Columbus McKinnon Corporation
10/30/2025 | Press release | Distributed by Public on 10/30/2025 14:32
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Executive Overview
The Company is a leading worldwide designer, manufacturer and marketer of intelligent motion solutions, including motion control products, technologies, automated systems and services, that efficiently and ergonomically move, lift, position and secure materials. Our key products include hoists, crane components, precision conveyors, actuators, rigging tools, light rail workstations, and digital power and motion control systems. These are highly relevant, professional-grade solutions that solve customers' critical material handling requirements.
Founded in 1875, we have grown to our current size and leadership position through organic growth and acquisitions. We developed our leading market position over our 150-year history by emphasizing technological innovation, manufacturing excellence and superior customer service. In accordance with our strategic framework, we are building out our business system (CMBS) and growth framework to be market-led, customer-centric, and operationally excellent with our people and values at the core. We believe this will transform Columbus McKinnon into a top-tier Intelligent Motion Solutions company. We expect our strategy will enhance shareholder value by expanding EBITDA margins and return on invested capital ("ROIC").
Our revenue base is geographically diverse with approximately 43% of net sales derived from customers outside the U.S. for the six months ended September 30, 2025. We believe this diversity balances the impact of changes that occur in local economies, as well as benefits the Company by providing access to growing emerging markets. We monitor both U.S. and Eurozone Industrial Capacity Utilization statistics as well as the ISM Production Index as indicators of anticipated demand for our products. In addition, we continue to monitor the potential impact of other global and U.S. trends including, industrial production, trade tariffs, raw material cost inflation, interest rates, foreign currency exchange rates, and activity of end-user markets around the globe.
From a strategic perspective, we are investing in new products and channels as we focus on our greatest opportunities for growth. We have leading market positions in hoists, lifting and sling chain, forged attachments, actuators, precision conveyors and digital power and motion control systems for the material handling industry. We are focusing our sales and marketing activities toward select North American and global market sectors including general industrial, energy, automotive, heavy OEM, entertainment, construction and infrastructure, life sciences food and beverage, e-commerce and consumer products.
In fiscal 2024, the Company completed its acquisition of montratec GmbH ("montratec"), a leading automation solutions company that designs and develops intelligent automation and transport systems for interlinking industrial production and logistics processes. montratec product offerings compliment the previous acquisitions of both Dorner and Garvey, and these acquisitions are collectively expected to accelerate the Company's shift to intelligent motion solutions and serve as a platform to expand capabilities in advanced, higher technology automation solutions.
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 lead-times, improve on-time deliveries, reduce warranty costs, and improve material and factory productivity. The initiatives are being driven by the implementation of our business operating system, CMBS. We are working to achieve these strategic initiatives through business simplification, operational excellence, and profitable growth initiatives. We believe these initiatives will enhance future operating margins.
Our principal raw materials and components purchases were approximately $375 million in fiscal 2025 (or 59% of Cost of product sold) and include steel, consisting of rod, wire, bar, structural, and other forms of steel; electric motors; bearings; gear reducers; castings; steel and aluminum enclosures and wire harnesses; electro-mechanical components; and standard variable drives and controls. These commodities are all available from multiple sources. We purchase most of these raw materials and components from a limited number of strategic and preferred suppliers under agreements which are negotiated on a company-wide basis through our global purchasing group. Currently, as a result of global inflation and tariffs, we are experiencing higher raw material costs and availability issues for select raw materials and components. To date, we have raised prices to our customers to cover these increased raw material costs and are working with our supply base to prioritize shipments and improve availability of key components.
We operate in a highly competitive and global business environment. We see a variety of opportunities in our markets and geographies, including trends toward automation and increasing labor productivity 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.
On February 10, 2025, the Company announced that it had entered into a definitive agreement to acquire all of the issued and outstanding equity of Kito Crosby. The Kito Acquisition's closing is subject to certain conditions, including regulatory approval as required by the HSR Act and other customary closing conditions described in the Stock Purchase Agreement entered into by the Company and Kito Crosby in connection with the Kito Acquisition. The Kito Acquisition is expected to meaningfully improve the Company's scale, enhance our collective geographic reach, significantly expand our lifting securement and consumables portfolio and enhance our customer value proposition.
With global engineering, manufacturing, distribution, and operations, Kito Crosby provides a broad range of products and solutions for the most demanding applications. Kito Crosby's people, products, solutions, and service have innovated the lifting and securement industry throughout its long history. Kito Crosby's iconic brands include Kito, Crosby, Harrington, Gunnebo Industries, and Peerless. We expect that the Kito Acquisition will strengthen our core lifting business and further the Company's position as a leading worldwide, designer, manufacturer and marketer of intelligent motion solutions that move the world forward and improve lives by efficiently and ergonomically moving, lifting, positioning and securing materials. The Company anticipates the Kito Acquisition to close during fiscal 2026.
Results of Operations
Three months ended September 30, 2025 and September 30, 2024
Net sales in the three months ended September 30, 2025 were $261,047,000, an increase of $18,773,000 or 7.7% from the three months ended September 30, 2024 net sales of $242,274,000. Net sales were positively impacted by $9,033,000 of sales volume and $4,955,000 due to price increases. Foreign currency translation favorably impacted sales by $4,785,000 for the three months ended September 30, 2025.
Gross profit in the three months ended September 30, 2025 was $90,160,000, an increase of $15,417,000 or 20.6% from the three months ended September 30, 2024 gross profit of $74,743,000. Gross profit margin was 34.5% in the fiscal 2026 second quarter compared to 30.9% in the fiscal 2025 second quarter. Higher sales volume and favorable mix increased gross profit by $3,393,000. In addition, gross profit was increased by $10,480,000 due to net factory consolidation activities in the prior year, $655,000 due to a net start-up costs related to the Monterrey, Mexico facility, $171,000 due to Hurricane Helene's costs recognized in the prior year, and a $11,000 of net business realignment costs. Current year acquisition and integration costs reduced gross profit by $67,000 related to the pending acquisition of Kito Crosby. Material inflation and other manufacturing cost changes net of price increases contributed to a reduction in gross profit of $986,000. The translation of foreign currencies had a favorable impact on gross profit of $1,760,000 during the three months ended September 30, 2025.
Selling expenses were $29,122,000 and $26,926,000, or 11.2% and 11.1% of net sales, in the fiscal 2026 and 2025 second quarters, respectively. Foreign currency translation had a $715,000 unfavorable impact on selling expenses in the three months ended September 30, 2025 with the remaining increase attributable to overall increase in sales during the period.
General and administrative expenses were $36,386,000 and $23,363,000, or 13.9% and 9.6% of net sales, for the three months ended September 30, 2025 and September 30, 2024, respectively. General and administrative expenses increased $9,929,000 as a result of Kito Acquisition related expenses and higher employee related costs of $2,515,000. Foreign currency translation had an unfavorable impact of $314,000 on general and administrative expenses in the three months ended September 30, 2025.
Research and development expenses were $4,781,000 and $6,102,000, or 1.8% and 2.5% of net sales, in both the fiscal 2026 and 2025 second quarter, respectively. The reduction in research and development expenses is primarily related to reduced labor and benefit costs.
Amortization of intangibles was $7,683,000 and $7,547,000 in the fiscal 2026 and 2025 second quarters, respectively, with the fluctuations related to foreign currency during the respective periods.
Interest and debt expense was $8,747,000 in the second quarter ended September 30, 2025 compared to $8,352,000 in the second quarter ended September 30, 2024. The increase is the result of increasing variable interest rates year over year due to the expiration of a favorable interest rate swap in February 2025.
Investment income was $521,000 in the second quarter ended September 30, 2025 compared to $610,000 in the second quarter ended and September 30, 2024. Investment income relates to the mark-to-market adjustments on the marketable securities held in the Company's wholly owned captive insurance subsidiary and the Company's equity method investment in EMC, described in Note 6 of the financial statements.
Income tax benefit as a percentage of the pre-tax income was (46)% and income tax benefit as a percentage of the pre-tax loss was 25% in the second quarters ended September 30, 2025 and September 30, 2024, respectively. Typically, these percentages vary from the U.S. statutory rate of 21% primarily due to varying statutory tax rates at the Company's foreign subsidiaries, and the jurisdictional mix of income for these subsidiaries.
During the three months ended September 30, 2025, income tax expense was favorably impacted by the phased reduction of the German corporate income tax rate under the New German Tax Law beginning in 2028, with the full reduction effective in 2032. The Company's effective tax rate for the three months ended September 30, 2025, also reflects an unfavorable impact due to the recording of a U.S. state tax reserve. Additionally, during the three months ended September 30, 2025 and September 30, 2024, the impact of equity compensation increased income tax expense. Refer to Note 13 of the financial statements for additional information.
Six months ended September 30, 2025 and September 30, 2024
Net sales in the six months ended September 30, 2025 were $496,967,000, an increase of $14,967,000 or 3.1% from the six months ended September 30, 2024 net sales of $482,000,000. Net sales were positively impacted by $7,398,000 due to price increases, offset by $342,000 of unfavorable sales volume. Foreign currency translation favorably impacted sales by $7,911,000 for the six months ended September 30, 2025
Gross profit in the six months ended September 30, 2025 was $167,382,000, an increase of $3,609,000 or 2.2% from the six months ended September 30, 2024 gross profit of $163,773,000. Gross profit margin was 33.7% in the six months ended September 30, 2025 compared to 34.0% in the six months ended September 30, 2024. Gross profit was increased by $10,055,000 due to net factory consolidation activities in the prior year, $379,000 due to net start-up costs related to the Monterrey, Mexico facility and $171,000 of costs due to Hurricane Helene recognized in the prior year. Lower sales volume and unfavorable mix reduced gross profit by $2,044,000. In addition, gross profit was reduced by $982,000 of net business realignment costs and current year acquisition and integration costs reduced gross profit by $67,000 related to the pending acquisition of Kito Crosby. Material inflation and other manufacturing cost changes net of price increases further contributed to a reduction in gross profit of $6,695,000. The translation of foreign currencies had a favorable impact on gross profit of $2,792,000 during the six months ended September 30, 2025.
Selling expenses were $57,653,000 and $54,696,000, or 11.6% and 11.3% of net sales, in the six months ended September 30, 2025 and 2024, respectively. Foreign currency translation had a $1,322,000 unfavorable impact on selling expenses in the six months ended September 30, 2025 with the remaining increase attributable to overall increase in sales during the period.
General and administrative expenses were $67,129,000 and $49,810,000, or 13.5% and 10.3% of net sales, in the six months ended September 30, 2025 and 2024, respectively. General and administrative expenses increased $18,032,000 as a result of Kito Acquisition related expenses offset by lower employee salary and benefit costs of $432,000. Foreign currency translation had an unfavorable impact of $503,000 on general and administrative expenses in the six months ended September 30, 2025.
Research and development expenses were $9,602,000 and $12,268,000, or 1.9% and 2.5% of net sales, in the six months ended September 30, 2025 and 2024, respectively. The reduction in research and development expenses is primarily related to reduced labor and benefit costs.
Amortization of intangibles was $15,318,000 and $15,047,000 in the six months ended September 30, 2025 and 2024, respectively, with fluctuations related to foreign currency during the respective periods.
Interest and debt expense was $17,445,000 in the six months ended September 30, 2025 compared to $16,587,000 in the six months ended September 30, 2024. The increase is the result of increasing variable interest rates year over year due to the expiration of a favorable interest rate swap in February 2025.
Investment income was $1,570,000 in the six months ended September 30, 2025 compared to $819,000 in the six months ended September 30, 2024. Investment income relates to the mark-to-market adjustments on the marketable securities held in the Company's wholly owned captive insurance subsidiary and the Company's equity method investment in EMC, described in Note 6 of the financial statements.
Income tax benefit as a percentage of the pre-tax income was (78)% and income tax benefit as a percentage of the pre-tax loss was 19% in the six months ended September 30, 2025 and September 30, 2024, respectively. Typically, these percentages vary from the U.S. statutory rate of 21% primarily due to varying statutory tax rates at the Company's foreign subsidiaries, and the jurisdictional mix of income for these subsidiaries.
During the six months ended September 30, 2025, income tax expense was favorably impacted by the phased reduction of the German corporate income tax rate under the New German Tax Law beginning in 2028, with the full reduction effective in 2032. The Company's effective tax rate for the six months ended September 30, 2025, also reflects an unfavorable impact due to the recording of a U.S. state tax reserve. Additionally, during the six months ended September 30, 2025 and September 30, 2024, the impact of equity compensation increased income tax expense. Refer to Note 13 of the financial statements for additional information.
Liquidity and Capital Resources
Cash, cash equivalents, and restricted cash totaled $28,289,000 at September 30, 2025, a decrease of $25,644,000 from the March 31, 2025 balance of $53,933,000.
Cash flow from operating activities
Net cash provided by operating activities was $248,000 for the six months ended September 30, 2025 compared to net cash used for operating activities of $1,370,000 for the six months ended September 30, 2024. Net income of $2,697,000 along with non-cash adjustments of $27,094,000 contributed to cash inflows from operations. The non-cash adjustments included $24,485,000 of depreciation and amortization, $4,820,000 of non-cash lease expense, and $4,626,000 of stock-based compensation offset by $7,940,000 of deferred income taxes and related valuation allowances. Changes in working capital which reduced cash from operations by $24,615,000 as a result of an increase of $11,256,000 in inventories, an increase in trade accounts receivable of $8,570,000, an increase in prepaid expenses and other current assets of $6,077,000, and a decrease in accrued expenses of $127,000, offset by an increase of $1,415,000 in trade payables. The increase in inventories relates to purchases made in advance of future tariffs. Cash provided for operations was also reduced by a decrease of $6,359,000 in other non-current liabilities primarily due to lease payments for the six months ended September 30, 2025.
Cash flow from investing activities
Net cash used for investing activities was $6,345,000 for the six months ended September 30, 2025 compared to $8,908,000 for the six months ended September 30, 2024. The use of cash for the six months ended September 30, 2025 primarily consisted of $6,523,000 in capital expenditures.
Cash flow from financing activities
Net cash used for financing activities was $18,722,000 and $47,839,000 for the six months ended September 30, 2025 and September 30, 2024, respectively. The most significant uses of cash in fiscal 2026 were for $12,482,000 of debt repayments and $4,014,000 of dividend payments. Cash flows from hedging activities related to the Company's cross currency swap are classified as financing activities in the Statement of Cash Flows which resulted in a net cash outflow of $866,000 during the six months ended September 30, 2025.
We believe that our cash on hand, cash flows, and borrowing capacity under our Revolving Credit Facility will be sufficient to fund our ongoing operations and debt obligations, and capital expenditures for at least the next twelve months. This belief is dependent upon successful execution of our current business plan and effective working capital utilization. No material restrictions exist in accessing cash held by our non-U.S. subsidiaries. We expect to meet our funding needs with cash provided by our U.S. operations, as well as by repatriating non-U.S. cash. We do not expect to incur significant incremental U.S. taxes as we repatriate funds. As of September 30, 2025, $24,798,000 of cash and cash equivalents were held by foreign subsidiaries.
Refer to Note 9 of the financial statements for further discussion of the Company's long-term debt and financing costs.
Capital Expenditures
In addition to keeping our current equipment and plants properly maintained, we are committed to replacing, enhancing and upgrading our property, plant and equipment to support new product development, improve productivity and customer responsiveness, reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet environmental requirements, enhance safety and promote ergonomically correct work stations. Consolidated capital expenditures for the six months ended September 30, 2025 and September 30, 2024 were $6,523,000 and $10,068,000, respectively. We expect capital expenditure spending in fiscal 2026 to range from $15,000,000 to $20,000,000.
Inflation and Other Market Conditions
Our costs are affected by inflation in the U.S. economy and, to a lesser extent, in non-U.S. economies including those of Europe, Canada, Mexico, South America, and Asia-Pacific. We do not believe that general inflation has had a material effect on our results of operations over the periods presented despite rising inflation due to our ability to pass on rising costs through price increases. We are currently experiencing higher raw material costs as a result of tariffs, which we expect to recover with pricing actions. In the future, we may not be able to pass on these cost increases to our customers.
Goodwill Impairment Testing
We test goodwill for impairment at least annually and more frequently whenever events occur or circumstances change that indicate there may be impairment. These events or circumstances could include a significant long-term adverse change in the business climate, poor indicators of operating performance, or a sale or disposition of a significant portion of a reporting unit.
We test goodwill at the reporting unit level, which is one level below our operating segment. We identify our reporting units by assessing whether the components of our operating segment constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. We also aggregate components that have similar economic characteristics into single reporting units (for example, similar products and / or services, similar long-term financial results, product processes, classes of customers, etc.). We have three reporting units: the Linear Motion Products reporting unit, the Rest of Products reporting unit, and the Precision Conveyance reporting unit, which have goodwill totaling $9,699,000, $319,838,000, and $401,681,000, respectively, as of September 30, 2025.
We currently do not believe that it is more likely than not that the fair value of any of our reporting units is less than its applicable carrying value. Additionally, we currently do not believe that we have any significant impairment indicators. However, if the projected long-term revenue growth rates, profit margins, or terminal growth rates are significantly lower, and/or the estimated weighted-average cost of capital is higher, future testing may indicate impairment of one or more of the Company's reporting units and, as a result, the related goodwill may be impaired.
Refer to our 2025 Form 10-K for additional information regarding our annual goodwill impairment process.
Seasonality and Quarterly Results
Quarterly results may be materially affected by the timing of large customer orders, periods of high vacation and holiday concentrations, legal settlements, gains or losses in our portfolio of marketable securities, restructuring charges, favorable or unfavorable foreign currency translation, divestitures and acquisitions. Therefore, the operating results for any particular fiscal quarter are not necessarily indicative of results for any subsequent fiscal quarter or for the full fiscal year.
Effects of New Accounting Pronouncements
Information regarding the effects of new accounting pronouncements is included in Note 17 to the accompanying consolidated financial statements included in this Quarterly Report on Form 10-Q.
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