Columbus McKinnon Reports $19.1 million in Cash from Operations in Fiscal 2010 Second Quarter Despite 25.5% Revenue Decline.* $19.1 million in cash generated from operations during second quarter; $23.9 million in first half of fiscal 2010 * Balance sheet remains strong with cash and cash equivalents of $54.3 million; debt net of cash at $80.3 million, or 29.9% of total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. * Global recession continues to impact results with 25.5% decline in revenue including acquired Pfaff business; organic sales decline 37.0% * Net loss was $2.7 million, or $0.14 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share; excluding special charges, non-GAAP net income was $0.12 per diluted share AMHERST, N.Y. -- Columbus McKinnon Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CMCO CMCO Classified Material Control Officer ), a leading designer, manufacturer and marketer of material handling products, today announced financial results for its second quarter of fiscal 2010 that ended on September 30, 2009. Current quarter results include the Company's Pfaff-silberblau (Pfaff) business which was acquired on October 1, 2008. Second quarter highlights Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the second quarter of fiscal 2010 were $115.2 million, including $17.9 million from the Pfaff business, down $39.4 million, or 25.5%, from the same period in the prior year, and down 37.0% excluding the Pfaff business. Continued weakness in the global economy, combined with the tendency for the Company's bookings to lag general capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. trends by one to two quarters, caused the significant decline in revenue. U.S. industrial capacity utilization, which the Company uses as a leading market indicator, was 67.8% in September 2009, up slightly from 65.2% in June 2009, but down from 72.4% in September 2008. Pricing helped to offset the impacts of foreign currency translation which negatively impacted sales by approximately $1.4 million. The net loss for the second quarter of fiscal 2010 was $2.7 million, or $0.14 per diluted share, compared with net income of $10.6 million, or $0.55 per diluted share, for the same period last year. Restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $2.7 million, associated with the previously announced consolidation of the Company's North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. hoist hoist: see winch. and rigging rigging, the wires, ropes, and chains employed to support and operate the masts, yards, booms, and sails of a vessel. Standing rigging is semipermanent, consisting mainly of mast supports, the fore-and-aft stays, and the stays running from the masthead to each side manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. , were recorded during the second quarter of fiscal 2010. Additionally, $0.5 million of restructuring-related costs were incurred, but do not qualify for the technical GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). classification. Finally, the Company recorded a $2.9 million provision for an unusually large and atypical atypical /atyp·i·cal/ (-i-k'l) irregular; not conformable to the type; in microbiology, applied specifically to strains of unusual type. a·typ·i·cal adj. product liability claim, up to its maximum self-insurance obligation. Management believes that segregating those special charges and applying an effective tax rate that would be more relevant to the ongoing operations without such charges is informative in understanding the performance of the ongoing operations. Accordingly, on a non-GAAP basis excluding the special charges described above and applying a 38% U.S. tax rate to them, as well as applying a normalized consolidated effective tax rate of 36% to the remaining operations, second quarter 2010 net income was $2.3 million, or $0.12 per diluted share, compared with $9.7 million, or $0.50 per diluted share, excluding special charges and gains in the same period last year, summarized on the following table. [TABLE OMITTED] Timothy T. Tevens, President and Chief Executive Officer, commented, "Sales volume continues to be heavily impacted by the global economy, although we began seeing stabilization Stabilization The action undertakes a country when it buys and sells its own currency to protect its exchange value. Actions registered competitive traders undertake by on the NYSE to meet the exchange requirement that 75% of their traded be stabilizing, meaning that sell orders in orders as we moved through the second quarter and passed the traditionally softer summer season. The improvement during the quarter in industrial capacity utilization was encouraging, and we also believe that our distributors have worked through their excess inventories. However, since we tend to lag the general economic cycle by approximately six months, we could realize strengthening in orders as we move into fiscal 2011 if the positive indicators continue. We also continue to remind investors that our December-ending third quarter has typically been our weakest quarter of the year. And, while historically our fourth quarter has been the strongest quarter, the lag in recovery we tend to realize may skew (1) The misalignment of a document or punch card in the feed tray or hopper that prohibits it from being scanned or read properly. (2) In facsimile, the difference in rectangularity between the received and transmitted page. that quarter's results as well." "Despite the economy, we are pursuing a long-term strategy that we believe will ultimately expand our position as a world leader in lifting, positioning and securing material handling equipment. We have solid market leadership in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , an expanding presence in Europe and are extending our breadth and depth in Asia, South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. , the Middle East and Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. . At the beginning of this past quarter, we also launched a more integrated sales approach with our field sales force in North America enabling them to represent all of our product lines while concurrently developing a deeper reach into specific vertical market sectors to create greater end-user demand." Continued Weakness in Global Industrial Economy Severely Impacts Volume The fluctuation Fluctuation A price or interest rate change. in sales compared with last year's quarter is summarized as follows, in millions: [TABLE OMITTED] International sales, which included $17.9 million associated with the Pfaff acquisition, were $47.7 million, or 41% of total net sales, down $2.6 million, or approximately 5.2%, from the second quarter of fiscal 2009. Aggressive Cost Saving Efforts Help to Offset Volume Decline Gross profit was $28.1 million, or 24.3% of sales, for the fiscal 2010 second quarter compared with $45.6 million, or 29.5% of sales, in last year's second quarter reflecting the effects of significantly lower volume in all markets combined with the following: * Non-GAAP restructuring-related expenses, primarily relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc inventory relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. : $0.5 million * Product liability reserves associated with a particular claim at the self-insurance maximum: $2.9 million The inventory relocation costs were associated with North American facility consolidation activities. The product liability charges were related to a tire shredder accident. Selling expenses were $15.6 million, down 9.1%, or $1.6 million, when compared with the second quarter of fiscal 2009. This reduction reflects aggressive efforts to reduce or eliminate costs, as well as lower commissions on lower sales volume which more than offset the addition of expenses associated with the Pfaff business and continued investments in emerging markets. Additionally, foreign currency translation had a $0.3 million favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impact on selling expenses. As a percent of revenue, selling expenses were 13.5% on measurably lower sales, compared with 11.1% in the same period last year. General and administrative (G&A) expenses were $8.7 million in the second quarter of fiscal 2010, down 7.6%, from the previous fiscal year's second quarter, as additional expenses associated with the Pfaff business and continued investment in new product development were more than offset by benefits from aggressive cost reduction activities. Additionally, foreign currency translation had a $0.1 million favorable impact on G&A expense. As a percent of revenue, G&A expenses were 7.6% for this year's second quarter, compared with 6.1% for the same period last year, due to the decline in revenue. Restructuring charges, primarily for severance costs and equipment write-offs associated with the previously described consolidation of the Company's North American hoist and rigging manufacturing operations, were $2.7 million in the fiscal 2010 second quarter. The Company expects restructuring charges for the remainder of the fiscal year to be in the range of $4.5 million to $5.5 million, with approximately $0.5 million to $1.0 million of that being non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. . Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the second quarter of fiscal 2010 was $0.5 million. Excluding restructuring charges in both years' quarters, non-GAAP restructuring-related costs and an unusually large reserve for a product liability claim, all as previously quantified, non-GAAP operating income for the fiscal 2010 second quarter was $6.7 million compared with $18.9 million in the same period of the prior year. The related non-GAAP operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was 5.8% in the second quarter of fiscal 2010 compared with 12.2% in the second quarter of fiscal 2009, negatively impacted by the lower global sales volume and the inclusion of lower Pfaff margins. Mr. Tevens commented, "We are on track with the consolidation of two operating facilities and down-sizing of a third facility to reduce our manufacturing footprint by approximately 500,000 square feet, or 25%, without reducing production capacity from previous levels. We expect the estimated $9 to $11 million in annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. savings from this effort to begin to be realized in the second half of this fiscal year, but be more fully visible in 2011. We're already realizing the additional $7 to $8 million of annualized savings from the actions undertaken during the first quarter of this fiscal year, although those savings have been masked A state of being disabled or cut off. somewhat by the special charges recognized during this quarter as previously described. As volume returns, the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. leverage from these cost improvement efforts should be readily apparent in our profit margins." Interest and debt expense increased 8.8% to $3.4 million in this year's second quarter due primarily to interest related to the debt assumed upon the acquisition of Pfaff. The effective tax rate for the quarter was not meaningful compared with 35.9% for the prior year's quarter. This year's quarter was impacted by the mix of income or loss among taxing jurisdictions, specifically U.S. versus foreign jurisdictions and the impact of state taxes in the U.S. Excluding the special charges previously described, the Company expects the rate to be in the 36% to 37% range for fiscal 2010. Working capital as a percentage of sales was 18.9% at the end of the second quarter of fiscal 2010 compared with 19.4% at the end of last fiscal year's second quarter. Actual working capital decreased sequentially $15.6 million, or 13% in the quarter, and $18.1 million or 15% compared with last year's second quarter, which was prior to the Pfaff acquisition. Solid balance sheet; excellent liquidity and financial flexibility Debt, net of cash, at September 30, 2009 was $80.3 million, or 29.9% of total capitalization, compared with $98.7 million, or 35.2% of total capitalization, at March 31, 2009, consistent with the Company's long-term goal of 30% with flexibility to expand to 50% to accommodate acquisitions. Gross debt at the end of this year's second quarter was $134.7 million, or 41.7% of total capitalization, compared with 43.1% of total capitalization at March 31, 2009. At the end of the second quarter, the Company had $54.3 million of cash on hand. Availability on its $75 million line of credit was $68.2 million, with $6.8 million used for outstanding letters of credit. The Company is in full compliance with the financial covenants under its credit agreement. Cash provided by continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the in the first half of fiscal 2010 was $23.9 million, or $1.26 per diluted share, compared with $31.2 million, or $1.63 per diluted share, during the first half of fiscal 2009. For the second quarter of fiscal 2010, cash provided by operations was $19.1 million, or $1.01 per diluted share. Columbus McKinnon continues to generate cash despite significant declines in revenue and ongoing spending on restructuring activities. Capital expenditures for the first half of fiscal 2010 were $4.0 million compared with $5.0 million in the first half of fiscal 2009. In general, capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. , while being carefully monitored, is focused on new product development and some additional capital for the facility consolidation projects we have underway. Accordingly, the Company anticipates capital spending for fiscal 2010 will be approximately $8 million to $9 million. Mr. Tevens noted, "Our ability to generate cash throughout the recession reflects not only the early effects of our current cost-reduction program, but also past efficiency improvements we implemented in recent years in anticipation of future cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. downturns. Our strong cash flow enables us to continue to invest in the business to drive future growth." First half fiscal 2010 review Net sales for the first half of fiscal 2010 were $234.2 million, including $35.5 million from the Pfaff business, down 23.4%, or $71.6 million, compared with the first half of fiscal 2009 and down 35.0% excluding the Pfaff acquisition. Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. was 24.5% compared with 30.8% for the fiscal 2009 period. The decline was primarily due to lower volumes and lower margins currently experienced in the acquired Pfaff business as well as the non-GAAP restructuring-related costs and unusually large product liability claim previously noted. Selling expenses decreased $3.3 million, or 9.3%, compared with last year due primarily to the steps taken to reduce selling costs along with lower commissions on reduced volume, offset by the addition of the Pfaff business. G&A expenses decreased $2.2 million, or 11.1%, primarily due to the Company's aggressive cost reduction measures offset by the addition of the Pfaff business. Favorable foreign currency translation was approximately $1.1 million and $0.4 million of the selling and G&A expense decreases, respectively. As a percent of sales, selling and G&A expenses were 21.0% during the first half of fiscal 2010 compared with 17.9% during the first half of fiscal 2009. The Company expects selling and G&A expenses to approximate 20.5% to 21.5% of revenue for fiscal 2010. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the first half of fiscal 2010 was $1.2 million, or 0.5% of sales, compared with operating income of $39.2 million, or 12.8% of sales, in the first half of fiscal 2009. Restructuring charges in the first half of fiscal 2010 were $8.5 million. Interest and debt expense in the first half of fiscal 2010 was up $0.4 million, or 6.6%, reflecting the Pfaff acquisition. Net loss for the first half of fiscal 2010 was $5.1 million, or $0.27 per diluted share, compared with net income of $20.3 million, or $1.06 per diluted share, during the first half of fiscal 2009. Excluding special charges or gains in both periods, as well as normalizing the fiscal 2010 effective tax rate to 36%, the non-GAAP net income per share for the first half of fiscal 2010 was $0.16 compared with $1.12 for the first half of fiscal 2009, summarized on the following table: [TABLE OMITTED] Outlook Backlog was $69.7 million at the end of the second quarter of fiscal 2010, relatively consistent with $68.6 million at the end of the first quarter, while backlog at the end of last year's second quarter was $63.8 million. Backlog for the Company's Pfaff business was $27.0 million at the end of the second quarter of fiscal 2010 which more than offset declines in the Company's other businesses. The time to convert the majority of backlog to sales averages from one day to a few weeks, and backlog normally represents four to five weeks of shipments. Mr. Tevens concluded, "In addition to the quarter-to-quarter stability in backlog, we saw some sequential improvement in orders during August, September and thus far in October which may indicate the beginnings of a slight recovery. However, given the severity of this global recession, it is unlikely we will be able to achieve our goal of outperforming operating margins as compared with the last trough Trough The stage of the economy's business cycle that marks the end of a period of declining business activity and the transition to expansion. in fiscal 2003. The integration of Pfaff is proceeding on schedule and, combined with the effects of our reorganization and consolidation, we are well positioned to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the upturn in the global industrial economy when it occurs. In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile , we are focused on generating cash, controlling costs, building global market share and new product development." 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 or secure material. Key products include hoists, cranes, actuators, chain and forged attachments. The Company is focused on commercial and industrial applications that require the safety and quality provided by its superior design and engineering know-how. Columbus McKinnon routinely posts news and other comprehensive information on its web site at http://www.cmworks.com. Teleconference/webcast A teleconference and webcast have been scheduled for October 23, 2009 at 10:00 AM Eastern Time at which the management of Columbus McKinnon will discuss the Company's financial results and strategy. Interested parties in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada can participate in the teleconference by dialing 1-888-459-1579, asking to be placed in the "Columbus McKinnon Second Quarter Fiscal 2010 Conference Call," providing the password "Columbus McKinnon," and identifying conference leader "Tim Tevens" when asked. The toll number for parties outside the United States and Canada is 1-210-234-7695. The webcast will be accessible at Columbus McKinnon's web site: http://www.cmworks.com. An audio recording of the call will be available two hours after its completion and until November 20, 2009 by dialing 1-800-253-1052 or the toll number for parties outside the United States and Canada, 1-402-220-9704. Alternatively, you may access an archive of the call and its transcript until December 23, 2009 on Columbus McKinnon's web site at: http://www.cmworks.com/news/presentations.aspx. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement This news release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. , 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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