S-1 1 d171619ds1.htm S-1 S-1
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As filed with the Securities and Exchange Commission on April 20, 2021

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

COLUMBUS McKINNON CORPORATION

(Exact name of registrant as specified in its charter)

 

New York   3531   16-0547600

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

205 Crosspoint Parkway

Buffalo, New York 14068

(716) 689-5400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Alan S. Korman

Vice President Corporate Development, General Counsel and Chief Human Resources Officer

Columbus McKinnon Corporation

205 Crosspoint Parkway

Buffalo, New York 14068

(716) 689-5400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Craig M. Fischer, Esq.
Robert J. Olivieri, Esq.
Hodgson Russ LLP
The Guaranty Building
140 Pearl Street, Suite 100
Buffalo, New York 14202-4040
(716) 856-4000
  David Azarkh, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:  

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
   Emerging growth company  

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 7(a)(2)(B) of the Securities Act.  

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of
securities to be registered
  Amount to be
registered
  Proposed maximum
aggregate price
per unit
  Proposed maximum
aggregate offering
price(1)
  Amount of
registration fee

Common Stock, par value $.01

      $172,500,000   $18,819.75

 

 

 

(1)   Calculated pursuant to Rule 457(o), based on the Proposed Maximum Aggregate Offering Price, and includes up to $22,500,000 of shares of common stock of the registrant that the underwriters have the option to purchase. See “Underwriting (conflicts of interest)”.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to completion, dated April 20, 2021

$150,000,000

 

Columbus McKinnon Corporation

Common stock

We are offering $150,000,000 of shares of our common stock, par value $0.01 per share (“common stock”).

Our common stock is listed on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “CMCO.” On April 19, 2021, the closing sales price of our common stock as reported on Nasdaq was $53.47 per share.

Investing in our common stock involves risks. See “Risk factors” on page 24 of this prospectus and in the documents we incorporate by reference in this prospectus.

 

     
      Per share      Total(1)  

Public offering price

   $                    $                

Underwriting discount

   $        $    

Proceeds, before expenses, to Columbus McKinnon(2)

   $        $    

 

(1)   Assumes no exercise of the underwriters’ option to purchase additional shares of our common stock described below.

 

(2)   We have agreed to reimburse the underwriters for certain FINRA-related expenses. See “Underwriting (conflicts of interest).”

We have granted the underwriters the option, exercisable in whole or from time to time in part, to purchase up to an additional $22,500,000 of shares of our common stock directly from us at the public offering price per share shown above, less the underwriting discount per share shown above, exercisable for 30 days after the date of this prospectus.

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the common stock to purchasers on or about                , 2021.

 

 

Joint book-running managers

 

J.P. Morgan           Wells Fargo Securities              PNC Capital Markets LLC  

The date of this prospectus is                 , 2021


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Table of contents

 

Market, ranking and industry data

     i  

Non-GAAP financial measures

     i  

Forward-looking statements

     ii  

Trademarks

     iii  

Summary

     1  

Risk factors

     24  

The acquisition and related financing

     35  

Unaudited pro forma condensed combined financial information

     38  

Use of proceeds

     55  

Capitalization

     56  

Dividend policy

     57  

Business

     58  

Management

     62  

Compensation of directors and executive officers

     66  

Security ownership of certain beneficial owners and management and related party transactions

     95  

Shares eligible for future sale

     97  

Description of capital stock

     98  

Material U.S. federal income tax considerations for non-U.S. holders

     102  

Certain ERISA considerations

     106  

Underwriting (conflicts of interest)

     108  

Legal matters

     115  

Experts

     116  

Where you can find more information and incorporation by reference

     117  

You should rely only on the information contained in or incorporated by reference into this prospectus and any free writing prospectus. We have not, and the underwriters have not, authorized any dealer, salesperson or other person to give any information or to make any representation other than those contained in or incorporated by reference into this prospectus or any applicable free writing prospectus. We do not take responsibility for any information or representation not contained in or incorporated by reference into this prospectus or any applicable free writing prospectus. This prospectus and any applicable free writing prospectus do not constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered securities to which it relates. Nor does this prospectus or any applicable free writing prospectus constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. You should not assume that the information contained in this prospectus or incorporated by reference into this prospectus or any applicable free writing prospectus is correct as of any date after its date, even though this prospectus or any applicable free writing prospectus is delivered or securities are sold at a later date. Our business, financial condition and results of operations may have changed since those dates.


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As used in this prospectus, unless otherwise noted or the context otherwise requires, references to: (i) the “Company,” “Columbus McKinnon,” “CMCO,” “we,” “our” or “us” refer to Columbus McKinnon Corporation and its consolidated subsidiaries, (ii) “Dorner” refers to Precision Acquisition MidCo, Inc. and its consolidated subsidiaries, including its main operating subsidiary Dorner Mfg. Corp., and (iii) “U.S. dollars,” “dollar” or “$” are to the currency of the United States of America.

 


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Market, ranking and industry data

This prospectus and the documents incorporated by reference herein include industry data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from industry publications, surveys and other independent sources available to us. Some data also are based on our good faith estimates, which are derived from management’s knowledge of the industry and from independent sources. These third-party publications and surveys generally state that the information included therein has been obtained from sources believed to be reliable. We have not independently verified any of the data from third-party sources. Similarly, we believe our internal research is reliable, even though such research has not been verified by any independent sources. While we are not aware of any misstatements regarding any such data, forecasts and information presented herein, you should carefully consider the inherent risks and uncertainties associated with the industry and market data contained in this prospectus and in the documents incorporated by reference herein.

Non-GAAP financial measures

We provide Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA, Adjusted EBITDA margin, Dorner Adjusted EBITDA and Dorner Adjusted EBITDA margin as supplemental measures to our financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”) regarding our operating performance. These financial measures exclude the impact of certain items and, therefore, have not been calculated in accordance with GAAP.

We believe that Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA, Adjusted EBITDA margin, Dorner Adjusted EBITDA and Dorner Adjusted EBITDA margin provide useful supplemental information about our and Dorner’s operating performance because they exclude amounts that we do not consider part of our or Dorner’s, as applicable, core operating results when assessing our or their, as applicable, performance, facilitate a more meaningful comparison of the Company’s results to that of other companies and assist in understanding a comparison of the Company’s or Dorner’s, as applicable, current period results to our or their, as applicable, historical period results.

We believe that Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA, Adjusted EBITDA margin, Dorner Adjusted EBITDA and Dorner Adjusted EBITDA margin are useful to investors and other readers of our financial statements in evaluating our or their, as applicable, operating performance. However, Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA, Adjusted EBITDA margin, Dorner Adjusted EBITDA and Dorner Adjusted EBITDA margin and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance, although our measures of Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA, Adjusted EBITDA margin, Dorner Adjusted EBITDA and Dorner Adjusted EBITDA margin may not be directly comparable to similarly titled measures reported by other companies. As a result, not all companies and analysts calculate Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA, Adjusted EBITDA margin, Dorner Adjusted EBITDA and Dorner Adjusted EBITDA margin in the same manner. We compensate for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by presenting the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures.

The non-GAAP financial measures presented in this prospectus should not be considered in isolation or as a substitute for any performance measure calculated in accordance with GAAP. The adjustments made to calculate these non-GAAP financial measures are significant components in understanding and evaluating our

 

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financial performance. See “Summary—Summary historical and unaudited pro forma financial data of Columbus McKinnon—Non-GAAP reconciliations” for a reconciliation of Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA and Adjusted EBITDA margin to the most closely comparable financial measures calculated in accordance with GAAP and see “Summary—Summary historical financial data of Dorner—Non-GAAP reconciliations” for a reconciliation of Adjusted EBITDA for Dorner and Adjusted EBITDA margin for Dorner to the most closely comparable financial measures calculated in accordance with GAAP.

Forward-looking statements

This prospectus and the information incorporated by reference herein contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements that relate to future sales, earnings, plans, including plans related to the integration of Dorner into the Company, events, liquidity, financial results or performance, projected capital expenditures, future contractual obligations, current and future business outlook, future global economic conditions, future growth or market share gains, the ability to manage costs or invest in future initiatives, as well as future changes in foreign currency rates, are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions or expressions of the negative of these terms.

These statements involve known and unknown risks and are based upon current information and expectations. Actual results may differ materially from those anticipated if the information on which those estimates were based ultimately proves to be incorrect or as a result of certain risks and uncertainties that could cause our actual results to differ materially from the results expressed or implied by such statements, including the integration of Dorner into the Company to achieve cost and revenue synergies, the ability of the Company and Dorner to achieve revenue expectations, global economic and business conditions including the impact of COVID-19, 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, the ability to expand into new markets and geographic regions, foreign currency fluctuations, the integration of acquisitions, including the acquisition of Dorner, and other factors disclosed in our periodic reports filed with the SEC. Consequently, such forward-looking statements should be regarded as our current plans, estimates and beliefs. Except as required by applicable law, 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.

 

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Trademarks

We have proprietary rights to trademarks appearing in this prospectus or in the information incorporated by reference herein, which are important to our business, many of which are registered under applicable intellectual property laws. Solely for convenience, trademarks and trade names appearing in this prospectus or in the information incorporated by reference may appear without the “®” or “” symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Each trademark, trade name or service mark of any other company appearing in this prospectus or in the information incorporated by reference herein is the property of its respective holder.

 

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Summary

This summary highlights information included or incorporated by reference into this prospectus and does not contain all of the information you should consider before investing in shares of our common stock. You should read this entire prospectus and the information incorporated by reference herein and therein carefully, including the sections entitled “Risk factors” included and incorporated by reference into this prospectus and “Management’s discussion and analysis of financial condition and results of operations” and the financial statements and the related notes in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 and our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2020, each of which are incorporated by reference herein, before you decide to invest in shares of our common stock.

Our Company

Columbus McKinnon is a leading worldwide designer, manufacturer and marketer of intelligent motion solutions 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.

We focus on commercial and industrial applications for our products, which require the safety, reliability and quality provided by our advanced design and engineering know-how. Our products are used for mission critical applications where we have established, trusted brands with significant customer retention. Our targeted market verticals include general industries, mobile industries, energy and utilities, process industries, industrial automation, construction and infrastructure, food processing, entertainment, life sciences, consumer packaged goods and e-commerce/supply chain/warehousing.

We maintain strong market share in North America with significant leading market positions in hoists, lifting and sling chain, forged attachments, precision conveyors, actuators, and digital power and motion control systems for the material handling industry. We are the world’s second largest hoist manufacturer.

In the United States, we are the market leader for hoists, material handling digital power control systems, and precision conveyors, our principal lines of products, and have strong market positions with certain chain, forged fittings, and actuator products. Additionally, in Europe, we believe we are the market leader for manual hoists and a market leader in the heavy load, rail and niche custom applications for actuation. We have achieved our leadership positions through strategic acquisitions, our extensive, diverse, and well-established channels to market and our commitment to product innovation and quality. We believe the breadth of our product offering and expansive channels to market provide us with a strategic advantage.

We have well-established brands that include CM, Yale, STAHL, Magnetek, Dorner, Pfaff, Unified, SHAW-BOX and Duff-Norton. Our market leadership and strong brands enable us to effectively sell our products through our extensive channels to market throughout the United States and Europe.

 

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We believe that key considerations for investing in Columbus McKinnon include the following:

 

 

The acquisition of STAHL CraneSystems (“STAHL”) in fiscal 2017, which is well known for its custom engineered 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.

We believe that the acquisition of Dorner provides a catalyst for growth and a platform where we can leverage our leadership position in the United States and our worldwide reach to expand globally in the precision conveyor market. This acquisition broadens our intelligent motion product offerings and diversifies our product portfolio. Dorner added a broad range of precision conveying systems to our product offerings, which include low profile, flexible chain, large scale, sanitary and vertical elevation conveyor systems, as well as pallet system conveyors. Our conveying solutions are offered in both modular standard and highly engineered custom formats, along with significant aftermarket offerings and support. Dorner serves a variety of customers across food processing, life sciences, consumer packaged goods (CPG), e-commerce and industrial automation end markets.

We seek to maintain and enhance our market share by focusing our sales and marketing activities toward select global market verticals that require our material handling expertise, and to accelerate our growth by expanding our reach into markets with stronger secular tailwinds than traditional industrial and energy markets, such as factory and warehouse automation, life sciences, food and beverage, consumer packaged goods and e-commerce.

Our revenue base is geographically diverse with approximately 47% of revenues derived from customers outside the United States for the nine months ended December 31, 2020 (excluding Dorner). We believe this diversity helps balance the impact of changes that occur in local economies, as well as allows us to benefit from growth in emerging markets. We monitor both U.S. and Eurozone Industrial Capacity Utilization statistics and 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. macroeconomic data, including industrial production, trade tariffs, raw material cost inflation, interest rates, foreign currency exchange rates, and activity of end-user markets around the globe.

Regardless of the economic climate and point in the economic cycle, we consistently explore ways to increase operating margins as well as further improve our productivity and competitiveness. We have specific initiatives

 

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to reduce quote lead-times, improve on-time deliveries, reduce warranty costs, and improve material and factory productivity. These initiatives are being driven by the implementation of our business operating system, CMBS (Columbus McKinnon Business System). We are working to achieve these strategic initiatives through business simplification, operational excellence, and revenue growth initiatives. We believe these initiatives will drive profitable growth and enhance future operating margins.

Our strengths

We believe the following strengths of our business position us to capitalize on continued growth of intelligent motion solutions for material handling, reinforce our strong leadership positions and distinguish us from our competitors:

Market leading manufacturer of material handling and intelligent motion products

We are one of the world’s largest producers of hoists with a leading precision conveyors platform that, we believe, is poised for significant growth. We are the number one producer of hoists in the United States and the second largest producer globally. Our Dorner brand is a leading North American manufacturer of precision conveying systems. We achieved our leadership position in hoists, material handling digital power control systems and high precision conveyor systems through strategic acquisitions, our extensive, diverse and well-established distribution channels and product innovation and quality. The substantial breadth of our product offering and broad distribution channels in the United States and Europe provide us a strategic advantage in our markets. We provide highly relevant, professional-grade solutions for solving customers’ critical material handling requirements with intelligent motion across broad geographic coverage through expansive distribution channels in approximately 50 countries. With over 145 years of product innovation and approximately 3,000 employees providing expertise worldwide, we believe that we are a seasoned leader with an extensive history of safely, efficiently, ergonomically and intelligently moving materials.

Dorner is a platform for further growth

The acquisition of Dorner and addition of precision conveying solutions to our product offering provides a catalyst for growth in attractive markets. We expect to achieve this growth by serving the growing needs of the food processing, life sciences, consumer packaged goods and e-commerce and industrial automation markets, replacing and upgrading legacy conveying products with Dorner’s high precision solutions, expanding Dorner’s reach beyond North America, accelerating new product development, and building on the Dorner platform by acquiring other intelligent motion companies in the fragmented conveyance sector. Dorner’s precision conveying systems enable its customers to automate processes throughout supply chains and thereby improve efficiency, reduce waste, lower costs, and increase throughput. Dorner’s precision conveying systems offer greater precision than alternative conveying products, and facilitate the use of robotics, sensors, cameras and other technology by its customers. Dorner also provides an opportunity for significant aftermarket sales growth as its installed base expands.

Strong cash flow generation

We have a long track record of generating cash flow through various market cycles. Our low capital expenditure requirements provide significant free cash flow, as annual capital expenditures are generally less than 2.5% of annual revenue. Cash flow from operations for the organic Columbus McKinnon business from fiscal 2017

 

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through the first nine months of fiscal 2021 was $388.5 million. Our enhanced scale resulting from the acquisition of Dorner and combined cash generating power is expected to enable us to rapidly pay down debt, and ultimately provide the additional financial flexibility to pursue our growth strategy.

Broad global presence and diverse end-markets with exposure to attractive growth markets

We operate across a variety of end-markets and geographies that have varying economic drivers. Our largest end-markets include industrial, mobile industries, energy, utilities, and process industries. Through the acquisition of Dorner, we have gained access to new markets for conveying solutions with enduring tailwinds, such as food processing, life sciences, consumer packaged goods, e-commerce and industrial automation. Furthermore, we are a global organization with production facilities in the Americas, EMEA and APAC. Sales to the Americas, EMEA and APAC represented 65%, 29% and 6%, respectively, of our pro forma net sales reflecting the acquisition of Dorner for the nine months ended December 31, 2020. We plan to leverage our global reach and leadership to support the geographic expansion of Dorner.

 

Talent leadership with proven track record of performance and successful M&A integration

Our senior management team has extensive operational, financial and managerial experience, and has been responsible for developing and executing strategies to both transform the Company and drive profitable growth via M&A and other strategic initiatives. Several notable initiatives include the Columbus McKinnon Business System, which underpins our strategic framework and defines the critical core competencies required to scale. This includes our 80/20 business tool to drive margin expansion. Our management team also has a track record of effective M&A integration, demonstrated by the successful acquisition of STAHL in 2017 and Magnetek in 2015. We believe our senior management team has the necessary talent and experience to continue to meet and exceed our long-term goals and continue to catalyze growth and drive our shift towards intelligent motion.

 

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History of delivering innovation

 

We are focused on growing our core via new product development and advancements in automation. We have a history of driving organic growth with new products as demonstrated through the development of our tandem hoist, utility lever hoist and precision conveyor systems. Improved customer experience, safety and productivity remain at the core of our new product development strategy. Additionally, we believe we are driving innovation through automation, seen in our new line of Intelli-Crane Solutions. Our solutions, including the Intelli-Guide System, Intelli-Protect System, Intelli-Lift Auto Detection and Intelli-Connect Mobile App, are creating competitive advantages with pre-engineered automation solutions. Dorner also has a strong history of innovation, which has defined its growth trajectory, including innovations such as a vertical spiral conveyance platform employing a patented, friction reducing spiral chain and a specialty modular chain that resulted in one of the safest, most compact and highest load capacity curved conveyors in the market.   

 

Our strategy

We initiated the Blueprint for Growth strategy in early fiscal 2018. It originally had three phases. In Phase 1, which was completed during fiscal 2018, we focused on attaining operational control and instilling a performance-based culture to drive results. Phase I enabled us to grow market share in the United States, achieve $6 million of synergies related to the STAHL acquisition, and repay $60 million of our long-term debt.

Phase II included simplifying the business with our 80/20 process, improving our operational excellence, and ramping the growth engine. Guided by the simplification process, we divested three businesses in fiscal 2019 that had represented approximately $38 million in revenue in the prior fiscal year. During fiscal 2020 and 2021, we also consolidated four manufacturing facilities for an estimated annual savings of approximately $8.3 million.    

Blueprint for Growth 2.0—We have evolved our Blueprint for Growth strategy to version 2.0 to accelerate our growth with an emphasis on broadening our expertise in intelligent motion solutions for material handling. Our Blueprint for Growth 2.0 strategy is focused on delivering above market growth through organic and inorganic initiatives as well as improved financial performance, which we believe drives shareholder value creation.

 

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The strategy is underpinned by our business system, CMBS, that provides the discipline, processes and core competencies necessary to scale our business. At the core of CMBS are our people and our values.    

 

 

With CMBS as the foundation, we are well positioned to execute the Core Growth Framework of our Blueprint for Growth 2.0 strategy. The Framework defines four parallel paths for Columbus McKinnon’s growth and provides clear organic and strategic initiatives. We have detailed action plans for each of the paths of our Core Growth Framework.

 

 

Strengthening the core is a foundational path focused on initiatives that will strengthen competencies and improve our competitive position within our existing share of our Serviceable Addressable Market (“SAM”). Initiatives include further developing commercial and product management competencies and improving our digital tools for a better, more efficient customer experience.

 

 

Growing the core is a path that is focused on taking greater marker share, both organically and through acquisitions, within our SAM. We believe we are making progress on this path through product localization, new product development and advancements in automation and aftermarket support for our distributors.

 

 

Expanding the core is a path that is focused on improved channel access and geographic expansion. Here we expand beyond our SAM into the broader Total Addressable Market (“TAM”). We believe this will involve building out our presence both geographically and in new verticals with expanded offerings, which we expect we can accomplish organically as well as with acquisitions.

 

 

Reimagining the core is a more transformational path that rethinks our TAM and targets strategic expansion beyond that. As we think more broadly about material handling and increasing trends in intelligent motion, not just lifting, but solutions for how materials move throughout customer environments, there are some compelling ideas that emerge. The Dorner acquisition is an example of reimagining Columbus McKinnon’s core.

The strategy is geared toward investing in new products that solve customers’ tough problems and expanding into new platforms that provide intelligent motion solutions for material handling, such as precision conveyance capabilities. We believe the acquisition of Dorner establishes a platform for expansion supported by new product development, a fragmented competitive landscape and complementary adjacencies.

Through the third quarter of fiscal 2021, we are ahead of our plan for our organic growth initiatives involving new product and solutions development, geographic expansion and advancing Compass, our online CPQ – or configure, price, quote tool—that speeds up our channel partners’ ability to design and quote our equipment. We are forecasting new product revenue, defined as revenue from products introduced within the last three years, to be up 22% year-over-year in fiscal 2021. As a percentage of sales, we expect our new product revenue for fiscal 2021 to have grown approximately 180 basis points compared with fiscal 2020.

 

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Our industry and market opportunity

We believe our TAM, prior to the acquisition of Dorner, was approximately $11 billion. We believe the Dorner acquisition provided an additional $5 billion of TAM. The $5 billion specialty conveying microsegment of material handling is growing at an estimated 6% to 8% rate annually. Furthermore, we believe there are meaningful opportunities to expand the SAM of our heritage material handling business through initiatives targeting geographic expansion, broader addressable markets and market share gains.

Dorner: Precision conveying is an attractive microsegment

There are strong secular growth drivers underlying the precision conveying segment, including supply chain automation and the acceleration of e-commerce adoption. Highly-engineered precision conveyor systems are key parts of the overall manufacturing process and supply chains of many end-markets, such as food processing, life sciences, and e-commerce, as the adoption of automation accelerates. Additionally, we believe the addressable market is expanding at accelerated rates as base levels of demand for new conveying solutions is complemented by the replacement and upgrade of legacy systems. There is also, we believe, significant potential for expansion in complex conveying solutions for processes that remain largely manual today and a deep aftermarket opportunity for precision conveying components.

The precision conveying market boasts a strong, recurring demand profile as processes or products continue to change. New conveying technologies and the relatively low cost of conveyors consistently accelerates the replacement cycle to less than the typical useful life of 15 to 20 years. Furthermore, we believe an increasing replacement and upgrade rate will continue to act as a positive tailwind in the sector. Approximately 65% of conveyor purchases are replacements or upgrades of an existing conveyor. Legacy conveying systems often lack the precision required by supply chain automation systems that utilize cameras, sensors, robots and other elements.

We also believe that there are both attractive aftermarket opportunities and further acquisition opportunities in the precision conveying microsegment of intelligent motion material handling. The highly profitable aftermarket opportunity is expected to grow as the installed base increases. Additionally, the fragmented specialty conveying market acts as a target rich acquisition environment. Beyond that, we believe there are also numerous complementary adjacencies including sortation, asynchronous conveyance and vibration.

Acquisition of Dorner

On April 7, 2021, upon the terms and subject to the conditions set forth in the Agreement and Plan of Merger (the “Merger Agreement”), dated March 1, 2021, among the Company, Dorner Merger Sub Inc. (“Merger Sub”), Precision Blocker, Inc. (“Dorner Parent”), and Precision TopCo LP, as representative of the equityholders, and in accordance with the applicable provisions of the General Corporation Law of the State of Delaware (the “DGCL”), Merger Sub merged with and into Dorner Parent (the “Acquisition”). At the effective time of the Acquisition (the “Effective Time”), the separate corporate existence of Merger Sub ceased and Dorner Parent continued its existence under Delaware law as the surviving corporation in the Merger and a wholly-owned subsidiary of the Company. As consideration for the acquisition of Dorner, the Company paid cash consideration of $485.0 million, on a cash-free, debt-free basis, which amount is subject to certain customary post-closing adjustments.

Dorner is a leading automation solutions company providing unique, patented technologies in the design, application, manufacturing and integration of high-precision conveying systems. Dorner provides diversification

 

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for the Company into attractive end-markets and is one of the market leaders in the global specialty conveyor market. Dorner is a leading supplier to the stable growth life sciences, food processing and consumer packaged goods markets and high growth industrial automation and e-commerce sectors. The Acquisition is expected to accelerate the Company’s shift to intelligent motion and to serve as a platform to expand the Company’s capabilities in advanced, higher technology automation solutions.

Compelling strategic rationale

 

 

Dorner’s deep technical expertise and experienced management team are an excellent complement to our global organization. In addition, Dorner’s product offerings provide a critical link to industrial automation, complementing our leadership position in material handling

 

 

Markets served by Dorner have strong secular tailwinds driven by supply chain automation and the acceleration of e-commerce adoption across consumer and industrial markets

 

 

Dorner is a leading supplier to the stable growth life sciences, food processing and consumer packaged goods markets and high growth industrial automation and e-commerce sectors

 

 

Dorner has a significant and growing high margin after-market business resulting from a mix of proprietary parts and a large installed base

 

 

Dorner has an opportunity to expand geographically and our acquisition of Dorner provides us with an entry point into a pipeline of additional acquisition targets in the fragmented precision conveying industry

Differentiated solutions

Profitability of Dorner is driven by product line differentiation:

 

 

Accuracy: greater precision than alternative conveying products

 

 

Configuration: well developed CPQ tool

 

 

Differentiated technology: patented technology and designs

 

 

Modularity of solution provides greater design flexibility

 

 

Automation ecosystem: integrates easily with other material handling and internet of things (IoT) systems

Strong financial profile

 

 

Trailing twelve-month revenue for Dorner for the period ended December 31, 2020 (“TTM 12/31/2020”) was $98.5 million

 

 

Seven-year compounded annual revenue growth rate for Dorner was approximately 13% from fiscal 2013 through fiscal 2020

 

 

Dorner generated, for TTM 12/31/2020, net income of $4.6 million and Dorner Adjusted EBITDA of $25.4 million, with a net income margin of 4.7% and a Dorner Adjusted EBITDA margin of 25.8%. See “—Summary historical financial data of Dorner—Non-GAAP reconciliations” for reconciliations of Dorner Adjusted EBITDA and Dorner Adjusted EBITDA margin to the most closely comparable financial measures calculated in accordance with GAAP

 

 

Strong cash generation capabilities with low capital expenditure requirements

 

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Expanding and reimagining Columbus McKinnon’s core with a platform for expansion

 

 

Expands the Company’s product offering through a broad range of highly engineered, precision conveying solutions

 

 

Accelerates the Company’s shift to intelligent motion and serves as a platform to expand capabilities in advanced, higher technology automation solutions

 

 

Attractive complementary adjacencies including sortation and asynchronous conveyance

 

 

Columbus McKinnon’s global presence will support Dorner’s geographic expansion

On April 7, 2021, in connection with the completion of the Acquisition, the Company entered into a Credit Agreement (the “Credit Agreement”), among the Company, Columbus McKinnon EMEA GmbH (the “German Borrower” and together with the Company, the “Borrowers”), certain of the Company’s subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders and parties thereto, which provides for (i) a revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of $100.0 million and (ii) a first lien term loan facility (the “First Lien Term Facility” and, together with the Revolving Credit Facility, the “Credit Facilities”) in an aggregate principal amount of $650.0 million. The Company borrowed $650.0 million under the First Lien Term Facility to finance the purchase price for the Acquisition, pay related fees, expenses and transaction costs, and repay the Company’s outstanding borrowings under its former term loan and revolving credit facilities. See “The acquisition and related financing” for additional information.

We intend to use the net proceeds from this offering (including the net proceeds from the underwriters’ option to purchase additional shares of common stock, if exercised by the underwriters) to repay in part outstanding borrowings under the First Lien Term Facility. See “Use of proceeds” for additional information.

Products, vertical markets and channels to market

Columbus McKinnon’s key products include Material Handling Equipment, such as electric and air hoists, manual hoists, trolleys, and winches; Crane Systems, including crane components, crane kits, enclosed track rail systems, mobile workstation and jib cranes, lift assists, and fall protection systems; Rigging Equipment, including below-the-hook lifters, wire grips, hooks, shackles, chain, forestry and hand tools, lifting slings, lashing systems, tie-downs, and load binders; and Power Fluid Transfer Technology, such as rotary unions and swivel joints.

Columbus McKinnon also offers a comprehensive portfolio of Power and Motion Technology, including AC motor controls systems, AC line regenerative systems, actuators, automation and diagnostics, brakes, cable and festoon systems, collision avoidance systems, conductor bar systems, DC motor and magnet control systems, elevator drives, inverter duty motors, mining drives, pendant pushbutton stations, and wind inverters.

The acquisition of Dorner added a broad range of precision conveying systems to our product offerings, including low profile, flexible chain, large scale, sanitary and vertical elevation conveyor systems, as well as pallet system conveyors. Our conveying solution are offered in both modular standard and highly engineered custom formats.

With the Acquisition, our product groups are better defined as lifting solutions and conveying solutions. Lifting solutions includes our legacy crane solutions, industrial products and engineered products. Our lifting solutions enable the safe, efficient and ergonomically effective lift of just about anything from 1/8 ton (250 pounds) to 140 tons (280,000 pounds).

 

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Our conveying solutions can move the tiniest of items, from pills to minor components, to much larger packaging that requires pallet management systems in warehousing operations.

Vertical markets served

As a result of the Acquisition, the vertical markets that we serve have increased to include markets with positive secular growth trends, including food processing, life sciences, consumer packaged goods, industrial automation and e-commerce/supply chain/warehousing.

Many of the Company’s legacy markets tend to grow at the rate of the gross domestic product and can be highly cyclical whereas the Acquisition, and Dorner’s focus on the precision conveying industry, brings more secular driven, higher growth rate verticals into the markets we serve.

Channels to market

Our channels to market include a variety of commercial distributors as well as engineering procurement contractors, crane builders, integrators of factory production systems, and original equipment manufacturers. We also sell direct to end users.

Our global distribution channels include large, nationally recognized distributors, a significant network of private companies, and specialized distributors such as in the entertainment industry.

We are unique with our channel to market for our crane solutions because we intentionally serve the crane builder market that competes with our largest global wire rope hoist competitor. We partner with our crane builder customers to allow them to provide unique solutions to their end users.

 

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Corporate social responsibility

At Columbus McKinnon, we appreciate the importance of environmental stewardship, social responsibility, and leading governance practices. We have identified important issues to our business to reduce risk and develop opportunities for value creation. We have key metrics that we are measuring and have identified clear priorities to drive improvement. We have many elements of ESG in motion, evidenced by our:

 

 

mission, vision and values,

 

 

quality, purposeful products,

 

 

the way we care for our people and our communities, and

 

 

prioritization of health and safety.

ESG Priorities

 

 

 

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Recent developments

Estimated preliminary unaudited financial results as of and for the three months and fiscal year ended March 31, 2021

Our financial results as of and for the three months and fiscal year ended March 31, 2021 are not yet complete and will not be available until after the completion of this offering. Accordingly, we are presenting ranges, rather than specific amounts, for certain estimated preliminary unaudited financial results set forth below as of and for the three months and fiscal year ended March 31, 2021. The unaudited estimated financial results set forth below are preliminary and subject to revision based upon the completion of our quarter-end financial closing processes and our fiscal year-end audit. Our estimated preliminary unaudited financial results set forth below are forward-looking statements based solely on information available to us as of the date of this prospectus. As a result, our actual results as of and for the three months and fiscal year ended March 31, 2021 may differ materially from the estimated preliminary unaudited financial results set forth below upon the completion of our financial closing procedures, as a result of the fiscal year-end audit, or upon occurrence of other developments that may arise prior to the time our financial results are finalized. You should not place undue reliance on these preliminary estimates. For additional information, see “Forward-looking statements” and “Risk factors.” Our estimated preliminary unaudited financial results contained in this prospectus have been prepared in good faith by, and are the responsibility of, our management based upon our internal reporting as of and for the three months and the fiscal year ended March 31, 2021. Ernst & Young LLP has not audited, reviewed, compiled or performed any procedures with respect to the preliminary financial results. Accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto.

Based on information currently available to us as of the date of this prospectus, we currently expect that our revenues for the three months ended March 31, 2021 will range between $                 million to $                 million and Adjusted EBITDA will range between $                 million to $                 million. In addition, we currently expect that our revenues for the fiscal year ended March 31, 2021 will range between $                 million to $                 million and Adjusted EBITDA will range between $                 million to $                 million. We also estimate, based upon information currently available to us, that orders received during the three months ended March 31, 2021 will range between $                 million and $                 million and that, as of March 31, 2021, our backlog will range between $                 million and $                 million.

We have not included a GAAP reconciliation of our Adjusted EBITDA to anticipated net income because we have not yet completed our financial closing procedures for the three months and fiscal year ended March 31, 2021 and such reconciliation could not be produced without unreasonable effort. We will provide a full GAAP reconciliation of final Adjusted EBITDA when we report our full fourth quarter and fiscal 2021 financial results. See “Non-GAAP financial measures” and “Summary—Summary historical and unaudited pro forma financial data of Columbus McKinnon.”

First lien term facility

In connection with this offering, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent under the First Lien Term Facility, intends to syndicate such facility to third-party investors. As a result of such syndication, certain of the terms of the First Lien Term Facility may change as they are subject to pricing and other flex rights. If any flex rights are exercised under the First Lien Term Facility, the terms of the First Lien Term Facility will be less favorable to us than the terms described in this prospectus. See “The acquisition and related financing.” As of the date of this prospectus, we cannot ensure you that such syndication will occur or that JPMorgan Chase will exercise any of its flex rights under the First Lien Term Facility. This offering is not conditioned on the syndication of the First Lien Term Facility.

 

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The offering

The summary below contains the basic information about this offering. It does not contain all of the information that is important to you. You should read this prospectus and the documents incorporated by reference herein carefully before making an investment decision.

 

Issuer

Columbus McKinnon Corporation, a New York corporation

 

Common stock offered

$150,000,000 of shares of our common stock (or $172,500,000 of shares of our common stock if the underwriters exercise their option to purchase additional shares of our common stock in full).

 

Common stock to be outstanding immediately after this offering

             shares (or              shares if the underwriters exercise their option to purchase additional shares of our common stock in full).

 

Use of proceeds

We expect the net proceeds from the sale of common stock in this offering to be approximately $             (or approximately $             if the underwriters exercise their option to purchase additional shares of our common stock in full) after deducting estimated underwriting discounts and commissions but not estimated offering expenses payable by us. We intend to use the net proceeds from this offering (including the net proceeds from the underwriters’ option to purchase additional shares of common stock, if they exercise it) to repay in part outstanding borrowings under the First Lien Term Facility. See “Use of proceeds.”

 

Material U.S. federal income tax considerations for non-U.S. holders

The material U.S. federal income tax consequences of the purchase, ownership and disposition of our common stock by non-U.S. holders (as defined herein) are described in “Material U.S. federal income tax considerations for non-U.S. holders.”

 

Listing

Our common stock is listed on Nasdaq under the symbol “CMCO.”

 

Dividend policy

We currently expect to continue to pay quarterly cash dividends on shares of our common stock, subject to approval of our board of directors (our “Board”). On March 22, 2021, our Board approved a quarterly dividend of $0.06 per share of common stock, which is payable on or about May 13, 2021 to shareholders of record at the close of business on May 3, 2021.

 

  There can be no assurance that we will pay dividends on shares of our common stock in the future. See “Risk factors—Risks related to ownership of our common stock—We cannot assure you that we will continue to pay dividends on our common stock, and our indebtedness limits our ability to pay dividends on our common stock.”

 

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Transfer agent and registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.

 

Risk factors

See “Risk factors” on page 24 of this prospectus and the risk factors in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 for a discussion of risks you should carefully consider before deciding to invest in our common stock.

 

Conflicts of Interests

Affiliates of J.P. Morgan Securities LLC, Wells Fargo Securities, LLC and PNC Capital Markets LLC will receive at least 5% of the net proceeds of this offering in connection with the repayment of outstanding borrowings under the First Lien Term Facility. See “Use of proceeds.” Accordingly, this offering is being made in compliance with the requirements of FINRA Rule 5121. In accordance with that rule, no “qualified independent underwriter” is required, because a bona fide public market exists in the shares, as that term is defined in the FINRA Rule 5121. See “Underwriting (conflicts of interest).”

The number of shares of common stock outstanding immediately following this offering that appears above is based on the 23,985,393 number of shares of common stock outstanding as of April 15, 2021 and does not give effect to:

 

 

shares of our common stock issuable upon the exercise of the underwriters’ option to purchase additional shares of our common stock;

 

 

an aggregate of 657,814 shares of our common stock issuable upon exercise of restricted stock units, performance restricted stock units and stock options outstanding as of March 31, 2021; and

 

 

an aggregate of 2,252,478 shares of our common stock available for future issuance under our equity compensation plans as of March 31, 2021.

Corporate information

Our principal executive offices are located at 205 Crosspoint Parkway, Buffalo, New York 14068. Our telephone number is (716) 689-5400. Our website address is www.columbusmckinnon.com. The information on, or accessible through, our website is not part of this prospectus and should not be relied upon in connection with making any investment decision with respect to the shares of common stock offered by this prospectus.

 

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Summary historical and unaudited pro forma financial data of Columbus McKinnon

The following table sets forth summary historical financial data for Columbus McKinnon as of and for the nine months ended December 31, 2020 and 2019 and the fiscal years ended March 31, 2020, 2019 and 2018.

The following summary historical statement of operations data and statement of cash flow data for the fiscal years ended March 31, 2020, 2019 and 2018 and balance sheet data as of March 31, 2020 and 2019 were derived from our audited consolidated financial statements incorporated herein by reference. The following summary historical statement of operations data and statement of cash flow data for the nine months ended December 31, 2020 and 2019 and balance sheet data as of December 31, 2020 were derived from our unaudited condensed consolidated financial statements incorporated herein by reference, which, in the opinion of our management, include all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of our financial position and results of operations for such periods. The following summary historical balance sheet data as of March 31, 2018 were derived from our audited consolidated financial statements not included or incorporated herein by reference. The results for the nine months ended December 31, 2020 are not necessarily indicative of results to be expected for the fiscal year ended March 31, 2021 or any future period or year.

The following table should be read in conjunction with “Management’s discussion and analysis of results of operations and financial condition” and the consolidated financial statements and accompanying notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, which are incorporated by reference herein. This information is only a summary and should be read together with the consolidated financial statements, the related notes and other financial information incorporated by reference into this prospectus.

The following table also sets forth summary unaudited pro forma financial data for Columbus McKinnon as of and for the nine months ended December 31, 2020 and the twelve months ended March 31, 2020. The following summary unaudited pro forma financial data as of and for the nine months ended December 31, 2020 and for the twelve months ended March 31, 2020 were derived from our unaudited pro forma condensed combined financial statements that are included elsewhere in this prospectus. The summary unaudited pro forma statements of operations data for the nine months ended December 31, 2020 and for the twelve months ended March 31, 2020 have been prepared to reflect the Transactions, as defined under “Unaudited pro forma condensed combined financial information,” as if the Transactions occurred on April 1, 2019, including giving effect to the completion of this offering and the use of proceeds therefrom. The unaudited pro forma condensed combined balance sheet data has been adjusted to give effect to the Transactions as if the Transactions occurred on December 31, 2020, including giving effect to the completion of this offering and the use of proceeds therefrom. The following summary unaudited pro forma financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the relevant transactions had been consummated on the dates indicated, nor are they indicative of future operating results.

 

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    Historical     Pro forma  

(in thousands, except for per
share amounts and percentages)

  Fiscal year ended March 31,     Nine months ended
December 31,
    Twelve months
ended
March 31,
2020
    Nine months
ended
December 31,
2020
 
  2018     2019     2020     2019     2020  

Statement of Income

             

Net sales

  $ 839,419     $ 876,282     $ 809,162     $ 619,676     $ 463,407     $ 891,256     $ 541,498  

Cost of products sold

    554,358       571,285       525,976       402,699       307,270       573,007       346,112  
 

 

 

 

Gross profit

    285,061       304,997       283,186       216,977       156,137       318,249       195,386  

Selling expenses

    101,956       97,925       91,054       68,801       56,087       105,792       68,815  

General and administrative expenses

    85,605       83,567       77,880       56,713       53,842       111,150       63,056  

Research and development expenses

    13,617       13,491       11,310       8,419       8,703       12,846       9,626  

Net loss on sales of businesses, including impairment

          25,672       176       176             176        

Amortization of intangibles

    15,552       14,900       12,942       9,708       9,449       25,573       18,922  
 

 

 

 

Income from operations

    68,331       69,442       89,824       73,160       28,056       62,712       34,967  

Interest and debt expense

    19,733       17,144       14,234       11,034       9,192       19,754       14,815  

Cost of debt refinancing

                                  14,645        

Investment (income) loss, net

    (157     (727     (891     (939     (1,429     (891     (1,429

Foreign currency exchange loss (gain), net

    1,539       843       (1,514     (518     1,083       (1,552     1,508  

Other (income) expense, net

    (2,469     (716     839       618       20,081       751       20,030  
 

 

 

 

Income (loss) from continuing operations before income tax expense

    49,685       52,898       77,156       62,965       (871     30,005       43  

Income tax expense (benefit)

    27,620       10,321       17,484       12,537       (392     6,234       (472
 

 

 

 

Net income (loss)

  $ 22,065     $ 42,577     $ 59,672     $ 50,428     $ (479   $ 23,771     $ 515  
 

 

 

 

Average basic shares outstanding

    22,841       23,276       23,619       23,581       23,871       26,920       27,172  

Average diluted shares outstanding

    23,335       23,660       23,855       23,925       23,871       27,163       27,190  

Basic income (loss) per share

  $ 0.97     $ 1.83     $ 2.53     $ 2.14     $ (0.02   $ 0.88     $ 0.02  

Diluted income (loss) per share

  $ 0.95     $ 1.80     $ 2.50     $ 2.11     $ (0.02   $ 0.88     $ 0.02  

Dividends declared per common share

  $ 0.17     $ 0.21     $ 0.24     $ 0.12     $ 0.12     $ 0.24     $ 0.12  

 

 

 

     

(in thousands)

  Fiscal Year ended March 31,     Nine months ended
December 31,
 
  2018     2019     2020     2019     2020  

Statement of Cash Flows

         

Net cash provided by operating activities

  $ 69,661     $ 79,499     $ 106,795     $ 70,252     $ 71,948  

Net cash (used for) provided by investing activities

    (32,592     2,486       (9,962     (6,977     846  

Net cash used for financing activities

    (59,502     (67,778     (51,551     (50,431     (7,680

 

 

 

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Table of Contents
     
    Historical     Pro forma  

(in thousands, except for
percentages)

  Fiscal year ended March 31,     Nine months ended
December 31,
    Twelve months
ended
March 31,
2020
    Nine months
ended
December 31,
2020
 
  2018     2019     2020     2019     2020  

Other Data

             

Adjusted EBITDA(1)

  $ 114,835     $ 132,450     $ 126,869     $ 99,549     $ 51,380     $ 87,374     $ 60,762  

Adjusted income from operations(1)

    78,699       99,775       97,743       77,558       30,177       72,893       39,559  

Adjusted EBITDA margin(1)

    13.7%       15.1%       15.7%       16.1%       11.1%       9.8%       11.2%  

Adjusted income from operations margin(1)

    9.4%       11.4%       12.1%       12.5%       6.5%       8.2%       7.3%  

 

 

 

(1)   See “—Non-GAAP reconciliations” below.

 

     
     Historical      Pro forma  

(in thousands)

   March 31,      December 31,
2020
     December 31,
2020
 
   2018      2019      2020  

Balance Sheet Data

              

Cash and cash equivalents

   $ 63,021      $ 71,093      $ 114,450      $ 187,626      $ 68,852  

Total current assets

     360,295        362,588        382,746        414,099        324,008  

Net property, plant, and equipment

     113,079        87,303        79,473        72,304        100,998  

Goodwill

     347,434        322,816        319,679        338,995        640,750  

Total assets

     1,142,446        1,061,571        1,093,272        1,147,386        1,556,739  

Total debt

     363,318        300,320        251,306        249,542        490,005  

Total current liabilities

     206,997        211,278        155,324        144,112        155,540  

Total shareholders’ equity

     408,229        431,159        463,585        497,324        614,865  

 

 

Non-GAAP reconciliations

Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA and Adjusted EBITDA margin are not financial measures presented in accordance with GAAP. See “Non-GAAP financial measures.” The following tables reconcile Adjusted income from operations, Adjusted income from operations margin, Adjusted EBITDA and Adjusted EBITDA margin to the most directly comparable GAAP financial measures for the periods indicated.

We define Adjusted income from operations as income from operations as reported in accordance with GAAP, adjusted for certain items. Adjusted income from operations is not a measure determined in accordance with GAAP and may not be comparable with the measures as used by other companies. Nevertheless, we believe that providing Adjusted income from operations is important for investors and other readers of our financial statements and assists in understanding the comparison of the current period’s income from operations to the historical periods’ income from operations, as well as facilitates a more meaningful comparison of our income from operations to that of other companies. Adjusted income from operations margin is computed by dividing Adjusted income from operations for the relevant period by net sales for the same corresponding period.

 

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Table of Contents
     
    Historical     Pro forma  

(in thousands, except for
percentages)

  Fiscal year ended March 31,     Nine months ended
December 31,
    Twelve months
ended
March 31,
2020
    Nine months
ended
December 31,
2020
 
  2018     2019     2020     2019     2020  

Income from operations

  $ 68,331     $ 69,442     $ 89,824     $ 73,160     $ 28,056     $ 62,712     $ 34,967  

Add back (deduct):

             

Factory closures

          1,473       4,709       3,089       3,472       4,709       3,472  

Business realignment costs

    8,763       1,906       2,831       1,075       1,058       2,831       1,058  

Insurance recovery legal costs

    2,948       1,282       585       425       229       585       229  

Loss on sales of businesses

          25,672       176       176             176        

Debt refinancing fees

    619                                      

Litigation costs

    400                                      

Insurance settlement

    (2,362           (382     (367           (382      

Gain on sale of building

                            (2,638           (2,638

Rent expense adjustment

                                        (197

Severance expense

                                  702       971  

Stock-based compensation expense

                                  173       255  

Integration team expense(1)

                                  374       202  

Other expense(2)

                                  180       398  

Board and sponsor fees(3)

                                  258       223  

Transaction-related expense(4)

                                  487       111  

Foreign exchange (gain) loss

                                  (13     427  

Professional fees(5)

                                  101       80  
 

 

 

 

Adjusted income from operations

  $ 78,699     $ 99,775     $ 97,743     $ 77,558     $ 30,177     $ 72,893     $ 39,559  
 

 

 

 

Net sales

  $ 839,419     $ 876,282     $ 809,162     $ 619,676     $ 463,407     $ 891,256     $ 541,498  

Operating margin

    8.1%       7.9%       11.1%       11.8%       6.1%       7.0%       6.5%  

Adjusted income from operations margin

    9.4%       11.4%       12.1%       12.5%       6.5%       8.2%       7.3%  

 

 

 

(1)   “Integration team expense” consists of payroll and other expenses incurred by Dorner in connection with a prior two person team with primary responsibility to integrate Dorner products, systems, technical knowledge and market introduction rollouts to acquired businesses and customers.

 

(2)   “Other expense” consists of certain COVID-19 related expenses, bank fees and other non-recurring expenses, which are not anticipated to be part of the ongoing costs incurred by Dorner in future periods.

 

(3)   “Board and sponsor fees” consists of fees paid to members of Dorner’s board of directors and to the former private equity sponsor of Dorner.

 

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(4)   “Transaction-related expense” consists of various professional fees related to potential and completed acquisitions by Dorner. Expenses include costs for representation and warranty insurance obtained by the former private equity sponsor of Dorner and legal fees from an unsuccessful acquisition pursued by Dorner.

 

(5)   “Professional fees” consists of certain non-recurring consulting fees for e-commerce, product redesign and derivative fees.

We define Adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization, and other adjustments. Adjusted EBITDA is not a measure determined in accordance with GAAP and may not be comparable with the measures as used by other companies. Nevertheless, we believe that providing Adjusted EBITDA is important for investors and other readers of our financial statements. Adjusted EBITDA margin is computed by dividing Adjusted EBITDA for the relevant period by net sales for the same corresponding period.

 

     
    Historical     Pro forma  
(in thousands, except for
percentages)
  Fiscal year ended March 31,     Nine months ended
December 31,
    Twelve months
ended
March 31,
2020
    Nine months
ended
December 31,
2020
 
  2018     2019     2020     2019     2020  

Net income (loss)

  $ 22,065     $ 42,577     $ 59,672     $ 50,428     $ (479   $ 23,771     $ 515  

Add back (deduct):

             

Income tax expense

    27,620       10,321       17,484       12,537       (392     6,234       (472

Interest and debt expense

    19,733       17,144       14,234       11,034       9,192       19,754       14,815  

Investment (income) loss

    (157     (727     (891     (939     (1,429     (891     (1,429

Foreign currency exchange loss (gain)

    1,539       843       (1,514     (518     1,083       (1,552     1,508  

Other (income) expense, net

    (2,469     (716     839       618       20,081       751       20,030  

Depreciation and amortization expense

    36,136       32,675       29,126       21,991       21,203       29,126       21,203  

Net loss on sales of businesses

          25,672       176       176             176        

Insurance recovery legal costs

    2,948       1,282       585       425       229       585       229  

Factory closures

          1,473       4,709       3,089       3,472       4,709       3,472  

Business realignment costs

    8,763       1,906       2,831       1,075       1,058       2,831       1,058  

Debt refinancing fees

    619                                      

Litigation costs

    400                                      

Insurance settlement

    (2,362           (382     (367           (382      

Gain on sale of building

                            (2,638           (2,638

Rent expense adjustment

                                        (197

Severance expense

                                  702       971  

Stock-based compensation expense

                                  173       255  

Integration team expense(1)

                                  374       202  

Other expense(2)

                                  180       398  

Board and sponsor fees(3)

                                  258       223  

Transaction-related expense(4)

                                  487       111  

Foreign exchange (gain) loss

                                  (13     427  

Professional fees(5)

                                  101       80  
 

 

 

 

Adjusted EBITDA

  $ 114,835     $ 132,450     $ 126,869     $ 99,549     $ 51,380     $ 87,374     $ 60,762  
 

 

 

 

Net sales

  $ 839,419     $ 876,282     $ 809,162     $ 619,676     $ 463,407     $ 891,256     $ 541,498  

Net income margin

    2.7%       4.9%       7.4%       8.1%       (0.1)%       2.7%       0.1%  

Adjusted EBITDA margin

    13.7%       15.1%       15.7%       16.1%       11.1%       9.8%       11.2%  

 

 

 

(1)   “Integration team expense” consists of payroll and other expenses incurred by Dorner in connection with a prior two person team with primary responsibility to integrate Dorner products, systems, technical knowledge and market introduction rollouts to acquired businesses and customers.

 

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(2)   “Other expense” consists of certain COVID-19 related expenses, bank fees and other non-recurring expenses, which are not anticipated to be part of the ongoing costs incurred by Dorner in future periods.

 

(3)   “Board and sponsor fees” consists of fees paid to members of Dorner’s board of directors and to the former private equity sponsor of Dorner.

 

(4)   “Transaction-related expense” consists of various professional fees related to potential and completed acquisitions by Dorner. Expenses include costs for representation and warranty insurance obtained by the former private equity sponsor of Dorner and legal fees from an unsuccessful acquisition pursued by Dorner.

 

(5)   “Professional fees” consists of certain non-recurring consulting fees for e-commerce, product redesign and derivative fees.

 

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Summary historical financial data of Dorner

The following table sets forth the summary historical financial data of Dorner for the periods indicated. The summary historical statements of operations data for the fiscal years ended September 30, 2020 and 2019 and the balance sheet data as of September 30, 2020 and 2019 have been derived from the audited financial statements of Dorner incorporated by reference into this prospectus from our Current Report on Form 8-K/A filed with the SEC on April 20, 2021. The summary historical statements of operations data for the three months ended December 31, 2020 and 2019 and the balance sheet data as of December 31, 2020 have been derived from the unaudited condensed financial statements of Dorner incorporated by reference into this prospectus from our Current Report on Form 8-K/A filed with the SEC on April 20, 2021, which, in the opinion of Dorner’s management, include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of Dorner’s financial position and results of operations for such period. The historical results presented below are not necessarily indicative of financial results to be achieved by Dorner after its integration into the Company in future periods. You should read the summary historical financial data together with the historical financial statements of Dorner and the related notes incorporated by reference into this prospectus from our Current Report on Form 8-K/A filed with the SEC on April 20, 2021. See “Where you can find more information and incorporation by reference” in this prospectus.

 

     
     Fiscal year ended
September 30,
    Three months ended
December 31,
 
      2019     2020     2019     2020  

Statement of Operations

        

Net sales

   $ 83,532,135     $ 90,196,775     $ 19,385,617     $ 27,671,498  

Cost of sales

     43,288,157       45,663,036       9,885,841       13,543,515  
  

 

 

 

Gross profit

     40,243,978       44,533,739       9,499,776       14,127,983  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

     37,527,135       36,875,778       9,021,540       9,157,582  
  

 

 

 

Income from operations

     2,716,843       7,657,961       478,236       4,970,401  

Other expenses

        

Acquisition costs

     182,258       109,788              

Interest expense, net

     6,794,240       6,218,658       1,602,980       1,370,709  

Other expense, net

     1,439       150,223       79,891       245,683  
  

 

 

 
     6,977,937       6,478,669       1,682,871       1,616,392  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (4,261,094     1,179,292       (1,204,635     3,354,009  

Income tax expense (benefit)

        

Current

     233,034       1,467,517       (73,450     1,668,873  

Deferred

     (984,471     (1,288,255     46,609       (734,627
  

 

 

 
     (751,437     179,262       (26,841     934,246  
  

 

 

 

Net (loss) income

   $ (3,509,657   $ 1,000,030     $ (1,177,794   $ 2,419,763  

 

 

 

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     Fiscal year ended
September 30,
    Three months ended
December 31,
 
      2019     2020     2019     2020  

Statement of Cash Flows

        

Net cash provided by operating activities

   $ 8,787,867     $ 11,617,409     $ 1,535,496     $ 5,323,357  

Net cash used in investing activities

     (2,349,421     (1,055,191     (462,589     (330,976

Net cash used in financing activities

     (3,675,156     (5,420,206     (45,260     (5,188,352

 

 

 

     
     September 30,      December 31,  
      2019      2020      2019      2020  

Balance Sheet Data

           

Cash and cash equivalents

   $ 6,403,691      $ 11,888,554      $ 7,379,599      $ 11,681,940  

Total current assets

     27,680,673        37,936,539        28,132,002        37,986,903  

Total property, plant and equipment

     19,618,347        18,086,850        19,506,569        18,436,393  

Goodwill

     87,836,323        87,836,323        87,836,323        87,836,323  

Total assets

     265,590,388        266,281,423        263,921,729        264,673,120  

Total current liabilities

     10,423,816        15,698,674        10,004,109        16,421,881  

Total stockholders’ equity

     142,549,680        144,112,794        141,524,206        146,844,035  

 

 

 

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Non-GAAP reconciliations

Dorner Adjusted EBITDA is not a financial measure presented in accordance with GAAP. See “Non-GAAP financial measures.” The following table reconciles, for the twelve months ended December 31, 2020, Dorner Adjusted EBITDA to net income (loss), which we consider to be the most directly comparable GAAP financial measure to Dorner Adjusted EBITDA.

We define Dorner Adjusted EBITDA as net income (loss) before interest expense, net, income tax expense, depreciation, amortization expense, and other adjustments. Dorner Adjusted EBITDA is not a measure determined in accordance with GAAP and may not be comparable with the measures as used by other companies, including Adjusted EBITDA as presented by the Company. Nevertheless, we believe that providing Adjusted EBITDA for Dorner presents important information for readers of this prospectus. Adjusted EBITDA margin is computed by dividing Dorner Adjusted EBITDA for the twelve months ended December 31, 2020 by net sales for the corresponding period.

 

   
(in thousands)   

Twelve months ended

December 31, 2020

 

Net income

   $ 4,598  

Add back (deduct):

  

Interest expense, net

     6,004  

Income tax expense

     1,140  

Depreciation and amortization expense

     10,751  

Rent expense adjustment

     (197

Severance expense

     1,067  

Stock-based compensation expense

     336  

Integration team expense(1)

     274  

Other expense(2)

     447  

Board and sponsor fees(3)

     282  

Transaction-related expense(4)

     254  

Foreign exchange loss

     355  

Professional fees(5)

     75  
  

 

 

 

Adjusted EBITDA

   $ 25,386  
  

 

 

 

Net sales

   $ 98,483  

Net income margin

     4.7%  

Adjusted EBITDA margin

     25.8%  

 

 

 

(1)   “Integration team expense” consists of payroll and other expenses incurred by Dorner in connection with a prior two person team with primary responsibility to integrate Dorner products, systems, technical knowledge and market introduction rollouts to acquired businesses and customers.

 

(2)   “Other expense” consists of certain COVID-19 related expenses, bank fees and other non-recurring expenses, which are not anticipated to be part of the ongoing costs incurred by Dorner in future periods.

 

(3)   “Board and sponsor fees” consists of fees paid to members of Dorner’s board of directors and to the former private equity sponsor of Dorner.

 

(4)   “Transaction-related expense” consists of various professional fees related to potential and completed acquisitions by Dorner. Expenses include costs for representation and warranty insurance obtained by the former private equity sponsor of Dorner and legal fees from an unsuccessful acquisition pursued by Dorner.

 

(5)   “Professional fees” consists of certain non-recurring consulting fees for e-commerce, product redesign and derivative fees.

 

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Risk factors

You should carefully consider the following risks, along with all of the risks and other information provided or referred to in this prospectus and the documents incorporated by reference herein, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 before making an investment decision. The following risks and those described in the risk factors incorporated by reference herein are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also materially and adversely affect our business, operations, financial condition and results of operations. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. Furthermore, the COVID-19 pandemic (including federal, state and local governmental responses, broad economic impacts and market disruptions) has heightened risks discussed in the risk factors described or incorporated by reference into this prospectus.

Risks to our business related to the COVID-19 pandemic

The risk related to Novel Coronavirus (“COVID-19”) has, and may continue to, adversely affect our business.

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 have caused and will continue to cause disruption to both 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, distributors, sub-contractors and customers have been and will continue to 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, and 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.

Risks related to ownership of our common stock

Our stock price may fluctuate significantly, depending on many factors, some of which may be beyond our control.

The market price of our common stock may fluctuate significantly, depending on many factors, some of which may be beyond our control, including:

 

 

actual or anticipated fluctuations in our operating results due to factors related to our business;

 

 

success or failure of our business strategies;

 

 

our quarterly or annual earnings, or those of other companies in our industry;

 

 

changes in preference by our customers;

 

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our ability to obtain financing as needed;

 

 

default on our indebtedness;

 

 

changes in our senior management or key personnel;

 

 

announcements by us or our competitors of significant acquisitions, dispositions or strategic investments and our ability to integrate Dorner into the Company;

 

 

announcements of new products or significant price reductions by us or our competitors or other actions by our competitors;

 

 

changes in accounting standards, policies, guidance, interpretations or principles;

 

 

the failure of securities analysts to cover, or maintain coverage of, our common stock;

 

 

changes in earnings estimates by securities analysts or our ability to meet those estimates;

 

 

rumors or dissemination of false information;

 

 

the operating and stock price performance of other comparable companies;

 

 

short selling of our common stock;

 

 

investor perception of our Company and our industry;

 

 

the extent and duration of COVID-19;

 

 

overall market fluctuations;

 

 

results from any material litigation or government investigation;

 

 

changes in laws and regulations (including tax laws and regulations) affecting our business;

 

 

changes in capital gains taxes and taxes on dividends affecting shareholders; and

 

 

general economic conditions and other external factors.

Low trading volume for our stock, which may occur if an active trading market is not sustained, among other reasons, would amplify the effect of the above factors on our stock price volatility.

Stock markets in general can experience volatility that is unrelated to the operating performance of a particular company. These broad market fluctuations could adversely affect the trading price of our common stock.

Certain provisions in our restated certificate of incorporation, as amended, and sixth amended and restated by-laws, and of New York law, may prevent or delay an acquisition of our Company, which could decrease the trading price of our common stock.

Our restated certificate of incorporation, as amended, our sixth amended and restated by-laws and New York law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirers to negotiate with our Board rather than to attempt a hostile takeover. In addition, provisions of our restated certificate of incorporation, as amended, sixth amended and restated by-laws and New York law impose various procedural and other requirements, which could make it more difficult for shareholders to effect certain corporate actions. These provisions include, among others:

 

 

the inability of our shareholders to call a special meeting;

 

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rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;

 

 

the right of our Board to issue preferred stock without shareholder approval; and

 

 

the ability of our directors, and not shareholders, to fill vacancies on our Board.

We believe these provisions may help protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition proposal. These provisions are not intended to make our Company immune from takeovers. In addition, although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board, they would apply even if the offer may be considered beneficial by some shareholders. These provisions may also frustrate or prevent any attempts by our shareholders to replace or remove our current management team by making it more difficult for shareholders to replace members of our Board, which is responsible for appointing the members of our management.

We cannot assure you that we will continue to pay dividends on our common stock, and our indebtedness limits our ability to pay dividends on our common stock.

The timing, declaration, amount and payment of future dividends to shareholders falls within the discretion of our Board. Our Board’s decisions regarding the amount and payment of future dividends will depend on many factors, including our financial condition, earnings, capital requirements of our business and covenants associated with debt obligations, including under our Credit Facilities, as well as legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant. There can be no assurance that we will continue to pay any dividend in the future.

Your percentage ownership in our Company may be diluted in the future.

Your percentage ownership in our Company may be diluted in the future because of equity awards previously granted, and that we expect to grant in the future, to our directors, officers and other employees. In addition, we may issue equity as all or part of the consideration paid for acquisitions and strategic investments that we may make in the future or as necessary to finance our ongoing operations.

Future sales of our common stock could cause the market price for our common stock to decline.

We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales will occur, could cause the market price of our common stock to decline or be depressed. The shares of common stock issued in connection with this offering will be freely tradable without restriction or further registration under the Securities Act. In connection with this offering, we and our directors and executive officers have agreed with the underwriters to a ”lock-up,” pursuant to which neither we nor they will sell, hedge or otherwise dispose of any shares without the prior written consent of J.P. Morgan Securities LLC for 90 days after the date of this prospectus, subject to certain exceptions. See “Underwriting (conflicts of interest)” Following the expiration of the applicable lock-up period, all these shares of our common stock will also be eligible for future sale. In the future, we may also issue our securities if we need to raise capital in connection with a capital expenditure or acquisition. The amount of shares of our common stock issued in connection with a capital expenditure or acquisition could constitute a material portion of our then-outstanding shares of common stock. Any perceived excess in the supply of our shares in the market could negatively impact our share price and any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to you.

 

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If securities or industry analysts do not publish research or reports about the Company, or if they adversely change their recommendations regarding our common stock, the market price for our common stock and trading volume could decline.

The trading market for our common stock is influenced by research or reports that industry or securities analysts publish about us or our business. We do not influence or control the reporting of these analysts. If one or more analysts who cover us downgrade our common stock or provide a negative outlook on our Company or our industry or the stock of any of our competitors, the market price for our common stock likely could decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our common stock to decline.

Risks related to the acquisition

The unaudited pro forma condensed combined financial information contained in this prospectus may not accurately reflect our financial position or results of operations.

The unaudited pro forma condensed combined financial information contained in this prospectus is presented for illustrative purposes only, and may not be an indication of what our financial position or results of operations would have been had the Acquisition been completed on the dates indicated. The unaudited condensed combined pro forma financial information has been derived from our audited and unaudited historical financial statements along with those of Dorner, and certain adjustments and assumptions have been made regarding the combined company after giving effect to the Acquisition. The assets and liabilities of Dorner have been measured at fair value based on various preliminary estimates using assumptions that our management believes are reasonable utilizing information currently available. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. These estimates and assumptions may be revised as additional information becomes available and as additional analyses are performed. Differences between preliminary estimates in the pro forma financial information and the final acquisition accounting will occur and could have a material impact on the pro forma financial information and the combined company’s financial position and future results of operations. In addition, the assumptions used in preparing the unaudited pro forma condensed combined financial information may not prove to be accurate, and other factors may affect our financial condition or results of operations. Any potential decline in our financial condition or results of operations may cause significant variations in the trading price of our common stock.

We will incur significant acquisition-related integration costs and have incurred significant transaction costs in connection with the Acquisition and the related financing transactions.

We are currently implementing a plan to integrate the operations of Dorner into the Company. In connection with that plan, we anticipate that we will incur certain non-recurring charges in connection with this integration including costs for:

 

 

employee retention, redeployment, relocation or severance;

 

 

integration, including of people, technology, operations, marketing, and systems and processes; and

 

 

maintenance and management of customers and other assets;

however, we cannot identify the timing, nature and amount of all such charges as of the date of this prospectus. Further, we have incurred significant transaction costs relating to negotiating and completing the Acquisition and the related financing transactions. These integration costs and transaction expenses will be charged as an expense in the period incurred. The significant transaction costs and Acquisition-related integration costs could materially affect our results of operations in the period in which such charges are recorded. Although we

 

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believe that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the business, will offset incremental transaction and Acquisition-related costs over time, this net benefit may not be achieved in the near term, or at all.

In connection with the completion of the Acquisition, our indebtedness has increased significantly. Our indebtedness could limit our cash flow available for operations and our flexibility.

In connection with the completion of the Acquisition, our indebtedness has increased significantly. In connection with the Acquisition, and prior to the completion of this offering or the application of the net proceeds therefrom, we incurred $650.0 million of debt under the Credit Facilities and we had approximately $83.0 million available for borrowing under the Revolving Credit Facility (after deducting approximately $17.0 million of letters of credit outstanding as of December 31, 2020). On a pro forma basis after giving effect to the Transactions, we would have had $                million of debt outstanding under the Credit Facilities (or $                million of debt outstanding under the Credit Facilities if the underwriters exercise their option to purchase additional shares of our common stock in full). Although the proceeds of this offering will repay outstanding borrowings under the First Lien Term Facility, our indebtedness will still be substantially greater than prior to the Acquisition.

The degree to which we are leveraged could have important consequences to our shareholders, including the following:

 

 

we may have greater difficulty satisfying our obligations with respect to our indebtedness;

 

 

we must dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness, reducing the funds available for our operations;

 

 

our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes may be impaired;

 

 

we may be limited in our ability to make additional acquisitions or pay dividends on our common stock;

 

 

our flexibility in planning for, or reacting to, changes in the markets in which we compete may be limited;

 

 

we may be at a competitive disadvantage relative to our competitors with less indebtedness;

 

 

we may be rendered more vulnerable to general adverse economic and industry conditions;

 

 

our credit ratings may be downgraded; and

 

 

we are exposed to increased interest rate risk given that a portion of our indebtedness obligations are at variable interest rates.

Dorner was previously a private company and has not been required to comply with the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”).

Sarbanes-Oxley requires public companies to have and maintain effective internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements and to have management report on the effectiveness of those controls on an annual basis (and have its independent public accountants attest annually to the effectiveness of such internal controls). As a private company, Dorner was not required to comply with the requirements of Sarbanes-Oxley.

In connection with the completion of the Acquisition, we are beginning to apply our Sarbanes-Oxley procedures regarding internal controls over financial reporting with respect to Dorner. This process will require a significant amount of time from our management and other personnel and will require us to expend a

 

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significant amount of financial resources, which is likely to increase our compliance costs, and we will be required to assess Dorner’s internal controls over financial reporting beginning one year after the date of the acquisition.

The Dorner acquired business may underperform relative to our expectations.

Following completion of the Acquisition, we may not be able to maintain the levels of revenue, earnings or operating efficiency that Dorner and we have achieved or might achieve separately. The business and financial performance of Dorner are subject to certain risks and uncertainties, including the risk of the loss of, or changes to, its relationships with its customers. We may be unable to achieve the same growth, revenues and profitability that Dorner has achieved in the past.

The future results of our Company will suffer if we do not effectively manage our expanded operations following the Acquisition.

Since the completion of the Acquisition, the size of our business has increased significantly beyond its pre-Acquisition size. Our future success depends, in part, upon our ability to manage Dorner, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that the Dorner business will be successful or that we will realize the expected benefits currently anticipated from the Acquisition.

Business risks

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.

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

 

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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 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.

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.

Financial risks

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, although on November 30, 2020 it announced that it had extended the period in which it will continue to publish certain LIBOR tenors, including three-month LIBOR, to June 30, 2023. It is unclear if at that time LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after June 30, 2023, or whether different benchmark rates used to price indebtedness will develop. The interest rate on the First Lien Term Facility and Revolving Credit Facility

 

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have a variable component that is based on LIBOR. The phase-out of LIBOR may negatively impact the terms of our outstanding 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 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, Hungary and Malaysia. 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, Hungary and Malaysia. 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.

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.

 

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We are subject to debt covenant restrictions.

Our Revolving Credit Facility and First Lien Term Facility 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 Credit Facilities. 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 Credit Facilities or being obliged to refinance and renegotiate the terms of our indebtedness.

Legal risks

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 our Annual Report on Form 10-K for this fiscal year ended March 31, 2020, which is incorporated by reference herein.

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 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

 

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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 rights of others. 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.

General risks

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.

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, including to process the data we collect, store and use in connection with our business. If these

 

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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 are subject to a variety of laws and regulations in the United States, Europe and around the world, as well as contractual obligations, regarding data privacy, security and protection. Any failure or perceived failure by us, or any third parties with which we do business, to comply with our posted privacy policies, changing consumer expectations, evolving laws, rules and regulations, industry standards, or contractual obligations to which we or such third parties are or may become subject, may result in actions or other claims against us by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines, penalties or other liabilities. In addition, any such action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, could damage our reputation and adversely affect our business, financial condition and 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.

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 Current Report on Form 8-K on May 14, 2020. Under Mr. Wilson’s leadership, the Company has continued to execute its Blueprint for Growth 2.0 strategy as demonstrated by this Acquisition.

 

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The acquisition and related financing

Acquisition of Dorner

On April 7, 2021, upon the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the applicable provisions of the DGCL, Merger Sub merged with and into Dorner Parent. At the Effective Time, the separate corporate existence of Merger Sub ceased and Dorner Parent continued its existence under Delaware law as the surviving corporation in the Merger and a wholly-owned subsidiary of the Company. As consideration for the acquisition, the Company paid cash consideration of $485.0 million on a cash-free, debt-free basis, which amount is subject to certain customary post-closing adjustments.

Financing transactions

On April 7, 2021, in connection with the completion of the Merger, the Company, Columbus McKinnon EMEA GmbH (the “German Borrower” and, together with the Company, the “Borrowers”) and certain of the Company’s subsidiaries entered into the Credit Agreement, which provides for (i) a Revolving Credit Facility in an aggregate principal amount of $100.0 million, including sublimits for the issuance of standby letters of credit, swingline loans and multi-currency borrowings in certain specified foreign currencies, and (ii) a First Lien Term Facility in an aggregate principal amount of $650.0 million. The First Lien Term Facility requires quarterly principal amortization payments of 0.25% of the aggregate amount of the first lien term loans thereunder, with the remaining principal amount outstanding thereunder due on the maturity date. In addition, if the Company has any Excess Cash Flow (as defined in the Credit Agreement), the ECF Percentage (as described in the sentence below) of the Excess Cash Flow for each fiscal year, less any optional prepayments of amounts outstanding under the Credit Facilities (except prepayments under the Revolving Credit Facility that are not accompanied by a corresponding permanent reduction of commitments under the Revolving Credit Facility) other than to the extent that any such prepayment is funded with the proceeds of Funded Debt (as defined in the Credit Agreement), is required to be used toward the prepayment of the First Lien Term Facility. The “ECF Percentage” is set in the Credit Agreement at 50%, but reduces to 25% or 0% based upon the achievement by the Company of specified Secured Leverage Ratios (as defined in the Credit Agreement) as of the last day of any fiscal year. Under the terms of the Credit Agreement, the Company may, subject to the satisfaction of certain conditions, incur unlimited amounts of additional debt that is pari passu or junior to the debt incurred under the Credit Agreement, subject to pro forma compliance with a Secured Leverage Ratio (as defined in the Credit Agreement) of 3.50:1.00.

The Company used borrowings under the First Lien Term Facility to, among other things, finance the purchase price for the Acquisition, pay related fees, expenses and transaction costs, and repay the Company’s outstanding borrowings under its former term loan and revolving credit facilities.

Interest

The Credit Facilities bear interest, at Borrower’s election, at the base rate plus an “applicable margin” (as described below) or the Eurodollar rate plus an applicable margin. Swingline loans bear interest at the base rate plus an applicable margin. The base rate, for any day, will be a floating rate that is the higher of (i) the prime rate in effect on such day, (ii) the NYFRB rate (defined as the greater of the federal funds effective rate and the overnight bank funding rate) in effect on such day plus 50 basis points, and (iii) the Eurodollar rate (defined as the LIBO Screen Rate) in effect on such date plus 100 basis points, subject to a 75 basis point floor; provided that if the base rate would be less than 175 basis points, it is deemed under the Credit Agreement to be 175 basis points. The “applicable margin” for the First Lien Term Facility is 325 basis points for base rate loans or 425 basis points for Eurodollar loans. The “applicable margin” for the Revolving Credit Facility is

 

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determined on a leveraged-based sliding scale which ranges from 100 to 225 basis points for base rate loans and 200 to 325 basis points for Eurodollar loans. Borrowers are required to pay commitment fees on any unused commitments under the Revolving Credit Facility, which are determined on a leverage-based sliding scale ranging from 30 basis points to 55 basis points. Interest and fees are payable on a quarterly basis (or if earlier, at the end of each interest period with respect to any Eurodollar loans).

Collateral and security

The obligations of the Borrowers under the Credit Agreement are guaranteed by each of the Company’s direct and indirect, existing and future, domestic subsidiaries and certain foreign subsidiaries, subject to certain exceptions (such guarantors, together with the Borrowers, collectively, the “Credit Parties”). The obligations of the Credit Parties under the Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of the existing and future personal property of the Credit Parties, including, without limitation, 65% of the voting capital stock of certain of the Credit Parties’ direct foreign subsidiaries, subject to certain exceptions.

Maturity and repayments

The Revolving Credit Facility has a five-year maturity. The First Lien Term Facility has a seven-year maturity.

The Credit Agreement allows a Borrower to voluntarily prepay either the First Lien Term Facility or the Revolving Credit Facility, in whole or in part, at any time, and requires certain mandatory prepayments of either the First Lien Term Facility or the Revolving Credit Facility upon the occurrence of certain events, which mandatory prepayments permanently reduce the commitments under the Revolving Credit Facility, each without premium or penalty, subject to the reimbursement of certain costs of the lenders. A prepayment premium of 1.00% of the principal amount of the First Lien Term Facility is required if any prepayment is associated with a Repricing Transaction (as defined in the Credit Agreement) that occurs within the first six months following April 7, 2021.

Representations, warranties and covenants

The Credit Agreement contains customary representations and warranties and certain covenants that limit (subject to certain exceptions) the ability of the Company and its subsidiaries to, among other things, (i) incur or guarantee additional indebtedness, (ii) incur or suffer to exist liens, (iii) make investments, (iv) consolidate, merge or transfer all or substantially all of their assets, (v) sell assets, (vi) pay dividends or other distributions on, redeem or repurchase capital stock, (vii) enter into transactions with affiliates, (viii) amend, modify, prepay or redeem certain indebtedness, (ix) enter into certain restrictive agreements, (x) engage in a new line of business, and (xi) enter into sale leaseback transactions.

In addition, the Credit Agreement contains a financial maintenance covenant that, as of the last day of any fiscal quarter ending on and after the Effective Time, require the ratio of the amount of the Company and its subsidiaries’ consolidated total net indebtedness to consolidated EBITDA (as each such term is defined in the Credit Agreement) to be less than specified maximum ratio levels, consisting of (i) 6.75:1.00 as of any date of determination prior to June 30, 2022, (ii) 5.75:1.00 as of any date of determination on June 30, 2022 and thereafter but prior to June 30, 2023, (iii) 4.75:1.00 as of any date of determination on June 30, 2023 and thereafter but prior to June 30, 2024 and (iv) 3.50:1.00 as of any date of determination on June 30, 2024 and thereafter. Under the terms of the Credit Agreement, this financial maintenance covenant will only be tested if any extensions of credit (other than letters of credit) are outstanding under the Credit Facilities at the end of any such fiscal quarter.

 

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Events of default

The Credit Agreement also contains customary events of default. If such an event of default occurs, the lenders would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement and all actions permitted to be taken by a secured creditor.

Credit ratings

In March 2021, following our announcement of entry into the Merger Agreement and its anticipated impact on our financial leverage, Moody’s Investor Service placed our credit ratings on review for downgrade and S&P Global Ratings placed our credit ratings on CreditWatch negative. Such agencies could take additional negative actions with respect to our credit ratings in the future.

Syndication

In connection with this offering, JPMorgan Chase, as administrative agent under the First Lien Term Facility, intends to syndicate such facility to third-party investors. See “Summary—Recent developments” for additional information.

We intend to use the net proceeds from this offering (including the net proceeds from the underwriters’ option to purchase additional shares of common stock, if exercised by the underwriters) to repay in part outstanding borrowings under the First Lien Term Facility. See “Use of proceeds” for additional information.

 

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Unaudited pro forma condensed combined financial information

On April 7, 2021, pursuant to the terms set forth in the previously announced Merger Agreement, the Company completed its acquisition of Dorner. The unaudited pro forma condensed combined balance sheet as of December 31, 2020 and the condensed combined statements of operations for the nine months ended December 31, 2020 and for the twelve months ended March 31, 2020, illustrate the effects of the Acquisition (the “Transaction” or the “Transaction Accounting Adjustments”), as well as contemporaneous financing activities, including this offering and the use of proceeds therefrom, and certain other related adjustments described below (the “Other Transaction Accounting Adjustments” and, together with the Transaction, the “Transactions”).

The Other Transaction Accounting Adjustments include but are not limited to the Company’s borrowing of $650.0 million under the First Lien Term Facility (which, for purposes of this section entitled “Unaudited pro forma condensed combined financial information” only, we define as the “New Term Loan”) to fund the Acquisition, the replacement of the Company’s prior revolving credit facility with an aggregate principal amount of $100.0 million (which, for purposes of this section entitled “Unaudited pro forma condensed combined financial information” only, we define as the “Existing Revolver”) with a new revolving credit facility with an aggregate principal amount of $100.0 million (which, for purposes of this section entitled “Unaudited pro forma condensed combined financial information” only, we define as the “New Revolver”), and the repayment of the remaining outstanding balance of the Company’s existing term loan (which, for purposes of this section entitled “Unaudited pro forma condensed combined financial information” only, we define as the “Existing Term Loan”). In addition, the Company plans to raise $150 million through the issuance of shares of the Company’s common stock, par value $0.01 per share (the offering of the Company’s common stock hereby, for purposes of this section entitled “Unaudited pro forma condensed combined financial information” only, we define as the “Equity Issuance”), with the proceeds of such Equity Issuance expected to be used to repay a portion of the First Lien Term Facility. The completion of the Equity Issuance is subject to market and other conditions, and there can be no assurance as to whether or when the Equity Issuance may be completed, or as to the actual size or terms of the Equity Issuance. For more information about the Equity Issuance, refer to Note 6(e) hereof.

The Company’s fiscal year ends on March 31st, while Dorner’s fiscal year ends on September 30th. As the Company’s fiscal year end differs by more than one quarter from Dorner’s fiscal year end, the unaudited pro forma condensed combined statement of operations presented herein have been presented using the different fiscal periods as discussed below. The unaudited pro forma condensed combined statement of operations for the twelve months ended March 31, 2020 presented herein reflects a combination of the Company’s results of operations for its fiscal year ended March 31, 2020 and Dorner’s results of operations from April 1, 2019 through March 31, 2020, which were calculated using its fiscal year ended September 30, 2019, less the six months ended March 31, 2019, plus the six months ended March 31, 2020. The unaudited pro forma condensed combined statement of operations for the nine months ended December 31, 2020 presented herein reflects a combination of the Company’s results of operations for the nine months ended December 31, 2020 and Dorner’s results of operations from April 1, 2020 through December 31, 2020, calculated using its fiscal year ended September 30, 2020, less the six months ended March 31, 2020, plus the three months ended December 31, 2020. The unaudited pro forma condensed combined balance sheet as of December 31, 2020 presented herein reflects a combination of the Company’s financial position as of December 31, 2020 and Dorner’s financial position as of December 31, 2020.

The unaudited pro forma condensed combined balance sheet data as of December 31, 2020 gives effect to the Transactions as if they occurred on December 31, 2020. The unaudited pro forma condensed consolidated statements of operations data for the nine months ended December 31, 2020 and for the twelve months ended March 31, 2020, have been prepared as if the Transactions had occurred on April 1, 2019.

 

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The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes, the Company’s audited annual consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the SEC on May 27, 2020, and the Company’s unaudited quarterly consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, filed with the SEC on January 28, 2021, each of which is incorporated by reference into this prospectus.

The adjustments to the unaudited pro forma condensed combined financial information described herein are based on available information and assumptions management believes are reasonable. These adjustments are estimates, subject to risks and uncertainties that could cause the unaudited pro forma condensed combined financial statements to differ materially from actual results.

The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Acquisition, nor the costs that may be incurred to achieve such benefits.

As such, the unaudited pro forma condensed combined financial information is shown purely for illustrative purposes and is not indicative of the combined financial position or results of operations that would have been realized had the Transactions occurred as of the dates indicated above. The unaudited pro forma condensed combined financial information should not be considered representative of future financial conditions or results of operations.

 

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Unaudited pro forma condensed combined balance sheet as of December 31, 2020

(in thousands)

 

             
    Historical                                
     CMCO     Dorner
(as adjusted)
Note 2
    Transaction
accounting
adjustments
    Reference    

Other

transaction
accounting

adjustments

    Reference     Pro forma
combined
 

ASSETS:

             

Current assets:

             

Cash and cash equivalents

  $ 187,626     $ 11,682     $ (497,085     5 (a)    $ 366,629       6 (a)    $ 68,852  

Trade accounts receivables, less allowance for doubtful accounts

    94,177       13,336       (179     5 (b)              107,334  

Inventories

    113,446       11,149       2,558       5 (c)              127,153  

Prepaid expenses and other

    18,850       1,819                       20,669  
 

 

 

 

Total current assets

    414,099       37,986       (494,706       366,629         324,008  

Property, plant, and equipment, net

    72,304       18,436       10,258       5 (d)              100,998  

Goodwill

    338,995       87,836       213,919       5 (e)              640,750  

Other intangibles, net

    221,741       120,041       72,959       5 (f)              414,741  

Marketable securities

    7,925                             7,925  

Deferred taxes on income

    27,777             (27,080     5 (m)              697  

Other assets

    64,545       373       514       5 (g)      2,188       6 (b)      67,620  
 

 

 

 

Total assets

  $ 1,147,386     $ 264,672     $ (224,136     $ 368,817       $ 1,556,739  
 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY:

             

Current liabilities:

             

Trade accounts payable

  $ 49,576     $ 5,451     $       $       $ 55,027  

Accrued liabilities

    90,086       9,618       434       5 (h)              100,138  

Current portion of long-term debt

    4,450       902       (902     5 (i)      (4,450     6 (c)       

Current portion financing lease liability

          450       (75     5 (j)          375  
 

 

 

 

Total current liabilities

    144,112       16,421       (543       (4,450       155,540  

Term loan and revolving credit facility

    245,092       60,965       (60,965     5 (k)      244,913       6 (d)      490,005  

Financing lease liability

          12,118       2,891       5 (l)          15,009  

Other non-current liabilities

    260,858       28,324       (7,862     5 (m)              281,320  
 

 

 

 

Total liabilities

    650,062       117,828       (66,479       240,463         941,874  

Shareholders’ equity:

             

Voting common stock

    240                     33       6 (e)      273  

Additional paid-in capital

    293,869       141,748       (141,748     5 (n)      143,967       6 (e)      437,836  

Retained earnings

    287,095       5,127       (15,940     5 (n)      (15,646     6 (e)      260,636  

Accumulated other comprehensive loss

    (83,880     (31     31       5 (n)              (83,880
 

 

 

 

Total shareholders’ equity

    497,324       146,844       (157,657       128,354         614,865  
 

 

 

 

Total liabilities and shareholders’ equity

  $ 1,147,386     $ 264,672     $ (224,136     $ 368,817       $ 1,556,739  

 

 

 

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Unaudited pro forma condensed combined statement of operations for the twelve months ended March 31, 2020

(dollars and shares in thousands, except per share amounts)

 

             
    Historical                                
     CMCO     Dorner
(as adjusted)
Note 2
    Transaction
accounting
adjustments
    Reference    

Other
transaction

accounting
adjustments

    Reference     Pro forma
combined
 

Net sales

  $ 809,162     $ 82,094     $       $       $ 891,256  

Cost of products sold

    525,976       43,289       3,742       5 (o)              573,007  
 

 

 

 

Gross Profit

    283,186       38,805       (3,742               318,249  

Selling

    91,054       14,738                       105,792  

General and administrative

    77,880       11,879       19,716       5 (p)      1,675       6 (f)      111,150  

Research and development expenses

    11,310       1,536                       12,846  

Net loss on sales of businesses, including impairment

    176                             176  

Amortization of intangibles

    12,942       8,033       4,598       5 (q)              25,573  
 

 

 

 

Income (loss) from operations

    89,824       2,619       (28,056       (1,675       62,712  

Interest and debt expense

    14,234       6,675               (1,155     6 (g)      19,754  

Cost of debt refinancing

                        14,645       6 (h)      14,645  

Investment (income) loss, net

    (891                           (891

Foreign currency exchange loss (gain), net

    (1,514     (38                     (1,552

Other (income) expense, net

    839       (88                     751  
 

 

 

 

Income from continuing operations before income tax expense (benefit)

    77,156       (3,930     (28,056       (15,165       30,005  

Income tax expense

    17,484       (379     (7,080     5 (r)      (3,791     6 (i)      6,234  
 

 

 

 

Net income (loss)

  $ 59,672     $ (3,551   $ (20,976     $ (11,374     $ 23,771  
 

 

 

 

Weighted average basic shares outstanding

    23,619                 3,301       6 (j)      26,920  

Weighted average diluted shares outstanding

    23,855                 3,308       6 (j)      27,163  
 

 

 

             

 

 

 

Basic income per share

  $ 2.53               $ 0.88  
 

 

 

             

 

 

 

Diluted income per share

  $ 2.50               $ 0.88  

 

 

 

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Unaudited pro forma condensed combined statement of operations for the nine months ended December 31, 2020

(dollars and shares in thousands, except per share amounts)

 

             
    Historical                                
    

CMCO

    Dorner
(as adjusted)
Note 2
    Transaction
accounting
adjustments
    Reference    

Other
transaction

accounting
adjustments

    Reference     Pro forma
combined
 

Net sales

  $ 463,407     $ 78,091     $       $       $ 541,498  

Cost of products sold

    307,270       38,371       471       5 (o)              346,112  
 

 

 

 

Gross Profit

    156,137       39,720       (471               195,386  

Selling

    56,087       12,728                       68,815  

General and administrative

    53,842       8,708               506       6 (f)      63,056  

Research and development expenses

    8,703       923                       9,626  

Net loss on sales of businesses, including impairment

                                 

Amortization of intangibles

    9,449       6,025       3,448       5 (q)              18,922  
 

 

 

 

Income (loss) from operations

    28,056       11,336       (3,919       (506       34,967  

Interest and debt expense

    9,192       4,387               1,236       6 (g)      14,815  

Cost of debt refinancing

                                 

Investment (income) loss, net

    (1,429                           (1,429

Foreign currency exchange loss (gain), net

    1,083       425                       1,508  

Other (income) expense, net

    20,081       (51                     20,030  
 

 

 

 

Income from continuing operations before income tax expense (benefit)

    (871     6,575       (3,919       (1,742       43  

Income tax expense

    (392     1,358       (1,002     5 (s)      (436     6 (i)      (472
 

 

 

 

Net income (loss)

  $ (479   $ 5,217     $ (2,917     $ (1,306     $ 515  
 

 

 

 

Weighted average basic shares outstanding

    23,871                 3,301       6 (j)      27,172  

Weighted average diluted shares outstanding

    23,871                 3,319       6 (j)      27,190  
 

 

 

             

 

 

 

Basic income per share

  $ (0.02             $ 0.02  
 

 

 

             

 

 

 

Diluted income per share

  $ (0.02             $ 0.02  

 

 

 

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Table of Contents

Notes to the unaudited pro forma condensed combined financial information

Note 1—Basis of Presentation

The historical financial information has been adjusted to give pro forma effect to the Acquisition, as well as the related debt issuances by the Company, which were used to fund the Acquisition and repay previously existing debt of both the Company and Dorner, and the expected Equity Issuance by the Company, the proceeds of which are expected to be used to repay a portion of the New Term Loan. The unaudited pro forma condensed combined financial information has been prepared in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures about Acquired and Disposed Businesses, as adopted by the SEC on May 20, 2020 (“Article 11”).

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). The purchase price for the Acquisition will be allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the acquisition date, and any excess value of the consideration transferred over the net assets will be recognized as goodwill. The Company has made a preliminary allocation of the purchase price for the Acquisition to the assets acquired and liabilities assumed as of the acquisition date based on the Company’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed using information currently available. Differences between these preliminary estimates and the final acquisition accounting could occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial information and the Company’s future results of operations and financial position.

 

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Table of Contents

Note 2—Presentation of Dorner—reclassification adjustments

Historical Dorner financial information included within the unaudited pro forma condensed combined financial information has been reclassified to conform the presentation to that of the Company as indicated in the table below:

Balance sheet as of December 31, 2020

 

     
Presentation in Dorner’s financial statements    Presentation in pro forma condensed combined
financial information
   Amount
(in thousands)
 

Accounts receivable, less allowance for doubtful accounts

  

 

Trade accounts receivable, less allowance for
doubtful accounts

   $ 13,336  

Prepaid and other

   Prepaid Expenses and Other      1,819  

Building

   Property, plant, and equipment, net      14,294  

Machinery and equipment

   Property, plant, and equipment, net      7,186  

Office equipment, including IT software

   Property, plant, and equipment, net      4,671  

Leasehold improvements

   Property, plant, and equipment, net      1,376  

Transportation equipment

   Property, plant, and equipment, net      176  

Less—accumulated depreciation and amortization

   Property, plant, and equipment, net      (9,990

Land

   Property, plant, and equipment, net      300  

Construction in progress

   Property, plant, and equipment, net      423  

Other intangible assets, net

   Other intangibles, net      120,041  

Deposits

   Other assets      373  

Current portion of capital lease obligation

   Current portion financing lease liability      450  

Line of credit

   Current portion of long-term debt      902  

Accounts payable

   Trade accounts payable      5,451  

Customer deposits

   Accrued liabilities      3,079  

Accrued compensation and benefits

   Accrued liabilities      3,231  

Other accrued liabilities

   Accrued liabilities      3,308  

Deferred tax liabilities, net

   Other non-current liabilities      28,324  

Term loan, less current portion, net of deferred financing costs

   Term loan and revolving credit facility      60,965  

Capital lease obligation, less current portion

   Financing lease liability      12,118  

Retained earnings

   Retained earnings      5,127  

Additional paid-in capital

   Additional paid-in-capital      141,748  

Accumulated other comprehensive loss

   Accumulated other comprehensive loss      (31

 

 

 

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Table of Contents

Statement of operations for the twelve months ended March 31, 2020

 

     
Presentation in Dorner’s financial statements    Presentation in pro forma condensed combined
financial information
   Amount
(in thousands)
 

Net sales

   Net sales    $ 82,094  

Cost of sales

  

Cost of products sold

     43,289  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

   General and administrative      11,597  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

   Research and development expenses      1,536  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

   Selling      14,738  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

   Amortization of intangibles      8,033  

Interest expense, net

   Interest and debt expense      6,675  

Acquisition Costs

   General and administrative      282  

Other expense, net

   Other (income) expense, net      (88

Other expense, net

   Foreign currency exchange loss (gain), net      (38

Current

   Income tax expense      (112

Deferred

   Income tax expense      (267

 

 

Statement of operations for the nine months ended December 31, 2020

 

     
Presentation in Dorner’s financial statements    Presentation in pro forma condensed combined
financial information
   Amount
(in thousands)
 

Net sales

   Net sales    $ 78,091  

Cost of sales

   Cost of products sold      38,371  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

   General and administrative      8,708  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

   Research and development expenses      923  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

   Selling      12,728  

Selling and marketing, engineering and administrative expenses, including amortization of intangibles

   Amortization of intangibles      6,025  

Interest expense, net

   Interest and debt expense      4,387  

Other expense, net

   Other (income) expense, net      (51

Other expense, net

   Foreign currency exchange loss (gain), net      425  

Current

   Income tax expense      3,057  

Deferred

   Income tax expense      (1,699

 

 

 

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Table of Contents

Note 3—Conforming accounting policies

The accounting policies used in the preparation of the unaudited pro forma condensed combined financial information are those set out in CMCO’s consolidated financial statements. Based on the procedures performed to date, the accounting policies of Dorner are similar in all material respects to CMCO’s accounting policies, with the exception of Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“Topic 842”) and ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”), which Dorner had not yet been required to adopt as a private company, as well as accounting for reserves on accounts receivable and warranties, accounting for slow-moving inventory, and accounting for inventory capitalization. The impacts have been described in Note 5 to the unaudited pro forma condensed combined financial information. There were no material differences to historical Dorner revenue recognition upon adoption of Topic 606.

CMCO is not aware of any other material differences between the accounting policies of the two companies that would continue to exist subsequent to the application of acquisition accounting. Following the consummation of the Acquisition, CMCO has begun to conduct, but has not yet completed, a more detailed review of Dorner’s accounting policies in an effort to determine if differences in accounting policies require further reclassification of Dorner’s results of operations or reclassification of assets or liabilities to conform to CMCO’s accounting policies and classifications. As a result, CMCO may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the unaudited pro forma condensed combined financial information.

Note 4—Estimated purchase consideration and preliminary purchase price allocation

The estimated consideration transferred in the Acquisition is $486 million of cash, which includes the extinguishment of existing Dorner debt of $61.8 million and the payment of $8.9 million of Dorner transaction expenses at transaction close.

The table below represents an estimated preliminary purchase price allocation based on estimates, assumptions, valuations, and other analyses based on Dorner’s balance sheet as of December 31, 2020. The total preliminary estimated purchase consideration is allocated to the tangible and intangible assets and liabilities of Dorner based on their estimated fair values as if the Acquisition had occurred on December 31, 2020, which is the assumed Acquisition date for purposes of the unaudited pro forma condensed combined balance sheet. Other than the items specifically noted below, Dorner’s assets and liabilities are presented at their respective carrying amounts (as adjusted for accounting policy alignment) and should be treated as preliminary values. Based on the information available as of the time of the preparation of this unaudited pro forma condensed combined financial information, CMCO believes that these carrying values approximate fair values. CMCO has not completed the final allocation of the purchase price for the Acquisition to Dorner’s assets and liabilities; such final allocation will be completed within one year. Therefore, the acquired assets and liabilities are reflected at their preliminarily estimated fair values with the excess consideration recorded as goodwill. The final valuation could result in a material difference from the amounts shown.

 

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Table of Contents

The following table summarizes the preliminary purchase price as if the Acquisition occurred on December 31, 2020

 

   
(dollars in thousands)    Amounts  

Total Consideration Paid

   $ 486,272  

Book value of net assets acquired at December 31, 2020

     208,711  

Adjusted for:

  

Accounting policy alignment(1)

     2,980  

Elimination of existing goodwill & intangible assets

     (207,877
  

 

 

 

Adjusted book value of net assets acquired

     3,814  

Adjustments to:

  

Inventories

     3,231  

Property, plant and equipment, net

     3,649  

Other intangibles, net

     193,000  

Goodwill

     301,667  

Other non-current liabilities

     (19,089
  

 

 

 

Reconciliation to consideration transferred

   $ 486,272  

 

 

 

(1)   Accounting policy alignment includes impact of adopting Topic 842, as well as accounting for reserves on accounts receivable and warranties, accounting for slow-moving inventory, and accounting for inventory capitalization. Refer to Note 5 for further disclosure.

Note 5—Transaction accounting adjustments

Pro Forma Transaction Accounting Adjustments to the unaudited pro forma condensed combined balance sheet

5(a)—Reflects adjustments to cash and cash equivalents to record the acquisition of Dorner and the payment of transaction costs in connection with the Acquisition.

 

   
(dollars in thousands)        

Acquisition of Dorner

   $ (486,272

CMCO transaction costs

     (10,813
  

 

 

 

Net Cash outflow

   $ (497,085

 

 

5(b)—Trade accounts receivables, less allowance for doubtful accounts was reduced by $0.18 million in order to align Dorner’s historical accounting policy with that of CMCO.

5(c)—Reflects the adjustments to inventories to record the accounting policy alignments for slow-moving inventory and inventory capitalization. Also reflects the step-up of acquired Dorner inventory (as adjusted for the accounting policy changes) to fair value.

 

   
(dollars in thousands)        

Adjustment to reflect accounting policy alignment of Inventory Reserves

   $ (625

Adjustment to reflect accounting policy alignment of Inventory Capitalization

     69  

Fair value step-up of acquired inventory

     3,114  
  

 

 

 

Pro forma adjustment to Inventories

   $ 2,558  

 

 

 

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Table of Contents

5(d)—Reflects the adjustments to property, plant, and equipment, net to record the acquisition of finance leases and the fair value step-up of acquired Dorner fixed assets.

 

   
(dollars in thousands)        

Adjustment to reflect acquisition of finance leases

   $ 6,609  

Fair value step-up of acquired property, plant, and equipment, net

     3,649  
  

 

 

 

Pro forma adjustment to Property, Plant, and Equipment, net

   $ 10,258  

 

 

The following table displays the expected useful lives of material property, plant, and equipment acquired.

 

   
     

Estimated

useful life

(years)

 

Building

     20  

Leasehold Improvements

     12  

Machinery & Equipment

     5  

Tooling

     3  

Furniture, Fixtures, and Equipment

     4  

Computer & Networking

     3  

Computer Software

     3  

Transportation Equipment

     5  

 

 

5(e)—Reflects adjustments to remove Dorner’s historical goodwill, and record estimated goodwill resulting from the Acquisition.

 

   
(dollars in thousands)        

Goodwill resulting from the Acquisition

   $ 301,755  

Dorner’s historical goodwill

     (87,836
  

 

 

 

Pro forma adjustment to Goodwill

   $ 213,919  

 

 

5(f)—Reflects adjustments to record the preliminary estimated fair value of the identifiable intangible assets acquired, net of historical book value of Dorner’s intangibles prior to the Acquisition.

 

     
(dollars in thousands)    Amount    

Estimated

useful life

(in years)

 

Elimination of Dorner’s historical intangibles

   $ (120,041  

Fair value of acquired customer relationships

     140,000       16  

Fair value of acquired technology portfolio

     45,000       14  

Fair value of acquired trade name portfolio

     8,000       12  
  

 

 

   

Pro forma adjustment to Other intangibles, net

   $ 72,959    

 

 

5(g)—Other assets increased by $0.51 million to record Dorner’s right of use assets for operating leases upon adoption of Topic 842.

 

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Table of Contents

5(h)—Reflects adjustments to Accrued liabilities to record the acquisition of Dorner’s operating leases and the alignment of Dorner’s historical accounting policy for accounting for warranty reserves with that of CMCO.

 

   
(dollars in thousands)        

Adjustment to reflect acquisition of operating leases

   $ 356  

Adjustment to reflect accounting policy alignment of Warranty Reserves

     78  
  

 

 

 

Pro forma adjustment to Accrued liabilities

   $ 434  

 

 

5(i)—Current portion of long-term debt decreased by $0.9 million to record the extinguishment of Dorner’s historical current portion of debt.

5(j)—Current portion financing lease liability decreased by $0.075 million from the acquisition of finance leases.

5(k)—Term loan and revolving credit facility decreased by $61 million as a result of CMCO’s extinguishment of Dorner’s existing debt on the Acquisition close date.

5(l)—Financing lease liability increased by $2.9 million from the acquisition of acquired finance leases.

5(m)—Reflects adjustments to record the effect of Dorner’s adoption of Topic 842, the recognition of deferred tax liabilities in connection of the Acquisition, jurisdictional netting of deferred tax assets with deferred tax liabilities, and the write-off of deferred taxes associated with Dorner’s historical goodwill.

 

   
(dollars in thousands)        

Adjustment to reflect acquisition of operating leases

   $ 158  

Adjustment to reflect increase in deferred tax liabilities from the Acquisition

     20,231  

Adjustment to reclassify for jurisdictional netting of deferred taxes

     (27,080

Adjustment to write-off deferred tax liabilities related to Dorner’s historical goodwill

     (1,171
  

 

 

 

Pro forma adjustment to Other non-current liabilities

   $ (7,862

 

 

5(n)—The following table presents the pro forma adjustments to shareholders’ equity:

 

     
(dollars in thousands)               

Elimination of Dorner’s Additional paid-in-capital

       (141,748

Elimination of Dorner Accumulated other comprehensive income

       31  

Elimination of Dorner’s Retained Earnings

     (5,127  

CMCO transaction costs

     (10,813  
  

 

 

   

Pro forma adjustment to Retained earnings

       (15,940
    

 

 

 

Pro forma adjustment to Shareholders’ Equity

     $ (157,657

 

 

Pro Forma Transaction Adjustments to the unaudited pro forma condensed combined statements of operations

5(o)—The following table presents the pro forma adjustments to cost of products sold:

 

     
     Twelve months
ended
     Nine months
ended
 
(dollars in thousands)    March 31, 2020      December 31, 2020  

Fair value step-up of acquired inventory

   $ 3,114      $  

Incremental depreciation on acquired property, plant, and equipment, net

     628        471  
  

 

 

 

Pro forma adjustment to Cost of products sold

   $ 3,742      $ 471  

 

 

 

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Table of Contents

5(p)—The following table presents the pro forma adjustments to general and administrative expenses:

 

   
     Twelve months
ended
 
(dollars in thousands)    March 31, 2020  

CMCO transaction costs

   $ 10,813  

Dorner transaction costs

     8,903  
  

 

 

 

Pro forma adjustment to General and administrative

   $ 19,716  

 

 

5(q)—The following table presents the pro forma adjustments to amortization of intangibles:

 

     
     Twelve months
ended
    Nine months
ended
 
(dollars in thousands)    March 31, 2020     December 31, 2020  

Pro forma amortization expense on acquired customer relationships

   $ 8,750     $ 6,563  

Pro forma amortization expense on acquired technology portfolio

     3,214       2,411  

Pro forma amortization expense on acquired trade name portfolio

     667       500  

Historical amortization of intangibles

     (8,033     (6,025
  

 

 

 

Pro forma adjustment to Amortization of intangibles

   $ 4,598     $ 3,448  

 

 

5(r)—Reflects the income tax effect of the Transaction Accounting Adjustments calculated using a weighted average statutory rate of (25%).

 

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Table of Contents

Note 6—Other transaction accounting adjustments

Pro Forma Other Transaction Accounting Adjustments to the unaudited pro forma condensed combined balance sheet

6(a)—The following table presents the pro forma Other Transaction Accounting Adjustments related to cash, which include (1) $650 million of cash received from the New Term Loan, $5 million of final original issuance discount, and $150 million received from the Equity Issuance, (2) the repayment of the Existing Term Loan, (3) repayment of a portion of the New Term Loan, (4) the payment of issuance costs related to the New Term Loan and the New Revolver, (5) the payment of transaction bonuses, and (6) payment of the Equity Issuance costs.

 

   
(dollars in thousands)        

Sources:

  

Cash received from New Term Loan

   $ 650,000  

Final original issuance discount

     (5,000

Cash received from Equity Issuance

     150,000  
  

 

 

 

Total Sources

     795,000  

Uses:

  

Repayment of Existing Term Loan

     (256,013

Cash to repay a portion of New Term Loan

     (150,000

Cash to pay New Term Loan issuance costs

     (12,308

Cash to pay New Revolver issuance costs

     (3,050

Payment of transaction bonuses

     (1,000

Cash to pay Equity Issuance costs

     (6,000
  

 

 

 

Total Uses

     (428,371
  

 

 

 

Net Cash Inflow

   $ 366,629  

 

 

6(b)—The following table reflects the change in Other assets as a result of incremental deferred financing fees for the New Revolver and the write-off of fees related to the Existing Revolver.

 

   
(dollars in thousands)        

Deferred financing fees—New Revolver

   $ 3,050  

Write-Off financing fees—Existing Revolver

     (862
  

 

 

 

Pro forma adjustment to Other Assets

   $ 2,188  

 

 

6(c)—Reflects the payoff of the $4.5 million current portion of the Existing Term Loan.

 

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6(d)—Reflects adjustments to fund the Acquisition and repay the Existing Term Loan. The interest rate on the New Term Loan is determined by the Eurodollar rate plus an applicable margin. The change in the Company’s borrowings are as follows:

 

     
(dollars in thousands)               

Issuance of New Term Loan

   $ 650,000    

Final original issuance discount

     (5,000  

Less New Term Loan issuance costs not written off

     (4,995  
  

 

 

   

Issuance of New Term Loan, net

       640,005  

Repayment of Existing Term Loan (net of issuance costs)

       (245,092

Partial repayment of New Term Loan

       (150,000
    

 

 

 

Pro forma adjustment to Term loan and revolving facility

     $ 244,913  

 

 

6(e)—The following table presents the pro forma adjustments to shareholders’ equity, which include (1) the expected Equity Issuance of 3,301,147 shares of the Company’s common stock, with an assumed share price of $45.44, net of $6 million of issuance costs, (2) payment of employee bonuses in connection with the Transaction, and (3) the write-off of deferred financing costs associated with the repayment of the Existing Term Loan, Existing Revolver, and the partial repayment of the New Term Loan.

 

     
(dollars in thousands)               

Adjustment to Voting Common Stock

     $ 33  

Common stock issuance—APIC

     149,967    

Fees related to Equity Issuance

     (6,000  
  

 

 

   

Total adjustment to APIC from Equity Issuance

       143,967  

Deferred financing costs on Existing Term Loan

   $ (6,471  

Deferred financing costs on Existing Revolver

     (862  

Deferred financing fees on partial repayment of New Term Loan

     (7,313  

Transaction bonuses

     (1,000  
  

 

 

   

Total adjustment to Retained Earnings

     $ (15,646
    

 

 

 

Pro forma adjustment to Shareholders’ equity

     $ 128,354  

 

 

A sensitivity analysis has been performed on the number of shares of the Company’s common stock expected to be issued in the Equity Issuance. The analysis gives effect to a hypothetical $1.00 change in the share price of the Company’s common stock in the Equity Issuance. A $1.00 change in the share price of the Company’s common stock in the Equity Issuance would cause a corresponding increase or decrease to the number of shares issued of approximately 0.07 million.

 

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Pro Forma Other Transaction Adjustments to the unaudited pro forma condensed combined statements of operations

6(f)—Reflects the issuance of restricted stock units to key Dorner employees and payment of employee transaction bonuses in connection with the Acquisition.

 

     
     Twelve months
ended
     Nine months
ended
 
(dollars in thousands)    March 31, 2020      December 31, 2020  

Compensation expense from issuance of restricted stock unit awards

   $ 675      $ 506  

Transaction bonuses

     1,000     
  

 

 

    

 

 

 

Pro forma adjustment to General and administrative

   $ 1,675      $ 506  

 

 

6(g)—Reflects the elimination of the Company’s interest expense and amortization of deferred financing costs related to the repaid Existing Term Loan and records the interest expense and amortization of debt issuance costs on the New Term Loan in connection with the Acquisition. Interest rates are determined based on either a eurocurrency rate or base rate plus an applicable margin. An interest rate of 3.70% was assumed below.

 

     
     Twelve months
ended
    Nine months
ended
 
(dollars in thousands)    March 31, 2020     December 31, 2020  

Pro forma interest on New Term Loan

   $ 18,315     $ 13,736  

Pro forma amortization of New Term Loan and New Revolver financing costs

     1,438       1,079  
  

 

 

 

Pro forma interest and debt expense

     19,753       14,815  

Historical CMCO interest and debt expense

   $ (14,234   $ (9,192

Historical Dorner interest and debt expense

     (6,675     (4,387
  

 

 

 

Historical interest and debt expense

     (20,909     (13,579
  

 

 

 

Pro forma adjustment to interest and debt expense

   $ (1,155   $ 1,236  

 

 

A sensitivity analysis has been performed on interest expense to assess the effect a hypothetical 0.125% change in the interest rate related to the New Term Loan, which reflects a gross issuance of $650 million, debt issuance costs of $4.9 million, $5 million of final original issuance discount, repayment of the Existing Term Loan of $256 million, as well as immediate repayment of $150 million on the New Term Loan. A 0.125% change in interest rates would cause a corresponding increase or decrease to interest expense of approximately $0.62 million for the twelve months ended March 31, 2020 and $0.47 million for the nine months ended December 31, 2020.

6(h)Reflects a loss from the extinguishment of the Existing Term Loan and New Term Loan, as well as a write-off of Existing Revolver deferred financing fees.

 

   
     Twelve months
ended
 
(dollars in thousands)    March 31, 2020  

Write-Off financing fees—Existing Term Loan

   $ 6,471  

Write-Off financing fees—Existing Revolver

     862  

Write-Off financing fees—repay portion of New Term Loan

     7,313  
  

 

 

 

Pro forma adjustment to Cost of debt refinancing

   $ 14,645  

 

 

6(i)—Reflects the income tax effect of the Other Transaction Adjustments calculated using a weighted average statutory rate of (25%).

 

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6(j)—Reflects the 3,301,147 shares of common stock of the Company expected to be issued in connection with the Equity Issuance and the vesting of the restricted stock units treated as post-Acquisition compensation expense.

 

     
     Twelve months
ended
     Nine months
ended
 
(dollars in thousands except for earnings per share figure)    March 31, 2020      December 31, 2020  

Pro Forma Net Income

   $ 23,771      $ 515  

Pro Forma Basic EPS

     

Historical average basic shares outstanding

     23,619        23,871  

Shares from Equity Issuance

     3,301        3,301  
  

 

 

 

Total average basic shares outstanding

     26,920        27,172  
  

 

 

 

Pro Forma Basic EPS

     0.88        0.02  
  

 

 

 

Pro Forma Diluted EPS

     

Historical average basic shares outstanding

     23,855        23,871  

Shares from Equity Issuance

     3,301        3,301  

Dilutive impact of restricted stock units

     7        18  
  

 

 

 

Total average dilutive shares outstanding

     27,163        27,190  
  

 

 

 

Pro Forma Diluted EPS

   $ 0.88      $ 0.02  

 

 

A sensitivity analysis has been performed on EPS to assess the effect a hypothetical $1.00 change in the share price of the Company’s common stock in the Equity Issuance. A $1.00 increase or decrease in the share price of the Company’s common stock in the Equity Issuance would cause an insignificant change to pro forma Basic EPS and Diluted EPS for the twelve months ended March 31, 2020 and for the nine months ended December 31, 2020.

Note 7—Nonrecurring adjustments

The following table reflects the adjustments related to non-recurring items within the pro forma condensed combined financial information. These non-recurring items were assumed to have occurred on April 1, 2019, the beginning of the twelve-month period ended March 31, 2020.

 

   
Nonrecurring adjustments       
     Twelve months
ended
 
(dollars in thousands)    March 31, 2020  

CMCO Transaction Costs

   $ (10,813

Dorner Transaction Costs

     (8,903

Transaction Bonuses

     (1,000

Fair value step-up of acquired inventory

     (3,114

Write-Off financing fees—Existing Term Loan

     (6,471

Write-Off financing fees—Existing Revolver

     (862

Write-Off financing fees—partial repayment of New Term Loan

     (7,313
  

 

 

 

Total Non-Recurring Adjustments

     (38,475

Income tax expense / (benefit)—assumed 25% statutory tax rate

     (9,655
  

 

 

 

Total Non-Recurring Adjustments, net of tax effects

   $ (28,820

 

 

 

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Use of proceeds

We expect the net proceeds from the sale of common stock in this offering to be approximately $             (or approximately $             if the underwriters exercise their option to purchase additional shares of our common stock in full) after deducting estimated underwriting discounts and commissions but not estimated offering expenses payable by us. We intend to use the net proceeds from this offering (including the net proceeds if the underwriters exercise their option to purchase additional shares of common stock) to repay in part outstanding borrowings under the First Lien Term Facility.

On April 7, 2021, in connection with the completion of the Acquisition, the Company and certain of the Company’s subsidiaries entered into the Credit Agreement, which provides for (i) the Revolving Credit Facility in an aggregate principal amount of $100.0 million and (ii) the First Lien Term Facility in an aggregate principal amount of $650.0 million. The Company used borrowings under the First Lien Term Facility to, among other things, finance the purchase price for the Acquisition, pay related fees, expenses and transaction costs, and repay the Company’s outstanding borrowings under its former term loan and revolving credit facilities. See “The acquisition and related financing” for additional information.

As of April 7, 2021, our outstanding borrowings under our First Lien Term Facility bore interest at a rate of 5.00% per annum. Our First Lien Term Facility is scheduled to mature on April 7, 2028.

Certain of the underwriters and/or certain of their affiliates are lenders, and/or are acting as agents or arrangers, under the Credit Facilities, which will be partially repaid in connection with this offering, and as a result, they will receive a portion of the proceeds from this offering. See “Underwriting (conflicts of interest).”

 

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Capitalization

The below table sets forth our consolidated cash and cash equivalents and capitalization as of December 31, 2020:

 

 

on an actual basis; and

 

 

on a pro forma basis to give effect to the Transactions.

You should read this table in conjunction with “Use of proceeds,” “Unaudited pro forma condensed combined financial information” and Part II—Item 7, “Management’s discussion and analysis of results of operations and financial condition” and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, which are incorporated by reference into this prospectus.

 

   
     As of December 31, 2020  
           Actual         Pro forma  
     

(in thousands)

(unaudited)

 

Cash and cash equivalents(1)

   $ 187,626     $    
  

 

 

 

Long-term debt (including current portion)

    

Former term loan and revolving credit facility

     256,013    

Revolving Credit Facility(2)

        

First Lien Term Facility(2)

        

Capital lease obligations

        
  

 

 

 

Total long-term debt (including current portion)

   $ 256,013     $                       
  

 

 

 

Shareholders’ equity

    

Voting common stock, $0.01 par value per share, 50,000,000 shares authorized; 23,970,387 shares issued and outstanding (actual) and                      shares issued and outstanding (pro forma)

     240    

Additional paid in capital

     293,869    

Retained earnings(1)

     287,095    

Accumulated other comprehensive loss

     (83,880  
  

 

 

 

Total shareholders’ equity(1)

     497,324    
  

 

 

 

Total capitalization

   $ 753,337     $    

 

 

 

(1)   The above table does not reflect the cash dividend of $0.06 per share that our Board declared on March 22, 2021, which is payable on May 13, 2021 to our shareholders of record as of the close of business on May 3, 2021.

 

(2)   For additional information on the Credit Facilities, see “The acquisition and related financing.” These amounts exclude financing fees and original issue discount.

 

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Dividend policy

Shares of our common stock are listed on Nasdaq under the symbol “CMCO.” On April 19, 2021, the last reported sale price of our common stock on Nasdaq was $53.47 per share. As of April 15, 2021, there were 23,985,393 shares of our common stock issued and outstanding. The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.

We expect to continue to pay quarterly cash dividends on shares of our common stock, subject to approval of our Board. On March 22, 2021, our Board approved a quarterly dividend of $0.06 per share of common stock, which is payable on or about May 13, 2021 to shareholders of record at the close of business on May 3, 2021. There can be no assurance that we will continue to pay dividends on shares of our common stock in the future. See “Risk factors—Risks related to ownership of our common stock—We cannot assure you that we will continue to pay dividends on our common stock, and our indebtedness limits our ability to pay dividends on our common stock.”

 

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Business

The information below is only a summary and may not contain all the information that is important to you. For more information about our business, please refer to the “Business” and “Management’s discussion and analysis of financial condition and results of operations” sections of our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, which are incorporated by reference into this prospectus in their entirety, as the same may be amended, supplemented or superseded.

Columbus McKinnon is a leading worldwide designer, manufacturer and marketer of intelligent motion solutions 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.

We focus on commercial and industrial applications for our products, which require the safety, reliability and quality provided by our advanced design and engineering know-how. Our products are used for mission critical applications where we have established, trusted brands with significant customer retention. Our targeted market verticals include general industries, mobile industries, energy and utilities, process industries, industrial automation, construction and infrastructure, food processing, entertainment, life sciences, consumer packaged goods and e-commerce/supply chain/warehousing.

We maintain strong market share in North America with significant leading market positions in hoists, lifting and sling chain, forged attachments, precision conveyors, actuators, and digital power and motion control systems for the material handling industry. We are the world’s second largest hoist manufacturer.

In the United States, we are the market leader for hoists, material handling digital power control systems, and precision conveyors, our principal lines of products, and have strong market positions with certain chain, forged fittings, and actuator products. Additionally, in Europe, we believe we are the market leader for manual hoists and a market leader in the heavy load, rail and niche custom applications for actuation. We have achieved our leadership positions through strategic acquisitions, our extensive, diverse, and well-established channels to market and our commitment to product innovation and quality. We believe the breadth of our product offering and expansive channels to market provide us with a strategic advantage.

We have well-established brands that include CM, Yale, STAHL, Magnetek, Dorner, Pfaff, Unified, SHAW-BOX and Duff-Norton. Our market leadership and strong brands enable us to effectively sell our products through our extensive channels to market throughout the United States and Europe.

 

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We believe that key considerations for investing in Columbus McKinnon include the following:

 

 

The acquisition of STAHL in fiscal 2017, which is well known for its custom engineered 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 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.

We believe that the acquisition of Dorner provides a catalyst for growth and a platform where we can leverage our leadership position in the United States and our worldwide reach to expand globally in the precision conveyor market. This acquisition broadens our intelligent motion product offerings and diversifies our product portfolio. Dorner added a broad range of precision conveying systems to our product offerings, which include low profile, flexible chain, large scale, sanitary and vertical elevation conveyor systems, as well as pallet system conveyors. Our conveying solutions are offered in both modular standard and highly engineered custom formats, along with significant aftermarket offerings and support. Dorner serves a variety of customers across food processing, life sciences, CPG, e-commerce and industrial automation end markets.

We seek to maintain and enhance our market share by focusing our sales and marketing activities toward select global market verticals that require our material handling expertise, and to accelerate our growth by expanding our reach into markets with stronger secular tailwinds than traditional industrial and energy markets, such as factory and warehouse automation, life sciences, food and beverage, consumer packaged goods and e-commerce.

Our revenue base is geographically diverse with approximately 47% of revenues derived from customers outside the United States for the nine months ended December 31, 2020 (excluding Dorner). We believe this diversity helps balance the impact of changes that occur in local economies, as well as allows us to benefit from growth in emerging markets. We monitor both U.S. and Eurozone Industrial Capacity Utilization statistics and 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. macroeconomic data, including industrial production, trade tariffs, raw material cost inflation, interest rates, foreign currency exchange rates, and activity of end-user markets around the globe.

 

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Regardless of the economic climate and point in the economic cycle, we consistently 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. These 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 revenue growth initiatives. We believe these initiatives will drive profitable growth and enhance future operating margins.

Our principal executive offices are located at 205 Crosspoint Parkway, Buffalo, New York 14068. Our telephone number is (716) 689-5400. Our web site address is www.columbusmckinnon.com. The information on, or accessible through, our website is not part of this prospectus.

Human capital management

Headquartered in Buffalo, New York, Columbus McKinnon’s global footprint includes offices and manufacturing facilities in more than 23 countries across North America, Latin America, Europe, Africa and Asia. At December 31, 2020, we had 2,648 employees globally. Approximately 8% of our employees are represented under two separate U.S. collective bargaining agreements, which expire 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. We believe the risk of employee or union led disruption in production is remote. The acquisition of Dorner adds approximately 400 employees to our global workforce and four primary manufacturing facilities.

Successful execution of our way forward is dependent on attracting, developing, and retaining key employees and members of our management team, which we achieve through the following:

 

 

We always begin with people and values at the center of all that we do and at the heart of our corporate social responsibility efforts. The Company’s people and the behaviors they display define our success, including integrity, respect and teamwork. Many of our material social factors, including Employee Health and Safety, Training and Development, Talent Recruitment and Retention, Diversity, Equity and Inclusion, and Community Involvement, are directly connected to our commitment to people and values. Our people enable us to grow, and our values ensure we grow responsibly and sustainably.

 

 

The Company believes strongly in workplace safety. We feel it is critical to ensure our most valuable assets, our employees, have a safe environment to work in every day. We added safety as our first core value as we entered fiscal 2021, recognizing the significant impact of the COVID-19 pandemic on everyone’s lives. “Connect safety to everything you do” highlights the importance of safety as a table stake to our culture. As a permanent agenda item at all management meetings, safety comes first. For fiscal 2021, the Company had an overall safety incident rate of 0.74 (number of injuries and illnesses multiplied by 200,000, divided by hours worked).

 

 

We are committed to embracing diversity, equity and inclusion and making it a part of everything we do. We know the positive impact diverse and inclusive teams have on our business, employees, customers, and communities around the world. We are dedicated to building a company that future generations can be proud of and a team that embraces diversity and appreciates differences across the enterprise. In fiscal 2021, we made diversity, equity and inclusion a strategic development area and hired a Director of Talent and Diversity, Equity and Inclusion to raise awareness and drive behaviors aligned to our values. We have embedded diversity, equity and inclusion into the People and Values framework of the Columbus McKinnon

 

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Business System. We are working to create an environment of inclusion. We launched virtual training series modules around diversity, inclusion and unconscious bias. We have updated our core value “Win as a team” to specifically address embracing diversity.

In response to the COVID-19 pandemic, we immediately mobilized an Enterprise Covid-19 Task Force and local task forces at each of our manufacturing sites and worked diligently to stay current with constantly evolving information. With guidance from the World Health Organization, U.S. Centers for Disease Control and Prevention, and other health organizations around the world, we implemented strict safety protocols at our sites, such as face covering requirements, daily temperature testing, social distancing, and frequent cleaning and sanitizing measures to keep our employees safe. We had regular communication with employees to keep them abreast of the corporate-wide expectations and posted signage throughout our facilities to remind our associates of the new heightened safety protocols. All associates who were able to work remotely were asked to do so and all safety protocols and policies were kept up to date by the Enterprise Covid-19 Task Force and documented in a Company “playbook.”

We also recognize our corporate responsibility to advance our Environmental Social and Governance (“ESG”) efforts and to be held accountable for making progress. We are making significant investments in our people and systems to enable meaningful progress in areas including, but not limited to, environmental stewardship, safety for our employees, workplace diversity and inclusion, connecting with our communities, and strong governance and risk management. We are taking deliberate steps to fully integrate ESG into our enterprise strategy, our business system, and our daily actions.

Our focus for the fiscal year ended March 31, 2021 was to develop and formalize our ESG strategy and build the framework that will enable us to prosper on this exciting journey. Our main objectives for the fiscal year ended March 31, 2021 included:

 

 

lay the foundation for our ESG journey with solid processes and policies;

 

 

make significant investments in forward advancement of ESG (People & Technology enablers);

 

 

perform extensive data collection and analysis to identify areas for improvement;

 

 

establish fiscal 2021 as our baseline year for ESG metrics;

 

 

perform materiality and risk assessments to allow for discipline and focus regarding ESG efforts; and

 

 

be more transparent with internal and external stakeholders through communications and public disclosures.

As we look forward to our fiscal year ending March 31, 2022 and beyond, we will continue evolving and improving. We have set aggressive targets and aspirational goals for ourselves, and we are committed to holding ourselves accountable to our commitments by embedding them into our business goals.

 

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Management

Directors and executive officers

Our directors and executive officers and their ages as of April 15, 2021 are as follows:

 

     
Name    Age        Position
Richard H. Fleming      73        Chairman of the Board

David J. Wilson

     52        Director, President and Chief Executive Officer

Nicholas T. Pinchuk

     74        Director

Liam G. McCarthy

     65        Director

Heath A. Mitts

     50        Director

Kathryn V. Roedel

     60        Director

Aziz S. Aghili

     62        Director

Jeanne Beliveau-Dunn

     61        Director

Bert A. Brant

     60        Vice President Global Manufacturing Operations

Appal Chintapalli

     45        Vice President Engineered Products Group

Alan S. Korman

     60        Vice President Corporate Development, General Counsel,
Chief Human Resources Officer & Secretary

Mario Y. Ramos Lara

     48        Vice President Global Product Development

Peter M. McCormick

     60        Vice President Crane Solutions Group

Mark Paradowski

     51        Vice President Information Services

Gregory P. Rustowicz

     61        Vice President Finance and Chief Financial Officer and Treasurer

Kurt F. Wozniak

     57        Vice President Industrial Products Group

 

Richard H. Fleming was the Chief Financial Officer of USG Corporation (NYSE: USG) for approximately 18 years and was its Executive Vice President and CFO from 1999 until his retirement in 2012. USG is a manufacturer of high-performance building systems for the construction and remodeling industries. Prior to joining USG, Mr. Fleming was employed by Masonite Corporation, which was acquired by USG in 1984. During his 39-year career with Masonite and USG, Mr. Fleming held various operating and finance positions. In addition to being the board chair of Columbus McKinnon, Mr. Fleming also assumed the role of Interim CEO on January 10, 2020 until June 1, 2020 when Mr. Wilson was hired as Chief Executive Officer. Mr. Fleming also serves as a member of the Board of Directors of Boise Cascade Company (NYSE: BCC) and OE Holdings, LLC, a private company. In addition, he is a director for several not-for-profit entities including UCAN and the University of the Pacific. Mr. Fleming’s qualifications to serve on the Board include his senior leadership and public company board and governance experience in global manufacturing companies and his high level of expertise and background in finance and accounting matters and strategic planning.

David J. Wilson joined Columbus McKinnon on June 1, 2020 as President and Chief Executive Officer and a Director. Prior to joining Columbus McKinnon, Mr. Wilson served as President of Flowserve Corporation’s Pumps Division from 2018 to 2020. He joined Flowserve in 2017 as President of the Industrial Pumps Division. Previous

 

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to Flowserve, Mr. Wilson was the President of the Industrial segment of SPX FLOW, Inc. He was with SPX Corporation, and subsequently SPX FLOW, between 1998 and 2017 and held senior leadership positions in each of the company’s operating segments, including six years in Asia while serving as the President of Asia Pacific and several years leading strategy and corporate development initiatives. Prior to joining SPX, Mr. Wilson held operating and engineering leadership positions at Polaroid Corporation. He currently serves on the Board of Trustees of the Manufacturers Alliance for Productivity and Innovation (MAPI) and previously served on the Board of Directors of the Hydraulic Institute and the Board of Trustees of the Maine College of Art (MECA). Mr. Wilson’s qualifications to serve on the Board include his senior leadership, operational excellence and customer-centric commercial experience, international and business development skills and demonstrated track record for delivering results.

Nicholas T. Pinchuk is the Chairman, CEO, and President of Snap-on Incorporated (NYSE: SNA), an S&P 500 company. Prior to that, Mr. Pinchuk served as Senior Vice President and President of Snap-on’s Worldwide Commercial and Industrial Group since June 2002. Before joining Snap-on, Mr. Pinchuk served in several executive operational and financial management positions at United Technologies Corporation, including President, Global Refrigeration Operations of its Carrier Corporation unit and President of Carrier’s Asia-Pacific Operations. He also served in financial and engineering managerial staff positions at the Ford Motor Company from 1972 to 1983. Mr. Pinchuk served as an officer in the United States Army in Vietnam. Mr. Pinchuk’s qualifications to serve on the Board include his senior leadership and public company board and governance experience and his manufacturing and international operations expertise, especially in Asia-Pacific.

Liam G. McCarthy retired in June 2017 from Molex LLC (previously NASDAQ: MOLX, acquired in 2013 by Koch Industries, Inc.). Mr. McCarthy served Molex in various executive and management capacities, including President and Chief Supply Chain Officer through June 2017; President and Chief Operating Officer through December 2015; Vice President, Operations, Europe from 2001 to 2005; President, Data Communications Division, Americas Region from 1998 to 2001; General Manager, Singapore from 1993 to 1998; Regional Marketing Manager, Far East South Region from 1991 to 1993; and Materials Director, Singapore from 1989 to 1991. Mr. McCarthy’s qualifications to serve on the Board include his extensive global leadership experience, having held significant executive roles in Operations and Business development while living in Asia, Americas and Europe. He has served on several boards including the Molex board of Koch Industries, the Chicago Council on Global Affairs, the Singapore National Science and Technology Council and on Singapore’s Economic Development Board.

Heath A. Mitts is Executive Vice President and CFO at TE Connectivity Ltd. (NYSE: TEL). He was appointed to the TE Connectivity Board of Directors in March 2021. Prior thereto, Mr. Mitts was Senior Vice President and Chief Financial Officer of IDEX Corporation (NYSE: IEX). Prior to joining IDEX Corporation, Mr. Mitts was at PerkinElmer, Inc. in various senior financial management roles in both North America and in Singapore. He went to PerkinElmer after five years at Honeywell where he gained world-class training in financial planning and analysis, progressing through various managerial roles including Director of Finance. Mr. Mitts qualifications to serve on the Board include his senior leadership and governance experience, his high level of finance and accounting background and his international industrial experience.

Kathryn V. Roedel retired in 2016 from her position of EVP, Chief Services and Fulfillment Officer at Sleep Number Corporation (NASDAQ: SCSS), a direct to consumer, vertically integrated mattress retailer and manufacturer. Prior to joining Sleep Number in 2005, Ms. Roedel held VP and General Management positions in operations, supply chain, services and continuous improvement, spanning 22 years with General Electric’s Healthcare and Information Services businesses. Ms. Roedel also serves on the Board of Directors of Generac Holdings, Inc. (NYSE: GNRC) and The Jones Family of Companies, a private company. Ms. Roedel’s qualifications to serve on the Board include her senior leadership, public company board and governance experience and her international supply chain experience.

 

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Aziz S. Aghili is Executive Vice President Dana, President Off-Highway Drive and Motion Technologies for Dana Incorporated and resides in Europe. Mr. Aghili joined Dana in 2009 as President of Dana Europe, before being named President of Dana Asia-Pacific in 2010. Prior thereto, he spent more than 20 years at ArvinMeritor, where he most recently served as Vice President and General Manager of Body Systems. Additionally, he held strategic leadership positions around the world, including Vice President and General Manager of Asia Pacific and Vice President of Global Procurement, Commercial Marketing, and Business Development Asia Pacific. Before joining ArvinMeritor, he worked for Nissan Motor Company and General Electric Plastics. Mr. Aghili’s qualifications to serve on the Board include his senior leadership and governance experience and his global manufacturing and operations experience.

Jeanne Beliveau-Dunn is the Chief Executive Officer and President of Claridad LLC. Prior to her tenure at Claridad, Ms. Beliveau-Dunn worked for twenty-two years in a variety of management positions at Cisco Systems Inc., which included eleven years as Vice President and General Manager of Services. Prior thereto, she ran business operations at Micronics Computers and the secure systems product lines for Wang Laboratories. Ms. Beliveau-Dunn served as President of the Board of the IoT Talent Consortium, a membership-driven non-profit organization from 2016 through March 2018, and serves on the Boards of Directors of Xylem Inc. (NYSE: XYL) and Edison International Inc. (NYSE: EIX) and its subsidiary Southern California Edison (SCE). Ms. Beliveau-Dunn’s qualifications to serve on the Board include her senior leadership, public company board and governance experience.

Bert A. Brant joined the Company in February 2018 as Vice President Global Manufacturing Operations. Prior to that he was SVP, Global Operations for Colfax Fluid Handling, a division of Colfax Corporation. Prior to joining Colfax in 2014, he led operations in the United States, Mexico and Canada for Apex Tool Group. He held other manufacturing and operational leadership roles at Pergo LLC, Rexnord Corporation and Denso Manufacturing, where he was trained by Toyota in Japan on the Toyota Production System.

Appal Chintapalli joined the Company in March 2018 as the Vice President Engineered Products Group. Prior thereto, he was General Manager and Vice President of IT & Edge Infrastructure EMEA in Germany for Vertiv. Previously, he worked in a number of positions for Emerson including Vice President of Marketing for Emerson Network Power EMEA in London, UK, and in the United States, Vice President of Enterprise Services for the Emerson Climate Division, and Corporate Marketing Manager. Mr. Appal holds an MBA from Harvard Business School, and a Bachelor and Master of Science in Chemical Engineering.

Alan S. Korman joined the Company in January 2011 as General Counsel and Assistant Secretary. In July 2011, he was elected V.P., General Counsel and Corporate Secretary. In 2015 he assumed the role of Corporate Development and in November 2017 the role of Chief Human Resources Officer. From 1994 until January 2011, he served in various senior executive positions of responsibility at Ivoclar Vivadent, Inc., including Vice President, General Counsel and Secretary, and President of Pentron Ceramics, Inc.

Mario Y. Ramos Lara joined the Company in June 2018 as Vice President Global Product Development. Prior thereto, he spent 18 years in various roles at Schneider Electric, most recently Vice President, Strategic Marketing, Product Management and Partnerships for Schneider’s Final Distribution line of business. Other positions at Schneider included Vice President, Global Engineering, Director of Engineering for Low and Medium Voltage Equipment and Director, Global Technology Center in Monterrey, Mexico. Mario holds an MBA from Vanderbilt, and a Bachelor and Master of Science in Mechanical Engineering.

Peter M. McCormick joined the Company in 2015 with the acquisition of Magnetek. He served as President/CEO of Magnetek from 2008 until 2016. From 2006 to 2008, he was Executive VP and COO of Magnetek. In 2016, he assumed the role of Integration Manager STAHL. In 2017, he was appointed Vice President Crane Solutions Group.

 

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Mark Paradowski joined the Company in 1997 as a Technical Manager. In August 2013, he was named Vice President—Information Services. Prior to that, he served as Director—Global Information Systems after having served as Director Information Services. Before joining the Company, Mr. Paradowski held various positions with Oracle Corporation and Electronic Data Systems (EDS).

Gregory P. Rustowicz joined the Company in August 2011 as Vice President Finance and Chief Financial Officer and Treasurer. From 2007, he was Vice President Finance and Corporate Treasurer at Momentive Performance Materials Inc. Prior thereto, he spent 20 years in various financial management positions for PPG Industries, Inc., including Group CFO for the Glass, Fiber Glass and Chemicals Businesses, CFO for Transitions Optical, Inc., and Assistant Treasurer and Global Credit Director. Prior to PPG, he worked as a CPA for KPMG.

Kurt F. Wozniak joined Columbus McKinnon in 1999. He was named Vice President Industrial Products Group in 2017. Prior thereto, he was Vice President—Americas from April 2014. Since July 2012, he served as the Vice President—Latin America. Prior to that, he had been Managing Director – Latin America since July 2010. He has also served as Director, Corporate Development and Director, Materials Management. Previously, Mr. Wozniak was a management consultant with Ernst & Young LLP.

 

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Compensation of directors and executive officers

Director compensation

The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on our Board. In fiscal 2021, each non-employee director was eligible to receive an annual cash retainer of $65,000, plus the following amounts for specified Board service, which amounts were pro-rated for any partial year service:

 

Chairman of the Board

   $ 60,000  

Audit Committee Chair

     20,000  

Compensation and Succession Committee Chair

     20,000  

Corporate Governance and Nomination Committee Chair

     20,000  

In fiscal 2021, the equity-based portion of each non-employee director’s annual retainer consisted of 1,500 restricted stock units (“RSUs”), which vest over a three year period, and 1,801 shares of common stock that vested immediately.

The following table sets forth the compensation of the Company’s directors for the fiscal year ended March 31, 2021.

 

         
Director   

Fees Earned or Paid
in Cash(1)

($)

    

Stock
Awards(2),(3)

($)

    

All Other

Compensation(4)

($)

    

Total(5)

($)

 

Aziz S. Aghili

     65,000        109,989        23        175,012  

Jeanne Beliveau-Dunn

     65,000        109,989               174,989  

Richard H. Fleming(6)

     93,750        109,989        51        203,790  

Liam G. McCarthy

     82,500        109,989        51        192,540  

Heath A. Mitts

     85,000        109,989        51        195,040  

Nicholas T. Pinchuk

     65,000        109,989        51        175,040  

Kathryn V. Roedel

     75,000        109,989        23        185,012  

R. Scott Trumbull(7)

     49,253        109,989        161        159,403  

Ernest R. Verebelyi(8)

     32,500        109,989        107        142,596  

David J. Wilson(9)

                           

 

(1)   For each director, the amount set forth in the fees earned or paid in cash column reflects the annual director cash retainer in the amount of $65,000. In addition, for Mr. Fleming includes the Chairman of the Board fee earned for fiscal year 2021 in the amount of $45,000 and for Messrs. McCarthy, Mitts and Trumbull and Ms. Roedel includes committee chair fees earned for fiscal year 2021.

 

(2)   Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of awards of common stock ($60,009 for each director) and RSUs ($49,980 for each director). The grant date fair value for each share of restricted stock and RSUs is equal to the market price of our common stock on the date of grant. This figure includes the 1,500 RSUs granted annually, which vest over three years, as well as the $60,009 in shares of common stock that were granted with immediate vesting provisions.

 

(3)   As the Company’s director compensation program includes RSUs that vest over a three year period, the following directors held the following number of unvested RSUs as of March 31, 2021: Mr. Aghili: 2,625 unvested RSUs; Ms. Beliveau-Dunn: 1,500 unvested RSUs; Mr. Fleming: 2,625 unvested RSUs; Mr. McCarthy: 2,625 unvested RSUs; Mr. Mitts: 2,625 unvested RSUs; Mr. Pinchuk 2,625 unvested RSUs; and Ms. Roedel: 2,625 unvested RSUs.

 

(4)   All other compensation column consists of cash received in lieu of fractional shares.

 

(5)   No additional fees are paid for attendance at Board or committee meetings. Our directors are reimbursed for reasonable expenses incurred in attending such meetings.

 

(6)   Mr. Fleming served as Interim President and Chief Executive Officer until June 1, 2020. The amounts presented in this table represent the fees earned by Mr. Fleming during fiscal 2021 in his capacity as Chairman of the Board, including $45,000 for his service as Chairman of the Board after the completion of his service as our Interim President and Chief Executive Off