NEWS RELEASE
CONTACT:
Karen L. Howard
Vice President and Chief Financial Officer
Columbus McKinnon Corporation
Phone: 716-689-5550
KAREN.HOWARD@CMWORKS.COM
------------------------
COLUMBUS MCKINNON REPORTS SIGNIFICANT MARGIN AND OPERATING INCOME IMPROVEMENT IN
FISCAL 2007 FIRST QUARTER
o OPERATING INCOME INCREASES 21.6% ON 4.1% CONSOLIDATED SALES GROWTH
o ORDERS INCREASE 9%
o GROSS MARGIN IMPROVES 290 BASIS POINTS TO 28.8%
o OPERATING MARGIN IMPROVES 170 BASIS POINTS TO 12.1%
o REPURCHASED $38.5 MILLION OF 10% NOTES TO REDUCE FUTURE ANNUAL PRE-TAX
INTEREST EXPENSE BY $3.85 MILLION; RELATED PRE-TAX DEBT REPURCHASING
COSTS OF $4.6 MILLION IMPACT EARNINGS PER SHARE BY $0.16
o FUNDED DEBT REDUCED BY $26.3 MILLION
o 50% FUNDED DEBT TO TOTAL CAPITALIZATION SHORT-TERM GOAL SURPASSED
(ACHIEVED 46%); 43% NET DEBT TO TOTAL CAPITALIZATION ACHIEVED
o DILUTED EPS OF $0.29; $0.49 EXCLUDING UNUSUAL ITEMS
AMHERST, N.Y., July 25, 2006 - Columbus McKinnon Corporation (NASDAQ: CMCO), a
leading designer, manufacturer and marketer of material handling products, today
announced financial results for its fiscal 2007 first quarter that ended on July
2, 2006. Operating income of $17.8 million for the fiscal 2007 first quarter was
up 21.6% on a 4.1% increase in net sales to $146.7 million. As a percent of
sales, operating income produced a 12.1% margin in the fiscal 2007 quarter
compared with 10.4% in the same period last year. Gross margin improved 290
basis points to 28.8% compared with 25.9% in the first quarter of fiscal 2006.
Strengthened margins reflect continued improvements in operational productivity
and the value of operating leverage on higher sales. Net income of $5.6 million
and net income per diluted share of $0.29 were affected by several unusual items
described below. The most significant item was after-tax financing costs of $3.0
million, or $0.16 per diluted share, ($4.6 million pre-tax) to repurchase higher
cost debt, which will reduce future annual interest expense by approximately
$2.5 million after-tax ($3.85 million pre-tax).
Timothy T. Tevens, President and Chief Executive Officer, commented, "Sales
trends in our markets remain very favorable, and we continue to anticipate
growth in Products segment sales in the mid-to-high single digit range as we
convert our high level of orders to sales. The broad-based demand in our
Products segment supports our belief that expansion is continuing in the
industrial economy worldwide."
He continued, "Our Products segment backlog again increased this quarter,
reflecting the strong level of bookings. We are adding direct labor resources to
improve our shipping rates. Consolidated bookings were up 9% over the same
quarter last year."
Fiscal 2007 first quarter net sales were $146.7 million, an increase of $5.8
million, or 4.1%, over last year's first quarter net sales of $140.9 million.
Higher sales reflect continued strong demand for material handling products
around the world. Demand for our products is strong from all major distribution
channels with the cranebuilder and rigging shop channels showing the greatest
strength. Backlog for the Products segment of $58.4 million at July 2, 2006
reflects $4.8 million and $15.6 million increases over the balances at March 31,
2006 and July 3, 2005, or 9% and 36% respectively.
On a sequential quarter basis, net sales declined by just $1 million (<1%) which
is notable based on two fewer shipping days in the fiscal 2007 first quarter,
and the fourth quarter historically being the Company's strongest revenue
quarter.
Net income for the fiscal 2007 first quarter was $5.6 million compared with
fiscal 2006 first quarter net income of $7.3 million. On a diluted per share
basis, first quarter 2007 net income was $0.29 compared with $0.49 in the same
period last year. This comparison was affected by the following:
o Financing costs of $3.0 million after-tax ($4.6 million pre-tax), or
$0.16 per share, associated with repurchasing $38.5 million of 10%
Notes during the quarter included $3.8 million pre-tax of premium
charges and the write-down of $0.8 million pre-tax of non-cash
deferred financing costs.
o The fiscal 2007 quarter includes $0.8 million of non-deductible
incentive stock option expense associated with the April 1, 2006
adoption of SFAS No. 123(R) "Share-Based Payment." For the remaining
quarters of fiscal 2007, the Company intends to recognize $0.2 million
per quarter of non-deductible expenses for stock options.
o As a result of the fiscal 2006 fourth quarter reversal of the
valuation allowance against deferred tax assets, primarily U.S.
federal net operating loss carryforwards, the Company is now
recognizing a more normal effective tax rate. The 44.0% effective tax
rate for the fiscal 2007 first quarter was up from last year's first
quarter rate of 18.3% primarily due to this change. The effective tax
rate for the fiscal 2007 quarter was also unfavorably impacted by the
non-deductible stock options expense noted above. For the remaining
quarters of fiscal 2007, the Company anticipates its effective tax
rate to range between 38% and 39%.
o As a result of the November 2005 equity offering of 3.0 million shares
and additional options that were in-the-money during the fiscal 2007
first quarter, there were 3.9 million, or 26.2%, additional diluted
shares outstanding in the fiscal 2007 first quarter compared with the
prior year's first quarter.
Excluding the above unusual items, net income for the fiscal 2007 and fiscal
2006 first quarters would have been $9.3 million and $5.5 million, respectively,
representing 69.1% improvement. Applying that net income for both periods to the
19.0 million diluted shares currently outstanding would result in $0.49 and
$0.29 pro forma net income per share for the fiscal 2007 and 2006 first
quarters, respectively, or 69.0% improvement. (See reconciliation between GAAP
net income and non-GAAP net income included in the final table of this news
release).
Higher selling expenses of $1.7 million, or 12.5%, reflect increased commissions
and marketing activities in the U.S. and overseas. The $0.9 million, or 11.2%,
increase in general and administrative expenses was primarily related to
incentive stock options expense, investments in international markets and new
product development expenses.
As a result of reduced debt levels, interest and debt expense for the first
quarter of fiscal 2007 was down $2.2 million to $4.5 million from $6.7 million
in the fiscal 2006 first quarter. Reduced interest expense was a direct result
of the Company's efforts to eliminate or efficiently refinance higher cost debt.
During the quarter, the Company reduced funded debt by $26.3 million to $183.4
million, resulting in a funded debt to total capitalization ratio of 46.1%. Our
long-term goal is for a 30% debt to total capitalization ratio, to provide us
the flexibility to support our ongoing growth strategy. Debt, net of cash at
July 2, 2006, was $163.5 million, a $89.5 million reduction from $253.0 million
a year ago, representing 43.2% net debt to total capitalization. The Company's
availability on its line of credit with its bank group at July 2, 2006 was $52.6
million.
Net cash provided by operations was $4.8 million for the fiscal 2007 first
quarter compared with $10.6 million in the fiscal 2006 first quarter, with the
fluctuation a result of changes in working capital.
Capital expenditures for the first quarter of fiscal 2007 were $1.9 million
compared with $1.7 million for the same period in fiscal 2006. Capital spending
is focused on new product development and the purchase of productivity-enhancing
equipment along with normal maintenance items.
PRODUCTS SEGMENT
- ----------------
Products segment sales for the first quarter of fiscal 2007 represented 87.4% of
consolidated net sales, increasing $4.2 million, or 3.4%, to $128.1 million. The
fluctuation compared with the year-ago quarter is summarized as follows, in
millions:
Two fewer shipping days $ (3.8) (3.1%)
Increased pricing 2.3 1.9%
Foreign currency translation 1.1 0.8%
Increased volume 4.6 3.8%
--------- ----
Total $ 4.2 3.4%
========= ====
Gross margin for this segment was 30.8% compared with 27.6% in last year's first
quarter. Income from operations, as a percent of sales, was 13.1% for this
period, up from 11.4% in the fiscal 2006 first quarter.
Backlog stood at $58.4 million at the end of the quarter. Backlog at the end of
the fiscal 2006 first quarter and fiscal 2006 fourth quarter was $42.8 million
and $53.6 million, respectively. The time to convert Products segment backlog to
sales averages from a few days to a few weeks, and backlog for this segment on
average normally represents four to five weeks of shipments.
SOLUTIONS SEGMENT
- -----------------
Net sales for the Solutions segment were $18.6 million in the fiscal 2007 first
quarter, up 9.2%, from sales of $17.0 million in the same period last year.
Gross margin was 15.4% compared with 13.7% last year. Income from operations as
a percent of sales was 5.2% for this period compared with 2.9% in the fiscal
2006 first quarter.
Backlog for the Solutions segment at July 2, 2006 was $11.4 million, down from
backlog of $17.3 million at the end of the fiscal 2006 first quarter and down
from $13.0 million at the end of the fiscal 2006 fourth quarter. The decrease is
due to timing of large contracts. For this segment, the average cycle time for
backlog to convert to sales ranges from one to six months.
SUMMARY
- -------
Mr. Tevens noted, "Fiscal 2007 is off to a strong start for Columbus McKinnon.
Higher bookings reflect the strength in the industrial global economy, which
drives increased needs for material handling equipment in a broad variety of
end-user markets. We have also made great strides in improving our operational
efficiency over the last several years through lean manufacturing practices and
the consolidation and rationalization of our facilities and product lines. In
the recent quarter, our strong operating leverage enabled us to achieve a 13.1%
operating margin for our Products segment, a level that historically was
achieved at higher levels of sales. We also further reduced our debt and
strengthened our balance sheet to have the financial flexibility to make
selective bolt-on acquisitions to maximize our leading U.S. market position,
grow our presence internationally and accelerate top line growth."
He added, "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."
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 July 25, 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 September 25, 2006 by dialing 1-888-568-0155. Alternatively, you may
access an archive of the call until September 25, 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.
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE DATA)
THREE MONTHS ENDED
------------------
JULY 2, 2006 JULY 3, 2005 CHANGE
------------ ------------ ------
NET SALES $ 146,694 $ 140,877 4.1%
Cost of products sold 104,411 104,334 0.1%
--------------------------------
Gross profit 42,283 36,543 15.7%
Gross profit margin 28.8% 25.9%
Selling expense 15,367 13,658 12.5%
General and administrative expense 9,089 8,175 11.2%
Restructuring charges 4 26 -84.6%
Amortization 43 62 -30.6%
--------------------------------
INCOME FROM OPERATIONS 17,780 14,622 21.6%
--------------------------------
Interest and debt expense 4,512 6,716 -32.8%
Other (expense) income (3,570) 789 -552.5%
--------------------------------
Income from continuing operations before
income tax expense 9,698 8,695 11.5%
Income tax expense 4,265 1,587 168.7%
--------------------------------
Income from continuing operations 5,433 7,108 -23.6%
Income from discontinued operations 139 214 -35.0%
--------------------------------
NET INCOME $ 5,572 $ 7,322 -23.9%
================================
Average basic shares outstanding 18,431 14,672 25.6%
Basic income per share:
Continuing operations $ 0.29 $ 0.49 -40.8%
Discontinued operations 0.01 0.01
--------------------------------
Net income $ 0.30 $ 0.50 -40.0%
================================
Average diluted shares outstanding 18,961 15,029 26.2%
Diluted income per share:
Continuing operations $ 0.28 $ 0.48 -41.7%
Discontinued operations 0.01 0.01
--------------------------------
Net income $ 0.29 $ 0.49 -40.8%
================================
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JULY 2, 2006 MARCH 31, 2006
------------ --------------
ASSETS
Current assets:
Cash and cash equivalents $ 19,927 $ 45,598
Trade accounts receivable 97,701 95,726
Unbilled revenues 16,292 12,061
Inventories 81,025 74,845
Prepaid expenses 17,623 15,676
-----------------------------------
Total current assets 232,568 243,906
-----------------------------------
Net property, plant, and equipment 55,661 55,132
Goodwill and other intangibles, net 187,705 187,327
Marketable securities 27,342 27,596
Deferred taxes on income 43,830 46,065
Other assets 5,569 6,018
-----------------------------------
TOTAL ASSETS $ 552,675 $ 566,044
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 6,331 $ 5,798
Trade accounts payable 43,674 39,311
Accrued liabilities 59,277 61,264
Restructuring reserve 668 793
Current portion of long-term debt 133 127
-----------------------------------
Total current liabilities 110,083 107,293
-----------------------------------
Senior debt, less current portion 40,973 67,841
Subordinated debt 136,000 136,000
Other non-current liabilities 51,049 50,489
-----------------------------------
Total liabilities 338,105 361,623
-----------------------------------
Shareholders' equity:
Common stock 187 185
Additional paid-in capital 172,662 170,081
Retained earnings 56,724 51,152
ESOP debt guarantee (3,851) (3,996)
Unearned restricted stock - (22)
Accumulated other comprehensive loss (11,152) (12,979)
-----------------------------------
Total shareholders' equity 214,570 204,421
-----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 552,675 $ 566,044
===================================
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED
------------------
JULY 2, 2006 JULY 3, 2005
------------ ------------
OPERATING ACTIVITIES:
Income from continuing operations $ 5,433 $ 7,108
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 2,105 2,332
Deferred income taxes 2,235 1,724
Other (371) (481)
Loss on early retirement of bonds 3,780 (11)
Stock option expense 798 -
Amortization/write-off of deferred financing costs 980 320
Changes in operating assets and liabilities:
Trade accounts receivable (921) (2,096)
Unbilled revenues and excess billings (3,528) (1,823)
Inventories (5,608) (2,620)
Prepaid expenses (1,925) 130
Other assets (248) (202)
Trade accounts payable 3,570 2,095
Accrued and non-current liabilities (1,511) 4,161
----------------------------
Net cash provided by operating activities 4,789 10,637
----------------------------
INVESTING ACTIVITIES:
Sale (purchase) of marketable securities, net 47 (688)
Capital expenditures (1,903) (1,674)
Proceeds from discontinued operations note
receivable - revised 139 214
----------------------------
Net cash used by investing activities (1,717) (2,148)
----------------------------
FINANCING ACTIVITIES:
Proceeds from stock options exercised 1,725 1
Net borrowings under revolving line-of-credit agreements 11,843 4,205
Repayment of debt (42,302) (8,186)
Deferred financing costs incurred (325) (98)
Other 145 145
----------------------------
Net cash used by financing activities (28,914) (3,933)
----------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 171 (408)
----------------------------
Net change in cash and cash equivalents (25,671) 4,148
Cash and cash equivalents at beginning of year 45,598 9,479
----------------------------
Cash and cash equivalents at end of period $ 19,927 $ 13,627
============================
COLUMBUS MCKINNON CORPORATION
BUSINESS SEGMENT DATA
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
QUARTER ENDED QUARTER ENDED
JULY 2, 2006 JULY 3, 2005 % CHANGE
------------------- ------------------- ----------
PRODUCTS
Net sales $128,139 $123,881 3.4%
Gross profit 39,417 34,220 15.2%
MARGIN 30.8% 27.6%
Income from operations 16,809 14,128 19.0%
MARGIN 13.1% 11.4%
SOLUTIONS
Net sales $ 18,555 $ 16,996 9.2%
Gross profit 2,866 2,323 23.4%
MARGIN 15.4% 13.7%
Income from operations 971 494 96.6%
MARGIN 5.2% 2.9%
CONSOLIDATED
Net sales $146,694 $140,877 4.1%
Gross profit 42,283 36,543 15.7%
MARGIN 28.8% 25.9%
Income from operations 17,780 14,622 21.6%
MARGIN 12.1% 10.4%
COLUMBUS MCKINNON CORPORATION
ADDITIONAL DATA
JULY 2, 2006 JULY 3, 2005 MARCH 31, 2006
------------ ------------ --------------
BACKLOG (IN MILLIONS)
Products segment $ 58.4 $ 42.8 $ 53.6
Solutions segment $ 11.4 $ 17.3 $ 13.0
TRADE ACCOUNTS RECEIVABLE
days sales outstanding 60.6 days 57.4 days 59.2 days
INVENTORY TURNS PER YEAR
(based on cost of products sold) 5.2 turns 5.2 turns 5.7 turns
DAYS' INVENTORY 70.8 days 69.7 days 64.4 days
TRADE ACCOUNTS PAYABLE
days payables outstanding 38.1 days 30.2 days 33.7 days
WORKING CAPITAL AS A % OF SALES 19.4 % 19.4 % 17.4 %
DEBT TO TOTAL CAPITALIZATION PERCENTAGE 46.1 % 75.6 % 50.6 %
NET DEBT TO TOTAL CAPITALIZATION
PERCENTAGE 43.2 % 74.6 % 44.5 %
SHIPPING DAYS BY QUARTER
Q1 Q2 Q3 Q4 TOTAL
-- -- -- -- -----
FY07 63 63 59 64 249
FY06 65 63 58 65 251
COLUMBUS MCKINNON CORPORATION
RECONCILIATION BETWEEN GAAP NET INCOME AND NON-GAAP NET INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
------------------
JULY 2, 2006 JULY 3, 2005
------------ ------------
GAAP NET INCOME $ 5,572 $ 7,322
Reconciliation between GAAP Net Income and
Non-GAAP Net Income:
Financing costs for 2010 Notes repurchase 4,583 -
FAS 123 (R) Adoption (incentive stock options) expense 798 -
Income tax expense (1,604) (1,797)
----------- -- --------------
NON-GAAP NET INCOME $ 9,349 $ 5,525
GAAP NET INCOME PER SHARE - DILUTED $ 0.29 $ 0.49
Shares used in GAAP per diluted share calculation 18,961 15,029
NON-GAAP NET INCOME PER SHARE - DILUTED $ 0.49 $ 0.29
Shares used in non-GAAP per diluted share calculation 18,961 18,961