CMCO - Earnings call transcript Q3 2020 | Columbus McKinnon Corporation

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Operator

Greetings. Welcome to Columbus McKinnon’s Third Quarter Fiscal Year 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

the for to Columbus turn Pawlowski, host, now Relations Investor McKinnon. will conference your over Deborah I Thank you.

You may begin.

Deborah Pawlowski

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

Rick with Fleming, Here are; our and Interim Chairman CEO. me

was the aware, XX departure Also is with CEO former of As our CEO Morelli, Mark Greg the Interim Chief us Rick Vontier. are effective appointed Rustowicz, Financial you who of CEO, likely January, with is Officer. our now here

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

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

be as Q&A during the may forward-looking make You that the we well some formal as should statements aware discussions session. during

could earnings uncertainties differ risks as today. These other uncertainties the are are subject stated at is can statements to These and found that Commission. actual documents other events as well that here documents risks apply as factors with provided Exchange These in with well to www.sec.gov. Securities from what cause website our and or on and be results future factors materially files as to and other release

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

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

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

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

Rick Fleming

joining you today. to Deb. all you, I’m pleased be Thank of

moment I’ve Director Columbus to a as decades. two been take a with myself. me Let for almost McKinnon introduce

products its So its company, markets. quite familiar with the and I’m

retirement at and in $X.X time. in Financial an from President revenues billion USG XXXX, that had Chief Vice my USG Corporation was Executive I Officer. about Before

and years of for its about Corporation company USG’s for Masonite was I XX subsidiary, the years. employee was I CFO XX an approximately for

has construction in career is my Exchange, Cascade a currently of New and Company been O.E. most a building material the as the company. well on Holdings I’m Stock spent York listed So, private as Director of which Boise industry.

role CEO was expected. new a These leading I’m of Interim conducting exciting as McKinnon. for my Well, search the are McKinnon this to not be we Columbus while times Columbus honored team, at our are CEO.

We the have a and helm. team at solid motivated leadership

our And for have We bright. is are our delivering with future our momentum on excellent In strategy. we promises. short, blueprint growth

turn the our let’s with of that, review quarter. to So

blueprint its solid for to on invested have effectiveness. about of the market. traction three We third deployed our capital years the growth continued quarter our of headwinds demonstrate earnings and and the expanded industrial new strategy the despite Margins for related return increased results and

our XX/XX experienced Even share operating X% our per gross lower basis quarter expansion driven achieved XX Process, per margin $X.XX earnings though volumes, earnings growth we points to with million by our share contributed was XXth margins $X.X Earnings XX%. Diluted we consecutive to adjusted $X.XX. to of grew of and approximately were which year-over-year increasing income.

customer contributions top reminder, our pricing line in in with a but structure, As also our and XX/XX only our are not cost from priority strategic program. reflected account

growth With continue initiatives. and able the invest market been to XX/XX Process, headwinds we industrial offset to have our in

also Our XXX points improved to margin EBITDA targets. achieve points our strategy, team basis by XX.X%. quarter expanded and XX.X% Adjusted urged year-to-date. financial great to ROIC basis execution for XXX the the to plus XX.X% by

million target we during in expected for raised third cycle. we cash as $XX also flow cash million. free have to generated million The our ability the demonstrate operations to from discuss, to Greg total, $XX quarter our over and flow substantial cash QX, generate will the In year $XX.X

reduced further debt. We cash this to reduce

leverage well is ahead is our of EBITDA, Our target. now which adjusted just times ratio X.X

pursue growth flexibility sheet business So continue financial blueprints model. our balance to for excellent transform strategy, to earnings provides to our our to power strengthen and our

Now in strategy. progress the discuss more Slide detail two of on making phase X, I to turning will our we’re

As where have quarter, a we strengthen several our power. long XX/XX although of XX/XX a $X.X left projects contributed and of been noted, quite our to further this have we earnings simplification income million operating Process during business for in approximately the the with runway bit years, and list employing still

fiscal the sometimes of goal XX/XX many approximately for income statement, in realized contributions we’re affected see to to factors face in have very $XX due But achieve income $XX.X P&L. confident and of to million it’s the of that difficult year-to-date will operating our We ‘XX. million we impact that the the

Its been be improved in performance can to We through ability measurably where seen would have historically. manage and our believe we performances headwinds. contributions margin over their

our blueprint Our provide XX/XX that while the tools for us discipline execute provided that with to system which growth E-PAS, is operating focus, well. business strategic and has us direction strategy incorporates with and

the our while made initiatives. much during our in volume result, to a impact our progress investment to continuing were we quarter, to As continued and realign the earnings programs marketing and our costs, focus on of development to under transformation new our lower profile. be of growth of absorption digital able through activities, on The the third offset product our factories,

we cover service more to Slide we have control growth I’ll to a dedicated automation the that in of December, details, center engine. formed ramp turn some Now is our product investments expanding of announced our organic to globally that excellence and growth X, portfolio. in automation

technology Specialist Lifting Smart our customers’ as to solve brands enables to skills solutions of high our value problems. our combines with create Movement Magnetek that the center The

more have of and customers center, our can we solutions. creation provide Of with the our across facilities and to hands-on leverage With capabilities these this ability the the customers testing center with markets. experience note, both

productivity new controls for as in up such improvements We’re provide products applications. launching critical which XX% Intelli-Crane incorporates our can also Systems, that to

our our related products, addressable and by drives been our offerings addition, the in US expanded of capacity and lifting hoist brand controls. of Magnetek increased Shaw hoist and the with the of market In has gained explosion-proof rope unique certification wire the

Also, it’s products new important digital. are note, that not all to

manual We innovation integrated be to that safety stocks. are our requirement that as has lever industrial eliminates safety of utility hoist products this brake launching the an will for we well. bringing chain The installation summer manual

If features working you replacing provides. would dozens air, appreciate new lineman lines, tool a that the feet imagine, being you in the of safety transmission our

turn over Greg With review our in financial greater that, to now I’ll detail. results to

Greg Rustowicz

On were Rick. you, everyone. quarter Slide Thank X, $XXX.X morning, million. sales a the third Good in net

by last year. sales compared last to three As $X million completed you which we know, quarter divestitures reduced fiscal year, this

contribute headwind by reduced a also as continued our currency Foreign – sales and $X.X million.

FX volume saw Adjusted divestitures, in or the sales million by $XX.X for X.X%. we declined

pricing a XX/XX our as by which initiatives. result evident pricing was While our power was of X.X%, volume this we same of amount the pricing half improved But was saw strategic quarter. was as down, last pricing

me little by Let region. sales a color provide regarding

For by for the third increases quarter, divestitures. of by in Sales price of we the US This saw down outside partially decline sales offset the FX the X.X%. X.X%. was adjusting X.X% of were volume US

the Latin volume rail weakness decline cycle partially we offset Canada, of our short up large was a saw APAC The in improvement in region and in X.X%. Sales was and of America project result volume as in X.X% project. businesses. price EMEA down EMEA, but of a both Solid

orders and backlog. review now Let’s

to industrial business This the quarter contraction continued cycle Our project business impacted headwind markets. as affected our December be by of the well. during short

dollar delayed, quotes Adjusted overall. both and high remains the orders the down US. senses X.X% that to divestitures, of in important in were by especially that number for somewhat year-over-year is projects our value, being note, is It quoting are activity but

As a end reduced million backlog December. of $XXX result, at was to the

While certainly of the leading the position industrial will market a we strong headwind, the brands market effect markets dampen that are and our believe slowdown.

focus and engine. customer to the ramping on continue growth We responsiveness

in As markets. addressable formed automation new division products Rick market grow discussed, that expand have we and share which introduce will an key will

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

certain the benefited we by of which XX/XX accounts. the $X.X This productivity, net pricing, the expansion million from and absorption cost offset due targeted medical benefit and higher lower cost Process, profit factories fixed sales the more gains our included and other are through lower mentioned Rick divestitures, or reductions cost category drove mix in of which of volume volume on and to was impact As strategic indirect than bridge. overhead earlier, gross changes inventory reductions at the

gross bridge. quarters’ profit review now the Let’s

products. of was tariffs quarter in costs the We closures divestitures. the see prior less pricing, profit were million for Ohio as compared gross expansion from prior inflation We year Chinese the than incurred adjusted $XX.X material the year profit of to of imported we China. cost down $X.X Third and $XXX,XXX gross for did and one-time lower net million factory

net also absorption cost which million, other negative our result by million translation reducing – inventories and reduced $X of by currency higher impact the Foreign the in $X.X gross was $XXX,XXX. $X.X fixed of costs of medical was million. negatively the This Productivity, of profit affected cost changes factories.

previous benefit $XXX,XXX. $X.X Slide or lower was the X, the on year of million to RSG&A RSG&A the period. reduction shown several sales. was the million due reduced quarter by RSG&A than factors; approximately FX of The of RSG&A As million and in $X divestitures XX.X% was impact $XX.X the in of

in reduction previous compensation addition, benefited from costs our stock of the a million expense $X CEO. In G&A departure our from

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

Taking account, marketing our range we in while RSG&A to We development, invest organization. quarter to continue in million are costs the $XX to reducing a into in be and projects, this product forecasting million. $XX.X of other of third parts digital

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

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

as tax year’s XXXX a year utilized are Tax the and tax result credits reversed full federal foreign now benefit, the valuation allowance rate this Jobs XX%. in income and allowance million. to Cuts partially by tax recorded originally GAAP tax in in valuation the rate a XXXX foreign quarter the was valuation credits reverse the transition we to of tax generated deferred asset was amount This relating allowance our the XX.X%, one-time tax fiscal $X.X XX% to the be this certain On we return. With tax, of We basis, our as Act. fiscal expecting approximately for

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

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

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

to we free still free cash to $XX this generated our are we to $X the Moving represents one $XX.X this for of million raising Consequently, free of McKinnon year-over-year flow we the ability Year-to-date, activities Net XX%. a of throughout generate million have of generated go. to This cash cash cash and cycle. guidance $XX have to was million quarter million, fiscal business increase XX, Columbus about which quarter of last was hallmarks from flow. operating flow one year. for the $XX XX% year Slide or million fiscal is we cash its

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

We to to total flexibility made three level since net $XXX ratio while achieved third providing – into debt X.X the of STAHL loan repaid now debt to adjusted is excellent a million net of debt million debt EBITDA net in our leverage and quarter capitalization by in progress of We nearly have de-levering acquiring reduced advance us the XX%. and term phase approximately Our of our strategy. $XX XXXX. financial January times,

times X.X We end. expect times fiscal our ratio leverage year to to be X.X by

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

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

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

use this to and we target, down our to leverage our balance achieved de-lever continue While sheet have cash pay the will net fiscal the year. for we remainder surplus debt of

blueprint move plan capital We of M&A to strategy. phase our three smart as deploy for for we growth into

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

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

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

Rick Fleming

now Thanks, to Concept and for quarter. Right line fourth our like only Greg. economy on short is outlook. out. continuing the and we cycle ‘XX our policy quarter would trends the our I manufacturing quarter discuss in to fiscal one a now, as top based entered backlog businesses guys give fourth our order softness

year. the lines that be We to are This both continue million and to of slowdown. in level the mitigate and we $XXX a with reduction essentially performance expected $XXX revenue the fourth flat our quarter range million. quarter on last QX deliver want will our hard of But X% implies these you of working assure bottom X% I to to from strong during and to top to a third headwinds

market that ‘XX. few a there starting mentioned conditions are suggest are for we as early to that improve indications Finally fiscal

recently For performance it early crane mentioned, project large under trend, we’re conditions. all automation system as several received said our a firming. the does Having waiting levels maximize not is call to recovery, too as order It job but any that large is our rail that, competence example, maybe a for and order, a and to we orders. suggest economic

December examples few completed a our China end facility about. the I’m are the ahead Here of of of talking what at schedule. of We closure

that fourth million We $X expect annualized beginning about quarter in in savings the from effort.

$X There’ll in track annualized on of of an quarter additional facility when second in ‘XX. closure fiscal with by first are Ohio the completed. that million be savings is end the of We the our

In reduced achieve $X income the believe XX/XX a blueprint track million we operating earlier, to noted have these well XX consolidations cost. $XX of in million fiscal factory implementing of process. strategy, total, X, to our Lisbon, that As in from we from the to generate goal including number reduce growth And Ohio consolidation, are Process facilities the we in for contributions on is by would XX, which ‘XX. about the as in

again provide we We enhance our underway including a to on provide Longer-term, us responsiveness growth further will additional ‘XX operational cost XX% realignment investments and XX/XX efforts and believe initiatives costs, in our operational our and reduce also continue the incremental further of have indirect expect our business expect talent, focus that that will improve earnings achieve by we fiscal that excellence, our savings, combined to drive customer simplification with EBITDA that will excellence, solid contributions in projects and enable power. to we the with mid-teens margin self-funded business fiscal innovation goals will ROIC year ‘XX. especially

me take a search well which for our is moment let to you underway. CEO, a on update Now new

lead the strategy, that Chief operational momentum We’re can a for blueprint who continue and performance and who we’ve Officer high with engine dealt the initiatives. Executive looking for growth can our our ramping simplification, excellence growth

tasked be level. to CEO E-PAS next with operating will taking to disciplines new operating system Our and the business our

we’re M&A. operator, and developing we experienced growth in-person the starting shortly. organic in interest To-date, this opportunities, we’ll and and executing encouraged for portfolio strong in an a to by addition optimization be looking position, who’s are In individual interview

With for open that, questions. now line we’ll the

Operator

you. is Company. Thank Instructions] Our Mike Dougherty [Operator from with proceed. Please first Shlisky & question

Mike Shlisky

Good Mike morning, here. everybody. Slishky

implies benefits that So, mean, year, third outlook the fourth based in want million will quarter. got that quarters, XX/XX slowdown $X we full you quarter but know, the I the first to the that in below the the first for your few quarter. the for just ask maintained I about appreciate on you fourth the benefit actually

hear the some three on upside in potential of any fourth is parts some quarter? the we can and So for moving major there

Greg Rustowicz

it’s Greg. Mike Hi, Yeah.

it know, basis, we incremental year-over-year. measure you an on we have, So, so did as

have in no the year. the quarter, have fourth didn’t carryover any we impact from we – So previous

some we So would this to think targeted be savings. is upside that exceed all that expect. us $XX the opportunity I new activities million there for could XX/XX

Mike Shlisky

an number, quarter. not in for know, is Okay, the and grants have ask that and In great. quarter salary area fourth you the for? placeholder that stock a about fourth that person’s is new benefits or to account I also your holding you for RSG&A that outlook CEO, there some want

Rick Fleming

this no new a is I having to placeholder in And for charged but no as fourth Rick clearly half something there’s quarter, way Mike the the quarter. And in Interim fiscal CEO, be considered my said my placeholder, stock. fourth There’s Fleming, by – is in that will for the CEO ‘XX. that, compensation being is be during compensation of

Greg Rustowicz

so too, add are let me just well executive other And, costs Mike costs. like involved search on there as

in into we quarter guidance. those that quarter So fourth taken third incur fiscal of fiscal have some in and and of the we’ll in the the more did account that’s

Mike Shlisky

that’s That okay, so perfect. included, not [technical – difficulty]

one Wanted the the day last again in back hop me to talks the queue. issues and on ask for that in coronavirus. one Just of the I’ll China one of about then the

you just can been operating your all and still time? business that, by Just current there, facilities has as due at they that your whether whether China in Columbus to anyone to the on your affected over thoughts changed has at are from

Rick Fleming

Well, that’s a Mike. question, great

to say First, has knowledge of by me itself. that impacted let our the pleased none our virus we’re been team

by halt the appreciate currently, precaution taken having of said but it XXth, have factory home, a as that, have basis. to to we team day-by-day lunar members reopen around it, February in work on in have holidays China been many the watched asked can companies Hangzhou kind down it’s to those and is being shut expect our China will but you during effectively same We as from travel

I’m the go cases experience newspaper to to sure where picture, had, and to And X,XXX the look X,XXX and all with you’ve see to we bigger this associated go XXX go to X,XXX at uncertainty go XX,XXX grappling go had been we I XX,XXX. now, back the think I’ve at same we the have looking right Stepping epidemic. with

speak, of as of very population. really so knowledge evolving well disease And evolving terms it’s as as a this to that’s building situation in and infect we our both it’s

we So, have clearly account. into take to uncertainty that

we that, and is that, total, and small today expectation factory we know, in shut the at all down think the we’re back know, but to at part million terms $X.X the impact closely. fourth continued if of what stay China – watching of in we that in in it’s to latter a part fairness we’ll very said getting about looked to the as just relatively be I and business it of Having McKinnon of Columbus revenue you be looked in February, quarter, you with have the

Mike Shlisky

very thanks will the hop I much. in queue. back Okay,

Operator

Our next with proceed question question. is Research. from Chris with your Howe Barrington Please

Chris Howe

Good morning, everyone.

Deborah Pawlowski

Good morning, Chris.

Rick Fleming

Good morning.

Chris Howe

to I phase bit three. dive wanted into a morning. Good deeper little

phase As we perhaps interim, new the and is towards consider or assess you XXXX, upside we in look towards move that’s other within to just the CEO, target you’re a the can year six on the margin EBITDA we how automation comment And candidates this search M&A activity of the for seeing as underlying you target and course margin developed as fiscal that opportunities? three, there in your of over months? for XX% potential past the

Rick Fleming

Well This question. thanks, That’s is Fleming. Rick a very good Chris.

our at mentioned, opportunities matter our standpoint, market in as have and largely on as an in say from First, as conducted I’m we adjacencies on sure we phase and been that associated thinking really thinking conducting of strategic us for M&A review. costs, which, three has adjacent not criteria qualitative, well as that thoughtful calls, three a are a activity let with really been interest in our Mark previous well through getting quantitative literally that through these, looking opportunities have research phase me our explained as as paused

about did do, Mark to company opportunistic is perhaps think M&A I contrasted past you’re in really the has this And many emphasize, and what companies where more the as And to that process. your I thought more try strategic.

if a lot as some will, lot early of of companies. with possibility that, of looking the at So a a with you reading, part of dialogue, lot on possible conversations opportunities,

a putting do till just the know interest on been the or circumstances that you There things in have noticed settle economic one previously cases. burner down now have they’ve the potential by industrial of may target back kind two market. in We

So right planning work say it’s oriented. to fair most is now of the

individual have grow as or solid has the we really in he in looking are place. benefit new she opportunity addition Columbus of being CEO the have when work in and And The that as to lot background mentioned, comes a for will a really to McKinnon as well that in the comes an operator.

Greg Rustowicz

Greg. Yeah. Hey, Chris, it’s

to on it. add me Let

So Movement. we’ve themes. and three as on Lifting is being the we centered Specialist about two really other phase One think and Smart acquisitions, major a

identified that have companies and pipeline a over this and So screening criteria were evaluating we’ve process. a XXX of doing against

those, once then, begins. Now, do identify an we outreach

different approach. really So from an investment a more of bit a of This inbound just this is approach taking is outreach than bankers. calls programmatic

that So next sheet to sometime and it’s balance the difficult the clearly is we with will you see to can fruits year. optimistic here appreciate, forward we’re in And of labor the that going you timing. as shape. continue predict our we’re fiscal strategy very But know, in great

Chris Howe

And pricing comments or shifted at expectations there? has your versus environment all the any prior

Greg Rustowicz

so price the multiples is can’t rich pay very the for we about change as sure. one something a that. you you for right deal now, that’s about know, that thing think M&A, And you are Yeah,

we very or outstanding and we’re technology that capabilities it’s important have opportunities us. smart so that the for buy we either have synergy looking And provide for that

Rick Fleming

are And hit have internal been with some they the because and variable, has EBITDA. in that in being have relative variable to addition actually taking I through to been a a they’re because pause dialogue their EBITDA multiples we some button, companies issues think

Chris Howe

as how was we year? expectations opportunities size to next into margin and deal want your automation very the crane some as all pricing just this the specifically, to large order, it deal and could Could or fiscal didn’t there perhaps Okay. you more color deal helpful. And the other be automation expect large overlooked. into we this of well more on play provide the as innovative how automation That’s move and

Rick Fleming

being say can up. in. start is that Greg But, me excellence Well, staffed let first jump still automation center first the I’ll then for and

We are place. people putting in

and management team place. will, We are creating the systems in if operating you the getting

order But built very to having in nicely quoting the I’ve said $XXX,XXX. I come, to area. which about the that pleased is mentioned, all activities that, And is get more we were mean,

proof encouraged that the track. of far so So on and we’re we’re was right point a January month of sort

add you Greg? to that, Do want to

Greg Rustowicz

Yeah, so our you know believe margins that’s than that business. an clearly area we has average higher

So to our the we can grow extent, profile. overall drive substantially help and that activities our margin automation gross will them

Chris Howe

Okay, I thanks the have all That’s for color. for right now. Appreciate it.

Operator

question Craig-Hallum is Palm from Please next proceed. Our Greg with Capital Group.

Greg Palm

All specifically right, that there. of a morning fiscal stronger markets and down. and know, commentary to a little everybody you fell was bit sounds on know, good kind itself. on Maybe Any like know just of macro year. business, I project-based you out the little past end with thanks bit starting this the commentary

So of about you the talk what can sort just differences you’re out there? and seeing

Rick Fleming

I To into November XX% and a of we December to somewhat – the October in me. due decline in the XX% orders and a give think October of marketplace. level, industrial on December helpful. this orders November pattern decline had be October sense been a of orders were of about you about may level where Well, caution – turned order saw the excuse obviously also for we was a a period orders hoist Sure. overall

the book the which X% look thing nonetheless up. take as and had to that’s down the maybe and that that’s and backdrop, seen to positive, would XX% will an been part while up has the it now is So be our really say up of I softening at but business is X% with a short good. cycle uptick side that it’s weaker in January a important continues relatively project firm about and of however the to orders small,

seen you even next in has then of side when some is But quote closed, we look level do the on spots a pretty at see as the bright activity speak. project which good area. you the data, Europe

up Construction, in very you in verticals. Steel generation to utility seasonal however up. several started strong appreciate. North slowdown picking after America it’s waste Asia relatively picking segments as government pick North is activities power still in can and up particularly has energy and are America and December. a soft

So, came the back be about good top the sales to we is, day, we’re slowly, chance had basically but and was pretty good looks just seeing on our trying lower team at feel we are in decline. XX stabilizing And this many that of got with the starting other like move news level. right normalize. what customers meet that to to seem to things a are our we not some things direction. how feedback I saying, word further surely the It are

So it’s February, positive basically we early January, now see and shoots green but some moving into signs.

Greg Palm

Okay, great. That’s really helpful.

again it because know, specifically on guidance than January your a some, top looking it the the quarter? you – about March, and that? in it’s March for you off thinking So the reconcile the you know, then quarter comments specific for Is line falls are that February guidance, maybe what are on the at underlying behind assumptions

Greg Rustowicz

that just for orders the to you really by about and quarter drove us the so X% adjust FX. were fact, what it down Yeah, in like when under is divestitures the

starting from quarter sequentially about where backlog down was so the it of million, $XXX with And we’re about a which XX% in is September.

the of it for in what we know, the typically inventory uptick, for advance larger quarter, really incentive an book you So, bit is picks people business know, implies a see the you fourth in that buying do and in up the on customers build that it buy to our of the shelves them and we for get US the have and incent season. programs increases summer some price which

the X% where we for are X%, with prudent guidance our to quarter. of So given guidance is we our really think down that backlog

Rick Fleming

the backlog improvement an based the think quarter, order in Yeah expect and I still business. it declining is short on have trends we we business and we that do a saw on think to project fourth one cycle the in about that, way

centers a you Greg of general of and sort flattish in lot two As of maybe offset or comes view about mentioned, that samplings. quarter end versus industrial that’s for programs, price other we fourth pre-buying performance then a a our up said what know, often that, kind before increase and the because the But having of the third. with a partners firm of each

Greg Palm

sense. behind have kind macro in of What between underlying growth And shifting then are in the then targets now to it, makes and Got fiscal do for to get some that? achieve mean, pickup just we ‘XX. those EBITDA targets? gears assumptions to order the I margin

Greg Rustowicz

we a XX% as target came of benefits with we in XX% and line a originally the set growth. single-digit mid-to-high certainly over had ‘XX, year, target, fiscal we when recall, years top so with Yeah, two the last kind but there out the on in got EBITDA you some we

So the with the of environment. GDP – presumption was in XX% kind a that, of growth is low kind achievable

hard well. margins are clearly footprint margin we and the just trying excellence consolidation, automation on that the with about to operational new product then investments, lift really development, XX/XX, business of the side So, both, as working Rick spoke our with

know, So, this of end right basis. year, we year-to-date around to where XX% on end XX.X% a you are or XX% north going – should

is an on we’ve And, that for we’re you goal have still up of – there recession. bit little or does think achievable assume it to a but to us, a a got not two but know, downturn years gap that got we’ve we So close, not it. and that’s giving number a do

Greg Palm

come the And does margin it. here? gross and from expansion majority of XX% the from the XX%, the Got delta between that

Rick Fleming

Yes.

Greg Rustowicz

Yeah.

Rick Fleming

operational XX/XX in excellence Yep. categories. And the the you’ll and see it

Greg Palm

Yep.

all right. Thanks. it That’s me. Okay, for

Rick Fleming

Thank you.

Operator

with question proceed. Our Securities. Please CJS Jon Tanwanteng next from is

Jon Tanwanteng

and margins they to my gentlemen. we of for upside the morning, flat what given in are Maybe operating that? puts biased revenue, the the taking head takes expectations or Thanks are start, downside QX, and for going questions. roughly into to into as Good kind growth

Greg Rustowicz

say, from September every we take an their down inventories plans. $X deductible Well, higher that, we to essence, December, million did sequentially that impact I also Jon, with you reset $X.X impact had million year, our would medical know, due medical January negative of high in on they to plans, our margin. a And costs. and gross saw And Xst

positive QX. margin in QX, So be we would gross there expect relative relative to to

is a little bit right I same quarter. million know, was. as lower QX. of the million I think mean, is to But, was $XX this $XX.X level about landing for you RSG&A the the spot we kind it the think it guidance

Jon Tanwanteng

realignments very across also XX/XX know, mentioned, and your you hasn’t you then additional that you thank been, activities plan on under lines. the implemented know, product I and Great, you geographies much. going know all And hood.

we So ‘XX the what of in ‘XX? above plan million realize that see could further kind you accretion in to fiscal $XX

Rick Fleming

deficiencies can now units with you our our that, discussion as fiscal in number on of that that for very are appreciate, said working and that there discussion. million business view Well, XX/XX our we Having opportunities in on, right ‘XX area but in topic. we’re in looking of of at are on we’re are the budget a early could $X is addition, still something loan. that, be are additional working then And we

our in I will think into our and desire going budget had we past numbers hope have good we what is similar the pretty that, to cycle. that

Greg Rustowicz

we everybody the on remind – our driving in Jon color, number, those growth. about coming have And earnings management savings you this facility that’s do let bit is we a get as just for all double-digit that, of us that’s of to a is $X quarter. the the number to year, to, million savings absolutely thing, first our footprint. we reduce one And a team the me Lisbon, annualized big accretive but the done Ohio you won’t know, phone Yeah, consolidation fiscal we will little committed give more

does looking And at a that that. developing so we’re plan

Jon Tanwanteng

the in asset then – the to you And future, consolidation? want there more you plants, after room close be for that two basement you. at you size thank Great, Are is

Rick Fleming

Well can that premature. be consolidation. you specifics I appreciate as there for And would more definitely give is can’t room

discussion a opportunity. we of see lot have but internally, to We

in Let put only US, way, that it me not the but overseas.

Jon Tanwanteng

company anything, any Okay, – Thank And been you. anything the operations the how Mark due leaving? any morale on – is great. hasn’t appreciable the I to there impact, in significant the the finally of there but been then assume has CEO just in search. change if or

Rick Fleming

No, is good. the team Morale intact. is

with next planning we can for feel good and to the be as one the with member of And each you I’ll go was individual my team week the through right on. team now I team strategy, Charlotte you and has As all of team in just it’s same working first appreciate meet our business really conversations. orders about that we’re really support of can I work budget. And the the been mantra and I positive same same internally that’s and our the say results. appreciate what know,

Jon Tanwanteng

Great. Thank you.

Operator

Our next Liptak Walter from proceed. with question is Seaport Global. Please

Walter Liptak

Hi, thanks. Good morning, guys.

Rick Fleming

Walt. morning, Good

Walter Liptak

good green know, shoots. Wanted it’s the to, about you hear to

about you on What base, and on these you specifically first? where Europe back? or region coming I you where you were the that. to get seeing geographic some you are things shoots of so US we as do more cycle, short And green And want that the know, projects the certainly or talking question know, think one ask

Rick Fleming

firming, is into and more for and where really it’s a if we’re on we’ve quotes will, America orders. you signs North a turned that activity quotes an of really seen getting

comments. major So the point that – of that’s basically focal my

now the of business oil and in And relates to project some up gas. Asia our you with in then coronavirus, clearly. right as air Europe it know, particularly Europe, Mideast

good. pretty So

say I’d shoots. America So the green area been but North the early for has

Walter Liptak

good. Okay, from about followed know, XX/XX. work doing first, you international. and the the I by then US recall, you’re that thinking was started If And

to so kind could And much related versus that of was maybe help – in market is, non-US activity relate to some sales, us decline of how XX/XX if improvements know, you and [indiscernible]? of the or you my PLS the related understand was some divestiture there this client or of internal question

Greg Rustowicz

Yeah.

had larger the EMEA about, we was declines when US, of well. but saw know, And of some you about the double-digits. a see sales base as think America was declines we $X volume did APAC, down in where or in we bit X.X%. double-digits, bit little we growth million of saw roughly that’s was So was outside total little off of and a Latin nice a small We Canada – volume

question. XX/XX were say, Europe, impact, to specific in I the not would your So

a are seen impact simplification. negative to line not due product We yet

being bit that part little of it’s a I underway is is that and particular longer. know, you work – XX/XX think there is, looked Process at, takes but the that

Walter Liptak

And doing you’re strategy. going that the last CEO this, that board going it on And doing the the E-PAS you one profits fit interest with are into pick can And got information think the boards revenue the then what margins, up as down gave know, Okay, someone through is you you E-PAS very or impressed to the CEO like, as coming me strategy. is guys who the for I is sounds you the with search all impressive based we’re it. split. the you’re the profit high and the know, getting

to you tries that changing E-PAS the usually that I it, make And because and his you imprint want you of are strategy know, accepting that of running, onto the plan know, focus they the kind that I understand this know, company. and that’s in you sure the, is to of know, search own, not a business the the understand CEOs are, CEO

Rick Fleming

give again. Fleming, I’ll some Rick happy you be additional information. to

completed firm, sense ground give me a on of And of but just specification to I’ll we’re who kind also the basically running Morelli. hired that hit our Korn then marketplace. in first and search did process answer more in after and Mark the search directly, in before got for we Let looking where set terms you documents table for search question are the Christmas, out we the we had your the what our Ferry, we

by of appreciate So top round and holidays. been are interviews to week the firm, literally we before And first have with having the of with moved as we’ve to pretty fast scheduled calls number some our that I our – now candidates alluded search as who’ve in you risen mid-February. every in December can

wave. have certainly I early after people the that other interviews into still, good to as within come process in can appreciate, said on you track first of several have that you six on working we get got mean, have we it’s gut feel as and pretty So rounds But all often that. process the says you somebody in, we’re my months sooner and and board on certainly the we’ve we’re

the that to looking has Now, you certainly can touch pleased what experienced individual, are you’ll a but want also with disciplines we’re But as individual have brought very that almost know there pleased new when M&A your perfect the be we’re what optimization, the both appreciate, a because of say, also growing of portfolio looking of bases. there for? can with we that kind the like organically individual we for, list smile individual’s and I on through part want, are very XX/XX alluded the I an as we’re to here’s and laundry And people lot of we Process, company. face probably You these have that and companies, it a out to, sounds portfolio.

of a the that and that which an is and new with people with acquisitions talent talent let the So developing running that global looking experience that leadership, experience we with management to firm, commercial track mergers excellence, markets operational of record that organic and we’re and strategy of innovation channels, potential understand have negotiation team. accountability, has operating as in joint me review for this on I and with due global and ventures, have steep diligence, right growing aspect person alliances, dedication, experienced people are opportunity the units, development, background company, leading do anomaly growth mentioned, attracting businesses, a mobile the at

got, long So to pleased what list, pretty it. with but mentioned, it’s we seeing more so a on level are so far. of a I as come we’ve we’re high And interest,

Walter Liptak

search. detail good Okay, on the the with thanks for and that luck

Rick Fleming

Thank you.

Operator

Our next Mondillo and proceed. Joe with question from Company. is Sidoti Please

Joe Mondillo

Hi, guys. Good morning.

Rick Fleming

Good morning, Joe.

Greg Rustowicz

Good morning, Joe.

Joe Mondillo

is roughly did closures? China $X of savings answered, year, some comments estimated maybe Ohio’s for questions couple just next my the of of have made. sort The question you’ve and to million you Most been the that follow-up that that including – a but facility of a

Greg Rustowicz

Yeah.

for as would So clearly yes, our XX/XX. think facility when roughly we we include yet year, going plans budget about formed next $X for the we about to But from are we fully – million all our haven’t of expect, think consolidations. we

Rick Fleming

we’re Yeah, – And having correct. hires. and that, that of drive that to going absolutely is the said number

Greg Rustowicz

Yeah.

Joe Mondillo

Okay.

and point? So XX/XX just exactly haven’t clarify million $X then you you those additional to this determined at some savings includes made facility that that potentially comments the closures

Rick Fleming

XXXX in from Ohio closure. savings the of million comes $X correct, actually the facility is Greg Yeah.

my team, looking we’re capacity $X as million leading the Now as well. in for

Joe Mondillo

that Okay. trends. you to also January comments clarify made just business And on I sort of wanted the

orders change? year-over-year Is X% stated were that You that up a X%.

Rick Fleming

It is.

Greg Rustowicz

Yes.

Deborah Pawlowski

FX. Adjusted, Joe for and divestitures

Rick Fleming

Yes.

Joe Mondillo

touched of thing what slowing or was given I’m some think one Right, going pricing, overall, you the you’ll get in markets not kind weaker curious, okay. that forward? just trends of the exactly the on was end And then pricing the, of just sort

Greg Rustowicz

and related, is about Yeah, half on where and so going that in about is call prices products you and of year-to-date got so XX/XX what quarter in that that sell. surgically X.X% the that raising we’ve pricing includes price, certain strategic you’re

it’s upcoming we’ve inflation. a to year, somewhat environment. think would and expect be exceed have going we weaker historically But positive nonetheless, price price we of the in So, had

So level I of to think in it’s going – be sort similar a a probably

Rick Fleming

products in industrial price increase for February. out North In went America their

Greg Rustowicz

month they earlier been about than a they’re So historically. have

Joe Mondillo

Okay, a lot. great. Thanks

in baked quarter. Just your much lastly, cost baked that How stated that? you for SG&A into the the CEO search for do was fourth guide for you the new have there

Greg Rustowicz

a neighborhood in it’s of so Yeah, $X.XX million. the

Joe Mondillo

All Okay. a lot. right, great. Thanks

Operator

And Group. our Craig-Hallum Please proceed. follow-up next with Capital Palm a is from question Greg

Greg Palm

massive here. focus of And prices a or generating is cash I guess valuation own remain flow M&A new wrong, that, especially elevated. one correct become here, big will current appointment cheaper on I especially free at levels you mean, a I One it buy guess last any guess, with amounts a my much and of the me M&A capital if doing allocation your could Yeah, stock eventual like sounds but thanks. CEO. at back for targets if I’m price potential you’re

do And my So is, not share I won’t you some the case, point differently? if you? that’s question at approach guess repurchases why

Greg Rustowicz

Yeah.

look about recently an more fiscal to ability share have board didn’t similar that of the repurchase authorization as and but million we opportunistic the we the for at $XX in the Greg, it we we that authorized lever – past, in it So have you, year earlier us. and thought so

You on year we said balance know, know, million to And clearly planning leverage ratio. that, we’re has our you de-lever will that. $XX sheet is, de-levering this focus do we below our would and been we do our targeted and

really as quite that, some was our we anomaly an factor about is other is would in reason from there you perspective, But purchases look more repurchase, the share in level know, have that low. And for make the think how an dropped know, we regards go capital so and dilution sense, float markets an we if at our, opportunistic to to some every a just didn’t see as plan. in and that offset our from we could that year to back perhaps price you the opportunity of to share

Rick Fleming

capital that flow Greg Board generation too, have that, we that fact And discussion this And having at just to priority because do each has let mention Meeting me of March it allocation. our schedule. we year on so the discussion positive will be will year a as a ahead been our cash of be and so

right it, way – a is bit to now. a in discussion under it’s summarize good So

Greg Palm

Okay.

Greg Rustowicz

good And to problem have. a it’s

Rick Fleming

It’s problem have, good right. to a

Greg Rustowicz

Yeah.

Rick Fleming

this and back was all in implicit we to go Greg’s it And comments.

Our and highest gets reduce either cost best as well. growth through and in growth to investing that in company spending or and opportunities return equation – organic capital obviously our inorganic and through is

Greg Palm

at mean, looking give to really M&A any be basis? I makes be Yep, know, is you criteria of might out when or sense. what valuation you going can kind going case-by-case sense your, for us a it

Greg Rustowicz

think a about to think you acquisition with it’s category Yeah, you know, about basis, categories. Magnetek that that to you specialist, as going lifting a have be Movement, case-by-case STAHL fit acquisition as a Smart

Movement, technology would different Smart could move much developing on allow have they So than smaller ourselves. forward there quicker you us offers that the a technology right a be profiles to sort know, the by that perspective a of company from business each

going us. for it’s be a to case-by-case So

Rick Fleming

I value, return and on in do mean, general, growth capital. create how you

Greg Palm

right. All Thanks.

Rick Fleming

you. Thank

Operator

end to turn reached back management over session, call have I for question-and-answer We the would of our like to the remarks. closing

Rick Fleming

you interest have appreciate continued your for quarter and performance in with really outlook, Corporation. much day. very you We thank the to the and our Well, nice chance for McKinnon share a our Columbus

Operator

conference. This you. concludes today’s Thank

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

Columbus McKinnon (CMCO) 4 Feb 202020 Q3 Earnings call transcript