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Columbus McKinnon Reports $0.51 Earnings per Diluted Share on 37% Sales Growth for First Quarter Fiscal Year 2018

08/01/2017

AMHERST, N.Y.--(BUSINESS WIRE)-- Columbus McKinnon Corporation (NASDAQ:CMCO), a leading designer, manufacturer and marketer of material handling products, technologies and services, today announced financial results for its fiscal year 2018 first quarter, which ended June 30, 2017. Fiscal year 2018 first quarter results include the January 31, 2017 acquisition of STAHL CraneSystems ("STAHL").

First Quarter Highlights (compared with prior-year period)

  • Sales for the quarter were $203.7 million, up 36.7%; excluding acquisitions, organic revenue was up 8.0% on measurably higher U.S. volume
  • Achieved record gross profit margin of 34%; operating profit margin was 9.8%, adjusted operating profit margin expanded 280 basis points to 10.5%
  • STAHL integration achieved $0.8 million in synergies and is on track to deliver $5 million of synergies in fiscal 2018
  • Net income was $11.7 million, or $0.51 per diluted share; adjusted net income was $12.6 million, or $0.55 per diluted share
  • Cash from operations doubled to $14.4 million; paid down $13.9 million in borrowings

Mark D. Morelli, President and CEO of Columbus McKinnon commented, "Fiscal 2018 started out strong. In North America, we saw organic volume growth as our channel partners stepped up inventory levels to address improved demand from the construction, utility, steel and entertainment industries. We are making very good progress with the integration of the Stahl acquisition and achieving targeted synergies. STAHL was a strong contributor in the quarter, addressing pent-up demand for midstream and downstream oil & gas projects."

He continued, "We have established a structured operating system. This new performance culture is changing the cadence and discipline within the organization. As a result, we have an enhanced focus on accountability and better roadmaps for achieving revenue and cost targets. We believe this system is sustainable and better positions us to recognize opportunities in a market favorable for growth."

Sales

($ in millions)       Q1 FY 18     Q1 FY 17     Change     % Change
Net sales $ 203.7 $ 149.0 $ 54.7 36.7 %
 
U.S. sales $ 110.7 $ 93.9 $ 16.8 17.9 %
% of total 54 % 63 %
Non-U.S. sales $ 93.0 $ 55.1 $ 37.9 68.8 %
% of total 46 % 37 %

STAHL's U.S. and non-U.S. sales were $3.6 million and $39.1 million, respectively. Volume improvement was realized in the U.S., Latin America and the Asia Pacific region. Sales in Europe, excluding STAHL, were down $1.9 million. The decline in Europe was due to three less shipping days in Germany, the Company's largest European market, and anticipated weakness in the U.K.

($ in millions)       Q1 FY 18     Q1 FY 17     Change     % Change
Gross profit $ 69.3 $ 48.0 $ 21.3 44.3 %
Gross margin 34.0 % 32.2 % 180 bps
Income from operations $ 20.0 $ 11.2 $ 8.8 78.7 %
Operating margin 9.8 % 7.5 % 230 bps
Net income $ 11.7 $ 6.4 $ 5.3 82.1 %
Diluted EPS $ 0.51 $ 0.32 $ 0.19 59.4 %

STAHL contributed $16.1 million to gross profit, which was 37.6% of STAHL sales. This was partially offset by $0.2 million in integration costs. For more information on changes in gross profit, please see the attached tables.

Income from operations was $20.0 million. Adjusted income from operations was $21.4 million, which was up $10.0 million from the prior year. Excluding integration costs, STAHL contributed $5.6 million to income from operations, which was 13.1% of STAHL sales. Please see the attached tables for a reconciliation of GAAP income from operations to adjusted income from operations.

The effective tax rate for the quarter was 21.0%. Given the geographic mix of sales and income, the Company expects the effective tax rate for fiscal 2018 to be in the 20% to 24% range, excluding any changes to current tax regulations.

Net income was $11.7 million. Adjusted net income was $12.6 million, which excludes the STAHL integration costs and costs for a legal action against our prior product liability insurance carriers. Please see the attached tables for a reconciliation of GAAP net income and earnings per share to adjusted net income and earnings per share.

Generating Cash and Reducing Debt

Cash generated from operating activities in the first quarter was $14.4 million. Working capital as a percentage of sales was down to 19.0% compared with 22.4% one year earlier. A $14.8 million payment was made to the former owner of STAHL related to a profit distribution agreement in place prior to the acquisition. Please see the attached table on page 10 of this release for further details.

Total debt was $408.0 million at June 30, 2017. Net debt to net total capitalization at June 30, 2017 was 48.5%, improved from 50.2% at March 31, 2017. The Company expects to reduce debt by approximately $50 million in fiscal 2018 and achieve a net debt to EBITDA ratio of 3x by the end of the fiscal year.

Capital expenditures for the quarter ended June 30, 2017 were $1.9 million. The Company expects capital expenditures in fiscal 2018 to be approximately $20 million.

Fiscal Year 2018 Outlook

Backlog increased 12.2% to $173.3 million as of June 30, 2017 compared with March 31, 2017.

Mr. Morelli concluded, "We are encouraged by our results and expect a solid fiscal 2018. We anticipate that sales in the fiscal second quarter will be comparable with the quarter just completed, although sales mix will provide somewhat lower operating income. In the meantime, we remain focused on our near-term priorities: the integration of STAHL, strengthening our core business for greater profitability, further leveraging our Magnetek technology for greater revenue potential and reducing debt."

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast today at 10:00 AM Eastern Time, at which Mark D. Morelli, 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 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 8, 2017 by dialing 412-317-6671 and entering the passcode 13665310. 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 material handling products, technologies, systems and services, which 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, 2017   June 30, 2016 Change
Net sales $ 203,726 $ 149,013 36.7 %
Cost of products sold 134,418   100,966   33.1 %
Gross profit 69,308 48,047 44.3 %
Gross profit margin 34.0 % 32.2 %
Selling expenses 23,800 18,814 26.5 %
% of net sales 11.7 % 12.6 %
General and administrative expenses 18,852 13,783 36.8 %
% of net sales 9.3 % 9.2 %
Research and development expenses 2,922 2,499 16.9 %
% of net sales 1.4 % 1.7 %
Amortization of intangibles 3,719   1,750   112.5 %
Income from operations 20,015   11,201   78.7 %
Operating margin 9.8 % 7.5 %
Interest and debt expense 5,141 2,574 99.7 %
Investment (income) loss (62 ) (217 ) (71.4 )%
Foreign currency exchange loss (gain) 324 (563 ) NM
Other (income) expense, net (139 ) (80 ) 73.8 %
Income before income tax expense 14,751 9,487 55.5 %
Income tax expense 3,095   3,086   0.3 %
Net income $ 11,656   $ 6,401   82.1 %
 
Average basic shares outstanding 22,580 20,135 12.1 %
Basic income per share $ 0.52   $ 0.32   62.5 %
 
Average diluted shares outstanding 23,028 20,266 13.6 %
Diluted income per share $ 0.51   $ 0.32   59.4 %
 

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

         

June 30,
2017

March 31,
2017
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 64,613 $ 77,591
Trade accounts receivable 119,739 111,569
Inventories 135,294 130,643
Prepaid expenses and other 19,615   21,147  
Total current assets 339,261   340,950  
 
Property, plant, and equipment, net 112,696 113,028
Goodwill 331,737 319,299
Other intangibles, net 263,362 256,183
Marketable securities 7,740 7,686
Deferred taxes on income 58,778 61,857
Other assets 12,776   14,840  
Total assets $ 1,126,350   $ 1,113,843  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 40,487 $ 40,994
Accrued liabilities 85,302 97,397
Current portion of long-term debt 49,847   52,568  
Total current liabilities 175,636   190,959  
 
Senior debt, less current portion 33 41
Term loan and revolving credit facility 358,138 368,710
Other non-current liabilities 228,567   212,783  
Total liabilities 762,374   772,493  
 
Shareholders' equity:
Common stock 226 226
Additional paid-in capital 259,697 258,853
Retained earnings 191,391 179,735
Accumulated other comprehensive loss (87,338 ) (97,464 )
Total shareholders' equity 363,976   341,350  
Total liabilities and shareholders' equity $ 1,126,350   $ 1,113,843  
 

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Statements of Cash Flows - UNAUDITED

(In thousands)

       
Three Months Ended
June 30, 2017   June 30, 2016
Operating activities:
Net income $ 11,656 $ 6,401
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 8,660 6,001
Deferred income taxes and related valuation allowance 1,856 969
Net gain on sale of real estate, investments, and other - (93 )
Stock based compensation 1,069 1,147
Amortization of deferred financing costs and discount on debt 664 172
Changes in operating assets and liabilities, net of effects of business acquisitions:
Trade accounts receivable (5,092 ) 4,018
Inventories (506 ) (1,896 )
Prepaid expenses and other (1,977 ) 3,049
Other assets 2,271 (25 )
Trade accounts payable (1,298 ) (2,557 )
Accrued liabilities 2,644 (3,485 )
Non-current liabilities (5,507 ) (6,496 )
Net cash provided by operating activities 14,440   7,205  
 
Investing activities:
Proceeds from sales of marketable securities 138 7,772
Purchases of marketable securities (47 ) (105 )
Capital expenditures (1,928 ) (4,301 )
Net payments to former STAHL owner (14,750 ) -  
Net cash provided by (used for) investing activities (16,587 ) 3,366  
 
Financing activities:
Proceeds from exercises of stock options 29 -
Net borrowings (repayments) under lines of credit - (13,500 )
Repayment of debt (13,874 ) (3,274 )
Payment of dividends (902 ) (804 )
Other (255 ) (367 )
Net cash provided by (used for) financing activities (15,002 ) (17,945 )
 
Effect of exchange rate changes on cash 4,171   (1,066 )
 
Net change in cash and cash equivalents (12,978 ) (8,440 )
Cash and cash equivalents at beginning of year 77,591   51,603  
Cash and cash equivalents at end of period $ 64,613   $ 43,163  
 

COLUMBUS McKINNON CORPORATION

Q1 FY 2018 Sales Bridge

         
First Quarter
($ in millions) $ Change   % Change
Fiscal 2017 Sales $ 149.0
STAHL acquisition 42.7 28.7 %
Volume 12.3 8.2 %
Pricing 0.6 0.4 %
Foreign currency translation (0.9 ) (0.6 )%
Total change $ 54.7   36.7 %
Fiscal 2018 Sales $ 203.7  
 

COLUMBUS McKINNON CORPORATION

Q1 FY 2018 Gross Profit Bridge

       
($ in millions) First Quarter
Fiscal 2017 Gross Profit $ 48.0
STAHL acquisition 16.1
Sales volume and mix 4.0
Productivity, net of other cost changes 0.8
Pricing, net of material cost inflation 0.4
Product liability 0.4
Foreign currency translation (0.2 )
STAHL integration costs (0.2 )
Total change $ 21.3  
Fiscal 2018 Gross Profit $ 69.3  
 

COLUMBUS McKINNON CORPORATION

Additional Data - UNAUDITED

           
June 30,

2017

March 31,

2017

June 30,

2016

($ in millions)      
Backlog $ 173.3 $ 154.5 $ 102.4
Backlog (excluding STAHL) $ 116.4 $ 107.7 $ 102.4
Long-term backlog (expected to ship beyond 3 months) $ 60.4 $ 53.5 $ 49.4
Long-term backlog as % of total backlog 34.9 % 34.6 % 48.2 %
 
Trade accounts receivable (3)
Days sales outstanding 53.5 days 46.2 days 48.3 days
 
Inventory turns per year (3)
(based on cost of products sold) 4.0 turns 4.1 turns 3.4 turns
Days' inventory (3) 91.3 days 89.0 days 107.4 days
 
Trade accounts payable
Days payables outstanding (3) 27.4 days 28.3 days 28.6 days
 
Working capital as a % of sales (1) (2) (3) 19.0 % 18.6 % 22.4 %
 
Debt to total capitalization percentage 52.9 % 55.2 % 46.3 %
 
Debt, net of cash, to net total capitalization 48.5 % 50.2 % 41.7 %
(1)   June 30, 2017 and March 31, 2017 figures exclude the impact of the acquisition of STAHL.
(2) June 30, 2016 figure excludes the impact of the acquisition of Magnetek.
(3) March 31, 2017 figures exclude the impact of the acquisition of STAHL.
 
U.S. Shipping Days by Quarter
    Q1   Q2   Q3   Q4   Total
FY 18 63 62 60 63 248
 
FY 17 64 63 60 64 251
 

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Profit and Margin

($ in thousands)

     
Three Months Ended June,
2017   2016
Gross profit $ 69,308 $ 48,047
Add back:
STAHL integration costs 169 -
Non-GAAP adjusted gross profit $ 69,477     $ 48,047  
 
Sales $ 203,726 $ 149,013
Adjusted gross margin 34.1 % 32.2 %

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 to the measure 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 Company's financial statements, and assists in understanding the comparison of the current quarter's gross profit to the historical period's gross profit, 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 Income from Operations to

Non-GAAP Adjusted Income from Operations and Operating Margin

($ in thousands, except per share data)

     
Three Months Ended June 30,
2017   2016
Income from operations $ 20,015 $ 11,201
Add back:
STAHL integration costs 1,171 -
Insurance recovery legal costs 229 -
Canadian pension lump sum settlements -     247  
Non-GAAP adjusted income from operations $ 21,415     $ 11,448  
 
Sales $ 203,726 $ 149,013
Adjusted operating margin 10.5 % 7.7 %

Adjusted income from operations is defined as income from operations as reported, adjusted for certain items and to apply 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 to 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,
2017   2016
Net income $ 11,656 $ 6,401
Add back:
STAHL integration costs 1,171 -
Insurance recovery legal costs 229 -
Canadian pension lump sum settlements - 247
Normalize tax rate to 22% (1) (458 )   945
Non-GAAP adjusted net income $ 12,598     $ 7,593
 
Average diluted shares outstanding 23,028 20,266
     
Diluted income per share - GAAP $ 0.51     $ 0.32
     
Diluted income per share - Non-GAAP $ 0.55     $ 0.37

(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 to apply 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.

Contacts

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

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