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Columbus McKinnon Reports Third Quarter Fiscal Year 2018 Financial Results 

AMHERST, N.Y.--(BUSINESS WIRE)-- 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 2018 third quarter, which ended December 31, 2017. Fiscal year 2018 third quarter and year to date results include the January 31, 2017 acquisition of STAHL CraneSystems (“STAHL”).

Third Quarter Highlights (compared with prior-year period)

  • Sales for the quarter were up 36.9% to $208.7 million, including $42.6 million from STAHL; after adjusting for FX impact, organic sales increased 6.6%
  • STAHL provided $0.02 earnings per share accretion in quarter; Achieved $0.11 accretion year-to-date
  • Cash flow from operating activities was $16.5 million in quarter and $51.2 million in the first nine months
  • Debt repayment ahead of schedule: $45.1 million paid down through Q3 FY2018 including $14.9 million in quarter; Raising debt repayment expectations to $60 million from original goal of $45 million to $50 million

Mark D. Morelli, President and CEO of Columbus McKinnon commented, “We believe that strong execution of the first phase of our strategic plan, Blueprint 2021, has contributed to our solid results in the quarter and first nine months of the fiscal year. Prioritizing our efforts with our Tiger Teams and the deployment of our E-PAS™ operating system enabled us to implement rapid improvements, such as product availability, which supported 8% organic growth in the U.S. for the quarter. We have also been helped with favorable global economic tailwinds which are creating demand in many of our key vertical markets. Notably, 48% of the quarter’s sales came from outside of the U.S. as STAHL continued to deliver solid results with its custom-engineered crane technologies.”

Sales

($ in millions)     Q3 FY 18     Q3 FY 17     Change     % Change
Net sales $ 208.7 $ 152.5 $ 56.2 36.9 %
U.S. sales $ 108.1 $ 98.1 $ 10.0 10.2 %
% of total 52 % 64 %
Non-U.S. sales $ 100.6 $ 54.4 $ 46.2 84.9 %
% of total 48 % 36 %
 

STAHL's U.S. and non-U.S. sales were $2.2 million and $40.3 million, respectively. Volume improvement was realized in the U.S., EMEA, and Asia Pacific. Sales in Europe, excluding STAHL, were up $5.4 million, including a $3.1 million benefit from foreign currency translation.

($ in millions)     Q3 FY 18     Q3 FY 17     Change     % Change
Gross profit $ 69.0 $ 44.8 $ 24.2 54.0 %
Gross margin 33.1 % 29.4 % 370 bps
Income from operations $ 14.2 $ 5.3 $ 8.9 166.6 %
Operating margin 6.8 % 3.5 % 330 bps
Net (loss) income $ (10.6 ) $ 0.5 $ (11.1 ) NM
Diluted EPS $ (0.46 ) $ 0.02 $ (0.48 ) NM
 

STAHL contributed $15.0 million to gross profit, which represented a 35.4% gross margin. For more information on changes in gross profit, please see the attached tables.

Income from operations was $14.2 million. Adjusted income from operations was $18.2 million, which was up $9.8 million from the prior year. Adjustments include $3.0 million in STAHL integration costs and $1.0 million in legal costs related to litigation against previous insurance carriers. STAHL contributed $4.5 million to adjusted income from operations, which was 10.5% of STAHL sales. Please see the attached tables for a reconciliation of GAAP income from operations to adjusted income from operations.

Gregory P. Rustowicz, Vice President - Finance and Chief Financial Officer, commented, “We had a really strong quarter which reflected the timing of STAHL shipments from their backlog. As a result, gross margin was stronger than we typically see in the fiscal third quarter. We would expect a similar level of sales from STAHL in the fourth quarter along with similar gross margins for the entire business. We also benefited from lower operating expenses in the quarter related to medical costs, workers compensation and stock compensation costs totaling $750 thousand that we would not expect to repeat in the fourth quarter.”

Income tax expense in the quarter was impacted by the estimated impact of the enactment of the U.S. Tax Cuts and Jobs Act (the Act). Tax expense reflects the revaluation of deferred tax assets due to the reduction in the U.S. corporate tax rate as well as the transition tax resulting from the Act. Given this adjustment, the Company expects the effective tax rate for fiscal 2018 to be in the 51% to 55% range. The Company expects its effective tax rate for fiscal 2019 to be in the 20% to 22% range depending upon the mix of pre-tax earnings by tax jurisdiction.

As a result of the deferred tax asset revaluation and the preliminary transition tax noted above, the Company reported a net loss of $10.6 million. On an adjusted basis, net income was $10.4 million, which excludes STAHL integration costs and costs for a legal action against prior product liability insurance carriers and includes a normalized tax rate. 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 third quarter was $16.5 million. Working capital as a percentage of sales was down to 17.4% compared with 19.9% as of December 31, 2016. Please see the attached additional data table for further details.

Total debt was $377.9 million at December 31, 2017 compared with $421.3 million at March 31, 2017. Net debt to net total capitalization at December 31, 2017 was 44.9%, compared with 45.5% at September 30, 2017 and 50.2% at March 31, 2017.

Mr. Rustowicz added, “With our strong free cash flow generation, we are raising our debt reduction goal for the year to $60 million. We have also achieved a net debt to adjusted EBITDA ratio of 2.8 times which is well ahead of our goal to reach a net debt to adjusted EBITDA ratio below 3 times by the end of the fiscal year. ”

Capital expenditures for the three and nine months ended December 31, 2017 were $3.3 million and $9.4 million, respectively. The Company expects capital expenditures for fiscal 2018 to be approximately $15 million.

Fiscal Year 2018 Outlook

Backlog was $152.3 million as of December 31, 2017, a decrease of $10.4 million compared with September 30, 2017 due to the timing of certain STAHL custom-engineered orders shipping in the third quarter.

Mr. Morelli concluded, “Given the timing of third quarter shipments and current order flow, we expect fourth quarter sales to be comparable with third quarter levels. This will represent organic sales growth of about 4% to 5% in our fourth quarter excluding the impact of two months of STAHL sales in the prior year quarter. Looking further out as we advance to Phase II of Blueprint 2021, we are simplifying our business structure and product platforms while implementing improvements to drive operational excellence. We will self-fund initiatives and new product development as we seek to capitalize on the trend toward factory automation and build a business with greater earnings power.”

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast today at 11:00 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 2:00 PM Eastern Time on the day of the call through Tuesday, February 13, 2018 by dialing 412-317-6671 and entering the passcode 13675058. 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

December 31,
2017

   

December 31,
2016

Change
Net sales $ 208,725 $ 152,497 36.9 %

Cost of products sold

139,680   107,676   29.7 %
Gross profit 69,045 44,821 54.0 %
Gross profit margin 33.1 % 29.4 %
Selling expenses 25,467 17,988 41.6 %
% of net sales 12.2 % 11.8 %
General and administrative expenses 22,204 17,206 29.0 %
% of net sales 10.6 % 11.3 %
Research and development expenses 3,293 2,545 29.4 %
% of net sales 1.6 % 1.7 %
Amortization of intangibles 3,908   1,765   121.4 %
Income from operations 14,173   5,317   166.6 %
Operating margin 6.8 % 3.5 %
Interest and debt expense 4,864 2,299 111.6 %
Investment (income) loss (53 ) (61 ) (13.1 )%
Foreign currency exchange loss (gain) 312 1,673 (81.4 )%
Other (income) expense, net (262 ) (110 ) 138.2 %
Income before income tax expense 9,312 1,516 514.2 %
Income tax expense 19,877   1,011   1,866.1 %
Net (loss) income $ (10,565 ) $ 505   NM
 
Average basic shares outstanding 23,007 20,239 13.7 %
Basic (loss) income per share $ (0.46 ) $ 0.02   NM
 
Average diluted shares outstanding 23,007 20,490 12.3 %
Diluted (loss) income per share $ (0.46 ) $ 0.02   NM
 
Dividends declared per common share $ 0.04   $ 0.04  
 
       

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Income Statements - UNAUDITED

(In thousands, except per share and percentage data)

 
Nine Months Ended

December 31,
2017

   

December 31,
2016

Change
Net sales $ 625,279 $ 453,435 37.9 %
Cost of products sold 415,307   310,838   33.6 %
Gross profit 209,972 142,597 47.2 %
Gross profit margin 33.6 % 31.4 %
Selling expenses 74,309 55,834 33.1 %
% of net sales 11.9 % 12.3 %
General and administrative expenses 60,403 44,820 34.8 %
% of net sales 9.7 % 9.9 %
Research and development expenses 9,938 7,526 32.0 %
% of net sales 1.6 % 1.7 %
Amortization of intangibles 11,547   5,280   118.7 %
Income from operations 53,775   29,137   84.6 %
Operating margin 8.6 % 6.4 %
Interest and debt expense 15,072 7,398 103.7 %
Investment (income) loss (161 ) (366 ) (56.0 )%
Foreign currency exchange loss (gain) 705 890 (20.8 )%
Other (income) expense, net (462 ) (238 ) 94.1 %
Income before income tax expense 38,621 21,453 80.0 %
Income tax expense 25,022   7,731   223.7 %
Net income $ 13,599   $ 13,722   (0.9 )%
 
Average basic shares outstanding 22,778 20,192 12.8 %
Basic income per share $ 0.60   $ 0.68   (11.8 )%
 
Average diluted shares outstanding 23,203 20,400 13.7 %
Diluted income per share $ 0.59   $ 0.67   (11.9 )%
 
Dividends declared per common share $ 0.08   $ 0.08  
 
       

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

 
December 31, 2017 March 31,
2017
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 64,598 $ 77,591
Trade accounts receivable 123,466 111,569
Inventories 144,697 130,643
Prepaid expenses and other 17,773   21,147  
Total current assets 350,534   340,950  
 
Property, plant, and equipment, net 111,815 113,028
Goodwill 341,619 319,299
Other intangibles, net 263,353 256,183
Marketable securities 7,558 7,686
Deferred taxes on income 39,889 61,857
Other assets 16,319   14,840  
Total assets $ 1,131,087   $ 1,113,843  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable $ 42,945 $ 40,994
Accrued liabilities 90,869 97,397
Current portion of long-term debt 60,134   52,568  
Total current liabilities 193,948   190,959  
 
Senior debt, less current portion 60 41
Term loan and revolving credit facility 317,696 368,710
Other non-current liabilities 235,420   212,783  
Total liabilities 747,124   772,493  
 
Shareholders’ equity:
Common stock 230 226
Additional paid-in capital 267,813 258,853
Retained earnings 191,504 179,735
Accumulated other comprehensive loss (75,584 ) (97,464 )
Total shareholders’ equity 383,963   341,350  
Total liabilities and shareholders’ equity $ 1,131,087   $ 1,113,843  
 
   

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Statements of Cash Flows - UNAUDITED

(In thousands)

 
Nine Months Ended

December 31,
2017

   

December 31,
2016

Operating activities:
Net income $ 13,599 $ 13,722
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 26,873 17,695
Deferred income taxes and related valuation allowance 20,141 2,627
Net gain on sale of real estate, investments, and other (10 ) (116 )
Stock based compensation 4,267 4,027
Amortization of deferred financing costs and discount on debt 2,009 515
Loss on revaluation of foreign exchange option 1,826
Changes in operating assets and liabilities, net of effects of business acquisitions:
Trade accounts receivable (6,516 ) 6,909
Inventories (6,456 ) 5,267
Prepaid expenses and other (130 ) 8,153
Other assets 2,803 (483 )
Trade accounts payable 389 (5,465 )
Accrued liabilities 5,388 2,082
Non-current liabilities (11,114 ) (8,239 )
Net cash provided by operating activities 51,243   48,520  
 
Investing activities:
Proceeds from sales of marketable securities 653 10,336
Purchases of marketable securities (110 ) (242 )
Capital expenditures (9,384 ) (11,274 )
Purchase of business, net of cash acquired (588 )
Purchase of foreign exchange option (6,370 )
Net payments to former STAHL owner (14,750 )
Cash paid for purchase of equity investment (3,359 )  
Net cash provided by (used for) investing activities (26,950 ) (8,138 )
 
Financing activities:
Proceeds from exercises of stock options 5,961 353
Net borrowings (repayments) under lines of credit (23,500 )
Repayment of debt (45,050 ) (9,792 )
Restricted cash related to purchase of business (588 )
Payment of dividends (2,737 ) (2,421 )
Other (1,255 ) (558 )
Net cash provided by (used for) financing activities (43,081 ) (36,506 )
 
Effect of exchange rate changes on cash 5,795   (3,941 )
 
Net change in cash and cash equivalents (12,993 ) (65 )
Cash and cash equivalents at beginning of year 77,591   51,603  
Cash and cash equivalents at end of period $ 64,598   $ 51,538  
       

COLUMBUS McKINNON CORPORATION

Q3 FY 2018 Sales Bridge

 
Third Quarter Year to Date
($ in millions) $ Change     % Change $ Change     % Change
Fiscal 2017 Sales $ 152.5 $ 453.4
STAHL acquisition 42.6 27.9 % 131.1 28.9 %
Volume 9.3 6.2 % 33.9 7.5 %
Pricing 0.6 0.4 % 1.9 0.4 %
Foreign currency translation 3.7   2.4 % 5.0   1.1 %
Total change $ 56.2   36.9 % $ 171.9   37.9 %
Fiscal 2018 Sales $ 208.7   $ 625.3  
 
       

COLUMBUS McKINNON CORPORATION

Q3 FY 2018 Gross Profit Bridge

 
($ in millions) Third Quarter Year to Date
Fiscal 2017 Gross Profit $ 44.8 $ 142.6
STAHL acquisition 15.1 48.2
Sales volume and mix 3.0 10.7
Product liability 2.2 3.0
Insurance settlement 1.7
Productivity, net of other cost changes 2.7 1.6
Foreign currency translation 1.0 1.4
Pricing, net of material cost inflation 0.3 1.1
STAHL integration costs (0.1 ) (0.3 )
Total change $ 24.2   $ 67.4  
Fiscal 2018 Gross Profit $ 69.0   $ 210.0  
 
           

COLUMBUS McKINNON CORPORATION

Additional Data - UNAUDITED

 

December 31,
2017

 

March 31,
2017

 

December 31,
2016

 

($ in millions)      
Backlog $ 152.3 $ 154.5 $ 97.9
Backlog (excluding STAHL) $ 109.6 $ 107.7 $ 97.9
Long-term backlog (expected to ship beyond 3 months) $ 50.9 $ 53.5 $ 41.3
Long-term backlog as % of total backlog 33.4 % 34.6 % 42.2 %
 
Trade accounts receivable (2)
Days sales outstanding 53.8 days 46.2 days 44.7 days
 
Inventory turns per year (2)
(based on cost of products sold) 3.9 turns 4.1 turns 3.9 turns
Days' inventory (2) 93.6 days 89.0 days 93.6 days
 
Trade accounts payable
Days payables outstanding (2) 28.0 days 28.3 days 23.8 days
 
Working capital as a % of sales (1) (2) 17.4 % 18.6 % 19.9 %
 
Debt to total capitalization percentage 49.6 % 55.2 % 44.5 %
 
Debt, net of cash, to net total capitalization 44.9 % 50.2 % 38.4 %
 
(1)   December 31, 2017 and March 31, 2017 figures exclude the impact of the acquisition of STAHL.
(2) 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 December 31, Year to Date December 31,
2017     2016 2017     2016
Gross profit $ 69,045 $ 44,821 $ 209,972 $ 142,597
Add back (deduct):
Insurance settlement (1,741 )
STAHL integration costs 50     271    
Non-GAAP adjusted gross profit $ 69,095   $ 44,821   $ 208,502   $ 142,597  
 
Sales $ 208,725 $ 152,497 $ 625,279 $ 453,435
Adjusted gross margin 33.1 % 29.4 % 33.3 % 31.4 %
 

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 December 31, Year to Date December 31, 2017
2017     2016 2017     2016
Income from operations $ 14,173 $ 5,317 $ 53,775 $ 29,137
Add back:
STAHL integration costs 3,006 4,846
Insurance recovery legal costs 1,040 2,592
Magnetek litigation 400
Insurance settlement (1,741 )
Acquisition deal costs 3,140 3,140
Canadian pension lump sum settlements       247  
Non-GAAP adjusted income from operations $ 18,219   $ 8,457   $ 59,872   $ 32,524  
 
Sales $ 208,725 $ 152,497 $ 625,279 $ 453,435
Adjusted operating margin 8.7 % 5.5 % 9.6 % 7.2 %
 

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
December 31,

Year to Date
December 31,

2017     2016 2017     2016
Net (loss) income $ (10,565 ) $ 505 $ 13,599 $ 13,722
Add back:
STAHL integration costs 3,006 4,846
Insurance recovery legal costs 1,040 2,592
Magnetek litigation 400
Insurance settlement (1,741 )
Acquisition deal costs 3,140 3,140
Loss on revaluation of foreign exchange option 1,826 1,826
Canadian pension lump sum settlements 247
Normalize tax rate to 22% (1) 16,938   (415 ) 15,184   1,864
Non-GAAP adjusted net income $ 10,419   $ 5,056   $ 34,880   $ 20,799
 
Average diluted shares outstanding 23,577 20,490 23,203 20,400
       
Diluted (loss) income per share - GAAP $ (0.46 ) $ 0.02   $ 0.59   $ 0.67
       
Diluted income per share - Non-GAAP $ 0.44   $ 0.25   $ 1.50   $ 1.02
 
(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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