CMCO - Earnings call transcript Q4 2019 | Columbus McKinnon Corporation

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Operator

Greetings. Welcome to the Columbus McKinnon Corporation Fourth Quarter and Full Fiscal Year 2019 Financial Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. the McKinnon. to turn Relations Pawlowski, now Columbus for will conference Deborah over Investor I Ms. may begin. you Pawlowski, now

Deborah Pawlowski

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

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

at You should and you not, today fourth our can the release of copy that quarter results, will financial conversation if XXXX have yesterday. website, released were And a slides accompany which after our cmworks.com. fiscal our the market access

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

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

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

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

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

to begin. will turn Slide I Mark it if turn over would that, to you to with So Mark? X,

Mark Morelli

to excellent was We delivered fiscal a good year. morning, great strong another Thanks, everyone. quarter, Deb, which an finish and

the is earnings surpassed earnings XX.X%. in up more a demonstrated which and comparison, point company. margin Growth continued expansion. quarter XX% The is EPS, margin an XX% solid of the for with Our EBITDA margin improvement record in and a $X.XX original in share the per was in We up traction has We the Blueprint driven had were the our year. for basis growth to impressive year Adjusted driving $X.XX XX.X%. quarter strategy gross the year. XXX greater goal and Diluted earnings relevant power a by for was for

FX. ratio return cash leverage in because in as basis and million drove net generated Our is the operations our improved invested to stronger capital better strong X.X, and in cash year result top-line generated a quite margins, up earnings us enabled thoughtful as rate notably and and the reduce capital divestitures from XXX of fiscal X% to and pay on down $XX We This a improved financial expanded points and solid our quarter for another bit well, of adjusted than business We improvement million target earnings $XX X% Supporting of XXXX. X. in our growth deployment. was which debt XX.X% our we our nearly simplified productivity. to of for

points. than and has has adjusted operating strategy. is impressive return income The two progress Combined has margin made strategy strong improved adjusted ago. doubled capital team net were top the As together improved past on since The XXX an the of basis executing the basis invested for over implementing of Blueprint two this of year improvements we’ve XXX years, Growth more great the years on points, strategy. and the first pulled this for organization, year performance

path excited were of about Given were our progress we opportunities ahead, the we on. runway that and

Phase and are II for of are: business, the Phase you during excellence focus growth II. Growth to We Slide of If X, made There areas Blueprint They discuss engine. strategy. I’ll operational fiscal XXXX. the in turn simplify progress three we our ramp launched the

each in progress the on you areas. of update these me Let

center You simplification operating of talk enabler income execution about XX/XX This is business at Acceleration million to our toolkit heard the Power for contributing target for our $X.X ahead fiscal System. operating million. and in key This is XXXX our of E-PAS, me for the stands which $X is system Earnings our Process. process

Some also of this from contribution customers but from simplification sharpened our has of our lines, focus as product come well. we our the saw gain on

three our several had significant we position businesses during company year. non-core to divested power The the process during ratings fact, identified fans. businesses and earnings of create as In in terms leading our year, shed we profile the also market We products, of not we growth these because fit worked did from the simplification customers that they potential.

of is reducing cost in in team year operations built excellence. brought achieved the area savings. will We Total of the This second eliminated of a XXXX. the from came $X focus record XX to million progress overhead today. operations million. savings was of change. and head The significant better facilities in $X.X which new We the have with significant is planned contribute about productivity consolidated we We material in Ohio and out divestitures, square XX operational productivity. team. reduced feet improving into and in demonstrating The of $X.X costs two million number one, for at than Combined XXX,XXX project facilities fiscal the

hired efforts II I’m teams. development impact. our year last early is of pleased are The building an of head the to engine. Phase ramp to out report product growth We our and making that development we’re third element

most measurable expenses putting the place and focusing progress discipline. by R&D on we were unchanged, resources appropriate processes and While our in important projects achieved

reviews SK our is fact, strong from hoist platform In new wire YK customers. rope getting

of family in our products. resulting gains share launching on customers are market to focus time for variable reducing we quote engineered-to-order and lines speed product We

significant launched let also to cover significant our results. it configurative it products. select made our With to to upgrade and digital We Compass customers turn improvements that, platform. added to financial for easier our products and to We me making software our purchase Greg? Greg

Greg Rustowicz

higher X to compared year, in was actually the than that. Slide business sales sales million net everyone. the by fourth On were X.X% $XXX.X were prior in morning Good the fundamental Mark. you, stronger quarter Thank growth much normally while

to the in we which sales As completed reduction million. for quarter, accounted divestitures $X.X you three of know,

to be a had X% our Adjusting of to $XX sales year. $X.X continues quarter due outlook previous adjustments these XX/XX basis over year up price from to points. to This the XX/XX and QX prior as sales Year-over-year of prior due our as X.X% levels foreign XXX compared and shedding than year. growth, X.X%. items, by are were performance currency reduced we for the part up unprofitable as the to initiatives. currency represents was growth was points million even annual net excluding increases headwind, improved also two which provided higher sales last by Sales than Foreign better XX organic pricing the basis X% volume impact This pricing of divestitures. million our translation Process. our was We well as of about strong the sales from pricing

of you As for QX. know, we typically in our prices businesses majority raised the fiscal

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

in gross very key outside We the of X% ago exchange well. expect translation currency currency in approximately to margin quarter, X% first headwind XXXX’s and it's of make be continue consecutive growth our margin is in range saw Foreign translation, of headwind today's growth X% we are in basis a the At this we will U.S., recorded saw remained quarter. fiscal divestitures and performance result point in XX.X%. the strong On of XX of growing $X.X the X%. the margin growth We to the headwind solid rates, foreign organic U.S. the markets Sales U.S. million engine. effects quarter reflects quarter expansion responsiveness quarter. the in organic executing Adjusted X% we the was remain from we progress to but with were a year Adjusting foreign the the share the customer believe growth sales year-over-year outside increased and expansion. FX. the or and divestitures sales in Xth X, a down where million X.X%. of that think U.S. of X%, of or is and were and for for $XX.X the the We quarter XX.X% divestitures, the This ramping we of particularly up Slide and in gross in

mentioned process Mark margins going gross strategy has our to to was in recorded accretive lot still the we improve the productivity margins was X quarter. runway the of of as gross As earlier, that Phase forward. XX-XX a feel We further

million pricing Let's to compared gross – $X.X $XX.X contributors three volume $X.X profit year. $X.X productivity at higher million. were inflation and bridge. $X.X The gross negatively inflation cost million. million now cost impacted the review gross Fourth profit increased gross contributed profit, the quarter’s prior growth to material of three $X.X while pricing Sales profit mix million sales profit and by at million divestitures by volume, a expansion largest a quarter gross and The contributed contributed material of productivity.

$X $XXX,XXX full In will mitigation productivity about manufacturing fiscal the gross tariff raw offset achieved our inflation efforts, year, schedule impact impact million no impact negative tariffs. improves $X.X structure. had with For tariffs million Tariffs and the a we our XXXX as continues in cost a to of fourth have the of profit. team XX% quarter. higher levels current negative of on material operations pricing record The and

Ohio of million incurred point to This consolidation. plant $X are cost I million project to now will and working fiscal in We the also actively overhead costs XXXX. the complete mitigate we headwind. we in approximately for in by this benefit out expect savings quarter that is $X.X

million profit in foreign translation Finally, quarter. $X.X currency gross by reduced the

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

and As the quarter totaling prior pro a forma costs fourth RSG&A included reduced the $X.X year reminder, divestitures by $XXX,XXX. million

$X.X costs. FX addition, costs that FX forma due spread XX.X% divestitures, net in pro current B to the by These $X.X the decreased costs R&D to by Term reduction the the approximately largely X.X% or some and and STAHL FX repricing declined acquisition FX. of to and cost debt to the was litigation and due insurance recovery prior which divestitures our we XX made decreased X.X% the compared and million costs, G&A occurred costs $XXX,XXX included year prior to changes costs and Selling costs costs, our a million. due in benefit of points divestitures, reduce year. a by basis In year. lowered Loan structural

in XXXX. meaningful We have to redeployed R&D and expect most our increase around projects resources expenditures fiscal

the quarter $XX levels of as to RSG&A than range a is to of expected QX a forecasted million million. first Our result divestitures and $XX is lower in be

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

quarter in on reflects to ability XXX%, was leverage earnings the operating strategy which our execute our adjusted drive Our power. to

was just represents a $XXX XXXX. operations from the For income under million, full versus fiscal adjusted year, XX.X% increase which

an see $X.XX $X.XX share you the per X, Slide quarter Adjusted earnings earnings on of per XX%. compared As were share in can or previous per with year, GAAP increase $X.XX. diluted for was diluted $X.XX share the

previous rate the of ability XX, utilize than as per for well foreign diluted Moving tax the $X.XX an Page for Jobs year XX%. to on the to our year share our GAAP of due which to was Tax to related per Cuts Act. per earnings was GAAP to adjustments effective certain increase $X.X, XX.X%. tax as to diluted was was XX% Adjusted XX% the basis, This credits better was On compared earnings share. a and share guidance $X.XX

XXXX. to be adjusted On tax expand expect approximately XX% We year Slide fiscal XX, margin. to in our we rate EBITDA the continue full

adjusted the points increase over an year, EBITDA basis margin was of last XXX our XX.X%, year. For

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

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

XX from Slide the forward, is Turning trailing than from as over sales working operating Slide was quarter. activities our days improved an which the trailing to We think a of year the an basis improve which improvement higher will year working for by inventory On payable outstanding We by percent as going to quarter. capital the capital net DPO our of $XX.X is million, days well opportunity further XX.X%, cash six points XX, utilization. was XX, prior as $X.X our million. performance turns improve further there

we of year, flow. the cash $XX For generated operating free million

is rate cash of quite free conversion Our strong. XXX% flow

approximately capital be for fiscal the is $XX expenditures guidance Our for year. to million for expected XXXX

debt net to million $XXX XX, debt was was Turning our fiscal our of end approximately year. and Slide this total at $XXX approximately million the

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

We million Please to to will expect $XX in turn to additional back XX Slide I over turn it fiscal an repay XXXX. and Mark.

Mark Morelli

Thanks, Greg.

me around our specifically some Let you industries, us. very steel markets. color heavy giving up are by for wrap going The strong process

Our processes being to Power users solid upgraded and is our XXXX. utility positive and digitizing provide heavily and the channel Magnetek and brand markets a work end of involved partners for expanded. outlook in are pointing facilities are base fiscal that in a automation of

Oil energy a projects. and projects the in alternative as in We midstream and and energy of markets pipeline remains such are seeing waste downstream with markets. gas hydropower strong also activity

activity also the expansion pipeline very a the our are petrochemical petrochemical sight. for significant the that cost gas continued turmoil, opportunities projects East. the I is the We visited of despite in encouraging. encouraging of developing are is offshore. industry And couple of see Middle customers low geopolitical And seeing in investing natural line recently We large there. supporting of capital

activity models While cycle this the globally. remains may being and both be to beyond investments are new proposed. and OEMs building the automotive strong there’s next sales looking for capacity in down, Entertainment expansion

Orders industry FX offer. up XX.X% have the were due it’s for year-over-year and We products. channel were our last Both Orders are continues quarter, in encouraging value is up timing, comparison. and strong backlog moderate. divestitures solutions solutions to the the Geographically, and leveled new each the project off to challenging interest and year orders fourth adjusted U.S. X% for a and and sequentially. theater customers’ creating with and opportunities and Europe rental the addressing we capabilities

anticipate $XXX forward X% look we impact to anticipated sales increase $XXX to adjusted and that quarter headwind related be is which of first will As the the to about $XX.X divestitures. XXXX, an to an fiscal revenue when X% million, of we the X% of million FX million from for

quarter full impact implementation initiatives. the and with have the tariffs estimated While an offset $X XXX,XXX expect we XX/XX will and process this our in approximately year, million to excellence for operational

our are we strategy. blueprint on growth down II doubling For Phase fiscal for of XXXX,

approximately to earnings have deeper the getting power. long significant We take XXXX. are a year, organization we an associates improvement. thank the this believe McKinnon Columbus our the XX/XX improve traction fiscal business is and deploying there Fiscal the We would to better and drive model opportunities and runway XXXX were incremental an million and operating even world. of further like through than I to around process outstanding more was opportunity income year $XX this broadly

please on that, We significant for Rob, and are With the the excited about we’re call questions. path it’s value. open delivering

Operator

Thank Thank you. Instructions] you. [Operator

with with your Securities. of is CJS coming the Please Our Jon questions. Tanwanteng line question first from proceed

Jon Tanwanteng

gentlemen. thank Nice and you questions. quarter my morning, taking for Good

Mark Morelli

you. Thank

Jon Tanwanteng

tell Greg, year? higher me the for next first, what’s going on just you, tax to Can rate

Greg Rustowicz

Sure.

this our So, foreign XX%. tax of with about this tax lowered year, a ended XX% able up rate, to guidance below which year, utilize around our which We rate. were we was credits

range and think tax are coming year. obviously it. utilize for XX% So, it’s foreign some for going go the if, to the probably once And calculations able that’s XX% to rate of earnings into could end it us. it a the again, at where is to we’re on more depends but top the normal tax be up be complex credits, lower But very that some that going tax we our rate

Jon Tanwanteng

operating $XX a XXXX. million of the And Okay, actually rate QX, you’re rate million? for $XX the that that improvement rate that absolute that it’s income Is expect we expecting you. if then great. year? the on Is in run than the improvement, just is for should an the Thank run higher absolute exit improvement,

Greg Rustowicz

XX/XX the about talking You’re process?

Jon Tanwanteng

Yes.

Greg Rustowicz

is we’re million $XX top doing year. Yes. of The incremental this what on

Jon Tanwanteng

to what So, million, million $XX you’re is saying? like-for-like $X.X

Greg Rustowicz

bottom drop tool all fiscal units the embedded $X.X million really And to to expect utilizing achieved with process, of now the our this year XX/XX $XX our we’re We and culture. get it’s to really and an then Yes. that to additional line. our business million into starting good and we progress remain seeing are

Jon Tanwanteng

businesses you that offhand do divested an operating And year? great. Okay, have the contributed amount income the last

Greg Rustowicz

had break income. actually We and Yes. And they it’s quarter, it actually Jon, the of $XX XX have $X.X a appendix. million slide million of XXXX, fiscal in operating by or we revenue XX, Page in about in so Page up

Jon Tanwanteng

in Mark, that some surprising trends then markets Okay. or end slowdowns the areas finally, that Perfect. there And Thank weakness you Are you the of went you. of through saw. any that the negative head things or that indicate – for that as it should the watch is here? seeing something we out would you’re business What’s usual? for it – is where’s

Mark Morelli

see across last to we much kind Jon, markets Well, choppy was pretty compared the strong. very this time, are a it board year, bit where of

so do than industrial We be And some seems pockets of may hesitating the general folks some more were see be channel, they to a see weakness, bit. we MRO year. last hesitant through

got Our the quick strong in contrast cycle that thing that, very a was. it robust. business you’ve still to very and is is But certainly that as strong business not as project as strange it’s

carefully areas we’ve year. for look appropriate compared a having the last a think, it’s very our very think got still slow we good for strategy to for on I good we’ve We So, environment more a more And environment focus to growth and that to we of got a is growth. year, our forward XX/XX pick have think spots those really strategy. and

Jon Tanwanteng

you do yourself risk in two level, or higher that you’ve see a next of bit little a the targets be from for years? to any Maybe decreased set great. increased Okay,

Mark Morelli

of environment. know growth years, modest of the in targets recession. certainly we kind Well, have to happen We anticipate two in terms a what’s going next the a don’t

predict business well, short Our doesn’t because is also of it cycle. that most

it’s really we to to tough going say us for what’s So, – out. longer-term happen

very the strategy we’re have confident that momentum. ton has of Although, we a

We’re on path. the right

is there’s market up this encouraged what as of we’re demonstrating, through we traction a that the think with last our the what see teams. into very year the getting that, not as fiscal next both year, of get we’re in fiscal well picking results I we and we’re as management this by ton benefit that we’re

right for appropriate see is guidance now. our think I everything that we So

Jon Tanwanteng

Okay, great. Thank you guys.

Operator

The line question. Please your Palm Greg next with of is question with Craig-Hallum. proceed the from

Danny Eggerichs

congrats good actually This the today. on for guys, is Hi on quarter. Danny Greg

Mark Morelli

Danny. thanks, Yes.

Danny Eggerichs

I sales of terms guess larger what just curious for in – given of levels hearing amount your what to any inventory you’re in there seeing I’m then I channel the from terms go right additional product. and that distributors, anything is know appetite guess now? channel through and of

Mark Morelli

think Yes, question, Danny. I good a that’s

is additional and to the and were oil saw call, gas, We And that definitely begin sit also where which inventory the that particularly selling some activity. channel noticed strongest the as out now up on reason have you call, too a up to we just inventory. North really there. typically heard I And our We the level opportunities, what lot the on and do that this quarter, levels. hesitant have open folks stock to of want noticed we past the high to uncertainty pockets don’t through think are being steel. that people I we that selling with think uncertainty, related of in to and in on is able prosecuted come well there’s industry, executed activities in the through is entertainment on have to America, And

last of were We’ll we’ve a we successfully the it. why due issues and hesitant little are able know clearly to on it’s forward. that going to And people watch some so been don’t more our far. just if eye we’ll year. it’s we’re we’ve tariff but so It’d or something navigate to going there than where have be able more to to We keep something deploy growth areas, successfully. they been see pretty

Greg Rustowicz

to onto that. Yes. And just add

about. Cuts of Jobs optimism if just we weren’t There had year and So, lot Tax Act. you Tariffs channel. was even a in a the being remember talked ago, the

those issues so year long And – have two clearly, point. or are a at now this

cautious return is, And think of so a I a more to outlook. there

Danny Eggerichs

margin really impact still this EBITDA Okay, and that does helpful. and be that for I with to That’s what great. for to a plan next gross then guys of tariffs, margin guess year, able that XX% guess blueprint comfortable higher you are assume target? I to growing gross get margin

Mark Morelli

question, delivering halfway more process that value. is of a a And part we we mind, tremendous of implementation we’re first And year. through the we’re XX/XX than confident of headwind the last pretty path little amount company. on and did that the about on our see definitely So, keep in we’re bit across

business also So, more just go go starting there’s because folks the areas broadly, and of are we it. can deeper

that. confident very is we’re our that to going offset new really getting be a the team fact well in than which we’re started able as So, what processes with doing operational XX/XX our with we’re more they’re to as offset initiatives, and that, team

on think term, to well, XX/XX you operational our have in I we a process long initiatives how becomes, I that to our of XXth business. to is, this invite talk margin both as And more this confident on we as New part elaborate we prosecute in June Investor think issue your expansion. our and and XX%? second opportunities on And kind in York the feel well runway in as directionally, of then the Day there’s of – more, because want we’ll do on longer City question the about

it’ll good be dialogue. a really think I So,

hopefully can So, you attend.

Danny Eggerichs

color. thanks, really appreciate the Great. Yes. guys. I

Operator

from you. is next with question Liptak coming proceed questions. The Please Global. line your the of with Thank Walter Seaport

Walter Liptak

me congratulations and guys too. All from thanks. right, morning Good

Mark Morelli

Thanks, Walt.

Walter Liptak

wanted already loaded. locked for is Well, savings of XX/XX sounds of million this to it $XX year. some about and like the ask I it

savings from of the separate saving the you’re You it. I of million. much going of and process savings get that if out you already wonder two could – other kind a buckets gains couple the are through and to mentioned you’re $X you plants Ohio of how

Greg Rustowicz

Yes.

footprint as to a So, million marker. as we count XX/XX clarify, Ohio consider or $XX line, counted that’s that XX/XX it’s item. we but product of Walt, just benefit, to our but not at in the get directly result simplify clearly, don’t do consolidation we’re being the able

of the we already deep as was XXXX, process. into we had the XX/XX the about ended So, that fiscal half year company

took the the with of that initiatives so full-year started analytical they last and an those, the you year And getting effect when process, it’s in first process. because

your get have have multiple focus there’s is people initiatives. our the You to our plan. up then with simplification, come product you our the game customers trained, data, main fans study which three areas And working to facets on, on to it in we’re our and line that raving and

that piece a we to do is see processes be carryover phases action starting meaningful which then before about some now that actually effect, start company we So, the is savings. of rest on of going months usually XX/XX the so of But to the the in top of the dollars six takes it, beginning drop. have significant formulating basically plans,

half the really first the started which with ago, I they what coming which they’re is is think only not new initiatives, to know. on of company, with continuing up important So, did, also a year

So, you’ve effect. carry-over got

XX/XX rolling businesses then we’re and You’ve initiatives process. got now get that really the with another started businesses from benefit the were already to are that from XX/XX, just new going the

we feel achievable very million that $XX pretty number. the is So, a confident

Walter Liptak

savings like Is fair? going be of related improvements. sounds kind that total enough. Fair $XX it’s plan, savings And the to the Okay. $X to with the million million from

Greg Rustowicz

Yes. Yes.

double-digit to trying we’re income year-over-year. again, once operating drive improvement So

some to couple to got And there, good well. of are tariffs impact so have a those offset guys as but certainly incremental that also remember, we the you we’ve got from

Walter Liptak

great. that… Okay, about to I ask wanted And

Greg Rustowicz

the in Normal inflation [ph] business.

Walter Liptak

that I that called costs pricing then you you wanted about out into too and pricing. fourth the Have great. ask tariffs Okay, in in of tariff to went quarter. a million the the covered that $X with you that effect

Mark Morelli

than it, than more covered more covered it.

in QX pricing that, and we’ll X.X% effect So, more not see the yet. we taken has all a of got as of bit little price

marginally a could go inflation that cover that up we little will our but So, bit, and raw than – tariffs. more material

our our million cost the material in were $X.X tariffs quarter in $XXX,XXX. margin bridge, a So, gross that the pricing and was inflation

good. we’re So, to $X the million still well over

Walter Liptak

great. Okay. That sounds

Mark Morelli

would mention bit. are drop little I that certain we well seeing as a And commodities, prices in

our So, to and with sourcing take working team lower costs overall as we’re advantage our well. there

Walter Liptak

the related And bit from And your if slower kind now that you’re for could you I because getting especially ask products for different of on which think little the productivity XXXX. of been sector then to has a and out out you one weakness commentary some I steel Magnetek’s called just new technology. great. I the think sectors, called And the area Okay, that on an of turning based seems potential the couple in that savings cuts. steel they’re I’m project in interested production a with business, that into like growth EU, technology

Mark Morelli

question, that for thanks Walt. Yes.

taking growth think safety on we’re new an able then exploit just terms is new think and high opportunities our expansion, is there lot to been code we past. go in really of this STAHL them And the And I a a it’s this and this applications It’s is opportunity. understanding time, a We’re into a relevant and as is business. enhance Columbus those more to product than line And been our for customers. well try really continue more as in focus our to advantage and customers folks with of aside focus the area for getting you our our and following customers, customers direction us bit And to also in you’re hearing our brand are area problems actually for that be rhetoric with this because a for if direction to software Mckinnon because above for values outstanding a has great very for for and safety. great new businesses productivity this on. combined reach a have long that ability happy it’s might this solving company, a you our we from in help Magnetek of been can to CapEx in on initiatives, period productivity of of have

the also softening particularly in a opportunities a not and It’s market. East. bit as EU, Asia China Southeast we see You as also in the some see just We Middle lot We in of as little as see outside United opportunity. opportunities in of States. in well a great the Pacific in of this Asia, mentioned well, global the U.S.

Walter Liptak

great. Okay,

Okay, you good guys. luck with

Mark Morelli

Thank you.

Operator

[Operator with proceed & from Mondillo Please Joe your comes Instructions] Sidoti with line next question the of questions. The Company.

Joe Mondillo

guys. Hi. Good morning

Mark Morelli

Joe. morning Good

Joe Mondillo

tariffs. touch to questions sounded may increases to be the on like Greg, the clarify of you saying $XX you fully offset initially tariff sounded that like tariffs, million were the wanted want will effects. I then just Just price of offset also by one because savings of regarding most that prior it but it sort recent said

do how that else million think and of savings about or to offsets included? any So other $XX negative the we tariffs anything

Greg Rustowicz

to $XX savings is expect hit we the with million so to yet line, fiscal bottom million year. $X expect those we on what consolidation, of and add plant two this the Yes, million to the initiatives, $XX XX/XX

of going our going the cost up the out as Joe of the to XX%, terms of themselves, inflation we’re offsetting that to with more to incrementally tariffs. to you’re was another pointing rate we cover. in going tariffs about is well right are But, as of I $X.X million So have tariffs have that the only than cost change pricing in

Joe Mondillo

the Should wondering on in topic that the year, just – how has wanted that a that whatever ramp at of I’m XX the on for then me, I hasn’t Thanks. past. addressed for just I’m been all all? should quarter, the and guidance I reason little gave anticipate the R&D, I bit at of been excuse you’ve wondering and think the about about reinvesting, some SG&A, we think And that to we how XX up sort Okay. you about to R&D first know costs, really R&D, any savings talked offset ask question XX/XX throughout to topic some a do or will

Greg Rustowicz

Yes.

we’ve done, far that being minimis flat. really discipline and into process. done efforts from minimis we’ve we’ve do So reason some can good the of new areas traction what gotten keeping the We’ve development where in R&D really to we’ve redeployed think areas, so that a de able why I projects had really get traction. R&D from is also we And our is, focus by resources lot de some product in

see Now traction. as is slowly the add But begin traction. back we R&D it’s only to to these the that will get some as beginning we results team get we Joe,

we as bit a time. go, at of kind it into a feed more So we’ll little

we’re where and more sort to think of open So out we giving we meet I we the it, going the now spent then what walk go of add our excellent through not guidance. we’re and as just wallet New And more also color you get think with is excellent traction of here through are. we on and Head think also more disciplined Development money think lot we’re it. as very at XX but there’s Product We of to our Day, can demonstrate approach I And this. right some a can and you not near-term June good back, give this return we’ll we And I is going Investor returns responsible. think

Joe Mondillo

know been of just maybe sort there I has thinking the square given what a footage, thought especially of to operational would situation where you ideal then plants. because been Okay, about, demand are just Mark, about thinking process, divestitures figure great. do going and trying sort XX in of me. an just you’re how how question the out Ohio general think prepared How the sort you’re with from you to down it’s closing, earlier be? ongoing, mentioned in now of about but wondering are, remarks down plant your trends And footprint sort the longer-term you last that, I’m

Mark Morelli

Yes.

prior when did how macro been we lot a it’s YKSK rope new last think inside that foot example, historically. less square through And we consider thinking the Mckinnon and to lot operating think of years environment, think also of sort an but Columbus is we I work to this as free-up done the per when couple we the a we’ve to of to for of up thinking a lot really do for see we really to as our through So through, freed footprint hoist complicated Ohio. dollars us us more the operate I very dimension across of around this the want square it’s And continue look there’s really to up really this freeing there’s really it improve think you’ll wire of areas per you dollars platform, our And opportunities we Columbus improve our is dimensions opportunities year, didn’t past Mckinnon. believe XX/XX that our one available and how not strategically foot.

the it’s also well. value there’s good adding we amount a about excited approach, because we’re lot of and here of we as think runway So that a think

and our June Head prosecute of again, and we opportunity how meet we forward. we our want Operations more of through going you kind once footprints of can meeting this So our how to give in XXth color think you’ll strategically

Joe Mondillo

Okay, for taking good and luck. great. Thanks questions my Thanks.

Mark Morelli

Thank you.

Operator

answer of Mark the I’ll call for over closing Thank remarks. session. the you. question end We’ve and reached the to now Morelli turn

Mark Morelli

Rob. you, Thank Great.

high-performance Columbus transforming Day are more, XXth participate in Mckinnon have to Investor learn York day. To We I technology into a and you you on Thank invite a industrial June City. our in good New company.

Operator

conference. This today’s concludes

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

Columbus McKinnon (CMCO) 29 May 192019 Q4 Earnings call transcript