2020 ANNUAL REPORT
PARTNERS IN MOTION CONTROL
Columbus McKinnon (Nasdaq: CMCO) 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.
Headquartered in Buffalo, New York, our key products include hoists, cranes, actuators, rigging tools, light rail
workstations, and digital power and motion control systems. We are focused on commercial and industrial
applications that require the safety and professional-grade quality provided by our superior design and
engineering know-how.
Financial Summary
(in thousands, except per share, margin and ratio data)
Fiscal Year Ended March 31,
2020
2019
2018
2017
2016
Income Statement Data
Net sales
Gross profit
Gross margin
Income from operations
Operating margin
Net income
Net income per diluted share
Non-GAAP adjusted net income per diluted share1
Balance Sheet Data
Total assets
Total liabilities
Total debt
Total debt, net of cash
Total shareholders’ equity
Total debt/capitalization
Total debt, net of cash/net total capitalization
Other Data
Operating cash flow
Depreciation and amortization
Capital expenditures
Working capital (excl. cash and debt)/sales 2 3
Days sales outstanding 2 3
Inventory turns 2 3
Employees
$
$
$
$
$
$
$
809,162
283,186
35.0 %
89,824
11.1 %
59,672
2.50
2.78
$
$
$
876,282
304,997
34.8 %
69,442
7.9 %
42,577
1.80
2.74
$
$
$
839,419
285,061
34.0 %
68,331
8.1 %
22,065
0.95
2.01
$
$
$
637,123
192,885
30.3 %
23,725
3.7 %
8,984
0.43
1.47
1,093,272
629,687
251,306
136,856
463,585
$ 1,061,571
630,412
300,320
229,227
431,159
$
$ 1,142,446
734,217
363,318
300,297
408,229
$
$ 1,113,843
772,493
421,319
343,728
341,350
$
35.2 %
22.8 %
41.1 %
34.7 %
47.1 %
42.4 %
55.2 %
50.2 %
106,795
29,126
(9,432)
$
$
79,499
32,675
(12,288)
$
$
69,661
36,136
(14,515)
$
$
60,450
25,162
(14,368)
14.5 %
59.4
3.9
2,997
17.2 %
55.5
3.7
3,128
17.9 %
54.3
3.6
3,328
18.6 %
46.2
4.1
3,380
$
$
$
$
$
$
$
597,103
185,610
31.1 %
37,453
6.3 %
19,579
0.96
1.72
772,851
486,542
267,632
216,029
286,309
48.3 %
43.0 %
52,645
20,531
(22,320)
21.5 %
49.2
3.6
2,896
1 The Company believes that non-GAAP adjusted net income per diluted share is a meaningful measure of financial performance in comparing period-to-period results. Please see the table at the
back of this report for a reconciliation of GAAP net income per diluted share to non-GAAP adjusted net income per diluted share. This information should be considered in addition to, but not as a
substitute for, other measures of financial performance reported in accordance with GAAP.
2 FY2017 working capital/sales, days sales outstanding and inventory turns exclude the impact of the STAHL acquisition, which closed on January 31, 2017.
3 FY2019 working capital/sales, days sales outstanding and inventory turns exclude the Tire Shredder business, which was divested on December 28, 2018, and Crane Equipment & Service, Inc.
and Stahlhammer Bommern GmbH, each of which were divested on February 28, 2019.
FY 2020 SALES
Asia Pacific
Canada
.
Latin America
4%
6%
4%
Geographic
Market
55%
55%
31%
31%
Europe,
Middle East
& Africa
U.S.
Engineered
Products
10%
44%
Product
Category
Industrial
Products
Crane
Solutions
46%
FY2020 Sales: $809.2 million
Sales
(in millions)
Cash Flow
from Operations
(in millions)
Total Debt,
Net of Cash
(in millions)
$876.3
$34.2
$809.2
$839.4
$38.3
$637.1
$36.0
$597.1
$37.8
$559.3 $601.1
$801.1
$842.1
$60.5
$52.6
$106.8
$343.7
$300.3
$79.5
$69.7
$216.0
$229.2
$136.9
'16
'17
'18
'19
'20
'16
'17
'18
'19
'20
'16
'17
'18
'19
'20
Sales
Divestitures
A LETTER FROM THE CHAIRMAN OF THE BOARD
Dear Shareholders,
As I reflect on Fiscal 2020, I think about the year in two distinct
timeframes. During the first eleven months, we were laser focused on
the successful execution of our Blueprint for Growth strategy as we
simplified the business, expanded margins, generated strong cash from
operations, paid down debt, and introduced new products. However,
just as the year was nearing an end, we were suddenly faced with the
challenges introduced by the COVID-19 pandemic. Fortunately, the
foundation we have established with our Blueprint for Growth strategy
served us well as we entered the pandemic, and it enabled an agile and
effective response guided by our core values. With our solid balance
sheet, strong cash generation and liquidity, and Blueprint for Growth
strategy, we believe that we can address these challenging times and
emerge as a stronger company when the world returns to a more normal
environment.
During these unprecedented times, we remain focused on the safety of our associates and business
continuity. We established a COVID-19 Task Force which rolled out a communication process to keep all
locations continually informed. We implemented stringent processes to reduce the spread of the virus with the
goal of ensuring the safety, health and well-being of our associates and their families. As an essential business,
the majority of our manufacturing facilities continue to operate while over 1,000 of our staff are working remotely.
As the reopening process unfolds in phases, we will be responsible about returning associates back to their
offices and facilities. Safety is a core value, and it is connected to everything we do.
As mentioned, given the successful execution of our Blueprint for Growth strategy and the discipline
provided by E-PAS™, our business operating system (Earnings Power Acceleration System), we are operating
from a strong financial position. At fiscal year end, we had total liquidity of nearly $200 million consisting of
approximately $115 million of cash and $84 million available on our revolver, net of outstanding letters of credit.
In addition, our debt leverage ratioi was just 1.1x. We have historically demonstrated an ability to generate cash
through all cycles and believe that we can successfully do so during this pandemic.
As it became clear that we faced a measurable reduction in the demand for our products as a result of
COVID-19, we swiftly implemented actions to align our costs with market demand with the objective of lowering
our breakeven point, generating cash and achieving positive operating income.
Cash Generation and Profit Preservation Efforts
Accelerating Blueprint for Growth strategy operational excellence plans to reduce overhead costs in
operations and achieve footprint rationalization
Using furloughs as much as possible to align engineering, sales & marketing, finance & accounting,
operations and plant staffing with the decline in demand and to protect enterprise talent
Reducing capital expenditures to $5 million in the first six months of fiscal 2021 with total capital
expenditures estimated to be about $15 million for fiscal 2021, flexing with market conditions
Reduced U.S. pension contributions to $0.8 million minimum requirement for the first half of fiscal 2021
and paying minimum required term loan principal payments of $1.1 million quarterly
We believe we are being prudent with these actions which will protect approximately $35 million in cash in the first
half of fiscal 2021 and help us achieve positive cash flow.
Fiscal 2020 Results
The success of our Blueprint for Growth Strategy was validated
with gross margin expansion of 20 basis points to 35.0% despite an
approximate 8% decline in sales. We achieved operating income of
$89.8 million, or 11.1% of sales. On an adjusted basisii, operating
margin was 12.1%, a 70-basis point improvement over the prior year.
Net income for the year was $59.7 million, or $2.50 per diluted share.
Of note, our adjusted EBTIDA marginiii was 15.7% and return on
invested capital (ROIC) was 11.5%, demonstrating continued progress
towards our goal of 19% adjusted EBTIDA margin and ROIC in the
mid-teens.
An important element of our strategy is the 80/20 Process of
simplification. This process contributed $20.4 million to operating
income in fiscal 2020 enabling margin expansion on lower sales. The
process involves simplification of our customer base and product lines,
prioritization of important customers – or creating what we refer to as
‘Raving Fans’, and the rationalization of our operations. These efforts
enabled stronger margins despite the headwinds of the slowdown in
industrial demand.
As mentioned, the hallmark of Columbus McKinnon is our strong cash
generation, and in fiscal 2020, we generated a record $107 million
in cash from operations.
Introducing New Leadership
In December 2019, our prior chief executive officer, Mark Morelli,
informed us of his plan to resign for a CEO opportunity at Vontier
Corporation. The Board of Directors, while disappointed, reacted
quickly and initiated a search with the goal of having a new CEO on
board by June 2020. Even with the challenges of COVID-19, we were
able to achieve our target, and we hired our candidate of choice
effective June 1, 2020. We are very pleased to welcome David J.
Wilson as President and CEO, and a member of the Board. David was
chosen because of his proven success with operational excellence and
customer-centric commercial growth. He has substantial international
and business development skills and a demonstrated track record for
delivering results. And, most importantly, David has proven leadership
skills and a reputation for driving performance cultures to even higher
levels. We are excited to have him join us.
As we navigate these uncertain times, I am confident that Columbus
McKinnon can continue to build value, create differentiated solutions for
our customers, and be a safe and healthy environment for our
employees. Thank you for your trust and investment in the Company.
Sincerely,
Richard H. Fleming
Chairman of the Board of Directors
June 5, 2020
OUR CORE VALUES
Connect safety to
everything we do.
Take personal responsibility.
Care for our people. Build
products that everyone can trust.
Be easy
to do business with.
Focus on the customer.
Listen. Simplify.
Deliver on your
commitments.
Aim for greatness. Do your
best. Hold yourself
accountable.
Think differently.
Be proactive with new ideas.
Ask questions. Be part of the
solution.
Win as a team.
Work together. Respect each
other. Celebrate success.
Act with integrity.
Do the right thing. Extend
trust. Appreciate differences.
A LETTER FROM THE PRESIDENT AND CEO
Dear Shareholders,
I am excited to be a part of Columbus McKinnon and honored to
have the opportunity to lead the organization to the next level of
excellence. As I write this, I have been on board for just five days and in
this short time have witnessed firsthand the energy and passion that the
team at Columbus McKinnon exudes.
These are certainly difficult times as we address the many
challenges presented by the COVID-19 crisis, but I believe we are
responding well and will be a better organization for it. We are in an
enviable position, in fact. Given the strong financial position of the
Company, we can continue to make investments in strategic growth
initiatives through the COVID-19 recession, and I expect we can begin to
play offense with Phase III of our Blueprint for Growth strategy earlier
than most.
By way of background, I am joining Columbus McKinnon from Flowserve Corporation (NYSE: FLS), where I
was most recently president of the Pumps Division. Prior to Flowserve, I was president of the Industrial Segment
at SPX Flow (NYSE: FLOW), a spinoff from SPX Corporation (NYSE: SPXC). During my nearly 20 years with
SPX and the spinoff, I served as president for a number of their industrial, technology, flow control, automotive,
and food & beverage equipment businesses. In these roles, many of which were similar in size or larger than
Columbus McKinnon, I was responsible for defining the businesses’ strategic visions, developing growth
initiatives, executing business simplification processes and restructurings, as well as leading acquisition and
portfolio management strategies. My international experience is fairly extensive as well, having spent the better
part of a decade living and working abroad in both Asia and Europe. I began my career as an engineer for
Polaroid Corporation and earned my Bachelor of Science degree in Electrical Engineering at the University of
Massachusetts Lowell.
I was attracted to this opportunity because I was impressed with Columbus McKinnon’s industry leadership
and believe there are tremendous opportunities to grow Columbus McKinnon by advancing our motion control
technologies with new product development and acquisitions that expand our addressable markets and target
growth trends. The focus on our core strengths as a lifting specialist which integrates smart movement to improve
safety and productivity for our customers is a logical foundation for our growth strategy.
I am impressed with the effectiveness of the Blueprint for Growth strategy which defines direction, provides
for accountability and has clearly improved the earnings power of the Company. I look forward to getting through
these challenging times and to building a stronger, more sustainable growth platform centered around market
segmentation, innovative product development and acquisitions.
Sincerely,
David J. Wilson
President and CEO
June 5, 2020
___________________________
i Net leverage ratio is the ratio of net debt to adjusted EBITDA
ii See the reconciliation of GAAP operating income and margins to non-GAAP adjusted operating income and margins in the
tables included in this annual report.
iii See the reconciliation of GAAP net income to non-GAAP adjusted EBITDA and margins in the tables included in this annual
report.
SEC FORM 10-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(FEE REQUIRED)
For the fiscal year ended March 31, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission file number 0-27618
_________________
COLUMBUS McKINNON CORPORATION
(Exact name of Registrant as specified in its charter)
New York
(State of Incorporation)
16-0547600
(I.R.S. Employer Identification Number)
205 Crosspoint Parkway
Getzville, New York 14068
(Address of principal executive offices, including zip code)
(716) 689-5400
(Registrant’s telephone number, including area code)
_________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value per share
Trading Symbol(s)
CMCO
Name of each exchange on which registered
NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes
No
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K
.
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Act.
Large accelerated
filer
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.
Emerging Growth
Company
Smaller reporting
company
Non-accelerated
filer
Accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30, 2019 (the second
fiscal quarter in which this Form 10-K relates) was approximately $859 million, based upon the closing price of the Company’s
common shares as quoted on the Nasdaq Stock Market on such date. The number of shares of the Registrant’s common stock
outstanding as of May 22, 2020 was 23,786,363 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s proxy statement for its 2020 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Registrant’s fiscal year ended
March 31, 2020 are incorporated by reference into Part III of this report.
2
COLUMBUS McKINNON CORPORATION
2020 Annual Report on Form 10-K
This annual report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995. 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 and other factors set forth herein under “Risk Factors.” 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 we do not undertake
and specifically decline any obligation to publicly release the results of 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. 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.
3
TABLE OF CONTENTS
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplemental Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III.
Item 10. Directors and Executive Officers of Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15 Exhibits and Financial Statement Schedules
4
5
11
15
16
17
17
18
19
21
32
34
94
94
96
96
96
96
96
96
97
Item 1.
Business
General
PART I
Columbus McKinnon is a leading worldwide designer, manufacturer and marketer of motion control products, technologies,
automated systems and services that efficiently and ergonomically move, lift, position and secure materials. Key products include
hoists, crane components, actuators, 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. Our products are used for mission critical industrial applications where we have established trusted
brands with significant customer retention. Our targeted market verticals include general industrial, construction and infrastructure,
mining, oil & gas, energy, aerospace, transportation, automotive, heavy equipment manufacturing and entertainment.
In the U.S., we are the market leader for hoists and material handling digital power control systems, our principal line of products,
as well as certain chain, forged fittings, and actuator products. We have achieved this leadership position through strategic
acquisitions, our extensive, diverse, and well-established distribution channels and our commitment to product innovation and
quality. We believe the breadth of our product offering and expansive distribution channels provide us a strategic advantage in
our markets. Additionally, we believe we are the market leader for manual hoist and actuator products in Europe. Our market
leadership and strong brands enable us to sell more products than our competition through our extensive distribution channels in
the U.S. and Europe. The acquisition of STAHL CraneSystems ("STAHL") in fiscal 2017, which is well renowned for its custom
engineering lifting solutions and hoisting technology, advanced our position as a global leader in the production of explosion-
protected hoists. STAHL serves independent crane builders and Engineering Procurement and Construction ("EPC") firms,
providing products to a variety of end markets including automotive, general manufacturing, oil and gas, steel and concrete, power
generation, as well as process industries such as chemical and pharmaceuticals.
Our Blueprint for Growth Strategy is a three-phased strategy to increase the earnings power of the Company and transform us
into a growth-oriented industrial technology company. The goal of our strategy is to increase our earnings power and expand
EBITDA margins, as well as improve our Return on Invested Capital. Phase I, which began early in fiscal 2018, was focused on
attaining operational control and instilling a performance-based culture to drive results.
We completed Phase I during fiscal 2018. In doing so, we believe we grew market share in the U.S. and achieved $6 million of
synergies related to the STAHL acquisition. In addition, we introduced several new products incorporating smart hoist technologies
and repaid $60 million of our long-term debt.
We began Phase II of the strategy in November 2017. This phase utilizes our 80/20 process which focuses on business simplification,
improving our operational excellence, and ramping the growth engine by investing in new product development and a digital
platform to grow profitably. Investment in R&D will advance our smart hoist technology and enhance our customers’ digital
experience so we can capitalize on the automation megatrend. Research and development costs were $11,310,000, $13,491,000,
and $13,617,000 in fiscal years 2020, 2019, and 2018, respectively.
In addition to restructuring our organization to simplify our business, we identified three businesses in our portfolio that were not
a fit with our product offerings and strategy. By March 2019, the Company had completed the divestiture of these three businesses.
The Tire Shredder business was sold in December 2018. The remaining two businesses, which were sold in February 2019, included
Crane Equipment and Service, Inc. and Stahlhammer Bommern GmbH. During fiscal 2020, the Company reduced its manufacturing
footprint by completing the closure of one manufacturing facility in Ohio and began consolidation of its remaining facility in Ohio
into our remaining U.S. facilities. Similarly, one of our manufacturing facilities in China was closed during fiscal 2020 and its
operations were consolidated into our other manufacturing facility in China.
Phase III of the strategy is centered on evolving the business model including optimizing our current product portfolio as well as
pursuing acquisitions to advance our transformation into a leading industrial technology company. Our acquisitions of Magnetek,
Inc. and STAHL and our efforts to leverage their technology are well aligned with our transformation efforts. We have demonstrated
our ability to acquire companies and achieve significant synergies and growth. As we begin Phase III of our strategy, we will look
for acquisitions that advance our position as a “lifting specialist” or further our technology in “smart movement”.
Our business is cyclical in nature and sensitive to changes in general economic conditions, including changes in industrial capacity
utilization, industrial production, and general economic activity indicators, like GDP growth. Both U.S. and Eurozone capacity
utilization are leading market indicators for our Company. Like many global companies, we are being affected by the Novel
Coronavirus ("COVID-19"). While the severity and duration of this global pandemic is not known at this time, we are seeking
5
to take all appropriate measures to protect the cash flow and liquidity of the Company. This includes reducing our cost base,
reducing working capital needs, and reducing capital expenditures. We have a flexible capital structure composed of a Credit
Agreement that includes a Term Loan that requires quarterly principal payments of $1.1 million, and a $100 million Revolving
Credit Facility ("Revolver"). Under the Credit Agreement, in addition to other affirmative and negative covenants, we have a
financial covenant whereby the total net leverage ratio cannot exceed 3.00: 1.00 and is only tested at the end of the relevant
reference period (quarter end) when the Revolver is outstanding. While the Revolver was undrawn as of March 31, 2020 and did
not apply, had we been required to determine the covenant ratio we would have been in compliance with the covenant provisions.
Subsequent to March 31, 2020, the Company drew $25 million from the Revolver for liquidity and working capital purposes,
demonstrating that it has a supportive bank group.
Business Description
ASC Topic 280 “Segment Reporting” establishes the standards for reporting information about operating segments in financial
statements. We provide our products and services through one operating and reportable segment.
We design, manufacture, and distribute a broad range of material handling products for various applications. Products include a
wide variety of electric, air-powered, lever, and hand hoists, hoist trolleys, explosion-protected hoists, winches, and aluminum
work stations; alloy and carbon steel chain; forged attachments, such as hooks, shackles, textile slings, clamps, and load binders;
mechanical and electromechanical actuators and rotary unions; and below-the-hook special purpose lifters; power and motion
control systems, such as AC and DC drive systems, radio remote controls, push button pendant stations, brakes, and collision
avoidance and power delivery subsystems. These products are typically manufactured for stock or assembled to order from standard
components and are sold primarily through a variety of commercial distributors and to a lesser extent, directly to end-users. Our
STAHL subsidiary brings market leadership with independent crane builders and EPC firms. The diverse end-users of our products
are in a variety of industries including manufacturing, power generation and distribution, utilities, wind power, warehouses,
commercial construction, oil and gas exploration and refining, petrochemical, marine, ship building, transportation and heavy-
duty trucking, agriculture, logging and mining. We also serve a niche market for the entertainment industry including permanent
and traveling concerts, live theater, and sporting venues.
Products
Of our fiscal 2020 sales, $442,623,000, or 55%, were U.S. and $366,539,000 or 45% were non-U.S. The following table sets forth
certain sales data for our products, expressed as a percentage of net sales for fiscal 2020 and 2019:
Hoists
Chain and rigging tools
Digital power control and delivery systems
Actuators and rotary unions
Industrial cranes
Elevator application drive systems
Other
Fiscal Years Ended
March 31,
2020
2019
64%
9
12
10
2
3
—
100%
62%
10
11
9
4
3
1
100%
Hoists - We manufacture a wide variety of electric chain hoists, electric wire rope hoists, hand-operated hoists, winches, lever
tools, and air-powered hoists. Load capacities for our hoist product lines range from one-eighth of a ton to nearly 140 tons with
the acquisition of STAHL. These products are sold under our Budgit, Chester, CM, Coffing, Little Mule, Pfaff, Shaw-Box, Yale,
STAHL, and other recognized brands. Our hoists are sold for use in numerous general industrial applications, as well as for use
in the construction, energy, mining, food services, entertainment, and other markets. We also supply hoist trolleys, driven manually
or by electric motors, that are used in conjunction with hoists.
We also offer several lines of standard and custom-designed, below-the-hook tooling, clamps, and textile strappings. Below-the-
hook tooling, textile, and chain slings and associated forgings, and clamps are specialized lifting apparatus used in a variety of
lifting activities performed in conjunction with hoisting or lifting applications.
6
STAHL primarily manufactures explosion-protected hoists and custom engineered hoists, including wire rope and manual and
electric chain hoists. STAHL products are sold to a variety of end markets including automotive, general manufacturing, oil and
gas, steel and concrete, power generation as well as process industries such as chemical and pharmaceuticals.
Chain and Rigging Tools - We manufacture alloy and carbon steel chain for various industrial and consumer applications. U.S.
federal regulations require the use of alloy chain, which we first developed, for overhead lifting applications because of its strength
and wear characteristics. A line of our alloy chain is sold under the Herc-AlloyTM brand name for use in overhead lifting, pulling,
and restraining applications. In addition, we also sell specialized load chain for use in hoists, as well as three grades and multiple
sizes of carbon steel welded-link chain for various load securing and other non-overhead lifting applications.
We produce a broad line of alloy and carbon steel closed-die forged chain attachments, including hooks, shackles, HammerloksTM,
and master links. These forged attachments are used in chain, wire rope, and textile rigging applications in a variety of industries,
including transportation, mining, construction, marine, logging, petrochemical, and agriculture.
In addition, we manufacture carbon steel forged and stamped products, such as load binders, logging tools, and other securing
devices, for sale to the industrial and logging markets through industrial distributors, hardware distributors, mass merchandiser
outlets, and Original Equipment Manufacturers ("OEMs").
Digital Power Control and Delivery Systems - Through our Magnetek brand, we are a leading provider of innovative power
control and delivery systems and solutions for overhead material handling applications used in a number of diverse industries,
including aerospace, automotive, steel, aluminum, paper, logging, mining, ship loading, nuclear power plants, and heavy movable
structures. We are a major supplier in North America of power and motion control systems, which include AC and DC drive
systems, radio remote controls, push button pendant stations, brakes, and collision avoidance and power delivery subsystems.
While we sell primarily to OEMs of overhead cranes and hoists, we spend a great deal of effort understanding the needs of end
users to gain specification. We can combine our products with engineered services to provide complete customer-specific systems
solutions.
We are also a leading independent supplier of AC and DC digital motion control systems for underground coal mining equipment.
Our systems are used in coal hauling vehicles, shuttle cars, scoops, and other heavy mining equipment.
Actuators and Rotary Unions - Through our Duff-Norton and Pfaff brands, we design and manufacture industrial components
such as mechanical and electromechanical actuators and rotary unions. Actuators are linear motion devices used in a variety of
industries, including the transportation, paper, steel, energy, aerospace, and many other commercial industries. Rotary unions are
devices that transfer a liquid or gas from a fixed pipe or hose to a rotating drum, cylinder or other device. Rotary unions are used
in a variety of industries including pulp and paper, printing, textile and fabric manufacturing, rubber, and plastic.
Elevator Application Drive Systems - Through our Magnetek brand we also design, build, sell, and support elevator application-
specific drive products that efficiently deliver power used to control motion, primarily in high-rise, high-speed elevator applications.
We are recognized as an industry leader for DC high-performance elevator drives, as well as for AC drives used with low- and
high-performance traction elevators, due to our extensive application expertise and product reliability. Our elevator product
offerings are comprised of highly integrated subsystems and drives, sold mainly to elevator OEMs. In addition, our product options
include a number of regenerative controls for both new building installations and elevator modernization projects that help building
owners save energy.
Distribution and Markets
Our distribution channels include a variety of commercial distributors. In addition, we sell aluminum light rail systems as well as
certain motion technology products directly to end-users. The following describes our global distribution channels:
General Distribution Channels - Our global general distribution channels consist of:
—
Industrial distributors that serve local or regional industrial markets and sell a variety of products for
maintenance repair, operating, and production, or MROP, applications through their own direct sales force.
— Rigging shops that are distributors with expertise in rigging, lifting, positioning, and load securing. Most
rigging shops assemble and distribute chain, wire rope and synthetic slings, and distribute manual hoists
and attachments, chain slings, and other products.
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—
Independent crane builders that design, build, install, and service overhead crane and light-rail systems for
general industry and also distribute a wide variety of hoists and crane components. We sell electric wire
rope hoists and chain hoists as well as crane components, such as end trucks, trolleys, drives, and
electrification systems to crane builders.
Specialty Distribution Channels - Our global specialty distribution channels consist of:
— National and regional distributors that market a variety of MROP supplies, including material handling
products, either exclusively through large, nationally distributed catalogs, or through a combination of
catalog, internet, and branch sales and a field sales force.
— Material handling specialists and integrators that design and assemble systems incorporating hoists,
overhead rail systems, trolleys, scissor lift tables, manipulators, air balancers, jib arms, and other material
handling products to provide end-users with solutions to their material handling problems.
— Entertainment equipment distributors that design, supply, and install a variety of material handling and
rigging equipment for concerts, theaters, ice shows, sporting events, convention centers, and night clubs.
Pfaff International Direct - Our German-based Pfaff business markets and sells most of its actuators directly to end-users,
providing an additional method to market for us in the European region.
Service-After-Sale Distribution Channel - Service-after-sale distributors include our authorized network of 23 chain repair service
stations and over 227 certified hoist service and repair stations globally. This service network is designed for easy parts and service
access for our large installed base of hoists and related equipment in that region.
OEM/Government Distribution Channels - This channel consists of:
— OEMs that supply various component parts directly to other industrial manufacturers as well as private
branding and packaging of our traditional products for material handling, lifting, positioning, and special
purpose applications.
— Government agencies, including the U.S. and Canadian Navies and Coast Guards, that primarily purchase
load securing chain and forged attachments. We also provide our products to the U.S. and other governments
for a variety of military applications.
Independent Crane Builders and Engineering Procurement and Construction ("EPC") firms - In addition to the Distribution
Channels mentioned above, we sell explosion-protected hoists and custom engineered non-standard hoists to independent crane
builders and EPC firms. Independent crane builders are lifting solution developers and final crane assemblers that source hoists
as components. EPC firms are responsible for project management or construction management of production facilities that
purchase lifting solutions from crane and hoist builders.
Backlog
Our backlog of orders at March 31, 2020 was approximately $131,030,000 compared to approximately $161,456,000 at March
31, 2019. The decrease is a result of declining industrial markets globally due to COVID-19 and changing foreign currency rates.
Our orders for standard products are generally shipped within one week. Orders for products that are manufactured to customer
specifications are generally shipped within four to twelve weeks. Given the short product lead times, we do not believe that the
amount of our backlog of orders is a reliable indication of our future sales. Fluctuations in backlog can reflect the project-oriented
nature of certain aspects of our business.
Competitive Conditions
The material handling industry remains fragmented. We face competition from a wide range of regional, national, and international
manufacturers globally. In addition, we often compete with individual operating units of larger, highly diversified companies.
The principal competitive factors affecting our business include customer service and support as well as product availability,
performance, functionality, brand reputation, reliability, and price. Other important factors include distributor relationships and
territory coverage.
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We believe we have leading U.S. market share in various products categories including hoists, trolleys and components, AC and
DC material handling drives, screw jacks, and elevator DC drives. These product categories represent 66% of our U.S. net sales.
Major competitors for hoists are Konecranes, which acquired Terex's Material Handling and Port Solutions business segment, and
Kito (and its U.S. subsidiary Harrington); for chain are Campbell Chain, Peerless Chain Company (acquired by Kito), and American
Chain and Cable Company; for digital power control systems are Konecranes, Power Electronics International, Inc., Cattron Group
International (a division of Harbor Group), Conductix-Wampfler (a division of Delachaux Group), Control Techniques (a division
of Emerson Electric), OMRON Corporation, KEB GmbH, and Fujitec; for forged attachments are The Crosby Group and Brewer
Tichner Company; and for actuators and rotary unions are Deublin, Joyce-Dayton, and Nook Industries.
Employees
At March 31, 2020, we had 2,997 employees globally. Approximately 8% of our employees are represented under three separate
U.S. collective bargaining agreements which expire April 2021, May 2021, and September 2021. We also have various labor
agreements with our non-U.S. employees which we negotiate from time to time. We have good relationships with our employees
and positive, productive relationships with our unions. The risk of employee or union led disruption in production is remote.
Raw Materials and Components
Our principal raw materials and components are 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 long-term agreements which are negotiated on
a company-wide basis through our global purchasing group to take advantage of volume discounts. Generally, as we experience
fluctuations in our costs, we reflect them as price increases to our customers with the goal of being margin neutral. In addition,
as a result of the recent trade tariff actions with China, the Company determined its fiscal 2020 exposure for tariffs to be
approximately $2,500,000 which resulted in increased cost of products sold. The Company is monitoring the impact of tariffs and
is actively working to mitigate this impact through material productivity actions and pricing strategies. For all other raw materials
and components, our ability to pass on these increases is determined by market conditions. Although raw materials and some
components (such as motors, bearings, gear reducers, steel and aluminum enclosures and wire harnesses, castings, electro-
mechanical components, and standard variable drives) are purchased, our vertical integration enables us to produce many of the
components used in the manufacturing of our products.
Environmental and Other Governmental Regulation
Like most manufacturing companies, we are subject to various federal, state, and local laws relating to the protection of the
environment. To address the requirements of such laws, we have adopted a corporate environmental protection policy which
provides that all of our owned or leased facilities shall comply, and all of our employees have the duty to comply with all applicable
environmental regulatory standards, and we have initiated an environmental auditing program for our facilities to ensure compliance
with such regulatory standards. We have also established managerial responsibilities and internal communication channels for
dealing with environmental compliance issues that may arise in the course of our business. We have made and could be required
to continue to make significant expenditures to comply with environmental requirements. Because of the complexity and changing
nature of environmental regulatory standards, it is possible that situations will arise from time to time requiring us to incur additional
expenditures to ensure environmental regulatory compliance. However, we are not aware of any environmental condition or any
operation at any of our facilities, either individually or in the aggregate, which would cause expenditures having a material adverse
effect on our results of operations, financial condition or cash flows.
We have been a part of the Pendleton Site PRP Group since about 1993. Many years ago, we sent pickle liquor wastes from
Tonawanda, NY to the Pendleton Site for treatment and disposal. The Pendleton Site PRP Group signed an Order on Consent
with the NYS DEC in 1996 and the cleanup was concluded in the early 2000s. The Order on Consent required a post-construction
operation and maintenance period of 30 years and we are required to pay our share of the costs associated with the operation and
maintenance period. Our share of these costs is 13.4% and reserves on the books are sufficient to cover these costs for the remainder
of the operations and maintenance period.
In 1986, Magnetek acquired the stock of Universal Manufacturing Corporation (“Universal”) from a predecessor of Fruit of the
Loom (“FOL”), and the predecessor agreed to indemnify Magnetek against certain environmental liabilities arising from pre-
acquisition activities at a facility in Bridgeport, Connecticut. Environmental liabilities covered by the indemnification agreement
included completion of additional cleanup activities, if any, at the Bridgeport facility and defense and indemnification against
liability for potential response costs related to offsite disposal locations. Magnetek's leasehold interest in the Bridgeport facility
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was assigned to the buyer in connection with the sale of Magnetek's transformer business in June 2001. FOL, the successor to the
indemnification obligation, filed a petition for Reorganization under Chapter 11 of the Bankruptcy Code in 1999 and Magnetek
filed a proof of claim in the proceeding for obligations related to the environmental indemnification agreement. Magnetek believes
that FOL had substantially completed the clean-up obligations required by the indemnification agreement prior to the bankruptcy
filing. In November 2001, Magnetek and FOL entered into an agreement involving the allocation of certain potential tax benefits
and Magnetek withdrew its claims in the bankruptcy proceeding. FOL's obligation to the state of Connecticut was not discharged
in the reorganization proceeding.
In January 2007, the Connecticut Department of Environmental Protection (“DEP”) requested parties, including Magnetek, to
submit reports summarizing the investigations and remediation performed to date at the site and the proposed additional
investigations and remediation necessary to complete those actions at the site. The DEP then requested additional information
relating to site investigations and remediation. Magnetek and the DEP agreed to the scope of the work plan in November 2010.
The Company has implemented the work plan and has recorded a liability of $352,000 as of March 31, 2020 related to the Bridgeport
facility, representing the best estimate of future site investigation costs and remediation costs which are expected to be incurred
in the future.
For all of the currently known environmental matters, we have accrued as of March 31, 2020 a total of $1,143,000 which, in our
opinion, is sufficient to deal with such matters. Further, we believe that the environmental matters known to, or anticipated by us
should not, individually or in the aggregate, have a material adverse effect on our operating results or financial condition. However,
there can be no assurance that potential liabilities and expenditures associated with unknown environmental matters, unanticipated
events, or future compliance with environmental laws and regulations will not have a material adverse effect on us.
In September of 2017, Magnetek received a request for defense and indemnification from Monsanto Company, Pharmacia, LLC,
and Solutia, Inc. (collectively, “Monsanto”) with respect to: (1) lawsuits brought by plaintiffs claiming that Monsanto manufactured
polychlorinated biphenyls ("PCBs"), exposure to which allegedly caused injury to plaintiffs; (2) lawsuits brought by municipalities
and municipal entities claiming that Monsanto should be responsible for a variety of damages due to the presence of PCBs in
bodies of water in those municipalities and/or in water treated by those municipal entities. Monsanto claims to be entitled to
defense and indemnification from Magnetek under a so-called “Special Undertaking” apparently executed by Universal in January
of 1972, which purportedly required Universal to defend and indemnify Monsanto from liabilities “arising out of or in connection
with the receipt, purchase, possession, handling, use, sale or disposition of” PCBs by Universal.
Magnetek has declined Monsanto’s tender, and believes that it has meritorious legal and factual defenses to the demands made by
Monsanto. Magnetek is vigorously defending against those demands and has commenced litigation to, among other things, declare
the Special Undertaking void and unenforceable. Monsanto has, in turn, commenced an action to enforce the Special Undertaking.
Magnetek intends to continue to vigorously prosecute its declaratory judgment action and to defend against Monsanto’s action
against it. As of March 31, 2020, the Company has recorded $100,000 for legal costs related to this matter. We cannot reasonably
estimate a potential range of loss with respect to Monsanto’s tender because there is insufficient information regarding the underlying
matters. Management believes, however, that the potential additional costs related to such matters, if any, will not have a material
effect on the financial condition of the Company or its liquidity, although the effect of any future liabilities recorded could be
material to earnings in a future period.
Our operations are also governed by many other laws and regulations, including those relating to workplace safety and worker
health, principally OSHA in the U.S. and others outside the U.S. and regulations thereunder. We believe that we are in substantial
compliance with these laws and regulations and do not believe that future compliance with such laws and regulations will have a
material adverse effect on our operating results, financial condition, or liquidity.
Available Information
Our internet address is www.columbusmckinnon.com. We make available free of charge through our website our Annual Report
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after
such documents are electronically filed with, or furnished to, the Securities and Exchange Commission.
10
Item 1A.
Risk Factors
Columbus McKinnon is subject to a number of risk factors that could negatively affect our results from business operations or
cause actual results to differ materially from those projected or indicated in any forward-looking statement. Such factors include,
but are not limited to, the following:
Adverse changes in global economic conditions may negatively affect our industry, business, and results of operations.
Our industry is affected by changes in economic conditions outside our control, which can result in a general decrease in product
demand from our customers. Such economic developments, like Brexit or the China trade wars, may affect our business in a
number of ways. Reduced demand may drive us and our competitors to offer products at promotional prices, which would have
a negative impact on our profitability. In addition, the tightening of credit in financial markets may adversely affect the ability of
our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in, or
cancellation of, orders for our products. If demand for our products slows down or decreases, we will not be able to maintain our
revenue and we may run the risk of failing to satisfy the financial and other restrictive covenants to which we are subject under
our existing indebtedness. Reduced revenue as a result of decreased demand may also reduce our planned growth and otherwise
hinder our ability to improve our performance in connection with our long-term strategy.
The risk related to Novel Coronavirus ("COVID-19") could adversely affect our business.
Our business has been and may continue to be materially and adversely impacted by the effects of the COVID-19. In addition to
global macroeconomic effects, the COVID-19 outbreak and any other related adverse public health developments will cause
disruption to our domestic and international operations and sales activities. The continued operation of our facilities is subject to
local laws and regulations. While all of our facilities have been deemed essential under applicable law there is no guarantee this
will continue. Our third-party manufacturers, suppliers, third-party distributors, sub-contractors and customers have been and will
be disrupted by worker absenteeism, quarantines and restrictions on their employees’ ability to work, office and factory closures,
disruptions to ports and other shipping infrastructure, border closures, or other travel or health-related restrictions. Depending on
the magnitude of such effects on our manufacturing operations or the operations of our suppliers, third-party distributors, or sub-
contractors, our supply chain, manufacturing and product shipments could be delayed, which could adversely affect our business,
operations, and customer relationships. In addition, the COVID-19 or other disease outbreaks will in the short-run and may over
the longer term adversely affect the economies and financial markets of many countries, resulting in an economic downturn that
will affect demand for our products and impact our operating results. In addition, a prolonged disruption from COVID-19 could
result in a requirement to record additional reserves against accounts receivable and inventories and impairments of goodwill,
intangible assets, and other long lived assets which could have a material impact on our results of operations. There can be no
assurance that any decrease in sales resulting from the COVID-19 will be offset by increased sales in subsequent periods. Although
the magnitude of the impact of the COVID-19 outbreak on our business and operations remains uncertain, the continued spread
of the COVID-19 or the occurrence of other epidemics and the imposition of related public health measures and travel and business
restrictions will adversely impact our business, financial condition, operating results and cash flows.
Changes in the method of determining the London Interbank Offered Rate ("LIBOR"), or the replacement of LIBOR with an
alternative reference rate, may adversely affect interest rates.
On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase
out LIBOR by the end of 2021. The interest rate on the Company’s Term Loan and Revolver have a variable component that is
based on LIBOR. It is unclear whether new methods of calculating LIBOR will be established if it continues to exist after 2021,
or whether different benchmark rates used to price indebtedness will develop. In the future, we may need to renegotiate our Term
Loan and Revolver or incur other indebtedness, and the phase-out of LIBOR may negatively impact the terms of such indebtedness.
In addition, the overall financial market may be disrupted as a result of the phase-out or replacement of LIBOR. Disruption in the
financial market could have a material adverse effect on our financial position, results of operations, and liquidity.
Our business is cyclical and is affected by industrial economic conditions.
Many of the end-users of our products are in highly cyclical industries, such as manufacturing, power generation and distribution,
commercial construction, oil and gas exploration and refining, transportation, agriculture, logging, and mining that are sensitive
to changes in general economic conditions. Their demand for our products, and thus our results of operations, is directly related
to the level of production in their facilities, which changes as a result of changes in general economic conditions and other factors
beyond our control. If there is deterioration in the general economy or in the industries we serve, our business, results of operations,
and financial condition could be materially adversely affected. In addition, the cyclical nature of our business could at times also
adversely affect our liquidity and ability to borrow under our revolving credit facility.
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Our business is highly competitive and subject to consolidation of competitors. Increased competition could reduce our sales,
earnings, and profitability.
The principal markets that we serve within the material handling industry are fragmented and highly competitive. Competition is
based primarily on customer service and support as well as product availability, performance, functionality, brand reputation,
reliability, and price. Our competition in the markets in which we participate comes from companies of various sizes, some of
which have greater financial and other resources than we do. Increased competition could force us to lower our prices or to offer
additional services at a higher cost to us, which could reduce our gross margins and net income.
The greater financial resources or the lower amount of debt of certain of our competitors may enable them to commit larger amounts
of capital in response to changing market conditions. Certain competitors may also have the ability to develop product or service
innovations that could put us at a disadvantage. In addition, through consolidation, some of our competitors have achieved
substantially more market penetration in certain of the markets in which we operate. If we are unable to compete successfully
against other manufacturers of material handling equipment, we could lose customers and our revenues may decline. There can
also be no assurance that customers will continue to regard our products favorably, that we will be able to develop new products
that appeal to customers, that we will be able to improve or maintain our profit margins on sales to our customers or that we will
be able to continue to compete successfully in our core markets.
Our operations outside the U.S. pose certain risks that may adversely impact sales and earnings.
We have operations and assets located outside of the United States, primarily in China, Mexico, Germany, the United Kingdom,
France, and Hungary. In addition, we import a portion of our hoist product line from Asia and sell our products to distributors
located in approximately 50 countries. In our fiscal year ended March 31, 2020, approximately 45% of our net sales were derived
from non-U.S. markets. These non-U.S. operations are subject to a number of special risks, in addition to the risks of our U.S.
business, differing protections of intellectual property, trade barriers, labor unrest, exchange controls, regional economic
uncertainty, differing (and possibly more stringent) labor regulation, risk of governmental expropriation, U.S. and foreign customs
and tariffs, current and changing regulatory environments, difficulty in obtaining distribution support, difficulty in staffing and
managing widespread operations, differences in the availability, and terms of financing, political instability and risks of increases
in taxes. Also, in some foreign jurisdictions we may be subject to laws limiting the right and ability of entities organized or operating
therein to pay dividends or remit earnings to affiliated companies unless specified conditions are met. These factors may adversely
affect our future profits.
Part of our strategy is to expand our worldwide market share and reduce costs by strengthening our international distribution
capabilities and sourcing components in lower cost countries, such as China, Mexico, and Hungary. Implementation of this strategy
may increase the impact of the risks described above, and we cannot assure you that such risks will not have an adverse effect on
our business, results of operations or financial condition.
Other risks of doing business in international markets include the increased risks and burdens of complying with different legal
and regulatory standards, difficulties in managing and staffing foreign operations, recruiting and retaining talented direct sales
personnel, limitations on the repatriation of funds and fluctuations of foreign exchange rates, varying levels of internet technology
adoption and infrastructure and our ability to enforce contracts and our intellectual property rights in foreign jurisdictions.
Additionally, there are risks associated with fundamental changes to international markets, such as those that may occur as a result
of the United Kingdom's withdrawal from the European Union ("Brexit"). Brexit may adversely affect global economic and market
conditions and could contribute to volatility in the foreign exchange markets, which we may be unable to effectively manage.
In addition, our success in international expansion could be limited by barriers to international expansion such as adverse tax
consequences and export controls. If we cannot manage these risks effectively, the costs of doing business in some international
markets may be prohibitive or our costs may increase disproportionately to our revenue.
Our strategy depends on successful integration of acquisitions.
Acquisitions are a key part of our growth strategy. Our historical growth has depended, and our future growth is likely to depend
on our ability to successfully implement our acquisition strategy, and the successful integration of acquired businesses into our
existing business. We intend to continue to seek additional acquisition opportunities in accordance with our acquisition strategy,
both to expand into new markets and to enhance our position in existing markets throughout the world. If we are unable to
successfully integrate acquired businesses into our existing business or expand into new markets, our sales and earnings growth
could be reduced.
12
Our products involve risks of personal injury and property damage, which exposes us to potential liability.
Our business exposes us to possible claims for personal injury or death and property damage resulting from the products that we
sell. We maintain insurance through a combination of self-insurance retentions and excess insurance coverage. We monitor claims
and potential claims of which we become aware and establish accrued liability reserves for the self-insurance amounts based on
our liability estimates for such claims. We cannot give any assurance that existing or future claims will not exceed our estimates
for self-insurance or the amount of our excess insurance coverage. In addition, we cannot give any assurance that insurance will
continue to be available to us on economically reasonable terms or that our insurers would not require us to increase our self-
insurance amounts. Claims brought against us that are not covered by insurance or that are in excess of insurance coverage could
have a material adverse effect on our results, financial condition, or liquidity.
In addition, like many industrial manufacturers, we are also involved in asbestos-related litigation. In continually evaluating costs
relating to our estimated asbestos-related liability, we review, among other things, the incidence of past and recent claims, the
historical case dismissal rate, the mix of the claimed illnesses and occupations of the plaintiffs, our recent and historical resolution
of the cases, the number of cases pending against us, the status and results of broad-based settlement discussions, and the number
of years such activity might continue. Based on this review, we estimate our share of liability to defend and resolve probable
asbestos related personal injury claims. This estimate is highly uncertain due to the limitations of the available data and the difficulty
of forecasting with any certainty the numerous variables that can affect the range of the liability. We continue to study the variables
in light of additional information in order to identify trends that may become evident and to assess their impact on the range of
liability that is probable and estimable. We believe that the potential additional costs for claims will not have a material effect on
the financial condition of the Company or its liquidity, although the effect of any future liabilities recorded could be material to
earnings in a future period. See Note 16 to our March 31, 2020 consolidated financial statements included in Item 8 of this Form
10-K.
As indicated above, our self-insurance coverage is provided through our captive insurance subsidiary. The reserves of our captive
insurance subsidiary are subject to periodic adjustments based upon actuarial evaluations, which adjustments impact our overall
results of operations. These periodic adjustments can be favorable or unfavorable.
We are subject to currency fluctuations from our sales outside the U.S.
Our products are sold in many countries around the world. Thus, a portion of our revenues (approximately $366,539,000 in our
fiscal year ended March 31, 2020) are generated in foreign currencies, including principally the Euro, the British Pound, the
Canadian Dollar, the South African Rand, the Brazilian Real, the Mexican Peso, and the Chinese Yuan, and while much of the
costs incurred to generate those revenues are incurred in the same currency, a portion is incurred in other currencies. Since our
financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other
currencies have had, and will continue to have, a currency translation impact on our earnings. Currency fluctuations may impact
our financial performance in the future.
Our future operating results may be affected by price fluctuations and trade tariffs on steel, aluminum, and other raw materials
purchased to manufacture our products. We may not be able to pass on increases in raw material costs to our customers.
The primary raw materials used in our chain, forging and crane building operations are steel, aluminum, and other raw materials
such as motors, electrical and electronic components, castings and machined parts and components. These industries are highly
cyclical and at times pricing and availability can be volatile due to a number of factors beyond our control, including general
economic conditions, labor costs, competition, import duties, tariffs, and currency exchange rates. This volatility can significantly
affect our raw material costs. In an environment of increasing raw material prices and trade tariffs, competitive conditions will
determine how much of the price increases we can pass on to our customers. In the future, to the extent we are unable to pass on
any steel, aluminum, or other raw material price increases to our customers, our profitability could be adversely affected.
We rely in large part on independent distributors for sales of our products.
For the most part, we depend on independent distributors to sell our products and provide service and aftermarket support to our
end-user customers. Distributors play a significant role in determining which of our products are stocked at their locations, and
hence are most readily accessible to aftermarket buyers, and the price at which these products are sold. Almost all of the distributors
with whom we transact business offer competitive products and services to our end-user customers. For the most part, we do not
have written agreements with our distributors. The loss of a substantial number of these distributors or an increase in the distributors'
sales of our competitors' products to our ultimate customers could materially reduce our sales and profits.
13
We are subject to various environmental laws which may require us to expend significant capital and incur substantial cost.
Our operations and facilities are subject to various federal, state, local, and foreign requirements relating to the protection of the
environment, including those governing the discharges of pollutants in the air and water, the generation, management and disposal
of hazardous substances and wastes, and the cleanup of contaminated sites. We have made, and will continue to make, expenditures
to comply with such requirements. Violations of, or liabilities under, environmental laws and regulations, or changes in such laws
and regulations (such as the imposition of more stringent standards for discharges into the environment), could result in substantial
costs to us, including operating costs and capital expenditures, fines and civil and criminal sanctions, third party claims for property
damage or personal injury, clean-up costs, or costs relating to the temporary or permanent discontinuance of operations. Certain
of our facilities have been in operation for many years, and we have remediated contamination at some of our facilities. Over time,
we and other predecessor operators of such facilities have generated, used, handled, and disposed of hazardous and other regulated
wastes. Additional environmental liabilities could exist, including clean-up obligations at these locations or other sites at which
materials from our operations were disposed, which could result in substantial future expenditures that cannot be currently quantified
and which could reduce our profits or have an adverse effect on our financial condition, operations, or liquidity.
We may face claims of infringement on the intellectual property of others, or others may infringe upon our intellectual property.
Our future success depends in part on our ability to prevent others from infringing on our proprietary rights, as well as our ability
to operate without infringing upon the proprietary rights of others. We may be required at times to take legal action to protect our
proprietary rights and, despite our best efforts, we may be sued for infringing on the patent rights of others. Patent litigation is
costly and, even if we prevail, the cost of such litigation could adversely affect our financial condition. In addition, we could be
adversely affected financially should we be judged to have infringed upon the intellectual property of others.
We rely on subcontractors or suppliers to perform their contractual obligations.
Some of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services we must
provide to our customers. There is a risk that we may have disputes with our subcontractors, including disputes regarding the
quality and timeliness of work performed by our subcontractor or customer concerns about the subcontractor. Failure by our
subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed upon services may
materially and adversely impact our ability to perform our obligations as the prime contractor. A delay in our ability to obtain
components and equipment parts from our suppliers may affect our ability to meet our customers' needs and may have an adverse
effect upon our profitability.
We are subject to debt covenant restrictions.
Our revolving credit facility and Term Loan contain a financial leverage covenant and other restrictive covenants. A significant
decline in our operating income or cash generating ability could cause us to violate our leverage covenant in our bank credit facility.
Other material adverse changes in our business could also cause us to be in default of our debt covenants. This could result in our
being unable to borrow under our bank credit facility or being obliged to refinance and renegotiate the terms of our indebtedness.
Our business operations may be adversely affected by information systems interruptions or intrusion.
We depend on various information technologies throughout our company to administer, store, and support multiple business
activities. If these systems are damaged, cease to function properly, or are subject to cyber-security attacks, such as those involving
unauthorized access, malicious software and/or other intrusions, we could experience production downtimes, operational delays,
other detrimental impacts on our operations or ability to provide products and services to our customers, the compromising of
confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper
use of our systems or networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our
reputation. While we attempt to mitigate these risks by employing a number of measures, including employee training, technical
security controls, and maintenance of backup and protective systems, our systems, networks, products, and services remain
potentially vulnerable to known or unknown threats, any of which could have a material adverse effect on our business, financial
condition or results of operations.
We depend on our senior management team and the loss of any member could adversely affect our operations.
Our success is dependent on the management and leadership skills of our senior management team. The loss of any of these
individuals or an inability to attract, retain, and maintain additional personnel could prevent us from implementing our business
strategy. We cannot assure you that we will be able to retain our existing senior management personnel or to attract additional
qualified personnel when needed.
14
Mark D. Morelli, our former President and CEO, resigned effective January 10, 2020. Our employment agreement with Mr. Morelli
was terminated on January 10, 2020 in connection with his resignation. The Board of Directors began an external search for his
replacement. Subsequent to his resignation, Richard H. Fleming, Chairman of the Board, was named Interim CEO until a
replacement is hired. On May 14, 2020, the Company announced that David J. Wilson has been named President and CEO effective
June 1, 2020. The Company has entered into an Employment Agreement and Change in Control agreement with Mr. Wilson which
was filed on Form 8-K on May 14, 2020. During the CEO transition, the Company has continued to execute its Blueprint for
Growth Strategy and expects to do so going forward.
Item 1B.
Unresolved Staff Comments
None.
15
Item 2.
Properties
We maintain our corporate headquarters in Getzville, New York (an owned property) and, as of March 31, 2020, conducted our
principal manufacturing at the following facilities:
Location
Kunzelsau, Germany
Wadesboro, NC
Lexington, TN
Charlotte, NC
Menomonee Falls, WI
Tennessee forging operation:
Chattanooga, TN
Chattanooga, TN
Wuppertal, Germany
Kissing, Germany
Damascus, VA
Hangzhou, China
Brighton, MI
Chester, England
Santiago Tianguistenco, Mexico
Szekesfehervar, Hungary
Romeny-sur-Marne, France
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Products/Operations
Hoists
Hoists
Chain
Actuators and Rotary Unions
Power control systems
Forged attachments
Forged attachments
Hoists
Hoists, winches, and actuators
Hoists
Hoists
Overhead light rail workstations
Plate clamps
Hoists
Textiles and textile strappings
Rotary unions
Square
Footage
Owned or
Leased
345,000
180,000
164,000
146,000
144,000
81,000
59,000
124,000
107,000
97,000
82,000
71,000
56,000
54,000
24,000
22,000
Leased
Owned
Owned
Leased
Leased
Owned
Owned
Leased
Leased
Owned
Owned
Leased
Owned
Owned
Leased
Owned
In addition, we have a total of 49 sales offices, distribution centers, and warehouses. We believe that our properties have been
adequately maintained, are in generally good condition and are suitable for our business as presently conducted. We also believe
our existing facilities provide sufficient production capacity for our present needs and for our anticipated needs in the foreseeable
future. Upon the expiration of our current leases, we believe that either we will be able to secure renewal terms or enter into leases
for alternative locations at market terms.
16
Item 3.
Legal Proceedings
From time to time, we are named a defendant in legal actions arising out of the normal course of business. We are not a party to
any pending legal proceeding other than ordinary, routine litigation incidental to our business. We do not believe that any of our
pending litigation will have a material impact on our business. We maintain comprehensive general product liability insurance
against risks arising out of the use of our products sold to customers through our wholly owned New York State captive insurance
subsidiary of which we are the sole policy holder. The per occurrence limits on the self-insurance for general and product liability
coverage were $2,000,000 from inception through fiscal 2003 and $3,000,000 for fiscal 2004 and thereafter. In addition to the
per occurrence limits, our coverage is also subject to an annual aggregate limit, applicable to losses only. These limits range from
$2,000,000 to $6,000,000 for each policy year from inception through fiscal 2020. We obtain additional insurance coverage from
independent insurers to cover potential losses in excess of these limits.
Like many industrial manufacturers, we are also involved in asbestos-related litigation. In continually evaluating costs relating to
our estimated asbestos-related liability, we review, among other things, the incidence of past and recent claims, the historical case
dismissal rate, the mix of the claimed illnesses and occupations of the plaintiffs, our recent and historical resolution of the cases,
the number of cases pending against us, the status and results of broad-based settlement discussions, and the number of years such
activity might continue. Because this liability is likely to extend over many years, management believes that the potential additional
costs for claims will not have a material effect on the financial condition of the Company or its liquidity, although the effect of
any future liabilities recorded could be material to earnings in a future period.
The Company believes that a share of its previously incurred asbestos-related expenses and future asbestos-related expenses are
covered by pre-existing insurance policies. The Company has been engaged in a legal action against the insurance carriers for
those policies to recover past expenses and future costs incurred. In March of fiscal 2020, the Company came to a tentative
agreement with the insurance carriers to settle its case against them for recovery of past and cost-sharing for future asbestos-related
legal defense costs. The settlement is subject to mutual agreement of the terms and conditions in a coverage in place agreement.
The terms of the tentative settlement require the carriers to pay gross defense costs prior to retro-premiums of 65% for future
asbestos-related defense costs subject to an annual cap of $1,650,000 for claims covered by the tentative settlement. In addition,
a payout of approximately $2,650,000 is expected to be received for past defense costs which will be reduced by contingent legal
costs. Further, it is expected that the insurance carriers will accept coverage for indemnity on all covered cases. Estimates of the
future cost sharing have been included in the loss reserve calculation as of March 31, 2020. The settlement is expected to be
finalized in fiscal 2021. Prior to the settlement agreement, during fiscal 2020 and fiscal 2019, the Company received settlement
payments of $381,000 and $484,000, respectively, net of legal fees related to the insurance recovery, from its insurance carriers
as partial reimbursement for asbestos-related expenses. These partial payments have been recorded as gains in cost of products
sold.
See Note 16 to our March 31, 2020 consolidated financial statements for more information on our matters involving litigation.
Item 4.
Mine Safety Disclosures.
Not Applicable.
17
PART II
Item 5.
Market for the Company’s Common Stock and Related Security Holder Matters
Our common stock is traded on the Nasdaq Global Select Market under the symbol ‘‘CMCO.” As of April 30, 2020, there were
354 holders of record of our common stock.
During fiscal 2020, the Company declared quarterly cash dividends totaling $5,690,000. On March 24, 2020, the Company's Board
of Directors declared regular quarterly dividends of $0.06 per common share. The dividend was paid on May 14, 2020 to
shareholders of record on May 4, 2020 and totaled approximately $1,430,000.
Our current credit agreement allows the declaration of dividends, but limits our ability to pay dividends.
PERFORMANCE GRAPH
The Performance Graph shown below compares the cumulative total shareholder return on our common stock based on its market
price, with the total return of the S&P SmallCap 600 Index, and the Dow Jones U.S. Diversified Industrials. The comparison of
total return assumes that a fixed investment of $100 was invested on March 31, 2015 in our common stock and in each of the
foregoing indices and further assumes the reinvestment of dividends. The stock price performance shown on the graph is not
necessarily indicative of future price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Columbus McKinnon Corporation, the S&P Smallcap 600 Index
and the Dow Jones US Diversified Industrials Index
$200
$150
$100
$50
$0
3/15
3/16
3/17
3/18
3/19
3/20
Columbus McKinnon Corporation
S&P Smallcap 600 Index
Dow Jones US Diversified Industrials Index
*$100 invested on 3/31/15 in stock or index, including reinvestment of dividends.
Fiscal year ending March 31.
18
Item 6.
Selected Financial Data
The consolidated balance sheets as of March 31, 2020 and 2019, and the related consolidated statements of operations, cash flows,
and shareholders’ equity for each of the three years ended March 31, 2020 and notes thereto appear elsewhere in this annual report.
The selected consolidated financial data presented below should be read in conjunction with, and are qualified in their entirety by
“Management’s Discussion and Analysis of Results of Operations and Financial Condition,” our consolidated financial statements
and the notes thereto and other financial information included elsewhere in this annual report.
Statements of Operations Data:
Net sales
Cost of products sold (1)
Gross profit
Selling expenses
General and administrative expenses (1) (2)
Research and development expenses (2)
Impairment of intangible asset
Net loss on sales of businesses, including
impairment
Amortization of intangibles
Income (loss) from operations
Interest and debt expense
Cost of debt refinancing
Other (income) and expense, net (1)
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Weighted average shares outstanding – basic
Weighted average shares outstanding –
assuming dilution
Balance Sheet Data (at end of period):
Total assets (5)
Total debt (3)
Total debt, net of cash and cash equivalents
Total shareholders’ equity
Other Data:
Net cash provided by operating activities
Net cash provided by (used in) investing
activities
Net cash provided by (used in) financing
activities
Capital expenditures
2020
(In million's, except per share data)
2017 (4)
2018
2019
2016
$
$
$
$
$
$
$
$
809.2
526.0
283.2
91.1
77.9
11.3
—
0.2
12.9
89.8
14.2
—
(1.6)
77.2
17.5
59.7
2.53
2.50
23.6
23.9
$
$
$
$
876.3
571.3
305.0
97.9
83.6
13.5
—
25.7
14.9
69.4
17.1
—
(0.6)
52.9
10.3
42.6
1.83
1.80
23.3
23.7
$
$
$
$
839.4
554.4
285.0
102.0
85.6
13.6
—
—
15.6
68.2
19.7
—
(1.2)
49.7
27.6
22.1
0.97
0.95
22.8
23.3
637.1
444.2
192.9
77.3
72.1
10.5
1.1
—
8.1
23.8
11.0
1.3
(1.5)
13.0
4.0
9.0
0.44
0.43
20.6
20.9
$ 1,093.3
251.3
136.9
463.6
$ 1,061.6
300.3
229.2
431.2
$ 1,142.4
363.3
300.3
408.2
$ 1,113.8
421.3
343.7
341.4
$
$
$
$
$
597.1
411.5
185.6
72.9
62.9
7.4
—
—
5.0
37.4
7.9
—
(2.1)
31.6
12.0
19.6
0.98
0.96
20.1
20.3
772.9
267.6
216.0
286.3
79.5
2.5
(67.8)
(12.3)
69.7
60.5
52.6
(32.6)
(224.0)
(203.2)
(59.5)
(14.5)
190.7
(14.4)
137.0
(22.3)
106.8
(10.0)
(51.6)
(9.4)
19
(1) The Company adopted ASU 2017-07 in the first quarter of fiscal 2019. The service cost component of net periodic benefit
cost above is recorded in Cost of products sold, Selling expense, and General and administrative expenses while the
remaining components are recorded to Other (income) expense, net. The prior year amounts have been reclassified to
provide comparable presentation in line with the guidance in ASU 2017-07 based on amounts previously disclosed for the
various components of net periodic pension cost (benefit).
(2) Beginning in fiscal 2018, the Company reclassified research and development expenses previously recorded in general and
administrative expense into a separate line item on the consolidated statements of operations. All prior periods presented
above have been revised to reflect this presentation. Please refer to Note 2 of the Company's financial statements for
additional information regarding research and development expenses.
(3) Total debt includes all debt, including the current portion, notes payable, term loan, and subordinated debt.
(4) The Company acquired STAHL in fiscal 2017 which was deemed to be a significant acquisition.
(5) Beginning in fiscal 2020, the Company recorded a $38,125,000 right-of-use lease asset in adopting ASU No. 2016-02,
"Leases (Topic 842)."
20
Item 7.
Management’s Discussion and Analysis of Results of Operations and Financial Condition
This section should be read in conjunction with our consolidated financial statements included elsewhere in this annual report.
EXECUTIVE OVERVIEW
The Company 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. We are focused on commercial and industrial
applications that require the safety and quality provided by our superior design and engineering know-how.
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 145-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 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 45% derived from customers outside the U.S. for the year ended
March 31, 2020. Our expansion within the European market with the acquisition of STAHL further expands our geographic
diversity. We believe this will help balance the impact of changes that will occur in local economies, as well as benefit the Company
from growth in emerging markets. We monitor both U.S. and Eurozone Industrial Capacity Utilization statistics 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 leveraging our recent acquisitions and 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, utility, energy, automotive, heavy OEM, entertainment, and
construction and infrastructure.
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 E-PAS™. 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.
We continuously monitor market prices of steel. We purchase approximately $25,000,000 to $30,000,000 of steel annually in a
variety of forms including rod, wire, bar, structural, and other forms of steel. Generally, as we experience fluctuations in our costs,
we reflect them as price increases to our customers with the goal of being margin neutral. However, as a result of the recent trade
tariff actions with China, the Company determined its fiscal 2020 exposure for tariffs to be approximately $2,500,000 which
resulted in increased cost of products sold. The Company is monitoring the impact of tariffs and is actively working to mitigate
this impact through material productivity actions and pricing strategies.
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.
Like many global companies, we are being affected by COVID-19. While the severity and duration of this global pandemic is
not known at this time, we are seeking to take all appropriate measures to protect the cash flow and liquidity of the Company.
This includes reducing our cost base, reducing working capital needs, and reducing capital expenditures. We have a flexible capital
structure composed of a Credit Agreement that includes a Term Loan that requires quarterly principal payments of $1.1 million
and a $100 million Revolver. Subsequent to March 31, 2020, the Company drew $25 million from the Revolver for liquidity and
working capital purposes demonstrating it has a strong, supportive bank group.
21
RESULTS OF OPERATIONS
Fiscal 2020 Compared to 2019
Fiscal 2020 sales were $809,162,000, a decrease of 7.7%, or $67,120,000 compared with fiscal 2019 sales of $876,282,000. Sales
for the year were negatively impacted by $34,195,000 in sales in the previous year from sold businesses and $32,951,000 in
decreased sales volume, offset by $13,169,000 in price increases. Unfavorable foreign currency translation decreased sales by
$13,143,000.
Our gross profit was $283,186,000 and $304,997,000 or 35.0% and 34.8% of net sales in fiscal 2020 and 2019, respectively. The
fiscal 2020 decrease in gross profit of $21,811,000 or 7.2% is the result of $14,069,000 in decreased volume, $7,053,000 in gross
profit from sold businesses, $3,461,000 in decreased productivity and unfavorable manufacturing costs, $1,327,000 in costs
incurred to consolidate the Salem and Lisbon Ohio facilities, $778,000 in increased tariffs, $751,000 in increased severance costs,
and $622,000 in increased product liability costs. These decreases were offset by $10,338,000 of price increases net of material
inflation and $382,000 received from insurance settlement. The translation of foreign currencies had a $4,470,000 unfavorable
impact on gross profit for the year ended March 31, 2020.
Selling expenses were $91,054,000 and $97,925,000, or 11.3% and 11.2% of net sales in fiscal years 2020 and 2019. Selling
expenses were lower as a result of $1,468,000 incurred in fiscal 2020 related to sold businesses. In addition, we had $804,000 in
lower advertising expenses,$550,000 in reduced U.S. warehouse rent expense, $331,000 lower incentive compensation, and
$453,000 in costs incurred to consolidate the Salem and Lisbon Ohio facilities classified as selling expense. These decreases were
offset by $299,000 in current year severance costs. Additionally, foreign currency translation had a $1,765,000 favorable impact
on selling expenses. The remainder of the decrease is due to lower sales volume.
General and administrative expenses were $77,880,000 and $83,567,000 or 9.6% and 9.5% of net sales in fiscal 2020 and 2019,
respectively. The fiscal 2020 decrease in general and administrative expenses was primarily due to $7,540,000 of lower incentive
compensation and stock compensation expense including $1,981,000 in stock compensation expense that was reversed in the third
quarter of fiscal 2020 for shares that were forfeited upon our Chief Executive Officer's resignation, $1,564,000 from sold businesses,
and a $697,000 net reduction in legal costs related to an insurance recovery legal action. The decrease in general and administrative
expense was partially offset by $1,528,000 in increased bed debt expenses, $1,455,000 in costs incurred to close a plant in the
Asia Pacific region and reorganize the business, $635,000 in tax professional services fees primarily related to a legal entity
restructuring, $624,000 in increased medical and benefit expenses, $436,000 of occupancy costs for our center of excellence in
North Carolina, and $352,000 in increased environmental costs. Foreign currency translation had a $1,036,000 favorable impact
on general and administrative expenses.
Research and development expenses were $11,310,000 and $13,491,000 in fiscal 2020 and 2019, respectively. As a percentage
of consolidated net sales, research and development expenses were 1.4% and 1.5% in fiscal 2020 and 2019. The reduction in
research and development expenses is largely due to lower professional services and other expenses. $277,000 of the decrease in
research and development expenses is from sold businesses.
A Net loss on sales of businesses, including impairment in the amount of $176,000 was recorded as a result of a final working
capital adjustment in the year ended March 31, 2020 from businesses that were sold in fiscal 2019.
Amortization of intangibles remained relatively consistent at $12,942,000 and $14,900,000 in fiscal 2020 and 2019, respectively.
The decrease is primarily related to foreign currency translation.
Interest and debt expense was $14,234,000 and $17,144,000 in fiscal 2020 and 2019, respectively, and primarily related to a
decrease in interest and debt expense on the Company's Term Loan due to lower average borrowings outstanding during the fiscal
2020 period.
Investment income of $891,000 and $727,000, in fiscal 2020 and 2019, 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 7.
Foreign currency exchange resulted in a gain of $1,514,000 and loss of $843,000 in fiscal 2020 and 2019, respectively, as a result
of foreign currency volatility related to foreign currency denominated sales and purchases and intercompany debt.
Other expense was $839,000 in fiscal 2020 and other income was $716,000 in fiscal 2019. This includes components of pension
expense (all except service costs, described in Note 13) and various non-operating income and expense related activities.
22
Income tax expense as a percentage of income from continuing operations before income tax expense was 22.7% and 19.5% in
fiscal 2020 and 2019, 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.
Fiscal 2019 Compared to 2018
Fiscal 2019 sales were $876,282,000, an increase of 4.4%, or $36,863,000 compared with fiscal 2018 sales of $839,419,000. Sales
for the year were positively impacted by $39,761,000 due to increased sales volume and $10,628,000 by price increases, offset
by $5,957,000 in prior year sales from sold businesses. Unfavorable foreign currency translation decreased sales by $7,569,000.
Our gross profit was $304,997,000 and $285,061,000 or 34.8% and 34.0% of net sales in fiscal 2019 and 2018, respectively. The
fiscal 2019 increase in gross profit of $19,936,000 or 7.0% is the result of $12,986,000 in increased volume, $8,573,000 in increased
productivity and favorable manufacturing costs, $6,476,000 of price increases net of material inflation, and $1,078,000 in decreased
product liability costs. These increases were offset by a prior year insurance settlement for $2,362,000 which did not reoccur in
the current year, $1,717,000 in increased tariffs, $1,473,000 in costs incurred to consolidate the Salem, Ohio facility, and $1,223,000
in gross profit from sold businesses. The translation of foreign currencies had a $2,423,000 unfavorable impact on gross profit for
the year ended March 31, 2019.
Selling expenses were $97,925,000 and $101,956,000 or 11.2% and 12.1% of net sales in fiscal years 2019 and 2018. Selling
expenses from sold businesses decreased selling expenses by $346,000 in fiscal 2019. Additionally, foreign currency translation
had a $1,016,000 favorable impact on selling expenses. The remaining decrease is largely due to lower warehouse and personnel
costs.
General and administrative expenses were $83,567,000 and $85,605,000 or 9.5% and 10.2% of net sales in fiscal 2019 and 2018,
respectively. The fiscal 2019 decrease was due to a $7,031,000 net reduction of STAHL integration costs that are classified as
general and administrative expense, a $1,666,000 net decrease in legal costs for an insurance recovery legal action, a $300,000
net reduction in legal costs for a former subsidiary of Magnetek involved in a litigation matter, and $619,000 in debt repricing
fees incurred in the prior year. These decreases were offset by higher incentive compensation and stock compensation expense of
$1,347,000, $2,317,000 in costs incurred to execute the Company's Blueprint for Growth Strategy, and increased environmental
remediation accruals of $585,000. The remaining increases in general and administrative expenses relates to investments in various
initiatives and general inflation. Foreign currency translation had a $495,000 favorable impact on general and administrative
expenses.
Research and development expenses were $13,491,000 and $13,617,000 in fiscal 2019 and 2018, respectively. As a percentage
of consolidated net sales, research and development expenses were 1.5% and 1.6% in fiscal 2019 and 2018. The decrease is
attributable to prior year expenses incurred by the sold business in the amount of $119,000.
A Net loss on sales of businesses in the amount of $25,672,000 was recorded in the year ended March 31, 2019. Included in the
Net loss on sales of businesses is a loss on Crane Equipment and Service Inc. and Stahlhammer Bommern GmbH in the amount
of $26,731,000, offset by a gain on the sale of the Tire Shredder business in the amount of $1,059,000 during the twelve months
ended March 31, 2019. Included in the Net loss on sales of businesses were impairment charges of $27,753,000 recorded in fiscal
2019.
Amortization of intangibles remained relatively consistent at $14,900,000 and $15,552,000 in fiscal 2019 and 2018, respectively.
The decrease is primarily related to foreign currency translation.
Interest and debt expense was $17,144,000 and $19,733,000 in fiscal 2019 and 2018, respectively, and primarily related to a
decrease in interest and debt expense on the Company's Term Loan due to a lower average borrowings outstanding during the
fiscal 2019 period.
Investment income of $727,000 and $157,000, in fiscal 2019 and 2018, 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 7. In accordance with ASU 2016-01, investment income for fiscal 2019 included net unrealized gains of marketable
securities of $183,000.
Foreign currency exchange loss was $843,000 and $1,539,000 in fiscal 2019 and 2018, respectively, as a result of foreign currency
volatility related to foreign currency denominated sales and purchases and intercompany debt.
23
Other income, net, was $716,000 and $2,469,000 in fiscal 2019 and 2018, respectively. This includes components of pension
expense (all except service costs, described in Note 13) and various non-operating income and expense related activities.
Income tax expense as a percentage of income from continuing operations before income tax expense was 19.5% and 55.6% in
fiscal 2019 and 2018, respectively. These percentages vary from the U.S. statutory rate primarily due to varying effective tax rates
at the Company's foreign subsidiaries, and the jurisdictional mix of taxable income for these subsidiaries. The effective tax rate
for fiscal 2019 was affected favorably by 6.2 percentage points by certain favorable permanent adjustments, including generation
and utilization of certain foreign tan credits, and by 2.8 percentage points by the reduction of the Company's one-time transition
tax on earnings of certain foreign subsidiaries to zero. These favorable effects were offset unfavorably by 7.6 percentage points
related to certain non-deductible losses on the sale of businesses.
24
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and restricted cash totaled $114,700,000, $71,343,000, and $63,565,000 at March 31, 2020, 2019, and
2018, respectively.
Cash flow from operating activities
Net cash provided by operating activities was $106,795,000, $79,499,000, and $69,661,000 in fiscal 2020, 2019, and 2018,
respectively. In fiscal 2020, net income of $59,672,000 and non-cash adjustments to net income of $51,188,000 contributed the
most to cash provided by operating activities as well as a decrease in inventory of $15,752,000, an increase in trade accounts
payable of $8,110,000, and a decrease in trade accounts receivable of $2,899,000. The increase in cash was partially offset by a
decrease in accrued expenses and non-current liabilities of $27,693,000. The decrease in inventory is due to the Company's
initiatives to increase cash flow and improve inventory turns. The decrease in accrued expenses and non-current liabilities primarily
consists of the fiscal 2019 annual incentive plan payments offset by fiscal 2020 incentive plan accruals, $10,967,000 in pension
plan contributions, and $8,593,000 in cash paid for amounts included in the measurement of operating lease liabilities.
In fiscal 2019, net income of $42,577,000 and non-cash adjustments to net income of $66,436,000 contributed the most to cash
provided by operating activities as well as an increase in trade accounts payable of $3,881,000. The increase in cash was offset
by an increase in inventory of $15,411,000, an increase in trade accounts receivable of $11,328,000, and a decrease in accrued
expenses and non-current liabilities of $6,759,000. The increase in inventory is due to the Company's initiatives to improve
inventory availability. The net decrease in non-current liabilities is largely due to pension plan contributions of $11,018,000.
Cash flow from investing activities
Net cash (used) provided by investing activities was $(9,962,000), $2,486,000, and $(32,592,000) in fiscal 2020, 2019, and 2018,
respectively. In fiscal 2020, the most significant use of cash in investing activities was $9,432,000 in capital expenditures followed
by $367,000 in net cash purchases of marketable equity securities.
In fiscal 2019, the most significant source of cash provided by investing activities was $14,230,000 in cash received from the Sold
Businesses, offset by $12,288,000 in capital expenditures. The Company also received $662,000 in net cash proceeds from the
sale of marketable equity securities.
Cash flow from by financing activities
Net cash used by financing activities was $51,551,000, $67,778,000, and $59,502,000 in fiscal 2020, 2019, and 2018, respectively.
In fiscal 2020, the most significant uses of cash were $51,113,000 in repayments on our Term Loan and dividends paid in the
amount $5,670,000, offset by $5,232,000 in net inflows from stock related transactions, which includes proceeds of $6,000,000
from stock options exercised.
In fiscal 2019, the most significant uses of cash were $65,088,000 in repayments on our Term Loan and dividends paid in the
amount of $4,652,000, offset by $1,962,000 in net inflows from stock related transactions, which included proceeds of $4,152,000
from stock options exercised.
We believe that our cash on hand, cash flows, and borrowing capacity under our New Revolving Credit Facility will be sufficient
to fund our ongoing operations and budgeted 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 restriction exists in
accessing cash held by our non-U.S. subsidiaries. As of March 31, 2020, $69,360,000 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 1st Lien Term Loan ("Term Loan"). The Term Loan has a seven-year term maturing in 2024
and the Revolver has a five-year term maturing in 2022. At March 31, 2020 the Company has not drawn from the Revolver.
The key terms of the agreement are as follows:
• Term Loan: An aggregate $445,000,000 1st Lien Term Loan which requires quarterly principal amortization of 0.25%
with the remaining principal due at maturity date. In addition, if the Company has Excess Cash Flow ("ECF") as defined
in the Credit Agreement, the ECF Percentage of the Excess Cash Flow for such fiscal year minus optional prepayment
25
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. The
ECF Percentage is defined as 50% stepping down to 25% or 0% based on the Secured Leverage Ratio as of the last day
of the fiscal year.
• 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.
•
•
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 based upon the Company's Total Leverage Ratio (as defined in the Credit Agreement).
Prepayments: Provisions permitting a Borrower to voluntarily prepay either the Term Loan or Revolver in whole or in
part at any time, and provisions requiring certain mandatory prepayments of the Term Loan 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% of the principal amount
of the First Lien Term Loans is required if the prepayment is associated with a Repricing Transaction and it were to occur
within the first twelve months.
• Covenants: Provisions containing covenants required of the Corporation 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 Revolving Facility is outstanding (excluding any Letters of Credit) (the “Covenant Trigger”),
and permits the Total Leverage Ratio for the Reference Period ended on such date to not exceed (i) 4.50:1.00 as of any
date of determination prior to December 31, 2017, (ii) 4.00:1.00 as of any date of determination on December 31, 2017
and thereafter but prior to December 31, 2018, (iii) 3.50:1.00 as of any date of determination on December 31, 2018 and
thereafter but prior to December 31, 2019 and (iv) 3.00:1.00 as of any date of determination on December 31, 2019 and
thereafter. As there is no amount drawn on the Revolver as of March 31, 2020 the requirement to comply with the covenant
is not triggered. Had we been required to determine the covenant ratio we would have been in compliance with the
covenant provisions as of March 31, 2020 and 2019.
The Facility is secured by all U.S. inventory, receivables, equipment, real property, certain subsidiary stock (limited to 65% of
non-U.S. subsidiaries) and intellectual property. The Credit Agreement allows, but limits our ability to pay dividends.
On February 26, 2018, the Company amended the Credit Agreement (known as the "Amended Credit Agreement"). The Amended
Credit Agreement has the same terms mentioned above except for a reduction in interest rates. The applicable rate for the repriced
term loan was reduced from 3.00% to 2.50%. The Company accounted for the Amended Credit Agreement as a debt modification,
therefore, debt repricing fees incurred in fiscal 2018 were expensed as General and Administrative expenses and the deferred
financing fees incurred as part of the Credit Agreement (discussed below) remain unchanged.
The outstanding balance of the Term Loan was $259,350,000 and $310,463,000 as of March 31, 2020 and 2019, respectively. The
Company made $51,113,000 of principal payments on the Term Loan during fiscal 2020 and $65,000,000 of principal payments
on the Term Loan during fiscal 2019 which is more than the minimum required principal payment the Company is obligated to
make. In response to COVID-19 the Company is seeking to take all appropriate measures to protect the cash flow and liquidity
of the Company and plans to make minimum required principal payments of $4,450,000 over the next 12 months. As such, only
the required principal amount has been recorded within the current portion of long-term debt on the Company's Consolidated
Balance Sheet with the remaining balance recorded as long-term debt.
There was $0 outstanding on the Revolving Credit Facility and $16,752,000 outstanding letters of credit as of March 31, 2020. The
outstanding letters of credit at March 31, 2020 consisted of $898,000 in commercial letters of credit and $15,854,000 of standby
letters of credit. Subsequent to March 31, 2020, the Company drew $25,000,000 from the Revolver for liquidity and working
capital purposes demonstrating it has a supportive bank group.
The gross balance of deferred financing costs on the term loan was $14,690,000 as of March 31, 2020 and 2019. The accumulated
amortization balances were $6,645,000 and $4,547,000 as of March 31, 2020 and 2019, respectively.
The gross balance of deferred financing costs associated with the Revolving Credit Facility is included in Other assets is $2,789,000
as of March 31, 2020 and March 31, 2019. The accumulated amortization balance is $1,766,000 and $1,209,000 as of March 31,
2020 and March 31, 2019 respectively. These balances are classified in Other assets since no funds were drawn on the Revolving
Credit Facility in fiscal 2020 and 2019.
26
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 March 31, 2020,
unsecured credit lines totaled approximately $2,428,000, of which $0 was drawn. In addition, unsecured lines of $14,160,000
were available for bank guarantees issued in the normal course of business of which $9,958,000 was utilized.
CONTRACTUAL OBLIGATIONS
The following table reflects a summary of our contractual obligations in millions of dollars as of March 31, 2020, by period of
estimated payments due:
Total
Fiscal
2021
Fiscal
2022-
Fiscal 2023
Fiscal
2024-
Fiscal 2025
More
Than
Five Years
Long-term debt obligations (a)
Operating lease obligations (b)
Purchase obligations (c)
Interest obligations (d)
Letter of credit obligations
Bank guarantees
Uncertain tax positions
Other long-term liabilities reflected on the
Company’s balance sheet under GAAP
$
259.4
$
4.5
$
8.9
$
246.0
$
43.9
—
40.8
16.8
10.0
0.2
195.9
8.3
—
10.4
14.4
10.0
0.2
—
14.6
—
20.3
2.4
—
—
70.7
8.9
—
10.1
—
—
—
60.4
Total
$
567.0
$
47.8
$
116.9
$
325.4
$
—
12.1
—
—
—
—
—
64.8
76.9
(a) As described in Note 12 to consolidated financial statements. Subsequent to March 31, 2020, the Company drew $25 million
from the Revolver.
(b) As described in Note 18 to consolidated financial statements.
(c) We have no purchase obligations specifying fixed or minimum quantities to be purchased. We estimate that, at any given
point in time, our cancelable open purchase orders to be executed in the normal course of business approximate $78 million.
(d) Estimated for our Term Loan and Revolving Credit Facility and interest rate swaps as described in Note 10 and Note 12
to our consolidated financial statements. Calculated using a Eurocurrency rate of 1.45% plus an applicable margin of
2.50%.
We have no additional off-balance sheet obligations that are not reflected above.
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, and enhance safety. Our capital expenditures for fiscal 2020, 2019, and 2018 were $9,432,000,
$12,288,000, and $14,515,000 respectively. Excluded from fiscal 2020 capital expenditures is $365,000, $227,000, and $0 in
property, plant and equipment purchases included in accounts payable at March 31, 2020, 2019, and 2018, respectively. We expect
capital expenditure spending in fiscal 2021 of approximately $15,000,000, excluding acquisitions and strategic alliances.
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 primarily due to overall low inflation levels over such periods and our ability to generally
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
27
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.
SEASONALITY AND QUARTERLY RESULTS
Our quarterly results may be materially affected by the timing of large customer orders, periods of high vacation and holiday
concentrations, restructuring charges, and other costs attributable to plan closures as well as divestitures and acquisitions. Therefore,
our operating results for any particular fiscal quarter are not necessarily indicative of results for any subsequent fiscal quarter or
for the full fiscal year.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make
estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We
continually evaluate the estimates and their underlying assumptions, which form the basis for making judgments about the carrying
value of our assets and liabilities. Actual results inevitably will differ from those estimates. If interpreted differently under different
conditions or circumstances, changes in our estimates could result in material changes to our reported results. We have identified
below the accounting policies involving estimates that are critical to our financial statements. Other accounting policies are more
fully described in Note 2 of our consolidated financial statements.
Insurance Reserves. Our accrued general and product liability reserves as described in Note 16 to consolidated financial statements
involve actuarial techniques including the methods selected to estimate ultimate claims, and assumptions including emergence
patterns, payment patterns, initial expected losses, and increased limit factors. These actuarial estimates are subject to a high degree
of uncertainty due to a variety of factors, including extended lag time in the reporting and resolution of claims, trends or changes
in claim settlement patterns, insurance industry practices, and legal interpretations. Changes to these estimates could result in
material changes to the amount of expense and liabilities recorded in our financial statements. Further, actual costs could differ
significantly from the estimated amounts. Adjustments to estimated reserves are recorded in the period in which the change in
estimate occurs. Other insurance reserves such as workers compensation and group health insurance are based on actual historical
and current claim data provided by third party administrators or internally maintained.
Goodwill and indefinite-lived intangible asset impairment testing. Our goodwill balance of $319,679,000 as of March 31, 2020
is subject to impairment testing. We test goodwill for impairment at least annually, as of the end of February, 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, or in circumstances where the components share assets or other
resources and have other economic interdependencies). The Company has two reporting units, both of which have goodwill. The
Duff-Norton and Rest of Products reporting units have goodwill totaling $9,593,000, and $310,086,000, respectively, at March
31, 2020.
Annual Goodwill Impairment Test
When we evaluate the potential for goodwill impairment, we assess a range of qualitative factors including, but not limited to,
macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services,
regulatory and political developments, entity specific factors such as strategy, and changes in key personnel and overall financial
performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting
unit is less than its carrying value, we proceed to a quantitative impairment test. We also proceed to the quantitative model when
economic or other business factors indicate that the fair value of our reporting units may have declined since our last quantitative
test. We performed the qualitative assessment as of February 29, 2020 and determined that the quantitative test should be performed
for the Rest of Products and Duff-Norton reporting units due to volatility in our stock price and uncertainty in the global economic
environment caused by COVID-19. We also performed sensitivities and other analysis and determined it is more likely than not
that goodwill is not impaired as of March 31, 2020.
28
Rest of Products Reporting Unit
In order to perform the quantitative impairment test for the Rest of Products reporting unit, we use the discounted cash flow method
and comparable market method to estimate fair value. The discounted cash flow method incorporates various assumptions, the
most significant being projected revenue growth rates, operating profit margins and cash flows, the terminal growth rate and the
discount rate. Management projects revenue growth rates, operating margins and cash flows based on each reporting unit’s current
business, expected developments and operational strategies over a five-year period. In estimating the terminal growth rate, we
consider our historical and projected results, as well as the economic environment in which the reporting unit operates. The discount
rates utilized for each reporting unit reflect management’s assumptions of marketplace participants’ cost of capital and risk
assumptions, both specific to the reporting unit and overall in the economy. The comparable market method estimates fair value
based on prices obtained in actual transactions. The method consists of examining selling prices for comparable assets. After
studying the selling prices, value adjustments are made for any dissimilarities.
Testing goodwill for impairment under the quantitative method described above requires us to estimate fair value of the reporting
unit using significant estimates and judgmental factors. The compound annual growth rate for revenue during the first five years
of our projections was approximately 1.91% for the Rest of Products reporting unit. The terminal value was calculated assuming
a projected growth rate of 3.0% after five years . These rates reflect our estimate of long-term growth into perpetuity and approximate
the long-term gross domestic product growth expected on a global basis as well as our normal annual price increases. The estimated
weighted-average cost of capital for the reporting units was determined to be 11.7% for the Rest of Products reporting unit. This
was estimated based upon an analysis of similar companies and their debt to equity mix, their related volatility and the size of
their market capitalization. We also consider any additional risk of the Rest of Products reporting unit achieving its forecast, and
adjust the weighted-average cost of capital applied when determining the reporting unit’s estimated fair value. Future changes in
these estimates and assumptions could materially affect the results of our goodwill impairment tests. For example, a decline in
the terminal growth rate by 50 basis points would decrease fair market value by $8,280,000 and an increase in the weighted-
average cost of capital by 100 basis points would result in a decrease in fair market value by $26,270,000 for the Rest of Products
reporting unit. Even with such changes, the fair value of the reporting unit would be greater than its net book value as of February
29, 2020, therefore indicating no impairment.
Duff-Norton Reporting Reporting Unit
Similar to the Rest of Products reporting unit, we use the discounted cash flow method and comparable market method to estimate
fair value for the Duff-Norton reporting unit. The discounted cash flow method incorporates various assumptions, the most
significant being projected revenue growth rates, operating profit margins and cash flows, the terminal growth rate and the discount
rate. Management projects revenue growth rates, operating margins and cash flows based on each reporting unit’s current business,
expected developments and operational strategies over a five-year period. In estimating the terminal growth rate, we consider our
historical and projected results, as well as the economic environment in which the reporting unit operates. The discount rates
reflect management’s assumptions of marketplace participants’ cost of capital and risk assumptions, both specific to the reporting
unit and overall in the economy. The comparable market method estimates fair value based on prices obtained in actual transactions.
The method consists of examining selling prices for comparable assets. After studying the selling prices, value adjustments are
made for any dissimilarities.
Testing goodwill for impairment under the quantitative method described above requires us to estimate fair value of the reporting
unit using significant estimates and judgmental factors. The compound annual growth rate for revenue during the first five years
of our projections was approximately 5.68% for the Duff-Norton reporting unit. The terminal value was calculated assuming a
projected growth rate of 3.5% after five years. These rates reflect our estimate of long-term growth into perpetuity and approximate
the long-term gross domestic product growth expected on a global basis as well as our normal annual price increases. The estimated
weighted-average cost of capital for the reporting units was determined to be 12.2% for the Duff-Norton reporting unit. This was
estimated initially based on the Company's consolidated weighted-average cost of capital and increased for additional market risk.
We also consider any additional risk of the Duff-Norton reporting unit achieving its forecast, and adjust the weighted-average cost
of capital applied when determining the reporting unit’s estimated fair value. Future changes in these estimates and assumptions
could materially affect the results of our goodwill impairment tests. For example, a decline in the terminal growth rate by 50 basis
points would decrease fair market value by $2,446,000 and an increase in the weighted-average cost of capital by 100 basis points
would result in a decrease in fair market value by $6,929,000 for the Duff-Norton reporting unit. Even with such changes, the fair
value of the reporting unit would be greater than its net book value as of February 29, 2020, therefore indicating no impairment.
29
We further test our indefinite-lived intangible asset balance of $46,670,000 consisting of trademarks on our recent acquisitions
on an annual basis for impairment. The methodology used to value trademarks is the relief from royalty method. The recorded
book value of these trademarks in excess of the calculated fair value results in impairment. The key estimate used in this calculation
consists of an overall royalty rate applied to the sales covered by the trademark. After performing this analysis, we determined
that the fair value of these trademarks exceeded their book values, and as such, no other impairment was recorded.
30
Effects of New Accounting Pronouncements
Information regarding the effects of new accounting pronouncements is included in Note 22 to the accompanying consolidated
financial statements included in this March 31, 2020 10-K report.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This report may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.
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, 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, facility consolidations and other
restructurings, our asbestos-related liability, the integration of acquisitions, and other factors disclosed in our periodic reports filed
with the Commission. Consequently such forward-looking statements should be regarded as our current plans, estimates and
beliefs. We do not undertake and specifically decline any obligation to publicly release the results of 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 events.
31
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. We are exposed to
various market risks, including commodity prices for raw materials, foreign currency exchange rates, and changes in interest rates.
We may enter into financial instrument transactions, which attempt to manage and reduce the impact of such changes. We do not
enter into derivatives or other financial instruments for trading or speculative purposes.
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 primarily due to overall low inflation levels over such periods and our ability to generally
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. The company is exposed
to trade tariffs with China. The Company monitors the impact of tariffs and actively works to mitigate this impact through material
productivity actions and pricing strategies. We will continue to monitor our costs and reevaluate our pricing policies.
We have been and may continue to be materially and adversely impacted by the effects of COVID-19. In addition to global
macroeconomic effects, the COVID-19 outbreak and any other related adverse public health developments will cause disruption
to our international operations and sales activities. The continued operation of our facilities is subject to local laws and regulations.
While all of our facilities have been deemed essential under applicable law there is no guarantee this will continue. Currently, our
Brighton, Michigan and Santiago, Mexico facilities are not operating. Our third-party manufacturers, suppliers, third-party
distributors, sub-contractors and customers have been and will be disrupted by worker absenteeism, quarantines and restrictions
on their employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border
closures, or other travel or health-related restrictions. Depending on the magnitude of such effects on our manufacturing operations
or the operations of our suppliers, third-party distributors, or sub-contractors, our supply chain, manufacturing and product
shipments could be delayed, which could adversely affect our business, operations, and customer relationships. In addition,
COVID-19 or other disease outbreaks will in the short-run and may over the longer term adversely affect the economies and
financial markets of many countries, resulting in an economic downturn that will affect demand for our products and impact our
operating results. There can be no assurance that any decrease in sales resulting from the COVID-19 will be offset by increased
sales in subsequent periods. Although the magnitude of the impact of the COVID-19 outbreak on our business and operations
remains uncertain, the continued spread of the COVID-19 or the occurrence of other epidemics and the imposition of related public
health measures and travel and business restrictions will adversely impact our business, financial condition, operating results and
cash flows.
In fiscal 2020, 45% of our net sales were from manufacturing plants and sales offices in foreign jurisdictions. We manufacture
our products in the United States, China, Germany, United Kingdom, Hungary, Mexico, and France and sell our products in
approximately 50 countries. Our results of operations could be affected by factors such as changes in foreign currency rates or
weak economic conditions in foreign markets. With our fiscal year 2017 acquisition of STAHL, we have an increased presence
in the United Arab Emirates, with total assets of approximately $10,000,000. Our operating results are exposed to fluctuations
between the U.S. Dollar and the Canadian Dollar, European currencies, the South African Rand, the Mexican Peso, the Brazilian
Real, and the Chinese Yuan. For example, when the U.S. dollar weakens against the Euro, the value of our net sales and net income
denominated in Euros increases when translated into U.S. dollars for inclusion in our consolidated results. We are also exposed
to foreign currency fluctuations in relation to purchases denominated in foreign currencies. Our foreign currency risk is mitigated
since the majority of our foreign operations’ net sales and the related expense transactions are denominated in the same currency,
which reduces the impact of a significant change in foreign exchange rates on net income. For example, a 10% change in the
value of the U.S. dollar in relation to our most significant foreign currency exposures would have had an impact of approximately
$3,900,000 on our income from operations. In addition, the majority of our export sale transactions are denominated in U.S. dollars.
The Company has a cross currency swap agreement that is designated as a cash flow hedge to hedge changes in the value of an
intercompany loan to a foreign subsidiary due to changes in foreign exchange rates. This intercompany loan is related to the
acquisition of STAHL. As of March 31, 2020, the notional amount of this derivative was $181,390,000, and the contract matures
on January 31, 2022. From its March 31, 2020 balance of AOCL, the Company expects to reclassify approximately $1,312,000
out of AOCL, and into foreign currency exchange loss (gain), during the next 12 months based on the contractual payments due
under this intercompany loan.
32
The Company has foreign currency forward agreements that are designated as cash flow hedges to hedge a portion of forecasted
inventory purchases denominated in foreign currencies. The notional amount of those derivatives is $8,422,000 and all contracts
mature by December 31, 2020. From its March 31, 2020 balance of AOCL, the Company expects to reclassify approximately
$264,000 out of AOCL during the next 12 months based on the underlying transactions of the sales of the goods purchased.
The Company's policy is to maintain a capital structure that is comprised of 50-70% of fixed rate long-term debt and 30-50% of
variable rate long-term debt. The Company has two interest rate swap agreements in which the Company receives interest at a
variable rate and pays interest at a fixed rate. These interest rate swap agreements are designated as cash flow hedges to hedge
changes in interest expense due to changes in the variable interest rate of the senior secured term loan. The amortizing interest
rate swaps mature by December 31, 2023 and had a total notional amount of $158,490,000 as of March 31, 2020. The effective
portion of the changes in fair values of the interest rate swaps is reported in AOCL and will be reclassified to interest expense over
the life of the swap agreements. From its March 31, 2020 balance of AOCL, the Company expects to reclassify approximately
$1,066,000 out of AOCL, and into interest expense, during the next 12 months.
33
Item 8.
Financial Statements and Supplemental Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 2020:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Description of Business
Accounting Principles and Practices
Disposals
Revenue Recognition
Fair Value Measurements
Inventories
Marketable Securities and Other Investments
Property, Plant, and Equipment
Goodwill and Intangible Assets
Derivative Instruments
Accrued Liabilities and Other Non-current Liabilities
Debt
Pensions and Other Benefit Plans
Employee Stock Ownership Plan ("ESOP")
Earnings per Share and Stock Plans
Loss Contingencies
Income Taxes
Leases
Business Segment Information
Selected Quarterly Financial Data (unaudited)
Accumulated Other Comprehensive Loss
Effects of New Accounting Pronouncements
Schedule II – Valuation and Qualifying Accounts.
34
35
38
39
40
41
42
43
43
47
48
51
54
54
55
55
57
60
61
63
70
70
75
79
83
85
87
88
90
93
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Columbus McKinnon Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Columbus McKinnon Corporation (the Company) as of March
31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, shareholders' equity and cash flows
for each of the three years in the period ended March 31, 2020, and the related notes and financial statement schedule listed in the
Index at Item 15(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at March 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the three years in the period ended March 31, 2020, in conformity with U.S.
generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of March 31, 2020, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework), and our report dated May 27, 2020, expressed an unqualified opinion thereon.
Adoption of New Accounting Standards
As discussed in Note 2 to the consolidated financial statements, the Company changed its method for recognizing revenue as a
result of the adoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606),
and the amendments in ASUs 2015-14, 2016-08, 2016-10 and 2016-12 effective April 1, 2018. As discussed in Note 2 to the
consolidated financial statements, the Company changed its method for accounting for leases as a result of the adoption of ASU
No. 2016-02, Leases (Topic 842), as amended, effective April 1, 2019.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
35
Description of
the Matter
How We
Addressed the
Matter in Our
Audit
Valuation of Goodwill
At March 31, 2020, the Company’s goodwill was $319.7 million. As discussed in Notes 2 and 9 of the
consolidated financial statements, goodwill is qualitatively tested and quantitatively tested, when
necessary, for impairment at least annually at the reporting unit level. For its fiscal 2020 annual impairment
test, the Company quantitatively tested goodwill impairment for the Rest of Products reporting unit which
had goodwill of $310.1 million. In its quantitative test, the Company applied a discounted cash flow method
to estimate the fair value of its reporting unit which incorporated various assumptions, the most significant
being projected revenue growth rates, operating profit margins and cash flows, the terminal growth rate
and the discount rate.
Auditing management’s annual goodwill impairment test was complex and highly judgmental due to the
significant estimation required to determine the fair value of the Rest of Products reporting unit. The fair
value estimate for the Rest of Products reporting unit was sensitive to significant assumptions inherent in
the Company’s discounted estimated future cash flows, in particular changes in the projected revenue
growth rates and the discount rate, which are affected by expectations about future market or economic
conditions.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the Company’s goodwill impairment review process, including controls over management’s review of the
significant assumptions described above.
To test the estimated fair value of the Company’s Rest of Products reporting unit, we performed audit
procedures with the assistance of our valuation professionals that included, among others, assessing the
methodology used and testing the significant assumptions discussed above and the underlying data used
in the impairment analysis. We compared the significant assumptions used by management to current
industry and economic trends and evaluated the effects of changes to the Company’s business model,
customer base or product mix and other factors on the significant assumptions. We assessed the historical
accuracy of management’s revenue forecasts and performed sensitivity analyses of significant assumptions
to evaluate the changes in the fair value of the reporting unit that would result from changes in the
assumptions. We considered the relationship between the aggregate fair value of the Company’s reporting
units and the Company’s market capitalization as of the annual impairment testing date.
Product Liabilities and Related Legal Costs
Description of
the Matter
At March 31, 2020 the Company’s liability for asbestos-related product liability claims and related legal
costs was $4.8 million. As discussed in Note 16 to the consolidated financial statements, the Company is
involved in asbestos-related litigation the cost of which is paid through a wholly-owned captive insurance
company.
How We
Addressed the
Matter in Our
Audit
Auditing management's estimate of its reserves for asbestos-related product liabilities is complex and
highly judgmental due to the significant estimation and judgment required in determining the ultimate
outcomes of the cases asserted against the Company and in determining the ultimate costs for the Company
to defend against such claims. In particular, the estimated product liability reserve is sensitive to significant
assumptions such as case dismissal rates, the number of years case activity might continue, legal and other
costs to defend claims. The cost to defend claims takes into consideration the extent to which insurance
carriers, under pre-existing insurance policies and pursuant to a pending legal settlement, are covering
future indemnity payments and sharing in payment of future legal defense costs.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the Company’s product liability estimation process. Our procedures included, among others, testing
management’s review of significant assumptions used for purposes of calculating the estimated liability.
To test the estimated liability for asbestos-related product liability claims, we performed audit procedures
that included, among others, testing the completeness and accuracy of the asbestos-related claims data
underlying the estimated liability. We compared forecasts of legal defense costs and dismissal ratios utilized
by management in prior year reserve estimates to actual defense costs incurred and the actual ratios of
asbestos claims asserted to claims dismissed. We inspected analyses prepared by the Company to support
the current forecasts of defense costs and dismissal ratios. We inspected correspondence from the
Company’s internal counsel as to the number and status of outstanding claims asserted and the pending
legal settlement with insurance carriers and correspondence from external counsel to corroborate the
information provided by management. We involved a specialist to assist with our procedures and to develop
an independent range of asbestos-related product liability reserves, which we compared to the Company’s
recorded amount.
36
/s/ Ernst & Young LLP
We have served as the Company’s auditor since at least 1917, but we are unable to determine the specific year.
Buffalo, New York
May 27, 2020
37
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
Current assets:
ASSETS
Cash and cash equivalents
Trade accounts receivable, less allowance for doubtful accounts ($5,056 and $3,264,
respectively)
Inventories
Prepaid expenses and other
Total current assets
Net property, plant, and equipment
Goodwill
Other intangibles, net
Marketable securities
Deferred taxes on income
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable
Accrued liabilities
Current portion of long-term debt
Total current liabilities
Term loan and revolving credit facility
Other non-current liabilities
Total liabilities
Shareholders’ equity:
Voting common stock: 50,000,000 shares authorized; 23,771,620 and 23,391,101 shares issued
and outstanding
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes.
March 31,
2020
2019
(In thousands, except
share data)
$
114,450
$
71,093
123,743
127,373
17,180
382,746
79,473
319,679
217,962
7,322
26,281
59,809
$ 1,093,272
129,157
146,263
16,075
362,588
87,303
322,816
232,940
7,028
27,707
21,189
$ 1,061,571
$
$
57,289
93,585
4,450
155,324
246,856
227,507
629,687
46,974
99,304
65,000
211,278
235,320
183,814
630,412
238
287,256
290,441
(114,350)
463,585
$ 1,093,272
234
277,518
236,459
(83,052)
431,159
$ 1,061,571
38
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31,
2019
(In thousands, except per share data)
2020
2018
Net sales
Cost of products sold
Gross profit
Selling expenses
General and administrative expenses
Research and development expenses
Net loss on sales of businesses, including impairment
Amortization of intangibles
Income from operations
Interest and debt expense
Investment (income) loss, net
Foreign currency exchange loss (gain), net
Other (income) expense, net
Income from continuing operations before income tax expense
Income tax expense
Net income
Average basic shares outstanding
Average diluted shares outstanding
Basic income per share
Diluted income per share
Dividends declared per common share
$
$
$
$
$
809,162
525,976
283,186
91,054
77,880
11,310
176
12,942
89,824
14,234
(891)
(1,514)
839
77,156
17,484
59,672
23,619
23,855
2.53
2.50
0.24
$
$
$
$
$
876,282
571,285
304,997
97,925
83,567
13,491
25,672
14,900
69,442
17,144
(727)
843
(716)
52,898
10,321
42,577
23,276
23,660
1.83
1.80
0.21
$
$
$
$
$
839,419
554,358
285,061
101,956
85,605
13,617
—
15,552
68,331
19,733
(157)
1,539
(2,469)
49,685
27,620
22,065
22,841
23,335
0.97
0.95
0.17
See accompanying notes.
39
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Pension liability adjustments, net of taxes of $8,062, $2,242 and $(4,981)
March 31,
2020
2019
(In thousands)
2018
$ 59,672
$ 42,577
$
22,065
(9,004)
(24,051)
(16,708)
(5,711)
21,717
12,047
Other post retirement obligations adjustments, net of taxes of $(35), $(126), and $(153)
Split-dollar life insurance arrangement adjustments, net of taxes of $(17), $(18), and
$(70)
Change in derivatives qualifying as hedges, net of taxes of $(565), $469, and $(1,519)
104
475
51
1,602
69
(1,037)
Change in investments:
Unrealized holding (loss) gain arising during the period, net of taxes of $0, $0, and
$(124)
Net change in unrealized gain (loss) on investments
Total other comprehensive income (loss)
Comprehensive income
—
—
(31,298)
$ 28,374
—
—
(22,912)
$ 19,665
484
206
3,563
189
189
38,206
$
60,271
See accompanying notes.
40
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data)
Balance at April 1, 2017
Net income 2018
Dividends declared
Change in foreign currency translation adjustment
Change in net unrealized gain on investments, net of tax of
$(124)
Change in derivatives qualifying as hedges, net of tax of
$(1,519)
Change in pension liability and postretirement obligations, net
of tax of $(5,205)
Stock compensation - directors
Stock options exercised, 363,091 shares
Stock compensation expense
Restricted stock units released, 116.775 shares, net of shares
withheld for minimum statutory tax obligation
Balance at March 31, 2018
Net income 2019
Dividends declared
Change in accounting principle
Change in foreign currency translation adjustment
Change in net unrealized gain on investments, net of tax of
Change in derivatives qualifying as hedges, net of tax of $469
Change in pension liability and postretirement obligations, net
of tax of $2,097
Stock compensation - directors
Stock options exercised, 187,907 shares
Stock compensation expense
Restricted stock units released, 157,715 shares, net of shares
withheld for minimum statutory tax obligation
Balance at March 31, 2019
Net income 2020
Dividends declared
Change in foreign currency translation adjustment
Change in derivatives qualifying as hedges, net of tax of $(565)
Change in pension liability and postretirement obligations, net
of tax of $8,010
Stock compensation - directors
Stock options exercised, 296,027 shares
Stock compensation expense
Restricted stock units released, 82,861 shares, net of shares
withheld for minimum statutory tax obligation
Common
Stock
($0.01 par
value)
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
$
226
$
258,853
$ 179,735
$
(97,464) $
341,350
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
430
6,328
5,156
(1,407)
22,065
(3,903)
—
—
—
—
—
—
—
—
—
—
21,717
189
3,563
12,737
—
—
—
—
22,065
(3,903)
21,717
189
3,563
12,737
430
6,332
5,156
(1,407)
$
230
$
269,360
$ 197,897
$
(59,258) $
408,229
—
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
—
430
4,148
5,768
(2,188)
42,577
(4,903)
888
—
—
—
—
—
—
—
—
—
—
—
(16,708)
(883)
(1,037)
(5,166)
—
—
—
—
$
234
$
277,518
$ 236,459
$
(83,052) $
—
—
—
—
—
—
3
—
1
—
—
—
—
—
460
5,997
4,047
(766)
59,672
(5,690)
—
—
—
—
—
—
—
—
—
(9,004)
1,602
(23,896)
(23,896)
—
—
—
—
460
6,000
4,047
(765)
42,577
(4,903)
888
(16,708)
(883)
(1,037)
(5,166)
430
4,152
5,768
(2,188)
431,159
59,672
(5,690)
(9,004)
1,602
Balance at March 31, 2020
$
238
$
287,256
$ 290,441
$
(114,350) $
463,585
See accompanying notes.
41
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31,
2020
2019
2018
(In thousands)
$
59,672
$
42,577
$
22,065
29,126
7,364
(563)
—
176
2,655
4,507
7,923
2,899
15,752
(3,857)
724
8,110
(14,304)
(13,389)
106,795
5,380
(5,747)
(9,432)
51
(214)
—
—
—
(9,962)
6,000
(5,670)
(51,113)
—
(768)
(51,551)
(1,925)
43,357
71,343
114,700
11,555
11,601
365
250
$
$
$
$
$
32,675
(958)
194
—
25,672
2,655
6,198
—
(11,328)
(15,411)
(128)
231
3,881
6,397
(13,156)
79,499
3,266
(2,604)
(12,288)
176
14,230
—
(294)
—
2,486
4,152
(4,652)
(65,088)
—
(2,190)
(67,778)
(6,429)
7,778
63,565
71,343
14,411
4,840
227
250
$
$
$
$
$
36,136
19,968
47
619
—
2,681
5,586
—
(9,308)
(12,249)
1,727
3,338
3,833
11,918
(16,700)
69,661
653
(327)
(14,515)
—
—
(14,750)
(294)
(3,359)
(32,592)
6,332
(3,658)
(60,144)
(619)
(1,413)
(59,502)
7,569
(14,864)
78,429
63,565
18,914
706
—
—
$
$
$
$
$
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization
Deferred income taxes and related valuation allowance
Net loss (gain) on sale of real estate, investments and other
Cost of debt repricing/refinancing
Net loss on sales of businesses, including impairment
Amortization of deferred financing costs
Stock-based compensation
Non-cash lease expense
Changes in operating assets and liabilities, net of effects of business acquisitions and divestitures:
Trade accounts receivable
Inventories
Prepaid expenses and other
Other assets
Trade accounts payable
Accrued liabilities
Non-current liabilities
Net cash provided by (used for) operating activities
Investing activities:
Proceeds from sales of marketable securities
Purchases of marketable securities
Capital expenditures
Proceeds from sale of equipment and real estate
Net (payments) proceeds from the sales of businesses
Net payment to former STAHL owner
Payment of restricted cash to former owner
Cash paid for equity investment
Net cash provided by (used for) investing activities
Financing activities:
Proceeds from issuance of common stock
Payment of dividends
Repayment of debt
Fees related to debt repricing/refinancing and equity offerings
Other
Net cash provided by (used for) financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of year
Supplementary cash flows data:
Interest paid
Income taxes paid, net of refunds
Property, plant and equipment purchases included in trade accounts payable
Restricted cash presented in Other assets
See accompanying notes.
42
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands, except share data)
1.
Description of Business
Columbus McKinnon Corporation ("the Company") is a leading worldwide designer, manufacturer, and marketer of hoists,
actuators, rigging tools, digital power control systems, motion control products, and other technologies, systems, and services that
efficiently and ergonomically move, lift, position, and secure materials. Key products include hoists, rigging tools, digital power
control systems, actuators, elevator application drive systems, and explosion-protected hoists. The Company is focused on
commercial and industrial applications that require safety and productivity in moving material. The Company’s targeted market
verticals include general industrial, construction and infrastructure, mining, oil & gas, energy, aerospace, transportation,
automotive, heavy equipment manufacturing, and entertainment.
The Company’s material handling products are sold globally, principally to third party distributors through diverse distribution
channels and, to a lesser extent, directly to end-users. During fiscal 2020, approximately 55% of sales were to customers in the
United States.
2.
Accounting Principles and Practices
Advertising
Costs associated with advertising are expensed as incurred and are included in Selling expense in the Consolidated Statements of
Operations. Advertising expenses were $1,648,000, $2,452,000, and $2,683,000 in fiscal 2020, 2019, and 2018, respectively.
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments with an original maturity of three months or less.
Concentrations of Labor
Approximately 8% of the Company’s employees are represented by three separate U.S. collective bargaining agreements which
expire April 2021, May 2021, and September 2021.
Consolidation
These consolidated financial statements include the accounts of the Company and its global subsidiaries; all significant
intercompany accounts and transactions have been eliminated.
Equity Method Investment
The Company has an investment in Eastern Morris Cranes Company Limited ("EMC") whose principal activity is to manufacture
various electrical overhead traveling cranes. This investment represents a minority ownership interest that is accounted for under
the equity method of accounting since the Company has significant influence over the investee. As a result, the Company records
its portion of the gains and losses incurred by this entity in Investment (income) loss in the Consolidated Statements of Operations.
Foreign Currency Translations
The Company translates foreign currency financial statements as described in Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 830, “Foreign Currency Matters.” Under this method, all items of income and
expense are translated to U.S. dollars at average exchange rates during the year. All assets and liabilities are translated to U.S.
dollars at the year-end exchange rate. Gains or losses on translations are recorded in accumulated other comprehensive loss in the
shareholders’ equity section of the balance sheet. The functional currency is the foreign currency in which the foreign subsidiaries
conduct their business. Gains and losses from foreign currency transactions are reported in foreign currency exchange loss (gain).
43
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Goodwill
Goodwill is not amortized but is tested for impairment at least annually, or more frequently if indicators of impairment exist, in
accordance with the provisions of ASC Topic 350-20-35-1. Goodwill impairment is deemed to exist if the net book value of a
reporting unit exceeds its estimated fair value. The fair value of a reporting unit is determined using a discounted cash flow
methodology. The Company’s reporting units are determined based upon whether discrete financial information is available and
reviewed regularly, whether those units constitute a business, and the extent of economic similarities and interdependencies between
those reporting units for purposes of aggregation. The Company’s reporting units identified under ASC Topic 350-20-35-33 are
at the component level, or one level below the reporting segment level as defined under ASC Topic 280-10-50-10 “Segment
Reporting – Disclosure.” As of March 31, 2020, the Company’s one segment is subdivided into two reporting units. Further, the
Company adopted ASU No. 2017-04, "Simplifying the Test for Goodwill Impairment (Topic 350)," in fiscal 2018, therefore, is
no longer required to compare the implied fair value of goodwill with its carrying value amount as part of step two of the goodwill
test. An impairment charge is the amount by which the carrying value is greater than the reporting unit's fair value.
When the Company evaluates the potential for goodwill impairment, it assesses a range of qualitative factors including, but not
limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for its products
and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and
overall financial performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value
of a reporting unit is less than its carrying value or if economic or other business factors indicate that the fair value of our reporting
units may have declined since our last quantitative test, the Company performs a quantitative test.
To perform the quantitative impairment test, the Company uses the discounted cash flow method and a market-based valuation
model to estimate the fair value of the reporting units. The discounted cash flow method incorporates various assumptions, the
most significant being projected revenue growth rates, operating profit margins and cash flows, the terminal growth rate, and the
discount rate. The Company projects revenue growth rates, operating margins and cash flows based on each reporting unit's current
business, expected developments, and operational strategies over a five-year period. In estimating the terminal growth rates, the
Company considers its historical and projected results, as well as the economic environment in which its reporting units operate.
The discount rates utilized for each reporting unit reflect the Company's assumptions of marketplace participants' cost of capital
and risk assumptions, both specific to the reporting unit and overall in the economy.
The Company performed its qualitative assessment as of February 29, 2020 and determined that the quantitative goodwill
impairment test was required for both the Rest of Products reporting unit and the Duff-Norton reporting unit due to economic
conditions at the time of the analysis. Based on results of the quantitative impairment test for the both reporting units, the Company
determined the fair value was not less than its carrying value. Refer to Note 5 for valuation techniques and significant inputs and
Note 9 for further details.
Impairment of Long-Lived Assets
The Company assesses impairment of its long-lived assets in accordance with the provisions of ASC Topic 360 “Property, Plant,
and Equipment.” This statement requires long-lived assets, such as property and equipment and purchased intangibles subject to
amortization, to be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group over its remaining
useful life. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized
equal to the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The fair values are
determined in accordance with ASC 820.
In assessing long-lived assets for an impairment loss, assets are grouped with other assets and liabilities at the lowest level for
which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Asset grouping requires a
significant amount of judgment. Accordingly, facts and circumstances will influence how asset groups are determined for
impairment testing. In assessing long-lived assets for impairment, management considered the Company’s product line portfolio,
customers and related commercial agreements, labor agreements and other factors in grouping assets and liabilities at the lowest
level for which identifiable cash flows are independent. The Company considers projected future undiscounted cash flows, trends
and other factors in its assessment of whether impairment conditions exist. While the Company believes that its estimates of future
44
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
cash flows are reasonable, different assumptions regarding such factors as future production volumes, customer pricing, economics,
and productivity and cost initiatives, could significantly affect its estimates. In determining fair value of long-lived assets,
management uses management estimates, discounted cash flow calculations, and appraisals where necessary. There were no
impairments recorded related to long-lived assets in the current year.
Intangible Assets
At acquisition, the Company estimates and records the fair value of purchased intangible assets which primarily consist of trade
names, customer relationships, and technology. The fair values are estimated based on management’s assessment as well as
independent third party appraisals. Such valuations may include a discounted cash flow of anticipated revenues resulting from
the acquired intangible asset.
Amortization of intangible assets with finite lives is recognized over their estimated useful lives using an amortization method
that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized. The straight
line method is used for customer relationships. As a result of the negligible attrition rate in our customer base, the difference
between the straight line method and attrition method is not considered significant. The estimated useful lives for our intangible
assets range from 1 to 25 years.
Similar to goodwill, indefinite-lived intangible assets (including trademarks on our acquisitions) are tested for impairment on an
annual basis. When the Company evaluates the potential for impairment of intangible assets, it assesses a range of qualitative
factors including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the
market for its products and services, regulatory and political developments, entity specific factors such as strategy and changes in
key personnel, and overall financial performance. If, after completing this assessment, it is determined that it is more likely than
not that the fair value of an indefinite-lived intangible asset is greater than its carrying value, we conclude that the indefinite-lived
intangible asset is not impaired. If, after completing this assessment, it is determined that it is more likely than not that the fair
value of an indefinite-lived intangible asset is less than its carrying value or if economic or other business factors indicate that the
fair value of our indefinite-lived intangible assets may have declined since our last quantitative test, the Company performs a new
quantitative test. The methodology used to value trademarks is the relief from royalty method. The recorded book value of these
trademarks in excess of the calculated fair value triggers an impairment. The key estimate used in this calculation consists of an
overall royalty rate applied to the sales covered by the trademark. After performing a qualitative assessment we determined that
economic factors indicate that the fair value of our indefinite-lived intangible assets may have declined since our last quantitative
test. We performed the quantitative test as of February 29, 2020 and determined that the trademarks were not impaired. Refer to
Note 9 for further details.
Inventories
Inventories are valued at the lower of cost and net realizable value. Cost of approximately 36% of inventories at March 31, 2020
and March 31, 2019 have been determined using the LIFO (last-in, first-out) method. Costs of other inventories have been determined
using the FIFO (first-in, first-out) or average cost method. FIFO cost approximates replacement cost. Costs in inventory include
components for direct labor and overhead costs.
Marketable Securities
The Company’s marketable securities, which consist of equity and fixed income securities, are recorded at fair value. Under ASU
2016-01 all equity investments (including certain fixed income securities) in unconsolidated entities are measured at fair value
through earnings. Therefore, gains and losses on marketable securities are realized within Investment (income) loss on the
Consolidated Statements of Operations. Estimated fair value is based on published trading values at the balance sheet dates. The
cost of securities sold is based on the specific identification method. Interest and dividend income are also included in Investment
(income) loss on the Consolidated Statements of Operations.
The marketable securities are carried as long-term assets since they are held for the settlement of the Company’s general and
products liability insurance claims filed through CM Insurance Company, Inc., a wholly owned captive insurance subsidiary. The
marketable securities are not available for general working capital purposes.
45
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and depreciated principally using the straight-line method over their respective
estimated useful lives (buildings and building equipment—15 to 40 years; machinery and equipment—3 to 18 years). When
depreciable assets are retired, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in operating results.
Research and Development
With the acquisitions of Magnetek in September 2015 and STAHL CraneSystems (“STAHL”) in January 2017, research and
development ("R&D") costs factor more prominently into the Company's cost structure. Therefore, R&D costs are presented on
the Consolidated Statement of Operations in order to provide transparency into these costs. Consistent with prior periods, the
Company continues to account for R&D expenses in accordance with the provisions of ASC 730 and are expensed as incurred.
Revenue Recognition, Accounts Receivable, and Concentration of Credit Risk
The Company adopted ASC 606, "Revenue from Contracts with Customers," in fiscal 2019. Revenue from contracts with customers
for standard products is recognized when legal title and significant risk and rewards has transferred to the customer, which is
generally at the time of shipment. This is the point in time when control is deemed to transfer to the customer. The Company also
sells custom engineered products and services which are contracts that are typically completed within one quarter but can extend
beyond one year in duration. The Company generally recognizes revenue for customer engineered products upon satisfaction of
its performance obligation under the contract which typically coincides with project completion which is when the products and
services are controlled by the customer. Control is typically achieved at the later of when legal title and significant risk and rewards
have transferred to the customer or the customer has accepted the asset. For both standard products and custom engineered products,
the transaction price is based upon the price stated in either the purchase order or contract. Refer to Note 4 for further details.
Additionally, the Company performs ongoing credit evaluations of its customers’ financial condition, but generally does not require
collateral to support customer receivables. The credit risk is controlled through credit approvals, limits, and monitoring procedures.
Accounts receivable are reported at net realizable value and do not accrue interest. The Company establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other factors. Accounts
receivable are charged against the allowance for doubtful accounts once all collection efforts have been exhausted. The Company
does not routinely permit customers to return product. However, sales returns are permitted in specific situations and typically
include a restocking charge or the purchase of additional product. As a result of ASU No. 2016-13, “Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," discussed in Note 22 and effective in fiscal 2021,
the Company is currently updating its existing allowance for doubtful accounts policy to comply with the new standard.
Shipping and Handling Costs
Shipping and handling costs are a component of cost of products sold.
Stock-Based Compensation
The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation.”
This standard requires all equity-based payments to employees, including grants of employee stock options, to be recognized in
the Consolidated Statements of Operations based on the grant date fair value of the award. Stock compensation expense is included
in Cost of products sold, Selling, and General and administrative expense depending on the nature of the service of the employee
receiving the award. The Company uses a straight-line method of attributing the value of stock compensation expense, subject to
minimum levels of expense, based on vesting. See Note 15 for further discussion of stock-based compensation.
Leases
All leases are reviewed for operating or finance classification at their inception. Rent expense for leases that contain scheduled
rent increases is recognized on a straight-line basis over the lease term. As described in Note 18, the Company adopted ASC 842,
"Leases," effective April 1, 2019 whereas leases with terms greater than twelve months are recorded on the balance sheet as a
right-of-use ("ROU") asset and corresponding lease liability. Refer to Note 18 for further details.
46
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Warranties
The Company offers warranties for certain products it sells. The specific terms and conditions of those warranties vary depending
upon the product sold and the country in which the Company sold the product. As noted in the Revenue Recognition note (Note
4), the Company offers standard warranties which are typically 12 months in duration for standard products and 24 to 36 months
for custom engineered products. These are assurance-type warranties that do not qualify as separate performance obligations under
ASC 606. The Company estimates the costs that may be incurred under its standard warranties, based largely upon actual warranty
repair costs history, and records a liability in the amount of such costs in the month that revenue is recognized. The resulting accrual
balance is reviewed during the year. Factors that affect the Company’s warranty liability include the number of units sold, historical
and anticipated rate of warranty claims, and cost per claim. Changes in the Company’s product warranty accrual are as follows:
Balance at beginning of year
Accrual for warranties issued
Warranties settled
Warranties on Sold Businesses (Note 3)
Foreign currency translation
Balance at end of year
March 31,
2020
2019
$
$
3,634
2,723
(2,548)
—
(228)
3,581
$
$
3,791
3,405
(3,625)
(66)
129
3,634
3.
Disposals
As part of our business strategy, Blueprint for Growth, in the first quarter of fiscal 2019 the Company started the process to sell
its Tire Shredder business, its crane builder business, Crane Equipment and Service Inc., and Stahlhammer Bommern GmbH, its
European forging business acquired in 2014 (the "Sold Businesses") as they were no longer considered part of the core business
or a strategic fit with the Company's long-term growth and operational objectives. On December 28, 2018, the Company sold its
Tire Shredder business and recognized a gain. On February 28, 2019, the Company sold the remaining two businesses, Crane
Equipment and Service Inc. and Stahlhammer Bommern GmbH, and recognized a loss. As such, there are no remaining businesses
which meet the criteria as being held for sale in accordance with ASC 360-10-45-9, "Property, Plant, and Equipment." The businesses
were not deemed a strategic shift or significant to be considered discontinued operations.
When businesses or asset groups meet the criteria as held for sale, they are recorded at the lesser of their carrying value or fair
value less cost to sell. The Company recognized a gain on the sale of its Tire Shredder business in the amount of $1,059,000 during
the twelve months ending March 31, 2019, a $44,000 decrease from the third quarter as a result of a final working capital adjustment.
The Company recognized a loss on Crane Equipment and Service Inc., and Stahlhammer Bommern GmbH in the amount of
$26,731,000 during the twelve months ended March 31, 2019, which is $1,022,000 less than the third quarter estimate primarily
as a result of an increase in the previously estimated selling price for one of the businesses. The recognized loss of $26,731,000
recognized during fiscal 2019 includes an impairment loss on the Sold Businesses in the amount of $27,753,000 which was recorded
through December 31, 2018. The impairment loss included a $6,174,000 reduction to goodwill, a $1,872,000 reduction to other
intangible assets, a $12,830,000 reduction to property, plant, and equipment, and a $6,877,000 reduction to inventory. Both the
gain and loss on sale of business were recorded in Net loss on sales of businesses, including impairment on the Consolidated
Statements of Operations and was determined based on the selling price less carrying value, described further in Note 5. Additionally,
net sales and pre-tax income (loss) before recognized gain or loss on sales for the three Sold Businesses was $34,195,000 and
$3,623,000 for the twelve months ended March 31, 2019 and $38,299,000 and $1,373,000 for the twelve months ended March
47
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
31, 2018, respectively. In the twelve months ending March 31, 2020, the Company recognized an additional loss of $176,000 as
a result of a final working capital adjustment.
As part of its business strategy, the Company is consolidating its manufacturing footprint. The Company previously announced
in fiscal 2019 the closure of its Salem, Ohio facility. In fiscal 2020 the Company announced that it plans to consolidate its hoist
manufacturing facility in Lisbon, Ohio with its Wadesboro, North Carolina and Damascus, Virginia facilities in fiscal 2021. The
Salem, Ohio facility consolidation was completed during the first quarter of fiscal 2020. In total $2,958,000 and $1,473,000 are
included in Cost of products sold on the Consolidated Statements of Operations during the twelve months ended March 31, 2020
and 2019, respectively, related to the consolidation of the Lisbon and Salem facilities. Costs incurred include accelerated
depreciation, accelerated lease costs, severance and other payroll related costs, and a potential refund of a previously recorded tax
credit which may need to be refunded to the state.
The Company also announced during fiscal 2020 its plan to consolidate two of its Hangzhou, China manufacturing facility into
one and reorganize its Asia Pacific operations. $1,455,000 are included in General and administrative expenses and $296,000 are
included in Selling expenses on the Consolidated Statements of Operations during the twelve months ended March 31, 2020 related
to this consolidation.
4.
Revenue Recognition
The core principle under ASC 606 is for revenue to be recognized when a customer obtains control of promised goods or services
in an amount that reflects the consideration we expect to receive in exchange for those goods or services. To achieve this core
principle, the Company applies the following five steps:
1) Identifying contracts with customers
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each
party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has
commercial substance, and (iii) the Company determines that collection of substantially all consideration for goods and services
that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the products and services that will be transferred to the
customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or
together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service
is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services,
the Company must apply judgment to determine whether promised goods and services are capable of being distinct and distinct
in the context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined
performance obligation.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring
products and services to the customer. To the extent the transaction price includes variable consideration, the Company estimates
the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or
the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the
transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the
contract will not occur. Any estimates, including the effect of the constraint on variable consideration, are evaluated at each reporting
period for any changes. In applying this guidance, the Company also considers whether any significant financing components
exist.
4) Allocate the transaction price to the performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation
48
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to
a performance obligation or to a distinct service that forms part of a single performance obligation.
5) Recognize revenue when or as the Company satisfies a performance obligation
The Company determines whether it satisfies performance obligations either over time or at a point in time. Revenue is recognized
over time if either 1) the customer simultaneously receives and consumes the benefits provided by the entity’s performance, 2)
the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or 3) the entity’s
performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for
performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation
is satisfied at a point in time by transferring the control of a promised good or service to a customer. Examples of control are using
the asset to produce goods or services, enhancing the value of other assets, settling liabilities, and holding or selling the asset. For
over time recognition, ASC 606 requires the Company to select a single revenue recognition method for the performance obligation
that faithfully depicts the Company’s performance in transferring control of the goods and services. The guidance allows entities
to choose between either an input method or an output method to measure progress toward complete satisfaction of a performance
obligation.
Performance obligations
The Company has contracts with customers for standard products and custom engineered products and determines when and how
to recognize revenue for each performance obligation based on the nature and type of contract following the five steps above.
Revenue from contracts with customers for standard products is recognized when legal title and significant risk and rewards has
transferred to the customer, which is generally at the time of shipment. This is the point in time when control is deemed to transfer
to the customer. The Company sells standard products to customers utilizing purchase orders. Payment terms for these types of
contracts generally require payment within 30-60 days. Each standard product is deemed to be a single performance obligation
and the amount of revenue recognized is based on the negotiated price. The transaction price for standard products is based on the
price reflected in each purchase order. Sales incentives are offered to customers who purchase standard products and include offers
such as volume-based discounts, rebates for priority customers, and discounts for early cash payments. These sales incentives are
accounted for as variable consideration included in the transaction price. Accordingly, the Company reduces revenue for these
incentives in the period which the sale occurs and is based on the most likely amount method for estimating the amount of
consideration the Company expects to receive. These sales incentive estimates are updated each reporting information as additional
information becomes available.
The Company also sells custom engineered products and services which are contracts that are typically completed within one
quarter but can extend beyond one year in duration. For custom engineered products, the transaction price is based upon the price
stated in the contract. Variable consideration has not been identified as a significant component of transaction price for custom
engineered products and services. The Company generally recognizes revenue for custom engineered products upon satisfaction
of its performance obligation under the contract which typically coincides with project completion which is when the products
and services are controlled by the customer. Control is typically achieved at the later of when legal title and significant risk and
rewards have transferred to the customer or the customer has accepted the asset. These contracts often require either up front or
installment payments. These types of contracts are generally accounted for as one performance obligation as the products and
services are not separately identifiable. The promised services (such as inspection, commissioning, and installation) are essential
in order for the delivered product to operate as intended on the customer’s site and the services are therefore highly interrelated
with product functionality.
For most custom engineered products contracts, the Company determined that while there is no alternative use for the custom
engineered products, the Company does not have an enforceable right to payment (which must include a reasonable profit margin)
for performance completed to date in order to meet the over time revenue recognition criteria. Therefore, revenue is recognized
at a point in time (when the contract is complete). For custom engineered products contracts that contain an enforceable right to
payment (including reasonable profit margin) the Company satisfies the performance obligation over time and recognizes revenue
based on the extent of progress towards completion of the performance obligation. The cost-to-cost measure of progress is an
appropriate measure of progress toward satisfaction of performance obligations as this measure most accurately depicts the progress
of work performed and transfer of control to the customers. Under the cost-to-cost measure of progress, the extent of progress
49
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the
performance obligation. Revenues are recognized proportionally as costs are incurred.
Sales and other taxes collected with revenue are excluded from revenue, consistent with the previous revenue standard. Shipping
and handling costs incurred prior to shipment are considered activities required to fulfill the Company’s promise to transfer goods,
and do not qualify as a separate performance obligation. Additionally, the Company offers standard warranties which are typically
12 months in duration for standard products and 24 to 36 months for custom engineered products. These types of warranties are
included in the purchase price of the product and are deemed to be assurance-type warranties which are not accounted for as a
separate performance obligation. Other performance obligations included in a contract (such as drawings, owner’s manuals, and
training services) are immaterial in the context of the contract and are not recognized as a separate performance obligation.
Reconciliation of contract balances
The Company records a contract liability when cash is received prior to recording revenue. Some standard contracts require a
down payment while most custom engineered contracts require installment payments. Installment payments for the custom
engineered contracts typically require a portion due at inception while the remaining payments are due upon completion of certain
performance milestones. For both types of contracts, these contract liabilities, referred to as customer advances, are recorded at
the time payment is received and are included in Accrued liabilities on the Consolidated Balance Sheets. When the related
performance obligation is satisfied, the contract liability is released into revenue.
The following table illustrates the balance and related activity for customer advances in fiscal 2020 and 2019 (in thousands):
Customer advances (contract liabilities)
Beginning balance
Additional customer advances received
Revenue recognized from customer advances included in the beginning balance
Other revenue recognized from customer advances
Customer deposits on Sold Businesses (Note 3)
Other (1)
Ending balance
(1) Other includes the impact of foreign currency translation
March 31,
2020
2019
$
11,501
$
36,058
(11,501)
(25,037)
—
(225)
10,796
$
$
15,909
39,868
(15,909)
(27,247)
(139)
(981)
11,501
During the twelve months ended March 31, 2020, revenue was recognized prior to the right to invoice the customer which
resulted in a contract asset balance in the amount of $2,361,000 as of March 31, 2020. Contract assets are included in Prepaid
expenses and other assets on the Consolidated Balance Sheets. Contract assets were not material as of March 31, 2019.
Disaggregated revenue
In accordance with ASC 606, the Company is required to disaggregate revenue into categories that depict how economic factors
affect the nature, amount, timing and uncertainty of revenue and cash flows. The following table illustrates the disaggregation of
revenue by product grouping for the year ending March 31, 2020 (in thousands):
Net Sales by Product Grouping
Industrial Products
Crane Solutions
Engineered Products
All other
Total
Twelve Months Ended
March 31, 2020
Twelve Months Ended
March 31, 2019
$
$
50
353,155 $
371,974
83,977
56
809,162 $
385,639
374,249
82,222
34,172
876,282
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Industrial products include: manual chain hoists, electrical chain hoists, rigging/ clamps, industrial winches, hooks, shackles, and
other forged attachments. Crane solutions products include: wire rope hoists, drives and controls, crane kits and components, and
workstations. Engineered products include: linear and mechanical actuators, lifting tables, rail projects, and actuations systems.
The All other product grouping includes miscellaneous revenue and the businesses divested in fiscal 2019. The prior year net sales
have been reclassified to be consistent with the current period presentation.
Practical expedients
Incremental costs to obtain a contract incurred by the Company primarily relate to sales commissions for contracts with a duration
of one year or less. Therefore, these costs are expensed as incurred and are recorded in Selling Expenses on the Consolidated
Statements of Operations.
Unsatisfied performance obligations for contracts with an expected length of one year or less are not disclosed. Further, revenue
from contracts with customers do not include a significant financing component as payment is generally expected within one year
from when the performance obligation is controlled by the customer.
5.
Fair Value Measurements
ASC Topic 820 “Fair Value Measurements and Disclosures” establishes the standards for reporting financial assets and liabilities
and nonfinancial assets and liabilities that are recognized or disclosed at fair value on a recurring basis (at least annually). Under
these standards, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the "exit
price") in an orderly transaction between market participants at the measurement date.
ASC Topic 820-10-35-37 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable
inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable
inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from
sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the valuation
techniques that market participants would use in pricing the asset or liability developed based on the best information available
in the circumstances. The hierarchy is separated into three levels based on the reliability of inputs as follows:
Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the
ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active
market, valuation of these products does not entail a significant degree of judgment.
Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are
observable, either directly or indirectly, involving some degree of judgment.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The
degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
51
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The availability of observable inputs can vary and is affected by a wide variety of factors, including the type of asset/liability,
whether the asset/liability is established in the marketplace, and other characteristics particular to the transaction. To the extent
that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value
requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in
its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure.
Therefore, even when market assumptions are not readily available, assumptions are required to reflect those that market participants
would use in pricing the asset or liability at the measurement date.
The Company primarily uses readily observable market data in conjunction with internally developed discounted cash flow
valuation models when valuing its derivative portfolio and, consequently, the fair value of the Company’s derivatives is based on
Level 2 inputs. The carrying amount of the Company's annuity contract is recorded at net asset value of the contract and,
consequently, its fair value is based on Level 2 inputs and is included in other assets on the Company's Consolidated Balance
Sheet. The Company uses quoted prices in an inactive market when valuing its term loan and, consequently, the fair value is based
on Level 2 inputs.
The following table provides information regarding financial assets and liabilities measured or disclosed at fair value on a recurring
basis:
Description
Assets/(Liabilities)
Measured at fair value:
Marketable securities
Annuity contract
Derivative assets (liabilities):
Foreign exchange contracts
Interest rate swap liability
Cross currency swap liability
Cross currency swap asset
Disclosed at fair value:
Term loan
Fair value measurements at reporting date using
Quoted prices in
active markets for
identical assets
Significant
other observable
inputs
Significant
unobservable
inputs
At March
31, 2020
(Level 1)
(Level 2)
(Level 3)
$
$
7,322
2,059
$
7,322
—
— $
2,059
285
(3,296)
(5,254)
1,750
—
—
—
—
285
(3,296)
(5,254)
1,750
$ (239,899) $
— $
(239,899) $
—
—
—
—
—
—
—
52
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Description
Assets/(Liabilities)
Measured at fair value:
Marketable securities
Annuity contract
Derivative assets (liabilities):
Foreign exchange contracts
Interest rate swap asset
Cross currency swap liability
Cross currency swap asset
Disclosed at fair value:
Term loan
Fair value measurements at reporting date using
Quoted prices in
active markets for
identical assets
Significant
other observable
inputs
Significant
unobservable
inputs
At March
31, 2019
(Level 1)
(Level 2)
(Level 3)
$
$
7,028
2,285
$
7,028
—
— $
2,285
(70)
1,213
(16,184)
2,476
—
—
—
—
(70)
1,213
(16,184)
2,476
$ (310,463) $
— $
(310,463) $
—
—
—
—
—
—
—
The Company did not have any non-financial assets and liabilities that are recognized at fair value on a recurring basis.
At March 31, 2020, the term loan and revolving credit facility have been recorded at carrying value which approximates fair value.
Market gains, interest, and dividend income on marketable securities are recorded in investment (income) loss. Changes in the
fair value of derivatives are recorded in foreign currency exchange (gain) loss or other comprehensive income (loss), to the extent
that the derivative qualifies as a hedge under the provisions of ASC Topic 815. Interest and dividend income on marketable securities
are measured based upon amounts earned on their respective declaration dates.
Fiscal 2020 Non-Recurring Measurements
The fair value of the net assets of the Company’s Rest of Products and Duff-Norton reporting units were calculated on a non-
recurring basis. These measurements have been used to test goodwill for impairment on an annual basis under the provisions of
ASC Topic 350-20-35-1 “Intangibles, Goodwill and Other – Goodwill Subsequent Measurement.”
The fiscal 2020 goodwill impairment test consisted of determining the fair values of the Rest of Products and Duff-Norton reporting
units on a quantitative basis. The fair value for the Company’s reporting units cannot be determined using readily available quoted
Level 1 inputs or Level 2 inputs that are observable in active markets. Therefore, the Company used a blended discounted cash
flow and market-based valuation model to estimate the fair value using Level 3 inputs. To estimate the fair values of the Rest of
Products and Duff-Norton reporting units, the Company used significant estimates and judgmental factors. The key estimates and
factors used in the discounted cash flow valuation include revenue growth rates and profit margins based on internal forecasts,
terminal value, and the weighted-average cost of capital used to discount future cash flows. The estimates used are disclosed
below:
Rest of Products
Reporting Unit
Duff-Norton
Reporting Unit
Compound annual growth rate
Terminal value growth rate
Weighted-average cost of capital
1.91%
3.0%
11.7%
5.68%
3.5%
12.2%
We further test our indefinite-lived intangible asset balance of $46,670,000 consisting of trademarks on our recent acquisitions
on an annual basis for impairment. The methodology used to value trademarks is the relief from royalty method. The recorded
53
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
book value of these trademarks in excess of the calculated fair value results in impairment. The key estimate used in this
calculation consists of an overall royalty rate applied to the sales covered by the trademark. After performing this analysis, we
determined that the fair value of these trademarks exceeded their book values, and as such, other impairment was recorded.
6.
Inventories
Inventories consisted of the following:
At cost—FIFO basis:
Raw materials
Work-in-process
Finished goods
LIFO cost less than FIFO cost
Net inventories
March 31,
2020
2019
$
$
85,452
25,876
33,216
144,544
(17,171)
127,373
$
$
88,786
32,547
40,523
161,856
(15,593)
146,263
There were LIFO liquidations resulting in $2,805,000 and $109,000 of additional income in fiscal 2020 and 2019 income,
respectively.
7.
Marketable Securities and Other Investments
In accordance with ASU 2016-01 "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities," adopted by the Company on April 1, 2018, all equity investments in unconsolidated entities
(other than those accounted for using the equity method of accounts) are measured at fair value through earnings. The Company's
marketable securities are recorded at their fair value, with unrealized changes in market value realized within Investment (income)
loss on the Consolidated Statements of Operations. The Company adopted this standard on a modified retrospective basis. A
cumulative effect adjustment of $888,000 was recorded on April 1, 2018 to the beginning balance of Retained Earnings with an
offset to Accumulated Other Comprehensive Loss. The impact on earnings for unrealized gains and losses was a loss of $143,000
and $183,000 in the twelve months ended March 31, 2020 and March 31, 2019, respectively.
Consistent with prior periods, the estimated fair value is based on quoted prices at the balance sheet dates. The cost of securities
is based on the specific identification method. Interest and dividend income are included in Investment (income) loss in the
Consolidated Statements of Operations.
Marketable securities are carried as long-term assets since they are held for the settlement of the Company’s general and products
liability insurance claims filed through CM Insurance Company, Inc. ("CMIC"), a wholly owned captive insurance subsidiary.
The marketable securities are not available for general working capital purposes.
Net realized gains related to sales of marketable securities were $50,000, $201,000, and $0 in fiscal years 2020, 2019, and 2018,
respectively, and are included in Investment (income) loss in the Consolidated Statements of Operations.
On December 21, 2017, the Company purchased a 49% ownership interest in Eastern Morris Cranes Company Limited ("EMC"),
a limited liability company organized and existing under the laws and regulations of the Kingdom of Saudi Arabia. The Company's
ownership represents an equity investment in a strategic customer of STAHL serving the Kingdom of Saudi Arabia. The investment's
carrying value is presented in Other assets in the Consolidated Balance Sheets in the amount of $3,402,000 and $3,602,000 as of
March 31, 2020 and March 31, 2019, respectively, and has been accounted for as an equity method investment. The investment
value was increased for the Company's ownership percentage of income earned by EMC in the amount of $778,000 and $449,000
in the twelve months ended March 31, 2020 and March 31, 2019, respectively, and is recorded in Investment (income) loss on the
Consolidated Statement of Operations. Further, in the twelve months ended March 31, 2020, EMC distributed a cash dividend
which the Company received 49% of pursuant to its ownership interest. The investment value was decreased for the Company's
54
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
share of EMC's cash dividend in the amount of $924,000 in the twelve months ended March 31, 2020 as it was determined to be
a return on the Company's investment. The dividend is included in operating activities on the Consolidated Statement of Cash
Flows under the cumulative earnings approach. The March 31, 2020 and 2019 trade accounts receivable balances due from EMC
are $4,166,000 and $2,986,000, respectively, and are comprised of amounts due for the sale of goods and services in the ordinary
course of business.
8.
Property, Plant, and Equipment
Consolidated property, plant, and equipment of the Company consisted of the following:
Land and land improvements
Buildings
Machinery, equipment, and leasehold improvements
Construction in progress
Less accumulated depreciation
Net property, plant, and equipment
March 31,
2020
2019
$
$
4,985
39,930
228,140
12,950
286,005
206,532
79,473
$
$
5,105
39,121
230,754
12,242
287,222
199,919
87,303
Depreciation expense was $16,184,000, $17,775,000, and $20,584,000 for the years ended March 31, 2020, 2019, and 2018,
respectively.
Gross property, plant, and equipment includes capitalized software costs of $37,864,000 and $37,832,000 at March 31, 2020 and
2019, respectively. Accumulated depreciation includes accumulated amortization on capitalized software costs of $22,962,000
and $20,225,000 at March 31, 2020 and 2019, respectively. Amortization expense on capitalized software costs was $2,937,000,
$3,045,000, and $3,151,000 during the years ended March 31, 2020, 2019, and 2018, respectively.
9.
Goodwill and Intangible Assets
As discussed in Note 2, goodwill is not amortized but is tested for impairment at least annually, in accordance with the provisions
of ASC Topic 350-20-35-1. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated
fair value. The fair value of a reporting unit is determined using a discounted cash flow methodology. The Company’s reporting
units are determined based upon whether discrete financial information is available and reviewed regularly, whether those units
constitute a business, and the extent of economic similarities and interdependencies between those reporting units for purposes of
aggregation. The Company’s reporting units identified under ASC Topic 350-20-35-33 are at the component level, or one level
below the operating segment level as defined under ASC Topic 280-10-50-10 “Segment Reporting – Disclosure.” At March 31,
2018, the Company had four reporting units. Two of these reporting units were sold in connection with the Sold Businesses
described in Note 3. As such, the Company has two reporting units as of March 31, 2020, both of which have goodwill. The Duff-
Norton reporting unit (which designs, manufactures, and sources mechanical and electromechanical actuators and rotary unions)
had goodwill of $9,593,000 and $9,611,000 at March 31, 2020 and 2019, respectively, and the Rest of Products reporting unit
(representing the hoist, chain, and forgings, digital power control systems, and distribution businesses) had goodwill of
$310,086,000 and $313,205,000 at March 31, 2020 and 2019, respectively.
Fiscal 2020 Annual Goodwill and Intangible Asset Impairment Test
When we evaluate the potential for goodwill impairment, we assess a range of qualitative factors including, but not limited to,
macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services,
regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and overall financial
performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting
unit is less than its carrying value or if economic or other business factors indicate that the fair value of our reporting units may
55
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
have declined since our last quantitative test, we proceed to a quantitative impairment test. To perform the quantitative impairment
test, the Company uses the discounted cash flow method to estimate the fair value of the reporting units. The discounted cash flow
method incorporates various assumptions, the most significant being projected revenue growth rates, operating profit margins and
cash flows, the terminal growth rate, and the discount rate. The Company projects revenue growth rates, operating margins and
cash flows based on each reporting unit's current business, expected developments, and operational strategies over a five-year
period. In estimating the terminal growth rates, the Company considers its historical and projected results, as well as the economic
environment in which its reporting units operate. The discount rates utilized for each reporting unit reflect the Company's
assumptions of marketplace participants' cost of capital and risk assumptions, both specific to the reporting unit and overall in the
economy.
We performed the qualitative assessment as of February 29, 2020 and determined that the quantitative test should be performed
for the Rest of Products and Duff-Norton reporting units due to volatility in our stock price and uncertainty in the global economic
environment caused by COVID-19. We also performed sensitivities and other analysis and determined it is more likely than not
that goodwill is not impaired as of March 31, 2020.
In accordance with ASC Topic 350-30-35, indefinite-lived intangible assets that are not subject to amortization shall be tested for
impairment annually or more frequently if events or circumstances indicate that it is more likely than not that an asset is impaired.
Similar to goodwill, we first assess various qualitative factors in the analysis. If, after completing this assessment, it is determined
that it is more likely than not that the fair value of an indefinite-lived intangible asset is greater than its carrying value, we conclude
that the indefinite-lived intangible asset is not impaired. If, after completing this assessment, it is determined that it is more likely
than not that the fair value of an indefinite-lived intangible asset is less than its carrying value or if economic or other business
factors indicate that the fair value of our indefinite-lived intangible assets may have declined since our last quantitative test, the
Company performs a new quantitative test. The methodology used to value trademarks is the relief from royalty method. The
recorded book value of these trademarks in excess of the calculated fair value triggers an impairment. The key estimate used in
this calculation consists of an overall royalty rate applied to the sales covered by the trademark. After performing a qualitative
assessment we determined that economic factors indicate that the fair value of our indefinite-lived intangible assets may have
declined since our last quantitative test. We performed the quantitative test as of February 29, 2020 and determined that the
trademarks were not impaired.
Fiscal 2019 Interim Goodwill Impairment Test
During the first quarter of fiscal 2019, the Company classified the assets and liabilities of certain businesses as held for sale. These
businesses were sold later in the year which is described in Note 3. As a result of this classification, the Company determined an
indicator of impairment existed and was required to perform an interim goodwill impairment test on the Rest of Products goodwill
reporting unit. The net assets of the Rest of Products reporting unit were measured on a non-recurring basis in order to perform a
quantitative goodwill impairment test. The interim quantitative goodwill impairment test for Rest of Products did not indicate that
goodwill was impaired.
The held for sale classification described above further required the Company to assign a portion of goodwill to the business that
was a part of the Rest of Products reporting unit being sold based on its relative fair value and to record the assets and liabilities
of the businesses held for sale at the lower of their carrying amount or fair value less cost to sell. Based on this analysis, the
Company recorded a $6,174,000 goodwill impairment charge at the time the businesses were classified as held for sale.
A summary of changes in goodwill during the years ended March 31, 2020 and 2019 is as follows:
Balance at April 1, 2018
Interim Goodwill Impairment
Currency translation
Balance at March 31, 2019
Currency translation
Balance at March 31, 2020
$
$
$
$
347,434
(6,174)
(18,444)
322,816
(3,137)
319,679
56
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Goodwill is recognized net of accumulated impairment losses of $113,174,000 as of both March 31, 2020 and 2019. There were
no goodwill impairment losses recorded in fiscal 2020 and $6,174,000 and $0 recorded in 2019 and 2018, respectively. The goodwill
impairment recorded in fiscal 2019 relates to the 2019 interim goodwill impairment test described above and in Note 5.
Identifiable intangible assets at March 31, 2020 are summarized as follows (in thousands):
Trademark
Indefinite-lived trademark
Customer relationships
Acquired technology
Other
Balance at March 31, 2020
Gross
Carrying
Amount
6,016
$
46,670
179,882
46,669
3,143
$ 282,380
Identifiable intangible assets at March 31, 2019 were as follows (in thousands):
Trademark
Indefinite-lived trademark
Customer relationships
Acquired technology
Other
Balance at March 31, 2019
Gross
Carrying
Amount
6,212
$
46,981
182,328
46,715
3,254
$ 285,490
$
$
Accumulated
Amortization
$
Net
(4,238) $
1,778
46,670
—
(44,216)
135,666
(13,306)
33,363
(2,658)
485
(64,418) $ 217,962
Accumulated
Amortization
$
Net
(4,138) $
2,074
—
46,981
(35,344)
146,984
(10,412)
36,303
(2,656)
598
(52,550) $ 232,940
Customer relationships with a gross carrying amount of $2,815,000 and accumulated amortization of $957,000 were written off
during fiscal 2019, in connection with the loss on the Sold Businesses discussed in Note 3. Further, other intangible assets with a
gross carrying amount of $226,000 and accumulated amortization of $211,000 were also written off during fiscal 2019 as a result
of the loss on the Sold Businesses.
The Company’s intangible assets that are considered to have finite lives are amortized over the period in which the assets are
expected to generate future cash flows. Identifiable intangible assets acquired in a business combination are amortized over their
estimated useful lives. The weighted-average amortization periods are 15 years for trademarks, 18 years for customer relationships,
18 years for acquired technology, 5 years for other, and 18 years in total. Trademarks with a book value of $46,670,000 have an
indefinite useful life and are therefore not being amortized.
Total amortization expense was $12,942,000, $14,900,000, and $15,552,000 for fiscal 2020, 2019, and 2018, respectively. Based
on the current amount of intangible assets, the estimated amortization expense for each of the succeeding five years is expected
to be approximately $12,400,000.
10.
Derivative Instruments
The Company uses derivative instruments to manage selected foreign currency and interest rate exposures. The Company does
not use derivative instruments for speculative trading purposes. All derivative instruments must be recorded on the balance sheet
at fair value. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is
recorded as accumulated other comprehensive gain (loss), or “AOCL,” and is reclassified to earnings when the underlying
transaction has an impact on earnings. The ineffective portion of changes in the fair value of the foreign currency forward agreements
is reported in foreign currency exchange loss (gain) in the Company’s consolidated statement of operations. The ineffective portion
57
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
of changes in the fair value of the interest rate swap agreements is reported in interest expense. For derivatives not designated as
cash flow hedges, all changes in market value are recorded as a foreign currency exchange (gain) loss in the Company’s consolidated
statements of operations. The cash flow effects of derivatives are reported within net cash provided by operating activities.
The Company is exposed to credit losses in the event of non-performance by the counterparties on its financial instruments. The
counterparties have investment grade credit ratings. The Company anticipates that these counterparties will be able to fully satisfy
their obligations under the contracts. The Company has derivative contracts with three counterparties as of March 31, 2020.
The Company's agreements with its counterparties contain provisions pursuant to which the Company could be declared in default
of its derivative obligations. As of March 31, 2020, the Company had not posted any collateral related to these agreements. If the
Company had breached any of these provisions as of March 31, 2020, it could have been required to settle its obligations under
these agreements at amounts which approximate the March 31, 2020 fair values reflected in the table below. During the year
ended March 31, 2020, the Company was not in default of any of its derivative obligations.
As of March 31, 2020 and 2019, the Company had no derivatives designated as net investments or fair value hedges in accordance
with ASC Topic 815, “Derivatives and Hedging.”
The Company has a cross currency swap agreement that is designated as a cash flow hedge to hedge changes in the value of an
intercompany loan to a foreign subsidiary due to changes in foreign exchange rates. This intercompany loan is related to the
acquisition of STAHL. As of March 31, 2020, the notional amount of this derivatives was $181,390,000, and the contract matures
on January 31, 2022. From its March 31, 2020 balance of AOCL, the Company expects to reclassify approximately $1,312,000
out of AOCL, and into foreign currency exchange loss (gain), during the next 12 months based on the contractual payments due
under this intercompany loan.
The Company has foreign currency forward agreements that are designated as cash flow hedges to hedge a portion of forecasted
inventory purchases denominated in foreign currencies. The notional amount of those derivatives is $8,422,000 and all contracts
mature by December 31, 2020. From its March 31, 2020 balance of AOCL, the Company expects to reclassify approximately
$264,000 out of AOCL during the next 12 months based on the underlying transactions of the sales of the goods purchased.
The Company's policy is to maintain a capital structure that is comprised of 50-70% of fixed rate long-term debt and 30-50% of
variable rate long-term debt. The Company has two interest rate swap agreements in which the Company receives interest at a
variable rate and pays interest at a fixed rate. These interest rate swap agreements are designated as cash flow hedges to hedge
changes in interest expense due to changes in the variable interest rate of the senior secured term loan. The amortizing interest rate
swaps mature by December 31, 2023 and had a total notional amount of $158,490,000 as of March 31, 2020. The effective portion
of the changes in fair values of the interest rate swaps is reported in AOCL and will be reclassified to interest expense over the
life of the swap agreements. From its March 31, 2020 balance of AOCL, the Company expects to reclassify approximately
$1,066,000 out of AOCL, and into interest expense, during the next 12 months.
58
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The following is the effect of derivative instruments on the consolidated statements of operations for the years ended March 31,
2020, 2019, and 2018 (in thousands):
Derivatives
Designated as
Cash Flow
Hedges
March 31,
2020
2020
Type of Instrument
Foreign exchange contracts
Interest rate swap
2020
Cross currency swap
2019
2019
2019
2018
2018
2018
Foreign exchange contracts
Interest rate swap
Cross currency swap
Foreign exchange contracts
Interest rate swap
Cross currency swap
Amount of Gain or
(Loss) Recognized in
Other Comprehensive
Income (Loss) on
Derivatives (Effective
Portion)
Location of Gain or
(Loss) Recognized
in Income on
Derivatives
Amount of Gain or
(Loss) Reclassified
from AOCL into
Income (Effective
Portion)
$
$
$
$
$
$
$
$
$
(3,185)
303 Cost of products sold
Interest expense
Foreign currency
exchange loss (gain)
7,654
(1,275)
(24) Cost of products sold
Interest expense
Foreign currency
exchange loss (gain)
18,242
(219) Cost of products sold
Interest expense
1,339
Foreign currency
exchange loss (gain)
(24,838)
$
$
$
$
$
$
$
$
$
40
242
2,888
(16)
765
17,231
(196)
(1,879)
(25,206)
Derivatives Not Designated as
Hedging Instruments (Foreign
Exchange Contracts)
March 31,
2020
2019
2018
Location of Gain or (Loss)
Recognized in
Income on Derivatives
Amount of
Gain or (Loss)
Recognized in
Income on
Derivatives
Foreign currency exchange loss (gain)
Foreign currency exchange loss (gain)
Foreign currency exchange loss (gain)
$
$
$
17
13
(11)
59
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The following is information relative to the Company’s derivative instruments in the consolidated balance sheets as of March 31,
2020 and 2019 (in thousands):
Derivatives Designated as
Hedging Instruments
Foreign exchange contracts
Foreign exchange contracts
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Cross currency swap
Cross currency swap
Cross currency swap
Balance Sheet Location
Prepaid expenses and other
Accrued Liabilities
Prepaid expenses and other
Other Assets
Accrued Liabilities
Other non current liabilities
Prepaid expenses and other
Accrued liabilities
Other non current liabilities
$
Fair Value of Asset
(Liability)
March 31,
2020
2019
$
318
(33)
—
—
(1,402)
(1,894)
1,750
—
(5,254)
43
(96)
743
470
—
—
2,476
(774)
(15,410)
Fair Value of Asset
(Liability)
March 31,
Derivatives Not Designated as
Hedging Instruments
Foreign exchange contracts
Balance Sheet Location
2020
2019
Accrued Liabilities
—
(17)
11.
Accrued Liabilities and Other Non-current Liabilities
Consolidated accrued liabilities of the Company consisted of the following:
Accrued payroll
Accrued income taxes payable
Accrued health insurance
Accrued general and product liability costs
Customer advances, deposits, and rebates
Current ROU lease liabilities
Other accrued liabilities
March 31,
2020
2019
$
$
29,966
11,889
2,018
3,500
13,507
6,924
25,781
93,585
$
$
36,946
12,864
2,806
3,500
14,922
—
28,266
99,304
60
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Consolidated other non-current liabilities of the Company consisted of the following:
Accumulated postretirement benefit obligation
Accrued general and product liability costs
Accrued pension cost
Cross currency swap
Deferred income tax
Non-current ROU lease liabilities
Other non-current liabilities
12.
Debt
Consolidated long-term debt of the Company consisted of the following:
Term loan
Unamortized deferred financing costs, net
Total debt
Less: current portion
Total debt, less current portion
March 31,
2020
2019
1,617
8,444
149,524
5,254
18,213
31,629
12,826
227,507
$
$
2,022
9,186
127,373
15,410
20,082
—
9,741
183,814
March 31,
2020
2019
259,350
(8,044)
251,306
4,450
246,856
$
310,463
(10,143)
300,320
65,000
235,320
$
$
$
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 1st Lien Term Loan ("Term Loan"). The Term Loan has a seven-year term maturing in 2024
and the Revolver has a five-year term maturing in 2022. At March 31, 2020 the Company has not drawn from the Revolver.
The key terms of the agreement are as follows:
• Term Loan: An aggregate $445,000,000 1st Lien Term Loan which requires quarterly principal amortization of 0.25%
with the remaining principal due at maturity date. In addition, if the Company has Excess Cash Flow ("ECF") as defined
in the Credit Agreement, the ECF Percentage of the Excess Cash Flow for such fiscal year minus optional prepayment
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. The
ECF Percentage is defined as 50% stepping down to 25% or 0% based on the Secured Leverage Ratio as of the last day
of the fiscal year.
• 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.
•
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 based upon the Company's Total Leverage Ratio (as defined in the Credit Agreement).
61
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
•
Prepayments: Provisions permitting a Borrower to voluntarily prepay either the Term Loan or Revolver in whole or in
part at any time, and provisions requiring certain mandatory prepayments of the Term Loan 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% of the principal amount
of the First Lien Term Loans is required if the prepayment is associated with a Repricing Transaction and it were to occur
within the first twelve months.
• Covenants: Provisions containing covenants required of the Corporation 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 Revolving Facility is outstanding (excluding any Letters of Credit) (the “Covenant Trigger”),
and permits the Total Leverage Ratio for the Reference Period ended on such date to not exceed (i) 4.50:1.00 as of any
date of determination prior to December 31, 2017, (ii) 4.00:1.00 as of any date of determination on December 31, 2017
and thereafter but prior to December 31, 2018, (iii) 3.50:1.00 as of any date of determination on December 31, 2018 and
thereafter but prior to December 31, 2019 and (iv) 3.00:1.00 as of any date of determination on December 31, 2019 and
thereafter. As there is no amount drawn on the Revolver as of March 31, 2020 the requirement to comply with the covenant
is not triggered. Had we been required to determine the covenant ratio we would have been in compliance with the
covenant provisions as of March 31, 2020 and 2019.
The Facility is secured by all U.S. inventory, receivables, equipment, real property, certain subsidiary stock (limited to 65% of
non-U.S. subsidiaries) and intellectual property. The Credit Agreement allows the declaration of dividends, but limits our ability
to pay dividends.
On February 26, 2018, the Company amended the Credit Agreement (known as the "Amended Credit Agreement"). The Amended
Credit Agreement has the same terms mentioned above except for a reduction in interest rates. The applicable rate for the repriced
term loan was reduced from 3.00% to 2.50%. The Company accounted for the Amended Credit Agreement as a debt modification,
therefore, debt repricing fees incurred in fiscal 2018 were expensed as General and Administrative expenses and the deferred
financing fees incurred as part of the Credit Agreement (discussed below) remain unchanged.
The outstanding balance of the Term Loan was $259,350,000 and $310,463,000 as of March 31, 2020 and 2019, respectively. The
Company made $51,113,000 of principal payment on the Term Loan during fiscal 2020 and $65,000,000 of principal payment on
the Term Loan during fiscal 2019. The Company is obligated to make $4,450,000 of principal payments over the next 12 months.
As previously discussed, in response to COVID-19 the Company is seeking to take all appropriate measures to protect the cash
flow and liquidity of the Company. As such, only the required principal amount has been recorded within the current portion of
long-term debt on the Company's Consolidated Balance Sheet with the remaining balance recorded as long-term debt.
There was $0 outstanding on the Revolving Credit Facility and $16,752,000 outstanding letters of credit as of March 31, 2020. The
outstanding letters of credit at March 31, 2020 consisted of $898,000 in commercial letters of credit and $15,854,000 of standby
letters of credit. Subsequent to March 31, 2020, the Company drew $25,000,000 from the Revolver for liquidity and working
capital purposes.
The gross balance of deferred financing costs on the term loan was $14,690,000 as of March 31, 2020 and 2019. The accumulated
amortization balances were $6,645,000 and $4,547,000 as of March 31, 2020 and 2019, respectively.
The gross balance of deferred financing costs associated with the Revolving Credit Facility is included in Other assets is $2,789,000
as of March 31, 2020 and March 31, 2019. The accumulated amortization balance is $1,766,000 and $1,209,000 as of March 31,
2020 and March 31, 2019 respectively. These balances are classified in Other assets since no funds were drawn on the Revolving
Credit Facility in fiscal 2020 and 2019.
62
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The principal payments obligated to be made as of March 31, 2020 on the Term Loan are as follows:
2021
2022
2023
2024
Thereafter
4,450
4,450
4,450
246,000
—
259,350
$
Non-U.S. Lines of Credit and Loans
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 March 31, 2020, unsecured credit
lines totaled approximately $2,428,000, of which $0 was drawn. In addition, unsecured lines of $14,160,000 were available for
bank guarantees issued in the normal course of business of which $9,958,000 was utilized.
13.
Pensions and Other Benefit Plans
The Company provides retirement plans, including defined benefit and defined contribution plans, and other postretirement benefit
plans to certain employees. The Company applies ASC Topic 715 “Compensation – Retirement Benefits,” which required the
recognition in pension and other postretirement benefits obligations and accumulated other comprehensive income of actuarial
gains or losses, prior service costs or credits and transition assets or obligations that had previously been deferred. This statement
also requires an entity to measure a defined benefit postretirement plan’s assets and obligations that determine its funded status as
of the end of the fiscal year.
63
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Pension Plans
The Company provides defined benefit pension plans to certain employees. The Company uses March 31 as the measurement
date. The following provides a reconciliation of benefit obligation, plan assets, and funded status of the plans:
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid
Foreign exchange rate changes
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual gain (loss) on plan assets
Employer contribution
Benefits paid
Foreign exchange rate changes
Fair value of plan assets at end of year
Funded status
Unrecognized actuarial loss
Net amount recognized
March 31,
2020
2019
$
$
$
$
446,397
1,139
14,759
26,193
(26,852)
(1,770)
459,866
321,902
7,512
10,967
(26,852)
(163)
313,366
$
$
$
$
462,284
1,078
15,526
4,074
(27,068)
(9,497)
446,397
326,745
11,333
11,018
(27,068)
(126)
321,902
$ (146,500) $ (124,495)
73,836
(50,659)
105,878
(40,622) $
$
Amounts recognized in the consolidated balance sheets are as follows:
Other assets
Accrued liabilities
Other non-current liabilities
Accumulated other comprehensive loss, before tax
Net amount recognized
March 31,
2020
$
$
$
6,587
(3,563)
(149,524)
105,878
(40,622) $
2019
6,424
(3,546)
(127,373)
73,836
(50,659)
Other assets are presented separately from pension liabilities as one of the Company's U.S. plans is overfunded.
In fiscal 2021, an estimated net loss of $3,516,000 and no prior service costs for the defined benefit pension plans will be amortized
from accumulated other comprehensive loss to net periodic benefit cost.
64
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Net periodic pension cost included the following components:
Service costs—benefits earned during the period
Interest cost on projected benefit obligation
Expected return on plan assets
Net amortization
Curtailment
Other
Net periodic pension cost (benefit)
2020
2019
2018
$
$
1,139
14,759
(15,887)
2,279
—
—
2,290
$
$
1,078
15,526
(18,454)
2,339
—
—
489
$
$
2,580
16,488
(21,483)
3,083
5
17
690
The Company adopted ASU 2017-07 in the fiscal 2019. The service cost component of net periodic benefit cost above is recorded
in Cost of products sold, Selling expense, and General and administrative expenses within the Consolidated Statements of
Operations, while the remaining components are recorded to Other (income) expense, net. Fiscal 2018 amounts have been
reclassified to provide comparable presentation in line with the guidance in ASU 2017-07 based on amounts previously disclosed
for the various components of net periodic pension cost (benefit).
Information for pension plans with a projected benefit obligation in excess of plan assets is as follows:
Projected benefit obligation
Fair value of plan assets
March 31,
$
2020
410,181
257,093
$
2019
395,202
264,211
Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
Accumulated benefit obligation
Fair value of plan assets
March 31,
$
2020
401,918
254,508
$
2019
389,509
264,211
Unrecognized gains and losses are amortized through March 31, 2020 on a straight-line basis over the average remaining service
period of active participants. Starting in fiscal 2016, the Company changed the amortization period of its largest plan to the average
remaining lifetime of inactive participants, as a significant portion of the plan population is now inactive. This change increases
the amortization period of the unrecognized gains and losses.
The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of the
projected benefit obligation for the year listed and also net periodic pension cost for the following year:
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase on active plans
2020
2019
2018
2.79%
5.01%
0.59%
3.42%
5.77%
0.61%
3.49%
6.77%
0.39%
The expected rates of return on plan asset assumptions are determined considering long-term historical averages and real returns
on each asset class.
65
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The Company’s retirement plan target and actual asset allocations are as follows:
Equity securities
Fixed income
Total plan assets
Target
2021
40-30%
60-70%
100%
Actual
2020
33%
67%
100%
2019
35%
65%
100%
The Company has an investment objective for domestic pension plans to adequately provide for both the growth and liquidity
needed to support all current and future benefit payment obligations. The Company's policy is to de-risk the portfolio by increasing
liability-hedging investments as the pension liability funded status increases, which is known as the glide path method. Within the
table above, cash equivalents are categorized as fixed income as they earn lower returns than equity securities which includes
alternative real estate funds (shown in the fair value tables below).
The Company’s funding policy with respect to the defined benefit pension plans is to contribute annually at least the minimum
amount required by the Employee Retirement Income Security Act of 1974 (ERISA). Additional contributions may be made to
minimize PBGC premiums. The Company plans to contribute the minimum amount required (approximately $4,945,000) to its
pension plans in fiscal 2021 as a response to COVID-19 but will reassess later in the fiscal year and increase contributions if
economic conditions improve.
Information about the expected benefit payments for the Company’s defined benefit plans is as follows:
2021
2022
2023
2024
2025
2026-2030
Postretirement Benefit Plans
$
26,943
27,052
27,312
27,189
26,965
131,220
The Company sponsors a defined benefit other postretirement health care plan that provide medical and life insurance coverage
to certain U.S. retirees and their dependents of one of its subsidiaries. Prior to the acquisition of this subsidiary, the Company did
not sponsor any postretirement benefit plans. The Company pays the majority of the medical costs for certain retirees and their
spouses who are under age 65. For retirees and dependents of retirees who retired prior to January 1, 1989, and are age 65 or over,
the Company contributes 100% toward the American Association of Retired Persons (“AARP”) premium frozen at the 1992 level.
For retirees and dependents of retirees who retired after January 1, 1989, the Company contributes $35 per month toward the
AARP premium. The life insurance plan is noncontributory.
66
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The Company’s postretirement health benefit plans are not funded. The following sets forth a reconciliation of benefit
obligation and the funded status of the plan:
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Actuarial gain
Benefits paid
Benefit obligation at end of year
Funded status
Unrecognized actuarial gain
Net amount recognized
Amounts recognized in the consolidated balance sheets are as follows:
Accrued liabilities
Other non-current liabilities
Accumulated other comprehensive gain, before tax
Net amount recognized
March 31,
2020
2019
2,348
71
(340)
(192)
1,887
$
$
3,284
92
(778)
(250)
2,348
(1,887) $
(1,417)
(3,304) $
(2,348)
(1,282)
(3,630)
March 31,
2020
2019
(270) $
(1,617)
(1,417)
(3,304) $
(326)
(2,022)
(1,282)
(3,630)
$
$
$
$
$
$
In fiscal 2021, an estimated gain of $207,000 for the defined benefit postretirement health care plans will be amortized from
accumulated other comprehensive loss to net periodic benefit cost. In fiscal 2020, net periodic postretirement benefit cost included
the following:
Interest cost
Net amortization
Net periodic postretirement benefit cost
Year Ended March 31,
2019
2018
2020
$
$
$
71
(205)
(134) $
$
92
(156)
(64) $
126
(5)
121
For measurement purposes, healthcare costs are assumed to increase 5.75% in fiscal 2021, grading down over time to 5.0% in four
years. The discount rate used in determining the accumulated postretirement benefit obligation was 3.17% and 3.63% as of March
31, 2020 and 2019, respectively.
Information about the expected benefit payments for the Company’s postretirement health benefit plans is as follows:
2021
2022
2023
2024
2025
2026-2030
$
274
245
225
206
186
631
67
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Assumed medical claims cost trend rates have an effect on the amounts reported for the health care plans. A one-percentage
point change in assumed health care cost trend rates would have the following effects
Effect on total of service and interest cost components
Effect on postretirement obligation
One
Percentage
Point
Increase
One
Percentage
Point
Decrease
$
$
3
78
(3)
(71)
The Company has collateralized split-dollar life insurance arrangements with two of its former officers. Under these arrangements,
the Company pays certain premium costs on life insurance policies for the former officers. Upon the later of the death of the
former officer and their spouse, the Company will receive all of the premiums paid to-date. The net periodic pension cost for
fiscal 2020 was $145,000 and the liability at March 31, 2020 is $4,631,000 with $4,494,000 included in Other non-current liabilities
and $137,000 included in Accrued liabilities in the Consolidated Balance Sheet. The cash surrender value of the policies is
$3,346,000 and $3,207,000 at March 31, 2020 and 2019, respectively. The balance is included in Other assets in the consolidated
balance sheet.
Other Benefit Plans
The Company also sponsors defined contribution plans covering substantially all domestic employees and certain international
employees. Participants may elect to contribute basic contributions. These plans provide for employer contributions based on
employee eligibility and participation. The Company recorded a charge for such contributions of approximately $5,239,000,
$5,260,000, and $4,198,000 for the years ended March 31, 2020, 2019, and 2018, respectively which are included in Cost of
Products Sold, Selling Expenses, and General and Administrative Expenses within the Consolidated Statements of Operations.
The Company expects its contributions for the defined contribution plans in future years to remain comparable to its fiscal 2020
contributions.
Fair Values of Plan Assets
The Company classified its investments within the categories of equity securities, fixed income securities, alternative real estate,
and cash equivalents, as the Company’s management bases its investment objectives and decisions from these four categories. The
Company’s investment policy is to use its glide-path method to de-risk the portfolio by increasing liability-hedging investments
as the pension liability funded status increases.
The fair values of the Company’s defined benefit plans’ consolidated assets by asset category as of March 31 were as follows:
Asset categories:
Equity securities
Fixed income securities
Alternative real estate
Cash equivalents
Total
March 31,
2020
2019
$
$
94,336
199,613
9,401
10,016
313,366
$
$
103,017
205,957
9,978
2,950
321,902
68
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The fair values of our defined benefit plans’ consolidated assets were determined using the fair value hierarchy of inputs described
in Note 5. The fair values by category of inputs as of March 31, 2020 and March 31, 2019 were as follows:
Quoted
Prices
in Active
Markets for
Identical
Assets
Significant
other
observable
Inputs
(Level 1)
(Level 2)
Significant
unobservable
Inputs
(Level 3)
Measured at
NAV (1)
$
$
42,252
30,598
4,195
—
77,045
$
$
52,084
24,014
5,206
10,016
91,320
$
$
— $
— $
139,498
—
—
139,498
$
5,503
—
—
5,503
$
Total
94,336
199,613
9,401
10,016
313,366
As of March 31, 2020:
Asset categories:
Equity securities
Fixed income securities
Alternative real estate
Cash equivalents
Total
(1) Reflects the net asset value (NAV) practical expedient used to approximate fair value.
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Measured at
NAV (1)
Significant
other
observable
Inputs
Significant
unobservable
Inputs
(Level 2)
(Level 3)
Total
$
$
43,314
45,713
7,161
—
96,188
$
$
59,703
602
2,817
2,950
66,072
$
$
— $
— $
153,941
—
—
153,941
$
5,701
—
—
5,701
$
103,017
205,957
9,978
2,950
321,902
As of March 31, 2019:
Asset categories:
Equity securities
Fixed income securities
Alternative real estate
Cash equivalents
Total
(1) Reflects the net asset value (NAV) practical expedient used to approximate fair value.
Level 1 securities consist of mutual funds with quoted market prices.
The Level 2 fixed income securities are investments in a combination of funds whose underlying investments are in a variety of
fixed income securities including foreign and domestic corporate bonds, securities issued by the U.S. government, U.S. and foreign
government obligations, and other similar fixed income investments. The fair values of the underlying investments in these funds
are generally based on independent broker dealer bids, or by comparison to other debt securities having similar durations, yields,
and credit ratings. The fair values of these funds are determined based on their net asset values which are published daily. We are
not aware of any significant restrictions on the issuances or redemption of shares of these funds
Fair value of Level 3 fixed income securities at the beginning of the year was $5,701,000. During fiscal 2020 fixed income securities
earned investment return of $113,000 and had disbursements of $311,000, which includes liquidations, resulting in an ending
balance of $5,503,000. These fixed income securities consist primarily of insurance contracts which are carried at their liquidation
value based on actuarial calculations and the terms of the contracts. Significant inputs in determining the fair value for these
contracts include company contributions, contract disbursements, and stated interest rates. Gains and losses on these contracts
are recognized as part of net periodic pension cost and recorded as part of cost of sales, selling, or general and administrative
expense.
69
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
14.
Employee Stock Ownership Plan (ESOP)
Effective January 1, 2012 the ESOP was closed to new hires. Prior to this date, substantially all of the Company’s U.S. non-union
employees were participants in the ESOP. Additionally, during the year ended March 31, 2015 the final loan payment was made
by the ESOP to the Company and there was no compensation expense recorded in fiscal years 2020, 2019, or 2018.
At March 31, 2020 and 2019, 234,000 and 280,000 of ESOP shares, respectively, were allocated or available to be allocated to
participants’ accounts. There are no shares of collateralized common stock related to the ESOP loan outstanding at March 31,
2020 and no ESOP shares were pledged as collateral to guarantee the ESOP term loans.
15.
Earnings per Share and Stock Plans
Earnings per Share
The Company calculates earnings per share in accordance with ASC Topic 260, “Earnings per Share.” Basic earnings per share
exclude any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share include any dilutive effects
of stock options, unvested restricted stock units, unvested performance shares, and unvested restricted stock. Stock options and
performance shares with respect to 196,000 and 128,000 common shares were not included in the computation of diluted earnings
per share for fiscal 2020 and 2019, respectively, because they were antidilutive. For the years ended March 31, 2020 and 2019,
an additional 40,000 and 153,000, respectively, in contingently issuable shares were not included in the computation of diluted
earnings per share because a performance condition had not yet been met.
The following table sets forth the computation of basic and diluted earnings per share (share data presented in thousands):
Numerator for basic and diluted earnings per share:
Net income
Denominators:
Year Ended March 31,
2019
2018
2020
$
59,672
$
42,577
$
22,065
Weighted-average common stock outstanding— denominator for basic EPS
Effect of dilutive employee stock options, RSU's and performance shares
23,619
236
23,276
384
22,841
494
Adjusted weighted-average common stock outstanding and assumed
conversions— denominator for diluted EPS
23,855
23,660
23,335
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note 14).
During fiscal 2018, the Company adopted ASU No. 2016-09, "Compensation—Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting" (ASU No. 2016-09). Among other modifications to accounting for stock based
compensation, this ASU requires that assumed proceeds from excess tax benefits and deficiencies are no longer included in the
calculation of weighted-average diluted common stock outstanding and are recorded as income tax expense or benefit in the
statement of operations. Refer to Note 17 for the impact the adoption had on the Company's financial statements.
Stock Plans
The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation,”
applying the modified prospective method. This Statement requires all equity-based payments to employees, including grants of
employee stock options, to be recognized in the statement of earnings based on the grant date fair value of the award. Under the
modified prospective method, the Company is required to record equity-based compensation expense for all awards granted after
the date of adoption and for the unvested portion of previously granted awards outstanding as of the date of adoption.
70
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The Company grants share based compensation to eligible participants under the 2016 Long Term Incentive Plan, as Amended
and Restated in June 2019 ("2016 LTIP"). The total number of shares of common stock with respect to which awards may be
granted under the 2016 LTIP were increased by 2,500,000 as a result of the June 2019 amendment. Shares not previously
authorized for issuance under any of the prior stock plans and any shares not issued or subject to outstanding awards under the
prior stock plans are still available for issuance. Details of the shares granted under these plans are discussed below.
Prior to the adoption of the 2016 LTIP, the Company granted stock awards under the 2010 Long Term Incentive Plan and the 2006
Long Term Incentive Plan, collectively referred to as the “Prior Stock Plans.”
Stock based compensation expense was $4,507,000, $6,198,000, and $5,586,000 for fiscal 2020, 2019, and 2018, respectively. The
decrease in stock based compensation expense in fiscal 2020 is primarily related to shares that were forfeited when the Company's
Chief Executive Officer (CEO) resigned on January 10, 2020. The forfeiture resulted in the reversal of $1,981,000 in stock
compensation expense during fiscal 2020 recorded as a reduction to General and administrative expenses.
Stock compensation expense is included in cost of products sold, selling, general and administrative, and research and development
expenses depending on the nature of the service of the employee receiving the award. The Company recognizes expense for all
share–based awards over the service period, which is the shorter of the period until the employees’ retirement eligibility dates or
the service period for the award, for awards expected to vest. Accordingly, expense is generally reduced for estimated
forfeitures. ASC Topic 718 requires forfeitures to be estimated at the time of grant and revised if necessary, in subsequent periods
if actual forfeitures differ from those estimates.
The Company recognized compensation expense for stock option awards and unvested restricted share awards that vest based on
time or market parameters straight-line over the requisite service period for vesting of the award.
Long Term Incentive Plan
Under the 2016 LTIP, the total number of shares of common stock with respect to which awards may be granted under the plan is
2,500,000 in addition to shares not previously authorized for issuance under any of the prior stock plans and any shares not issued
or subject to outstanding awards under the prior stock plans. As of March 31, 2020, 3,033,000 shares remain for future grants.
The 2016 LTIP was designed as an omnibus plan and awards may consist of non-qualified stock options, incentive stock options,
stock appreciation rights, restricted stock, restricted stock units, or stock bonuses.
Under the 2016 LTIP, the granting of awards to employees may take the form of options, restricted shares, and performance shares.
The Compensation Committee of our Board of Directors determines the number of shares, the term, the frequency and date, the
type, the exercise periods, any performance criteria pursuant to which awards may be granted, and the restriction and other terms
and conditions of each grant in accordance with terms of the Plan.
In connection with the acquisition of Magnetek, the Company agreed to continue the 2014 Stock Incentive Plan of Magnetek, Inc.
(the "Magnetek Stock Plan"). In doing so, the Company has available under the Magnetek Stock Plan 164,461 of the Company's
shares which can be granted to certain employees as stock-based compensation.
Stock Option Plans
Options outstanding under the 2016 LTIP generally become exercisable over a four-year period at a rate of 25% per year commencing
one year from the date of grant and have an exercise price of not less than 100% of the fair market value of the common stock on
the date of grant.
71
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
A summary of option transactions during each of the three fiscal years in the period ended March 31, 2020 is as follows:
Outstanding at April 1, 2017
Granted
Exercised
Cancelled
Outstanding at March 31, 2018
Granted
Exercised
Cancelled
Outstanding at March 31, 2019
Granted
Exercised
Cancelled
Outstanding at March 31, 2020
Exercisable at March 31, 2020
Weighted-
average
Exercise Price
per share
19.10
24.33
17.43
19.83
21.04
38.70
22.09
23.94
23.52
35.16
20.26
31.01
26.53
22.67
$
Shares
1,063,894
227,783
(363,091)
(6,136)
922,450
133,743
(187,907)
(33,509)
834,777
171,515
(296,027)
(183,471)
526,794
225,337
Weighted-
average
Remaining
Contractual
Life (in years)
6.98
Aggregate
Intrinsic
Value
$
6,477
7.56
$
13,654
7.04
$
9,602
6.93
5.74
$
$
1,518
858
The Company calculated intrinsic value for those options that had an exercise price lower than the market price of our common
shares as of March 31, 2020. The aggregate intrinsic value of outstanding options as of March 31, 2020 is calculated as the difference
between the exercise price of the underlying options and the market price of our common shares for the 302,505 options that were
in-the-money at that date. The aggregate intrinsic value of exercisable options as of March 31, 2020 is calculated as the difference
between the exercise price of the underlying options and the market price of our common shares for the 177,251 exercisable options
that were in-the-money at that date. The Company's closing stock price was $25.00 as of March 31, 2020. The total intrinsic value
of stock options exercised was $5,438,000, $3,577,000, and $5,851,000 during fiscal 2020, 2019, and 2018, respectively.
The grant date fair value of options that vested was $7.43, $7.36, and $7.42 during fiscal 2020, 2019, and 2018, respectively.
As of March 31, 2020, $1,961,000 of unrecognized compensation cost related to non-vested stock options is expected to be
recognized over a weighted-average period of approximately 2.6 years.
Exercise prices for options outstanding as of March 31, 2020, ranged from $13.43 to $38.70. The following table provides certain
information with respect to stock options outstanding at March 31, 2020:
Stock Options
Outstanding
Weighted-average
Exercise Price
Weighted-average
Remaining
Contractual Life
Range of Exercise Prices
$10.01 to 20.00
$20.01 to 30.00
$30.01 to $40.00
15.56
24.89
$36.59
26.53
5.64
6.20
8.61
6.93
152,666
177,705
196,423
526,794
$
$
$
72
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The following table provides certain information with respect to stock options exercisable at March 31, 2020:
Range of Exercise Prices
Stock Options
Exercisable
$10.01 to $20.00
$20.01 to $30.00
$30.01 to $40.00
89,764
115,353
20,220
225,337
Weighted- average
Exercise Price per share
15.85
$
25.19
38.58
22.67
$
The fair value of stock options granted was estimated on the date of grant using a Black-Scholes option pricing model. The Black-
Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation models require the input of subjective assumptions including
the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate,
in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee
stock options. The weighted-average grant date fair value of the options was $12.39, $13.56, and $7.66 for options granted during
fiscal 2020, 2019, and 2018, respectively. The following table provides the weighted-average assumptions used to value stock
options granted during fiscal 2020, 2019, and 2018:
Assumptions:
Risk-free interest rate
Dividend yield
Volatility factor
Expected life
Year Ended
March 31,
2020
Year Ended
March 31,
2019
Year Ended
March 31,
2018
2.23%
0.68%
0.372
5.5 years
2.64%
0.52%
0.352
5.5 years
1.42%
0.66%
0.343
5.5 years
To determine expected volatility, the Company uses historical volatility based on daily closing prices of its Common Stock over
periods that correlate with the expected terms of the options granted. The risk-free rate is based on the United States Treasury yield
curve at the time of grant for the appropriate term of the options granted. Expected dividends are based on the Company's history
and expectation of dividend payouts. The expected term of stock options is based on vesting schedules, expected exercise patterns
and contractual terms.
Restricted Stock Units
The Company granted restricted stock units under the 2016 LTIP during fiscal 2020, 2019, and 2018 to employees as well as to
the Company’s non-executive directors as part of their annual compensation. Restricted stock units for employees vest ratably
based on service one-quarter after each of years one, two, three, and four.
73
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
A summary of the restricted stock unit awards granted under the Company’s LTIP plan as of March 31, 2020 is as follows:
Unvested at April 1, 2017
Granted
Vested
Forfeited
Unvested at March 31, 2018
Granted
Vested
Forfeited
Unvested at March 31, 2019
Granted
Vested
Forfeited
Unvested at March 31, 2020
Shares
370,256
136,935
(157,448)
(12,954)
336,789
116,942
(211,932)
(11,602)
230,197
151,351
(106,792)
(62,035)
212,721
$
Weighted-average
Grant Date
Fair Value per share
19.32
$
29.38
20.39
17.99
22.62
37.90
22.66
25.18
30.22
38.40
31.09
31.61
35.20
$
$
Total unrecognized compensation cost related to unvested restricted stock units as of March 31, 2020 is $4,954,000 and is expected
to be recognized over a weighted average period of 2.4 years. The fair value of restricted stock units that vested during the year
ended March 31, 2020 and 2019 was $3,320,000 and $4,802,000, respectively.
Performance Shares
The Company granted performance shares under the 2016 LTIP during fiscal 2020, 2019, and 2018. Performance based shares are
recognized as compensation expense based upon their grant date fair value and to the extent it is probable that the performance
conditions will be met. This expense is recognized ratably over the three year period that these shares are restricted. Fiscal 2017
performance shares granted vest pursuant to a performance condition based upon the Company’s Consolidated Net Sales. During
fiscal 2019, the Company determined that the fiscal year 2017 performance shares would not vest due to the performance condition
not being met. Fiscal 2018 performance shares granted vest pursuant to a performance condition based upon the Company’s
Consolidated Net Sales. During fiscal 2019, the Company determined that the fiscal year 2018 performance shares were earned
based on the performance condition being met. Fiscal 2019 performance shares granted vest pursuant to a performance condition
based upon the Company’s Consolidated EBITDA margin for the twelve months ended March 31, 2020. During fiscal 2020, the
Company determined that the fiscal year 2019 performance shares were earned based on the performance condition being met.
Fiscal 2020 performance shares granted vest pursuant to a performance condition based upon the Company’s Consolidated EBITDA
margin for the twelve months ended March 31, 2021. At this time we believe it is probable that the March 31, 2021 performance
condition will be met.
74
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
A summary of the performance shares transactions during each of the three fiscal years in the period ended March 31, 2020 is
as follows:
Unvested at April 1, 2017
Granted
Forfeited
Unvested at March 31, 2018
Granted
Forfeited
Unvested at March 31, 2019
Granted
Forfeited
Unvested at March 31, 2020
Shares
118,853
49,221
(41,504)
126,570
34,695
(7,879)
153,386
38,585
(125,251)
66,720
$
Weighted-average
Grant Date
Fair Value per share
18.92
$
25.28
24.94
19.42
36.43
22.40
23.11
37.67
22.67
32.36
$
$
The Company had $1,335,000 in unrecognized compensation costs related to the unvested performance share awards as of March
31, 2020.
Directors Stock
During fiscal 2020, 2019, and 2018, a total of 11,768, 10,031, and 16,667 shares of stock, respectively, were granted under the
2016 LTIP to the Company’s non-executive directors as part of their annual compensation. The weighted average fair value grant
price of those shares was $39.09, $41.88, and $25.80 for fiscal 2020, 2019, and 2018, respectively. The expense related to the
shares for fiscal 2020 was $460,000 and $430,000 for fiscal years 2018 and 2019.
Shareholder Rights Plan
On March 29, 2018 the Company announced that its Board of Directors had amended the Company's Shareholder Rights Plan,
which accelerated the expiration of the Company's preferred share purchase rights to March 31, 2018. Prior to its expiration,
preferred share purchase right holders could exercise their rights if a person or group acquired 20% or more of the Company’s
common shares or announced a tender offer for 20% or more of the common shares.
Dividends
On March 24, 2020 the Company's Board of Directors approved payment of a quarterly dividend of $0.06 per common share,
representing an annual dividend rate of $0.24 per share. The dividend was paid on May 14, 2020 to shareholders of record on
May 4, 2020 and totaled approximately $1,430,000.
Stock Repurchase Plan
On March 26, 2019, the Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $20
million of the Company's common stock. No repurchases were made during the fiscal years ended March 31, 2020 or 2019.
16.
Loss Contingencies
From time to time, the Company is named a defendant in legal actions arising out of the normal course of business. The Company
is not a party to any pending legal proceeding other than ordinary, routine litigation incidental to our business. The Company does
not believe that any of our pending litigation will have a material impact on its business.
75
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Accrued general and product liability costs are actuarially estimated reserves based on amounts determined from loss reports,
individual cases filed with the Company, and an amount for losses incurred but not reported. The aggregate amounts of reserves
were $11,944,000 and $12,686,000 of which $8,444,000 and $9,185,000 are included in Other non current liabilities and $3,500,000
in Accrued liabilities for both years as of March 31, 2020 and 2019, respectively. The liability for accrued general and product
liability costs are funded by investments in marketable securities (see Notes 2 and 7).
The following table provides a reconciliation of the beginning and ending balances for accrued general and product liability:
Accrued general and product liability, beginning of year
Add provision for claims
Deduct payments for claims
Accrued general and product liability, end of year
Year Ended March 31,
2019
2018
2020
$
$
12,686
3,233
(3,975)
11,944
$
$
13,582
2,887
(3,783)
12,686
$
$
13,335
3,965
(3,718)
13,582
The per occurrence limits on the self-insurance for general and product liability coverage to Columbus McKinnon through its
wholly-owned captive insurance company were $2,000,000 from inception through fiscal 2003 and $3,000,000 for fiscal 2004
and thereafter. In addition to the per occurrence limits, the Company’s coverage is also subject to an annual aggregate limit,
applicable to losses only. These limits range from $2,000,000 to $6,000,000 for each policy year from inception through fiscal
2020.
Along with other manufacturing companies, the Company is subject to various federal, state, and local laws relating to the protection
of the environment. To address the requirements of such laws, the Company has adopted a corporate environmental protection
policy which provides that all of its owned or leased facilities shall, and all of its employees have the duty to, comply with all
applicable environmental regulatory standards, and the Company utilizes an environmental auditing program for its facilities to
ensure compliance with such regulatory standards. The Company has also established managerial responsibilities and internal
communication channels for dealing with environmental compliance issues that may arise in the course of its business. Because
of the complexity and changing nature of environmental regulatory standards, it is possible that situations will arise from time to
time requiring the Company to incur expenditures in order to ensure environmental regulatory compliance. However, the Company
is not aware of any environmental condition or any operation at any of its facilities, either individually or in the aggregate, which
would cause expenditures having a material adverse effect on its results of operations, financial condition or cash flows and,
accordingly, has not budgeted any material capital expenditures for environmental compliance for fiscal 2020.
We have entered a voluntary environmental cleanup program in certain states where we operate and believe that our current reserves
are sufficient to remediate these locations. For all of the currently known environmental matters, we have accrued as of March
31, 2020, a total of $1,143,000 which, in our opinion, is sufficient to deal with such matters. The Company is not aware of any
environmental condition or any operation at any of its facilities, either individually or in the aggregate, which would cause
expenditures to have a material adverse effect on its results of operations, financial condition or cash flows and, accordingly, has
not budgeted any material capital expenditures for environmental compliance for fiscal 2020.
Like many industrial manufacturers, the Company is involved in asbestos-related litigation. In continually evaluating costs relating
to its estimated asbestos-related liability, the Company reviews, among other things, the incidence of past and recent claims, the
historical case dismissal rate, the mix of the claimed illnesses and occupations of the plaintiffs, its recent and historical resolution
of the cases, the number of cases pending against it, the status and results of broad-based settlement discussions, and the number
of years such activity might continue. Based on this review, the Company has estimated its share of liability to defend and resolve
probable asbestos-related personal injury claims. This estimate is highly uncertain due to the limitations of the available data and
the difficulty of forecasting with any certainty the numerous variables that can affect the range of the liability. The Company will
continue to study the variables in light of additional information in order to identify trends that may become evident and to assess
their impact on the range of liability that is probable and estimable.
Based on actuarial information, the Company has estimated its asbestos-related aggregate liability including related legal costs to
range between $3,800,000 and $6,900,000 using actuarial parameters of continued claims for a period of 37 years from March 31,
2020. The Company's estimation of its asbestos-related aggregate liability that is probable and estimable, in accordance with U.S.
76
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
generally accepted accounting principles approximates $4,753,000, which has been reflected as a liability in the consolidated
financial statements as of March 31, 2020. The recorded liability does not consider the impact of any potential favorable federal
legislation. This liability will fluctuate based on the uncertainty in the number of future claims that will be filed and the cost to
resolve those claims, which may be influenced by a number of factors, including the outcome of the ongoing broad-based settlement
negotiations, defensive strategies, and the cost to resolve claims outside the broad-based settlement program. Of this amount,
management expects to incur asbestos liability payments of approximately $2,000,000 over the next 12 months. Because payment
of the liability is likely to extend over many years, management believes that the potential additional costs for claims will not have
a material effect on the financial condition of the Company or its liquidity, although the effect of any future liabilities recorded
could be material to earnings in a future period.
The Company believes that a share of its previously incurred asbestos-related expenses and future asbestos-related expenses are
covered by pre-existing insurance policies. The Company has been engaged in a legal action against the insurance carriers for
those policies to recover past expenses and future costs incurred. In March of fiscal 2020, the Company came to a tentative
agreement with the insurance carriers to settle its case against them for recovery of past and cost-sharing for future asbestos-related
legal defense costs. The settlement is subject to mutual agreement of the terms and conditions in a coverage in place agreement.
The terms of the tentative settlement require the carriers to pay gross defense costs prior to retro-premiums of 65% for future
asbestos-related defense costs subject to an annual cap of $1,650,000 for clams covered by the tentative settlement. In addition,
a payout of approximately $2,650,000 is expected to be received for past defense costs which will be reduced by contingent legal
costs. Further, it is expected that the insurance carriers will accept coverage for indemnity on all covered cases. Estimates of the
future cost sharing have been included in the loss reserve calculation as of March 31, 2020. The settlement is expected to be
finalized in fiscal 2021. During fiscal 2020 and fiscal 2019, the Company received settlement payments of $381,000 and $484,000,
respectively, net of legal fees, from its insurance carriers as partial reimbursement for asbestos-related expenses. These partial
payments have been recorded as gains in cost of products sold.
The Company is also involved in other unresolved legal actions that arise in the normal course of business. The most prevalent of
these unresolved actions involve disputes related to product design, manufacture and performance liability. The Company's
estimation of its product-related aggregate liability that is probable and estimable, in accordance with U.S. generally accepted
accounting principles approximates $6,423,000, which has been reflected as a liability in the consolidated financial statements as
of March 31, 2020. In some cases, we cannot reasonably estimate a range of loss because there is insufficient information regarding
the matter. Management believes that the potential additional costs for claims will not have a material effect on the financial
condition of the Company or its liquidity, although the effect of any future liabilities recorded could be material to earnings in a
future period.
The following loss contingencies relate to the Company's Magnetek subsidiary:
Product Liability
Magnetek has been named, along with multiple other defendants, in asbestos-related lawsuits associated with business operations
previously acquired but which are no longer owned. During Magnetek's ownership, none of the businesses produced or sold
asbestos-containing products. For such claims, Magnetek is uninsured and either contractually indemnified against liability, or
contractually obligated to defend and indemnify the purchaser of these former business operations. The Company aggressively
seeks dismissal from these proceedings. Based on actuarial information, the asbestos related liability including legal costs is
estimated to be approximately $768,000 which has been reflected as a liability in the consolidated financial statements at March
31, 2020.
Litigation-Other
In October 2010, Magnetek received a request for indemnification from Power-One, Inc. ("Power-One") for an Italian tax matter
arising out of the sale of Magnetek's power electronics business to Power-One in October 2006. With a reservation of rights,
Magnetek affirmed its obligation to indemnify Power-One for certain pre-closing taxes. The sale included an Italian company,
Magnetek, S.p.A., and its wholly owned subsidiary, Magnetek Electronics (Shenzhen) Co. Ltd. (the “Power-One China
Subsidiary”). The tax authority in Arezzo, Italy, issued a notice of audit report in September 2010 wherein it asserted that the
Power-One China Subsidiary had its administrative headquarters in Italy with fiscal residence in Italy and, therefore, is subject to
taxation in Italy. In November 2010, the tax authority issued a notice of tax assessment for the period of July 2003 to June 2004,
alleging that taxes of approximately $2,100,000 (Euro 1,900,000) were due in Italy on taxable income earned by the Power-One
China Subsidiary during this period. In addition, the assessment alleges potential penalties together with interest in the amount
of approximately $2,900,000 (Euro 2,600,000) for the alleged failure of the Power-One China Subsidiary to file its Italian tax
77
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
return. The Power-One China Subsidiary filed its response with the provincial tax commission of Arezzo, Italy in January 2011.
A hearing before the Tax Court was held in July 2012 on the tax assessment for the period of July 2003 to June 2004. In September
2012, the Tax Court ruled in favor of the Power-One China Subsidiary dismissing the tax assessment for the period of July 2003
to June 2004. In February 2013, the tax authority filed an appeal of the Tax Court's September 2012 ruling. The Regional Tax
Commission of Florence heard the appeal of the tax assessment dismissal for the period of July 2003 to June 2004 and thereafter
issued its ruling finding in favor of the tax authority. Magnetek believes the court’s decision was based upon erroneous interpretations
of the applicable law and appealed the ruling to the Italian Supreme Court in April 2015.
The tax authority in Arezzo, Italy also issued a tax inspection report in January 2011 for the periods July 2002 to June 2003 and
July 2004 to December 2006 claiming that the Power-One China Subsidiary failed to file Italian tax returns for the reported periods.
In August 2012, the tax authority in Arezzo, Italy issued notices of tax assessment for the periods July 2002 to June 2003 and July
2004 to December 2006, alleging that taxes of approximately $7,500,000 (Euro 6,700,000) were due in Italy on taxable income
earned by the Power-One China Subsidiary together with an allegation of potential penalties in the amount of approximately
$3,100,000 (Euro 2,800,000) for the alleged failure of the Power-One China Subsidiary to file its Italian tax returns. On June 3,
2015, the Tax Court ruled in favor of the Power-One China Subsidiary dismissing the tax assessments for the periods of July 2002
to June 2003 and July 2004 to December 2006. On July 27, 2015, the tax authority filed an appeal of the Tax Court's ruling of June
3, 2015. In May 2016, the Regional Tax Court of Florence rejected the appeal of the tax authority and at the same time canceled
the notices of assessment for the fiscal years of 2004/2005 and 2005/2006. The tax authority had up to six months to appeal the
decision. In December 2016, Magnetek was served by the Italian Revenue Service with two appeals to the Italian Supreme Court
regarding the two positive judgments on the tax assessments for the fiscal periods 2004/2005 and 2005/2006. In March 2017, the
tax authority rejected the appeal of the assessment for 2005/2006 fiscal year. The tax authority had until October 2017 to appeal
this decision. In October 2017, Magnetek was served by the Italian Revenue Service with an appeal to the Italian Supreme Court
against the positive judgment on the tax assessment for fiscal year 2005/2006. In November 2017 Magnetek filed a memorandum
with the Italian Revenue Service and the Italian Supreme Court in response to the appeal made by the tax authority. In February
2018 an appeal hearing was held at the Regional Tax Court of Florence regarding the Italian tax authority's claim for taxes due for
fiscal 2002/2003. In October 2018 Magnetek was served by the Italian Revenue Service with an appeal to the Italian Supreme
Court against the positive judgment on the tax assessment for fiscal year 2002/2003. In November 2018 Magnetek filed a
memorandum with the Italian Supreme Court in response to the appeal made by the tax authority.
The Company believes it will be successful and does not expect to incur a liability related to these assessments.
Environmental Matters
From time to time, Magnetek has taken action to bring certain facilities associated with previously owned businesses into compliance
with applicable environmental laws and regulations. Upon the subsequent sale of certain businesses, Magnetek agreed to indemnify
the buyers against environmental claims associated with the divested operations, subject to certain conditions and limitations.
Remediation activities, including those related to indemnification obligations, did not involve material expenditures during fiscal
year 2020.
Magnetek has also been identified by the United States Environmental Protection Agency and certain state agencies as a potentially
responsible party for cleanup costs associated with alleged past waste disposal practices at several previously utilized, owned or
leased facilities and offsite locations. Its remediation activities as a potentially responsible party were not material in fiscal year
2020. Although the materiality of future expenditures for environmental activities may be affected by the level and type of
contamination, the extent and nature of cleanup activities required by governmental authorities, the nature of Magnetek's alleged
connection to the contaminated sites, the number and financial resources of other potentially responsible parties, the availability
of indemnification rights against third parties, and the identification of additional contaminated sites, Magnetek's estimated share
of liability, if any, for environmental remediation, including its indemnification obligations, is not expected to be material.
In 1986, Magnetek acquired the stock of Universal Manufacturing Corporation (“Universal”) from a predecessor of Fruit of the
Loom (“FOL”), and the predecessor agreed to indemnify Magnetek against certain environmental liabilities arising from pre-
acquisition activities at a facility in Bridgeport, Connecticut. Environmental liabilities covered by the indemnification agreement
included completion of additional cleanup activities, if any, at the Bridgeport facility and defense and indemnification against
liability for potential response costs related to offsite disposal locations. Magnetek's leasehold interest in the Bridgeport facility
was assigned to the buyer in connection with the sale of Magnetek's transformer business in June 2001. FOL, the successor to the
indemnification obligation, filed a petition for Reorganization under Chapter 11 of the Bankruptcy Code in 1999 and Magnetek
filed a proof of claim in the proceeding for obligations related to the environmental indemnification agreement. Magnetek believes
78
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
that FOL had substantially completed the clean-up obligations required by the indemnification agreement prior to the bankruptcy
filing. In November 2001, Magnetek and FOL entered into an agreement involving the allocation of certain potential tax benefits
and Magnetek withdrew its claims in the bankruptcy proceeding. Magnetek further believes that FOL's obligation to the state of
Connecticut was not discharged in the reorganization proceeding.
In January 2007, the Connecticut Department of Environmental Protection (“DEP”) requested parties, including Magnetek, to
submit reports summarizing the investigations and remediation performed to date at the site and the proposed additional
investigations and remediation necessary to complete those actions at the site. DEP requested additional information relating to
site investigations and remediation. Magnetek and the DEP agreed to the scope of the work plan in November 2010. The Company
has recorded a liability of $352,000, included in the amount specified above, related to the Bridgeport facility, representing the
best estimate of future site investigation costs and remediation costs which are expected to be incurred in the future.
The Company has recorded total liabilities of $464,000 for all environmental matters related to Magnetek in the consolidated
financial statements as of March 31, 2020 on an undiscounted basis.
In September of 2017, Magnetek received a request for defense and indemnification from Monsanto Company, Pharmacia, LLC,
and Solutia, Inc. (collectively, “Monsanto”) with respect to: (1) lawsuits brought by plaintiffs claiming that Monsanto manufactured
polychlorinated biphenyls ("PCBs"), exposure to which allegedly caused injury to plaintiffs; and (2) lawsuits brought by
municipalities and municipal entities claiming that Monsanto should be responsible for a variety of damages due to the presence
of PCBs in bodies of water in those municipalities and/or in water treated by those municipal entities. Monsanto claims to be
entitled to defense and indemnification from Magnetek under a so-called “Special Undertaking” apparently executed by Universal
in January of 1972, which purportedly required Universal to defend and indemnify Monsanto from liabilities “arising out of or in
connection with the receipt, purchase, possession, handling, use, sale or disposition of” PCBs by Universal.
Magnetek has declined Monsanto’s tender, and believes that it has meritorious legal and factual defenses to the demands made by
Monsanto. Magnetek is vigorously defending against those demands and has commenced litigation to, among other things, declare
the Special Undertaking void and unenforceable. Monsanto has, in turn, commenced an action to enforce the Special Undertaking.
Magnetek intends to continue to vigorously prosecute its declaratory judgment action and to defend against Monsanto’s action
against it. We cannot reasonably estimate a potential range of loss with respect to Monsanto’s tender because there is insufficient
information regarding the underlying matters. Management believes, however, that the potential additional legal costs related to
such matters will not have a material effect on the financial condition of the Company or its liquidity, although the effect of any
future liabilities recorded could be material to earnings in a future period.
As of March 31, 2020 the Company has recorded a reserve of $100,000 for legal costs incurred to date and expected to be incurred
related to this matter. The Company previously filed suit against Travelers in District Court seeking coverage under insurance
policies in the name of Magnetek’s predecessor Universal Manufacturing. In July 2019, the District Court ruled that Travelers is
obligated to defend Magnetek under these policies in connection with Magnetek’s litigation against Monsanto. The Court held
that Monsanto’s claims against Magnetek fall within the insuring agreement of the Travelers policies and that none of the policy
exclusions precluded the possibility of coverage. The Court also held that Travelers prior settlements with other insureds under
the policies did not cut off or release Magnetek’s rights under the policies. Travelers has moved for reconsideration and has sought
discovery from Magnetek and Monsanto in connection with that motion, which is not yet decided, and will have a right of appeal
after that motion is decided. Subject to any appeal, Travelers will be required to reimburse Magnetek’s defense costs to date, and
fund its defense costs moving forward.
The Company is also engaged in similar coverage litigation against Transportation Insurance Company in the Circuit Court of
Cook County, Illinois. The Company has sought a ruling that Transportation Insurance Company is also obligated to reimburse
Magnetek’s defense costs to date, and fund its defense costs moving forward. That motion is not yet fully briefed.
17.
Income Taxes
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“Tax Reform Act” or “the
Act”). The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, assessing
a one-time transition tax on a deemed repatriation of non-previously taxed earnings of foreign subsidiaries, and implementing a
territorial tax system.
79
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
While the Tax Reform Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion
provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”)
provisions. The Act also provides for the foreign-derived intangible income (“FDII”) deduction for corporations that derive gross
income from export activities
The GILTI provisions require the Company to include in its U.S. income tax return any foreign subsidiary earnings in excess of
an allowable return on the foreign subsidiary’s tangible assets. The Company recorded $525,000 and $0 additional income tax
expense as a result of GILTI for the years ended March 31, 2020 and 2019, respectively. The Company has elected to account for
GILTI tax in the period in which it is incurred, and therefore has not provided any deferred tax impacts of GILTI in its consolidated
financial statements for the years ended March 31, 2020 and 2019.
The BEAT provisions in the Tax Reform Act eliminate the deduction of certain base-erosion payments made to related foreign
corporations, and impose a minimum tax if greater than regular tax. The BEAT tax had no impact on the Company's consolidated
financial statements for the years ended March 31, 2020 and 2019.
The FDII provisions of the Act provide an incentive to domestic corporations in the form of a lower tax rate on income derived
from tangible and intangible products and services in foreign markets. This lower tax rate is accomplished via an additional tax
deduction based on a percentage of qualifying sales. The FDII deduction provided the Company an additional tax benefit of
$1,029,000 and $945,000 in the years ended March 31, 2020 and 2019, respectively.
SAB 118 measurement period adjustments
On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S.
GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including
computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act.
We applied the guidance in SAB 118 when accounting for the enactment-date effects of the Act in 2017 and throughout 2018. At
December 31, 2017, we had not completed our accounting for all of the enactment-date income tax effects of the Act under ASC
740, Income Taxes, for the following aspects: remeasurement of deferred tax assets and liabilities and one-time transition tax. As
of December 31, 2018, we completed our accounting for all of the enactment-date income tax effects of the Act, the impacts of
which are summarized below.
One-time transition tax
The one-time transition tax is based on our total post-1986 earnings and profits ("E&P"), the tax on which we previously substantially
deferred from U.S. income taxes under U.S. law. We recorded a provisional amount for our one-time transition tax liability for
each of our foreign subsidiaries, resulting in a transition tax liability of $1,500,000 at March 31, 2018.
Upon further analysis of the Act, Notices and regulations issued and proposed by the U.S. Department of the Treasury and the
Internal Revenue Service, we finalized our calculations of the transition tax liability during the quarter ended December 31, 2018.
We decreased our March 31, 2018 provisional amount of $1,500,000 to zero, the effect of which is included as a component of
income tax expense in fiscal 2019.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to the
COVID-19 pandemic. Other tax jurisdictions have enacted similar legislation. The Company is currently evaluating the impact
of the CARES Act and other, similar, legislation, but at present does not expect that the provision of the legislation would result
in a material income tax benefit.
Deferred tax assets and liabilities
As of December 31, 2017 we remeasured certain deferred tax assets and liabilities based on the rates at which they were expected
to reverse in the future (which was generally 21%), by recording a provisional amount of $16,128,000. Based upon further analysis
completed during the measurement period, we reduced this estimate by $26,000 during the year ended March 31, 2018. No further
adjustments were made to this provisional amount during the measurement period.
80
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income
from continuing operations before income tax expense. The sources and tax effects of the differences were as follows:
Statutory federal income tax rate (1)
Expected tax at statutory rate
Effect of Tax Reform Act (2), (3)
State income taxes net of federal benefit
Foreign taxes at rates other than statutory federal rate
Net loss on sale of businesses (5)
Permanent items (8), (9)
Valuation allowance (4), (6)
Foreign tax credits (4)
Federal tax credits (7)
Other
Actual tax provision expense
Year Ended March 31,
2019
2018
2020
21.00%
16,203
—
1,397
1,102
—
266
(1,184)
—
(1,903)
1,603
17,484
$
$
21.00%
11,108
(1,500)
1,728
(145)
4,041
(1,694)
13,190
(15,371)
(1,376)
340
10,321
$
$
31.55%
15,676
17,602
(37)
(2,667)
—
(2,220)
(104)
—
(612)
(18)
27,620
$
$
(1) For fiscal 2018, represents the blended rate of 35 percent for the first three quarters of the fiscal year and 21 percent for
the fourth quarter.
(2) For fiscal 2018, represents the discrete expense of the one-time transition tax ($1,500,000) and the remeasurement of
our net U.S. deferred tax assets at the new lower U.S. corporate income tax rate ($16,102,000).
(3) For fiscal 2019, represents the discrete benefit of the reduction of the one-time transition tax of $1,500,000 recorded in
fiscal 2018 to zero.
(4) For fiscal 2019, primarily represents foreign tax credits generated by the one-time transition tax calculation and valuation
allowance as the Company believes their utilization is uncertain.
(5) For fiscal 2019, represents losses on sales of businesses that are not deductible for income tax purposes.
(6) For fiscal 2020, represents the reversal of a valuation allowance on certain foreign tax credits offset by increases in
valuation allowances required in certain foreign jurisdiction.
(7) Federal tax credits include research and development credits and minimum tax credits.
(8) For fiscal 2019, permanent items include a FDII deduction of $945,000.
(9) For fiscal 2020, permanent items include a net GILTI inclusion of $525,000 and a FDII deduction of $1,029,000.
The provision for income tax expense (benefit) consisted of the following:
Current income tax expense (benefit):
United States Federal
State taxes
Foreign
Deferred income tax expense (benefit):
United States
Foreign
Year Ended March 31,
2019
2018
2020
$
$
(2,491) $
626
11,984
(1,663) $
394
12,548
1,109
402
6,141
7,827
(462)
17,484
$
5,873
(6,831)
10,321
$
21,177
(1,209)
27,620
81
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The Company applies the liability method of accounting for income taxes as required by ASC Topic 740, “Income Taxes.” The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are
as follows:
Deferred tax assets:
Federal net operating loss carryforwards
State and foreign net operating loss carryforwards
Employee benefit plans
Insurance reserves
Accrued vacation and incentive costs
Federal tax credit carryforwards
ASC 842 Lease Liability
Equity compensation
Other
Valuation allowance
Deferred tax assets after valuation allowance
Deferred tax liabilities:
Property, plant, and equipment
ASC 842 Right-of-Use Asset
Intangible assets
Total deferred tax liabilities
Net deferred tax assets (liabilities)
March 31,
2020
2019
18,091
7,142
31,471
3,216
3,218
11,922
9,048
1,974
7,319
(15,036)
78,365
(1,962)
(8,938)
(59,397)
(70,297)
8,068
$
$
21,990
8,069
27,955
3,204
4,766
17,685
—
2,285
4,449
(16,881)
73,522
(2,429)
—
(63,468)
(65,897)
7,625
$
$
The net deferred tax asset increased in fiscal 2020 primarily as a result of an increase is accrued employee benefits and the
amortization of certain intangible assets, offset by the utilization of federal and state net operating losses and certain tax credits.
The gross amount of the Company’s deferred tax assets were $93,401,000 and $90,403,000 at March 31, 2020 and 2019,
respectively.
The valuation allowance includes $2,696,000, $2,372,000, and $3,837,000 related to foreign net operating losses at March 31,
2020, 2019, and 2018, respectively. The Company’s foreign subsidiaries have net operating loss carryforwards that expire in
periods ranging from five years to indefinite.
The federal net operating losses arose from the acquisition of Magnetek and have expiration dates ranging from 2021 through
2035 and are subject to certain limitations under U.S. tax law. The state net operating losses have expiration dates ranging from
2020 through 2038. The federal tax credits have expiration dates ranging from 2032 to indefinite.
Deferred income taxes are classified within the consolidated balance sheets based on the following breakdown:
Net non-current deferred tax assets
Net non-current deferred tax liabilities
Net deferred tax assets (liabilities)
Net non-current deferred tax liabilities are included in other non-current liabilities.
82
March 31,
2020
2019
$
$
26,281
(18,213)
8,068
$
$
27,707
(20,082)
7,625
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Income from continuing operations before income tax expense includes foreign subsidiary income of $37,577,000, $14,362,000,
and $25,144,000 for the years ended March 31, 2020, 2019, and 2018, respectively. As of March 31, 2020, the Company had
approximately $137,000,000 of undistributed earnings of foreign subsidiaries. These earnings are considered to be permanently
invested in operations outside the U.S. with the exception of the current earnings from one foreign subsidiary. Any repatriation of
these amounts would not be expected to result in a material increase to income tax expense due to the one-time transition tax and
the new U.S. territorial tax system. Determination of the amount of unrecognized deferred U.S. income tax liability with respect
to such earnings is not practicable.
During fiscal 2018, the Company adopted ASU No. 2016-09. There were shares of common stock issued through restricted stock
units, the exercise of non-qualified stock options, or through the disqualifying disposition of incentive stock options in the years
ended March 31, 2020 and 2019. The tax effect to the Company from these share transactions during fiscal 2020 and 2019 was a
reduction to income tax expense of ($169,000) and ($1,129,000), respectively.
Changes in the Company’s uncertain income tax positions, excluding the related accrual for interest and penalties, are as follows:
Beginning balance
Additions for tax positions of the current year
Reductions for prior year tax positions
Foreign currency translation
Lapses in statutes of limitation
Ending balance
2020
2019
2018
$
936
$
592
$
—
(802)
(2)
—
550
(141)
(65)
—
$
132
$
936
$
975
444
—
20
(847)
592
The Company had $46,000 and $38,000 accrued for the payment of interest and penalties at March 31, 2020 and 2019, respectively.
The Company recognizes interest expense or penalties related to uncertain tax positions as a part of income tax expense in its
consolidated statements of operations.
All of the unrecognized tax benefits as of March 31, 2020 would impact the effective tax rate if recognized.
The Company and its subsidiaries file income tax returns in the U.S., various state, local, and foreign jurisdictions. The Internal
Revenue Service has completed an examination of the Company’s U.S. income tax returns for fiscal 2015 resulting in no adjustments.
The Company has no current U.S. income tax examinations or audits.
The Company’s major tax jurisdictions are the United States and Germany. With few exceptions, the Company is no longer subject
to tax examinations by tax authorities in the United States for tax years prior to March 31, 2016 and in Germany for tax years prior
to March 31, 2012. The Company has a current tax examination in Germany for fiscal years 2012 to 2014.
The Company anticipates that total unrecognized tax benefits will change due to the settlement of audits in certain foreign
jurisdictions prior to March 31, 2021.
18.
Leases
Transition
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASC 842"). ASC 842 requires the recognition of
lease ROU assets and lease liabilities by lessees for those leases classified as operating leases and additional disclosures regarding
the nature of the Company's leases, significant judgments made, and amounts recognized in the financial statements relating to
those leases. The Company adopted this standard effective April 1, 2019 under the modified retrospective method whereas
comparative period information is not restated. In addition, the Company elected the package of practical expedients which permits
the Company to not reassess whether existing contracts are or contain leases, to not reassess the lease classification of any existing
leases, and to not reassess initial direct costs for any existing leases. The Company also elected the practical expedient to not
83
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
separate lease and non-lease components for all classes of underlying assets and made an accounting policy election to not record
leases with an initial term of twelve months or less on the balance sheet for all classes of underlying assets.
As a result of the adoption of ASC 842, the Company recognized an initial operating lease ROU assets of $35,553,000 on April
1, 2019 with a corresponding lease liability of the same amount. The standard did not materially impact the Company's Consolidated
Statement of Operations or the Consolidated Statements of Cash Flows for the fiscal year ending March 31, 2020.
Nature of leases
The Company's leases are classified as operating leases and consist of manufacturing facilities, sales offices, distribution centers,
warehouses, vehicles, and equipment. For leases with terms greater than twelve months, at lease commencement the Company
recognizes a ROU asset and a lease liability. The initial lease liability is recognized at the present value of remaining lease payments
over the lease term. Leases with an initial term of twelve months or less are not recorded on the Company's Consolidated Balance
Sheet. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term. Additionally, because
the Company has elected to not separate lease and non-lease components, variable costs also include payments to the landlord for
common area maintenance, real estate taxes, insurance, and other operating expenses.
The Company's leases have lease terms ranging from 1 to 15 years, some of which include options to extend or terminate the lease.
The exercise of lease renewal options is at the Company’s sole discretion. When deemed reasonably certain of exercise, the renewal
options are included in the determination of the lease term. The Company’s lease agreements do not contain material residual
value guarantees or any material restrictive covenants.
As of March 31, 2020, the Company does not have any significant additional operating leases that have not yet commenced.
Significant assumptions or judgments
The discount rate implicit within each lease is generally not readily determinable, therefore, the Company uses its estimated
incremental borrowing rate in determining the present value of lease payments. The incremental borrowing rate is determined
based on the Company’s recent debt issuances, lease term, and the currency in which lease payments are made.
The following table presents the weighted average remaining lease term and discount rate:
Weighted-average remaining lease term (in years)
Weighted-average discount rate
March 31, 2020
6.74
4.05%
Amounts recognized on the financial statements
The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of March 31, 2020 (in
thousands):
Assets
Balance sheet classification
Other assets
Current
Accrued liabilities
Non-current
Total liabilities
Other non current liabilities
$
$
March 31, 2020
38,125
6,924
31,629
38,553
Operating lease expense of $8,869,000 for the fiscal year ending March 31, 2020 is included in income from operations on the
Consolidated Statements of Operations. Short-term lease expense, sublease income, and variable lease expenses are not material
for the fiscal year ending March 31, 2020. Rental expense for the years ended March 31, 2019 and 2018 was $12,248,000 and
$13,020,000, respectively, under ASC 840 (prior to the adoption of ASC 842).
84
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Other lease disclosures
At March 31, 2020, the maturities of operating lease liabilities were as follows (in thousands):
Year:
2021
2022
2023
2024
2025
Thereafter
Total undiscounted lease payments
Less: imputed interest
Present value of lease liabilities
March 31, 2020
8,285
7,756
6,853
4,662
4,190
12,136
43,882
5,329
38,553
$
$
$
$
Supplemental cash flow information related to operating leases is as follows (in thousands):
Cash paid for amounts included in the measurement of operating lease liabilities
ROU assets obtained in exchange for new operating lease liabilities
Year ended
March 31, 2020
$
$
8,593
10,589
19.
Business Segment Information
ASC Topic 280, “Segment Reporting,” establishes the standards for reporting information about operating segments in financial
statements. The Company has one operating and reportable segment for both internal and external reporting purposes.
Financial information relating to the Company’s operations by geographic area is as follows:
Net sales:
United States
Germany
Europe, Middle East, and Africa (Excluding Germany)
Canada
Asia Pacific
Latin America
Total
Year Ended March 31,
2019
2018
2020
$
$
450,242
175,492
121,600
21,984
14,193
25,651
809,162
$
$
485,969
196,055
127,453
22,206
17,749
26,850
876,282
$
$
455,483
195,807
120,887
20,672
19,082
27,488
839,419
Note: Net sales to external customers are attributed to geographic areas based upon the location from which the product was
shipped from the Company to the customer.
85
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Total assets:
United States
Germany
Europe, Middle East, and Africa (Excluding Germany)
Canada
Asia Pacific
Latin America
Total
Long-lived assets:
United States
Germany
Europe, Middle East, and Africa
Canada
Asia Pacific
Latin America
Total
Year Ended March 31,
2020
2019
2018
$
518,914
$
496,580
$
477,712
438,210
86,638
9,979
20,314
429,859
85,680
8,688
22,129
514,244
99,598
7,469
23,630
19,217
$ 1,093,272
18,635
$ 1,061,571
19,793
$ 1,142,446
Year Ended March 31,
2020
2019
2018
$
272,816
$
282,456
$
293,576
327,420
9,561
1,192
4,928
1,197
342,150
10,163
1,319
5,781
1,190
409,827
11,356
1,172
6,847
1,499
$
617,114
$
643,059
$
724,277
Note: Long-lived assets include net property, plant, and equipment, goodwill, and other intangibles, net.
Sales by major product group are as follows:
Hoists
Chain and rigging tools
Industrial cranes
Actuators and rotary unions
Digital power control and delivery systems
Elevator application drive systems
Other
Total
$
$
$
$
Year Ended March 31,
2019
546,924
89,215
30,967
77,719
98,187
25,548
7,722
876,282
2020
520,217
68,666
16,058
77,957
100,658
25,606
—
809,162
$
$
2018
532,925
79,884
35,071
71,525
84,565
24,423
11,026
839,419
On December 28, 2018, the Company sold its Tire Shredder business, and on February 28, 2019, the Company sold Crane Equipment
and Service Inc. and Stahlhammer Bommern GmbH. In fiscal year 2019, these businesses accounted for chain and rigging tools
sales of $12,289,000, industrial cranes sales of $14,184,000, and other sales of $7,722,000.
86
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
20.
Selected Quarterly Financial Data (Unaudited)
Below is selected quarterly financial data for fiscal 2020 and 2019:
Three Months Ended
September 30,
2019
December 31,
2019
$
$
$
$
207,609
73,493
25,231
16,599
0.70
0.69
$
$
$
$
$
$
$
$
217,142
75,900
24,825
15,912
0.68
0.67
$
$
$
$
March 31,
2020
189,486
66,209
16,664
9,244
$
$
199,355
67,872
20,886
15,250
0.64
0.63
$
$
0.39
0.39
March 31,
2019
216,733
76,045
24,468
19,741
$
217,415
73,405
6,646
(782) $
(0.03) $
0.84
(0.03) $
0.83
Three Months Ended
September 30,
2018
December 31,
2018
Net sales
Gross profit
Income from operations
Net income (loss)
Net income (loss) per share – basic
Net income (loss) per share – diluted
Net sales
Gross profit
Income from operations
Net income (loss)
Net income (loss) per share – basic
Net income (loss) per share – diluted
June 30,
2019
212,712
75,612
27,043
18,579
0.79
0.78
June 30,
2018
224,992
79,647
13,503
7,706
0.33
0.33
$
$
$
$
$
$
$
$
87
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
21.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss is as follows:
Foreign currency translation adjustment – net of tax
Pension liability – net of tax
Postretirement obligations – net of tax
Split-dollar life insurance arrangements – net of tax
Derivatives qualifying as hedges – net of tax
Accumulated other comprehensive loss
March 31,
$
2020
(34,359) $
(79,651)
1,950
(1,340)
(950)
$ (114,350) $
2019
(25,355)
(55,601)
1,847
(1,391)
(2,552)
(83,052)
The deferred taxes related to the adjustments associated with the items included in accumulated other comprehensive loss, net of
deferred tax asset valuation allowances, were $7,445,000, $2,566,000, and $(6,848,000) for fiscal 2020, 2019, and 2018
respectively. Refer to Note 17 for discussion of the deferred tax asset valuation allowance. In the period subsequent to our initial
recording of the valuation allowance in fiscal 2011, increases and decreases to both the deferred tax assets associated with items
in accumulated other comprehensive loss, and the valuation allowance, have been recorded as offsets to comprehensive income.
As a result of the Act as described in Note 17, the Company recorded as an offsetting entry a $(9,477,000) stranded tax effect in
the minimum pension liability component and a $(194,000) stranded tax effect in the split dollar life insurance arrangement
component of other comprehensive income in fiscal 2018. The stranded tax effect related to the other post retirement obligations
component was not material.
As a result of the recording of a deferred tax asset valuation allowance in fiscal 2011, the Company recorded as an offsetting entry
a $10,006,000 stranded tax effect in the minimum pension liability component, $935,000 stranded tax effect in the other post
retirement obligations component and a $747,000 stranded tax effect in the split dollar life insurance arrangement component of
other comprehensive income. With the reversal of that valuation allowance in fiscal 2013, the Company recorded the reversal of
the valuation allowance as a reduction of income taxes in the consolidated statement of operations.
As a result of the recording of a deferred tax asset valuation allowance in fiscal 2005, the Company recorded as an offsetting entry
a $534,000 stranded tax effect in the minimum pension liability component of other comprehensive income. With the reversal of
that valuation allowance in fiscal 2006, the Company recorded the reversal of the valuation allowance as a reduction of income
taxes in the consolidated statement of operations.
The stranded tax effects described above are in accordance with ASC Topic 740, “Income Taxes” even though the impact of the
act and the deferred tax asset valuation allowance described above were initially established as an adjustment to comprehensive
income. This amount will remain indefinitely as a component of accumulated other comprehensive loss. As described in Note 22,
the Company is evaluating the impact ASU 2018-02 will have accumulated other comprehensive income. Refer to Note 22 for
additional information.
88
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
The activity by year related to investments, including reclassification adjustments for activity included in earnings are as follows
(all items shown net of tax):
Net unrealized investment gain (loss) at beginning of year
Unrealized holdings gain (loss) arising during the period
Reclassification adjustments for gain included in earnings
Adoption of ASU 2016-01
Net change in unrealized gain (loss) on investments
Net unrealized investment gain at end of year
Year Ended March 31,
2019
2018
2020
$
$
— $
—
—
—
—
— $
$
888
—
—
(888)
(888)
— $
699
189
—
—
189
888
Changes in accumulated other comprehensive income by component for the year ended March 31, 2020 are as follows (in
thousands):
Beginning balance net of tax
Other comprehensive income (loss) before
reclassification
Amounts reclassified from other comprehensive
loss to net income
Net current period other comprehensive (loss)
income
Ending balance net of tax
March 31, 2020
Foreign
Currency
Change in
Derivatives
Qualifying
as Hedges
(25,355) $
(2,552)
Retirement
Obligations
$
(55,145) $
Total
(83,052)
(25,449)
(9,004)
4,772
(29,681)
1,553
—
(3,170)
(1,617)
(23,896)
(79,041) $
(9,004)
(34,359) $
$
(31,298)
1,602
(950) $ (114,350)
89
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
Details of amounts reclassified out of accumulated other comprehensive loss for the year ended March 31, 2020 are as follows
(in thousands):
Details of AOCL Components
Net pension amount unrecognized
Amount
reclassified
from AOCL
Affected line item on consolidated statement of
operations
Change in derivatives qualifying as hedges
$
$
$
$
(1)
2,074
2,074 Total before tax
(521) Tax benefit
1,553 Net of tax
(54) Cost of products sold
(327)
Interest expense
(3,907) Foreign currency
(4,288) Total before tax
1,118 Tax benefit
(3,170) Net of tax
(1) These accumulated other comprehensive loss components are included in the computation of net periodic pension
cost. (See Note 13 — Pensions and Other Benefit Plans for additional details.)
22.
Effects of New Accounting Pronouncements
ASU 2016-02 (Topic 842) - Adopted in fiscal 2020
In March 2019, the FASB issued ASU No. 2019-01, "Codification Improvements: Leases (Topic 842)." The ASU clarifies transition
disclosure requirements, specifically that entities are not subject to the transition disclosure requirements in ASC 250 related to
the effect on income of an accounting change on certain interim period information. The ASU was effective for fiscal years
beginning after December 15, 2018, and interim periods within those years, with early adoption permitted no earlier than when
the entity adopts ASC 842.
In December 2018, the FASB issued ASU No. 2018-20, "Narrow-Scope Improvements for Lessors (Topic 842)." The ASU gives
lessors elections to account for the following under the new lease standard: sales taxes and other similar taxes collected from
lessees, lessor costs paid directly by a lessee, and recognition of variable payments for contracts with lease and nonlease components.
The ASU was effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early
adoption permitted no earlier than when the entity adopts ASC 842.
In July 2018, the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements." Under the ASU, entities may
elect not to recast the comparative periods presented when transitioning to ASC 842 and lessors may elect not to separate lease
and nonlease components when certain conditions are met. The ASU was effective for fiscal years beginning after December 15,
2018, and interim periods within those years, with early adoption permitted no earlier than when the entity adopts ASC 842.
In July 2018, the FASB issued ASU No. 2018-10, "Codification Improvements to Topic 842." Under the ASU, various aspects
within ASC 842 were improved, such as the rate implicit in the lease, lessee's reassessment of lease classification, lease term and
purchase option, as well as many others aspects of the guidance. The ASU is effective when the entity adopts ASC 842.
90
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This standard requires all leases with durations greater
than twelve months to be recognized on the balance sheet as right-of-use ("ROU") assets and leases liabilities. The standard also
requires additional disclosures about leasing arrangements and requires a modified retrospective transition approach for existing
leases, whereby the standard will be applied to the earliest year presented. The Company adopted this standard and all related
standards effective April 1, 2019. Refer to Note 18 (Leases) for the transition impact and further details.
Other Topics adopted in fiscal 2020
In July 2019, the FASB issued ASU No. 2019-07, "Codification Updates to SEC Sections." The standard aligns the guidance in
various SEC sections of the codification with the requirements of certain SEC final rules. The standard became effective upon
issuance and the standard did not have a material impact on the financial statements for the twelve months ended March 31, 2020.
In June 2018, the FASB issued ASU No. 2018-07, "Improvements to Nonemployee Share-Based Payment Accounting (Topic 550
and 718)." The standard simplifies the accounting for share-based payments granted to nonemployees for goods and services.
Under the ASU, most of the guidance on such payments to nonemployees (accounted for under ASC 550) would be aligned with
the requirements for share-based payments granted to employees (accounted for under ASC 718). The Company adopted this
standard effective April 1, 2019 and the standard did not have a material impact on the financial statements for the twelve months
ended March 31, 2020.
In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This ASU amends ASC 220, Income
Statement — Reporting Comprehensive Income, to allow a reclassification from accumulated other comprehensive income to
retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The Company adopted this standard effective
April 1, 2019 and did not make the election to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated
other comprehensive income to retained earnings.
In August 2017, the FASB issued ASU No. 2017-12, "Targeted Improvements to Accounting for Hedging Activities (Topic 815)."
The standard better aligns an entity’s financial reporting for hedging relationships with risk management activities and reduces
the complexity for the application of hedge accounting. For example, the ASU continues to require an initial prospective quantitative
hedge effectiveness assessment and documentation at hedge inception. However, if certain criteria are met, entities can elect to
subsequently perform prospective and retrospective effectiveness assessments qualitatively, unless facts and circumstances change,
and the hedge effectiveness assessment generally does not need to be completed until the first quarterly hedge effectiveness
assessment date (i.e., up to three months). The new standard also removes the concept of separately measuring and reporting hedge
ineffectiveness and requires a company to present the earnings effect of the hedging instrument, including any ineffectiveness, in
the same income statement line item in which the earnings effect of the hedged item is reported. The Company adopted this standard
effective April 1, 2019 and the standard did not have a material impact on the financial statements for the twelve months ended
March 31, 2020. The Company adopted the guidance on the modified retrospective basis and did not recognize a cumulative effect
adjustment upon adoption as the Company had not recognized ineffectiveness on any of the hedging instruments existing as of
the date of adoption.
Other Topics not yet adopted
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting." The ASU is elective and is relief to all entities, subject to meeting certain criteria, that have
contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued
because of reference rate reform. Optional expedients are provided for contract modification accounting under topics such as debt,
leases, and derivatives. The optional amendments are effective for all entities as of any date from the beginning of an interim
period that includes or is subsequent to March 12, 2020 through December 31, 2022. We are currently evaluating the impact the
standard will have on our consolidated financial statements if we chose to elect.
In March 2020, the FASB issued ASU No. 2020-03, "Codification Improvements to Financial Instruments." The ASU makes
narrow-scope improvements to various aspects of the financial instruments guidance, including the current expected credit losses
CECL) standard issued in 2016. Certain issues (topics) in the standard are effective upon issuance and did not have a material
impact on our consolidated financial statements. The two issues that pertain to CECL are effective when the Company adopts ASU
2016-13 (fiscal 2021, discussed below).
91
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(tabular amounts in thousands, except share data)
In December 2019, the FASB issued ASU No. 2019-12, "Simplifying the Accounting for Income Taxes" (Topic 740). The standard
clarifies, among other topics, that the effects of an enacted change in tax law on taxes currently payable or refundable for the
current year be reflected in the computation of the annual effective tax rate in the first interim period that includes the enactment
date of the new legislation. The standard is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2020. Early adoption is permitted for fiscal years, and interim periods within those years. We are currently evaluating
the impact the standard will have on our consolidated financial statements.
In November 2019, the FASB issued ASU No. 2019-11, "Codification Improvements to Topic 326: Financial Instruments - Credit
Losses." The ASU allows, among other aspects, companies to make accounting policy elections to simplify certain aspects of the
presentation and measurement of accrued interest on receivables as well as certain practical expedients for disclosure of accrued
interest and financial assets secured by collateral maintenance provisions. The ASU is effective when the entity adopts ASU
2016-13, which is fiscal 2021 for the Company.
In May 2019, the FASB issued ASU No. 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief."
The ASU allows companies to elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that were
previously recorded at amortized cost and are within the scope of ASC 326-20 if the instruments are eligible for the fair value
option under ASC 825-10. The ASU is effective when the entity adopts ASU 2016-13.
In November 2018, the FASB issued ASU No. 2018-19, "Codification Improvements to Topic 326: Financial Instruments - Credit
Losses." The ASU changes the effective date of ASU 2016-13, Financial Instruments - Credit Losses, to fiscal years beginning
after December 15, 2019, including interim periods within those fiscal years.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments” (“ASU 2016-13”). The standard changes the methodology for measuring credit losses on financial
instruments and the timing of when such losses are recorded. ASU 2016-13 is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2019. The Company has made significant progress on its implementation plan and is
on track to adopt this standard effective fiscal 2021. We are currently updating our existing allowance for doubtful accounts policy
and enhancing our controls in order to comply with the new standard and expect the impact to consolidated financial statement to
be immaterial. However, the Company is monitoring the impact that COVID-19 is having on our customers and their outstanding
receivable balances and is taking preventative measures, such as tightening credit limits and increasing bad debt expense, as
necessary.
In August 2018, the FASB issued ASU No. 2018-14, "Disclosure Framework - Changes to the Disclosure Requirements for Defined
Benefit Plan (Topic 715)." The ASU amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit
pension and other postretirement plans such as a narrative description describing the reasons for significant gains and losses
affecting the benefit obligation for the period and the removal of disclosing amounts in accumulated other comprehensive income
expected to be recognized as part of net periodic benefit cost over the next year. The ASU is effective for fiscal years beginning
after December 15, 2020 with early adoption permitted. We anticipate this standard will change the disclosures in the Net Periodic
Benefit Cost footnote in the Company's Form 10-K upon adoption.
In August 2018, the FASB issued ASU No. 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair
Value Measurement (Topic 820)." The ASU changes the fair value measurement disclosure requirements including new, eliminated,
and modified disclosure requirements of ASC 820. For instance, the ASU requires the addition of disclosures for Level 3 fair value
measurements with unrealized gains and losses included in other comprehensive income and disclosure of the range of the weighted
average used to develop significant unobservable inputs for Level 3 measurements. The ASU is effective for fiscal years beginning
after December 15, 2019, and interim periods within those years, with early adoption permitted for any eliminated or modified
disclosures. We anticipate this standard will modify the disclosures in the Derivative Instruments footnote upon adoption.
92
COLUMBUS McKINNON CORPORATION
SCHEDULE II—Valuation and qualifying accounts
March 31, 2020, 2019, and 2018
Dollars in thousands
Description
Year ended March 31, 2020:
Deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
Accrued general and product liability costs
Year ended March 31, 2019:
Deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
Accrued general and product liability costs
Year ended March 31, 2018:
Deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
Accrued general and product liability costs
_________________
Balance at
Beginning
of Period
Charged
to Costs
and
Expenses
Additions
Charged
to Other
Accounts
Acquisition/
Divestiture
Deductions
Balance
at End of
Period
$
$
$
$
$
$
$
$
$
3,264
16,881
20,145
12,686
3,520
4,671
8,191
13,582
2,676
4,585
7,261
13,335
$
$
$
$
$
$
$
$
$
3,115
(1,184)
1,931
3,033
784
13,190
13,974
2,887
1,184
(104)
1,080
3,965
$
$
$
$
$
$
$
$
$
(69) $
(661)
(730) $
— $
1,254 (1)
$
—
—
— $
1,254
$
5,056
15,036
20,092
— $
— $
3,775 (2)
$
11,944
(112) $
(848)
(960) $
(26) $
902 (1)
$
(132)
—
(158) $
902
$
3,264
16,881
20,145
— $
— $
3,783 (2)
$
12,686
153 $
190
343 $
— $
—
— $
493 (1)
$
—
493
$
3,520
4,671
8,191
— $
— $
3,718 (2)
$
13,582
(1) Uncollectible accounts written off, net of recoveries
(2) Insurance claims and expenses paid
93
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A.
Controls and Procedures
Management’s Evaluation of Disclosure Controls and Procedures
As of March 31, 2020, an evaluation was performed under the supervision and with the participation of our management, including
the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer,
concluded that our disclosure controls and procedures were effective as of March 31, 2020.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in Internal Control--Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO). Based on that evaluation, our management
concluded that our internal control over financial reporting was effective as of March 31, 2020.
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2020 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial
reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further,
because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people,
or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or
procedures.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting during the three months ended March 31, 2020 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
94
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Columbus McKinnon Corporation
Opinion on Internal Control over Financial Reporting
We have audited Columbus McKinnon Corporation’s internal control over financial reporting as of March 31, 2020, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Columbus McKinnon Corporation (the Company)
maintained, in all material respects, effective internal control over financial reporting as of March 31, 2020, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets as of March 31, 2020 and 2019, the related consolidated statements of operations,
comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2020, and
the related notes and financial statement schedule listed in the Index at Item 15(2) and our report dated May 27, 2020 expressed
an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial
reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Buffalo, New York
May 27, 2020
95
Item 9B.
Other Information
None.
PART III
Item 10.
Directors and Executive Officers of the Registrant
The information regarding Directors and Executive Officers of the Registrant will be included in a Proxy Statement to be filed
with the Commission prior to July 31, 2020 and upon the filing of such Proxy Statement, is incorporated by reference herein.
The charters of our Audit Committee, Compensation and Succession Committee, and Governance and Nomination Committee
are available on our website at www.columbusmckinnon.com and are available to any shareholder upon request to the Corporate
Secretary. The information on the Company's website is not incorporated by reference into this Annual Report on Form 10-K.
We have adopted a code of ethics that applies to all of our employees, including our principal executive officer, principal financial
officer and principal accounting officer, as well as our directors. Our code of ethics, the Columbus McKinnon Corporation Legal
Compliance & Business Ethics Manual, is available on our website at www.columbusmckinnon.com. We intend to disclose any
amendment to, or waiver from, the code of ethics that applies to our principal executive officer, principal financial officer or
principal accounting officer otherwise required to be disclosed under Item 10 of Form 8-K by posting such amendment or waiver,
as applicable, on our website.
Item 11.
Executive Compensation
The information regarding Executive Compensation will be included in a Proxy Statement to be filed with the Commission prior
to July 31, 2020 and upon the filing of such Proxy Statement, is incorporated by reference herein.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information regarding Security Ownership of Certain Beneficial Owners and Management and regarding equity compensation
plan incorporation will be included in a Proxy Statement to be filed with the Commission prior to July 31, 2020 and upon the
filing of such Proxy Statement, is incorporated by reference herein.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information regarding Certain Relationships and Related Transactions will be included in a Proxy Statement to be filed with
the Commission prior to July 31, 2020 and upon the filing of such Proxy Statement, is incorporated by reference herein.
Item 14.
Principal Accountant Fees and Services
The information regarding Principal Accountant Fees and Services will be included in a Proxy Statement to be filed with the
Commission prior to July 31, 2020 and upon the filing of such Proxy Statement, is incorporated by reference herein.
96
PART IV
Item 15.
Exhibits and Financial Statement Schedules
(1)
Financial Statements:
The following consolidated financial statements of Columbus McKinnon Corporation are included in Item 8:
Reference
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets - March 31, 2020 and 2019
Consolidated Statements of Operations – Years ended March 31, 2020, 2019, and 2018
Consolidated Statements of Comprehensive Income – Years ended March 31, 2020, 2019, and 2018
Consolidated Statements of Shareholders’ Equity – Years ended March 31, 2020, 2019, and 2018
Consolidated Statements of Cash Flows – Years ended March 31, 2020, 2019, and 2018
Notes to consolidated financial statements
(2) Financial Statement Schedule:
Schedule II - Valuation and qualifying accounts
Page
No.
35
38
39
40
41
42
43
Page
No.
93
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
(3)
Exhibits:
Exhibit
Number
Exhibit
3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Company’s
Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
3.2 Amended By-Laws of the Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
dated March 28, 2013).
3.3 Certificate of Amendment to the Restated Certificate of Incorporation of Columbus McKinnon Corporation, dated as of May
18, 2009 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 18, 2009).
3.4 Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.5 to the Company’s Current Report
on Form 8-K dated March 29, 2018).
4.1 Specimen common share certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995.)
#10.1 Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon
Corporation and Marine Midland Bank, dated November 2, 1995 (incorporated by reference to Exhibit 10.6 to the Company’s
Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.2 Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 (incorporated by
reference to Exhibit 10.23 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
97
#10.3 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of
April 1, 1989, dated March 2, 1995 (incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995).
#10.4 Amendment No. 2 to the Columbus McKinnon Corporation Employee Stock Ownership Plan, dated October 17, 1995
(incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K for the fiscal year ended March
31, 1997).
#10.5 Amendment No. 3 to the Columbus McKinnon Corporation Employee Stock Ownership Plan, dated March 27, 1996
(incorporated by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K for the fiscal year ended March
31, 1997).
#10.6 Amendment No. 4 of the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of
April 1, 1989, dated September 30, 1996 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1996).
#10.7 Amendment No. 5 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of
April 1, 1989, dated August 28, 1997 (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form
10-K for the fiscal year ended March 31, 1998).
#10.8 Amendment No. 6 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of
April 1, 1989, dated June 24, 1998 (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-
K for the fiscal year ended March 31, 1998).
#10.9 Amendment No. 7 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of
April 1, 1989, dated April 30, 2000 (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-
K for the fiscal year ended March 31, 2000).
#10.10 Amendment No. 8 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of
April 1, 1989, dated March 26, 2002 (incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form
10-K for the fiscal year ended March 31, 2002).
#10.11 Amendment No. 9 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of
April 1, 1989, dated March 27, 2003 (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form
10-K for the fiscal year ended March 31, 2003).
#10.12 Amendment No. 10 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as
of April 1, 1989, dated February 28, 2004 (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2004).
#10.13 Amendment No. 11 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as
of April 1, 1989, dated December 19, 2003 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 28, 2003).
#10.14 Amendment No. 12 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as
of April 1, 1989, dated March 17, 2005 (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form
10-K for the fiscal year ended March 31, 2005).
#10.15 Amendment No. 13 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as
of April 1, 1989, dated December 19, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended December 28, 2008).
#10.16 Columbus McKinnon Corporation Personal Retirement Account Plan Trust Agreement, dated April 1, 1987 (incorporated by
reference to Exhibit 10.25 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.17 Second Amendment to the Columbus McKinnon Corporation Restricted Stock Plan (incorporated by reference to Exhibit
10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2002).
#10.18 Columbus McKinnon Corporation Thrift [401(k)] Plan 1989 Restatement Effective January 1, 1998 (incorporated by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 27,
1998).
#10.19 Amendment No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated
December 10, 1998 (incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the fiscal
year ended March 31, 1999).
#10.20 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401 (k)] Plan, dated June 1,
2000 (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2000).
#10.21 Amendment No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401 (k)] Plan, dated March
26, 2002 (incorporated by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2002).
#10.22 Amendment No. 4 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated May 10,
2002 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period
ended September 29, 2002).
98
#10.23 Amendment No. 5 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated
December 20, 2002 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended December 29, 2002).
#10.24 Amendment No. 6 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated May 22,
2003 (incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2003).
#10.25 Amendment No. 7 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated April
14, 2004 (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2004).
#10.26 Amendment No. 8 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated
December 19, 2003 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended December 28, 2003).
#10.27 Amendment No. 9 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated March
16, 2004 (incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2004).
#10.28 Amendment No. 10 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated July
12, 2004 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended July 4, 2004).
#10.29 Amendment No. 11 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated March
31, 2005 (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2005).
#10.30 Amendment No. 12 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated
December 27, 2005 (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the fiscal
year ended March 31, 2006).
#10.31 Amendment No. 13 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated
December 21, 2006 (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the fiscal
year ended March, 31, 2007).
#10.32 Amendment No. 14 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated
December 21, 2007 (incorporated by reference to Exhibit 10.36 to the Company’s Annual Report on Form 10-K for the fiscal
year ended March 31, 2008).
#10.33 Amendment No. 15 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated
January 29, 2009 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended December 28, 2008).
#10.34 Columbus McKinnon Corporation Thrift 401(k) Plan Trust Agreement Restatement Effective August 9, 1994 (incorporated
by reference to Exhibit 10.32 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
#10.35 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Restatement Effective April 1, 1998 (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 27,
1998).
#10.36 Amendment No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated December 10, 1998 (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the
fiscal year ended March 31, 1999).
#10.37 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated May 26, 1999 (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal
year ended March 31, 1999).
#10.38 Amendment No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated March 26, 2002 (incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K for the
fiscal year ended March 31, 2002).
#10.39 Amendment No. 4 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated December 20, 2002 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for
the quarterly period ended December 29, 2002).
#10.40 Amendment No. 5 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated February 28, 2004 (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the
fiscal year ended March 31, 2004).
#10.41 Amendment No. 6 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated March 17, 2005 (incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the
fiscal year ended March 31, 2005).
99
#10.42 Amendment No. 7 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated December 28, 2005 (incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K for the
fiscal year ended March 31, 2006).
#10.43 Amendment No. 8 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated December 28, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for
the quarterly period ended December 31, 2006).
#10.44 Amendment No. 9 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated April 21, 2008 (incorporated by reference to Exhibit 10.47 to the Company’s Annual Report on Form 10-K for the
fiscal year ended March 31, 2008).
#10.45 Amendment No. 10 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan,
dated December 19, 2008 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for
the quarterly period ended December 28, 2008).
#10.46 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Trust Agreement Effective as of April 1, 1987
(incorporated by reference to Exhibit 10.34 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
#10.47 Form of Change in Control Agreement as entered into between Columbus McKinnon Corporation and certain of its executive
officers. (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1998).
#10.48 Form of Omnibus Code Section 409A Compliance Policy as entered into between Columbus McKinnon Corporation and
certain of its executive officers. (incorporated by reference to Appendix to the definitive Proxy Statement for the Annual
Meeting of Stockholders of Columbus McKinnon Corporation held on July 31, 2006).
#10.49 Amendment to the Company’s non-qualified deferred compensation plan, effective January 1, 2013. (incorporated by
reference to Exhibit 5.02 of the Company’s Current Report on Form 8-K filed on July 19, 2012)
#10.50
2016 Long Term Incentive Plan effective August 3, 2016 (incorporated by reference to Exhibit 4.1 of the Company’s S-8 filed
on August 3, 2016, as amended June 5, 2019.
#10.51 Credit agreement dated January 31, 2017. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on
Form 8-K filed on January 31, 2017)
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Independent Registered Public Accounting Firm.
*31.1 Certification of the principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as
amended.
*31.2 Certification of the principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
*32.1 Certification of the principal executive officer and the principal financial officer pursuant to Rule 13a-14(b) of the Securities
Exchange Act of 1934, as amended and 18 U.S.C. Section 1350, as adopted by pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. The information contained in this exhibit shall not be deemed filed with the Securities and Exchange
Commission nor incorporated by reference in any registration statement foiled by the Registrant under the Securities Act of
1933, as amended.
*101 The financial statements from the Company’s Annual Report on Form 10-K for the twelve months ended March 31, 2020
formatted in iXBRL
*101.INS XBRL Instance Document
*101.SCH XBRL Taxonomy Extension Schema Document
*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB XBRL Taxonomy Extension Label Linkbase Document
*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
*104 Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)
* Filed herewith
# Indicates a Management contract or compensation plan or arrangement
100
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
Date: May 27, 2020
COLUMBUS McKINNON CORPORATION
By:
/s/ Richard H. Fleming
Richard H. Fleming
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
101
Signature
Title
Date
/s/ Richard H. Fleming
Chief Executive Officer and Chairman of the Board
of Directors (Principal Executive Officer)
May 27, 2020
Richard H. Fleming
/s/ Gregory P. Rustowicz
Vice President and Chief Financial Officer
(Principal Financial Officer)
May 27, 2020
Gregory P. Rustowicz
/s/ Jeanne Beliveau-Dunn
Director
May 27, 2020
Jeanne Beliveau-Dunn
/s/ Aziz S. Aghili
Director
May 27, 2020
Aziz S. Aghili
/s/ Liam G. McCarthy
Director
May 27, 2020
Liam G. McCarthy
/s/ Heath A. Mitts
Director
May 27, 2020
Heath A. Mitts
/s/ Nicholas T. Pinchuk
Director
May 27, 2020
Nicholas T. Pinchuk
/s/ Kathryn V. Roedel
Director
May 27, 2020
Kathryn V. Roedel
/s/ R. Scott Trumbull
Director
May 27, 2020
R. Scott Trumbull
/s/ Ernest R. Verebelyi
Chairman Emeritus
May 27, 2020
Ernest R. Verebelyi
102
Exhibit 21.1
COLUMBUS McKINNON CORPORATION
SUBSIDIARIES
(as of March 31, 2020)
CM Insurance Company, Inc. (US-NY)
Magnetek, Inc. (US-DE)
Magnetek National Electric Coil, Inc. (US-DE)
Yale Industrial Products, Inc. (US-DE)
Yale Industrial Products Ltd. (England)
Columbus McKinnon Dutch Holdings 1 B.V. (The Netherlands)
Columbus McKinnon Dutch Holdings 2 B.V. (The Netherlands)
Columbus McKinnon Dutch Holdings 3 B.V. (The Netherlands)
Morris Middle East, Ltd. (Cayman Islands)
Eastern Morris Cranes Company Limited (49% Investment) (Saudi Arabia)
Columbus McKinnon Limited (Canada)
Columbus McKinnon Asia Pacific Pte. Ltd. (Singapore)
Columbus McKinnon (Shanghai) International Trading Co. LTD (China)
Columbus McKinnon Asia Pacific Ltd. (Hong Kong)
Columbus McKinnon Industrial Products Co. Ltd. (China)
Columbus McKinnon (Hangzhou) Industries Co. Ltd. (China)
Columbus McKinnon Singapore Pte. Ltd. (Singapore)
STAHL Cranesystems Shanghai Co. Ltd. (China)
STAHL Cranesystems India Private Ltd. (India)
Columbus McKinnon EMEA GmbH (Germany)
Columbus McKinnon Industrial Products GmbH (Germany)
Columbus McKinnon Corporation Ltd. (England)
Magnetek (UK) Limited (England)
Stahl Cranesystems Ltd. (England)
Columbus McKinnon France S.a.r.l. (France)
Columbus McKinnon Maghreb S.a.r.l AAU (Morocco)
Société d’Exploitation des Raccords Gautier (France)
Columbus McKinnon Italia S.r.l. (Italy)
Columbus McKinnon Ibérica S.L.U. (Spain)
Columbus McKinnon Benelux, B.V. (The Netherlands)
CMCO Material Handling (Pty), Ltd. (South Africa)
Yale Engineering Products (Pty.) Ltd. (South Africa)
Yale Lifting Solutions (Pty.) Ltd. (South Africa)
Yale Lifting Solutions Industrial (Pty.) Ltd. (South Africa)
Columbus McKinnon Austria GmbH (Austria)
Hebetechnik Gesellschaft GmbH (Austria)
Columbus McKinnon Hungary Kft. (Hungary)
Columbus McKinnon Russia LLC (Russia)
Columbus McKinnon Kaldirma ESVT, Ltd. (Turkey)
Columbus McKinnon Polska Sp.z.o.o (Poland)
Columbus McKinnon Switzerland AG (Switzerland)
Columbus McKinnon Ireland, Ltd. (Ireland)
Ferromet al Limitada (Portugal)
Stahl Cranesystems GmbH (Germany)
STAHL Cranesystems FZE (UAE)
Columbus McKinnon Engineered Products GmbH (Germany)
Verkehrstechnik Gmbh (Germany)
Columbus McKinnon Latin America B.V. (The Netherlands)
Columbus McKinnon de Mexico, S.A. de C.V. (Mexico)
Columbus McKinnon de Uruguay, S.A. (Uruguay)
Columbus McKinnon do Brazil Ltda. (Brazil)
Columbus McKinnon de Panama S.A. (Panama)
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-168777) pertaining to the Columbus McKinnon Corporation 2010 Long Term
Incentive Plan,
(2) Registration Statement (Form S-8 No. 333-207165) pertaining to the 2014 Incentive Plan of Magnetek, Inc.,
(3) Registration Statement (Form S-8 No. 333-212865) pertaining to the Columbus McKinnon Corporation 2016 Long Term
Incentive Plan,
(4) Registration Statement (Form S-3 No. 333-217382) and related Prospectus of Columbus McKinnon Corporation for the
registration of 2,273,000 shares of common stock of Columbus McKinnon Corporation, and
(5) Registration Statement (Form S-3 No. 333-231827) and related Prospectus of Columbus McKinnon Corporation for the
registration of common stock, preferred stock, warrants, rights, stock purchase contracts, debt securities, units and guarantees
of debt securities of Columbus McKinnon Corporation;
of our reports dated May 27, 2020, with respect to the consolidated financial statements and schedule of Columbus McKinnon
Corporation and the effectiveness of internal control over financial reporting of Columbus McKinnon Corporation included in
this Annual Report (Form 10-K) for the year ended March 31, 2020.
/s/ Ernst & Young LLP
Buffalo, New York
May 27, 2020
CERTIFICATION
I, Richard H. Fleming, certify that:
1.
I have reviewed this report on Form 10-K of Columbus McKinnon Corporation;
EXHIBIT 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter, the registrant’s fourth fiscal quarter in the case of an annual
report, that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: May 27, 2020
/s/ Richard H. Fleming
Richard H. Fleming
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION
I, Gregory P. Rustowicz, certify that:
1.
I have reviewed this report on Form 10-K of Columbus McKinnon Corporation;
Exhibit 31.2
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter, the registrant’s fourth fiscal quarter in the case of an annual
report, that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: May 27, 2020
/s/ Gregory P. Rustowicz
Gregory P. Rustowicz
Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION
Exhibit 32.1
Each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the Annual Report of Columbus McKinnon Corporation (the "Company") on Form 10-K for
the year ended March 31, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that information contained in the such Annual Report on Form 10-K fairly presents, in all material respects, the financial
condition and result of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: May 27, 2020
/s/ Richard H. Fleming
Richard H. Fleming
Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory P. Rustowicz
Gregory P. Rustowicz
Chief Financial Officer
(Principal Financial Officer)
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Executive Officers
Board of Directors
David J. Wilson
President and Chief Executive Officer
Richard H. Fleming, Chairman
USG Corporation (NYSE: USG) (retired)
Gregory P. Rustowicz
Vice President-Finance and Chief Financial Officer
David J. Wilson
Columbus McKinnon
Bert A Brant
Vice President, Global Manufacturing
Appal Chintapalli
Vice President, Engineered Products
Alan S. Korman
Vice President Corporate Development, General
Counsel and Chief Human Resources Officer
Peter M. McCormick
Vice President, Crane Solutions Group
Mark R. Paradowski
Vice President, Information Services
Mario Ramos
Vice President, Global Product Development
Kurt F. Wozniak
Vice President, Industrial Products
Aziz S. Aghili 2,3
Dana Holding Corporation
Jeanne Beliveau-Dunn 2,3
Claridad LLC
Liam G. McCarthy 1,2,3*
Molex Inc. (retired)
Heath A. Mitts 1*,3
TE Connectivity Ltd. (NYSE: TEL)
Nicholas T. Pinchuk 1,2
Snap-on Inc. (NYSE: SNA)
Kathryn V. Roedel 1,2,3
Sleep Number Corporation (NASDAQ: SCSS) (retired)
R. Scott Trumbull 1,2*
Franklin Electric Company (NASDAQ: FELE) (retired)
1 Audit
2 Compensation and Succession
3 Corporate Governance and Nomination
* Chairperson
Reconciliation of GAAP Net Income & EPS to
Non-GAAP Net Income & EPS
Net Income
Add back (deduct):
Factory closures
Business realignment costs
Insurance recovery legal costs
Net loss on sales of businesses, including impairment
Acquisition deal, integration, and severance costs
Debt repricing fees
Magnetek litigation
Acquisition inventory step-up expense
CEO retirement pay and search costs
Loss on foreign exchange option for acquisition
Loss on extinguishment of debt
Impairment of intangible asset
Canadian pension lump sum settlements
Product liability costs for legal settlement
Acquisition amortization of backlog
Building held for sale impairment charge
Insurance settlement
Normalize tax rate to 22% *
2020
Year Ended March 31,
2018
2019
2017
2016
$
59,672
$
42,577
$
22,065
$
8,984
$
19,579
4,709
2,831
585
176
-
-
-
-
-
-
-
-
-
-
-
-
(382)
(1,232)
1,473
1,906
1,282
25,672
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,990)
-
-
2,948
-
8,763
619
400
-
-
-
-
-
-
-
-
-
(2,362)
14,408
-
-
1,359
-
8,815
-
-
8,852
3,085
1,590
1,303
1,125
247
-
-
-
-
(4,626)
1,444
-
-
-
8,046
-
-
1,446
-
-
-
-
-
1,100
581
429
-
2,218
Non-GAAP adjusted net income
$
66,359
$
64,920
$
46,841
$
30,734
$
34,843
Average diluted shares outstanding
23,855
23,660
23,335
20,888
20,315
Net income per diluted share - GAAP
Net income per diluted share - Non-GAAP
2.50
2.78
1.80
2.74
0.95
2.01
0.43
1.47
0.96
1.72
* Applies a normalized tax rate of 22% to GAAP pre-tax income and non-GAAP adjustments above, pre-tax.
Shareholder and Corporate Information
Common Stock
Columbus McKinnon’s common stock is traded
on Nasdaq under the symbol CMCO. As of
June 1, 2020, there were 351 shareholders
of record and 23,823,516 total shares of common
stock outstanding. According to SEC filings, as
of March 31, 2020, there were 236 institutional
and mutual fund investors who own approximately
96.8% of Columbus McKinnon’s outstanding
common shares.
Annual Meeting of Shareholders
July 20, 2020
10:00 a.m. Central Time
Four Seasons Hotel Chicago
120 East Delaware Place
Chicago, Illinois 60611
Transfer Agent
Please direct questions about lost certificates,
change of address and consolidation of accounts
to the Company’s transfer agent and registrar:
American Stock Transfer & Trust Company
620 15th Avenue
Brooklyn, New York 11219
800-937-5449
718-921-8124
www.amstock.com
Reconciliation of GAAP Income from Operations & Margin to
Non-GAAP Income from Operations & Margin
Corporate Headquarters
Columbus McKinnon Corporation
205 Crosspoint Parkway
Buffalo, New York 14068
716-689-5400
www.columbusmckinnon.com
Investor Relations
Gregory P. Rustowicz
Vice President and Chief Financial Officer
Columbus McKinnon Corporation
716-689-5442
greg.rustowicz@cmworks.com
Deborah K. Pawlowski
Kei Advisors LLC
716-843-3908
dpawlowski@keiadvisors.com
Investor information is available on the
Company’s website:
investors.columbusmckinnon.com
Independent Auditors
Ernst & Young LLP
1500 Key Tower
50 Fountain Plaza
Buffalo, New York 14202-2297
Income from operations
Add back (deduct):
Plant closures
Business realignment costs
Insurance recovery legal costs
Net loss on sales of businesses, including impairment
Insurance settlement
Non-GAAP income from operations
Sales
Adjusted operating margin
Year Ended March 31,
2020
89,824
$
2019
69,442
$
4,709
2,831
585
176
(382)
1,473
1,906
1,282
25,672
-
$
97,743
$
99,775
$
809,162
12.1%
$
876,282
11.4%
Reconciliation of GAAP Net Income to Non-GAAP Adjusted EBITDA
Net Income
Add back (deduct):
Income tax expense
Interest and debt expense
Investment (income) loss
Foreign currency exchange (gain) loss
Other (income) expense, net
Depreciation and amortization expense
Factory closures
Business realignment costs
Insurance recovery legal costs
Net loss on sales of businesses, including impairment
Insurance settlement
Non-GAAP adjusted EBITDA
Sales
Adjusted EBITDA margin
Year Ended
March 31,
2020
$
59,672
17,484
14,234
(891)
(1,514)
839
29,126
4,709
2,831
585
176
(382)
126,869
$
$
809,162
15.7%
Forward-Looking Information
The Columbus McKinnon annual report 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 aggressive 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,
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.
Nasdaq: CMCO
205 Crosspoint Parkway | Buffalo, New York 14068
www.columbusmckinnon.com