• Magnetek acquisition exceeding expectations
  • Achieved cost-synergy run rate of $3.7 million to date; already at 74% of $5 million goal
  • Revenue synergy opportunities on track; strong cultural integration, as expected
  • Reduced Magnetek acquisition borrowings by $30 million since closing; well ahead of $50 million debt reduction goal by September 30, 2016
• Revenue increased to $159.7 million;  Acquisition revenue of $31.7 million more than offset impact of U.S. industrial downturn and negative currency translation
• Adjusted gross margin of 30.9% in the quarter driven by Magnetek acquisition, price realization and Lean processes
• Generated $28.8 million of cash from operations in the third quarter, up from $17.1 million in prior-year period
• Debt reduced by $18.3 million in the quarter

AMHERST, N.Y., Jan. 28, 2016 (GLOBE NEWSWIRE) -- Columbus McKinnon Corporation (NASDAQ:CMCO), a leading designer, manufacturer and marketer of material handling products and services, today announced financial results for its fiscal year 2016 third quarter ended December 31, 2015.  Fiscal year 2016 third quarter results include the Stahlhammer Bommern GmbH (“STB”) acquisition completed on December 30, 2014, and the Magnetek, Inc. ("Magnetek") acquisition completed on September 2, 2015.

Net sales ("sales") were $159.7 million in the third quarter of fiscal 2016, compared with $140.8 million in the third quarter of fiscal 2015, an increase of $18.9 million, or 13.5%.  Excluding the negative effects of foreign currency exchange, sales increased $26.3 million, or 18.8%, to $167.1 million.  Magnetek and STB contributed sales of $29.2 million and $2.5 million, respectively, to third quarter fiscal 2016 sales. 

Timothy T. Tevens, President and Chief Executive Officer, commented, “We believe the diversity of our key end markets and geographic sales has helped to mitigate the impact of a slowing global economy that is a result of plummeting oil prices, a strong dollar, rapid deceleration in China and weak global commodity demand.  The economic challenges in the U.S. have resulted in a measurable decline in our U.S. hoist and rigging business.  However, we did have bright spots in the quarter as our Magnetek acquisition is delivering solid performance, while volume in Europe also grew as that economy improves.”

Net income was $7.2 million in the third quarter of fiscal 2016, compared with $7.9 million in the prior-year period, a decline of $0.6 million, or 8.1%.  Third quarter adjusted net income, a non-GAAP financial measure, was $6.6 million, or $0.32 per diluted share, compared with $6.7 million, or $0.33 per diluted share, in the third quarter of fiscal 2015.  Reduced adjusted net income was primarily the result of lower organic sales volume in the U.S. and the related under-absorption of fixed costs.  Adjusted net income excludes Magnetek acquisition deal costs of $0.3 million and acquisition purchase accounting adjustments of $0.4 million for inventory step-up expense and $0.3 million for backlog amortization, all after tax, as well as an adjustment of $1.7 million to reflect a more normalized tax rate of 34%.  Please see the attached tables for a reconciliation of GAAP net income and earnings per share to adjusted net income and earnings per share.

U.S. sales, which comprised 64% of total sales, were $102.7 million, compared with $83.3 million in the prior-year period, an increase of $19.4 million, or 23.3%.  Acquisitions contributed $26.1 million to U.S. sales and more than offset lower volume in the organic business, which was impacted by falling demand in the industrial sector.

Sales outside of the U.S. were $57.1 million, compared with $57.5 million in the prior-year period, a decline of
$0.5 million, or 0.8%.  Excluding the unfavorable FX impact of $7.4 million, sales were up $7.0 million, or 12.1%, to $64.5 million when compared with the prior-year period.  Acquisitions, improved pricing and volume contributed to sales growth.

The fluctuation in sales for the third quarter of fiscal 2016 compared with the third quarter of fiscal 2015 is summarized as follows:

Third Quarter Fiscal 2016 Review:  Gross Margin Strengthened

Gross profit was $48.3 million, compared with $43.4 million in the third quarter of fiscal 2015, an increase of $4.9 million, or 11.4%.  Adjusted gross profit, a non-GAAP financial measure, was $49.4 million, or 30.9% of sales.  Adjusted gross profit was up $6.0 million, or 13.9%, compared with the prior-year period.  Adjusted gross profit excludes acquisition purchase accounting adjustments of $0.7 million for inventory step-up expense and $0.4 million of backlog amortization.  This quarter represented the twenty-first consecutive quarter of year-over-year gross margin improvement on an adjusted basis.  Please see the attached tables for a reconciliation of GAAP gross profit to adjusted gross profit.

Selling expenses were $19.3 million, an increase of $1.9 million, or 10.9%, over the prior-year period.  Acquisitions added $3.2 million to selling expenses, while favorable FX reduced selling expenses by $1.3 million.  As a percent of sales, selling expenses were down to 12.1%, compared with 12.4% in the same period last year. 

General and administrative (G&A) expenses were $16.4 million, compared with $12.8 million in the prior-year period, an increase of $3.6 million, or 27.7%.  Acquisitions added $2.5 million incremental G&A expenses and acquisition deal costs associated with the Magnetek acquisition were $0.4 million.  Favorable foreign currency translation reduced G&A expenses by $0.7 million.  G&A expenses as a percent of sales were 10.3%, compared with 9.1% in the prior-year period. 

Income from operations was $11.0 million, compared with $12.6 million in the third quarter of fiscal 2015, a decline of $1.7 million, or 13.1%.  Operating margin was 6.9%, compared with 9.0% in the prior-year period.  Adjusted income from operations, a non-GAAP financial measure, was $12.5 million, or 7.8% of sales.  Adjustments exclude $0.4 million of acquisition deal costs and acquisition purchase accounting adjustments of $1.1 million.  Please see the attached tables for a reconciliation of GAAP income from operations to adjusted income from operations.

The effective tax rate in the quarter was 14.1%, compared with 23.1% in the prior-year period.  The effective tax rate was lower primarily as a result of certain tax credits realized during the quarter.  The credits created an income tax benefit of $1.2 million, which reduced the effective tax rate by 14 percentage points.  The Company estimates that the effective tax rate for fiscal 2016 will be approximately 37% to 41%.

Strong Cash Generation Enabling Debt Repayments

Cash and cash equivalents were $51.9 million at December 31, 2015.  Total debt was $281.1 million, down from $299.3 million at September 30, 2015, reflecting $18.3 million of debt repayments during the quarter.  Debt, net of cash, was $229.2 million, or 44.9% of net total capitalization.

During the third quarter, cash provided by operating activities of $28.8 million was up significantly from $17.1 million in the prior-year period and $0.9 million in the trailing second quarter of fiscal 2016.  Net cash provided by operating activities was $32.9 million in the nine months ended December 31, 2015, compared with $29.9 million in the prior-year period.  Excluding the impact of the Magnetek acquisition, working capital as a percent of sales was 21.6%, compared with 22.9% and 20.8% for the second quarter of fiscal 2016 and fourth quarter of fiscal 2015, respectively.

Capital expenditures were $6.8 million in the third quarter.  For the nine months ended December 31, 2015, capital expenditures were $15.5 million, compared with $11.3 million in the prior-year period.  Year-to-date capital expenditures included $0.3 million associated with the implementation of a new enterprise resource planning system.  Fiscal 2016 capital expenditures are expected to be in the range of $18 million to $22 million.

Fiscal 2016 Year-to-Date Review

Sales were $442.0 million in the nine months ended December 31, 2015, compared with $430.7 million in the prior-year period, an increase of $11.3 million, or 2.6%.  Excluding the negative effects of foreign currency exchange, sales increased $36.9 million, or 8.6%, to $467.6 million.  Acquisitions contributed $48.6 million to year-to-date sales.  U.S. sales, which comprised 62% of total sales, were $272.3 million, an increase of $22.3 million, or 8.9%, compared with the prior-year period.  Sales outside of the U.S. were $169.7 million, a decline of $11.0 million, or 6.1%, compared with the prior-year period.  Adjusting for currency translation, sales outside the U.S. were up
$14.6 million, or 8.1%, to $195.3 million.

Gross profit was $138.9 million in the nine months ended December 31, 2015, compared with $136.1 million in the first nine months of fiscal 2015, an increase of $2.7 million, or 2.0%.  Gross margin as a percent of sales was 31.4%, compared with 31.6% in the prior year.  Adjusted gross profit, a non-GAAP financial measure, was $141.2 million.  As a percent of sales, adjusted gross margin increased by 30 basis points to 31.9%.  Foreign currency translation negatively impacted gross profit by $7.4 million.  Please see the attached tables for a reconciliation of GAAP gross profit to adjusted gross profit.

Selling expenses were $53.3 million in the fiscal 2016 year-to-date period, compared with $52.4 million in the nine months ended December 31, 2014.  As a percent of sales, selling expenses were 12.1%, compared with 12.2% in the same period last year.  The acquisitions added $4.5 million to selling expenses, and favorable currency translation reduced selling expenses by $4.4 million.

General and administrative (G&A) expenses were $53.5 million in the nine months ended December 31, 2015, compared with $40.2 million in the nine months ended December 31, 2014.  Incremental G&A from the acquisitions was $3.7 million.  Also included in fiscal 2016 year-to-date G&A expenses were $5.7 million of acquisition deal costs and $2.3 million of acquisition-related severance costs.  Favorable currency translation reduced G&A expenses by $2.3 million.  As a percent of sales, G&A expenses were 12.1%, compared with 9.3% in the prior-year period.  Excluding the acquisition deal costs and acquisition-related severance costs, G&A expenses were $45.5 million, or 10.3% of sales. 

Income from operations was $28.8 million, or 6.5% of sales, in the nine months ended December 31, 2015.  Adjusted income from operations, a non-GAAP financial measure, was $39.4 million, compared with $41.8 million in the nine months ended December 31, 2014.  As a percent of sales, adjusted operating margin was 8.9% compared with 9.7% in the prior-year period.  Please see the attached tables for a reconciliation of GAAP income from operations to adjusted income from operations.

Net income was $13.7 million, or $0.67 per diluted share, in the first nine months of fiscal 2016.  Adjusted net income, a non-GAAP financial measure, was $22.1 million, compared with $22.3 million in the prior-year period.  Adjusted earnings per diluted share were $1.09 and $1.10 for the nine months ended December 31, 2015 and 2014, respectively.  Please see the attached tables for a reconciliation of GAAP net income and earnings per share to adjusted net income and earnings per share.

Facing Challenging Market Conditions with Strategic Initiatives

Backlog was $97.6 million at December 31, 2015, compared with $110.8 million at September 30, 2015.  Backlog that represents longer-lead time projects was $38.5 million, or 39.4% of total backlog.  These projects are scheduled for shipment beyond March 31, 2016 and compares with project backlog of $46.8 million, or 42.2% of total backlog, at September 30, 2015.  Backlog is not necessarily a leading indicator of sales for the Company.

Mr. Tevens concluded, “The global industrial economy remains challenged even as Europe sees improvement.  Specifically, U.S. markets have been hard hit as the dramatic decline in the oil & gas industry permeates other supporting industries.  We believe we are in a strong position to face these headwinds given our ability to deliver solid profits and strong cash generation through industrial cycles.  We are building upon our strong market positions in developed markets and deepening our reach into Asia Pacific, Eastern Europe and Latin America.  In the face of these economic challenges, our focus remains on organic growth driven by product innovation, building our global market position and deftly executing our Lean processes to drive cost out of products and processes, while continuously improving quality and safety.”

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast today at 10:00 a.m. Eastern Time, at which Timothy T. Tevens, President and Chief Executive Officer, and Gregory P. Rustowicz, Vice President - Finance and Chief Financial Officer, will review the Company’s financial results and strategy.  The review will be accompanied by a slide presentation, which will be available on Columbus McKinnon’s website at http://www.cmworks.com/investors.  A question and answer session will follow the formal discussion.

Columbus McKinnon’s conference call can be accessed by calling 201-493-6780.  The webcast can be monitored on Columbus McKinnon’s website at http://www.cmworks.com/investors. A telephonic replay of the call will be available from approximately 1:00 p.m. Eastern Time through February 4, 2016 by dialing 858-384-5517 and entering replay code 13627617.  Alternatively, an archived webcast of the call will be on Columbus McKinnon’s web site at: http://www.cmworks.com/investors.  In addition, a transcript of the call will be posted to the website once available.

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 and secure materials.  Key products include hoists, cranes, actuators, rigging tools and digital power and motion control systems.  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 website at http://www.cmworks.com

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 and integrating new business, 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.

Financial Tables follow.

Adjusted gross profit is defined as gross profit as reported, adjusted for certain 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.

Adjusted income from operations is defined as operating income as reported, adjusted for certain items. 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 measure 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 income from operations to the historical period’s income from operations.

Adjusted net income and diluted EPS is 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 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 net income and diluted EPS to the historical period’s net income and diluted EPS.

Contacts:
Gregory P. Rustowicz
Vice President - Finance and Chief Financial Officer
Columbus McKinnon Corporation
716-689-5442
greg.rustowicz@cmworks.com
Investor Relations:
Deborah K. Pawlowski
Kei Advisors LLC
716-843-3908
dpawlowski@keiadvisors.com