Columbus McKinnon Corp.'s second-quarter profits more than doubled as sales grew modestly while the company reaped the benefits of its efforts to slash its debt and increase its productivity.
The Amherst-based material handling equipment maker said Tuesday that its second-quarter profits jumped to $8.3 million, or 44 cents per share, 2 cents better than analysts surveyed by Thomson Financial/First Call were expecting and up from $3.3 million, or 21 cents per share, a year ago.
While the company's overall sales grew by 7 percent to $144 million, Columbus McKinnon's operations were significantly more profitable because of sharply lower borrowing costs and the additional earnings it achieves as its revenues grow. For every dollar in additional sales, Columbus McKinnon's earnings rise by 41 cents, company executives said.
While Columbus McKinnon's products business, which accounts for almost 90 percent of the company's sales, boosted its earnings by 34 percent during the quarter, its solutions segment lost $935,000 due to problems with a major contract and sluggish order flows.
Still, Columbus McKinnon executives said they believe the problems at its Univeyor conveyor business in Europe are largely behind it, blaming the problems with the major contract on difficulties with a software provider that has since been replaced.
"We think most of the pain is behind us there," said Timothy T. Tevens, Columbus McKinnon's president and chief executive officer.
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 nearly $34 million over the last six months, saving the company $2.5 million in interest expense during the quarter and slashing its debt-to-cap-italization ratio to 44 percent from 75 percent a year ago. The company earlier this month bought back $3 million of its debt that initially carried a 10 percent yield, which will save the company $300,000 a year in interest expense.
"We continue to focus on debt reduction," said Karen L. Howard, the company's chief financial officer.
Howard said the company hopes to reduce its debt load further, with a long-term goal of reducing its borrowings to between 30 percent and 40 percent of its capitalization.
Company officials repeated their earlier forecast that Columbus McKinnon's sales, which reached $556 million last year, are expected to be about $600 million during the current fiscal year that ends in March.