Attached files
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| EX-99.1 - EXHIBIT 99.1 - COLUMBUS MCKINNON CORP | exhibit99102062018.htm |
| 8-K - 8-K - COLUMBUS MCKINNON CORP | a8k02062018.htm |
Sept
2017 Investor Presentation
Mark D. Morelli
President and Chief Executive Officer
Gregory P. Rustowicz
Vice President – Finance & Chief Financial Officer
February 6,
2018
Q3 Fiscal Year 2018
Financial Results Conference Call
2© 2018 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© 2018 Columbus McKinnon Corporation
Solid Growth & Strengthening Balance Sheet
Sales rose 36.9% to $208.7 million
Organic growth 6.6% (FX adjusted), slightly ahead of expectations:
U.S. organic growth +8.0%
Non-U.S. organic growth +3.9%
Strength in end markets both U.S. and Europe
STAHL provided $.02 earnings per share accretion in quarter
Net loss of $10.6 million reflects one-time impact of Tax Cuts and Jobs Act
Cash from operations of $16.5 million in quarter, $51.2 million YTD
$14.9 million of debt paid down in quarter
Net debt to Adjusted EBITDA at 2.8x, below 3.0x target, ahead of schedule
Blueprint 2021 progressing
Phase I of Blueprint 2021: Get control and achieve results
Moving into Phase II: Operational Excellence and Profitable Growth
4© 2018 Columbus McKinnon Corporation
$152.5
$183.7
$203.7 $212.8 $208.7
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
Net Sales
($ in millions) Growth driven by organic volume and
STAHL acquisition
6.6% organic growth (FX adjusted)
Strong organic growth in U.S.: 8%
• Construction, utilities, steel & entertainment
Non-U.S. organic growth of 4%:
• APAC 22%, EMEA +6%
• LatAm (4)%, Canada (12)%
Q3 FY18
STAHL Acquisition $ 42.6 27.9%
Volume 9.3 6.2%
Foreign currency translation 3.7 2.4%
Pricing 0.6 0.4%
Y/Y
+ 36.9%
Sales Bridge
5© 2018 Columbus McKinnon Corporation
$44.8
$50.3 $69.3 $71.6 $69.0
($1.7)
$0.1
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
$59.2
$69.5 $69.9
$8.9
$69.1
$0.2
34.1%*29.4%
32.9%*
32.2%* 33.1%*
Gross Profit & Adjusted Gross Margin(1)
Non-GAAP AdjustmentsGross Profit
* Adjusted gross profit as % of sales
Gross Profit Bridge
(1) Adjusted gross profit is a non-GAAP financial measures. Please see
supplemental slides for a reconciliation from GAAP gross profit to non-
GAAP gross profit and other important disclosures regarding the use of
non-GAAP financial measures.
($ in millions)
STAHL adjusted gross margin was 35.4%
Q3
FY18
Q3 FY2017 Gross Profit $ 44.8
STAHL acquisition 15.1
Sales volume and mix 3.0
Productivity, net of other cost
changes
2.7
Product liability 2.2
Foreign currency translation 1.0
Pricing, net of material cost inflation 0.3
STAHL integration costs (0.1)
Total Change $ 24.2
Q3 FY2018 Gross Profit $ 69.0
6© 2018 Columbus McKinnon Corporation
RSG&A
$18.0 $21.5 $23.8 $25.0 $25.5
$51.0
$19.4
$2.5
$3.7$2.9
$2.9 $3.3
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
$49.5
$37.7
$48.1$45.6
(1)
$22.2$18.9
$17.2
$25.1
Incremental $8.5 million RSG&A with
STAHL
Pro-forma items:
$3.0 million in integration costs
$1.0 legal costs for insurance recovery
Higher warehouse costs due to warehouse
consolidation of $0.7 million
Change vs. prior year also includes FX
impact of $0.8 million and higher incentive
costs of $1.7 million offset by $3.1 million of
pro-forma deal costs in the prior year
R&D expense: 1.6% of sales
Q4 FY18 RSG&A estimate ~$46 million
Excludes STAHL integration costs
and other pro-forma items
($ in millions)
Selling G&A R & D
(1) Excludes impairment of intangible asset (STB) in FY2017 Q4
7© 2018 Columbus McKinnon Corporation
$5.3
($3.2)
$20.0 $19.6 $14.2
$18.2
$20.1
$1.4 $0.7
$4.0
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
($3.2)
Operating Income & Non-GAAP Margin(1)
Non-GAAP AdjustmentsIncome from Operations
* Non-GAAP operating income as % of sales. (1) Adjusted operating income is a non-GAAP financial measures.
Please see supplemental slides for a reconciliation from GAAP operating
income to non-GAAP operating income and other important disclosures
regarding the use of non-GAAP financial measures.
($ in millions)
8.7%*
STAHL accretive to operating margin:
(excluding integrations costs)
$4.5 million incremental operating income
10.5% adjusted operating margin
Adjusted operating income grew 115%
over prior year
Adjusted operating margin improved
320 bps over prior year to 8.7%
STAHL amortization estimated to be
~$8.5 million per year at current FX rates
10.5%*5.5%* 9.5%*9.2%*
$20.2
$8.5
$16.9
$21.4
$3.1
8© 2018 Columbus McKinnon Corporation
($ in millions)
$0.02 ($0.22)
$0.51 $0.54
($0.46)
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
$0.25
$0.45
$0.55 $0.51
$0.44
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 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 February 6, 2018
Net loss: $10.6 million
Reflects impact of Tax Cuts and Jobs Act
Non-GAAP adjusted net income:
$10.4 million(1), or $0.44 per diluted share
76% increase in Adjusted EPS over prior-
year
Includes $0.02 accretion from STAHL in
Quarter, $0.11 YTD
Tax expense of $19.9 million includes
$18.6 million write down of deferred tax
assets and impact of transition tax
Due to passage of Tax Cuts and Jobs Act
Expected FY18 tax rate: 51% to 55%(2)
Expected FY19 tax rate: 20-22%
9© 2018 Columbus McKinnon Corporation
Working Capital
3.9x
4.1x
4.0x
4.1x
3.9x
12/31/16 3/31/17 6/30/17 9/30/17 12/31/2017
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 250 bps from
the prior year period to 17.4%(1)
Driven by higher DPO’s of 4.2 days and
higher accrued liabilities for incentive
costs and other items
(1)
Inventory turns unchanged vs. prior
year
Lower sequentially as building inventory
for Q4
(1)
(1)
19.9%
18.6% 19.0% 18.5%
17.4%
12/31/16 3/31/17 6/30/17 9/30/17 12/31/17(1) (1)
10© 2018 Columbus McKinnon Corporation
Strong operating free cash flow
YTD operating free cash flow of $41.9 million utilized to pay down debt
Managing CapEx: working to improve return on invested capital and
pay down debt
FY 2018 expected CapEx: ~ $15 million(1)
Cash Flow
Note: Components may not add to totals due to rounding
Three Months Ended
December 31,
2017 2016
Net cash provided by operating activities $ 16.5 $ 22.9
Capital expenditures (CapEx) (3.3) (2.8)
Operating free cash flow $ 13.2 $ 20.0
(1) Capital expenditure guidance provided February 6, 2018
11© 2018 Columbus McKinnon Corporation
CAPITALIZATION
December 31,
2017
March 31,
2017
Cash and cash equivalents $ 64.6 $ 77.6
Total debt 377.9 421.3
Total net debt 313.3 343.7
Shareholders’ equity 384.0 341.4
Total capitalization $ 761.9 $ 762.7
Debt/total capitalization 49.6% 55.2%
Net debt/net total
capitalization 44.9% 50.2%
De-levering Balance Sheet
Increased level of debt reduction in
FY 2018
Increased target to $60 million in
FY18, up from original $45 - $50
million target
Target of <3x Net Debt/ Adjusted
EBITDA(1) achieved early, currently
at 2.8x
Plan to pay down an additional
$55 million to $65 million in FY19
Covenant-lite
No leverage maintenance covenant
as long as revolver is undrawn
(1) Adjusted EBITDA is a non-GAAP financial measure. Please see supplemental slides for a reconciliation from GAAP income from operations to non-GAAP
adjusted EBITDA and other important disclosures regarding the use of non-GAAP financial measures.
12© 2018 Columbus McKinnon Corporation
Q4 FY2018 Outlook
Orders and backlog
Q3 order growth: 16% organic year/year
• NA up low double digits; EMEA up ~30%
Organic backlog up 12% over prior year; down 6% sequentially to $152.3 million
• STAHL backlog lower as a result of project shipment timing
Expect 4% to 5% organic growth in fourth quarter (excludes two months of STAHL sales in
Q4 FY2017) and STAHL sales comparable with the third quarter
Blueprint 2021: 3-year strategy to drive earnings power
Pivot from late stage industrial to growth-oriented technology company
Advancing into Phase II
Simplified business structure: global business units aligned “customer back”
Streamline product platforms while bolstering key brands
Operating improvements
Increase R&D
13© 2018 Columbus McKinnon Corporation
Supplemental
Information
14© 2018 Columbus McKinnon Corporation
Replay Number: 412-317-6671 passcode: 13675058
Telephone replay available through February 13, 2018
Webcast / PowerPoint / Replay available at www.cmworks.com/investors
Transcript, when available, at www.cmworks.com/investors
Conference Call Playback Info
15© 2018 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
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
Gross Profit $44,821 $50,335 $69,308 $71,619 $69,045
Add back:
Acquisition inventory step-up expense — 8,852 — — —
STAHL integration costs — — 169 52 50
Insurance Settlement — — — (1,741) —
Non-GAAP adjusted gross margin $44,821 $59,187 $69,477 $69,930 $69,095
Sales 152,497 183,688 203,726 212,828 208,725
Adjusted gross margin 29.4% 32.2% 34.1% 32.9% 33.1%
($ in thousands)
16© 2018 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 assists in understanding the
comparison of the current quarter’s and current year's income from operations to the historical periods' income from operations
Quarter
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
Income (loss) from operations $5,317 $(3,164) $20,015 $19,587 $14,173
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 3,006
CEO retirement pay and search costs — 3,085 — — —
Insurance recovery legal costs — 1,359 229 1,323 1,040
Impairment of intangible asset — 1,125 — — —
Magnetek litigation — — — 400 —
Insurance settlement — — — (1,741) —
Non-GAAP adjusted income from operations $8,457 $16,932 $21,415 $20,238 $18,219
Sales 152,497 183,688 203,726 212,828 208,725
Adjusted operating margin 5.5% 9.2% 10.5% 9.5% 8.7%
($ in thousands)
17© 2018 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
Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18
Net income (loss) $505 $(4,738) $11,656 $12,508 $(10,565)
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 3,006
CEO retirement pay and search costs — 3,085 — — —
Insurance recovery legal costs — 1,359 229 1,323 1,040
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) (415) (6,490) (458) (1,296) 16,938
Non-GAAP adjusted net income $5,056 $9,935 $12,598 $11,863 $10,419
Average diluted shares outstanding 20,490 22,201 23,028 23,142 23,577
Diluted income per share - GAAP $0.02 $(0.22) $0.51 $0.54 $(0.46)
Diluted income per share - Non-GAAP $0.25 $0.45 $0.55 $0.51 $0.44
($ in thousands, except per share data)
18© 2018 Columbus McKinnon Corporation
Adjusted EBITDA Reconciliation
Period
Q4 FY17 Q3 FY18YTD
Q3 FY18
TTM
Income from Operations - GAAP $(3,164) $53,775 $50,611
Non-GAAP Adjustments:
Acquisition inventory step-up expense and real estate transfer taxes 8,852 — 8,852
Acquisition deal, integration, and severance costs 5,675 — 5,675
CEO retirement pay and search costs 3,085 — 3,085
Insurance recovery legal costs 1,359 2,592 3,951
Impairment of intangible asset 1,125 — 1,125
Magnetek litigation — 400 400
STAHL integration costs — 4,846 4,846
Insurance settlement — (1,741) (1,741)
Income from Operations – Non-GAAP $16,932 $59,872 $76,804
—
Depreciation & Amortization 7,467 26,873 34,340
—
Adjusted EBITDA $24,399 $86,745 $111,144
As of December 31, 2017:
Gross Debt 377,890
Cash 64,598
Net Debt 313,292
Net Debt to TTM Adjusted EBITDA 2.8
($ in thousands)
Adjusted EBITDA represents net income adjusted for income taxes, interest, depreciation and amortization and other items as noted in the
reconciliation table. The Company believes Adjusted EBITDA is an important supplemental measure of operating performance and uses it to
assess performance and inform operating decisions. However, Adjusted EBITDA is not a GAAP financial measure. The Company’s calculation
of Adjusted EBITDA should not be used as a substitute for GAAP measures of performance, including net cash provided by operations, operating
income and net income. The Company’s method of calculating Adjusted EBITDA may vary substantially from the methods used by other
companies and investors are cautioned not to rely unduly on it.