Columbus McKinnon to make big cost cuts

May 21, 2009 (The Buffalo News - McClatchy-Tribune Information Services via COMTEX) -- CMCO | Quote | Chart | News | PowerRating -- Columbus McKinnon Corp. is making major cutbacks after its fourth-quarter profits from operations plunged by 75 percent and the company warned that its sales during the current fiscal year will tumble by 20 percent to 25 percent.

The Amherst-based material handling equipment maker said Wednesday its business essentially fell off a cliff beginning in December as the recession hammered its commercial and industrial markets, leading to a 16 percent drop in sales, even with its acquisition last fall of Pfaff-silberblau, a German hoist and material handling equipment maker.

In response to the rapid deterioration of its markets, Columbus McKinnon said it would consolidate its North American hoist and rigging manufacturing facilities by closing two plants and significantly reducing the size of a third facility.

Karen Howard, Columbus McKinnon's chief financial officer, declined to say where those plants are located, but none of them are in the Buffalo Niagara region.

The company also said it has cut about 700 jobs, or roughly 20 percent of its full-time work force. The company, which employs about 145 people between its Amherst headquarters and its light-rail crane systems factory in the City of Tonawanda, has eliminated 'a handful' of local jobs as part of the cutbacks, Howard said. The company had about 2,850 employees worldwide at the end of March.

Columbus McKinnon also has frozen all wages and stopped making matching contributions for worker 401(k) plans. The company also has cut advertising and commissions, while requiring executives to forfeit some of their compensation.

'I'm planning for the worst and hoping for the best,' said Timothy T. Tevens, Columbus McKinnon's president and chief executive officer.

The plant consolidation, which is expected to be completed by June 2011, will reduce the company's manufacturing space by about 500,000-square-feet and save the company about $8 million to $10 million a year. That savings, however, will be eaten up in the first year by the cost of the consolidation program, Tevens said.

Columbus McKinnon launched the cost-cutting effort as its business sharply weakened in the first three months of this year. The company's profits, excluding one-time items, tumbled to $3.2 million, or 17 cents per share, from $12.9 million, or 67 cents per share, a year ago. The earnings were far below the 28 cents per share that analysts were expecting.

Sales dropped to $135.8 million during the quarter that ended in March, down from $161.2 million a year earlier. Excluding the Pfaff acquisition, Columbus McKinnon's sales from its existing operations tumbled by 26 percent.

Because the company faced $105.7 million in one-time charges during the quarter, almost all of it from a goodwill impairment charge as its stock price fell below the company's net book value, Columbus McKinnon posted a net loss of $102.5 million, or $5.43 per share, during the quarter, compared with a profit of $8.4 million, or 44 cents per share, a year ago.

Business has not rebounded since the end of the quarter, either. 'Things have not improved. They continue to be depressed,' Tevens said.

Tevens said he was 'very concerned' by a 30 percent drop in new order bookings during the quarter, as distributors reduced their inventories. Booking rates have been down by roughly the same level since the end of March.

'We think we're at the level now where the de-stocking is pretty much behind us,' he said. 'We're seeing the same number of orders, but less quantity per order.'

drobinson@buffnews.com

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