COLUMBUS MCKINNON CO

CMCO
Real-time Estimate Quote. Real-time Estimate  - 01/19 12:38:37 pm
47.86USD -0.93%

COLUMBUS MCKINNON CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (form 10-Q)

10/28/2021 | 04:24pm

Executive Overview



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



Founded in 1875, we have grown to our current size and leadership position
through organic growth and acquisitions. We developed our leading market
position over our 146-year history by emphasizing technological innovation,
manufacturing excellence and superior customer service. In addition,
acquisitions significantly broadened our product lines and services and expanded
our geographic reach, end user markets and customer base. In accordance with our
Blueprint for Growth 2.0 Strategy, we are simplifying the business utilizing our
80/20 process, improving our operational excellence, and ramping the growth
engine by investing in new product development and a digital platform to grow
profitably. Shareholder value will be enhanced by expanding EBITDA margins and
return on invested capital ("ROIC").



Our revenue base is geographically diverse with approximately 42% derived from
customers outside the U.S. for the six months ended September 30, 2021. We
believe this diversity balances the impact of changes that occur in local
economies, as well as benefits the Company by providing access to growing
emerging markets. We monitor both U.S. and Eurozone Industrial Capacity
Utilization statistics as well as the ISM Production Index as indicators of
anticipated demand for our products. In addition, we continue to monitor the
potential impact of other global and U.S. trends including, industrial
production, trade tariffs, raw material cost inflation, interest rates, foreign
currency exchange rates, and activity of end-user markets around the globe.



From a strategic perspective, we are investing in new products as we focus on
our greatest opportunities for growth. We maintain a strong North American
market share with significant leading market positions in hoists, lifting and
sling chain, forged attachments, actuators, 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, and construction and infrastructure.



In March 2021, the Company announced that it had entered into a definitive
agreement to acquire Dorner. The acquisition of Dorner closed on April 7, 2021.
Dorner, headquartered in Hartland, Wisconsin, is a leading automation solutions
company providing unique, patented technologies in the design, application,
manufacturing and integration of high-precision conveying systems. The
acquisition of Dorner accelerates the Company's shift to intelligent motion and
serves as a platform to expand capabilities in advanced, higher technology
automation solutions. Dorner is a leading supplier to the stable life sciences,
food processing, and consumer packaged goods markets as well as the high growth
industrial automation and e-commerce sectors. The addition of Dorner provides
attractive complementary adjacencies including sortation and asynchronous
conveyance systems.



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



Our principal raw materials and components purchases were approximately $255
million
in fiscal 2021 (or 59% of Cost of product sold) and include steel,
consisting of rod, wire, bar, structural, and other forms of steel; electric
motors; bearings; gear reducers; castings; steel and aluminum enclosures and
wire harnesses; electro-mechanical components and standard variable drives.
These commodities are all available from multiple sources. We purchase most of
these raw materials and components from a limited number of strategic and
preferred suppliers under agreements which are negotiated on a companywide basis
through our global purchasing group. Currently, as a result of supply chain
challenges, we are experiencing higher raw material costs. To date, we have
raised prices to our customers to cover these increased raw material costs.



32
--------------------------------------------------------------------------------



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



Results of Operations



Three Months Ended September 30, 2021 and September 30, 2020



Net sales in the fiscal 2022 quarter ended September 30, 2021 were $223,635,000,
up $65,845,000 or 41.7% from the fiscal 2021 quarter ended September 30, 2020
net sales of $157,790,000. Net sales were positively impacted by the acquisition
of Dorner which contributed $33,539,000, $26,402,000 due to increased sales
volume, and $4,014,000 due to price increases. Foreign currency translation
favorably impacted sales by $1,890,000 for the three months ended September 30,
2021
.



Gross profit in the fiscal 2022 quarter ended September 30, 2021 was
$81,135,000, an increase of $25,110,000 or 44.8% from the fiscal 2021 quarter
ended September 30, 2020 gross profit of $56,025,000. Gross profit margin was
36.3% in the fiscal 2022 second quarter compared to 35.5% in the fiscal 2021
second quarter. The increase in gross profit was due to $13,288,000 in gross
profit as a result of the acquisition of Dorner, higher sales volume which
increased gross profit by $8,244,000, $5,489,000 in increased productivity net
of other cost changes, $860,000 of price increases net of material inflation,
and $493,000 in costs incurred in the prior year quarter due to factory closures
that did not reoccur. These gross profit increases were offset by a prior year
gain in the amount of $2,189,000 recorded for a building sold in China, $914,000
in business realignment costs, and $787,000 in increased tariffs. The
translation of foreign currencies had a $626,000 favorable impact on gross
profit in the three months ended September 30, 2021.



Selling expenses were $24,157,000 and $18,563,000, or 10.8% and 11.8% of net
sales, in the fiscal 2022 and 2021 second quarters, respectively. Selling
expense increased by $3,589,000 for costs incurred by Dorner and $211,000 in
business realignment costs during the three months ended September 30, 2021.
Foreign currency translation had a $243,000 unfavorable impact on selling
expenses in the three months ended September 30, 2021.



General and administrative expenses were $23,208,000 and $15,554,000, or 10.4%
and 9.9% of net sales, in the fiscal 2022 and 2021 second quarters,
respectively. The increase in general and administrative expenses was due to
$2,754,000 in general and administrative expenses incurred by Dorner, $2,218,000
in higher incentive compensation expense and stock compensation expense,
$1,500,000 in consulting costs to execute our Blueprint for Growth 2.0 Strategy,
and $632,000 in acquisition integration expenses in the three months ended
September 30, 2021. Foreign currency translation had a $140,000 unfavorable
impact on general and administrative expenses in the three months ended
September 30, 2021.



Research and development expenses were $3,825,000 and $2,896,000, or 1.7% and
1.8% of net sales, in the fiscal 2022 and 2021 second quarters, respectively.
The increase in research and development expenses was due to $409,000 in
research and development expenses incurred by Dorner and $122,000 in higher
incentive compensation expense and stock compensation expense.



Amortization of intangibles was $6,285,000 and $3,192,000 in the fiscal 2022 and
2021 second quarters, respectively, with the increase related to new intangible
assets recorded from the Dorner acquisition.



Interest and debt expense was $4,587,000 in the second quarter ended
September 30, 2021 compared to $3,018,000 in the second quarter ended
September 30, 2020. The increase is related to higher interest and debt expense
incurred on the Company's new Term Loan B as a result of the Dorner acquisition
and debt refinancing.



Investment income of $115,000 and $357,000 in the second quarters ended
September 30, 2021 and 2020, 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 6 of the
financial statements.



Other income was $539,000 in the second quarter ended September 30, 2021
compared to other expense of $16,911,000 in the second quarter ended September
30, 2020
. The prior year expense primarily related to a $16,324,000 settlement
charge as a result of the termination of one of the Company's U.S. pension
plans, as described in Note 10 of the financial statements. There were no
similar expenses incurred in the second quarter of fiscal 2022.



Income tax expense as a percentage of income from continuing operations before
income tax expense was 21% and 1% in the second quarters ended September 30,
2021
and September 30, 2020, respectively. Typically these percentages vary from
the



33
--------------------------------------------------------------------------------



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



For the quarter ended September 30, 2020, the rate was lower than the U.S.
statutory rate as a result of the impacts associated with pre-tax losses in the
U.S. related to the pension settlement expense described above, the U.S. R&D
credit, and the utilization of net operating losses that previously had a full
valuation allowance against them.



The Company estimates that the effective tax rate related to continuing
operations will be approximately 21% to 23% for fiscal 2022.



Six Months Ended September 30, 2021 and September 30, 2020



Net sales in the six months ended September 30, 2021 were $437,099,000, up
$140,239,000 or 47.2% from the fiscal 2021 six months ended September 30, 2020
net sales of $296,860,000. Net sales were positively impacted by the acquisition
of Dorner which contributed $67,718,000, $57,720,000 due to increased sales
volume, and $5,971,000 due to price increases. Foreign currency translation
favorably impacted sales by $8,830,000 for the six months ended September 30,
2021
.



Gross profit in the six months ended September 30, 2021 was $155,198,000, an
increase of $54,376,000 or 53.9% from the six months ended September 30, 2020
gross profit of $100,822,000. Gross profit margin was 35.5% in the six months
ended September 30, 2021 compared to 34.0% in the six months ended September 30,
2020
. The increase in gross profit was due to $27,260,000 in gross profit as a
result of the acquisition of Dorner, higher sales volume which increased gross
profit by $19,866,000, $8,263,000 in increased productivity net of other cost
changes, $2,421,000 in costs incurred in the prior year due to factory closures
that did not reoccur, $1,598,000 of price increases net of material inflation,
and $329,000 in integration related severance costs incurred in the prior year
that did not reoccur. These gross profit increases were offset by $2,981,000 in
acquisition related inventory amortization at Dorner, a prior year gain in the
amount of $2,189,000 recorded for a building sold in China that did not reoccur,
$1,737,000 in increased tariffs, $914,000 in business realignment costs, and
$521,000 in acquisition costs related to a transaction bonus classified as Cost
of products sold. The translation of foreign currencies had a $2,981,000
favorable impact on gross profit in the six months ended September 30, 2021.



Selling expenses were $47,639,000 and $37,258,000, or 10.9% and 12.6% of net
sales, in the six months ended September 30, 2021 and 2020, respectively.
Selling expense increased by $6,700,000 for costs incurred by Dorner. The
remaining increase relates to variable selling costs which have increased with
sales as well as higher personnel costs as a result of annual merit increases.
Foreign currency translation had a $1,179,000 unfavorable impact on selling
expenses in the six months ended September 30, 2021.



General and administrative expenses were $53,351,000 and $33,983,000, or 12.2%
and 11.4% of net sales, in the six months ended September 30, 2021 and 2020,
respectively. The increase in general and administrative expenses was due to
$8,977,000 in acquisition expenses, which include costs related to a transaction
bonus which are classified as general and administrative expense, $5,225,000 in
general and administrative expenses incurred by Dorner, $3,780,000 in higher
incentive compensation expense and stock compensation expense, $1,500,000 in
consulting costs to execute our Blueprint for Growth 2.0 Strategy, and $516,000
in higher business realignment costs in the six months ended September 30, 2021.
These increases were offset by $1,521,000 in reduced bad debt expense in the six
months ended September 30, 2021 compared to the six months ended September 30,
2020
as a result of improving economic conditions due to the lessening impact of
COVID-19 in the six months ended September 30, 2021. Foreign currency
translation had a $610,000 unfavorable impact on general and administrative
expenses in the six months ended September 30, 2021.



Research and development expenses were $7,408,000 and $5,665,000, or 1.7% and
1.9% of net sales, in the six months ended September 30, 2021 and 2020,
respectively. The increase in research and development expenses was due to
$737,000 in research and development expenses incurred by Dorner and $324,000 in
higher incentive compensation expense and stock compensation expense.



Amortization of intangibles was $12,394,000 and $6,307,000 in the six months
ended September 30, 2021 and 2020, respectively, with the increase related to
new intangible assets recorded from the Dorner acquisition.



Interest and debt expense was $10,399,000 in the six months ended September 30,
2021
compared to $6,206,000 in the six months ended September 30, 2020. The
increase is related to higher interest and debt expense incurred on the
Company's Bridge Facility and new Term Loan B as a result of the Dorner
acquisition and debt refinancing.



34
--------------------------------------------------------------------------------



The Company incurred $14,803,000 in Cost of debt refinancing during the six
months ended September 30, 2021 as a result of the Dorner acquisition and
related refinancing as described in Note 9 of the financial statements. There
were no similar expenses incurred in the six months ended September 30, 2020.
Investment income of $548,000 and $934,000 in the six months ended September 30,
2021
and 2020, 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 6 of the financial
statements.



Other income was $289,000 in the six months ended September 30, 2021 compared to
other expense of $19,937,000 in the six months ended September 30, 2020. The
prior year expense primarily related to a $19,046,000 settlement charge as a
result of the termination of one of the Company's U.S. pension plans, as
described in Note 10 of the financial statements. There were no similar expenses
incurred in the six months ended September 30, 2021.



Income tax expense as a percentage of income from continuing operations before
income tax expense was 16% and 12% in the six months ended September 30, 2021
and September 30, 2020, respectively. Typically these percentages vary from the
U.S. statutory rate of 21% primarily due to varying effective tax rates at the
Company's foreign subsidiaries, and the jurisdictional mix of taxable income for
these subsidiaries. The impact of equity compensation decreased the rate by 8
percentages points during the six months September 30, 2021.



For the six months ended September 30, 2020, the rate was lower than the U.S.
statutory rate as a result of the impacts associated with pre-tax losses in the
U.S. related to the pension settlement expense described above, the U.S. R&D
credit, and the utilization of net operating losses that previously had a full
valuation allowance against them.



Liquidity and Capital Resources



Cash, cash equivalents, and restricted cash totaled $105,561,000 at
September 30, 2021, a decrease of $96,816,000 from the March 31, 2021 balance of
$202,377,000.



Cash flow from operating activities



Net cash provided by operating activities was $17,942,000 for the six months
ended September 30, 2021 compared to $46,943,000 for the six months ended
September 30, 2020. Net income of $7,940,000 along with non-cash adjustments to
net income of $44,682,000, of which $20,969,000 is from Depreciation and
amortization and $14,803,000 is from Cost of debt refinancing as a result of the
Dorner acquisition, were the primary drivers contributing to cash provided by
operations for the six months ended September 30, 2021. These increases in cash
for the six months ended September 30, 2021 were offset by an increase of
$21,959,000 in inventories as the Company increased inventory due to current
supply chain constraints, a decrease in trade accounts payable of $6,274,000, a
decrease of $2,001,000 in accrued expenses and non-current liabilities, and an
increase in trade accounts receivable of $1,709,000. The decrease in accrued
expenses and non-current liabilities primarily consists of the fiscal 2021
annual incentive plan payments, which were paid in the quarter ended June 30,
2021
, a decrease in customer deposits as well as $4,569,000 in cash paid for
amounts included in the measurement of operating lease liabilities during the
six months ended September 30, 2021.



The net cash provided by operating activities for the six months ended
September 30, 2020 primarily consisted of a decrease in trade accounts
receivable of $33,594,000, non-cash adjustments to net income of $32,417,000,
and a decrease in inventory of $18,987,000 for the six months ended September
30, 2020
.



Cash flow from investing activities



Net cash used by investing activities was $480,797,000 for the six months ended
September 30, 2021 compared with net cash provided by investing activities of
$2,536,000 for the six months ended September 30, 2020. The most significant use
of cash was $472,954,000 to purchase Dorner, net of cash acquired, as well as
$6,752,000 in capital expenditures.



The net cash provided by investing activities for the six months ended
September 30, 2020 was primarily due to $5,453,000 in proceeds received from a
sale of a building owned in China, offset by $2,779,000 in capital expenditures.



Cash flow from financing activities



Net cash provided by financing activities was $366,860,000 for the six months
ended September 30, 2021 and $18,536,000 for the six months ended September 30,
2020
. The most significant sources of cash were $650,000,000 in gross proceeds
from the



35
--------------------------------------------------------------------------------



issuance of long term debt and $207,000,000 in gross proceeds from an equity
offering, both of which were used to fund the Dorner acquisition. These sources
of cash were offset by $461,286,000 in repayments of debt, $25,292,000 in fees
related to the debt and equity offering, and dividends paid in the amount of
$3,145,000. As noted in Note 8 of the financial statements, during the second
quarter of fiscal 2022, the Company modified its cross currency swap and
interest rate swap. As such, the 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 $80,000 during the six months ended
September 30, 2021.



The most significant source of cash for the six months ended September 30, 2020
was $25,000,000 from borrowings on the Revolver, offset by $2,225,000 in
repayments on the prior Term Loan, and dividends paid in the amount of
$2,860,000.



We believe that our cash on hand, cash flows, and borrowing capacity under our
new First Lien Facility will be sufficient to fund our ongoing operations and
debt obligations, and capital expenditures for at least the next twelve months.
This belief is dependent upon successful execution of our current business plan
and effective working capital utilization. No material restrictions exist in
accessing cash held by our non-U.S. subsidiaries. Additionally we expect to
meet our U.S. funding needs without repatriating non-U.S. cash and incurring
incremental U.S. taxes. As of September 30, 2021, $62,824,000 of cash and cash
equivalents were held by foreign subsidiaries.



On January 31, 2017 the Company entered into a Credit Agreement ("Credit
Agreement") and $545,000,000 of debt facilities ("Facilities") in connection
with the STAHL acquisition. The Facilities consist of a Revolving Facility
("Revolver") in the amount of $100,000,000 and a $445,000,000 First Lien Term
Loan ("Term Loan"). The Term Loan had a seven-year term maturing in 2024. On
August 26, 2020, the Company entered into a Second Amendment to the Credit
Agreement (as amended by the First Amendment, dated as of February 26, 2018).
The Second Amendment extended the $100,000,000 secured Revolver which was
originally set to expire on January 31, 2022 to August 25, 2023.



As discussed in Note 2 of the financial statements, the Company completed its
acquisition of Dorner on April 7, 2021 and entered into a $750,000,000 First
Lien Facility with JPMorgan Chase Bank, PNC Capital Markets LLC, and Wells Fargo
Securities LLC
. The First Lien Facility consists of a New Revolving Credit
Facility in an aggregate amount of $100,000,000 and a $650,000,000 Bridge
Facility. Proceeds from the Bridge Facility were used, among other things, to
finance the purchase price for the Dorner acquisition, pay related fees,
expenses and transaction costs, and refinance the Company's outstanding
borrowings under its prior Term Loan and Revolver.



In addition to the debt borrowing described above, the Company commenced and
completed an underwritten public offering of 4,312,500 shares of its common
stock at a price of $48.00 per share for total gross proceeds of $207,000,000.
The Company used all of the net proceeds from the equity offering to repay in
part outstanding borrowings under its Bridge Facility. The equity offering
closed on May 4, 2021. Following the repayment of outstanding borrowings under
the Bridge Facility, the Bridge Facility was refinanced with a syndicated Term
Loan B facility.



The key terms of the Term Loan B facility are as follows:



1) Term Loan B: An aggregate $450,000,000 Term Loan B facility, which requires
quarterly principal amortization of 0.25% with the remaining principal due at
the maturity date. In addition, if the Company has Excess Cash Flow (ECF) as
defined in the Credit Agreement for the First Lien Facility (the "Credit
Agreement"), the ECF Percentage of the Excess Cash Flow for each fiscal year
minus optional prepayments of the Loans (except prepayments of Revolving Loans
that are not accompanied by a corresponding permanent reduction of Revolving
Commitments) pursuant to Section 2.10(a) of the Credit Agreement other than to
the extent that any such prepayment is funded with the proceeds of Funded Debt,
shall be applied toward the prepayment of the Term Loan B facility. The ECF
Percentage is defined as 50% stepping down to 25% or 0% based on the achievement
of specified Secured Leverage Ratios as of the last day of such fiscal year.



2) Revolver: An aggregate $100,000,000 secured revolving facility which includes
sublimits for the issuance of standby letters of credit, swingline loans and
multi-currency borrowings in certain specified foreign currencies.



3) Fees and Interest Rates: Commitment fees and interest rates are determined on
the basis of either a Eurocurrency rate or a Base rate plus an applicable
margin, which is based upon the Company's Total Leverage Ratio (as defined in
the Credit Agreement) in the case of Revolver loans.



4) Prepayments: Provisions permitting a Borrower to voluntarily prepay either
the Term Loan B facility or Revolver in whole or in part at any time, and
provisions requiring certain mandatory prepayments of the Term Loan B facility
or Revolver on the occurrence of certain events which will permanently reduce
the commitments under the Credit Agreement, each without premium or penalty,
subject to reimbursement of certain costs of the Lenders. A prepayment premium
of 1%



36
--------------------------------------------------------------------------------



of the principal amount of the First Lien Term Facility is required if the
prepayment is associated with a Repricing Transaction and it were to occur
within the first six months following the closing date.



5) Covenants: Provisions containing covenants required of the Company and its
subsidiaries including various affirmative and negative financial and
operational covenants. The key financial covenant is triggered only on any date
when any Extension of Credit under the New Revolving Credit Facility is
outstanding (excluding any Letters of Credit) (the "Covenant Trigger"), and
prohibits the Total Leverage Ratio for the Reference Period ended on such date
from exceeding (i) 6.75:1.00 as of any date of determination prior to June 30,
2021
, (ii) 5.50:1.00 as of any date of determination on June 30, 2021 and
thereafter but prior to June 30, 2022, (iii) 4.50:1.00 as of any date of
determination on June 30, 2022 and thereafter but prior to June 30, 2023 and
(iv) 3.50:1.00 as of any date of determination on June 30, 2023 and thereafter.



6) Collateral: Obligations under the First Lien Facilities are secured by liens
on substantially all assets of the Company and its material domestic
subsidiaries.



In the first six months of fiscal 2022, the Company incurred $14,803,000 in debt
extinguishment costs of which $5,946,000 relates to the Company's prior Term
Loan, $326,000 relates to the Company's prior Revolver, and $8,531,000 relates
to fees paid on the portion of the First Lien Facilities that were associated
with the Bridge Facility, all of which were incurred in the first quarter of
fiscal 2022. These costs are classified as Cost of debt refinancing in the
Condensed Consolidated Statements of Operations.



Further, in the first quarter of fiscal 2022 the Company recorded $5,432,000 in
deferred financing costs on the First Lien Term Facility, which will be
amortized over seven years. The Company recorded $4,027,000 in deferred
financings costs on the New Revolving Credit Facility, of which $3,050,000 is
related to the New Revolving Credit Facility and $977,000 is carried over from
the Company's prior Revolver as certain Revolver lenders increased their
borrowing capacity. These balances will be amortized over five years and
classified in Other assets since no funds were drawn on the New Revolving Credit
Facility.



The outstanding principal balance of the Term Loan B facility was $443,875,000
as of September 30, 2021. The Company made $6,125,000 in principal payments on
the Term Loan B facility during the six months ended September 30, 2021 of which
$1,125,000 was required. No payments were made during the first quarter of
fiscal 2022. The Company is obligated to make $4,500,000 of principal payments
on the Term Loan B facility over the next 12 months plus applicable ECF
payments, if required, however, plans to pay down approximately $60,000,000 in
principal payments in total during such 12 month period. This amount has been
recorded within the current portion of long term debt on the Company's Condensed
Consolidated Balance Sheet with the remaining balance recorded as long term
debt.



There were no outstanding borrowings and $17,196,000 in outstanding letters of
credit issued against the New Revolving Credit Facility as of September 30,
2021
. The outstanding letters of credit as of September 30, 2021 consisted of
$701,000 in commercial letters of credit and $16,495,000 of standby letters of
credit.



The gross balance of deferred financing costs on the Term Loan B facility was
$5,432,000 as of September 30, 2021 and $14,690,000 on the prior Term Loan as of
March 31, 2021. The accumulated amortization balances were $463,000 and
$8,744,000 as of September 30, 2021 and March 31, 2021, respectively.



The gross balance of deferred financing costs associated with the New Revolving
Credit Facility was $4,027,000 as of September 30, 2021 and the prior Revolver
was $3,615,000 as of March 31, 2021, which are included in Other assets on the
Condensed Consolidated Balance Sheet. The accumulated amortization balances were
$403,000 and $2,313,000 as of September 30, 2021 and March 31, 2021,
respectively.



In connection with Dorner acquisition, the Company recorded a finance lease for
a manufacturing facility in Hartland, WI under a 23 year lease agreement which
terminates in 2035. The outstanding balance on the finance lease obligation is
$14,336,000 as of September 30, 2021 of which $515,000 has been recorded within
the Current portion of long term debt and the remaining balance recorded within
Term loan and revolving credit facility on the Company's Condensed Consolidated
Balance Sheet. See Note 15 of the financial statements, for further details.



Unsecured and uncommitted lines of credit are available to meet short-term
working capital needs for certain of our subsidiaries operating outside of the
U.S. The lines of credit are available on an offering basis, meaning that
transactions under the line of credit will be on such terms and conditions,
including interest rate, maturity, representations, covenants and events of
default, as mutually agreed between our subsidiaries and the local bank at the
time of each specific transaction. As of September 30, 2021, unsecured credit
lines totaled approximately $2,547,000, of which $0 was drawn. In addition,
unsecured lines of $15,651,000 were available for bank guarantees issued in the
normal course of business of which $12,911,000 was utilized.



37
--------------------------------------------------------------------------------



Capital Expenditures



In addition to keeping our current equipment and plants properly maintained, we
are committed to replacing, enhancing and upgrading our property, plant and
equipment to support new product development, improve productivity and customer
responsiveness, reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety and promote ergonomically correct work stations. Consolidated
capital expenditures for the six months ended September 30, 2021 and
September 30, 2020 were $6,752,000 and $2,779,000, respectively. We expect
capital expenditure spending in fiscal 2022 to range from $18,000,000 to
$22,000,000, of which $3,000,000 to $4,000,000 is attributable to Dorner.



Inflation and Other Market Conditions



Our costs are affected by inflation in the U.S. economy and, to a lesser extent,
in non-U.S. economies including those of Europe, Canada, Mexico, South America,
and Asia-Pacific. We do not believe that general inflation has had a material
effect on our results of operations over the periods presented despite rising
inflation levels over such periods due to our ability to pass on rising costs
through annual price increases. However, increases in U.S. employee benefits
costs such as health insurance and workers compensation insurance have exceeded
general inflation levels. In the future, we may be further affected by inflation
that we may not be able to pass on as price increases. With changes in worldwide
demand for steel and fluctuating scrap steel prices over the past several years,
we experienced fluctuations in our costs that we have reflected as price
increases to our customers. We believe we have been successful in instituting
price increases to pass on these material cost increases. We will continue to
monitor our costs and reevaluate our pricing policies.



Goodwill Impairment Testing



We test goodwill for impairment at least annually and more frequently whenever
events occur or circumstances change that indicate there may be impairment.



These events or circumstances could include a significant long-term adverse
change in the business climate, poor indicators of operating performance, or a
sale or disposition of a significant portion of a reporting unit.



We test goodwill at the reporting unit level, which is one level below our
operating segment. We identify our reporting units by assessing whether the
components of our operating segment constitute businesses for which discrete
financial information is available and segment management regularly reviews the
operating results of those components. We also aggregate components that have
similar economic characteristics into single reporting units (for example,
similar products and / or services, similar long-term financial results, product
processes, classes of customers, etc.). With the acquisition of Dorner, we have
three reporting units: the Duff Norton reporting unit, the Rest of Products
reporting unit, and the Dorner reporting unit which have goodwill totaling
$9,699,000, $318,990,000, and $286,640,000, respectively, as of September 30,
2021
.



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



Refer to our Annual Report on Form 10-K for fiscal year 2021 for additional
information regarding our annual goodwill impairment process.



Seasonality and Quarterly Results



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



Effects of New Accounting Pronouncements



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



38
--------------------------------------------------------------------------------



Forward-Looking Statements



This Quarterly Report on Form 10-Q contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Forward-looking statements include statements relating to:




•the impact of COVID-19 on our business;
•future development and expected growth of our business and industry;
•our ability to execute our business model, our Columbus McKinnon Business
System operating system and our Blueprint for Growth 2.0 Strategy;
•plans to repay additional principal on the Term Loan B facility during future
periods;
•having available sufficient cash and borrowing capacity to fund ongoing
operations, debt obligations and capital expenditures for the next twelve
months; and
•projected capital expenditures.


Such statements involve known and unknown risks, uncertainties and other factors
that could cause our actual results to differ materially from the results
expressed or implied by such statements, including general economic and business
conditions, including the impact of the COVID-19 pandemic, conditions affecting
the industries served by us and our subsidiaries, conditions affecting our
customers and suppliers, competitor responses to our products and services, the
overall market acceptance of such products and services, the integration of
acquisitions, including the acquisition of Dorner, and other risks and
uncertainties that arise from time to time are described in Item 1A "Risk
Factors" of our Annual Report on Form 10-K and in other periodic filings with
the SEC. All forward-looking statements attributable to us or persons acting on
our behalf are expressly qualified in their entirety by these cautionary factors
and to others contained throughout this Quarterly Report on Form 10-Q. We use
words like "will," "may," "should," "plan," "believe," "expect," "anticipate,"
"intend," "future" and other similar expressions to identify forward looking
statements. These forward looking statements speak only as of their respective
dates and are based on our current expectations. Except as required by
applicable law, we do not undertake and specifically decline any obligation to
publicly release any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances after the date of such
statements or to reflect the occurrence of anticipated or unanticipated changes.
Actual events or our actual operating results could differ materially from those
predicted in these forward-looking statements, and any other events anticipated
in the forward-looking statements may not actually occur.



39



--------------------------------------------------------------------------------

© Edgar Online, source Glimpses

© Acquiremedia 2022
Copier lien
All news about COLUMBUS MCKINNON CORPORATION
19h ago
20h ago
20h ago
1d ago
1d ago