Q3 Fiscal Year 2013 Earnings Conference Call

Transcription

1 NASDAQ: CMCO 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 2013 by Columbus McKinnon Corp.

2 Safe Harbor Statement These slides contain (and the accompanying oral discussion will contain) forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 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. 2

3 Long-Term Objectives & Metrics of Success Growth Revenue: $1 billion Efficiency & Productivity Operating margin: 12% - 14% Financial Flexibility Debt to total capitalization: 30% 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 Working capital/revenue: 15% Flex to 50% for acquisitions Inventory turns: 6x DSO: < 50 days Global Resources in Place to Execute Plan New products: 20% of sales 3

4 Third Quarter Fiscal 2013 Highlights 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 4

5 Third Quarter FY2013 Sales $142.8 Revenue $153.2 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% Q3 FY12 Q3 FY13 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 5

6 Third Quarter FY2013 Gross Margin Gross Profit $ %* Q3 FY12 $ %* Q3 FY % 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 * as % of Revenue 6

7 Third Quarter FY2013 SG&A Selling Expenses $16.0 $16.4 G&A Expenses Higher selling expenses reflect investments for growth South African acquisition New offices in Turkey, North Africa and U.A.E. 11.5%* 11.2%* 10.3%* 10.7%* 10.3%* $ %* $ %* G&A reflects investments for growth in Asia Pacific and $0.6 million favorable pension adjustment in prior year Q3 FY12 Q3 FY13 * as % of Revenue Q3 FY12 Q3 FY13 SG&A run rate expected to be ~$30 million per quarter 7

8 Third Quarter FY2013 Operating Income Operating Income $12.0 $ %* 8.4%* 9.3%* Q3 FY12 Q3 FY13 * as % of Revenue 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 Operating margin of 12% to 14% achievable with return to peak revenue and manufacturing efficiency improvements 8

9 Third Quarter FY2013 Bottom Line Growth EPS (Diluted) EPS increased by 11.4% to $0.49 $0.44 Q3 FY12 $0.49 Q3 FY13 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 * 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 9

10 Year-to-Date Financial Highlights Revenue Up 8.5% excluding FX Gross Profit $432.4 $452.7 $113.5 $130.0 FY2012 FY2013 FY2012 FY2013 Operating Income Operating leverage YTD = 41.1% EPS (Diluted) $31.5 $39.9 $0.92 $1.34 FY2012 FY2013 FY2012 FY

11 Improved Working Capital Metrics Working Capital as a Percent of Sales Working capital as a % of sales was flat with prior-year period, improved from 19.4% in 2Q FY % 16.2% 16.9% 17.6% 17.5% Better inventory management and completion of several large projects during the quarter reduced inventory FY09 FY10 FY11 FY12 Q3 FY13 Inventory Turns Inventory turns returned to FY 2012 levels FY09 FY10 FY11 FY12 Q3 FY13 11

12 Excellent Free Cash Flow Nine Months Ended December 31, Net cash provided by operating activities $ 26.3 $ 13.5 Capital expenditures (7.1) (10.5) Operating free cash flow (Components may not add up to totals due to rounding) Plenty of liquidity to execute growth plan $111.9 million in cash and cash equivalents at December 31, 2012 FY2013 capital expenditures expected to be $12 million to $15 million 12

13 Strong Balance Sheet Financial Flexibility at December 31, 2012 Cash Total debt Shareholder equity $ Credit Ratings (Corporate) S & P BB- Total capitalization $ Moody s Ba3 Net debt $ 40.4 Debt / total capitalization 44.6% Net debt / net total capitalization* 17.6% Goal: 30% Net debt / TTM EBITDA 0.61 * Net total capitalization = total capitalization minus cash **See supplemental slide for EBITDA reconciliation and other important disclaimers regarding Columbus McKinnon s use of EBITDA 13

14 Fiscal 2013 Outlook: Slow Growth 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 14

15 Conference Call Playback Info Replay Number: (No pass code necessary) Telephone replay available through February 22, 2013 Webcast / PowerPoint / Replay available at cmworks.com Transcript, when available, at cmworks.com 15

16 EBITDA Reconciliation $ in thousands 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 Foreign currency exchange loss Investment income (1,211) + Depreciation & amortization 12,369 EBITDA* $65,876 * 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. 16