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Columbus McKinnon Corporation (CMCO)
Q2 2009 Earnings Call
October 24, 2008 10:00 am ET
Timothy T. Tevens - President, Chief Executive Officer, Director
Karen L. Howard - Chief Financial Officer, Vice President - Finance, Treasurer
Derwin R. Gilbreath - Chief Operating Officer, Vice President
Ryan Jones - RBC Capital Markets
Joe Giamichael - Rodman & Renshaw LLC
Theodor Kundtz - Needham & Company
James Bank - Sidoti & Company
Analyst for [Arnold Erstiner - TJS Securities]
[Bob Franklin - Prudential]
Analyst for Peter Lisnic – Robert W. Baird & Co., Inc.
Previous Statements by CMCO
» Columbus McKinnon Corp. F3Q09 (Qtr End 12/28/08) Earnings Call Transcript
» Columbus McKinnon Corp. F1Q09 (Qtr End 6/29/08) Earnings Call Transcript
» Columbus McKinnon Corp. F4Q08 (Qtr End 03/31/08) Conference Call Transcript
Now I’ll turn the meeting over to Mr. Tim Tevens, President and CEO of Columbus McKinnon.
Timothy T. Tevens
Welcome to the Columbus McKinnon conference call to review the results of our fiscal 2009 second quarter. Earlier this morning we issued a press release with the corresponding financials. On the call with me today is Karen Howard, our Chief Financial Officer, and Derwin Gilbreath, our Chief Operating Officer.
We want to remind you that the press release and this conference call may contain some forward-looking statements within the meaning of the Private Litigation Reform Act of 1995. These statements contain known and unknown risks and other factors that could cause the actual results to vary. You should in fact read the periodic reports that Columbus McKinnon files with the SEC to be sure you understand these risks.
We have made a significant step forward in executing our strategic plan with the acquisition of Pfaff earlier this month. We also have a very strong balance sheet with about $29 million in cash; this is after the Pfaff acquisition; and an untapped revolver that is available to support us in the event of an economic downturn. I will remind you that we are considerably stronger today than we have ever been especially when comparing us to the last economic downturn of ’01 to ’04.
We have only long-term debt in place today with approximately $100 million of net pro forma the Pfaff acquisition. Compared to 2000 we had in excess of $400 million.
I think many of you know that we have weathered significant storms in our 133-year history and will certainly weather this one as well, but this time unlike the last downturn and others, from a position of strength. We will continue to be mindful of investments and will be tempered by these economic conditions.
In an overview here, Columbus McKinnon performed very well this quarter notwithstanding the volatile commodity and currency markets as well as the impact on our business in the Gulf Coast area that was negatively affected by Hurricane Ike. Just as a reminder, the Pfaff acquisition that I just spoke about that we announced on October 1 does not affect the second quarter results.
Our revenues outpaced the same quarter last year by almost 7%; actually 6.7%. However we were unable to ship or deliver certain services or products for about one to two weeks in September as a result of Hurricane Ike. Our facilities in this area were without power for a week or so and our service technicians were unable to service our hoists and cranes for a similar period of time. Additionally, we were unable to secure open top oceangoing containers for certain international shipments.
These facts negatively impacted our revenue in the quarter by about $2 million or 1.4% but certainly we have recovered in October and many of those are up and running and doing fine now.
Sales outside the United States grew to over $50million, up nearly 11% over the same quarter last year including about 5% of volume growth. For the quarter international revenue represented about a third of our total revenue. Looking forward, we believe the Pfaff acquisition will increase the percentage to about 40%.
Our gross profit for the second quarter was up 9.5% but down 170 basis points as operations were negatively impacted by that Hurricane Ike that I mentioned earlier as well as an incredible spike in costs of raw materials. As we have done in the past and as a matter of fact for the last several years, as many of you know, we have expected and planned for an increase in raw material costs.
But in this quarter we did not expect the rapid and significant rise in steel and other commodity prices especially in the latter half of the quarter, particularly September. We now see commodity prices retreating to lower and certainly much more manageable levels; in fact the levels that we have experienced early in the first part of the second quarter.
As a result of the impact on gross margin, our income from operations was down about 4.5% this quarter.
But once again we’re very pleased with the strength of the company’s liquidity in terms of cash availability and an open revolver of $75 million which Karen will touch on in a moment here.
However having said that, you should know that we are actively preparing for potential and significant downturn and its impact on our company given the current condition of credit markets and the corresponding impact on the global economy. We are planning for the worst and hoping for the best, but regardless of the severity of this downturn we will be prepared.
Bookings for our business remained solid in Q2 and overall we’re up again in the mid-single-digit area over the same quarter last year. Backlog was up slightly as you can see from the first quarter and this is a reminder to you all that this backlog represents four to five weeks or so worth of shipments.