Columbus McKinnon's third-quarter profits easily topped analyst forecasts as the Amherst-based material handling equipment maker's efforts to slash its debt and increase its productivity paid off.
At the same time, company executives said they were restructuring its struggling Univeyor rolled conveyor business that accounts for almost two-thirds of its solutions segment's sales and were thinking about selling the Denmark-based business.
"There may be a better owner for this business than Columbus McKinnon," said Timothy T. Tevens, the company's president and chief executive officer. "We were not happy with . . . Univeyor. We expected a decent turnaround in this quarter and we did not see it."
Columbus McKinnon's profits soared more than sixfold to $9.1 million, or 48 cents per share, from $1.4 million, or 8 cents per share, a year earlier, when earnings were depressed by $5 million in debt-reduction expenses. This year's profits also were aided by $3.8 million in investment gains.
Excluding those one-time expenses and gains, Columbus McKinnon's operating profits improved by 14 percent, easily topping the 38 cents per share that analysts surveyed by Thomson Financial/First Call were expecting.
Tevens said he was pleased with the performance of the company's products business, which accounts for almost 90 percent of Columbus McKinnon's sales. Rising international sales, especially from Europe and Latin America, helped the products business increase revenues by 8 percent, while operating profits jumped by 32 percent as profit margins strengthened.
Columbus McKinnon also continued to reap the benefits of its ongoing efforts to cut costs and pay down its once-hefty debt load. After several years of cost-cutting and restructuring moves to streamline the company's facilities and boost its efficiency, Columbus McKinnon has been able to pay down nearly half of its debt since 2002 and has refinanced a portion of its remaining borrowings to lower its interest expenses.
The company has reduced its debt by more than $36 million over the last nine months, saving the company $2.2 million in interest expense during the quarter and slashing its debt-to-capitalization ratio to 43 percent from 51 percent in March.
The company bought back $3.7 million of its debt that initially carried a 10 percent yield in October, and Tevens said he expects to repurchase the rest of those $25 million in notes when they become callable in August.
Tevens said the Univeyor business has been hurt by intense price competition, which has reduced its profit margins, and unexpected costs on some projects, leading to a $1.2 million operating loss for the solutions segment.
Columbus McKinnon is restructuring Univeyor's business to focus on packaged products, rather than custom-engineered solutions for its customers. But Tevens said the company has "had a couple of conversations with third parties" about strategic alternatives for Univeyor.
Columbus McKinnon considered selling Univeyor in 2001-02, but backed off after its adviser said it would be hard to find a buyer because of the weak capital goods market at that time. Tevens said that market now is healthier and potential buyers are in better financial shape.
The company is not looking to sell the other firms that make up its solutions business, including a tire shredding business in Florida.