CMCO - Columbus McKinnon Reports Record Gross Margin of 37.5% for First Quarter Fiscal Year 2023

July, 28 2022 06:30 AM Columbus McKinnon Corporation

Columbus McKinnon Corporation (Nasdaq: CMCO), a leading designer, manufacturer and marketer of intelligent motion solutions for material handling, today announced financial results for its fiscal year 2023 first quarter, which ended June 30, 2022. Results include the addition of Garvey Corporation, which was acquired on December 1, 2021.

First Quarter Highlights (compared with prior year period)

Delivered revenue of $220 million, up 6.5% on a constant currency basis
Achieved record gross margin of 37.5% as Columbus McKinnon Business System (CMBS) enabled strong execution
Realized first quarter fiscal 2023 earnings per diluted share of $0.29 compared with a loss of $0.27 in prior-year; adjusted EPS* was $0.69, unchanged from prior-year period
Continued strength in demand with orders up 11% on a constant currency basis driven by 10% growth in North America and 12% growth in EMEA
Maintained strong balance sheet; reduced debt an additional $10 million in quarter

David Wilson, President and CEO of Columbus McKinnon, commented, “We had a strong start to the year with our first quarter results. I am proud of how our team executed to deliver growth and record gross margin while improving the business. The realignment of Columbus McKinnon’s structure is enabling cost synergies and improved collaboration across the organization. In fact, our new regional leadership structure has created greater cross-functional engagement and is unlocking even more potential to deliver results in the face of current supply chain challenges, labor constraints and high inflation. Encouragingly, we continue to see strong demand for our intelligent motion solutions across a breadth of markets. We are also well positioned financially to execute our strategy and further transform Columbus McKinnon into a higher growth, less cyclical enterprise with expanded margins.”

*Adjusted EPS is a non-GAAP measure. See accompanying discussion and reconciliation tables in this release regarding the reconciliation of GAAP financials to non-GAAP measures.

First Quarter Fiscal 2023 Sales









($ in millions)

Q1 FY 23

Q1 FY 22

Change

% Change
Net sales

$
220.3


$
213.5


$
6.8


3.2
%









U.S. sales

$
138.7


$
124.5


$
14.2


11.4
%
% of total


63
%


58
%




Non-U.S. sales

$
81.6


$
89.0


$
(7.4
)

(8.3
)%
% of total


37
%


42
%

For the quarter, sales increased $6.8 million, or 3.2%. The acquisition added $8.5 million in sales which helped to offset unfavorable foreign currency translation of $7.0 million, or 3.3% of total sales. In the U.S., volume improved $0.1 million, or 0.1%, and price improved $6.4 million, or 5.1%. U.S. sales related to the acquisition were

$7.8 million. Outside the U.S., price improvement of $3.2 million, or 3.6% helped to offset the $4.4 million, or 4.9%, decline in volume. The acquisition added $0.7 million of sales outside the U.S.

First Quarter Fiscal 2023 Operating Results









($ in millions)

Q1 FY 23

Q1 FY 22

Change

% Change
Gross profit

$
82.5


$
74.1


$
8.5

11.4
%
Gross margin


37.5
%


34.7
%

280 bps


Adjusted gross profit*

$
82.5


$
77.6


$
5.0

6.4
%
Adjusted gross margin*


37.5
%


36.3
%

120 bps


Income from operations

$
22.8


$
10.7


$
12.1

112.3
%
Operating margin


10.4
%


5.0
%

540 bps


Adjusted income from operations*

$
24.6


$
23.6


$
1.0

4.1
%
Adjusted operating margin*


11.1
%


11.1
%

0 bps


Net income (loss)

$
8.4


$
(7.3
)

$
15.7

NM

Net income (loss) margin


3.8
%


(3.4
)%

720 bps


Diluted EPS

$
0.29


$
(0.27
)

$
0.56

NM

Adjusted EPS*

$
0.69


$
0.69


$
—

—
%
Adjusted EBITDA*

$
35.0


$
34.1


$
1.0

2.8
%
Adjusted EBITDA margin*


15.9
%


16.0
%

(10) bps

*Adjusted gross profit, adjusted gross margin, adjusted income from operations, adjusted operating margin, adjusted EPS, adjusted EBITDA, and adjusted EBITDA margin are non-GAAP measures. See accompanying discussion and reconciliation tables in this release regarding adjusted operating income, adjusted operating margin, adjusted EPS, and the reconciliation of GAAP net income (loss) to adjusted EBITDA.

Adjusted earnings per diluted share were $0.69 in the fiscal 2023 first quarter unchanged from the prior-year period. Adjusted EPS excludes amortization of intangible assets related to acquisitions. The Company believes this better represents its inherent earnings power and cash generation capability.

Second Quarter Fiscal 2023 Outlook

Columbus McKinnon expects second quarter fiscal 2023 sales of approximately $230 million to $240 million at current exchange rates, a sequential increase in the mid-to-high single digits.

Mr. Wilson concluded, “We are confident in our ability to deliver our plan as we continue to advance Columbus McKinnon’s transformation. We are executing to meet our commitments and to achieve our goals of $1.5 billion in revenue and 21% adjusted EBITDA margin in fiscal 2027.”

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast today 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 investors.columbusmckinnon.com . To listen to the archived call, dial 412-317-6671 and enter the passcode 13730934. The telephonic replay will be available from 1:00 PM Eastern Time on the day of the call through Thursday, August 4, 2022. 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 intelligent motion solutions that move the world forward and improve lives by efficiently and ergonomically moving, lifting, positioning and securing materials. Key products include hoists, crane components, precision conveyor systems, rigging tools, light rail workstations and digital power and motion control systems. 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 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 release.

Financial tables follow.

COLUMBUS McKINNON CORPORATION Condensed Consolidated Income Statements - UNAUDITED (In thousands, except per share and percentage data)







Three Months Ended




June 30, 2022

June 30, 2021

Change
Net sales

$
220,287


$
213,464


3.2
%
Cost of products sold


137,768



139,401


(1.2
)%
Gross profit


82,519



74,063


11.4
%
Gross profit margin


37.5
%


34.7
%


Selling expenses


26,156



23,482


11.4
%
% of net sales


11.9
%


11.0
%


General and administrative expenses


21,881



30,143


(27.4
)%
% of net sales


9.9
%


14.1
%


Research and development expenses


5,130



3,583


43.2
%
% of net sales


2.3
%


1.7
%


Amortization of intangibles


6,535



6,109


7.0
%
Income from operations


22,817



10,746


112.3
%
Operating margin


10.4
%


5.0
%


Interest and debt expense


6,203



5,812


6.7
%
Cost of debt refinancing


—



14,803


(100.0
)%
Investment (income) loss


430



(433
)

NM

Foreign currency exchange (gain) loss


1,203



94


1,179.8
%
Other (income) expense, net


(2,303
)


250


NM

Income (loss) before income tax expense (benefit)


17,284



(9,780
)

NM

Income tax expense (benefit)


8,893



(2,517
)

NM

Net income (loss)

$
8,391


$
(7,263
)

NM








Average basic shares outstanding


28,544



26,762


6.7
%
Basic income (loss) per share

$
0.29


$
(0.27
)

NM








Average diluted shares outstanding


28,699



26,762


7.2
%
Diluted income (loss) per share

$
0.29


$
(0.27
)

NM

COLUMBUS McKINNON CORPORATION Condensed Consolidated Balance Sheets (In thousands)







June 30, 2022

March 31, 2022


(unaudited)


ASSETS




Current assets:




Cash and cash equivalents

$
85,660


$
115,390

Trade accounts receivable


133,006



147,515

Inventories


189,324



172,139

Prepaid expenses and other


34,649



31,545

Total current assets


442,639



466,589






Property, plant, and equipment, net


95,651



97,926

Goodwill


640,970



648,849

Other intangibles, net


378,398



390,788

Marketable securities


10,322



10,294

Deferred taxes on income


2,147



2,313

Other assets


64,602



68,948

Total assets

$
1,634,729


$
1,685,707






LIABILITIES AND SHAREHOLDERS’ EQUITY




Current liabilities:




Trade accounts payable

$
73,867


$
90,881

Accrued liabilities


104,820



118,187

Current portion of long-term debt and finance lease obligations


40,565



40,551

Total current liabilities


219,252



249,619






Term loan and finance lease obligations


460,762



470,675

Other non-current liabilities


179,534



192,610

Total liabilities


859,548



912,904






Shareholders’ equity:




Common stock


286



285

Additional paid-in capital


505,926



506,074

Retained earnings


324,734



316,343

Accumulated other comprehensive loss


(55,765
)


(49,899
)
Total shareholders’ equity


775,181



772,803

Total liabilities and shareholders’ equity

$
1,634,729


$
1,685,707

COLUMBUS McKINNON CORPORATION Condensed Consolidated Statements of Cash Flows - UNAUDITED (In thousands)





Three Months Ended


June 30, 2022

June 30, 2021
Operating activities:




Net income (loss)

$
8,391


$
(7,263
)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:




Depreciation and amortization


10,469



10,467

Deferred income taxes and related valuation allowance


1,272



(245
)
Net loss (gain) on sale of real estate, investments, and other


485



(391
)
Stock-based compensation


751



2,262

Amortization of deferred financing costs


430



471

Cost of debt refinancing


—



14,803

Loss (gain) on hedging instruments


(192
)


—

Loss on retirement of fixed asset


173



—

Non-cash lease expense


2,139



1,989

Changes in operating assets and liabilities, net of effects of business acquisitions:




Trade accounts receivable


11,265



2,043

Inventories


(21,467
)


(10,802
)
Prepaid expenses and other


359



(5,714
)
Other assets


(143
)


35

Trade accounts payable


(15,720
)


(5,879
)
Accrued liabilities


(6,938
)


(5,945
)
Non-current liabilities


(2,451
)


(3,227
)
Net cash provided by (used for) operating activities


(11,177
)


(7,396
)





Investing activities:




Proceeds from sales of marketable securities


650



2,181

Purchases of marketable securities


(1,226
)


(4,137
)
Capital expenditures


(2,953
)


(3,648
)
Proceeds from insurance reimbursement


—



482

Purchases of businesses, net of cash acquired


(1,616
)


(475,311
)
Dividend received from equity method investment


313



—

Net cash provided by (used for) investing activities


(4,832
)


(480,433
)





Financing activities:




Proceeds from issuance of common stock


415



290

Repayment of debt


(10,128
)


(455,040
)
Proceeds from issuance of long-term debt


—



650,000

Proceeds from equity offering


—



207,000

Fees related to debt and equity offering


—



(25,292
)
Cash inflows from hedging activities


6,163



—

Cash outflows from hedging activities


(6,022
)


—

Payment of dividends


(1,996
)


(1,439
)
Other


(1,313
)


(1,764
)
Net cash provided by (used for) financing activities


(12,881
)


373,755






Effect of exchange rate changes on cash


(840
)


601






Net change in cash and cash equivalents


(29,730
)


(113,473
)
Cash, cash equivalents, and restricted cash at beginning of year


115,640



202,377

Cash, cash equivalents, and restricted cash at end of period

$
85,910


$
88,904

COLUMBUS McKINNON CORPORATION Q1 FY 2023 Sales Bridge





Quarter
($ in millions)

$ Change

% Change
Fiscal 2022 Sales

$
213.5



Acquisition


8.5


4.0
%
Volume


(4.3
)

(2.0
)%
Pricing


9.6


4.5
%
Foreign currency translation


(7.0
)

(3.3
)%
Total change

$
6.8


3.2
%
Fiscal 2023 Sales

$
220.3

COLUMBUS McKINNON CORPORATION Q1 FY 2023 Gross Profit Bridge



($ in millions)

Quarter
Fiscal 2022 Gross Profit

$
74.1

Acquisition


3.1

Price, net of material cost inflation


3.1

Prior year acquisition inventory step-up expense


3.0

Sales volume and mix


1.0

Prior year acquisition integration costs


0.5

Tariffs


0.1

Productivity, net of other cost changes


0.1

Foreign currency translation


(2.5
)
Total change


8.4

Fiscal 2023 Gross Profit

$
82.5

U.S. Shipping Days by Quarter


Q1

Q2

Q3

Q4

Total
FY 23

63

64

60

63

250











FY 22

63

64

61

63

251

COLUMBUS McKINNON CORPORATION Additional Data - UNAUDITED









June 30, 2022

March 31, 2022

June 30, 2021
($ in millions)









Backlog

$
351.6



$
309.1


$
247.4


Long-term backlog









Expected to ship beyond 3 months

$
162.8



$
135.2


$
107.3


Long-term backlog as % of total backlog


46.3

%


43.7
%


43.4

%










Trade accounts receivable









Days sales outstanding


54.9

days


53.0
days


52.5

days










Inventory turns per year









(based on cost of products sold)


2.9

turns


3.9
turns


4.0

turns
Days' inventory


125.4

days


93.6
days


90.8

days










Trade accounts payable









Days payables outstanding


58.6

days


58.7
days


52.4

days










Working capital as a % of sales ⁽²⁾


19.9

%


15.5
%


12.5

%










Net cash provided by (used for) operating activities

$
(11.2
)


$
25.2


$
(7.4
)

Capital expenditures

$
3.0



$
3.6


$
3.6


Free cash flow ⁽¹⁾

$
(14.1
)


$
21.6


$
(11.0
)











Debt to total capitalization percentage


39.3

%


39.8
%


38.8

%










Debt, net of cash, to net total capitalization


34.9

%


33.9
%


33.8

%

⁽¹⁾ Free cash flow is defined as cash from operations less capital expenditures. Free cash flow 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 free cash flow, is important for investors and other readers of the Company’s financial statements.

Components may not add due to rounding.

⁽²⁾ June 30, 2022 and March 31, 2022 figures exclude the impact of the acquisition of Garvey. June 30, 2021 figure excludes the impact of the acquisition of Dorner.

COLUMBUS McKINNON CORPORATION Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Profit ($ in thousands)



Three Months Ended June 30,


2022



2021

GAAP gross profit
$
82,519


$
74,063

Add back (deduct):



Acquisition inventory step-up expense

—



2,981

Acquisition integration costs

—



521

Non-GAAP adjusted gross profit
$
82,519


$
77,565





Sales
$
220,287


$
213,464





Gross margin - GAAP

37.5
%


34.7
%
Adjusted gross margin - Non-GAAP

37.5
%


36.3
%

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 CORPORATION Reconciliation of GAAP Income from Operations to Non-GAAP Adjusted Income from Operations ($ in thousands)



Three Months Ended June 30,


2022



2021

GAAP income from operations
$
22,817


$
10,746

Add back (deduct):



Business realignment costs

1,657



623

Acquisition deal and integration costs

86



9,242

Acquisition inventory step-up expense

—



2,981

Non-GAAP adjusted income from operations
$
24,560


$
23,592





Sales
$
220,287


$
213,464





Operating margin - GAAP

10.4
%


5.0
%
Adjusted operating margin - Non-GAAP

11.1
%


11.1
%

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 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 June 30,

2022


2021

GAAP net income (loss)
$
8,391

$
(7,263
)
Add back (deduct):



Amortization of intangibles

6,535


6,109

Business realignment costs

1,657


623

Acquisition deal and integration costs

86


9,242

Cost of debt refinancing

—


14,803

Acquisition inventory step-up expense

—


2,981

Normalize tax rate to 22% ⁽¹⁾

3,269


(7,792
)
Non-GAAP adjusted net income
$
19,938

$
18,703





Average diluted shares outstanding

28,699


27,159





Diluted income (loss) per share - GAAP
$
0.29

$
(0.27
)




Diluted income per share - Non-GAAP
$
0.69

$
0.69

⁽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, 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 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. 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.

COLUMBUS McKINNON CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA ($ in thousands)



Three Months Ended June 30,


2022



2021

GAAP net income (loss)
$
8,391


$
(7,263
)
Add back (deduct):



Income tax expense (benefit)

8,893



(2,517
)
Interest and debt expense

6,203



5,812

Investment (income) loss

430



(433
)
Foreign currency exchange (gain) loss

1,203



94

Other (income) expense, net

(2,303
)


250

Depreciation and amortization expense

10,469



10,467

Business realignment costs

1,657



623

Acquisition deal and integration costs

86



9,242

Cost of debt refinancing

—



14,803

Acquisition inventory step-up expense

—



2,981

Non-GAAP adjusted EBITDA
$
35,029


$
34,059





Sales
$
220,287


$
213,464





Net income (loss) margin - GAAP

3.8
%


(3.4
)%
Adjusted EBITDA margin - Non-GAAP

15.9
%


16.0
%

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220728005222/en/

Gregory P. Rustowicz
Senior Vice President - Finance and Chief Financial Officer
Columbus McKinnon Corporation
716-689-5442
greg.rustowicz@cmworks.com

Investor Relations:
Deborah K. Pawlowski
Kei Advisors LLC
716-843-3908
dpawlowski@keiadvisors.com

Company Name:	Columbus McKinnon Corporation
Stock Symbol:	CMCO
Market:	NASDAQ
Website:	columbusmckinnon.com

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