EX-99 2 q407pr.txt PRESS RELEASE NEWS RELEASE CONTACT: Karen L. Howard Vice President-Finance and Chief Financial Officer Columbus McKinnon Corporation Phone: 716-689-5550 karen.howard@cmworks.com COLUMBUS MCKINNON REPORTS CONTINUED SALES GROWTH AND MARGIN EXPANSION FOR FOURTH QUARTER AND FISCAL YEAR 2007 o FISCAL YEAR 2007 SALES GROW 6% TO $590 MILLION; OPERATING MARGIN EXPANDS 120 BASIS POINTS TO 11.6% o FOURTH QUARTER SALES GROW 7% TO $157 MILLION; OPERATING MARGIN EXPANDS 100 BASIS POINTS TO 12.5% o FOURTH QUARTER PRODUCTS SEGMENT SALES GROW 9% TO $143 MILLION; OPERATING MARGIN EXPANDS 230 BASIS POINTS TO 15.0% o FOURTH QUARTER AND FULL YEAR PRO FORMA NET INCOME OF $11.2 MILLION AND $36.0 MILLION, RESPECTIVELY; INCREASE 33% AND 50%, RESPECTIVELY, COMPARED WITH THE FOURTH QUARTER AND FULL YEAR OF FISCAL 2006, ALL ON A PRO FORMA BASIS o DEBT, NET OF CASH, AT 33.8% OF TOTAL CAPITALIZATION ON MARCH 31, 2007 COMPARED WITH 44.5% A YEAR AGO o ANNUAL INTEREST EXPENSE DOWN $8.2 MILLION, OR 33.4%, FROM LOWER DEBT LEVELS AMHERST, N.Y., May 29, 2007 - Columbus McKinnon Corporation (NASDAQ: CMCO) ("CMCO"), a leading designer, manufacturer and marketer of material handling products, today announced financial results for its fourth quarter and fiscal year 2007 that ended on March 31, 2007. For the quarter, net sales were $156.9 million, up 6.7% from last year's fourth quarter reflecting continued strong demand for most products. For the full year, net sales were $589.8 million, up $33.8 million, or 6.1%. Timothy T. Tevens, Columbus McKinnon's President and Chief Executive Officer, commented, "Fiscal 2007 marks our third consecutive year of sales growth and margin expansion, as well as our ninth consecutive year of debt reduction. Pro forma net income, which excludes a significant tax benefit last year in addition to some other items, increased 33% in the quarter and 50% for the full year. In fiscal 2007, we also achieved our goals of operating margin in the 11% to 12% range and debt, net of cash, below 35% of total capitalization. The drivers of our steadily improving operating performance and financial strength are the strong sales and cash flow of our Products segment, which comprises approximately 90% of CMCO's sales, and our successful refinancing activities. In the 2007 fourth quarter, we achieved 9% net sales growth and an operating margin of 15% in the Products segment." Net income for the fiscal 2007 fourth quarter was $11.1 million, or $0.58 per diluted share, compared with $47.8 million, or $2.53 per diluted share for the fiscal 2006 fourth quarter. Net income in the 2006 fourth quarter included a $38.6 million income tax benefit, as a result of the reversal of a valuation allowance against deferred tax assets, primarily U.S. federal net operating loss carryforwards. Adjusting for that, other unusual items, and applying a normalized tax rate for both periods, pro forma net income for the fiscal 2007 fourth quarter was $11.2 million, or $0.59 per diluted share, a 32.5% increase from pro forma net income for the fiscal 2006 fourth quarter of $8.5 million, or $0.45 per diluted share. On a per diluted share basis, pro forma fiscal 2007 fourth quarter net income increased 31.1%.

* Normalized tax rate of approximately 34.9%, excluding $38.6 million FY06 Q4 tax benefit ** Shares in thousands used in per diluted share calculation: FY07 Q4: 19,015 FY06 Q4: 18,865 Net income for fiscal 2007 was $34.1 million, or $1.80 per diluted share, compared with $59.8 million, or $3.60 per diluted share for fiscal 2006. Adjusting for the $38.6 million income tax benefit in fiscal 2006, other unusual items and applying a normalized tax rate for both periods, pro forma net income for fiscal 2007 was $36.0 million, or $1.90 per diluted share, a 49.8% increase from pro forma net income for fiscal 2006 of $24.1 million, or $1.45 per diluted share. On a per diluted share basis, pro forma fiscal 2007 net income increased 31.0%.

* Normalized tax rate of approximately 37.5%, excluding $38.6 million FY06 Q4 tax benefit ** Shares in thousands used in per diluted share calculation: FY07: 18,951 FY06: 16,628 FOURTH QUARTER FISCAL 2007 REVIEW Gross margin improved 60 basis points to 28.5% for the quarter compared with 27.9% in the fourth quarter of fiscal 2006, resulting in a 9.0% increase in gross profit on the 6.7% increase in sales. Income from operations grew 16.7%, or $2.8 million, to $19.7 million for the fiscal 2007 fourth quarter compared with the year ago quarter. Driving margin expansion was strong operating leverage from higher sales in the Products segment, successful cost management and continued improvement in operational processes through lean manufacturing and other strategic initiatives. These improvements were partially offset by lower sales and operating losses in the Solutions segment. As a percent of sales, operating income produced a 12.5% margin in the fiscal 2007 quarter compared with 11.5% in the same period last year, amounting to $0.29 of operating income for each incremental sales dollar over the prior year quarter. Selling expenses increased $2.4 million, or 16.9%, of which $1.5 million reflects CMCO's increased sales and marketing activities. More than half of the spending on sales and marketing was for programs in Europe, to advance the Company's strategic initiative to expand in that region. The rest of the increase was due to general sales activities in North America and currency conversion. General and administrative expenses were down $0.6 million to $7.9 million, due primarily to lower variable compensation. Combined, selling, general and administrative (SG&A) expenses increased to 15.6% of sales compared with 15.5% in the fiscal 2006 fourth quarter. Lower debt levels, especially higher cost debt, resulted in a $1.3 million, or 26.6%, decrease in interest expense this quarter compared with the prior year's quarter. The favorable effective tax rate of 34.9% in the fiscal 2007 fourth quarter reflects the benefit of some unusual non-taxable income items. The Company's normal effective tax rate is 38% to 39%. CMCO continues to realize the cash flow benefits of its U.S. net operating loss (NOL) carryforward, of which $38.6 million, representing approximately $13.5 million of cash tax savings, remained available at the end of fiscal 2007. Debt, net of cash at March 31, 2007, was $123.4 million, or 33.8% of total capitalization, compared with $164.2 million, or 44.5% of total capitalization, at the end of the prior fiscal year. At the end of fiscal 2007, funded debt was $172.1 million, or 41.6% of total capitalization, compared with $209.8 million at the end of fiscal 2006, or 50.6% of total capitalization. During the fiscal 2007 fourth quarter, the Company purchased $3.0 million of its 10% notes, leaving $22.1 million outstanding that are callable in August 2007. CMCO's availability on its line of credit with its bank group at March 31, 2007 was $64.8 million. The Company's financial strategy is to maintain a conservative capital structure with the flexibility to support its growth strategies, including acquisitions, regardless of the point in the economic cycle. Its long-term goal for its funded debt to total capitalization ratio is 30%, flexing to 50% for acquisitions. Capital expenditures for the fourth quarter and full year of fiscal 2007 were $3.8 million and $10.7 million, respectively, compared with $3.7 million and $8.4 million for the same periods in fiscal 2006. Capital spending continues to be focused on new product development and the purchase of productivity-enhancing equipment along with normal maintenance items. On March 5, 2007, CMCO announced the sale of Larco Industrial Services, Ltd. (Larco), which did not have a material financial impact on the Company's fiscal 2007 fourth quarter financial results. The Company estimates that the effect of the Larco sale in fiscal 2008 will be a reduction of approximately $9 million in consolidated net sales with no meaningful impact on earnings as Larco was operating near breakeven. PRODUCTS SEGMENT ---------------- Products segment net sales grew 8.8% to $143.1 million for the fourth quarter of fiscal 2007, an increase of $11.6 million compared with the fourth quarter of fiscal 2006. Variances between quarters are summarized as follows, in millions: Volume $ 10.6 8.0% Number of shipping days (2.0) (1.5%) Price 2.4 1.8% Foreign currency translation 0.6 0.5% ------ ---- Total $ 11.6 8.8% Gross margin for this segment reached 30.9% compared with 29.7% in last year's fourth quarter. Income from operations, as a percent of sales, was 15.0% for this period, a 230 basis point improvement over 12.7% in the fiscal 2006 fourth quarter. Operating leverage was 40.9% in the quarter. Backlog was $53.2 million at the end of the year. Backlog at the end of fiscal 2006 and the fiscal 2007 third quarter was $53.6 million and $54.7 million, respectively. The lower backlog reflects CMCO's efforts to increase production out of certain facilities to meet demand in a timely manner. The time to convert the majority of Products segment backlog to sales averages from a few days to a few weeks, and backlog for this segment on average normally represents four to five weeks of shipments. SOLUTIONS SEGMENT ----------------- Net sales for the Solutions segment were $13.8 million in the fiscal 2007 fourth quarter, down 11.3% from sales of $15.6 million in the same period last year. Gross margin was 3.6% compared with 12.5% last year. Income from operations as a percent of sales was a negative (13.1%) for this period compared with 0.7% in the fiscal 2006 fourth quarter. Weak performance by the Company's European material handling systems business, Univeyor, which represented approximately 68% of this segment's quarterly sales, and overall contributed approximately 5% to consolidated net sales, resulted from performance issues on some projects, a challenging pricing environment and an unfavorable sales mix. Restructuring activities, which began in the third quarter of fiscal 2007 and continued into the fourth quarter, have not yet produced sufficient improvements to complete the change in Univeyor's business model, which is to increase its focus on offering products as packaged solutions rather than engineered-to-order systems. This change is expected to reduce the volatility of this unit's performance and improve the return on invested capital. Mr. Tevens noted, "Our efforts to improve Univeyor's operations and better capitalize on market opportunities did not progress quickly enough in the fourth quarter. As a result, there have been more changes made at the organization and a more aggressive restructuring plan is being implemented. We have assigned an experienced executive from our Products segment to reevaluate the business situation and to lead the implementation of the restructuring and business improvement plan. Further, we have recently appointed a new Managing Director and they will work together to carry out the plan. Additional restructuring costs are expected to be $0.2 million to $0.3 million in the first quarter of fiscal 2008. We are not ruling out the possibility of monetizing the assets of this business, yet we are keenly interested in being able to realize the benefit of innovative new products being developed by Univeyor." Quoting activity for the Solutions segment has been strong, and backlog improved to $9.6 million at year-end compared with $9.2 million at the end of the third quarter of fiscal 2007. For this segment, the average cycle time for backlog to convert to sales generally ranges from one to six months. FISCAL 2007 REVIEW Net sales for the year were $589.8 million, up 6.1%, or $33.8 million compared with fiscal 2006. Gross profit of $164.6 million was 11.5% higher in fiscal 2007 resulting in a 130 basis point improvement to a 27.9% gross margin. SG&A expenses were $95.8 million in fiscal 2007 compared with $87.9 million in the prior fiscal year. As a percent of sales, SG&A was 16.2% and 15.8% for fiscal 2007 and 2006, respectively. The increase was primarily due to investments made to support CMCO's strategic growth initiatives through expansion of market share in North America, Europe, Central and South America and Asia. Operating margin for fiscal 2007 was 11.6% compared with 10.4% for fiscal 2006, representing 31.3% operating leverage. Interest expense in fiscal 2007 was down $8.2 million, or 33.4%, to $16.4 million reflecting the $38 million year-over-year reduction in average funded debt outstanding. Net cash provided by operations was $45.5 million for fiscal 2007 compared with $46.4 million in fiscal 2006. Higher working capital requirements on increased sales volume somewhat affected cash generation for the year. The Company realized modest improvements in some key working capital metrics this year, including days sales outstanding of 56.4 days at March 31, 2007 compared with 59.2 days at March 31, 2006, and inventory turns of 5.8 times at March 31, 2007 compared with 5.7 times at March 31, 2006. Despite these improvements, overall working capital as a percentage of latest twelve months' revenues increased to 20.1% at March 31, 2007 compared with 17.4% at March 31, 2006. This increase was partially due to an accounting change for pension liability classification reducing accrued liabilities and increasing other non-current liabilities by $6.3 million. Additionally, the increase was driven by a reduction in days payable outstanding and various accrued liabilities. SUMMARY Mr. Tevens noted, "We continue to be optimistic as we look forward into fiscal 2008. Bookings for the fourth quarter were up in the mid-single digits range over last year's fourth quarter. We are focused on further increasing our international market share as we expand in higher growth foreign markets with a broader array of our products while continuing to lead North American markets. We also continue to search for strategic, bolt-on acquisitions to complement our organic growth around the world. Our primary use of cash will be debt reduction and acquisitions, and we continue to work on improving our margins and cash flows by improving order-to-delivery cycle times and strengthening working capital management through our Lean Manufacturing culture. As we look forward, we expect that operating leverage from sales growth projected in the mid-single digit range, combined with resolution of the issues within our Solutions segment, should drive our operating leverage to exceed our 30% goal, continuing operating margin expansion." He concluded, "We are well positioned to grow Columbus McKinnon, with a strong balance sheet and cash flows, to leverage our market leadership position and grow in new markets. We will continue to work towards being the global leader in material handling products as we help our customers move, secure or position material in an easy and safe manner. " 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 or secure material. Key products include hoists, cranes, chain and forged attachments. 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 web site at HTTP://WWW.CMWORKS.COM. ---------------------- TELECONFERENCE AND WEBCAST A teleconference and webcast have been scheduled for May 29, 2007 at 10:00 AM Eastern Time at which the management of Columbus McKinnon will discuss the Company's financial results and strategy. Interested parties in the United States and Canada can participate in the teleconference by dialing 1-888-459-1579, and asking to be placed in the "Columbus McKinnon Quarterly Conference Call" and providing the password "Columbus McKinnon" and identifying conference leader "Tim Tevens" when asked. The toll number for parties outside the United States and Canada is +1-210-234-7695. The webcast will be accessible at Columbus McKinnon's web site: http://www.cmworks.com. An audio recording of the call will be available two hours after its completion and until July 20, 2007 by dialing 1-800-873-2068. Alternatively, you may access an archive of the call until July 20, 2007 on Columbus McKinnon's web site at: HTTP://WWW.CMWORKS.COM/INVREL/PRESENTATION.ASP. ---------------------------------------------- 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 NEW BUSINESS, THE SPEED AT WHICH SHIPMENTS IMPROVE, 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. TABLES FOLLOW.

SHIPPING DAYS BY QUARTER Q1 Q2 Q3 Q4 TOTAL -- -- -- -- ----- FY08 63 63 60 63 249 FY07 63 63 59 64 249 FY06 65 63 58 65 251 - ### -

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