Columbus McKinnon Gross Profit Increased 7% on 4% Revenue Growth in Third 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 third quarter, which ended December 31, 2018.

Third Quarter Highlights (compared with prior-year period)

  • Blueprint for Growth strategy working: 80/20 process delivered cost savings and improved earnings power
  • Strong cash generation: Paid down more than $50 million in debt year-to-date; net leverage ratio now less than 2x
  • Market share gains support revenue growth of 4%; adjusted for FX, revenue grew more than 6%
  • Gross margin was 33.8%, up 90 bps; delivered 7th consecutive quarter of year-over-year expansion

Mark Morelli, President and CEO of Columbus McKinnon, commented, Our financial results are demonstrating that our Blueprint for Growth strategy is working. We have rapidly deployed our 80/20 process through approximately half of Columbus McKinnon and as a result are improving customer response time, reducing costs and streamlining processes. Our strong performance reflects our success in simplifying the business, improving operational efficiencies, ramping our growth engine and strengthening earnings power.

The net loss on held for sale businesses of $15.6 million includes the gain on the sale of the Tire Shredder business and an additional impairment on the remaining businesses held for sale, reflecting managements estimate of their fair market value.

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Third Quarter Fiscal 2019 Sales

($ in millions)Q3 FY 19Q3 FY 18Change% Change
Net sales$217.4$208.7$8.74.2%
U.S. sales$116.0$108.1$7.9

7.3%

% of total53%52%
Non-U.S. sales$101.4$100.6$0.80.8%
% of total47%48%

Higher sales were driven by strong volume in the U.S. and Canada and pricing in EMEA. Excluding the effect of foreign currency translation, sales increased 6.1%.

Third Quarter Fiscal 2019 Operating Results

($ in millions)Q3 FY 19Q3 FY 18Change% Change
Gross profit$73.4$68.7$4.76.9%
Gross margin33.8%32.9%90 bps
Income from operations$6.6$13.7$(7.1)(51.5)%
Operating margin3.1%6.6%(350) bps
Net income (loss)$(0.8)$(10.6)$9.8NM
Diluted EPS$(0.03)$(0.46)$0.43NM
Adjusted EBITDA *$30.8$26.9$3.914.6%
Adjusted EBITDA margin14.2%12.9%130 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 (loss).

Gross profit and gross margin improvement were largely the result of higher volume and productivity improvements from operational excellence measures and lower medical costs. Pricing more than offset material cost inflation. For more information on changes in gross profit, please see the table on page 8 of this release. Adjusted income from operations was $22.9 million, up $5.1 million, or 28.9%, over the third quarter of fiscal 2018. Adjusted operating margin expanded 200 basis points from the effects of 80/20 simplification and lower selling expenses. Please see the reconciliation of GAAP income from operations to adjusted income from operations on page 11 of this release.

Adjusted net income for the quarter was $14.5 million, or $0.61 per diluted share, compared with $10.4 million, or $0.44 per diluted share, in the prior-year period. Adjusted EBITDA margin was 14.2%. Please see the reconciliation of GAAP net income and earnings per share to adjusted net income and earnings per share on page 12 of this release.

Fourth Quarter Fiscal 2019 Outlook

Excluding the businesses expected to be divested, orders in the third quarter grew more than 5% and backlog increased at a similar rate. With the continued strength, the Company expects year-over-year sales growth in the fourth quarter of fiscal 2019 to be approximately 4% to 5%, excluding an approximate 3% to 4% anticipated headwind from foreign currency translation, the impact of the divestiture of the Tire Shredder business and the timing of remaining divestitures. Last years fiscal fourth quarter included $3.3 million in revenue related to the Tire Shredder business, which was divested December 28, 2018. The sale of Crane Equipment & Service, Inc. is expected to close by the end of February 2019. That business had $1.5 million in revenue in the month of March 2018. The sales process is ongoing for Stahlhammer Bommern GmbH.

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 Companys financial results and strategy. The review will be accompanied by a slide presentation, which will be available on Columbus McKinnons 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. The listen-only audio webcast can be monitored at www.cmworks.com/investors. To listen to the archived call, dial 412-317-6671 and enter the passcode 13686186. The telephonic replay will be available from 1:00 PM Eastern Time on the day of the call through Thursday, February 7, 2019. Alternatively, an archived webcast of the call can be found on the Companys 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, 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 the effectiveness of the Companys 80/20 process to simplify operations, the ability of the Companys operational excellence initiatives to drive profitability, the success of the Companys new products to enhance revenue, the timing and success of the divestitures, global 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 ability to expand into new markets and geographic regions, 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
December 31, 2018December 31, 2017Change
Net sales$217,415$208,7254.2%
Cost of products sold144,010140,0292.8%
Gross profit73,40568,6966.9%
Gross profit margin33.8%32.9%
Selling expenses23,85825,467(6.3)%
% of net sales11.0%12.2%
General and administrative expenses20,37922,318(8.7)%
% of net sales9.4%10.7%
Research and development expenses3,2713,293(0.7)%
% of net sales1.5%1.6%
Net loss on held for sale businesses15,550NM
Amortization of intangibles3,7013,908(5.3)%
Income from operations6,64613,710(51.5)%
Operating margin3.1%6.6%
Interest and debt expense4,3304,864(11.0)%
Investment (income) loss, net82(53)NM
Foreign currency exchange (gain) loss(25)312NM
Other (income) expense, net(70)(725)(90.3)%
Income before income tax expense2,3299,312(75.0)%
Income tax expense3,11119,877(84.3)%
Net income (loss)$(782)$(10,565)NM
Average basic shares outstanding23,34823,0071.5%
Basic income (loss) per share$(0.03)$(0.46)NM
Average diluted shares outstanding23,34823,0071.5%
Diluted income (loss) per share$(0.03)$(0.46)NM
Dividends declared per common share$0.05$0.04

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Income Statements – UNAUDITED

(In thousands, except per share and percentage data)

Nine Months Ended
December 31, 2018December 31, 2017Change
Net sales$659,549$625,2795.5%
Cost of products sold430,597416,2573.4%
Gross profit228,952209,0229.5%
Gross profit margin34.7%33.4%
Selling expenses73,94074,309(0.5)%
% of net sales11.2%11.9%
General and administrative expenses61,89360,7042.0%
% of net sales9.4%9.7%
Research and development expenses10,1379,9382.0%
% of net sales1.5%1.6%
Net loss on held for sale businesses26,650NM
Amortization of intangibles11,35811,547(1.6)%
Income from operations44,97452,524(14.4)%
Operating margin6.8%8.4%
Interest and debt expense13,18515,072(12.5)%
Investment (income) loss, net(297)(161)84.5%
Foreign currency exchange (gain) loss206705(70.8)%
Other (income) expense, net(417)(1,713)(75.7)%
Income before income tax expense32,29738,621(16.4)%
Income tax expense9,46125,022(62.2)%
Net income$22,836$13,59967.9%
Average basic shares outstanding23,24522,7782.1%
Basic income per share$0.98$0.6063.3%
Average diluted shares outstanding23,64723,2031.9%
Diluted income per share$0.97$0.5964.4%
Dividends declared per common share$0.10$0.08

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

December 31, 2018

March 31, 2018
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$58,079$63,021
Trade accounts receivable123,411127,806
Inventories149,716152,886
Prepaid expenses and other16,57716,582
Total current assets347,783360,295
Property, plant, and equipment, net88,656113,079
Goodwill326,851347,434
Other intangibles, net239,452263,764
Marketable securities6,9517,673
Deferred taxes on income32,66832,442
Other assets20,16317,759
Total assets$1,062,524$1,142,446
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Trade accounts payable$39,725$46,970
Accrued liabilities95,49499,963
Current portion of long-term debt60,03860,064
Total current liabilities195,257206,997
Senior debt, less current portion33
Term loan and revolving credit facility254,795303,221
Other non-current liabilities192,041223,966
Total liabilities642,093734,217
Shareholders equity:
Common stock234230
Additional paid-in capital275,750269,360
Retained earnings219,289197,897
Accumulated other comprehensive loss(74,842)(59,258)
Total shareholders equity420,431408,229
Total liabilities and shareholders equity$1,062,524$1,142,446

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Statements of Cash Flows – UNAUDITED

(In thousands)

Nine Months Ended
December 31, 2018December 31, 2017
Operating activities:
Net income$22,836$13,599
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization24,76326,873
Deferred income taxes and related valuation allowance(2,353)20,141
Net loss (gain) on sale of real estate, investments, and other109(10)
Stock based compensation4,6254,267
Amortization of deferred financing costs and discount on debt1,9922,009
Net loss on held for sale businesses26,650
Changes in operating assets and liabilities, net of effects of business acquisitions and divestitures:
Trade accounts receivable(1,407)(6,516)
Inventories(13,043)(6,456)
Prepaid expenses and other(103)(130)
Other assets2322,803
Trade accounts payable(5,330)389
Accrued liabilities3,5585,388
Non-current liabilities(8,733)(11,114)
Net cash provided by operating activities53,79651,243
Investing activities:
Proceeds from sales of marketable securities1,238653
Purchases of marketable securities(835)(109)
Capital expenditures(7,236)(9,384)
Proceeds from sale of real estate176
Net proceeds from sale of business5,103
Net payments to former STAHL owner(14,750)
Payment of restricted cash to former owner(294)(294)
Cash paid for purchase of equity investment(3,359)
Net cash used for investing activities(1,848)(27,243)
Financing activities:
Proceeds from the issuance of common stock3,7085,961
Repayment of debt(50,051)(45,050)
Payment of dividends(3,484)(2,737)
Other(1,941)(1,255)
Net cash used for financing activities(51,768)(43,081)
Effect of exchange rate changes on cash(5,416)5,795
Net change in cash and cash equivalents(5,236)(13,286)
Cash, cash equivalents, and restricted cash at beginning of year63,56578,428
Cash, cash equivalents, and restricted cash at end of period$58,329$65,142

COLUMBUS McKINNON CORPORATION

Q3 FY 2019 Sales Bridge

Third QuarterYear to Date
($ in millions)$ Change% Change$ Change% Change
Fiscal 2018 Sales$208.7$625.3
Volume9.94.8%28.24.5%
Pricing2.81.3%6.91.1%
Foreign currency translation(4.0)

(1.9)

%

(0.9)

(0.1)

%

Total change$8.74.2%$34.25.5%
Fiscal 2019 Sales$217.4$659.5

COLUMBUS McKINNON CORPORATION

Q3 FY 2019 Gross Profit Bridge

($ in millions)Third QuarterYear to Date
Fiscal 2018 Gross Profit$68.7$209.0
Sales volume and mix2.08.9
Productivity, net of other cost changes1.67.9
Pricing, net of material cost inflation1.64.4
Product liability0.60.8
Prior year STAHL integration costs0.10.3
Foreign currency translation(1.0)(0.1)
Ohio plant closure(0.2)(0.2)
Current year STAHL integration costs(0.3)
Prior year insurance settlement(1.7)
Total change$4.7$20.0
Fiscal 2019 Gross Profit$73.4$229.0

COLUMBUS McKINNON CORPORATION

Additional Data – UNAUDITED

December 31, 2018March 31, 2018December 31, 2017
($ in millions)
Backlog$159.9$177.4$152.3
Long-term backlog (expected to ship beyond 3 months)$55.1$59.5$50.9
Long-term backlog as % of total backlog34.5%33.5%33.4%
Trade accounts receivable
Days sales outstanding (2)52.3days54.3days53.8days
Inventory turns per year (2)
(based on cost of products sold)3.8turns3.7turns3.9turns
Days’ inventory (2)96.1days100.0days93.6days
Trade accounts payable
Days payables outstanding (2)25.4days30.6days28.0days
Working capital as a % of sales (1), (2)17.9%17.9%17.4%
Debt to total capitalization percentage42.8%47.1%49.6%
Debt, net of cash, to net total capitalization37.9%42.4%44.9%

(1) December 31, 2017 figure excludes the impact of the acquisition of STAHL.

(2) December 31, 2018 figures exclude the Tire Shredder business, which was divested on December 28, 2018.

U.S. Shipping Days by Quarter
Q1Q2Q3Q4Total
FY 2063636164251
FY 1964636063250
FY 1863626063248

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Gross Profit to

Non-GAAP Adjusted Gross Profit and Adjusted Gross Margin

($ in thousands, except per share data)

Three Months Ended December 31,Year to Date Ended December 31,
2018201720182017
Gross profit$73,405$68,696$228,952$209,022
Add back (deduct):
Ohio plant closure200200
STAHL integration costs50271
Insurance settlement(1,741)
Non-GAAP adjusted gross profit$73,605$68,746$229,152$207,552
Sales$217,415$208,725$659,549$625,279
Adjusted gross margin33.9%32.9%34.7%33.2%

Adjusted gross profit is defined as gross profit as reported, adjusted for certain items. Adjusted gross profit 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 gross profit, is important for investors and other readers of the Companys financial statements and assists in understanding the comparison of the current quarters and current year’s gross profit to the historical periods’ gross profit, as well as facilitates a more meaningful comparison of the Companys gross profit to that of other companies.

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 December 31,Year to Date Ended December 31,
2018201720182017
Income from operations$6,646$13,710$44,974$52,524
Add back (deduct):
Impairment on held for sale business16,65327,753
Gain on sale of business(1,103)(1,103)
Insurance recovery legal costs4911,0401,1502,592
Ohio plant closure200200
STAHL integration costs3,0061,9064,846
Magnetek litigation400
Insurance settlement(1,741)
Non-GAAP adjusted income from operations$22,887$17,756$74,880$58,621
Sales$217,415$208,725$659,549$625,279
Adjusted operating margin10.5%8.5%11.4%9.4%

Adjusted income from operations is defined as income from operations as reported, adjusted for certain items. 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 Companys financial statements and assists in understanding the comparison of the current quarters and current year’s income from operations to the historical periods’ income from operations, as well as facilitates a more meaningful comparison of the Companys income from operations to that of other companies.

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Net Income (Loss) 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 December 31,Year to Date December 31,
2018201720182017
Net income (loss)$(782)$(10,565)$22,836$13,599
Add back (deduct):
Impairment on held for sale business16,65327,753
Gain on sale of business(1,103)(1,103)
Insurance recovery legal costs4911,0401,1502,592
Ohio plant closure200200
STAHL integration costs3,0061,9064,846
Magnetek litigation400
Insurance settlement(1,741)
Normalize tax rate to 22% (1)(974)16,938(4,224)15,184
Non-GAAP adjusted net income$14,485$10,419$48,518$34,880
Average diluted shares outstanding23,68123,57723,64723,203
Diluted income (loss) per share – GAAP$(0.03)$(0.46)$0.97$0.59
Diluted income per share – Non-GAAP$0.61$0.44$2.05$1.50

(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 Companys financial statements and assists in understanding the comparison of the current quarters 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 Companys net income and diluted EPS to that of other companies.

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted EBITDA

($ in thousands)

Three Months Ended December 31,Year to Date December 31,
2018201720182017
Net income (loss)$(782)$(10,565)$22,836$13,599
Add back (deduct):
Income tax expense3,11119,8779,46125,022
Interest and debt expense4,3304,86413,18515,072
Investment loss (income)82(53)(297)(161)
Foreign currency exchange (gain) loss(25)312206705
Other (income) expense, net(70)(725)(417)(1,713)
Depreciation and amortization expense7,9019,11824,76326,873
Impairment on held for sale business16,65327,753
Gain on sale of business(1,103)(1,103)
Insurance recovery legal costs4911,0401,1502,592
Ohio plant closure200200
STAHL integration costs3,0061,9064,846
Magnetek litigation400
Insurance settlement(1,741)
Non-GAAP adjusted EBITDA$30,788$26,874$99,643$85,494
Sales$217,415$208,725$659,549$625,279
Adjusted EBITDA margin14.2%12.9%15.1%13.7%

Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation, 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 Companys financial statements and assists in understanding the comparison of the current quarters 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 Companys net income and diluted EPS to that of other companies.

Gregory P. Rustowicz
Vice President – Finance and Chief Financial
Officer
Columbus McKinnon Corporation
716-689-5442
[email protected]

Investor Relations:
Deborah K. Pawlowski
Kei Advisors
LLC
716-843-3908
[email protected]