Columbus McKinnon(CMCO) - 2024 Q3 - Quarterly Report

Part I. Financial Information Unaudited condensed consolidated financial statements and management's discussion and analysis for the company Item 1. Condensed Consolidated Financial Statements (Unaudited) Unaudited condensed consolidated financial statements for Columbus McKinnon Corporation as of December 31, 2023, with financial statements and notes Condensed Consolidated Balance Sheet (unaudited, in thousands) | | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | | Total current assets | $516,412 | $496,240 | | Total assets | $1,857,310 | $1,698,455 | | Total current liabilities | $269,321 | $241,657 | | Total liabilities | $978,873 | $864,658 | | Total shareholders' equity | $878,437 | $833,797 | | Total liabilities and shareholders' equity | $1,857,310 | $1,698,455 | Condensed Consolidated Statements of Operations (unaudited, in thousands, except per share data) | | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | Nine Months Ended Dec 31, 2023 | Nine Months Ended Dec 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $254,143 | $230,370 | $748,036 | $682,397 | | Gross profit | $93,897 | $82,044 | $280,523 | $250,881 | | Income from operations | $26,912 | $20,179 | $81,711 | $70,372 | | Net income (loss) | $9,728 | $12,029 | $34,816 | $34,534 | | Diluted income (loss) per share | $0.34 | $0.42 | $1.20 | $1.20 | Condensed Consolidated Statements of Cash Flows (unaudited, in thousands) | | Nine Months Ended Dec 31, 2023 | Nine Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $28,591 | $16,902 | | Net cash used for investing activities | ($125,965) | ($10,912) | | Net cash provided by (used for) financing activities | $67,771 | ($37,639) | | Net change in cash and cash equivalents | ($30,231) | ($33,870) | | Cash, cash equivalents, and restricted cash at end of period | $103,195 | $81,770 | Note 1. Description of Business This note describes the company's core business as a global leader in intelligent motion solutions - The Company is a global leader in designing, manufacturing, and marketing intelligent motion solutions, including hoists, crane components, and precision conveyor systems[119] - For the nine months ended December 31, 2023, approximately 56% of total net sales were to customers in the United States[163] Note 2. Acquisitions & Disposals Details the acquisition of montratec GmbH, financed through new debt, advancing intelligent motion strategy - On May 31, 2023, the Company acquired montratec GmbH for $115.7 million, including cash acquired and a contingent payment, financed through new debt borrowings[134] - The acquisition of montratec, an automation solutions company, complements previous acquisitions and advances the Company's strategy in intelligent motion and high-technology automation[120] Preliminary Purchase Price Allocation for montratec (in thousands) | Account | Amount | | :--- | :--- | | Intangible assets | $52,581 | | Goodwill | $78,943 | | Contingent liability | ($18,355) | | Total | $115,721 | Note 3. Revenue & Receivables This note provides disaggregated revenue information by product grouping and details on performance obligations Disaggregated Revenue by Product Grouping (in thousands) | Product Grouping | Nine Months Ended Dec 31, 2023 | Nine Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Industrial Products | $253,925 | $240,366 | | Crane Solutions | $303,746 | $266,959 | | Engineered Products | $70,895 | $61,309 | | Precision Conveyor Products | $119,379 | $113,646 | | Total | $748,036 | $682,397 | - As of December 31, 2023, the company had approximately $11.3 million in unsatisfied performance obligations, with about 52% expected to be recognized as revenue over the next twelve months[138] Note 6. Marketable Securities and Other Investments This note explains the company's marketable securities holdings for insurance claims and their unrealized gains or losses - Marketable securities are held long-term for settling general and product liability insurance claims through the company's wholly owned captive insurance subsidiary, CMIC, and are not available for general working capital[153] - Unrealized gains on marketable securities were $390.0 thousand for the nine months ended Dec 31, 2023, compared to a loss of $558.0 thousand in the prior year period[180] Note 7. Goodwill and Intangible Assets This note details changes in goodwill and intangible assets, including amortization expenses and reporting units - Goodwill increased from $644.6 million at April 1, 2023, to $728.4 million at December 31, 2023, primarily due to the $78.9 million from the montratec acquisition[183] - As of December 31, 2023, the company has three reporting units with goodwill: Duff Norton ($9.7 million), Rest of Products ($308.7 million), and Precision Conveyance ($410.0 million)[182] - Total amortization expense for intangible assets was $21.9 million for the nine months ended Dec 31, 2023, with estimated annual amortization expense for the next five years at approximately $30.0 million[315] Note 8. Derivative Instruments This note describes the company's use of derivative instruments to manage interest rate and foreign currency exposures - The Company uses derivative instruments, such as interest rate swaps, cross currency swaps, and foreign currency forwards, to manage interest rate and foreign currency exposures, not for speculative purposes[156] - As of December 31, 2023, the notional amount of the cross currency swap was $99.4 million, interest rate swaps totaled $353.2 million, and foreign currency forwards were $4.6 million[157][186][324] Note 9. Debt This note outlines the company's debt structure, including credit facilities, term loans, and securitization arrangements - In fiscal 2024, the Company increased its New Revolving Credit Facility by $75.0 million to $175.0 million, borrowed an additional $75.0 million under its Term Loan B, and entered a new $45.0 million AR Securitization Facility to fund the montratec acquisition[218] - The outstanding principal balance of the Term Loan B facility was $497.6 million as of December 31, 2023[220] - As of December 31, 2023, there were no outstanding borrowings under the New Revolving Credit Facility, but $15.7 million in outstanding letters of credit[190] Note 10. Net Periodic Benefit Cost This note discusses the company's pension plan settlement charges and planned contributions - During the three months ended December 31, 2023, the Company recorded a settlement charge of $4.6 million related to lump sum payments as part of the process to terminate one of its U.S. pension plans[193] - The Company plans to contribute approximately $6.9 million to its pension plans in fiscal 2024[14] Note 12. Loss Contingencies Details asbestos-related litigation and other legal actions, with estimated liabilities - The company is involved in asbestos-related litigation, with an estimated net aggregate liability ranging from $4.9 million to $8.9 million, and a probable and estimable liability of approximately $6.4 million recorded[21][232] - Accrued general and product liability reserves were $19.4 million (gross of $7.5 million in estimated insurance recoveries) as of December 31, 2023[19] - The company is involved in other legal actions, including a tax matter in Italy with its Power-One China Subsidiary and an indemnification request from Monsanto related to PCBs, but does not expect them to have a material effect[26][56][58] Note 15. Leases This note presents the company's lease-related assets and liabilities for both operating and finance leases Lease-related Assets and Liabilities (in thousands) | | Dec 31, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | | Operating Leases | | | | Other assets (ROU assets) | $65,424 | $53,551 | | Total operating liabilities | $68,274 | $54,490 | | Finance Lease | | | | Net property, plant, and equipment | $11,846 | $12,597 | | Total finance liabilities | $13,093 | $13,541 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion and analysis of financial performance, strategic initiatives, liquidity, and capital resources Executive Overview This section provides an executive overview of the company's strategic framework and its focus on intelligent motion solutions - The company is a leading global designer and manufacturer of intelligent motion solutions, focusing on products like hoists, crane components, and precision conveyors[276] - The strategic framework focuses on being market-led, customer-centric, and operationally excellent through the Columbus McKinnon Business System (CMBS) to transform into a top-tier Intelligent Motion Solutions company and enhance shareholder value[36] - The acquisition of montratec GmbH on May 31, 2023, is a key part of the strategy to shift towards intelligent motion and expand capabilities in advanced automation solutions[277] Results of Operations This section analyzes the company's financial performance, including net sales, gross profit, and gross margin, for the reporting periods Financial Performance Comparison: Three Months Ended Dec 31 | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $254.1M | $230.4M | +10.3% | | Gross Profit | $93.9M | $82.0M | +14.4% | | Gross Margin | 36.9% | 35.6% | +1.3 p.p. | - For the three months ended Dec 31, 2023, sales growth was driven by the montratec acquisition ($15.5 million) and price increases ($6.5 million), partially offset by unfavorable sales volume ($2.4 million)[279] Financial Performance Comparison: Nine Months Ended Dec 31 | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $748.0M | $682.4M | +9.6% | | Gross Profit | $280.5M | $250.9M | +11.8% | | Gross Margin | 37.5% | 36.8% | +0.7 p.p. | - For the nine months ended Dec 31, 2023, sales growth was driven by price increases ($28.1 million) and revenue from the montratec acquisition ($27.7 million)[252] Liquidity and Capital Resources This section discusses the company's cash position, operating, investing, and financing cash flows, and overall capital resources - Cash, cash equivalents, and restricted cash decreased by $30.2 million to $103.2 million from March 31, 2023 to December 31, 2023[45] - Net cash from operating activities was $28.6 million for the nine months ended Dec 31, 2023, an increase from $16.9 million in the prior year period, despite a $44.2 million reduction from working capital changes[76] - Net cash used for investing activities was $126.0 million, primarily due to the $108.1 million purchase of montratec[46] - Net cash provided by financing activities was $67.8 million, driven by $120.0 million in new long-term debt proceeds, offset by $40.4 million in debt repayments and $6.0 million in dividends[77] Item 3. Quantitative and Qualitative Disclosures About Market Risk No significant changes to the company's market risks since the last annual report - There have been no material changes in the market risks as previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023[93] Item 4. Controls and Procedures Management evaluated the company's disclosure controls and procedures, concluding they were effective with no material changes to internal controls - Based on an evaluation as of December 31, 2023, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective[262] - There were no changes in the Company's internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, these controls[82] Part II. Other Information Covers legal proceedings, risk factors, equity security sales, and exhibits Item 1. Legal Proceedings No material developments in the company's legal proceedings since the last annual report - There have been no material developments from the legal proceedings as previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023[263] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's last annual report - There have been no material changes from the risk factors as previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023[295] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Update on share repurchase program, noting no repurchases during the quarter and remaining authorization - No shares of common stock were repurchased by the Company during the three months ended December 31, 2023[54][84] - As of December 31, 2023, approximately $19.0 million remains available for share repurchases under the current authorization plan[296] Item 6. Exhibits Lists exhibits filed with the quarterly report, including certifications and financial data - The report includes exhibits such as CEO and CFO certifications pursuant to the Sarbanes-Oxley Act and financial statements formatted in iXBRL[86][265]