Columbus McKinnon Corporation

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Columbus McKinnon Operating Margin Increased to 10% of Sales in Fiscal 2013 Fourth Quarter
  • Q4 operating margin expanded 150 basis points to 10%
  • Reversed $49.2 million tax valuation allowance, favorably affected EPS; Q4 earnings of $2.64 per diluted share
  • Adjusted EPS for Q4 was $0.37 excluding the tax valuation allowance reversal and applying a 38% tax rate
  • Full year operating income increased 20% compared with the prior year to $54.4 million, or 9.1% of sales; Operating leverage in fiscal 2013 was significant at 173.5%
  • Generated $42.4 million in cash from operations in fiscal 2013; Fiscal year end cash and cash equivalents was $121.7 million

AMHERST, N.Y.--(BUSINESS WIRE)-- Columbus McKinnon Corporation (NASDAQ: CMCO), a leading designer, manufacturer and marketer of material handling products, today announced financial results for its fiscal 2013 fourth quarter and full year, which ended March 31, 2013.

Timothy T. Tevens, President and Chief Executive Officer, commented, “We believe our focus on productivity and operational excellence is demonstrated in our financial performance for the quarter and year. As we grow our market share around the world and further penetrate emerging economies as well as improve our productivity, we expect to continue to strengthen our earnings power.”

He also noted, “Our operating leverage was significant in the year as we recognized the productivity benefits of our Lean Business System and the value of our prior-year’s restructuring efforts.”

Net sales for the fourth quarter of fiscal 2013 were $144.6 million, down $15.0 million, or 9.4%, from the prior-year period. U.S. sales, which comprised 59% of total sales, were down by $5.3 million, or 5.8%, to $85.3 million compared with $90.6 million for the fourth quarter of fiscal 2012. The decline in sales reflected a $5.6 million impact of a business divested in August 2012 and three fewer shipping days. Sales outside of the U.S. were down $9.7 million, or 14.1%, to $59.3 million, reflecting lower sales volume primarily in Western Europe and Canada as well as fewer shipping days. Foreign currency translation had a negative impact of $0.7 million on sales during the quarter. Excluding the effects of foreign currency translation and the divestiture, sales declined by 5.4% in the quarter.

The fluctuation in sales for the fourth quarter of fiscal 2013 compared with fiscal 2012 is summarized as follows:

($ in millions)    
$ Change % Change
Shipping days (7.4 ) (4.6

)%

Divestitures (5.6 ) (3.5

)%

Volume (4.4 ) (2.8

)%

Foreign currency translation (0.7 ) (0.5 )%
Pricing 3.1     2.0 %
Total $ (15.0 )   (9.4 )%
 

Pricing and productivity drove margin improvements

Gross profit remained unchanged from the prior year at $44.2 million for the quarter. However, as a percent of sales, gross margin expanded 290 basis points to 30.6% compared with 27.7% for the fourth quarter of fiscal 2012. Gross margin expanded as pricing and productivity improvements offset the impact of lower volume and inflation.

Selling expenses were $16.4 million, down 5.4%, or $0.9 million, from the same period of the prior year. The divestiture accounted for approximately $0.3 million of the reduction, and the remainder was primarily related to cost containment. As a percent of revenue, selling expenses were 11.3% compared with 10.9% in the same period last year.

General and administrative (G&A) expenses were $12.8 million, relatively unchanged from $12.7 million in the prior-year period. As a percent of sales, G&A was 8.9% of sales compared with 8.0% in the prior year.

Operating income in the fiscal 2013 fourth quarter was up $0.9 million, or 6.3%, to $14.5 million. Operating margin expanded 150 basis points to 10.0%.

As a result of a tax valuation allowance reversal, the Company recognized an income tax benefit of $40.2 million in the quarter.

Net income grew 478.3% to $52.0 million, or $2.64 per diluted share, in the fiscal 2013 fourth quarter. On an adjusted basis, excluding the tax valuation allowance reversal and applying a more normalized tax rate of 38%, earnings per diluted share were $0.37. Further details of the reconciliation of adjusted EPS to GAAP EPS are shown on page 10 of this release.

Strong cash generation and significant financial flexibility

Cash provided by operations during fiscal 2013 was $42.4 million, up $18.8 million over the prior-year period. Cash and cash equivalents grew to $121.7 million at the end of fiscal 2013’s fourth quarter from $89.5 million at March 31, 2012.

Working capital as a percentage of sales was 18.3% at the end of fiscal 2013, up from 17.6% at the end of fiscal 2012 and 17.5% at the end of the trailing third quarter of fiscal 2013. Excluding the impact of the reversal of the deferred tax valuation allowance, working capital as a percentage of sales was 17.1% at the end of fiscal 2013.

Capital expenditures for fiscal 2013 were $14.9 million compared with $13.8 million in the comparable prior year. Approximately $4.0 million was associated with the implementation of a new enterprise management system. The Company expects fiscal 2014 capital spending to be in the range of $20 million to $25 million which is higher than fiscal 2013 due to investments in China as well as capital projects that are expected to further generate productivity improvements.

Gross debt at the end of fiscal 2013 was $152.1 million. Debt, net of cash, at March 31, 2013 was $30.4 million, or 11.2% of net total capitalization, compared with $63.6 million, or 28.4% of net total capitalization, at March 31, 2012.

Fiscal 2013 Review

Net sales for fiscal 2013 were $597.3 million, up slightly from $591.9 million for the prior year as U.S. sales more than offset the slight decline in sales outside of the U.S. U.S. sales were up $13.0 million, or 3.9%. Sales outside of the U.S., representing 42% of total sales, decreased by $7.7 million, or 3.0%, in fiscal 2013. Foreign currency translation had a $17.1 million negative impact on sales in fiscal 2013. Net of foreign currency translation, revenue outside of the U.S. grew 3.6%.

Gross profit increased 10.5% to $174.2 million and gross profit margin expanded 260 basis points to 29.2% in fiscal 2013 due to improved pricing, higher sales volumes, and productivity improvements.

Selling expenses were $65.6 million, an increase of $0.7 million, or 1.2%, compared with the prior-year period. As a percent of sales, selling expenses were 11.0% in fiscal 2013, unchanged from the prior-year period. G&A expenses increased $5.6 million, or 12.0%. As a percent of sales, G&A expenses were 8.8% in the current period, compared with 7.9% in the prior-year period. Increased G&A in fiscal 2013 was due to higher variable compensation costs, higher employee benefit costs, including pension and group medical costs, and the implementation in the Company’s new enterprise management system.

Operating income grew 20.4% to $54.4 million, while operating margin expanded 150 basis points to 9.1% in fiscal 2013. Operating leverage achieved during fiscal 2013 was 173.5%.

Net income for fiscal 2013 grew $51.3 million, or 190.3%, to $78.3 million. On a per diluted share basis, earnings in fiscal 2013 grew 188.4% to $3.98 compared with $1.38 for the prior-year period. On an adjusted basis, excluding the tax valuation allowance reversal and applying a more normalized tax rate of 38%, earnings per diluted share were $1.34. Further details of the reconciliation of adjusted EPS to GAAP EPS are shown on page 10 of this release.

Continued growth in emerging economies and strong performance in key vertical markets to offset slow economic growth

We continue to invest in global emerging markets where we expect them to grow at a faster rate than the developed markets of the world. We are also focusing our resources on global vertical markets such as oil & gas, heavy OEM, mining and entertainment where our products and knowledge are needed to help these customers perform their work in a safe and productive way. Backlog was $99.0 million at March 31, 2013 compared with $95.4 million at December 31, 2012. Although the time to convert the majority of backlog to sales typically averages from one day to a few weeks, backlog can include project-type orders from customers that have defined deliveries that may extend out 12 to 24 months. As of March 31, 2013, approximately $33.0 million of backlog, or 33.3%, was scheduled for shipment beyond June 30, 2013.

Both U.S. and Eurozone capacity utilization are leading market indicators for the Company. U.S. industrial capacity utilization was 77.1% in March 2013, up from 76.2% in March 2012, and slightly improved from 77.0% in December 2012. Eurozone capacity utilization was 77.2% in the quarter ended March 31, 2013, down from 79.9% during the quarter ended March 31, 2012, but improved from 76.9% in the quarter ended December 31, 2012. The European indicator reflects the modest recession being experienced in the Eurozone, while the U.S. indicator demonstrates moderate economic growth. The Company’s sales tend to lag these indicators by one to two quarters.

Mr. Tevens concluded, “We continue to focus on driving productivity in our facilities through our lean system, capital projects, training programs and safety initiatives. We believe these efforts will continue to result in productivity improvements and operating leverage and positively impact the bottom line. As a global company, we work as a team to continually build upon the strong reputation of our brands, increase our market presence, provide responsive customer service and innovate in our product and service offerings. We expect to continue to grow through our organic initiatives as well as through acquisitions. Importantly, we believe that our continuous improvement activities will create greater earnings power in the future to build our balance sheet which will facilitate our growth initiatives.”

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast today at 10:00 a.m. Eastern Time, at which Timothy T. Tevens, President and Chief Executive Officer, and Gregory P. Rustowicz, Vice President - Finance and Chief Financial Officer, will review the Company’s financial results and strategy. The review will be accompanied by a slide presentation, which will be available on Columbus McKinnon’s website at http://www.cmworks.com/investors. A question and answer session will follow the formal discussion.

Columbus McKinnon’s conference call can be accessed by calling 210-234-7695 and asking for the “Columbus McKinnon conference call.” The webcast can be monitored on Columbus McKinnon’s website at http://www.cmworks.com/investors. An audio recording of the call will be available two hours after its completion through June 20, 2013 by dialing 203-369-0603. Alternatively, an archived webcast of the call will be on Columbus McKinnon’s web site at: http://www.cmworks.com/investors until June 20, 2013. In addition, a transcript of the call will be posted to the website once available.

About Columbus McKinnon

Columbus McKinnon is a leading worldwide designer, manufacturer and marketer of material handling products, systems and services, which efficiently and ergonomically move, lift, position and secure materials. Key products include hoists, cranes, actuators and rigging tools. The Company is focused on commercial and industrial applications that require the safety and quality provided by its superior design and engineering know-how. Comprehensive information on Columbus McKinnon is available on its website at http://www.cmworks.com.

Safe Harbor Statement

This news release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning future revenue and earnings, involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the effect of operating leverage, the pace of bookings relative to shipments, the ability to expand into new markets and geographic regions, the success in acquiring new business, the speed at which shipments improve, and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update the forward-looking information contained in this release.

Financial Tables follow.

 
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Income Statements - UNAUDITED
(In thousands, except per share and percentage data)
 
  Three Months Ended  
March 31, 2013   March 31, 2012 Change
 
Net sales $ 144,553 $ 159,572 -9.4 %
Cost of products sold   100,345         115,330   -13.0 %
Gross profit 44,208 44,242 -0.1 %
Gross profit margin 30.6 % 27.7 %
Selling expense 16,404 17,345 -5.4 %
General and administrative expense 12,823 12,721 0.8 %
Restructuring charges - -
Amortization   500         559   -10.6 %
Income from operations   14,481         13,617   6.3 %
Operating margin 10.0 % 8.5 %
Interest and debt expense 3,339 3,563 -6.3 %
Investment income (529 ) (194 ) 172.7 %
Foreign currency exchange (gain) loss (192 ) 178 NM
Other expense, net   12         718   -98.3 %
Income before
income tax expense 11,851 9,352 26.7 %
Income tax (benefit) expense   (40,178 )       998   NM
Income from continuing operations 52,029 8,354 522.8 %
Income from discontinued operations -
net of tax   -         643   -100.0 %
Net income $ 52,029       $ 8,997   478.3 %
 
Average basic shares outstanding 19,464 19,321 0.7 %
Basic income per share:
Income from continuing operations 2.67 0.44 506.8 %
Income from discontinued operations   -         0.03  
Net income $ 2.67       $ 0.47   468.1 %
 
Average diluted shares outstanding 19,730 19,552 0.9 %
Diluted income per share:
Income from continuing operations 2.64 0.43 514.0 %
Income from discontinued operations   -         0.03  
Net income $ 2.64       $ 0.46   473.9 %
 
 
COLUMBUS McKINNON CORPORATION

Condensed Consolidated Income Statements - UNAUDITED

(In thousands, except per share and percentage data)
 
  Year Ended  
March 31, 2013   March 31, 2012 Change
 
Net sales $ 597,263 $ 591,945 0.9 %
Cost of products sold   423,032         434,227   -2.6 %
Gross profit 174,231 157,718 10.5 %
Gross profit margin 29.2 % 26.6 %
Selling expense 65,608 64,860 1.2 %
General and administrative expense 52,271 46,677 12.0 %
Restructuring charges - (1,037 ) -100.0 %
Amortization   1,981         2,074   -4.5 %
Income from operations   54,371         45,144   20.4 %
Operating margin 9.1 % 7.6 %
Interest and debt expense 13,757 14,214 -3.2 %
Investment income (1,546 ) (1,018 ) 51.9 %
Foreign currency exchange (gain) loss (45 ) 316 NM
Other income, net   (417 )       (1,179 ) -64.6 %
Income before
income tax (benefit) expense 42,622 32,811 29.9 %
Income tax (benefit) expense   (35,674 )       6,896   NM
Income from continuing operations 78,296 25,915 202.1 %
Income from discontinued operations -
net of tax   -         1,052   -100.0 %
Net income $ 78,296       $ 26,967   190.3 %
 
Average basic shares outstanding 19,425 19,272 0.8 %
Basic income per share:
Income from continuing operations 4.03 1.35 198.5 %
Income from discontinued operations   -         0.05  
Net income $ 4.03       $ 1.40   187.9 %
 
Average diluted shares outstanding 19,687 19,512 0.9 %
Diluted income per share:
Income from continuing operations 3.98 1.33 199.2 %
Income from discontinued operations   -         0.05  
Net income $ 3.98       $ 1.38   188.4 %
 
 
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Balance Sheets - UNAUDITED
(In thousands)
 
  March 31, 2013   March 31, 2012
ASSETS
Current assets:
Cash and cash equivalents $ 121,660 $ 89,473
Trade accounts receivable 80,224 88,642
Inventories 94,189 108,055
Prepaid expenses and other   17,905       10,449  
Total current assets   313,978       296,619  
 
Net property, plant, and equipment 65,698 61,709
Goodwill 105,354 106,435
Other intangibles, net 13,395 15,791
Marketable securities 23,951 25,393
Deferred taxes on income 37,205 2,824
Other assets   7,286       6,636  
Total assets $ 566,867     $ 515,407  
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable to banks $ - $ 112
Trade accounts payable 34,329 40,991
Accrued liabilities 48,884 61,713
Current portion of long-term debt   1,024       1,093  
Total current liabilities   84,237       103,909  
 
Senior debt, less current portion 2,641 3,749
Subordinated debt 148,412 148,140
Other non-current liabilities   91,590       99,143  
Total liabilities   326,880       354,941  
 
Shareholders’ equity:
Common stock 195 193
Additional paid-in capital 192,308 189,260
Retained earnings 104,191 25,895
ESOP debt guarantee (552 ) (975 )
Accumulated other comprehensive loss   (56,155 )     (53,907 )
Total shareholders’ equity   239,987       160,466  
Total liabilities and shareholders’ equity $ 566,867     $ 515,407  
 
 
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Statements of Cash Flows - UNAUDITED

(In thousands)

 

   
Year Ended
March 31, 2013 March 31, 2012
 
Operating activities:
Net income $ 78,296 $ 26,967
Adjustments to reconcile net income to net cash provided by operating activities:
Gain from discontinued operations - (1,052 )
Depreciation and amortization 12,115 11,862
Deferred income taxes and related valuation allowance (42,047 ) (910 )
Gain on sale of real estate/investments (827 ) (1,958 )
Gain on re-measurement of investment - (850 )
Stock based compensation 3,334 2,913
Amortization of deferred financing costs and discount on subordinated debt 592 383
Changes in operating assets and liabilities:
Trade accounts receivable 6,712 (9,823 )
Inventories 10,106 (17,489 )
Prepaid expenses (1,283 ) 3,232
Other assets (354 ) 544
Trade accounts payable (5,465 ) 3,862
Accrued and non-current liabilities   (18,801 )     5,906  
Net cash provided by operating activities   42,378       23,587  
 
Investing activities:
Proceeds from sale of marketable securities 6,573 5,747
Purchases of marketable securities (4,138 ) (5,190 )
Capital expenditures (14,879 ) (13,765 )
Purchase of businesses, net of cash acquired - (3,356 )
Proceeds from sale of assets   2,357       1,971  
Net cash used for investing activities from continuing operations   (10,087 )     (14,593 )
Net cash provided by investing activities from discontinued operations   -       1,052  
Net cash used for investing activities   (10,087 )     (13,541 )
 
Financing activities:
Proceeds from stock options exercised 295 1,436
Net payments under lines-of-credit (54 ) (361 )
Repayment of debt (1,066 ) (1,036 )
Payment of deferred financing costs (684 ) -
Change in ESOP guarantee   423       435  
Net cash (used for) provided by financing activities   (1,086 )     474  
 
Effect of exchange rate changes on cash   982       (1,186 )
 
Net change in cash and cash equivalents 32,187 9,334
Cash and cash equivalents at beginning of year   89,473       80,139  
Cash and cash equivalents at end of period $ 121,660     $ 89,473  
 
 
COLUMBUS McKINNON CORPORATION
Additional Data - UNAUDITED
             
March 31, 2013 December 31, 2012 March 31, 2012
 
Backlog, as reported (in millions) $99.0 $95.4 $114.2
Backlog, excluding divestiture (in millions) $99.0 $95.4 $109.6
 
Trade accounts receivable
days sales outstanding 50.5 days 46.7 days 50.6 days
 
Inventory turns per year
(based on cost of products sold) 4.3 turns 4.3 turns 4.3 turns
Days' inventory 84.9 days 84.9 days 85.5 days
 
Trade accounts payable
days payables outstanding 31.1 days 25.2 days 32.3 days
 
Working capital as a % of sales 18.3 % 17.5 % 17.6 %
 
Debt to total capitalization percentage 38.8 % 44.6 % 48.8 %
Debt, net of cash, to total capitalization 11.2 % 17.6 % 28.4 %
 
 
Shipping Days by Quarter
                             
Q1 Q2 Q3 Q4 Total
 
FY 14 64 63 61 62 250
 
FY 13 63 63 60 62 248
 
FY 12 63 64 58 65 250
 
 
COLUMBUS MCKINNON CORPORATION
Reconciliation of Adjusted EPS to GAAP EPS
             
Three Months Ended Year Ended
March 31, March 31, March 31, March 31,
2013 2012 2013 2012
 
Adjusted EPS $ 0.37 $ 0.30 $ 1.34 $ 1.04
Discontinued operations - 0.03 - 0.05
Normalized 38% tax rate   2.27     0.13   2.64     0.29
GAAP EPS $ 2.64   $ 0.46 $ 3.98   $ 1.38

Columbus McKinnon Corporation
Gregory P. Rustowicz, 716-689-5442
Vice President - Finance and Chief Financial Officer
greg.rustowicz@cmworks.com
or
Investor Relations:
Kei Advisors LLC
Deborah K. Pawlowski, 716-843-3908
dpawlowski@keiadvisors.com

Source: Columbus McKinnon Corporation

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