CMCO - Earnings call transcript Q1 2020 | Columbus McKinnon Corporation

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Operator

Greetings, and welcome to the Columbus McKinnon Corporation First Quarter Fiscal Year 2020 Financial Results [Operator Instructions]. A question-and-answer session will follow the formal presentation [Operator Instructions]. It is now my pleasure to introduce your host Deborah Pawlowski, Investor Relations for Columbus McKinnon. Thank you. Ms. begin. may you Pawlowski,

Deborah Pawlowski

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

the Greg Financial on and me call Morelli, Mark Joining our CEO and Rustowicz, Officer. Chief our are President

website You today market. XXXX released results, fiscal first slides cmworks.com. financial well not, if will a at you should our before the which that the as release copy as have morning our quarter of this our And we conversation can accompany access the

to turn the I you'll in If slide harbor deck, will two safe the statement. first review

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

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

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

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

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

Mark Morelli

everyone. morning and Thanks, Deb, good

EPAS expanding earnings was Net our Margin drive evidence Blueprint income or fiscal for and of XX%. On system provides Growth to Acceleration. our for nearly share of margins call adjusted Earnings up earnings which up Growth we EPAS earnings Blueprint deployment an XXX%. further quarter the effectiveness quarter basis the our First per was is power. strategy the to is use validates driving operating growth. and execute strategy our Power continued plan. This diluted that 'XX tools of we expansion for business

expanded Since implementing EPAS in ROIC. we've XXXX, margins and consistently

we points. gross margin by margin up solid offset points ROIC reached record than prior facility. made last this progress XX.X% record Contributing basis as record as XXX tariffs year's Surpassing to adjusted consolidation more Ohio our the XX XX.X%. achieved the the and In previous inflation. basis We well, $XXX,XXX fact, was on last record from improvement savings of pricing had from of past We in EBITDA year which quarter.

operating of divestitures foreign leverage. the XX%. our The increased exchange with expanded operating Growth income had in Phase and as simplification improving structure base is basis of margin XXX our We our on due rates, II business strategy for changes for leverage adjusting operating adjusted the quarter and operating the After reducing outstanding to Blueprint lower for to divestitures. revenue points currency more than cost

the this growth is X, Slide This simplifying the ramping operational excellence focused our Phase at business, on on engine. year. strategy of we're Looking down phase and II doubling

further Our and our efforts runway significant results continues continue business believe to drive growth. for improvement. deliver is there earnings we to Simplifying

RSG&A our was also quarter profit our streamlined million There XX:XX more million business. savings to organizational from an the operating by the In operating simplify which tool important fact, delivered structure. us in $X.X process, the help in $X in of system

by identified of as increased XX basis our divestitures a during margin operating simplification Additionally, process. result points the

discipline our cost excellence operational the side, improving is cost better structure. our On

our efforts of simplification to is and realized percentage our the basis The quarter, During RSG&A footprint. we excellence driving point reduction of operating sales. reduce in a XXX the as operational combination

we're divesting businesses, Ohio. one facility consolidate In into in able to to non-core addition

track on $XXX,XXX China that in provided and in our consolidation year. we're million in footprint achieve June. We're our to also Day we earlier, I As at the forward this this of moving in quarter with $X announced mentioned fiscal savings savings Investor the in

expect U.S. one-year We're our McKinnon progress seeing in penetrate I've are the several have growth by accounts. our Middle off. Both as Columbus they a cost strong engine as payback. We $X.X accounts and we're growth opportunities our in of East key new paying making are Several about engagement about realizing encouraged customers and recently mutual million this growth and well. our met is with the the markets. ramping and to

and and that also Product higher innovation we is our growth markets. markets on margins. expand to our safety productivity our ramping at opportunities and focuses increase engine Through product innovation expanding addressable grow

me examples. you couple a give Let

the We a standard crane can accelerate package. with expect to platform and configurator Customers use crane which new call enter of parameters Compass recent hoist wire kits. our basic to configure rope now we our launch design sales online of

the easily engineering For and quickly This many this quoted, needs, them components installation. be crane shortens and customers as get at online delivered effort basic fits industrial with customers allows times and system to crane and our their allows reduces delivery included. our lead design, now productive to their more all for

our market as enhancing offering and expanding our new addressable a a of explosion-proof position launching crane. by also lifting We're specialist

cranes movement to industries. explosion-proof Our the element LNG of us Smart key a our a strategy. brand US, more is STAHL now is and the compete leader growth have and allowing in effectively petrochemical and in certification

steel We're for Magnetek segment. to is and many that This modern DC safety the four drive retrofits drive a existing motors to the diagnostics. in waste to digital digital and and sole digital drive cranes that solution them improve brand, energy is greater us This safety. a ideal incorporates a provider and have grow system. upgrades of helping an market features This with older for offering of crane productivity retrofit allows DC quadrant, to cranes

to me our over that cover results. Greg financial With let to Greg? turn it

Greg Rustowicz

Mark. everyone. sales in Slide Thank $XXX.X quarter the morning, Good were you, On net X, first million.

year fiscal $XX.X divestitures which last three the reduced completed we sales know, quarter by in you As million.

$X.X also by the year. which sales be to prior Foreign a million, continues currency compared to reduced our headwind

We Adjusted good the X%. for will expect second rates, quarter. organic headwind we and growth in saw foreign our to the exchange X.X%. of be At FX the about continue fiscal today's headwind divestitures,

pricing was some This improved Our as included evident Process. by saw the X.X%. XX/XX of from power we our benefits pricing

$X.X was in divestitures the the We for basis where particularly points. growth quarter, the the our saw effects with divestitures. good volume project translation. or X.X% million X.X% in X.X outside managing up environment. up foreign sell-through growth adjusted currency a is Sales US short XX sales increased were or uncertain businesses We the from our think the cycle million Sales adjusting US businesses levels, the in inventory in distribution. but We of slowdown macroeconomic saw given for solid channel

given good and make responsiveness was that ramping We think of the that continue with approximately simplification believe key X% efforts growing executing growth and the share the in we well. the and bad uncertainty macroeconomic organic growth engine. are customer we revenue. We to This eliminates quarter performance markets progress reflects in

we our year-over-year margin On expansion a in of in This record is Slide year quarter XX.X% margin from and consecutive is quarter. the XX this gross expansion. of a ago, Xth gross X, achieved margin basis point

the Process was margins. As XX/XX accretive Mark earlier, gross mentioned to

margins lot has than improve and material which Phase our an going runway covering In of gross feel forward. that inflation We addition, has of tariffs. pricing, raw XX/XX to strategy II to is further our a it element more still

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

from million million expansion profit of contributed from we had largely the expect tariff decreased contributed currency growth million of in First $X 'XX, the impact a the a quarter tariffs sales pricing, $X inflation, see a impact cost of cost million and year. profit. gross gross net result with of Pricing, gross first did $XXX,XXX prior and will foreign of by profit a divestitures This material to have schedules, material on negative and inflation We $X.X fiscal $XX.X productivity compared profit. In productivity. of was translation, negative $XXX,XXX mix. current net quarter. about Tariffs

We mitigate headwind. actively working are to this

I we cost expect fiscal and savings is the approximately that project plant now This in by $X for will million 'XX. of also point costs consolidation. incurred Ohio overhead complete in $XXX,XXX benefit to we out

by currency lower our $X.X million in businesses translation, volumes profit higher had mix project of million was three and gross a impacted reduced volume negatively Foreign quarter. million of sales gross and $X.X we projects quarter. rail as negative level $X.X this The certain profit by divestitures and this

$XX.X by points prior the totaling previous million the or $X.X As in pro is X, quarter of was RSG&A RSG&A reduced percent quarter million included and sales year RSG&A of $X.X million of cost sales. XXX the of This shown a divestitures and an The $X on from as a year. Slide forma XX.X% reduction in million. first improvement basis

of SG&A approximately the part benefit million ago. In in reduced $X addition, where a the in reduction million. $X.X remaining result a of RSG&A our The we of is FX year a was current simplification year by strategy

our to exercising We are good drive earnings look also as power. cost discipline we

We second about are RSG&A be our forecasting million. $XX to quarter

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

which strong all Mark of discussed, Blueprint which earnings Our power. adjusted Phase to the includes growth our operating as execute to our and to engine ability II the power. strategy, in ramping are strategy operational on leverage quarter our earnings was drive driving reflects contributing simplification, excellence our

with earnings a was share As was the in $X.XX On XX%. earnings our Slide Adjusted previous share an per of can rate the tax see compared diluted on basis, per for share increase you quarter X. $X.XX GAAP X%. $X.XX diluted about GAAP or for per effective was quarter the year, $X.XX.

XX% year full the expect in We rate 'XX. to to approximately be fiscal XX% tax

XX, we Slide continue EBITDA our adjusted On to expand margin.

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

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

the Blueprint achieve 'XX adjusted reminder, adjusted an a teens. a in XX% strategy to margin As goal ROIC is our mid EBITDA and in fiscal for achieve Growth

million of operating million our net pension the we year $X source XX, a $X.X in $X.X a annual was in this related compared US Slide whereas timing fund amount We of contribution to million This funded over Moving last to was year. the prior year decided of cash the to to use activities year. from QX issues. the in for

paid of we million annual $XX QX. payments out addition, plan In incentive in

of is $XX $XX million for in expect the the Regarding for CapEx million be million to be 'XX approximately for to to range flow We fiscal year. fiscal our cash free $XX our 'XX. CapEx, expected for still guidance

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

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

to repay million expect fiscal debt We $XX of 'XX. in

Please turn will to it and to Slide turn Mark. XX back I over

Mark Morelli

Greg. Thanks,

me strategy also lifting you potential a and result a tools our growth in as confident execute some in potential business market. model We're by We're expanding movement. operating is The smart up to by operating target improved better traction the ability seeing Let and giving increased leverage. leveraging innovating enable greater color our with system. markets through to specialist wrap around our by our and our

such storm see we good are and their entertainment also We infrastructure. and grid the aerospace, and season. Despite specific and gas, waste energy, segment steel, weakness, up government-funded demand of as defense grids gearing opportunities in to inspecting power by encouraged Major utilities hydropower, growth some are The the market segments growing. markets. providers we're is from for seeing system oil

automotive OEMs our is SUVs for investing to products. as of for looks are designing sensor We built-in some with automation-ready the enhanced Also, a is product models permanent America. with changeover demand large building expanding opportunity won what compete and business and and our North strong and our safety. encouraging. drives trucks, Model have growing. We're are orders electric new incorporating by touring in offerings installs vehicles load

weakness well our remain is While in strategy. recent reported, industrial market confident we

unchanged to last over expect slightly be to for translation revenue current divestitures and second foreign We year's quarter, improved currency adjusted at rates.

approximately $XXX was second year's revenue quarter million. Last

fiscal We and the drive Blueprint Growth expansion are margin will leverage. our operational for and the will continue and operating that Simplification stronger power deliver strategy for confident quarter excellence earnings year. to

that, for would open the With you call Doug, please questions?

Operator

Thank Instructions]. you [Operator

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

Jon Tanwanteng

the quality the backlog about Looking from orders the year-over-year, giving And backlogs down and at growth are talk you in perspective? the slightly what's second, can confidence of you a mix in QX? in margin

GregRustowicz

So elaborate in in that about that on there's happening Day I dynamics also are June our a today. Investor two can talked bit that we little

dynamic much The think really the of what cycle short April. related as see first July, take that cycle McKinnon that a with is as some improvement and sell business It this you as might is a want historic consequence, in is last May inventory in to and actually, mostly that business our they don't to and some there really depth. June business And we the year, America. And folks have bottom Columbus has hit in and a we it of. to moderated North short

we However, the do see

Mark Morelli

in with short particularly this also business in Europe, the weakness impacted cycle in Europe Europe.

up, by so total we're However, encouraged the for is short-cycle that. business the trending

done related our newer this is of we've or mostly to longer second the the that's last to And timing business dynamic is report mostly of The the related of is that issues to that that project. project over couple some acquisitions years. cycle important on

project see what we good. these business, returns. So There's some timing very But you're segments good being strong that as some power. well. see a to of is as quoting the segments in These about. It's do and good as And consequence, to a that spoke still seeing gas, Projects activity see we the go the quite consequence, are projects issues are of and as business steel, oil and strong. numbers. related the we continuing timing are I in

has business lumpy pretty impact. business. In the particular, rail rail timing is the a what's And impacting our

far, we've $X.X in orders in intake related China. July. July about actually rail order and some the so Republic, for million business, is Czech in of in orders And seen came the This to Germany,

describes dynamics we're of seeing that hopefully, some So there. the

Jon Tanwanteng

And that comment the in now? the just you a have on expected right backlog margin

Mark Morelli

the backlog Greg, on to comment do you want margins?

Greg Rustowicz

Sure.

that as But orders million and Mark than little be the said, a has about probably higher But a reduction backlog income going a gross just because up tends -- rail in some our in margin of picked margins a corporate would they are the the lower was our So $X to to backlog, July than business. of historically because average. it be the bit be good RSG&A. it we in operating lower here little of

Jon Tanwanteng

the How XX/XX guidance How reduction RSG&A Plan? more room to pretty you for it then your nice a is And made of this in current quarter. RSG&A, in down. much have you in much good there is go

Mark Morelli

So there's aspects. I think two

our I simplification this margins. there the spend. our a XX/XX is -- think of business overall certainly hitting have predominantly structurally clearly our of gross But footprint and over reduces the will also operating benefit time,

as what make think to this on giving for more I traction our is quarter simplification responsible next we're processes. So come we guidance and further

Operator

proceed with Our line comes Palm Craig-Hallum next question the Capital Please question. of Group. from with Greg your

Greg Palm

bit year-end reported and on I when since the rate morning, you seems your you maybe macro September following frame Good the the the maybe what for thinking time on back that guidance fiscal on saw it little during here. thereafter, said or slowdown shortly comments organic that thanks a you up in results for more the growth on questions the Day taking based like guess, just Analyst macro, quarter.

bit I'm So or curious, us reconcile board, can items around you it a more a just little is it one-quarter more. inventory those of the is just just maybe help timing across sell-in

Mark Morelli

Sure.

business. So the some let of me short go commentary the back cycle on to

inventory seeing Europe more in North some hope the occurred. lot moderating and order economic I it's soft hard to with is folks We deployment macro correction bit July, strength, the strength. right yields of May recovery we of in America to in that upticks of do we're really short that areas in call certainly, say think by drop in encouraged some of patch are in upticks of recently. on may conditions spoke saw see strength and a Europe, some concerns said, seeing about industrial I on are we the Whereas offset and where like our that through issues off, messages we April but tariffs, earnings some in now. the, in that particular, some areas given little the why with we have think I cycle I definitely some hesitant of and soft a that that It are the capacity been intakes

So it's important that we work those and out to growth opportunities our of of mind that. get some

we're our it we're at seeing we're that would that strategy. these is actually what conditions. and market there on So right indicate very our nothing pretty that derail for encouraged strategy strategy We're all. our We're very confident focused is by would seeing

we're speaking, generally the say, encouraged that visibility would have. pretty I So we for

Greg Palm

have market gains the seems like comment on have what is or if market accelerating. the been share two over growing. past to overall data Curious, the quarters, any you you think four It

get So expectations well. as and, just your that thoughts curious on forward your to obviously, what are going

Mark Morelli

over we core, share think these seen deployment in last two our the growth some strengthening the I years, areas. some of have on of initiatives market some the gains

As you and some can this remarks capturing growth as I call, on hear segment from to we're well. the continue innovate think market we

So I think data overall and that's encouraged think we've written is doing are getting. we've we The traction on I been been some market these. the there what by

opportunities of saw occurring industrial XX We July reported market that do there is the share, grow. basis. on what know to opportunities currency an time focus we to about gain orders a really think they on don't Konecranes I equipment is X.X% because spend what and our decline that ton constant We our segment have at on

pretty think we're I direction in. good headed the about getting we're we feel and traction the So

Greg Palm

mentioned or last the terms double had year goal mean And target macro, that of operating in income you quarter the light this I in I achievable guess a I more still me. last. digit of the little -- think just Greg, bit in for versus in slowdown about last something is or not? you growth think the one is

Greg Rustowicz

do and right Yes, growth because sales in internal said low that seeing strategy now. we remember can a double-digit drive on environment is whole the predicated growth we we're actually what earnings we that's and improvements,

Greg Palm

And I sales even little that about guess that maybe in level things? right up probably were Is down comes imply way what from would inherently bit. a QX, think that tick a as to the margins they gross

Greg Rustowicz

X.X%. as to our term long We our think it. to good at pricing a tamed There so and continue what that's impacts really think for got our right this and improve factories year our has last we're to I on part this hard we impact far on seasonal productivity front is percentages, year But way in with work handle that's seeing on about that know. we the think been from carryover year. we've really margin But the gross are got you inflation, most factories.

year So expect than now. seeing higher have and would ago year we a we to we're the for did that margins

Operator

Our Liptak question. next of question Walter Global. with line Please comes Seaport proceed from the your with

Steven Friedberg

Hi, filling Steven Walt. this is in Friedberg for

talk guys on color could there So hoping But plays you cost, provide know you're rolling first, XXXX some in I you to fiscal surcharges mentioned is I the if out cadence positive off. about, and QX. was I see any want how and

Greg Rustowicz

Sure.

one. So I'll take that

the been we and have implemented. price our some quarter. the Most So price got from as to and of already about hold essentially just rest have for the that for did been I year. level That pricing in XX/XX announced expect benefit increases of include would pricing, we mentioned, X.X%

X. increases essentially standard Our that's April and implemented announced have done been and price by

So be at this pricing going we're about X.X% pretty level. confident to is that

Steven Friedberg

about XXXX? plan. know million commented the prepaying $XX incentive million was you I to turning it then quarter that guys you cash cadence as weak and guess, fiscal the in rationale as the for $XX I can well of talk And the for flow.

Greg Rustowicz

that just So last actually the June. such was in let we year is plan we've payment paid $XX a great clarify something, because larger annual million is a than always had me year, incentive largely the which payment and historically had

the some chose our pension we quarter wasn't US to, of So the million that issue timing $X that paid year contributions we and to timing from really before first the for that do where the and we on divestitures issue. plan The earmarked proceeds used we this in the was payment.

chose early. we it to pay So

a get cash for it. perspective, than really from percentage, You on decision our it. some do get have bank. sit a return it will you bit And sense But on timing rather which EPS made was expected to, the help that the in it us little the benefit asset from

Steven Friedberg

the of the And cash throughout cadence flow year.

Greg Rustowicz

you million if QX. Yes, it's are there it, definitely QX outflows that in not cash to going of was QX going QX, to in think repeat or improve because about $XX

Steven Friedberg

thanks. right, All

Greg Rustowicz

$XX which quarters. the will think pay I to we so, another will one use paid of down other so expect spread that million that's relevant we leaves -- is We down next debt. that And $XX point here already, three $XX get do million million over

Operator

your Our & next line Mondillo comes Please with Joe from of Company. question Sidoti question. with the proceed

Joe Mondillo

guess, Just And cost, for the about that to expectations I facility, going the sure what more we 'XX is else prior. from expect? is that regarding, of Chinese your and understanding under that but Growth, restructuring was fiscal $X million bucket anything should or to then this and understand in Blueprint million from or are improvements make there I is come that and maintained have that's you $XX I XX/XX, just wanted mentioned

Greg Rustowicz

what about terms expect in of incremental $XX million million the income So and of operating we that's last on of we're had top X.X that this expecting we from year, XX/XX year.

part the XX/XX, those million. So not specifically in are of as of terms consolidations, out called $XX the

So That's the QX. closure as already savings is the achieved $X of in completed. for million Ohio expect be $XXX,XXX mentioned, we already was to we year; plant going

completed. fiscal income is way a an from quarter be next and have it that it don't Because operating for consolidation talked but our into two to about will we take mostly expect into And under now it material to year. this impact fourth have call will on China year, We that our on that the already, then from us our one, --

Joe Mondillo

quarter, related is more any first for cost lowering in that rail SG&A? of require that Or of the the the second And is second more mostly how from XX/XX projects And so think then to then should to for $XX we you quarter etc. less that year? just about related the SG&A, half the guys million that reductions,

Greg Rustowicz

rate million, $XX it to our I compare [XX.X in which would QX, the was So million]. run

at that the of to $XX make level. in investments the to on going the some product So be we We're us to adding with development be side a an forward. some quarter, going really of house that's think going plan look half certainly new be this upcoming as the and we million we going to the year of out important we to it's closer come And on at driver for point, of growth second the it. haven't guidance for more

-- is on can things. a few there So quite depend it

we this QX our point. I probably at just guidance with So think stick should

Joe Mondillo

And some -- ask started see then, that you've type Investor I cranes, those Day, to guess Mark, in but presented the engineered early factors probably the at wanted know think I that R&D, to things, growth the stages. would think I maybe you about benefits, of all we're products would kit I Compass, to

we time these see initiatives? what -- benefit a of you a a -- point wondering at should Just -- factor starting to more of do more from in anticipate

Mark Morelli

I think you're right.

in engine. we that early for of think it's see I are trickling growth some to the beginning But I innings ramping now. think

by the products encouraged of margins, really speed. higher that we're think encouraged I commentary we're these seeing through on encouraged new some from operating it. at getting what our from we're leverage on some we're We're today, of variable

as I that this would we should greater think fiscal we seeing progress year. traction through start

of know, making and our making be we're getting updates development a on of things going think I through of take can some out fiscal calls pretty product year. launches regular to our you As this but earnings bit some progress through I'm on is the and the this time, accretive

Joe Mondillo

question, And then last Greg.

rate the is a XX? tax is normal point rate, tax or on at still this it XX% Just

Greg Rustowicz

to think our we mix to about of Day with we're that is that effective to earnings Investor tax rate XX% the a We good have we XX%. anticipating the is from XX% range we So at going go. lowered lower. pretty where It be current that's that to think where of the talked

very we of company, the those have which to calculations end detailed do rate the have XXX been of tax a as As fiscal effective completed. year

And think rate we now XX% have this year. fiscal the to that additional for information, the XX% we is right so, rate

Operator

to Instructions] [Operator queue. no are to for like closing back the I'd in management the There call comments. hand further questions

Mark Morelli

Great. your in McKinnon. us today's call. for on Thanks joining Have Columbus nice Thanks, We Doug. appreciate a interest day.

Columbus McKinnon (CMCO) 2 Aug 192020 Q1 Earnings call transcript