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Item 1. Business

2022-05-25 compared with 2021-05-26 · 64 added, 63 removed, 177 unchanged (42% of the section changed)

Columbus McKinnon 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.

Columbus McKinnon Corporation ("Columbus McKinnon" or the "Company") is a leading worldwide designer, manufacturer and marketer of intelligent motion solutions that move the world forward and improve lives by efficiently and ergonomically moving, lifting, positioning and securing materials.

Key products include hoists, crane components, precision conveyor systems, 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.

The Company is focused on commercial and industrial applications for our products, which require the safety, reliability and quality provided by our advanced design and engineering know-how.

The Company is focused on commercial and industrial applications that require the safety, reliability and quality provided by its superior design and engineering know-how.

Our products are used for mission critical applications where we have established, trusted brands with significant customer retention.

Our targeted market verticals include general industries, mobile industries, energy and utilities, process industries, industrial automation, construction and infrastructure, food processing, entertainment, life sciences, consumer packaged goods and e-commerce/supply chain/warehousing.

In March 2021, the Company announced that it had entered into a definitive agreement to acquire Dorner Mfg.

The acquisition of Dorner closed on April 7, 2021.

Our targeted market verticals include general industries, transportation, energy and utilities, process industries, industrial automation, construction and infrastructure, food and beverage, entertainment, life sciences, consumer packaged goods and e-commerce/supply chain/warehousing.

On April 7, 2021, the Company completed its acquisition of Dorner Mfg.

Dorner, headquartered in Hartland, Wisconsin, is a leading automation solutions company providing unique, patented technologies in the design, application, manufacturing and integration of high-precision conveying systems.

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Dorner offers a broad range of precision conveying systems to our product offerings, which include low profile, flexible chain, large scale, sanitary and vertical elevation conveyor systems, as well as pallet system conveyors.

Dorner’s conveying solutions are offered in both modular standard and highly engineered custom formats, along with significant aftermarket offerings and support.

In addition, on December 1, 2021, the Company completed its acquisition of Garvey Corporation ("Garvey"), which further expanded its precision conveyance offerings.

Garvey is a leading accumulation systems solutions company providing unique, patented systems for the automation of production processes whose products complement those of Dorner.

The acquisitions of Dorner and Garvey accelerate the Company’s shift to intelligent motion and serves as a platform to expand capabilities in advanced, higher technology automation solutions.

In the United States, we are the market leader for hoists, material handling digital power control systems and precision conveyors, our principal lines of products, and have strong market positions with certain chain, forged fittings, and actuator products.

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It originally had three phases.

In Phase 1, which was completed during fiscal 2018, we focused on attaining operational control and instilling a performance-based culture to drive results, which included reorganizing the business into three product groups.

In Phase 1, which was completed during fiscal 2018, we focused on instilling a performance-based culture to drive results, which included reorganizing the business into three product groups.

Phase II, which began in the latter half of fiscal 2018, included simplifying the business with our 80/20 process, improving our operational excellence, and ramping the growth engine by investing in new product development and a digital platform to grow profitably.

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By the end of fiscal 2019, we divested these three businesses and completed the closure of one manufacturing facility in Ohio, which provided $2 million in cost savings in fiscal 2020.

During fiscal 2020, the Company began to further reduce its manufacturing footprint by initiating the closure and consolidation of the remaining facility in Ohio into our remaining U.S.

During fiscal 2020, the Company began to further reduce its manufacturing footprint by initiating the closure and consolidation of our remaining facility in Ohio into other U.S.

facilities, which was completed in fiscal 2021.

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Simplification with the 80/20 process and other operational efficiencies implemented enabled the consolidations without reducing our ability to serve our customers and address demand.

Phase III of the strategy was centered on evolving the business model including optimizing our current product portfolio as well as pursuing acquisitions to advance our transformation into a leading industrial technology company.

Phase III of the strategy was centered on evolving the business

model including optimizing our current product portfolio as well as pursuing acquisitions to advance our transformation into a leading intelligent motion solutions company.

The Dorner and Garvey transactions are examples of these types of acquisitions.

We have since evolved our Blueprint for Growth strategy to version 2.0 in order to accelerate our pivot to growth with an emphasis on broadening our expertise in intelligent motion solutions for material handling.

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The Framework defines four parallel paths for Columbus McKinnon’s growth and provides clear organic and strategic initiatives.

We have detailed action plans for each of the paths of our Core Growth framework.

• Strengthening the core is a foundational path focused on initiatives that will strengthen competencies and improve our competitive position within our existing share of our Serviceable Addressable Market (”SAM”).

Our Core Growth framework includes:

• Strengthening the Core which is a foundational path focused on initiatives that will strengthen competencies and improve our competitive position within our existing share of our Serviceable Addressable Market (”SAM”).

Initiatives include further developing commercial and product management competencies and improving our digital tools for a better, more efficient customer experience.

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Here we expand beyond our SAM into the broader Total Addressable Market (“TAM”).

This will involve building out our presence both geographically and in new verticals with expanded offerings, which we expect we can accomplish organically as well as with acquisitions.

• Reimagining the core is a more transformational path that rethinks our TAM and targets strategic expansion beyond that.

This involves building out our presence both geographically and in new verticals with expanded offerings, which we expect we can accomplish organically as well as with acquisitions.

• Reimagining the core is a more transformational path that rethinks our TAM and targets strategic expansion beyond our existing TAM.

As we think more broadly about material handling and increasing trends in intelligent motion, not just lifting, but solutions for how materials move throughout customer environments, there are some compelling ideas that emerge.

The Dorner acquisition is an example of reimagining Columbus McKinnon’s core, which added an additional $5 billion to our TAM, which specialty conveying microsegment of material handling is growing at an estimated 6% to 8% rate annually.

The strategy is geared toward investing in new products that solve customers’ tough problems and expanding into new platforms that provide intelligent motion solutions for material handling, such as precision conveyance capabilities.

We believe the acquisition of Dorner establishes a platform for expansion supported by new product development, a fragmented competitive landscape and complementary adjacencies.

It also allows Dorner to expand geographically and provides us with an entry point into a pipeline of additional acquisition opportunities in the fragmented precision conveying industry.

Our business is cyclical in nature and sensitive to changes in general economic conditions, including changes in industrial capacity utilization, industrial production, and general economic activity indicators, like GDP growth.

The Dorner and Garvey acquisitions are examples of reimagining Columbus McKinnon’s core, which added an additional $5 billion to our TAM, with the specialty conveying microsegment growing at an estimated 6% to 8% rate annually.

The strategy is geared toward investing in new products that solve our customers’ tough problems and expanding into new platforms that provide intelligent motion solutions for material handling, such as precision conveyance capabilities.

We believe the acquisitions of Dorner and Garvey establish a platform for expansion supported by new product development, a fragmented competitive landscape and complementary adjacencies.

It also allows Dorner and Garvey to expand geographically by having access to our global footprint and provides us with an entry point into a pipeline of additional acquisition opportunities in the fragmented precision conveying industry.

Our legacy Lifting business is cyclical in nature and sensitive to changes in general economic conditions, including changes in industrial capacity utilization, industrial production, and general economic activity indicators, like GDP growth.

and Eurozone capacity utilization and the ISM Production Index are leading market indicators for our Company.

Like many global companies, we have been, and continue to be, affected by the Novel Coronavirus ("COVID-19").

During fiscal 2021, we took appropriate measures to generate positive operating income and protect the cash flow and liquidity of the Company.

This included reducing our cost base, reducing working capital needs, and reducing capital expenditures.

These measures helped contribute to positive operating income and strong cash flow throughout fiscal 2021 despite the impact of COVID-19.

Business Description

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power and motion control systems, such as AC and DC drive systems, radio remote controls, push button pendant stations, brakes, and collision avoidance and power delivery subsystems.

The fiscal 2022 acquisition of Dorner expands our product offerings to include a broad range of highly engineered, precision conveying solutions.

The fiscal 2022 acquisitions of Dorner and Garvey expand our product offerings to include a broad range of highly engineered, precision conveying solutions.

Our products are typically manufactured for stock or assembled to order from standard components, and are sold primarily through a variety of commercial distributors and, to a lesser extent, directly to end-users.

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The diverse end-users of our products are in a variety of industries including manufacturing, power generation and distribution, utilities, wind power, warehouses, commercial construction, oil and gas exploration and refining, petrochemical, marine, ship building, transportation and heavy-duty trucking, agriculture, logging and mining.

The fiscal 2022 Dorner

acquisition expands the Company's reach to include the stable life sciences, food processing and consumer packaged goods markets and high growth industrial automation and e-commerce sectors.

The acquisitions

of Dorner and Garvey expand the Company's reach to include the stable life sciences, food processing and consumer packaged goods markets and high growth industrial automation and e-commerce sectors.

We also serve a niche market for the entertainment industry, including permanent and traveling concerts, live theater, and sporting venues.

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Hoists 48 % 61 %

High-precision conveying systems 16 —

Digital power control and delivery systems 11 12

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Our hoists are sold for use in numerous general industrial applications, as well as for use in the construction, energy and utilities, steel and metals processing, mining, transportation, entertainment, and other markets.

We also supply hoist trolleys, driven manually or by electric motors, that are used in conjunction with hoists.

We also supply hoist trolleys, driven manually or by electric motors, which are used in conjunction with hoists.

We also offer several lines of standard and custom-designed, below-the-hook tooling, clamps, and textile strappings.

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Our STAHL branded products are sold to a variety of end markets including automotive, general manufacturing, oil and gas, steel and concrete, power generation as well as process industries such as chemical and pharmaceuticals.

High-precision conveying systems – Our fiscal 2022 acquisitions of Dorner and Garvey expanded our product offerings to include high-precision, specialty conveyor system solutions.

These conveyor systems range from build to order modular standard systems to highly engineered customer solutions.

These products offer customers high quality and reliable solutions that enhance productivity and profitability.

Digital Power Control and Delivery Systems - Through our Magnetek brand, we are a leading provider of innovative power control and delivery systems and solutions for overhead material handling applications used in a number of diverse industries, including aerospace, automotive, steel, aluminum, paper, logging, mining, ship loading, nuclear power plants, and heavy movable structures.

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In addition, our product options include a number of regenerative controls for both new building installations and elevator modernization projects that help building owners save energy.

High-precision conveying systems – Our fiscal 2022 acquisition of Dorner expands our product offerings to include high-precision, specialty conveyor system solutions.

These conveyor systems range from build to order modular standard systems to highly engineered customer solutions.

These products offer customers high quality and reliable solutions that enhance productivity and profitability.

Our fiscal 2021 results did not include any sales of these products as the acquisition of Dorner was completed on April 7, 2021.

Distribution and Markets

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EPC firms are responsible for project management or construction management of production facilities that purchase lifting solutions from crane and hoist builders.

Our backlog of orders at March 31, 2021 was approximately $171,698,000 compared to approximately $131,030,000 at March 31, 2020.

The increase is a result of higher order rates as markets recover from COVID-19 and to a lesser extent, changing foreign currency rates.

Our backlog of orders at March 31, 2022 was approximately $309,052,000, including $60,223,000 of backlog related to the Dorner and Garvey acquisitions, compared to approximately $171,698,000 at March 31, 2021.

The increase is a result of growing order rates as markets recover from COVID-19, backlog related to the acquired businesses, as well as higher than normal backlog due to supply chain challenges.

Our orders for standard products are generally shipped within one week.

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Competitive Conditions

The material handling industry remains fragmented.

The material handling and precision conveyance industries remains fragmented.

We face competition from a wide range of regional, national, and international manufacturers globally.

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net sales for fiscal 2022.

Major competitors for hoists are Konecranes, which acquired Terex's Material Handling and Port Solutions business segment, and Kito (and its U.S.

Major competitors for hoists are Konecranes, and Kito (and its U.S.

subsidiary Harrington);

for chain are Campbell Chain, Peerless Chain Company (acquired by Kito), and American Chain and Cable Company;

for digital power control systems are Konecranes, Power Electronics International, Inc., Cattron Group International (a division of Harbor Group), Conductix-Wampfler (a division of Delachaux Group), Control Techniques (a division of Emerson Electric), OMRON Corporation, KEB GmbH, and Fujitec;

for forged attachments are The Crosby Group and Brewer Tichner Company;

and for actuators and rotary unions are Deublin, Joyce-Dayton, and Nook Industries.

for digital power control systems are Konecranes, Power Electronics International, Inc., Cattron Holdings (a division of Harbour Group), Conductix-Wampfler (a division of Delachaux Group), Control Techniques (a division of Nidec Corporation), OMRON Corporation, KEB GmbH, and Fujitec;

for forged attachments are The Crosby Group, Brewer Tichner Company and Chicago Hardware and Fixture Company;

for actuators and rotary unions are Deublin, Joyce-Dayton, and Nook Industries, a division of Altra Industrial Motion Corp.;

and for precision conveyors and accumulators are FlexLink, Bosch Rexroth AG, MK North America, Inc., Duravant, Nercon Eng.

Inc and Arrowhead Systems.

Human Capital Management

Headquartered in Buffalo, New York, Columbus McKinnon’s global footprint includes offices and manufacturing facilities in more than 23 countries across North America, Latin America, Europe, Africa and Asia.

Headquartered in Buffalo, New York, Columbus McKinnon’s global footprint includes offices and manufacturing facilities in more than 24 countries across North America, Latin America, Europe, the Middle East, Africa and Asia.

At March 31, 2022, we had 3,224 employees globally.

Approximately 6% of our employees are represented under two separate U.S.

collective bargaining agreements that expire in June 2021 and September 2021.

collective bargaining agreements that expire in May 2024 and September 2024.

We also have various labor agreements with our non-U.S.

employees that we negotiate from time to time.

We have good relationships with our employees and positive, productive relationships with our unions.

We have good relationships with our employees and positive, productive

relationships with our unions.

We believe the risk of employee or union led disruption in production is remote.

The acquisition of Dorner in fiscal 2022 adds approximately 400 employees to our global workforce and four primary manufacturing facilities.

Successful execution of our way forward is dependent on attracting, developing, and retaining key employees and members of

The acquisitions of Dorner and Garvey in fiscal 2022 added approximately 596 employees to our global workforce and five primary manufacturing facilities.

Successful execution of our strategy is dependent on attracting, developing, and retaining key employees and members of

our management team, which we achieve through the following:

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Our people enable us to grow, and our values ensure we grow responsibly and sustainably.

• The Company believes strongly in workplace safety.

• The Company places the highest priority on workplace safety.

We feel it is critical to ensure our most valuable assets, our employees, have a safe environment to work in every day.

We added safety as our first core value as we entered fiscal 2021, recognizing the significant impact of the pandemic on everyone’s lives.

“Connect safety to everything you do” highlights the importance of safety to our culture.

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For fiscal 2022, the Company had an overall safety incident rate of 0.70 (number of injuries and illnesses multiplied by 200,000, divided by hours worked).

This figure excludes our fiscal 2022 acquisitions of Dorner and Garvey which will be incorporated in Fiscal 2023.

• We are committed to embracing diversity, equity and inclusion and making it a part of everything we do.

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We are dedicated to building a company that future generations can be proud of and a team that embraces diversity and appreciates differences across the enterprise.

In fiscal 2021, we made diversity, equity and inclusion a strategic development area and hired a Director of Talent and Diversity, Equity and Inclusion to raise awareness and drive behaviors aligned to our values.

We have embedded diversity, equity and inclusion into the People and Values framework of the Columbus McKinnon Business System.

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We have updated our core value “Win as a team” to specifically address embracing diversity.

In response to the COVID-19 pandemic, we immediately mobilized an Enterprise Covid-19 Task Force and local task forces at each of our manufacturing sites and worked diligently to stay current with constantly evolving information.

With guidance from the World Health Organization, U.S.

Centers for Disease Control and Prevention, and other health organizations around the world, we implemented strict safety protocols at our sites, such as face covering requirements, daily temperature testing, social distancing, and frequent cleaning and sanitizing measures to keep our employees safe.

We had, and continue to have, regular communication with employees to keep them abreast of the corporate-wide expectations and posted signage throughout our facilities to remind our associates of the new heightened safety protocols.

All associates who were able to work remotely were asked to do so and all safety protocols and policies were kept up to date by the Enterprise COVID-19 Task Force and documented in a Company “playbook.”

As part of our response to the COVID-19 pandemic, we implemented strict safety protocols at our sites, as recommended by medical and public health experts.

We continue to have regular communication with employees to keep them abreast of the corporate-wide expectations and posted signage throughout our facilities reminds our associates of the new heightened safety protocols, including frequent cleaning and increased sanitization efforts to keep our employees safe.

Associates where possible are being brought back to the office in a hybrid working model, increasing site collaboration while maintaining flexibility.

We also recognize our corporate responsibility to advance our Environmental Social and Governance (“ESG”) efforts and to be held accountable for making progress.

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We are taking deliberate steps to fully integrate ESG into our enterprise strategy, our business system, and our daily actions.

Our focus for fiscal 2021 was to develop and formalize our ESG strategy and build the framework that will enable us to prosper on this exciting journey.

Our main objectives for fiscal 2021 included:

• Lay the foundation for our ESG journey with solid processes and policies;

In fiscal 2022, we made it a priority to articulate our Purpose - Together we create intelligent motion solutions that move the world forward and improve lives.

In addition, we also set the following objectives for fiscal 2022:

• Make significant investments in forward advancement of ESG (People & Technology enablers);

• Perform extensive data collection and analysis to identify areas for improvement;

• Establish Fiscal Year 2021 as our baseline year for ESG metrics;

• Perform Materiality and Risk Assessments to allow for discipline and focus regarding ESG efforts;

• Build upon our baseline year ESG metrics;

• Build upon our legacy products and commitment to customers, while also growing through acquisitions;

• Launch our CMCO Cares platform, a more formal and centralized process for corporate giving and community involvement;

• Be more transparent with internal and external stakeholders through communications and public disclosures.

As we look forward to fiscal 2022 and beyond, we will continue evolving and improving.

We have set aggressive targets and aspirational goals for ourselves and we are committed to holding ourselves accountable to our commitments by embedding them into our business goals.

As we look forward to fiscal 2023 and beyond, we have additional plans that will continue to move our ESG initiatives forward.

We continue to collect and analyze data to set realistic, yet challenging goals.

We expect to publish several of these goals in our next Corporate Social Responsibility Report.

Raw Materials and Components

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electro-mechanical components;

and standard variable drives.

These commodities are all available from multiple sources.

accumulators and standard variable drives.

We purchase most of these raw materials and components from a limited number of strategic and preferred suppliers under agreements that are negotiated on a Company-wide basis through our global purchasing group.

Generally, as we experience fluctuations in our costs, we reflect these increases in costs as price increases to our customers with the goal of being margin neutral.

Our ability to pass on these increases is dependent upon market conditions.

Currently, as a result of global supply chain challenges, we are experiencing higher raw material costs.

To date, we have successfully raised prices several times globally to our customers to cover these increased raw material costs and protect gross margins.

Environmental and Other Governmental Regulation

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We believe that we are in substantial compliance with these laws and regulations and do not believe that future compliance with such laws and regulations will have a material adverse effect on our operating results, financial condition, or liquidity.

See Note 16 to our March 31, 2021 consolidated financial statements for more information on our matters involving litigation.

See Note 16 to our March 31, 2022 consolidated financial statements included in Item 8 of this Form 10-K for more information on our matters involving litigation.

Available Information

Our internet address is www.columbusmckinnon.com .

We make available free of charge through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the Securities and Exchange Commission.

The content on any website referred to in this Annual Report on Form 10-K (“Form 10-K”) is not incorporated by reference into this Form 10-K, unless expressly noted otherwise.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business