Columbus McKinnon Corp (CMCO) 2005 Q4 法說會逐字稿

Good morning and welcome to the Columbus McKinnon fiscal 2005 fourth quarter investor conference call.

At this time all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session.

To ask a question, please press star, one.

Today's conference is is being recorded.

If you have any objections, you may disconnect at this time.

Now, I will turn the meeting over to Mr. Timothy Tevens, President and CEO.

Sir, you may begin.

Thank you, Trisha.

Good morning all and welcome to the Columbus McKinnon conference call.

Earlier this morning we issued a press release on our fourth quarter and our fiscal '05 results.

Hopefully you have received it and have it in front of you.

With me today here in Amherst, New York, is Bob Friedl, our Chief Financial Officer, Karen Howard, our Vice President and Controller, Joe Owen, our Vice President, Strategic Integration, Ned Librock, our VP of Sales, and a new participant with us for the first time, at least on an earnings call, is Derwin Gilbreath, our new Chief Operating Officer.

Let me make one correction, Karen is our Treasurer, now, not our Controller.

She was actually moved over a while back and I apologize for that, Karen.

We do want to remind that you this press release and the conference call may contain some forward-looking statements within the meaning of the Private Litigation Reform Act of 1995.

These statements known and unknown risks and other factors can cause actual results to vary.

You should, in fact, read the periodic reports that CMCO files with the SEC to be sure you understand these risks.

I will give a brief overview and then turn it over to Bob Friedl for some details on our financials.

But overall, our revenue for the fourth quarter exceeded the same quarter last year by over 19% and about 14.7% greater than the third quarter of this fiscal year.

Clearly, a strong -- a strong revenue quarter.

Revenue for the fiscal year was up 15.8% and net income was up $15.5 million, or over 14 times higher than last year.

Admittedly, about 3.9 million of this increase can be attributed to the sales of some under utilized real estate that we have previously announced and that happened in this fourth quarter as well.

And our evaluation of market share data does show that we continue to lead the U.S. hoist chain and forging market.

We do have a very strong position in indoor industrial cranes as well.

I also want to make note that we were successful in meeting our SOXs, Sarbanes-Oxley 404 attestation standards, and I'm pleased to say that we have no material weaknesses as a Company.

Relative to our Products segment, sales in the fourth quarter were up 13.6% compared to the same quarter last year.

And up over 15.5% compared to the third quarter.

This increase is driven primarily from demand from end user markets through our various distribution channels that represents the lion share of those -- of those increases.

But that revenue increase was also driven by surcharges as well as price increases, up small amount for currency translation, offset by fewer shipping days, actually about 4.5% or so.

Our international sales continue to be robust and were up about 17.8%, led by Canada, Mexico and Europe.

The product segment profit was up about 11.7% over the same quarter last year.

Operating income was down about 11.9%.

This was primarily driven by a one-time non-cash pretax charge of $2 million for converting our German pensions into U.S.

GAAP standards.

You should also know that we have experienced some additional operating costs as you compare last year's fourth quarter over this year's fourth quarter.

Things like the Sarbanes-Oxley 404 costs to be compliant with that law, about $0.5 millions or so.

We've also seen health care costs about $1.3 million higher than last year.

And also this quarter, had actually three fewer shipping days, which did have an impact on the quarter's results.

Let me tell you about bookings for this segment, the product segment.

They continue to be robust in the quarter, up over double-digit over the same quarter last year.

Our backlog ended about $42 million, down slightly from the backlog at the end of our fiscal '05 third quarter.

Keep in mind that the cycle time on these product segment sales is days, sometimes weeks and backlog number as a result represents about four or five weeks of shipments.

Relative to our Solution segment, sales were up about 81% over the same quarter last year and about 9.7% higher on a consecutive quarter basis.

Our gross profits increased 1.8 million from last year and down about 18.5% from the third quarter.

Backlog is at a 9.6 million on par with last year, but down from the third quarter's very high level of 19.6 million.

The good news here is that we have just booked a substantial order in this segment, actually it is the highest we've seen in many years, and that backlog has jumped back up into that 19 to $20 million level, as we speak today.

Another key metric for Columbus McKinnon, as you all well know, is funded debt net of cash is down to about 261.5 million at the end of the quarter, which is down 22.5 million for the year.

Inventories ended the quarter at about 77.6 million, or up about 8.5 million from March of 2004.

The inventory increase is primarily due to some increases in volume and also some currency exchange and some additional hand pallet truck increases in inventory we had to make in our European businesses.

However, having said that, our inventory turns ended the year at a record 5.7 times.

As you can see, the lean manufacturing process that we embarked on several years ago now continues to be a benefit for our Company.

With that brief overview, let me turn it over to Bob Friedl, who will lead us through some more detailed financial results.

Thank you, Tim.

And good morning, everyone.

I'm pleased to take a few minutes and review some further financial highlights for Columbus McKinnon's fourth quarter and fiscal 2005, both of which ended on March 31.

And I will focus primarily on the fourth quarter with a few comments on the year as a whole.

As Tim mentioned, consolidated sales increased by 19.2% in the fourth quarter of this year, compared to last year's fourth quarter.

Product segment sales, which accounted for 87.4% of total sales in the quarter, increased by 15.2 million or 13.6% with strong double-digit sales increases from the hoist and crane builder product lines.

Dilution segment sales increased by 8.1 million, or a little over 80%, compared to the fourth quarter of last year, driven primarily by the strength of the tire shredder and Univeyor conveyor product businesses.

Included in fourth quarter sales last year were revenues from the Lister and Positech businesses, both of of which were sold in the fourth quarter of last year.

Lister sales had a negligible impact on the product segment for the sales in last year's quarter -- fourth quarter.

However, removing the Positech sales from the Solution segment in the fourth quarter last year increases the sales improvement year-over-year this year fourth quarter compared to last year fourth quarter to 86%, up from 80%.

Foreign currency translation continued to have a positive impact on revenues in the quarter, principally from our European operations, adding about 1.8% in sales, as the U.S. dollar continued to strengthen over previous quarters.

The Company's typical quarterly sales pattern in the U.S. historically shows sales strongest in the fourth quarter and weakest in the third quarter, with either first or the second quarter coming in second and third.

Now, as we've seen and commented in past quarters, as U.S. demand continues to increase for the Company's Products, this pattern has changed.

On a sequential quarter over quarter basis, the Company has now reported increased sales in each of the last four quarters -- eight quarters, excuse me, increasing sales in each of the last eight quarters, that's since the first quarter of fiscal 2004.

And revenues in the fourth quarter of this year of 144.5 million were the highest quarterly revenues recorded since the second quarter of fiscal '01 when the sales were 150.7 million.

As Tim pointed out, there were three fewer shipping days in the recent quarter, compared to the fourth quarter of last year, 63 days versus 66 days.

And included in the press release is a table showing the number of shipping days in each of the quarters for the year ended March 31, 2005, and for fiscal 2004.

For the upcoming year, the current year we're in now, fiscal '06, we will see the same number of of shipping days in each of the first three quarters as in fiscal '05, with two additional shipping days in the fourth quarter.

Turning to the gross profit, as the product segment gross profit dollars increased 11.7% quarter over quarter, the Solution segment, 766% increase, drove overall consolidated gross profit dollars up 17.7%.

The gross profit margin improvement in the Solutions segment from 2.3% to 11% was generated from improved profitability in our Univeyor conveyor and Sarasota tire shredder businesses due to higher sales volume.

Product segment gross profit as a percent of sales was slightly higher than last year's fourth quarter, after removing the $700,000 German pension expense from cost of sales.

Consolidated selling expense as a percent of sales was down at 9.7% in the fourth quarter versus 10.7% last year.

Even after the additional $400,000 one-time pension expense was recorded in this year's fourth quarter.

General and administrative expenses were 6.8% of sales, compared to 5.7% in the fourth quarter of last year.

Included in the G&A in this quarter was 1. -- $1 million in German pension cost, $500,000 of outside costs incurred in the implementation of Sarbanes-Oxley, a $500,000 increase in bad debt reserves from higher sales levels and about a $100,000 increase due to currency translation.

Without these costs, general and administrative expenses were below last year on a percent of sales basis.

Interest and debt expense was down $322,000 quarter over quarter due to lower debt levels, even though last year's interest in debt expense had been reduced by $200,000 from the favorable impact of an interest rate swap.

This year's income includes $3.9 million in gains from the sales of the Abell-Howe, the Amherst headquarter building which we're in right now, and the Virginia real estate that was sold.

Last year's other expense included $3.9 million of losses on the sale of Positech and Lister, partially offset by Columbus McKinnon Insurance Company investment income.

Beginning with the first quarter of fiscal 2005, no U.S. federal income taxes have been recorded for our U.S. entities through the use of net operating loss carry-forwards.

The Company currently has $98 million of losses available to offset future U.S. taxable income.

The income tax credit of of 700,000 in the quarter resulted from booking the benefit of a $1 million tax refund and the $2 million German pension expense as well as the use of U.S. federal loss carry-forwards against operating income and gains from the sale of real estate.

In fiscal 2004's fourth quarter, the income tax expense was unusually high, due to the nondeductibility of a portion of the loss on the sale of of the Lister business.

The overall worldwide effective tax rate for fiscal '05 was 12%.

Also impacted by the items affected -- affecting the fourth quarter.

Going forward, we expect to see an overall tax rate in the high teens to low 20s, depending on the actual proportion of U.S. taxable income to foreign taxable income.

Depreciation for the quarter was a 1.889 million compared to last year's depreciation in the fourth quarter of 2.064 million.

CapEx for the fourth quarter were 2.8 million, bringing the total for the year to 5.9 million, up from 3.6 million in fiscal 2004.

We expect capital expenditures to be in the 5 to $7 million range for fiscal 2006.

Net cash provided by operating activities was 8.8 million in the quarter, with 6.2 million generated from earnings.

The other 2.6 million resulted from changes in operating assets and liabilities, primarily, as Tim mentioned, from a $3.1 million decrease in inventories, a $4 million increase in accounts payable, and a $4 million increase in accrued and noncurrent liabilities, partially being offset by higher accounts receivable of 6.4 million from higher sales levels.

At quarter's end, as Tim mentioned, net debt was 261.5 million and funded debt was 270.9 million.

During the quarter, fourth quarter of this year, funded debt decreased by $12.5 million as the Company reduced bank debt by 3.4 million, repurchased an additional 10 million of the 2008 notes, and increased debt held by foreign subsidiaries by about $900,000.

During the quarter, the Company repur -- excuse me, for the whole year, fiscal 2005, the Company repurchased $19.6 million of the 8.5% sub notes.

And I might note that this interest savings drops directly to the bottom line due to our tax position.

At year end, the Company's senior credit agreement with its five bank group provided a $50 million revolver commitment.

Availability on the revolver at the end of the quarter was 39.4 million, with no outstanding balances.

At the end of the year, the Company was comfortably in full compliance with all of its financial covenants related to this agreement.

As mentioned in the release, on April 29th, the Company signed an amendment to the senior credit agreement with the existing bank group, providing an increase in the commitment to $65 million, eliminating the term loan and reducing the effective interest rate costs.

This agreement is scheduled to expire on March 31, 2007 and the amendment, we believe, will provide added flexibility as we continue to address our capital structure over the next 24 months.

We will continue to focus on debt and interest expense reduction in the future.

Debt to total capitalization at the end of the quarter was 76.8%, down from 82.3% at the beginning of the year.

Longer term, within the next five year, we're targeting a 50/50 debt to equity ratio and a debt rating of BB or better.

And with that, I would like to thank you and turn it over to Ned.

Thanks, Bob.

Good morning, everybody.

The fourth quarter of fiscal year 2005 was a repeat of our third quarter.

All Columbus McKinnon brand names and distribution channels equaled or exceeded revenues of the comparable quarter last year.

The general distribution product sales in North America increased by 12%, or 34% of total revenues.

Our specialty distribution product sales in North America increased 13%, or 9% of total revenue.

Consolidated international sales increased 33% for approximately 36% of our total revenue.

Consolidated parts sales supporting our extensive service network nationwide increased by approximately 25%.

No new price increases were implemented this quarter, consistent with the same quarter last year.

However, surcharge remained in effect for most chain and forged products with some minor adjustments based on the cost of steel.

Overall, Columbus McKinnon continues to lead the industry compared to our competition, while orders remain strong.

Looking forward, two separate price and surcharge actions were announced for the first quarter of fiscal year 2006.

Effective May 1, 2005, price increases were implemented for hoist units, approximately 4%, and all hoist parts, approximately 5%.

Secondly, all surcharges for chain and forged products, plus a 5% increase, were consolidated into new list pricing for the industry.

Market share for all hoist product groups and chain and forged products remained relatively stable in calendar year 2004 compared to 2003.

The outlook continues to be positive going into the new fiscal year.

Again, no one market product or geography is dominating our revenue growth.

Distribution in North America continues to be optimistic for sales growth the remainder of this calendar year.

International initiatives to grow revenues with our multi-branding strategy are on target and we remain encouraged by the market responses to these efforts and products.

Thank you.

And now I will turn the program back to Derwin.

Thank you, Ned.

Good morning, everyone.

Our focus is to continue to generate cash to repay debt as quickly as possible.

Along these lines, I would like to mention a few things.

The operating leverage continues to be very evident.

For every incremental dollar in sales, so far this year has generated about $0.30 in gross profit.

We announced the sale of three under utilized properties totaling 6.9 million of proceeds and 3.9 million of gains.

We continue to market the real estate of the properties we have closed and will report the significant transactions as they occur.

We continue -- we are continually analyzing our facilities for opportunities to rationalize our production.

We do have some additional opportunities and will keep you apprised of our progress.

The process of implementing lean for our Company -- continues for our Company and has -- continues to show some improvements in productivity, inventory turns, and working capital reductions.

Inventory turns ended this year at 5.7 times and working capital as a percent of revenues ended at 20.2.

Both of these metrics are the best we have seen so far in this process.

Customer service is also improved and stands at about 90% on time and complete deliveries.

This number can and will be improved as we move through this fiscal year.

About one and a half years ago, we engaged an advisor to assist us in developing strategic alternates for seven less synergistic businesses.

About one year ago, we were successful in selling two of these businesses, Positech and Lister.

We removed three businesses, the Shredder Division, American Lifts and Duff-Norton.

They are all in the process of operating successfully or they are being restructured in one way or another.

We have not yet begun to market two businesses, Univeyor and Larco, while they recover.

But expect to revisit this during the fiscal year.

Lastly, I'd like to point out, as Ned reported, we are rolling in the steel surcharges into the base prices, which I think is a very good thing for the Company.

Now let me turn this over to Tim.

Derwin, thank you.

At this point,Trisha, while don't we open it up to questions.

[OPERATOR INSTRUCTIONS] And our first question comes from Tom Klamka of Credit Suisse First Boston.

Good morning.

Hello, Tom.

Can you quickly, on the German pension charge, I guess it was 1.7 million pretax, is that a -- you said one time, but is that an under accrual that was being made up?

Will there be some ongoing incremental costs or was that a truly one time?

What exactly was that charge for?

Yes, hi, Tom, this is Bob Friedl.

That -- the full pretax amount was $2 million.

We saw a little over 700,000 impact cost of sales, about 400,000 rounded going to selling, and the balance, about $1 million, going into G&A.

That really is a one-time item, and it has to do with the difference in the discount rates used in valuing or arriving at the total liability in connection with the German -- our German operation's pension plan.

The difference between U.S.

GAAP and German GAAP.

The U.S.

GAAP actually having a little lower discount rate, meaning that -- I guess, resulting in a higher liability that we needed to book.

So that really is a one-time.

It is non-cash.

We don't anticipate, certainly, that going forward.

And I hope that answers your question.

Yes and what was the total pension expense for the year and then what was your actual cash funding of that pension cost for the year?

That is an excellent question.

Let's see.

You're talking about on a consolidated basis?

Yes, all in for the Company.

That might take us a moment to get that information for you, Tom.

That's fine.

Okay.

While you're getting that, I guess when you're looking into 2006, it sounds like you're still pretty bullish about the business and I would expect the growth, you know, would come down somewhat because you're not going to see those same kind of steel increases but what are you looking at in terms of sort of base level growth and what do you see happening to margins in 2006 on the Product side?

Tom, this is Tim.

Let me see if I can take a shot at that.

I think, yes, we are still relatively bullish on the economy.

You heard Ned's report and as you look through our first quarter of '06, which is is now is a couple months old, the bookings and the activity in the marketplace really hasn't slowed.

So it's been at the same kind of levels.

Even though the comps are becoming a little more difficult, as you know, because we really started to see this increase, probably, in the fourth quarter of of our fiscal 2004.

So a little more than a year ago now or so.

Right.

So still remain bullish.

I think you're right, I think that there are some things working against us, as you look down the road a little bit further into the year, that should soften that double-digit kind of growth that we're seeing right now.

First of all the comparables are going to be difficult.

I think, secondly, the industrial world economy is -- everyone seems to be pointed toward a show down at the end of the calendar year, maybe into the beginning of next -- first quarter of next calendar year, which obviously would have an impact on us.

The good news is, though, we're not seeing any of that, nor are we hearing any of that at this point in time.

I would expect from a margin standpoint to continue to see the leverage come through in our business.

I think there's some things that are really scary.

Healthcare continues to be a concern of ours.

We are doing many things in the healthcare arena, including putting in place some consumer-driven plans for our employees to participate in, which would be beneficial for them as well as the Company, putting in place some wellness kinds of plans to help our people, you know, make sure they become as healthy as they possibly can be, to try to minimize those healthcare costs.

But I do think we have an industry that is a bit out of control right now, that we kind of all live in.

I also -- there is a positive on this side.

I think looking forward, now that we have one year of SOX 404 under our belt, we have the experience of putting in place the necessary documentation and going through the testing standards, I think we're going to be a heck of a lot more efficient going forward and actually have challenged our organization to cut those numbers in half for fiscal '06 and I think we can really do that.

We have a great team of people who have now lived through it and, you know, so we should see less expense so therefore more operating leverage coming forward.

And I also think that on the general, let's say, manufacturing cost side, steel has, I will say, become more consistent.

I'm not sure it is totally in control just yet.

We have a team of people that look at this on a regular basis and study it, and I would hope that, though, we would see steel kind of flattening out for the year.

As you heard Ned and Derwin both mentioned, we are going to put our surcharges into the price increase, roll it into the prices, if you will, into our chain and forest products.

So that is going to become a little more permanent and we think that there is going to be flat going forward.

All the commodities seem to be relatively in control, so I think we should be okay there.

We do have a couple of opportunities that we're looking at from a plant standpoint and operating standpoint to figure out how to consolidate and take some more fixed costs out.

We're still working on that.

I have nothing to announce just yet, but there is some clearly some opportunities.

It seems like the price increases are sticking on your passing through.

Yes,yes, I think for the most part, we're seeing them stick, that's right.

Okay.

And just last question on that real estate sale, was 6.9 the net proceeds received and that was done as of the end of the quarter?

Yes, that's correct.

That was -- those were sales during the fourth quarter.

Right.

Okay, good.

And if you guys dig out during the call or later the pension expense for the funding, that would be great, too.

Well, we have that for you.

Okay.

For fiscal '05, the employer pension contributions were 9.673 million.

And that compares to 9.597 million in fiscal '04.

The net periodic pension cost in '05 was 8.371 million and that compares with 7.206 million in fiscal '04.

Included, though, in that 8.371 million in fiscal '05 was 2.037 million related to the German pension plan.

Great.

Okay.

Thank you very much.

Thank you, Tom.

You're welcome.

Thank you.

And our next question comes from Sarah Thompson of Lehman Brothers.

Hi, just a quick follow-up on that last question.

What is your pension expense for 2006 and your contributions?

Well, I think we just gave you '05 and '04, right?

Right.

What do we anticipate for '06?

Yes.

I mean, are we just supposed to look at something -- I realize that it is a moving target but is something around $6.5 million number is a right number for '06?

Yes.

Okay.

Because the 2 million would not repeat.

Okay, great.

And then earlier on the comments, you had talked about, you know, your goal of getting to BB, I think you said, 50% debt to capital.

Is there something that you expect to do organically or issuing additional equity or asset sales or can you just expand on that a little bit?

Sure.

Sarah, that, of course, we're going to continue to -- as we talked about during the call, we are going to continue to focus on generating cash and focusing on our working capital and paying down our debt as rapidly as we are able.

We are, of course, continually evaluating our capital structure and, you know, to get to that 50/50 debt to equity position within the next five years, it may require -- it may require some equity.

But certainly that's something that we'll continue to evaluate, and along the way, we expect to build our equity, and through earnings, and take down our debt with excess cash.

I think it is fair to say, Bob, we would evaluate all options available to us.

Sure.

Okay.

Terrific.

That's all I had.

Thank you.

Thank you, Sarah.

Thank you.

And our next question comes from Chris Dory of Jefferies & Company.

Hi, gentlemen.

I think you've sort of answered part of my question, but in relating to the one-time charges, specifically healthcare, is that something that you see ongoing?

Or is that just a, you know, a one-time hit?

Yes, good question on the healthcare.

You know, I would like to believe it is one-time, but I'm thinking it is really sticking right now and we're not seeing it come down.

So it becomes more of an ongoing kind of cost.

The activities that we're trying to put in place to help control those things are clearly something that is dynamic and we evaluate on a regular and ongoing basis.

And then put in place the necessary plans to try to mitigate those increased costs as best we can.

But I think it is fair to say that healthcare costs at the level they're at are here to stay and from a trendline standpoint, I'm happy to say, it is slowed a bit, it is not as radical as it was over the last couple of of years but nevertheless, it is still increasing.

So there was nothing that was -- like, I mean, it is the trend which we all, I think, understand.

Yes, that's correct.

And just to confirm, the 0.5 million for Sarbanes-Oxley, that is what you think is probably a one-time now you have all the documentation in?

Yes, we had to hire a fair number of consultants to help us in the international front.

Of course, our auditors had a fee associated with their work.

And that doesn't count any of the internal costs that our people went through to create the documentation and go through the testing.

But we think now we're structured in a way where we can do a lot of our own testing without hiring the outside third parties, as well as allowing our auditors, Ian Wide(ph), to rely on some of our internal work which could reduce that expense going forward and that's what we're counting on for '06.

All right, thank you, gentlemen.

Thank you.

And our next question comes from Mark Graminski of Needham & Company.

Good morning.

Good morning, Mark.

How are you doing?

About the international markets, I think, you know, now it represents about 37% of your total sales, but can you talk specifically about how Europe is tracking and as well as -- and break it out by international markets?

Where you're seeing strength and maybe where you're not?

Well, I think on -- this is Ned.

I think on a very broad level, we -- there are pockets of very positive growth in Europe, Spain, and Holland and England.

There are softer spots, such as France and Germany.

We've got quite an initiative going on now with a lot of irons in the fire for Asia.

And again, just focusing more towards North and South America, our Mexican business is doing well, our Brazilian business and South American business is doing well.

So, you almost have to drill down by brand name and marketplace to be really specific.

But I would say for the most part, we see pretty good pockets of of business worldwide for us right now.

Right.

And how about on like a light industrial or heavy, is there any way that you know which is tracking better?

I mean from what I -- from what, you know, you hear is that the light industrial is doing very well, but is there any way that you know how they're doing?

Mark, this is Tim.

Let me just see if I can take a shot at that because I think I know where you're coming from with that.

I think in North America we're seeing heavy industrial, our wire rope hoist business is very robust, which is more heavy lifting, quite honestly, and I think that is driven by the -- just the general industrial North American economy coming to life.

Around the world, it continues to be construction, as well as North America, I might add, so which is more manual product, as well as -- you mentioned light industrial, I think of that as small castings that need to be put on a machine.

Our electric chain hoist business, as well as our manual hoist business, would support that and that is very robust, I would say, around the world.

So I think you're on to something there relative to light loads.

North America has really rebounded strongly in the last year in this business, but I would add to that that so has the rest of the world.

Right.

Right.

Great.

And from a -- kind of changing gears, I assume that the -- it seems that the plant consolidations are going very well and I'm just curious, how many more pieces of property are you still -- do you still have up on the block?

Well, I think --

And maybe I missed it from earlier.

No, we didn't report it.

I'm going to look to Joe, is it active about three or four right now?

We have three larger properties for sale right now.

Two are, let's call it -- well, one is completely idled, another one is under utilized.

Well, two of those three are under utilized.

So I guess with -- what are we, two months into the first quarter?

Are orders tracking in this quarter at -- in double-digit as compared to Q1 of last year?

I think you might have mentioned that towards the end of the year, you might see, you know, lighter growth, but are you still seeing double-digit in this quarter?

Yes, Mark, it is -- it really continues the pace of growth continues at the same as what we've seen in the fourth quarter.

You know, a good solid double-digit, very broad, consistent with Ned's report on the distribution channels, a very broad growth, and it is really driven by end user markets that would use our products.

It is consistent for the first two months.

Great.

And now just one quickie on, and you mentioned it before I just missed it, the carry-forward number, what was that?

Did you say -- I think I missed it. 100 million?

98 million.

98, great.

Thanks, guys.

Okay, Mark.

Thank you.

And our next question comes from John Affholter of Robert W. Baird.

Hi, guys.

Most of my questions have been answered.

But just have a couple real quick.

First off, for the bad debt expense in the quarter, the increase there, was that any one customer?

Or was that just kind of across the board?

Yes, it was a very broad increase in the reserve to accommodate the increased sales.

It is not tied to one customer or one channel or anything of that nature.

Okay.

And then just conceptually, I want to go through kind of operating leverage through the rest of the year.

If you guys -- if steel cost kind of moderates for the rest of the year, you probably run into a situation where you could show kind of incremental operating leverages as the year goes on, is that correct?

Yes, let me add one caveat, and it is a very big one and broad one, and that is that the rest of the costs remain relatively constant as well.

And I'm speaking of energy and healthcare, and product liability, and all those things that we've seen this past year increase on us.

But you're absolutely right.

We could see additional leverage if those costs remain flat.

Okay.

And then just to remind me, it was in kind of Q3 of last year that steel costs really started to pick up, right?

It actually started -- we began to see it in Q4 of 2004.

Let's say January, February is when it -- that's when the scrap steel problem really occurred, if you might recall, and China was importing a lot of that over the -- around the world.

And then we really started to see it in our March, April time frame, and that's, I think, when we put our first surcharge in was maybe March 18th, to coin a phrase, March 18 was the first whack and then we had several throughout the course of the fiscal year.

Okay.

So you're really starting to, I mean, hit the anniversary numbers for the price increases already?

That's right.

That's right.

All right, thanks, that's it guys.

Thanks, John.

And once again, that is star, one if you have a question.

And at this time, I'm showing no further questions.

Trisha, thank you.

Let me just summarize by saying -- giving you a quick reminder that our strategy is to leverage our superior material handling design and engineering know-how to continue our dominance in the U.S. markets as we expand our global presence.

Our market share of growth will be built upon new products designed specifically for the various market needs, incorporating our high quality standards and service support.

I also want to thank all of the CM Associates around the world for their hard work and ultimate success in making this fiscal year a very sound turnaround for our Company.

We continue to experience growth in bookings and revenue, as most of our distribution channels have experienced the double-digit growth this past year.

Combine this with revenue -- combine this revenue increase with significant cost reductions we've accomplished in the Product segment in the last several years, and you see the results, a greatly improved profitability.

Also, the restructuring we have done in the Solutions segment along with the recent improvement in bookings and revenue and we have recognized the respectable turnaround in that business as well.

The operating leverage, that we just spoke about, remains significant, as we generate more profit on even the smallest increase in sales, sometimes offset with these rising costs that we've also spoken about.

We have maintained our strong market position in the domestic markets and have penetrated new markets around the world -- and have penetrated new markets around the world.

Specifically, we continue to have success in Europe, Latin America and the Far East.

We believe we will continue to perform well but we -- I think we all need to recognize there are some uncertainties in the world markets that could have an impact on the improvements that we have seen to date, things like energy costs, interest rate increases, healthcare and product liability increases, as well as regulatory costs such as SOX 404 certainly had an impact on Columbus McKinnon and might in the future.

We continue to drive that lean manufacturing concept across our business, as we have proven that this process will continually improve our operations around the world.

We will also continue to invest prudently in those markets as well as new products to protect our market share in the U.S. and grow our sales internationally, to keep Columbus McKinnon's position as the leader in material handling industry.

Again, I want to thank all of our Associates around the world for their efforts to make CM a leader.

As always we appreciate your time today.

Have a good day.

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