NEWS RELEASE
CONTACT:
Karen L. Howard
Vice President-Finance and Chief Financial Officer
Columbus McKinnon Corporation
Phone: 716-689-5550
karen.howard@cmworks.com
COLUMBUS MCKINNON REPORTS CONTINUED MARGIN EXPANSION,
DEBT REDUCTION AND EARNINGS GROWTH IN FISCAL 2008 FIRST QUARTER
o ACHIEVES CONSOLIDATED OPERATING LEVERAGE OF 34%
o GROSS MARGIN IMPROVES 80 BASIS POINTS TO 29.6%
o PRODUCTS SEGMENT OPERATING MARGIN EXPANDS 70 BASIS POINTS TO 13.8% ON
6.7% REVENUE GROWTH
o DEBT, NET OF CASH, AT 30.8% OF TOTAL CAPITALIZATION ON JULY 1, 2007
COMPARED WITH 43.2% A YEAR AGO
o DILUTED EPS OF $0.50, UP 11.1% ON A PRO FORMA BASIS EXCLUDING FISCAL
2007 UNUSUAL ITEMS
AMHERST, N.Y., July 24, 2007 - Columbus McKinnon Corporation (NASDAQ: CMCO), a
leading designer, manufacturer and marketer of material handling products, today
announced financial results for its fiscal 2008 first quarter that ended on July
1, 2007. Gross margin improved 80 basis points to 29.6% compared with 28.8% in
the first quarter of fiscal 2007 on a 1.0% increase in net sales to $148.1
million. Strong performance in the Company's Products segment, representing
92.3% of total revenue, included sales growth of 6.7%, and operating margin
expansion of 70 basis points, more than offsetting declines in sales and profits
in its Solutions segment. Products segment sales increased $8.6 million with
significant contributions reported by both domestic and European hoist
operations, while Solutions segment revenue was intentionally held back to
facilitate the transition of the business model for its Univeyor business from
engineered-to-order projects to a more "standard" products-oriented offering.
Timothy T. Tevens, President and Chief Executive Officer, commented, "We
continue to achieve robust performance from our Products segment as it
experiences strong demand for material handling products around the world,
successfully penetrates new markets and benefits from continuous improvement in
productivity, leveraging the higher volume. The positive effect of operating
leverage from our Products segment, combined with lower interest expense, is
enabling us to continue increasing Columbus McKinnon's profitability even while
we restructure our Solutions business for improved performance. Consolidated
operating leverage rose to 34% in the quarter, continuing a strong trend of
generating significant additional profit on increased sales."
Net income for the fiscal 2008 first quarter was $9.5 million compared with
fiscal 2007 first quarter net income of $5.6 million. On a per diluted share
basis, first quarter fiscal 2008 net income was $0.50 compared with $0.29 in the
same period last year. In last year's first quarter, the Company recorded net
after-tax charges of $3.0 million, or $0.16 per diluted share, in financing
costs associated with the repurchase of $38.5 million of 10% Notes. Excluding
the net effect of the refinancing, fiscal 2007 first quarter pro forma net
income per diluted share was $0.45.
FY 2008/2007 Q1 RECONCILIATION OF GAAP NET INCOME TO NON-GAAP PRO FORMA NET
INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
------------------------------------------------------ ------------------------------ ---------------------
FY 2008 Q1 FY 2007 Q1
------------------------------------------------------ ------------------------------ ---------------------
GAAP net income $9,520 $5,572
------------------------------------------------------ ------------------------------ ---------------------
Financing costs - 2010 Notes repurchase --- 4,583
------------------------------------------------------ ------------------------------ ---------------------
Income tax expense --- (1,604)
------------------------------------------------------ ------------------------------ ---------------------
Non-GAAP pro forma net income $9,520 +11.3% $8,551
------------------------------------------------------ ------------------------------ ---------------------
GAAP net income per diluted share* $0.50 $0.29
------------------------------------------------------ ------------------------------ ---------------------
Non-GAAP pro forma net income per diluted share* $0.50 +11.1% $0.45
------------------------------------------------------ ------------------------------ ---------------------
*Shares in thousands used in per diluted share calculation: FY08 Q1:
19,088; FY07 Q1: 18,987
Operating income of $18.3 million for the fiscal 2008 first quarter was up from
$17.8 million for the fiscal 2007 first quarter. As a percent of sales,
operating income produced a 12.3% margin in the fiscal 2008 first quarter, up
slightly from 12.1% in the same period last year. Losses from the Solutions
segment partially offset the Products segment operating margin of 13.8%, a 70
basis point improvement over the same period last year. Operating income was
also affected by higher selling expenses which increased $0.8 million, or 4.9%,
reflecting marketing activities to continue the Company's European expansion
strategy and to focus on U.S. specialty markets. A $0.3 million increase in
restructuring charges relates to reorganization activities at Univeyor as the
Company migrates this business to a more standard products-oriented focus, less
dependent on its more volatile and risk-oriented systems business.
Mr. Tevens continued, "We are continuing to invest resources in Europe, Asia,
and Latin America to expand our revenues in these regions and diversify our
revenues into new geographic regions, thereby reducing revenue risk. We are also
focused on gaining greater market penetration in specialty domestic markets such
as commercial and road construction, and a variety of energy-related industries.
As a result of these efforts and the continued strong industrial economy in our
important markets of interest, we believe we can sustain our expected Products
segment growth rate in the mid single-digit range for the foreseeable future."
As a result of reduced debt levels, interest and debt expense for the first
quarter of fiscal 2008 was down $0.3 million, or 7.4%, compared with the prior
year's quarter and reflects the Company's efforts to strengthen its capital
structure by eliminating or efficiently refinancing higher cost debt.
Debt, net of cash at July 1, 2007, was $112.8 million, or 30.8% of total
capitalization, a $10.6 million reduction from $123.4 million, or 33.8% of total
capitalization, at the end of last quarter and a reduction of $50.7 million from
$163.5 million, or 43.2% of total capitalization, a year ago. At the end of the
fiscal 2008 first quarter, funded debt was $174.7 million, or 40.8% of total
capitalization, a $2.6 million increase from $172.1 million, or 41.6% of total
capitalization, at the end of last quarter and a reduction of $8.7 million from
$183.4 million, or 46.1% of total capitalization a year ago. The Company's
availability on its line of credit with its bank group at July 1, 2007 was $64.8
million. On June 25, 2007, the Company called for redemption of the remaining
$22.1 million of its outstanding 10% Senior Secured Notes Due 2010, with a
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redemption date of August 1, 2007. The Company intends to redeem the Notes using
available cash. Further, on June 29, 2007, the Company announced proceeds of
approximately $4.8 million from the sale of its facility in Charlotte, North
Carolina, which will be applied to further reduce debt during its fiscal 2008
second quarter which ends on September 30, 2007. In conjunction with the
building sale, the Company will lease back a portion of the property, with $3.5
million recorded as a capital lease debt obligation in June.
Capital expenditures for the first quarter of fiscal 2008 were $2.6 million
compared with $1.9 million for the same period in fiscal 2007. Capital spending
is focused on new product development and the purchase of productivity-enhancing
equipment along with normal maintenance items. The Company anticipates capital
spending to be approximately $11 to $12 million in fiscal 2008.
PRODUCTS SEGMENT
- ----------------
Products segment sales for the first quarter of fiscal 2008 increased 6.7%
compared with last year's first quarter and represented 92.3% of consolidated
net sales. The fluctuation compared with the year-ago quarter is summarized as
follows, in millions:
Increased volume $ 9.2 7.1%
Increased pricing 0.6 0.5%
Foreign currency translation 1.5 1.2%
Divested business * (2.7) (2.1%)
-------- ------
Total $ 8.6 6.7%
======== ======
* Divested business is Larco Industrial Services, Ltd., sale announced
March 5, 2007
Gross margin for this segment was 30.8%, consistent with last year's first
quarter. Income from operations, as a percent of sales, was 13.8% for this
period, up from 13.1% in the fiscal 2007 first quarter.
Backlog stood at $63.0 million at the end of the quarter compared with backlog
of $58.4 million and $53.2 million at the end of the fiscal 2007 first quarter
and fiscal 2007 fourth quarter, respectively. The time to convert the majority
of Products segment backlog to sales averages from a few days to a few weeks,
and backlog for this segment normally represents four to five weeks of
shipments, although backlog at July 1 represented approximately six weeks of
shipments. This increase was primarily driven by longer lead-time orders for
more capital-type equipment such as cranes.
SOLUTIONS SEGMENT
- -----------------
Net sales for the Solutions segment were $11.3 million in the fiscal 2008 first
quarter, down 38.9%, from sales of $18.6 million in the same period last year.
Gross margin was 15.8% compared with 15.4% last year. Restructuring charges of
$0.3 million contributed to the loss from operations of $0.6 million during the
current period compared with income from operations of $1.0 million during the
first quarter of fiscal 2007.
Continued weak performance by the Company's European material handling systems
business, Univeyor, which represented approximately 59% of this segment's
quarterly sales, and overall contributed approximately 5% to consolidated net
sales, resulted from performance issues to complete some remaining problem
projects, restructuring costs and the decision to reduce certain new project
work. Restructuring activities are focused on measurably reducing costs and
changing Univeyor's business model to increase its focus on offering products as
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packaged solutions rather than engineered-to-order systems. This change is
expected to reduce the volatility of this unit's performance and improve its
return on invested capital.
"We believe we have made some progress on the realignment and restructuring of
the Univeyor business. We also continue to evaluate strategic options in order
to accelerate the resolution. By calendar year end, we expect to resolve this
issue," Mr. Tevens stated.
Backlog for the Solutions segment at July 1, 2007 was $8.5 million, down from
backlog of $11.4 million at the end of the fiscal 2007 first quarter and $9.6
million at the end of the fiscal 2007 fourth quarter. For this segment, the
average cycle time for backlog to convert to sales generally ranges from one to
six months.
SUMMARY
- -------
Mr. Tevens noted, "Products segment bookings in the first quarter continued at a
solid pace, up in the mid single-digits range over last year. We are having
measurable success with our efforts in Europe and see continued opportunity in
this market. We are challenging ourselves to continue to expand margins and cash
generation by improving order-to-delivery cycle times and inventory turns. Our
objective is to drive our previously stated operating leverage goal of 20% - 30%
sustainably to the high end of the range, and on a longer-term basis achieve
working capital as a percent of sales in the mid-teens. As to our balance sheet,
during our fiscal second quarter we will redeem the remaining $22.1 million of
our outstanding 10% Notes which should effectively result in a funded debt to
total capitalization ratio of approximately 38.3% and reduce interest expense by
$2.2 million per year. This action will also move us closer to our goal of 30%
funded debt to total capitalization."
He concluded, "Growth beyond our organic efforts will be dependent upon
acquisitions. We are focused on finding businesses that provide us greater
geographic and market diversity, complement our product lines and will benefit
from our broad channel reach. Over the long term, we see Columbus McKinnon
emerging as the global champion in material handling products that lift,
position and secure materials easily and safely."
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 24, 2007 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 July 31, 2007 by dialing 1-800-385-2289. Alternatively, you may access
an archive of the call until October 23, 2007 on Columbus McKinnon's web site
at: HTTP://WWW.CMWORKS.COM/INVREL/PRESENTATION.ASP.
----------------------------------------------
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SAFE HARBOR STATEMENT
- ---------------------
THIS NEWS 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 EFFECT OF OPERATING LEVERAGE, THE
PACE OF BOOKINGS RELATIVE TO SHIPMENTS, THE ABILITY TO EXPAND INTO NEW MARKETS
AND GEOGRAPHIC REGIONS, THE SUCCESS IN ACQUIRING NEW BUSINESS, THE SPEED AT
WHICH SHIPMENTS IMPROVE, 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.
TABLES FOLLOW.
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COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE DATA)
THREE MONTHS ENDED
------------------
JULY 1, 2007 JULY 2, 2006 CHANGE
------------ ------------ ------
NET SALES $ 148,110 $ 146,694 1.0%
Cost of products sold 104,222 104,411 -0.2%
--------------------------------
Gross profit 43,888 42,283 3.8%
Gross profit margin 29.6 % 28.8 %
Selling expense 16,121 15,367 4.9%
General and administrative expense 9,196 9,089 1.2%
Restructuring charges 276 4 6800.0%
Amortization 28 43 -34.9%
--------------------------------
INCOME FROM OPERATIONS 18,267 17,780 2.7%
--------------------------------
Interest and debt expense 4,178 4,512 -7.4%
Cost of bond redemptions - 4,583 -100.0%
Investment income (294) (474) -38.0%
Other income (954) (539) 77.0%
--------------------------------
Income from continuing operations before income tax
expense 15,337 9,698 58.1%
Income tax expense 5,956 4,265 39.6%
--------------------------------
Income from continuing operations 9,381 5,433 72.7%
Income from discontinued operations 139 139 0.0%
--------------------------------
NET INCOME $ 9,520 $ 5,572 70.9%
================================
Average basic shares outstanding 18,638 18,431 1.1%
Basic income per share:
Continuing operations $ 0.50 $ 0.29 72.4%
Discontinued operations 0.01 0.01
--------------------------------
Net income $ 0.51 $ 0.30 70.0%
================================
Average diluted shares outstanding 19,088 18,987 0.5%
Diluted income per share:
Continuing operations $ 0.49 $ 0.28 75.0%
Discontinued operations 0.01 0.01
--------------------------------
Net income $ 0.50 $ 0.29 72.4%
================================
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COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JULY 1, 2007 MARCH 31, 2007
------------ --------------
ASSETS
Current assets:
Cash and cash equivalents $ 61,898 $ 48,655
Trade accounts receivable 105,136 97,269
Unbilled revenues 7,935 15,050
Inventories 85,164 77,179
Prepaid expenses 17,741 18,029
-------------------------------
Total current assets 277,874 256,182
-------------------------------
Net property, plant, and equipment 55,265 55,231
Goodwill and other intangibles, net 186,044 185,903
Marketable securities 28,808 28,920
Deferred taxes on income 28,841 34,460
Other assets 4,845 4,942
-------------------------------
TOTAL ASSETS $ 581,677 $ 565,638
===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 8,712 $ 9,598
Trade accounts payable 37,624 35,896
Accrued liabilities 53,203 52,344
Restructuring reserve 49 599
Current portion of long-term debt 481 297
-------------------------------
Total current liabilities 100,069 98,734
-------------------------------
Senior debt, less current portion 29,514 26,168
Subordinated debt 136,000 136,000
Other non-current liabilities 62,833 63,411
-------------------------------
Total liabilities 328,416 324,313
-------------------------------
Shareholders' equity:
Common stock 189 188
Additional paid-in capital 175,519 174,654
Retained earnings 94,571 85,237
ESOP debt guarantee (3,275) (3,417)
Accumulated other comprehensive loss (13,743) (15,337)
-------------------------------
Total shareholders' equity 253,261 241,325
-------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 581,677 $ 565,638
===============================
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COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED
------------------
JULY 1, 2007 JULY 2, 2006
------------ ------------
OPERATING ACTIVITIES:
Income from continuing operations $ 9,381 $ 5,433
Adjustments to reconcile income from continuing operations to
net cash provided by operating activities:
Depreciation and amortization 2,209 2,105
Deferred income taxes 5,619 2,235
Gain on divestitures - (371)
Gain on sale of investments/real estate (325) -
Loss on early retirement of bonds - 3,780
Stock option expense 195 798
Amortization/write-off of deferred financing costs 163 980
Changes in operating assets and liabilities:
Trade accounts receivable (7,377) (921)
Unbilled revenues and excess billings 7,296 (3,528)
Inventories (7,642) (5,608)
Prepaid expenses 308 (1,925)
Other assets (118) (248)
Trade accounts payable 1,605 3,570
Accrued and non-current liabilities (1,653) (1,511)
---------------------------------
Net cash provided by operating activities 9,661 4,789
---------------------------------
INVESTING ACTIVITIES:
Sale of marketable securities, net 113 47
Capital expenditures (2,553) (1,903)
Proceeds from sale of property 5,454 -
Proceeds from discontinued operations note receivable 139 139
---------------------------------
Net cash provided by (used in) investing activities 3,153 (1,717)
---------------------------------
FINANCING ACTIVITIES:
Proceeds from stock options exercised 569 1,725
Net (repayments) borrowings under revolving
line-of-credit agreements (1,034) 11,843
Repayment of debt (56) (42,302)
Deferred financing costs incurred - (325)
Tax benefit from exercise of stock options - -
Other 142 145
---------------------------------
Net cash used by financing activities (379) (28,914)
---------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 805 171
---------------------------------
Net change in cash and cash equivalents 13,240 (25,671)
Cash and cash equivalents at beginning of year 48,655 45,598
---------------------------------
Cash and cash equivalents at end of period $ 61,895 $ 19,927
=================================
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COLUMBUS MCKINNON CORPORATION
BUSINESS SEGMENT DATA
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
QUARTER ENDED JULY 1, QUARTER ENDED JULY 2,
2007 2006 % CHANGE
------------------------ ----------------------- ------------
PRODUCTS
Net sales $ 136,766 $ 128,139 6.7%
Gross profit 42,099 39,417 6.8%
MARGIN 30.8 % 30.8 %
Income from operations 18,871 16,809 12.3%
MARGIN 13.8 % 13.1 %
SOLUTIONS
Net sales $ 11,344 $ 18,555 -38.9%
Gross profit 1,789 2,866 -37.6%
MARGIN 15.8 % 15.4 %
Income from operations (604) 971 -162.2%
MARGIN (5.3) % 5.2 %
CONSOLIDATED
Net sales $ 148,110 $ 146,694 1.0%
Gross profit 43,888 42,283 3.8%
MARGIN 29.6 % 28.8 %
Income from operations 18,267 17,780 2.7%
MARGIN 12.3 % 12.1 %
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COLUMBUS MCKINNON CORPORATION
ADDITIONAL DATA
JULY 1, 2007 JULY 2, 2006 MARCH 31, 2007
------------ ------------ --------------
BACKLOG (IN MILLIONS)
Products segment $ 63.0 $ 58.4 $ 53.2
Solutions segment $ 8.5 $ 11.4 $ 9.6
TRADE ACCOUNTS RECEIVABLE
days sales outstanding 64.6 days 60.6 days 56.4 days
INVENTORY TURNS PER YEAR
(based on cost of products sold) 4.9 turns 5.2 turns 5.8 turns
DAYS' INVENTORY 74.6 days 70.8 days 62.8 days
TRADE ACCOUNTS PAYABLE
days payables outstanding 32.9 days 38.1 days 29.1 days
WORKING CAPITAL AS A % OF SALES 21.2 % 19.4 % 20.1 %
DEBT TO TOTAL CAPITALIZATION PERCENTAGE 40.8 % 46.1 % 41.6 %
DEBT, NET OF CASH, TO TOTAL CAPITALIZATION 30.8 % 43.2 % 33.8 %
SHIPPING DAYS BY QUARTER
Q1 Q2 Q3 Q4 TOTAL
-- -- -- -- -----
FY08 63 63 60 63 249
FY07 63 63 59 64 249
###
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