Columbus Mckinnon Corp 8-K, filed Aug 23, 2022
Columbus Mckinnon Corp (CMCO)
8-K
2022-08-23
For: 2022-08-22
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April 08, 2026
About this 8-K
Columbus Mckinnon Corp filed this 8-K on August 23, 2022, reporting on events of August 22, 2022.
Items reported
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
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): August 22, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
| (Commission File Number) | (IRS Employer Identification No.) | |||||||
| (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 | ||||||
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)) | |||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| 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 7.01 | REGULATION FD DISCLOSURE. | ||||
On August 22, 2022 , Columbus McKinnon Corporation (the “Company”) posted August investor slides to its website, which are annexed as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Current Report on Form 8-K and the exhibits 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 NUMBER | DESCRIPTION | |||||||
Investor slides dated August 2022 | ||||||||
| 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: | Executive Vice President - Finance and Chief Financial Officer | ||||
| (Principal Financial Officer) | |||||
Dated: August 23, 2022
Investor Presentation Executive Vice President – Finance and Chief Financial Officer Gregory P. Rustowicz President and Chief Executive Officer David J. Wilson August 2022
© 2022 COLUMBUS MCKINNON CORPORATION These slides, and the accompanying oral discussion (together, this “presentation”), 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 expected growth, future sales and EBITDA margins, and future potential to deliver results; the execution of its strategy and further transformation of the Company with stronger growth, less cyclicality and higher margins, and achievement of certain goals. These statements 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 supply chain challenges and inflation, the ability of the Company to scale the organization, achieve its financial targets including revenue and adjusted EBITDA margin, and to execute CMBS and the Core Growth Framework; global economic and business conditions affecting the industries served by the Company and its subsidiaries including COVID-19; 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. Consequently, such forward- looking statements should be regarded as current plans, estimates and beliefs. The Company assumes no obligation to update the forward-looking information contained in this presentation. Non-GAAP Financial Measures and Forward-looking Non-GAAP 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. Safe Harbor Statement 2
© 2022 COLUMBUS MCKINNON CORPORATION 3 Intelligent Motion Solutions for Material Handling Seasoned Leader With Extensive History Of Safely, Efficiently And Ergonomically Moving Materials (1) Market data as of 8/17/2022 (Source: S&P Capital IQ); Financial data represents TTM ended June 30, 2022 (2) Product mix data represents fiscal year ended March 31, 2022 Columbus McKinnon (Nasdaq: CMCO) Financial & Market Data (1) Transforming from a legacy cyclical industrial company to a top-tier, secular growth, intelligent motion solutions company Strategic priorities • Strengthen and build upon CMCO’s core • Invest in high-growth, high margin platforms • Increase exposure to high growth, secular end markets • Achieve top-tier performance utilizing CMBS and growth framework Highly relevant, professional-grade solutions for solving customers’ critical material handling requirements #1 U.S. hoist provider and #2 largest global hoist company Market leader in North America in precision conveyance $913M $1.0B Revenue Market Cap. Product Mix (2) Linear Motion 10% Automation 13% Conveying Solutions 16% Lifting Solutions 61%
© 2022 COLUMBUS MCKINNON CORPORATION 4 Lifting Solutions: #1 U.S. market position in hoists Lifting capacity from 1/8 ton to ~140 tons Manual chain, electric chain and wire rope hoists Reliable, high-quality products Compass™ configure, price and quote tool Linear Motion Solutions: Specialty Actuation Products: Demonstrated leadership and differentiated offering Serving a breadth of end markets from rail to warehousing to defense Automation Solutions: Design and develop drives and controls for lifting, linear motion including conveying systems Lifting, Linear Motion and Automation Solutions Global Leader In Intelligent Motion Solutions For Material Handling
© 2022 COLUMBUS MCKINNON CORPORATION 5 Specialty conveying provides growth platform: ~$4B TAM growing at 6% to 8% CAGR Higher margin profile Strong secular growth drivers: Supply chain automation Acceleration of e-commerce adoption Fragmented market provides target rich acquisition environment Acquired Garvey in December 2021 Complementary adjacencies: Sortation, asynchronous, vibration, etc. Conveying Solutions: A Scalable, High-Growth Platform Developing Leading Platform for Growth Precision Conveyance Solutions
© 2022 COLUMBUS MCKINNON CORPORATION 6 Unlocking CMCO’s Potential Business System and Core Growth Framework to Transform CMCO Framework To Deliver Differentiated Growth, Financial Performance And Shareholder Value GROWTH FRAMEWORKCMBS TRANSFORMATION
© 2022 COLUMBUS MCKINNON CORPORATION 7 Business Model Transformation Growth Strategy Substantially Advances Underlying Portfolio Targeting $1.5 Billion In Revenue In Fiscal 2027 And ~21% EBITDA Margin Revenue Growth Rate EBITDA Margin Lifting Solutions 61% Specialty Conveying 16% Linear Motion 10% Automation 13% Lifting Solutions FY21 Lifting Solutions Specialty Conveying Linear Motion Automation Linear Motion & Automation FUTURE FY22
© 2022 COLUMBUS MCKINNON CORPORATION Targeting Top-tier Performance Over The Strategic Planning Period Increases digital capabilities with technology enablers that support growth and cost optimization Incorporates factory simplification to drive earnings power Elevates competitive advantage via deployment of Columbus McKinnon’s Business System (CMBS) Strengthens talent processes, improves organizational structure and advances succession STRATEGIC PLAN TO TRANSFORM COLUMBUS MCKINNON INTO A GLOBAL INTELLIGENT MOTION ENTERPRISE Advances CMCO to achieve target ~$1.5 billion in revenue and ~21% EBITDA margin in FY27 Evolves the enterprise from cyclical industrial to top-tier, secular growth, intelligent motion solutions Delivers ~$250 million of organic initiative growth and ~$325 million of M&A growth M&A includes ~$250 million of acquired revenue and ~$75 million of growth from acquired businesses Beyond the Blueprint 8
© 2022 COLUMBUS MCKINNON CORPORATION 9 CMBS to Deliver Margin Expansion 80/20 Critical Business Tool Created More Than $45 Million Of Incremental OI Beginning In FY19… More Opportunities To Pursue Product SKUs Down to ~22,000* from ~50,000 in 2019 Surpassed goal of 26,000 Purchased parts Reduced by 40% to ~239,000* Simplify the Business: Eliminate bleeders… focus on areas of growth Raving fans and priority account program Customer list simplification Business Segmentation, Zero Up • Processes being embedded into “Core Competencies” • Ownership, Accountability & Measurability • Drive realization of synergies from Dorner acquisition Focus Area: Product Line Simplification 80/20 Embedded in CMBS Product Line Simplification * Excludes Dorner and Garvey standard SKUs
© 2022 COLUMBUS MCKINNON CORPORATION 10 Secular Growth Markets Provide Strong Tailwinds New platform adds attractive vertical markets with enduring tailwinds Strategy Aligned With Significant Megatrends That Are Driving High-Single-Digit Growth Trends Life Sciences / Pharma E-Commerce Custom designed sanitary and easy to clean conveyors engineered to the strictest USDA guidelines Customizable designs built for precision, speed, and to FDA / industry standards for clean- room certifications Single piece picking, robotics integration to automate picking and sorting functions ~6% of FY22 sales* ~3% of FY22 sales* Food, Beverage & Consumer Goods ~3% of FY22 sales* * Percentage of total fiscal year 2022 sales, including acquisitions
© 2022 COLUMBUS MCKINNON CORPORATION 11 Driving Organic Growth with New Products Improved Customer Experience, Safety and Productivity At The Core Of New Product Development • Improved facility safety for large complex loads • Available in Compass™ configurator Linear Actuator with Intelli-Motion™ Precision Pallet System Tandem Hoist D e li v e ri n g I n n o v a ti o n • Unique, beltless zone control for pallet and tray handling • Ideal for accumulation and automation assembly applications • Provides enhanced control and position feedback capabilities • Reduces installation costs and the overall product footprint
© 2022 COLUMBUS MCKINNON CORPORATION 12 Driving Innovation Through Automation Intelli-Crane™ Solutions Creating Competitive Advantages With Pre-Engineered Automation Solutions • Protection boundaries for improved facility safety • Full configuration to exact requirements • Visible and audible warnings when off-center pick is detected • Auto-correction mode • Provides critical crane and hoist status information • Reduces plan maintenance and ultimately increases uptime Intelli-Protect™ System Intelli-Lift™ Auto Detection Intelli-Connect™+ Mobile App
© 2022 COLUMBUS MCKINNON CORPORATION 13 Strong Track Record Creating Value Through M&A Transforming Columbus McKinnon Into A Top-Tier, Higher Growth, Higher Margin Enterprise January 2017 Acquisition of STAHL CraneSystems from Konecranes for ~$218M strengthens leading global position in lifting solutions Programmatic M&A M&A Pipeline Target Screen Acquisition Committee Feedback Outreach Due Diligence Decision 2016 2017 2018 2019 2020 2021 September 2015 Acquisition of Magnetek, Inc. for ~$182M added automation capabilities February 2019 Divestiture of Stahlhammer Bommern GmbH to Turbo Investment BV April 2021 Acquisition of Dorner for $485M advances Intelligent Motion strategy and creates platform for scalable growth February 2019 Divestiture of Crane Equipment and Service, Inc. December 2018 Divestiture of Tire Shredder Business Tire Shredder 2015 December 2021 Acquisition of Garvey for $74M expands conveying solutions platform
© 2022 COLUMBUS MCKINNON CORPORATION Reducing RSG&A as a Percent of Sales to ~20%* • Reorganization to optimize management and commercial structure • ERP implementations enable shared service model • Additional investments in digital enablement (i.e. HRIS, CRM, CPQ, SIOP) • Improved leverage and scale with mid-single-digit organic revenue growth & accretive M&A Growing Sales by >10% CAGR • Organic growth of ~5% driven by go-to-market structure and strategic initiatives • Inorganic growth of ~6% from programmatic M&A inclusive of market growth • No material changes to current market conditions Expanding Gross Margin to ~40%+ • Factory footprint simplification & productivity improvements reduce COGS by ~$30M • Product Line Simplification (PLS), material productivity and value engineering savings of ~$9M • Raw material inflation normalizes to ~2% on average from FY23 levels SALES COGS RSG&A FY2027 Financial Targets Driving Gross Margin Expansion while Reducing SG&A as a Percent of Revenue 14 Key Assumptions * Excludes proforma items
© 2022 COLUMBUS MCKINNON CORPORATION 15 Financial Targets Execution of Strategy Delivers Attractive Financial Results $115 $132 $127 $77 $140 $235 $80 ~$315 13.7% 15.1% 15.7% 11.9% 15.4% ~21% -2.0% 3.0% 8.0% 13.0% 18.0% 23.0% 28.0% -50 50 150 250 350 450 550 FY18 FY19 FY20 FY21 FY22 FY27E ADJUSTED EBITDA & ADJUSTED EBITDA MARGIN $876 $839 $809 $650 $907 $1,175 $32533.7% 35.0% 35.4% 34.1% 36.1% ~40% 19.0% 24.0% 29.0% 34.0% 39.0% $- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 FY18 FY19 FY20 FY21 FY22 FY27E SALES & ADJUSTED GROSS MARGIN $1,500 ($ in millions)
© 2022 COLUMBUS MCKINNON CORPORATION 16 Revenue Bridge Strategy Expected to Deliver >10% Revenue Growth REVENUE FY22 TO FY27E ($ in millions)
© 2022 COLUMBUS MCKINNON CORPORATION 17 Adjusted EBITDA Margin Bridge Expanding Adjusted EBITDA Margins ~550 bps Driven by Cost Actions & Scale ~21% ADJUSTED EBITDA MARGIN FY22 to FY27E $309M Backlog at 3/31/22 Pricing & Freight Recovery Actions In Process ~19% ($ in millions)
© 2022 COLUMBUS MCKINNON CORPORATION D e c re a s in g P ri o ri ty Acquisitions New product development and CapEx De-lever the balance sheet Regular/Special dividend Share repurchase Capital Allocation Priorities Disciplined Approach to Capital Allocation Prioritizing Growth and Returns Fund pension contributions above minimum requirement GROWTH Continue programmatic M&A Invest in growth initiatives Terminate plans when feasible BALANCE SHEET Manage capital structure responsibly RETURN OF CAPITAL Adhere to dividend policy Consider opportunistically 18
© 2022 COLUMBUS MCKINNON CORPORATION 19 Free Cash Flow and Net Leverage Strong Cash Generation Funds Strategic Investments 46 55 67 97 87 36 160 513% 250% 158% 163% 951% 121% 98% -1200% -700% -200% 300% 800% 0 50 100 150 200 FY17 FY18 FY19 FY20 FY21 FY22 FY27E FREE CASH FLOW GENERATION / CONVERSION(1) NET DEBT / NET LEVERAGE(2) 344 300 229 137 47 396 630 3.5x 2.6x 1.7x 1.1x 0.6x 2.7x 2.0x -4.00 -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00 5.00 0.0 200.0 400.0 600.0 800.0 1000.0 FY17 FY18 FY19 FY20 FY21 FY22 FY27E ($ in millions) (1) FCF Conversion = FCF / Net Income (2) FY17 EBITDA adjusted to reflect 12 months of STAHL; FY22 EBITDA adjusted to reflect 12 months of Garvey
© 2022 COLUMBUS MCKINNON CORPORATION 22.8% 36.1% 33.3% ADJ. GROSS MARGIN(1) 7.8x 9.3x 11.3x EBITDA TRADING MULTIPLE(2) 16.3% 39.5% 22.4% Legacy Industrial CMCO Motion Control YOY SALES GROWTH LEGACY INDUSTRIAL PEERS MOTION CONTROL PEERS 10.3% 15.4% 18.8% ADJ. EBITDA MARGIN CMCO Peer Group Comparison Industrial Peers vs. Motion Control Peers CMCO More Similar to Motion Control Peer Group… Valuation Lags 20 19% Target: ~21% Sources: Peers – Refinitiv; CMCO – FY22 Earnings Release (1) Excludes Konecranes who does not report GM% (2) Enterprise Value priced as of 6/17/2022 (Based on average TTM ending 3/31/2022)
© 2022 COLUMBUS MCKINNON CORPORATION 21 Strong Demand Across Markets Continued strength throughout breadth of industries served Strong Book-to-Bill Ratio Supports Continued Future Growth Continued Strength in Orders Record backlog of $351.6 million • Up 7%; 11% on constant currency basis with double-digit growth in Americas and EMEA • Sequential average daily order rate held steady countering typical Q1 decline off Q4 strength • Up 9% in short term backlog and up 20% in long term backlog (1), sequentially • Short term backlog represents 80% of Q2 FY23 revenue guidance at mid-point of range $249.8 $238.3 $230.5 $269.8 $267.1 1.17x 1.07x 1.07x 1.06x 1.21x Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Orders Book:Bill $107.3 $110.5 $116.3 $135.2 $162.8 $140.1 $145.1 $178.4 $173.9 $188.8 $247.4 $255.6 $294.7 $309.1 $351.6 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 Long Term Backlog Short Term Backlog (1) ($ in millions) (1) Long term backlog is expected to ship beyond three months
© 2022 COLUMBUS MCKINNON CORPORATION 22 Record Backlog and Strong Pricing Drives Sales Driving Towards $1 Billion In Annual Revenue NET SALES $213.5 $223.6 $216.1 $253.4 $220.3 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 $649.6 $906.6 $913.4 FY21 FY22 Q1 FY23 TTM ($ in millions) (1) Only Garvey acquisition from December 2021 is included in Q1 FY23 contribution (2) Revenue guidance provided July 28, 2022 ADJUSTED EBITDA MARGIN 16.0% 16.1% 14.2% 15.4% 15.9% Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 ADJUSTED EARNINGS PER SHARE $(0.27) $0.53 $0.34 $0.41 $0.29 $0.69 $0.74 $0.60 $0.79 $0.69 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 EPS Adjustment $0.38 $1.04 $1.57 $1.57 $2.83 $2.83 FY21 FY22 Q1 FY23 TTM 11.9% 15.4% 15.4% FY21 FY22 Q1 FY23 TTM Sales growth driven by pricing helping to offset volume which was restricted by supply chain challenges Adjusted EBITDA margin benefits from accretive acquisitions and strong demand
© 2022 COLUMBUS MCKINNON CORPORATION 23 Capital Structure Flexible Capital Structure and Solid Balance Sheet Supports Strategy in All Market Conditions Pro-forma net debt leverage ratio of ~2.9x(1) • Net debt to net total capital: 34.9% Reduced debt $10 million in the quarter Expect to pay down $40 million in FY23 Financial flexibility • ~$168 million of liquidity • Financial strength and cash generation capability enables execution of strategy including bolt-on acquisitions, without over leveraging balance sheet CAPITALIZATION June 30, 2022 March 31, 2022 Cash and cash equivalents $ 85.7 $ 115.4 Total debt 501.3 511.2 Total net debt 415.7 395.8 Shareholders’ equity 775.2 772.8 Total capitalization $ 1,276.5 $ 1,284.0 Debt/total capitalization 39.3% 39.8% Net debt/net total capitalization 34.9% 33.9% ($ in millions) Note: Components may not add to totals due to rounding (1) Pro-forma net debt leverage ratio is defined as Net Debt / TTM Adjusted EBITDA including acquisition
© 2022 COLUMBUS MCKINNON CORPORATION 24 Outlook and Perspective Creating A Scalable Enterprise With Stronger Earnings Power Q2 FY2023 outlook • Expect Q2 FY23 net sales of approximately $230 million to $240 million,(1) up mid-to-high single digits sequentially • Executing plan and addressing supply chain bottlenecks Driving growth initiatives with Core Growth Framework • Near record orders in Q1 of $267 million • Demand remains strong across markets and is increasing in Defense, Entertainment, Rail & Utilities Realigned business, driving operational improvements, elevating competitive advantage • Focused on delivering results aligned with transformation strategy • Financial strength to execute plan through cycles (1) Revenue guidance provided July 28, 2022
© 2022 COLUMBUS MCKINNON CORPORATION 25 Key Takeaways Transforming to a Top-tier, Secular Growth, Intelligent Motion Solutions Enterprise Growth Strategy Is Underpinned By CMBS Enabling Scalability And Operational Excellence EVOLVED STRATEGY BLUEPRINT FOR GROWTH 2.0 DEFINES GROWTH FRAMEWORK COLUMBUS MCKINNON BUSINESS SYSTEM – CMBS – ENABLES SCALABILITY DEMONSTRATED PERFORMANCE WITH STRONG LEADERSHIP TEAM SIGNIFICANT CASH GENERATION THROUGHOUT BUSINESS CYCLES CONVEYING SOLUTIONS ADDS GROWTH CATALYST IN ATTRACTIVE MARKETS OPERATIONAL EXCELLENCE DRIVES STRONGER MARGIN PROFILE AS ECONOMY RECOVERS
Investor Presentation Executive Vice President – Finance and Chief Financial Officer Gregory P. Rustowicz President and Chief Executive Officer David J. Wilson August 2022
Supplemental Information
© 2022 COLUMBUS MCKINNON CORPORATION 28 Corporate Sustainability Report Together We Create Intelligent Motion Solutions That Move The World Forward And Improve Lives Strategic Initiatives • Five-year plan – based on baselines, gap analysis & target setting • Tightly aligned with business strategy • Prioritized by impact, risk assessment and opportunity for value • Metrics and goals embedded in business functions ENVIRONMENTAL STEWARDSHIP CLIMATE CHANGE & ENERGY MANAGEMENT WASTE MANAGEMENT & RECYCLING SOCIAL RESPONSIBILITY EMPLOYEE HEALTH & SAFETY HUMAN CAPITAL MANAGEMENT PRODUCT QUALITY & INNOVATION PURPOSE, MISSION, VISION, VALUES CUSTOMER SATISFACTION GOVERNANCE & ETHICS SUPPLY CHAIN MANAGEMENT CYBERSECURITY ETHICS & COMPLIANCE ENTERPRISE RISK MANAGEMENT BOARD GOVERNANCE
© 2022 COLUMBUS MCKINNON CORPORATION 29 U.S. Capacity Utilization Industrial Capacity Utilization Eurozone Capacity Utilization Source: The Federal Reserve Board Source: European Commission 60% 65% 70% 75% 80% Manufacturing Total 79.8% (Manufacturing) 80.3% (Total) July 2022(1) 65% 67% 69% 71% 73% 75% 77% 79% 81% 83% 85% 82.4% Q3 2022 (1) July 2022 numbers are preliminary
© 2022 COLUMBUS MCKINNON CORPORATION Source: Institute for Supply Chain Management ISM Production Index 30 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 53.5% July 2022
© 2022 COLUMBUS MCKINNON CORPORATION 31 Adjusted Gross Profit Reconciliation 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. ($ in thousands) Fiscal Year TTM 2018 2019 2020 2021 2022 Q1 FY23 GAAP gross profit $ 285,061 $ 304,997 $ 283,186 $ 220,225 $ 315,730 $ 324,186 Add back (deduct): Product liability settlement — — — — 2,850 2,850 Acquisition amortization of backlog — — — — 2,100 2,100 Acquisition inventory step-up expense — — — — 5,042 2,061 Business realignment costs — 286 1,037 830 1,606 1,606 Acquisition deal and integration costs 307 — — — 521 — Factory closures — 1,473 2,800 2,671 — — Insurance settlement (2,362) — (382) — — — Gain on sale of building — — — (2,189) — — Non-GAAP adjusted gross profit $ 283,006 $ 306,756 $ 286,641 $ 221,537 $ 327,849 $ 332,803 Sales 839,419 876,282 809,162 649,642 906,555 913,378 Add back: Acquisition amortization of backlog — — — — 2,100 2,100 Non-GAAP sales $ 839,419 $ 876,282 $ 809,162 $ 649,642 $ 908,655 $ 915,478 Gross margin – GAAP 34.0% 34.8% 35.0% 33.9% 34.8% 35.5% Adjusted gross margin – Non-GAAP 33.7% 35.0% 35.4% 34.1% 36.1% 36.4%
© 2022 COLUMBUS MCKINNON CORPORATION Adjusted net income and diluted EPS are defined as GAAP net income/(loss) and diluted EPS as reported, adjusted for certain items, including amortization of intangible assets, and also adjusted for 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 with the measures 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/(loss) and diluted EPS to the historical periods' net income/(loss) and diluted EPS, as well as facilitates a more meaningful comparison of the Company’s net income/(loss) and diluted EPS to that of other companies. The Company believes that representing adjusted EPS provides a better understanding of its earnings power inclusive of adjusting for the non-cash amortization of intangible assets, reflecting the Company’s strategy to grow through acquisitions as well as organically. Adjusted Net Income Reconciliation 32 ($ in thousands, except per share data) Quarter Fiscal Year TTM Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 FY 2021 FY 2022 Q1 FY23 GAAP net income (loss) $ (7,263) $ 15,203 $ 9,894 $ 11,826 $ 8,391 $ 9,106 $ 29,660 $ 45,314 Add back (deduct): Amortization of intangibles 6,109 6,285 6,254 6,635 6,535 12,623 25,283 25,709 Cost of debt refinancing 14,803 — — — — — 14,803 — Acquisition deal and integration costs 9,242 632 370 229 86 3,951 10,473 1,317 Acquisition inventory step-up expense 2,981 — 515 1,546 — — 5,042 2,061 Business realignment costs 623 1,200 964 1,115 1,657 1,470 3,902 4,936 Product liability settlement — — 2,850 — — — 2,850 2,850 Acquisition amortization of backlog — — 450 1,650 — — 2,100 2,100 Non-cash pension settlement expense — — — — — 19,046 — — Factory closures — — — — — 3,778 — — Insurance recovery legal costs — — — — — 229 — — Gain on sale of building — — — — — (2,638) — — Normalize tax rate to 22%(1) (7,792) (1,946) (3,854) (260) 3,269 (9,708) (13,852) (2,790) Non-GAAP adjusted net income $ 18,703 $ 21,374 $ 17,443 $ 22,741 $ 19,938 $ 37,857 $ 80,261 $ 81,497 Average diluted shares outstanding 27,159 28,756 28,840 28,845 28,699 24,173 28,401 28,785 Diluted income (loss) per share – GAAP $(0.27) $0.53 $0.34 $0.41 $0.29 $0.38 $1.04 $1.57 Diluted income per share – Non-GAAP $0.69 $0.74 $0.60 $0.79 $0.69 $1.57 $2.83 $2.83 (1)Applies normalized tax rate of 22% to GAAP pre-tax income and non-GAAP adjustments above, which are each pre-tax.
© 2022 COLUMBUS MCKINNON CORPORATION Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted EBITDA, is important for investors and other readers of the Company’s financial statements. Adjusted EBITDA Reconciliation 33 ($ in thousands) Quarter Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY22 Q1 FY23 GAAP net income (loss) $ (7,263) $ 15,203 $ 9,894 $ 11,826 $ 8,391 Add back (deduct): Income tax expense (benefit) (2,517) 4,083 1,066 6,154 8,893 Interest and debt expense 5,812 4,587 4,375 5,352 6,203 Investment (income) loss (433) (115) (76) 578 430 Foreign currency exchange (gain) loss 94 441 512 527 1,203 Other (income) expense, net 250 (539) (455) (378) (2,303) Depreciation and amortization expense 10,467 10,502 10,276 10,679 10,469 Cost of debt refinancing 14,803 — — — — Acquisition deal and integration costs 9,242 632 370 229 86 Acquisition inventory step-up expense 2,981 — 515 1,546 — Product liability settlement — — 2,850 — — Business realignment costs 623 1,200 964 1,115 1,657 Acquisition amortization of backlog — — 450 1,650 — Factory closures — — — — — Insurance recovery legal costs — — — — — Gain on sale of building — — — — — Non-GAAP adjusted EBITDA $ 34,059 $ 35,994 $ 30,741 $ 39,278 $ 35,029 Sales $ 213,464 $ 223,635 $ 216,088 $ 253,368 $ 220,287 Add back: Acquisition amortization of backlog — — 450 1,650 — Non-GAAP sales $ 213,464 $ 223,635 $ 216,538 $ 255,018 $ 220,287 Net income (loss) margin – GAAP (3.4)% 6.8% 4.6% 4.7% 3.8% Adjusted EBITDA margin – Non-GAAP 16.0% 16.1% 14.2% 15.4% 15.9%
© 2022 COLUMBUS MCKINNON CORPORATION 34 Adjusted EBITDA Reconciliation ($ in thousands) Fiscal Year TTM 2018 2019 2020 2021 2022 Q1 FY23 GAAP net income (loss) $ 22,065 $ 42,577 $ 59,672 $ 9,106 $ 29,660 $ 45,314 Add back (deduct): Income tax expense (benefit) 27,620 10,321 17,484 970 8,786 20,196 Interest and debt expense 19,733 17,144 14,234 12,081 20,126 20,517 Investment (income) loss (157) (727) (891) (1,693) (46) 817 Foreign currency exchange (gain) loss 1,539 843 (1,514) 941 1,574 2,683 Other (income) expense, net (2,469) (716) 839 20,850 (1,122) (3,675) Depreciation and amortization expense 36,136 32,675 29,126 28,153 41,924 41,926 Cost of debt refinancing — — — — 14,803 — Acquisition deal and integration costs 8,763 — — 3,951 10,473 1,317 Acquisition inventory step-up expense — — — — 5,042 2,061 Factory closures — 1,473 4,709 3,778 — — Business realignment costs — 1,906 2,831 1,470 3,902 4,936 Product liability settlement — — — — 2,850 2,850 Acquisition amortization of backlog — — — — 2,100 2,100 Insurance recovery legal costs 2,948 1,282 585 229 — — Loss on sales of businesses — 25,672 176 — — — Insurance settlement (2,362) — (382) — — — Magnetek litigation 400 — — — — — Debt repricing fees 619 — — — — — Gain on sale of building — — — (2,638) — — Non-GAAP adjusted EBITDA $ 114,835 $ 132,450 $ 126,869 $ 77,198 $ 140,072 $ 141,042 Sales $ 839,419 $ 876,282 $ 809,162 $ 649,642 $ 906,555 $ 913,378 Add back: Acquisition amortization of backlog — — — — 2,100 2,100 Non-GAAP sales $ 839,419 $ 876,282 $ 809,162 $ 649,642 $ 908,655 $ 915,478 Net income (loss) margin – GAAP 2.6% 4.9% 7.4% 1.4% 3.3% 5.0% Adjusted EBITDA margin – Non-GAAP 13.7% 15.1% 15.7% 11.9% 15.4% 15.4% 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.
© 2022 COLUMBUS MCKINNON CORPORATION NM: Not meaningful Free cash flow is defined as cash from operations minus capital expenditures. Free cash flow conversion is defined as free cash flow divided by net income. Free cash flow and free cash flow conversion are not measures 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 free cash flow and free cash flow conversion, 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 cash flow to the historical periods’ cash flow, as well as facilitates a more meaningful comparison of the Company’s cash flow to that of other companies. Free Cash Flow Reconciliation ($ in thousands) Quarter Fiscal Year TTM Q1 FY22 Q1 FY23 2017 2018 2019 2020 2021 2022 Q1 FY23 Cash (used in) provided by operations $ (7,396) $ (11,177) $ 60,450 $ 69,661 $ 79,499 $ 106,795 $ 98,890 $ 48,881 $ 45,100 Capital expenditures (3,648) (2,953) (14,368) (14,515) (12,288) (9,432) (12,300) (13,104) (12,409) Free cash flow (FCF) $ (11,044) $ (14,130) $ 46,082 $ 55,146 $ 67,211 $ 97,363 $ 86,590 $ 35,777 $ 32,691 GAAP net (loss) income $ (7,263) $ 8,391 $ 8,984 $ 22,065 $ 42,577 $ 59,672 $ 9,106 $ 29,660 $ 45,314 Free cash flow conversion NM (168)% 513% 250% 158% 163% 951% 121% 72% 35