Columbus McKinnon Reports Gross Margin Expanded to 31.9% in Fiscal 2014 Second Quarter

  Columbus McKinnon Reports Gross Margin Expanded to 31.9% in Fiscal 2014
  Second Quarter

  *Solid operating efficiencies expands gross margin to 31.9%, a 300 basis
    point improvement over prior-year period; operating margin steady at 8.8%
  *Sales to emerging markets increased to $14.2 million, or 10.2% of sales,
    up 10.9% from prior-year period
  *Order rate improved sequentially from fiscal 2014 first quarter, up 5%

Business Wire

AMHERST, N.Y. -- October 24, 2013

Columbus McKinnon Corporation (NASDAQ:CMCO), a leading designer, manufacturer
and marketer of material handling products, today announced financial results
for its fiscal 2014 second quarter which ended September 30, 2013.

Timothy T. Tevens, President and Chief Executive Officer, commented, “We
continue to realize the benefits of our lean manufacturing processes and
continuous improvement efforts as demonstrated by the level of gross margin we
achieved despite lower sales volume. Our growth in Asia, specifically China,
continues to outpace the rest of the geographic markets we serve. We are also
making excellent progress on the new facilities we are building to better
serve that region. The facilities will enable us to compete in China on a
better cost basis and provide more capacity to address this important market.”

Net sales for the second quarter of fiscal 2014 were $138.9  million, down
$7.6 million, or 5.2%, from the prior-year period as pricing improvements were
more than offset by reductions in volume. Volume declines were mostly driven
by reduced levels of investment on major capital projects by end users and the
continued poor economy in Europe. The net effect of acquisitions and
divestitures offset the impact of foreign currency translation.

U.S. sales, which comprised 57% of total sales, were down by $6.1 million, or
7.1%, to $78.9 million compared with the second quarter of fiscal 2013. Lower
volume and the impact of the crane business divestiture in August 2012 more
than offset pricing improvements.

Sales outside of the U.S. were down $1.6 million, or 2.5%, to $60.0 million,
as growth in emerging markets, improved pricing and the $1.4 million
contribution from the June 2013 Austrian acquisition were not sufficient to
offset lower volume, primarily in Europe. Foreign currency translation had a
positive impact of $0.3 million on sales during the quarter.

The fluctuation in sales for the second quarter of fiscal 2014 compared with
the second quarter of fiscal 2013 is summarized as follows:

                                           
($ in millions)                    $ Change      % Change
Volume                               (11.1 )     (7.6 ) %
Acquisitions & divestitures          (0.3  )     (0.2 ) %
Foreign currency translation         0.3         0.2  %
Pricing                             3.5      2.4  %
Total                              $ (7.6  )   (5.2 ) %
                                                 

Improved Gross Margin

Gross profit in the second quarter of fiscal 2014 increased to $44.3 million,
up $1.9 million from the prior-year period. Improved pricing net of raw
material inflation and acquisitions and divestitures had a positive effect on
gross profit. This more than offset the negative impact of lower volume and
higher product liability costs resulting from a favorable reserve adjustment
in the prior-year period. As a percentage of sales, gross margin improved 300
basis points to 31.9% compared with 28.9% for the prior-year period.

Selling expense was $17.3 million, up 5.1%, or $0.8 million, from the same
period of the prior year. The recent Austrian acquisition resulted in an
increase in selling expense of approximately $1.0 million when compared with
the prior year. As a percent of revenue, selling expense was 12.4% compared
with 11.2% in the same period last year.

General and administrative (G&A) expense was $14.2 million, up from $12.5
million in the prior-year period. Approximately $0.6 million in costs were
non-recurring and included personnel related costs and professional services.
As a percent of sales, G&A was 10.2%, compared with 8.6% in the prior-year
period.

Operating income in the fiscal 2014 second quarter was down $0.6 million, or
4.9%, to $12.3 million when compared with the second quarter of fiscal 2013.
Operating margin of 8.8% was unchanged when compared with the prior-year
period.

Income before tax expense was positively impacted by approximately $1.0
million as a result of a gain on the sale of certain equity securities
received in an insurance company demutualization when compared with the prior
year. The effective tax rate in the 2014 second quarter was 30.6% compared
with 15.6% in the prior-year period. The prior-year period effective tax rate
was impacted by a valuation allowance on deferred tax assets, primarily in the
U.S.

Second quarter fiscal 2014 net income was $7.1 million, or $0.36 per diluted
share, down from $8.3 million, or $0.42 per diluted share, in fiscal 2013’s
second quarter. Adjusted for the current quarter’s tax rate, the prior-year
period’s earnings per diluted share were $0.35. Further details of the
reconciliation of GAAP EPS to adjusted EPS are shown on page 10 of this
release.

Strong cash position and financial flexibility

Cash provided by operations was $3.6 million in the fiscal 2014 second
quarter. Working capital as a percentage of sales was 21.5% at the end of the
second quarter of 2014, up from 20.2% at the end of the trailing first quarter
of fiscal 2014 on higher inventory related to a new in-stock guarantee
customer program and the increase of approximately $2.9 million associated
with large engineered projects.

Capital expenditures for the first half of fiscal 2014 were $8.0 million
compared with $4.1 million in the prior-year period. Approximately $1.4
million was associated with the implementation of a new enterprise management
system. The Company continues to expect fiscal 2014 capital spending to be in
the range of $20 million to $25 million which includes new facilities being
constructed in China.

Cash and cash equivalents was $111.8 million at September 30, 2013. Gross debt
at September 30, 2013 was $152.0 million. Debt, net of cash, was $40.2
million, or 13.4% of net total capitalization, compared with $41.5 million, or
14.4% of net total capitalization, at June 30, 2013.

First half fiscal 2014 review

Net sales for the first six months of fiscal 2014 were $277.7 million, down
7.3%, or $21.7 million, from the prior-year period. Last year’s sales included
the crane business that was divested in August 2012. The net effect of
acquisitions and divestitures was a negative $4.1 million in the first half of
fiscal 2014. Sales to the U.S., which represented 58% of total sales, were
down 8.0% to $160.9 million. Non-U.S. sales decreased by $7.7 million, or
6.2%, in the first six months of fiscal 2014. Foreign currency translation had
a $0.1 million positive impact on sales in the first six months of fiscal
2014.

Despite lower sales, gross profit in the first half of fiscal 2014 increased
1.8% while gross margin expanded 280 basis points to 31.6%. Gross margin
expansion reflects productivity gains, the net effect of acquisitions and
divestitures and pricing.

Selling expenses increased $1.2 million, or 3.7%, to $34.0 million when
compared with the first half of fiscal 2013. As a percent of sales, selling
expenses were 12.3% in the first half of fiscal 2014 compared with 11.0% in
the prior-year period. G&A expenses were $27.0 million, up 1.1% from $26.7
million in the prior-year period. G&A expenses as a percent of sales were 9.7%
in the first half of fiscal 2014 compared with 8.9% in the prior-year period.

Operating income for the first six months of fiscal 2014 of $25.7 million was
unchanged from the prior-year period while operating margin increased by 70
basis points to 9.3%.

Net income for the first half of fiscal 2014 decreased by $2.5 million, or
15.3%, to $14.1 million due to the prior period’s unusually low tax rate as a
result of a deferred tax asset valuation allowance. Earnings per diluted share
for the first six months of fiscal 2014 were down by 16.5% to $0.71 compared
with $0.85 for the prior-year period. Adjusted for the first half of fiscal
2014’s tax rate, adjusted earnings per diluted share for the first six months
of fiscal 2013 were $0.72. Further details of the reconciliation of GAAP EPS
to adjusted EPS are shown on page 10 of this release.

Backlog was $91.9 million at September 30, 2013, slightly lower than $92.0
million at June 30, 2013. Although the time to convert the majority of backlog
to sales typically ranges 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 September 30, 2013, project-type backlog of
$34.4 million, or 37.4% of total backlog, was scheduled for shipment beyond
December 31, 2013. Backlog at September 30, 2013 available for shipment in the
quarter ended December 31, 2013 totaled $57.5 million.

Both U.S. and Eurozone capacity utilization are leading market indicators for
the Company. In August 2013, U.S. industrial capacity utilization was 76.8%,
compared with 75.9% in September 2012, and unchanged from June 2013. Eurozone
capacity utilization was 78.3% in the quarter ended September 30, 2013, up
from 78.2% during the quarter ended September 30, 2012, and up from 77.5% in
the quarter ended June 30, 2013. The Company’s sales tend to lag changes in
these indicators by one to two quarters.

Emerging market growth

Mr. Tevens concluded, “Our biggest revenue growth opportunities remain the
emerging markets of Latin America, China, Eastern Europe and Africa. We still
see strength in targeted North American market verticals of oil & gas, as well
as entertainment. Weakness continues in the heavy OEM verticals and general
industrial markets in the U.S., while mining and construction markets remain
weak around the world. Encouragingly, we are seeing signs of improvement in
Western Europe and some initial indications of opportunity with infrastructure
investment in the U.S.”

He concluded, “As we look further out, we are focused on driving growth
organically through new product development and further developing new
markets, as well as making strategic investments that expand our market reach,
extend our product offerings and grow market share.”

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast today at 10:00
AM 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 November 21, 2013 by dialing 402-220-4169. Alternatively,
an archived webcast of the call will be on Columbus McKinnon’s web site at:
http://www.cmworks.com/investors until November 21, 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.

                                                                 
COLUMBUS McKINNON CORPORATION

Condensed Consolidated Income Statements
(Unaudited)
                          
(In thousands, except per share and percentage data)
                             
                             Three Months Ended
                                                                       
                             September 30,       September 30,         Change
                             2013                2012
                                                                       
Net sales                    $  138,852          $  146,472            -5.2  %
Cost of products sold          94,592         104,070           -9.1  %
Gross profit                    44,260              42,402             4.4   %
Gross profit margin             31.9       %        28.9       %
Selling expense                 17,281              16,447             5.1   %
General and                     14,167              12,546             12.9  %
administrative expense
Amortization                   526            489               7.6   %
Income from operations         12,286         12,920            -4.9  %
Operating margin                8.8        %        8.8        %
Interest and debt               3,372               3,505              -3.8  %
expense
Investment income               (276     )          (382     )         -27.7 %
Foreign currency                195                 190                2.6   %
exchange loss
Other (income) expense,        (1,261   )      (173     )         628.9 %
net
Income before income tax        10,256              9,780              4.9   %
expense
Income tax expense             3,134          1,528             105.1 %
Net income                   $  7,122        $  8,252             -13.7 %
                                                                       
Average basic shares            19,655              19,419             1.2   %
outstanding
Basic income per share:                      
Basic income per share       $  0.36         $  0.42              -14.3 %
                                                                       
Average diluted shares          19,959              19,581             1.9   %
outstanding
Diluted income per                           
share:
Diluted income per share     $  0.36         $  0.42              -14.3 %
                                                                             

                                                               
COLUMBUS McKINNON CORPORATION

Condensed Consolidated Income Statements
(Unaudited)
                                                                       
(In thousands, except per share and percentage data)
                             
                             Six Months Ended
                                                                       
                             September 30,       September 30,         Change
                             2013                2012
                                                                       
Net sales                    $  277,743          $  299,485            -7.3  %
Cost of products sold          189,992        213,259           -10.9 %
Gross profit                    87,751              86,226             1.8   %
Gross profit margin             31.6       %        28.8       %
Selling expense                 34,028              32,814             3.7   %
General and                     27,017              26,724             1.1   %
administrative expense
Amortization                   985            988               -0.3  %
Income from operations         25,721         25,700            0.1   %
Operating margin                9.3        %        8.6        %
Interest and debt               6,743               7,004              -3.7  %
expense
Investment income               (492     )          (662     )         -25.7 %
Foreign currency                420                 (146     )         NM
exchange loss (gain)
Other (income) expense,        (1,172   )      (495     )         136.8 %
net
Income before income tax        20,222              19,999             1.1   %
expense
Income tax expense             6,080          3,311             83.6  %
Net income                   $  14,142       $  16,688            -15.3 %
                                                                       
Average basic shares            19,587              19,384             1.0   %
outstanding
Basic income per share:                      
Basic income per share       $  0.72         $  0.86              -16.3 %
                                                                       
Average diluted shares          19,866              19,546             1.6   %
outstanding
Diluted income per                           
share:
Diluted income per share     $  0.71         $  0.85              -16.5 %
                                                                             


COLUMBUS McKINNON CORPORATION

Condensed Consolidated Balance Sheets
                                                            
(In thousands)
                                                                 
                                               September 30,     March 31,
                                               2013              2013
                                               (unaudited)
                                                                 
ASSETS
Current assets:
Cash and cash equivalents                      $  111,819        $ 121,660
Trade accounts receivable                         76,852           80,224
Inventories                                       106,392          94,189
Prepaid expenses and other                       19,082       17,905  
Total current assets                             314,145      313,978 
                                                                 
Net property, plant, and equipment                69,112           65,698
Goodwill                                          111,901          105,354
Other intangibles, net                            12,906           13,395
Marketable securities                             22,612           23,951
Deferred taxes on income                          39,084           37,205
Other assets                                     6,491        7,286   
Total assets                                   $  576,251     $ 566,867 
                                                                 
                                                                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable                         $  29,466         $ 34,329
Accrued liabilities                               49,319           48,884
Current portion of long-term debt                1,119        1,024   
Total current liabilities                        79,904       84,237  
                                                                 
Senior debt, less current portion                 2,327            2,641
Subordinated debt                                 148,549          148,412
Other non-current liabilities                    86,906       91,590  
Total liabilities                                317,686      326,880 
                                                                 
Shareholders’ equity:
Common stock                                      197              195
Additional paid-in capital                        194,634          192,308
Retained earnings                                 118,333          104,191
ESOP debt guarantee                               (346     )       (552    )
Accumulated other comprehensive loss             (54,253  )    (56,155 )
Total shareholders’ equity                       258,565      239,987 
Total liabilities and shareholders’ equity     $  576,251     $ 566,867 
                                                                           

                                                            
COLUMBUS McKINNON CORPORATION

Condensed Consolidated Statements of Cash Flows
(Unaudited)
                                                                 
(In thousands)
                                               
                                               Six Months Ended
                                               September 30,     September 30,
                                               2013              2012
                                                                 
Operating activities:
Net income                                     $  14,142         $  16,688
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization                     6,324             6,221
Deferred income taxes and related                 (1,249   )        155
valuation allowance
Gain on sale of real estate, investments,         (1,543   )        (315    )
and other
Stock based compensation                          1,758             1,649
Amortization of deferred financing costs          436               192
and discount on debt
Changes in operating assets and
liabilities, net of effects of business
acquisition and divestiture:
Trade accounts receivable                         5,074             4,618
Inventories                                       (10,433  )        (7,231  )
Prepaid expenses                                  (1,024   )        (3,477  )
Other assets                                      684               445
Trade accounts payable                            (5,366   )        (6,002  )
Accrued and non-current liabilities              (7,094   )     (5,369  )
Net cash provided by operating activities        1,709         7,574   
                                                                 
Investing activities:
Proceeds from sale of marketable                  3,724             3,101
securities
Purchases of marketable securities                (2,597   )        (1,936  )
Capital expenditures                              (8,033   )        (4,080  )
Purchase of business, net of cash acquired        (5,847   )        -
Proceeds from sale of assets                     -             1,482   
Net cash used for investing activities           (12,753  )     (1,433  )
                                                                 
Financing activities:
Proceeds from stock options exercised             838               219
Net payments under lines-of-credit                -                 (51     )
Repayment of debt                                 (295     )        (393    )
Change in ESOP guarantee                         206           213     
Net cash provided by (used for) financing        749           (12     )
activities
                                                                 
Effect of exchange rate changes on cash          454           (675    )
                                                                 
Net change in cash and cash equivalents           (9,841   )        5,454
Cash and cash equivalents at beginning of        121,660       89,473  
year
Cash and cash equivalents at end of period     $  111,819     $  94,927  
                                                                            

                                                               
COLUMBUS McKINNON CORPORATION

Additional Data
(Unaudited)
                                                                         
                     September             September             March
                     30,                   30,                   31,
                     2013                  2012                  2013
                                                                         
Backlog (in          $91.9                 $105.1                $99.0
millions)
                                                                         
Trade accounts
receivable
days sales           50.4        days      51.5        days      50.5    days
outstanding
                                                                         
Inventory turns
per year
(based on cost
of products          3.6         turns     3.7         turns     4.3     turns
sold)
Days' inventory      101.4       days      98.6        days      84.9    days
                                                                         
Trade accounts
payable
days payables        28.3        days      29.6        days      31.1    days
outstanding
                                                                         
Working capital      21.5        %         19.4        %         18.3    %
as a % of sales
                                                                         
Debt to total
capitalization       37.0        %         46.4        %         38.8    %
percentage
Debt, net of
cash, to net         13.4        %         24.6        %         11.2    %
total
capitalization
                                                                         


Shipping Days by Quarter
                                     
              Q1         Q2         Q3         Q4         Total
                                                          
FY 14         64         63         61         62         250
                                                          
FY 13         63         63         60         62         248
                                                          

                                                         
COLUMBUS McKINNON CORPORATION
Reconciliation Adjusted Diluted EPS to GAAP Diluted EPS
                                                            
                                                            Three Months Ended
                                                            September 30, 2012
                                                            
GAAP diluted EPS                                            $0.42
Adjusted to reflect current quarter’s 30.6% tax rate      ($0.07)
Adjusted diluted EPS                                        $0.35
                                                            
                                                            
                                                            Six Months Ended
                                                            September 30, 2012
                                                            
GAAP diluted EPS                                            $0.85
Adjusted to reflect current year to date 30.1% tax rate   ($0.13)
Adjusted diluted EPS                                        $0.72

Adjusted diluted EPS is defined diluted EPS as reported, adjusted to apply the
current quarter’s tax rate. Adjusted diluted EPS is not a measure determined
in accordance with generally accepted accounting principles in the United
States, commonly known as GAAP. Nevertheless, Columbus McKinnon believes that
providing non-GAAP information such as adjusted 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 diluted EPS to the
historical period’s diluted EPS.

Contact:

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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