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| 8-K - 8-K RESULTS OF OPERATIONS AND FINANCIAL CONDITION 07.28.16 - COLUMBUS MCKINNON CORP | a8k7282016.htm |
EXHIBIT 99.1
News Release
Getzville, NY 14068
Immediate Release
Columbus McKinnon Reports First Quarter
Fiscal Year 2017 Financial Results
AMHERST, NY, July 28, 2016 - Columbus McKinnon Corporation (NASDAQ: CMCO), a leading designer, manufacturer and marketer of material handling products, technologies and services, today announced financial results for its fiscal year 2017 first quarter, which ended June 30, 2016. First quarter results include the Magnetek, Inc. ("Magnetek") acquisition completed on September 2, 2015.
First Quarter Summary (compared with prior year period, unless otherwise noted)
•Net sales were $149.0 million, up 9.4%; end markets appear to be stabilizing.
•Magnetek short-term integration and long-term smart technology continues to move forward with positive results.
•Gross margin was 32.2%, up 20 basis points; operating margin was 7.5%.
•Net income was $6.4 million compared with $6.9 million; includes additional $1.4 million, pre-tax, in interest and debt expense for acquisition borrowings; Earnings per diluted share were $0.32 and adjusted earnings were $0.34*.
•Cash provided by operating activities more than doubled over prior-year period to $7.2 million.
•Repaid $16.8 million of debt: ahead of $43 million target in Fiscal 2017. Debt to total capitalization down 200 basis points from March 31, 2016 to 46.3%; goal is 30%.
*Please see the attached tables for a reconciliation of GAAP earnings per share to adjusted earnings per share.
Timothy T. Tevens, President and Chief Executive Officer, commented, "Sales growth in the quarter was driven by our Magnetek acquisition and solid revenue growth in Europe. Our focus remains to drive sales initiatives and push for growth, regardless of the economic environment. For example, during the quarter we enhanced our value proposition for our customers with the introduction of the Yale LodeKing LT wire rope hoist. This new hoist is the first collaboration of Magnetek’s leading motion control technology with our best-in-class hoist designs. The new product offers the added functionality of an integrated Magnetek drive system that enables a smaller packaged hoist. We have also launched our digital platform, Compass™, which allows customers to quickly and easily design and specify their lifting systems. And, we are testing ‘a Magnetek Drive in every hoist’ on two key platforms, our world-wide leading Lodestar and the well-regarded Global King wire rope hoist.”
Columbus McKinnon Reports First Quarter Fiscal Year 2017 Financial Results
July 28, 2016
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Mr. Tevens added, “We continue to prove our ability to consistently generate cash and reduce debt. With only one quarter completed, we expect to exceed our fiscal 2017 target of $43 million in debt reduction. In fact, in the ten months since we acquired Magnetek, we have paid down approximately $54 million, or 27%, of the $195 million we borrowed for the acquisition."
He concluded with his outlook for fiscal 2017, “We still believe the year will be challenging, but end markets appear to be stabilizing. We continue to take market share in the U.S. with excellent customer service and the introduction of new and enhanced products. Encouragingly, we believe that the North American market may have bottomed as oil prices and rig counts have stabilized and supporting industries seemed to have steadied. However, even with our leading market positions, Latin America and Asia remain weak. The Brexit move has caused heightened uncertainty in Europe, but nonetheless, we will remain focused on our efforts to gain new customers, increase market penetration, advance our offerings and deliver quality product in a timely manner. Likewise, we continually pursue the reduction of our cost structure and improving productivity in all facets of our business. We believe our high quality products and strong brands, the breadth of our market reach, our extensive channels to market and our leading efforts with smart hoist technology provide us competitive advantages in any market environment.”
First Quarter Review
Sales
($ in millions) | Q1 FY 17 | Q1 FY 16 | Change | % Change | ||||||||||
Net sales | $ | 149.0 | $ | 136.2 | $ | 12.8 | 9.4 | % | ||||||
U.S. sales | $ | 93.9 | $ | 81.6 | $ | 12.3 | 15.1 | % | ||||||
% of total | 63 | % | 60 | % | ||||||||||
Non-U.S. sales | $ | 55.1 | $ | 54.6 | $ | 0.5 | 0.9 | % | ||||||
% of total | 37 | % | 40 | % | ||||||||||
Excluding a $1.4 million unfavorable impact of foreign currency exchange, sales increased $14.2 million, or 10.4%. The Magnetek acquisition contributed $23.9 million to first quarter sales which, combined with very modest price improvement, more than offset lower volume. For more information on changes in sales, please see the attached tables.
Magnetek contributed $20.9 million to U.S. sales, more than offsetting lower volume in the region. Sales outside of the U.S. were up $2.0 million, or 3.6%, after excluding unfavorable foreign currency exchange.
Operating Results
($ in millions) | Q1 FY 17 | Q1 FY 16 | Change | % Change | ||||||||||
Gross profit | $ | 48.0 | $ | 43.6 | $ | 4.5 | 10.2 | % | ||||||
Gross margin | 32.2 | % | 32.0 | % | 20 bps | |||||||||
Income from operations | $ | 11.2 | $ | 11.3 | $ | (0.1 | ) | (0.8 | )% | |||||
Operating margin | 7.5 | % | 8.3 | % | (80) bps | |||||||||
Net income | $ | 6.4 | $ | 6.9 | $ | (0.5 | ) | (7.4 | )% | |||||
Diluted EPS | $ | 0.32 | $ | 0.34 | $ | (0.02 | ) | (5.9 | )% | |||||
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Columbus McKinnon Reports First Quarter Fiscal Year 2017 Financial Results
July 28, 2016
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Higher gross profit reflects incremental gross profit of $8.4 million from Magnetek and $1.4 million of productivity gains. This more than offset the unfavorable impact of lower sales volume, mix and foreign currency translation. Product liability costs were higher as a result of a $1.0 million legal settlement this quarter. For more information on changes in gross profit, please see the attached tables.
Income from operations decreased 0.8% as incremental gross profit from higher sales was offset by higher selling, general and administrative costs and amortization from the acquisition. Magnetek added an incremental $4.6 million in selling, general and administrative expenses.
Net income declined just $0.5 million despite a $1.4 million increase in interest and debt expense from the higher levels of debt associated with the acquisition. Net income also benefitted from a slightly lower tax rate due to the mix of pre-tax income by geographic jurisdiction. Adjusted net income, a non-GAAP financial measure, was $6.8 million, compared with $7.8 million in the prior-year period. The decline in adjusted net income was largely the result of lower sales volume. Please see the attached tables for a reconciliation of GAAP net income and earnings per share to adjusted net income and earnings per share.
Ahead of Target: Paying Down Debt with Strong Cash Generation
Cash provided by operating activities in the first quarter more than doubled to $7.2 million over the prior-year period. Excluding the impact of the Magnetek acquisition, working capital as a percent of sales increased 90 basis points during the quarter. The variation, beyond the typical impact of timing of receivables and payables, was due to higher inventory levels required for an approximately $8 million increase in project backlog over March 31, 2016 levels. Project backlog increased to $49.4 million, or 48% of total backlog, as more Rail & Road projects were booked. These are longer-lead time projects that will not be shipped within the typical three-months-or-less timeframe. Approximately $11 million of these Rail & Road projects are scheduled for shipment in fiscal 2018 and beyond.
During the quarter, $16.8 million of debt repayments resulted in a decline in gross debt to $250.5 million.
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 201-493-6780 and asking for the “Columbus McKinnon conference call.” The webcast can be monitored on Columbus McKinnon’s website at www.cmworks.com/investors. An audio recording of the call will be available two hours after its completion through Thursday, August 4, 2016 by dialing 858-384-5517 and entering the passcode 136405537. Alternatively, an archived webcast of the call will be on Columbus McKinnon’s web site at: www.cmworks.com/investors. 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, technologies, systems and services, which efficiently and ergonomically move, lift, position and secure materials. Key products include hoists, cranes, 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 on its website at http://www.cmworks.com.
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Columbus McKinnon Reports First Quarter Fiscal Year 2017 Financial Results
July 28, 2016
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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.
Contacts:
Gregory P. Rustowicz | Investor Relations: |
Vice President - Finance and Chief Financial Officer | Deborah K. Pawlowski |
Columbus McKinnon Corporation | Kei Advisors LLC |
716-689-5442 | 716-843-3908 |
greg.rustowicz@cmworks.com | dpawlowski@keiadvisors.com |
Financial Tables follow.
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Columbus McKinnon Reports First Quarter Fiscal Year 2017 Financial Results
July 28, 2016
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COLUMBUS McKINNON CORPORATION
Condensed Consolidated Income Statements - UNAUDITED
(In thousands, except per share and percentage data)
Three Months Ended | |||||||||||
June 30, 2016 | June 30, 2015 | Change | |||||||||
Net sales | $ | 149,013 | $ | 136,236 | 9.4 | % | |||||
Cost of products sold | 100,966 | 92,652 | 9.0 | % | |||||||
Gross profit | 48,047 | 43,584 | 10.2 | % | |||||||
Gross profit margin | 32.2 | % | 32.0 | % | |||||||
Selling expenses | 18,814 | 16,598 | 13.4 | % | |||||||
% of net sales | 12.6 | % | 12.2 | % | |||||||
General and administrative expenses | 16,282 | 15,102 | 7.8 | % | |||||||
% of net sales | 10.9 | % | 11.1 | % | |||||||
Amortization of intangibles | 1,750 | 593 | 195.1 | % | |||||||
Income from operations | 11,201 | 11,291 | (0.8 | )% | |||||||
Operating margin | 7.5 | % | 8.3 | % | |||||||
Interest and debt expense | 2,574 | 1,156 | 122.7 | % | |||||||
Investment (income) loss | (217 | ) | (128 | ) | 69.5 | % | |||||
Foreign currency exchange (gain) loss | (563 | ) | (185 | ) | 204.3 | % | |||||
Other (income) expense, net | (80 | ) | (5 | ) | 1,500.0 | % | |||||
Income before income tax expense | 9,487 | 10,453 | (9.2 | )% | |||||||
Income tax expense | 3,086 | 3,542 | (12.9 | )% | |||||||
Net income | $ | 6,401 | $ | 6,911 | (7.4 | )% | |||||
Average basic shares outstanding | 20,135 | 20,022 | 0.6 | % | |||||||
Basic income per share | $ | 0.32 | $ | 0.35 | (8.6 | )% | |||||
Average diluted shares outstanding | 20,266 | 20,229 | 0.2 | % | |||||||
Diluted income per share | $ | 0.32 | $ | 0.34 | (5.9 | )% | |||||
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Columbus McKinnon Reports First Quarter Fiscal Year 2017 Financial Results
July 28, 2016
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COLUMBUS McKINNON CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
June 30, 2016 | March 31, 2016 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 43,163 | $ | 51,603 | ||||
Trade accounts receivable | 79,063 | 83,812 | ||||||
Inventories | 118,875 | 118,049 | ||||||
Prepaid expenses and other | 16,243 | 19,265 | ||||||
Total current assets | 257,344 | 272,729 | ||||||
Property, plant, and equipment, net | 101,948 | 104,790 | ||||||
Goodwill | 170,003 | 170,716 | ||||||
Other intangibles, net | 120,149 | 122,129 | ||||||
Marketable securities | 10,706 | 18,186 | ||||||
Deferred taxes on income | 72,201 | 73,158 | ||||||
Other assets | 11,089 | 11,143 | ||||||
Total assets | $ | 743,440 | $ | 772,851 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 31,699 | $ | 36,061 | ||||
Accrued liabilities | 48,546 | 53,210 | ||||||
Current portion of long-term debt | 44,279 | 43,246 | ||||||
Total current liabilities | 124,524 | 132,517 | ||||||
Senior debt, less current portion | 457 | 844 | ||||||
Term loan and revolving credit facility | 205,760 | 223,542 | ||||||
Other non-current liabilities | 122,585 | 129,639 | ||||||
Total liabilities | 453,326 | 486,542 | ||||||
Shareholders’ equity: | ||||||||
Common stock | 202 | 201 | ||||||
Additional paid-in capital | 207,462 | 206,682 | ||||||
Retained earnings | 180,574 | 174,173 | ||||||
Accumulated other comprehensive loss | (98,124 | ) | (94,747 | ) | ||||
Total shareholders’ equity | 290,114 | 286,309 | ||||||
Total liabilities and shareholders’ equity | $ | 743,440 | $ | 772,851 | ||||
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Columbus McKinnon Reports First Quarter Fiscal Year 2017 Financial Results
July 28, 2016
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COLUMBUS McKINNON CORPORATION
Condensed Consolidated Statements of Cash Flows - UNAUDITED
(In thousands)
Three Months Ended | ||||||||
June 30, 2016 | June 30, 2015 | |||||||
Operating activities: | ||||||||
Net income | $ | 6,401 | $ | 6,911 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 6,001 | 3,972 | ||||||
Deferred income taxes and related valuation allowance | 969 | (916 | ) | |||||
Net gain on sale of real estate, investments, and other | (93 | ) | (150 | ) | ||||
Stock based compensation | 1,147 | 911 | ||||||
Amortization of deferred financing costs and discount on debt | 172 | 119 | ||||||
Changes in operating assets and liabilities, net of effects of business acquisitions: | ||||||||
Trade accounts receivable | 4,018 | 9,621 | ||||||
Inventories | (1,896 | ) | (6,027 | ) | ||||
Prepaid expenses and other | 3,049 | 2,164 | ||||||
Other assets | (25 | ) | 3,286 | |||||
Trade accounts payable | (2,557 | ) | (5,575 | ) | ||||
Accrued liabilities | (3,485 | ) | (902 | ) | ||||
Non-current liabilities | (6,496 | ) | (10,212 | ) | ||||
Net cash provided by (used for) operating activities | 7,205 | 3,202 | ||||||
Investing activities: | ||||||||
Proceeds from sale of marketable securities | 7,772 | 57 | ||||||
Purchases of marketable securities | (105 | ) | (7 | ) | ||||
Capital expenditures | (4,301 | ) | (4,079 | ) | ||||
Net cash provided by (used for) investing activities | 3,366 | (4,029 | ) | |||||
Financing activities: | ||||||||
Net borrowings (payments) under line-of-credit agreements | (13,500 | ) | — | |||||
Repayment of debt | (3,274 | ) | (3,236 | ) | ||||
Dividends paid | (804 | ) | (800 | ) | ||||
Other | (367 | ) | (847 | ) | ||||
Net cash provided by (used for) financing activities | (17,945 | ) | (4,883 | ) | ||||
Effect of exchange rate changes on cash | (1,066 | ) | 718 | |||||
Net change in cash and cash equivalents | (8,440 | ) | (4,992 | ) | ||||
Cash and cash equivalents at beginning of year | 51,603 | 63,056 | ||||||
Cash and cash equivalents at end of period | $ | 43,163 | $ | 58,064 | ||||
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COLUMBUS McKINNON CORPORATION
Q1 FY 2016 to Q1 FY 2017 Sales Bridge
First Quarter | ||||
($ in millions) | $ Change | % Change | ||
Q1 Fiscal 2016 Sales | $136.2 | |||
Magnetek acquisition | 23.9 | 17.5% | ||
Pricing | 0.3 | 0.2% | ||
Volume | (10.0) | (7.3)% | ||
Subtotal of change | 14.2 | 10.4% | ||
Foreign currency translation | (1.4) | (1.0)% | ||
Total change | $12.8 | 9.4% | ||
Q1 Fiscal 2017 Sales | $149.0 | |||
COLUMBUS McKINNON CORPORATION
Q1 FY 2016 to Q1 FY 2017 Gross Profit Bridge
($ in millions) | First Quarter |
Q1 Fiscal 2016 Gross Profit | $43.6 |
Magnetek Acquisition | 8.4 |
Productivity, net of other cost changes | 1.4 |
Prior year purchase accounting & restructuring costs | 0.6 |
Pricing, net of material cost inflation | (0.1) |
Product liability | (0.8) |
Sales volume and mix | (4.6) |
Subtotal of change | 4.9 |
Foreign currency translation | (0.5) |
Total change | $4.4 |
Q1 Fiscal 2017 Gross Profit | $48.0 |
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July 28, 2016
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COLUMBUS McKINNON CORPORATION
Additional Data - UNAUDITED
June 30, 2016 | March 31, 2016 | June 30, 2015 | ||||||||||||||||
Backlog (in millions) | $ | 102.4 | $ | 98.6 | $ | 84.9 | ||||||||||||
Backlog (in millions, excluding Magnetek) | $ | 88.1 | $ | 85.2 | $ | 84.9 | ||||||||||||
Project backlog (in millions, expected to ship beyond 3 months) | $ | 49.4 | $ | 41.2 | $ | 32.4 | ||||||||||||
Project backlog as % of total backlog | 48.2 | % | 41.8 | % | 38.2 | % | ||||||||||||
Trade accounts receivable | ||||||||||||||||||
days sales outstanding | 48.3 | days | 49.2 | days | 48.1 | days | ||||||||||||
Inventory turns per year | ||||||||||||||||||
(based on cost of products sold) | 3.4 | turns | 3.6 | turns | 3.3 | turns | ||||||||||||
Days' inventory | 107.4 | days | 101.0 | days | 110.6 | days | ||||||||||||
Trade accounts payable | ||||||||||||||||||
days payables outstanding | 28.6 | days | 30.8 | days | 27.4 | days | ||||||||||||
Working capital as a % of sales (1) | 22.4 | % | 21.5 | % | 21.9 | % | ||||||||||||
Debt to total capitalization percentage | 46.3 | % | 48.3 | % | 30.6 | % | ||||||||||||
Debt, net of cash, to net total capitalization | 41.7 | % | 43.0 | % | 18.9 | % | ||||||||||||
(1) June 30, 2016 and March 31, 2016 figures exclude the impact of the acquisition of Magnetek; June 30, 2015 figure excludes the impact of the acquisition of STB
Shipping Days by Quarter | ||||||||||
Q1 | Q2 | Q3 | Q4 | Total | ||||||
FY 17 | 64 | 63 | 60 | 64 | 251 | |||||
FY 16 | 63 | 64 | 60 | 63 | 250 | |||||
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Columbus McKinnon Reports First Quarter Fiscal Year 2017 Financial Results
July 28, 2016
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COLUMBUS McKINNON CORPORATION
Reconciliation of GAAP Net Income 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 June 30, | |||
2016 | 2015 | ||
$ | $ | ||
Net income | $6,401 | $6,911 | |
Add back: | |||
Canadian pension lump sum settlements | 247 | — | |
Acquisition inventory step-up expense | — | 374 | |
European facility consolidation costs | — | 297 | |
Normalize tax rate to 30% (1) | 166 | 205 | |
Non-GAAP adjusted net income | $6,814 | $7,787 | |
Average diluted shares outstanding | 20,266 | 20,229 | |
Diluted income per share - GAAP | $0.32 | $0.34 | |
Diluted income per share - Non-GAAP | $0.34 | $0.38 | |
(1) Applies a normalized tax rate of 30% 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 to apply 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.
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