Columbus McKinnon Reports 21% Increase in Operating Income on 11% Growth in Revenue for Fourth Quarter Fiscal 2014

Columbus McKinnon Reports 21% Increase in Operating Income on 11% Growth in Revenue for Fourth Quarter Fiscal 2014    *Fourth quarter sales were up 11% to $160.5 million driven by 16% increase     in non-U.S. sales and 7% increase in U.S. sales   *Gross margin improved 70 basis points to 31.3% in the fourth quarter over     the prior-year period; Fiscal 2014 gross margin improved 180 basis points     to 31.0%   *Generated $29.5 million of cash from operations in fiscal 2014.   *Announced regular quarterly dividend of $0.04 per share during the quarter   *Acquired Unified Industries in quarter and expanded product offerings  AMHERST, N.Y., May 22, 2014 (GLOBE NEWSWIRE) -- Columbus McKinnon Corporation (Nasdaq:CMCO), a leading designer, manufacturer and marketer of material handling products and services, today announced financial results for its fiscal fourth quarter and full year ended March 31, 2014. Results include the acquisition of Unified Industries, Inc. on February 28, 2014. Unified Industries, Inc. designs, manufactures and markets overhead light rail workstations primarily used in automotive and industrial applications.  Net sales for the fourth quarter of fiscal 2014 were $160.5million, up $15.9 million, or 11.0%, from the prior-year period. Sales volume was the largest driver of improved revenue; however price improvements and incremental revenue related to acquisitions also contributed to the growth. Foreign exchange translation had a positive impact on sales of $0.2 million in the quarter compared with the prior-year period.  Timothy T. Tevens, President and Chief Executive Officer, commented, "We recognized strong demand in the fourth quarter which converted to revenue very quickly. We completed the installation of a large Rail & Road project in Canada and were excited to see Europe rebound rather nicely from its lows. Higher volume along with productivity improvements drove gross profits at a greater rate than sales as we realized the leverage inherent in our business. Additionally, our recent Unified acquisition was accretive in the quarter and will have a positive impact on sales and operating income in fiscal 2015."  U.S. sales, which comprised 57% of total sales, were up by $6.2 million, or 7.3%, to $91.5 million compared with the fourth quarter of fiscal 2013. This growth was generated by higher volume on improved demand, price increases and $1.0 million in revenue associated with the Unified acquisition.  Sales outside of the U.S. were up $9.7 million, or 16.3%, to $69.0 million. Higher demand, especially in EMEA, along with the Rail & Road project in Canada drove the increased volume. Additionally, price increases, $1.7 million of incremental revenue related to the first quarter Austrian acquisition and foreign exchange translation all benefited sales outside the U.S.  The fluctuation in sales for the fourth quarter of fiscal 2014 compared with the fourth quarter of fiscal 2013 is summarized as follows:  ($ in millions)                                                     $ Change % Change Volume                        11.8     8.1% Acquisitions and divestitures 2.7      1.9% Pricing                      1.2      0.9% Foreign currency translation  0.2      0.1% Total                         $15.9    11.0%  Fourth Quarter Margin Growth Drives Bottom-line Expansion  Gross profit was $50.3 million, up $6.1 million from the prior-year period.As a percentage of sales, gross margin improved 70 basis points to 31.3% compared with 30.6% for the prior-year period.Gross profit growth was driven by the following:                                                  Impact on Gross Profit Higher sales volume                             $3.3 million Productivity gains                               $1.4 million Improved pricing net of material cost inflation $1.0 million Acquisitions                                    $0.7 million Product liability costs                         ($0.3 million)  Selling expense was $18.7 million, up from $16.4 million in the same period of the prior year.As a percent of revenue, selling expense was 11.7% compared with 11.3% in the same period last year.  General and administrative (G&A) expense was up $0.7 million to $13.5 million from the prior-year period.As a percent of sales, G&A declined to 8.4%, compared with 8.9% in the prior-year period.  Operating income grew 21%, or $3.0 million, to $17.5 million over the prior-year period.Operating margin improved to 10.9% in the quarter compared with 10.0% in the prior-year period.Operating leverage was 19.1%.   The effective tax rate in the quarter was 35.7%. The fourth quarter of fiscal 2013 included the benefit of a reversal of a deferred tax asset valuation allowance, and as a result, the prior year tax rate is not meaningful for comparison with this quarter's tax rate.  Fourth quarter fiscal 2014 net income was $9.6 million, or $0.48 per diluted share.This compares with $2.64 per diluted share, which included a $49.0 million tax valuation allowance reversal in the 2013 fourth quarter. On an adjusted basis, excluding the tax valuation allowance reversal and applying a more normalized tax rate of 30%, earnings per diluted share were $0.52 compared with $0.42 in the 2013 fourth quarter.Further details of the reconciliation of adjusted EPS to GAAP EPS are shown on page 11 of this release.  Consistent Cash Generation Enables Financial Flexibility for Acquisitions and Dividend  Cash provided by operations was $11.5 million in the fiscal 2014 fourth quarter.Working capital as a percentage of sales was 21.7% at the end of the fourth quarter of 2014, compared with 18.3% at the end of fiscal 2013's fourth quarter.This was driven by an increase in trade accounts receivable as a result of the 11% increase in quarterly sales compared with the previous year.The Company expects working capital as a percentage of sales to revert back to more normal levels in fiscal 2015.  Capital expenditures for fiscal 2014 were $20.8 million compared with $14.9 million in the prior-year period.Capital expenditures for the expansion of the Company's production facilities in China were approximately $6.4 million of which $4.4 million was expended in fiscal 2014 with the remaining $2 million in accounts payable at fiscal year end.There were $2.7 million in capital investments during the year that were associated with the implementation of a new enterprise resource planning system.The Company expects fiscal 2015 capital spending to be in the range of $20 million to $25 million.  Cash and cash equivalents were $112.3 million at March 31, 2014.Gross debt at March 31, 2014 was $152.3 million.Debt, net of cash, was $40.0 million, or 12.1% of net total capitalization.  Mr. Tevens commented, "Our Company has demonstrated throughout business cycles that we can generate strong levels of cash.This provides us the opportunity to execute our strategic growth plans both organically and through acquisitions, while also rewarding our shareholders with the re-initiation of our quarterly dividend."  Fiscal 2014 Review  Net sales for fiscal 2014 were $583.3 million, down 2.3%, or $14.0 million, on lower volume which was somewhat offset by improved pricing, two additional shipping days and the net impact of acquisitions and divestitures. Foreign currency translation had a $0.6 million positive impact on sales in fiscal 2014.Sales to the U.S., which represented 57% of total sales, were down 3.7% to $331.4 million.Non-U.S. sales decreased by $1.4 million, or 0.5%.Emerging markets represented 9.9% of total sales.  Gross profit in fiscal 2014 increased 3.9% despite lower sales while gross margin expanded 180 basis points to 31.0%.Gross margin expansion reflects productivity gains, the net effect of acquisitions and divestitures and pricing.  Selling expenses increased $3.4 million, or 5.1%, to $69.0 million.As a percent of sales, selling expenses were 11.8% in fiscal 2014 compared with 11.0% in the prior year.G&A expenses were $55.8 million, up 6.7% from $52.3 million in fiscal 2013.G&A expenses as a percent of sales were 9.6% in fiscal 2014 compared with 8.8% in the prior-year period.G&A expenses in fiscal 2014 included $1.7 million of atypical merger and acquisition expenses.   Operating income for fiscal 2014 was flat with the prior year at $54.4 million, despite lower sales. Operating margin of 9.3%, improved over the operating margin of 9.1% in the prior year.  Net income for fiscal 2014 was $30.4 million.Net income for fiscal 2013 was $78.3 million and included the reversal of a deferred tax asset valuation allowance which created a $49.0 million tax benefit. Earnings per diluted share for fiscal 2014 were $1.52 compared with $1.49 per diluted share in 2013 when adjusted for the tax valuation allowance reversal of $2.49 per diluted share.  Solid Growth Outlook as Strategic Investments Take Root and Global Economies Moderately Expand  Backlog was $86.8 million at March 31, 2014, a decrease of $11.6 million, or 11.8%, from backlog of $98.4 million at December 31, 2013 due to strong fourth quarter shipment levels, a good portion of which was related to the large Rail & Road project installed in Canada and other project backlog that was shipped.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.Backlog at March 31, 2014 available for shipment in the quarter ended June 30, 2014 totaled $57.2 million.As of March 31, 2014, project-type backlog of $29.6 million, or 34.1% of total backlog, was scheduled for shipment beyond June 30, 2014.This compares with project-type backlog of $31.1 million at the end of the trailing third quarter and $33.0 million at March 31, 2013.  Both U.S. and Eurozone capacity utilization are leading market indicators for the Company.In March 2014, U.S. industrial capacity utilization improved to 77.6%, compared with 76.8% in March 2013, and 77.1% in December 2013.Eurozone capacity utilization was up measurably to 80.1% in the quarter ended March 31, 2014, compared with 77.6% during the quarter ended March 31, 2013, and 78.4% in the quarter ended December 31, 2013.The Company's sales tend to lag changes in these indicators by one to two quarters.  Mr. Tevens commented, "We are making great strides in our targeted vertical market expansion such as the oil & gas, entertainment, automotive and aerospace industries. In addition, we expect to benefit from our leading market position in developed markets and the investments we have made in emerging markets."  Mr. Tevens concluded, "We believe that our continuous improvement activities have created greater earnings power in the organization which is readily apparent with higher volume and profits, as evidenced by this quarter."  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 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 audio recording of the call will be available two hours after its completion through June 22, 2014 by dialing 203-369-1850.Alternatively, an archived webcast of the call will be on Columbus McKinnon's web site at: June 22, 2014.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  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                                          March 31, 2014 March 31, 2013 Change                                                                       Net sales                                 $160,475       $144,553       11.0% Cost of products sold                     110,175        100,345        9.8% Gross profit                              50,300         44,208         13.8% Gross profit margin                       31.3%          30.6%           Selling expense                           18,747         16,404         14.3% General and administrative expense        13,507         12,823         5.3% Amortization                              518            500            3.6% Income from operations                    17,528         14,481         21.0% Operating margin                          10.9%          10.0%           Interest and debt expense                 3,354          3,339          0.4% Investment income                         (849)          (529)          60.5% Foreign currency exchange loss (gain)     136            (192)          NM Other (income) expense, net               (74)           12             NM Income before income tax expense          14,961         11,851         26.2% (benefit) Income tax expense (benefit)              5,346          (40,178)       NM Net income                                $9,615         $52,029        -81.5%                                                                       Average basic shares outstanding          19,755         19,464         1.5% Basic income per share:                                                Basic income per share                    $0.49          $2.67          -81.6%                                                                       Average diluted shares outstanding        20,075         19,730         1.7% Diluted income per share:                                              Diluted income per share                  $0.48          $2.64          -81.8%   COLUMBUS McKINNON CORPORATION Condensed Consolidated Income Statements (Unaudited) (In thousands, except per share and percentage data)                                                                                                                Year Ended                                          March 31, 2014 March 31, 2013 Change                                                                       Net sales                                 $583,290       $597,263       -2.3% Cost of products sold                     402,242        423,032        -4.9% Gross profit                              181,048        174,231        3.9% Gross profit margin                       31.0%         29.2%          Selling expense                           68,963         65,608         5.1% General and administrative expense        55,754         52,271         6.7% Amortization                              1,981          1,981          0.0% Income from operations                    54,350         54,371         0.0% Operating margin                          9.3%          9.1%           Interest and debt expense                 13,492         13,757         -1.9% Investment income                         (1,595)        (1,546)        3.2% Foreign currency exchange loss (gain)     1,124          (45)           NM Other (income) expense, net               (1,393)        (417)          234.1% Income before income tax expense          42,722         42,622         0.2% (benefit) Income tax expense (benefit)              12,301         (35,674)       NM Net income                                $30,421        $78,296        -61.1%                                                                       Average basic shares outstanding          19,655         19,425         1.2% Basic income per share:                                                Basic income per share                    $1.55          $4.03          -61.5%                                                                       Average diluted shares outstanding        19,950         19,687         1.3% Diluted income per share:                                              Diluted income per share                  $1.52          $3.98          -61.8%   COLUMBUS McKINNON CORPORATION Condensed Consolidated Balance Sheets (Unaudited) (In thousands)                                                                                                    March 31, 2014 March 31, 2013                                                          ASSETS                                                    Current assets:                                           Cash and cash equivalents                  $112,309       $121,660 Trade accounts receivable                  93,223         80,224 Inventories                                97,576         94,189 Prepaid expenses and other                 23,444         17,905 Total current assets                       326,552        313,978                                                          Net property, plant, and equipment         78,687         65,698 Goodwill                                   119,303        105,354 Other intangibles, net                     20,842         13,395 Marketable securities                      21,941         23,951 Deferred taxes on income                   23,406         37,205 Other assets                               7,943          7,286 Total assets                               $598,674       $566,867                                                                                                                   LIABILITIES AND SHAREHOLDERS' EQUITY                      Current liabilities:                                      Trade accounts payable                     $35,359        $34,329 Accrued liabilities                        52,348         48,884 Current portion of long-term debt          1,588          1,024 Total current liabilities                  89,295         84,237                                                          Senior debt, less current portion          2,020          2,641 Subordinated debt                          148,685        148,412 Other non-current liabilities              67,388         91,590 Total liabilities                          307,388        326,880                                                          Shareholders' equity:                                     Common stock                               198            195 Additional paid-in capital                 198,546        192,308 Retained earnings                          133,820        104,191 ESOP debt guarantee                        (142)          (552) Accumulated other comprehensive loss       (41,136)       (56,155) Total shareholders' equity                 291,286        239,987 Total liabilities and shareholders' equity $598,674       $566,867   COLUMBUS McKINNON CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)                                                                                                                Year Ended                                                 March 31, 2014 March 31, 2013                                                                Operating activities:                                           Net income                                       $30,421        $78,296 Adjustments to reconcile net income to net cash                 provided by operating activities: Depreciation and amortization                    13,380         12,115 Deferred income taxes and related valuation      5,031          (42,047) allowance Gain on sale of real estate, investments, and    (2,332)        (827) other Stock based compensation                         3,633          3,334 Amortization of deferred financing costs and     870            592 discount on debt Changes in operating assets and liabilities, net of effects of business acquisition and                          divestiture: Trade accounts receivable                        (9,318)        6,712 Inventories                                      1,312          10,106 Prepaid expenses                                 (3,750)        (1,283) Other assets                                     (273)          (354) Trade accounts payable                           (2,821)        (5,465) Accrued liabilities                              1,081          (12,268) Non-current liabilities                          (7,727)        (6,533) Net cash provided by operating activities        29,507         42,378                                                                Investing activities:                                           Proceeds from sale of marketable securities      6,689          6,573 Purchases of marketable securities               (4,099)        (4,138) Capital expenditures                             (20,846)       (14,879) Purchases of businesses, net of cash acquired    (22,169)       -- Proceeds from sale of assets                     --             2,357 Net cash used for investing activities           (40,425)       (10,087)                                                                Financing activities:                                           Proceeds from stock options exercised            2,194          295 Net payments under lines-of-credit               (7)            (54) Repayment of debt                                (858)          (1,066) Payment of deferred financing costs              --             (684) Change in ESOP guarantee                         410            423 Net cash provided by (used for) financing        1,739          (1,086) activities                                                                Effect of exchange rate changes on cash          (172)          982                                                                Net change in cash and cash equivalents          (9,351)        32,187 Cash and cash equivalents at beginning of year   121,660        89,473 Cash and cash equivalents at end of period       $112,309       $121,660   COLUMBUS McKINNON CORPORATION Additional Data (Unaudited)                                                                                                       March 31, 2014 December 31, 2013 March 31,                                                                      2013                                                                    Backlog (in millions)               $86.8          $98.4             $99.0                                                                    Trade accounts receivable                                           days sales outstanding              52.9 days      47.4 days         50.5 days                                                                    Inventory turns per year                                            (based on cost of products sold)    4.5 turns      3.9 turns         4.3 turns Days' inventory                     81.1 days      93.6 days         84.9 days                                                                    Trade accounts payable                                              days payables outstanding           29.2 days      26.9 days         31.1 days                                                                    Working capital as a % of sales     21.7%          19.9%             18.3%                                                                    Debt to total capitalization        34.3%          36.2%             38.8% percentage Debt, net of cash, to net total     12.1%          9.4%              11.2% capitalization   Shipping Days by Quarter                      Q1 Q2 Q3 Q4 Total                FY 15  63 64 60 63 250                FY 14  64 63 61 62 250                FY 13  63 63 60 62 248   COLUMBUS McKINNON CORPORATION Reconciliation GAAP Diluted EPS to Adjusted Diluted EPS                                                                                                            Three Months Ended                                               March 31, 2014 March 31, 2013                                                              GAAP diluted EPS                              $0.48          $2.64 Adjustment to reflect normalized 30% tax rate $0.04          ($2.22) Adjusted diluted EPS                          $0.52          $0.42  Adjusted diluted EPS is defined as diluted EPS as reported, adjusted to apply a normalized 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 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 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: Gregory P. Rustowicz          Vice President - Finance and Chief Financial Officer          Columbus McKinnon Corporation          716-689-5442                   Investor Relations:          Deborah K. Pawlowski          Kei Advisors LLC          716-843-3908  
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