Skip to main content

Columbus McKinnon Blueprint for Growth Strategy Continues to Strengthen Earnings Power in Second Quarter Fiscal Year 2020

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 2020 second quarter, which ended September 30, 2019.

Second Quarter Highlights (compared with prior-year period)

  • Revenue up 1.8% adjusted for divestitures and changes in foreign currency exchange rates driven by impact of 80/20 Process and solid projects business
  • Blueprint for Growth strategy delivered operating margin expansion of 80 basis points to 12.2%; Adjusted operating margin expanded 100 bps to 12.7%
  • $5.2 million in operating income contributions realized from 80/20 process, including footprint rationalization, more than offset headwinds
  • Net income was $16.6 million, up 4.3%; Adjusted net income increased 8.1%
  • Generated strong operating cash flow of $40 million in the quarter

Mark Morelli, President and CEO of Columbus McKinnon, commented, “We are executing to plan, and our results demonstrate the continued success of our Blueprint for Growth strategy and the implementation of our business operating system E-PAS™ (“Earnings Power Acceleration System”). The execution of our strategy drove more than an 8% increase in adjusted net income. Importantly, we continue to demonstrate our cash generating strength, producing $40 million in cash from operating activities in the quarter.”

He continued, “The 80/20 Process, specifically strategic pricing and indirect cost reductions, along with factory closures provided approximately $9 million in operating income year-to-date of which $5.2 million was in the second quarter. This more than offset industrial market headwinds, higher medical costs, tariffs and the impact of divesting less profitable businesses. We now expect our Blueprint for Growth strategy to contribute approximately $18 million in operating income in fiscal 2020, up from our previous expectation of $12 million.”

Mr. Morelli concluded, “Our self-help strategy is enabling significant investment in product development, marketing and digital initiatives despite weaker economic conditions. Early examples of innovation to solve high value customer problems include automating workstations with ProPath™, integrating load sensing into hoists and productizing custom automation into modules. These products improve customer safety, productivity and up time.”

Second Quarter Fiscal 2020 Sales

($ in millions)

Q2 FY 20

Q2 FY 19

Change

% Change

Net sales

$

207.6

$

217.1

$

(9.5

)

(4.4

)%

U.S. sales

$

113.5

$

117.5

$

(4.0

)

(3.4

)%

% of total

55

%

54

%

Non-U.S. sales

$

94.1

$

99.6

$

(5.5

)

(5.5

)%

% of total

45

%

46

%

Adjusted for the $9.2 million of sales from divestitures from the prior-year period and the $4.0 million negative impact of foreign currency translation, sales grew 1.8% due to the impact of the 80/20 Process and strong volume in our projects business which more than offset weakness in our short cycle business. Sales outside the U.S., adjusted for divestitures and foreign currency translation, were up $2.8 million, or 2.9%, while U.S. sales, adjusted for divestitures, were up $0.9 million, or 0.8%.

Second Quarter Fiscal 2020 Operating Results

($ in millions)

Q2 FY 20

Q2 FY 19

Change

% Change

Gross profit

$

73.5

$

75.9

$

(2.4

)

(3.2

)%

Gross margin

35.4

%

35.0

%

40 bps

Income from operations

$

25.2

$

24.8

$

0.4

1.6

%

Operating margin

12.2

%

11.4

%

80 bps

Net income

$

16.6

$

15.9

$

0.7

4.3

%

Diluted EPS

$

0.69

$

0.67

$

0.02

3.0

%

Adjusted EBITDA *

$

33.7

$

33.5

$

0.2

0.5

%

Adjusted EBITDA margin

16.2

%

15.4

%

80 bps

*A non-GAAP measure, Adjusted EBITDA is defined as adjusted operating income plus depreciation and amortization. Please see the attached tables for a reconciliation of adjusted EBITDA to GAAP net income (loss).

Gross margin expanded as pricing, net of material cost inflation, and productivity offset tariffs, the negative effects of foreign currency exchange, factory closure and business realignment costs. For more information on changes in gross profit, please see the table on page 8 of this release. Adjusted income from operations was $26.3 million, up $0.9 million, or 3.4%, over the second quarter of fiscal 2019. Adjusted operating margin expanded 100 basis points from the impact of the 80/20 Process. Please see the reconciliation of GAAP income from operations to adjusted income from operations on page 11 of this release.

Adjusted EBITDA margin was 16.2% for the quarter, an 80 basis point expansion over the prior-year period. Please see the reconciliation of GAAP net income to adjusted EBITDA on page 13 of this release.

Third Quarter Fiscal 2020 Outlook

Progress with the 80/20 Process has enabled the Company to announce the intended closure of a second facility in Ohio. This is expected to provide annual savings of approximately $5 million beginning in the third quarter of fiscal 2021. Well-reported industrial market weakness will likely continue however, we are encouraged that industrial market indicators are stabilizing. The Company believes that savings realized from its Blueprint for Growth strategy can continue to offset headwinds, fund investments for growth, and drive margin and earnings expansion. The Company expects revenue in the third quarter of fiscal year 2020 to be down approximately 2% compared with revenue of $205 million in the prior-year period (adjusted for divestitures and foreign currency translation at current rates).

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast Thursday, November 7, 2019 at 10:00 AM Eastern Time, at which management 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. The listen-only audio webcast can be monitored at www.cmworks.com/investors. To listen to the archived call, dial 412-317-6671 and enter the passcode 13694761. The telephonic replay will be available from 1:00 PM Eastern Time on the day of the call through Thursday, November 14, 2019. 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, 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 sales 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 the effectiveness of the Company’s 80/20 Process to simplify operations, the ability of the Company’s Operational Excellence initiatives to drive profitability, the success of the Company’s efforts to Ramp the Growth Engine, global 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 ability to expand into new markets and geographic regions, 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

September 30,
2019

September 30,
2018

Change

Net sales

$

207,609

$

217,142

(4.4

)%

Cost of products sold

134,116

141,242

(5.0

)%

Gross profit

73,493

75,900

(3.2

)%

Gross profit margin

35.4

%

35.0

%

Selling expenses

22,877

24,515

(6.7

)%

% of net sales

11.0

%

11.3

%

General and administrative expenses

19,153

19,688

(2.7

)%

% of net sales

9.2

%

9.1

%

Research and development expenses

2,999

3,118

(3.8

)%

% of net sales

1.4

%

1.4

%

Net loss on sales of businesses, including impairment

7

NM

Amortization of intangibles

3,226

3,754

(14.1

)%

Income from operations

25,231

24,825

1.6

%

Operating margin

12.2

%

11.4

%

Interest and debt expense

3,759

4,248

(11.5

)%

Investment (income) loss

(229

)

(111

)

106.3

%

Foreign currency exchange (gain) loss

(296

)

507

NM

Other (income) expense, net

257

(307

)

NM

Income before income tax expense

21,740

20,488

6.1

%

Income tax expense

5,141

4,576

12.3

%

Net income

$

16,599

$

15,912

4.3

%

Average basic shares outstanding

23,631

23,272

1.5

%

Basic income per share

$

0.70

$

0.68

2.9

%

Average diluted shares outstanding

23,926

23,721

0.9

%

Diluted income per share

$

0.69

$

0.67

3.0

%

Dividends declared per common share

$

0.06

$

0.05

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Income Statements - UNAUDITED

(In thousands, except per share and percentage data)

 

Six Months Ended

September 30,
2019

September 30,
2018

Change

Net sales

$

420,321

$

442,134

(4.9

)%

Cost of products sold

271,216

286,587

(5.4

)%

Gross profit

149,105

155,547

(4.1

)%

Gross profit margin

35.5

%

35.2

%

Selling expenses

45,632

50,082

(8.9

)%

% of net sales

10.9

%

11.3

%

General and administrative expenses

38,753

41,514

(6.7

)%

% of net sales

9.2

%

9.4

%

Research and development expenses

5,791

6,866

(15.7

)%

% of net sales

1.4

%

1.6

%

Net loss on sales of businesses, including impairment

176

11,100

(98.4

)%

Amortization of intangibles

6,479

7,657

(15.4

)%

Income from operations

52,274

38,328

36.4

%

Operating margin

12.4

%

8.7

%

Interest and debt expense

7,611

8,855

(14.0

)%

Investment (income) loss

(531

)

(379

)

40.1

%

Foreign currency exchange (gain) loss

(706

)

231

NM

Other (income) expense, net

419

(347

)

NM

Income before income tax expense

45,481

29,968

51.8

%

Income tax expense

10,303

6,350

62.3

%

Net income

$

35,178

$

23,618

48.9

%

Average basic shares outstanding

23,532

23,194

1.5

%

Basic income per share

$

1.49

$

1.02

46.1

%

Average diluted shares outstanding

23,832

23,621

0.9

%

Diluted income per share

$

1.48

$

1.00

48.0

%

Dividends declared per common share

$

0.06

$

0.05

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Balance Sheets

(In thousands)

 

September 30, 2019

March 31, 2019

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

71,979

$

71,093

Trade accounts receivable

129,978

129,157

Inventories

142,427

146,263

Prepaid expenses and other

16,711

16,075

Total current assets

361,095

362,588

Property, plant, and equipment, net

82,674

87,303

Goodwill

317,616

322,816

Other intangibles, net

222,699

232,940

Marketable securities

7,862

7,028

Deferred taxes on income

26,361

27,707

Other assets

53,072

21,189

Total assets

$

1,071,379

$

1,061,571

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Trade accounts payable

$

48,996

$

46,974

Accrued liabilities

95,115

99,304

Current portion of long-term debt

65,000

65,000

Total current liabilities

209,111

211,278

Term loan and revolving credit facility

206,369

235,320

Other non-current liabilities

192,081

183,814

Total liabilities

607,561

630,412

Shareholders’ equity:

Common stock

237

234

Additional paid-in capital

284,271

277,518

Retained earnings

270,218

236,459

Accumulated other comprehensive loss

(90,908

)

(83,052

)

Total shareholders’ equity

463,818

431,159

Total liabilities and shareholders’ equity

$

1,071,379

$

1,061,571

COLUMBUS McKINNON CORPORATION

Condensed Consolidated Statements of Cash Flows - UNAUDITED

(In thousands)

 

Six Months Ended

September 30, 2019

September 30, 2018

Operating activities:

Net income

$

35,178

$

23,618

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Depreciation and amortization

14,747

16,862

Deferred income taxes and related valuation allowance

748

(1,768

)

Net loss (gain) on sale of real estate, investments, and other

(446

)

(42

)

Stock based compensation

3,511

3,094

Amortization of deferred financing costs

1,327

1,328

Net loss on sales of businesses, including impairment

176

11,100

Non-cash lease expense

4,223

Changes in operating assets and liabilities, net of effects of business acquisitions and divestitures:

Trade accounts receivable

(2,648

)

(8,236

)

Inventories

1,400

(11,531

)

Prepaid expenses and other

(2,883

)

(906

)

Other assets

(171

)

487

Trade accounts payable

332

(4,268

)

Accrued liabilities

(8,230

)

1,511

Non-current liabilities

(9,384

)

(3,660

)

Net cash provided by (used for) operating activities

37,880

27,589

Investing activities:

Proceeds from sales of marketable securities

1,928

598

Purchases of marketable securities

(2,581

)

(59

)

Capital expenditures

(4,843

)

(4,847

)

Proceeds from sale of equipment and real estate

51

176

Net payment related to the sales of businesses

(214

)

Payment of restricted cash to former owner

(294

)

Net cash provided by (used for) investing activities

(5,659

)

(4,426

)

Financing activities:

Proceeds from the issuance of common stock

3,784

3,708

Repayment of debt

(30,000

)

(25,051

)

Payment of dividends

(2,824

)

(2,317

)

Other

(544

)

(566

)

Net cash provided by (used for) financing activities

(29,584

)

(24,226

)

Effect of exchange rate changes on cash

(1,751

)

(4,571

)

Net change in cash and cash equivalents

886

(5,634

)

Cash, cash equivalents, and restricted cash at beginning of year

71,343

63,565

Cash, cash equivalents, and restricted cash at end of period

$

72,229

$

57,931

COLUMBUS McKINNON CORPORATION

Q2 FY 2020 Sales Bridge

 

Quarter

Year To Date

($ in millions)

$ Change

% Change

$ Change

% Change

Fiscal 2019 Sales

$

217.1

$

442.1

Divestitures

(9.2

)

(20.3

)

Fiscal 2019 Sales adjusted for divestitures

$

207.9

$

421.8

Volume

0.4

0.2

%

0.5

0.2

%

Pricing

3.3

1.6

%

7.1

1.7

%

Foreign currency translation

(4.0

)

(1.9

)%

(9.1

)

(2.2

)%

Total change adjusted for divestitures

$

(0.3

)

(0.1

)%

$

(1.5

)

(0.3

)%

Fiscal 2020 Sales

$

207.6

$

420.3

COLUMBUS McKINNON CORPORATION

Q2 FY 2020 Gross Profit Bridge

 

($ in millions)

Quarter

Year To Date

Fiscal 2019 Gross Profit

$

75.9

$

155.5

Divestitures

(2.4

)

(4.2

)

Fiscal 2019 Gross Profit adjusted for divestitures

73.5

151.3

Pricing, net of material cost inflation

2.6

5.0

Productivity, net of other cost changes

0.4

0.4

Insurance settlement

0.3

Business realignment costs

(0.1

)

0.2

Product liability

(0.2

)

(0.2

)

Factory closures

(0.2

)

(0.8

)

Tariffs

(0.8

)

(1.3

)

Sales volume and mix

(0.2

)

(2.7

)

Foreign currency translation

(1.5

)

(3.1

)

Total change adjusted for divestitures

$

$

(2.2

)

Fiscal 2020 Gross Profit

$

73.5

$

149.1

COLUMBUS McKINNON CORPORATION

Additional Data - UNAUDITED

 

September 30,
2019

June 30,
2019

September 30,
2018

($ in millions)

Backlog

$

143.1

$

148.2

$

173.9

Backlog excluding divestitures

$

143.1

$

148.2

$

166.4

Long-term backlog

Expected to ship beyond 3 months

$

53.9

$

53.9

$

56.4

Long-term backlog as % of total backlog

37.7

%

36.4

%

32.4

%

Trade accounts receivable

Days sales outstanding

57.0

days

58.0

days

55.4

days

Inventory turns per year

(based on cost of products sold)

3.8

turns

3.6

turns

3.6

turns

Days' inventory

96.9

days

100.6

days

102.3

days

Trade accounts payable

Days payables outstanding

33.2

days

26.7

days

26.7

days

Working capital as a % of sales (1)

17.2

%

19.3

%

19.7

%

Debt to total capitalization percentage

36.9

%

39.1

%

44.4

%

Debt, net of cash, to net total capitalization

30.1

%

34.2

%

39.9

%

(1) September 30, 2019 and June 30, 2019 figures exclude the Tire Shredder business, which was divested on December 28, 2018, and Crane Equipment & Service, Inc. and Stahlhammer Bommern GmbH, each of which were divested on February 28, 2019.

U.S. Shipping Days by Quarter

Q1

Q2

Q3

Q4

Total

FY 20

63

63

61

64

251

FY 19

64

63

60

63

250

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Gross Profit to

Non-GAAP Adjusted Gross Profit and Adjusted Gross Margin

($ in thousands, except per share data)

 

Three Months Ended
September 30,

Year To Date
September 30,

2019

2018

2019

2018

Gross profit

$

73,493

$

75,900

$

149,105

$

155,547

Add back (deduct):

Factory closures

249

755

Business realignment costs

140

140

286

Insurance settlement

(290

)

Non-GAAP adjusted gross profit

$

73,882

$

75,900

$

149,710

$

155,833

Sales

$

207,609

$

217,142

$

420,321

$

442,134

Adjusted gross margin

35.6

%

35.0

%

35.6

%

35.2

%

Adjusted gross profit is defined as gross profit as reported, adjusted for certain items. Adjusted gross profit is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures 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 and current year's gross profit to the historical periods' gross profit, as well as facilitates a more meaningful comparison of the Company’s gross profit to that of other companies.

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Income from Operations to

Non-GAAP Adjusted Income from Operations and Adjusted Operating Margin

($ in thousands, except per share data)

 

Three Months Ended
September 30,

Year To Date
September 30,

2019

2018

2019

2018

Income from operations

$

25,231

$

24,825

$

52,274

$

38,328

Add back (deduct):

Factory closures

470

1,497

Business realignment costs

413

413

1,906

Insurance recovery legal costs

220

659

359

659

Net loss on sales of businesses, including impairment

7

176

11,100

Insurance settlement

(290

)

Non-GAAP adjusted income from operations

$

26,341

$

25,484

$

54,429

$

51,993

Sales

$

207,609

$

217,142

$

420,321

$

442,134

Adjusted operating margin

12.7

%

11.7

%

12.9

%

11.8

%

Adjusted income from operations is defined as income from operations as reported, adjusted for certain items. 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 with 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 income from operations to that of other companies.

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Net Income (Loss) 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
September 30,

Year To Date
September 30,

2019

2018

2019

2018

Net income

$

16,599

$

15,912

$

35,178

$

23,618

Add back (deduct):

Factory closures

470

1,497

Business realignment costs

413

413

1,906

Insurance recovery legal costs

220

659

359

659

Net loss on sales of businesses, including impairment

7

176

11,100

Insurance settlement

(290

)

Normalize tax rate to 22% (1)

114

(76

)

(177

)

(3,249

)

Non-GAAP adjusted net income

$

17,823

$

16,495

$

37,156

$

34,034

Average diluted shares outstanding

23,926

23,721

23,832

23,621

Diluted income per share - GAAP

$

0.69

$

0.67

$

1.48

$

1.00

Diluted income per share - Non-GAAP

$

0.74

$

0.70

$

1.56

$

1.44

(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 at 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.

COLUMBUS McKINNON CORPORATION

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted EBITDA

($ in thousands)

 

Three Months Ended
September 30,

Year To Date
September 30,

2019

2018

2019

2018

Net income

$

16,599

$

15,912

$

35,178

$

23,618

Add back (deduct):

Income tax expense

5,141

4,576

10,303

6,350

Interest and debt expense

3,759

4,248

7,611

8,855

Investment (income) loss

(229

)

(111

)

(531

)

(379

)

Foreign currency exchange (gain) loss

(296

)

507

(706

)

231

Other (income) expense, net

257

(307

)

419

(347

)

Depreciation and amortization expense

7,344

8,030

14,747

16,862

Factory closures

470

1,497

Business realignment costs

413

413

1,906

Insurance recovery legal costs

220

659

359

659

Net loss on sales of businesses, including impairment

7

176

11,100

Insurance settlement

(290

)

Non-GAAP adjusted EBITDA

$

33,685

$

33,514

$

69,176

$

68,855

Sales

$

207,609

$

217,142

$

420,321

$

442,134

Adjusted EBITDA margin

16.2

%

15.4

%

16.5

%

15.6

%

Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA 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 with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted EBITDA, 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:

Gregory P. Rustowicz
Vice President - Finance and Chief Financial Officer
Columbus McKinnon Corporation
716-689-5442
greg.rustowicz@cmworks.com

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.