What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-05-28 compared with 2024-05-29 · 60 added, 61 removed, 126 unchanged (49% of the section changed)

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We believe this will transform Columbus McKinnon into a top-tier intelligent motion solutions company.

We expect our strategy will enhance shareholder value by growing sales, expanding EBITDA margins and increasing our return on invested capital ("ROIC").

We expect our strategy will enhance shareholder value by growing sales and expanding EBITDA margins.

Our revenue base is geographically diverse with approximately 44% derived from customers outside the U.S.

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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.

From a strategic perspective, we are investing in new products and channels as we focus on our greatest opportunities for growth.

We have 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 are 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.

On May 31, 2023, the Company completed its acquisition of montratec GmbH ("montratec"), a leading automation solutions company that designs and develops intelligent automation and transport systems for interlinking industrial production and logistics processes.

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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.

Currently, as a result of global inflation, we are experiencing higher raw material costs and availability issues for select raw materials and components.

Currently, as a result of global inflation and tariffs, we are experiencing higher raw material costs and availability issues for select raw materials and components.

To date, we have raised prices to our customers to cover these increased raw material costs and 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.

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.

On February 10, 2025, the Company announced that it had entered into a definitive agreement to acquire Kito.

The Kito Acquisition closing is subject to certain conditions, including regulatory approval as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and other customary closing conditions described in the stock purchase agreement entered into by the Company and Kito in connection with the Kito Acquisition.

The Kito Acquisition is expected to meaningfully improve the Company's scale, enhance our collective geographic reach, significantly expand our lifting securement and consumables portfolio and enhance our customer value proposition.

With global engineering, manufacturing, distribution, and operations, Kito provides a broad range of products and solutions for the most demanding applications.

Kito’s people, products, solutions, and service have innovated the lifting and securement industry throughout its long history.

Kito's iconic brands include Kito, Crosby, Harrington, Gunnebo Industries, and Peerless.

We expect that the Kito Acquisition will strengthen our core lifting business and further the Company's position as 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.

The Company anticipates the Kito Acquisition to close during fiscal 2026.

RESULTS OF OPERATIONS

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Fiscal 2025 Compared to Fiscal 2024

Fiscal 2024 sales were $1,013,540,000, an increase of 8.3%, or $77,300,000 compared with fiscal 2023 sales of $936,240,000.

Sales for the fiscal year were positively impacted by price increases of $33,837,000 as well as $32,584,000 of incremental sales from the montratec acquisition.

Offsetting these increases was $469,000 in decreased sales volume.

The translation of foreign currency had a favorable impact of $11,348,000.

Fiscal 2025 sales were $963,027,000, a decrease of 5.0%, or $50,513,000 compared with fiscal 2024 sales of $1,013,540,000.

Fiscal 2025 sales were positively impacted by price increases of $12,548,000 as well as $2,655,000 of incremental sales from the montratec acquisition.

Offsetting these increases were lower sales volume of $60,238,000.

The translation of foreign currency had an unfavorable impact of $5,478,000.

Gross profit was $325,680,000 and $374,838,000 or 33.8% and 37.0% of net sales in fiscal 2025 and 2024, respectively.

The fiscal 2024 increase in gross profit of $32,739,000 or 9.6% is the result of the $28,987,000 of price increases net of material inflation, $13,828,000 in gross profit as a result of the acquisition of montratec, $946,000 due to favorable sales mix and $904,000 of decreased product liability costs offset by $12,087,000 of other manufacturing cost changes, $3,294,000 of start up costs for our new Monterrey, Mexico facility and $346,000 of current year business realignment costs.

The translation of foreign currencies had a $3,756,000 favorable impact on gross profit for the year ended March 31, 2024.

The fiscal 2025 decrease in gross profit was $49,158,000 or 13.1%.

The decrease in gross profit was due to start-up costs totaling $6,919,000 related to the Monterrey, Mexico facility, $15,178,000 of costs incurred to close our Charlotte Manufacturing Operations and two of our Precision Conveyance operations which includes employee severance costs and asset-related impairments, $33,007,000 due to lower sales volumes, $1,999,000 due to higher product liability expenses, $648,000 of net business realignment costs, and $171,000 of additional costs due to Hurricane Helene's impact on one of our facilities.

These decreases were offset by $9,456,000 of price increases net of material inflation and other manufacturing costs changes and $799,000 as a result of the acquisition of montratec.

The translation of foreign currencies had a $1,491,000 unfavorable impact on gross profit for the year ended March 31, 2025.

Selling expenses were $110,043,000 and $105,341,000, or 11.4% and 10.4% of net sales in fiscal years 2025 and 2024, respectively.

Selling expenses increased $6,426,000 as a result of the montratec acquisition offset by a decreases in net business realignment costs, which did not recur for $3,807,000, and lower employee costs of $1,157,000 as a result of the prior year business realignment.

Foreign currency translation had a $1,055,000 unfavorable impact on selling expenses.

Selling expenses increased by $909,000 as a result of the montratec acquisition, $929,000 for net business realignment costs, $891,000 for net factory and warehouse consolidation cost 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 year ended March 31, 2025.

Foreign currency translation had a $769,000 favorable impact on selling expenses in the year ended March 31, 2025

General and administrative expenses were $107,249,000 and $106,760,000 or 11.1% and 10.5% of net sales in fiscal 2025 and 2024, respectively.

The increase in general and administrative expenses was due to the acquisition of montratec which added $3,586,000 in expenses, net increases of $2,595,000 for acquisition and deal integration costs, an increase in stock-based compensation of $2,171,000, an increase of $1,596,000 for the new Monterrey, Mexico facility and an increase in net business realignment costs of $1,084,000.

These increases were offset by a $1,230,000 adjustment in the prior year for the Garvey acquisition contingent consideration which did not recur.

Foreign currency translation had a $711,000 unfavorable impact on general and administrative expenses for the year ended March 31, 2024.

The increase includes $7,803,000 of net deal and integration costs primarily attributable to the Kito Acquisition and $1,299,000 of expense to record a reserve against an accounts receivable balance for a customer who declared bankruptcy in January 2025.

These increases were offset by lower employee related costs of $2,485,000 including lower incentive-based compensation.

Additionally, the Company had lower stock based compensation costs of $4,903,000 compared to the prior year and lower net headquarter relocation expenses of $1,686,000.

Foreign currency translation had a $841,000 favorable impact on general and administrative expenses for the year ended March 31, 2025.

Research and development expenses were $23,869,000 and $26,193,000 in fiscal 2025 and 2024, respectively.

As a percentage of consolidated net sales, research and development expenses were 2.5% and 2.6% in fiscal 2025 and 2024, 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 were $29,396,000 and $26,001,000 in fiscal 2024 and 2023, respectively, with the increase related to amortization of new intangible assets acquired in the montratec acquisition.

Amortization of intangibles were $29,946,000 and $29,396,000 in fiscal 2025 and 2024, respectively, with fluctuation attributable to foreign currency translation.

Interest and debt expense was $32,426,000 and $37,957,000 in fiscal 2025 and 2024, respectively.

The increase is related to higher interest rates, as well as increased borrowings to finance the montratec acquisition.

The decrease is a result of a reduction in the Company's long term debt as a result of accelerated principal payments and lower interest rates.

Investment income of $1,302,000 and $1,759,000, in fiscal 2025 and 2024, respectively, related to earnings on marketable securities held in the Company’s wholly owned captive insurance subsidiary and the Company's equity method investment in EMC, described in Note 7 to our March 31, 2025 consolidated financial statements.

Foreign currency exchange resulted in a loss of $1,826,000 and a gain $2,189,000 in fiscal 2024 and 2023, respectively.

This unfavorable change was due to the strengthening of the U.S.

Dollar in comparison to the Euro and other currencies where our businesses operates.

Other expense was $7,597,000 in fiscal 2024 and other income was $2,072,000 in fiscal 2023.

During fiscal 2024, the Company terminated both of its Canadian pension plans and began the process to terminate one of its U.S.

pension plans.

plan, lump sum payments were made to eligible participants who elected to receive them.

Both of these actions resulted in a settlement charge of $4,984,000.

Further as discussed in Note 17, the increase in expense is also related to an income tax refund which will be paid to the former owners of STAHL, as agreed to in a tax indemnification agreement, as it relates to a tax period prior to the acquisition date.

Other expense was $25,775,000 and $7,597,000 in fiscal 2025 and fiscal 2024, respectively.

The increase primarily relates to the non-cash settlement charge of $23,634,000 associated with the termination of one of the Company's U.S.

pension plans in current year ending March 31, 2025 described in Note 13 of the financial statements.

Income tax expense as a percentage of income from continuing operations before income tax expense was 6.7% and 24.2% in fiscal 2025 and 2024, respectively.

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statutory rate of 21% due to varying effective tax rates at the Company's foreign subsidiaries and the jurisdictional mix of income for these subsidiaries.

In fiscal 2023, the rate was unfavorably impacted 3 percentage points due to settlement of income tax assessments related to tax periods prior to the Company’s acquisition of Stahl Cranesystems GmbH (“STAHL").

In accordance with the tax indemnification clause of the share purchase agreement, the Company received full reimbursement from STAHL’s prior owner which was recorded as a gain in Other (income) expense, net on the Consolidated Statements of Operations.

The tax rate also reflects an unfavorable impact of 2 percentage points due to the recording of a U.S.

state tax valuation allowance.

The valuation allowance primarily relates to changes in the Company’s expectations regarding its ability to more likely than not utilize certain U.S.

state net operating losses prior to their expiration.

The tax rate was also unfavorably affected by non-deductible compensation and U.S.

taxes on foreign earnings, which increased the rate by 2 percentage points each.

In fiscal 2025, the tax effect of the pension termination described in Note 13 reduced the effective tax rate by 17 percentage points.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents, and restricted cash totaled $53,933,000 and $114,376,000, at March 31, 2025 and 2024, respectively.

Our primary sources of liquidity are funds generated by operating activities and available capacity for borrowings on our $175.0 million revolving credit facility (“Revolver”) maturing May 14, 2026 and our secured asset-based revolving credit facility (“AR Securitization”) maturing June 19, 2026.

Our ability to fund our operations, to make planned capital investments, to make scheduled debt payments and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business, and other factors, some of which are beyond our control.

Our liquidity as of March 31, 2025 was $240,155,000 comprising cash and cash equivalents of $53,683,000 and $159,583,000 of availability on the Revolver and $26,889,000 of availability on the AR Securitization.

We believe that our current resources, together with anticipated cash flows from operations and borrowing capacity under the Revolver and AR Securitization facilities, will be sufficient to finance our operations, meet our current cash requirements, and fund anticipated capital investments for at least the next 12 months.

We may, however, seek additional financing to fund future growth or refinance our existing indebtedness through the debt capital markets, but we cannot be assured that such financing will be available on favorable terms, or at all.

Cash flow from operating activities

Net cash provided by operating activities was $45,612,000 and $67,198,000 in fiscal 2025 and 2024, respectively.

In fiscal 2024, net income of $46,625,000 and non-cash adjustments to net income of $57,928,000 were the largest contributors.

Of the non-cash adjustments, $45,945,000 was depreciation and amortization and $12,039,000 was stock-based compensation offset by $15,285,000 of deferred income taxes and related valuation allowance.

Net working capital increases reduced operating cash flows by $29,132,000, which included an increase of $14,428,000 in accounts receivable, a $9,583,000 decrease in accrued liabilities and an increase in prepaid expenses and other of $8,555,000.

This was partially offset by a decrease in trade payables of $4,748,000.

In addition, non-current liabilities decreased by $8,760,000.

The decrease in non-current liabilities primarily consists of $9,454,000 in cash paid for amounts included in the measurement of operating lease liabilities in fiscal 2024.

In fiscal 2025, the net loss of $5,138,000 and non-cash adjustments to net loss of $75,503,000 contributed to cash provided by operations.

The non-cash adjustments included $48,187,000 of depreciation and amortization, $23,634,000 related to the settlement of one of the Company's pension plans, $10,105,000 of non-cash lease expense, $6,256,000 of stock-based compensation, and $3,911,000 related to the impairment of Charlotte Manufacturing Operation's and two Precision Conveyance leases ( refer to Note 3 ) offset by $20,256,000 of deferred income taxes and related valuation allowance.

Changes in working capital reduced cash from operations by $18,664,000 as a result of an increase in prepaid expenses and other current assets of $20,998,000, and an increase of $13,042,000 in inventories, offset by an increase of trade payables of $11,144,000 and a decrease in trade accounts receivable of $4,482,000.

Cash provided by operations also included a decrease of $9,587,000 in other non-current liabilities primarily due to lease payments for fiscal 2025.

Cash flow from investing activities

Net cash used for investing activities was $19,891,000 and $133,364,000 in fiscal 2025 and 2024, respectively.

In fiscal 2024, the most significant uses of cash in investing activities was $108,145,000 of cash used for the purchase of montratec on May 31, 2023.

Additionally, the Company used $24,813,000 in capital expenditures.

The use of cash in fiscal 2025 primarily consisted of $21,411,000 in capital expenditures.

The most significant use of cash in fiscal 2024 related to the Company's purchase of montratec for $108,145,000.

Cash flow from financing activities

Net cash provided by financing activities was $48,201,000 in fiscal 2024 compared to net cash used for financing activities of $49,987,000 in fiscal 2023.

The most 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.

This was offset by $60,604,000 in debt repayments, $8,044,000 in dividend payments and $2,859,000 in fees paid to secure the new debt borrowings.

Associated cash flows from hedging activities are classified as financing activities in the Statement of Cash Flows, which resulted in a net cash inflow of $1,370,000.

Net cash used for financing activities was $86,747,000 in fiscal 2025 compared to net cash provided by financing activities of $48,201,000 in fiscal 2024.

The most significant uses of cash were for $60,670,000 in debt repayments, $10,000,000 of shares repurchased as treasury stock during the year, a $6,711,000 payment to the former owners of montratec for the contingent consideration agreement (refer to Note 3 for additional information) and $8,042,000 in dividend payments Associated cash flows from hedging activities are classified as financing activities in the Statement of Cash Flows, which resulted in a net cash inflow of $474,000.

We believe that our cash on hand, cash flows, and borrowing capacity under our Amended and Restated Credit Agreement will be sufficient to fund our ongoing operations and debt obligations, and capital expenditures for at least the next twelve months.

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CAPITAL EXPENDITURES

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.

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.

Our capital expenditures for fiscal 2025 and 2024 were $21,411,000 and $24,813,000, respectively.

This increase in capital expenditures during fiscal 2024 was related to the establishment of a machining center of excellence in Mexico.

Excluded from fiscal 2024 capital expenditures is $690,000 and $624,000, in property, plant and equipment purchases included in accounts payable at March 31, 2024 and 2023, respectively.

Excluded from capital expenditures is $318,000 and $690,000, in property, plant and equipment purchases included in accounts payable at March 31, 2025 and 2024, respectively.

We expect capital expenditure spending in fiscal 2026 to range from $20,000,000 to $30,000,000.

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In order to perform the quantitative impairment test for the Precision Conveyance reporting unit, we used the discounted cash flow method to estimate fair value.

The discounted cash flow method incorporates various assumptions, the most significant being projected revenue growth rates, EBITDA margins and cash flows, and the weighted-average cost of capital.

The discounted cash flow method incorporates various assumptions, the most significant being projected revenue growth rates, EBITDA margins and cash flows based on internal forecasts, and the discount rate (weighted-average cost of capital).

Management projects discounted cash flows based on the reporting unit's current business, expected developments and operational strategies over a seven-year period.

In estimating the terminal growth rate, we consider our historical and projected results, as well as the economic environment in which the reporting unit operates.

The weighted-average cost of capital utilized for the reporting unit reflects management’s assumptions of marketplace participants’ cost of capital and risk assumptions, both specific to the reporting unit and overall in the economy.

The discount rate utilized for the reporting unit reflects management’s assumptions of marketplace participants’ cost of capital and risk assumptions, both specific to the reporting unit and overall in the economy.

Testing goodwill for impairment under the quantitative method described above requires us to estimate fair value of the reporting unit using significant estimates and judgmental factors.

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The terminal value was calculated assuming a projected growth rate of 3.5% after seven years.

These rates reflect our estimate of long-term growth into perpetuity and approximate the long-term gross domestic product growth expected on a global basis as well as our normal annual price increases.

The estimated weighted-average cost of capital was determined to be 13.2% for the Precision Conveyance reporting unit.

This rate reflects our estimate of long-term growth into perpetuity in the precision conveyance vertical market and as well as expected increases in the consumer price index.

The estimated discount rate was determined to be 12.0% for the Precision Conveyance reporting unit.

This was estimated based upon an analysis of similar companies and their debt to equity mix, their related volatility and the size of their market capitalization.

We also consider any additional risk of the Precision Conveyance reporting unit achieving its forecast, and adjust the weighted-average cost of capital applied when determining the reporting unit’s estimated fair value.

We also consider any additional risk of the Precision Conveyance reporting unit achieving its forecast, and adjust the discount rate applied when determining the reporting unit’s estimated fair value.

The quantitative test results indicate that the Precision Conveyance reporting unit is not impaired as its fair value exceeds its book value by 2.6%.

Future changes in these estimates and assumptions could materially affect the results of our goodwill impairment tests.

For example, a decline in the terminal growth rate by 100 basis points would decrease fair market value by $24,800,000, an increase in the weighted-average cost of capital by 75 basis points would result in a decrease in fair market value by $33,500,000, and an annual decrease in gross profit of 200 basis points would result in a decrease in fair value of $23,100,000 for the Precision Conveyance reporting unit.

Even with such changes, the fair value of the reporting unit would be greater than its net book value as of February 29, 2024, therefore indicating no impairment.

Holding all other assumptions constant, a reduction in the compound annual growth rate for revenue in the first seven years of the model by one percentage point would reduce fair value by $42,700,000.

Similarly, a 50 basis increase in the discount rate would reduce fair value by $35,600,000 and a 25 basis point reduction in the terminal growth rate would reduce fair value by $15,386,000.

While the Precision Conveyance reporting unit was not determined to be impaired, it may be at risk of future impairment if the related business does not perform as projected, or if market factors utilized in the impairment analysis deteriorate, including an unfavorable change in the discount rate.

We will monitor the Precision Conveyance reporting unit's performance against its forecasts in fiscal 2026 as part of our quarterly analysis of impairment indicators.

We further test our indefinite-lived intangible asset balance of $46,294,000 consisting of trademarks for acquisitions prior to fiscal 2025.

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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 7. Management’s Discussion and Analysis