CMCO 10-K & 10-Q changes, risk factors and insider trading

Many of the end-users of our products are in industries affected by changes in industrial economic and macroeconomic conditions, 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 macroeconomic conditions. Their demand for our products, and thus our results of operations, are directly related to the level of production in their facilities, which changes as a result of changes in general macroeconomic conditions, including, among others, movements in interest rates, tariffs and other trade regulations, inflation, changes in currency exchange rates, higher fuel and other energy costs, and other factors beyond our control, and is vulnerable to economic downturns. Decreased capital and maintenance spending by these customers has in the past, and could in the future, have a material adverse effect on the demand for our products and our business, financial condition, and results of operations. In particular, higher interest rates have in the past, and could in the future, result in decreased demand for our products from end-users, which would have a material adverse effect on our business and results of operations, and concurrently result in higher interest expense related to borrowings under our credit facilities. In addition, inflation can also result in higher interest rates and negatively impact our results of operation. During an inflationary period, the cost of capital will often increase, and the purchasing power of our end users’ cash resources will decline, which can negatively affect demand from our customers. Current or future efforts by the government to stimulate the economy may increase the risk of significant inflation, which could have a direct and indirect adverse impact on our business and results of operations. 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. Furthermore, even if demand for our products improves, it is difficult to predict whether any improvement represents a long-term improving trend or the extent or timing of improvement. There can be no assurance that historically improving cycles are representative of actual future demand. In addition, general macro-economic conditions could at times also adversely affect our liquidity and ability to borrow under our Amended and RestatedNew Revolving Credit Facility (as defined herein) and limits our ability to make accurate long-term predictions about the performance of the Company.

Our growth strategy depends on successful integration of acquisitions, including uponthe closingrecently of such transaction, thecompleted Kito Crosby Acquisition.

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 execute our acquisition strategy, and the successful integration of acquired businesses into our existing business, including, upon closing of such transaction,including the recently completed Kito Crosby Acquisition. Such a strategy involves the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities, and potential profitability of acquisition candidates and in integrating the operations of acquired companies. Furthermore, the price we pay for any business acquired may overstate the value of that business or otherwise be too high. In addition, any acquisitions of businesses with foreign operations or sales may increase our exposure to risks inherent in doing business outside the U.S.

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. Inherent in connection with any acquisition is the risk of transitioning company cultures and facilities and the corresponding risk of management and employee turnover. In addition, the focus on the integration of operations of acquired entities may divert management’s attention from the day-to-day operation of our businesses. The failure to efficiently and effectively achieve such transitions could increase our costs and decrease our profitability. Furthermore, the failure to achieve the anticipated synergies of our recent significant acquisitionsacquisitions, including the Kito Crosby Acquisition, or any future acquisitions, or recognize the anticipated market opportunities or integration from our recent acquisitions, could have a material adverse effect on our business, financial condition and results of operations.

In an environment of increasing raw material prices and trade tariffs, duties and quotas, 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 and margins could be adversely affected, including materially.

Our results of operations could be materially adversely affected if we are unable to obtain sufficient pricing for our products and serviceservices to meet our profitability expectations.

Our backlog is comprised of the portion of firm signed purchase orders or other written contractual commitments received from customers that we have not recognized as sales. The dollar amount of backlog as of March 31, 20252026 was $323 million.$519,639,000. Our backlog can be significantly affected by the timing of orders for large projects, and the amount of our backlog at March 31, 20252026 is not necessarily indicative of future backlog levels or the rate at which backlog will be recognized as sales. Although modifications and terminations of our orders may be partially offset by cancellation fees, customers can, and sometimes do, terminate or modify these orders. We cannot predict whether cancellations will accelerate or diminish in the future. Cancellations of purchase orders, indications that the customers will not perform under their existing purchase orders or contracts or reductions of product quantities in existing contracts could substantially and materially reduce our backlog and, consequently, our future sales. Our failure to replace canceled orders could negatively impact our sales and results of operations.

We depend on independent distributors to sell our products and provide service and aftermarketafter market 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 aftermarketafter market 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.

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

In connection with the montratecKito acquisition,Crosby Acquisition, the Company (i) entered into anthe Amended and RestatedNew Credit Agreement increasingwhich provides for credit facilities (the size“New Facilities”) consisting of thea Revolving Credit Facility byin $75,000,000an toaggregate a totalamount of $175,000,000.$500,000,000 The Company subsequently borrowed additional funds in accordance with (the Accordion“New featureRevolving underFacility”) itsand existinga Term Loan B facilityFacility to(the increase“New theTerm Loan B Facility”) in an aggregate amount of $1,650,000,000 and (ii) issued $900,000,000 in aggregate principal amount of its 7.125% Senior Secured Notes due 2033 (the Term Loan B facility by $75,000,000 in both fiscal years 2022 and 2024.“Notes”). The Company also borrowed an additional $25,000,000$53,400,000 under a new credit agreement secured by the Company's U.S. accounts receivable balances (the "AR Securitization Facility"). As of March 31, 2025,2026, the outstanding principal balance of the New Term Loan B facility was $437,560,000, which includes $75,000,000 in principal balance from the Accordion exercised in the first quarter of fiscal 2024 as described above.$1,456,990,000. We had $175,000,000$458,933,000 available for borrowing under the Amended and RestatedNew Revolving Credit Facility (beforeafter deducting approximately $15,417,000$16,067,000 of letters of credit outstanding and $25,000,000 of outstanding borrowings) as of March 31, 2025).2026.

Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debt, or a combination of both. Additional financing may not be available on favorable terms or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue newadditional debt securities, the debt holders would have rights senior to holders of our common stock to make claims on our assets and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities or securities convertible into equity securities, existing shareholders will experience dilution and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of our future offerings and their impact on the market price of our common stock.

We have operations and assets located outside of the U.S., primarily in Germany, Japan, the United Kingdom, Australia, Hungary, China, Malaysia and Mexico, including our new facility in Monterrey, Mexico. 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, 2025,2026, approximately 44% 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, including but not limited to differing protections of intellectual property, trade barriers, labor unrest, geopolitical conflicts, exchange controls, regional economic uncertainty, differing (and possibly more stringent) labor regulation, risk of governmental expropriation, U.S. and foreign customs, quotas and duties, and tariffs (in particular, the new tariffs implemented and additional tariffs proposed to be implemented by the new U.S. presidential administration on goods imported into the U.S. from Mexico and other countries where we have manufacturing operations and ongoing uncertainty in the interpretation of new tariffs and their applicability), political and economic instability in the jurisdictions in which we operate, foreign receivables collection risk, 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. In particular, in connection with our Mexican manufacturing operations, as a result of the tariffs or other trade restrictions implemented or proposed to be implemented by the U.S. or other countries, the cost of our products manufactured in Mexico or other countries and imported into the U.S. or other countries have increased and could continue to increase further, which, in turn, has adversely affected, and could continue to adversely affect, the demand for these products, make our products less competitive and have an adverse effect on our business, results of operations and margins. Any of these factors, individually or together, could have a material adverse effect on our business, financial condition, results of operations and cash flows. 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, including through the use of our new facility in Monterey,Monterrey, Mexico. Implementation of this strategy may increase the impact of the risks described above, and we cannot assure you that such risks will not have a material adverse effect on our business, results of operations or financial condition.

In addition, in connection with Russia’s invasion of Ukraine, the U.S. has imposed, and is likely tomay impose material additional, financial and economic sanctions and export controls against Russia and certain Russian organizations and individuals, with similar actions either implemented or plannedeffected by the European Union and the U.K. and other jurisdictions. WhileAs thea Company’s business operations relating to Russia constitute an immaterial part of the Company’s overall business,result, we maydecided decide to, or be required to,to exit from our operations in Russia in their entirety,entirety which(an couldimmaterial result in a losspart of revenues from our Russian operations (approximately $836,000 for the fiscalCompany's yearoverall ended March 31, 2025business) or may necessitate the need to incur a bad debt reserve or an asset write-off related to our Russian operations.. Furthermore, there is no guarantee that the current Russian invasion of Ukraine will not draw military intervention from other countries or further retaliation from Russia, which, in turn, could lead to a much larger conflict beyond its current geographic, political and economic scope. If such escalation should occur, supply chain, trade routes and markets currently served by the Company could be adversely affected and other risks discussed in this Form 10-K may be exacerbated. In addition, a further escalation could disrupt the supply of oil and natural gas in Europe, impacting our ability to operate our European manufacturing facilities, which, in turn, could materially adversely affect the Company’s business operations and financial performance.

Our products are sold in many countries around the world. Thus, a portion of our revenues (approximately $425,478,000$525,118,000 in our fiscal year ended March 31, 20252026) are generated in foreign currencies, including principally the Euro, the Japanese Yen, the British Pound, the Canadian Dollar, the South African Rand, the Brazilian Real, the Mexican Peso, and the Chinese Yuan, and while much of the costs incurred to generate those revenues are incurred in the same currency, a portion is incurred in other currencies. Since our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, a currency translation impact on our earnings. Currency fluctuations may impact our financial performance in the future.

Our Amended and Restated RevolvingNew Credit Facility contains a financial leverage covenant, which will only be tested if anyoutstanding extensions of credit (other than letters of credit) are outstandingborrowings under the Amended and RestatedNew Revolving CreditFacility exceeds 30% of the aggregate amount of all commitments under the New Revolving Facility at the end of any fiscal quarter, 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 bankNew creditCredit facilities.Facilities. Other material adverse changes in our business could also cause us to be in default of our debt covenants. Any breach of any such covenants or restrictions would result in a default under such agreement that could result in our being unable to borrow under our bankNew creditRevolving facilitiesFacility and would permit theour lenders to declare all borrowings under such agreement to be immediately due and payable and, through cross-default provisions, could entitle other lenders and note holder to accelerate their loans toor other indebtedness owed by us. In such an event, the Company would need to modify or restructure all or a portion of its indebtedness. Depending on prevailing economic conditions at the time, the Company might find it difficult to modify or restructure the debt on attractive terms, or at all.

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. Increased public awareness and concern regarding climate change and other ESG matters at numerous levels of government in various jurisdictions may lead to additional international, national, regional and local legislative and regulatory responses, and compliance with any new rules could be difficult and costly. We have made, and will continue to make, expenditures to comply with such requirements. Violations of, or liabilities under, environmental laws and regulations, or changes in such laws and regulations (such as the imposition of more stringent standards for discharges into the environment), could result in substantial costs to us, including operating costs and capital expenditures, fines and civil and criminal sanctions, third party claims for property damage or personal injury, clean-up costs, or costs relating to the temporary or permanent discontinuance of operations. Certain of our facilities have been in operation for many years, and we have remediated contamination at some of our facilities. Over time, we and other predecessor operators of such facilities have generated, used, handled, and disposed of hazardous and other regulated wastes. Additional environmental liabilities could exist, including clean-up obligations at these locations or other sites at which materials from our operations were disposed, which could result in substantial future expenditures that cannot be currently quantified and which could reduce our profits or have a material adverse effect on our financial condition, operations, or liquidity.

On May 31, 2023, the Company completed its acquisition of montratec GmbH ("montratec"), a leading automation solutions company that designs and develops intelligent automation and transport systems for interlinking industrial production and logistics processes. montratec product offerings compliment the previous acquisitions of both Dorner and Garvey, and these acquisitions are collectively expectedhelped to accelerate the Company’s shift to intelligent motion solutions and serve as a platform to expand capabilities in advanced, higher technology automation solutions.

Our principal raw materials and components purchases were approximately $375$428.2 million in fiscal 20252026 (or 59%51% of Cost of productproducts sold) and include steel, consisting of rod, wire, bar, structural, and other forms of steel; electric motors; bearings; gear reducers; castings; steel and aluminum enclosures and wire harnesses; electro-mechanical components; and standard variable drives and controls. These commodities are all available from multiple sources. We purchase most of these raw materials and components from a limited number of strategic and preferred suppliers under agreements which are negotiated on a company-wideCompany-wide basis through our global purchasing group. Currently, as a result of global inflation and tariffs, we are experiencing higher raw material costs and availability issues for select raw materials and components. To date, we have raised prices to our customers to cover these increased raw material costs and are working with our supply base to prioritize shipments and improve availability of key components.

Fiscal 20252026 sales were $963,027,000,$1,193,451,000, aan decreaseincrease of 5.0%,23.9%, or $50,513,000$230,424,000 compared with fiscal 20242025 sales of $1,013,540,000.$963,027,000. FiscalThe 2025Kito salesCrosby wereAcquisition positivelyadded impacted$188,089,000 byto fiscal 2026 sales. In addition, price increases of $12,548,000$21,535,000 asand wellhigher assales $2,655,000volume of incremental$10,151,000 salesfurther fromincreased theour montratecfiscal acquisition.2026 sales. Offsetting these increases were lower sales volumevolumes from our Divested Business of $60,238,000.$13,986,000. The translation of foreign currencycurrencies had ana unfavorablefavorable impact of $5,478,000.$24,635,000.

Selling expenses were $110,043,000$133,579,000 and $105,341,000,$110,043,000, or 11.4%11.2% and 10.4%11.4% of net sales in fiscal years 20252026 and 2024,2025, respectively. Selling expenses increased primarily by $909,000$17,144,000 as a result of the montratecKito acquisition,Crosby $929,000 for net business realignment costs, $891,000 for net factory and warehouse consolidation cost and $802,000 primarily related to trade show and travel costs including the Company's strategic partner conference that was not held in the prior year. The remaining increase is due to higher employee related costs during the year ended March 31, 2025.Acquisition. Foreign currency translation had a $769,000$3,890,000 favorableunfavorable impact on selling expenses in thefiscal year ended March 31, 20252026 General and administrative expenses were $107,249,000$178,325,000 and $106,760,000$107,249,000 or 11.1%14.9% and 10.5%11.1% of net sales in fiscal 20252026 and 2024,2025, respectively. The increase includes $7,803,000$55,243,000 of net deal and integration costs primarily attributable to the Kito Crosby Acquisition and $1,299,000$12,868,000 of incremental expense toincurred recordat aKito reserve against an accounts receivable balanceCrosby for a customer who declared bankruptcy in January 2025. These increases were offset by lower employee related costs of $2,485,000 including lower incentive-based compensation. Additionally, the Company had lower stock based compensation costs of $4,903,000 compared to the prior year and lower net headquarter relocation expenses of $1,686,000.period. Foreign currency translation had a $841,000$1,578,000 favorableunfavorable impact on general and administrative expenses for thefiscal year ended March 31, 2025.2026.

Amortization of intangibles were $29,946,000$48,757,000 and $29,396,000$29,946,000 in fiscal 20252026 and 2024,2025, respectively, with fluctuationthe attributableincrease related to foreignamortization currencyof translation.new intangible assets acquired in the Kito Crosby Acquisition.

Interest and debt expense was $32,426,000$61,145,000 and $37,957,000$32,426,000 in fiscal 20252026 and 2024,2025, respectively. The decreaseincrease is arelated resultto ofhigher ainterest reductionrates, inas well as increased borrowings to finance the Company'sKito longCrosby term debt as a result of accelerated principal payments and lower interest rates.Acquisition.

Investment income of $1,302,000$2,182,000 and $1,759,000,$1,302,000, in fiscal 20252026 and 2024,2025, respectively, related to earnings on marketable securities held in the Company’s wholly owned captive insurance subsidiary and the Company's equity method investment in EMC, described in Note 7 to our March 31, 2025 consolidated financial statements.7.

Other expense was $25,775,000$1,525,000 and $7,597,000$25,775,000 in fiscal 20252026 and fiscal 2024,2025, respectively. The increasedecrease primarily relates to the non-cash settlement charge of $23,634,000 associated with the termination of one of the Company's U.S. pension plans in currentthe prior year ending March 31, 2025 described in Note 1313. ofNo thesuch financialtermination statements.occurred in fiscal 2026.

Income tax expense as a percentage of income from continuing operations before income tax expense was 6.7%(11.1)% and 24.2%6.7% in fiscal 20252026 and 2024,2025, respectively. Typically these percentages vary from the U.S. statutory rate of 21% due to varying effective tax rates at the Company's foreign subsidiaries and the jurisdictional mix of income for these subsidiaries. In fiscal 2026 the rate was decreased by 25 percentage points as the result of the Precision Conveyance reporting unit goodwill impairment which is not deductible (see Note 9). Additionally, nondeductible Kito Crosby acquisition-related costs decreased the rate by 5 percentage points.

Our primary sources of liquidity are funds generated by operating activities and available capacity for borrowings on our $175.0 million revolving credit facility (“Revolver”) maturing May 14, 2026 and our secured asset-based revolving credit facility (“AR Securitization”) maturing June 19, 2026. Our ability to fund our operations, to make planned capital investments, to make scheduled debt payments and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business, and other factors, some of which are beyond our control. Our liquidity as of March 31, 2025 was $240,155,000 comprising cash and cash equivalents of $53,683,000 and $159,583,000 of availability on the Revolver and $26,889,000 of availability on the AR Securitization. We believe that our current resources, together with anticipated cash flows from operations and borrowing capacity under the Revolver2026 Revolving Credit Facility and AR Securitization facilities, will be sufficient to finance our operations, meet our current cash requirements, and fund anticipated capital investments for at least the next 12 months. We may, however, seek additional financing to fund future growth or refinance our existing indebtedness through the debt capital markets, but we cannot be assured that such financing will be available on favorable terms, or at all.

Net cash used for investing activities was $19,891,000$2,457,654,000 and $133,364,000$19,891,000 in fiscal 20252026 and 2024,2025, respectively. The use of cash in fiscal 20252026 primarily consisted of $21,411,000$2,627,389,000 related to the Kito Crosby Acquisition and $17,859,000 in capital expenditures. The mostCompany significantsaw use ofa cash ininflow fiscalfrom 2024investing activities related to thenet Company'sDivestiture purchaseproceeds of montratec$183,976,000 forand $108,145,000.proceeds of $3,257,000 received from sale of two previously closed manufacturing facilities.

Net cash provided for financing activities was $2,653,414,000 in fiscal 2026 compared to net cash used for financing activities wasof $86,747,000 in fiscal 2025 compared to net cash provided by financing activities of $48,201,000 in fiscal 2024.2025. The most significant usessource of cash werewas for$2,590,000,000 $60,670,000in gross proceeds from the issuance of long-term debt and $780,978,000 from the issuance of preferred stock, which was used to fund the Kito Crosby Acquisition as well as to refinance the Company's prior outstanding indebtedness. This was offset by $616,177,000 in debt repayments, $10,000,000$91,004,000 ofin sharesfees repurchasedpaid asto treasury stock duringsecure the year,new adebt $6,711,000 payment to the former owners of montratec for the contingent consideration agreement (refer to Note 3 for additional information)borrowing and $8,042,000$8,037,000 in dividend paymentspayments. Associated cash flows from hedging activities are classified as financing activities in the Statementstatement of Cashcash Flows,flows, which resulted in a net cash inflow of $474,000.$1,644,000.

We believe that our cash on hand, cash flows, and borrowing capacity under our AmendedNew andRevolving Restated Credit AgreementFacility will be sufficient to fund our ongoing operations and debt obligations, and capital expenditures for at least the next twelve months. This belief is dependent upon successful execution of our current business plan and effective working capital utilization. No material restrictions exist in accessing cash held by our non-U.S. subsidiaries. We expect to meet our funding needs with cash provided by our U.S. operations, as well as by repatriating non-U.S. cash. We do not expect to incur significant incremental U.S. taxes as we repatriate funds. As of March 31, 2025,2026, $38,689,000$93,054,000 of cash and cash equivalents were held by foreign subsidiaries.

In addition to keeping our current equipment and plants properly maintained, we are committed to replacing, enhancing and upgrading our property, plant and equipment to support new product development, improve productivity and customer responsiveness, reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet environmental requirements, enhance safety and promote ergonomically correct work stations. Our capital expenditures for fiscal 20252026 and 20242025 were $21,411,000$17,859,000 and $24,813,000,$21,411,000, respectively. Excluded from capital expenditures is $318,000$2,398,000 and $690,000,$318,000, in property, plant and equipment purchases included in accounts payable at March 31, 20252026 and 2024,2025, respectively. We expect capital expenditure spending in fiscal 20262027 to range from $20,000,000$50,000,000 to $30,000,000.$60,000,000 inclusive of the Kito Crosby business.

Our costs are affected by inflation and tariffs in the U.S. economy and, to a lesser extent, in non-U.S. economies including those of Europe, Canada, Mexico, South America, and Asia-Pacific. We do not believe that general inflation hasand tariffs have had a material effect on our results of operations over the periods presented despite rising inflation due to our ability to pass on rising costs through price increases. We are currently experiencing higher raw material, freight, and logistics costs as well as tariffs than we have seen in recent years, which we have been able to recover with pricing actions. In the future, we may not be able to pass on these cost increases to our customers.

We test goodwill at the reporting unit level, which is one level below our operating segment. We identify our reporting units by assessing whether the components of our operating segment constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. We also aggregate components that have similar economic characteristics into single reporting units (for example, similar products and / or services, similar long-term financial results, product processes, classes of customers, or in circumstances where the components share assets or other resources and have other economic interdependencies). WeHistorically, we have had three reporting units, Linear Motion Products (formerly referred to as Duff-Norton), Rest of Products and Precision Conveyance, and have goodwill totaling $9,699,000, $305,110,000,$265,708,000, and $395,998,000,$201,359,000, respectively, at March 31, 2025.2026. montratec,The whichKito wasCrosby acquiredAcquisition completed in February of fiscal 2026 represents a reporting unit holding the remaining balance of the goodwill recorded at March 31, 2026. Kito Crosby goodwill has been evaluated for impairment separately in fiscal 2024,2026 hasas beenpart includedof our procedures to calculate the fair value of its opening balance sheet. We will evaluate the impact of the Kito Crosby on our reporting units in thefiscal Precision2027 Conveyanceas reportingwe unit.continue to integrate its operations.

InThe orderCompany may first elect to perform a qualitative evaluation to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative assessment considers, among other factors, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, changes in management or strategy, and other entity specific events. If, based on the qualitative assessment, the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company elects to bypass the qualitative assessment, the Company performs a quantitative impairment test. The quantitative test compares the estimated fair value of our reporting units with the carrying amount, including goodwill. The Company recognizes an impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value. To perform the quantitative impairment test fortest, the PrecisionCompany Conveyance reporting unit, we useduses the discounted cash flow method to estimate the fair value.value of the reporting units. The discounted cash flow method incorporates various assumptions, the most significant being projected revenue growth rates, EBITDA margins and cash flowsflows, basedthe onterminal internalgrowth forecasts,rate, and the discount raterate. (weighted-averageThe cost of capital). ManagementCompany projects discounted cash flows based on theeach reporting unit's current business, expected developmentsdevelopments, and operational strategies over a seven-year period. In estimating the terminal growth rate,rates, wethe considerCompany ourconsiders its historical and projected results, as well as the economic environment in which theits reporting unitunits operates.operate. The discount rate rates utilized for theeach reporting unit reflectsreflect management’sthe Company's assumptions of marketplace participants’participants' cost of capital and risk assumptions, both specific to the reporting unit and overall in the economy. For its fiscal year 2026 annual goodwill impairment test, the Company elected to bypass the qualitative assessment and performed a quantitative impairment test comparing the carrying amount of each reporting unit with its estimated fair value, except for the Kito Crosby reporting unit due to the proximity of the acquisition date to our annual impairment assessment date..

Testing goodwill for impairment under the quantitative method described above requires us to estimate fair value of theEach reporting unit using significant estimates and judgmental factors. Theunits' compound annual growth rate for revenue duringreflects the firstgrowth seven years of our projections was approximately 9.7%rate for the Precisionmarkets Conveyancewhich reportingthey unit. This reflects the higher expected growth rates on our precision conveyor business compared to our other businesses.serve. The terminal value was calculated assuming a projected growth rate of 3.5% after seven years. This rate reflects our estimate of long-term growth into perpetuity in theeach precisionreporting conveyanceunit's vertical market and as well as expected increases in the consumer price index. The estimated discount rate was determined to be 12.0% for the Precision Conveyance reporting unit. This was estimated based upon an analysis of similar companies and their debt to equity mix, their related volatility and the size of their market capitalization. We also consider any additional risk ofin the Precision Conveyance reporting unit achieving its forecast, and adjust the discount rate applied when determining the reporting unit’s estimated fair value. The quantitative test results indicate that the Precision Conveyance reporting unit is not impaired as its fair value exceeds its book value by 2.6%.

Holding all other assumptions constant, a reduction in the compound annual growth rate for revenue in the first seven years of the model by one percentage point would reduce fair value by $42,700,000.$37,600,000 for Precision Conveyance, $72,077,000 for Rest of Products, and $4,945,000 for Linear Motion. Similarly, a 50 basis point increase in the discount rate would reduce fair value for the Precision Conveyance reporting unit by $35,600,000$25,000,000, the Rest of Products reporting unit by $25,879,000 and athe 25Linear Motion reporting unit by $5,805,000. A 50 basis point reduction in the terminal growth rate would reduce fair value by $15,386,000. Whilefor the Precision Conveyance reporting unit wasby not$13,300,000, determinedthe to be impaired, it may be at riskRest of futureProducts impairmentGroup ifby $15,202,000 and the relatedLinear businessMotion doesGroup notby perform as projected, or if market factors utilized in the impairment analysis deteriorate, including an unfavorable change in the discount rate. We will monitor the Precision Conveyance reporting unit's performance against its forecasts in fiscal 2026 as part of our quarterly analysis of impairment indicators.$1,612,000.

TheColumbus McKinnon Corporation ("Columbus McKinnon" or the "Company") is a leading worldwide designer, manufacturer and marketer of intelligent motion solutions,solutions includingthat motionmove controlthe products,world technologies, automated systemsforward and services,improve thatlives by efficiently and ergonomically move,moving, lift,lifting, positionpositioning and securesecuring materials. Our keyKey products include hoists, crane components, precision conveyors,conveyor actuators,systems, rigging tools, light rail workstations,workstations and digital power and motion control systems. These are highly relevant, professional-grade solutions that solve our customers’ critical material handling requirements.

Founded in 1875, we have grown to our current size and leadership position through organic growth and acquisitions. We developed our leading market position over our 150-year history by emphasizing technological innovation, manufacturing excellence and superior customer service. In accordance with our strategic framework, we are building out our business system ("CMBS") and growth framework to be market-led, customer-centric, and operationally excellent with our people and values at the core. We believe this will transform Columbus McKinnon into a top-tier Intelligentintelligent Motionmotion Solutionssolutions company. We expect our strategy will enhance shareholder value by growing sales and expanding EBITDA margins and return on invested capital ("ROIC").margins.

Our revenue base is geographically diverse with approximately 43% of net sales45% derived from customers outside the U.S. for the ninethree months ended DecemberJune 31,30, 2025.2026. We believe this diversity balances the impact of changes that occur in local economies, as well as benefits the Company by providing access to growing emerging markets. We monitor both U.S. and Eurozone Industrial Capacity Utilization statistics as well as the ISM Production Index as indicators of anticipated demand for our products. In addition, we continue to monitor the potential impact of other global and U.S. trends including,including industrial production, trade tariffs, raw material cost inflation, interest rates, foreign currency exchange rates, and activity of end-user markets around the globe.

InOn fiscalMay 2024,31, 2023, the Company completed its acquisition of montratec GmbH ("montratec"), a leading automation solutions company that designs and develops intelligent automation and transport systems for interlinking industrial production and logistics processes. montratec product offerings complimentcomplement the previous acquisitions of both Dorner and Garvey, and these acquisitions are collectively expectedhelped to accelerate the Company’s shift to intelligent motion solutions and serve as a platform to expand capabilities in advanced, higher technology automation solutions.

Three months ended DecemberJune 31,30, 20252026 and DecemberJune 31,30, 20242025

Net sales in the ninethree months ended DecemberJune 31,30, 20252026 were $755,622,000,$531,461,000, an increase of $39,484,000$295,541,000 or 5.5%125.3% from the ninethree months ended DecemberJune 31,30, 20242025 net sales of $716,138,000.$235,920,000. Net sales were positively impacted by $13,474,000$304,764,000 duerelated to pricethe increases,Kito andCrosby $11,391,000acquisition as well as a $16,061,000 of favorable sales volume.volumes offset by $34,848,000 of sales loss due to the divestiture of the U.S. Power Chain Hoist and Chain Manufacturing Operations. Foreign currency translation favorably impacted sales by $14,619,000$2,438,000 for the ninethree months ended DecemberJune 31,30, 2025.2026.

Selling expenses were $86,430,000$54,689,000 and $82,044,000,$28,531,000, or 11.4%10.3% and 11.5%12.1% of net sales, in the ninethree months ended DecemberJune 31,30, 20252026 and 2024,June 30, 2025, respectively. Selling expenses increased in the period for $26,227,000 related to the Kito Crosby Acquisition. Foreign currency translation had a $2,278,000$445,000 unfavorable impact on selling expenses in the ninethree months ended DecemberJune 31,30, 2025 with the remaining increase attributable to overall increase in sales during the period.2026.

General and administrative expenses were $99,277,000$65,362,000 and $74,043,000,$30,743,000, or 13.1%12.3% and 10.3%13.0% of net sales, infor the ninethree months ended DecemberJune 31,30, 20252026 and 2024,June 30, 2025, respectively. General and administrative expenses increased $24,373,000$23,580,000 as a result of the Kito Crosby AcquisitionAcquisition, higher net integration and higher employee relatedacquisition costs ofand $2,756,000.an Theseincrease increasesin werethe Company's incentive compensation, partially offset by $1,299,000acquisition ofrelated expensecost tosaving record a reserve against an accounts receivable balance for a customer who declared bankruptcy in January of 2025.synergies. Foreign currency translation had an unfavorable impact of $910,000$224,000 on general and administrative expenses in the ninethree months ended DecemberJune 31,30, 2025.2026.

Research and development expenses were $14,044,000$8,541,000 and $17,593,000,$4,821,000, or 1.9%1.6% and 2.5%2.0% of net sales, in both the ninefiscal months ended December 31, 20252027 and 2024,2026 first quarter, respectively. TheKito reductionCrosby incontributed an additional $3,853,000 to research and development expenses is primarily related to reduced labor and benefit costs.expenses.

Amortization of intangibles was $22,940,000$34,808,000 and $22,548,000$7,635,000 in the ninethree months ended DecemberJune 31,30, 20252026 and 2024,June 30, 2025, respectively, with fluctuationsthe increase related to foreignamortization currencyof duringnew intangible assets acquired in the respectiveKito periods.Crosby Acquisition.

Interest and debt expense was $25,757,000$47,610,000 in the ninefirst monthsquarter ended DecemberJune 31,30, 20252026 compared to $24,285,000$8,698,000 in the ninefirst monthsquarter ended DecemberJune 31,30, 2024.2025. The increase is the result of increasing variable interest rates year over year duerelated to borrowings to finance the expirationKito ofCrosby a favorable interest rate swap in February 2025.Acquisition.

Investment income was $1,965,000$1,692,000 in the ninefirst monthsquarter ended DecemberJune 31,30, 20252026 compared to $873,000$1,049,000 in the ninefirst monthsquarter ended DecemberJune 31,30, 2024.2025. Investment income relates to the mark-to-market adjustments on the marketable securities held in the Company’s wholly owned captive insurance subsidiary and the Company's equity method investment in EMC, described in Note 6 of the financial statements.

Cash, cash equivalents, and restricted cash totaled $35,734,000$98,866,000 at DecemberJune 31,30, 2025,2026, aan decreaseincrease of $18,199,000$1,843,000 from the March 31, 20252026 balance of $53,933,000.$97,023,000.

Net cash provided by operating activities was $20,595,000$25,624,000 for the ninethree months ended DecemberJune 31,30, 20252026 compared to net cash providedused byfor operating activities of $10,000,000$18,153,000 for the ninethree months ended DecemberJune 31,30, 2024.2025. NetThe incomenet loss of $8,695,000$88,729,000 alongwas withoffset non-cashby adjustments of $40,858,000$63,779,000 which contributed to cash inflows from operations. The non-cash adjustments included $36,620,000$53,201,000 of depreciation and amortization, $7,779,000 of stock-based compensation and $7,321,000$4,056,000 of non-cash lease expenseexpense, offset$2,696,000 byof $11,472,000stock-based compensation, $2,501,000 of amortization of deferred financing costs and discounts of debt and $2,026,000 of deferred income taxes and related valuation allowances. Changes in working capital which reduceddecreased cash from operations by $22,686,000$6,387,000, asexcluding athe acquisition-related inventory step-up amortization of $55,198,000. This was the result of anincreases increasein accrued expenses of $15,997,000$6,174,000 and a decrease in inventories,trade accounts receivable of $5,508,000, offset by a decrease of $3,616,000$7,954,000 in trade payables, an increase in tradeinventory accounts receivablenet of $3,480,000,acquisition-related step-up amortization of $7,532,000 and an increase in prepaid expenses and other current assets of $403,000, offset by an increase in accrued expenses of $810,000. The increase in inventories relates to purchases made in advance of expected future demand.$2,583,000. Cash provided for operations was also reduced by a decrease of $8,875,000$2,890,000 in other non-current liabilities primarily due to lease payments for the ninethree months ended DecemberJune 31,30, 2025.2026.

Net cash used for investing activities was $6,830,000$5,352,000 for the ninethree months ended DecemberJune 31,30, 20252026 compared to $14,222,000$3,217,000 for the ninethree months ended DecemberJune 31,30, 2024.2025. The use of cash for the ninethree months ended DecemberJune 31,30, 20252026 primarily consisted of $10,347,000$5,668,000 in capital expenditures offset by $3,257,000 of proceeds received from sale of two previously closed manufacturing facilities.expenditures.

Net cash used for financing activities was $30,520,000$21,225,000 and $69,499,000$977,000 for the ninethree months ended DecemberJune 31,30, 20252026 and DecemberJune 31,30, 2024,2025, respectively. The most significant uses of cash in fiscal 2026 were for $21,821,000$18,368,000 of debt repayments and $6,025,000$2,016,000 of dividend payments. Cash flows from hedging activities related to the Company's cross currency swap are classified as financing activities in the StatementStatements of Cash Flows which resulted in a net cash outflow of $1,301,000$274,000 during the ninethree months ended DecemberJune 31,30, 2025.2026.

We believe that our cash on hand, cash flows, and borrowing capacity under our Revolving Credit Facility will be sufficient to fund our ongoing operations and debt obligations, and capital expenditures for at least the next twelve months. This belief is dependent upon successful execution of our current business plan and effective working capital utilization. No material restrictions exist in accessing cash held by our non-U.S. subsidiaries. We expect to meet our funding needs with cash provided by our U.S. operations, as well as by repatriating non-U.S. cash. We do not expect to incur significant incremental U.S. taxes as we repatriate funds. As of DecemberJune 31,30, 2025,2026, $34,314,000$92,794,000 of cash and cash equivalents were held by foreign subsidiaries.

In addition to keeping our current equipment and plants properly maintained, we are committed to replacing, enhancing and upgrading our property, plant and equipment to support new product development, improve productivity and customer responsiveness, reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet environmental requirements, enhance safety and promote ergonomically correct work stations. Consolidated capital expenditures for the ninethree months ended DecemberJune 31,30, 2026 and June 30, 2025 and December 31, 2024 were $10,347,000$5,668,000 and $15,266,000,$3,202,000, respectively. We expect capital expenditure spending in fiscal 20262027 to range from $12,000,000$50,000,000 to $16,000,000.$60,000,000 inclusive of the Kito Crosby business.

We test goodwill at the reporting unit level, which is one level below our operating segment. We identify our reporting units by assessing whether the components of our operating segment constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. We also aggregate components that have similar economic characteristics into single reporting units (for example, similar products and / or services, similar long-term financial results, product processes, classes of customers, etc.). We have threefour reporting units: the Linear Motion Products reporting unit, the Rest of Products reporting unit, and the Precision Conveyance reporting unit,unit and Kito Crosby reporting unit which have goodwill totaling $9,699,000, $320,083,000,$263,398,000, $201,357,000, and $401,764,000,$946,098,000, respectively, as of DecemberJune 31,30, 2025.2026. In February 2026, the Company completed its acquisition of Kito Crosby as described in Note 2. Given its proximity to the Company's goodwill in the prior year, in fiscal 2027 the Company is reassessing its reporting units as the integration of Kito Crosby progresses.

We currently do not believe that it is more likely than not that the fair value of any of our reporting units is less than its applicable carrying value. Additionally, we currently do not believe that we have any significant impairment indicators.indicators that could materially impact the financial statements. However, if the projected long-term revenue growth rates, profit margins, or terminal growth rates are significantly lower, and /or the estimated weighted-average cost of capital is higher, future testing may indicate impairment of one or more of the Company’s reporting units and, as a result, the related goodwill may be impaired.

Information regarding the effects of new accounting pronouncements is included in Note 17 to the accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.