Columbus McKinnon has put its Automotive Solutions business back up for sale, six months after deciding to keep the business intact.
The US lifting equipment manufacturer has engaged ABN AMRO Incorporated as a financial advisor “to explore strategic alternatives for the Solutions – Automotive segment, including a possible sale of Automatic Systems, Inc.” In February this year Columbus McKinnon completed a year-long review of its business in a bid to improve shareholder value. One option was the sale of all or part of the business. The outcome was a decision to retain the business but to scale back its operations.
Exactly a year ago president and chief executive officer Timothy Tevens told shareholders that the troubled Solutions – Automotive segment had been turned around. “We are especially encouraged by the turnaround achieved in CM’s Solutions–Automotive segment,” he said after sales in this business rose more than $10m to $45.7m for the quarter to 2 July 2000.
Now, however, reporting results for the first quarter of fiscal 2002, Tevens said: “The shortfall in the contribution from our Solutions – Automotive segment reflects cost overruns confined to a large project. While this segment has made significant progress over the last two years in enhancing its performance, the variability of its results and concentration on one industry continue to be a concern for a public company of our size. With the strong and diverse foundation our core Products business provides, and our continuing drive to lower fixed costs, it makes sense to revisit the sale of the Solutions – Automotive business to better position CM to deliver more consistent results.” Columbus McKinnon’s net sales for the quarter to 1 July 2001 were $175.9m, compared to $188.4m in fiscal 2001. Net income for the first quarter of fiscal 2002, excluding a previously announced $8.8m restructuring charge, was $0.8m. Including the restructuring charge, the company reported a first quarter net loss of $4.7m, compared with net income of $5.9m in last year’s first quarter.
Tevens said: “This quarter’s results reflect a solid performance from our Products segment, which generated income from operations before amortisation margin of 15.0%, compared with 15.7% in fiscal 2001 in spite of a 12.4% reduction in revenue. This year’s margin does not reflect the restructuring charges we announced in June to implement a major product rationalisation and facility closure in Forrest City, Arkansas expected to save approximately $7.25m pre-tax annually when completed.” He continued: “We are especially encouraged by the positive impact on our cost structure from this program, as well as from the lean manufacturing initiative now being implemented in a significant number of facilities throughout the company. We are also pleased that our Products segment margins held steady in spite of a significant reduction in revenue due to an economic environment which continues to be very difficult for manufacturers of industrial products. These margins should improve more as we continue to implement the product and facility rationalisation program and lean manufacturing initiative that is underway.
“Revenue in the Solutions – Industrial segment was off 22.2% reflecting very difficult economic conditions in this capital goods intensive business. Margins fell accordingly,” he added.
