8-K
Columbus Mckinnon Corp (CMCO)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 29, 2020
COLUMBUS MCKINNON CORPORATION
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of incorporation)
| 0-27618 | 16-0547600 | ||
|---|---|---|---|
| (Commission File Number) | (IRS Employer Identification No.) | ||
| 205 Crosspoint Parkway | Getzville | NY | 14068 |
| --- | --- | --- | --- |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number including area code: (716) 689-5400
_________________________________________________
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value per share | CMCO | NASDAQ Global Select Market |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||
|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||
| --- | --- | ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| --- | --- | ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
| --- | --- | ☐ | Emerging Growth Company | |
| --- | --- | ☐ | If an Emerging Growth Company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | |
| --- | --- | |||
| Item 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION | |||
| --- | --- |
On October 29, 2020, the registrant issued a press release announcing its financial results for the second quarter, which ended September 30, 2020. The press release is annexed as Exhibit 99.1 to this Current Report on Form 8-K. The slides used during the earnings call are annexed as Exhibit 99.2 to this Current Report on Form 8-K.
The information contained in this Form 8-K and the Exhibit annexed hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth in such filing.
| Item 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
|---|
(d) Exhibits.
| EXHIBIT<br>NUMBER | DESCRIPTION |
|---|---|
| 99.1 | Press Release dated October 29, 2020 |
| 99.2 | Earnings call slides dated October 29, 2020 |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| COLUMBUS McKINNON CORPORATION | |
|---|---|
| By: | /s/ Gregory P. Rustowicz |
| Name: | Gregory P. Rustowicz |
| Title: | Vice President and Chief |
| Financial Officer (Principal Financial Officer) |
Dated: October 29, 2020
Document
EXHIBIT 99.1
News Release
205 Crosspoint Parkway
Buffalo, NY 14068
Immediate Release
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
BUFFALO, NY, October 29, 2020 - Columbus McKinnon Corporation (Nasdaq: CMCO), a leading designer, manufacturer and marketer of motion control products, technologies and services for material handling, today announced financial results for its fiscal year 2021 second quarter, which ended September 30, 2020.
Second Quarter Highlights
•Strong sequential improvement demonstrates effectiveness of cost saving and self-help improvement measures
•Revenue up 13.5% over trailing first fiscal quarter to $157.8 million; at high end of expected range
•Operating income of $15.8 million or 10.0% of sales; Adjusted operating income* of $14.0 million, or 8.9% of sales
•Cash from operations in the quarter was $37.4 million driven by a disciplined focus on reducing working capital requirements
•Advancing product launches and broadening offerings in Compass™ configurator
David Wilson, President and CEO of Columbus McKinnon, commented, “We delivered solid results in the quarter achieving the higher end of our expected revenue range and demonstrated our capabilities to drive profitability and strong cash generation in a challenging environment. In fact, the 80/20 Process, a key tool in our business system, contributed $3.4 million in operating income during the quarter, helping to offset headwinds caused by the pandemic. Our strong cash flow and excellent liquidity position enabled our repayment of the $25 million Revolver borrowing in early October.
“We are building momentum as we strengthen our business operating system, evolve the Blueprint for Growth strategy and pivot to growth. Our focus is on identifying opportunities to both deepen our market penetration and expand our addressable markets. We have the financial strength to continue to invest in prioritized growth initiatives even as we carefully manage our operations and ensure the safety and well-being of the Columbus McKinnon team.”
*Adjusted operating income is a non-GAAP measure. See accompanying discussion and reconciliation table in this release regarding adjusted operating income.
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 2 of 13
October 29, 2020
Second Quarter Fiscal 2021 Sales
| ($ in millions) | Q2 FY 21 | Q2 FY 20 | Change | % Change | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 157.8 | $ | 207.6 | $ | (49.8) | (24.0) | % | ||
| U.S. sales | $ | 84.7 | $ | 113.5 | $ | (28.8) | (25.4) | % | ||
| % of total | 54 | % | 55 | % | ||||||
| Non-U.S. sales | $ | 73.1 | $ | 94.1 | $ | (21.0) | (22.3) | % | ||
| % of total | 46 | % | 45 | % |
Compared with the prior-year period, lower volume was due to the global economic impact of the COVID-19 pandemic. Lower U.S. sales volume more than offset a 1.1% price improvement while lower volume outside the U.S. was somewhat offset by a $2.2 million, or 2.3%, positive impact from foreign currency translation and price improvement of 1.2%.
Compared with the trailing first quarter, sales improved 13.5% with short cycle sales up 22.2% and project sales up 5.5%.
Second Quarter Fiscal 2021 Operating Results
| ($ in millions) | Q2 FY 21 | Q2 FY 20 | Change | % Change | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Gross profit | $ | 56.0 | $ | 73.5 | $ | (17.5) | (23.8) | % | ||
| Gross margin | 35.5 | % | 35.4 | % | 10 bps | |||||
| Income from operations | $ | 15.8 | $ | 25.2 | $ | (9.4) | (37.3) | % | ||
| Operating margin | 10.0 | % | 12.2 | % | (220) bps | |||||
| Net income (loss) | $ | (4.1) | $ | 16.6 | $ | (20.7) | NM | |||
| Diluted EPS | $ | (0.17) | $ | 0.69 | $ | (0.86) | NM | |||
| Adjusted EBITDA * | $ | 21.1 | $ | 33.7 | $ | (12.5) | (37.2) | % | ||
| Adjusted EBITDA margin | 13.4 | % | 16.2 | % | (280) bps |
*A non-GAAP measure, Adjusted EBITDA is defined as adjusted operating income plus depreciation and amortization. Please see the attached tables for a reconciliation of adjusted EBITDA to GAAP net income (loss).
Adjusted income from operations was $14.0 million, or 8.9% of sales. Decremental adjusted operating income leverage from the prior-year period was 25% which continues to demonstrate better than historic decremental leverage. (See the reconciliation of GAAP income from operations to adjusted income from operations on the attached tables.) Net loss for the quarter was $4.1 million, which included a $16.3 million non-cash pension settlement charge related to the termination of a U.S. pension plan.
On a sequential basis, Adjusted EBITDA was up $9.1 million, or 74.9%, to $21.1 million on an $18.7 million increase in sales. Adjusted EBITDA margin expanded 470 basis points sequentially to 13.4% from the fiscal 2021 first quarter.
Third Quarter Fiscal 2021 Outlook
Orders were up nearly 26% compared with the trailing first quarter. Order growth was driven mostly by the recovery of the short cycle business, which improved 41% over the first quarter this fiscal year whereas the project business grew at a rate of 12%. Total backlog has recovered to pre-COVID levels and long-term backlog, which is expected to ship beyond the fiscal third quarter, grew to 41.5% of total backlog. As a result, the Company expects third quarter fiscal 2021 revenue to be within a range of approximately $150 million to $160 million at current exchange rates.
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 3 of 13
October 29, 2020
Mr. Wilson concluded, “I am really proud of the team and how we have executed in the first half of the fiscal year. Importantly, we are keeping our eye on the long term as we advance our strategic plan. In the second quarter, we launched several new products, expanded the capabilities of our Compass™ configurator and increased our focus on improving our customers’ experience. I am confident we will continue to execute well, and we will emerge from these challenging times a better company.”
Teleconference/webcast
Columbus McKinnon will host a conference call and live webcast Thursday, October 29, 2020 at 10:00 AM Eastern Time, at which management will review the Company’s financial results and strategy. The review will be accompanied by a slide presentation, which will be available on Columbus McKinnon’s website at investors.columbusmckinnon.com. A question and answer session will follow the formal discussion.
The conference call can be accessed by dialing 201-493-6780. The listen-only audio webcast can be monitored at https://investors.columbusmckinnon.com. To listen to the archived call, dial 412-317-6671 and enter the passcode 13710950. The telephonic replay will be available from 1:00 PM Eastern Time on the day of the call through Thursday, November 5, 2020. Alternatively, an archived webcast of the call can be found on the Company’s website. In addition, a transcript of the call will be posted to the website once available.
About Columbus McKinnon
Columbus McKinnon is a leading worldwide designer, manufacturer and marketer of motion control products, technologies, systems and services that efficiently and ergonomically move, lift, position and secure materials. Key products include hoists, actuators, rigging tools, light rail work stations and digital power and motion control systems. The Company is focused on commercial and industrial applications that require the safety and quality provided by its superior design and engineering know-how. Comprehensive information on Columbus McKinnon is available at www.columbusmckinnon.com.
Safe Harbor Statement
This news release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning future sales and earnings, involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including the impact of Covid-19 and the Company’s efforts to reduce costs, maintain liquidity and generate cash in the current pandemic, the effectiveness of the Company’s 80/20 Process to simplify operations, the ability of the Company’s Operational Excellence initiatives to drive profitability, the Company’s ability to grow market share, the ability to achieve revenue expectations, global economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the ability to expand into new markets and geographic regions, and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update the forward-looking information contained in this release.
Contacts:
| Gregory P. Rustowicz | Investor Relations: |
|---|---|
| Vice President - Finance and Chief Financial Officer | Deborah K. Pawlowski |
| Columbus McKinnon Corporation | Kei Advisors LLC |
| 716-689-5442 | 716-843-3908 |
| greg.rustowicz@cmworks.com | dpawlowski@keiadvisors.com |
Financial tables follow.
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 4 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Income Statements - UNAUDITED
(In thousands, except per share and percentage data)
| Three Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2020 | September 30, 2019 | Change | ||||||
| Net sales | $ | 157,790 | $ | 207,609 | (24.0) | % | ||
| Cost of products sold | 101,765 | 134,116 | (24.1) | % | ||||
| Gross profit | 56,025 | 73,493 | (23.8) | % | ||||
| Gross profit margin | 35.5 | % | 35.4 | % | ||||
| Selling expenses | 18,563 | 22,877 | (18.9) | % | ||||
| % of net sales | 11.8 | % | 11.0 | % | ||||
| General and administrative expenses | 15,554 | 19,153 | (18.8) | % | ||||
| % of net sales | 9.9 | % | 9.2 | % | ||||
| Research and development expenses | 2,896 | 2,999 | (3.4) | % | ||||
| % of net sales | 1.8 | % | 1.4 | % | ||||
| Loss on sales of businesses | — | 7 | NM | |||||
| Amortization of intangibles | 3,192 | 3,226 | (1.1) | % | ||||
| Income from operations | 15,820 | 25,231 | (37.3) | % | ||||
| Operating margin | 10.0 | % | 12.2 | % | ||||
| Interest and debt expense | 3,018 | 3,759 | (19.7) | % | ||||
| Investment (income) loss | (357) | (229) | 55.9 | % | ||||
| Foreign currency exchange (gain) loss | 397 | (296) | NM | |||||
| Other (income) expense, net | 16,911 | 257 | 6,480.2 | % | ||||
| Income (loss) before income tax expense (benefit) | (4,149) | 21,740 | NM | |||||
| Income tax expense (benefit) | (45) | 5,141 | NM | |||||
| Net income (loss) | $ | (4,104) | $ | 16,599 | NM | |||
| Average basic shares outstanding | 23,883 | 23,631 | 1.1 | % | ||||
| Basic income (loss) per share | $ | (0.17) | $ | 0.70 | NM | |||
| Average diluted shares outstanding | 23,883 | 23,926 | (0.2) | % | ||||
| Diluted income (loss) per share | $ | (0.17) | $ | 0.69 | NM | |||
| Dividends declared per common share | $ | 0.06 | $ | 0.06 |
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 5 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Income Statements - UNAUDITED
(In thousands, except per share and percentage data)
| Six Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| September 30, 2020 | September 30, 2019 | Change | ||||||
| Net sales | $ | 296,860 | $ | 420,321 | (29.4) | % | ||
| Cost of products sold | 196,038 | 271,216 | (27.7) | % | ||||
| Gross profit | 100,822 | 149,105 | (32.4) | % | ||||
| Gross profit margin | 34.0 | % | 35.5 | % | ||||
| Selling expenses | 37,258 | 45,632 | (18.4) | % | ||||
| % of net sales | 12.6 | % | 10.9 | % | ||||
| General and administrative expenses | 33,983 | 38,753 | (12.3) | % | ||||
| % of net sales | 11.4 | % | 9.2 | % | ||||
| Research and development expenses | 5,665 | 5,791 | (2.2) | % | ||||
| % of net sales | 1.9 | % | 1.4 | % | ||||
| Loss on sales of businesses | — | 176 | NM | |||||
| Amortization of intangibles | 6,307 | 6,479 | (2.7) | % | ||||
| Income from operations | 17,609 | 52,274 | (66.3) | % | ||||
| Operating margin | 5.9 | % | 12.4 | % | ||||
| Interest and debt expense | 6,206 | 7,611 | (18.5) | % | ||||
| Investment (income) loss | (934) | (531) | 75.9 | % | ||||
| Foreign currency exchange (gain) loss | 481 | (706) | NM | |||||
| Other (income) expense, net | 19,937 | 419 | 4,658.2 | % | ||||
| Income (loss) before income tax expense (benefit) | (8,081) | 45,481 | NM | |||||
| Income tax expense (benefit) | (1,008) | 10,303 | NM | |||||
| Net income (loss) | $ | (7,073) | $ | 35,178 | NM | |||
| Average basic shares outstanding | 23,843 | 23,532 | 1.3 | % | ||||
| Basic income (loss) per share | $ | (0.30) | $ | 1.49 | NM | |||
| Average diluted shares outstanding | 23,843 | 23,832 | — | % | ||||
| Diluted income (loss) per share | $ | (0.30) | $ | 1.48 | NM | |||
| Dividends declared per common share | $ | 0.06 | $ | 0.06 |
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 6 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
| September 30, 2020 | March 31, 2020 | |||
|---|---|---|---|---|
| (unaudited) | ||||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 186,556 | $ | 114,450 |
| Trade accounts receivable | 92,540 | 123,743 | ||
| Inventories | 112,095 | 127,373 | ||
| Prepaid expenses and other | 18,124 | 17,180 | ||
| Total current assets | 409,315 | 382,746 | ||
| Property, plant, and equipment, net | 72,782 | 79,473 | ||
| Goodwill | 330,859 | 319,679 | ||
| Other intangibles, net | 219,434 | 217,962 | ||
| Marketable securities | 8,534 | 7,322 | ||
| Deferred taxes on income | 27,798 | 26,281 | ||
| Other assets | 63,212 | 59,809 | ||
| Total assets | $ | 1,131,934 | $ | 1,093,272 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Trade accounts payable | $ | 37,724 | $ | 57,289 |
| Accrued liabilities | 88,679 | 93,585 | ||
| Current portion of long-term debt | 29,450 | 4,450 | ||
| Total current liabilities | 155,853 | 155,324 | ||
| Term loan and revolving credit facility | 245,680 | 246,856 | ||
| Other non-current liabilities | 250,445 | 227,507 | ||
| Total liabilities | 651,978 | 629,687 | ||
| Shareholders’ equity: | ||||
| Common stock | 239 | 238 | ||
| Additional paid-in capital | 290,690 | 287,256 | ||
| Retained earnings | 281,935 | 290,441 | ||
| Accumulated other comprehensive loss | (92,908) | (114,350) | ||
| Total shareholders’ equity | 479,956 | 463,585 | ||
| Total liabilities and shareholders’ equity | $ | 1,131,934 | $ | 1,093,272 |
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 7 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Condensed Consolidated Statements of Cash Flows - UNAUDITED
(In thousands)
| Six Months Ended | ||||
|---|---|---|---|---|
| September 30, 2020 | September 30, 2019 | |||
| Operating activities: | ||||
| Net income (loss) | $ | (7,073) | $ | 35,178 |
| Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | ||||
| Depreciation and amortization | 14,210 | 14,747 | ||
| Deferred income taxes and related valuation allowance | (6,745) | 748 | ||
| Net loss (gain) on sale of real estate, investments, and other | (557) | (446) | ||
| Stock based compensation | 3,989 | 3,511 | ||
| Amortization of deferred financing costs | 1,327 | 1,327 | ||
| Loss on sales of businesses | — | 176 | ||
| Non-cash pension settlement expense | 19,046 | — | ||
| Gain on sale of building | (2,638) | — | ||
| Non-cash lease expense | 3,785 | 4,223 | ||
| Changes in operating assets and liabilities, net of effects of business acquisitions and divestitures: | ||||
| Trade accounts receivable | 33,594 | (2,648) | ||
| Inventories | 18,987 | 1,400 | ||
| Prepaid expenses and other | (1,627) | (2,883) | ||
| Other assets | 570 | (171) | ||
| Trade accounts payable | (20,078) | 332 | ||
| Accrued liabilities | (7,895) | (8,230) | ||
| Non-current liabilities | (1,952) | (9,384) | ||
| Net cash provided by (used for) operating activities | 46,943 | 37,880 | ||
| Investing activities: | ||||
| Proceeds from sales of marketable securities | 1,034 | 1,928 | ||
| Purchases of marketable securities | (1,759) | (2,581) | ||
| Capital expenditures | (2,779) | (4,843) | ||
| Proceeds from sale of building, net of transaction costs | 5,453 | — | ||
| Dividend received from equity method investment | 587 | — | ||
| Proceeds from sale of equipment | — | 51 | ||
| Net (payments) proceeds from sales of businesses | — | (214) | ||
| Net cash provided by (used for) investing activities | 2,536 | (5,659) | ||
| Financing activities: | ||||
| Proceeds from issuance of common stock | 429 | 3,784 | ||
| Borrowings under line-of-credit agreements | 25,000 | — | ||
| Repayment of debt | (2,225) | (30,000) | ||
| Fees paid for revolver extension | (826) | — | ||
| Payment of dividends | (2,860) | (2,824) | ||
| Other | (982) | (544) | ||
| Net cash provided by (used for) financing activities | 18,536 | (29,584) | ||
| Effect of exchange rate changes on cash | 4,091 | (1,751) | ||
| Net change in cash and cash equivalents | 72,106 | 886 | ||
| Cash, cash equivalents, and restricted cash at beginning of year | 114,700 | 71,343 | ||
| Cash, cash equivalents, and restricted cash at end of period | $ | 186,806 | $ | 72,229 |
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 8 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Q2 FY 2021 Sales Bridge
| Quarter | Year To Date | |||||
|---|---|---|---|---|---|---|
| ($ in millions) | Change | % Change | Change | % Change | ||
| Fiscal 2020 Sales | ||||||
| Volume | (54.3) | (26.2) | % | (128.4) | (30.5) | % |
| Pricing | 2.3 | 1.1 | % | 4.8 | 1.1 | % |
| Foreign currency translation | 2.2 | 1.1 | % | 0.2 | — | % |
| Total change | (24.0) | % | (29.4) | % | ||
| Fiscal 2021 Sales |
All values are in US Dollars.
COLUMBUS McKINNON CORPORATION
Q2 FY 2021 Gross Profit Bridge
| ($ in millions) | Quarter | Year To Date | ||
|---|---|---|---|---|
| Fiscal 2020 Gross Profit | $ | 73.5 | $ | 149.1 |
| Pricing, net of material cost inflation | 2.3 | 4.7 | ||
| Gain on sale of building | 2.2 | 2.2 | ||
| Tariffs | 0.6 | 1.4 | ||
| Foreign currency translation | 0.8 | 0.2 | ||
| Business realignment costs | 0.1 | (0.2) | ||
| Insurance settlement | — | (0.3) | ||
| Factory closures | (0.3) | (1.6) | ||
| Productivity, net of other cost changes | (3.8) | (8.3) | ||
| Sales volume and mix | (19.4) | (46.4) | ||
| Total change | $ | (17.5) | $ | (48.3) |
| Fiscal 2021 Gross Profit | $ | 56.0 | $ | 100.8 |
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 9 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Additional Data - UNAUDITED
| June 30, 2020 | March 31, 2020 | September 30, 2019 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| ( in millions) | |||||||||||
| Backlog | 146.6 | $ | 130.7 | $ | 131.0 | $ | 143.1 | ||||
| Long-term backlog | |||||||||||
| Expected to ship beyond 3 months | 60.8 | $ | 52.8 | $ | 49.1 | $ | 53.9 | ||||
| Long-term backlog as % of total backlog | % | 40.4 | % | 37.5 | % | 37.7 | % | ||||
| Trade accounts receivable | |||||||||||
| Days sales outstanding | days | 63.1 | days | 59.4 | days | 57.0 | days | ||||
| Inventory turns per year | |||||||||||
| (based on cost of products sold) | turns | 3.0 | turns | 3.9 | turns | 3.8 | turns | ||||
| Days' inventory | days | 120.6 | days | 94.3 | days | 96.9 | days | ||||
| Trade accounts payable | |||||||||||
| Days payables outstanding | days | 37.6 | days | 42.3 | days | 33.2 | days | ||||
| Working capital as a % of sales (1) | % | 14.9 | % | 14.5 | % | 17.2 | % | ||||
| Debt to total capitalization percentage | % | 37.1 | % | 35.2 | % | 36.9 | % | ||||
| Debt, net of cash, to net total capitalization | % | 20.9 | % | 22.8 | % | 30.1 | % |
All values are in US Dollars.
(1) September 30, 2019 figure excludes the Tire Shredder business, which was divested on December 28, 2018, and Crane Equipment & Service, Inc. (CES) and Stahlhammer Bommern GmbH (STB), each of which were divested on February 28, 2019.
| U.S. Shipping Days by Quarter | |||||
|---|---|---|---|---|---|
| Q1 | Q2 | Q3 | Q4 | Total | |
| FY 21 | 63 | 64 | 61 | 63 | 251 |
| FY 20 | 63 | 63 | 61 | 64 | 251 |
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 10 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Reconciliation of GAAP Gross Profit to
Non-GAAP Adjusted Gross Profit and Adjusted Gross Margin
($ in thousands, except per share data)
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Gross profit | $ | 56,025 | $ | 73,493 | $ | 100,822 | $ | 149,105 | ||||
| Add back (deduct): | ||||||||||||
| Factory closures | 493 | 249 | 2,421 | 755 | ||||||||
| Business realignment costs | — | 140 | 329 | 140 | ||||||||
| Insurance settlement | — | — | — | (290) | ||||||||
| Gain on sale of building | (2,189) | — | (2,189) | — | ||||||||
| Non-GAAP adjusted gross profit | $ | 54,329 | $ | 73,882 | $ | 101,383 | $ | 149,710 | ||||
| Sales | $ | 157,790 | $ | 207,609 | $ | 296,860 | $ | 420,321 | ||||
| Adjusted gross margin | 34.4 | % | 35.6 | % | 34.2 | % | 35.6 | % |
Adjusted gross profit is defined as gross profit as reported, adjusted for certain items. Adjusted gross profit is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted gross profit, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's gross profit to the historical periods' gross profit, as well as facilitates a more meaningful comparison of the Company’s gross profit to that of other companies.
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 11 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Reconciliation of GAAP Income from Operations to
Non-GAAP Adjusted Income from Operations and Adjusted Operating Margin
($ in thousands, except per share data)
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Income from operations | $ | 15,820 | $ | 25,231 | $ | 17,609 | $ | 52,274 | ||||
| Add back (deduct): | ||||||||||||
| Factory closures | 747 | 470 | 3,003 | 1,497 | ||||||||
| Business realignment costs | — | 413 | 821 | 413 | ||||||||
| Insurance recovery legal costs | 88 | 220 | 229 | 359 | ||||||||
| Loss on sales of businesses | — | 7 | — | 176 | ||||||||
| Insurance settlement | — | — | — | (290) | ||||||||
| Gain on sale of building | (2,638) | — | (2,638) | — | ||||||||
| Non-GAAP adjusted income from operations | $ | 14,017 | $ | 26,341 | $ | 19,024 | $ | 54,429 | ||||
| Sales | $ | 157,790 | $ | 207,609 | $ | 296,860 | $ | 420,321 | ||||
| Adjusted operating margin | 8.9 | % | 12.7 | % | 6.4 | % | 12.9 | % |
Adjusted income from operations is defined as income from operations as reported, adjusted for certain items. Adjusted income from operations is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted income from operations, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's income from operations to the historical periods' income from operations, as well as facilitates a more meaningful comparison of the Company’s income from operations to that of other companies.
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 12 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Reconciliation of GAAP Net Income and Diluted Earnings per Share to
Non-GAAP Adjusted Net Income and Diluted Earnings per Share
($ in thousands, except per share data)
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Net income (loss) | $ | (4,104) | $ | 16,599 | $ | (7,073) | $ | 35,178 |
| Add back (deduct): | ||||||||
| Non-cash pension settlement expense | 16,324 | — | 19,046 | — | ||||
| Factory closures | 747 | 470 | 3,003 | 1,497 | ||||
| Business realignment costs | — | 413 | 821 | 413 | ||||
| Insurance recovery legal costs | 88 | 220 | 229 | 359 | ||||
| Loss on sales of businesses | — | 7 | — | 176 | ||||
| Insurance settlement | — | — | — | (290) | ||||
| Gain on sale of building | (2,638) | — | (2,638) | — | ||||
| Normalize tax rate to 22% (1) | (2,327) | 114 | (3,732) | (177) | ||||
| Non-GAAP adjusted net income | $ | 8,090 | $ | 17,823 | $ | 9,656 | $ | 37,156 |
| Average diluted shares outstanding | 24,123 | 23,926 | 24,030 | 23,832 | ||||
| Diluted income (loss) per share - GAAP | $ | (0.17) | $ | 0.69 | $ | (0.30) | $ | 1.48 |
| Diluted income per share - Non-GAAP | $ | 0.34 | $ | 0.74 | $ | 0.40 | $ | 1.56 |
(1) Applies a normalized tax rate of 22% to GAAP pre-tax income and non-GAAP adjustments above, which are each pre-tax.
Adjusted net income and diluted EPS are defined as net income and diluted EPS as reported, adjusted for certain items and at a normalized tax rate. Adjusted net income and diluted EPS are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable to the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted net income and diluted EPS, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's net income and diluted EPS to the historical periods' net income and diluted EPS, as well as facilitates a more meaningful comparison of the Company’s net income and diluted EPS to that of other companies.
Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021
Page 13 of 13
October 29, 2020
COLUMBUS McKINNON CORPORATION
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA
($ in thousands)
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net income (loss) | $ | (4,104) | $ | 16,599 | $ | (7,073) | $ | 35,178 | ||||
| Add back (deduct): | ||||||||||||
| Income tax expense (benefit) | (45) | 5,141 | (1,008) | 10,303 | ||||||||
| Interest and debt expense | 3,018 | 3,759 | 6,206 | 7,611 | ||||||||
| Investment (income) loss | (357) | (229) | (934) | (531) | ||||||||
| Foreign currency exchange (gain) loss | 397 | (296) | 481 | (706) | ||||||||
| Other (income) expense, net | 16,911 | 257 | 19,937 | 419 | ||||||||
| Depreciation and amortization expense | 7,129 | 7,344 | 14,210 | 14,747 | ||||||||
| Factory closures | 747 | 470 | 3,003 | 1,497 | ||||||||
| Business realignment costs | — | 413 | 821 | 413 | ||||||||
| Insurance recovery legal costs | 88 | 220 | 229 | 359 | ||||||||
| Loss on sales of businesses | — | 7 | — | 176 | ||||||||
| Insurance settlement | — | — | — | (290) | ||||||||
| Gain on sale of building | (2,638) | — | (2,638) | — | ||||||||
| Non-GAAP adjusted EBITDA | $ | 21,146 | $ | 33,685 | $ | 33,234 | $ | 69,176 | ||||
| Sales | $ | 157,790 | $ | 207,609 | $ | 296,860 | $ | 420,321 | ||||
| Adjusted EBITDA margin | 13.4 | % | 16.2 | % | 11.2 | % | 16.5 | % |
Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted EBITDA, is important for investors and other readers of the Company’s financial statements.
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Q2 Fiscal Year 2021 Financial Results Conference Call October 29, 2020 David J. Wilson President and Chief Executive Officer Gregory P. Rustowicz Vice President – Finance & Chief Financial Officer
Safe Harbor Statement These slides, and the accompanying oral discussion, contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning future sales and earnings, involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including the impact of Covid-19 and the Company’s efforts to reduce costs, maintain liquidity and generate cash in the current pandemic, the effectiveness of the Company’s 80/20 Process to simplify operations, the ability of the Company’s Operational Excellence initiatives to drive profitability, the Company’s ability to grow market share, the ability to achieve revenue expectations, global economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the ability to expand into new markets and geographic regions, and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update the forward-looking information contained in this release. Non-GAAP Financial Measures This presentation will discuss some non-GAAP (“adjusted”) financial measures which we believe are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results compared in accordance with GAAP. The non-GAAP (“adjusted”) measures are noted and reconciliations of comparable GAAP with non-GAAP measures can be found in tables included in the Supplemental Information portion of this presentation. 2
Building Momentum Solid recovery from trailing first quarter; effect of Blueprint for Growth strategy demonstrated in margin improvement • Sales were $157.8 million, at upper end of expected range • Strong gross margin of 35.5% positively impacted by the $2.2 million gain on sale of a facility in China; adjusted gross margin was 34.4% • Operating income of $15.8 million; adjusted operating income of $14.0 million and adjusted operating margin of 8.9% • Diluted net loss per share of $(0.17) due to a non-cash pension settlement charge of $16.3 million; adjusted earnings per share of $0.34 Strengthening business system: Significant cash from operations and free cash flow • Generated $37.4 million in cash from operations; $46.9 million YTD • Free cash flow of $35.7 million in the quarter and $44.2 million YTD • Strong capital structure with net debt leverage ratio(1) below 1.0x • Liquidity of $245 million at end of quarter Improved profitability and strong cash generation reflect a strengthening Columbus McKinnon Business System (CMBS) (1)Net debt leverage ratio is defined as Net Debt / TTM Adjusted EBITDA 3
Sequential Improvement Q2 FY2021 vs Q1 FY2021: Results demonstrate improvement from Q1 FY2021 trough ($ in millions) Net Sales Adjusted Operating Income & Margin $157.8 $14.0 $139.1 $15.8 $5.0 3.6% $1.8 8.9% Q1 FY21 Q2 FY21 Q1 FY21 Q2 FY21 Positive sequential improvement Income from Operations Non-GAAP Adjustments • Net sales increased $18.7 million, or 13.5% Adjusted EBITDA & Margin • Strong rebound in short cycle business $21.1 • Adjusted operating income increased $9 million to $14 million $12.1 • Adjusted operating leverage of 48% 13.4% • Sequentially 80/20 tools contributed $1.3 million 8.7% Adjusted EBITDA margin expanded 470 bps to 13.4% Q1 FY21 Q2 FY21 Actions taken deliver improved performance as volume returns 4
Net Sales ($ in millions) Q2 sales down 24.0%, or $49.8 million Q2 FY21 Sales Bridge • U.S.: Pricing of 1.1% partially offset 26.4% volume Quarter decline • Non-U.S: Pricing of 1.2% and 2.3% favorable FX Q2 FY20 Sales $ 207.6 partially offset 25.8% volume decline Volume (54.3) (26.2)% Pricing 2.3 1.1% $207.6 $199.4 $189.5 Foreign currency translation 2.2 1.1% $157.8 $139.1 Total change $ (49.8) (24.0)% Q2 FY21 Sales $ 157.8 Note: Components may not add to totals due to rounding Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Year-over-year change in sales volume reflects COVID-19 impact 5
Gross Profit & Margin ($ in millions) Quarter Gross Profit Bridge Quarter $73.5 Q2 FY20 Gross Profit $ 73.5 $67.9 $66.2 Pricing, net of material cost inflation 2.3 $56.0 Gain on sale of building 2.2 $54.3 Foreign currency translation 0.8 $44.8 34.4% Tariffs 0.6 Business realignment costs 0.1 Factory closures (0.3) Productivity, net of other cost changes (3.8) 35.4% 34.0% 34.9% 32.2% 35.5% Sales volume and mix (19.4) Total Change $ (17.5) Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q2 FY21 Gross Profit $ 56.0 Gross profit adjustments primarily due to gain on sale of building 80/20 process and operational efficiencies deliver strong gross margins despite lower volume 6
RSG&A ($ in millions) RSG&A at 23.5% of sales RSG&A as 21.7% 21.9% 24.4% 28.7% 23.5% % of sales: Reduced Y/Y by: $46.3 • $7.2 million of net cost reductions $45.0 $43.8 $39.9 • $0.9 million less bad debt expense $2.9 $37.0 $3.0 $2.6 $2.8 • $0.4 million for gain on sale of building $2.9 Increased Y/Y by: $19.2 $18.0 $21.2 $18.4 $15.6 • $0.5 million unfavorable FX Q3 FY21 RSG&A estimate of approximately $43 million* $22.9 $23.2 $22.3 $18.7 $18.6 • Sequential increase includes second half incentive Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 compensation accrual, growth investments and return Selling G&A R&D to work impacts Note: Components may not add to totals due to rounding Containing costs while ramping investments for growth *RSG&A guidance provided October 29, 2020 excludes business realignment costs 7
Operating Income & Adjusted OI Margin ($ in millions) Q2 FY21 operating income of $15.8 million • $2.6 million favorable impact from gain on sale of building $26.3 • Adjusted operating income of $14.0 million $23.1 $25.2 $20.2 Adjusted operating margin of 8.9% $20.9 $14.0 • Volume decline of 26.2% due to COVID-19 $16.7 $15.8 • Cost savings partially offset lower volume 12.7% 11.6% 10.7% 8.9% $5.0 Improved Y/Y decremental 3.6% adjusted operating leverage to 25% $1.8 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Income from Operations Non-GAAP Adjustments Driving profitability in challenging environment 8
Earnings Per Share GAAP Diluted EPS Net income impacted by: $0.69 $0.63 • $16.3 million pension settlement expense related to $0.39 termination of U.S. pension plan • Factory closure costs of $0.7 million • Favorable impact of $2.6 million from gain on sale of facility ($0.12) ($0.17) Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Adjusted EPS FY21 expected tax rate: 10% to 12%* $0.74 • Lower tax rate due to U.S. pre-tax losses from pension $0.64 $0.58 settlement expense, U.S. R&D tax credit and utilization of net operating losses $0.34 $0.07 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Adjusted EPS demonstrates strengthening earnings power from CMBS * Tax rate guidance provided October 29, 2020 9
Adjusted EBITDA & ROIC Adjusted EBITDA Margin Solid adjusted EBITDA margin during challenging environment 15.7% 15.1% • Adjusted EBITDA margin in Q2 FY2021 improved to 13.4% from 8.7% in trailing first quarter 13.3% • Continuing to target 19% Adjusted EBITDA margin post COVID-19 recession FY19 FY20 Q2 FY21 TTM Return on Invested Capital (ROIC)(1) Return on Invested Capital expected to improve • Continuing to target mid-teen ROIC post Covid-19 11.2% 11.5% recession 7.1% (1)ROIC is defined as adjusted income from operations, net of taxes at a 22% normalized rate, for the trailing 12 months divided by the average of debt plus equity less cash (average capital) FY19 FY20 Q2 FY21 TTM for the trailing 13 months. Confident we are building a better Columbus McKinnon to achieve long-term goals 10
Cash Flow Outstanding cash generation ($ in millions) Free Cash Flow(1) Three Months Ended YTD 9/30/20 9/30/19 9/30/20 Net cash provided by $108.5 $37.4 $40.0 $46.9 operating activities $97.4 CapEx (1.7) (3.0) (2.8) Free cash flow (FCF) $35.7 $37.1 $44.2 $67.2 Note: Components may not add to totals due to rounding $55.1 • Operating cadence drove working capital reduction • Capital expenditures of $2.8 million in 1H FY21 • FY21 expected CapEx: $14 - $15 million FY18 FY19 FY20 Q2 FY21 TTM Significant cash generation resulted from reduced working capital requirements Capital expenditure guidance provided October 29, 2020 11 (1)Free cash flow is defined as cash provided by operating activities minus capital expenditures
Capital Structure ($ in millions) Significant financial flexibility in uncertain CAPITALIZATION macroeconomic environment Sept. 30, March 31, Net debt leverage ratio below target of 2.0x 2020 2020 • Net debt leverage ratio(1) of 0.97x Cash and cash equivalents $ 186.6 $ 114.5 • Net debt to net total capital 15.6% Total debt 275.1 251.3 Total liquidity of $244.8 million at quarter end Total net debt 88.6 136.9 Shareholders’ equity 480.0 463.6 Paid down $25 million Revolver draw Total capitalization $ 755.1 $ 714.9 • Covenant-lite credit agreement Debt/total capitalization 36.4% 35.2% • Financial covenant of 3.0x Net debt/net total capitalization 15.6% 22.8% • Tested only if outstanding borrowings • Extended maturity to August 25, 2023 Significant financial strength and liquidity supports pivot to growth (1) Net debt leverage ratio is defined as Net Debt / TTM Adjusted EBITDA 12
Orders and Backlog ($ in millions) Solid orders of $172.7 million in the quarter Backlog of $146.6 million up 2% year over year • Recovery of short-cycle businesses drove • Long-term backlog expanded to 41.5% of total backlog 26% sequential order increase • 12% sequential increase of total backlog driven by both project and short-cycle businesses $205.3 $197.3 $146.6 $179.4 $143.1 $172.7 $125.3 $131.0 $130.7 $137.4 $89.2 $74.0 $81.9 $77.9 $85.8 $53.9 $51.3 $49.1 $52.8 $60.8 0.99x 0.90x 1.04x 0.99x 1.09x Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Orders Book:Bill Long Term Backlog* Short Term Backlog Backlog recovered to pre-COVID levels *Long-term backlog is expected to ship beyond three months 13
Driving Innovation Creating competitive advantages Product Launch Update Tandem Hoist Intelli-Lift™ Auto Detection Utility Lever Hoist • Improved facility safety for large • Visible and audible warnings when • Safety brake prevents unexpected complex loads off-center pick is detected load release • Available in Compass™ configurator • Auto-correction mode • Two patent applications on the YaleErgo 360 Improved customer experience, safety and productivity at the core of new product development 14
Outlook and Perspective Q3 FY2021 outlook • Expect Q3 FY21 net sales of $150 million to $160 million despite fewer shipping days Blueprint for Growth strategy is evolving • Strengthening our business system • Advancing our growth framework Consistent capital allocation priorities • Investing internally • Targeted growth initiatives • Productivity CapEx • Building our acquisition pipeline • Providing a consistent dividend that will grow over time Building a stronger Columbus McKinnon 15
Q2 Fiscal Year 2021 Financial Results Conference Call October 29, 2020 David J. Wilson President and Chief Executive Officer Gregory P. Rustowicz Vice President – Finance & Chief Financial Officer
Supplemental Information 17
Conference Call Playback Info Replay Number: 412-317-6671 passcode: 13710950 Telephone replay available through November 5, 2020 Webcast / PowerPoint / Replay available at investors.columbusmckinnon.com Transcript, when available, at investors.columbusmckinnon.com 18
Adjusted Gross Profit Reconciliation ($ in thousands) Quarter Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Gross profit $ 73,493 $ 67,872 $ 66,209 $ 44,797 $ 56,025 Add back (deduct): Factory closures 249 696 1,349 1,928 493 Business realignment costs 140 123 774 329 — Insurance settlement — (77) (15) — — Gain on sale of building — — — — (2,189) Non-GAAP adjusted gross profit $ 73,882 $ 68,614 $ 68,317 $ 47,054 $ 54,329 Sales 207,609 199,355 189,486 139,070 157,790 Adjusted gross margin 35.6% 34.4% 36.1% 33.8% 34.4% Adjusted gross profit is defined as gross profit as reported, adjusted for certain items. Adjusted gross profit is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted gross profit, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's gross profit to the historical periods' gross profit, as well as facilitates a more meaningful comparison of the Company’s gross profit to that of other companies. 19
Adjusted Income from Operations Reconciliation ($ in thousands) Quarter Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Income from operations $ 25,231 $ 20,886 $ 16,664 $ 1,789 $ 15.820 Add back (deduct): Factory closures 470 1,592 1,621 2,256 747 Business realignment costs 413 662 1,755 821 — Insurance recovery legal costs 220 66 160 141 88 Loss on sales of businesses 7 — — — — Insurance settlement — (77) (15) — — Gain on sale of building — — — — (2.638) Non-GAAP adjusted income from operations $ 26,341 $ 23,129 $ 20,185 $ 5,007 $ 14,017 Sales 207,609 199,355 189,486 139,070 157,790 Adjusted operating margin 12.7% 11.6% 10.7% 3.6% 8.9% Adjusted income from operations is defined as income from operations as reported, adjusted for certain items. Adjusted income from operations is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted income from operations, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's income from operations to the historical periods' income from operations, as well as facilitates a more meaningful comparison of the Company’s income from operations to that of other companies. 20
Adjusted Net Income Reconciliation ($ in thousands, except per share data) Quarter Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Net income (loss) $ 16,599 $ 15,250 $ 9,244 $ (2,969) $ (4,104) Add back (deduct): Non-cash pension settlement expense — — — 2,722 16,324 Factory closures 470 1,592 1,621 2,256 747 Business realignment costs 413 662 1,755 821 — Insurance recovery legal costs 220 66 160 141 88 Loss on sales of businesses 7 — — — — Insurance settlement — (77) (15) — — Gain on sale of building — — — — (2,638) Normalize tax rate to 22%(1) 114 (2,106) 1,050 (1,405) (2,327) Non-GAAP adjusted net income $ 17,823 $ 15,387 $ 13,815 $ 1,566 $ 8,090 Average diluted shares outstanding 23,926 24,031 23,938 23,922 24,123 Diluted income (loss) per share – GAAP $0.69 $0.63 $0.39 $(0.12) $(0.17) Diluted income per share - Non-GAAP $0.74 $0.64 $0.58 $0.07 $0.34 (1) Applies normalized tax rate of 22% to GAAP pre-tax income and non-GAAP adjustments above, which are each pre-tax. Adjusted net income and diluted EPS are defined as net income and diluted EPS as reported, adjusted for certain items and at a normalized tax rate. Adjusted net income and diluted EPS are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable to the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted net income and diluted EPS, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's net income and diluted EPS to the historical periods' net income and diluted EPS, as well as facilitates a more meaningful comparison of the Company’s net income and diluted EPS to that of other companies. 21
Adjusted EBITDA Reconciliation ($ in thousands) Quarter Fiscal Year Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 2020 2019 Net income (loss) $ 16,599 $ 15,250 $ 9,244 $ (2,969) $ (4,104) $ 59,672 $ 42,577 Add back (deduct): Income tax expense (benefit) 5,141 2,234 4,947 (963) (45) 17,484 10,321 Interest and debt expense 3,759 3,423 3,200 3,188 3,018 14,234 17,144 Investment (income) loss (229) (408) 48 (577) (357) (891) (727) Foreign currency exchange (gain) loss (296) (188) (996) 84 397 (1,514) 843 Other (income) expense, net 257 199 221 3,026 16,911 839 (716) Depreciation and amortization expense 7,344 7,244 7,135 7,081 7,129 29,126 32,675 Factory closures 470 1,592 1,621 2,256 747 4,709 1,473 Business realignment costs 413 662 1,755 821 — 2,831 1,906 Insurance recovery legal costs 220 66 160 141 88 585 1,282 Loss on sales of businesses 7 — — — — 176 25,672 Insurance settlement — (77) (15) — — (382) — Gain on sale of building — — — — (2,638) — — Non-GAAP adjusted EBITDA $ 33,685 $ 30,373 $ 27,320 $ 12,088 $ 21,146 $ 126,869 $ 132,450 Sales $ 207,609 $ 199,355 $ 189,486 $ 139,070 $ 157,790 $ 809,162 $ 876,282 Adjusted EBITDA margin 16.2% 15.2% 14.4% 8.7% 13.4% 15.7% 15.1% Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted EBITDA, is important for investors and other readers of the Company’s financial statements. 22
Industrial Capacity Utilization U.S. Capacity Utilization Eurozone Capacity Utilization Source: The Federal Reserve Board Source: European Commission 85% 80% 83% 81% 75% 79% 77% 70% 75% 70.5% (Manufacturing) & 73% 72.1% 71.5% (Total) Q3 2020 September 2020(1) 71% 65% 69% 67% 60% 65% Manufacturing Total (1)September 2020 numbers are preliminary 23
ISM Production Index Source: Institute of Supply Chain Management 70% 61.0% 65% Sept. 2020 60% 55% 50% 45% 40% 35% 30% 25% 24
Q2 Fiscal Year 2021 Financial Results Conference Call October 29, 2020 25