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Net sales for the first quarter of fiscal 2009 were $151.2 million, up $9.7 million, or 6.9%, over the same period in the prior year solidly reflecting the positive impact of the Company's diverse geographic and end- user markets. Income from continuing operations in the first quarter of fiscal 2009 was $11.8 million, up 12.6% from $10.5 million in the first quarter of fiscal 2008. On a per diluted share basis, income from continuing operations was $0.61, a 10.9% increase over $0.55 from last year's first quarter. Net income, which includes discontinued operations, was $9.7 million for the fiscal 2009 first quarter compared with net income of $9.5 million in the first quarter of fiscal 2008, reflecting losses from the discontinued Univeyor operations of $2.2 million and $1.1 million, respectively. On a per diluted share basis, fiscal 2009 first quarter net income was $0.50, consistent with $0.50 in the same period last year.
Timothy T. Tevens, President and Chief Executive Officer, commented, "A key element of our growth strategy has been to drive the top line with investments in new markets around the world. These efforts are paying off with strong product and brand expansion, which is driving double digit growth in international markets. The growth is primarily from emerging economies in Eastern Europe, Asia and Latin America, as well as in the established markets of Western Europe. In addition, our targeted marketing activities in the United States and internationally are resulting in success with the products which serve the energy industry and those in global infrastructure development, among others. Despite a slowed economic environment in the U.S., sales in the first quarter outpaced the same period last year."
Geographic and Market Diversity Drives Sales Growth; Marketing Investments Pay Off
The fluctuation in sales compared with last year's quarter is summarized as follows, in millions: Increased volume $ 2.0 1.5% Improved pricing 3.7 2.6% Foreign currency translation 4.0 2.8% Total $ 9.7 6.9%
Revenue growth has been driven by growth in international markets, as well as the energy, mining, entertainment and public infrastructure construction markets. Over the last year, the Company increased its investments in sales and marketing activities and resources in Europe, Asia and for targeted U.S. markets, such as the oil and gas and construction industries.
International sales from continuing operations were $49.4 million, or 33% of total net sales, up $6.5 million, or 15% from the first quarter of fiscal 2008, representing the fourth consecutive quarter of double digit growth. International sales growth reflects the continued strong performance of Columbus McKinnon Europe operations as it gains market share and capitalizes on growing economies, especially in Eastern Europe and Russia.
Mr. Tevens noted, "Our business continues to grow in the mid-single digit range and provide strong margins. Additionally, we continue to invest in markets that will be expanding for the foreseeable future."
Productivity Continues to Positively Impact Margins and Cash Management
Gross margin increased on higher sales to 32.1% for the quarter compared with 30.6% in last year's first quarter. The Company has also maintained margin neutrality on steel, which represents about 9% of total cost of goods sold, by increasing the steel surcharge in step with rising market prices.
First quarter 2009 results reflect a $2.7 million increase in selling expenses of which approximately $1.1 million were associated with expansion efforts in international markets, especially Eastern Europe, Southeast Asia and Latin America. Further, an incremental $0.8 million was invested to grow market share in North America, including the Company's focus on the energy and non-residential construction markets. Currency translation contributed $0.8 million to the increase in selling expenses when compared with the first quarter of fiscal 2008. As a percent of revenue, selling expenses were 12.0% for this year's first quarter, compared with 11.0% in last year's quarter. The Company expects fiscal 2009 selling expenses will be in the range of 12% and 12.5% of revenue.
General and administrative (G&A) expenses were $9.9 million in the first fiscal quarter of 2009. The $1.6 million increase over the first fiscal quarter of 2008 included $0.4 million for global infrastructure expansion in Europe, Asia and Latin America to continue to meet the strong global demand for Columbus McKinnon products, $0.5 million as a reserve adjustment related to receivables and $0.3 million of increased engineering costs to support new product development. Foreign currency translation was about $0.4 million of the G&A increase. As a percent of revenue, G&A expenses were 6.5% for this year's first quarter and 5.9% for last year's first quarter. The Company expects G&A to trend toward 6% to 6.5% of sales for fiscal 2009.
Lower debt in this year's first quarter resulted in a $0.8 million, or 19.4%, decrease in interest and debt expense for the current quarter and reflects the Company's emphasis on maintaining its strong capital structure.
The effective tax rate for the quarter was 35.6% compared with 37.6% for the prior year's quarter. The Company expects the rate to be in the 35% to 36% range for fiscal 2009.
The Company realized a loss from discontinued operations, including the Univeyor divestiture, of $2.1 million in this year's quarter, compared with last year's $0.9 million loss.
Cash from operating activities of continuing operations was $12.0 million for both the fiscal 2009 and 2008 first quarters, or $0.63 per diluted share in each period.
Working capital as a percentage of sales was 20.7% at the end of fiscal 2009's first quarter compared with 20.2% at the end of last fiscal year's first quarter and 18.2% at the end of fiscal 2008. The fiscal 2009 statistic includes $14.0 million in prepaid expenses reflecting the favorable tax impact of the Univeyor divestiture, which benefit is expected to be realized over the next year. Excluding that, adjusted working capital was 18.4% of sales. The adjusted improvement quarter over quarter reflects increases in accounts payable and accrued liabilities during the fiscal 2009 first quarter. When compared sequentially with the fourth quarter of fiscal 2008, adjusted working capital as a percentage of sales increased on higher inventories.
Sound Financial Discipline
Debt, net of cash, of continuing operations at June 29, 2008, was $48.4 million, or 13.6% of total capitalization, a reduction of $64.4 million from $112.8 million, or 28.4% of total capitalization, a year ago. Net debt sequentially improved from $71.9 million the end of fiscal 2008. Gross debt of continuing operations at the end of the first quarter was $133.2 million, or 30.3% of total capitalization, a reduction of $41.5 million from $174.7 million, or 39.0% of total capitalization, a year ago. The Company believes that long-term debt-to-total capitalization approximating 30% allows sufficient flexibility for strategic acquisitions and financial strength for capitalizing on market downturns. In addition to $84.8 million of cash, the Company's availability on its $75 million line of credit with its bank group was $62.8 million at June 29, 2008. Approximately $17 million of cash will be used in the September quarter to fund the transaction costs and pay down debt associated with the Univeyor transaction.
Capital expenditures for the first quarter of fiscal 2009 were $2.1 million compared with $2.5 million for the same period in fiscal 2008. In general, capital spending is focused on new product development, the purchase of productivity-enhancing equipment and capital maintenance items at various manufacturing facilities. The Company anticipates capital spending for the fiscal year will be approximately $14 to $15 million.
Outlook Remains Solid; International to Remain the Primary Growth Driver
Backlog was $63.9 million at the end of the quarter compared with backlog of $65.1 million and $57.7 million at the end of the fiscal 2008 first and fourth quarters, respectively. 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 commented, "We continue to believe Columbus McKinnon can achieve mid-single digit growth for the foreseeable future, as current U.S. and international markets support our expectation. Further, we are realizing higher growth rates from developing economies in Eastern Europe, Latin America and Asia Pacific. We believe the greatest opportunity for us is in growing our presence in international markets, both organically and through acquisition or partnership, in pursuit of our long-term goal to derive 50% of sales from outside the United States. Notwithstanding, we will also continue to invest in our U.S. markets in order to maintain growth in our home markets as well."
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, 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. Comprehensive information on Columbus McKinnon is available on its web site at http://www.cmworks.com.
Teleconference/webcast
A teleconference and webcast have been scheduled for July 24, 2008 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 and Canada can participate in the teleconference by dialing 1-888-459-1579, and asking to be placed in the "Columbus McKinnon Quarterly Conference Call" and 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 July 31, 2008 by dialing 1-800-333-1859. Alternatively, you may access an archive of the call and its transcript until November 20, 2008 on Columbus McKinnon's web site at: http://www.cmworks.com/news/presentations.aspx.
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.
Contact: Karen L. Howard Vice President - Finance and Chief Financial Officer Columbus McKinnon Corporation 716-689-5550 karen.howard@cmworks.com COLUMBUS McKINNON CORPORATION Condensed Consolidated Income Statements (In thousands, except per share and percentage data) Three Months Ended June 29, 2008 July 1, 2007 Change Net sales $151,164 $141,450 6.9% Cost of products sold 102,639 98,118 4.6% Gross profit 48,525 43,332 12.0% Gross profit margin 32.1 % 30.6 % Selling expense 18,202 15,544 17.1% General and administrative expense 9,901 8,277 19.6% Restructuring charges - 8 -100.0% Amortization 27 28 -3.6% Income from operations 20,395 19,475 4.7% Interest and debt expense 3,193 3,960 -19.4% Investment income (291) (294) -1.0% Other income (772) (939) -17.8% Income from continuing operations before income tax expense 18,265 16,748 9.1% Income tax expense 6,499 6,294 3.3% Income from continuing operations 11,766 10,454 12.6% Loss from discontinued operations, net of tax (2,096) (934) 124.4% Net income $9,670 $9,520 1.6% Average basic shares outstanding 18,819 18,638 1.0% Basic income (loss) per share: Continuing operations $0.62 $0.56 10.7% Discontinued operations (0.11) (0.05) Net income $0.51 $0.51 0.0% Average diluted shares outstanding 19,221 19,088 0.7% Diluted income (loss) per share: Continuing operations $0.61 $0.55 10.9% Discontinued operations (0.11) (0.05) Net income $0.50 $0.50 0.0% COLUMBUS McKINNON CORPORATION Condensed Consolidated Balance Sheets (In thousands) June 29, 2008 March 31, 2008 ASSETS Current assets: Cash and cash equivalents $84,834 $75,994 Trade accounts receivable 93,736 93,833 Inventories 89,071 84,286 Prepaid expenses 32,610 17,320 Current assets of discontinued operations - 17,334 Total current assets 300,251 288,767 Net property, plant, and equipment 53,374 53,420 Goodwill and other intangibles, net 187,348 187,376 Marketable securities 30,098 29,807 Deferred taxes on income 16,390 17,570 Other assets 6,695 8,094 Non-current assets of discontinued operations - 5,001 Total assets $594,156 $590,035 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks $28 $36 Trade accounts payable 34,606 35,149 Accrued liabilities 55,696 52,265 Restructuring reserve - 58 Current portion of long-term debt 332 326 Current liabilities of discontinued operations 15,191 24,955 Total current liabilities 105,853 112,789 Senior debt, less current portion 2,986 3,066 Subordinated debt 129,855 129,855 Other non-current liabilities 49,294 48,844 Total liabilities 287,988 294,554 Shareholders' equity: Common stock 190 189 Additional paid-in capital 179,374 178,457 Retained earnings 131,296 122,400 ESOP debt guarantee (2,694) (2,824) Accumulated other comprehensive loss (1,998) (2,741) Total shareholders' equity 306,168 295,481 Total liabilities and shareholders' equity $594,156 $590,035 COLUMBUS McKINNON CORPORATION Condensed Consolidated Statements of Cash Flows (In thousands) Three Months Ended June 29, 2008 July 1, 2007 Operating activities: Income from continuing operations $11,766 $10,454 Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Depreciation and amortization 2,172 2,091 Deferred income taxes 1,180 6,072 Gain on sale of investments/real estate (48) (325) Stock option expense 408 195 Amortization/write-off of deferred financing costs 133 163 Changes in operating assets and liabilities: Trade accounts receivable 247 130 Inventories (4,613) (7,064) Prepaid expenses (1,236) 409 Other assets 1,244 (118) Trade accounts payable (551) 3,201 Accrued and non-current liabilities 1,347 (3,188) Net cash provided by operating activities from continuing operations 12,049 12,020 Net cash used by operating activities from discontinued operations (2,218) (2,359) Net cash provided by operating activities 9,831 9,661 Investing activities: (Purchase) sale of marketable securities, net (497) 113 Capital expenditures (2,118) (2,530) Proceeds from sale of property - 5,454 Net cash (used) provided by investing activities from continuing operations (2,615) 3,037 Net cash provided by investing activities from discontinued operations 139 116 Net cash (used) provided by investing activities (2,476) 3,153 Financing activities: Proceeds from stock options exercised 221 569 Net repayments under revolving line- of-credit agreements (8) (671) Repayment of debt (74) (21) Other 317 142 Net cash provided by financing activities from continuing operations 456 19 Net cash provided (used) by financing activities from discontinued operations 579 (398) Net cash provided (used) by financing activities 1,035 (379) Effect of exchange rate changes on cash 450 808 Net change in cash and cash equivalents 8,840 13,243 Cash and cash equivalents at beginning of year 75,994 48,655 Cash and cash equivalents at end of period $84,834 $61,898 COLUMBUS McKINNON CORPORATION Additional Data June 29, July 1, March 31, 2008 2007 2008 Backlog (in millions) $63.9 $65.1 $57.7 Trade accounts receivable days sales outstanding 56.4 days 58.9 days 53.0 days Inventory turns per year (based on cost of products sold) 4.6 turns 4.8 turns 5.2 turns Days' inventory 79.2 days 75.9 days 70.1 days Trade accounts payable days payables outstanding 30.7 days 28.0 days 29.2 days Working capital as a % of sales 20.7 % 20.2 % 18.2 % Debt to total capitalization percentage 30.3 % 39.0 % 31.1 % Debt, net of cash, to total capitalization 13.6 % 28.4 % 16.2 % Shipping Days by Quarter Q1 Q2 Q3 Q4 Total FY09 63 63 60 65 251 FY08 63 63 60 63 249
SOURCE Columbus McKinnon Corporation
http://www.cmworks.com
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