[Operator Instructions] This conference is being recorded. If you have any objections, please disconnect at this time. I would now like to turn the call over to Mr. Tim Tevens, President and CEO of Columbus McKinnon. You may begin.

Thanks, Wendy, and good morning, everyone. Welcome to our conference call this morning to review the results of our first quarter of fiscal '13. With me today here is Greg Rustowicz, our Vice President of Finance and Chief Financial Officer. Please note that we have included some summary slides on the quarter for your review. They can be found at our website at www.cmworks.com/investors, and hopefully, that'll help you follow our earnings call comments. We do want to remind you that the press release and accompanying slides in this call today 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 actual results to vary. You should, in fact, read the periodic reports that we file with the SEC to be sure you understand these risks. As a reminder, starting on Page 3 of the summary deck, our long-term objectives include growing this company to a $1 billion business with 1/3 of our revenue in developing markets and 2/3 in developed markets along with a $200 million to $300 million acquisition in terms of revenue, with a 12% to 14% operating margin and a strong working capital level as well as an overall balance sheet. We certainly continue to focus and work and apply our resources on acquiring companies that strategically add product breadth and market presence to help us grow around the world. Page 4 does provide some highlights for you on the first quarter of '13, and I'll go over these and then turn it over to Greg in a moment for some more details. Our revenue growth continued at a very nice positive trend, up 9.5% in the quarter, which was very strong considering the currency translation headwinds…

Thank you, Tim, and good morning, everyone. Turning to Slide 6, our first quarter consolidated gross profit dollars increased by $8.2 million or 23%, and our gross profit margin improved 310 basis points to 28.6%. Our gross profit increase was driven by net price over inflation of $2.7 million as well as the positive earnings impact of increased sales volumes of $3.9 million previously mentioned. This quarter's sales volume was favorably impacted by $1.8 million of net revenue with no associated cost of sales from a large rail crane project completed in the quarter, where we provided technical support, training and ultimately service. Due to the accounting rules regarding such transactions, revenue was recognized on a net basis. In addition, improved efficiencies in our manufacturing facilities added $3.2 million of gross margin. We also benefited from additional gross profit from the South African subsidiary acquired last December. Finally, foreign currency had a negative impact on gross margin in the quarter of $2.4 million. On Slide 7, selling expense increased 2.1% from the prior year in dollar terms, but decreased to 10.7% of sales this year compared to 11.5% last year. The increase in selling costs is primarily related to the overall increase in sales. Foreign currency translation had a favorable impact on selling expense of $1 million this quarter. G&A expense increased $2.7 million compared with the prior year, representing 9.3% of sales versus 8.2% in the prior year. About $500,000 of the increase was related to our ERP system implementation. We also had $300,000 of incremental costs associated with our South African acquisition. Other increases were due to severance costs, higher accruals for incentive compensation and increasing group health cost, which, together, totaled $900,000. We expect our SG&A run rate to be around $30 million per quarter going forward.…

Thanks, Greg. Let's take a moment and, if you would, flip to Page 13, talk a little bit about our outlook for the second quarter. We would expect to continue to see revenues grow in the mid- to high-single-digit range. This, of course, is even in the face of a sluggish U.S. economy, a poor Eurozone economy and slower or slowing growth in emerging markets. As you might imagine, we read the same economic reports that you all do and we are cautious. We do expect positive growth, however, even in Europe, but we certainly will have a currency translation headwind as the dollar strengthens against the euro. Mexico should remain strong, and Brazil will face some challenges, and they are facing some challenges now. But I think with the planned infrastructure investments given the upcoming World Cup and the Olympics there, we should be able to grow in that market as well. We’ll also continue to make our strategic investments in China. And as you can see on the slide as well, our backlog remains almost $110 million, which is up from a year ago. And as you know, most of it, 57% of it is in the U.S. It is a slight reduction in the backlog from the Q4 fiscal '12 quarter, but actually right now as we sit here today, a couple weeks into our new quarter, our second quarter, we're at the same level of backlog. So that's our outlook. Let me just pause here for a moment and ask Wendy if she would open it up to questions.

[Operator Instructions] Our first question today comes from Jason Ursaner with CJS.

I just want to make sure I'm understanding the recurring parts of earnings. So the revenue, it included this $1.8 million fee, and the costs have already been incurred there, so you're implying, I guess, $1.3 million of costs that should have been allocated to match this?

Yes, let's take a moment. I'll have Greg just describe this to you. This is somewhat unique for our business, so we'll give you some details here.

Sure, this is a large rail crane project where we acted as an agent/broker. The contract was in process for over 2 years. And it was not a crane that Columbus McKinnon made, but it was one that we helped our customers spec. We're going to be servicing it, and we're actually helping with the assembly. So given the accounting rules for it, we actually recorded net revenue of $1.8 million with no cost to sales. So there was the top line and obviously, that would drop to the gross margin. And I think in our press release, we actually even indicated that the impact of that transaction was about a positive 80 basis points on our gross margin.

Right, but that wouldn't have been the whole 1.8 then? That would have -- it's sort of implying...

Well, it's $1.8 million of sales with no cost to sales, so it drops the $1.8 million of margin.

Okay. Okay, and then the incremental costs of South Africa, that's an ongoing incremental or onetime? And then also the severance costs, how much of the $900,000 would have been related to that?

Yes, regarding South Africa, we had pointed out or said on the press release last December that we had closed on a relatively small South African acquisition that we were already an equity owner on. So for the next 2 quarters, we will continue to have, on a year-over-year basis, incremental sales, incremental gross profit, incremental SG&A. But come the last quarter of our fiscal year, we will have, in both periods, when we do our comparisons, the results of the South African acquisition. So at that point, we will no longer refer to the kind of year-over-year change.

But the extra $300,000 that you were talking about, Jason, is really the cost to acquire the South African business. And that's a onetime cost.

And then you had asked about the severance. For confidentiality reasons, we're not going to break that out. But I believe we told you in total that those 3 items added up to about $900,000.

Right.

Okay. Such -- so if I'm pulling out the brokerage fee and sort of bring your operating margin down in the 7.5 range, and that's going to push up the effective tax rate that you reported to around 20%. So if I adjusted out the valuation allowance, you're talking roughly a $0.30 quarterly run rate at this revenue level on a fully tax basis, excluding the other onetimes?

I believe, this morning, I calculated it to be a little over $0.07 is the impact. You’d have to take the revenue also, the $1.8 million of profit also when you look at margin out of the revenue line as well. But I believe the EPS impact is around a little over $0.07 a share.

Okay. And then just last question and I'll jump back in the queue, the $30 million SG&A run rate, Greg, you had mentioned pension expense is one of the items that you previously called out in the increase. With the new legislation there, is there any -- is there some other offset that's increasing it to get you back to that run rate, or do you not expect to see much of a benefit?

Well, with the new pension legislation, that was not baked into our estimates at the time. We're still in the process of studying what impact that will mean from a contribution perspective. The $30 million run rate is really, at the size company we are today, including the impact of the South African acquisition, which adds incremental SG&A, so that's what we expect going forward. And it's going to include, as the company's results improve, higher incentive comp costs as well. Our medical costs, like most companies, continue to go up, although ours are actually trending a lot less than the high single-digit increases that other companies have seen.

Our next question is from Schon Williams with BB&T Capital Markets.

I wonder if I can maybe just ask Jason's question all little bit differently. I mean, I'm -- if I back out the pension curtailment charge from last year, I mean, I'm coming up with base incremental margins of 30%, which is on the low end of your established range. And then that number would be -- my thought would be that number is actually inflated by this service work that you were able to capture in the quarter. So, I mean, am I looking at this right that core incremental margins in the quarter, excluding the service work, excluding the pension curtailment were actually kind of below your 30% to 40% guidance?

Well, I didn't do the calculation without the pension curtailment cost, but our operating leverage, excluding the Transnet -- or excluding that rail contract would have been around 33%.

Okay. And then was there any SG&A that would be associated with that project or not really? I mean, it should have all been captured in that kind of net revenue number that you reported, the $1.8 million?

Correct, it's captured in that net revenue.

Okay, that's fine. And then could you just talk a little bit more about -- a little bit more of what you're seeing on the international side? I want to say that it seems like you're still seeing some stability overseas. I was all little surprised, I mean, it sounds like you're talking about -- is it still up 10% internationally, kind of excluding ForEx? Is that the right number?

That's the right number, Schon, right.

Okay. And what -- I mean, how does that look as we look -- how does that look as we kind of dive in a little bit? I mean, is that Europe kind of still barely up and then being more than offset by the growth you're seeing in some of your new international markets?

Yes, our volume in Europe is in that high single-digit area of growth. We're still very strong in our Hoist and Rigging business. It's somewhat offset by the capital-intensive Engineer Projects we have, which were down. And we're seeing that quotation activity for those kinds of special rail and road and actuator projects remain pretty high at the same level, I'd say, a year ago. But people are not making decisions to push forward with some of these major capital projects. So we're seeing delays in the booking side. So we quote, we don't get the booking, which of course then we don't get the revenue. But the core -- I call it core Hoist business that you would know us as and the Rigging component business and the slings and things of that nature, are up. The volume is up quite nicely year-over-year, in Europe in particular. And, of course, as you go around the world and you look at Latin America and Asia Pacific as well, we're seeing very nice growth there. But those are not economic-driven activities for us, those are really investments that we have made over the years that are bearing fruit into those growing industrial markets.

Okay. And then the backlog decline, I mean, would you point to some of the engineered product as being the source of most of that backlog decline? Or is that some of the general...

Yes, most of it is currency decline, most of it. Some of it is some of these projects that are rolling off. But in reality now, if you look at our backlog today, it's back up to the same level. So it bounces around. It's not a perfect proxy, but it -- bookings are strong, so the backlog grows slightly so. Moving $4 million, $5 million of backlog is, in my mind, immaterial.

Okay. And then just lastly, I would have expected, given that the sales actually ticked down slightly Q1 versus Q4, I understand that some of that is ForEx. But then we actually saw inventories tick up ever so slightly. I would've thought maybe you'd be a little bit further along in some of your inventory reduction initiatives. Can you just talk about where we are and maybe what some of your goals are for fiscal 2013?

Sure. Yes, looking at it on the surface, your assumption, I could see how you could draw that. But in reality, when you look at the inventory ticking up slightly, it's a direct result of some very large projects, particularly in the States, that we have captured. And these are work in process right now, so the inventory ticked up to accommodate those larger projects. The core business, the Hoist and Rigging business, is -- really, the turns are doing fine. So the normal business is flowing and flowing well. We need to get better, by the way, even in the 4 area turns is not acceptable for us. We need to be in the 5 to 6 area turns. So really, this is more project-driven inventory growth than anything else.

Our next question is from Joe Mondillo with Sidoti & Company.

Just as regarding the SG&A, just to clarify, so you were at $31 million for the quarter and you mentioned about $900,000. So if you take that out, that gets you to about $30 million, is that correct?

Yes.

Yes, that's correct.

So the ERP is falling off completely in the second quarter?

No, it's a question of we're now -- we have kicked off our next implementation. We had about a quarter where we were kind of finishing up kind of postal live activities at our Duff-Norton facility, and so those costs are not capitalizable. So we have now kicked off the next major site, which actually is in Europe. And so we'll have less of those postal live costs as the resources are dedicated to the next implementation.

Okay, and when is that?

Right now. It's starting now, right.

Okay. And the severance, what -- where was that related to in terms of those costs? What region?

That was...

U.S.

Predominantly U.S.

Okay. And then could you just talk about the seasonality and just remind us about that? I think last year, we saw June, the June quarter to the September quarter ticked up and then ticked down in the December quarter. How does that look this year? And how does that play out with European vacation and such like that?

Yes, I would expect it to be the same. Historically, our company has had a very strong fourth quarter as we reported $159.6 million last quarter, and we're at $153 million this quarter. The fiscal first quarter and, correspondingly, the second quarter are usually about the same. The weakest quarter is our December quarter, and that's predominantly driven because of the holidays around the world, and there's just less working days before that. So Q1, Q2 alternate between which one is going to be second in line so to speak in terms of highest revenue. Q4 is always the best and Q3 is always the, generally, the lowest.

And just to add on, Joe, the second quarter shipping days are comparable to what they were in the first quarter.

Okay, perfect. Also, just last question, I missed U.S. volume versus non-U.S. volume growth. Usually you give that out. I missed that.

Okay, the U.S. volume growth was...

15%.

15%, and non-U.S. growth was 6.8%.

Okay, so you actually saw an acceleration in the non-U.S. volume, is that correct, from the fourth quarter?

That's an excellent question. I don't know [indiscernible].

Yes, I don't know. I don't have that.

I think it was 4% in the first -- fourth quarter and actually 4% maybe in the third quarter too. That's what I had.

Okay. If that's what it was, then yes.

What regions is the -- what's driving that? What regions are the strongest?

For us, Germany, France and the U.K. are the 3 predominant regions. But then our emerging market, Eastern European exposure has also been very helpful and growing quite well.

And so is Asia and Latin America. Yes, you're right, it was 4.2% in the fourth quarter, Joe, so it did accelerate. And I think Hoist business in Europe, Western Europe, Eastern Europe, and then of course the emerging markets added to that.

Have any regions been -- have those regions been offsetting any other sort of maybe some of your weaker non-U.S. markets?

Yes, this Engineered Products business in Europe, which seems to be -- our bookings seem to have slowed and our revenue have slowed. That's being offset by the Hoist and Rigging business in Europe as well as the emerging markets around the world.

Our next question is from Gary Farber with CL King.

Just 2 questions. Can you -- I don't know if you already talked to it, is -- just an update on your Tennessee facilities, what you're seeing there, what trends you're seeing? And then just any commentary you can give us just on the competitor environment particularly in Europe?

Sure, sure. Well, Chattanooga has our Forging business there, and it's continuing to improve and doing much nicer, much better today, servicing customers and producing quality products with fewer defects. So we're -- we continue to be on that same very upward positive trend line. It's not at the level where I'm happy with it yet at this point by any stretch of imagination, but it's much better. I think quarter-over-quarter, Greg can give you some details on the -- the revenue is up...

15%.

Yes, and the profits were up significantly from last year.

Correct, yes.

I mean, what else has to happen there? What else do you want to see?

Oh, I want to see more growth. Top line growth is of importance. We did see some very good growth, and that's beginning because we're -- when you're able to deliver product when the customers need and want them, you begin to win back the market share that we lost over the last couple of years. And that -- we're seeing that now, Gary. And then corresponding with the volume is the profitability. I think the quality is headed in the right direction. From a production standpoint, I think that the utilization of the plant is up substantially. We finally have, for all intents and purposes, a full cadre of people that are now trained or in the process of being trained, so we're feeling much better about it. We have -- we continue to have our Lean experts in that facility, helping the plant management push forward with improvements. And that's creating some of our cost reductions and productivity gain.

Right. Right. Okay, and on the competitive front?

Especially in Europe, I'm not seeing anything change from historically. We have 3 major hoist competitors around the world, and they're behaving as they always have, that's KONE, KITO and Demag. Demag was acquired by Terex or is in the process of being acquired by Terex, and -- but we haven't seen anything substantially different in terms of their behavior. And then the rigging folks that we see around the world as well. I think right now, the bottlenecks that all of us face as the recovery hit us are pretty much through, and we're all doing a fairly good job of delivering product into the marketplace and behaving rationally.

Right. And just one last one, just on inventories in the channel, do you think they're being -- given the IFM data that came out and stuff like that, do you find out they're being run pretty lean, or do you think it's pretty clear?

I think it's pretty clear. I did see inventory -- we got a price increase in March. And usually, in advance of the price increase, we have our channel partners, let's say, stock up. They did that in the fourth quarter. And we delivered some of that in, not only in the fourth quarter but in this first quarter. But I think for the most part, I'm seeing that being flushed through, and it's pretty clear.

[Operator Instructions] Our next question is from Jason Ursaner with CJS.

Can you just talk about orders by geography, what you're seeing in terms of order growth?

Sure, hang on one second. Order growth, mid to high single digits in total, pretty strong, continue to be stronger in the United States. And this is as of up through last week, Friday, Jason, so it's fairly current. We see the U.S. continuing the fairly solid pace that we saw last year, and now this first quarter. Europe is, let's say, lower single digit at this point, and we're also seeing very solid bookings in Latin America and Asia right now. And those are -- I don't know what those percentages are, I don't have them in front of me, but they're double digit and pretty large. But of course, as you know, it's a low base of business for us today.

And so the Europe, the lower growth there, that's including currency that's sort of an all-in number?

Yes, that's correct.

Okay. And anything new on the acquisition strategy? Are you seeing assets come available and they're just not fitting for whatever reason or are properties really not up for sale at this point?

We're seeing -- we have a good 6 to 8 active ones that we're working on now and have been -- some of them have been for a long time. The process that we go through of targeting and looking for what we perceive to be good strategic value-added kind of acquisitions takes a lot longer for us to close on than have true auction that we don't -- haven't participated in as of late, at least. So these processes take time. We're happy with some process and not happy with others. We couldn’t agree on price on one recently here that the owner felt differently than we did, which is fine, and those things happen. But of course, we're pushing forward with other parts of the world and spending our time and energy with those target partners, potential partners, and working through the details of what we think they're worth and what the owner thinks they're worth. And I'm very hopeful that we'll actually come across the finish line here at some point in the near future and something maybe a little bit bigger than the South Africa one we did last December.

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

Great. Well, thank you. Let me conclude by saying we certainly expect the rest of '13 to be a nice growth year for our company. The operating leverage should continue to be very positive. Our investments in the emerging markets continue to bear fruit, and we expect that the U.S. will continue to grow, and it may be a more modest pace, especially as the comps become a little bit more difficult. I think Europe will be in a slow growth mode. They have to recover. But Germany is our biggest and largest market in Europe, and that should remain relatively positive for us even with some of the headwinds on the euro as well as the Engineered Products business. We're well positioned to continue to execute our plans and grow profitably. We have $82 million in cash and an $85 million revolver to help execute those plans. We're spending a considerable amount of time and energy in acquiring strategic and value-added companies that can add to our product portfolio and provide us with a better presence in emerging markets. We're going to continue to make those strategic investments in the selling and emerging markets such as China and Brazil, which has proven to be very beneficial for us, as well as continue to invest in new products and services. And also, one other point that you should know, the industrial capacity utilization around the world is either growing or is stable, and this is a good leading indicator for our company, which I'm happy to see. I want to thank all of our associates around the world for their dedication to excellence and making our company a stronger, well-positioned organization. And as always, we also appreciate your time today. Thanks and have a good day.

Thank you. This does conclude today's conference. Thank you for joining. You may disconnect at this time.