Jul 31, 2018   SOURCE: BusinessWire

Columbus McKinnon Achieves Record Gross Margin in First Quarter Fiscal Year 2019

Columbus McKinnon Corporation (Nasdaq: CMCO), a leading designer, manufacturer and marketer of motion control products, technologies and services for material handling, today announced financial results for its fiscal year 2019 first quarter, which ended June 30, 2018.

First Quarter Highlights (compared with prior-year period)

  • Delivered strong results demonstrating progress with Blueprint 2021 strategy to improve earnings power
  • Achieved record gross margin of 35.4% driven by volume and productivity
  • Operating margin was 6.0%; Adjusted operating margin expanded 150 basis points to 11.8%, excluding $11.1 million held for sale impairment charge and $1.9 million of integration costs
  • Net income was $7.7 million; adjusted net income increased 39% to $17.5 million; earnings per diluted share was $0.33, or $0.74 on an adjusted basis
  • Achieved record quarterly sales of $225.0 million; excluding foreign currency impact, sales increased 7.8%

Mark Morelli, President and CEO of Columbus McKinnon, commented, “We delivered another strong quarter which we believe demonstrates that we are on the right path with our Blueprint 2021 strategy. We are successfully driving margin expansion and improving earnings power. We are still in the early stages of Phase II of our strategy, and we are encouraged that the enhancements we are making will be sustainable throughout economic cycles.”

He added, “In line with our strategy to simplify our business, we have initiated the divestiture of three businesses. This includes our Tire Shredder business, our crane builder business, Crane Equipment and Service Inc., and Stahlhammer Bommern GmbH, which was acquired in 2014.” The Company recorded a held for sale impairment charge of $11.1 million as it considers strategic alternatives for these businesses. These businesses contributed approximately $38 million of sales and $1 million of operating income in Fiscal 2018.

Mr. Morelli concluded, “Markets remain strong and our bidding pipeline is robust. In fact, project orders are being pushed out as customers address schedules and staffing challenges. We are also advancing our Phase II efforts to focus on profitable revenue. As a result, we plan to shed an estimated 1% of revenue in the second quarter that will provide gross margin expansion. Given our focus on quality revenue and the timing of projects, we believe second quarter revenue will grow about 2% to 3%. And, while research, selling, and general and administrative expenses are expected to be approximately $48 to $49 million in the quarter, we believe the impact of our Phase II efforts will drive year-over-year margin expansion.”

First Quarter Fiscal 2019 Sales

($ in millions)       Q1 FY 19   Q1 FY 18   Change   % Change
Net sales $ 225.0 $ 203.7 $ 21.3 10.4 %
 
U.S. sales $ 119.8 $ 110.7 $ 9.1 8.2 %
% of total 53 % 54 %
Non-U.S. sales $ 105.2 $ 93.0 $ 12.2 13.1 %
% of total 47 % 46 %
 

Volume drove growth in the U.S. and EMEA. Excluding the effect of foreign currency translation, non-U.S. sales were up 7.5%.

First Quarter Fiscal 2019 Operating Results

($ in millions)       Q1 FY 19   Q1 FY 18   Change   % Change
Gross profit $ 79.6 $ 69.0 $ 10.7 15.4 %
Gross margin 35.4 % 33.9 % 150 bps
Income from operations $ 13.5 $ 19.6 $ (6.1 ) (31.1 )%
Operating margin 6.0 % 9.6 % (360) bps
Net income $ 7.7 $ 11.7 $ (4.0 ) (33.9 )%
Diluted EPS $ 0.33 $ 0.51 $ (0.18 ) (35.3 )%
Adjusted EBITDA * $ 35.3 $ 29.7 $ 5.7 19.2 %
Adjusted EBITDA margin 15.7 % 14.6 % 110 bps
 

*A non-GAAP measure, Adjusted EBITDA is defined as adjusted operating income plus depreciation and amortization. Please see the attached tables for a reconciliation of Adjusted EBITDA to GAAP net income.

Record gross profit and margin were largely the result of higher volume and improved productivity. For more information on changes in gross profit, please see the table on page 7 of this release. Excluding an $11.1 million impairment charge and $1.9 million in STAHL integration costs, adjusted income from operations was $26.5 million, a $5.5 million, or 26% increase. Adjusted operating margin was 11.8% compared with 10.3% in the first quarter of fiscal 2018. Please see the reconciliation of GAAP income from operations to adjusted income from operations on page 9 of this release.

Adjusted net income for the quarter was $17.5 million, or $0.74 per diluted share, compared with $12.6 million, or $0.55 per diluted share, in the prior-year period. Adjusted EBITDA margin achieved a record level of 15.7%. Please see the reconciliation of GAAP net income and earnings per share to adjusted net income and earnings per share on page 10 of this release.

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast today at 10:00 AM Eastern Time, at which management 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 www.cmworks.com/investors. A question and answer session will follow the formal discussion.

The conference call can be accessed by dialing 201-493-6780 and asking for the “Columbus McKinnon conference call.” The webcast can be monitored at www.cmworks.com/investors. An audio recording will be available from 1:00 PM Eastern Time on the day of the call through Tuesday, August 7, 2018 by dialing 412-317-6671 and entering the passcode 13680955. Alternatively, an archived webcast of the call can be found on the Company’s website. 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 motion control products, technologies, systems and services that efficiently and ergonomically move, lift, position and secure materials. Key products include hoists, cranes, actuators, rigging tools, light rail work stations and digital power and motion control systems. 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 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, the effectiveness of new products 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
June 30, 2018   June 30, 2017 Change
Net sales $ 224,992 $ 203,726 10.4 %
Cost of products sold 145,345   134,737   7.9 %
Gross profit 79,647 68,989 15.4 %
Gross profit margin 35.4 % 33.9 %
Selling expenses 25,567 23,800 7.4 %
% of net sales 11.4 % 11.7 %
General and administrative expenses 21,826 18,953 15.2 %
% of net sales 9.7 % 9.3 %
Research and development expenses 3,748 2,922 28.3 %
% of net sales 1.7 % 1.4 %
Held for sale impairment 11,100 — NM
Amortization of intangibles 3,903   3,719   4.9 %
Income from operations 13,503   19,595   (31.1 )%
Operating margin 6.0 % 9.6 %
Interest and debt expense 4,607 5,141 (10.4 )%
Investment (income) loss, net (268 ) (62 ) 332.3 %
Foreign currency exchange (gain) loss (276 ) 324 NM
Other (income) expense, net (40 ) (559 ) (92.8 )%
Income before income tax expense 9,480 14,751 (35.7 )%
Income tax expense 1,774   3,095   (42.7 )%
Net income $ 7,706   $ 11,656   (33.9 )%
 
Average basic shares outstanding 23,115 22,580 2.4 %
Basic income per share $ 0.33   $ 0.52   (36.5 )%
 
Average diluted shares outstanding 23,610 23,028 2.5 %
Diluted income per share $ 0.33   $ 0.51   (35.3 )%
 
 

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

       
June 30, 2018 March 31,
2018
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 57,131 $ 63,021
Trade accounts receivable 129,815 127,806
Inventories 155,662 152,886
Prepaid expenses and other 16,805   16,582  
Total current assets 359,413   360,295  
 
Property, plant, and equipment, net 104,456 113,079
Goodwill 330,368 347,434
Other intangibles, net 249,659 263,764
Marketable securities 7,565 7,673
Deferred taxes on income 33,585 32,442
Other assets 22,505   17,759  
Total assets $ 1,107,551   $ 1,142,446  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable $ 43,416 $ 46,970
Accrued liabilities 92,300 99,963
Current portion of long-term debt 60,046   60,064  
Total current liabilities 195,762   206,997  
 
Senior debt, less current portion 43 33
Term loan and revolving credit facility 293,746 303,221
Other non-current liabilities 208,432   223,966  
Total liabilities 697,983   734,217  
 
Shareholders’ equity:
Common stock 232 230
Additional paid-in capital 273,789 269,360
Retained earnings 206,491 197,897
Accumulated other comprehensive loss (70,944 ) (59,258 )
Total shareholders’ equity 409,568   408,229  
Total liabilities and shareholders’ equity $ 1,107,551   $ 1,142,446  
 
 

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Statements of Cash Flows - UNAUDITED

(In thousands)

     
Three Months Ended
June 30, 2018   June 30, 2017
Operating activities:
Net income $ 7,706 $ 11,656
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 8,832 8,660
Deferred income taxes and related valuation allowance (2,084 ) 1,856
Net (gain) loss on sale of real estate, investments, and other (16 ) —
Stock based compensation 1,335 1,069
Amortization of deferred financing costs and discount on debt 665 664
Impairment of business classified as held for sale 11,100 —
Changes in operating assets and liabilities, net of effects of business acquisitions:
Trade accounts receivable (5,553 ) (5,092 )
Inventories (8,088 ) (506 )
Prepaid expenses and other (296 ) (1,977 )
Other assets 374 2,271
Trade accounts payable (2,488 ) (1,298 )
Accrued liabilities (2,684 ) 2,644
Non-current liabilities (685 ) (5,507 )
Net cash provided by operating activities 8,118   14,440  
 
Investing activities:
Proceeds from sales of marketable securities 260 138
Purchases of marketable securities (150 ) (47 )
Capital expenditures (2,338 ) (1,928 )
Proceeds from sale of real estate 176 —
Net payments to former STAHL owner —   (14,750 )
Net cash used for investing activities (2,052 ) (16,587 )
 
Financing activities:
Proceeds from the issuance of common stock 3,641 29
Repayment of debt (10,000 ) (13,874 )
Payment of dividends (1,153 ) (902 )
Other (550 ) (255 )
Net cash used for financing activities (8,062 ) (15,002 )
 
Effect of exchange rate changes on cash (3,894 ) 4,171  
 
Net change in cash and cash equivalents (5,890 ) (12,978 )
Cash, cash equivalents, and restricted cash at beginning of year 63,565   78,428  
Cash, cash equivalents and restricted cash at end of period $ 57,675   $ 65,450  
 
 

COLUMBUS McKINNON CORPORATION

Q1 FY 2019 Sales Bridge

     
First Quarter
($ in millions) $ Change   % Change
Fiscal 2018 Sales $ 203.7
Volume 14.0 6.8 %
Pricing 2.0 1.0 %
Foreign currency translation 5.3   2.6 %
Total change $ 21.3   10.4 %
Fiscal 2019 Sales $ 225.0  
 
 

COLUMBUS McKINNON CORPORATION

Q1 FY 2019 Gross Profit Bridge

     
($ in millions) First Quarter
Fiscal 2018 Gross Profit $ 69.0
Sales volume and mix 4.0
Productivity, net of other cost changes 3.7
Foreign currency translation 1.6
Pricing, net of material cost inflation 1.5
Product liability (0.1 )
STAHL integration costs (0.1 )
Total change $ 10.6  
Fiscal 2019 Gross Profit $ 79.6  
 
 

COLUMBUS McKINNON CORPORATION

Additional Data - UNAUDITED

         
June 30, 2018 March 31, 2018 June 30, 2017
($ in millions)      
Backlog $ 163.9 $ 177.4 $ 173.3
Long-term backlog (expected to ship beyond 3 months) $ 54.2 $ 59.5 $ 60.4
Long-term backlog as % of total backlog 33.1 % 33.5 % 34.9 %
 
Trade accounts receivable
Days sales outstanding 52.5 days 54.3 days 53.5 days
 
Inventory turns per year
(based on cost of products sold) 3.7 turns 3.7 turns 4.0 turns
Days' inventory 98.6 days 100.0 days 91.3 days
 
Trade accounts payable
Days payables outstanding 27.2 days 30.6 days 27.4 days
 
Working capital as a % of sales (1) 19.4 % 17.9 % 19.0 %
 
Debt to total capitalization percentage 46.3 % 47.1 % 52.9 %
 
Debt, net of cash, to net total capitalization 42.0 % 42.4 % 48.5 %

(1) June 30, 2017 figure excludes the impact of the acquisition of STAHL.

 
U.S. Shipping Days by Quarter
        Q1   Q2   Q3   Q4   Total
FY 19 64 63 60 63 250
 
FY 18 63 62 60 63 248
 
 

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Income from Operations to

Non-GAAP Adjusted Income from Operations and Adjusted Operating Margin

($ in thousands, except per share data)

     
Three Months Ended June 30,
2018   2017
Income from operations $ 13,503 $ 19,595
Add back (deduct):
Held for sale impairment 11,100 —
STAHL integration costs 1,906 1,171
Insurance recovery legal costs —   229  
Non-GAAP adjusted income from operations $ 26,509   $ 20,995  
 
Sales $ 224,992 $ 203,726
Adjusted operating margin 11.8 % 10.3 %
 

Adjusted income from operations is defined as income from operations as reported, adjusted for certain items and at a normalized tax rate. Adjusted income from operations is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted income from operations, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's income from operations to the historical periods' income from operations, as well as facilitates a more meaningful comparison of the Company’s net income and diluted EPS to that of other companies.

 

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Net Income and Diluted Earnings per Share to

Non-GAAP Adjusted Net Income and Diluted Earnings per Share

($ in thousands, except per share data)

     
Three Months Ended June 30,
2018   2017
Net income $ 7,706 $ 11,656
Add back (deduct):
STAHL integration costs 1,906 1,171
Insurance recovery legal costs — 229
Held for sale impairment 11,100 —
Normalize tax rate to 22% (1) (3,173 ) (458 )
Non-GAAP adjusted net income $ 17,539   $ 12,598  
 
Average diluted shares outstanding 23,610 23,028
   
Diluted income per share - GAAP $ 0.33   $ 0.51  
   
Diluted income per share - Non-GAAP $ 0.74   $ 0.55  

(1) Applies a normalized tax rate of 22% to GAAP pre-tax income and non-GAAP adjustments above, which are each pre-tax.

Adjusted net income and diluted EPS are defined as net income and diluted EPS as reported, adjusted for certain items and at a normalized tax rate. Adjusted net income and diluted EPS are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP and may not be comparable to the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted net income and diluted EPS, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's net income and diluted EPS to the historical periods' net income and diluted EPS, as well as facilitates a more meaningful comparison of the Company’s net income and diluted EPS to that of other companies.

 

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA

($ in thousands)

     
Three Months Ended June 30,
2018   2017
Net income $ 7,706 $ 11,656
Add back (deduct):
Income tax expense 1,774 3,095
Interest and debt expense 4,607 5,141
Investment income (268 ) (62 )
Foreign currency exchange (gain) loss (276 ) 324
Other (income) expense, net (40 ) (559 )
Depreciation and amortization expense 8,832 8,660
STAHL integration costs 1,906 1,171
Insurance recovery legal costs — 229
Held for sale impairment 11,100   —  
Non-GAAP adjusted EBITDA $ 35,341   $ 29,655  
 
Sales $ 224,992 $ 203,726
Adjusted EBITDA margin 15.7 % 14.6 %
 

Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization and other adjustments. Adjusted EBITDA is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted EBITDA, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's income from operations to the historical periods income from operations, as well as facilitates a more meaningful comparison of the Company’s net income and diluted EPS to that of other companies.