Columbus McKinnon Corporation (CM) is managing to reduce its debt burden more quickly than expected but is continuing to make a net loss and is in breach of banking covenents.
President and chief executive officer Timothy Tevens remains confident of the progress the company is making in difficult market conditions. ‘We are holding our own,’ he said.
CM has announced financial results for the third quarter and first nine months of fiscal 2002 which ended on 30 December 2001.
Third quarter consolidated net sales were $137.7m, compared to $175.1m a year ago. Income from operations before amortisation was $13.2m for the current quarter, compared to $17.7m last year. CM’s net loss for the third quarter of fiscal 2002 was $100,000, compared with net income of $1.3m a year ago.
‘Our results for the quarter continue to reflect a very difficult operating environment for manufacturers of industrial products,’ said Tevens. ‘While sales were down in each of our business segments, their margins all remained close to last year’s level due to our productivity and cost control initiatives. The gross profit margin in our products segment, which makes up almost 70% of sales, was 28.1%, virtually even with last year despite a 15% reduction in sales.’
Consolidated net sales for the first nine months of fiscal 2002 were $485.2m, compared to $552.5m for the comparable period last year. CM’s net loss for the first nine months of fiscal 2002 was $6.1m, including restructuring charges of $9.6m, compared to net income of $11.6m for the comparable period of fiscal 2001. Excluding the $9.6m restructuring charge, primarily recorded in the first quarter to implement a product and facility rationalisation programme, CM’s pro forma fiscal 2002 year-to-date net loss was $100,000, or $0.01 per diluted share.
‘We have taken significant actions this year to make CM’s cost structure more competitive which will enhance our ability to manage through economic downturns like the one we are currently experiencing and also make us more profitable when the economy and our sales recover to more normal levels,’ said Tevens. ‘Our previously announced product and facility rationalisations are all proceeding on schedule, along with our revenue enhancement and Lean Manufacturing initiatives. At this point, about half of our domestic manufacturing facilities are undergoing conversion to Lean Manufacturing processes which will result in further improvements in our cost structure going forward. Our long-term debt is $77.5m below a year ago, exceeding our target of $50m in debt reduction for fiscal 2002, and reducing interest expense by $1.7m in the quarter.’
Tevens concluded: ‘We are holding our own in a very challenging business environment – one that we expect will continue into the next few quarters. While our recent financial performance has been affected, Columbus McKinnon remains a strong business with leading market share in its major product lines, an excellent reputation for product and service quality and significant cash flow. We will continue to take the appropriate actions to mitigate the effect of this environment on our near-term financial results while preserving and enhancing the strength of our business for the longer term.’
The company also said that, as a result of its third fiscal quarter results, it is technically not in compliance with certain of its senior debt bank covenants, and that it is negotiating a new credit facility with its lenders which will include a waiver of non-compliance for the third fiscal quarter.
The previously announced evaluation of strategic alternatives for its Solutions-Automotive segment, including the possible sale of Automatic Systems Inc, remains in process.
The board of directors voted to suspend indefinitely payment of its quarterly cash dividend in order to dedicate its cash resources to debt repayment.
