CMCO - Earnings call transcript Q2 2018 | Columbus McKinnon Corporation

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Operator

Good day and welcome to the Columbus McKinnon Second Quarter Fiscal Year 2018 Conference Call and Webcast. All participants will be in a listen-only mode. [Operator instructions] After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference call over to Ms. for Relations Investor Pawlowski, Columbus McKinnon. Deborah Ms. floor the is yours, ma'am. Pawlowski,

Deborah Pawlowski

me good, Thanks Columbus appreciate with Chief our Financial everyone. Rustowicz, your and and and McKinnon. Mark CEO; President time have Officer. in certainly our interest We Mike Greg Morelli, your today I here and

fiscal this You morning. should quarter have that results of copy financial a were second our XXXX released earlier

cmworks.com. find you If can them on website you at don't, our

today's also find slides conversation. alongside accompanying will You that the are

turn to Safe you’ll X, with I the if So, those review Number Harbor will slides statement.

stated discussions that forward-looking risks As to These can well is you’re could cause release make the in today. filed session. with and future here may are at the aware, or and the to with to documents These factors These on earnings factors subject other sec.gov. are uncertainties other documents and during actual we what results uncertainties statements Securities events, from some during be Commission. statements which materially apply found as and the our formal well provided differ as website as Q&A as well other risks as Exchange as

in we these some We discuss will will call, performance. our non-GAAP measures. be financial today’s During also useful evaluating believe

the You for or as results additional should a not presentation information consider substitute GAAP. with prepared this of in isolation in accordance

to slides, measures in GAAP accompany and non-GAAP the comparable release information. for your We measures have the reconciliation provided that today’s of tables

So, over Mark? please with to begin. to it to Mark that, turn turn and X, Slide I’ll

Mark Morelli

of quarter. quarter. great the indicative this I strong we by We fiscal another Deb. of our solid XXXX first continued as is a from had the of that half franchise momentum you, Thank the potential first believe delivering

get many prior the work had the quarter to relatively sales with our excluding hard with to exchange year we compared Nonetheless, products rose the customers the to with strong we of got to organic time. hurricanes. Our the get rates. light on million of Compared impact with growth others, currency off to port of X.X% favorable the $XXX.X Houston to in XX%

was employees products. Another of believe through and a our demand was drive fact of to this the issues. availability excellent help roadmap and execute an I of demonstration growth work of the professionalism improved commitment our

operating we and Our relevancy process of structure effective segments structure need discipline has and clarified more roadmaps results new and they The products but in product our improved the lines us wide review in better helped goals. our around grade organization to and of highlight and polarization, targets system deep execution. to a workflow deliver performance putting our variety regular deployment professional high quality, and achieve the the fill decision-making quarter market developed led for the the also solutions. how and This

our of growth in market. tailwinds industrial strong organic robust improvement our This quarter growth the this discuss GDP capacity first the were in market we quarter than was Let's and U.S. from for approximate past X.X% X% the anticipated certainly U.S. welcome. utilization and

success our needs performance addressing responsiveness the products ensure to in quarter. too to our better It's understand by customer several that and reducing in times which the Sales vertical in also were improving we're lead helps robust. our enable key market. utilities markets However, important relevant

and tools quickly for hurricanes, our the We As I of pulling logistics. to some and used mentioned restringing re-stocked and with we lines. hoists power able effectively hand manage operations were our

refurbish construction continues in to Magnetek the products preparation replenish has future U.S. and disasters, equipment recover summer is and steel from upgrade to business events. material demand Construction the throughout as in they impacted for of deploy look driving there industry was utilities months. construction commercial The strong production tool the cities steady our be particularly to likelihood drives The As a many of that facilities. for also increase the boom natural particularly in as stock U.S. industrial producers

for measurable controls. well. them the making for these well. segment demand demand provide automotive helped particularly business for hoist, the to model result Automotive our summer rail, has products drives energy our mining retool our This and in in The controls changeovers a for Magnetek to such customer helped their OEMs the Our the also products. has U.S. as months. improving require operations. demands sector as industry beginning Lodestar The unified drive savings and to market is as as drive entertainment products through Magnetek The also

summer large the government or with has X.X%. for products Europe actuators we festivals, used vehicles and touring aircraft orders been organic in for bridge for assets. in Our jacks screw for downs Also, been project had capacity drive utilization hoisting manufacturing in well explosionproof industry has downstream other Middle U.S. for We've notably revenue for in and leading applications growth like as and and theater. used particularly Outside such aircraft placing industrial attachments midstream the East. X.X% the acts, lifting a as tie oil manual successful serving entertainment U.S. selling EMEA the strong up construction engine Increase Russia, gas hoist demand. for helped for and

of several region local localizing of selling successful in manufactured Latin been comes that addition, America capital equipment sales automotive, or experienced in $X.XX into share now Strong working, growth seeing diluted the In into for recession. income had and quarter. net out We're per significant products translated in are durable and that growth in markets. Mexico as goods We've $XX.X manufacturing region. million GAAP metal that

diluted we For generated per the share. of half XXXX, fiscal fiscal $X.XX

our strong and debt used continue half $XX.X of have In first We our to million cash demonstrate million in scheduled in borrowings. cash year, quarter. fiscal in $XX have We $XX the the the in we repayment in pay paid cash cash from million operations ahead down $XX.X million of debt generated generated engine down and to plan.

focus the technology industrial you capabilities. results to of commentary some the I let over walk on the our through to call quarter, provide me Before turn on our Greg brief

portfolio As an The leader. last our call, in acquisitions from industrial and evolution of the earnings STAHL of technology our products we're McKinnon accelerating again with average Columbus well is industrial we engineered engineered than business this we see company performed quarter, with once highly our better that Magnetek of increase markets. very a and legacy And discussed products solutions. product into can

leading LNG and Magnetek industries specific unified which example, position gas and customers, crane for leading and controls appreciate in For of up driven solutions such the and Similarly, the solutions engineered in because technical midstream energy in these applications and infrastructure, demanding hoist market steel design into the again their generation. and technical entertainment industry. high industry productivity other high-performance automotive oil our yields features reliability growth by and explosionproof in after STAHL the and time. high Magnetek and role the in automotive with enables its growth and support. system holds functionality a and higher as drove Customers provide a sales quality specified industries was power Lodestar its the companies and also end-users, for unique for terminals rail market and outstanding markets, greater penetration

beginning strategic fiscal Following with what year. provide plan the of and expect XXXX introduce the on Greg, in some discuss that calendar our I'll we will outlook to

call let turn Greg. me the to you So, now

Greg Rustowicz

you, Thank and Mark good morning, everyone.

contributor from in was Slide of the strong second the $XXX.X XX.X% prior adding quarter of XX.X% the was sales Turning up year. STAHL sales to quarter's of a sales million quarter million in growth. which consolidated X, represented the $XX.X

by was the and million We up X% growth the strength up was also U.S. $XXX,XXX organically markets we or points. to organic as Overall, in Canada X.X%. EMEA. quarter and $XX.X million grew and and or saw or American $XX.X in continue improved pricing Latin basis Sales XX volume show markets sound

a largely translations the the U.S. sales increased quarter of and tailwind shifted result stronger X.X% to euro in dollar. and currency Foreign a weaker by

XX.X% $XX.X compared XX.X%. Canada $X U.S. organic STAHL contributed outside profit sales international high profit ago by U.S. the a million of increase the of XX.X% environment $XX.X X, or an or the million or were to single $XX.X the million million U.S. with sales. Slide period. was saw saw up organic up gross million $XX.X quarter For Adjusted in to America XX%. and contributed double-digit $XX.X were Sales while STAHL growth EMEA year our quarter, in sales. improved or Latin our growth versus increased the regions. mid-to On million $XX.X our gross digit quarter these two prior business as second year. million

XX of percentage for accretive to demonstrates plans can a margin adjusted was points. with an presentation. value to margin, engineered, the of compared margin gross consistent posting gross adjusted of gross prior is an adjusted product gross The technology on Our This margin increase was transform line, which the adjusted found XX.X% Page XX be in of year company. XX.X%. ATEX-certified reconciliation our into STAHL XX.X% an basis industrial this to highly

increase result added million profit gross Let's contributed now of volumes. $X.X review was and drivers of primary the STAHL quarter's profit. gross million bridge. gross The in profit, of sales gross the STAHL sales $XX.X volumes higher the acquisition higher two profit

inflation, million by added our adjusted impact Other In which pricing, an for as $XXX,XXX. partial gross item. litigation which impacted for net received profit foreign of profit, and gross gross pro items item gross also out higher This included asbestos a profit of payment margin addition, from of we a ongoing carrier regarding the material is affecting raw $X.X translation, positively coverage currency $XXX,XXX of insurance claims. positively insurance forma

pro In the compared also $XXX,XXX year. a gross by cost STAHL profit and forma prior were integration addition, to costs product item. by liability impacted $XXX,XXX lower is negatively

cost to also for Workers cost to plants $X.X costs this annual negative of our incentive and benefit profit. other changes plan cost, quarter compared other and decreased costs, of gross $X.X one ago. productivity, which due was We This changes and year of Medical Comp saw in million net compensation higher stock million,

adjustments this than had more the which inventory for quarter, In addition, of negative we balance unfavorable deviation. the accounted

expense well well. cost the G&A from $X.X two the prior expense by was increased expense pro Unfavorable integration in selling Slide X.X% offset STAHL cost to G&A incentive Magnetek. currency expected $XXX,XXX forma was on to included cost related is $XXX,XXX legal annual increased G&A accrual represents higher previously $X.X XXXX. million also STAHL added to The of for second added items quarter $X currency as selling As measures. we including the quarter. translation year costs were expense selling year $XXX,XXX a and in prior expected in added added than this insurance G&A. to compared remainder million fiscal investment to translation cost coming G&A be as of for due to year. the in R&D see of $X and year. cost shown claim by $X.X prior R&D legal $XXX,XXX plan the cost in largely to STAHL incurred $XXX,XXX a $X.X sales subsidiary related STAHL foreign million by savings former XXXX growing mentioned million this to million million costs also integration expense. to costs. foreign million. cost to compared as the added increase fiscal $X.X year. higher the R&D X, Unfavorable that

run other costs and per quarterly approximate items. remains is million unchanged to the RSG&A quarter Our forecasted rate integration $XX pro excluding forma and expected STAHL

X.X% Turning STAHL rates. to of the of million margin which sales. year of prior estimated income, of or was adjusted presentation. operating year. for $XX.X of margin be operating X, XX million Slide on reconciliation to $X.X XX.X%. is for added from income The adjusted amortization represents STAHL in adjusted FX operating compares found can million Page operating this or This an be to adjusted operations at income X.X% current million $XX.X adjusted $X the

was an $X.XX reconciliation per year, to of of XX.X%. GAAP increase of earnings per X, $X.XX share this versus in quarter of were accretion. has year-to-date $X.XX share were quarter period. and or As $X.XX you share Slide per $X.XX XXXX the STAHL compared The diluted for adjusted can earnings $X.XX the in diluted the fiscal Adjusted contributed on EPS accretion share diluted to XX.X%. $X.XX year previous per in affected adjustments a earnings per see Page adjusted second as prior added effective are than XX%. tax tax GAAP standard previous of be a impacting XX treatment our new can per result of accounting the our the of basis, guidance accounting tax GAAP of earnings the On GAAP current All to quarter tax lower equity compensation. rate rate was This this presentation. found share share a of normalized at in

change, we now in to Given effective the full expect tax the this to XX% XX% be year rate range.

XXXX XX.X% year capital to percent sales X, XXX September as Inventory turns X.X inventory sales quarter, basis reflecting Slide XXXX. a working improved and XXXX. from XX.X% to as points XX, Working September X.X as XX, Turning at decreased XX.X% to the turns at were our prior turns. compared percent decreased XX, of a capital turns compared to of March of

the expect $XX.X million, We was net $XX.X cash this we in look are committed the inventory million turns strong year also cash from at generate XX, which always activities fiscal The its company has On managing to prior higher year. Free cash to was Slide million in hallmark down flow of in second one to quarter our strong cash to to ability than increasing pay as this compared generate and continue XXXX. to we is debt. ago. been $XX.X operating to

and for million priorities debt. capital for fiscal as Our $XX on been continue paying for expenditures to evaluate the our XXXX we $XX to of guidance has capital focus down use to lowered million

result Turning debt of XXXX. $XXX.X $XXX.X acquisition, was our September STAHL was as XX, total our the million to net Slide million a and of debt XX, as

Our total net net We debt capitalization a to of total debt quarter. $XX.X this of repaid million XX.X%. was

net to continue de-lever a net more normal level our XX%. very to We total debt ability capital demonstrate of to to quickly

which repay EBITDA will We're from and fiscal been in three of $XX month plan by the to net we of debt that from original of leverage an XXXX. adjusted has EBITDA times STAHL. fiscal our on than LTM end eight EBITDA targeting times which only X.X less expect be million approximately We to currently debt basis, we're reflects XXXX, increased

as With we a B undrawn. covenant has reminder as maintenance loan revolver term a is Mark. back over turn covenant which no As have long I'll leverage the lite that, it to

Mark Morelli

Thanks Greg.

levels this I'll growth considerations remainder year-over-year very provide in XXXX. look Sequentially orders Slide from the at to quarter. strong was X.X% the organic we overall. up with down had the some we fiscal quarter With XX, as Turning first of solid

and Our was the about strong for than a quarter backlog XXXX, million $XXX.X while higher the second adjusted acquisition. down X% September from X% STAHL

third As quarters our quarter our quarter we is at two to there. rebound remaining we the from look XXXX, expect fiscal the seasonally quarter and fourth in would weakest

been growth this could X% confident given but and for the in difficult good typical XXXX Our on will At revenue fourth X% that we December organic growth has what of our uptick certainly relative it's expect be strength organic the quarter year. the to uncertainty to point we're a the be encouraging a fiscal recovery, tell quarter. for sustainability industrial

integration Let in approximately XXXX our million progress me update track is you $X on captured the and million on with provide in fiscal near-term priorities. year-to-date. The we synergies STAHL to $X.XX

We the well capturing and agreement. service of supply chain leverage efficiencies synergies, organizing savings as transfer for elimination as are

our products. opportunities advantage defined team up strengthening opportunities. further products. for partner Technology to near-term smart creating for core is Our a roadmap has taken We've leveraging for growth hoist of several to Magnetek pick organic key our component demand A

customer with our the operations, part in availability we're responsiveness we're working reduction about our better many As and Greg, goal. improving success lead in times. by improved spoke having product mentioned, I've debt toward of

we requirements. While to there is still strong potential cash, reduce capital do our generate working

offer strategies expect team Finally there. what our and a plan of longer-term calendar We for let developing spent the should quality strategic new discussion me beginning to leadership goals at time year. the global our get as you

have our on next earnings Expect in for am we the potential our detail will in encouraged highlight business. power. greater runway our our discuss the increasing earnings inherent thoughts plan importance I with the While we the call,

tools earnings deployed of set which accountability. checkpoints also this our path. is Within we've system along setting of discussed earnings strong our drivers also the that progress. is power and redefined targets you By operating operating and team accountability has which tools the the is for around that and clarifying developed EPAS, before a has a more frequent system our case work acceleration, for we processes. which of and clarity new organization, power EPAS new EPAS standards or the with system, we of embodies provides One call as driving expectations,

and can and risk we So, manage opportunities. both monitor

new forward, processes EPAS, and we'll adding tools move be help earnings to accelerate which As will power. our us we

of excellence. we our as crane technology have business, stronger We industrial engineered in relevant proper power set and independent execution the on to margin is great been plan critical to focus of on company a plan, believe core our into engine a a drive continued Focus expansions. a Another with is drive that wide operational which sell of our product fit good product EBITDA earning growth has development multiple earlier. acquisition as center I expansion, industrial they They to element both greater install, we discussed on us. a strengthening of our for builders. we expect will can translate will Culturally primarily STAHL highly represent ramping markets. profitable

opportunity to position year A and more of force. core sales fiscal part a better market, this our build We're platform. the globalized comes leverage We key growth have our excited upon the product multiple to create strengthening in platforms brands businesses. from this

our not reduction and to initiatives for for go grade applications. forward, our we a lead to programs Columbus If professional McKinnon continue have time they're product look pay will elsewhere. off. trusted availability forced stocking excellent with to Going do Customers brand

uptime higher ramp Columbus product that pay product tough We solve well-made understand problems. solve from better McKinnon more also our striking focus to to better business They're effective expect provide to continue the using to that tools yields. with. we'll becomes We'll online development so how engine. grow willing and know to Also, for content leverage better on their will that's We and core appreciate problems this accordingly. offerings, customers simplify customers apart can equipment. do easier is and our We'll

warehousing we through R&D the approach solve effective our to to McKinnon time, same the Our effectively represent warehouses investment rich to manage reduce a smart the in products and and voice concept approximately significant greater costs. At our improve production opportunities more marketplace our Columbus X.X feet manufacturing. footprint has profits. in can million to square more factories, believe XX has our will bring in needs We ability heritage eight in market.

have of profits. represents year. significant functionality fiscal our efficiency our supply runway This greater costs. an products EPAS further lines, and to improve through value as part capture our engineer product our to of the summary, effectively first tools also drive opportunity out opportunities and and take excellent We leverage of a we to half chain we processes had will and In simplify

We are its concerned uncertainty industrial on potential markets as and geopolitical many others are about globally. impact

However, markets growth. outsized have been has favorable us operating system enabled capture our and to new

Our technology also striking our greater well markets. support our products at the model aspects value brands and legacy business We're of on acquisitions of sheet important higher balance as emphasizing industrial new as striving schedule. ahead

of We together. and on purpose lines questions. goals collaboration have Thank works, now with all improved team listening you clarity and Mike, we for we're the for shared can the pulling open

Operator

question-and-answer Thank Please Capital. instructions] you, question first we Matt The session. Sir. come We'll have ROTH of go begin will ahead. from [Operator Koranda the now

Matt Koranda

Good morning. Hey guys.

Mark Morelli

morning, Matt. Good

Matt Koranda

a half? detail just wanted we So to would ahead provide you back of the but first wondering you guide versus expected, the it's could growth to why for just go where causes little ahead bit revenue if more here, on in or bit with that organic Is have QX half? it conservatism just channel a are you throttle guys it the the seeing first versus something relative the specific deceleration

Greg Rustowicz

it's pretty would in QX. we decline of seasonality see typical Matt, business our our a Hey that

a end we the trends, into look rates I the holiday if happen as things at you the back year. is of particularly think and historically approach couple So, there that our season

that days also We impacted. working have also have less

with slowdown very I line the much it's expect. So, in we characteristically would think

probably some think I growth well you beyond are our received from what expect we business. that outsized

to So, the far. that this as rates get well able we've want or order we to what really in point. is I pleased that forward been guidance reflects seasonality I understand really with do responsible able we think we're as recognize But at the we've been see reflective so think going to

Matt Koranda

is some now next comments utilities maybe to on are could some remarks any expectation prepared your and in all of to in impact hurricane also Mark you sounded over couple be to is just maybe residual the up going potential, you of alluding terms And impact? buttoned the revenue of from that impact in any you material if tie of there like logistics, quarters? Okay. It

Mark Morelli

hurricanes been quarter. the pretty our think already much we is impacted Yeah, in impact

Our with of quick-cycle business some tools. hand these

and either it folks You you're availability or or have out to got it have of position able it sell elsewhere. go to

I we're So, hard to see we're I able don't pretty and you of been other Obviously, a or with manage to going reflected out we that's how through time, some on luck, again, work should with pleased Once much we're than orders to able pretty there bump forward. that had We restocking some to resolved. small manage think we things. and think really some came and and equipment that, disruptions unscathed. that we're small some getting us did I but else impact think able anything expect

Matt Koranda

All Greg next expected wondering you right. nice then pulling of 'XX should but repayment expect some same debt fiscal the from as the heading one guys we year on job rate forward And maybe well? repayments, debt repayment are of into or for there,

Greg Rustowicz

question. good Thanks Matt. Yeah

level $XX 'XX which in to as is fiscal new expect we debt for this guidance would to year. million be well, comparable our the at for So, repayment

Matt Koranda

it. Got

million That's And by Okay. in more sneak you synergies, on an the incremental got the synergies like $X.X STAHL one then my helpful. just and looks I'll calculation. it

to So rest during the where maybe visibility of like achieving that And the color remaining $X.X for the specifically a the little from quarter? year? what's can just then provide you bit of on million came the

Greg Rustowicz

faster those IT from sourcing through. in of bit are came subsidiary a add Agreements, lot anticipated. savings Services in related. some Transition going quarter, of originally we're the savings to getting some A area. is that we part the operations the Yeah than that we're of so synergies Matt, the those had consolidations items There TSAs of off the little

puts million at So, about the us those combination year-to-date. all $X.X of

very million about towards feel million clearly confident year. this the $X $X we're we number that cracking So,

Matt Koranda

queue All right guys. jump I'll back in thanks.

Operator

have instructions] Next, Global Seaport we of Securities. [Operator Shlisky Mike

Jordan Bender

This morning. downside? guess the in from Good morning. quarter upside this second to I or the with surprised guys organic any is you there on Jordan back growth, the organic maybe to the of going Mike growth were even Bender

Mark Morelli

think in certain I the of so level was number. surprise there Yes,

into headed obviously we the roadmap, As started and quarter, for things. been figuring have things our us just we together piecing started out we strong as

have We that line and with in we had the things to early up. We some the up to businesses. headwind of offset some begin get quarter issues had the came hurricane we

pretty very for our We quarter have a that to proud review I really we fronts. the pleased then am opportunities and the process and and many and came on very through regular build where roadmaps try team the risk manage we

testament on wheel your a foot quarter. team the but real to was we it's getting able you go had the little So thought but in hand put faster accelerator to, to a what sometimes bit think the your might the you than I end on and achieve we up

Jordan Bender

then modeling question a Okay. here. And quick

Your organic growth that outlook does exclude or current include in that quarter, does it? that third

Greg Rustowicz

excludes That currency.

of might rate current on a little levels, at exchange bit So, translation. positive benefit be there a

Jordan Bender

Okay. if pricing improvement? any there's was improvement forward, then of wondering going And anticipated there, kind I pricing

Greg Rustowicz

third Yeah, points continue XX that pricing we expect would have of and the in we so we expect to about would basis quarter. far

Jordan Bender

thanks. right. appreciate All it I guys,

Operator

[Operator we of Roubaix instructions] have Capital. Hillary Next, Christopher

Christopher Hillary

morning. Good Hi.

Mark Morelli

Good morning.

Christopher Hillary

constructive we more given bit a price? that strength more manufacturing recently oil in and of outlook Can kind perspective the you demand this give continued see us surveys medium-term your the on of

Greg Rustowicz

wide I see and where So, definitely I think our in spoke the about markets pretty we verticals set recovered. of we're as script, from seeing my applications business industrial

tracked capacity. marginally have It's of a bit. sort uptick industrial just We

encouraging. has certainly say what So, been I seen quite we've would

to happen but the markets us at setting. all accordingly. There to in are But these and and tell that will it's that for twists advantage can going midterm. present uncertainty some but have a We've predict, how us forward customers refurbishing continue how capital I and to our them of you their seen have whatever of opportunities visited we're It's very it's market the continue retooling play in. from out us think and will roadmap outsized the have factories. I in and understand to out difficult times get to themselves for environment. equipment turns number difficult tough and going this difficult going industrial political seen an really play be toured take We've I say for given political growth hopefully to we'll build will to

Christopher Hillary

Okay. Great. Thank you.

Operator

this no I questions. this back and conference any at to go hand Well, I'd time, ahead team the closing management further to We'll showing question-and-answer over time, for am At session. the the like conclude remarks.

Mark Morelli

you thank Well for participating today.

new durable Thank I discussing strategy, day. enjoy participating with forward this believe strategy think this high-quality highly is objectives. that is McKinnon goals I already executing and great to and and value time what you our your and for franchise. look an a Columbus for you greater exciting builds making into for I and we're progress

Operator

take this thank again Thank has sir we today. and management you of call At The now team conference And rest also care. lines. and disconnect everyone, the time, to may for your your you you time the concluded.

Columbus McKinnon (CMCO) 31 Oct 172018 Q2 Earnings call transcript