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| EX-99.1 - EXHIBIT 99.1 - COLUMBUS MCKINNON CORP | exhibit99110312017.htm |
| 8-K - 8-K - COLUMBUS MCKINNON CORP | a8k10312017.htm |
Gregory P. Rustowicz
Vice President – Finance & Chief Financial Officer
Jon Adams
Treasurer
Sept
2017
Investor Presentation
Mark D. Morelli
President and Chief Executive Officer
Gregory P. Rustowicz
Vice President – Finance & Chief Financial Officer
October 31,
2017
Q2 Fiscal Year 2018
Financial Results Conference Call
2© 2017 Columbus McKinnon Corporation
Safe Harbor Statement
These slides contain (and the accompanying oral discussion will contain) “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements 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 integration of acquisitions and other factors disclosed in the Company’s periodic
reports filed with the Securities and Exchange Commission. Consequently such forward looking statements should
be regarded as the Company’s current plans, estimates and beliefs. The Company does not undertake and
specifically declines any obligation to publicly release the results of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances after the date of such statements or
to reflect the occurrence of anticipated or unanticipated events.
This presentation will discuss some non-GAAP financial measures, which we believe are useful in evaluating
our performance. You should not consider the presentation of this additional information in isolation or as a
substitute for results compared in accordance with GAAP. We have provided reconciliations of comparable
GAAP to non-GAAP measures in tables found in the Supplemental Information portion of this presentation.
3© 2017 Columbus McKinnon Corporation
Strong Organic Growth & Solid EPS Results
Sales rose 40.1% to $212.8 million
Organic growth 8.5% (FX adjusted) – stronger than expected
Robust U.S. organic growth +9.5%
Market tailwinds: Industrial capacity utilization and GDP growth
Product availability and relevance; Strength in construction, materials and mining,
automotive, entertainment and government
Non-U.S. organic growth +6.5%
EMEA market tailwinds
• Improved industrial capacity utilization
• Strength in general industrial, aerospace, oil & gas and mining
Double digit growth as Latin America emerges out of recession
Net income increased 84% to $12.5 million, or $0.54 diluted eps, in quarter
Cash from operations was $20.3 million in quarter, $35 million year-to-date
Debt repayment ahead of schedule
Focus on industrial technology
4© 2017 Columbus McKinnon Corporation
$151.9 $152.5
$183.7
$203.7 $212.8
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
Net Sales
($ in millions)
Growth driven by organic volume and
STAHL acquisition
8.5% organic growth (FX adjusted)
Strong organic growth in U.S.: +10%
• Construction, utilities, steel & entertainment
Non-U.S. organic growth of 6%:
• LatAm +15%, Canada +9%, EMEA +5%
Q2 FY18
STAHL Acquisition $ 45.8 30.2%
Volume 12.2 8.0%
Foreign currency translation 2.2 1.4%
Pricing 0.7 0.5%
Y/Y
+ 40.1%
Sales Bridge
5© 2017 Columbus McKinnon Corporation
$49.7
$44.8
$50.3 $69.3
$71.6
$0.2
($1.7)
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
$59.2
$69.5 $69.9
$8.9
34.1%*29.4%*32.7%* 32.2%*
32.9%*
Gross Profit & Adjusted Gross Margin
(1)
Non-GAAP AdjustmentsGross Profit
* Adjusted gross profit as % of sales
Gross Profit Bridge
(1) Adjusted gross profit is a non-GAAP financial measures. Please see supplemental
slides for a reconciliation from GAAP gross profit to non-GAAP gross profit and other
important disclosures regarding the use of non-GAAP financial measures.
($ in millions)
STAHL adjusted gross margin was 36.7%
Q2
FY18
Q2 FY2017 Gross Profit $ 49.7
STAHL acquisition 16.8
Sales volume and mix 3.7
Insurance Settlement 1.7
Foreign currency translation 0.6
Pricing, net of material cost inflation 0.5
Product liability 0.4
STAHL integration costs (0.1)
Productivity, net of other cost changes (1.7)
Total Change $ 21.9
Q2 FY2018 Gross Profit $ 71.6
6© 2017 Columbus McKinnon Corporation
RSG&A
$19.0 $18.0 $21.5 $23.8 $25.0
$48.1
$19.4
$2.5
$2.5
$2.9
$2.9
$3.7
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
$49.5
$37.7$35.3
$45.6
(1)
$13.8
$18.9
$17.2 $25.1
Incremental $9.2 million RSG&A with
STAHL
Pro-forma items:
$1.3 legal costs for insurance recovery
Received $1.7 million net from insurance
carrier in July which reduced cost of sales
$0.6 million in integration costs
$0.4 million Magnetek litigation
R&D expense: 1.7% of sales
FY18 quarterly RSG&A run-rate:
~$46 million
Excludes STAHL integration costs
of ~$6 million and other pro-forma items
($ in millions)
Selling G&A R & D
(1) Excludes impairment of intangible asset (STB) in FY2017 Q4
7© 2017 Columbus McKinnon Corporation
$12.6
$5.3
($3.2)
$19.6
$3.1
$20.1
$1.4 $0.7
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
$20.0
($3.2)
Operating Income & Non-GAAP Margin
(1)
Non-GAAP AdjustmentsIncome from Operations
* Non-GAAP operating income as % of sales.
(1) Adjusted operating income is a non-GAAP financial measures. Please see
supplemental slides for a reconciliation from GAAP operating income to non-GAAP
operating income and other important disclosures regarding the use of non-GAAP
financial measures.
($ in millions)
8.3%*
STAHL accretive to operating margin:
(excluding integrations costs)
$5.5 million incremental operating income
11.9% adjusted operating margin
STAHL amortization estimated to be
~$8 million per year at current FX rates10.5%*5.5%* 9.5%*9.2%*
$20.2
$12.6
$8.5
$16.9
$21.4
8© 2017 Columbus McKinnon Corporation
($ in millions)
$0.33
$0.02 ($0.22)
$0.51 $0.54
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
$0.40
$0.25
$0.45
$0.55 $0.51
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
Quarterly Earnings Per Share
GAAP Diluted EPS
Non-GAAP Adjusted EPS(1)
(1) Adjusted net income and diluted earnings per share (EPS) are non-GAAP financial measures. Please see supplemental slides for a reconciliation from GAAP
net income and diluted EPS to non-GAAP adjusted net income and diluted EPS and other important disclosures regarding the use of non-GAAP financial
measures.
(2) Tax rate guidance provided October 31, 2017
Net income: $12.5 million
Organic volume and acquisition drove
bottom-line expansion
$3.0 million benefit from lower YOY tax rate
Non-GAAP adjusted net income:
$11.9 million(1), or $0.51 per diluted share
28% increase over prior-year
Includes $0.04 accretion from STAHL in
Quarter, $0.09 YTD
Effective tax rate: 14.1%
Due to change in U.S. GAAP accounting
standard impacting tax accounting treatment
of equity compensation
Expected FY18 tax rate: 18% to 22%(2)
Reduced from previous range of 20% to
24%
9© 2017 Columbus McKinnon Corporation
21.2%
19.9%
18.6% 19.0% 18.5%
9/30/16 12/31/16 3/31/17 6/30/17 9/30/17
(1)
Working Capital
3.5x
3.9x
4.1x
4.0x
4.1x
9/30/16 12/31/16 3/31/17 6/30/17 9/30/17
Working Capital
as a Percent of Sales
Inventory Turns
(1) Excludes the impact of STAHL which was acquired on January 31, 2017
Working capital decreased 270 bps from
the prior year period to 18.5%(1)
(1)
Inventory turns increased to 4.1x
Improvements drive cash flow for debt
repayment
(1)
(1)
10© 2017 Columbus McKinnon Corporation
Strong operating cash flow
Managing CapEx: working to improve return on invested capital and
pay down debt
FY 2018 expected CapEx: ~ $15 million to $20 million(1)
Cash Flow
Note: Components may not add to totals due to rounding
Three Months Ended
September 30,
2017 2016
Net cash provided by operating activities $ 20.3 $ 18.4
Capital expenditures (CapEx) (4.2) (4.1)
Operating free cash flow $ 16.2 $ 14.3
(1) Capital expenditure guidance provided October 31, 2017
11© 2017 Columbus McKinnon Corporation
CAPITALIZATION
Sep 30,
2017
March 31,
2017
Cash and cash equivalents $ 69.5 $ 77.6
Total debt 392.3 421.3
Total net debt 322.8 343.7
Shareholders’ equity 386.8 341.4
Total capitalization $ 779.0 $ 762.7
Debt/total capitalization 50.3% 55.2%
Net debt/net total capitalization 45.5% 50.2%
De-levering Balance Sheet
Increased level of debt reduction in
FY 2018
Increased to $55 million in FY18,
up from original $45 million to
$50 million plan
Targeting <3x Net Debt/EBITDA
by end of FY18
Currently at 3.3x
Plan to pay down an additional
$55 million in FY19
Covenant-lite
No leverage maintenance covenant
as long as revolver is undrawn
12© 2017 Columbus McKinnon Corporation
FY 2018 Outlook
Orders and backlog
Q2 order growth: 5.5% organic year/year
Backlog decreased $10.6 million sequentially to $162.7 million; up 5% over prior year
excluding STAHL
• Seasonally slower order intake in Europe
• STAHL backlog down $6.8 million sequentially
Near-term Outlook
Expect 3% to 5% organic growth in third quarter
Leads to solid Fiscal 2018
On track with near-term priorities
STAHL value creation
Leverage Magnetek technology
Strengthen the core
Pay down debt
13© 2017 Columbus McKinnon Corporation
Expect to introduce full plan in early 2018
Earnings Power Acceleration -- “EPAS”
Plan to drive stronger earnings power with industrial technology focus
Believe potential for margin expansion can translate to multiple expansion
Focused on Profitable Growth
STAHL value creation
• Achieve cost synergy target of $11 million in FY19
• Leverage brand and platform
Strengthen the core
• Product availability
• Make it easy for our customers: simplified offerings, on-line tools, bundled solutions and kits
Ramp the new product engine
• Invest for growth, smart hoists
Operational Excellence
• Product line simplification and value engineering
Strategic Plan to Increase Earnings Power
14© 2017 Columbus McKinnon Corporation
Supplemental
Information
15© 2017 Columbus McKinnon Corporation
Replay Number: 412-317-6671 passcode: 13671705
Telephone replay available through November 7, 2017
Webcast / PowerPoint / Replay available at www.cmworks.com/investors
Transcript, when available, at www.cmworks.com/investors
Conference Call Playback Info
16© 2017 Columbus McKinnon Corporation
Adjusted Gross Profit Reconciliation
Adjusted gross profit is defined as gross profit as reported, adjusted for unusual 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 to the
measure 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 gross profit to the historical period’s gross profit.
Quarter
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
Gross Profit $49,729 $44,821 $50,335 $69,308 $71,619
Add back:
Acquisition inventory step-up expense — — 8,852 — —
STAHL integration costs — — — 169 52
Insurance Settlement — — — — (1,741)
Non-GAAP adjusted gross margin $49,729 $44,821 $59,187 $69,477 $69,930
Sales 151,925 152,497 183,688 203,726 212,828
Adjusted gross margin 32.7% 29.4% 32.2% 34.1% 32.9%
($ in thousands)
17© 2017 Columbus McKinnon Corporation
Adjusted Income from Operations Reconciliation
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 to 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 assis ts in understanding the
comparison of the current quarter’s and current year's income from operations to the historical periods' income from operations
Quarter
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
Income (loss) from operations $12,619 $5,317 $(3,164) $20,015 $19,587
Add back:
Acquisition inventory step-up expense and real
estate transfer taxes
— — 8,852 — —
Acquisition deal, integration, and severance costs — 3,140 5,675 1,171 669
CEO retirement pay and search costs — — 3,085 — —
Insurance recovery legal costs — — 1,359 229 1,323
Impairment of intangible asset — — 1,125 — —
Magnetek litigation — — — — 400
Insurance settlement — — — — (1,741)
Non-GAAP adjusted income from operations $12,619 $8,457 $16,932 $21,415 $20,238
Sales 151,925 152,497 183,688 203,726 212,828
Adjusted operating margin 8.3% 5.5% 9.2% 10.5% 9.5%
($ in thousands)
18© 2017 Columbus McKinnon Corporation
Adjusted Diluted EPS Reconciliation
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 measure 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.
(1) Applies normalized tax rate of 22% to GAAP pre-tax income and non-GAAP adjustments above, which are each pre-tax.
Quarter
Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18
Net income (loss) $6,816 $505 $(4,738) $11,656 $12,508
Add back:
Acquisition inventory step-up expense and real estate
transfer taxes
— — 8,852 — —
Acquisition deal, integration, and severance costs — 3,140 5,675 1,171 669
CEO retirement pay and search costs — — 3,085 — —
Insurance recovery legal costs — — 1,359 229 1,323
Impairment of intangible asset — — 1,125 — —
Loss on extinguishment of debt — — 1,303 — —
(Gain) loss on foreign exchange option for acquisition — 1,826 (236) — —
Magnetek litigation — — — — 400
Insurance settlement — — — — (1,741)
Normalize tax rate (1) 1,335 (415) (6,490) (458) (1,296)
Non-GAAP adjusted net income $8,151 $5,056 $9,935 $12,598 $11,863
Average diluted shares outstanding 20,368 20,490 22,201 23,028 23,142
Diluted income per share - GAAP $0.33 $0.02 $(0.22) $0.51 $0.54
Diluted income per share - Non-GAAP $0.40 $0.25 $0.45 $0.55 $0.51
($ in thousands, except per share data)