Columbus McKinnon Management Discusses Q4 2013 Results - Earnings Call Transcript

May.23.13 | About: Columbus McKinnon (CMCO)

Columbus McKinnon (NASDAQ:CMCO)

Q4 2013 Earnings Call

May 23, 2013 10:00 am ET

Executives

Timothy T. Tevens - Chief Executive Officer, President and Director

Gregory P. Rustowicz - Chief Financial Officer and Vice President of Finance

Analysts

Aaron M. Reeves - BB&T Capital Markets, Research Division

Jason Ursaner - CJS Securities, Inc.

James Bank - Sidoti & Company, LLC

Joseph Mondillo - Sidoti & Company, LLC

Operator

Welcome, and thank you, all, for standing by. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I'll turn the meeting over to your host, Mr. Tim Tevens. Sir, you may begin.

Timothy T. Tevens

Thank you, Marilyn. And welcome, everyone to the Columbus McKinnon Conference Call to review the results of our fourth quarter and full fiscal year 2013. With me here today is Greg Rustowicz, our VP of Finance and CFO. Please note that we have included some summary slides for the quarter and for the year for your review, and they can be found at our website, cmworks.com/investors. Hopefully, this will help you follow our earnings call comments. We do want to remind you that this -- that the press release and the accompanying slides in this conference call may contain some forward-looking statements within the meaning of the Private Litigation Reform Act of 1995. These statements contain known and unknown risks and other factors that could cause the actual results to vary. You should, in fact, read the periodic reports that the Columbus McKinnon files with the SEC to be sure you understand the risks.

So if you have the slides in front of you, I'm going to start actually on Page 3, and remind you of our long term objectives, including to grow to a $1 billion business with about 1/3 of our revenue in developing markets and 2/3 in developed markets. This, along with the $200 million to $300 million or so in acquisitions, and we expect to be in the 12% to 14% operating margin range, with a strong working capital level and an overall balance sheet.

We continue to focus resources and energy on acquiring companies that strategically add market presence and product breadth to help us grow around the world and achieve these results.

Page 4 provides some highlights of the fourth quarter . As you can see on this slide, our revenue was down 9.4%. This was negatively affected by 2 major things. Number one is, the divestiture that we did last summer, that's about 4.6%. We actually had 3 fewer shipping days in this quarter compared to last year, that was about 3.5%, and volume was down 2.8%, and most of that being from Europe. The U.S. revenue actually excluding the divestiture in these 3 fewer shipping days was up. Sales outside the U.S. were down 14.1%, the bulk of this was volume-related, about $7.6 million out of a $9.7 million shrink, and up $3.2 million with fewer shipping days.

Europe continues to be weak at this point in time, but our emerging growth does continue to be strong albeit from a smaller base. Our global bookings were down about 5% to 6% compared to a very strong prior year fourth quarter. Some bright spots that we looked at in the quarter were material handling specialists and the entertainment industry. We have found that special hoists that serves specific markets such as oil and gas and entertainment seem to be going quite well. Europe seems to have bottomed in the fall early winter of last year, and now we're just beginning to see some positive trends in their order rates. Asia Pacific and Latin America are small and certainly continue to grow rapidly, and this, of course, is driven by strategic investments in those markets as opposed to economic, just general economic activity.

Our margins expanded nicely in the quarter, gross margins improved 290 basis points over last year, up to 30.6% and our operating margins improved to 10%, up 150 basis points. Overall the operating leverage in the quarter was very strong, for the year, was very strong at 73.5%. Of course, our lowest sales growth given the divestiture, as well as some very good productivity in cost control, drove this very large leverage.

EPS of $2.64 for the quarter is up from $0.46 last year, of course there's just some weird things going on in the quarter that affect that. We did reverse the deferred tax asset valuation allowance in the quarter, Greg will touch on that in a little bit more detail in a moment. If you exclude that reversal and normalizing the business to a 38% tax rate, our EPS would have been $0.37 in this quarter, and that compares to $0.30 in the last year's fourth quarter.

We also generated some pretty good cash flow from operations at $16.1 million for the quarter and $42.4 million for the year.

Page 5 summarizes full year fiscal '13. And overall, our revenues were up modestly arguably flat. This was negatively impacted by that divestiture that I mentioned and foreign currency translation. Emerging markets grew nicely at 13%, excluding the effects of currency. Our margins were very strong. Gross margins improved to 29.2% or up 260 basis points from the prior year. Operating margin improved to 9.1%, up 150 basis points as compared to the prior year. And as I mentioned earlier, our operating leverage was 173.5% for the whole year.

If you exclude the reversal of the tax, the deferred tax asset valuation, and normalize the rate, tax rate at 38%, fiscal year '13 EPS was $1.34 compared to $1.04 last year. This is up about 29%.

Page 6 talks a little bit about revenues, down compared to last year's Q4, and again as I mentioned, negatively affected by 3 fewer shipping days and the divestiture we made last year. In the U.S., if you exclude the 3 fewer shipping days and the negative impact of the divestiture, our revenues actually grew about 15% or 16%. Sales outside of the U.S. were down 14% and again, as I mentioned, primarily lower in Europe in Canada.

So at this point, let me turn it over to Greg for some more detail about the fourth quarter and then we'll come back to me.

Gregory P. Rustowicz

Thank you, Tim, and good morning, everyone. Turning to Slide 7, our fourth quarter consolidated gross profit dollars were unchanged from the previous year despite $15 million of lower sales. As a result, our gross profit margin improved 290 basis points to 30.6%. Lower volumes negatively impacted gross profit dollars by $2.6 million, that's the raw material inflation by a negative $1.6 million. Offsetting these negative factors were favorable pricing of $3.2 million and productivity gains of $800,000. We also had lower product liability costs of $500,000 compared to a year ago. Additionally, foreign currency translation had a $400,000 negative impact on gross profit this quarter.

On Slide 8, selling expense declined 5.4% from the prior year in dollar terms, and represented 11.3% of sales this year compared to 10.9% last year. The decline in selling cost was primarily related to the divestiture of our Gaffey crane business accounting for $300,000, as well as cost-containment actions instituted as a result of the lower demand environment we are in. In addition, foreign currency translation had a favorable impact on selling expense of $300,000 this quarter.

G&A expense was essentially unchanged compared with the prior year, representing 8.9% of sales versus 8% in the prior year. At the current sales levels, we expect our SG&A run rate to be approximately $30 million per quarter going forward.

Turning to Slide 9. Operating income increased by 6.3% to $14.5 million or 10% of sales compared to 8.5% of sales in the previous year. The improvement in operating income was driven by the net pricing gains over materials inflation, as well as productivity gains in our facilities due to our Lean manufacturing program, coupled with the benefits of our CapEx projects, training programs and safety initiatives. In addition, lower selling expense also contributed to offset the negative impact of the lower sales volume.

As you can see on Slide 10, income per diluted share for the fourth quarter of fiscal 2013 was $2.64 per share, reflecting a $2.18 increase from the prior year period where we reported earnings of $0.46 per share. The large increase in reported earnings per share was largely due to the reversal of a valuation allowance on the majority of our deferred tax assets that resulted in an income tax benefit of $40.2 million. Excluding the impact of this reversal, on a pro forma basis, at a normalized tax rate of 38%, earnings per share in the fourth quarter of fiscal 2013 were $0.37 compared to $0.30 per share in the fourth quarter of fiscal 2012. Our effective tax rate for fiscal 2014 is expected to be between 30% and 35% based on the geographic mix of earnings that we anticipate.

On Slide 11, we have compared our full year performance for several key metrics. For fiscal 2013, revenue was up slightly, but excluding the impact of net divestitures and foreign currency translation, revenue was up 5.4%. This was largely driven by volume and price increases totaling $36.9 million, offset by $17.1 million of unfavorable foreign currency translation. The volume impact of 2 fewer shipping days of a negative $4.8 million and net divestitures of a negative $9.6 million. Gross profit was up 10.5% and gross profit margin expanded 260 basis points to 29.2%. Higher volumes and net pricing over material inflation along with manufacturing efficiencies drove the margin expansion. Full year operating income was up 20.4% as a result of the additional gross margin. Operating leverage for the year was 173.5%. Finally, earnings per share for the year were $3.98 per share versus $1.38 in the previous year. On a pro forma basis, at a 38% tax rate, earnings per share were $1.34 per share versus $1.04 per share in the previous year, an increase of 29%.

Turning to Slide 12, our working capital as a percent of sales increased to 18.3% in the current quarter from 17.6% at March 31, 2012. However, if you exclude the impact of the deferred tax asset valuation allowance reversal, working capital as a percent of sales declined to 17.1%. DSOs remain constant at 50.5 days compared to 50.6 days as reported last fiscal year. Inventory turns remained unchanged at 4.3 times, but in dollar terms, declined $13.9 million for the full year, and in fact, dropped $7.3 million in the fourth quarter alone. The reduction in inventory balance was due to management initiatives that have been ongoing, which we expect will continue in fiscal 2014.

On Slide 13, you can see we generated $42.5 million of operating free cash flow for the full year and ended the year with $121.7 million of cash. Capital expenditures were $14.9 million versus $13.8 million in the previous year. We expect capital expenditures for fiscal 2014 to be in the $20 million to $25 million range due to investments in China, as well as capital projects that are expected to generate further productivity improvements.

Finally, on Slide 14, you can see that as of March 31, 2012, net debt was $30.4 million and total gross debt was $152.1 million. Net debt to net total capitalization was 11.2%. In addition to having $121.7 million of cash in our balance sheet at March 31, we have an additional $89.9 million available under our new $100 million senior credit facility, net of $10.1 million of outstanding letters of credit. This new facility, along with our healthy cash balance, provides significant liquidity to support our strategic growth plan.

With that, I will turn it back over to Tim to cover the fiscal 2014 outlook.

Timothy T. Tevens

Great. Thank you, Greg. So if we continue on the slide show to Page 15, I think at the end of the day, we continue to expect slow growth. I think emerging markets are doing well and especially given our investments in those regions of the world, I would continue the order rate to be in this low double-digit area. Order activity in the U.S. is flat compared to last year, but there is positive signs in the market, as I mentioned, the oil and gas and entertainment. But at the end of the day, it's still tentative out there with some of these exceptions. The strong -- excuse me, the capacity utilization was 77.1% in March, basically this has been the flat for all of 2012, it's hovering in the 77% to 78% area.

Europe is down from a very strong Q4 last year in bookings, but an interesting thing, and I know one point does not make a trend, if you look at the sequential booking rate in Europe, since about the fall or winter of last year, we have seen a turnaround, and in fact our fourth quarter booking activity sequentially compared to the third quarter was up about 10%.

Capacity utilization is down to 77.2% at the end of the March, but it's actually up from the low in December of 76.9%. So it is a little bit more activity in Europe, maybe the beginning signs of something of a concern yet to be proven out.

Our backlog does remain solid at $99 million. Obviously, this was negatively affected by that divestiture we announced last summer by about $4.6 million. And as always is the case, seemingly in this area, about 2/3 of our backlog is scheduled to ship in this first quarter fiscal '14 and the balances beyond that.

We continue to execute the strategic plan that we've talked about for a while in making investments in emerging markets of the world like China, the eastern block of Europe, Africa, Latin America. And as, hopefully you all know, we continue to look for acquisitions to accelerate that growth in the other regions in the world as well. Nothing to report just yet, but lots of activity and discussions.

So Marilyn, at this point, let me open it up to questions, if I could.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from C. Schon Williams.

Aaron M. Reeves - BB&T Capital Markets, Research Division

This is Aaron Reeves sitting in for Schon. I was just wondering if you could talk a bit about how demand developed throughout the quarter. Did you see was it about the same throughout or did you see any trends you can maybe give us some color on?

Timothy T. Tevens

I think the trends throughout the quarter were very weak in the beginning portion of the quarter and improved as the fourth quarter went on, and that's true across the company. So I would say January was the weakest, then a little stronger in February and then March was the best.

Aaron M. Reeves - BB&T Capital Markets, Research Division

Could you maybe talk about what you're seeing in April early on? Does it look a bit like March?

Timothy T. Tevens

Looks more like March than it does January.

Aaron M. Reeves - BB&T Capital Markets, Research Division

Fair enough.

Timothy T. Tevens

A lot more like March. Yes.

Aaron M. Reeves - BB&T Capital Markets, Research Division

Okay. And I do want to ask another question about volume. Supposed volumes, maybe they don't move much from current levels, are there any levers that you could pull to maybe keep operating margins in the 12% to 14% range you've talked about?

Timothy T. Tevens

Yes, as you can see in this quarter, we've had very little -- or actually we had sales shrink in the quarter and profitability was up tremendously. There's a couple of things going on there. We're beginning to certainly see the activities that we took 2, 3 years ago to reconstruct our facilities and remove some fixed cost that's being beneficial to us today as we operate. Our Lean business system is generating some great productivity gains in our manufacturing facilities. So we're much more productive, gives us a higher gross margin rate, which is pushing in now arguably to the 30%, lower 30% area. So as we even at -- stay at these levels of sales volume, we would expect, given these initiatives, to generate more profits.

Operator

Our next question is from Mr. Jason Ursaner.

Jason Ursaner - CJS Securities, Inc.

Yes. Obviously, want to talk about the margin improvement. But first, just following up on the questions on revenues since I did come in a bit late. In the U.S., you're stripping out the divestiture and the shipping days, you mentioned volume and price combined for almost 5% growth. So still seeing that volume increase in the low single-digit. So you mentioned the global bookings down 5%, 6%, but combined with this improving trend for the quarter. So I guess just wondering, how do you see that growth holding up throughout the whole fiscal year? And just what your outlook really is for volume trends in the balance of the year.

Timothy T. Tevens

Yes, I think Jason, it is in this category of slow growth. I think that there's some hot spots, but there are also some weak spots. And I think, overall, the U.S. is going to continue to be reasonably positive. These low single-digit kind of areas. I think I'm encouraged by some of the activity in Europe. It's early, arguably very early, but there is more activity, more recent activity there and, of course, we're seeing the emerging markets. And as you know, Jason, it's a very small piece of our business today, but they are continuing to do quite well for us. So if you add that all together as and you look out over the course of the year, I think we're thinking about low-single-digit, mid-single-digit kind of feel to the year as we sit here today, at least.

James Bank - Sidoti & Company, LLC

Okay. And so in the quarter, volume growth in the U.S. obviously offset fairly significant declines in Europe as you mentioned. So, I guess, I'm wondering, how much of this was the engineered project work and how do you think about that part of the business internally versus the traditional core industrial product space?

Timothy T. Tevens

Yes, I think that both were negatively affected in Europe. So they were both impacted. The engineered product business would have been more negatively impacted than the traditional hoist and rigging business that you know it as around the world. That was not down as much as the engineered projects.

Gregory P. Rustowicz

Okay, Jason, just to add on, the engineered products business, as we've talked before, is lumpy. And when we have these large projects, they can be millions of euros of business. We talked in the last quarter where had 2 that actually shipped in the same quarter and that was about EUR 6 million. So those are -- we tend to get one to 2 of those projects a year of that magnitude.

Jason Ursaner - CJS Securities, Inc.

Okay. And was there any last year that, I guess, would have in the quarter comparison...

Timothy T. Tevens

Not in the quarter.

Jason Ursaner - CJS Securities, Inc.

Okay. And then on the margin, the best gross margin you guys had since before the downturn. And it's been a slow climb up to get back above the 30% level. So I guess, just want to ask about the sustainability. And then also you made a hire in early April for a new Chief Procurement Officer. So I guess I'm just wondering, do you still see benefits that you think you can achieve there on the sourcing program?

Timothy T. Tevens

Yes. The answer to the first question first, I do believe that these gross profit margins in the low 30% area are sustainable. And that's given the hard work that our folks have done to get more productive and reduce cost. So overall, I would expect even on slow growth, that to be maintained. The Chief Procurement Officer, Larry Gavin, a super guy, and look forward to you meeting him, Jason. He just started 2 months ago, and he's giving his arms around the business now. But I think as he looks out to our organization -- we've had a sourcing program for many, many years, 15, 20 years, but I think he sees some opportunity for us to do more work in this area and achieve even better results. It's just it's early in the game at this point.

Jason Ursaner - CJS Securities, Inc.

And just last question for me. Still on the margin, yes, so we haven't heard about for a couple of quarters, but maybe an update on Chattanooga and some sense for the drag that business is still having on consolidated gross margin at its current volume rate?

Gregory P. Rustowicz

Yes, it's a still a bit of a drag, although it's a more of a benefit, I'd say, in this quarter. They have their costs in line and they're much more productive now and we're getting quality products servicing customers very, very well today. I'm very pleased in that regard. The thing that the business lacks today is the volume. It's got a very low volume compared to what we think is available in the marketplace. So if we can get an incremental $5 million to $10 million to the business, their margins will recover very, very nicely back up into the area that they were at before the consolidation. So I think we're positioned well. We just need to work hard on the sales side to get our fair share, arguably more than our fair share of the market back.

Operator

[Operator Instructions] Our next question is from Mr. Joe Mondillo.

Joseph Mondillo - Sidoti & Company, LLC

The productivity gains of $800,000 that you mentioned, was that year-over-year or quarter-to-quarter?

Timothy T. Tevens

That was year-over-year compared to the fourth quarter of last year. So for the full year, our productivity was $5.3 million.

Joseph Mondillo - Sidoti & Company, LLC

Okay, so sequentially, it was less than $800,000?

Gregory P. Rustowicz

Sequentially, if you remember last quarter, we had a slightly negative productivity numbers because of the December shutdowns that we had into -- in reacting to the lower volumes. So this is actually you're going from a slight negative in our fiscal third quarter to this positive $800,000 on a year-over-year basis.

Joseph Mondillo - Sidoti & Company, LLC

So sequentially, you're looking at maybe over $1 million of improvements?

Gregory P. Rustowicz

A quarter. In the quarter.

Joseph Mondillo - Sidoti & Company, LLC

Okay. I guess, what I'm trying to understand is with your sales -- looking at the sales per day, they were down almost the lowest levels for the year, for over a year. And given that and with the sales much higher, they were down 9% sequentially. Just given the huge improvement in gross margin, I'm just trying to understand that. If you could maybe give a little bit more detail regarding that.

Gregory P. Rustowicz

Yes, so once again, as Tim had mentioned, where we're gaining in our gross margin, in my mind, I really do the 2 factors. One, our pricing that we've gotten has exceeded our raw material inflation, which has been relatively tamed and then the productivity. And it's really -- those are the 2 primary causal factors, and when you get into the productivity, it's due to -- the benefits of the restructuring from a couple of years ago, as well as our Lean programs, as well as we have been focused on deploying our capital. And so to the extent we have good capital projects that out on our cost to capital, we've been -- we're starting to get some traction there as well. But it's really those 2 factors.

Joseph Mondillo - Sidoti & Company, LLC

So if the -- if you add $1 million to the cost to -- or you subtract the $1 million to cost of goods sold in the third quarter, you're still only getting the 29.2% or so gross margins in the third quarter. You're still seeing another 140 basis points sequentially in the fourth quarter. You didn't see any price improvements sequentially, right?

Gregory P. Rustowicz

Yes, there was. There was some...

Joseph Mondillo - Sidoti & Company, LLC

Oh, you did...

Timothy T. Tevens

Yes, yes. That should be in the press release.

Joseph Mondillo - Sidoti & Company, LLC

Okay. So you initiated, you did increase prices in the...

Timothy T. Tevens

Well, it's not that we increased. In the U.S. our price increases are typically in the March timeframe, it's just on a year-over-year basis for the whole company, we had $3.1 million of favorable price on a year-over-year basis.

Joseph Mondillo - Sidoti & Company, LLC

Okay, so but compared to the third quarter, did you see any price increases or any improvements there?

Timothy T. Tevens

Are you asking, did we have any new price initiated?

Joseph Mondillo - Sidoti & Company, LLC

Yes.

Timothy T. Tevens

We would have because in the U.S., we typically raise prices in the March timeframe.

Joseph Mondillo - Sidoti & Company, LLC

Okay, okay, okay. The next question I have just regarding Europe. I believe the last quarter you said the orders were up sequentially 19%. This quarter, you're saying their orders are up 10% sequentially. Just trying to decipher the differences that we're sort of hearing. It seems like a lot of the environment seems to still be sort of weak/bottoming. Those orders seem quite strong. So -- and the fact that you guys sort of usually lag 1 to 2 quarters, just wondering if you could sort of just give a little more color on sort of what you're seeing there.

Gregory P. Rustowicz

Yes. I don't -- I'm trying to find the plus 19% from last -- in the third quarter. I think that's what you're referring to, Joe?

Joseph Mondillo - Sidoti & Company, LLC

Yes, that's what I have written down.

Timothy T. Tevens

It's about sales not orders. Because we benefited from the 2 large rail and road projects in the fiscal third quarter.

Gregory P. Rustowicz

Yes. Because I'm showing in my schedule here of minus 3.5% at order level Q3 versus Q2 of 2013. And that...

Joseph Mondillo - Sidoti & Company, LLC

I had written down project work was up 19% in Europe. I'm sorry, maybe that's wrong. I don't know.

Gregory P. Rustowicz

Okay that's probably [indiscernible] Because we did ship those in that quarter. So that maybe revenue and not orders, Joe.

Joseph Mondillo - Sidoti & Company, LLC

Okay.

Gregory P. Rustowicz

So if you -- I'm looking at the bookings here and it's more like a negative 3.5% in the third quarter and the fourth quarter is a positive 10%.

Timothy T. Tevens

And those are sequential, not year-over-year.

Joseph Mondillo - Sidoti & Company, LLC

Okay, okay. And then 2 last questions, the CapEx investments for 2014, could you just expand exactly sort of what you're doing, especially over in China?

Timothy T. Tevens

Sure. So we have our normal productivity investments this year in equipment, normal maintenance, normal safety expenditures, plus a couple of $3 million for SAP. The continuation of the rollout of our ERP global enterprise resource planning system and then up say 6 million to 7 million area right now in China. And what we're doing is we're refurbishing our Chinese manufacturing footprint there to be able to accept a broader array of products to produce in China. Predominantly, for the Chinese, or the Asian market, I should say. And this is a broad array of hoists that our Western design units that we make in America today for the Americas, that we're transferring into our Chinese facility. So they needed to reorganize their facility. In fact, for the most part, add on quite a bit and maybe even tear down some old buildings that were in the way and create new space so that we can produce a line of more rope hoists, electric chain hoists, manual chain hoists, et cetera. So it's just really, it's more of an expansion.

Joseph Mondillo - Sidoti & Company, LLC

Okay. And you don't expect any expenses to be -- additional expenses that are associated with the capitalized expenses with that?

Gregory P. Rustowicz

There -- it was very small, less than $200,000, Joe. Any moving and reinstallation costs end up being expensed, but there was a small part of the total project.

Joseph Mondillo - Sidoti & Company, LLC

Okay. And then last question, just regarding pricing. I believe this past year, you were looking at 2.5% to 3% or so of a benefit from pricing. What are you guys anticipating for 2014?

Timothy T. Tevens

Historically, we've always been in this 2% to 3% area, Joe. And I think that we would expect that to continue for the next fiscal year.

Operator

Our next question is from Mr. Bob Franklin.

Unknown Analyst

With Prudential Financial. Following up on the CapEx questions. Is this -- you anticipate this being a one year bump or could you see spending this level going forward after this?

Gregory P. Rustowicz

I think this seems -- is indeed exceptional given the investment in the Chinese locations. We do have a strategic plan that goes out 3 years, and it's probably going to be lower than this level that we're currently at right now.

Unknown Analyst

Okay. And then on the cash from operations line, this was better than we've seen in a while. Can you comment on what you think of that going forward?

Timothy T. Tevens

Sure. I think we did, first of all, pretty decent job as Greg mentioned. And not only obviously generating operating income but also reducing the inventory level. We had a $10 million benefit from inventories. And that was a lot of hard work and focus from the teams to get those in line and restructured. We're down actually quite low now, the level of inventory is below...

Gregory P. Rustowicz

$94.2 million.

Timothy T. Tevens

$94 million. Because the cost of sales number was so low, the terms look bad. But generally speaking, it's going pretty well. And I would think in these kinds of an economic environment, the slow growth environment, the activities that we have to reduce our costs going forward, it wouldn't surprise me at all to continues to see this kind of cash generated from our operating activities going forward.

Unknown Analyst

Okay. Was the $10 million inventory a one-time thing? Or...

Gregory P. Rustowicz

Well, it's been a part of our ongoing initiatives. It went from $108 million of inventory to $94 million. So that's almost a $14 million reduction. So we wouldn't anticipate getting another $14 million out of our inventory line this year. I mean, I expect that there would be some further reductions based on just managing our inventory smarter and we've got a number of initiatives to do so.

Unknown Analyst

Okay, because I mean, I would love to see $42 million cash from operations every year. It just sounds like it's a big leap and, again, the sustainability is what I'm getting after. You're saying you think you can do that.

Timothy T. Tevens

Well, I think our net income is going to grow. I think that inventory -- I think you're right, Greg, getting $14 million might be a challenge, but we should get some more out.

Gregory P. Rustowicz

Yes. The other thing you have to factor as well is that we will now be paying more in cash taxes as we utilize a lot our NOLs in the U.S.

Unknown Analyst

Okay. And then just a bigger picture question. Have you ever commented publicly on the multiple of what your shares trade and where you think they should trade?

Timothy T. Tevens

Yes, we have. Yes. We look at the share price and scratch our head and shake our head and try figure out why it is what it is. I think that, historically speaking, Columbus McKinnon has traded in the 7 multiple of EBITDA to 8 multiple, somewhere in that general area, and this level is lower than that. And we don't necessarily understand the reasons why, especially as we continue to grow but also grow our EBITDA quite nicely. So I think what we need to do is continue to put up good numbers and continue to perform, and I think eventually the markets will recognize that and reward it.

Operator

[Operator Instructions] For at this time, sir, we don't have any questions on queue.

Timothy T. Tevens

Thank you. Thank you very much, Marilyn. Let me summarize by saying we do expect fiscal '14 to be in this slow growth kind of environment. But we do expect our operating profits to continue to improve as our Lean business system, the results of our fixed cost reductions that we did several years ago and just general overall good cost control to bear fruit. The investments we're making at emerging markets continue to be successful, and we expect the U.S. to continue to grow, albeit slowly. I think Europe is going to be a very slow environment for a while, although I am buoyed by the more recent positive trends that we've seen of late. We are at position to continue to execute our strategic plans to profitably grow our business as we have about $121.7 million in cash and $100 million untapped revolver to help execute these plans. Continue to have multiple discussions with businesses that certainly can add strategic value to our company. Our acquisition targeting process takes time as these business are generally not for sale. So introductions and in-depth discussions need to take place before any agreement can be reached, and of course as you know, this takes time. We continue to make strategic investments into emerging markets, China, Latin America, EMEA regions, as well as invest in new products, services and productivity enhancing equipment in our manufacturing facilities. And, as always, I'd like to thank all of the Columbus McKinnon associates around the world for their dedication and excellence to making our company a stronger, well-positioned organization. And, as always, we do appreciate your time today. Have a good day. Thank you.

Operator

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