CJS SECURITIES NEW IDEAS FOR THE NEW YEAR CONFERENCE

Transcription

1 January 9, 2019 CJS SECURITIES NEW IDEAS FOR THE NEW YEAR CONFERENCE Mark D. Morelli President and Chief Executive Officer Gregory P. Rustowicz Vice President Finance & Chief Financial Officer

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. This presentation will discuss some non-gaap financial measures, which we believe are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results compared in accordance with GAAP. We have provided reconciliations of comparable GAAP to non-gaap measures in tables found in the Supplemental Information portion of this presentation. 2

3 NASDAQ: CMCO Leading global designer, manufacturer and marketer of motion control products, technologies and services for material handling Leader in highly engineered lifting solutions and explosion-protected hoists Premium, well respected brands World s 2 nd largest hoist company with leading share in U.S. Blueprint Strategy for Growth: Founded: 1875 Transform into a high performing, industrial technology company Increase earnings power with selective deployment of self-funded key initiatives Market Capitalization $658.8 Million 52-Week Price Range $ $45.85 Recent Price $28.22 Average Volume (3 mo.) 127,650 Common Shares Outstanding 23.3 Million Ownership: Institutions 97% Insiders 3% Market data as of 1/3/19 (Source: S&P Global IQ); shares outstanding as of 10/25/18; Institutional and insider ownership as of most recent filing 3

4 HIGHLY RELEVANT TO CUSTOMERS Professional grade solutions for complex applications 4

5 THREE DISTINCT PRODUCT CATEGORIES Customer Driven Solutions Linear & Mechanical Actuators Lifting Tables Rail & Road Actuation Systems Engineered Products ~10% ~45% Industrial Products Crane Solutions Cranes, Wire Rope Hoists Drives and Controls Crane Kits & Components Jibs, Workstations ~45% Manual Chain Hoist Electric Chain Hoist Rigging / Clamps Industrial Winches High Capacity Hooks $865.0 Million 2Q FY19 TTM Revenue 5

6 DEFINED CHANNELS TO MARKET Specialty Distributors Pfaff International Direct OEM/Government ~10% ~5% ~10% ~29% US General Line Distributors Crane Builders ~11% EPC ~12% ~23% International General Line Distributors $865.0 Million 2Q FY19 TTM Revenue Market channels provide access to end users 6

7 MARKET DRIVES STRUCTURE Reorganized November 2017 Channel Partners: Product Categories: General Distribution/Rental Lifting Specialists (Direct Sales) Industrial Products Industrial End Users Rigging Specialists Crane Builders EPC OEM Motion Technology Distributors Crane Solutions & Kits Engineered Products Motion Technology Understanding the business from the customer back 7

8 END MARKET AND GEOGRAPHIC DIVERSIFICATION Construction Entertainment Elevators Heavy OEM Pulp Paper/Chemical/ Pharma Mining ~3% ~3% ~3% ~3% ~5% ~5% ~5% Government / Others ~25% General Industrial Latin America Canada APAC 6% 4% 4% 53% U.S. Rail / Aerospace / Transport ~10% ~10% Automotive ~10% ~10% ~10% Oil & Gas Metals Processing / Steel / Concrete Europe, Middle East & Africa 33% Energy/ Utilities $865.0 Million 2Q FY19 TTM Revenue 8

9 KEY VERTICAL MARKETS CONSTRUCTION MINING ENTERTAINMENT OIL & GAS POWER / UTILITIES TRANSPORTATION AUTOMOTIVE HEAVY EQUIPMENT MANUFACTURING 9

10 STRATEGY: EVOLUTION OF COLUMBUS MCKINNON Phase II underway Growth oriented Industrial Technology Phase II Simplify and drive profitable growth Phase III Evolve business model Further pivot: Portfolio optimization M&A Phase I Get control Achieve results Simplify through 80/20 process Operational excellence Ramp growth engine: New product development Digital platform Late stage cyclical industrial Create performance culture: Tiger teams E-PAS TM Mission, vision, values Today Future Further pivot from late stage industrial to growth oriented industrial technology company 10

11 BLUEPRINT PHASE I ACCOMPLISHMENTS STAHL value creation Achieved ~$11 million of synergies by Q2 FY19; $0.17 accretive in first full year Leveraged Magnetek technology Launched three variable-speed drive platforms to address the industrial automation trend Strengthened the core Improved product availability & reduced lead times to drive sales and market share gains Paid down debt Surpassed initial goal: Paid down $60 million in FY2018; paid $25 million in 1H FY19 Achieved net leverage ratio* of 2.25x as of September 30, 2018 ahead of plan Established business operating system: E-PAS Driving performance culture 1H FY2019 results raised expectations for future * Net Debt to Adjusted EBITDA 11

12 TRACKING BLUEPRINT PHASE II PROGRESS Simplify the Business Starting to see traction with 80/20 process; driving margin improvement Expect ~$7 million savings in FY2019; $1.6 million savings year-to-date Divestitures on track for completion this fiscal year Operational Excellence Record productivity of $6.1 million year-to-date Footprint consolidation in Ohio: expect $2 million in savings in FY2020 Ongoing material productivity initiatives Ramp the Growth Engine Digitization with Compass : an on-line configurator Improving new product development process Phase II expected to drive EBITDA and ROIC improvements 12

13 OPERATING SYSTEM DEPLOYMENT CONTINUES E-PAS : Earnings Power Acceleration System Key Performance Indicators Strategy Deployment Talent Development Monthly Operating Reviews (MORs) 80 / 20 Process M&A Process Risk & Opportunity (R&Os) Mission Vision Values Lean Tools 80/20 process: Centerpiece of operating system Eliminates bleeders - Sharpens focus on growth 13

14 PHASE II: SIMPLIFY THROUGH 80/20 80 / 20 Process Product Line Simplification Customer Focus Core Business Segmentation Purchasing leverage and indirect cost reduction Targeted selling Sharper business focus Savings Expected to accelerate Realize a full year s impact of actions in FY2020 Roll-out 50% of CMCO using 80/20 process today Full roll out through all relevant businesses in FY

15 PHASE II: SIMPLIFY THROUGH 80/20 Product Line Simplification Wire Rope Hoist Platform Basic Standard Industrial High Performance Rationalize global platforms while maintaining brands 15

16 PHASE II: OPERATIONAL EXCELLENCE Common Component Utilization LEVER TOOL 1 CHAIN BLOCK 1 Manual Chain Hoist Platform PARTS ARE 100% SHARED Everything between the side plates LEVER TOOL 2 LEVER TOOL COMMON PARTS CHAIN BLOCK CHAIN BLOCK 2 PARTS ARE SHARED BETWEEN PRODUCT TYPE Everything between the side plates and the shell LEVER TOOL 3 CHAIN BLOCK 3 INDIVIDUAL PARTS The individual shell plus outside Shared platforms lead to common parts drives inventory efficiencies and purchasing power 16

17 PHASE II: RAMP THE GROWTH ENGINE ($ in millions) CREATING CENTER OF EXCELLENCE IN FY2019 Increase R&D spend by ~$11M: $5M coming from STAHL Incremental $6M from FY17 baseline $21 ~$27 $16 Sustaining Engineering Investment (1) Engineered to Order Research Product Engineering R&D ~$10M 65% R&D ~$14M 67% R&D ~$21M 75% FY17 FY18 FY21E Baseline Doubling R&D spend from FY2017 including STAHL R&D (2) 1 Included in SG&A 2 Excludes impact of STAHL 17

18 millions PHASE II: SMART HOIST VISION Megatrend movement to industrial automation 80 Projected full-time jobs automated in the U.S Source: University of Oxford, ARK Original Research Opportunity to capitalize on automation megatrend 18

19 PHASE II: NEW PRODUCT DEVELOPMENT Smart Hoists Capabilities Leveraging technology and experience to design Smart Hoists Onboard diagnostics Remote monitoring Precision lifting Load sensing Preventative maintenance Leads to improved safety and reduced down time Leveraging recent acquisitions to deliver solution-based products 19

20 CMCO PHASE III: BUSINESS DEVELOPMENT Portfolio assessment Selective Investment Invest / Grow Scale-Up Indust. Tech Portfolio Assessment Business model Profitability Market position Fix / Exit Selective Investment Invest / Grow Industry growth Risk assessment EBITDA (to scale) Divest Fix / Exit Selective Investment <~$5M New >~$5M >~$10M 20

21 FINANCIAL PERFORMANCE ($ in millions) Sales & Gross Margin Growth in revenue driven by organic and acquired sales $579.6 $597.1 $637.1 $839.4 $865.0 Gross margin improvement driven by Blueprint strategy 31.3% 31.4% 30.3% 33.7% 34.4% FY15 FY16 FY17 FY18 TTM Q2 FY19 Total Sales Gross Margin 21

22 FINANCIAL PERFORMANCE ($ in millions) Adjusted Operating Income (1) Diluted EPS (1) $ % $ % $ % $ % $ % $1.53 $1.72 $1.47 $2.01 $2.39 $54.6 $40.6 $26.0 $68.3 $67.8 $1.34 $0.96 $0.43 $0.95 $0.91 FY15 FY16 FY17 FY18 TTM Q2 FY19 Non-GAAP Adjustments Adjusted OI Margin Income from Operations Driving earnings power FY15 FY16 FY17 FY18 TTM Q2 FY19 Non-GAAP Adjustments GAAP Diluted EPS (1) Adjusted figures are non-gaap financial measures. Please see supplemental slides for a reconciliation from GAAP to non-gaap results and other important disclosures regarding the use of non-gaap financial measures. 22

23 DE-LEVERING BALANCE SHEET CAPITALIZATION Sept 30, 2018 March 31, 2018 Cash and cash equivalents $ 57.7 $ 63.0 Total debt Total net debt Shareholders equity Total capitalization $ $ Fast paced debt reduction continues Paid down $15 million in debt YTD Net Debt/ Adjusted TTM EBITDA (1) Down to 2.25x Expect to achieve targeted leverage ratio of 2.0x or better by fiscal year end Debt/total capitalization 44.4% 47.1% Net debt/net total capitalization 39.9% 42.4% On track for $60 million debt reduction in FY19 (1) Adjusted EBITDA is a non-gaap financial measures. Please see supplemental slides for a reconciliation from GAAP net income to non-gaap adjusted EBITDA and other important disclosures regarding the use of non-gaap financial measures. 23

24 SIGNIFICANT FREE CASH FLOW 1 GENERATION ($ in millions) FY19E and Beyond, FCF After: Annual CapEx of approximately $15 million* Annual Pension contribution of ~$12 million $46.1 $55.1 $60 - $65 $70 - $75 $80 - $85 $90 - $95 ENABLES MEASURABLE ANNUAL DEBT PAYMENT ~$60 million in FY19 $21.0 $30.3 FY15 FY16 FY17 FY18 FY19E FY20E FY21E FY22E Achieving net leverage of 2x in FY19 provides sufficient financial flexibility for pivot strategy * Guidance provided October 30, 2018 (1) Free cash flow is defined as cash provided by operating activities minus capital expenditures 24

25 Creating Shareholder Value Adjusted EBITDA Margin (1) Return on Invested Capital (ROIC) (2) 12.4% 12.4% 11.7% 13.7% 14.5% 11.7% 8.7% 8.9% 10.1% 6.4% FY15 FY16 FY17 FY18 Q2 FY19 TTM FY15 FY16 FY17 FY18 Q2 FY19 TTM GOAL: Adjusted EBITDA Margin of 19% and Adjusted ROIC of >10% (1) Adjusted EBITDA is a non-gaap financial measures. Please see supplemental slides for a reconciliation from GAAP net income to non-gaap adjusted EBITDA and other important disclosures regarding the use of non-gaap financial measures. (2) ROIC is defined as adjusted income from operations, net of taxes, for the trailing 12 months divided by the average of debt plus equity less cash (average capital) for the trailing 13 months. A 30% tax rate was used for fiscal years 2015, 2016, & 2017, and 22% for fiscal years 2018 &

26 KEY TAKEAWAYS Pivot from late stage industrial to higher growth, industrial technology company Raising expectations over next three years: Double-digit earnings growth and >19% EBITDA margins Cost savings through simplification and operational excellence Opportunity to capitalize on automation megatrend Drive sales and margins by ramping the growth engine 26

27 SUPPLEMENTAL INFORMATION 27

28 ADJUSTED GROSS PROFIT RECONCILIATION ($ in thousands) Fiscal Year FY 2015 FY 2016 FY 2017 FY 2018 TTM Q2 FY19 Gross profit $ 181,607 $ 187,263 $ 192,932 $ 283,251 $ 298,472 Add back: Product liability costs for legal settlement 1,100 Building held for sale impairment charge 429 Acquisition inventory step-up expense 543 1,446 8,852 Acquisition amortization of backlog 581 STAHL integration costs Facility consolidation costs 1, Insurance settlement (2,362) (621) Non-GAAP adjusted gross margin $ 183,326 $ 191,165 $ 201,784 $ 281,196 $ 297,937 Sales $ 579,643 $ 597,103 $ 637,123 $ 839,419 $ 864,999 Adjusted gross margin 31.6% 32.0% 31.7% 33.5% 34.4% Adjusted gross profit is defined as gross profit as reported, adjusted for unusual items. Adjusted gross profit is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable to the measure as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-gaap information such as adjusted gross profit is important for investors and other readers of the Company s financial statements, and assists in understanding the comparison of the current quarter s gross profit to the historical period s gross profit. 28

29 ADJUSTED INCOME FROM OPERATIONS RECONCILIATION ($ in thousands) Fiscal Year FY 2015 FY 2016 FY 2017 FY 2018 TTM Q2 FY19 Income from operations $ 54,648 $ 40,570 $ 25,973 $ 68,331 $ 67,845 Add back: Acquisition inventory step-up expense and real estate transfer taxes 659 1,446 8,852 Acquisition deal, integration, and severance costs 8,046 8,815 8,763 8,829 CEO retirement pay and search costs 3,085 Insurance recovery legal costs 1,359 2,948 2,055 Impairment of intangible asset 1,125 Canadian pension lump sum settlements 247 Product liability costs for legal settlement 1,100 Building held for sale impairment charge ,100 Facility consolidation costs 1,726 1,444 Magnetek acquisition amortization of backlog 581 Magnetek litigation 400 Insurance settlement (2,362) (621) Debt repricing fees Non-GAAP adjusted income from operations $ 57,033 $ 53,616 $ 49,456 $ 78,699 $ 89,827 Sales $ 579,643 $ 597,103 $ 637,123 $ 839,419 $ 864,999 Adjusted operating margin 9.8% 9.0% 7.8% 9.4% 10.4% Adjusted income from operations is defined as income from operations as reported, adjusted for certain items and to apply a normalized tax rate. Adjusted income from operations is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP and may not be comparable to the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-gaap information, such as adjusted income from operations, is important for investors and other readers of the Company s financial statements and assists in understanding the comparison of the current quarter s and current year's income from operations to the historical periods' income from operations 29

30 ADJUSTED DILUTED EPS RECONCILIATION ($ in thousands, except per share data) Fiscal Year FY 2015 FY 2016 FY 2017 FY 2018 TTM Q2 FY19 Net income $ 27,190 $ 19,579 $ 8,984 $ 22,065 $ 21,519 Add back: Acquisition inventory step-up expense and real estate transfer taxes 659 1,446 8,852 Acquisition deal, integration, and severance costs 8,046 8,815 8,763 8,829 CEO retirement pay and search costs 3,085 Insurance recovery legal costs 1,359 2,948 2,055 Impairment of intangible asset 1,125 Loss on extinguishment of debt 1,303 (Gain) loss on foreign exchange option for acquisition 1,590 Canadian pension lump sum settlements 247 Product liability costs for legal settlement 1,100 Building held for sale impairment charge ,100 Facility consolidation costs 1,726 1,444 Magnetek acquisition amortization of backlog 581 Debt refinancing costs 8, Magnetek litigation 400 Insurance settlement (2,362) (621) Normalize tax rate (1) (1,508) 2,218 (4,626) 14,408 12,913 Non-GAAP adjusted net income $ 36,634 $ 34,843 $ 30,734 $ 46,841 $ 56,414 Average diluted shares outstanding 20,224 20,315 20,888 23,335 23,634 Diluted income per share - GAAP $1.34 $0.96 $0.43 $0.95 $0.91 Diluted income per share - Non-GAAP $1.81 $1.72 $1.47 $2.01 $2.39 (1) Applies normalized tax rate of 22% to GAAP pre-tax income and non-gaap adjustments above, which are each pre-tax. Adjusted net income and diluted EPS are defined as net income and diluted EPS as reported, adjusted for certain items and to apply a normalized tax rate. Adjusted net income and diluted EPS are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable to the measure as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-gaap information, such as adjusted net income and diluted EPS, is important for investors and other readers of the Company s financial statements and assists in understanding the comparison of the current quarter s and current year s net income and diluted EPS to the historical periods net income and diluted EPS. 30

31 ADJUSTED EBITDA RECONCILIATION ($ in thousands) Fiscal Year FY 2015 FY 2016 FY 2017 FY 2018 TTM Q2 FY19 Net income (loss) $ 27,190 $ 19,579 $ 8,984 $ 22,065 $ 21,519 Add back (deduct): Income tax expense/(benefit) 8,825 12,045 4,043 27,620 28,825 Interest and debt expense 12,390 7,904 10,966 19,733 18,380 Cost of debt refinancing 1,303 Cost of bond redemption 8,567 Investment (income) loss (2,725) (796) (462) (157) (428) Foreign currency exchange loss 863 2,215 1,232 1,539 1,377 Other (income)/expense (462) (377) (93) (2,469) (1,828) Depreciation and amortization expense 14,562 20,531 25,162 36,136 35,243 Acquisition deal, integration, and severance costs 8,046 8,815 8,763 8,829 Insurance recovery legal costs 1,359 2,948 2,055 Debt repricing fees Magnetek litigation 400 Insurance settlement (2,362) (621) Held for sale impairment 11,100 Acquisition inventory step-up expense 659 1,446 8,852 CEO retirement pay and search costs 3,085 Impairment of intangible asset 1,125 Canadian pension lump sum settlements 247 Product liability cost for legal settlement 1,100 Building held for sale impairment charge 429 North America facility consolidation and reduction in force 859 Acquisition amortization of backlog 581 European facility consolidation costs and reduction in force 1, Non-GAAP adjusted EBITDA $ 71,595 $ 74,147 $ 74,618 $ 114,835 $ 125,070 Sales $ 579,643 $ 597,103 $ 637,123 $ 839,419 $ 864,999 Adjusted EBITDA margin 12.4% 12.4% 11.7% 13.7% 14.5% Adjusted EBITDA represents net income adjusted for income taxes, interest, depreciation and amortization and other items as noted in the reconciliation table. The Company believes Adjusted EBITDA is an important supplemental measure of operating performance and uses it to assess performance and inform operating decisions. However, Adjusted EBITDA is not a GAAP financial measure. The Company s calculation of Adjusted EBITDA should not be used as a substitute for GAAP measures of performance, including net cash provided by operations, operating income and net income. The Company s method of calculating Adjusted EBITDA may vary substantially from the methods used by other companies and investors are cautioned not to rely unduly on it. 31

32 INDUSTRIAL CAPACITY UTILIZATION U.S. Capacity Utilization Eurozone Capacity Utilization Source: The Federal Reserve Board Source: European Commission 80% 79% 78% 75.7% (Manufacturing) & 78.5% (Total) November 2018 (1) 85% 84% 83% 83.9% December % 82% 76% 81% 75% 80% 74% 79% Manufacturing Total 32

33 STRATEGY: PARTNERS IN MOTION CONTROL Become the leading Industrial Technology Company in safe & productive motion control Best in class safety & quality Strengthen the core Continuous improvement Ramp new product engine Optimize supply chain & global footprint Simplify product platform Simplify business structure Operational Excellence Profitable Growth Create end-user pull Become easy to do business with STAHL value creation Business Development Portfolio Analysis Pivot strategy: Value creating acquisitions 33

34 GLOBAL PRESENCE Ambacht, Netherlands United States Brampton, Ontario Bedford, UK Chester, UK Coleshill, UK Newtownabbey, N. Ireland Prenton, UK Carlow, Ireland Romeny-sur-Marne, France Argenteuil, France Vierzon, France Buchs, Switzerland Cerro Maggiore, Italy Hamm, Germany St. Petersburg, Russia Wuppertal, Germany Plewiska, Poland Künzelsau, Germany Kissing, Germany Pfaffstatten, Austria Wuhan, China Shanghai, China Shenyang, China Apodaca N.L., Mexico Santiago Tianguistenco, Mexico Lisboa, Portugal Madrid, Spain Sevilla, Spain Szekesfehervar, Hungary Istanbul, Turkey Hangzhou, China Panama City, Panama Budapest, Hungary Dubai, UAE Chennai, India Bangkok, Thailand Honeydew, South Africa Singapore, Singapore Sao Paulo, Brazil Montevideo, Uruguay Magaliesburg, South Africa Middleberg, South Africa Westmead, South Africa Corporate Headquarters Getzville, New York USA Manufacturing Facility (17 locations) Warehouse Facility (6 locations) Sales & Service Office (39 locations) EXTERNAL (rev. 5/25/18) 34