Corporation
Phone: 716-689-5550
KAREN.HOWARD@CMWORKS.COM
COLUMBUS MCKINNON ANNOUNCES
39% INCREASE IN OPERATING INCOME ON
6% GROWTH IN SALES FOR THIRD QUARTER FISCAL 2006
o PRODUCTS SEGMENT SALES GREW 8% IN THE QUARTER ON CONTINUED STRENGTH IN
END-USER DEMAND
o THIRD QUARTER GROSS PROFIT MARGIN INCREASED 240 BASIS POINTS FROM PRIOR
YEAR TO 26.2%, REFLECTING LEAN MANUFACTURING IMPROVEMENTS AND STRATEGIC
PRICING
o $40.25 MILLION OF 10% SENIOR SECURED NOTES REDEEMED IN DECEMBER WITH
PROCEEDS FROM NOVEMBER STOCK OFFERING
o EXCLUDING $5.0 MILLION IN PREVIOUSLY DISCLOSED REFINANCING CHARGES FOR
PARTIAL NOTES REDEMPTION, NET INCOME WOULD HAVE BEEN $6.4 MILLION, OR $0.37
PER DILUTED SHARE
o ANTICIPATED FUTURE ANNUAL INTEREST EXPENSE SAVINGS OF $4.0 MILLION
o DEBT-TO-TOTAL CAPITALIZATION IMPROVED TO 58.6% FROM 75.0% IN SECOND QUARTER
FISCAL 2006
AMHERST, N.Y., January 24, 2006 -- Columbus McKinnon Corporation (Nasdaq: CMCO),
a leading designer, manufacturer and marketer of material handling products,
today announced net sales of $133.3 million for the third quarter of fiscal
2006, which ended January 1, 2006. This quarter's net sales represented a 5.9%
increase over sales of $125.9 million in the third quarter of fiscal 2005
reflecting continued growth in global demand for most products, partially offset
by timing and mix of conveyor project revenue. Income from operations grew $3.7
million, or 38.7%, to $13.1 million compared with last year's third quarter
driven by operating leverage, lean manufacturing, operational efficiencies and
improved pricing.
Net income of $1.4 million, or $0.08 per diluted share, for this fiscal year's
third quarter was adversely affected by two major one-time items:
o A $4.0 million pretax premium expense (approximately $0.23 per share)
incurred upon the December 16, 2005 partial redemption of 10% Senior
Secured Notes due 2010 as previously disclosed; and
o the write-off of $1.0 million of deferred finance costs,
(approximately $0.06 per share), associated with the partial
redemption as previously disclosed.
Excluding the $5.0 million in charges associated with the partial redemption,
net income would have been $6.4 million, or $0.37 per diluted share on 17.3
million shares, reflecting a $4.0 million, or 167%, increase over last year's
third quarter net income of $2.4 million, or $0.16 per diluted share on 14.8
million shares.
Because the partial redemption of the notes occurred late in the third quarter,
interest expense savings for the quarter were insignificant. However, going
forward, as a result of its recent refinancing activities, the Company expects
quarterly interest savings of approximately $1 million.
Timothy Tevens, President and Chief Executive Officer of Columbus McKinnon,
commented, "The demand for our products continues to be strong as the economic
climate worldwide continues its positive trend, and as a result of our increased
focus on marketing and sales in international markets. Our lean manufacturing
discipline and lower cost structure also continue to provide benefits. Gross
profit margin this quarter improved by 240 basis points over the prior year's
quarter to 26.2%. We continue to strengthen and make significant improvements in
our balance sheet that favorably position our future financial performance. Debt
to total capitalization is now 58.6%, down from 75.0% at the end of our second
quarter fiscal 2006, providing us with the financial flexibility to better
support our global growth initiatives."
Mr. Tevens continued, "Our longer-term goal is to operate with a 30-40% debt to
total capitalization level, with the flexibility to expand up to the 50-60%
range for shorter time frames given the right strategic opportunities."
THIRD QUARTER REVIEW
Third quarter fiscal 2006 consolidated sales of $133.3 million were up 5.9% over
the prior year and down sequentially 1.0% from the 2006 second fiscal quarter
due to fewer operating days. Increased sales continue to reflect the strength in
end-user demand for our products on a global basis. Products segment sales grew
by $8.5 million, or 7.8%, in the third quarter of fiscal 2006 compared with the
same quarter in fiscal 2005, net of a $1.1 million reduction due to currency
translation. Volume contributed approximately six percentage points while price
changes contributed approximately three percentage points to the year-over-year
sales increase. The growth in Products sales was spread worldwide. The Solutions
segment recorded a $1.1 million decline in sales compared with the year-ago
quarter, of which $0.9 million was unfavorable currency translation.
The Company's effective tax rate for the fiscal 2006 third quarter was 55.1%
compared with 35.1% in the fiscal 2005 third quarter. The higher effective
income tax rate in fiscal 2006 reflects the partial redemption charges of $5.0
million, which reduced U.S. taxable income in the fiscal 2006 third quarter,
resulting in no associated tax benefit being recorded in the quarter. The
Company has approximately $93 million of fully reserved U.S. federal net
operating loss carryforwards available to offset future U.S. taxable income,
allowing more of its U.S.-based margin expansion to be directly reflected in net
income. Based on our more normal recent levels and mix of U.S.-based and foreign
taxable income, our expected effective tax rate would approximate 38% to 39%.
PRODUCTS SEGMENT
Products segment sales for the third quarter of fiscal 2006 were $117.8 million,
up $8.5 million from last year's third quarter of $109.3 million. Strong global
growth has driven the increase in sales in this segment. Of note, U.S.
industrial capacity utilization exceeded 79% as reported for the month of
December 2005 and indications are that utilization will continue to climb.
Domestic Products segment sales trends generally correlate with this key
indicator of U.S. industrial strength.
Gross margin for this segment improved 210 basis points over the prior year's
third quarter to 27.3%. Income from operations as a percentage of sales improved
to 10.4% from 8.2% last year. Higher sales on a controlled cost base, favorable
product mix and lower product liability costs drove that operating leverage.
At January 1, 2006, backlog was $46.5 million, up 1% from the backlog at the end
of the prior year's third quarter. The conversion of backlog to sales for this
segment can range from a few days to a few weeks, and the backlog represents
approximately four to five weeks of shipments.
2
SOLUTIONS SEGMENT
Solutions segment sales this quarter were down $1.1 million to $15.5 million
compared with the prior year's period. This segment's sales are contract-driven
and variations in sales are not uncommon quarter to quarter due to the nature
and timing of projects. Gross margin was 18.0%, compared with 14.9% for the
prior year. Income from operations improved to 5.5% from 3.1% last year due to
favorable product mix.
Backlog for this segment at quarter end was $12.8 million, down $6.8 million
from last year, due to the timing on various projects. However, quoting activity
remains strong and the Company's success rate is consistent with historical
results. The conversion of backlog to sales for this segment can range from one
to six months.
NINE-MONTH REVIEW
Net sales for the nine-month period of fiscal 2006 were $408.9 million, up
10.4%, or $38.6 million, compared with the same period of fiscal 2005. Gross
profit of $106.6 million was 16.7% higher for this fiscal year's first nine
months, resulting in a 140 basis point improvement in gross profit margin to
26.1%. The improved margin was the result of continued operating leverage on
higher sales volume and lean manufacturing improvements. The impact of lean
manufacturing can also be seen in our balance sheet, where working capital as a
percentage of the latest twelve-months' sales improved to 16.8% from 22.1%
year-over-year. Selling, general and administrative expenses as a percent of
sales improved to 15.9%, compared with 16.3% in the prior year.
Net income for the nine-month period of fiscal 2006 was $12.0 million, up $3.6
million, or 43.5%. On a diluted per share basis, net income was $0.75 for the
first nine months of fiscal 2006 (or $1.27 excluding the $0.29 charge for the
third quarter partial redemption and an additional $0.23 charge for the second
quarter subordinated debt refinancing), a 31.6% increase from $0.57 for the same
period in fiscal 2005.
Net cash provided by operating activities was $38.5 million for the nine-month
period of fiscal 2006, compared with $8.4 million for the prior year period. The
increase was driven by improved profits and working capital management.
Capital expenditures for fiscal 2006 through January 1, 2006 were $4.7 million,
up from $3.2 million in the prior year period. Columbus McKinnon expects capital
spending for fiscal 2006 to be in the range of $6.0 to $7.0 million compared
with $5.2 million in fiscal 2005. Higher capital expenditures for fiscal 2006
have been primarily directed toward new product development and productivity
improvement.
OUTLOOK
- -------
Mr. Tevens noted, "Sales trends in our markets remain favorable, and we continue
to anticipate growth in Products segment sales in the mid-to-high single digit
range. Additionally, we will continue to focus on making further improvements in
working capital utilization. Our strategic objectives remain to:
o Increase our domestic organic sales growth by introducing new products
and maximizing market coverage,
o Increase our global sales and market share by expanding our presence
in emerging and existing international industrial markets,
o Increase our profitability through lean manufacturing and facility
rationalization while increasing effective capacity on a reduced
manufacturing footprint,
o Pay down debt to reduce interest expense and enhance our strategic
flexibility, and
o Pursue strategic acquisitions and alliances."
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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, 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 24, 2006 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 March 24, 2006 by dialing 1-866-356-3373. Alternatively, you may
access an archive of the call until March 24, 2006 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.
4
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT
PER SHARE AND PERCENTAGE DATA)
THREE MONTHS ENDED
------------------
1/1/06 1/2/05 CHANGE
---------------------- --------
Net sales ....................................... $ 133,322 $ 125,913 5.9%
Cost of products sold ........................... 98,391 95,914 2.6%
----------------------
Gross profit .................................... 34,931 29,999 16.4%
Gross profit margin .......................... 26.2% 23.8%
Selling expense ................................. 13,281 13,356 -0.6%
General and administrative expense .............. 8,392 6,918 21.3%
Restructuring charges ........................... 83 191 -56.5%
Amortization .................................... 61 78 -21.8%
----------------------
Income from operations .......................... 13,114 9,456 38.7%
----------------------
Interest and debt expense ....................... 6,268 6,837 -8.3%
Interest and other expense (income) ............. 4,177 (755) -653.2%
----------------------
Income from cont. ops. before income tax expense 2,669 3,374 -20.9%
Income tax expense .............................. 1,471 1,183 24.3%
----------------------
Income from cont. ops ........................... 1,198 2,191 -45.3%
Income from disc. ops ........................... 215 214
----------------------
Net income ...................................... $ 1,413 $ 2,405 -41.2%
======================
Average basic shares outstanding .............. 16,611 14,594 13.8%
Basic net income per share:
Continuing operations ...................... $ 0.08 $ 0.15 -46.7%
Discontinued operations .................... 0.01 0.01
----------------------
Net income ................................. $ 0.09 $ 0.16 -43.8%
======================
Average diluted shares outstanding ............ 17,287 14,803 16.8%
Diluted net income per share:
Continuing operations ...................... $ 0.07 $ 0.15 -53.3%
Discontinued operations .................... 0.01 0.01
----------------------
Net income ................................. $ 0.08 $ 0.16 -50.0%
======================
5
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT
PER SHARE AND PERCENTAGE DATA)
NINE MONTHS ENDED
-----------------
1/1/06 1/2/05 CHANGE
---------------------- --------
Net sales ...................................... $ 408,911 $ 370,282 10.4%
Cost of products sold .......................... 302,279 278,889 8.4%
----------------------
Gross profit ................................... 106,632 91,393 16.7%
Gross profit margin ......................... 26.1% 24.7%
Selling expense ................................ 40,019 38,326 4.4%
General and administrative expense ............. 25,106 21,920 14.5%
Restructuring charges .......................... 320 408 -21.6%
Amortization ................................... 184 231 -20.3%
----------------------
Income from operations ......................... 40,103 30,508 34.4%
Interest and debt expense ...................... 19,617 21,026 -6.7%
Interest and other expense (income) ............ 5,252 (1,344) -490.8%
----------------------
Income from cont. ops. before income tax expense 16,134 10,826 49.0%
Income tax expense ............................. 4,779 2,893 65.2%
----------------------
Income from cont. ops .......................... 11,355 7,933 43.1%
Income from disc. ops .......................... 643 428
----------------------
Net income ..................................... $ 11,998 $ 8,361 43.5%
======================
Average basic shares outstanding ............. 15,368 14,585 5.4%
Basic net income per share:
Continuing operations ..................... $ 0.74 $ 0.54 37.0%
Discontinued operations ................... 0.04 0.03
----------------------
Net income ................................ $ 0.78 $ 0.57 36.8%
======================
Average diluted shares outstanding ........... 15,906 14,733 8.0%
Diluted net income per share:
Continuing operations ..................... $ 0.71 $ 0.54 31.5%
Discontinued operations ................... 0.04 0.03
----------------------
Net income ................................ $ 0.75 $ 0.57 31.6%
======================
6
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
1/1/06 3/31/05
----------------------
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 41,788 $ 9,479
Trade accounts receivable .............................. 82,059 88,974
Unbilled revenues ...................................... 11,407 8,848
Inventories ............................................ 75,078 77,626
Prepaid expenses ....................................... 13,883 14,198
----------------------
Total current assets ........................................ 224,215 199,125
Net property, plant, and equipment .......................... 53,198 57,237
Goodwill and other intangibles, net ......................... 186,569 187,285
Marketable securities ....................................... 25,809 24,615
Deferred taxes on income .................................... 4,353 6,122
Other assets ................................................ 6,164 6,487
----------------------
Total assets ................................................ $ 500,308 $ 480,871
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks ................................. $ 2,951 $ 4,839
Trade accounts payable ................................. 35,137 33,688
Accrued liabilities .................................... 54,434 51,962
Restructuring reserve .................................. 107 144
Current portion of long-term debt ...................... 192 5,819
----------------------
Total current liabilities ................................... 92,821 96,452
Senior debt, less current portion ........................... 75,289 115,735
Subordinated debt ........................................... 136,000 144,548
Other non-current liabilities ............................... 44,730 42,369
----------------------
Total liabilities ........................................... 348,840 399,104
----------------------
Shareholders' equity:
Common stock ........................................... 182 149
Additional paid-in capital ............................. 164,016 104,078
Retained earnings (accumulated deficit) ................ 3,354 (8,644)
ESOP debt guarantee .................................... (4,108) (4,554)
Unearned restricted stock .............................. (29) (6)
Accumulated other comprehensive loss ................... (11,947) (9,256)
----------------------
Total shareholders' equity .................................. 151,468 81,767
----------------------
Total liabilities and shareholders' equity .................. $ 500,308 $ 480,871
======================
7
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED
-----------------
1/1/06 1/2/05
----------------------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Income from continuing operations ................................ $ 11,355 $ 7,933
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities of continuing operations:
Depreciation and amortization ............................... 6,809 7,201
Deferred income taxes ....................................... 1,769 1,823
Gain on sale of real estate/investments ..................... (1,794) -
Loss (gain) on early retirement of bonds .................... 6,432 (93)
Amortization/write-off of deferred financing costs .......... 2,786 1,029
Changes in operating assets and liabilities:
Trade accounts receivable .............................. 6,197 2,529
Unbilled revenues and excess billings .................. (3,539) (2,701)
Inventories ............................................ 2,139 (9,937)
Prepaid expenses ....................................... 321 1,990
Other assets ........................................... (197) (220)
Trade accounts payable ................................. 2,141 (447)
Accrued and non-current liabilities .................... 4,090 (694)
----------------------
Net cash provided by operating activities of continuing operations 38,509 8,413
----------------------
INVESTING ACTIVITIES:
Sale of marketable securities, net ............................... 90 957
Capital expenditures ............................................. (4,738) (3,169)
Proceeds from sale of businesses and fixed assets ................ 2,091 -
Net assets held for sale ......................................... - 375
----------------------
Net cash used in investing activities of continuing operations ... (2,557) (1,837)
----------------------
FINANCING ACTIVITIES:
Proceeds from stock offering/options exercised ................... 59,944 -
Net payments under revolving line-of-credit agreements ........... (1,417) 2,906
Repayment of debt ................................................ (196,881) (13,244)
Payment of deferred financing costs .............................. (2,357) (24)
Proceeds from issuance of long-term debt ......................... 136,000 -
Other ............................................................ 446 427
----------------------
Net cash used in financing activities of continuing operations ... (4,265) (9,935)
EFFECT OF EXCHANGE RATE CHANGES ON CASH .......................... (21) 454
----------------------
Net cash provided by (used in) continuing operations ............. 31,666 (2,905)
NET CASH PROVIDED BY DISCONTINUED OPERATIONS ..................... 643 428
----------------------
Net change in cash and cash equivalents .......................... 32,309 (2,477)
Cash and cash equivalents at beginning of period ................. 9,479 11,101
----------------------
Cash and cash equivalents at end of period ....................... $ 41,788 $ 8,624
======================
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COLUMBUS MCKINNON CORPORATION
BUSINESS SEGMENT DATA
($ IN THOUSANDS)
QUARTER ENDED QUARTER ENDED %
1/1/06 1/2/05 CHANGE
------------------------------------------
PRODUCTS
Net sales .................................................... $117,850 $109,309 7.8%
Gross profit ................................................. 32,142 27,533 16.7%
Margin ................................................ 27.3% 25.2%
Income from operations ....................................... 12,269 8,936 37.3%
Margin ................................................ 10.4% 8.2%
SOLUTIONS
Net sales .................................................... $ 15,472 $ 16,604 -6.8%
Gross profit ................................................. 2,789 2,466 13.1%
Margin ................................................ 18.0% 14.9%
Income from operations ....................................... 845 520 62.5%
Margin ................................................ 5.5% 3.1%
CONSOLIDATED
Net sales .................................................... $133,322 $125,913 5.9%
Gross profit ................................................. 34,931 29,999 16.4%
Margin ................................................ 26.2% 23.8%
Income from operations ....................................... 13,114 9,456 38.7%
Margin ................................................ 9.8% 7.5%
NINE-MONTHS NINE-MONTHS %
ENDED 1/1/06 ENDED 1/2/05 CHANGE
-----------------------------------------
PRODUCTS
Net sales .................................................... $362,405 $326,847 10.9%
Gross profit ................................................. 99,027 84,583 17.1%
Margin ................................................ 27.3% 25.9%
Income from operations ....................................... 39,089 29,195 33.9%
Margin ................................................ 10.8% 8.9%
SOLUTIONS
Net sales .................................................... $ 46,506 $ 43,435 7.1%
Gross profit ................................................. 7,605 6,810 11.7%
Margin ................................................ 16.4% 15.7%
Income from operations ....................................... 1,914 1,313 45.8%
Margin ................................................ 4.1% 3.0%
CONSOLIDATED
Net sales .................................................... $408,911 $370,282 10.4%
Gross profit ................................................. 106,632 91,393 16.7%
Margin ................................................ 26.1% 24.7%
Income from operations ....................................... 41,003 30,508 34.4%
Margin ................................................ 10.0% 8.2%
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COLUMBUS MCKINNON CORPORATION
ADDITIONAL DATA
JANUARY 1, 2006 JANUARY 2, 2005
--------------- ---------------
Backlog (in thousands)
Products segment .................. $ 46,534 $ 46,026
Solutions segment ................. 12,796 19,558
Trade accounts receivable -
Days sales outstanding ............ 56.0 60.4
Inventory turns per year (based on
cost of products sold) ............ 5.2x 4.7x
Days per turn ..................... 69.6 77.3
Trade accounts payable -
Days payables outstanding ......... 32.5 29.0
Working capital as a % of total sales . 16.8% 22.1%
Debt to total capitalization percentage 58.6% 78.6%
SHIPPING DAYS BY QUARTER
------------------------
Q1 Q2 Q3 Q4
-- -- -- --
FY06 65 63 58 65
FY05 65 63 58 63
10