Core Viewpoint - Columbus McKinnon Corporation has announced a definitive agreement to sell its U.S. power chain hoist and chain manufacturing operations for $210 million, with a potential earn-out of $25 million, to Pacific Avenue Capital Partners, aiming to simplify its portfolio and reduce debt while progressing towards the acquisition of Kito Crosby Limited [1][2][3]. Divestiture Details - The divestiture involves operations based in Damascus, Virginia, and Lexington, Tennessee, and is expected to close in the first quarter of calendar year 2026 [1]. - Cash proceeds of approximately $160 million are anticipated to be used for debt reduction related to the acquisition of Kito Crosby, aligning with the company's capital allocation priority [2]. Strategic Rationale - The divestiture is seen as a means to simplify the company's portfolio and reduce product redundancies with Kito Crosby, enhancing the combined business's customer value proposition [3][4]. - The acquisition of Kito Crosby is expected to create significant scale and capabilities, improving service across diverse markets [4][5]. Financial Outlook - The company expects to achieve $70 million in annual net run rate cost synergies post-acquisition, contributing to a projected Adjusted EBITDA margin in the mid-20% range [5][9]. - Following the acquisition and divestiture, the company anticipates combined net sales of approximately $2.00 billion to $2.05 billion and Adjusted EBITDA between $440 million and $460 million for fiscal 2026 [9]. Regulatory Process - Columbus McKinnon is actively working with the Antitrust Division of the U.S. Department of Justice to facilitate the acquisition's closure within the expected timeline [4][6]. Future Capital Allocation - The primary focus for capital allocation post-transaction will be on debt reduction, with expectations to achieve a Net Leverage Ratio below 4.0x by the end of fiscal 2028 [8][9].

Financial Data and Key Metrics Changes - Columbus McKinnon reported fiscal year 2025 net sales of $963 million, down 4% year over year on a constant currency basis, reflecting lower volume due to short cycle order softness [15] - In the fourth quarter, sales were $246.9 million, a decrease of 5% from the prior year on a constant currency basis, primarily due to a 9% decrease in short cycle sales [15] - Gross profit for the quarter was $79.8 million, down $14.5 million year over year, impacted by factory closure costs and lower sales volume [16] - Adjusted earnings per diluted share decreased by $0.15 versus the prior year, driven by lower volume and unfavorable mix [17] Business Line Data and Key Metrics Changes - Short cycle orders were flat on a constant currency basis in the quarter, but there was an improved comparison trend from the third quarter [6] - Precision conveyance orders grew by 19% year over year, indicating strong demand in this segment [36] - Backlog increased by 15% year over year to $322.5 million, reflecting strength in project-related orders, particularly in precision conveyance [15] Market Data and Key Metrics Changes - The company noted strength in vertical end markets such as battery production, life sciences, e-commerce, food and beverage, and aerospace [8] - Demand in industries impacted by tariffs, such as steel and heavy equipment, is expected to stabilize over time [8] - The company anticipates that macroeconomic uncertainty will continue to affect short cycle orders, which are sensitive to channel dynamics [7] Company Strategy and Development Direction - Columbus McKinnon is focused on operational execution, customer experience, and cost management while navigating an evolving macro environment [58] - The pending acquisition of Keto Crosby is expected to scale the business, expand customer capabilities, and enhance financial results [11] - The company aims to achieve tariff cost neutrality by the second half of fiscal 2026 and margin neutrality over time [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about order momentum and backlog as they enter fiscal 2026, despite ongoing macroeconomic uncertainties [58] - The company expects continued volatility related to evolving US policy landscape, impacting sales and margins in the first half of the year [9] - Management is encouraged by early order performance and quotation activity, indicating a healthy demand funnel [9] Other Important Information - The company paid down $60 million of debt in fiscal 2025, prioritizing debt repayment moving forward [18] - Adjusted EBITDA for the fourth quarter was $36.1 million, with an adjusted EBITDA margin of 14.6% [18] - The company expects a $40 million EBITDA impact from unmitigated tariff exposure in fiscal 2026 [19] Q&A Session Summary Question: What is the tariff rate embedded for China and EU for the $0.20 to $0.30 headwind in the first half of the year? - Management indicated a 14.5% tariff on China and 10% on EU tariffs are currently factored into the guidance [26] Question: Can you discuss the near-term outlook for short cycle orders? - Management noted that short cycle sales improved in the latter portion of Q4, with growth in order demand observed [28] Question: How much of the tariff impact is expected to come from pricing versus cost reductions? - Management stated that the demand environment remains uncertain, with pricing and surcharges expected to offset some tariff impacts, but volume reductions may occur due to price increases [33] Question: Can you elaborate on the strength in precision conveyance orders? - Management reported robust demand in precision conveyance, particularly from Montrotech and Dorner businesses, with strong performance in various end markets [36] Question: How will the tariff impacts carry over into the second half of the year? - Management expects to manage tariff impacts through pricing adjustments and surcharges, with a goal to cover tariff increases by the second half of the year [45]