q4 & fiscal year 2012 earnings conference call · q3 fiscal year 2013 earnings conference call...
TRANSCRIPT
NASDAQ: CMCO
© 2013 by Columbus McKinnon Corp.
Q3 Fiscal Year 2013
Earnings Conference Call
January 25, 2013
Timothy T. Tevens President & Chief Executive Officer
Gregory P. Rustowicz Vice President - Finance & Chief Financial Officer
These slides contain (and the accompanying oral discussion will contain) “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements 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 integration of acquisitions and other factors disclosed
in the Company’s periodic reports filed with the Securities and Exchange Commission. Consequently
such forward looking statements should be regarded as the Company’s current plans, estimates and
beliefs. The Company does not undertake and specifically declines any obligation to publicly release
the results of any revisions to these forward-looking statements that may be made to reflect any
future events or circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
Safe Harbor Statement
2
Long-Term Objectives & Metrics of Success
Global Resources in Place to Execute Plan
Revenue: $1 billion
• Achieve 1/3 of revenue in
developing markets and
2/3 in developed markets
• Organic growth:
- US at GDP+ (on a trend
line basis)
- Non-US at 10%-11%
(on a trend line basis)
• Acquisitions:
$200 - $300 million
• New products: 20% of sales
Growth
Operating margin: 12% - 14%
Working capital/revenue: 15%
Inventory turns: 6x
DSO: < 50 days
Efficiency & Productivity
Debt to total capitalization: 30%
• Flex to 50% for acquisitions
Financial Flexibility
3
Net sales of $153.2 million up 7.3% (+$10.5 million)
U.S. Sales of $83.1 million increased 5.4% (+$4.3 million) on volume and mix; Excluding
divestiture, up 10.9%
• Relatively steady demand from end-users and channel partners; two additional shipping days
• Strength across product lines
• Strong quarter for project business
Sales outside of the U.S. of $70.2 million increased 9.7% (+$6.2 million); Up 12.9% excluding FX
• Driven by large engineered project sales
• Growth in emerging economies continues; Emerging markets grew 42% (+$4.2 million) in quarter
Margins expand on pricing and volume leverage
Gross margin improved to 28.6%, up 160 basis points
Operating margin improved 90 basis points to 9.3%
Operating leverage, excluding one time gain in prior year, was 34.9%
Earnings per share of $0.49, up from $0.44 last year
Generated $18.7 million in cash from operations in Q3 FY2013
Third Quarter Fiscal 2013 Highlights
4
Sales increased 7.3% (up 10.6% excluding
FX translation and the net effect of acquisitions
and divestitures)
Solid gains in volume driven by large projects
and pricing
• Volume/Mix 4.6%
• Additional days 3.4%
• Price 2.6%
U.S. sales increased 10.9% excluding
impact from sale of crane business
$3.9 million negative impact from divestiture
Sales outside the U.S. increased 10.8%
excluding FX and acquisition
Sales to emerging markets = 9% of total sales
FX negative impact of $2.0 million, acquisition
added $1.3 million
Non-U.S. sales represent 46% of total sales
Q3 FY12 Q3 FY13
$153.2
$142.8
Revenue ($ in millions)
Third Quarter FY2013 Sales
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Third Quarter FY2013 Gross Margin
Gross Profit ($ in millions)
* as % of Revenue
6
Q3 FY12 Q3 FY13
$43.8 $38.6
28.6%*
13.5% increase in gross profit
Pricing gains: $3.8 million
Volume and mix: $2.6 million
South African Acquisition: $0.6 million
Lower product liability costs: $0.6 million
Material inflation: -$1.5 million
FX translation: -$0.6 million
Productivity: -$0.2 million
• December shutdowns and favorable inventory
adjustments in prior year period, partially offset
by sale of crane business
Margin expanded 160 basis points on
leverage from volume and pricing
27.0%*
Q3 FY12 Q3 FY13
Third Quarter FY2013 SG&A
$12.7 $11.6
8.3%* 8.1%*
G&A Expenses
($ in millions)
* as % of Revenue
11.5%*
Selling
Expenses ($ in millions)
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10.3%* 10.3%*
Q3 FY12 Q3 FY13
$16.4 $16.0
11.2%* 10.7%*
Higher selling expenses
reflect investments for
growth
South African acquisition
New offices in Turkey,
North Africa and U.A.E.
G&A reflects investments
for growth in Asia Pacific
and $0.6 million favorable
pension adjustment in prior
year
SG&A run rate expected to
be ~$30 million per quarter
Third Quarter FY2013 Operating Income
Operating income increased by 18.2%
Excluding gain on sale of closed
facility in prior year, operating income
expands 34.7%
Pricing improvement and volume and mix
gains more than offset SG&A increases
Operating leverage of 34.9%
excluding prior-period facility sale
FX translation had no material impact
on operating income
5.2%*
Operating Income ($ in millions)
* as % of Revenue
8
Q3 FY12 Q3 FY13
$14.2 $12.0
8.4%* 9.3%*
Operating margin of 12% to 14% achievable with return to
peak revenue and manufacturing efficiency improvements
Third Quarter FY2013 Bottom Line Growth
EPS increased by 11.4% to $0.49
Pro forma EPS*: Q3 FY13 was $0.34
vs. $0.32 in Q3 FY12
Effective tax rate in the quarter was
11.1% vs. 16.4% in prior-year period
Full year effective tax rate expected
to fall within a 13% - 17% range
including impact of the valuation
allowance on deferred tax assets
EPS (Diluted)
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Q3 FY12 Q3 FY13
$0.49 $0.44
* Reconciliation Pro Forma EPS to GAAP EPS
Q3 FY12 Q3 FY13
Pro forma EPS $0.32 $0.34
Normalized 38% tax rate 0.12 $0.15
GAAP EPS $0.44 $0.49
Year-to-Date Financial Highlights
Revenue ($ in millions)
10
FY2012 FY2013
$39.9 $31.5
Operating Income ($ in millions)
EPS (Diluted)
Gross Profit ($ in millions)
FY2012 FY2013
$452.7 $432.4
FY2012 FY2013
$130.0 $113.5
Operating
leverage YTD =
41.1%
FY2012 FY2013
$1.34 $0.92
Up 8.5% excluding FX
18.8%
16.2% 16.9%
17.6% 17.5%
FY09 FY10 FY11 FY12 Q3 FY13
Working Capital as
a Percent of Sales
Inventory Turns
4.0
4.6 4.7
4.3 4.3
FY09 FY10 FY11 FY12 Q3 FY13
Improved Working Capital Metrics
11
Working capital as a % of sales
was flat with prior-year period,
improved from 19.4% in 2Q FY13
Better inventory management
and completion of several large
projects during the quarter
reduced inventory
Inventory turns returned to
FY 2012 levels
Excellent Free Cash Flow
$111.9 million in cash and cash equivalents at December 31, 2012
FY2013 capital expenditures expected to be $12 million to $15 million
($ in millions)
Nine Months Ended
December 31,
2012 2011
Net cash provided by operating activities $ 26.3 $ 13.5
Capital expenditures (7.1) (10.5)
Operating free cash flow 19.1 3.0
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(Components may not add up to totals due to rounding)
Plenty of liquidity to execute growth plan
($ in millions) at December 31, 2012
Cash
Total debt
Shareholder equity
Total capitalization
Net debt
111.9
152.3
189.5
341.8
40.4
$
$
$
Debt / total capitalization 44.6%
Net debt / net total capitalization* 17.6%
Net debt / TTM EBITDA 0.61
Goal:
30%
Financial Flexibility
13
(Corporate)
S & P BB-
Moody’s Ba3
Credit Ratings
* Net total capitalization = total capitalization minus cash
Strong Balance Sheet
**See supplemental slide for EBITDA reconciliation and other important disclaimers regarding Columbus McKinnon’s use of EBITDA
Order trends
Emerging markets continue to experience strong growth (Asia and Latin America)
• Growing at 15% - 20% rate
Order activity in North America flattening
• U.S industrial capacity utilization was 78.1% in December 2012
– Was 77.4% in September 2012; Declined in October
– Moderated in a range from 77% to 78% for most of 2012
Europe weak and demonstrating effects of recession
• Order activity in Europe is flat; Engineered project business down
• Eurozone capacity utilization was 76.8% in quarter ended December 31, 2012
– Down from 77.9% in trailing quarter ended September 30, 2012
Backlog: $95.4 million compared with $104.2 million a year ago
Prior year excludes $6.1 million of backlog from divested crane business
$33.2 million, or 34.8%, scheduled to ship after March 31, 2013
Investing in emerging regions, but controlling costs elsewhere
Fiscal 2013 Outlook: Slow Growth
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Replay Number: 1-203-369-0225 (No pass code necessary)
Telephone replay available through February 22, 2013
Webcast / PowerPoint / Replay available at cmworks.com
Transcript, when available, at cmworks.com
Conference Call Playback Info
15
16
EBITDA Reconciliation
12/31/2012
TTM
Net income $35,264
+ Income from discontinued
operations, net of tax (643)
+ Income taxes 5,502
+ Net interest expense 13,981
+ Other expense, net 272
+ Foreign currency exchange loss 342
+ Investment income (1,211)
+ Depreciation & amortization 12,369
EBITDA* $65,876
$ in thousands
* EBITDA is defined as consolidated net income before income from discontinued operations, foreign currency exchange adjustments, non-operating
expenses and income, net interest expense, income taxes, and depreciation and amortization. EBITDA is not a measure determined in accordance
with generally accepted accounting principles in the United States, commonly known as GAAP. Because EBITDA is a non-GAAP measure and is thus
susceptible to varying calculations, EBITDA, as presented, may not be directly comparable to other similarly titled measures used by other companies.