Columbus McKinnon Reports Financial Results for Second Quarter Fiscal Year 2021

Columbus McKinnon Corporation (Nasdaq: CMCO), a leading designer, manufacturer and marketer of motion control products, technologies and services for material handling, today announced financial results for its fiscal year 2021 second quarter, which ended September 30, 2020.

Second Quarter Highlights

• Strong sequential improvement demonstrates effectiveness of cost saving and self-help improvement measures
• Revenue up 13.5% over trailing first fiscal quarter to $157.8 million; at high end of expected range
• Operating income of $15.8 million or 10.0% of sales; Adjusted operating income* of $14.0 million, or 8.9% of sales
• Cash from operations in the quarter was $37.4 million driven by a disciplined focus on reducing working capital requirements
• Advancing product launches and broadening offerings in Compass configurator

David Wilson, President and CEO of Columbus McKinnon, commented, “We delivered solid results in the quarter achieving the higher end of our expected revenue range and demonstrated our capabilities to drive profitability and strong cash generation in a challenging environment. In fact, the 80/20 Process, a key tool in our business system, contributed $3.4 million in operating income during the quarter, helping to offset headwinds caused by the pandemic. Our strong cash flow and excellent liquidity position enabled our repayment of the $25 million Revolver borrowing in early October.

“We are building momentum as we strengthen our business operating system, evolve the Blueprint for Growth strategy and pivot to growth. Our focus is on identifying opportunities to both deepen our market penetration and expand our addressable markets. We have the financial strength to continue to invest in prioritized growth initiatives even as we carefully manage our operations and ensure the safety and well-being of the Columbus McKinnon team.”

*Adjusted operating income is a non-GAAP measure. See accompanying discussion and reconciliation table in this release regarding adjusted operating income.

Second Quarter Fiscal 2021 Sales

($ in millions)	Q2 FY 21				Q2 FY 20				Change				% Change
Net sales	$	157.8			$	207.6			$	(49.8)			(24.0)	%
U.S. sales	$	84.7			$	113.5			$	(28.8)			(25.4)	%
% of total	54		%		55		%
Non-U.S. sales	$	73.1			$	94.1			$	(21.0)			(22.3)	%
% of total	46		%		45		%

Compared with the prior-year period, lower volume was due to the global economic impact of the COVID-19 pandemic. Lower U.S. sales volume more than offset a 1.1% price improvement while lower volume outside the U.S. was somewhat offset by a $2.2 million, or 2.3%, positive impact from foreign currency translation and price improvement of 1.2%.

Compared with the trailing first quarter, sales improved 13.5% with short cycle sales up 22.2% and project sales up 5.5%.

Second Quarter Fiscal 2021 Operating Results

($ in millions)	Q2 FY 21				Q2 FY 20				Change				% Change
Gross profit	$	56.0			$	73.5			$	(17.5)			(23.8)	%
Gross margin	35.5		%		35.4		%		10 bps
Income from operations	$	15.8			$	25.2			$	(9.4)			(37.3)	%
Operating margin	10.0		%		12.2		%		(220) bps
Net income (loss)	$	(4.1)			$	16.6			$	(20.7)			NM
Diluted EPS	$	(0.17)			$	0.69			$	(0.86)			NM
Adjusted EBITDA *	$	21.1			$	33.7			$	(12.5)			(37.2)	%
Adjusted EBITDA margin	13.4		%		16.2		%		(280) bps

*A non-GAAP measure, Adjusted EBITDA is defined as adjusted operating income plus depreciation and amortization. Please see the attached tables for a reconciliation of adjusted EBITDA to GAAP net income (loss).

Adjusted income from operations was $14.0 million, or 8.9% of sales. Decremental adjusted operating income leverage from the prior-year period was 25% which continues to demonstrate better than historic decremental leverage. (See the reconciliation of GAAP income from operations to adjusted income from operations on the attached tables.) Net loss for the quarter was $4.1 million, which included a $16.3 million non-cash pension settlement charge related to the termination of a U.S. pension plan.

On a sequential basis, Adjusted EBITDA was up $9.1 million, or 74.9%, to $21.1 million on an $18.7 million increase in sales. Adjusted EBITDA margin expanded 470 basis points sequentially to 13.4% from the fiscal 2021 first quarter.

Third Quarter Fiscal 2021 Outlook

Orders were up nearly 26% compared with the trailing first quarter. Order growth was driven mostly by the recovery of the short cycle business, which improved 41% over the first quarter this fiscal year whereas the project business grew at a rate of 12%. Total backlog has recovered to pre-COVID levels and long-term backlog, which is expected to ship beyond the fiscal third quarter, grew to 41.5% of total backlog. As a result, the Company expects third quarter fiscal 2021 revenue to be within a range of approximately $150 million to $160 million at current exchange rates.

Mr. Wilson concluded, “I am really proud of the team and how we have executed in the first half of the fiscal year. Importantly, we are keeping our eye on the long term as we advance our strategic plan. In the second quarter, we launched several new products, expanded the capabilities of our Compass configurator and increased our focus on improving our customers’ experience. I am confident we will continue to execute well, and we will emerge from these challenging times a better company.”

Teleconference/webcast

Columbus McKinnon will host a conference call and live webcast Thursday, October 29, 2020 at 10:00 AM Eastern Time, at which management will review the Company’s financial results and strategy. The review will be accompanied by a slide presentation, which will be available on Columbus McKinnon’s website at investors.columbusmckinnon.com. A question and answer session will follow the formal discussion.

The conference call can be accessed by dialing 201-493-6780. The listen-only audio webcast can be monitored at https://investors.columbusmckinnon.com. To listen to the archived call, dial 412-317-6671 and enter the passcode 13710950. The telephonic replay will be available from 1:00 PM Eastern Time on the day of the call through Thursday, November 5, 2020. Alternatively, an archived webcast of the call can be found on the Company’s website. In addition, a transcript of the call will be posted to the website once available.

About Columbus McKinnon

Columbus McKinnon is a leading worldwide designer, manufacturer and marketer of motion control products, technologies, systems and services that efficiently and ergonomically move, lift, position and secure materials. Key products include hoists, actuators, rigging tools, light rail work stations and digital power and motion control systems. The Company is focused on commercial and industrial applications that require the safety and quality provided by its superior design and engineering know-how. Comprehensive information on Columbus McKinnon is available at www.columbusmckinnon.com.

Safe Harbor Statement

This news release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning future sales and earnings, involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including the impact of Covid-19 and the Company’s efforts to reduce costs, maintain liquidity and generate cash in the current pandemic, the effectiveness of the Company’s 80/20 Process to simplify operations, the ability of the Company’s Operational Excellence initiatives to drive profitability, the Company’s ability to grow market share, the ability to achieve revenue expectations, global economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the ability to expand into new markets and geographic regions, and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update the forward-looking information contained in this release.

Financial tables follow.

COLUMBUS McKINNON CORPORATION Condensed Consolidated Income Statements - UNAUDITED (In thousands, except per share and percentage data)
		Three Months Ended
		September 30, 2020				September 30, 2019				Change
Net sales		$	157,790			$	207,609			(24.0)	%
Cost of products sold		101,765				134,116				(24.1)	%
Gross profit		56,025				73,493				(23.8)	%
Gross profit margin		35.5		%		35.4		%
Selling expenses		18,563				22,877				(18.9)	%
% of net sales		11.8		%		11.0		%
General and administrative expenses		15,554				19,153				(18.8)	%
% of net sales		9.9		%		9.2		%
Research and development expenses		2,896				2,999				(3.4)	%
% of net sales		1.8		%		1.4		%
Loss on sales of businesses		—				7				NM
Amortization of intangibles		3,192				3,226				(1.1)	%
Income from operations		15,820				25,231				(37.3)	%
Operating margin		10.0		%		12.2		%
Interest and debt expense		3,018				3,759				(19.7)	%
Investment (income) loss		(357)				(229)				55.9	%
Foreign currency exchange (gain) loss		397				(296)				NM
Other (income) expense, net		16,911				257				6,480.2	%
Income (loss) before income tax expense (benefit)		(4,149)				21,740				NM
Income tax expense (benefit)		(45)				5,141				NM
Net income (loss)		$	(4,104)			$	16,599			NM
Average basic shares outstanding		23,883				23,631				1.1	%
Basic income (loss) per share		$	(0.17)			$	0.70			NM
Average diluted shares outstanding		23,883				23,926				(0.2)	%
Diluted income (loss) per share		$	(0.17)			$	0.69			NM
Dividends declared per common share		$	0.06			$	0.06

COLUMBUS McKINNON CORPORATION Condensed Consolidated Income Statements - UNAUDITED (In thousands, except per share and percentage data)
		Six Months Ended
		September 30, 2020				September 30, 2019				Change
Net sales		$	296,860			$	420,321			(29.4)	%
Cost of products sold		196,038				271,216				(27.7)	%
Gross profit		100,822				149,105				(32.4)	%
Gross profit margin		34.0		%		35.5		%
Selling expenses		37,258				45,632				(18.4)	%
% of net sales		12.6		%		10.9		%
General and administrative expenses		33,983				38,753				(12.3)	%
% of net sales		11.4		%		9.2		%
Research and development expenses		5,665				5,791				(2.2)	%
% of net sales		1.9		%		1.4		%
Loss on sales of businesses		—				176				NM
Amortization of intangibles		6,307				6,479				(2.7)	%
Income from operations		17,609				52,274				(66.3)	%
Operating margin		5.9		%		12.4		%
Interest and debt expense		6,206				7,611				(18.5)	%
Investment (income) loss		(934)				(531)				75.9	%
Foreign currency exchange (gain) loss		481				(706)				NM
Other (income) expense, net		19,937				419				4,658.2	%
Income (loss) before income tax expense (benefit)		(8,081)				45,481				NM
Income tax expense (benefit)		(1,008)				10,303				NM
Net income (loss)		$	(7,073)			$	35,178			NM
Average basic shares outstanding		23,843				23,532				1.3	%
Basic income (loss) per share		$	(0.30)			$	1.49			NM
Average diluted shares outstanding		23,843				23,832				—	%
Diluted income (loss) per share		$	(0.30)			$	1.48			NM
Dividends declared per common share		$	0.06			$	0.06

COLUMBUS McKINNON CORPORATION Condensed Consolidated Balance Sheets (In thousands)
		September 30, 2020				March 31, 2020
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	186,556			$	114,450
Trade accounts receivable		92,540				123,743
Inventories		112,095				127,373
Prepaid expenses and other		18,124				17,180
Total current assets		409,315				382,746
Property, plant, and equipment, net		72,782				79,473
Goodwill		330,859				319,679
Other intangibles, net		219,434				217,962
Marketable securities		8,534				7,322
Deferred taxes on income		27,798				26,281
Other assets		63,212				59,809
Total assets		$	1,131,934			$	1,093,272
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable		$	37,724			$	57,289
Accrued liabilities		88,679				93,585
Current portion of long-term debt		29,450				4,450
Total current liabilities		155,853				155,324
Term loan and revolving credit facility		245,680				246,856
Other non-current liabilities		250,445				227,507
Total liabilities		651,978				629,687
Shareholders’ equity:
Common stock		239				238
Additional paid-in capital		290,690				287,256
Retained earnings		281,935				290,441
Accumulated other comprehensive loss		(92,908)				(114,350)
Total shareholders’ equity		479,956				463,585
Total liabilities and shareholders’ equity		$	1,131,934			$	1,093,272

COLUMBUS McKINNON CORPORATION Condensed Consolidated Statements of Cash Flows - UNAUDITED (In thousands)
		Six Months Ended
		September 30, 2020				September 30, 2019
Operating activities:
Net income (loss)		$	(7,073)			$	35,178
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization		14,210				14,747
Deferred income taxes and related valuation allowance		(6,745)				748
Net loss (gain) on sale of real estate, investments, and other		(557)				(446)
Stock based compensation		3,989				3,511
Amortization of deferred financing costs		1,327				1,327
Loss on sales of businesses		—				176
Non-cash pension settlement expense		19,046				—
Gain on sale of building		(2,638)				—
Non-cash lease expense		3,785				4,223
Changes in operating assets and liabilities, net of effects of business acquisitions and divestitures:
Trade accounts receivable		33,594				(2,648)
Inventories		18,987				1,400
Prepaid expenses and other		(1,627)				(2,883)
Other assets		570				(171)
Trade accounts payable		(20,078)				332
Accrued liabilities		(7,895)				(8,230)
Non-current liabilities		(1,952)				(9,384)
Net cash provided by (used for) operating activities		46,943				37,880
Investing activities:
Proceeds from sales of marketable securities		1,034				1,928
Purchases of marketable securities		(1,759)				(2,581)
Capital expenditures		(2,779)				(4,843)
Proceeds from sale of building, net of transaction costs		5,453				—
Dividend received from equity method investment		587				—
Proceeds from sale of equipment		—				51
Net (payments) proceeds from sales of businesses		—				(214)
Net cash provided by (used for) investing activities		2,536				(5,659)
Financing activities:
Proceeds from issuance of common stock		429				3,784
Borrowings under line-of-credit agreements		25,000				—
Repayment of debt		(2,225)				(30,000)
Fees paid for revolver extension		(826)				—
Payment of dividends		(2,860)				(2,824)
Other		(982)				(544)
Net cash provided by (used for) financing activities		18,536				(29,584)
Effect of exchange rate changes on cash		4,091				(1,751)
Net change in cash and cash equivalents		72,106				886
Cash, cash equivalents, and restricted cash at beginning of year		114,700				71,343
Cash, cash equivalents, and restricted cash at end of period		$	186,806			$	72,229

COLUMBUS McKINNON CORPORATION Q2 FY 2021 Sales Bridge
		Quarter							Year To Date
($ in millions)		$ Change				% Change			$ Change				% Change
Fiscal 2020 Sales		$	207.6						$	420.3
Volume		(54.3)				(26.2)	%		(128.4)				(30.5)	%
Pricing		2.3				1.1	%		4.8				1.1	%
Foreign currency translation		2.2				1.1	%		0.2				—	%
Total change		$	(49.8)			(24.0)	%		$	(123.4)			(29.4)	%
Fiscal 2021 Sales		$	157.8						$	296.9

COLUMBUS McKINNON CORPORATION Q2 FY 2021 Gross Profit Bridge
($ in millions)	Quarter				Year To Date
Fiscal 2020 Gross Profit	$	73.5			$	149.1
Pricing, net of material cost inflation	2.3				4.7
Gain on sale of building	2.2				2.2
Tariffs	0.6				1.4
Foreign currency translation	0.8				0.2
Business realignment costs	0.1				(0.2		)
Insurance settlement	—				(0.3		)
Factory closures	(0.3		)		(1.6		)
Productivity, net of other cost changes	(3.8		)		(8.3		)
Sales volume and mix	(19.4		)		(46.4		)
Total change	$	(17.5	)		$	(48.3	)
Fiscal 2021 Gross Profit	$	56.0			$	100.8

COLUMBUS McKINNON CORPORATION Additional Data – UNAUDITED
		September 30, 2020					June 30, 2020					March 31, 2020					September 30, 2019
($ in millions)
Backlog		$	146.6				$	130.7				$	131.0				$	143.1
Long-term backlog
Expected to ship beyond 3 months		$	60.8				$	52.8				$	49.1				$	53.9
Long-term backlog as % of total backlog		41.5			%		40.4			%		37.5			%		37.7			%
Trade accounts receivable
Days sales outstanding		53.4			days		63.1			days		59.4			days		57.0			days
Inventory turns per year
(based on cost of products sold)		3.6			turns		3.0			turns		3.9			turns		3.8			turns
Days' inventory		100.5			days		120.6			days		94.3			days		96.9			days
Trade accounts payable
Days payables outstanding		33.7			days		37.6			days		42.3			days		33.2			days
Working capital as a % of sales (1)		14.1			%		14.9			%		14.5			%		17.2			%
Debt to total capitalization percentage		36.4			%		37.1			%		35.2			%		36.9			%
Debt, net of cash, to net total capitalization		15.6			%		20.9			%		22.8			%		30.1			%

(1)	September 30, 2019 figure excludes the Tire Shredder business, which was divested on December 28, 2018, and Crane Equipment & Service, Inc. (CES) and Stahlhammer Bommern GmbH (STB), each of which were divested on February 28, 2019.

U.S. Shipping Days by Quarter
		Q1		Q2		Q3		Q4		Total
FY 21		63		64		61		63		251
FY 20		63		63		61		64		251

COLUMBUS McKINNON CORPORATION Reconciliation of GAAP Gross Profit to Non-GAAP Adjusted Gross Profit and Adjusted Gross Margin ($ in thousands, except per share data)
	Three Months Ended September 30,								Six Months Ended September 30,
	2020				2019				2020				2019
Gross profit	$	56,025			$	73,493			$	100,822			$	149,105
Add back (deduct):
Factory closures	493				249				2,421				755
Business realignment costs	—				140				329				140
Insurance settlement	—				—				—				(290)
Gain on sale of building	(2,189)				—				(2,189)				—
Non-GAAP adjusted gross profit	$	54,329			$	73,882			$	101,383			$	149,710
Sales	$	157,790			$	207,609			$	296,860			$	420,321
Adjusted gross margin	34.4		%		35.6		%		34.2		%		35.6		%

Adjusted gross profit is defined as gross profit as reported, adjusted for certain items. Adjusted gross profit is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted gross profit, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's gross profit to the historical periods' gross profit, as well as facilitates a more meaningful comparison of the Company’s gross profit to that of other companies.

COLUMBUS McKINNON CORPORATION Reconciliation of GAAP Income from Operations to Non-GAAP Adjusted Income from Operations and Adjusted Operating Margin ($ in thousands, except per share data)
	Three Months Ended September 30,								Six Months Ended September 30,
	2020				2019				2020				2019
Income from operations	$	15,820			$	25,231			$	17,609			$	52,274
Add back (deduct):
Factory closures	747				470				3,003				1,497
Business realignment costs	—				413				821				413
Insurance recovery legal costs	88				220				229				359
Loss on sales of businesses	—				7				—				176
Insurance settlement	—				—				—				(290)
Gain on sale of building	(2,638)				—				(2,638)				—
Non-GAAP adjusted income from operations	$	14,017			$	26,341			$	19,024			$	54,429
Sales	$	157,790			$	207,609			$	296,860			$	420,321
Adjusted operating margin	8.9		%		12.7		%		6.4		%		12.9		%

Adjusted income from operations is defined as income from operations as reported, adjusted for certain items. Adjusted income from operations is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted income from operations, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's income from operations to the historical periods' income from operations, as well as facilitates a more meaningful comparison of the Company’s income from operations to that of other companies.

COLUMBUS McKINNON CORPORATION Reconciliation of GAAP Net Income and Diluted Earnings per Share to Non-GAAP Adjusted Net Income and Diluted Earnings per Share ($ in thousands, except per share data)
	Three Months Ended September 30,								Six Months Ended September 30,
	2020				2019				2020				2019
Net income (loss)	$	(4,104)			$	16,599			$	(7,073)			$	35,178
Add back (deduct):
Non-cash pension settlement expense	16,324				—				19,046				—
Factory closures	747				470				3,003				1,497
Business realignment costs	—				413				821				413
Insurance recovery legal costs	88				220				229				359
Loss on sales of businesses	—				7				—				176
Insurance settlement	—				—				—				(290)
Gain on sale of building	(2,638)				—				(2,638)				—
Normalize tax rate to 22% (1)	(2,327)				114				(3,732)				(177)
Non-GAAP adjusted net income	$	8,090			$	17,823			$	9,656			$	37,156
Average diluted shares outstanding	24,123				23,926				24,030				23,832
Diluted income (loss) per share - GAAP	$	(0.17)			$	0.69			$	(0.30)			$	1.48
Diluted income per share - Non-GAAP	$	0.34			$	0.74			$	0.40			$	1.56

(1) Applies a normalized tax rate of 22% to GAAP pre-tax income and non-GAAP adjustments above, which are each pre-tax.

Adjusted net income and diluted EPS are defined as net income and diluted EPS as reported, adjusted for certain items and at a normalized tax rate. Adjusted net income and diluted EPS are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable to the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted net income and diluted EPS, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year's net income and diluted EPS to the historical periods' net income and diluted EPS, as well as facilitates a more meaningful comparison of the Company’s net income and diluted EPS to that of other companies.

COLUMBUS McKINNON CORPORATION Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA ($ in thousands)
	Three Months Ended September 30,								Six Months Ended September 30,
	2020				2019				2020				2019
Net income (loss)	$	(4,104)			$	16,599			$	(7,073)			$	35,178
Add back (deduct):
Income tax expense (benefit)	(45)				5,141				(1,008)				10,303
Interest and debt expense	3,018				3,759				6,206				7,611
Investment (income) loss	(357)				(229)				(934)				(531)
Foreign currency exchange (gain) loss	397				(296)				481				(706)
Other (income) expense, net	16,911				257				19,937				419
Depreciation and amortization expense	7,129				7,344				14,210				14,747
Factory closures	747				470				3,003				1,497
Business realignment costs	—				413				821				413
Insurance recovery legal costs	88				220				229				359
Loss on sales of businesses	—				7				—				176
Insurance settlement	—				—				—				(290)
Gain on sale of building	(2,638)				—				(2,638)				—
Non-GAAP adjusted EBITDA	$	21,146			$	33,685			$	33,234			$	69,176
Sales	$	157,790			$	207,609			$	296,860			$	420,321
Adjusted EBITDA margin	13.4		%		16.2		%		11.2		%		16.5		%

Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA is not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus McKinnon believes that providing non-GAAP information, such as adjusted EBITDA, is important for investors and other readers of the Company’s financial statements.

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