EX-99.1 2 ex99_1.htm EXHIBIT 99.1
EXHIBIT 99.1
 
News Release
140 John James Audubon Parkway
Amherst, NY  14228
 
Immediate Release
 
Columbus McKinnon Fiscal 2014 Q1 Gross Margin
Expanded to 31.3%
 
· Gross margin improved by 270 basis points over the prior-year period despite lower sales
 
· Operating income increased to $13.4 million
 
· Sales to emerging markets represented 10.4% of sales, up 18.6%
 
AMHERST, NY, July 26, 2013 – Columbus McKinnon Corporation (NASDAQ: CMCO), a leading designer, manufacturer and marketer of material handling products, today announced financial results for its fiscal 2014 first quarter which ended June 30, 2013.
 
Timothy T. Tevens, President and Chief Executive Officer, commented, “We achieved great success in driving margin expansion in the quarter as we realized one of the highest gross margin levels in our recent history.  We are making solid headway in increasing our sales volumes in emerging markets, specifically Asia, the Middle East, Latin America and Eastern Europe.  These gains have helped to offset the recessionary industrial economy in Europe.  Our Lean Business System has also been successful in driving out waste and therefore cost from our operating structure, which has improved our margins on a lower sales base.”
 
Net sales for the first quarter of fiscal 2014 were $138.9 million, down $14.1 million, or 9.2%, from the prior-year period as one additional shipping day and improved pricing were more than offset by the decline in volume, particularly in Europe.  Excluding the effects of acquisitions and divestitures and foreign currency translation, sales declined by $10.1 million, or 6.6%, in the quarter.
 
U.S. sales, which comprised 59% of total sales, were down by $7.9 million, or 8.8%, to $82.0 million compared with $90.0 million for the first quarter of fiscal 2013.  Lower volume and the $4.5 million impact of the crane business divestiture in August 2012 more than offset improved pricing and one additional shipping day.  Sales outside of the U.S. were down $6.2 million, or 9.8%, to $56.9 million, primarily on lower sales volume.  The additional shipping day, improved pricing and the effect of a small acquisition in Austria with approximately $10 million in annual revenue somewhat offset the volume decline.  The Austrian acquisition, which was completed on June 1, 2013, has been a value-added partner of the Company in the lifting industry in the Austrian market for over 20 years.  This acquisition enables the Company to better leverage sales in this and other regions of the world and does not have a material effect on earnings.  Foreign currency translation had a negative impact of $0.2 million on sales during the quarter.
Columbus McKinnon Fiscal 2014 Q1 Gross Margin Expanded to 31.3%
 July 26, 2013
Page 2 of 9

The fluctuation in sales for the first quarter of fiscal 2014 compared with the first quarter of fiscal 2013 is summarized as follows:
 
($ in millions)
 
  
$ Change
    
% Change
  
Volume
    
(15.9
)
    
(10.4
) %
Acquisitions & divestitures
    
(3.8
)
    
(2.5
) %
Foreign currency translation
    
(0.2
)
    
(0.1
) %
Additional shipping day
    
2.4
      
1.6
%
Pricing
    
3.4
      
2.2
%
Total
  
$
(14.1
)
    
(9.2
) %

Pricing and productivity drove margin improvements
 
Gross profit in the first quarter of fiscal 2014 declined slightly to $43.5 million, down just $0.3 million from the prior-year period.  As a percentage of sales, gross margin expanded 270 basis points to 31.3% compared with 28.6% for the prior-year period.  Productivity improvements and pricing drove margin expansion, more than offsetting the impact of lower volume.  The prior-year’s first quarter had the benefit of a $1.8 million brokerage fee, or 80 basis points, that was accounted for on a net revenue basis with no associated cost of sales.
 
Selling expense was $16.7 million, up 2.3%, or $0.4 million, from the same period of the prior year.  Increased selling expense was related to the Austrian acquisition that was completed during the quarter and investments in emerging markets.  As a percent of revenue, selling expense was 12.1% on measurably lower revenue compared with 10.7% in the same period last year.
 
General and administrative (G&A) expense was $12.8 million, down from $14.2 million in the prior-year period, which included approximately $0.8 million of one-time costs.  As a percent of sales, G&A was 9.3%, flat when compared with the prior-year period.
 
Operating income in the fiscal 2014 first quarter was up $0.7 million, or 5.1%, to $13.4 million when compared with the first quarter of fiscal 2013.  Operating margin expanded 130 basis points to 9.7% of sales.
 
Income before tax expense was negatively impacted by approximately $1.0 million as a result of the realized change in foreign currency exchange when compared with the prior year.  The effective tax rate in the 2014 first quarter was 29.6% compared with 17.4% in the prior-year period.  The prior-year period effective tax rate was impacted by a valuation allowance on deferred tax assets, primarily in the U.S.
 
First quarter fiscal 2014 net income was $7.0 million, or $0.35 per diluted share, down from $8.4 million or $0.43 per diluted share in the prior-year period.  Adjusted for the current quarter’s tax rate, fiscal 2013’s first quarter earnings per diluted share were $0.37.  Further details of the reconciliation of GAAP EPS to adjusted EPS are shown on page 9 of this release.
 
Balance sheet provides significant financial flexibility
 
Cash used in operations was $1.9 million.  This was primarily due to an increase in inventories as a result of a higher level of project type orders, as well as an increase in prepaid expenses due to the timing of insurance renewals, offset by lower trade receivables.  Net cash used for investing activities included $5.8 million for the Austrian acquisition previously mentioned as well as normal capital expenditures.  As a result, cash and cash equivalents decreased by $11.3 million to $110.4 million at the end of fiscal 2014’s first quarter, from $121.7 million at March 31, 2013.  Working capital as a percentage of sales was 20.2% at the end of the first quarter of 2014, up from 19.8% at the end of the first quarter of 2013 and 18.3% at the end of the trailing fourth quarter of fiscal 2013.
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Columbus McKinnon Fiscal 2014 Q1 Gross Margin Expanded to 31.3%
 July 26, 2013
Page 3 of 9

Capital expenditures for the first quarter of fiscal 2014 were $3.6 million compared with $1.7 million in the prior-year period.  Approximately $0.7 million was associated with the implementation of a new enterprise management system.  The Company continues to expect fiscal 2014 capital spending to be in the range of $20 million to $25 million.
 
Gross debt at June 30, 2013 was $151.9 million.  Debt, net of cash, was $41.5 million, or 14.4% of net total capitalization, compared with $30.4 million, or 11.2% of net total capitalization, at March 31, 2013.
 
Continued growth in emerging economies and strong performance in key vertical markets expected to offset slow economic growth
 
Backlog was $92.0 million at June 30, 2013 compared with $99.0 million at March 31, 2013.  Although the time to convert the majority of backlog to sales typically ranges 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 June 30, 2013, approximately $34.6 million of backlog, or 37.6%, was scheduled for shipment beyond September 30, 2013.
 
Both U.S. and Eurozone capacity utilization are leading market indicators for the Company.  U.S. industrial capacity utilization was 76.8% in June 2013, compared with 76.5% a year ago, and 77.0% in March 2013.  Eurozone capacity utilization was 77.5% in the quarter ended June 30, 2013, down from 80.0% during the quarter ended June 30, 2012, but unchanged from the quarter ended March 31, 2013.  The European indicator reflects the recessionary environment in the Eurozone, while the U.S. remains flat.  The Company’s sales tend to lag changes in these indicators by one to two quarters.
 
Mr. Tevens concluded, “We remain committed to improving and sustaining our earnings and have made great strides over this past year to enable strong margins.  Additionally, there are early signs that our industrial markets are improving in Europe.  For example, we have seen early indications of increasing bidding activity in our European project business, which is a positive sign in this uncertain economy.  And, we expect the U.S. to grow modestly during the remainder of the fiscal year. We continue to realize growth in emerging economies, despite concerns of China's slowed growth, as we take market share in that region.”
 
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 210-234-7695 and asking for the “Columbus McKinnon conference call.”  The webcast can be monitored on Columbus McKinnon’s website at http://www.cmworks.com/investors.  An audio recording of the call will be available two hours after its completion through August 30, 2013 by dialing 203-369-3724.  Alternatively, an archived webcast of the call will be on Columbus McKinnon’s web site at: http://www.cmworks.com/investors until August 30, 2013.  In addition, a transcript of the call will be posted to the website once available.
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Columbus McKinnon Fiscal 2014 Q1 Gross Margin Expanded to 31.3%
July 26, 2013
Page 4 of 9

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.
 
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 Fiscal 2014 Q1 Gross Margin Expanded to 31.3%
July 26, 2013
Page 5 of 9

COLUMBUS McKINNON CORPORATION
Condensed Consolidated Income Statements - UNAUDITED
(In thousands, except per share and percentage data)
 
 
Three Months Ended
 
  
June 30, 2013
    
June 30, 2012
    
Change
  
 
  
   
   
 
Net sales
  
$
138,891
    
$
153,013
      
-9.2
%
Cost of products sold
    
95,400
      
109,189
      
-12.6
%
Gross profit
    
43,491
      
43,824
      
-0.8
%
Gross profit margin
    
31.3
%
    
28.6
%
        
Selling expense
    
16,747
      
16,366
      
2.3
%
General and administrative expense
    
12,849
      
14,177
      
-9.4
%
Amortization
    
459
      
499
      
-8.0
%
Income from operations
    
13,436
      
12,782
      
5.1
%
Operating margin
    
9.7
%
    
8.4
%
        
Interest and debt expense
    
3,371
      
3,499
      
-3.7
%
Investment income
    
(216
)
    
(280
)
    
-22.9
%
Foreign currency exchange loss (gain)
    
226
      
(336
)
  
NM
  
Other expense (income), net
    
89
      
(320
)
  
NM
  
Income before income tax expense
    
9,966
      
10,219
      
-2.5
%
Income tax expense
    
2,946
      
1,783
      
65.2
%
Net income
  
$
7,020
    
$
8,436
      
-16.8
%
 
                        
Average basic shares outstanding
    
19,520
      
19,347
      
0.9
%
Basic income per share:
                        
Basic income per share
  
$
0.36
    
$
0.44
      
-18.2
%
 
                        
Average diluted shares outstanding
    
19,779
      
19,507
      
1.4
%
Diluted income per share:
                        
Diluted income per share
  
$
0.35
    
$
0.43
      
-18.6
%

5
Columbus McKinnon Fiscal 2014 Q1 Gross Margin Expanded to 31.3%
 July 26, 2013
Page 6 of 9

COLUMBUS McKINNON CORPORATION
Condensed Consolidated Balance Sheets - UNAUDITED
(In thousands)

 
  
June 30, 2013
    
March 31, 2013
  
 
  
   
 
ASSETS
  
   
 
Current assets:
  
   
 
Cash and cash equivalents
  
$
110,399
    
$
121,660
  
Trade accounts receivable
    
76,034
      
80,224
  
Inventories
    
101,451
      
94,189
  
Prepaid expenses and other
    
21,005
      
17,905
  
Total current assets
    
308,889
      
313,978
  
 
                
Net property, plant, and equipment
    
67,091
      
65,698
  
Goodwill
    
110,961
      
105,354
  
Other intangibles, net
    
12,878
      
13,395
  
Marketable securities
    
24,166
      
23,951
  
Deferred taxes on income
    
38,711
      
37,205
  
Other assets
    
6,458
      
7,286
  
Total assets
  
$
569,154
    
$
566,867
  
 
                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current liabilities:
                
Trade accounts payable
  
$
30,133
    
$
34,329
  
Accrued liabilities
    
50,706
      
48,884
  
Current portion of long-term debt
    
1,043
      
1,024
  
Total current liabilities
    
81,882
      
84,237
  
 
                
Senior debt, less current portion
    
2,376
      
2,641
  
Subordinated debt
    
148,480
      
148,412
  
Other non-current liabilities
    
89,248
      
91,590
  
Total liabilities
    
321,986
      
326,880
  
 
                
Shareholders’ equity:
                
Common stock
    
196
      
195
  
Additional paid-in capital
    
193,083
      
192,308
  
Retained earnings
    
111,211
      
104,191
  
ESOP debt guarantee
    
(449
)
    
(552
)
Accumulated other comprehensive loss
    
(56,873
)
    
(56,155
)
Total shareholders’ equity
    
247,168
      
239,987
  
Total liabilities and shareholders’ equity
  
$
569,154
    
$
566,867
  

6
Columbus McKinnon Fiscal 2014 Q1 Gross Margin Expanded to 31.3%
 July 26, 2013
Page 7 of 9

COLUMBUS McKINNON CORPORATION
Condensed Consolidated Statements of Cash Flows - UNAUDITED
(In thousands)
 
 
  
Three Months Ended
  
 
  
June 30, 2013
    
June 30, 2012
  
 
  
   
 
Operating activities:
  
   
 
Net income
  
$
7,020
    
$
8,436
  
Adjustments to reconcile net income to net cash used for operating activities:
                
Depreciation and amortization
    
2,992
      
3,110
  
Deferred income taxes and related valuation allowance
    
(786
)
    
13
  
Gain on sale of real estate, investments, and other
    
(347
)
    
(114
)
Stock based compensation
    
717
      
664
  
Amortization of deferred financing costs and discount on debt
    
171
      
95
  
Changes in operating assets and liabilities, net of effects of business acquisition:
                
Trade accounts receivable
    
4,854
      
(2,090
)
Inventories
    
(6,961
)
    
(4,204
)
Prepaid expenses
    
(3,724
)
    
(2,336
)
Other assets
    
865
      
448
  
Trade accounts payable
    
(4,550
)
    
(2,964
)
Accrued and non-current liabilities
    
(2,159
)
    
(4,947
)
Net cash used for operating activities
    
(1,908
)
    
(3,889
)
 
                
Investing activities:
                
Proceeds from sale of marketable securities
    
952
      
1,196
  
Purchases of marketable securities
    
(1,613
)
    
(962
)
Capital expenditures
    
(3,614
)
    
(1,716
)
Purchase of business, net of cash acquired
    
(5,847
)
    
-
  
Net cash used for investing activities
    
(10,122
)
    
(1,482
)
 
                
Financing activities:
                
Proceeds from stock options exercised
    
412
      
-
  
Net payments under lines-of-credit
    
-
      
(13
)
Repayment of debt
    
(266
)
    
(211
)
Change in ESOP guarantee
    
104
      
107
  
Net cash provided by (used for) financing activities
    
250
      
(117
)
 
                
Effect of exchange rate changes on cash
    
519
      
(1,819
)
 
                
Net change in cash and cash equivalents
    
(11,261
)
    
(7,307
)
Cash and cash equivalents at beginning of year
    
121,660
      
89,473
  
Cash and cash equivalents at end of period
  
$
110,399
    
$
82,166
  

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Columbus McKinnon Fiscal 2014 Q1 Gross Margin Expanded to 31.3%
 July 26, 2013
Page 8 of 9

COLUMBUS McKINNON CORPORATION
Additional Data - UNAUDITED

 
  
June 30, 2013
  
June 30, 2012
  
March 31, 2013
 
  
 
 
  
 
 
  
 
       
Backlog (in millions)
  
$
92.0
  
 
  
$
109.9
  
 
  
$
99.0
  
 
 
        
 
        
 
        
       
Trade accounts receivable
        
 
        
 
        
      
days sales outstanding
    
49.8
  
days
    
52.9
  
days
    
50.5
  
days
 
        
 
        
 
        
       
Inventory turns per year
        
 
        
 
        
      
(based on cost of products sold)
    
3.8
  
turns
    
4.0
  
turns
    
4.3
  
turns
Days' inventory
    
96.1
  
days
    
91.3
  
days
    
84.9
  
days
 
        
 
        
 
        
       
Trade accounts payable
        
 
        
 
        
      
days payables outstanding
    
28.7
  
days
    
30.4
  
days
    
31.1
  
days
 
        
 
        
 
        
       
Working capital as a % of sales
    
20.2
  
%
    
19.8
  
%
    
18.3
  
%
 
        
 
        
 
        
       
Debt to total capitalization percentage
    
38.1
  
%
    
48.2
  
%
    
38.8
  
%
 
Debt, net of cash, to net total capitalization
    
14.4
  
%
    
30.0
  
%
    
11.2
  
%

Shipping Days by Quarter 
 
  
   
   
   
   
 
 
    
Q1
      
Q2
      
Q3
      
Q4
    
Total
  
 
                                  
 
FY 14
    
64
      
63
      
61
      
62
      
250
  
 
                                        
FY13
    
63
      
63
      
60
      
62
      
248
  

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Columbus McKinnon Fiscal 2014 Q1 Gross Margin Expanded to 31.3%
July 26, 2013
Page 9 of 9

COLUMBUS McKINNON CORPORATION
Reconciliation Adjusted Diluted EPS to GAAP Diluted EPS

 
  
Three Months Ended
  
 
  
June 30,2012
  
 
  
 
GAAP diluted EPS
  
$
0.43
  
Adjusted to reflect current quarter’s 29.6% tax rate
  
$
(0.06
 ) 
Adjusted diluted EPS
  
$
0.37
  

Adjusted diluted EPS is defined diluted EPS as reported, adjusted to apply the current quarter’s tax rate.  Adjusted diluted EPS is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP.  Nevertheless, Columbus McKinnon believes that providing non-GAAP information such as adjusted 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 diluted EPS to the historical period’s diluted EPS.
 
 
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