Columbus McKinnon Reports Operating Income Expanded 18% on 7% Increase in Sales in Third Quarter Fiscal 2013 *Sales outside the U.S. increased 9.7%; U.S. sales up 5.4% *Margins expand on higher volume and pricing; Gross margin increased 160 basis points to 28.6% *Operating income grew 34.7% to $14.2 million compared with prior year adjusted operating income of $10.5 million, which excluded a one-time gain; Operating margin reached 9.3% *Adjusted operating leverage 34.9% in the third quarter, 41.1% operating leverage YTD *Net income grew 12.5% to $9.6 million, or $0.49 per diluted share *Generated $26.3 million in cash from operations in first nine months of fiscal 2013; Cash on hand at quarter end was $111.9 million; Net debt to net total capitalization was 17.6% Business Wire AMHERST, N.Y. -- January 25, 2013 Columbus McKinnon Corporation (NASDAQ: CMCO), a leading designer, manufacturer and marketer of material handling products, today announced financial results for its fiscal 2013 third quarter, which ended December 31, 2012. Timothy T. Tevens, President and Chief Executive Officer, commented, “We continue to have solid growth in emerging economies, specifically in China, as our brand strength helps to drive demand. Investments in Asia that require our equipment are also driving demand. U.S. order growth was flat in the third quarter compared with the prior year due to the uncertain economic climate that currently exists.” Net sales for the third quarter of fiscal 2013 were $153.2 million, up $10.5 million, or 7.3%, from the prior-year period. U.S. sales, which comprised 54% of total sales, increased $4.3 million, or 5.4%, to $83.1 million. End user and channel partner demand, as well as two additional shipping days, were the main drivers of higher U.S. sales this quarter when compared with the prior year. Sales outside of the U.S. were up $6.2 million, or 9.7%, to $70.2 million, reflecting positive growth in emerging economies, the completion of large engineered projects and the additional shipping days. Foreign currency translation had a negative impact of $2.0 million, or 1.4%, on sales during the quarter. Excluding the impact of foreign currency effects, sales outside of the U.S. increased by 12.9%. Acquisitions and divestitures had a negative impact of $2.6 million on sales when compared with the prior-year period. Excluding the effects of foreign currency translation and acquisitions and divestitures, revenue grew by 10.6% in the quarter. The fluctuation in sales for the third quarter of fiscal 2013 compared with fiscal 2012 is summarized as follows: $ % ($ in millions) Change Change Increased volume 6.4 4.6 % Additional shipping days 4.9 3.4 % Pricing 3.8 2.6 % Acquisitions and divestitures (net) (2.6 ) (1.9 )% Foreign currency translation (2.0 ) (1.4 )% Total $ 10.5 7.3 % Volume and pricing drive margin improvements Gross profit increased to $43.8 million, or 28.6% of net sales, for the fiscal 2013 third quarter from $38.6 million, or 27.0% of net sales, in fiscal 2012’s third quarter. Improved gross profit was driven by volume and mix of $2.6 million combined with improved pricing of $3.8 million, which more than offset material cost inflation. Foreign currency translation had a $0.6 million unfavorable impact on gross profit. Selling expenses were $16.4 million, up 2.6%, or $0.4 million, from the third quarter of fiscal 2012. Increased costs were related to the Company’s expansion into South Africa, as well as Turkey, Morocco and Dubai. As a percent of revenue, selling expenses were 10.7% compared with 11.2% in the same period last year. General and administrative (G&A) expenses were $12.7 million, or 8.3% of net sales, in the third quarter of fiscal 2013, up 9.7% from the previous fiscal year’s third quarter, when G&A was $11.6 million, or 8.1% of net sales. G&A costs were up in the third quarter of fiscal 2013 due to investments for growth in the Asia Pacific region. Also, the prior-year period had a favorable pension adjustment of $0.6 million. Operating income in the fiscal 2013 third quarter was up $2.2 million, or 18.2%, to $14.2 million. Operating margin expanded 90 basis points to 9.3%. When adjusting the prior year’s third quarter operating income for the gain realized on the sale of a closed facility, operating income grew 34.7% in the fiscal 2013 third quarter. Operating leverage for the fiscal 2013 third quarter was 34.9% when adjusted for the gain in the prior year’s quarter. The effective tax rate for the 2013 third quarter was 11.1% compared with 16.4% in the third quarter of fiscal 2012. The effective tax rate for fiscal 2013 is expected be in the range of 13% to 17%, including the impact of the valuation allowance on deferred tax assets. Tax rates for the Company are impacted by the mix of income or loss among taxing jurisdictions, specifically U.S. versus foreign jurisdictions and the impact of various state taxes within the U.S. Net income grew 12.5% to $9.6 million, or $0.49 per diluted share, in the fiscal 2013 third quarter. Strong cash generation and significant financial flexibility Cash provided by operations for the first nine months of fiscal 2013 was $26.3 million, up $12.8 million over the prior-year period. Cash and cash equivalents grew to $111.9 million at the end of fiscal 2013’s third quarter from $89.5 million at March 31, 2012. Mr. Tevens noted, “With our solid cash position and strong cash generation capability, we are well positioned to execute our strategic growth plans and to focus on targeted activities to utilize our excess cash.” Working capital as a percentage of sales was 17.5% at the end of the third quarter of fiscal 2013, unchanged from the third quarter of fiscal 2012, but improved from 19.4% at the end of the second quarter of fiscal 2013. Capital expenditures for the first nine months of fiscal 2013 were $7.1 million compared with $10.5 million in the comparable prior-year period. Approximately $0.7 million was associated with the implementation of a new enterprise management system. The Company expects fiscal 2013 capital spending to be in the range of $12 million to $15 million. Gross debt at the end of this fiscal year’s third quarter was $152.3 million. Debt, net of cash, at December 31, 2012 was $40.4 million, or 17.6% of net total capitalization, compared with $63.6 million, or 28.4% of net total capitalization, at March 31, 2012. At December 31, 2012, the Company had $11.5 million in outstanding letters of credit. First Nine Months of Fiscal 2013 Review Net sales for the first nine months of fiscal 2013 were $452.7 million, up 4.7%, or $20.3 million, from the same period in the prior fiscal year. U.S. sales, which drove the growth, were up $21.3 million, or 9.1%. Sales outside of the U.S. decreased by $0.9 million, or 0.5%, in the first nine months of fiscal 2013, representing 44% of total sales. Foreign currency translation had a $16.3 million negative impact on sales in the first nine months of fiscal 2013. Net of foreign currency translation, revenue outside of the U.S. grew 7.7%. Gross profit increased 14.6% and gross profit margin expanded 250 basis points to 28.7% in the first nine months of fiscal 2013. Driving margin improvement were higher sales volumes, increased pricing, improved productivity, and lower product liability costs. This was partially offset by material inflation and foreign currency translation. Selling expenses were $49.2 million, an increase of $1.7 million, or 3.6%, compared with the prior-year period. As a percent of sales, selling expenses were 10.9% in the first nine months of fiscal 2013 compared with 11.0% in the prior-year period. G&A expenses increased $5.5 million, or 16.2%. As a percent of sales, G&A expenses were 8.7% in the current period, compared with 7.9% in the prior-year period. Increased G&A in the first nine months of fiscal 2013 were due to expenses associated with the new ERP system implementation, higher employee benefit costs, investments in Asia Pacific and general inflationary increases. Operating income grew 26.5% to $39.9 million, while operating margin expanded 150 basis points to 8.8% in the first nine months of fiscal 2013. Net income for the nine-month period ended December 31, 2012 grew $8.3 million, or 46.2%, to $26.3 million. On a per diluted share basis, earnings in the first nine months of fiscal 2013 grew 45.7% to $1.34 compared with $0.92 for the prior-year period. Company expects growth to moderate Backlog was $95.4 million at December 31, 2012 compared with $104.2 million at December 31, 2011, when adjusted for the divestiture of the Gaffey crane business. This reduction reflects the shipment of several large engineered orders in the quarter. 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 December 31, 2012, approximately $33.2 million of backlog, or 34.8%, was scheduled for shipment beyond March 31, 2013. Mr. Tevens noted, “We remain optimistic regarding Asia and Latin America as those regions continue to grow despite global economic challenges. We are expecting the recession that Europe is currently experiencing to have a negative impact on sales in the near term and we are also seeing slower growth in the U.S. It does appear, however, that we should see some strengthening in those markets in the second half of 2013 barring major economic or geopolitical issues. We continue to find opportunities to expand our business as the sales operations that we have established in South Africa, Turkey, Morocco and Dubai are proving successful and our operations in Asia Pacific and Latin America continue to build.” Sales to emerging markets, which were approximately 9.0% of total sales in the first nine months of fiscal 2013, have grown 16.5% when compared with the prior-year period. Both U.S. and Eurozone capacity utilization are leading market indicators for the Company. U.S. industrial capacity utilization was 78.1% in December 2012, up from 77.2% in December 2011, and improved from 77.4% in September 2012. Eurozone capacity utilization was 76.8% in the quarter ended December 31, 2012, a decrease from 79.7% during the quarter ended December 31, 2011, as well as from 77.9% at the end of September 2012. The European indicator reflects the modest recession being experienced in the Eurozone, while the U.S. indicator demonstrates slower economic growth. The Company’s sales tend to lag these indicators by one to two quarters. 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 February 22, 2013 by dialing 203-369-0225. Alternatively, an archived webcast of the call will be on Columbus McKinnon’s web site at: http://www.cmworks.com/investors until February 22, 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 December 31, 2012 December 31, 2011 Change Net sales $ 153,225 $ 142,750 7.3% Cost of products sold 109,428 104,147 5.1% Gross profit 43,797 38,603 13.5% Gross profit margin 28.6 % 27.0 % Selling expense 16,390 15,980 2.6% General and 12,725 11,605 9.7% administrative expense Restructuring charges - (1,467 ) -100.0% Amortization 493 485 1.6% Income from operations 14,189 12,000 18.2% Operating margin 9.3 % 8.4 % Interest and debt 3,413 3,590 -4.9% expense Investment income (354 ) (275 ) 28.7% Foreign currency 293 (97 ) NM exchange loss (gain) Other (income) and 65 (1,399 ) NM expense, net Income before income tax expense 10,772 10,181 5.8% Income tax expense 1,193 1,666 -28.4% Income from continuing 9,579 8,515 12.5% operations Income from discontinued operations - net of tax - - Net income $ 9,579 $ 8,515 12.5% Average basic shares 19,451 19,313 0.7% outstanding Basic income per share: Income from continuing 0.49 0.44 operations Income from discontinued - - operations Net income $ 0.49 $ 0.44 11.4% Average diluted shares 19,697 19,488 1.1% outstanding Diluted income per share: Income from continuing 0.49 0.44 operations Income from discontinued - - operations Net income $ 0.49 $ 0.44 11.4% COLUMBUS McKINNON CORPORATION Condensed Consolidated Income Statements - UNAUDITED (In thousands, except per share and percentage data) Nine Months Ended December 31, 2012 December 31, 2011 Change Net sales $ 452,710 $ 432,373 4.7 % Cost of products sold 322,687 318,897 1.2 % Gross profit 130,023 113,476 14.6 % Gross profit margin 28.7 % 26.2 % Selling expense 49,204 47,515 3.6 % General and 39,448 33,956 16.2 % administrative expense Restructuring charges - (1,037 ) -100.0 % Amortization 1,481 1,515 -2.2 % Income from operations 39,890 31,527 26.5 % Operating margin 8.8 % 7.3 % Interest and debt 10,418 10,651 -2.2 % expense Investment income (1,017 ) (824 ) 23.4 % Foreign currency 147 121 21.5 % exchange loss Other income, net (429 ) (1,880 ) -77.2 % Income before income tax expense 30,771 23,459 31.2 % Income tax expense 4,504 5,898 -23.6 % Income from continuing 26,267 17,561 49.6 % operations Income from discontinued operations - net of tax - 409 -100.0 % Net income $ 26,267 $ 17,970 46.2 % Average basic shares 19,406 19,256 0.8 % outstanding Basic income per share: Income from continuing 1.35 0.91 operations Income from - 0.02 discontinued operations Net income $ 1.35 $ 0.93 45.2 % Average diluted shares 19,620 19,526 0.5 % outstanding Diluted income per share: Income from continuing 1.34 0.90 operations Income from - 0.02 discontinued operations Net income $ 1.34 $ 0.92 45.7 % COLUMBUS McKINNON CORPORATION Condensed Consolidated Balance Sheets - UNAUDITED (In thousands) December 31, 2012 March 31, 2012 ASSETS Current assets: Cash and cash equivalents $ 111,937 $ 89,473 Trade accounts receivable 78,710 88,642 Inventories 101,531 108,055 Prepaid expenses and other 9,111 10,449 Total current assets 301,289 296,619 Net property, plant, and equipment 60,765 61,709 Goodwill 106,061 106,435 Other intangibles, net 14,281 15,791 Marketable securities 23,699 25,393 Deferred taxes on income 3,033 2,824 Other assets 6,614 6,636 Total assets $ 515,742 $ 515,407 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Notes payable to banks $ - $ 112 Trade accounts payable 30,310 40,991 Accrued liabilities 51,603 61,713 Current portion of long-term debt 1,108 1,093 Total current liabilities 83,021 103,909 Senior debt, less current portion 2,881 3,749 Subordinated debt 148,345 148,140 Other non-current liabilities 92,035 99,143 Total liabilities 326,282 354,941 Shareholders’ equity: Common stock 194 193 Additional paid-in capital 191,945 189,260 Retained earnings 52,162 25,895 ESOP debt guarantee (657 ) (975 ) Accumulated other comprehensive loss (54,184 ) (53,907 ) Total shareholders’ equity 189,460 160,466 Total liabilities and shareholders’ $ 515,742 $ 515,407 equity COLUMBUS McKINNON CORPORATION Condensed Consolidated Statements of Cash Flows - UNAUDITED (In thousands) Nine Months Ended December 31, 2012 December 31, 2011 Operating activities: Net income $ 26,267 $ 17,970 Adjustments to reconcile net income to net cash provided by operating activities: Gain from discontinued operations - (409 ) Depreciation and amortization 9,116 8,609 Deferred income taxes and related 153 378 valuation allowance Gain on sale of real (431 ) (1,909 ) estate/investments Gain on re-measurement of investment - (850 ) Stock based compensation 2,474 2,246 Amortization of deferred financing 226 289 costs Changes in operating assets and liabilities: Trade accounts receivable 9,330 (775 ) Inventories 4,129 (14,011 ) Prepaid expenses (345 ) 2,440 Other assets 415 332 Trade accounts payable (8,835 ) 927 Accrued and non-current liabilities (16,212 ) (1,774 ) Net cash provided by operating 26,287 13,463 activities Investing activities: Proceeds from sale of marketable 4,907 5,747 securities Purchases of marketable securities (2,724 ) (4,503 ) Capital expenditures (7,139 ) (10,464 ) Purchase of businesses, net of cash - (3,356 ) acquired Proceeds from sale of assets 2,357 1,971 Net cash used for investing activities (2,599 ) (10,605 ) from continuing operations Net cash provided by investing activities from discontinued - 409 operations Net cash used for investing activities (2,599 ) (10,196 ) Financing activities: Proceeds from stock options exercised 232 1,733 Net payments under lines-of-credit (52 ) (238 ) Repayment of debt (592 ) (488 ) Payment of deferred financing costs (684 ) - Change in ESOP guarantee 318 324 Net cash (used for) provided by (778 ) 1,331 financing activities Effect of exchange rate changes on (446 ) (2,704 ) cash Net change in cash and cash 22,464 1,894 equivalents Cash and cash equivalents at beginning 89,473 80,139 of year Cash and cash equivalents at end of $ 111,937 $ 82,033 period COLUMBUS McKINNON CORPORATION Additional Data - UNAUDITED December December March 31, 2012 31, 2011 31, 2012 Backlog, as $95.4 $110.3 $114.2 reported(in millions) Backlog, excluding divestiture (in $95.4 $104.2 $109.6 millions) Trade accounts receivable days sales outstanding 46.7 days 50.6 days 50.6 days Inventory turns per year (based on cost of 4.3 turns 4.0 turns 4.3 turns products sold) Days' inventory 84.9 days 91.4 days 85.5 days Trade accounts payable days payables 25.2 days 33.2 days 32.3 days outstanding Working capital as a % 17.5 % 17.5 % 17.6 % of sales Debt to total capitalization 44.6 % 46.6 % 48.8 % percentage Debt, net of cash, to net total 17.6 % 28.9 % 28.4 % capitalization Shipping Days by Quarter Q1 Q2 Q3 Q4 Total FY 13 63 63 60 62 248 FY 12 63 64 58 65 250 Contact: Columbus McKinnon Corporation Gregory P. Rustowicz, 716-689-5442 Vice President - Finance and Chief Financial Officer email@example.com or Investor Relations: Kei Advisors LLC Deborah K. Pawlowski, 716-843-3908 firstname.lastname@example.org
Columbus McKinnon Reports Operating Income Expanded 18% on 7% Increase in Sales in Third Quarter Fiscal 2013
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