Columbus McKinnon Operating Income Expanded 46% On 11% Sales Growth For Fiscal 2012 Fourth Quarter

Columbus McKinnon Corporation (NASDAQ: CMCO), a leading designer, manufacturer and marketer of material handling products, today announced financial results for its fiscal fourth quarter and full year ended March 31, 2012.

Net sales for the fourth quarter of fiscal 2012 were $159.6 million, up $15.6 million, or 10.8%, from the prior year period. U.S. sales grew $15.0 million, or 20.0%, to $90.4 million, while sales outside of the U.S. were essentially flat at $69.2 million and comprised 43.3% of total net sales. Excluding changes in foreign currency translation, which had an unfavorable impact of $2.4 million on fiscal 2012 fourth quarter sales, sales outside the U.S. grew 4.2%.

Timothy T. Tevens, President and Chief Executive Officer, commented, “Our diverse product offering, brand strength and market status have afforded us the leading position in hoists and other products in the U.S. and western Europe. Given the current strength of our markets, we are capitalizing on this leadership and growing our revenues around the world, primarily in developing economies. We are also increasing our presence in key markets such as oil and gas, power generation, mining and entertainment.”

The fluctuation in sales compared with fiscal 2011’s fourth quarter is summarized as follows, in millions:
        Sales $ Change     Sales % Change
Increased volume $ 13.8 9.6 %
Pricing $ 4.2 2.9 %
Foreign currency translation $ (2.4 ) (1.7 )%
Total $ 15.6   10.8 %
 

Net income improved 253.8% to $9.0 million, or $0.46 per diluted share, in the fiscal 2012 fourth quarter from $2.5 million, or $0.13 per diluted share, in the prior year period.

Higher Volume and Improved Pricing Drove Margin Expansion in Fourth Quarter

Gross profit increased to $44.2 million, or 27.7% of sales, for the fiscal 2012 fourth quarter from $37.4 million, or 26.0% of sales, in fiscal 2011’s fourth quarter. Gross margin expansion and higher gross profit were driven primarily by higher sales volume. Increased volume accounted for approximately $5.9 million, or 87%, of the $6.8 million increase in gross profit. The now completed hoist restructuring program provided an additional $0.8 million.

Selling expenses were $17.3 million in the fourth quarter, an increase of $0.7 million, or 3.9%, when compared with the fourth quarter of fiscal 2011. As a percent of revenue, selling expenses were 10.9% compared with 11.6% in the same period last year.

General and administrative (G&A) expenses were $12.7 million in the fourth quarter of fiscal 2012, up 18.5%, or $2.0 million, from the previous fiscal year’s fourth quarter. G&A expenses were 8.0% of revenue for the fourth quarter of this year compared with 7.5% for the prior year period. Increases in G&A included approximately $1.0 million in costs associated with the ERP system implementation and human resource professional services.

Fourth quarter fiscal 2012 operating margin improved to 8.5% from 6.5% in the fourth quarter of fiscal 2011. Operating leverage was 27.7% in the quarter (defined as the year-over-year change in operating income divided by the year-over-year change in sales).

Mr. Tevens commented, “The leverage we have built into the business through our lean processes and restructuring activities becomes evident as sales expand even as the costs of doing business continue to rise.”

Interest and debt expense was unchanged at $3.6 million for the fourth quarter of both fiscal years 2011 and 2012.

Strong balance sheet provides financial flexibility to support growth initiatives

Cash and equivalents at March 31, 2012 was $89.5 million. Net debt at March 31, 2012 was $63.6 million, or 28.4% of net total capitalization, compared with $74.3 million, or 31.4% of net total capitalization at March 31, 2011. Total debt at the end of the fiscal 2012 was $153.1 million. The Company also had $70.3 million of availability on its $85 million line of credit with nothing drawn and $14.7 million of outstanding letters of credit.

Cash provided by operations during fiscal 2012 was $23.6 million of which $10.2 million was generated in the fourth quarter. Cash provided by operations in fiscal 2011 was $3.3 million.

Working capital as a percentage of sales increased to 17.6% at the end of the fourth quarter of fiscal 2012, compared with 16.9% at the end of the fourth quarter of fiscal 2011. The Company’s long-term goal remains a 15% working capital to sales ratio.

Gregory P. Rustowicz, Chief Financial Officer, noted, “We are focused on inventory optimization to improve turns and reduce our working capital requirements. Along with our Lean activities, we expect the ERP system, which will be a multi-year implementation, to also contribute toward our efforts.”

Capital expenditures during fiscal 2012 were $13.4 million compared with $12.5 million in the prior year period. Fiscal 2012 capital expenditures included $5.2 million associated with the global ERP system initiative. The Company anticipates capital spending will be approximately $14 million to $17 million in fiscal 2013 with approximately $2.5 million to $3.0 million dedicated to its global ERP system implementation.

Fiscal 2012 review

Net sales for fiscal 2012 were $591.9 million, up 13.0% from the fiscal 2011. This was a $67.9 million increase over sales of $524.1 million in fiscal 2011. Volume accounted for $43.7 million of the increase. Pricing added an additional $13.6 million. Changes in foreign currency translation provided a positive $10.6 million impact.

Gross profit margin was 26.6% in fiscal 2012 compared with 24.1% in fiscal 2011. Selling expenses increased by $2.0 million, or 3.1%, compared with last year. G&A expenses increased $6.1 million, or 15.0%, over the prior year as a result of the new ERP system implementation, variable compensation costs as well as general inflationary increases. As a percent of sales, selling and G&A expenses decreased to 18.8% during fiscal 2012 compared with 19.7% in the same period the prior year.

Income from operations for fiscal 2012 was $45.1 million, or 7.6% of sales, compared with $18.6 million, or 3.5% of sales, in the prior year period. Operating leverage for the year was 39.1%, realized from higher sales and the benefits of the restructuring efforts. Fiscal 2012 benefitted from a $1.0 million favorable adjustment in restructuring charges as the gain on the sale of the Cedar Rapids, IA facility that had housed forging operations offset other restructuring costs. Fiscal 2011 had $2.2 million in restructuring costs.

Mr. Tevens commented, “As a result of our restructuring efforts, we have 500,000 square feet less of manufacturing floor space and lower overhead and direct costs; yet, we have sufficient capacity available for growth.”

Interest and debt expense in fiscal 2012 was $14.2 million, up from $13.5 million in fiscal 2011 due to higher average debt balances outstanding as a result of the January 2011 refinancing.

The effective tax rate for fiscal 2012 was 21% reflecting the U.S. deferred tax asset valuation allowance that was recorded in fiscal 2011. Tax rates for the Company are impacted by the mix of income or loss among taxing jurisdiction, specifically U.S. versus foreign jurisdictions and the impact of various state taxes within the U.S. The Company expects the effective tax rate for fiscal 2013 to be in the range of 17% to 22% including the impact of the valuation allowance on deferred tax assets.

Reflecting the strength in sales and margin expansion, net income for fiscal 2012 improved to $27.0 million, or $1.38 per diluted share, compared with a loss of $36.0 million, or ($1.89) per diluted share, during fiscal 2011.

Solid Order Growth Continues

Backlog grew to $114.2 million at March 31, 2012, compared with $89.4 million at March 31, 2011 and $110.3 million at December 31, 2011. 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 March 31, 2012, approximately $28.4 million of backlog was scheduled to ship beyond June 30, 2012

Mr. Tevens concluded, “We believe that our strategy to further penetrate emerging economies, while expanding market share where we have a strong presence, enables us to grow at a solid rate. And, our focus on Lean manufacturing processes and continuous improvement provides significant operating leverage on increasing volume. Our long-term objective is to achieve operating margins in the 12% to 14% range and believe that this is achievable.”

Both U.S. and Eurozone capacity utilization are leading market indicators for the Company. U.S. industrial capacity utilization increased to 78.0% in March 2012 , up from 75.2% in March 2011 and 77.2% in December 2011. U.S. industrial capacity utilization increased again in April 2012 to 78.4%. Eurozone capacity utilization improved during the quarter ended March 31, 2012 to 79.8% from 79.6% during the quarter ended December 31, 2011. Eurozone capacity utilization was 80.0% in the quarter ended March 31, 2011.

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.

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. Their 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 dialing 1-888-459-1579, or for those outside the United States and Canada, 1-210-234-7695, and providing the password “Columbus McKinnon”. The webcast can be monitored on Columbus McKinnon’s website at http://www.cmworks.com/investors.

An archived recording of the call will be available approximately two hours after the calls completion and until June 21, 2012. To listen to the archived call, dial 1-866-475-1457 or 1-203-369-1505 for callers outside of the United States and Canada. Alternatively, the archive can be heard on the Company’s website at http://www.cmworks.com/investors/NewsPresentations.aspx until June 21, 2012. A transcript of the call will also be posted to the website once available.

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
   

March 31,

2012
     

March 31,

2011

Change
 
Net sales $ 159,572 $ 143,970 10.8 %
Cost of products sold   115,330           106,525 8.3 %
Gross profit 44,242 37,445 18.2 %
Gross profit margin 27.7 % 26.0 %
Selling expense 17,345 16,691 3.9 %
General and administrative expense 12,721 10,737 18.5 %
Restructuring charges - 253 NM
Amortization   559           463 20.7 %
Income from operations   13,617           9,301 46.4 %
Operating margin 8.5 % 6.5 %
Interest and debt expense 3,563 3,647 -2.3 %
Cost of bond redemptions - 3,939 NM
Investment income (194 ) (2,021 ) -90.4 %
Foreign currency exchange loss 178 149 19.5 %
Other (income) and expense   718           (442 ) NM
Income from continuing operations before
income tax expense 9,352 4,029 132.1 %
Income tax expense   998           1,621 -38.4 %
Income from continuing operations 8,354 2,408 246.9 %
Income from discontinued operations, net of tax   643           135 376.3 %
Net income $ 8,997         $ 2,543 253.8 %
 
Average basic shares outstanding 19,321 19,068 1.3 %
Basic income per share:
Continuing operations $ 0.44 $ 0.12 266.7 %
Discontinued operations   0.03           0.01
Net income $ 0.47         $ 0.13 261.5 %
 
Average diluted shares outstanding 19,552 19,317 1.2 %
Diluted income per share:
Continuing operations $ 0.43 $ 0.12 258.3 %
Discontinued operations   0.03           0.01
Net income $ 0.46         $ 0.13 253.8 %
 
 
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Income Statements - UNAUDITED
 
(In thousands, except per share and percentage data)
       

Year Ended
   

March 31,

2012
     

March 31,

2011

Change
 
Net sales $ 591,945 $ 524,065 13.0 %
Cost of products sold   434,227           398,013 9.1 %
Gross profit 157,718 126,052 25.1 %
Gross profit margin 26.6 % 24.1 %
Selling expense 64,860 62,910 3.1 %
General and administrative expense 46,677 40,592 15.0 %
Restructuring charges (1,037 ) 2,200 NM
Amortization   2,074           1,778 16.6 %
Income from operations   45,144           18,572 143.1 %
Operating margin 7.6 % 3.5 %
Interest and debt expense 14,214 13,532 5.0 %
Cost of bond redemptions - 3,939 NM
Investment income (1,018 ) (3,041 ) -66.5 %
Foreign currency exchange loss 316 452 -30.1 %
Other (income) and expense   (1,179 )         (1,375 ) -14.3 %
Income from continuing operations before
income tax expense 32,811 5,065 547.8 %
Income tax expense   6,896           41,411 -83.3 %
Income (loss) from continuing operations 25,915 (36,346 ) NM
Income from discontinued operations, net of tax   1,052           396 165.7 %
Net income (loss) $ 26,967         $ (35,950 ) NM
 
Average basic shares outstanding 19,272 19,047 1.2 %
Basic income (loss) per share:
Continuing operations $ 1.35 $ (1.91 ) NM
Discontinued operations   0.05           0.02
Net income (loss) $ 1.40         $ (1.89 ) NM
 
Average diluted shares outstanding 19,512 19,047 2.4 %
Diluted income (loss) per share:
Continuing operations $ 1.33 $ (1.91 ) NM
Discontinued operations   0.05           0.02
Net income (loss) $ 1.38         $ (1.89 ) NM
 
 
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Balance Sheets - UNAUDITED
 
(In thousands)              
March 31, 2012 March 31, 2011
 
ASSETS
Current assets:
Cash and cash equivalents $ 89,473 $ 80,139
Trade accounts receivable 88,642 77,744
Inventories 108,055 90,031
Prepaid expenses and other   10,449           14,294  
Total current assets   296,619           262,208  
 
Net property, plant, and equipment 61,709 59,360
Goodwill 106,435 106,055
Other intangibles, net 15,791 18,089
Marketable securities 25,393 24,592
Deferred taxes 2,824 1,217
Other assets   6,636           7,351  
Total assets $ 515,407         $ 478,872  
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable to banks $ 112 $ 473
Trade accounts payable 40,991 37,174
Accrued liabilities 61,713 56,502
Current portion of long-term debt   1,093           1,116  
Total current liabilities   103,909           95,265  
 
Senior debt, less current portion 3,749 4,949
Subordinated debt 148,140 147,867
Other non-current liabilities   99,143           68,645  
Total liabilities   354,941           316,726  
 
Shareholders’ equity:
Common stock 193 191
Additional paid-in capital 189,260 184,884
Retained earnings (accumulated deficit) 25,895 (1,072 )
ESOP debt guarantee (975 ) (1,407 )
Accumulated other comprehensive loss   (53,907 )         (20,450 )
Total shareholders’ equity   160,466           162,146  
Total liabilities and shareholders’ equity $ 515,407         $ 478,872  
 
 
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Statements of Cash Flows - UNAUDITED
 
(In thousands)        

Year Ended

March 31, 2012
   

March 31, 2011
Operating activities:
Net income (loss) $ 26,967 $ (35,950 )

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:
Income from discontinued operations (1,052 ) (396 )
Depreciation and amortization 11,564 11,050
Deferred income taxes (910 ) 40,773
Gain on sale of real estate/investments (1,958 ) (2,884 )
Loss on early retirement of bonds - 3,939
Gain on re-measurement of investment (850 )
Stock-based compensation expense 2,913 2,484
Amortization/write-off of deferred financing costs 383 278
Changes in operating assets and liabilities:
Trade accounts receivable (9,707 ) (6,683 )
Inventories (17,347 ) (9,848 )
Prepaid expenses 3,232 (3,983 )
Other assets 544 (1,195 )
Trade accounts payable 3,862 4,027
Accrued and non-current liabilities   5,978         1,668  
Net cash provided by operating activities   23,619         3,280  
 
Investing activities:
Proceeds from sale of marketable securities 5,747 23,048
Purchases of marketable securities (5,190 ) (16,427 )
Capital expenditures (13,391 ) (12,543 )
Purchase of businesses, net (3,356 ) -
Proceeds from sale of businesses or assets   1,971         1,182  
Net cash used for investing activities from continuing operations   (14,219 )       (4,740 )
Net cash provided by investing activities from discontinued operations   1,052         396  
Net cash used for investing activities   (13,167 )       (4,344 )
 
Financing activities:
Proceeds from exercise of stock options 1,436 -
Payment of tender fees - (3,154 )
Net payments under revolving line-of-credit agreements (361 ) (337 )
Repayment of debt (1,036 ) (125,817 )
Proceeds from issuance of long-term debt - 147,844
Deferred financing costs incurred - (3,185 )
Other   435         443  
Net cash provided by financing activities   474         15,794  
 

Effect of exchange rate changes on cash
  (1,592 )       1,441  
 
Net change in cash and cash equivalents 9,334 16,171
Cash and cash equivalents at beginning of year   80,139         63,968  
Cash and cash equivalents at end of period $ 89,473       $ 80,139  
 
 

COLUMBUS McKINNON CORPORATION
Additional Data - UNAUDITED
 
        March 31, 2012       December 31, 2011       March 31, 2011
 
Backlog (in millions) $ 114.2 $ 110.3 $ 89.4
 
Trade accounts receivable
days sales outstanding

50.6 days

50.6 days

49.1 days
 
Inventory turns per year
(based on cost of products sold)

4.3 turns

4.0 turns

4.7 turns
Days' inventory

85.5 days

91.4 days

77.1 days
 
Trade accounts payable
days payables outstanding

32.3 days

33.2 days

31.8 days
 
Working capital as a % of sales 17.6 % 17.5 % 16.9 %
 
Debt to total capitalization percentage 48.8 % 46.6 % 48.8 %
Debt, net of cash, to net total capitalization 28.4 % 28.9 % 31.4 %
 
 
Shipping Days by Quarter
 
      Q1       Q2       Q3       Q4       Total
 
FY 13 63 63 60 62 248
 
FY 12 63 64 58 65 250
 
FY 11 63 64 59 64 250
 

Copyright Business Wire 2010

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