Columbus Mckinnon Corporation · NASDAQ:CMCO
Columbus Mckinnon — CJS Securities 20th Annual New Ideas for the New Year Conference 2020
37 slides from Columbus Mckinnon's conference presentation, Jan 8, 2020
Slide 1: CJS Securities "New Ideas for the New Year" Conference
January 8, CJS SECURITIES 2020 “NEW IDEAS FOR THE NEW YEAR” CONFERENCE Gregory P. Rustowicz Vice President – Finance & Chief Financial Officer PARTNERS IN MOTION CONTROL
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT These slides, and the accompanying oral discussion, contain “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 sales and earnings, involve known a
Slide 3: NASDAQ: CMCO
NASDAQ: CMCO Leading global designer, manufacturer and marketer of motion control products, technologies and services for material handling Founded: 1875 Leader in highly-engineered, professional grade, intelligent motion lifting solutions and explosion-protected products Premium, well-respected glo
Slide 4: Value Proposition
VALUE PROPOSITION Highly relevant, professional-grade solutions for solving customers’ critical problems in safety & productivity © 2020 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 Manual Chain Hoist Crane ~45% Electric Chain Hoist ~45% Solutions Rigging / Clamps 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 $840.6 Million Q2 FY20 TTM Revenue (excluding divestitures) Market channels provide ac
Slide 7: End Market and Geographic Diversification
END MARKET AND GEOGRAPHIC DIVERSIFICATION Mining Entertainment Government / Others ~3%~3% APAC ~3% Elevators Latin America ~3% 6% Heavy OEM General Canada 4% Pulp ~5% ~25% Industrial 4% Paper/Chemical/ Pharma ~5% Construction ~5% 55% U.S. Metals Rail / Aerospace / ~10% ~10% Processing / Europe, Tran
Slide 8: Target Markets
TARGET MARKETS ALTERNATIVE AEROSPACE & ENTERTAINMENT OIL & GAS/ ENERGY DEFENSE PETROCHEMICAL WASTEWATER INFRASTRUCTURE AUTOMATION METALS TREATMENT PROCESSING Targeting market segments with better than GDP growth © 2020 Columbus McKinnon Corporation 8
Slide 9: Blueprint for Growth Strategy
BLUEPRINT FOR GROWTH STRATEGY Growth-oriented Industrial Technology Phase III Evolve business model • Portfolio optimization • Mergers & acquisitions Phase II Simplify the business Today Drive profitable growth • 80/20 Process • Operational Excellence Phase I • Ramp the Growth Engine Get control Ach
Slide 10: E-PAS: Earnings Power Acceleration System
E-PAS™: EARNINGS POWER ACCELERATION SYSTEM Business Operating System Key Performance Strategy Inspired to Indicators Deployment Lead™ (KPIs) Monthly Operating 80 / 20 M&A Reviews Process Process (MORs) Risk & Raising Lean Opportunity Expectations Tools (R&Os) Developed Under development Business ope
Slide 11: Strategy Drives Performance
STRATEGY DRIVES PERFORMANCE ($ in millions) Strategy creates stronger Making significant progress towards Transformation more than earnings power… 19% EBITDA margin goal… doubles ROIC(1)… $2.85 $2.74 16.2% 15.1% $2.01 13.7% 11.7% $2.27 11.2% 11.4% $1.47 $1.80 8.7% 5.6% $0.95 $0.43 FY17 FY18 FY19 Q2
Slide 12: Phase II Simplify the Business: 80/20 Process
PHASE II SIMPLIFY THE BUSINESS: 80/20 PROCESS Improve profitability • Reduce overhead • Strategic pricing Purchased Product parts SKUs Profitable revenue growth ~400,000 ~50,000 80 / 20 ROIC improvement Process • Inventory reduction • Footprint reduction Simplify the Business: Eliminate bleeders… fo
Slide 13: 80/20: Product Line & Customer List Simplification
80/20: PRODUCT LINE & CUSTOMER LIST SIMPLIFICATION Hoist and Rigging SKU Rationalization North American Industrial Products Started: ~6,200 SKUs Started: ~1,900 Active Customers Eliminated: Eliminated: ~2,500 SKUs ~500 accounts (40%) (27%) Remaining: Remaining: ~3,700 SKUs ~1,400 accounts (60%) (73%
Slide 14: Phase II: Operational Excellence
PHASE II: OPERATIONAL EXCELLENCE Path to Top Tier Operational Performance Enable Customer Improve Cost Optimize Actions Experience Structure Working Capital Consolidate Material Three Facilities Productivity Improvement of On-Time- Overhead Cost Delivery Reduction Building Team Performance Footprint
Slide 15: Phase II: Delivering Results
PHASE II: DELIVERING RESULTS ($, in millions contribution to operating income) 80/20 Process: Expecting $18 million contribution to operating income in FY20 Customer simplification (strategic pricing) FY 2019 Actual $8.5 Priority customer account program (incremental volume from sharpened customer f
Slide 16: Phase II: Ramping the Growth Engine
PHASE II: RAMPING THE GROWTH ENGINE Investing in Organic Growth and Improved Returns ($ in millions) Have increased R&D investment on steady spend… While improving returns* ~$29 Top 127% ~$22 ~$22 Performers ~$21 114% ~$16 Medium 94% 87% Sustaining Performers Engineering R&D 80% 56% Engineered to R&
Slide 17: Intelligent Motion
INTELLIGENT MOTION Starts with Identifying Customers “High-Value” Problems Total Addressable Lifting Automation Market ~$500 Million Current Market Expanded Market Opportunity ~$300 Million Significant growth opportunity at +40% gross margins © 2020 Columbus McKinnon Corporation 17
Slide 18: Ramping the Growth Engine
RAMPING THE GROWTH ENGINE Intelligent Motion Solutions Integrated load sensing Scalable automation ProPath™ Automated in smart electric chain and control modules: Workstation Crane hoist offering “No-Fly Zone” Investing in innovation © 2020 Columbus McKinnon Corporation 18
Slide 19: Phase III: Portfolio Optimization
PHASE III: PORTFOLIO OPTIMIZATION Selective Invest / Grow Scale-Up Investment Indust. Portfolio Assessment Criteria: Tech Business model Profitability Fix / Exit Selective Invest / Grow Market position Investment Industry growth Risk assessment Exit Fix / Exit Selective Investment Size of
Slide 20: Megatrends Relevant to CMCO
MEGATRENDS RELEVANT TO CMCO Automation Vertical Markets CAGR Dropping cost of sensors ~5% Aerospace Rising wages of qualified labor ~3% Steel & Metals Population ~80M people/year Food & Beverage ~6% Increase demand for food and Chemicals clean water ~4% Processing Energy Demand Wind Energy ~13% CAGR
Slide 21: Intelligent Motion
Intelligent Motion Builds on core competencies, optimizes customer experience Lifting Specialist Technology Enabled • Leverages engineering & production knowhow • Leverages installed base & “reason to be” • Leverage channels, valuable brand • Responds to customer requests • Fragmented industry with
Slide 22: Evolution of the Business Model
EVOLUTION OF THE BUSINESS MODEL Business Composition Evolves with the Strategy FY2015 Acquired: Now Engineered Products Aftermarket Industrial 6% Aftermarket 13% Aftermarket 4% Engineered Technology Crane ~ 20% ~13% Solutions Products 10% 9% Industrial Products 38% Crane Solutions 40% ~ Industrial I
Slide 23: Financial Performance
FINANCIAL PERFORMANCE ($ in millions) Sales Blueprint for Growth strategy 1100.0 helping to offset headwinds 900.0 $839.4 $876.3 $854.5 700.0 $637.1 $801.1 $842.1 $840.6 Organic growth of 1.8% 1H FY20 and expanding margins 500.0 $601.1 300.0 • Strong gross margin of 35.4% in 100.0 Q2 FY20 FY17 FY18
Slide 24: Financial Performance
FINANCIAL PERFORMANCE ($ in millions) Operating Income & Adjusted OI Margin Improving earnings power $99.8 $102.2 Q2 FY20 operating income increased $78.7 $0.4 million, or 1.6% $83.4 $47.2 $68.3 $69.4 • Adjusted operating income grew 3.4%, $23.7 or 9.6% normalized for divestitures 7.4% 9.4% 11.4% 12
Slide 25: Cash Flow
CASH FLOW ($ in millions) Free Cash Flow(1) Three Months Ended YTD 9/30/19 9/30/18 9/30/19 $90 - $95 $80 - $85 Net cash $70 - $75 provided by $67.2 operating $40.0 $19.5 $37.9 $55.1 activities $46.1 CapEx (3.0) (2.5) (4.8) Operating free cash flow $37.1 $17.0 $33.0 Note: Components may not add to to
Slide 26: Strong Balance Sheet
STRONG BALANCE SHEET ($ in millions) CAPITALIZATION DE-LEVERING BALANCE SHEET Sept. 30, March 31, Paid down $125 million of debt in FY18 2019 2019 & FY19 Cash and cash equivalents $ 72.0 $ 71.1 Debt leverage ratio(1) of 1.5x Total debt 271.4 300.3 • Paid down $20 million of debt in Total net debt 19
Slide 27: Capital Deployment Priorities
CAPITAL DEPLOYMENT PRIORITIES Organic Growth New product development Investing in growth initiatives and CapEx De-lever the balance sheet Decreasing Priority Achieved net leverage target In-organic Growth M&A Fund M&A Return of Capital Regular dividend Adhere to dividend policy Share repurchase Cons
Slide 28: Roadmap to Achieving EBITDA Margin Target
ROADMAP TO ACHIEVING EBITDA MARGIN TARGET (+/- in basis points) 25.0% +50 -200 +540 20.0% +140 -180 +200 15.0% +210 10.0% 20.5% 19.0% 19.0% 15.5% 15.1% 15.1% 15.1% 13.5% 11.4% 11.4% 5.0% 0.0% FY17 Stahl 80/20 & Ops Divestitures Inflation & FY19 80/20 & Ops Ramp the Inflation & FY22E Synergies Excell
Slide 29: Value Creation vs. Peers
VALUE CREATION VS. PEERS CMCO Objective: Achieve Top Quartile Performance Target Q2 FY20 TTM FY17 TTM EBITDA % EV/EBITDA TTM ROIC 1st ~27% 1st ~18.9x 1st ~18% ~19% Mid-teens 2nd ~16% 2nd ~13.5x 2nd ~14% 15.5% 11.7% 3rd ~13% 3rd ~9.8x 9.4x 3rd ~11% 52 Week Hi 7/24/19 11.7% 8.5x 4th ~10% 4th ~7.3x as
Slide 30: Why Columbus McKinnon?
WHY COLUMBUS MCKINNON? Blueprint for Growth strategy is driving change Building stronger earnings power - creating value Strong management team executing well Strategy expected to outperform in recession Delivering returns with lower risk profile © 2020 Columbus McKinnon Corporation 30
Slide 31: Supplemental Slides
SUPPLEMENTAL SLIDES PARTNERS IN MOTION CONTROL
Slide 32: Businesses Sold
BUSINESSES SOLD Q1 Q2 Q3 Q4 ($ in thousands) FY17 FY18 FY19 FY19 FY19 FY19 FY19 Sales 36,055 38,299 11,104 9,233 8,983 4,875 34,195 Income (loss) (1,158) 985 665 1,461 1,007 532 3,665 from operations 1. The Tire Shredder business was divested December 28, 2018. 2. Crane Equipment & Service, Inc. was
Slide 33: Adjusted Income from Operations Reconciliation
ADJUSTED INCOME FROM OPERATIONS RECONCILIATION ($ in thousands) Fiscal Year TTM FY 2017 FY 2018 FY 2019 Q2 FY20 Income from operations $ 23,725 $ 68,331 $ 69,442 $ 83,388 Add back (deduct): Factory closures — — 1,473 2,970 Business realignment costs — — — 413 Insurance recovery legal costs 1,359 2,9
Slide 34: Adjusted Net Income Reconciliation
ADJUSTED NET INCOME RECONCILIATION ($ in thousands, except per share data) Fiscal Year TTM FY 2017 FY 2018 FY 2019 Q2 FY20 Net income $ 8,984 $ 22,065 $ 42,577 $ 54,137 Add back: Factory closures — — 1,473 2,970 Business realignment costs — — — 413 Insurance recovery legal costs 1,359 2,948 1.282 98
Slide 35: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION ($ in thousands) Fiscal Year Quarter TTM FY 2017 FY 2018 FY 2019 Q2 FY20 Q2 FY20 Net income $ 8,984 $ 22,065 $ 42,577 $ 16,599 $ 54,137 Add back (deduct): Income tax expense 4,043 27,620 10,321 5,141 14,274 Interest and debt expense 10,966 19,733 17,144 3,759 15,900 Co
Slide 36: Industrial Capacity Utilization
INDUSTRIAL CAPACITY UTILIZATION U.S. Capacity Utilization Eurozone Capacity Utilization Source: The Federal Reserve Board Source: European Commission 82% 85% 75.2% (Manufacturing) & 81% 77.3% (Total) November 2019(1) 84% 80% 79% 83% 78% 82% 77% 81.3% December 2019 76% 81% 75% 80% 74% 73% 79% Manufac
Slide 37: CJS Securities "New Ideas for the New Year" Conference
January 8, CJS SECURITIES 2020 “NEW IDEAS FOR THE NEW YEAR” CONFERENCE PARTNERS IN MOTION CONTROL
Columbus McKinnon — CJS Securities 20th Annual New Ideas for the New Year Conference 2020 on 6ix