Columbus McKinnon Corporation

Greetings and welcome to the Columbus McKinnon Corporation Second Quarter Fiscal Year 2020 Financial Results Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Deb Palowski, Investor Relations for Columbus McKinnon. Thank you. You may begin.

Thanks, Melissa, and good morning, everyone. We certainly appreciate your time today and your interest in Columbus McKinnon. Joining me on the call are Mark Morelli, our President and CEO, and Greg Rustowicz, our Chief Financial Officer. You should have a copy of the second quarter fiscal 2020 financial results, which we released this morning before the market, and if not, you can access the release as well as the slides that will accompany our conversation today at our website, cmworks.com. If you'll turn to slide two in the deck, I will first review the St. Harbour Statement. You should be aware that we may make some forward-looking statements during the formal discussions as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release as well as with other documents filed with Securities and Exchange Commission. These documents can be found on our website or at www.sdc.gov. During today's call, we will also discuss some non-GAAP financial measures. We believe those will be useful in evaluating our performance. You should not consider the presentation as additional information in isolation or as a substitute for results prepared in reports with GAAP. We've provided reconciliation of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and the slides for your information. With that, if you turn to slide three, I will turn it over to Mark to begin.

Mark? Thank you, Deb. We've deployed our Blueprint for Growth strategy over two and a half years now, and we continue to demonstrate its effectiveness with our results this quarter. We're improving our margin and earnings even in the face of significant industrial market headwinds. After adjusting for divested businesses and foreign currency exchange rates, Revenue in our second quarter of fiscal 2020 was up 2%. The impact of our 80-20 process provided more than $3 million in revenue driven by strategic pricing and our priority customer account program. We saw strong growth in our projects business, which overcame the decline in demand from our short cycle business. In total, our 80-20 process contributed $5.2 million in operating margin, including incremental revenue, and $2.1 million in savings from overhead cost reduction. This benefit is more than offsetting industrial market headwinds as well as enabling us to invest in growth initiatives. As a result, net income grew 4% year-over-year and outpaced revenue growth. Adjusted net income was up over 8%. Our strategy and execution is keeping us on track as we continue to achieve our targets. Adjusted EBITDA margin expanded 80 basis points to 16.2%, and ROIC was up 180 basis points to 11.7%. A hallmark of Columbus McKinnon is our strong cash generation through economic cycles. As we execute our strategy and improve our business model, we are strengthening this tradition. We generated $40 million in cash from operations this quarter. We used the cash to further reduce debt. Our leverage ratio is now just 1.5 times adjusted EBITDA ahead of target. The changes we've made to our business model have improved our performance as global industrial markets have weakened. After a year of decline in vessel capacity utilization and six months of ISM manufacturing declines in the U.S., we continue to make progress. We've grown organic revenue and consistently expanded margins and ROIC while investing for innovation and strengthening our balance sheet. Please turn to slide four. We're doubling down on Phase 2 of our strategy and are now raising our target for 80-20 process benefits this fiscal year. Through the first half of this year, we've achieved $9 million in contribution to operating income. This was higher than the total benefits to earnings in the prior year, and our performance here today gives us confidence to raise our full-year guidance to $18 million, up from our previous target of $12 million. Our self-help strategy sheds unprofitable revenue and focuses on areas of growth with our customers. It also provides the resources to strengthen our business. The 80-20 process gives us the lens to reduce indirect overhead costs and improve material productivity, driven by simplification of our product lines. We're shedding footprint with our first factory closure in Ohio and one in China. I should note that China factory closure is on track to be complete by the end of this fiscal year. And we announced yesterday we're closing a second facility in Ohio, enabling us to consolidate operations in Waitsboro, North Carolina, which is our North American manufacturing center for wire rope products, and Damascus, Virginia, which is our North American manufacturing center for chain hoists. This removes overhead costs and allows us to fund initiatives to improve our competitiveness. The true value of our strategy is demonstrated through the success we are having by funding our investments. This fiscal year, we hired nearly 30 people focused on product innovation, marketing, and digital initiatives. We've also offset headwinds from the global macroeconomic and industrial markets. We more than offset declines in our short cycle business, Higher tariffs and higher medical costs. Our year-over-year comparisons in the quarter were also better despite the loss of income from our intentional divestiture of less profitable businesses. Let me give you a couple of examples of how we're realizing innovation in our business as a result of solving high-value customer problems. First, We're building on our legacy as a lifting specialist by creating solutions for intelligent motion. This quarter, we launched several new products that strengthen our business through innovation. One of these is our revolutionary ProPath automated workstation crane, which increases productivity and improves worker safety. The ProPath provides an auto dispatch mode that enables pre-programmed movement. It powers the bridge, trolley, and hoist motions or in other words, provides multi-axis automated movement to enable the line worker to be more productive. The automated workstation crane travels to designated location with its load, leaving the operator free to work on other more critical tasks. This intelligent workstation assists operators to be more productive and improve safety. Without our unique solution, the worker manually guides the crane and its load to the next location, an inefficient use of valuable labor. Another example of our innovation solutions providing intelligent motion is the enhancement of our smart hoist electric chain offering, now with fully integrated load sensing technology. Operators can remotely measure the load real time. This solution improves headroom compared with external solutions. We improve equipment uptime because less of the equipment and wiring is exposed. For applications such as in the entertainment industry, the integrated load sensor also eliminates extra shipping cases, simplifying transportation and setup. We're also creating ways to leverage and scale critical automation solutions for wire rope hoist cranes. We recently launched the no-fly zone control module. We standardized hardware and software options. Now we are making them available in our new and improved online crane configurator. Operators can easily program a crane to avoid obstacles and high traffic areas to improve productivity and safety. We have more projects in the pipeline as well, and I look forward to discussing more about innovation and growth through our Intelligent Motion theme. With that, let me turn it over to Greg, and he'll review the financials in greater detail.