# Columbus McKinnon Corp: Form 10-Q for the period ended Jun 30, 2024

- Company: [Columbus McKinnon Corp](/companies/cmco.md) (CIK 1005229)
- Form: 10-Q
- Filed: 2024-07-31
- Accepted by EDGAR: Jul 31, 2024, 16:16 ET
- Period: 2024-06-30
- Accession: 0001005229-24-000234
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1005229/000100522924000234/cmco-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1005229/000100522924000234/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $239.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $150.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $89.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $6.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $21.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $3.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $8.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.30 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | $0.30 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 29,127,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-04-01 to 2024-06-30 | −$10.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-04-01 to 2024-06-30 | $4.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-04-01 to 2024-06-30 | $2.0m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-06-30 | $68.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $478.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $1.78bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $231.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $895.9m | us-gaap:Liabilities |
| Current portion of debt | at 2024-06-30 | $50.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-06-30 | $885.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 17,917 characters.

### Executive Overview

The Company is a leading worldwide designer, manufacturer and marketer of intelligent motion solutions, including motion control products, technologies, automated systems and services, that efficiently and ergonomically move, lift, position and secure materials. Our key products include hoists, crane components, precision conveyors, actuators, rigging tools, light rail workstations, and digital power and motion control systems. These are highly relevant, professional-grade solutions that solve customers’ critical material handling requirements.

Founded in 1875, we have grown to our current size and leadership position through organic growth and acquisitions. We developed our leading market position over our 150-year history by emphasizing technological innovation, manufacturing excellence and superior customer service. In accordance with our strategic framework, we are building out our business system (CMBS) and growth framework to be market-led, customer-centric, and operationally excellent with our people and values at the core. We believe this will transform Columbus McKinnon into a top-tier Intelligent Motion Solutions company. We expect our strategy will enhance shareholder value by expanding EBITDA margins and return on invested capital ("ROIC").

Our revenue base is geographically diverse with approximately 43% of net sales derived from customers outside the U.S. for the three months ended June 30, 2024. We believe this diversity balances the impact of changes that occur in local economies, as well as benefits the Company by providing access to growing emerging markets. We monitor both U.S. and Eurozone Industrial Capacity Utilization statistics as well as the ISM Production Index as indicators of anticipated demand for our products. In addition, we continue to monitor the potential impact of other global and U.S. trends including, industrial production, trade tariffs, raw material cost inflation, interest rates, foreign currency exchange rates, and activity of end-user markets around the globe.

From a strategic perspective, we are investing in new products as we focus on our greatest opportunities for growth. We maintain a strong North American market share with significant leading market positions in hoists, lifting and sling chain, forged attachments, actuators, precision conveyors and digital power and motion control systems for the material handling industry. We seek to maintain and enhance our market share by focusing our sales and marketing activities toward select North American and global market sectors including general industrial, energy, automotive, heavy OEM, entertainment, construction and infrastructure, life sciences food and beverage, e-commerce and consumer products.

In fiscal 2024, the Company acquired montratec GmbH ("montratec"), a leading automation solutions company that designs and develops intelligent automation and transport systems for interlinking industrial production and logistics processes. montratec product offerings compliment the previous acquisitions of both Dorner and Garvey, and these acquisitions are collectively expected to accelerate the Company’s shift into a provider of intelligent motion solutions and serve as a platform to expand capabilities in advanced, higher technology automation solutions.

Regardless of the economic climate and point in the economic cycle, we constantly explore ways to increase operating margins as well as further improve our productivity and competitiveness. We have specific initiatives to reduce lead-times, improve on-time deliveries, reduce warranty costs, and improve material and factory productivity. The initiatives are being driven by the implementation of our business operating system, CMBS. We are working to achieve these strategic initiatives through business simplification, operational excellence, and profitable growth initiatives. We believe these initiatives will enhance future operating margins.

Our principal raw materials and components purchases were approximately $396 million in fiscal 2024 (or 62% of Cost of product sold) and include steel, consisting of rod, wire, bar, structural, and other forms of steel; electric motors; bearings; gear reducers; castings; steel and aluminum enclosures and wire harnesses; electro-mechanical components; and standard variable drives and controls. These commodities are all available from multiple sources. We purchase most of these raw materials and components from a limited number of strategic and preferred suppliers under agreements which are negotiated on a company-wide basis through our global purchasing group. While we are still experiencing some availability issues for select raw materials and components, we are working with our supply base to prioritize shipments and improve availability of key components.

We operate in a highly competitive and global business environment. We see a variety of opportunities in our markets and geographies, including trends toward automation and increasing labor productivity and the expansion of market opportunities in Asia and other emerging markets. While we execute our long-term growth strategy, we are supported by our strong free cash flow as well as our liquidity position and flexible debt structure.

### Results of Operations

#### Three months ended June 30, 2024 and June 30, 2023

Net sales in the three months ended June 30, 2024 were $239,726,000, up $4,234,000 or 1.8% from the three months ended June 30, 2023 net sales of $235,492,000. Net sales were positively impacted by $3,546,000 due to price increases, $2,655,000 of revenue from the montratec acquisition, offset by $1,374,000 of unfavorable sales volume. Foreign currency translation unfavorably impacted sales by $593,000 for the three months ended June 30, 2024.

Gross profit in the three months ended June 30, 2024 was $89,030,000, an increase of $2,381,000 or 2.7% from the three months ended June 30, 2023 gross profit of $86,649,000. Gross profit margin was 37.1% in the fiscal 2025 first quarter compared to 36.8% in the fiscal 2024 first quarter. The increase in gross profit was due to $3,442,000 of price increases net of manufacturing costs changes including inflation and other cost changes, $799,000 as a result of the acquisition of montratec, and $197,000 due to favorable sales mix. These increases in gross margin were offset by $1,625,000 of start-up costs related to the new Monterrey, Mexico facility and $196,000 of net business realignment costs. The translation of foreign currencies had a $236,000 unfavorable impact on gross profit in the three months ended June 30, 2024.

Selling expenses were $27,770,000 and $24,981,000, or 11.6% and 10.6% of net sales, in the fiscal 2025 and 2024 first quarters, respectively. Selling expenses increased by $909,000 related to the montratec acquisition and $802,000 primarily related to trade show and travel costs including the Company's strategic partner conference that was not held in the prior year. The remaining increase is due to higher employee related costs during the three months ended June 30, 2024. Foreign currency translation had a $99,000 favorable impact on selling expenses in the three months ended June 30, 2024.

General and administrative expenses were $26,447,000 and $27,443,000, or 11.0% and 11.7% of net sales, in the fiscal 2025 and 2024 first quarters, respectively. General and administrative expenses decreased by $2,501,000 related to prior year acquisition deal related costs which did not recur and $1,132,000 of net headquarter realignment costs. Additionally, the Company had lower stock based compensation costs of $622,000 compared to the prior year. These cost decreases were offset by $1,852,000 of start-up costs related to the new Monterrey, Mexico facility and $694,000 from the montratec acquisition. The remaining increase is due to higher employee related costs during the three months ended June 30, 2024. Foreign currency translation had a $40,000 favorable impact on general and administrative expenses in the three months ended June 30, 2024.

Research and development expenses were $6,166,000 and $5,900,000, or 2.6% and 2.5% of net sales, in the fiscal 2025 and 2024 first quarter, respectively. The increase in research and development expenses was due to additional spending to achieve strategic goals related to new product development.

Amortization of intangibles was $7,500,000 and $6,877,000 in the fiscal 2025 and 2024 first quarters, respectively, with the increase related to new intangible assets recorded from the montratec acquisition.

Interest and debt expense was $8,235,000 in the first quarter ended June 30, 2024 compared to $8,625,000 in the first quarter ended June 30, 2023. The decrease is a result of a reduction of the Company's long term debt as a result of accelerated principal payments.

Investment income of $209,000 compared to $543,000 in the first quarter ended June 30, 2024 and June 30, 2023. Investment income relates to the mark-to-market adjustments on the marketable securities held in the Company’s wholly owned captive insurance subsidiary and the Company's equity method investment in EMC, described in Note 6 of the financial statements.

Income tax expense as a percentage of income from continuing operations before income tax expense was 28% and 27% in the first quarters ended June 30, 2024 and June 30, 2023, respectively. Typically, these percentages vary from the U.S. statutory rate of 21% primarily due to varying statutory tax rates at the Company's foreign subsidiaries, and the jurisdictional mix of income for these subsidiaries. Further, the impact of equity compensation increased the rate by 3 percentage points for the quarter ended June 30, 2024.

### Liquidity and Capital Resources

Cash, cash equivalents, and restricted cash totaled $68,623,000 at June 30, 2024, a decrease of $45,753,000 from the March 31, 2024 balance of $114,376,000.

#### Cash flow from operating activities

Net cash used for operating activities was $10,758,000 for the three months ended June 30, 2024 compared to $17,247,000 for the three months ended June 30, 2023. Net income of $8,629,000 along with non-cash adjustments to net income of $16,868,000 contributed to cash used for operations. The non-cash adjustments included $11,840,000 of depreciation and amortization, $2,584,000 of non-cash lease expense and $1,101,000 of stock-based compensation. Changes in working capital reduced cash from operations by $34,729,000 as a result of an increase of $15,613,000 in inventories, a decrease in accrued expenses of $11,600,000, a decrease of $8,640,000 in trade payables, and an increase in prepaid expenses of $2,222,000 offset by a decrease in trade accounts receivable of $3,346,000. The increase in inventories relates to purchases required for expected future customer demand. The decrease in accrued expenses primarily consists of the fiscal 2024 annual incentive plan payments, which were paid in the quarter ended June 30, 2024 as well as a payment to the former owners of STAHL related to a tax indemnity agreement. Refer to our Fiscal 2024 10-K for further discussion of this tax payment. Cash used for operations also included a decrease of $1,399,000 in other non-current liabilities primarily due to lease payments for the three months ended June 30, 2024.

#### Cash flow from investing activities

Net cash used for investing activities was $4,041,000 for the three months ended June 30, 2024 compared to $112,684,000 for the three months ended June 30, 2023. The use of cash for the three months ended June 30, 2024 primarily consisted of $4,629,000 in capital expenditures. In the three months ended June 30, 2023, the most significant use of cash in the period related to the Company's purchase of montratec for $107,605,000.

#### Cash flow from financing activities

Net cash used for financing activities was $30,583,000 for the three months ended June 30, 2024 and net cash provided by financing activities was $103,985,000 for the three months ended June 30, 2023. The most significant uses of cash were for $20,158,000 in debt repayments, a $6,711,000 payment to the former owners of montratec for the contingent consideration agreement (refer to Note 2 for additional information) and a $2,016,000 dividend payment in the quarter. Cash flows from hedging activities related to the Company's cross currency swap are classified as financing activities in the Statement of Cash Flows which resulted in a net cash inflow of $122,000 during the three months ended June 30, 2024. In the three months ended June 30, 2023, the significant source of cash was $120,000,000 in gross proceeds from the issuance of long-term debt, which was used to fund the montratec acquisition.

We believe that our cash on hand, cash flows, and borrowing capacity under our Amended and Restated Credit Revolving Credit Facility will be sufficient to fund our ongoing operations and debt obligations, and capital expenditures for at least the next twelve months. This belief is dependent upon successful execution of our current business plan and effective working capital utilization. No material restrictions exist in accessing cash held by our non-U.S. subsidiaries. We expect to meet our funding needs with cash provided by our U.S. operations, as well as by repatriating non-U.S. cash. We do not expect to incur significant incremental U.S. taxes as we repatriate funds. As of June 30, 2024, $51,126,000 of cash and cash equivalents were held by foreign subsidiaries.

Refer to Note 9 for further discussion of the Company's long-term debt and financing costs.

### Capital Expenditures

In addition to keeping our current equipment and plants properly maintained, we are committed to replacing, enhancing and upgrading our property, plant and equipment to support new product development, improve productivity and customer responsiveness, reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet environmental requirements, enhance safety and promote ergonomically correct work stations. Consolidated capital expenditures for the three months ended June 30, 2024 and June 30, 2023 were $4,629,000 and $5,273,000, respectively. We expect capital expenditure spending in fiscal 2025 to range from $20,000,000 to $30,000,000.

### Inflation and Other Market Conditions

Our costs are affected by inflation in the U.S. economy and, to a lesser extent, in non-U.S. economies including those of Europe, Canada, Mexico, South America, and Asia-Pacific. We do not believe that general inflation has had a material effect on our results of operations over the periods presented despite rising inflation due to our ability to pass on rising costs through price increases. In the past we have experienced higher raw material, freight, and logistics costs as a result of the COVID-19 pandemic, which we have been able to recover with pricing actions. In the future, we may not be able to pass on similar cost increases to our customers.

### Goodwill Impairment Testing

We test goodwill for impairment at least annually and more frequently whenever events occur or circumstances change that indicate there may be impairment. These events or circumstances could include a significant long-term adverse change in the business climate, poor indicators of operating performance, or a sale or disposition of a significant portion of a reporting unit.

We test goodwill at the reporting unit level, which is one level below our operating segment. We identify our reporting units by assessing whether the components of our operating segment constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. We also aggregate components that have similar economic characteristics into single reporting units (for example, similar products and / or services, similar long-term financial results, product processes, classes of customers, etc.). We have three reporting units: the Linear Motion Products reporting unit, the Rest of Products reporting unit, and the Precision Conveyance reporting unit, which have goodwill totaling $9,699,000, $303,499,000, and $395,373,000, respectively, as of June 30, 2024.

We currently do not believe that it is more likely than not that the fair value of any of our reporting units is less than its applicable carrying value. Additionally, we currently do not believe that we have any significant impairment indicators or that any of our reporting units with goodwill are at risk of failing Step One of the goodwill impairment test. However, if the projected long-term revenue growth rates, profit margins, or terminal growth rates are significantly lower, and/or the estimated weighted-average cost of capital is considerably higher, future testing may indicate impairment of one or more of the Company’s reporting units and, as a result, the related goodwill may be impaired.

Refer to our 2024 10-K for additional information regarding our annual goodwill impairment process.

### Seasonality and Quarterly Results

Quarterly results may be materially affected by the timing of large customer orders, periods of high vacation and holiday concentrations, legal settlements, gains or losses in our portfolio of marketable securities, restructuring charges, favorable or unfavorable foreign currency translation, divestitures and acquisitions. Therefore, the operating results for any particular fiscal quarter are not necessarily indicative of results for any subsequent fiscal quarter or for the full fiscal year.

### Effects of New Accounting Pronouncements

Information regarding the effects of new accounting pronouncements is included in Note 16 to the accompanying consolidated financial statements included in this Quarterly Report on Form 10-Q.

## Controls and procedures

As filed, 1,129 characters.

As of June 30, 2024, an evaluation was performed under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. These disclosure controls and procedures have been designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is made known to them on a timely basis, and that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based on that evaluation, the Company’s management, including our Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2024.

There have been no other 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, our internal control over financial reporting.

## Risk factors

As filed, 140 characters.

There have been no material changes from the risk factors as previously disclosed in the 2024 10-K for the fiscal year ended March 31, 2024.

Filed Jul 31, 2024.
Source: SEC EDGAR, the filing index for accession 0001005229-24-000234. Last ingested by Listed: Nov 3, 2026, 19:38 ET. No prices; not investment advice.