Download - CMCO 2020 PPT Template
Investor PresentationFebruary 24, 2021
1
David J. WilsonPresident and Chief Executive Officer
Gregory P. RustowiczVice President – Finance & Chief Financial Officer
2
Safe Harbor Statement
These slides, and the accompanying oral discussion, contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning future sales and earnings, involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including the impact of Covid-19 and the Company’s efforts to reduce costs, maintain liquidity and generate cash in the current pandemic, the effectiveness of the Company’s 80/20 Process to simplify operations, the ability of the Company’s Operational Excellence initiatives to drive profitability, the Company’s ability to grow market share, the ability to achieve revenue expectations, global economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the ability to expand into new markets and geographic regions, and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update the forward-looking information contained in this release.
Non-GAAP Financial MeasuresThis presentation will discuss some non-GAAP (“adjusted”) financial measures which we believe are useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results compared in accordance with GAAP. The non-GAAP (“adjusted”) measures are notated and we have provided reconciliations of comparable GAAP to non-GAAP measures in tables found in the Supplemental Information portion of this presentation.
3
Who We Are: Columbus McKinnon
A leading industrial technology company
in safe and productive motion control
Founded: 1875
Market Capitalization $1.2 billion Average Volume (3 mo.) 84,560
Recent Price / 52-Week Range $48.93 / $19.20 - $49.18 Common Shares Outstanding 24.0 million
Market data as of 2/22/2021 (Source: S&P Capital IQ); Shares outstanding as of 1/25/2021; Institutional and insider ownership as of most recent filing
IPO: 1996
4
Highly relevant, professional-grade solutions for solving customers’ critical problems in safety, uptime & productivity
Strong Value Proposition
5
Three Product GroupsCustomer Driven Solutions
Industrial Products
Crane Solutions
46% 43%
11%
Manual Chain Hoist
Electric Chain Hoist
Rigging / Clamps
Industrial Winches
Cranes, Wire Rope Hoists
Drives and Controls
Crane Kits & Components
Jibs, Workstations
Linear & Mechanical Actuators
Lifting Tables
Rail Systems
Actuation Systems
Engineered
Products
$652.9 MillionQ3 FY21 TTM Revenue
6
Diversified Revenue Streams
General Industrial
Metals Processing / Steel
/ Concrete
Oil & Gas
Energy/Utilities
Automotive
Rail / Aerospace / Transport
Construction
Pulp Paper/Chemical/Pharma
Heavy OEM
Elevators
Entertainment
MiningGovernment / Others
~25%
~10%
~10%
~10%
~10%
~10%
~5%
~5%
~5%
~3%~3%
~3% ~3%
US General Line
Distributors
Crane Builders
Pfaff International Direct
OEM/Government
Specialty Distributors
EPC
International General Line Distributors
~24%
~26%
~20%
~11%
~11%
~6%
~2%
U.S.
Europe, Middle East & Africa
APAC
Canada Latin America
54%33%
4%3%6%
$652.9 Million Q3 FY21 TTM Revenue
7
Strategy to deliver growth, financial performance and shareholder value
Blueprint for Growth 2.0Pivot Columbus McKinnon toward growth: Organic and Inorganic
8
Columbus McKinnon Business System (CMBS) will become our competitive advantage
Columbus McKinnon Business System
8. Operations
9. Finance
10. Data & Systems
6. Commercial / Selling
7. Product Development1. People & Values
2. Strategic Planning
3. Marketing
4. Product Management
5. M&A
Strategic Framework and Core Competencies
Created more than $35M of incremental OI since FY19… Substantial opportunities still exist
80/20Critical Business Tool
Product SKUsDown to ~40,000
from ~50,000 in 2019
Purchased parts~400,000
Simplify the Business:Eliminate bleeders… focus on areas of growth
Raving fans and priority
account program
Customer list simplification
9
Product Line Simplification
Business Segmentation,
Zero Up
• Processes being embedded into “Core Competencies”
• Ownership, Accountability & Measurability
Focus Area:
Product Line Simplification80/20 Embedded in CMBS
10
Reimaging our Future
• Rethinking current addressable markets and targeting further strategic expansion through innovative approaches
• Improving vertical market, channel and geographic access
• Taking greater marker share through product localization, new product development and advancements in automation
• Strengthen competencies and improve overall competitive position
Providing a clear path to organic and strategic growth initiatives
11
Tandem Hoist Intelli-Lift™ Auto Detection Utility Lever Hoist
Delivering InnovationDriving organic growth
Improved customer experience, safety and productivity at the core of new product development
• Visible and audible warnings when off-center pick is detected
• Auto-correction mode
• Safety brake prevents unexpected load release
• Two patent applications on the YaleErgo 360
• Improved facility safety for large complex loads
• Available in Compass™ configurator
New Product Introductions
Criteria aligned to enterprise strategy, which will drive search and outreach efforts
Target
Screen Outreach Due
DiligenceDecision
M&A
Pipeline Programmatic
M&A
Acquisition
Committee
Feedback
12
Inorganic GrowthM&A Funnel Process
13
Business Model Evolution
Revenue
Growth Rate
EBITDA
Multiple
FY21
Core CMCO
Automation & Digitization
Reimagine Core
Core CMCO
Future
Strategy evolving Columbus McKinnon into a high value, intelligent motion enterprise
Growth Strategy Substantially Advances Underlying Portfolio
14
Encouraged by an improving landscape
Sequential ResultsNet Sales continue to recover, profitability impacted by return to work and growth investments
Net sales increased $8.8 million, or 5.5%
• Short-cycle business: 5.6% increase
• Project business: 5.5% increase
Solid adjusted operating income of $11.2 million $5.0
$14.0
$11.2
Q1 FY21 Q2 FY21 Q3 FY21
$139.1
$157.8$166.5
Q1 FY21 Q2 FY21 Q3 FY21
$1.8
$15.8
$10.4
Q1 FY21 Q2 FY21 Q3 FY21
Net Sales Operating Income & Margin
Adjusted Operating Income & Margin
1.3%
10.0% 6.3%
3.6% 8.9% 6.7%
($ in millions)
15
Net Sales Operating Income & Margin
Solid Margins on Lower Volume
Q3 FY21 TTM sales and operating income reflect COVID-19 impact
• Q3 FY21 sales volume down 19%
Cost management efforts drive profitability in challenging environment
80/20 Process and operational excellence initiatives drove margin performance
($ in millions)
9.1%9.4% 11.4% 12.1%
$68.3 $69.4
$89.8
$44.7
FY18 FY19 FY20 Q3 FY21 TTM
See Supplemental Slides for definition of Adjusted Income from Operations and reconciliation from GAAP and other disclaimers regarding non-GAAP information.
Adjusted Operating Income & Margin
$78.7
$99.8 $97.7
$50.4
FY18 FY19 FY20 Q3 FY21 TTM
$801.1 $842.1 $809.2 $652.9
$839.4 $876.3 $809.2
$652.9
FY18 FY19 FY20 Q3 FY21 TTM
Sales Divestitures
8.1% 7.9% 11.1% 6.8%
9.4% 11.4% 12.1% 7.7%
16
Adjusted EBITDA Margin Solid adjusted EBITDA margin during challenging environment
Adjusted EBITDA & ROIC
Return on Invested Capital (ROIC)(1)
Strong confidence in strategy evolution to drive profitable growth and realize long-term objectives
15.1%15.7%
12.0%
FY19 FY20 Q3 FY21 TTM
11.3% 11.7%
6.6%
FY19 FY20 Q3 FY21 TTM
(1)ROIC is a non-GAAP measure defined as adjusted income from operations, net of taxes at a
22% normalized rate, for the trailing four quarters divided by the average of debt plus equity
less cash (average capital) for the trailing five quarters.
• Q3 FY2021 Adjusted EBITDA margin of 10.9% down 430 basis points from prior year on 19% lower volume
• Continuing to target 19% Adjusted EBITDA margin post COVID-19 recession
Return on Invested Capital expected to
improve in fiscal 2022
• Continuing to target mid-teen ROIC post Covid-19 recession
$55.1
$67.2
$97.4 $99.9
FY18 FY19 FY20 Q3 FY21 TTM
17
Free Cash Flow(2)
Cash Flow Outstanding cash generation
• Capital expenditures of $5.9 million in Q3 FY21 YTD
• FY21 expected CapEx: $10 - $12 million(1)
Sufficient liquidity to navigate through COVID-19 pandemic
Note: Components may not add to totals due to rounding
($ in millions)
FY18 FY19 FY20Q3 FY21
TTM
3/31/18 3/31/19 3/31/20 12/31/20
Net cash provided
by operating
activities
$69.7 $79.5 $106.8 $108.5
CapEx (14.5) (12.3) (9.4) (8.6)
Free cash flow
(FCF)(2)$55.1 $67.2 $97.4 $99.9
(1)Capital expenditure guidance provided January 28, 2021(2)Free cash flow is a non-GAAP measure defined as cash provided by operating activities minus capital expenditures
18
Significant financial flexibility in uncertain macroeconomic environment
Capital Structure
Net debt leverage ratio below target of 2.0x
• Net debt leverage ratio(1) of 0.79x
• Net debt to net total capital 11.1%
Total liquidity of $270.6 million at quarter end
Significant financial strength and liquidity supports pivot to growth
CAPITALIZATION
Dec. 31,
2020
March 31,
2020
Cash and cash equivalents $ 187.6 $ 114.5
Total debt 249.5 251.3
Total net debt 61.9 136.9
Shareholders’ equity 497.3 463.6
Total capitalization $ 746.9 $ 714.9
Debt/total capitalization 33.4% 35.2%
Net debt/net total capitalization 11.1% 22.8%
($ in millions)
(1)Net debt leverage ratio is defined as Net Debt / TTM Adjusted EBITDA
19
Why Columbus McKinnon?
COLUMBUS MCKINNON BUSINESS SYSTEM (CMBS) ESTABLISHING SCALABILITY
EVOLVING STRATEGY INTO BLUEPRINT FOR GROWTH 2.0 DEFINES GROWTH FRAMEWORK
BUILDING STRONGER EARNINGS POWER - CREATING VALUE
STRONG MANAGEMENT TEAM EXECUTING WELL
LOWERING RISK PROFILE AND EXPANDING MARGINS
Supplemental Information
20
21
U.S. Capacity Utilization Eurozone Capacity Utilization
Industrial Capacity Utilization
Source: The Federal Reserve Board Source: European Commission
60%
65%
70%
75%
80%
Manufacturing Total
74.6% (Manufacturing) &
75.6% (Total)
January 2021(1)
65%
67%
69%
71%
73%
75%
77%
79%
81%
83%
85%
76.3%
Q4 2020
(1)January 2021 numbers are preliminary
22
ISM Production IndexSource: Institute of Supply Chain Management
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%60.7%
Jan. 2021
23
Adjusted Income from Operations Reconciliation
($ in thousands) Fiscal Year Quarter TTM
FY 2018 FY 2019 FY 2020 Q1 FY21 Q2 FY21 Q3 FY21 Q3 FY21
GAAP income from operations $ 68,331 $ 69,442 $ 89,824 $ 1,789 $ 15,820 $ 10,447 $ 44,720
Add back (deduct):
Factory closures — 1,473 4,709 2,256 747 469 5,092
Business realignment costs — 1,906 2,831 821 — 237 2,814
Insurance recovery legal costs 2,948 1,282 585 141 88 — 389
Insurance settlement (2,362) — (382) — — — (15)
Gain on sale of building — — — — (2,638) — (2,638)
Loss on sales of businesses — 25,672 176 — — — —
Acquisition deal, integration, and severance costs 8,763 — — — — — —
Debt repricing fees 619 — — — — — —
Magnetek litigation 400 — — — — — —
Adjusted income from operations – Non-GAAP $ 78,699 $ 99,775 $ 97,743 $ 5,007 $ 14,017 $ 11,153 $ 50,362
Sales $ 839,419 $ 876,282 $ 809,162 $ 139,070 $ 157,790 $ 166,547 $ 652,893
Operating margin – GAAP 8.1% 7.9% 11.1% 1.3% 10.0% 6.3% 6.8%
Adjusted operating margin – Non-GAAP 9.4% 11.4% 12.1% 3.6% 8.9% 6.7% 7.7%
Adjusted income from operations is defined as income from operations as reported, adjusted for certain items. Adjusted income from operations is not a measure determined in accordance with
generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless, Columbus
McKinnon believes that providing non-GAAP information, such as adjusted income from operations, is important for investors and other readers of the Company’s financial statements and assists in
understanding the comparison of the current quarter’s and current year's income from operations to the historical periods' income from operations, as well as facilitates a more meaningful
comparison of the Company’s income from operations to that of other companies.
24
Adjusted EBITDA Reconciliation
Adjusted EBITDA is defined as net income before interest expense, income taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA is not a measure determined in accordance
with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable with the measures as used by other companies. Nevertheless,
Columbus McKinnon believes that providing non-GAAP information, such as adjusted EBITDA, is important for investors and other readers of the Company’s financial statements and assists in
understanding the comparison of the current quarter’s and current year's net income and diluted EPS to the historical periods' net income and diluted EPS, as well as facilitates a more meaningful
comparison of the Company’s net income and diluted EPS to that of other companies.
($ in thousands) Fiscal Year Quarter TTM
FY 2019 FY 2020 Q3 FY21 Q3 FY21
GAAP net income $ 42,577 $ 59,672 $ 6,594 $ 8,765
Add back (deduct):
Income tax expense (benefit) 10,321 17,484 616 4,555
Interest and debt expense 17,144 14,234 2,986 12,392
Investment (income) loss (727) (891) (495) (1,381)
Foreign currency exchange (gain) loss 843 (1,514) 602 87
Other (income) expense, net (716) 839 144 20,302
Depreciation and amortization expense 32,675 29,126 6,993 28,338
Factory closures 1,473 4,709 469 5,092
Business realignment costs 1,906 2,831 237 2,814
Insurance recovery legal costs 1,282 585 — 389
Insurance settlement — (382) — (15)
Gain on sale of building — — — (2,638)
Loss on sales of businesses 25,672 176 — —
Non-GAAP adjusted EBITDA $ 132,450 $ 126,869 $ 18,146 $ 78,700
Sales $ 876,282 $ 809,162 $ 166,547 $ 652,893
Net income margin – GAAP 4.9% 7.4% 4.0% 1.3%
Adjusted EBITDA margin – Non-GAAP 15.1% 15.7% 10.9% 12.0%
Investor PresentationFebruary 24, 2021
25