CMCO - Earnings call transcript Q3 2019 | Columbus McKinnon Corporation

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Deborah Pawlowski

Thanks Brenda, and good morning everyone. We certainly appreciate your time today and your interest in Columbus McKinnon.

On the call with me today are Mark Morelli, our President and CEO; and Greg Rustowicz, our Chief Financial Officer.

You should have a copy of the third quarter fiscal 2019 financial results, which were released earlier this morning. If not, you can access those as well as the slides that will accompany our conversation today at our Web Site cmworks.com.

Slide Safe the Harbor to first I turn the review statement. you'll X deck, in will If

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

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

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

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

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

Mark Morelli

quarter and about everyone. morning Deb, delivered solid We optimistic Thanks, and results remain our another good future. of

of We of improving the strategy Columbus are earnings McKinnon. demonstrating growth execution for our power excellent blueprint as we're

as times we of quarter in lead For million rail the our $X.X we as FX Saudi gain sales delivered well. impact course] X% quarter, and growth in Arabia share the the shortening strong we had improving the for strong of organic [ph]. sales project the adjusting was by availability Helping growth [of

was was GAAP share held expanded XX had margin diluted businesses associated basis, XX.X% that in expanding driven a per points. the For basis by the consecutive charge seventh gross remaining with $X.XX quarter non-cash sale. loss year-over-year. the a for the we On of Gross quarter, margin

expanded EBITDA XXX $X.XX, operating deploying process and XX.X% our basis XX% Through deluding significant stands per system However, share year-to-date. points bottom-line at we're margin XX/XX basis adjusted includes on an strategy, further to improved XX.X% to helping that to earnings adjusted self-help drive growth. our is which our

realize we our million with a drive opportunities in ahead to is initiatives. runway long a from the strategic improvements. us There quarter of lot fact, In savings $X.X of in further

We paid generate continue $XX of year-to-today. to flow. strong cash We down debt million

of ratio leverage is crossed net now to important debt has as net Our ahead below milestone target. an EBITDA once Xx again

cash leverage reduce We will our continue improve prioritize and to debt to our net ratio.

Another important is us metric ROIC. for

performance turn improvement financial was points progress of four year-over-year. blueprint on an our our me and basis update our of ROIC adjusted strength you XX.X% with the XXX Please With to strategy. page let

growth productivity in our the We power are employed thus system. the our our and ramp of process far. company On Simplify it part process XX/XX the has points. and blueprint strategy focal phase We've calls, acceleration three business, elements our two earnings of of as improve we've about operating discussed engine. growth across currently for of previous half

and hoist product hoist to our enhancing our conversion their model hoist while first fiscal platform. converted and lowers offer and The about now offering. compact smooth SKUs to due cost run more of features new our legacy We line superior of significantly our spoke more half engineering. the wire and XXXX. our for rope the also We reduces during line The quiet launch the expect simplification platform rope product have new to completely

STAHL market range with expanded high-end the leverage competitive the of brand to mid-market the Our a the allows in product very in the and brand Yale us for compete offering.

has identified stock the signed in the of been and tire million approximately captured three on We end the We're more. savings, and confident Through yesterday was $X.X Of making the of process XX, we're XX/XX progress we German $X of identified the divestitures can clearly Our simplification the purchase the February. December million lens, results sale is operation. which we remaining we're execution at business previously, year-to-date. we've demonstrating deliver right on on is XXXX. sold path fiscal the of disclosed shredder for the business agreement sale expected close CS which the is forging the to of XXXX, the

is The two phase second focal two; phase productivity. is improving point

success in several demonstrating areas. is Our here

savings. million operational million is initiatives through at are productivity saved and improvements attributable Of excellence our considerable efficiencies directly to $X First, factories our improving excellence. generating $X.X nearly operational

paying the is off. Our focus waste and amount reducing indirect of labor on eliminating

fact, include improving and streamlining Other labor scheduling processes. productivity reducing by indirect In support actions levels. productivity we're improving material

as are to and improve in throughput for intensified upgrades investing operators paint quality. systems training We and well like

of is Second engine Ohio in factories eliminate combination Ramping This in point be of a the able excellence product consolidate and expect two. with phase savings. completed we're to million and line from approximately the which operational square simplification, $X we growth XXXX should early XX,XXX consolidation about third in fiscal feet.

Here on professional and in enhancing position productivity us growth and applications share higher solutions offer We product to our that delivering will improving and offerings market grade position lead we greater focus safety. gains. our by believe this

drive are customers. speed variable gaining Our traction hoists with

X beam a in Interface product applications control now which use stands computer range technology to We parameters interface. deliver easy demand. quickly ability gives This full the features unique our a and of low HI-Tech, hoist capacity. performance line precision to adjust their This operators to to are tons launching Lodestar CM the Hoist for VS X.X

one means team our sales. see also another which major to is values core We in area making strides. as a growing is be easy with This our of do of business

our Compass digital is on Compass platform configuration enhanced specifically improves tool great Our an example. is tool our productivity. cloud-based digital a tools customer that

the activity the their grow. complete we coding offered number efficiently while customers Our increase more to of design work products and on continue platform continues to online

by excellence and In product we talent, product development, can too our believe we're We over new of investments financials. expect efficiencies. further the the new cover resources to Greg centralizing customer This thin. competition and Carolina and that, spreading opening to more outpace key call to drive too development. Greg? enhancements April, we human continue me center than aligning to far North operational Charlotte, efficiently to our improve and the online our let people capital focuses turn tools With in rather

Greg Rustowicz

points. organic top-end the Thank impact was you, $XX.X up the the excluding last currency pricing outlook Good was the Slide growth X, up consolidated growth was or initiatives. million year FX, or prior $X.X foreign the XX/XX Sales and translation. QX improved million of quarter X% Year-over-year previous $XXX.X X% largely by quarter approximately to year. or we points XX to provided pricing Mark. basis third morning due X% volume XXX million X.X%. due were levels our sales everyone. from of slightly than X% the pricing of sales about On of million Without from than in better adjustments saw This sales of to approximately $X.X basis higher

the know, fiscal and As of you for those in businesses raised plans typically QX our majority we prices underway. are

markets are ability we the capture annually. pricing to While our demonstrated competitive, have

were today's the FX. the to U.S. of and the in X% the the headwind quarter fiscal positive quarter. foreign the We translation results X% in despite At impact non-U.S. remained saw exchange expect range sales be we and approximately a will the to worse rates, headwind headwind growth of Foreign in X%. in get of fourth currency solid

quarter, X.X%. up of XXX,XXX U.S. X.X%. were For outside Sales $X.X the the were up sales million or U.S. or

valued our our is growth the Middle It's Excluding organic We of approximately from delivered at This quarter We of we which margin non-U.S. important key growth know believe XX point historically Mark to a XX.X% currency was translation, X, year it's a executing seventh share East. growing strong the in seasonality ago outside included consecutive year-over-year a recorded margin this the about well. a gross FX quarter that On the rail perspective. in performance weakest of that large U.S. feel quarter. the foreign our saw good gross project expansion. basis million of sales from to are which we and $X.X X.X% quarter we mentioned is and expansion Slide markets in margin a

is As simplification you strategy excellence. of our two focused know on operational phase and

driving seeing good margin with result as a We these of expansion initiatives. traction are

the gross bridge. profit quarter's now review Let's

we level tariffs. Year-to-date, hold. pricing quarter of contributed higher million. and of record of as of $X.X a cost volume sales were $XX.X increased million $X.X year. X.X% and prior the expansion by to productivity to strategy profit inflation takes contributed to Third offset productivity gross million compared raw have profit X.X net while The continues million gross inflation. three profit, volume, pricing million material higher The of achieved inflation or Sales of gross of cost pricing largest material impact contributors our each and net material $X productivity

quarter. We in In efforts, $X expect a negative have million up the impact to tariffs $X have mitigation about negative fourth no fiscal profit. with a XXXX tariff million current impact tariffs will gross to on schedule and the

are to mitigate We headwind. this working actively

currency reduced Foreign by gross quarter. million translation $X profit this

million on is improvement quarter or SG&A $XX.X costs year. As sales. our in the points an were basis of the shown XXX This X, XX.X% Slide of from previous

current costs the and totaling reminder, pro XXX,XXX. included pro the forma a prior third million quarter As of quarter $X cost forma year has

cost decrease net to STAHL costs due prior decreased changes. due of for costs Selling million costs insurance XXX FX in is by of that year. by to forma compared X.X% year year costs was pro costs G&A occurred and points. benefit or in a decreased acquisition reduction in $X.X and addition, in FX The $XXX,XXX and litigation Selling costs some basis recovery G&A FX to prior the current the In decreased structural the approximately costs and X.X%. a

forma annual this This pro of compared a was of the X.X%. to the prior year due as G&A year. FX, primarily up company's to and performance strong comp financial the costs these impact higher Excluding costs result comp were incentive stock and

in the rate forecasted lowered as expected our result be a tire is and $XX.X divestiture quarter fourth shredder million Our and a of to SG&A million. of has $XX.X run range been

operations improvement X, XXX or of Slide sales Turning XX.X% a over prior the point to from to grew $XX.X year. XX% million income adjusted basis

the operating is adjusted operating leverage was quarter power. driving XX% our strong earnings in is a which ratio. Overall, performance leverage Our

on noted in was the charge estimate partially is shredder updated non-cash this growth was Mark We quarter tire of to impairment of sale businesses As a $XX.X blueprint $X.X fair charge savings additional an held to for achieved million our for gain a million our of $X.X total strategy. had offset million this quarter The of related our This by we a business. market sale. value. the result on related

GAAP of non-core our impact businesses core income operating and was these earnings $XX.X not the are reflective the million to of are While power small business.

per This diluted loss earnings on XX%. $X.XX GAAP GAAP diluted year the partially discussed. was you the share in an reflects the a or related in basis, quarter reversal which XXX%. Act. was the X, remaining our the just share On is per of earnings current compared on share As non-cash Cuts Jobs that rate see Slide effective to I was impairment by increase impacted previous businesses transition the non-deductible held can $X.XX tax a the and the $X.XX Adjusted for charge sale tax $X.XX Tax with of by per offset of was

We and the is this not do for that have transition required. believe a finalized accounting tax

and believe the EBITDA the this continue our we rate adjusted While is last rate calculate in margin basis year-to-date be XX%, and EPS. to XX, to of is was Slide non-GAAP used used an XXX to of increase we XX% expand EBITDA On rate the XX.X% rate we basis normalized full to tax year. our XX% a our calculate year over points adjusted adjusted margins. On expect tax non-GAAP to range that a

driving to ROIC are on We make our higher now XX.X%. also continue at progress and

blueprint EBITDA teens. As the a and achieve goal in reminder, an XX% fiscal our achieve for adjusted is year to margins in strategy ROIC growth XXXX adjusted mid

lower cash our XX, capital turns impact Inventory DSO This third sales acquisition. overall. year's due improvement over working of company was turns the net is opportunity trailing further three-day basis the million. to the year in for improve approximately an million the was XX fiscal of higher X.X activities Slide Slide from free points a basis performance was there were $XX.X trailing as XX, improvement Year-to-date, quarter. STAHL was operating We million, of for generated which to percent inventory over due than turns XX.X% $XX the to think Turning a quarter the going prior points Last of amount have cash is On $XX.X the quarter. we of improvement quarter an XXX to operating forward. flow.

conversion quarter. in free strong cash flow cash generation the We expect fiscal flow fourth and

fiscal for has expenditures been year. million XXXX for the guidance $XX million $XX lowered to Our capital to approximately for

our $XXX was total net million Turning million of debt to XX, December approximately and debt as approximately XXXX. was our $XXX XX, Slide

Our and of below deleveraging loan debt now years our the ago by million and is is balance to capital adjusted in targeted debt is have have We From two $XX of Xx. capitalization our to net allocation achieved debt perspective, today. to progress since reduced term use million a of We net ratio nearly net our $XXX XX%. total repaid debt acquiring leverage which third delever cash to quarter made flow EBITDA excellent a net our to below plan now X.XXx free our continue sheet. ratio STAHL

Mark. target to and our of Please Slide debt will it XX over exceed turn to to million turn expect repayment I We XXXX. $XX fiscal in back

Mark Morelli

you, Thank Greg.

new remains a spot low offering are chain more for brand offerings. our in you has that entertainment into been the our give where on positioning applications automation sweet Let segment and color entertainment me us well-received. our for There markets. plays black Globally some

for new is require an for automation leading us. cases, positioning hoist confidence construction a customers industrial DC engineered relative industry channels high, drive precise equipment. our quite power gas or and steel industry such activity look is power the our cranes competency and is Globally, and equipment hoist heavy launching in these and the lifting of market and mills our downstream construction the core the choice as a the strap are markets the generation driving backlog and utility factories In is is DDC On for grid these conversion and petrochemical us. gas, modifications series for and In remains safe which of for many front, contractors. mid and strength all to expected oil the order where distribution growth strong X demand The And March. power drive platform projects. oil for and of for area new explosion-proof

systems our lumpy, infrastructure a of ever it is might replace upgrading say trains. spot rail soft are than they be new I automotive. project expand as While rail been. electrifying stronger pipeline Customers and has routes diesel and

models is advance strong to new of in However, vehicles changes. we're model seeing Geographically, trucks The for plus America still and sales related on have of X% slowness some China to Middle our results. timing. the less and remains demand North which is of SUVs, a and in doesn't grow. impact a East There us. project continues was than electric were our Europe significant total

advancing excellent making for embracing The We're into Columbus point team blueprint with team doing growth I'd result. globally our to rising like we're discussed, we've further progress that with and As a blueprint for many is Phase McKinnon X culture. are is our the growth out through strategy to that transforming challenge, the successes on strategy. the performance job. a great visible

and resonates culture. new our and work core identify vision employees Our new mission, values with helps collective us with

streamlined very more for and of to tenets and shareholders. key customers drive proud achieve of customers I'm drives the dedication, focused our is to on structure organization commitment new strategy. and and results value this Our adding

the growth continued fourth X.X quarter the from million divestiture. the to related the fourth of reduced XXX,XXX by X%. related we and approximately tire organic divestiture expected to strength the fiscal shredders outlook timing during Given XXXX of quarter compared There's growth be solid the operating should approximately related about year's $X.X to backlog Last expect CES the to income. of million revenue X% order be in to quarter customers, and also in

not X% approximately which adjusted X% to revenue a reduce percent. estimate headwind for foreign is outlook we Our by exchange currency could

three over in power technology. track next reiterate the achieve business earnings Columbus strengthen a industrial earnings on McKinnon measurably XX% to EBITDA improve that the to years reaching to is our We me long-term our ROIC the goals in of adjusted focused and Allow to better margins strategy mid on are with model teens. power our

changes the a are resilient we're We more that making confident create business.

working, are changes questions. making sustainable. traction gained the ready and is has open Brenda, for we to team strategy believe we're Our the we call our now are

Operator

line Our first Instructions] [Operator comes question Greg you. with Palm Thank from of Craig-Hallum.

Greg Palm

guys the and snow Good Hopefully Thanks you morning. the for surviving are Yes. taking questions. there. cold out

Okay?

Mark Morelli

an winter. impressive Yes. It's

Greg Palm

the on you any sort of of curious saw thanks sales a seeing Anyways end-market curious, hearing the as in inconsistency Yes. or for if exposure. Mark the on and from the quarter January? far commentary Was cadence basis with change what you're trended so month-by-month or

Mark Morelli

was projects on and order saw We're well businesses really demand related strong received. growth steel, well progressing project think the very Folks aerospace. related our by So a encouraged that. to I are very

very my in markets. generation utility said I is remarks as as power good As well

the the So demand, year to budgets good. business and we're for their is folks try related end is this have this drop do I that on know. off. happens the as time every and who this industrial projects And of business the year to their normal we type very, downturn seeing and follow We seasonal the think products the where very people saw the of inventories manage some a

there are think happy very think normal seeing outsized an was I projects, we I and I probably So we're growth which about. that like said in very

Greg Palm

great. Okay,

on didn't relates the call, launch. had the some initial to but digest smart whole hear it more As a time hoist, you've to lot

make going forward? curious So what customers, the of you're from just confident, in that kind you less what confident hearing mean I more is opportunity

Mark Morelli

That makes more us confident.

ton we're particularly out now eight very use announces ease just the and going ton that interface. of In received three is press fact, we're we the we're well expanding a have of feedback capacity. to getting that because an range expanding release that's The

for parameters hoist set on for the this it. so intuitive control you And is very folks how and

it's and we're some getting good think really positive that. interface with very user I a offering feedback pretty with so a And solid

Greg Palm

a this of overall product sort customers. it, I an that in new mean of lot a terms in of your is application for new acceptance And

in So overall thinking how and are doing sort that? of adoption of timeline about they sort

Mark Morelli

now Yes. was market. premium positioned the end the at of This right

So think it's And they folks that want productivity. of I to this. see the enhance benefits

launch. that mentioned offering to we continue feel the preorders we're because part that for of market. as launch preorders more think ahead I excited very the We're expand also middle get good the for not about actually as and normal good getting I it's be we So and it is to a of pushing which we'll this us into

sign. so And encouraging also think an I that's

Greg Palm

That's great. Last one for me.

done You've wondering a additional I delivering capital be have assuming priorities just I'm bit, that further softening industrial I've road, the that environment here maybe I'm always job fantastic at your thought a allocation valuations the really over year. mean past at changed M&A all. coming down is but got you've are an would in.

your that acquisitions all. So around at curious if changes thinking

Mark Morelli

Well, as does you know our involve M&A. phase X

really we're generating down with our posture cash However, flow comfortable of to and strong continuing current pay debt.

work. haven't three for phase fully on doing We engaged M&A the yet

don't I think in particularly anything market. the strategy near-term great suspect for the have we the with So I is outlooks the capital and allocation current

below we'll target So had. we've Greg any that the down to pay you that. on continue want make X% comment debt to

Greg Rustowicz

No.

of the We've million expect of the already of to one clearly to for of for paid next hallmarks exceed sheet. first the immediate we quarters ability of We year. that's expect and the think focus continue couple do the $XX the least I and to at is generate will target we year. repayment down XX debt our -- at we the balance least company delever time our cash for

into phase we're X, to continue our more And sheet. delever the fully balance we'll so

Greg Palm

been my far changed an in or don't might could cash I expectations quick quarter, you cash guess model, like looks this sneak was record It as I back free time the more estimates I record if if one. for go in free the have flow for was know, have all but it flow as a just it in I one year.

GregRustowicz

increase to we And that the I new would would you're really the generate. would Yes. CapEx quarter is flow we XX really our operating that that the probably free in for say a XX to company. thing free for our flow XXXX free on hallmark is fourth strong margin that fiscal will flow expectation the from XX fantastic right XX% so of performance cash the have obviously I going expect guidance is, it's generation cash year flow you cash of the more target point our we forward. cash quarter us. other And if the what Typically, know EBITDA out lowered generation

$XX million least For the $XX next example at million million million range to to million probably $XX million next $XX $XX year. to $XX in year year this

Greg Palm

I Awesome. so floor. will much. the All right. see Thanks

Operator

is Koranda Capital. question of next ROTH from Our with the Matt line

Matt Koranda

to out with Hey QX a I guide. clarification want morning. guys. on Good the start just

X% So then if divestiture take with I net from up equipment combined. then, out And against need shredder. the we crane of additional million growth FX the headwind come service another overall the the to guide tire about $X.X related business. something the organic to headwind And

like all $XXX I So together in total for million think roughly directionally something it's of sort correct? QX. That's

Greg Rustowicz

is Yes. about It's Greg. million at our to absolutely it to this $XXX thinking estimate the going Yes, neighborhood $XXX of Matt best be right. point. it's in million you're

Matt Koranda

And I is still the Okay. Got underlying then, pretty organic growth healthy. it. mean

take, PMI I Just that coming wondering talk leading decline would that's are or at mean the but I But out macro digit look is low-single your Columbus growth in if something quarters. for maybe mid-single a the critical just in it's I are drivers that's sustain just key puts your some about indicator and know then, pricing you and typically the I either about seemed in quarter move of data globally, and you the way expanding you least obviously capacity the mean comes there wondered guys. rate I lower mentioned direction follow-on I in expectations still fiscal good figures more at and talk XX? the that If as at But sort the quarters. about say into of digit also And the could for take mean or I there growth, the guess takes guys around world. What out a kind you share the U.S., a the I to McKinnon. of growth think in outperformance. growth kind of drivers we key that utilization or could if organic the of general, share that just then little unit rate. bit for

Mark Morelli

really are initiatives by process on that we we because more the gives a should the But XX/XX talk focus want there's leaders what we good and around really some lot got parts to as should deploy driven that of how it clarity also that. you part us and of that. We've Yes. about we of the business emphasize

line as segments helps capacity. well get translates market better and into a well us coverage and of I great the as example added is this it excellent this into for think really of to not share. of product cost it example how consolidation. a different platform wire we project rope an is that we repositioning us as really reduction a better -- talk That's that expand product about a It's hoist with

resources The of I'd for digital of make particularly be second where customers scratch, in might to focus actually point get some tools chains be that on these things. those able like labor stretch are these supply to hard are them to kind that to is, environment

quote we're quicker lead share the share. gain is think we actually the to strategy to beginning a products exactly think do perfect low get and down. it environment and And a can and lead you by If you And going easier done. work for healthy huge to our to productivity, really us improve be then think times But gain on feel which folks you're done and markets times business that's about go and leads easier I what on and to very you're lot get with growth reduce to going good outside product don't need that see. way for I their that. because I can we're their going growth, if to if see is

slow think happy strategy. growth we that see we're very said. I If enjoy slow there you as good our is growth with to So markets

Matt Koranda

else time of Okay. into I in critical head the where positive. you environment for share heard increases? there which we guys of typically of commentary lot Anything a you sort sort as a about is pricing take on make price period

Mark Morelli

Yes.

forward So XX/XX year-over-year from go X.X% did quarters to in largely to due couple initiatives. increase about last our been we you're see that But X% right. the of as and our would some pricing have of we

raise We business have businesses this effective March being that a U.S. of quarter number our in largest fiscal price fourth our the date. early a as mid-March,

we on right continue we've raw in we We've businesses expect continue cautiously all went increases Europe. of in January all with and say tariffs leverage and forward and into you see effective out material don't I'd to headwinds but gone for have some that continue offset But some of our you and other and asked effect competitive April. the good we'll So all, to Their a market with in prices price now, we're optimistic, we'll get unfortunately what costs. it's that. had press to pricing drive pricing in

Matt Koranda

did for looks roughly guys you $X since an last front. It the in savings just in one the then, you're incremental savings attack you XX/XX. quarter fourth when And you it helpful. from That's expecting like mentioned million from XX/XX,

$X little 'XX. then, talk guys And but in of bit you higher on the color simplification that I that some fiscal any that. about saving XX/XX be million have that you're rope more the think a from, should maybe doing hoist wire for buckets than 'XX, think you said Mark So the that's could of I coming mentioned the product

to helpful. kind anyway commentary a or little that where directionally on mention of that would be So provide should that be,

Greg Rustowicz

Yes.

Matt that. right on math your So is

savings. comes important million, we bigger $X more call areas. about lists and of so another implies also there's targeting product million simplification, our X.X our through customers indirect mean lists that And -- from because kind of we're that better made. simplified We ratings that simplification, service fans I not taken got achieved in less QX product of we to perhaps as a We've our X.X making are resources and cases making number program. looking December, it processes manufacturing customer as some redeploy a result of costs and facilities that being we're our on we out of we're is some where we've where money, a refocus in money we've

comes from typically there it in we quarter past the this from incremental the story about of that process So saw all is and half that those some it's areas margin now. it into a XX/XX company it's and comes pricing is gross

is going with other year. get this The half to calendar it going

So we're about excited that.

U.S. and out seeing and that businesses good long others lot our business. of of savings a than One where the and in we're of industrial business that's is further our products coming

Matt Koranda

Okay. 'XX, magnitude it I in of more color. we'll leave savings, that's And out any you than what or fiscal it's be of fiscal directional But this then terms going at time guys more for anything think to additional the have said 'XX. the

Greg Rustowicz

think the around Yes. and I target. to another we deal that to No past -- do March know we're decisions to get data What point bit It implement trained go ready the at analyze to I with decisions. we is in with not got this make a takes don't this out started to it year. timeframe

premature the the for year So full analytics might year the the we'll and we talk started so see got too haven't to their. run next about yet. We've businesses it's what to see process run then that rate

Matt Koranda

jump just I'll queue. guys. enough Fair in Thanks. Okay. back

Operator

of Company. next line Our Joe & Sidoti with question the front is Mondillo

Joe Mondillo

morning, Good guys. Hi, Joe.

Mark Morelli

morning, Joe. Good

Joe Mondillo

the four tackling going wondering terms be are to of what sort about Is implement low of tackle at guess, overall thinking to timeframe I guys five be next I you're what other to between to on at you pause kind of that have the mentioned before and in some to have going you've implement. I to ways think to you just hanging sort with to America just What you XX/XX. analytics starting that initially maybe But of or timeframe? this of or are implement. of of easier sort far to looking I'm rest XX/XX. months, North XX% mean kind started follow fruit that so a done level look sort up going things. Just starting there's -- of you you I'm other things to they're on of six that half within the that be

Mark Morelli

activity can So imagine. you this phase is a as

You it once. at can't do all

to as this -- and we'll some that we've forward starting low are products also lines thought calendar we we our have STAHL year. start think in obviously And business might later hanging I fruit. with then, said be that engineered we're of moving we for But up with our areas next. we you keen So now tried that be product

So excited a People here. are benefits engaged. I activity really it do of because the pipeline Folks really see we they it. of good think about are have

moving through so a we good are And company here methodically I pretty the pretty at clip. think

But So you go we're as more we'll forward we going it. update through for sure.

Joe Mondillo

it's terms about in potential do or that you room can we improvement sort advantage with and of of improvements else then, with with what that? and think And efficiency anything maybe done of take have whether square consolidation how How of. footage that of improvements productivity sort much you've you

Mark Morelli

talent added in supply here lot as our came Great chain a Brant on highlight And terms it of an folks of new also side. bringing we're Head Bert we've operations new also question team. because of opportunity operations in our gives in that Operations, leads know you in and really to me safety

So where their tremendous digging much opportunities very and do tackle a can look the runway where is in it can facts we in of them the order we this problems biggest team legs of the we some logical is because And at on we in a approach some what's there encouraging really under benefits. have. about opportunity what really how business really shows database it's get the how encouraging is of and getting and

team. in for that have really best I it significantly. out it's bringing seen there top and who's class examples some to folks the a new and We've up grading been really of organization fairly think our journey on a the ramps Columbus a approach lot lean like done So company McKinnon

what only what we're can beginning very So but we're encouraged we see we deliver. to not more deliver, can

Joe Mondillo

restructuring the everything benefits just from getting Okay. that you're sort And and core at business the looking of out that. then, taking

In about could incremental just us or you sort sort incremental margin? normalized you terms think your of how of on margin of update

Greg Rustowicz

Yes.

you're I the of Joe? kind leverage, operating to think referring of kind

Joe Mondillo

Yes. That's right.

Greg Rustowicz

Yes.

it's higher historically cost say our go our XX%. quarter and XX company's lot leverage between So, to said strong that historically XX% are I actually strategy had that because operating and would we performance strategy somewhere operating always would our driving have driving was of the we would really instance a is we it expecting of a leverage this where our of like we're is and out self-help expect products -- XX%. for it's almost

last XXX%. over I quarter was think

very the forward So strong leverage. we're continue to operating initiatives see with as we strategy, to move should able our

roughly basis isn't our yet margin EBITDA kind on we growth. depending high and low assumption of but of still growth think drive we can XXX It's improvement. points a So strategy

Joe Mondillo

say saving is higher. just to personnel all in the that to when should And of for see you clarify of here, from process the benefit more Are you're sort less here inventory Okay. less of sort you accounting going over efficient. be

there. there big So savings were

relative of trying and the about just cost XX% sort incremental In the future XX%? take terms than terms that in sort still incremental out to think comments case of the of to of to of higher your savings sort margin savings I'm that the relative X to restructuring. Is

Greg Rustowicz

XX% Yes. to I than in say today strategy XX% margins once your question our probably made than historical level leverage, normalized understand to the and I the a higher it's XX%. if we would the would so have gross down we that progress would on with XX% to say so XX% higher have we've road., more expect probably basis the I

Joe Mondillo

China; your Asia also and like the as and Okay. geographical they're It the and industrial in to is seemingly up U.S. Perfect. seems a exposure not just worst the theme softness, best. terms little you're little of of sort seeing seeing. Europe bit common Thanks. sector of and And then, around ask I as bled wanted is what the a in much bit holding but China the

Your even guess like bit rail a of non-U.S. and sort if maybe low-single rail was shipment. you it shipment down sales, digits that including looks I flattish little it that exclude

exposure, talk Sort you you're going what you're this about --could your what trend are how is quarter beyond that? non-U.S. seeing, into of you hearing the and what

Mark Morelli

Yes.

of and And but concur think we really more to our to I growth area some remarks slower. I the share. as are like have our Q&A So not In environment business a business said bit environment, China our Asia-Pacific, that well that gain seeing slower on it part and opportunity continues for it works a be strong. we a we we net-net the large be or It's Europe, us. here statements to other in slow would because growth a might your

continued there, don't any forward. see demand So going have concerns we reduce

we're continue very quite so But with compared sets. the that comfortable we time. some project that bit demand slowed excuse actually demand as has U.S., I see into calendar this real And things color Europe this business be to where as And to year in it this certainly gave some -- a year In year. is last well, strong. me strong continuing

is So our good. our from outlook visibility

And so reason overly trends, really a the macro to Obviously, lot right pretty concerned. we look have you us. on good to read now don't be but things

Joe Mondillo

Perfect. Thanks question. taking my for

Operator

you. Thank

Global. Liptak next Seaport question Our comes with of Walter a line from

Walter Liptak

my Thanks morning. Hi. Thanks. question. for Good taking

Mark Morelli

Walter. Hi,

Walter Liptak

stronger one across quarter Sure. little X% guidance to border kind with basis there, ask that of on weaker, to please? international guess growth next the a I a expecting for to the of want the bit a Are the I you U.S. some X%. follow-on last revenue regional

Mark Morelli

color And is Canada's I East. growth. strength And can strong. Well, I Middle project off but the little North seeing once, give see American East see we a Middle say compared We to think we more U.S. that little a the the issues. timing I Europe did again, on believe would bit, continue also fall in that's markets. you the slow because some due to to markets

ebb that flow project gas East lot and on into of Middle the We timing. of normal based have a oil projects and and there's a

really but about timing. to China continues weakness such not we we be. grow East, the just because we're in net-net share, exposed companies see some but more the to Europe not we did we're expand So think may and other to have I as project low have Middle there concerned and But opportunities Asia we

we're not really from as So feeling impact much that.

Walter Liptak

Okay.

heavier on based book project just the and Is visibility. businesses the one and EU region or more commented another the the best EU of ask ship project you've me where you is Let that distribution world business? it got

Mark Morelli

Yes. business base about the have mix, Columbus sides but we historical an also have definitely that's great equal both so see has industrial with historical of that. project McKinnon we we there, It's more a products STAHL --

Walter Liptak

And price from much how next top-line we about, Okay. implemented one, the and did, months increase. was it he over ask the And if I an could annual if I pricing a you do XX at expect wonder that? when can

Greg Rustowicz

Yes.

We world. raise and the the region is typically it's annually the Walt, timing of on Greg. So prices depending different

has in April in So has Stahl now. well Xst, industrial products Xst been with be customers is business also underway effective right enacted announced in as an already that a timing the is And on that early Xst Pacific Latin and been January America Europe effective and timing. our that would April to Asia U.S. date March that our in

going the the price further is think to years. over sense -- little I eight end exceed again, a We'll down we're proved terms a once it's of in where always a bit road. So better And up least tell. its always seven, inflation But, early it have environment. have probably last raw material had too the to we've get competitive years company's and price ability at to seven a

Walter Liptak

Okay.

Mark Morelli

I'll that well add McKinnon is you a as the different where lot actually insightful color on raise Columbus price. for process because on which more some is too XX/XX

So we speaking, where be I actually more traction think insightful lot raising we've should price to think of just generally raising on out the instead which a and going I more. demonstrated good markets

of benefits we're that. So the also seeing

us about think there's price. any to about don't for pessimistic be pricing, reason I we're optimistic more less So

Walter Liptak

ask And But of your gross I the that margin? lower about if bit by some of wondered, the one anything that is that those during on I I to you first Page buckets. sounds XX% I metrics to margin quarter want great. That more was X, on you other about different gross question versus of and expectation get guess little were Okay. surprised out. comment growth of just one growth called guess and gross profit profit margin, congratulations as year-over-year the that And some the a some

Mark Morelli

for Yes. Every less us. quarter a not we I'm going in. seasonally you I that that QX, surprised well, at This answer to is working have were want we down have jump for to asking all. but Greg question, days. Thank

We have a for typically us. period -- it's margin lower

we have year-over-year what would saw that. expected expect exactly that growth we we So saw and also we would the

you Greg So want to some more that? on color give

Greg Rustowicz

Yes.

from roll included So year in that impact basis, see beginning some of improvement out. XXX the year-over-year the We of versus point on Ohio basis that and the had and points gross a ago. costs expanded a We the margin closure. a we're took reported XX basis plant to

strong. business although impacted associated that us the carry lower a this sales We than was business rail record typically It's it. year have manufacturing to look you a the just --when rail We're other Mark's doesn't absorbing three operating is slowest quarter we the you're which to gross are had a have factor the at it our point, typical sequentially less with quite And facilities. this quarter, of quarter. at costs our then, lot projects. our those fixed think seasonally And third tend days. I working margin SG&A only of less our margins

the our at operational all seventh from would of row in margin well be the improvement as expectations we'll continue excellence a year-over-year margin it's with XX/XX. as to improvement. gross surprised that initiatives And forward our quarter not So perspective going drive

Walter Liptak

about, kind if gross great. -- seasonal we about expecting similar And in a guess Okay. gross But range can in think third can quarter All improvement quarter see the for fourth had change what last so to fourth sounds we I I you I as This quarter. margin? year? right. the can of ask margin are

Greg Rustowicz

Yes. that see than going say But sure. the be margins of you Walt. at gross to margins typically kind I mean, can it's -- track if better record really don't Well, would rolls QX think is guidance how out. it you gross a give stretch for It be QX look to I on not we

because Just is of shipping more there perspective. typically quarter our year revenue from strongest our the days, it's

raw has material a there thing lot moving where to somewhat. would think although a of up. are it. a The it's one a is for appears lot to say offsetting year to some we hard exactly There's as that it's of this well, of us end be headwinds So inflation moderating that but upside I been pieces like there were pinpoint headwind going to bit is tariffs,

Walter Liptak

Great. right. thank you guys. much All Okay. very Well,

Mark Morelli

Walt. Thanks

Operator

Thank you. comes of Jon CJS [Operator the Securities. with line Instructions] from Our next question Tanwanteng

Jon Tanwanteng

morning the Good my nice job quarter. gentlemen. in and questions Thanks for taking

Mark Morelli

Jon. Thanks

Jon Tanwanteng

Yes. just talk the Greg, and can tire possibility about you crane business recently.

improved So My earnings understanding year-over-year we as the they're can divested. is model compared they've that impact better to…

Greg Rustowicz

Yes.

a So great question Jon.

modeling we a folks So it little wanted to are who make this. the for easier

slide, for year. appendix so the our sure the and I'm not which seen the far this in included three so section sales And deck a you've it, provides we've Slide basically which XX the businesses for operating income in together --

on longer operation of million can and first that taken QX, see operations. $X.X in you had income out is to the the being result a a would in and the is grown depreciation I accounting around of from One which $XX of XX income that about XXX,XXX And was and change in was for it's which quarter held it's page about we've there from no beginning is QX. And $XXX,XXX about million million and year-to-date five point actually a about million so in then, QX that of sale revenue thing requirements.

quarters. same are really income in those and QX the QX of in as reality number. is as two EBITDA more the so the And it is, earnings operating exactly EBITDA numbers

part there. And so the of that's change

Jon Tanwanteng

but that it. great just seeing gain, really? they that share they going is that helpful competitors standing are you've back it's thanks. still? share noticing question you're on And then Are run doing? all? previous That's that now, at a how Got for Are talked your gain rate about very what much And Mark

Mark Morelli

is gaining have I'd on It think comment But of we've you what hard for market Historically, competitive key is are actions we markets. toes. So headroom in on it's share lot and us the being taking. a in to we a your been really in competition keeps like that competitive I the that area.

is off look we've I some of and over the ball at eye maybe share periods I lost think our If of think time Columbus the McKinnon some long you share. taking

think purpose focus going and is sense deployment drive around what really And I our this that. real solid so with a to for around of and customers value

be have concrete we think I that. able ways to very do to some

started not fold we're that of one engine. in And other is really of ramp working is that do the two third we're that. we how that really think strategy is I And this phase come growth into part our just area on is yet product part our on new getting development. the is of area the

lot variable some out and the great ideas offerings that see working of have coming You we our on. of been a folks speed have

are lot a where automation to higher very there's growing at higher think solid demand see growth rate. than we the the margins we that space market So and related in

later I think is much the the should rationalization tremendous think early of simplification but innings, much more strategy into So think as in a get is here. headroom And innings, we very about it's I there we growth. about

Jon Tanwanteng

that helpful. Got there. you long out downturn your we it. finally, targets have down then, it's to XXXX in timeframe, margins the can reasonably and or XX% And to in a when to trying till improve things expect Sales operations where If is do XX% all a That's way also are you to the trough? that are there given then. still to margins

Mark Morelli

go recession think obviously, that little If I generally. business color. Greg answer if the business I'll not proof. can bit there a And down. the it see Look more a answer Yes. is I'll is will recession,

the in here. initiatives think we lot However, to did more a make to you And expect lot than want to a make of in do better and businesses it our line the when what it, comment? progress progress Greg, going excellent in model the due that I you perform I we're we're bottom a environment low downturn magnitude. think last growth equal fully going it on

Greg Rustowicz

Yes.

think question, I that. else were million say lose Jon, if drop everything XX% XX% your to drop sales that's to to roughly if expect $XX understand we'd So XX% I being a of equal

there but in XXXX, here, would do its I gap. readjust I belt a to there know wasn't would expenses It'd And services. think I be there'd SG&A costs. the professional on $XX travel. headcount factories would the And from we million. mean items in we so their that lot clearly company reduction last was in tactical time substantial And about offset the be so I reduce of tighten a it'd then,

of things higher key margin. say we tactical some level. how So all much would those in the point look historical starting -- can I is that would XXXX But the at a of progress you we're there. And would much I that from to going did be offset that where say

so, two from And we're a and level level. there a higher will is but be then. if reduction, EBITDA at or now margin from a XX% a by years XX% we're coming there Yes, much recession

recessions. the we'd so past from we be perspective, in than And been better that have

Jon Tanwanteng

Thanks guys. Great. a lot

Operator

next Mondillo Our Sidoti the question is of with line Joe from & Company.

Joe Mondillo

guys. Hi,

Just a quick follow-up question.

are needs thoughts working on well towards fiscal your as capital your to free look and flow we as of wondering relative guidance, Just what sort as wondering CapEx? 'XX cash

Greg Rustowicz

Yes.

So our we haven't actually given in budgeting We're yet. the CapEx innings of just process. guidance early

to it on me the answering receivables. will mean as room bigger we I company well, we or but as more of see be clearly payables more receivables increase as more getting receivables, on one. So or side, let sales but hold-off that inventory up ends certainly to do expect the be

about of think might roughly cash... is sure if of use So $XX you to a not I'm as you factored year the want in one and thing I pension guess contributions million

Joe Mondillo

Okay.

go so And ahead. sorry -- I'm again

Greg Rustowicz

in the other No. a having is In least company at the item the is year. short-term really strong

paid bonuses there'll the to June be management team timeframe. no so And probably the out in

Joe Mondillo

Okay.

the sort your inventory single-digit just Is on you're say sort low of ballpark keep could to you of I thinking? So you could hypothetically just if revenue let's the growth, that follow-up mean, seeing of part of inventory flattish. say it, kind

Greg Rustowicz

look it the way perspective. Without at math, X.X today. running turns an turns Yes. is the inventory I actually We're would other mean from I

year. improvement more the year We some of turns expect or close be like see we'd to year to next by that fiscal sorry. X on end And to calendar the

Joe Mondillo

Okay. you. Great. Thank

Greg Rustowicz

Yes, okay.

Operator

question-and-answer the closing floor Morelli session. you. Okay. turn This to I'd to back Thank like for our concludes comments. Mark

Mark Morelli

Thanks interest Brenda. Thanks McKinnon. in Columbus your for

our hosting plan Just and Analyst our XXth We update we in on for Day to and on our your you growth Investor strategy. blueprint information, June progress on an for plan for further New Thursday plans York.

day. So By good now. a thanks lot. Have a

Operator

teleconference. today's concludes This you. Thank

your thank time. disconnect for you And at participation. may You lines this your

Columbus McKinnon (CMCO) 31 Jan 192019 Q3 Earnings call transcript