Columbus McKinnon Operating Margin Increased to 10% of Sales in Fiscal 2013 Fourth Quarter

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Columbus McKinnon Operating Margin Increased to 10% of Sales in Fiscal 2013 Fourth Quarter

  • Q4 operating margin expanded 150 basis points to 10%
  • Reversed $49.2 million tax valuation allowance, favorably affected EPS; Q4 earnings of $2.64 per diluted share
  • Adjusted EPS for Q4 was $0.37 excluding the tax valuation allowance reversal and applying a 38% tax rate
  • Full year operating income increased 20% compared with the prior year to $54.4 million, or 9.1% of sales; Operating leverage in fiscal 2013 was significant at 173.5%
  • Generated $42.4 million in cash from operations in fiscal 2013; Fiscal year end cash and cash equivalents was $121.7 million

AMHERST, N.Y.--(BUSINESS WIRE)-- Columbus McKinnon Corporation (NAS: CMCO) , a leading designer, manufacturer and marketer of material handling products, today announced financial results for its fiscal 2013 fourth quarter and full year, which ended March 31, 2013.

Timothy T. Tevens, President and Chief Executive Officer, commented, "We believe our focus on productivity and operational excellence is demonstrated in our financial performance for the quarter and year. As we grow our market share around the world and further penetrate emerging economies as well as improve our productivity, we expect to continue to strengthen our earnings power."


He also noted, "Our operating leverage was significant in the year as we recognized the productivity benefits of our Lean Business System and the value of our prior-year's restructuring efforts."

Net sales for the fourth quarter of fiscal 2013 were $144.6million, down $15.0 million, or9.4%, from the prior-year period. U.S. sales, which comprised 59% of total sales, were down by $5.3 million, or 5.8%, to $85.3 million compared with $90.6 million for the fourth quarter of fiscal 2012. The decline in sales reflected a $5.6 million impact of a business divested in August 2012 and three fewer shipping days. Sales outside of the U.S. were down $9.7 million, or 14.1%, to $59.3 million, reflecting lower sales volume primarily in Western Europe and Canada as well as fewer shipping days. Foreign currency translation had a negative impact of $0.7 million on sales during the quarter. Excluding the effects of foreign currency translation and the divestiture, sales declined by 5.4% in the quarter.

The fluctuation in sales for the fourth quarter of fiscal 2013 compared with fiscal 2012 is summarized as follows:

($ in millions)  
$ Change% Change
Shipping days(7.4)(4.6

)%

Divestitures(5.6)(3.5

)%

Volume(4.4)(2.8

)%

Foreign currency translation(0.7)(0.5)%
Pricing3.1  2.0%
Total$ (15.0) (9.4)%
 

Pricing and productivity drove margin improvements

Gross profit remained unchanged from the prior year at $44.2 million for the quarter. However, as a percent of sales, gross margin expanded 290 basis points to 30.6% compared with 27.7% for the fourth quarter of fiscal 2012. Gross margin expanded as pricing and productivity improvements offset the impact of lower volume and inflation.

Selling expenses were $16.4 million, down 5.4%, or $0.9 million, from the same period of the prior year. The divestiture accounted for approximately $0.3 million of the reduction, and the remainder was primarily related to cost containment. As a percent of revenue, selling expenses were 11.3% compared with 10.9% in the same period last year.

General and administrative (G&A) expenses were $12.8 million, relatively unchanged from $12.7 million in the prior-year period. As a percent of sales, G&A was 8.9% of sales compared with 8.0% in the prior year.

Operating income in the fiscal 2013 fourth quarter was up $0.9 million, or 6.3%, to $14.5 million. Operating margin expanded 150 basis points to 10.0%.

As a result of a tax valuation allowance reversal, the Company recognized an income tax benefit of $40.2 million in the quarter.

Net income grew 478.3% to $52.0 million, or $2.64 per diluted share, in the fiscal 2013 fourth quarter. On an adjusted basis, excluding the tax valuation allowance reversal and applying a more normalized tax rate of 38%, earnings per diluted share were $0.37. Further details of the reconciliation of adjusted EPS to GAAP EPS are shown on page 10 of this release.

Strong cash generation and significant financial flexibility

Cash provided by operations during fiscal 2013 was $42.4 million, up $18.8 million over the prior-year period. Cash and cash equivalents grew to $121.7 million at the end of fiscal 2013's fourth quarter from $89.5 million at March 31, 2012.

Working capital as a percentage of sales was 18.3% at the end of fiscal 2013, up from 17.6% at the end of fiscal 2012 and 17.5% at the end of the trailing third quarter of fiscal 2013. Excluding the impact of the reversal of the deferred tax valuation allowance, working capital as a percentage of sales was 17.1% at the end of fiscal 2013.

Capital expenditures for fiscal 2013 were $14.9 million compared with $13.8 million in the comparable prior year. Approximately $4.0 million was associated with the implementation of a new enterprise management system. The Company expects fiscal 2014 capital spending to be in the range of $20 million to $25 million which is higher than fiscal 2013 due to investments in China as well as capital projects that are expected to further generate productivity improvements.

Gross debt at the end of fiscal 2013 was $152.1 million. Debt, net of cash, at March 31, 2013 was $30.4 million, or 11.2% of net total capitalization, compared with $63.6 million, or 28.4% of net total capitalization, at March 31, 2012.

Fiscal 2013 Review

Net sales for fiscal 2013 were $597.3 million, up slightly from $591.9 million for the prior year as U.S. sales more than offset the slight decline in sales outside of the U.S. U.S. sales were up $13.0 million, or 3.9%. Sales outside of the U.S., representing 42% of total sales, decreased by $7.7 million, or 3.0%, in fiscal 2013. Foreign currency translation had a $17.1 million negative impact on sales in fiscal 2013. Net of foreign currency translation, revenue outside of the U.S. grew 3.6%.

Gross profit increased 10.5% to $174.2 million and gross profit margin expanded 260 basis points to 29.2% in fiscal 2013 due to improved pricing, higher sales volumes, and productivity improvements.

Selling expenses were $65.6 million, an increase of $0.7 million, or 1.2%, compared with the prior-year period. As a percent of sales, selling expenses were 11.0% in fiscal 2013, unchanged from the prior-year period. G&A expenses increased $5.6 million, or 12.0%. As a percent of sales, G&A expenses were 8.8% in the current period, compared with 7.9% in the prior-year period. Increased G&A in fiscal 2013 was due to higher variable compensation costs, higher employee benefit costs, including pension and group medical costs, and the implementation in the Company's new enterprise management system.

Operating income grew 20.4% to $54.4 million, while operating margin expanded 150 basis points to 9.1% in fiscal 2013. Operating leverage achieved during fiscal 2013 was 173.5%.

Net income for fiscal 2013 grew $51.3 million, or 190.3%, to $78.3 million. On a per diluted share basis, earnings in fiscal 2013 grew 188.4% to $3.98 compared with $1.38 for the prior-year period. On an adjusted basis, excluding the tax valuation allowance reversal and applying a more normalized tax rate of 38%, earnings per diluted share were $1.34. Further details of the reconciliation of adjusted EPS to GAAP EPS are shown on page 10 of this release.

Continued growth in emerging economies and strong performance in key vertical markets to offset slow economic growth

We continue to invest in global emerging markets where we expect them to grow at a faster rate than the developed markets of the world. We are also focusing our resources on global vertical markets such as oil & gas, heavy OEM, mining and entertainment where our products and knowledge are needed to help these customers perform their work in a safe and productive way. Backlog was $99.0 million at March 31, 2013 compared with $95.4 million at December 31, 2012. 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, 2013, approximately $33.0 million of backlog, or 33.3%, was scheduled for shipment beyond June 30, 2013.

Both U.S. and Eurozone capacity utilization are leading market indicators for the Company. U.S. industrial capacity utilization was 77.1% in March 2013, up from 76.2% in March 2012, and slightly improved from 77.0% in December 2012. Eurozone capacity utilization was 77.2% in the quarter ended March 31, 2013, down from 79.9% during the quarter ended March 31, 2012, but improved from 76.9% in the quarter ended December 31, 2012. The European indicator reflects the modest recession being experienced in the Eurozone, while the U.S. indicator demonstrates moderate economic growth. The Company's sales tend to lag these indicators by one to two quarters.

Mr. Tevens concluded, "We continue to focus on driving productivity in our facilities through our lean system, capital projects, training programs and safety initiatives. We believe these efforts will continue to result in productivity improvements and operating leverage and positively impact the bottom line. As a global company, we work as a team to continually build upon the strong reputation of our brands, increase our market presence, provide responsive customer service and innovate in our product and service offerings. We expect to continue to grow through our organic initiatives as well as through acquisitions. Importantly, we believe that our continuous improvement activities will create greater earnings power in the future to build our balance sheet which will facilitate our growth initiatives."

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. 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 June 20, 2013 by dialing 203-369-0603. Alternatively, an archived webcast of the call will be on Columbus McKinnon's web site at: http://www.cmworks.com/investors until June 20, 2013. 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, 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.

Financial Tables follow.

 
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Income Statements - UNAUDITED
(In thousands, except per share and percentage data)
 
 Three Months Ended 
March 31, 2013 March 31, 2012Change
 
Net sales$144,553$159,572-9.4%
Cost of products sold 100,345    115,330 -13.0%
Gross profit44,20844,242-0.1%
Gross profit margin30.6%27.7%
Selling expense16,40417,345-5.4%
General and administrative expense12,82312,7210.8%
Restructuring charges--
Amortization 500    559 -10.6%
Income from operations 14,481    13,617 6.3%
Operating margin10.0%8.5%
Interest and debt expense3,3393,563-6.3%
Investment income(529)(194)172.7%
Foreign currency exchange (gain) loss(192)178NM
Other expense, net 12    718 -98.3%
Income before
income tax expense11,8519,35226.7%
Income tax (benefit) expense (40,178)   998 NM
Income from continuing operations52,0298,354522.8%
Income from discontinued operations -
net of tax -    643 -100.0%
Net income$52,029   $8,997 478.3%
 
Average basic shares outstanding19,46419,3210.7%
Basic income per share:
Income from continuing operations2.670.44506.8%
Income from discontinued operations -    0.03 
Net income$2.67   $0.47 468.1%
 
Average diluted shares outstanding19,73019,5520.9%
Diluted income per share:
Income from continuing operations2.640.43514.0%
Income from discontinued operations -    0.03 
Net income$2.64   $0.46 473.9%
 
 
COLUMBUS McKINNON CORPORATION

Condensed Consolidated Income Statements - UNAUDITED

(In thousands, except per share and percentage data)
 
 Year Ended 
March 31, 2013 March 31, 2012Change
 
Net sales$597,263$591,9450.9%
Cost of products sold 423,032    434,227 -2.6%
Gross profit174,231157,71810.5%
Gross profit margin29.2%26.6%
Selling expense65,60864,8601.2%
General and administrative expense52,27146,67712.0%
Restructuring charges-(1,037)-100.0%
Amortization 1,981    2,074 -4.5%
Income from operations 54,371    45,144 20.4%
Operating margin9.1%7.6%
Interest and debt expense13,75714,214-3.2%
Investment income(1,546)(1,018)51.9%
Foreign currency exchange (gain) loss(45)316NM
Other income, net (417)   (1,179)-64.6%
Income before
income tax (benefit) expense42,62232,81129.9%
Income tax (benefit) expense (35,674)   6,896 NM
Income from continuing operations78,29625,915202.1%
Income from discontinued operations -
net of tax -    1,052 -100.0%
Net income$78,296   $26,967 190.3%
 
Average basic shares outstanding19,42519,2720.8%
Basic income per share:
Income from continuing operations4.031.35198.5%
Income from discontinued operations -    0.05 
Net income$4.03   $1.40 187.9%
 
Average diluted shares outstanding19,6871
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