CMCO - Earnings call transcript Q2 2020 | Columbus McKinnon Corporation

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Operator

Greetings, and welcome to the Columbus McKinnon Corporation Second Quarter Fiscal Year 2020 Financial Results Call. At this time, all participants are in a listen-only mode.

Our question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. for Relations Investor Pawlowski, Columbus McKinnon. Deb you. Thank

may You begin.

Deborah Pawlowski

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

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

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

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

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

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

non-GAAP information. results not accompany slides for comparable the with that for with and or in the prepared presentation the reconciliation measures substitute consider in should a accordance of You We've as release isolation additional in your GAAP as information, today's tables GAAP. measures provided

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

Mark Morelli

the X.X its improving for and our Blueprint this headwinds. effectiveness years in and now, face demonstrate We're continue Thank you, we of significant Deb. market We've our margins even industrial quarter. Growth results earnings with to our strategy deployed over

Process provided impact revenue in exchange which program. customer XX/XX by more account second pricing strong driven priority XXXX short-cycle fiscal million in overcame We divested business. X%. After up The currency our adjusting foreign demands decline $X from and of saw in revenue was business, for the rates, our in strategic businesses our projects our of quarter and than our growth

Process revenue $X.X operating million In million invest overhead in as in from contributed and more industrial as $X.X initiatives. This cost benefit including enabling incremental market to XX/XX well savings margin, our us total, than offsetting in growth headwinds is reduction.

As a X%. revenue result, up income net over growth. net income outpaced and X% was grew year-over-year Adjusted

to our execution XX.X%, Our was expanded achieve strategy us XX XX.X%. to margin keeping and basis EBITDA targets. basis track points Adjusted is up continue we to as on ROIC points XXX and

our cash generation A Columbus economic strong cycles. hallmark McKinnon of is through

this we As further cash our model, to We operations we strategy this debt. reduce million strengthening and quarter. business are improve from cash $XX in generated We execute the used tradition. our

Our leverage ratio target. X.Xx is ahead just now adjusted of EBITDA,

continue consistently our The balance our months business declines we and to improved we've We've and industrial revenue and in make After to a weakened. ROIC, of as utilization expanded of capacity decline innovation made global our the for in industrial organic changes have performance six grown margins manufacturing while sheet. markets ISM year progress. strengthening investing model and U.S., have

target year-to-date year. the of of raise than up Process was to $X we've $XX confidence income. the our from the to benefit Please down year XX/XX our We're full to $XX to in year, our fiscal this us million. achieved half turn Phase now performance operating contribution gives And for guidance earnings This this total million, benefits in our higher target prior previous doubling on first raising to Slide X million Through and X. our of strategy are year.

to resources driven business. overhead our with our material revenue reduce lines. us strategy productivity, self-help growth The and to unprofitable simplification costs product Process focused XX/XX on and indirect Our provides It the areas our by of of improve strengthen the shed also gives customers. lens

We're note that on fiscal in be end factory shedding to is and overhead track And a footprint with year. second we're China our should the China. one announced I closure complete by closure to in manufacturing enabling first manufacturing closing yesterday, of factory Ohio Virginia, this Ohio, allows Damascus, we North costs facility operations in Wadesboro, wire improve to center fund initiatives us in This us which to American for our our for products competitiveness. is North chain consolidate is American and North our Carolina, which hoist. center rope removes and

demonstrated year, higher we is from product tariffs our having We industrial headwinds people higher offset short-cycle investments. initiatives. strategy nearly focused XX are and by we The in costs. digital our innovation, funding the value and our true offset marketing and hired markets. macroeconomic business, through the global We've success than declines fiscal more of also This medical on

income of of comparisons intentional the year-over-year divestiture were Our better businesses. profitable from despite also in less the our loss quarter

turn next the Please to slide.

problems. of you Let me our solving give examples result business couple high-value how we're of innovation realizing customer a of as in a

as First, motion. creating listing our legacy by we're a specialist building on intelligent solutions for

launched This that innovation. business strengthen quarter, new our through products we several

in provides of worker auto to increases movement that enables to or and trolley that One movement multi-access Automated other powers is the these which Workstation The bridge, our words, automated ProPath productive. productivity dispatch and worker revolutionary ProPath preprogrammed improves an provides motions, be more enable safety. hoist Crane, the mode line

Without to improve other solutions, the travels on crane operator be its to load productive inefficient use to and the This with next manually our assists the free location labor. guides crane workstation its valuable of intelligent load, work designated the unique to critical an leaving tasks. location, workstation operators worker more and automated safety. The more

equipment with our example innovation load exposed. technology. improve We hoist Operators time. headroom integrated of real with because remotely external improves This enhancement of load equipment is less wiring the uptime measure electric Another intelligent fully of providing can solutions the is now smart and motion chain offering, compared solutions. solution our sensing the

the eliminates the sensor set also industry, as and load integrated applications shipping in entertainment For simplifying cases, extra transportation up. such

rope We're a options. scale, leverage standardized cranes. also for recently to no-fly-zone software solutions hoist We We wire control automation and hardware module. creating launched ways and critical

we areas and and Operators them improved making in improve crane obstacles configurator. a to high-traffic new online to crane avoid easily can Now productivity are our available program and safety.

have and more forward more intelligent well, We motion innovation look projects through the theme. pipeline and as about our I in to discussing growth

in turn to greater With and it that, over let he'll detail. the review me financials Greg,

Greg Rustowicz

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

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

a our compared million X.X% reduced prior to today's continue third sales by exchange headwind be in rates. sales will will to approximately at fiscal year. continues and which negatively also currency by $X impact quarter the Foreign This foreign headwind, our

Adjusted the and saw for divestitures, good we organic FX of growth X.X%.

strategic uncertainty. Our saw environment. up X.X% given our pricing businesses, result a XX/XX levels volume inventory we difficult our in basis We but by organic The short-cycle XX was evident, globally. growth a our saw slowdown improve to manage pricing as points channel initiatives. power continues of was industrial double-digit project this pricing Sales as businesses a in in

the from This U.S. adjusted quarter, and for U.S. basis Volumes This is of the initiatives were our the adjusted XX of XX strategic XX/XX FX. saw in effects pricing points. were of organic up largely for Process. Sales down divestitures. X.X%, basis divestitures we due to growth outside points

pricing benefits from primarily but as the large result was We volume rail the Germany, strong STAHL-branded down region. saw volume was This of offset as EMEA higher project business. in Germany. up and more the our in delivered in East project European short-cycle was Middle into and for business in well with our the in along The which a in than Sales sales higher saw strategic volumes. Canada weakness EMEA, APAC we product,

were that simplification given industrial growth in with This of and growth approximately encouraged that efforts we make ramping continue revenue. customer bad the XX/XX X% reflects to exist the Overall, eliminates engine. we headwinds in responsiveness the organic market progress the with quarter, our

in expand grow new markets. addressable introducing market will are products We our and that share key

is of a XX basis. gross in point year and margin Slide X, in consecutive on XX.X% quarter. year-over-year a margin basis expansion GAAP gross This ago a XXth our was our quarter from expansion On the margin

benefited and higher more than was which of pricing, through $X.X As strategic overhead the drove gross expansion tariffs This million we which by this medical certain from Process, volume and reductions we gains the Mark of benefit the accounts. FX, XX/XX earlier, offset in indirect profit mentioned saw impact quarter. targeted our divestitures, costs

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

Process. prior was expansion productivity, inflation flat million to of the $XX.X the We which to divestitures. adjusted pricing compared gross of profit did for and profit attributable cost XX/XX material see net the year, gross directly from were quarter Second

more profit, $X.X net material and mentioned contributed inflation Pricing I higher $XXX,XXX gross previously. offsetting that medical million contributed of productivity of the cost costs than

$X.X impact quarter. by a currency and Foreign of profit translation million, tariffs gross had $XXX,XXX the reduced in negative

of Ohio incurred $XXX,XXX We costs the yesterday. which we also announced factory for closure,

current on an reduction and XX The sales. a FX, in was shown RSG&A which by the approximately improvement year RSG&A and RSG&A points was of reduction $X.X largely XX.X% year. the million was $XXX,XXX the the is $XX X, As of impact of in quarter This previous the benefit in or divestitures, RSG&A million reduced in from Slide which of $XXX,XXX. of basis from a

selling $XXX,XXX. last year. reduced several by the by costs U.S. addition, we consolidating In selling in reduced warehouses This cost

we RSG&A are key are actively we costs While macroeconomic also investing initiatives. headwinds, for conditions in create controlling growth as

In projects fact, quarter. investments made we marketing product and development, approximately in digital of the million in $X

drive even invest strategy net RSG&A Our costs this a we while will continue reduction in year, and grow. to

range to $XX.X We be RSG&A in are of our to the forecasting quarter $XX third million million.

X. Growth operating X.X% of an the operating over X.X%. divestitures Adjusted for Slide adjusted X.X% for operating point revenue, margin improvement income our able a specifically in When adjusted Adjusted basis XXX operating XX.X% strategy largely prior by income grow operating to million. was normalize driven Process, to grew FX, were grew which leverage. despite Turning outstanding the decline Blueprint sales, year. is $XX.X you our year-over-year to income in With we divestitures, XX/XX and overall

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

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

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

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

driving adjusted a increase and from EBITDA achieve for progress demonstrates we tracking margin an an We are are our also quarter. second Growth are our Blueprint ROIC at goals now to achieve and points adjusted strategic XXXX progress the mid-teens. on XX% ROIC fiscal higher of This that basis year's XXX XX.X%, in making last in

$XX to of doubled Slide Moving basis. flow. on Net generated million operating activities XX. for quarter $XX to from free have million we a cash cash year-over-year the Year-to-date,

on We million are this to track cash to year. of million free $XX $XX deliver fiscal flow

McKinnon the One its of generate is to cycle. the business ability cash of throughout Columbus hallmarks

expect our year per years. We cash to by grow flow approximately the several next $XX free million over

to Turning Slide XX.

net quarter our million. this and approximately was debt million, debt is total $XXX Our $XXX

financial in Phase leverage strategy. Our by nearly excellent acquiring $XXX million and net advance ratio us progress repaid total into a the capitalization which our EBITDA have approximately of January We quarter second debt X of term We the and flexibility XX%. million debt XXXX. of since of now to debt X.Xx, net achieved reduced made have is our delevering STAHL in provides $XX debt-to-adjusted net loan to

allocation. XX, Page on thoughts our reiterate capital on me Let

continue will our in financial growth to use We initiatives. invest flexibility to

cost invest as overall We CapEx also financial to these will good be our projects accretive savings, with will in objectives.

of for and our sheet for the cash the we use to target, fiscal net delever achieved pay Growth year. will strategy. leverage we plan for M&A debt While to Blueprint down as Phase to move X into remainder capital deploy balance this smart of surplus we continue our have We our

also a to consistent and grows dividend that pay plan We over time. is

would priority Our share that be other capital repurchases final priorities. opportunistically, as our we consider will allocation we weigh

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

Mark Morelli

Greg. Thanks,

into the Our is as Blueprint persist quarter. even market Growth our third strategy industrial performance for improving headwinds

continue for and innovation be to enabler self-funded investments to us make Our a will strategy for key growth.

million QX in growing. the of about this flows. quarter year-over-year, expect We won't is timing revenue projects pipeline decline because our rail to Overall, a global point to that $X.X project repeat decline business is in organic of X% rail approximately of related the

uneven is quarter-to-quarter. it However, from

growth Our would be customer for benefits focus worse, of segments, not on strategic if and accounts expectations quarter the pricing. for the priority our the program

driven realignments and growth The we implementing further by restructurings we Phase we As our will cost our out, The more lines, we're our simplification solid on strategy. our gain benefits business our enabler has make track measurable of look believe X for strategy, deliver competitiveness. the of as us we're our XXXX. earnings are reductions from we is and that targets to to allowed which product validate achieve improve fiscal key and in

mentioned announced yesterday expect the fiscal Lisbon, initiate site to have complete I our first now of We located half that facility will we manufacturing we to another rationalization in of As close the Ohio, closure. will which second XXXX. include that visibility in earlier, round in another we

we With the Lisbon, million in savings. expect Ohio realize consolidation, to annualized $X

that, strategy, down to we and initiated will have XX. we rationalized With facilities Blueprint since we now six are our

In These we have in suppliers key human margins. investments addition, making and self-funded our been as expand to growth even engine. and we've ramp innovation capital drive investments been

represents EBITDA margins industrial performance This top mid-teen We means. technology continue and we're very well-respected in progress, XXXX. the narrowing quartile XX% to achieve among fiscal and ROIC to make gap

slide. a X Blueprint significant how Phase reminder XX the X. and in Please other. our to initiating for and each our and the turn Phase We're ahead. phases efforts as upon in layer next progress, improvements of Growth We're these Slide strategy phases We furthering there runway is making of excellent elements and put

growth-oriented We a technology our pivoting to industrial company. business continue

in expect year. calendar further discuss you We theme next our with to half first sometime the motion in intelligent of details

the with questions. open So Melissa, for we'll line that, now

Operator

At question. you. line question question-and we'll a [Operator Thank of comes from time, Please with be proceed Dougherty Mike with your Company. conducting Instructions] Schilsky answer-session. first & Our this the

Mike Schilsky

Good morning, hear you me okay? guys. Can

Mark Morelli

fine, you hear Mike. can we Yes,

Mike Schilsky

great. right, All

that's recently fiscal gross take this a X a margins, be that you shipping margins fewer days QX to might and down your to see customer Because gross so some year? think you've is I step So well having seen a decline guess, there on QX, could even. actually historically, from we've maybe due seasonal your chance holidays done close that

Mark Morelli

let and up. answer, Greg Yes, the I'll follow start I'll

business, We manage is particularly improvement more And the year-end. because Folks to directionally, in the So a results. we the But in calendar you're absolutely they driving right. activity this do seasonal seasonal XX/XX decline for their seeing think our our inventory December are reported. – short-cycle see is quarter. in the try I margins year well

to And see so wants turn I'll it Greg add over if he color. additional to any to

Greg Rustowicz

so adjustments and Mike, a had, last XX.X% we look some for gross if the were divestitures year's you of the margins, non-GAAP about margin. if at you we adjust at gross

but a seeing Tariffs are are there's perspective headwinds we are going this progress So margin XX/XX the been quarter, continue. though, good quarter, in from with current which continue. likely to to

significant which our we a quarter. quarter, continue inventory into We coming the reducing saw also you then, over million, also know medical can in cost have as $X been well to And see, or expect this levels. increase we

volumes out, Process to at tougher drop so from overhead it's but costs. – production when And a the indirect it continued it lot facilities. the volumes perspective fixed puts manufacturing our a a absorb And XX/XX it's – been those challenge taken has our

Mike Schilsky

the with you few Could share the and was end-markets at great you quarter, of the also X% you to of share ask volume the quarter. quarter. gaining wanted that actually least your in That's a I puts any whether of the takes volumes kind perhaps? great. about some wasn't to between I key X% sort in of maybe down thought color. surprised Okay, and in us

Mark Morelli

Sure.

level, it higher for and bit little down you. a with off start me Let I'll break

digits, really some verticals double some first the traction which encouraged think that than the all, I the macro to that it our I of with that outstanding this They business down shorter-cycle of and saw mostly in were of offset we've on. been think businesses. of that So some some more than XX% digit, the reporting we've up due sort in industrial serving we everybody's in been of decline there, headwinds mid-single more quarter, project-related shows

So demand We've us that seen projects some steel driving there. There's retrofits verticals good well. into good Entertainment the been are for strength, are as of been has really our aerospace. strong the some industry. in really

New quite utility good utilities the as infrastructure side. selling been into on construction also and we're have projects

Mike Schilsky

place could color, closure, the going the cost of benefits? separately went a sense first I more just the You the million mean, fiscal of a to here press just that half Great. part you've Mark. of or and But that of from – course, be $XX million? to night take the you the place? take can guys benefits to it of timing got in was the throw about announcement it on in the And of actually XXXX. going one benefits released change in – day last the any is Ohio Any on That's completed fiscal XXXX? is that from any I in for $XX If had XX/XX mentioned great cost different upfront of was

Greg Rustowicz

one. Mike, Greg. I'll it's take that

the We've side, question back year. the rate the that benefit in benefit $X double going is in first half the first XX/XX able a run on half of would we've to the had year. through largely from $XX year. of generated we're half over half the that additional the the say, we million, million the first success should target of of due And So $XX that on the to second million, of I'll take of your be

of the beginning to really with although year. fiscal place nothing program, do Ohio benefit this took So the it consolidation that of this have does Salem, the at

facilities we regards the then the There XX – and to That seven remember, it's complete. take Ohio the was with a there one, expect Ohio. to Lisbon, complex months There's Salem to because in facility, to had two So move. we was one. Lisbon

to the year. this We be don't any Carolina and lines Wadesboro, work the see North switched facility showing have really and a facility. fiscal It's benefits up factory product sizable the Damascus that to

going takes associated likely we we're that start costs full of this, are have going with to year, really we but to onetime be start modestly fiscal of the do that think incur given benefit started will the some in fact, the second half timing to it to it's In the see to the to next that and incur move. more

Mike Schilsky

Is or is If an lower base? because And a owned ROIC? for coming Or there you change there? Lisbon some large I'm some chunk have if to would asking some – asset Okay. in an to curious plant? cash plant sold bit at that a in point? plant outlook be have a there I'm your you leased asset Is also

Greg Rustowicz

questions. Good Sure.

do we every our that put XX-K So into year.

schedule We our an have facilities. is owned a on of That all facility.

I think top it's, my about it's a foot facility, so I'm of the off going roughly. XX,XXX mind, square

at as the right to you we large book expect, isn't so of brokers older might facility. an with for put our the time, up will it's property facility sale. that The work And value as

total, of So a size it's million dollars in couple a from perspective.

more yes, taking it's impact importantly, ROIC. an it out have But benefit So will of $X think overhead. the I million on of

Mark Morelli

streamlining is simplification. chance us product What's because It line also the inventory, driving operations. gives reduce it a to it's is, our really

think on I so what that pretty also the for big you've seen some traction benefits some ROIC great we're And in seeing XX/XX Process.

So as with. some that think be I I commensurate lens well. benefits it think viewing there kind And of the that's we're should

Mike Schilsky

in so Thanks the I’ll guys. hop much. Perfect, back queue.

Mark Morelli

Appreciate it.

Operator

Thank you.

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

Greg Palm

Thank the macro. results Good here, morning, guys, on impressive given and pretty you. stuff congrats the

Greg Rustowicz

Yes. Thanks, Craig.

Greg Palm

new some of these just starting products. with maybe So

movement, on the cetera. call from et guess, or are You highlighted excited importantly, reception customers? feedback the either about? kits, crane what's that What distribution end I again. initial you or that's And mean, base few I most smart getting more you're a the whether

Mark Morelli

announced. just talking we're of is about hoist under ProPath talking large of the is a There new in about. It's stuff, we're theme time theme, you here some we market. that workstation in the rope we're intelligent we overhead And number is areas. about traction When excited larger of the wire for kind things automation on providing this about gaining now to crane there's a that that motion. the Yes, workstation. couple I'm It's a think crane typically first this

our uses – rail. light is unified this And

to So you a worker really and productive workstation be enable more in can safe. a

excited examples of that. were because very it's about And one showing we're each our So with customers. interesting, that we're interactions driven these by

these we're the these come there. their out like literally sort problems, higher-value the So with things. lab working and it's inventing how trying with out ideas is of not then figure solve can and customers, up in traction to we We're then

some we're of already products. So demand for these getting

wants Another integrated great cell brings the load to example Folks about. into it we was integrated Having benefits all I talked from real-time those talked about of the that cell. load that's the read hoist.

two about new offerings. So I'm excited really those

that cranes. runway a We more automation rope more come wire wire And also forming group the be there. for providing can have I those actually side about, larger hoist we dedicated on provided lot a to talked rope on that We're of that side there's, and there. hoist automation think,

these these kind we'll beginning the you're pay to the about take think get It's actually volume year, kind are I which that but of offsets investments of that negative from some of see beginning due beginning So growth come of this through. to some fiscal probably to and see we of point to see trickling XX/XX we're revenue point one through, Process. out off, initiatives

get the seeing even more fiscal year, we traction. moving So I us, be can think into next you'll

Greg Palm

Got it. really helpful. That's

Any business the in environment? Just positioned how I at And feel guidance you to goes increase guess, terms thought the arrived in does the December destocking? that it relates process you it into assume of I'm guidance? As inventories sort consistent through curious curious the the in of destocking? for distribution, your quarter, how current are

Mark Morelli

Yes.

of will to So given levels kind market, in – we that inventory out that that we're and is weak, that and particularly manage do destock carefully, figure the continue down. are people short-cycle believe side trying to

of And of daily, watch we're through a on basis. happen. anticipating we Obviously, growth that's trying what initiatives, we a the that we're number end fiscal orders weekly of the For will fight those but year. kind to

the unfold holiday So we as go it season. forward towards will

too, there, got folks time downtime some off. And with of course, you taking

some brand actually there. there'll that have projects, are weakness and this up is, ramps we maintenance holiday folks offsets of Magnetek not shutdown ready some our What that period. on we're counting but we weakness be for time because only So year, business that, getting good anticipate this

want retrofits. do actually product they where So they can

that working up, initiatives we've some the got there. running been with And is on we've really so good of demand and traction some

offsetting that's think to going we be that. So

So hopefully, what we've the out I in think wash, that. come some guiding it'll we're to to, confidence around got and

Greg Rustowicz

and Greg, so do ago, add year revenue highlight on, And And have rail I'll did We lumpy business. just the a in Mark quarter. a that. we had particularly strong

So really about to one point of business. that revenue rail related the decline is

Greg Palm

that's of for reminder. last really to debt Thanks in Yes, And quarter. I'm cash in pay impressive right. kind addition mean, for down, the one here me, I curious the just flow would what all, at the environment not? some of the near-term timeline accelerate your or the Would just you in priorities? we're valuations given allocation highlight coming capital down you as M&A and

Mark Morelli

me Yes, to that let I'll take it over Greg. first, turn and

the an once very it's, accelerate in this again, M&A are we different motion past because we're develop type Phase But and out running It's phone targets. by What sort talk the about at pipelines looked X. outreach in any is programmatic before our initiating I than nature, we're theme. things we where of that the kind it's program. did comments that those meaning not there. of – we've intelligent it's on initiating on And to So really we're

calendar the next in we're about So that more year. talk going to

to here, turn the get and about just won't And allocation. out detail right that hopefully rush to the Greg to away, into going buy we anything to but also I'll not go over out we're capital it on priorities, So there.

Greg Rustowicz

covered remarks. So Slide to maybe to add XX, just I prepared my more a which little in color

to million of at debt. leverage of another $XX fiscal X.Xx. going balance target our Xx. intend year, do So EBITDA, for the X.Xx, our is down we That's ratio this put to pay about Adjusted

well underneath clearly, So that.

matures on of give our XXXX, and a as loan X. in structure, XXXX. reminder Phase powder capital B, matures January us have revolver we we into move will our term a that So lot which in A dry

will sometime that likely when that. next the it's go looking we'll balance be term with the So the have summer, sheet, recapitalize along we to loan to revolver, recapitalize because

term, would. makes see – things next pay year, the of debt, we progress to going strategy were our We're we sense. doing and determine are once how the down those So then do. what we with again, in said what short we'll said like Phase And X we

Greg Palm

going That Good makes sense. luck forward. Thanks.

Operator

you. Thank

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

Jon Tanwanteng

guys. for taking questions. Hey, have in in start and margin visibility sensitivity short-cycle with, the you of good my Every Maybe morning, is standpoint? from Thank the business, you end the given to side EBITDA decline an X%, uncertainty just what I in going of percent what's standpoint, markets are the or revenue? the efficiency that dollar have flow your you revenue to programs a know purely to a up lot on going and cost decremental take from but through profitability? the

Greg Rustowicz

Yes.

question, So it's Jon. a good

gone to leverage be was XX% we've year, nonmeaningful, has revenue can't yet goes our up. been Columbus volume range actually we our operating – income historically, been calculated outperforming our it's operating This that. has and it in down, XX%. when McKinnon year, up, XX% Last the leverage So gone because has and operating

of part Process. XX/XX the strategy, benefits of self-help That's our the

certainly XX% do So going that and XX%, improvement historical to impacts our maybe we at the volume. to XX% got forward negative we would obviously range going on the expect try of look the we've so downside, way than to XX% can opportunities in once better down. on again, dampen But that to much the we're

Jon Tanwanteng

Xx acquisitions back get term, as consider near the below share net Barring on of any use medium you debt-to-EBITDA? cash. to Okay, to go just debt buybacks great. And the you would and in then pay down

Greg Rustowicz

around We'll question. do use the good March that in going every timeframe. our cash board We review of Yes, potential with as have that a year clearly discussions forward.

throughout and a cycle, a very it's we business cash problem throughout we great think are that strong the the I that generator have cycle.

us And what's clearly things. we good about to, in think as into us we important for – time. going clearly the of over perspective regularly to the leverage want to gives side our growth be grow balance maintain to we our talked which shape, initiatives, more The really fund I and sure. is dividend move from a earlier, flexibility want to it M&A sheet

is is, low. share us, other opportunity lot buyback, of the which because of we And share our time. actually look quite So is an flow for to positions that at authorized factor a available period consider repurchase holders do long one to if we have our is a it have maintain but opportunistically we

mindful we're dynamic So well. that of as

Jon Tanwanteng

a in enough. Fair your you looking might be at buy purely to out basis? And terms could at valuation point just Okay. discount of standpoint, shares industrial just technology own to a that what you from maybe

Greg Rustowicz

is obviously That would we something consider. Yes.

Jon Tanwanteng

Yes.

question last me. Just from

job You've and asset with as of consolidation that to where by want Is process? you great at asset are done the footprint? there the in enabled base room capacity and kind lines Or your consolidation you rationalize product of go of through of simplification. to more then terms you a be

Mark Morelli

No, think have there. I we runway more

looking of or of announced another is, figuring I through this think product and on sort happens sort this kind we've XX/XX of of is we you're call lines. what of lens at round your what What it sort through rationalization. yesterday released out

a swat it. pretty take You good at

we've certainly we sort markets more what announced we'll But announce step as and is of as clarity, you here. well. there to kind I of back yesterday. then you kind out runway And it do of analysis, you think some and more the And more have figured

to fiscal and this because next greater kind I our we I into that also us going earnings. the do we're on markets good will visibility how have of softened, think year generate think give timing as it's

doing very but we're of encouraged encouraged what So only what not potential by that. the very see. by we're we We're also

Jon Tanwanteng

Great.

of you that. are and design supply in and terms to of footprint? simplification the follow-up product rationalizing through your one way percentage Just What

Mark Morelli

basis, think, inning an this line it speaking. we about the innings initiative, Well, generally third, did more year. bottom you just in last I saying we're than we're And the us fourth on of generating to see

demonstrated, more that's do lot also a to I lot more runway here go. work a to and think been but

Greg Rustowicz

Yes. We're excited, John, about the possibilities.

this started other The of ideas. the of as half about have of out done and ago run haven't year well. year. reminder, company And teams had the the a We started company a half we really

runway the several we years. pretty do a moving next expect So of opportunities forward good for

Jon Tanwanteng

guys. thanks Great,

Operator

you. Thank

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

Joe Mondillo

good guys. right, morning, All

Greg Rustowicz

Hi Joe.

Joe Mondillo

and a a divestitures. Was So ask of the excluding on I order question weakened implied that obviously and backlog, things bit backlog sort trends sort year-over-year, a the to the that of your just trends order quite for bit. the on little have wanted

Just order in wondering trends have of wondering October? guess, October? trended? and quarter has progressed, throughout sort how the into seen things Just how your what – I what you're in that have And

Mark Morelli

color Yes, let on you me give that. some

it bit. roll little just first of all, So back a let's

period. remember, down If a you April, They again through the actually may saw orders rebounded of in declined and September. in kind July we August then bit

rail. us October. also really not that is health the it's pretty in that pipeline. a there's But orders it's for on But mind of with indicative lot, think out keep us of in watch the rail ebb a declined know and I too. something lot flow and lumpy, also we I of obviously

business improved lumpy. through business the as project quite short-cycle it bit product also summer, well. a the But industrial in encouraging. as our is that's you've seen, And August was weakened and And And September.

So in the going And which terms But also seeing the getting and we're activity at we're measuring and trend the better up. the in the of quoting as orders by there a we're a pipelines, lot not meaningful quoting of activity pipeline is health necessarily well. quoting. encouraged

that it's walk-through size So the pipeline at. And something we're do the maybe want Greg, do you for a obviously looking of to folks?

Greg Rustowicz

Sure.

$XX down basis is a is but So million to it's rates. the XX%, FX year-over-year due it of $X on million, – just backlog about

in So of million about and rail. that million, $XX it's down is about currency, $XX local

lumpy. is So timing a talked larger The strong projects. of year a couple for rail, really on of had intake order we've issue. We a ago It's project, pipeline still more it's just about as a really our strong very rail.

So the in about short-cycle the $X million. and really is down decline business, our remainder of that's

is Our about project business backlog same. the

really about factor isn't in in September. at But about we're reason on down was October, September that's guided And a in the from that. Now when revenue the it X% we you I look million why the you, the backlog as is sequentially, tell of levels, same in it quarter. October currency in about can part down June $X

Joe Mondillo

what mean in Or that timing given in trying of be Just the timing the cash terms to out are a rail you sort comp, just quarter? is rebound sort Okay. this you're next third a quarter timing-wise, hopefully thing And of quarters fourth implying going potentially rebound to rail Rail seeing that saw business, the of next and bit on what to is in you on trends terms of by in of things? that those of just side And couple the you that then of there? the start little year? a things tougher the

Mark Morelli

by electrifying you that some Yes, to the sure. decreased. give this million project think side rail. this about We're folks headwinds more infrastructure's where rail quarter can And And And is in color, also see rail. doing is pipeline the you backlog let what on But on overall, a as infrastructure you is the December diesel this increasing. you year-over-year see, is also that thing is, have business are has our about $X.X if projects global me going globally, on the business. don't trains. for They're

people go not government of have off continuing spending, driven spending. forward. A by is that cut and to this lot And it's

that seeing you're But of a the year. we long ebb going we're We is has. flow into that calendar think happy our next and business the and pretty potential that's decline. business, appropriately don't while that it and on where guide we'll term think of increasing, longer-term So project with that's actually some

Joe Mondillo

of And guidance weighted to $XX fourth in how you realized? in have realized much regarding rest And million by Okay. does far? in the of half? quarter sort it then sort how million. out terms the of $XX from play just more of Or – is Wondering you that upping that the that of haven't that savings sort thus announced of you the back

Greg Rustowicz

Yes.

looking So at the the for is of incremental impact we year-over-year look we're initiatives. the it way

fall from initiatives X-year mark, they as off. the hit the year So prior

savings we're to were new see the but this we ideas start starting that So we've those – that tail see of and in some first have taken. year off, actions of got that half to new –

– should over might split towards comfortable to QX between for it XX-XX our because number close very full volume the little of of with is to a pretty it's $XX additional we element actions a hit taken a be XX-XX. the that It we see targeted million there the heavily can quarters, more date, to accounts. year. the be weighted terms But we more the in savings next feel general, a $X two in little might So million

Joe Mondillo

And have there of an first is do – any way realized you much idea to that have the half? already of you've how in

Mark Morelli

million was dollars. that $X Yes,

Greg Rustowicz

$X million dollars.

Joe Mondillo

Right. All

Greg Rustowicz

in of the So double are mark that that once again, it's kind rate. items. are there at have actually off where will grandfathering we QX, in But run X-year actions off really fully QX, grandfathered

Joe Mondillo

if Okay. know but I'm fingertips, for And have don't what can last if divestitures. I just the I up this follow the with the your year wondering was Greg, quarter fourth you, you ex you don't. margin at gross

Greg Rustowicz

XX.X%. Yes, or I do XX.X% have that, Joe.

Sorry.

Joe Mondillo

in any I'm if then not And of I heard this question, the commentary sure and great. in last questions. Okay, the prepared

down such, bit. restructuring has and M&A, midst the your and debt quite Just in healthily the we're pretty of a come regarding Phase and X all

good You've done a job that. with really

and of where we X and sort with M&A Just strategy? wondering Phase part the are of that

Mark Morelli

Sure.

different Columbus It's McKinnon We're terms that in we an initiated has past. done approach through intelligent in on to we've theme want that. And outreach much thinking view. program based what X Phase calling So of how of motion. a more than it's quite strategic the

a year. the that be benefits, We'll we're we to of going in it's too about talk is think get that any We're this we it's it excited not fact time But but to lot have because term. to put early it's calendar great. really to about that pretty year. place. going in And clearly near transactions it. next more And anything take going we're fiscal on say it to started doing the doing But going to that be some

Joe Mondillo

then last for And question me. Okay.

engineered seen of seeing some taking you the opportunity, of see a early, really in Mark, Just terms would still share more? it that the some Is of that? And lot drive product. lot? are the from of more of and new haven't a terms in say, – products, Where the how we kick initiatives crane regarding how R&D, we at benefits with progression growth? next is whole year, the and describe growth on would to trying sort Or some of the opportunities been you've take we you maybe

Mark Morelli

Sure.

So I think early. it is

up. some we're of one beginning elements of X, pretty kind But Phase X And ramping tractions the nurturing they still those is Phase about see of we engine. from seeds measurable are the planting and come to think you as If growth that.

early And is so think it I innings.

line, hitting of attributes some our seeing are We results some that think too. of it's We the XX/XX offsetting line. the rationalization negative revenue on top

will So see the this next you'll think into build. fiscal I year that certainly

out not beginning teams And to times So making super as We're great spending can investments. are the because we're even building the by very encouraged necessary more we're on time, perspective, see, we're teams see that, from is in this. are December compare, happy We're look ISM we time industrial I though this. for a about of our when of XX, lot market you hard on sort do thing saw this last declines back that that, saw to business it's organic One of us but to throw about below that contraction out benefits. this the XXXX, revenue want X%. business of kind an

operating if saw that's point improvement decline operating about this and big It basis we growing adjusted margins around we're to quarter, operating margin and at points, and it's XXX basis margin past to XX% X%. margin. had difference, compare a were it where we're XXX you pretty X%, –

for good growth ramping and then executing right plan, So of I think combination seeds also these and strategy. we're is rationalizing we're really think by it. the And very I a us encouraged on

Joe Mondillo

question. lot. a taking you Appreciate thanks my Great,

Operator

you. Thank

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

Walter Liptak

Thanks morning. question. my backlog. the going for good Hi, through taking for And thanks

mentioned bad earlier? of get is kind of decline. as much rid a can backlog we've got wonder you you I I short-cycle business how the your just I quantify related PLS, was, own of related the to of think, to revenue, or that think about that the much if on Or clarity $X The had actions other to short-cycle or distributors is lot how customers? described I million. you being And down, how question much

Mark Morelli

Yes.

top slowdown at on the So hit the really take on – hard I wars But the of They're well in we type there Europe. related think see reported. trade back see short-cycle waiting lot. is Europe they an going in from next happen cut has inventory of also overall to due probably to point to been People – reported well there to by is have are business softness line have about Brexit out that really kind what's rationalization a business. efforts levels one XX/XX. industrial things

that's think in reflected I clearly there our numbers. So

Walter Liptak

with mentioned think your regard to Okay, this alluded them next inventory down inventories in great. to And you coming your you levels. I Greg, the again quarter. – that in

inventory where level are the industrial for right what's this slowing? However, with we

Greg Rustowicz

Yes.

focused at clearly we're it So levels down. We bringing look a on our inventory turns basis. back on

we're by capital to year. to working better improvement. turns the committed on hard the We driving four a want of team September. lot that It's fiscal work X.X do that, It's the of in about – We it. are number focused end or is operations but

you overall we when capital a are of to sales, that working at XX.X%, fact, down In compares to and of percent ago a as about look our year XX.X%.

of out benefit of from well through with quarter this inventory simplification, fully capital that inventory continue was initiative. So system. millions XX/XX potential dollars to product as take we think progress tens a it's an and of the is to would And once XX/XX line integrated. we the perspective made the that's And of help total going move of the of with as to lot working Process

Walter Liptak

have is the with nine last wonder that didn't what questions of I six pricing that on guys us And And the offline. pricing. raw you could are over comment one How thinking on around are Yes, impressive. that just given or I'll about pricing? if help And was moved my the strategies? months? XX/XX timing the you materials for Maybe save pricing? way you really

Greg Rustowicz

Yes.

great in XX/XX. strategic of initiatives we've benefit terms a in pricing, through So seen pricing

and strategic in price we I bit was quarter, overall, a that. X.X%, saw – at of pricing of think, XX/XX the about good a was

March the increases vary normal Typically, in price by frame. U.S., it's Our time the region. in

Europe, April. APAC, In In January. in around it's it's

America, think the I in in Latin April frame. generally time it's

strategic are initiatives prices going of what what that's XX/XX, increases the sure. sticky cetera. very been material But less out on doing, what on after. which are those for coming beneficial terms and in very are the we're pricing raw of doing competition et based market are for really about so based we're what very more or And is And year strategic us this bullish

Walter Liptak

Okay, sounds you. Thank great.

Operator

Thank you.

Please with question next proceed Mike line of Company. question. & the Shlisky Our with Dougherty comes your from

Mike Shlisky

Hi actually guys. Thanks. Appreciate it. It question looks was answered. like my

Operator

concludes gentlemen, and Ladies session. any for to the I'll our this you. back Thank floor question-and-answer Mr. final turn Morelli comments.

Mark Morelli

Great. folks, Well, and thanks, a day. for Have nice your time McKinnon. in Columbus interest

Operator

concludes teleconference. today's you. This Thank

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

Columbus McKinnon (CMCO) 8 Nov 192020 Q2 Earnings call transcript