Columbus Mckinnon Corporation · NASDAQ:CMCO
Columbus Mckinnon — CJS Securities "New Ideas for the New Year" Conference 2019
34 slides from Columbus Mckinnon's conference presentation, Jan 9, 2019
Slide 1: CJS Securities "New Ideas for the New Year" Conference
January 9, CJS SECURITIES 2019 “NEW IDEAS FOR THE NEW YEAR” CONFERENCE Mark D. Morelli President and Chief Executive Officer Gregory P. Rustowicz Vice President – Finance & Chief Financial Officer
Slide 2: Safe Harbor Statement
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 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause th
Slide 3: NASDAQ: CMCO – World's 2nd largest hoist company
NASDAQ: CMCO Leading global designer, manufacturer and marketer of motion control products, technologies and services for material handling Founded: 1875 Leader in highly engineered lifting solutions and explosion-protected hoists Premium, well respected brands World’s 2nd largest hoist company with
Slide 4: Highly Relevant to Customers
HIGHLY RELEVANT TO CUSTOMERS Professional grade solutions for complex applications © 2019 Columbus McKinnon Corporation 4
Slide 5: Three Distinct Product Categories
THREE DISTINCT PRODUCT CATEGORIES Customer Driven Solutions Linear & Mechanical Actuators Lifting Tables Rail & Road Engineered Actuation Systems Products ~10% Industrial Products ~45% Manual Chain Hoist Crane Electric Chain Hoist ~45% Rigging / Clamps Solutions Industrial Winches
Slide 6: Defined Channels to Market
DEFINED CHANNELS TO MARKET Specialty Distributors Pfaff International Direct ~10% US General Line Distributors ~5% ~29% OEM/Government ~10% Crane ~11% Builders ~12% ~23% International General EPC Line Distributors $865.0 Million 2Q FY19 TTM Revenue Market channels provide access to end users © 2019
Slide 7: Market Drives Structure
MARKET DRIVES STRUCTURE Reorganized November 2017 Channel Partners: Product Categories: General Distribution/Rental Lifting Specialists (Direct Sales) Industrial Products Rigging Specialists Industrial Crane Builders End Users Crane Solutions & Kits EPC OEM Engineered Products Motion Technology Dist
Slide 8: End Market and Geographic Diversification
END MARKET AND GEOGRAPHIC DIVERSIFICATION Mining Entertainment Government / Others ~3%~3% APAC ~3% Elevators Latin America ~3% 6% Heavy OEM General Canada 4% Pulp ~5% ~25% Industrial 4% Paper/Chemical/ Pharma ~5% Construction ~5% 53% U.S. Metals Rail / Aerospace / ~10% ~10% Processing / Transport St
Slide 9: Key Vertical Markets
KEY VERTICAL MARKETS CONSTRUCTION MINING ENTERTAINMENT OIL & GAS POWER / UTILITIES TRANSPORTATION AUTOMOTIVE HEAVY EQUIPMENT MANUFACTURING © 2019 Columbus McKinnon Corporation 9
Slide 10: Strategy: Evolution of Columbus McKinnon
STRATEGY: EVOLUTION OF COLUMBUS MCKINNON Phase II underway Growth oriented Phase III Industrial Evolve business Technology model Further pivot: • Portfolio optimization Phase II • M&A Simplify and drive profitable growth Simplify through 80/20 process Operational excellence Ramp growth engine: Phase
Slide 11: Blueprint Phase I Accomplishments
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 avail
Slide 12: Tracking Blueprint Phase II Progress
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; $1.6 million savings year-to-date Divestitures on track for completion this fiscal year Operational Excellence Record productivity
Slide 13: Operating System Deployment Continues
OPERATING SYSTEM DEPLOYMENT CONTINUES E-PAS™: Earnings Power Acceleration System Key Strategy Talent Performance Deployment Development Indicators Monthly Operating 80 / 20 M&A Reviews Process Process (MORs) Risk & Mission Lean Opportunity Vision Tools (R&Os) Values 80/20 process: Centerpiece of ope
Slide 14: Phase II: Simplify Through 80/20
PHASE II: SIMPLIFY THROUGH 80/20 • Product Line Simplification 80 / 20 • Customer Focus Process • Core Business Segmentation • Purchasing leverage and indirect cost reduction • Targeted selling • Sharper business focus Savings • Expected to accelerate • Realize a full year’s impact of actions in FY2
Slide 15: Phase II: Simplify Through 80/20
PHASE II: SIMPLIFY THROUGH 80/20 Product Line Simplification Wire Rope Hoist Platform Basic Standard Industrial High Performance Rationalize global platforms while maintaining brands © 2019 Columbus McKinnon Corporation 15
Slide 16: Phase II: Operational Excellence
PHASE II: OPERATIONAL EXCELLENCE Common Component Utilization Manual Chain Hoist Platform LEVER CHAIN TOOL 1 BLOCK 1 PARTS ARE 100% SHARED “Everything between the side plates” COMMON LEVER PARTS CHAIN TOOL BLOCK PARTS ARE SHARED BETWEEN CHAIN PRODUCT TYPE BLOCK 2 LEVER TOOL “Everything between the s
Slide 17: Phase II: Ramp the Growth Engine
PHASE II: RAMP THE GROWTH ENGINE ($ in millions) CREATING CENTER OF EXCELLENCE IN FY2019 Increase R&D spend by ~$11M: ~$27 $5M coming from STAHL Incremental $6M from FY17 baseline $21 $16 Sustaining Engineering Investment (1) R&D ~$21M Engineered to Order R&D 75% ~$14M Research R&D 67% ~$10M Pro
Slide 18: Phase II: Smart Hoist Vision
PHASE II: SMART HOIST VISION Megatrend movement to industrial automation 80 Projected full-time jobs automated in the U.S. millions 0 2017 2035 Source: University of Oxford, ARK Original Research Opportunity to capitalize on automation megatrend © 2019 Columbus McKinnon Corporation 18
Slide 19: Phase II: New Product Development
PHASE II: NEW PRODUCT DEVELOPMENT Smart Hoists Capabilities Leveraging technology and experience to design “Smart Hoists” Onboard diagnostics Remote monitoring Precision lifting Load sensing Preventative maintenance Leads to improved safety and reduced down time Leveraging recent acquisiti
Slide 20: Phase III: Business Development
PHASE III: BUSINESS DEVELOPMENT Portfolio assessment Selective Invest / Grow Scale-Up Investment Portfolio Assessment Indust. Tech Business model Profitability Market position Fix / Exit Selective Invest / Grow Industry growth Investment Risk assessment EBITDA (to scale) Divest Fix / Exit
Slide 21: Financial Performance
FINANCIAL PERFORMANCE ($ in millions) Sales & Gross Margin Growth in revenue driven by organic and acquired sales $865.0 $839.4 Gross margin improvement driven by Blueprint strategy $637.1 $579.6 $597.1 34.4% 33.7% 31.3% 31.4% 30.3% FY15 FY16 FY17 FY18 TTM Q2 FY19 Total Sales Gross Margin © 2019 Col
Slide 22: Financial Performance
FINANCIAL PERFORMANCE ($ in millions) Adjusted Operating Income(1) Diluted EPS(1) $89.8 $2.39 $78.7 $2.01 $57.0 $1.72 $53.6 $1.53 $1.47 $49.5 9.8% 10.4% 9.0% 9.4% 7.8% $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 FY15 FY16 FY17 FY18 TTM Q2 FY19 FY19 Non-GAAP
Slide 23: De-Levering Balance Sheet
DE-LEVERING BALANCE SHEET CAPITALIZATION Fast paced debt reduction Sept 30, March 31, continues 2018 2018 Paid down $15 million in debt YTD Cash and cash equivalents $ 57.7 $ 63.0 Net Debt/ Adjusted TTM EBITDA(1) Total debt 339.3 363.3 • Down to 2.25x Total net debt 281.6 300.3 Expect to achieve tar
Slide 24: Significant Free Cash Flow Generation
SIGNIFICANT FREE CASH FLOW1 GENERATION ($ in millions) FY19E and Beyond, FCF After: ENABLES MEASURABLE • Annual CapEx of approximately $15 million* ANNUAL DEBT PAYMENT • Annual Pension contribution of ~$12 million ~$60 million in FY19 $90 - $80 - $95 $70 - $85 $60 - $75 $65 $55.1 $46.1 $30.3 $21.0 F
Slide 25: Creating Shareholder Value
Creating Shareholder Value Adjusted EBITDA Margin(1) Return on Invested Capital (ROIC)(2) 13.7% 14.5% 12.4% 12.4% 11.7% 11.7% 10.1% 8.7% 8.9% 6.4% FY15 FY16 FY17 FY18 Q2 FY19 FY15 FY16 FY17 FY18 Q2 FY19 TTM TTM GOAL: Adjusted EBITDA Margin of 19% and Adjusted ROIC of >10% (1) Adjusted EBITDA is a no
Slide 26: Key Takeaways
KEY TAKEAWAYS Pivot from late stage industrial to higher growth, industrial technology company Raising expectations over next three years: Double-digit earnings growth and >19% EBITDA margins Cost savings through simplification and operational excellence Opportunity to capitalize on automation megat
Slide 27: Supplemental Information
SUPPLEMENTAL INFORMATION © 2019 Columbus McKinnon Corporation 27
Slide 28: Adjusted Gross Profit Reconciliation
ADJUSTED GROSS PROFIT RECONCILIATION ($ 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 — — — Acqui
Slide 29: Adjusted Income from Operations Reconciliation
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 d
Slide 30: Adjusted Diluted EPS Reconciliation
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 de
Slide 31: Adjusted EBITDA Reconciliation
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
Slide 32: Industrial Capacity Utilization
INDUSTRIAL CAPACITY UTILIZATION U.S. Capacity Utilization Eurozone Capacity Utilization Source: The Federal Reserve Board Source: European Commission 80% 85% 75.7% (Manufacturing) & 79% 78.5% (Total) 84% November 2018(1) 83.9% December 2018 78% 83% 77% 82% 76% 81% 75% 80% 74% 79% Manufacturing Total
Slide 33: Strategy: Partners in Motion Control
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 Create end-user pull & global footprint Beco
Slide 34: Global Presence
GLOBAL PRESENCE Ambacht, Netherlands Bedford, UK Hamm, Germany Chester, UK St. Petersburg, Russia Coleshill, UK Newtownabbey, N. Ireland Wuhan, China Wuppertal, Germany Brampton, Ontario Prenton, UK Plewiska, Poland Carlow, Ireland Künzelsau, Germany Shanghai, China Kissing, Germany Romeny-sur-Marne
Columbus McKinnon — CJS Securities "New Ideas for the New Year" Conference 2019 on 6ix