Columbus McKinnon Corporation (CMCO)

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Columbus McKinnon Corp. (CMCO)

F1Q09 (Qtr End 6/29/08) Earnings Call

July 24, 2008 10:00 am ET


Tim Tevens - President and CEO

Karen Howard - VP of Finance, CFO and Treasurer

Derwin Gilbreath - VP and COO

Joe Owen - VP and Hoist Group Leader


Joe Giamichael - Rodman & Renshaw

Ted Kundtz - Needham & Company

Peter Lisnic - Robert W. Baird & Company

James Bank - Sidoti & Company

Amit Daryanani - RBC Capital Markets

Beth Lilly - Gabelli



Good morning and thank you all for holding. Your lines have been placed on a listen-only mode until the question-and-answer portion of today's conference. I would like to remind all parties today's call is now being recorded, if you have any objections, to please disconnect at this time.

I would now like to turn the call over to Mr. Tim Tevens. Thank you, sir. You may begin.

Tim Tevens

Thank you, Ulan. Good morning, everyone, and welcome to the Columbus McKinnon conference call to review the results of our fiscal 2009 first quarter. Earlier this morning we did issue a couple of press releases and corresponding financials with one. And hopefully, you read that we did issue the additional press release announcing the divestiture of Univeyor.

With me today is Karen Howard, our Chief Financial Officer; Derwin Gilbreath, our Chief Operating Officer; and Joe Owen, our Vice President of our Hoist Group.

We do want to remind you that this press release and the 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.

Okay. With that as a backdrop, let me just get started here. We have signed a definitive agreement to sell Univeyor to the owner of a Danish material handling company and expect it to close tomorrow. As a result, we have restated Columbus McKinnon financials to reflect Univeyor's discontinued operation. Now, in a moment here, Karen will review these details with you.

We have completed an open auction for Univeyor and have selected the best bid from a company who happens to be a fairly good strategic fit for Univeyor. As we have said in the past, there is a better owner for Univeyor than Columbus McKinnon and we believe the buyer is clearly better suited for managing Univeyor on a go-forward basis. I do believe that the sale is a win-win for all parties involved.

Columbus McKinnon performed very well this past quarter. Overall, our revenue for the first quarter was about $151 million and exceeded the same quarter last year by almost 7%. Please note that we now only have one segment for the quarter given this divestiture of Univeyor.

Sales outside the United States grew to $49.4 million, up about 15% over the same quarter last year. And for the quarter, international revenue represented about 33% of our total revenue. Contrary to what we all read about in the state of the global economy, we continue to experience strong demand for our products.

Our gross profit was up 4.6% and gross margin was up 150 basis points to 32.1%. Income from operations was up 4.7%, and income from continuing operations increased 12.6%. Our operating leverage on this quarter was 9.5% as we continue to make investments in international and domestic markets as well.

The bookings for our business continue to be strong, and, overall, we're up once again in the mid single digit area over the same quarter last year. Our backlog was up slightly compared to the fourth quarter, and this backlog number represents somewhere in the vicinity of four to five weeks worth of shipments.

Our cash flow from operations continued to be strong and in the quarter was about $12 million. Funded debt net of cash is down to $48 million at the end of the quarter. That represents a 13.6% net debt to total capitalization, which is just a very superb number for our company.

And with that backdrop, let me just turn it over to Karen who will lead us through more details of the financials. Karen?

Karen Howard

Thank you, Tim, and good morning, everyone. I'm pleased to have the opportunity to review some of the financial highlights of Columbus McKinnon's Univeyor business divestiture that is scheduled to close tomorrow as well as fiscal 2009's first quarter that ended on June 29, 2008.

As a result of a comprehensive strategic evaluation process, we are pleased to announce that our Danish Univeyor subsidiary will have a better opportunity to realize its potential with the new owner, which is aligned with a Danish material handling provider. Effective tomorrow, Columbus McKinnon will sell its Univeyor shares for a nominal amount and will repay approximately $15.2 million of third-party debt.

We've accounted for the business as a discontinued operation, recording a $2.2 million loss in the first quarter of 2009, which is net of $14 million US tax benefit that will be realized as a result of the transaction. Accordingly, all periods presented reflect Univeyor's discontinued operations on the income statements, balance sheets and statements of cash flows. Further, we have combined what remained of our Solutions segment into our Products segment, and now are reporting as one segment for all periods presented.

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