cmco-20230630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-34362

Columbus McKinnon Corporation

(Exact name of registrant as specified in its charter)

New York

16-0547600

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

13320 Ballantyne Corporate Place, Suite D

Charlotte

28277

(Address of principal executive offices)

(Zip code)

(716)

689-5400

(Registrant's telephone number, including area code)

205 Crosspoint Parkway

Buffalo

14068

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	CMCO	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. : ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of common stock outstanding as of July 31, 2023 was: 28,724,485 shares.

FORM 10-Q INDEX

COLUMBUS McKINNON CORPORATION

For the quarterly period ended June 30, 2023


		Page #
Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements (Unaudited).

	Condensed consolidated balance sheets - June 30, 2023 and March 31, 2023	3

	Condensed consolidated statements of operations - Three months ended June 30, 2023 and June 30, 2022	4

	Condensed consolidated statements of comprehensive income (loss) - Three months ended June 30, 2023 and June 30, 2022	5

	Condensed consolidated statements of shareholders' equity - Three months ended June 30, 2023 and June 30, 2022	6

	Condensed consolidated statements of cash flows - Three months ended June 30, 2023 and June 30, 2022	8

	Notes to condensed consolidated financial statements - June 30, 2023	9

Item 2.	Management's Discussion and Analysis of F inancial Condition and Results of Operations.	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	33

Item 4.	Controls and Procedures.	33

Part II. Other Information

Item 1.	Legal Proceedings .	34

Item 1A.	Risk Factors.	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds .	34

Item 3.	Defaults upon Senior Securities .	34

Item 4.	Mine Safety Disclosures.	34

Item 5.	Other Information .	34

Item 6.	Exhibits.	35

Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited).

COLUMBUS McKINNON CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30, 2023		March 31, 2023
	(unaudited)
ASSETS:	(In thousands)
Current assets:
Cash and cash equivalents	$	106,994	$	133,176
Trade accounts receivable, less allowance for doubtful accounts ($3,573 and $3,620, respectively)	165,050		151,451
Inventories	204,747		179,359
Prepaid expenses and other	37,435		32,254
Total current assets	514,226		496,240
Property, plant, and equipment, net	98,372		94,360
Goodwill	731,953		644,629
Other intangibles, net	409,541		362,537
Marketable securities	10,253		10,368
Deferred taxes on income	2,145		2,035
Other assets	93,019		88,286
Total assets	$	1,859,509	$	1,698,455

LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Trade accounts payable	$	77,378	$	76,736
Accrued liabilities	145,927		124,317
Current portion of long-term debt and finance lease obligations	40,619		40,604
Total current liabilities	263,924		241,657
Term loan, AR securitization facility and finance lease obligations	539,150		430,988
Other non current liabilities	209,478		192,013
Total liabilities	1,012,552		864,658
Shareholders' equity:
Voting common stock; 50,000,000 shares authorized; 28,707,702 and 28,611,721 shares issued and outstanding	287		286
Treasury stock	(1,001)		(1,001)
Additional paid in capital	516,197		515,797
Retained earnings	366,033		356,758
Accumulated other comprehensive loss	(34,559)		(38,043)
Total shareholders' equity	846,957		833,797
Total liabilities and shareholders' equity	$	1,859,509	$	1,698,455

See accompanying notes.

COLUMBUS McKINNON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	Three Months Ended
	June 30, 2023		June 30, 2022
	(In thousands, except per share data)
Net sales	$	235,492	$	220,287
Cost of products sold	148,843		137,768
Gross profit	86,649		82,519

Selling expenses	24,981		26,156
General and administrative expenses	27,443		21,881
Research and development expenses	5,900		5,130
Amortization of intangibles	6,877		6,535
	65,201		59,702

Income from operations	21,448		22,817
Interest and debt expense	8,625		6,203

Investment (income) loss	(543)		430
Foreign currency exchange (gain) loss	483		1,203
Other (income) expense, net	214		(2,303)
Income (loss) before income tax expense (benefit)	12,669		17,284
Income tax expense (benefit)	3,394		8,893
Net income (loss)	$	9,275	$	8,391

Average basic shares outstanding	28,662		28,544
Average diluted shares outstanding	28,906		28,699

Basic income (loss) per share:	$	0.32	$	0.29

Diluted income (loss) per share:	$	0.32	$	0.29

See accompanying notes.

COLUMBUS McKINNON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


	Three Months Ended
	June 30, 2023		June 30, 2022
	(In thousands)
Net income (loss)	$	9,275	$	8,391
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	2,901		(8,701)
Change in derivatives qualifying as hedges, net of taxes of $(176), $(812)	541		2,689
Change in pension liability and postretirement obligation, net of taxes of $(5), $(49)	42		146
Total other comprehensive income (loss)	3,484		(5,866)
Comprehensive income (loss)	$	12,759	$	2,525

See accompanying notes.

COLUMBUS McKINNON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)


	(In thousands, except share data)
	Common Stock ($0.01 par value)		Treasury Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
Balance at March 31, 2023	$	286	$	(1,001)	$	515,797	$	356,758	$	(38,043)	$	833,797
Net income (loss)	—		—		—		9,275		—		9,275
Change in foreign currency translation adjustment	—		—		—		—		2,901		2,901
Change in derivatives qualifying as hedges, net of tax of $(176)	—		—		—		—		541		541
Change in pension liability and postretirement obligations, net of tax of $(5)	—		—		—		—		42		42
Stock options exercised, 8,485 shares	—		—		225		—		—		225
Stock compensation expense	—		—		1,981		—		—		1,981
Restricted stock units released, 87,496 shares, net of shares withheld for minimum statutory tax obligation	1		—		(1,806)		—		—		(1,805)
Balance at June 30, 2023	$	287	$	(1,001)	$	516,197	$	366,033	$	(34,559)	$	846,957

See accompanying notes.

COLUMBUS McKINNON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)


	(In thousands, except share data)
	Common Stock ($0.01 par value)		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
Balance at March 31, 2022	$	285	$	506,074	$	316,343	$	(49,899)	$	772,803
Net income (loss)	—		—		8,391		—		8,391
Change in foreign currency translation adjustment	—		—		—		(8,701)		(8,701)
Change in derivatives qualifying as hedges, net of tax of $(812)	—		—		—		2,689		2,689
Change in pension liability and postretirement obligations, net of tax of $(49)	—		—		—		146		146
Stock options exercised, 18,907 shares	—		415		—		—		415
Stock compensation expense	—		751		—		—		751
Restricted stock units released, 52,276 shares, net of shares withheld for minimum statutory tax obligation	1		(1,314)		—		—		(1,313)
Balance at June 30, 2022	$	286	$	505,926	$	324,734	$	(55,765)	$	775,181

See accompanying notes.

COLUMBUS McKINNON CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Three Months Ended
	June 30, 2023		June 30, 2022
OPERATING ACTIVITIES:	(In thousands)
Net income (loss)	9,275		8,391
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	10,890		10,469
Deferred income taxes and related valuation allowance	(1,825)		1,272
Net loss (gain) on sale of real estate, investments and other	(467)		485
Stock-based compensation	1,981		751
Amortization of deferred financing costs	483		430

Loss (gain) on hedging instruments	231		(192)

Loss on retirement of fixed asset	—		173
Non-cash lease expense	2,389		2,139
Changes in operating assets and liabilities, net of effects of business acquisitions:
Trade accounts receivable	(7,649)		11,265
Inventories	(19,214)		(21,467)
Prepaid expenses and other	(2,800)		359
Other assets	(636)		(143)
Trade accounts payable	1,718		(15,720)
Accrued liabilities	(8,668)		(6,938)
Non-current liabilities	(2,955)		(2,451)
Net cash provided by (used for) operating activities	(17,247)		(11,177)

INVESTING ACTIVITIES:
Proceeds from sales of marketable securities	1,100		650
Purchases of marketable securities	(906)		(1,226)
Capital expenditures	(5,273)		(2,953)

Dividend received from equity method investment	—		313

Purchase of businesses, net of cash acquired (See Note 2)	(107,605)		(1,616)
Net cash provided by (used for) investing activities	(112,684)		(4,832)

FINANCING ACTIVITIES:
Proceeds from the issuance of common stock	225		415

Repayment of debt	(10,143)		(10,128)
Proceeds from issuance of long-term debt	120,000		—
Fees paid for borrowings on long-term debt	(2,046)		—

Cash inflows from hedging activities	6,053		6,163
Cash outflows from hedging activities	(6,298)		(6,022)
Payment of dividends	(2,004)		(1,996)
Other	(1,802)		(1,313)
Net cash provided by (used for) financing activities	103,985		(12,881)
Effect of exchange rate changes on cash	(236)		(840)
Net change in cash and cash equivalents	(26,182)		(29,730)
Cash, cash equivalents, and restricted cash at beginning of year	133,426		115,640
Cash, cash equivalents, and restricted cash at end of period	$	107,244	$	85,910

Supplementary cash flow data:
Interest paid	$	6,786	$	5,741
Income taxes paid, net of refunds	$	4,701	$	3,940
Property, plant and equipment purchases included in trade accounts payable	$	205	$	204
Restricted cash presented in Other assets	$	250	$	250

See accompanying notes.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 2023

1. Description of Business

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of Columbus McKinnon Corporation ("the Company") at June 30, 2023, the results of its operations for the three months ended June 30, 2023 and June 30, 2022, and cash flows for the three months ended June 30, 2023 and June 30, 2022, have been included. Results for the period ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2024. The balance sheet at March 31, 2023 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Columbus McKinnon Corporation Annual Report on Form 10-K for the fiscal year ended March 31, 2023 (the “2023 10-K”).

The Company is a leading worldwide designer, manufacturer, and marketer of intelligent motion solutions that efficiently and ergonomically move, lift, position, and secure materials. Key products include hoists, crane components, precision conveyor systems, accumulation tables, rigging tools, light rail workstations, and digital power and motion control systems. The Company is focused on commercial and industrial applications that require the safety and quality provided by its superior design and engineering know-how.

The Company’s products are sold globally, principally to third party distributors and crane builders through diverse distribution channels, and to a lesser extent directly to end-users. During the three months ended June 30, 2023, sales to customers in the United States were approximately 58% of total net sales.

2. Acquisitions & Disposals

On May 31, 2023, the Company completed its acquisition of montratec GmbH ("montratec") for $115,181,000 including $7,576,000 in cash acquired, subject to a working capital adjustment and a contingent payment that becomes payable if a certain EBITDA level for the twelve-month period December 31, 2023 is achieved as set forth in the purchase agreement for montratec. As of June 30, 2023, the Company has estimated this contingent liability to be $25,093,000. A liability for this amount has been established in the opening balance sheet for montratec. The Company initially financed the acquisition by borrowing $117,000,000 on its New Revolving Credit Facility, but later repaid the New Revolving Credit Facility by borrowing an additional $120,000,000. Utilizing the Accordion feature under the Company's existing Term Loan B, the Company borrowed $75,000,000 and another $45,000,000 was borrowed through a new credit agreement secured by its U.S accounts receivable balances. Refer to Note 9 for additional details on the Company's debt agreements.

montratec is a leading automation solutions company that designs and develops intelligent automation and transport systems for interlinking industrial production and logistics processes. montratec product offerings complement the Company's previous acquisitions of both Dorner Mfg. Corp. ("Dorner") and Garvey Corporation ("Garvey"), and further the Company's shift to intelligent motion and serve as a platform to expand capabilities in advanced, higher technology automation solutions. As the Company determined that the acquisition is not material to its existing operations, certain disclosures, including pro forma financial information, have not been included. montratec results have been included in the Company's results of operations from the acquisition date and the Company incurred $2,587,000 of acquisition and deal costs classified as part of General and administrative expenses in the three months ended June 30, 2023.

The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed as of the date of acquisition. The excess consideration of $85,357,000 has been recorded as goodwill. The identifiable intangible assets acquired include customer relationships valued at $33,471,000, a tradename valued at $2,915,000, and technology valued at $16,196,000. The weighted average life of the acquired identifiable intangible assets subject to amortization was estimated at 14 years at the time of acquisition. Of the $85,357,000 goodwill recorded from the acquisition, $7,300,000 is deductible for tax purposes.

The preliminary assignment of purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):


Cash	$	7,576
Working capital	5,156
Property, plant, and equipment, net	2,366
Intangible assets	52,581
Contingent liability (see above)	(25,093)
Other assets	5,596
Other non current liabilities	(18,358)
Goodwill	85,357
Total	$	115,181

3. Revenue & Receivables

Revenue Recognition:

Performance obligations

The Company has contracts with customers for standard products and custom engineered products, and determines when and how to recognize revenue for each performance obligation based on the nature and type of contract.

Revenue from contracts with customers for standard products is recognized when legal title and significant risk and rewards has transferred to the customer, which is generally at the time of shipment. This is the point in time when control is deemed to transfer to the customer. The Company sells standard products to customers utilizing purchase orders. Payment terms for these types of contracts generally require payment within 30 to 60 days. Each standard product is deemed to be a single performance obligation and the amount of revenue recognized is based on the negotiated price. The transaction price for standard products is based on the price reflected in each purchase order. Sales incentives are offered to customers who purchase standard products and include offers such as volume-based discounts, rebates for priority customers, and discounts for early cash payments. These sales incentives are accounted for as variable consideration included in the transaction price. Accordingly, the Company reduces revenue for these incentives in the period which the sale occurs and is based on the most likely amount method for estimating the amount of consideration the Company expects to receive. These sales incentive estimates are updated each reporting period as additional information becomes available.

The Company also sells custom engineered products and services, which are contracts that are typically completed within one quarter but can extend beyond one year in duration. For custom engineered products, the transaction price is based upon the price stated in the contract. Variable consideration has not been identified as a significant component of transaction price for custom engineered products and services. The Company generally recognizes revenue for custom engineered products upon satisfaction of its performance obligation under the contract which typically coincides with project completion which is when the products and services are controlled by the customer. Control is typically achieved at the later of when legal title and significant risk and rewards have transferred to the customer or the customer has accepted the asset. These contracts often require either up front or installment payments. These types of contracts are generally accounted for as one performance obligation as the products and services are not separately identifiable. The promised services (such as inspection, commissioning, and installation) are essential in order for the delivered product to operate as intended on the customer’s site and the services are therefore highly interrelated with product functionality.

For most custom engineered products contracts, the Company determined that while there is no alternative use for the custom engineered products, the Company does not have an enforceable right to payment (which must include a reasonable profit margin) for performance completed to date in order to meet the over time revenue recognition criteria. Therefore, revenue is recognized at a point in time (when the contract is complete). For custom engineered products contracts that contain an enforceable right to payment (including reasonable profit margin) the Company satisfies the performance obligation over time and recognizes revenue based on the extent of progress towards completion of the performance obligation. The cost-to-cost measure of progress is an appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress of work performed and transfer of control to the customers. Under the cost-to-cost measure of progress, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recognized proportionally as costs are incurred.

Sales and other taxes collected with revenue are excluded from revenue. Shipping and handling costs incurred prior to shipment are considered activities required to fulfill the Company’s promise to transfer goods, and do not qualify as a separate performance obligation. Additionally, the Company offers standard warranties which are typically 12 months in duration for standard products and 24 to 36 months for custom engineered products. These types of warranties are included in the purchase price of the product and are deemed to be assurance-type warranties which are not accounted for as a separate performance obligation. Other performance obligations included in a contract (such as drawings, owner’s manuals, and training services) are immaterial in the context of the contract and are not recognized as a separate performance obligation.

For additional information on the Company’s revenue recognition policy refer to the consolidated financial statements included in the 2023 10-K.

Reconciliation of contract balances

The Company records a contract liability when cash is received prior to recording revenue. Some standard contracts require a down payment while most custom engineered contracts require installment payments. Installment payments for the custom engineered contracts typically require a portion due at inception while the remaining payments are due upon completion of certain performance milestones. For both types of contracts, these contract liabilities, referred to as customer advances, are recorded at the time payment is received and are included in Accrued liabilities on the Condensed Consolidated Balance Sheets. When the related performance obligation is satisfied and revenue is recognized, the contract liability is released into income.

The following table illustrates the balance and related activity for customer advances in the three months ended June 30, 2023 and June 30, 2022 (in thousands):


Customer advances (contract liabilities)	June 30, 2023		June 30, 2022
March 31, beginning balance	$	27,003	$	22,453
Additional customer advances received	24,251		20,814
Revenue recognized from customer advances included in beginning of period	(21,908)		(18,708)

Customer advances recorded from acquisitions	3,866		—
Other (1)	99		(539)
June 30, ending balance	$	33,311	$	24,020

(1) Other includes the impact of foreign currency translation

Revenue was recognized prior to the right to invoice the customer which resulted in a contract asset balance in the amount of $1,710,000 and $2,944,000 as of June 30, 2023 and March 31, 2023, respectively. Contract assets are included in Prepaid expenses and other assets on the Condensed Consolidated Balance Sheets.

Remaining Performance Obligations

As of June 30, 2023, the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) was approximately $16,348,000. We expect to recognize approximately 48% of these sales over the next twelve months.

Disaggregated revenue

In accordance with FASB ASC Topic 606, the Company is required to disaggregate revenue into categories that depict how economic factors affect the nature, amount, timing and uncertainty of revenue and cash flows.

The following table illustrates the disaggregation of revenue by product grouping for the three months ended June 30, 2023 and June 30, 2022 (in thousands):


	Three Months Ended
Net Sales by Product Grouping	June 30, 2023		June 30, 2022
Industrial Products	$	84,159	$	81,847
Crane Solutions	94,642		79,331
Engineered Products	23,850		18,270
Precision Conveyor Products	32,808		40,799
All other	33		40
Total	$	235,492	$	220,287

Industrial products include: manual chain hoists, electrical chain hoists, rigging/clamps, industrial winches, hooks, shackles, and other forged attachments. Crane solutions products include: wire rope hoists, drives and controls, crane kits and components, and workstations. Engineered products include: linear and mechanical actuators, lifting tables, rail projects, and actuation systems. Precision conveyor products include: low profile, flexible chain, large scale, sanitary and vertical elevation conveyor systems, pallet system conveyors, accumulation systems, as well as other high-precision conveyance systems. The All other product grouping includes miscellaneous revenue.

Practical expedients

Incremental costs to obtain a contract incurred by the Company primarily relate to sales commissions for contracts with a duration of one year or less. Therefore, these costs are expensed as incurred and are recorded in Selling expenses on the Condensed Consolidated Statements of Operations.

Unsatisfied performance obligations for contracts with an expected length of one year or less are not disclosed. Further, revenue from contracts with customers do not include a significant financing component as payment is generally expected within one year from when the performance obligation is controlled by the customer.

Accounts Receivable:

Under ASU 2016-13, the Company is required to remeasure expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. In addition to these factors, the Company establishes an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends, and other factors. Accounts receivable are charged against the allowance for doubtful accounts once all collection efforts have been exhausted. Due to the