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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 2002
Commission file number 0-27618
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COLUMBUS McKINNON CORPORATION
(Exact name of Registrant as specified in its charter)
New York 16-0547600
(State of Incorporation) (I.R.S. Employer Identification Number)
140 John James Audubon Parkway
Amherst, New York 14228-1197
(Address of principal executive offices, including zip code)
(716) 689-5400
(Registrant's telephone number, including area code)
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Securities pursuant to section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value (and rights attached thereto)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [X].
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as of May 31, 2002 was $115,345,490.
The number of shares of the Registrant's common stock outstanding as
of May 31, 2002 was: 14,895,172 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's proxy statement for its 2002 Annual
Meeting of Shareholders to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after the end of the
Registrant's fiscal year ended March 31, 2002 are incorporated by reference into
Part III of this report.
COLUMBUS McKINNON CORPORATION
2002 Annual Report on Form 10-K
This annual report contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors that could
cause our actual results to differ materially from the results expressed or
implied by such statements, including general economic and business conditions,
conditions affecting the industries served by us and our subsidiaries,
conditions affecting our customers and suppliers, competitor responses to the
our products and services, the overall market acceptance of such products and
services, the integration of acquisitions and other factors set forth herein
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Factors Affecting Our Operating Results." We use words like
"will," "may," "should," "plan," "believe," "expect," "anticipate," "intend,"
"future" and other similar expressions to identify forward looking statements.
These forward looking statements speak only as of their respective dates and we
do not undertake and specifically decline any obligation to publicly release the
results of any revisions to these forward-looking statements that may be made to
reflect any future events or circumstances after the date of such statements or
to reflect the occurrence of anticipated or unanticipated. Our actual operating
results could differ materially from those predicted in these forward-looking
statements, and any other events anticipated in the forward looking statements
may not actually occur.
PART I
Item 1. Business.
- ------- ---------
General
We are a leading manufacturer and marketer of hoists, cranes, chain and
component parts serving a wide variety of commercial and industrial end markets.
Our products are used to efficiently and ergonomically move, lift, position or
secure objects and loads. We are the domestic market leader in hoists, our
principal line of products, which we believe provides us with a strategic
advantage in selling our other products. We have achieved this leadership
position through strategic acquisitions, our extensive and well-established
distribution channels and our commitment to product innovation and quality. We
have one of the most comprehensive product offerings in the industry and we
believe we have more overhead hoists in use in North America than all of our
competitors combined. Our brand names, including CM, Coffing, Duff-Norton,
Shaw-Box and Yale, are among the most recognized and well-respected in our
marketplace.
The Building of Our Business
Founded in 1875, we have grown to our current size and leadership position
largely as the result of 14 businesses we acquired since February 1994. These
acquisitions have significantly broadened our product lines and services and
expanded our geographic, end-user market and our customer base. Our senior
management has substantial experience in the acquisition and integration of
businesses, aggressive cost management, efficient manufacturing techniques and
global operations, all of which are critical to our long-term growth strategy.
We have a proven track record of acquiring complementary businesses and product
lines, integrating their activities into our organization, and aggressively
managing their cost structures to improve operating efficiencies. The history of
our Products and Solutions acquisitions since 1994 is outlined below (purchase
price in millions):
Date of
Acquisition Acquired Company Purchase Price Products/Services
- ----------- ---------------- -------------- -----------------
April 1999 Washington Equipment Company $ 6.4 Overhead cranes
March 1999 GL International (1) 20.6 Overhead cranes
January 1999 Camlok/Tigrip 10.6 Plate clamps and crane weighers
December 1998 Gautier 2.9 Rotary unions and swivel joints
August 1998 Abell-Howe Crane 7.0 Overhead cranes
March 1998 ASI (2) 155.0 Design and manufacture of custom conveyor
systems
January 1998 Univeyor 15.0 Design and manufacture of powered roller conveyor systems
December 1996 Lister 7.0 Cement kiln, anchor and buoy chain
October 1996 Yale (3) 270.0 Hoists, scissor lift tables, actuators, jacks
and rotary unions
November 1995 Lift-Tech 63.0 Hoists
October 1995 Endor 2.0 Hoists
January 1995 Cady Lifters 0.8 Below-the-hook lifters
December 1994 Conco 0.8 Operator controlled manipulators
February 1994 Durbin-Durco 2.4 Load securing equipment and attachments
- ----------------------
(1) In January 2002, we sold Handling Systems & Conveyors, Inc., a subsidiary
of GL International.
(2) In May 2002, we sold substantially all of the assets of Automatic
Systems, Inc. ("ASI").
(3) In August 1998, we sold the Mechanical Products division of Yale.
Our Position in the Industry
The U.S. material handling industry is generally divided into the
following sectors:
o overhead material handling and lifting devices;
o continuous materials movement;
o wheeled handling devices; o pallets, containers and packaging;
o storage equipment and shop furniture; o automation systems
and robots; and
o services and unbundled software.
The breadth of our products and services enable us to participate in each
of these sectors, except for pallets, containers and packaging and storage
equipment and shop furniture. This diversification, together with our extensive
and varied distribution channels, minimizes our dependence on any particular
product, market or customer. We believe that none of our competitors offers the
variety of products or services in the markets we serve.
We believe that the demand for our products and services will increase in
the future as a result of several favorable trends. These trends include:
o Productivity Enhancement. In recent years employers have responded to
competitive pressures by seeking to maximize productivity and efficiency. Our
hoists and other lifting and positioning products allow loads to be lifted and
placed quickly, precisely, with little effort and fewer people, thereby
increasing productivity and reducing cycle time.
o Safety Regulations and Concerns. Driven by federal and state workplace
safety regulations such as the Occupational Safety and Health Act and the
Americans with Disabilities Act, and by the general competitive need to reduce
costs such as health insurance premiums and workers' compensation expenses,
employers seek safer ways to lift and position loads. Our lifting and
positioning products enable these tasks to be performed with reduced risk of
personal injury.
o Consolidation of Suppliers. In an effort to reduce costs and increase
productivity, our customers and end-users are increasingly consolidating their
suppliers. We believe that our competitive strengths will enable us to benefit
from this consolidation and enhance our market share.
o Outsourcing of Material Handling Project Design and Management. More of
our customers and end-users are outsourcing non-core business functions to
improve productivity and cost efficiency. This has created opportunities for us
to assume the project design, management and implementation responsibilities for
both workstation and facility-wide material handling systems.
o Workforce Diversity. The percentages of women, disabled and older persons
in the work force and the tasks they perform are continuing to increase. Our
products enable many workplace tasks to be performed safely, efficiently and
with less physical stress. We believe that increasing diversity in the workforce
will continue to increase demand for our products.
Our Competitive Strengths
o Comprehensive Product Line and Strong Brand Name Recognition. We believe
we offer the most
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comprehensive product lines in the markets we serve. The breadth of product
lines enables us to provide a "one-stop shop" to many of our distributors who
are looking to consolidate their suppliers. In addition, our brand names,
including Big Orange, Budgit, Chester, CM, Coffing, Cyclone, Duff-Norton,
Hammerlok, Herc-Alloy, Little Mule, Lodestar, Puller, Shaw-Box, Valustar and
Yale, are among the most recognized and respected in the industry. We believe
that our strong brand name recognition has created customer loyalty and helps us
maintain existing business, as well as capture additional business.
o Leading Market Position and Reputation. We are the largest manufacturer
of hoists, alloy and high strength carbon steel chain and operator-controlled
manipulators in North America. We have developed our leading market position
over our 125-year history by emphasizing technological innovation, manufacturing
excellence and superior after-sale service. Over 60% of our domestic net sales
in fiscal 2002 were from product categories in which we that we believe we hold
the leading market share. We believe that the strength of our established
products and brands and our leading market position provide us with significant
competitive advantages, including preferred supplier status with a majority of
our largest customers. Our large installed base of products also provides us
with a significant competitive advantage in selling our products to existing
customers as well as providing repair and replacement parts.
o Low-Cost Manufacturing Capability. We believe we are a low-cost
manufacturer and we will continue to consolidate our manufacturing operations
and reduce our manufacturing costs through the following initiatives:
- Rationalization and Consolidation. In fiscal 2002, we closed five
manufacturing plants and one warehouse, consolidated a number of
similar product lines and standardized certain component parts.
We have identified five additional manufacturing facilities for
consolidation within the next 12 months.
- Lean Manufacturing. In fiscal 2002, we instituted Lean
Manufacturing at 13 of our facilities, resulting in substantial
inventory reductions, a significant decline in required
manufacturing floor area, decreased product lead time and
improved productivity.
- Purchasing Council. We continue to leverage our company-wide
purchasing power through our Purchasing Council to reduce our
costs.
- Vertical Integration. We manufacture many of the parts and
components used in our manufacture of hoists and cranes,
resulting in reduced costs.
- International Expansion. Our continued expansion of our
manufacturing facilities in China and Mexico provides us with
another cost efficient platform to manufacture certain of our
products.
o Distribution Channel Diversity and Strength. Our products are sold to
over 20,000 general and specialty distributors and OEMs, as well as to over 100
consumer outlets. We enjoy long-standing relationships with, and are a preferred
provider to, the majority of our largest distributors and industrial buying
groups. Over the past decade, there has been significant consolidation among
distributors of material handling equipment. We have benefited from this
consolidation and have maintained and enhanced our relationships with our
leading distributors, as well as formed new relationships. We believe our
extensive North American distribution channels provide a significant competitive
advantage and allow us to effectively market new product line extensions and
promote cross-selling.
o Strong After-Market Sales and Support. We believe that we retain
customers and attract new customers due to our ongoing commitment to customer
service and satisfaction. We have a large installed base of hoists and chain
that drives our after-market sales for components and repair parts and is a
stable source of higher margin business. We maintain strong relationships with
our customers and provide prompt aftermarket service to end-users of our
products through our authorized network of 13 chain repair stations and over 350
hoist service and repair stations.
o Experienced Management Team. Our senior management team provides a depth
and continuity of experience in the material handling industry, with our top six
executives possessing an average of over 19 years of experience with us. Our
management has experience in aggressive cost management, efficient manufacturing
3
techniques, acquiring and integrating businesses and global operations, all of
which are critical to our long-term growth.
Our Strategy
o Increase Our Domestic Organic Growth. We intend to use our completive
advantages to increase our domestic and international market share across all of
our product lines through the following initiatives:
- Leverage Strong Competitive Position. Our large diversified customer
base, our extensive distribution channels and our close relationship
with our distributors provide us with insights into customer
preferences and product requirements that allow us to anticipate and
address the future needs of end-users. Additionally, we continue to
implement our CraneMart(TM)initiative launched in 1999 to build an
integrated North American network of independent and company-owned
crane builders. CraneMart(TM)participants purchase our products and
parts for incorporation in their products as well as for
distribution and are provided a full range of services, including
best pricing, parts distribution rights, technical support and
shared resources.
- Introduce New Products. We continue to expand our business by
developing new material handling products and services and expand
the breadth of our product lines to address customer needs. Recent
new product introductions include:
o global wire rope hoists used in overhead cranes;
o lifting clamps used for lifting large plates of steel;
o self-standing or ceiling-mounted, light-rail crane systems used in
work station material handling applications;
o top-running and underhung end-trucks used in the crane builder
industry;
o hand pallet trucks used in warehouse and factory applications; and
o high speed, light-weight, mini-load cranes used in warehouse
applications.
o Increase Our Penetration of International Markets. Our international
sales comprised 29.4% of our net sales in fiscal 2002 and grew at a compounded
annual rate of 26.5%, from $34.3 million in fiscal 1996 to $140.9 million in
fiscal 2002. We sell to distributors in approximately 50 countries and have
manufacturing facilities in Canada, Mexico, Germany, the United Kingdom,
Denmark, France and China. In addition to new product introductions, we intend
to increase international sales and enhance margins by:
- Expanding Our Sales and Service Presence. We are expanding our
sales and service presence in the major market areas of Europe,
Asia and South America. We have recently added four new sales
offices and warehouse facilities in Europe, one in Brazil and one
in Mexico.
- Increasing Sales and Improving Margins. We intend to increase our
sales and improve our margins by manufacturing and exporting a
broader array of high quality, low-cost products and components
from our facilities in Mexico and China. We have recently
constructed a third manufacturing facility in China and are
expanding our manufacturing capacity and distribution channels in
Mexico.
o Reduce Our Operating Costs. Our objective is to remain a low-cost
producer. We continuously seek ways to reduce our operating costs and increase
our manufacturing productivity. In furtherance of this objective, we have
undertaken the following:
- Rationalization of Facilities. Consolidating acquired operations is an
integral part of our acquisition strategy. We closed five manufacturing
plants and one warehouse in fiscal 2002 and have identified five
additional facilities for consolidation within the next 12 months. When
completed, we believe these consolidations will result in annual fixed
cost reductions of approximately $20 million.
- Implementation of Lean Manufacturing. Through fiscal 2002, we
have instituted Lean Manufacturing at 13 of our major
facilities. In fiscal 2002, largely as a result of our Lean
4
Manufacturing initiatives, we recaptured approximately 185,000
square feet of manufacturing floor area and consolidated an
additional 345,000 square feet of closed facilities. Additionally,
we reduced inventories by approximately $19 million, improved
productivity and achieved significant reductions in product lead
time. We expect to introduce Lean Manufacturing in five additional
facilities in fiscal 2003. Our Lean Manufacturing initiative
complements our strategy of integrating and consolidating our
manufacturing facilities.
- Leverage Purchasing Power. The Columbus McKinnon Purchasing Council
was formed in fiscal 1998 to centralize and leverage our overall
purchasing power, which has grown through acquisitions. This has
resulted in annualized savings of approximately $16.3 million since
its inception, including approximately $3.8 million in fiscal 2002.
o Pursue Selective Acquisitions. We are negotiating and have received a
term sheet regarding a new bank credit agreement to replace our existing bank
credit agreement which terminates on March 31, 2003. The closing of our new
credit agreement is one of the first steps in our plan to improve our capital
structure. This, together with our other strategies, will better position us to
seek accretive and complementary acquisitions at some time in the future.
Our Segments
We currently report our operations in two business segments, Products and
Solutions.
Our Products segment designs, manufactures and distributes a broad range
of material handling products for various industrial applications and for
consumer use. Products in this segment include a wide variety of electric,
lever, hand and air-powered hoists; hoist trolleys; industrial crane systems
such as bridge, gantry and jib cranes; alloy, carbon steel and kiln chain;
closed-die forged attachments, such as hooks, shackles, logging tools and
loadbinders; industrial components, such as mechanical and electromechanical
actuators, mechanical jacks and rotary unions; and below-the-hook special
purpose lifters. These products are typically manufactured for stock and are
sold through a variety of commercial distributors and to end-users. The
end-users of our products are in manufacturing plants, power utility facilities
and warehouses. Some of our products have farming, mining and logging
applications, and we serve a niche market for large entertainment productions.
We also sell some of our products to the consumer market through a variety of
retailers and wholesalers.
Our Solutions segment is engaged primarily in the design, fabrication and
installation of integrated workstation and facility-wide material handling
systems and in the design and manufacture of operator-controlled manipulators
and tire shredders. This segment also includes our LICO steel erection
operation. The products and services of this segment are highly engineered, are
typically built to order and are primarily sold directly to end-users for
specific applications in a variety of industries.
Note 18 to our consolidated financial statements included elsewhere in
this annual report provides information related to our business segments in
accordance with generally accepted accounting principles. Summary information
concerning our business segments for fiscal 2000, 2001 and 2002 is set forth
below.
Fiscal Years Ended March 31,
----------------------------------------------------------------------------------
2000 2001 2002
---- ---- ----
(Dollars in millions)
% of Total % of Total % of Total
---------- ---------- ----------
Amount Sales Amount Sales Amount Sales
------ ----- ------ ----- ------ -----
Net Sales
Products....................... $511.3 83.9 $478.9 81.7 $404.7 84.3
Solutions...................... 97.9 16.1 107.3 18.3 75.3 15.7
---- ----- ----
Total..................... $609.2 $586.2 $480.0
====== ====== ======
5
% of % of
---- -----
Amount % of Segment Segment Segment
------ ------------- ------- -------
Sales Amount Sales Amount Sales
----- ------ ----- ------ -----
Income from Operations before
Restructuring Charges and
Amortization
Products $75.4 14.7 $73.1 15.3 $47.0 11.6
Solutions 7.8 8.0 3.8 3.5 1.7 2.2
--- --- --- --- --- ---
Total $83.2 13.7 $76.9 13.1 $48.7 10.1
===== ==== ===== ==== ===== ====
Products Segment
Products
Our Products segment primarily designs, manufactures and distributes a
broad range of material handling, lifting and positioning products for various
applications in industry and for consumer use. These products are typically
manufactured for stock and are sold through a variety of distributors.
Approximately 75% of our Products segment net sales is derived from the sale of
products that we sell at a unit price of less than $5,000. In fiscal 2002, net
sales of the Products segment were approximately $404.7 million or approximately
84.3% of our net sales, from continuing operations, of which approximately
$293.2 million, or 72.4%, were domestic and $111.5 million, or 27.6%, were
international. The following table sets forth certain sales data for the
products of our Products segment, expressed as a percentage of net sales of this
segment for fiscal 2001 and 2002:
Year Ended March 31,
----------------------------------
2001 2002
---- ----
Hoists 53% 52%
Chain and forged attachments 25 25
Industrial cranes 14 15
Industrial components 8 8
-- --
100% 100%
==== ====
o Hoists. We manufacture a variety of electric chain hoists, electric wire
rope hoists, hand-operated hoists, lever tools, air-powered balancers and
hoists. Load capacities for our hoist product lines range from one-eighth
of a ton to 100 tons. These products are sold under our Budgit, Chester,
CM, Coffing, Shaw-Box, Yale and other recognized trademarks. Our hoists are
sold for use in a variety of general industrial applications, as well as
for use in the entertainment, consumer, rental, health care and other
markets. We also supply hoist trolleys, driven manually or by electric
motors, for the industrial, consumer and OEM markets.
We offer a line of custom-designed, below-the-hook tooling, clamps,
pallet trucks and textile strappings. Below-the-hook tooling and clamps are
specialized lifting apparatus used in a variety of lifting activities
performed in conjunction with hoist and chain applications. Pallet trucks
are manual devices used for across-the-floor material handling, frequently
in warehouse settings. Textile strappings are below-the-hook attachments,
frequently used in conjunction with hoists.
o Chain and Forged Attachments. We manufacture alloy and carbon steel chain
for various industrial and consumer applications. Federal regulations
require the use of alloy chain, which we first developed, for overhead
lifting applications because of its strength and wear characteristics. A
line of our alloy chain is sold under the Herc-Alloy brand name for use in
overhead lifting, pulling and restraining applications. In addition, we
also sell specialized load chain for use in hoists, as well as three grades
and multiple sizes of carbon steel welded-link chain for various load
securing and other non-overhead lifting applications. We also manufacture
kiln chain sold primarily to the cement manufacturing market and anchor and
buoy chain sold primarily to the United States and Canadian governments.
We also produce a complete line of alloy and carbon steel closed-die
forged attachments, including hooks, shackles, hitch pins, master links and
loadbinders. These forged attachments are used in all chain and wire rope
rigging applications in a variety of industries, including transportation,
mining, railroad, construction, marine, logging, petrochemical and
agriculture.
In addition, we manufacture carbon steel forged and stamped products,
such as loadbinders, logging tools and other securing devices, for sale to
the industrial, consumer and logging markets through industrial
distributors, hardware distributors, mass merchandiser outlets and OEMs.
6
o Industrial Cranes. We entered the crane manufacturing market through our
August 1998 acquisition of Abell-Howe, a Chicago-based regional
manufacturer of jib and overhead bridge cranes. Our March 1999 acquisition
of GL International, which included the Gaffey and Larco brands, and our
April 1999 acquisition of Washington Equipment Company established us as a
significant participant in the crane building and servicing markets. Crane
builders represent a specialized distribution channel for electric wire
rope hoists and other crane components. We have also established a presence
in Monterrey, Mexico to provide that growing geographic market with crane
systems and service.
o Industrial Components. Through our Duff-Norton division, we design and
manufacture industrial components such as mechanical and electromechanical
actuators, mechanical jacks and rotary unions for sale domestically and
abroad. Actuators are linear motion devices used in a variety of
industries, including the paper, steel and aerospace industries. Mechanical
jacks are heavy duty lifting devices used in the repair and maintenance of
railroad equipment, locomotives and industrial machinery. Rotary unions are
devices that transfer a liquid or gas from a fixed pipe or hose to a
rotating drum, cylinder or other device. These unions are unique in that
they connect a moving or rotating component of a machine to fixed plumbing
without major spillage or leakage. Rotary unions are used in a variety of
industries including pulp and paper, printing, textile and fabric
manufacturing, rubber and plastic.
Sales and Marketing
Our sales and marketing efforts in support of our Products segment consist
of the following programs:
o Factory-Direct Field Sales and Customer Service. We sell our products
through our direct sales forces of more than 140 salespersons and through
independent sales agents worldwide. Our sales are further supported by our
more than 250 company-trained customer service correspondents and sales
application engineers. We compensate our sales force through a combination
of base salary and a commission plan based on top line sales and a
pre-established sales quota.
o Product Advertising. We promote our products by regular advertising in
leading trade journals as well as producing and distributing high quality
information catalogs. We support our product distribution by running
cooperative "pull-through" advertising in over 15 vertical trade magazines
and directories directed at theatrical, international, consumer and crane
builder markets. We run targeted advertisements for chain, hoists, forged
attachments, scissor lift tables, actuators, hydraulic jacks, hardware
programs, cranes and light-rail systems.
o Trade Show Participation. Trade shows are central to the promotion of our
products, and we participate in more than 40 regional, national and
international trade shows each year. Shows in which we participate range
from global events held in Germany to local "markets" and "open houses"
organized by individual hardware and industrial distributors. We also
attend specialty shows for the entertainment, rental and safety markets, as
well as general purpose industrial and consumer hardware shows. In fiscal
2002, we participated in trade shows in the U.S., Canada, France, Mexico,
Germany, England, Brazil, Australia, China and Spain.
o Industry Association Membership and Participation. As a recognized industry
leader, we have a long history of work and participation in a variety of
industry associations. Our management is directly involved at the officer
and director levels of numerous industry associations including the
following: ISMA (Industrial Supply Manufacturers Association), AWRF
(Associated Wire Rope Fabricators), PTDA (Power Transmission and
Distributors Association), SCRA (Specialty Carriers and Riggers
Association), WSTDA (Web Sling and Tie Down Association), MHI (Material
Handling Institute), HMI (Hoist Manufacturers Institute), CMAA (Crane
Manufacturers Association of America), ESTA (Entertainment Services and
Technology Association), NACM (National Association of Chain
Manufacturers), AHMA (American Hardware Manufacturers Association)
and ARA (American Rental Association).
o Product Standards and Safety Training Classes. We conduct on-site training
programs worldwide for distributors and end-users to promote and reinforce
the attributes of our products and their safe use and operation in various
material handling applications.
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o Web Site. Our web site at www.cmworks.com currently includes
electronic catalogs of Columbus McKinnon hoist and chain products and
list prices. Current and potential customers can browse through our
diverse product offering or search for specific products by name or
classification code and obtain technical product specifications. In
addition, we currently sponsor an additional 19 brand specific web
sites and have begun a pilot program to sell hand pallet trucks on one
of these sites. We continue to add additional product catalogs,
maintenance manuals, advertisements and customer service information
on our web sites. Many of the web sites allow distributors to search
for personalized pricing information, order status and product serial
number data.
Distribution and Markets
The distribution channels for the Products segment include a variety of
commercial distributors. In addition, the Products segment sells overhead
bridge, jib and gantry cranes, as well as certain forgings and chain assemblies,
directly to end-users. We also sell to the consumer market through wholesalers.
Our products are sold through the following distribution channels:
o General Distribution Channels. Our general distribution channels
consist of:
- Industrial distributors that serve local or regional industrial markets
and sell a variety of products for maintenance, repair, operating and
production, or MROP, applications through their own direct sales force.
- Rigging shops that are distributors with expertise in rigging, lifting,
positioning and load securing. Most rigging shops assemble and distribute chain,
wire rope and synthetic slings and distribute off-the-shelf hoists and
attachments, chain slings and other off-the-shelf products.
- Crane builders that design, build, install and service overhead crane and
light-rail systems for general industry and also sell a wide variety of hoists
and lifting attachments. We sell electric wire rope hoists and chain hoists as
well as crane components, such as end trucks, trolleys, drives and
electrification systems to crane builders
o Crane End-Users. We sell overhead bridge, jib and gantry cranes, parts
and service to end-users through our wholly owned crane builders within the
CraneMart(TM) network. Our wholly owned crane builders (Abell-Howe, Gaffey,
Larco and Washington Equipment) design, manufacture, install and service a
variety of cranes with capacities up to 100 tons.
o Specialty Distribution Channels. Our specialty distribution channels
consist of:
- Catalog houses that market a variety of MROP supplies, including
material handling products, either exclusively through large,
nationally distributed catalogs, or through a combination of catalog
and internet sales and a field sales force. More recently, catalog
houses, particularly W.W. Grainger, Inc., are pursuing e-commerce
through their web sites. The customer base served by catalog houses,
which traditionally included smaller industrial companies and
consumers, has grown to include large industrial accounts and
integrated suppliers.
- Material handling specialists and integrators that design and assemble
systems incorporating hoists, overhead rail systems, trolleys, scissor
lift tables, manipulators, air balancers, jib arms and other material
handling products to provide end-users with solutions to their
material handling problems.
- Entertainment equipment distributors that design, supply and install a
variety of material handling and rigging equipment for concerts,
theaters, ice shows, sports arenas, convention centers and discos.
o Service-After-Sale Distribution Channel. Service-after-sale
distributors include our authorized network of 13 chain repair service
stations and over 350 hoist service and repair stations. This service
network is designed for easy parts and service access for our large
installed base of hoists and related equipment in North America.
o OEM/Government Distribution Channels. This channel consists of:
8
- OEMs that supply various component parts directly to other industrial
manufacturers as well as private branding and packaging of our
traditional products for material handling, lifting, positioning and
special purpose applications.
- Government agencies, including the United States and Canadian Navies
and Coast Guards, that purchase primarily anchor, buoy and mooring
chain and forged attachments.
o Consumer Distribution. Consumer sales, consisting primarily of carbon
steel chain and assemblies, forged attachments and hand powered
hoists, are made through five distribution channels: two-step
wholesale hardware distribution (such as Distribution America and Ace
Hardware); one-step distribution (such as Canadian Tire); trucking and
transportation distributors (such as U-Haul and Fruehauf); farm
hardware distributors (such as John Deere and Tractor Supply Company);
and rental outlets (such as Hertz).
o International Distribution. We distribute virtually all of our products
in over 50 countries on six continents through a variety of distribution
channels.
Customer Service and Training
We maintain customer service departments staffed by trained personnel for
all of our Products segment sales divisions, and regularly schedule product and
service training schools for all customer service representatives and field
sales personnel. Training programs for distribution and service station
personnel, as well as for end-users, are scheduled on a regular basis at most of
our facilities and in the field. We have more than 350 service stations
worldwide that provide local and regional repair, warranty and general service
work for distributors and end-users. End-user trainees attending our various
programs include representatives of General Motors, DuPont, 3M, GTE, Cummins
Engine, General Electric and many other industrial organizations.
We also provide, in multiple languages, a variety of collateral material
in video, cassette, CD-ROM, slide and print format addressing relevant material
handling topics such as the care, use and inspection of chains and hoists, and
overhead lifting and positioning safety. In addition, we sponsor advisory boards
made up of representatives of our primary distributors and service-after-sale
network members who are invited to participate in discussions focused on
improving products and service. These boards enable us and our primary
distributors to exchange product and market information relevant to industry
trends.
Backlog
Our Products segment backlog of orders at March 31, 2002 was approximately
$41.3 million compared to approximately $44.3 million at March 31, 2001. Our
orders for standard products are generally shipped within one week. Orders for
products that are manufactured to customers' specifications are generally
shipped within four to twelve weeks. We do not believe that the amount of our
Products segment backlog of orders is a reliable indication of our future sales.
Competition
Despite recent consolidation, the material handling industry remains
highly fragmented. We face competition from a wide range of regional, national
and international manufacturers in both domestic and international markets. In
addition, we often compete with individual operating units of larger, highly
diversified companies.
The principal competitive factors affecting our Products segment include
product performance, functionality, price, brand, reputation, reliability and
availability, as well as customer service and support. Other important factors
include distributor relationships, territory coverage and the ability to
service the distributor with on-time delivery and repair services.
Our Products segment competes in hoists with Siemens Dematic,
Kito-Harrington, Ingersoll-Rand, KCI Konecranes and Morris Material Handling; in
chain with Cooper Industries, Peerless Chain Company and American Chain and
Cable Company; in forged attachments with the Crosby Group and Cooper
Industries; in crane building with Siemens Dematic, KCI Konecranes, Morris
Material Handling and R. Stahl; and in industrial components with Deublin,
Joyce-Dayton and Nook Industries.
9
Solutions Segment
The Solutions segment is engaged primarily in the design, fabrication and
installation of integrated work station and facility-wide material handling
systems and in the manufacture and distribution of operator-controlled
manipulators, scissor lift tables and tire shredders. Net sales of the Solutions
segment in fiscal 2002 were approximately $75.3 million, or approximately 15.7%
of our total net sales from continuing operations, of which approximately $46.0
million, or 61.1%, were domestic and approximately $29.3 million, or 38.9% were
international. The following table sets forth certain sales data for the
products and services of our Solutions segment, expressed as a percentage of
this segment's net sales for fiscal 2001 and 2002:
Fiscal Years Ended March 31,
---------------------------------------------
2001 2002
---- ----
Integrated material handling conveyor systems 33% 40%
Steel erection 36 24
Manipulators and light-rail systems 14 17
Scissor lift tables 11 11
Other 6 8
-- --
100% 100%
==== ====
Products and Services
o Integrated Material Handling Conveyor Systems. Conveyors are the most
important component of a material handling system, reflecting their
high functionality for transporting material throughout manufacturing
and warehouse facilities. We specialize in designing
computer-controlled and automated powered roller conveyors for use in
warehouse operations and distribution systems.
o Steel Erection. Through our LICO Steel operation, we erect structural
steel in commercial buildings. We primarily act as a subcontractor in
the construction of manufacturing plants and warehouse facilities in
the Kansas City area.
o Manipulators and Light-Rail Systems. We manufacture two lines of
sophisticated operator-controlled manipulators under the names
Positech and Conco. These products are articulated mechanical arms
with specialized end tooling designed to perform lifting, rotating,
turning, tilting, reaching and positioning tasks in a manufacturing
process. We can offer custom-designed hydraulic, pneumatic, and
electric manipulators utilizing various models and size configurations
for a wide variety of applications where the user requires multi-axial
movement in a harsh or repetitive environment. In fiscal 2001, we
introduced light-rail systems that are portable steel overhead beam
configurations used at workstations, from which hoists are frequently
suspended.
o Scissor Lift Tables. Our American Lifts division manufactures powered
scissor lift tables. These products enhance workplace ergonomics and
are sold primarily to customers in the manufacturing, construction,
general industrial and air cargo industries.
Sales and Marketing
The products and services of the Solutions segment are sold primarily to
large sophisticated corporate end-users, including Federal Express, UPS, United
Biscuits, Lego, John Deere, Lowe's and other industrial companies, systems
integrators and distributors. In the sale of our integrated material handling
conveyor systems, we act as a prime contractor with turnkey responsibility or as
a supplier working closely with the customer's general contractor. Sales are
generated by internal sales personnel and rely heavily on engineer-to-engineer
interactions with the customer. The process of generating client contract awards
for integrated conveyor systems generally entails receiving a
request-for-quotation from customers and undergoing a competitive bidding
process. The Solutions segment also sells manipulators, light-rail systems and
scissor lift tables through its internal sales force and through specialized
independent distributors and manufacturers representatives.
Customer Service and Training
10
The Solutions segment offers a wide range of value-added services to
customers including: an engineering review of the customer's processes; an
engineering solution for identified material handling problems; project
management; and custom design, manufacturing and installation services. We also
offer after-sales services including operator training and maintenance. The
typical length of after-sales service varies depending on customer requirements
and supplemental training courses are offered as needed.
Backlog
Revenues from our Solutions segment are generally recognized within one to
six months. Our backlog of orders at March 31, 2002 was approximately $15.0
million compared to approximately $13.5 million at March 31, 2001.
Competition
The principal competitive factors affecting the market for the products
and services of our Solutions segment include application solutions, performance
and price. The process of generating client contract awards for these businesses
generally entails receiving a request-for-quotation from end-users and
undergoing a competitive bidding process. Our Solutions segment competes
primarily with Crisplant, Diafuku, Swisslog, Gorbel and Southworth.
Employees
At March 31, 2002, our continuing operations had 3,074 employees; 2,263 in
the U.S., 224 in Canada, 106 in Mexico and 481 in Europe and Asia. Approximately
800 of our employees are represented under nine separate U.S. or Canadian
collective bargaining agreements which terminate at various times between August
2002 and April 2007. We believe that our relationship with our employees is
good.
Raw Materials and Components
Our principal raw materials and components are steel, consisting of
structural steel, processed steel bar, forging bar steel, steel rod and wire,
steel pipe and tubing and tool steel; electric motors; bearings; and gear
reducers; castings; and electro-mechanical components. These commodities are all
available from multiple sources. We purchase most of these raw materials and
components from a limited number of strategic and preferred suppliers under
long-term agreements which are negotiated on a company-wide basis through our
Purchasing Council to take advantage of volume discounts and to protect us from
price increases. Although the steel industry is cyclical and steel prices can
fluctuate, we have not been significantly impacted in recent years by increases
in steel prices. We estimate the recently enacted U.S. steel tariffs will result
in a 3% increase in our steel raw materials costs. We generally seek to pass on
materials price increases to our customers, although a lag period often exists.
Our ability to pass on these increases is determined by competitive conditions.
Manufacturing
We manufacture approximately 90% of the products we sell. Additionally, we
outsource components and finished goods from an established global network of
suppliers. We regularly upgrade our manufacturing facilities and invest in
tooling, equipment and technology. We have implemented Lean Manufacturing in our
plants which has resulted in inventory reductions, reductions in required
manufacturing floor area, shorter product lead time and increased productivity.
Our manufacturing operations are highly integrated. Although raw materials
and some components such as motors, bearings, gear reducers, castings and
electro-mechanical components, are purchased, our vertical integration enables
us to produce many of the components used in the manufacturing of our products.
We manufacture hoist lifting chain, steelforged gear blanks, lift wheels,
trolley wheels, hooks and other attachments for incorporation into our hoist
products. These products are also sold as spare parts for hoist repair.
Additionally, our hoists are used as components in the manufacture of
crane systems by us and by our end-users. We believe this vertical integration
results in lower production costs, greater manufacturing flexibility and
higher product quality, and reduces our reliance on outside suppliers.
Environmental and Other Governmental Regulation
Like many manufacturing companies, we are subject to various federal,
state and local laws relating to the protection of the environment. To address
the requirements of such laws, we have adopted a corporate environmental
11
protection policy which provides that all of our owned or leased facilities
shall, and all of our employees have the duty to, comply with all applicable
environmental regulatory standards, and we have initiated an environmental
auditing program for our facilities to ensure compliance with such regulatory
standards. We have also established managerial responsibilities and internal
communication channels for dealing with environmental compliance issues that may
arise in the course of our business. Because of the complexity and changing
nature of environmental regulatory standards, it is possible that situations
will arise from time to time requiring us to incur expenditures in order to
ensure environmental regulatory compliance. However, we are not aware of any
environmental condition or any operation at any of our facilities, either
individually or in the aggregate, which would cause expenditures having a
material adverse effect on our results of operations or financial condition and,
accordingly, have not budgeted any material capital expenditures for
environmental compliance for fiscal 2002.
Certain federal and state laws, sometimes referred to as Superfund laws,
require certain companies to remediate sites that are contaminated by hazardous
substances. These laws apply to sites owned or operated by a company, as well as
certain off-site areas for which a company may be jointly and severally liable
with other companies or persons. The required remedial activities are usually
performed in the context of administrative or judicial enforcement proceedings
brought by regulatory authorities. We have been identified by the New York State
Department of Environmental Conservation, or NYSDEC, along with other companies,
as a potentially responsible party, or PRP, at the Frontier Chemical Site in
Pendleton, New York, a site listed on NYSDEC's Registry. From 1958 to 1977, the
Pendleton Site had been operated as a commercial waste treatment and disposal
facility. We sent waste pickling liquor generated at our facility in Tonawanda,
New York, to the Pendleton Site during the period from approximately 1969 to
1977, and we participated with other PRPs in conducting the remediation of the
Pendleton Site under a consent order with NYSDEC. Construction in connection
with the remediation has been completed and this project is currently in its
operations and maintenance phase. As a result of a negotiated cost allocation
among the participating PRPs, we have paid our pro rata share of the remediation
construction costs and accrued our share of the ongoing operations and
maintenance costs. As of March 31, 2002, we have paid approximately $1.0 million
in remediation and ongoing operations and maintenance costs associated with the
Pendleton Site. The participating PRPs have identified and commenced a cost
recovery action against a number of other parties who sent hazardous substances
to the Pendleton Site. If the currently non-participating parties identified by
the participating PRPs pay their pro rata shares of the remediation costs, then
our share of total site remediation costs will decrease. Full settlements have
been reached with 111 of the 113 defendants in the cost recovery action, and
settlements in principle have been reached with the remaining two defendants.
All settlement payments in connection with the Pendleton Site are being held in
a trust account pending a final allocation. We have also entered into a
settlement agreement with one of our insurance carriers in the amount of $0.7
million in connection with the Pendleton Site and have received payment in full
of the settlement amount.
For all of the currently known environmental matters, we have accrued a
total of approximately $0.7 million as of March 31, 2002, which, in our opinion,
is sufficient to deal with such matters. Further, our management believes that
the environmental matters known to, or anticipated by, us should not,
individually or in the aggregate, have a material adverse effect on our
operating results or financial condition. However, there can be no assurance
that potential liabilities and expenditures associated with unknown
environmental matters, unanticipated events, or future compliance with
environmental laws and regulations will not have a material adverse effect on
us.
Our operations are also governed by many other laws and regulations,
including those relating to workplace safety and worker health, principally OSHA
and regulations thereunder. We believe that we are in material compliance with
these laws and regulations and do not believe that future compliance with such
laws and regulations will have a material adverse effect on our operating
results or financial condition.
Item 2. Properties.
- ------- -----------
We maintain our corporate headquarters in Amherst, New York and conduct
our principal manufacturing at the following facilities:
Square Owned or Business
------ -------- --------
Location Type of Facility Footage Leased Segment
-------- ---------------- ------- ------ -------
United States:
- --------------
Muskegon, MI Hoists 500,000 Owned Products
Charlotte, NC Industrial components 250,000 Owned Products
Tonawanda, NY Manipulators, light-rail and forged
products 187,600 Owned Solutions
Wadesboro, NC Hoists 180,000 Owned Products
Lexington, TN Chain 153,200 Owned Products
Forest Park, IL Cranes 116,000 Owned Products
Cedar Rapids, IA Forged attachments 100,000 Owned Products
Reform, AL Stampings 99,800 Owned Products
Eureka, IL Cranes 91,300 Owned Products
Damascus, VA Hoists 87,400 Owned Products
Chattanooga, TN Forged attachments 77,000 Owned Products
Greensburg, IN Scissor lifts 60,000 Owned Solutions
Laurens, IA Manipulators 50,400 Owned Solutions
Claremore, OK Cranes 42,000 Owned Products
Lisbon, OH Hoist manufacturing 37,000 Owned Products
Cleveland, TX Cranes 35,000 Owned Products
Chattanooga, TN Forged attachments 33,000 Owned Products
Sarasota, FL Tire shredders 25,000 Owned Solutions
Blaine, WA Chains 15,800 Owned Products
12
Square Owned or Business
------ -------- --------
Location Type of Facility Footage Leased Segment
-------- ---------------- ------- ------ -------
International:
- -------------
Cobourg, Ontario, Canada Chain and hoists 125,000 Owned Products
Santiago, Tianguistenco,
Mexico Hoists and chain 85,000 Owned Products
Arden, Denmark Project design and conveyors 70,500 Owned Solutions
Velbert, Germany Hoists 56,000 Leased Products
Chester, United Kingdom Plate clamp manufacturing (Camlok) 47,900 Leased Products
Stoney Creek, Ontario, Canada Crane manufacturing 42,400 Owned Products
Hangzhou, China Metal fabrication, textiles and textile 37,000 Leased Products
strappings
Chester, United Kingdom Plate clamps 25,400 Owned Products
Romeny-sur-Marne, France Rotary unions 21,600 Owned Products
Hangzhou, China Textile strappings 20,000 Leased Products
Arden, Denmark Project construction 19,500 Leased Solutions
Vierzon, France Hoists 14,000 Leased Products
Hangzhou, China Hoists and hand pallet trucks 7,200 Leased Products
In addition, we have a total of 32 sales offices, distribution centers and
warehouses. We believe that our properties have been adequately maintained, are
in generally good condition and are suitable for our business as presently
conducted. We also believe our existing facilities provide sufficient production
capacity for our present needs and for our anticipated needs in the foreseeable
future. Upon the expiration of our current leases, we believe that either we
will be able to secure renewal terms or enter into leases for alternative
locations at market terms.
Item 3. Legal Proceedings.
- ------- ------------------
From time to time, we are named a defendant in legal actions arising out of
the normal course of business. We are not a party to any pending legal
proceeding other than ordinary, routine litigation incidental to our business.
We do not believe that any of our pending litigation will have a material impact
on our business. We maintain liability insurance against risks arising out of
the normal course of business. This insurance coverage is obtained through our
wholly-owned insurance subsidiary of which we are the sole policy holder. The
limits of this coverage are $2.0 million per occurrence and $5.0 million
aggregate per year. We obtain additional insurance coverage from independent
insurers in excess of these limits.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
13
Not applicable.
14
PART II
Item 5. Market for the Company's Common Stock and Related Security
- ------- Holder Matters.
----------------------------------------------------------
Our common stock is traded on the Nasdaq National Market under the symbol
"CMCO." As of May 31, 2002, there were 493 holders of record of our common
stock.
We paid quarterly cash dividends on our common stock from 1988 through the
second quarter of fiscal 2002. In January 2002, we announced that we were
indefinitely suspending the payment of cash dividends on our common stock in
order to dedicate our cash resources to the repayment of outstanding
indebtedness. We may reconsider or revise this policy from time to time based
upon conditions then existing, including, without limitation, our earnings,
financial condition, capital requirements or other conditions our Board of
Directors may deem relevant.
The following table sets forth, for the fiscal periods indicated, the high
and low sale prices per share for our common stock as reported on the Nasdaq
National Market and our dividend history.
Price Range
of Dividend
Common Stock Per Share
------------ ----------
High Low
Year Ended March 31, 2000
First Quarter............................... $ 29.00 $ 18.88 $ 0.07
Second Quarter.............................. 25.25 17.12 0.07
Third Quarter............................... 17.44 9.87 0.07
Fourth Quarter.............................. 15.75 10.00 0.07
Year Ended March 31, 2001
First Quarter............................... $ 15.06 $ 12.87 $ 0.07
Second Quarter.............................. 15.25 13.55 0.07
Third Quarter............................... 13.94 8.75 0.07
Fourth Quarter.............................. 9.67 7.50 0.07
Year Ended March 31, 2002
First Quarter............................... $ 11.25 $ 6.96 $ 0.07
Second Quarter.............................. 10.40 9.36 0.07
Third Quarter............................... 10.15 7.45 0.00
Fourth Quarter.............................. 12.80 9.31 0.00
On June 10, 2002, the last reported sale price of our common stock on the
Nasdaq National Market was $9.29 per share.
Item 6. Selected Financial Data.
- ------- ------------------------
The following financial data represent our continuing operations and
reflect the May 2002 sale of substantially all of the assets of ASI. The
consolidated balance sheets as of March 31, 2001 and 2002 and the related
statements of operations, cash flows and shareholders' equity for the three
years ended March 31, 2002 and notes thereto appear elsewhere in this annual
report. The selected consolidated financial data presented below should be read
in conjunction with, and are qualified in their entirety by, "Management's
Discussion and Analysis of Results of Operations and Financial Condition," our
consolidated financial statements and the notes thereto and other financial
information included elsewhere in this annual report.
15
Fiscal Years Ended March 31,
-----------------------------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
(Amounts in millions, except per share data)
Statement of Operations Data:
Net sales $ 561.8 $ 594.0 $ 609.2 $ 586.2 $ 480.0
Cost of products sold 401.7 424.5 436.8 426.7 359.6
----------- ------------ ----------- ----------- -----------
Gross profit 160.2 169.5 172.4 159.5 120.5
Selling expenses 46.6 47.6 48.7 48.4 43.5
General and administrative expenses 33.4 36.6 40.5 34.3 28.2
----------- ------------ ----------- ----------- -----------
Income from operations before restructuring 80.2 85.3 83.2 76.9 48.7
charges and amortization
Restructuring charges - - - - 9.6
Amortization of intangibles 10.3 10.6 11.4 11.0 11.0
----------- ------------ ----------- ----------- -----------
Income from operations 69.9 74.7 71.8 65.9 28.1
Interest and debt expense 25.1 34.7 33.5 36.3 29.4
Other (income) and expense, net (1) (1.9) (1.5) (1.3) (2.2) 2.5
----------- ------------ ----------- ----------- -----------
Income (loss) before income taxes 46.8 41.6 39.7 31.7 (3.7)
Income tax expense 22.8 18.5 17.6 16.8 2.3
----------- ------------ ----------- ----------- -----------
Income (loss) from continuing operations (2) $ 24.0 $ 23.1 $ 22.1 $ 14.9 $ (6.0)
=========== ============ =========== =========== ===========
Diluted earnings (loss) per share from $1.66 $1.61 $1.55 $1.04 $ (0.42)
continuing operations
Basic earnings (loss) per share from continuing
operations $1.69 $1.63 $1.56 $1.04 $ (0.42)
Weighted average shares outstanding - assuming
dilution 14.4 14.3 14.2 14.3 14.4
Weighted average shares outstanding - basic 14.2 14.1 14.1 14.3 14.4
Balance Sheet Data (at end of period):
Total assets (3) $ 762.7 $ 741.3 $ 731.8 $ 722.4 $ 524.3
Total debt 458.6 423.6 413.8 407.0 347.9
Total shareholders' equity 170.9 188.7 203.5 207.9 71.6
Other Financial Data:
EBITDA (4) $ 91.9 $ 97.8 $ 96.1 $ 90.7 $ 62.0
Cash provided by operating activities 38.4 52.2 44.3 38.3 49.8
Capital expenditures 11.4 12.8 7.9 10.2 4.8
Cash dividends per common share 0.28 0.28 0.28 0.28 0.14
- -------------------
(1) Other (income) and expense, net includes the following unusual items in
fiscal 2002: (i) $2.8 for an unrealized, non-cash, mark-to-market loss
recognized on certain marketable equity securities held by our captive
insurance subsidiary; (ii) $1.5 loss on the January 2002 sale of a
small subsidiary; and (iii) $1.9 gain on the sale of assets held for
sale.
(2) Income (loss) from continuing operations and earnings per share data
are presented prior to an extraordinary charge for early debt
extinguishment of $4.5 in fiscal 1998.
(3) Total assets includes net assets of discontinued operations of $150.3,
$149.9, $152.6, $163.5 and $21.5 as of March 31, 1998, 1999, 2000, 2001
and 2002, respectively.
(4) EBITDA is defined as the sum of income from continuing operations
before income taxes, interest and debt expense, depreciation expense,
amortization of intangible assets (including goodwill), non-recurring
restructuring charges and certain non-cash charges included in other
(income) and expense, net as described in clauses (i) and (ii) of note
1. EBITDA is commonly used as an analytical indicator and also serves
as a
16
measure of leverage capacity and debt servicing ability. EBITDA should not
be considered as a measure of financial performance under accounting
principles generally accepted in the United States. The items excluded from
EBITDA are significant components in understanding and assessing financial
performance. EBITDA should not be considered in isolation or as an
alternative to net income, cash flows generated by operating, investing or
financing activities or other financial statement data presented in our
consolidated financial statements as an indicator of financial performance
or liquidity. EBITDA as measured in this annual report is not necessarily
comparable with similarly titled measures for other companies.
Item 7. Management's Discussion And Analysis Of Results Of Operations And
-----------------------------------------------------------------
Financial Condition
-------------------
This section should be read in conjunction with our consolidated financial
statements included elsewhere in this annual report. Comments on the results of
operations and financial condition below refer to our continuing operations,
except in the section entitled "Discontinued Operations."
Overview
We are a leading manufacturer and marketer of hoists, cranes, chain and
component parts serving a wide variety of commercial and industrial end markets.
Our products are used to efficiently and ergonomically move, lift, position or
secure objects and loads. Our Products segment sells a wide variety of powered
and manually operated wire rope and chain hoists, industrial crane systems,
chain, hooks and attachments. Our Solutions segment designs, manufactures, and
installs application-specific material handling systems and solutions for
end-users to improve work station and facility-wide work flow.
Founded in 1875, we have grown to our current size and leadership position
largely as the result of the 14 businesses we acquired between February 1994 and
April 1999. These acquisitions have significantly broadened our product lines
and services and expanded our geographic reach, end-user markets and customer
base. As a result of these acquisitions and internal growth, our revenues have
increased from approximately $209.8 million in fiscal 1996, the year of our
initial public offering, to approximately $480.0 million in fiscal 2002.
The operations of our acquired businesses have been substantially
integrated with our existing businesses. We converted nearly all of our acquired
North American businesses onto our computer system which integrates all of our
applications from order entry to production planning to accounting, facilitating
company-wide information flow. Further acquisition integration activities
included cost reductions resulting from internally supplying chain and forged
attachments to acquired hoist businesses we've acquired, consolidating
purchasing efforts through our Purchasing Council, reducing duplicative sales
and marketing activities, eliminating administrative headcount and consolidating
treasury and accounts receivable functions. Our acquisition integration
activities also included revenue enhancements through cross-selling of products
between existing and acquired businesses. The next phase of the integration of
these businesses includes reducing our excess manufacturing capacity and
improving our productivity. This phase is currently in progress through our
facility rationalization program and Lean Manufacturing efforts.
The latter phase of these integration activities was delayed for a period
of approximately two years, from early 1999 through early 2001, due to
difficulties encountered with the assimilation of our 1998 ASI acquisition.
Substantially all of the assets of that business, which formerly comprised our
Solutions - Automotive segment, were sold in May 2002. ASI did not prove to be a
good fit for us mainly because of the highly volatile nature of its business,
its significant dependence on the auto industry and its heavy use of working
capital. Despite the fact that the write-off associated with that disposition
increased our financial leverage, the proceeds furthered our efforts to reduce
debt and future interest expense, which has recently been one of our primary
objectives.
Many of the U.S. industrial sectors that we serve have been impacted by
soft economic conditions since mid-1998. These conditions deteriorated
significantly in our fiscal 2001 fourth quarter and continued to decline
throughout fiscal 2002, impacting our net sales and financial performance. After
reaching a historical high of $609.2 million in fiscal 2000, our net sales
declined 3.8% to $586.2 million in fiscal 2001, and further by 18.1% to $480.0
million in fiscal 2002, primarily due to this downturn in the business cycle.
Despite these economic conditions and their impact on our operating results, we
maintained our leading market share, generated positive cash flow from
operations and repaid $6.4 million and $59.7 million of debt in fiscal 2001 and
2002, respectively. Our positive cash flow was favorably impacted by our Lean
Manufacturing efforts, which began in fiscal 2002. These efforts are
fundamentally changing our manufacturing processes, resulting in significant
inventory reductions.
17
Results of Operations
Net sales of the Products and Solutions segments, in millions of dollars
and with percentage changes for each segment, were as follows:
Change Change
Fiscal Years Ended March 31, 2002 vs. 2001 2001 vs. 2000
---------------------------- ------------- -------------
2002 2001 2000 Amount % Amount %
---- ---- ---- ------ - ------ -
Products segment......... $404.7 $478.9 $511.3 $(74.2) (15.5) $(32.4) (6.3)
Solutions segment........ 75.3 107.3 97.9 (32.0) (29.8) 9.4 9.6
---- ----- ---- ------ ------ --- ---
Total net sales..... $480.0 $586.2 $609.2 $(106.2) (18.1) $(23.0) (3.8)
====== ====== ====== ======== ====== ======= =====
Sales fluctuations during the periods were primarily due to the downturn
in the general economy and the industrial sectors in particular. Net sales in
fiscal 2002 of $480.0 million decreased by $106.2 million, or 18.1%, from fiscal
2001, and sales in fiscal 2001 of $586.2 million decreased $23.0 million, or
3.8%, from fiscal 2000. Our Products segment net sales declined 15.5% and 6.3%
in fiscal 2002 and 2001, respectively, primarily due to decreased unit sales
resulting from the soft U.S. industrial markets. Our Solutions segment net sales
decreased 29.8% and increased 9.6% in fiscal 2002 and 2001, respectively. The
decline in fiscal 2002 was primarily due to soft U.S. industrial markets and our
decision to exit our domestic general contracting business, which had net sales
of $1.4 million and $____ million in fiscal 2002 and 2001, respectively. The
growth in fiscal 2001 was primarily due to the expansion of our European
operations, partially offset by soft U.S. industrial markets.
Gross profit of the Products and Solutions segments, in millions of
dollars and as a percentage of total segment net sales, were as follows:
Fiscal Years Ended March 31,
--------------------------------------------------------------
2002 2001 2000
---- ---- ----
Amount % Amount % Amount %
------ - ------ - ------ -
Products segment................ $109.3 27.0 $145.1 30.3 $153.9 30.1
Solutions segment............... 11.2 14.9 14.4 13.4 18.5 18.9
---- ---- ---- ---- ---- ----
Total gross profit......... $120.5 25.1 $159.5 27.2 $172.4 28.3
====== ==== ====== ==== ====== ====
Our gross profit margins were approximately 25.1%, 27.2% and 28.3% for
fiscal 2002, 2001 and 2000, respectively. The decreases in gross profit margin
for fiscal 2002 and 2001 were primarily the result of the significant decline in
net sales over the years presented and the resulting decrease in absorption of
fixed production costs, partially offset by discretionary cost control measures.
The gross profit margin in our Products segment decreased in fiscal 2002 due to
the 15.5% decrease in net sales and resulting decrease in production cost
absorption, the lack of a general price increase to offset inflationary costs
especially insurance costs, and a $3.8 million reclassification of certain crane
builder expenses to cost of products sold from general and administrative
expenses in fiscal 2002. Despite soft industrial markets, increasing energy
costs and a $3.5 million reclassification of certain crane builder expenses to
cost of products sold from general and administrative expenses in fiscal 2001,
the gross profit margin in the Products segment increased in fiscal 2001. This
increase primarily resulted from our cost control efforts and the integration of
acquisitions. The gross profit margin in our Solutions segment increased in
fiscal 2002 despite the 29.8% decrease in net sales and the resulting decrease
in production cost absorption. This decrease was primarily attributable to weak
margins in fiscal 2001. The Solutions segment's gross profit margin decreased in
fiscal 2001 primarily as a result of relatively low sales volumes in soft U.S.
industrial markets and increasing energy costs. Additionally, our margins were
adversely impacted by unprofitable operations in our general contracting
business, a service we no longer provide, and operational inefficiencies at one
of our European facilities that was consolidated.
Selling expenses were $43.5 million, $48.4 million and $48.7 million in
fiscal 2002, 2001 and 2000, respectively. As a percentage of net sales, selling
expenses were 9.1%, 8.3% and 8.0% in fiscal 2002, 2001 and 2000, respectively.
The fiscal 2002 and 2001 reductions reflect cost control efforts due to soft
economic conditions as well as the variable nature of some expenses,
particularly commissions, travel expenses and sales office costs.
18
General and administrative expenses were $28.2 million, $34.3 million and
$40.5 million in fiscal 2002, 2001 and 2000, respectively. As a percentage of
net sales, general and administrative expenses were 5.9%, 5.8% and 6.6% in
fiscal 2002, 2001 and 2000, respectively. The expense reductions resulted from
cost control measures and the reclassification of $3.8 million and $3.5 million
of crane builder expenses into cost of products sold in fiscal 2002 and 2001,
respectively, partially offset by sales office expansions into new geographic
regions and the expenses associated with our strategic alternatives evaluation
in fiscal 2001.
Restructuring charges of $9.6 million, or 2.0% of net sales, in fiscal
2002 were attributable to the closure of manufacturing facilities in fiscal
2002. We anticipate that our restructuring charges for fiscal 2003 in connection
with our ongoing facility rationalization initiative will be between $8.5
million to $9.5 million.
Amortization of intangibles was $11.0 million, $11.0 million and $11.4
million in fiscal 2002, 2001 and 2000, respectively, relating primarily to
non-tax deductible goodwill amortization.
Interest and debt expense was $29.4 million, $36.3 million and $33.5
million in fiscal 2002, 2001 and 2000, respectively. As a percentage of net
sales, interest and debt expense was 6.1%, 6.2% and 5.5% in fiscal 2002, 2001
and 2000, respectively. The fiscal 2002 decrease was the result of a paydown of
senior bank debt of $59.7 million and a reduction in interest rates. The fiscal
2001 increase was primarily the result of increased interest rates.
Other (income) and expense, net was $2.5 million, $2.2 million and $1.3
million in fiscal 2002, 2001 and 2000, respectively. The expense in fiscal 2002
included an unrealized, non-cash, mark-to-market loss recognized on certain
marketable equity securities held by our captive insurance subsidiary; a loss on
the January 2002 sale of a small subsidiary; and a gain on the sale of assets
held for sale. The remaining fluctuations were due to the sale of marketable
securities by our captive insurance subsidiary for settlement of a portion of
our general and products liability claims.
Income taxes as a percentage of income before income taxes were not
meaningful in fiscal 2002 and were 52.9% and 44.3% in fiscal 2001 and 2000,
respectively. The percentages reflected the effect of non-deductible goodwill
amortization resulting from business acquisitions, offset by the impact of tax
credits and other tax items.
As a result of the above, income (loss) from continuing operations was
(1.3%), 2.5% and 3.6% as a percentage of net sales in fiscal 2002, 2001 and
2000, respectively.
Liquidity and Capital Resources
Our existing bank credit agreement, as recently amended, provides
availability up to $150 million and matures on March 31, 2003. Since the
expiration date is within one year from the balance sheet date in our current
financial statements, outstanding balances are classified as current liabilities
in our March 31, 2002 consolidated balance sheet. At March 31, 2002, $145.8
million was outstanding under our bank credit agreement. Subsequently, $17.6
million of proceeds resulting from the May 10, 2002 sale of substantially all of
the assets of ASI were applied to further reduce the outstanding balance. The
recent amendment also waived and modified certain financial covenants. Interest
is payable at varying Eurodollar rates based on LIBOR plus a spread determined
by our leverage ratio, amounting to 375 basis points at May 20, 2002. Our
obligations under the bank credit agreement are secured by all equipment,
inventory, receivables, subsidiary stock (limited to 65% for foreign
subsidiaries) and intellectual property.
Our senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199.5 million, net of original issue discount of $0.5 million, and are due
March 31, 2008. Interest is payable semi-annually based on an effective rate of
8.45%, considering $1.9 million of proceeds from rate hedging in advance of the
placement. Provisions of the 8 1/2% Notes include, without limitation,
restrictions on liens, indebtedness, asset sales and dividends and other
restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at
our option, in whole or in part, at the Make-Whole Price (as defined in the
Indenture for the Notes). On or after April 1, 2003, they are redeemable at
prices declining annually from 104.25% to 100% on and after April 1, 2006. In
the event of a Change of Control (as defined), each holder of the 8 1/2% Notes
may require us to repurchase all or a portion of such holder's 8 1/2% Notes at a
purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes
are not subject to any sinking fund requirements.
On April 1, 2001, we adopted Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
as amended, which requires companies to carry all derivatives on
19
the balance sheet at fair value. Our use of derivative instruments is limited to
cash flow hedges, as defined in SFAS No. 133, of certain interest rate risks. In
order to provide interest rate risk protection we entered into an interest rate
swap agreement in June 2001, to effectively convert $40 million of variable rate
debt to fixed rate debt. The $40 million interest rate swap agreement matures in
June 2003.
Net cash provided by operating activities was $49.8 million, $38.3 million
and $44.3 million in fiscal 2002, 2001 and 2000, respectively. The $11.5 million
increase in fiscal 2002 was the result of a reduction in working capital
components, especially inventory, despite decreased income from continuing
operations. The $6.0 million decrease in fiscal 2001 compared to fiscal 2000 was
the result of an increase in net working capital components and deferred income
taxes. Operating assets net of liabilities provided cash of $28.3 million in
fiscal 2002, used cash of $0.6 million in fiscal 2001 and used cash of $5.0
million in fiscal 2000.
Net cash used in investing activities was $1.6 million $7.2 million and
$18.7 million in fiscal 2002, 2001 and 2000, respectively. The fiscal 2002 and
2001 amounts included $2.3 million and $5.0 million, respectively, of proceeds
from the sale of a portion of land included in net assets held for sale. The
fiscal 2000 amount included the acquisition of WECO for $6.4 million.
Net cash used in financing activities was $48.5 million, $19.5 million and
$24.2 million in fiscal 2002, 2001 and 2000, respectively. Those amounts
included $46.7 million, $16.0 million and $20.5 million of debt repayment as
well as $2.0 million, $4.0 million and $4.0 million of dividends paid in fiscal
2002, 2001 and 2000, respectively.
Our existing bank credit agreement terminates on March 31, 2003 and if we
are unable to enter into a new bank credit agreement prior to such termination,
our ability to fund our operations will be significantly impaired. We have
received a term sheet for a new bank credit agreement that provides for
borrowings up to $95 million and will mature in 2006. However, the term sheet is
not binding on the lenders, and we may not be able to negotiate this agreement
on commercially reasonable terms, or at all. We anticipate the closing of the
new bank credit agreement will occur prior to the termination of our existing
bank credit agreement. We believe that the reduced availability of $95 million
contemplated under the term sheet, will be, together with cash on hand, cash
provided by operations and cash provided by the future sales of securities,
sufficient to fund our ongoing operations and budgeted capital expenditures for
the next twelve months. We believe our history of positive cash flow and the
assets we have available as collateral will help us finalize a new bank credit
agreement. As proposed in the term sheet, our new bank credit agreement would
result in a decrease in the interest rate of our bank debt. Borrowings under our
new bank credit agreement will be secured by a first priority security interest
in all of our personal property, mortgages on certain of our real property and a
pledge of the capital stock of our subsidiaries (limited to 65% for our foreign
subsidiaries), and will contain covenants restricting our ability to incur
additional indebtedness, to sell a substantial portion of our assets, to merge
or to make acquisitions or investments. It will also obligate us to meet certain
financial requirements and will restrict our ability to pay dividends.
We were in default of certain financial covenants under our existing bank
credit agreement as of March 31, 2002. We have obtained a waiver of the defaults
along with an amendment that modifies certain covenants prospectively.
Capital Expenditures
In addition to keeping our current equipment and plants properly
maintained, we are committed to replacing, enhancing and upgrading our property,
plant and equipment to reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety and promote ergonomically correct work stations. Further, our
facility rationalization program currently in progress reduces our annual
capital expenditure requirements and also provides for transfers of equipment
from the rationalized facilities to other operating facilities. Our capital
expenditures for fiscal 2002, 2001 and 2000 were $4.8 million, $10.2 million and
$7.9 million, respectively. The decreased spending in fiscal 2002 reflects a
deferral of certain projects due to soft market conditions as well as reduced
needs resulting from our facility rationalization program. The increased
spending in fiscal 2001 was the result of our decision to purchase real estate
that was previously leased.
Inflation and Other Market Conditions
Our costs are affected by inflation in the U.S. economy and, to a lesser
extent, in foreign economies including those of Europe, Canada, Mexico and the
Pacific Rim. We do not believe that inflation has had a material effect on
20
our results of operations over the periods presented primarily due to low
inflation levels over such periods and our ability to generally pass on rising
costs through price increases. We did not implement a general price increase in
fiscal 2002 due to the soft economic conditions. In the future, there can be no
assurance that our business will not be further affected by inflation or that we
will be able to pass on cost increases.
Seasonality and Quarterly Results
Our quarterly results may be materially affected by the timing of large
customer orders, periods of high vacation and holiday concentrations,
restructuring charges attributable to our facility rationalization program,
acquisitions and the magnitude of acquisition integration costs. Therefore, the
operating results for any particular fiscal quarter are not necessarily
indicative of results for any subsequent fiscal quarter or for the full fiscal
year.
Discontinued Operations
In May 2002, we completed the divestiture of substantially all of the
assets of ASI which comprised the principal business unit in our former
Solutions - Automotive segment. Proceeds from this sale included cash of $20.6
million and an 8% subordinated note in the principal amount of $6.8 million
payable over 10 years. We may also receive additional payments of up to $2.0
million from the proceeds of certain designated receivables and up to $10.0
million over the next two years based on the financial performance of the ASI
business.
Accordingly, the ASI operation was reflected as discontinued operations in
our financial statements and prior periods have been restated. The income (loss)
from discontinued operations was ($7.9) million, $0.3 million and ($5.0) million
in fiscal 2002, 2001 and 2000, respectively. The fluctuations were primarily due
to the volatility of the automobile industry and the ASI operation's dependence
on certain significant customers. The loss on the sale of the discontinued
operations was $121.5 million and was reflected in our fiscal 2002 statement of
operations.
Cash used by discontinued operations was $0.3 million and $1.1 million in
fiscal 2002 and 2001, respectively, and provided by discontinued operations was
$0.9 million in fiscal 2000.
The net current assets of discontinued operations of $21.5 million were
reflected on the March 31, 2002 balance sheet.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect the amounts reported in our consolidated financial statements and
accompanying notes. We continually evaluate the estimates and their underlying
assumptions, which form the basis for making judgments about the carrying value
of our assets and liabilities. Actual results inevitably will differ from those
estimates. We have identified below the accounting policies involving estimates
that are critical to our financial statements. Other accounting policies are
more fully described in note 2 of notes to our consolidated financial
statements.
Pension and Other Postretirement Benefits.The determination of the
obligations and expense for pension and postretirement benefits is dependent on
our selection of certain assumptions that are used by actuaries in calculating
such amounts. Those assumptions are disclosed in Notes 9 and 11, respectively,
to our consolidated financial statements and include the discount rates,
expected long-term rate of return on plan assets and rates of future increases
in compensation and healthcare costs.
Insurance Reserves. Our accrued general and product liability reserves as
described in Note 13 to our consolidated financial statements involve actuarial
techniques including the methods selected to estimate ultimate claims, and
assumptions including emergence patterns, payment patterns, initial expected
losses and increased limit factors. Other insurance reserves such as workers
compensation and group health insurance are based on actual historical and
current claim data provided by third party administrators or internally
maintained.
Inventory and Accounts Receivable Reserves. Slow-moving and obsolete
inventory reserves are judgmentally determined based on historical and expected
future usage within a reasonable timeframe. Allowances for doubtful accounts and
credit memo reserves are also judgmentally determined based on historical bad
debt write-offs and credit memos issued, assessing potentially uncollectible
customer accounts and analyzing the accounts receivable agings.
21
Long-Lived Assets. Property, plants and equipment and goodwill and other
intangibles are depreciated or amortized over their assigned lives. These assets
are also periodically measured for impairment. The assigned lives and the
projected cash flows used to test impairment are subjective. If actual lives are
shorter than anticipated or if future cash flows are less than anticipated, we
could incur a future impairment charge or a loss on disposal relating to these
assets.
Effects of New Accounting Pronouncements
The Financial Accounting Standards Board ("FASB") issued Statement on
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" in June
2001. SFAS No. 141 eliminates the pooling-of-interests method of accounting for
business combinations and modifies the application of the purchase accounting
method. The elimination of the pooling-of-interests method is effective for
transactions initiated after June 30, 2001. The adoption of this statement did
not have an impact on our consolidated financial statements.
The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets"
in June of 2001. SFAS No. 142 eliminates the current requirement to amortize
goodwill and indefinite-lived intangible assets, addresses the amortization of
intangible assets with a defined life and the impairment testing and recognition
for goodwill and intangible assets. SFAS No. 142 will apply to goodwill and
intangible assets arising from transactions completed before and after the
effective date. This statement, which will be effective for our fiscal year
beginning on April 1, 2002, must be adopted at the beginning of the fiscal year.
We are currently assessing the statement and the impact that adoption will have
on our fiscal 2003 consolidated financial statements. Upon adoption, we will
stop amortizing goodwill which, based upon current levels of goodwill for
continuing operations, would reduce amortization expense by approximately $11
million on an annual basis.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" in June 2001. SFAS No. 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset. This statement, which is
effective for our fiscal year beginning April 1, 2003, may be adopted as of
April 1, 2002. We are currently assessing the statement and the impact, if any,
that adoption will have on our fiscal 2003 consolidated financial statements.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" in August 2001. SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." The statement, while retaining many of the fundamental
recognition and measurement provisions of SFAS No. 121, changes the criteria to
be met to classify an asset as held-for-sale as well as the grouping of
long-lived assets and liabilities that represent the unit of accounting for a
long-lived asset to be held and used. SFAS No. 144 is effective for our fiscal
year beginning April 1, 2002. We are currently assessing the statement and the
impact, if any, that adoption will have on our fiscal 2003 consolidated
financial statements.
Factors Affecting Our Operating Results
The success of our business is affected by industrial economic conditions.
Periods of industrial economic slowdown or recession in the United States
or other countries, or the public perception that one may occur, could decrease
the demand for our products, affect the availability and cost of our products
and adversely impact our business. In fiscal 2001, for example, we were
negatively impacted by the general slowing in the economy. That impact has
continued, and in fiscal 2002 we experienced a loss.
Our significant indebtedness could limit our operational and financial
flexibility.
We have incurred indebtedness that is substantial in relation to our
shareholders' equity. As of March 31, 2002, we had total funded debt of
approximately $347.9 million. This represents approximately 83% of our total
capitalization at that date. We may need to incur additional debt to fund our
continued growth. We may not be able to service or refinance our debt at
maturity on terms that are acceptable to us. Our debt service, consisting of
interest expense and required principal payments, was $32.4 million in fiscal
2002. The degree to which we are leveraged could have other important
consequences to holders of our common stock, including the following:
22
o we must dedicate a substantial portion of our cash flow from operations
to the payment of principal and interest on our debt, which reduces the
funds available for our operations;
o a portion of our debt is at variable rates of interest, which makes us
vulnerable to increases in interest rates; for example, interest
expense in fiscal 2002 would have increased $1.4 million for every
percentage point increase in interest rates, based upon average
variable rate debt outstanding; and
o our debt instruments contain numerous financial and other restrictive
covenants, such as restrictions on paying dividends, incurring
additional debt, selling assets and making capital expenditures.
Our existing bank credit agreement, which had outstanding borrowings of
$145.8 million at March 31, 2002, terminates on March 31, 2003. We have received
a term sheet for a new bank credit agreement providing for aggregate borrowings
up to $95 million that we anticipate the closing of the new bank credit
agreement will occur prior to the termination of our existing bank credit
agreement. However, the term sheet is not binding on the lenders, and we cannot
assure you that we will be able to negotiate this agreement on commercially
reasonable terms, or at all. For instance, a new bank credit agreement could
result in an increase in the interest rate of our bank debt over the rate we
currently pay or more restrictive covenants than our existing bank credit
agreement currently contains. If we are unable to enter into a new bank credit
agreement by March 31, 2003, our ability to fund our operations will be
significantly impaired.
A write-off of all or part of our goodwill could adversely affect our operating
results and net worth and cause us to violate covenants in our bank credit
agreement.
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141 Business Combinations and Statement of
Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets. FAS
141 requires that all business combinations be accounted for under the purchase
method only and that certain acquired intangible assets in a business
combination be recognized as assets apart from goodwill. FAS 142 requires that
ratable amortization of goodwill be replaced with periodic tests of the
goodwill's impairment and that intangible assets other than goodwill should be
amortized over their useful lives. As a result of our prior acquisitions, we
have a material amount of goodwill recorded on our financial statements. At
March 31, 2002 our recorded goodwill was approximately $200.8 million, or
approximately 38% of our total assets. We may have to write-off all or a portion
of our goodwill if its value becomes impaired. Although any such write-off would
be a non-cash charge, it could reduce our earnings and net worth significantly.
A write-off of goodwill could also cause us to violate covenants contained in
our bank credit agreement that require a minimum level of net worth. Any such
violation could disqualify us from making additional borrowings under our bank
credit agreement and could require us to refinance or renegotiate the terms of
our bank indebtedness.
We may not be able to successfully integrate our acquired companies.
Historically, a significant portion of our growth has been attributable to
acquisitions. Our acquired companies have and will continue to place significant
demands on our management, operational and financial resources. Realization of
the benefits of acquisitions often requires integration of some or all of the
acquired companies' sales and marketing, distribution, manufacturing,
engineering, finance and administrative organizations. The integration of our
acquired companies will continue to demand substantial attention from our senior
management and the management of the acquired companies. We cannot assure you
that we will be able to successfully integrate our acquired companies, that
these companies will operate profitably or that we will realize the potential
benefits from these acquisitions.
We may be adversely impacted by our inability to identify and finance future
acquisitions.
Although we have not made any acquisitions since April 1999, we intend to
pursue strategic acquisitions again in the future. We cannot provide any
assurance that we will be able to identify appropriate future acquisition
candidates or, if we do, that we will be able to successfully negotiate the
terms of an acquisition, finance the acquisition or integrate the acquired
business effectively and profitably into our existing operations. Consummating
an acquisition could require us to raise additional funds through additional
equity or debt financing. Additional equity financing could depress the market
price of our common stock. Additional debt financing could require us to accept
covenants that would, among other things, limit our ability to pay dividends.
Our international operations pose certain risks that may adversely impact sales
and earnings.
23
We have operations and assets located outside of the United States,
primarily in Canada, Mexico, Germany, Denmark, France and China. In addition, we
import a portion of our hoist product line from China and Japan, and sell our
products to distributors located in approximately 50 countries. Our
international operations are subject to a number of special risks, including
currency exchange rate fluctuations, trade barriers, exchange controls, risk of
governmental expropriation, political risks 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.
Our business is highly competitive and increased competition could reduce our
income and profitability.
The principal markets that we serve are highly competitive. Competition is
based primarily on performance, functionality, price, brand recognition,
customer service and support, and product availability. 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.
Our certificate of incorporation, by-laws and Rights Agreement, as well as the
New York Business Corporation Law, contain provisions that could have the effect
of deterring takeovers or delaying or preventing changes in control or
management of our company.
Provisions of our certificate of incorporation and by-laws, our Rights
Agreement and applicable New York law may discourage, delay or prevent a change
in control that shareholders may consider favorable or may impede the ability of
the holders of our common stock to change our management. The provisions of our
certificate of incorporation and by-laws will:
o authorize our Board of Directors to issue preferred stock in one or more
series, without shareholder approval;
o regulate how shareholders may present proposals or nominate directors for
election at annual meetings of shareholders; and
o limit the right of shareholders to remove a director.
Our Rights Agreement and applicable provisions of New York law impose
limitations on persons proposing to acquire us in a transaction not approved by
our Board of Directors.
Our future operating results may be affected by fluctuations in steel prices. We
may not be able to pass on increases in raw material costs to our customers.
The principal raw material used in our specialty chain and forging
operations is steel. The steel industry as a whole is very cyclical, and at
times pricing 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.
Through our Purchasing Council, we purchase steel on a regular basis in an
effort to maintain our inventory at levels that we believe are sufficient to
satisfy the anticipated needs of our customers based upon historic buying
practices and market conditions. In an environment of increasing raw material
prices, competitive conditions will determine how much of the steel price
increases we can pass on to our customers. To the extent we are unable to pass
on any price increases to our customers, our profitability could be adversely
affected.
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. We have not entered into employment agreements
with any of our senior management personnel.
24
We are subject to various environmental laws which may require us to expend
significant capital and incur substantial cost.
Our facilities are subject to many federal, state and local requirements
relating to the protection of the environment and we have made, and will
continue to make, expenditures to comply with such provisions. Failure to comply
with environmental laws, regulations and permits, or changes in such laws,
including the imposition of more stringent standards for discharges into the
environment, could result in substantial operating costs and capital
expenditures in order to maintain compliance and could also include fines and
civil and criminal sanctions, third party claims for property damage or personal
injury, clean-up costs or temporary or permanent discontinuance of operations.
Certain of our facilities have been in operation for many years and, over time,
we and other predecessor operators of such facilities have generated, used,
handled and disposed of hazardous and other regulated wastes. Environmental
liabilities could exist, including clean-up obligations at these or other
locations where materials from our operations were disposed of, which could
result in substantial future expenditures that cannot be currently quantified
and which could reduce our profits.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- -------- ----------------------------------------------------------
Market risk is the potential loss arising from adverse changes in market
rates and prices, such as interest rates. We are exposed to various market
risks, including commodity prices for raw materials, foreign currency exchange
rates and changes in interest rates. We may enter into financial instrument
transactions, which attempt to manage and reduce the impact of such changes. We
do not enter into derivatives or other financial instruments for trading or
speculative purposes.
Our primary commodity risk is related to changes in the price of steel. We
control this risk through negotiating purchase contracts on a consolidated basis
and by attempting to build changes in raw material costs into the selling prices
of our products. We have not entered into financial instrument transactions
related to raw material costs.
In fiscal 2002, approximately 22.5% of our net sales were from
manufacturing plants and sales offices in foreign jurisdictions. We manufacture
our products in the United States, Canada, Germany, Denmark, the United Kingdom,
Mexico, France and China and sell our products and solutions in over 50
countries. Our results of operations could be affected by factors such as
changes in foreign currency rates or weak economic conditions in foreign
markets. Our operating results are exposed to fluctuations between the U.S.
dollar and the Canadian dollar, European currencies, the Mexican peso and the
Chinese renminbi. For example, when the U.S. dollar strengthens against the
Canadian dollar, the value of our net sales and net income denominated in
Canadian dollars decreases when translated into U.S. dollars for inclusion in
our consolidated results. We are also exposed to foreign currency fluctuations
in relation to purchases denominated in foreign currencies. Our foreign currency
risk is mitigated since the majority of our foreign operations' net sales and
the related expense transactions are denominated in the same currency. In
addition, the majority of our export sale transactions are denominated in U.S.
dollars. Accordingly, we currently have not invested in derivative instruments,
such as foreign exchange contracts, to hedge foreign currency transactions.
We control risk related to changes in interest rates by structuring our
debt instruments with a combination of fixed and variable interest rates and by
periodically entering into financial instrument transactions. At March 31, 2002,
we had one interest rate swap agreement in effect which converts $40 million of
variable rate debt to fixed rate debt. This swap agreement matures in June 2003.
We do not have any other swap agreements or similar financial instruments in
place. Including the effect of our existing swap agreement, at March 31, 2002,
approximately 68% of our outstanding debt had fixed interest rates. At that
date, we had approximately $110.7 million of outstanding variable rate debt. A
1% fluctuation in interest rates in fiscal 2002 would have changed interest
expense on that outstanding variable rate debt by approximately $1.4 million.
25
Item 8. Financial Statements and Supplementary Data.
- ------- --------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 2002:
Report of Independent Auditors.................................................. F-2
Consolidated Balance Sheets..................................................... F-3
Consolidated Statements of Operations........................................... F-4
Consolidated Statements of Shareholders' Equity................................. F-5
Consolidated Statements of Cash Flows........................................... F-6
Notes to Consolidated Financial Statements...................................... F-7
F-1
Report of Independent Auditors
Board of Directors
Columbus McKinnon Corporation
We have audited the accompanying consolidated balance sheets of Columbus
McKinnon Corporation as of March 31, 2002 and 2001, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended March 31, 2002. Our audits also include the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Columbus McKinnon Corporation at March 31, 2002 and 2001, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended March 31, 2002, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/S/ ERNST & YOUNG LLP
Buffalo, New York
June 6, 2002
F-2
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
--------------------
2002 2001
-------- --------
(In thousands, except
share data)
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 13,068 $ 14,015
Trade accounts receivable, less allowance for doubtful accounts ($2,337 and
$2,305, respectively)..................................................... 82,266 99,873
Inventories................................................................. 89,656 108,913
Net assets held for sale.................................................... 4,290 4,270
Net current assets of discontinued operations............................... 21,497 46,874
Prepaid expenses............................................................ 8,543 5,637
-------- --------
Total current assets........................................................... 219,320 279,582
Net property, plant, and equipment............................................. 70,742 77,762
Goodwill and other intangibles, net............................................ 200,801 213,301
Marketable securities.......................................................... 24,634 22,326
Deferred taxes on income....................................................... 3,133 5,441
Net non-current assets of discontinued operations.............................. -- 116,658
Other assets................................................................... 5,665 7,318
-------- --------
Total assets................................................................... $524,295 $722,388
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks...................................................... $ 2,518 $ 3,012
Trade accounts payable...................................................... 31,617 28,525
Accrued liabilities......................................................... 39,533 41,876
Restructuring reserve....................................................... 949 --
Current portion of debt..................................................... 146,663 3,092
-------- --------
Total current liabilities...................................................... 221,280 76,505
Senior debt, less current portion.............................................. 1,509 204,324
Subordinated debt.............................................................. 199,681 199,628
Other non-current liabilities.................................................. 30,214 34,067
-------- --------
Total liabilities.............................................................. 452,684 514,524
Shareholders' equity:
Voting common stock; 50,000,000 shares authorized; 14,895,172 shares issued. 149 149
Additional paid-in capital.................................................. 104,920 105,418
(Accumulated deficit) retained earnings..................................... (12,536) 124,806
ESOP debt guarantee; 417,854 and 504,794 shares............................. (6,514) (7,527)
Unearned restricted stock; 47,318 and 82,670 shares......................... (414) (955)
Accumulated other comprehensive loss........................................ (13,994) (14,027)
-------- --------
Total shareholders' equity..................................................... 71,611 207,864
-------- --------
Total liabilities and shareholders' equity..................................... $524,295 $722,388
======== ========
See accompanying notes.
F-3
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31,
------------------------------------
2002 2001 2000
--------- -------- --------
(In thousands, except per share data)
Net sales........................................... $ 480,028 $586,168 $609,178
Cost of products sold............................... 359,551 426,659 436,814
--------- -------- --------
Gross profit........................................ 120,477 159,509 172,364
Selling expenses.................................... 43,522 48,393 48,699
General and administrative expenses................. 28,245 34,251 40,468
--------- -------- --------
Income from operations before restructuring
charges and amortization.......................... 48,710 76,865 83,197
Restructuring charges............................... 9,569 -- --
Amortization of intangibles......................... 11,013 10,975 11,384
--------- -------- --------
Income from operations.............................. 28,128 65,890 71,813
Interest and debt expense........................... 29,381 36,329 33,451
Other (income) and expense, net..................... 2,464 (2,160) (1,320)
--------- -------- --------
(Loss) income from continuing operations before
income tax expense................................ (3,717) 31,721 39,682
Income tax expense.................................. 2,301 16,794 17,583
--------- -------- --------
(Loss) income from continuing operations............ (6,018) 14,927 22,099
(Loss) income from discontinued operations.......... (7,873) 292 (5,019)
Loss on disposition of discontinued operations...... (121,475) -- --
--------- -------- --------
Total (loss) income from discontinued operations.... (129,348) 292 (5,019)
--------- -------- --------
Net (loss) income................................... $(135,366) $ 15,219 $ 17,080
========= ======== ========
Average basic shares outstanding.................... 14,414 14,316 14,138
Basic (loss) income per share:
(Loss) income from continuing operations........ $ (0.41) $ 1.04 $ 1.57
(Loss) income from discontinued operations...... (0.55) 0.02 (0.36)
Loss on disposition of discontinued operations.. (8.43) -- --
--------- -------- --------
Basic (loss) income per share................... $ (9.39) $ 1.06 $ 1.21
========= ======== ========
Average diluted shares outstanding.................. 14,414 14,316 14,221
Diluted (loss) income per share:
(Loss) income from continuing operations........ $ (0.41) $ 1.04 $ 1.55
(Loss) income from discontinued operations...... (0.55) 0.02 (0.35)
Loss on disposition of discontinued operations.. (8.43) -- --
--------- -------- --------
Diluted (loss) income per share................. $ (9.39) $ 1.06 $ 1.20
========= ======== ========
See accompanying notes.
F-4
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data)
Common Addi- Retained Accumulated
Stock tional Earnings ESOP Unearned Other Total
($.01 Paid-in (Accumulated Debt Restricted Comprehensive Shareholders'
par value) Capital Deficit) Guarantee Stock Income (Loss) Equity
---------- -------- ------------ --------- ---------- ------------- -------------
Balance at March 31, 1999.............. $146 $102,313 $ 100,455 $(9,865) $(1,009) $ (3,366) $ 188,674
Comprehensive income:
Net income 2000........................ -- -- 17,080 -- -- -- 17,080
Change in foreign currency
translation adjustment................ -- -- -- -- -- (3,129) (3,129)
Net unrealized gain on investments, net
of tax expense of $347................ -- -- -- -- -- 520 520
Change in minimum pension
liability adjustment, net of
tax expense of $239................... -- -- -- -- -- 359 359
---- -------- --------- ------- ------- -------- ---------
Total comprehensive income............. -- -- -- -- -- -- 14,830
Earned 101,822 ESOP shares............. -- 590 -- 1,162 -- -- 1,752
Restricted common stock granted,
60,700 shares......................... 1 2,871 -- -- (2,872) -- --
Earned portion of restricted stock..... -- -- -- -- 1,038 -- 1,038
Stock options exercised,
153,008 shares........................ 2 1,110 -- -- -- -- 1,112
Common dividends declared
$0.28 per share....................... -- -- (3,953) -- -- -- (3,953)
---- -------- --------- ------- ------- -------- ---------
Balance at March 31, 2000.............. $149 $106,884 $ 113,582 $(8,703) $(2,843) $ (5,616) $ 203,453
Comprehensive income:
Net income 2001........................ -- -- 15,219 -- -- -- 15,219
Change in foreign currency
translation adjustment................ -- -- -- -- -- (5,039) (5,039)
Net unrealized loss on investments,
net of tax benefit of $1,954.......... -- -- -- -- -- (2,931) (2,931)
Change in minimum pension
liability adjustment, net of
tax benefit of $294................... -- -- -- -- -- (441) (441)
---- -------- --------- ------- ------- -------- ---------
Total comprehensive income............. -- -- -- -- -- -- 6,808
Earned 101,765 ESOP shares............. -- (56) -- 1,176 -- -- 1,120
Earned portion and adjustment of
restricted shares..................... -- (1,501) -- -- 1,888 -- 387
Stock options exercised,
19,340 shares......................... -- 91 -- -- -- -- 91
Common dividends declared
$0.28 per share....................... -- -- (3,995) -- -- -- (3,995)
---- -------- --------- ------- ------- -------- ---------
Balance at March 31, 2001.............. $149 $105,418 $ 124,806 $(7,527) $ (955) $(14,027) $ 207,864
Comprehensive income:
Net loss 2002.......................... -- -- (135,366) -- -- -- (135,366)
Change in foreign currency
translation adjustment................ -- -- -- -- -- 216 216
Net unrealized gain on investments,
net of tax expense of $1,445.......... -- -- -- -- -- 2,168 2,168
Unrealized loss on derivatives
qualifying as hedges, net of
tax benefit of $282................... -- -- -- -- -- (424) (424)
Change in minimum pension
liability adjustment, net of
tax benefit of $1,285................. -- -- -- -- -- (1,927) (1,927)
---- -------- --------- ------- ------- -------- ---------
Total comprehensive loss............... (135,333)
Earned 86,939 ESOP shares.............. -- (169) -- 1,013 -- -- 844
Earned portion and adjustment of
restricted shares..................... -- (329) -- -- 541 -- 212
Common dividends declared
$0.14 per share....................... -- -- (1,976) -- -- -- (1,976)
---- -------- --------- ------- ------- -------- ---------
Balance at March 31, 2002.............. $149 $104,920 $ (12,536) $(6,514) $ (414) $(13,994) $ 71,611
==== ======== ========= ======= ======= ======== =========
See accompanying notes.
F-5
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31,
----------------------------
2002 2001 2000
-------- -------- --------
(In thousands)
Operating activities:
Net (loss) income from continuing operations.................................. $ (6,018) $ 14,927 $ 22,099
Adjustments to reconcile net (loss) income from continuing operations to net
cash provided by operating activities:
Depreciation and amortization.............................................. 22,462 22,675 22,935
Deferred income taxes...................................................... 166 84 3,586
Unrealized loss on investments............................................. 2,757 -- --
Other...................................................................... 2,177 1,148 687
Changes in operating assets and liabilities net of effects from businesses
purchased:
Trade accounts receivable.............................................. 14,644 12,449 (10,520)
Inventories............................................................ 18,876 (4,433) 9,127
Prepaid expenses....................................................... (1,276) 622 (221)
Other assets........................................................... 1,328 (985) 1,284
Trade accounts payable................................................. 3,677 (1,152) (9,240)
Accrued and non-current liabilities.................................... (8,996) (7,065) 4,527
-------- -------- --------
Net cash provided by operating activities of continuing operations............ 49,797 38,270 44,264
-------- -------- --------
Investing activities:
Purchase of marketable securities, net........................................ (1,794) (2,064) (3,318)
Capital expenditures.......................................................... (4,753) (10,179) (7,923)
Proceeds from sale of business................................................ 890 -- --
Proceeds from sale of property, plant, and equipment.......................... 1,750 -- --
Purchase of businesses, net of cash acquired.................................. -- -- (6,430)
Net assets held for sale...................................................... 2,280 5,002 (1,058)
-------- -------- --------
Net cash used in investing activities of continuing operations................ (1,627) (7,241) (18,729)
-------- -------- --------
Financing activities:
Proceeds from issuance of common stock, net................................... -- -- 3
Net payments under revolving line-of-credit agreements........................ (43,678) (12,262) (17,922)
Repayment of debt............................................................. (3,047) (3,737) (2,538)
Payment of deferred financing costs........................................... (794) (687) (997)
Dividends paid................................................................ (1,976) (3,995) (3,953)
Change in ESOP debt guarantee................................................. 1,013 1,176 1,162
-------- -------- --------
Net cash used in financing activities of continuing operations................ (48,482) (19,505) (24,245)
Effect of exchange rate changes on cash....................................... (306) (4,026) (1,486)
-------- -------- --------
Net cash (used in) provided by continuing operations.......................... (618) 7,498 (196)
Net cash (used in) provided by discontinued operations........................ (329) (1,065) 911
-------- -------- --------
Net change in cash and cash equivalents....................................... (947) 6,433 715
Cash and cash equivalents at beginning of year................................ 14,015 7,582 6,867
-------- -------- --------
Cash and cash equivalents at end of year...................................... $ 13,068 $ 14,015 $ 7,582
======== ======== ========
Supplementary cash flows data:
Interest paid.............................................................. $ 29,887 $ 36,764 $ 33,929
Income taxes paid.......................................................... $ 3,262 $ 20,381 $ 16,818
See accompanying notes.
F-6
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Business Acquisitions
Columbus McKinnon Corporation (the Company) is a leading U.S. designer and
manufacturer of material handling products, systems and services which
efficiently and ergonomically move, lift, position or secure material. Key
products include hoists, cranes, chain and forged attachments. The Company is
focused on commercial and industrial applications that require the safety and
quality provided by its superior design and engineering know-how. The Company's
material handling products are sold, domestically and internationally,
principally to third party distributors through diverse distribution channels,
and to a lesser extent directly to manufacturers and other end-users.
Distribution channels include general distributors, specialty distributors,
crane end users, service-after-sale distributors, original equipment
manufacturers (OEMs), government, consumer and international. The general
distributors are comprised of industrial distributors, rigging shops and crane
builders. Specialty distributors include catalog houses, material handling
specialists and entertainment equipment riggers. The service-after-sale network
includes repair parts distribution centers, chain service centers and hoist
repair centers. Consumer distribution channels include mass merchandisers,
hardware distributors, trucking and transportation distributors, farm hardware
distributors and rental outlets. The Company's integrated material handling
solutions businesses deal primarily with end-users and sales are concentrated,
domestically and internationally (primarily Europe), in the consumer products,
manufacturing, warehousing, and, to a lesser extent, the steel, construction,
automotive, and other industrial markets. During fiscal 2002, approximately 71%
of sales were to customers in the United States. The operations of Automatic
Systems, Inc. (ASI) have been reflected as a discontinued operation and as more
fully described in Note 3, the consolidated financial statements for all
periods presented have been restated to reflect this change.
On April 29, 1999, the Company acquired all of the outstanding stock of
Washington Equipment Company (WECO), a regional manufacturer and servicer of
overhead cranes. The total cost of the acquisition, which was accounted for as
a purchase, was approximately $6.4 million and was financed by proceeds from
the Company's revolving debt facility. The consolidated statement of operations
and the consolidated statement of cash flows for the year ended March 31, 2000
include WECO activity since its April 29, 1999 acquisition by the Company.
2. Accounting Principles and Practices
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments with
an original maturity of three months or less.
Concentrations of Labor
Approximately 26% of the Company's employees are represented by nine
separate domestic and Canadian collective bargaining agreements which terminate
at various times between August 2002 and April 2007. Approximately 6% of the
labor force is covered by collective bargaining agreements that will expire
within one year. In addition, the Company hires union production workers for
field installation under its material handling systems contracts.
F-7
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Consolidation
These consolidated financial statements include the accounts of the Company
and its domestic and foreign subsidiaries; all significant intercompany
accounts and transactions have been eliminated.
Derivative Financial Instruments
Derivative instruments held by the Company are designated as hedges, have
high correlation with the underlying exposure and are highly effective in
offsetting underlying price movements. Accordingly, gains and losses from
changes in derivatives fair values are deferred until the underlying
transaction occurs at which point they are then recognized in the statement of
operations. All derivates are carried at fair value in the balance sheet. The
fair value of derivatives are determined by reference to quoted market prices.
The Company's use of derivative instruments is limited to cash flow hedges of
certain interest rate risks.
Foreign Currency Translations
The Company translates foreign currency financial statements as described in
Financial Accounting Standards (FAS) No. 52. Under this method, all items of
income and expense are translated to U.S. dollars at average exchange rates for
the year. All assets and liabilities are translated to U.S. dollars at the
year-end exchange rate. Gains or losses on translations are recorded in
accumulated other comprehensive income (loss) in the shareholders' equity
section of the balance sheet.
Goodwill
It is the Company's policy to account for goodwill and other intangible
assets at the lower of amortized cost or fair value based on discounted cash
flows, if indicators of impairment exist. The Company evaluates the existence
of goodwill impairment on the basis of whether the goodwill is fully
recoverable from projected, undiscounted net cash flows of the related
businesses. Goodwill is amortized on a straight-line basis over twenty-five
years. At March 31, 2002 and 2001 accumulated amortization was $58,343,000 and
$47,330,000, respectively. As more fully disclosed in Note 21, effective April
1, 2003 the Company will account for goodwill in accordance with Statement of
Financial Accounting Standards No. 142.
Inventories
Inventories are valued at the lower of cost or market. Costs of
approximately 56% of inventories at March 31, 2002 (48% in 2001) have been
determined using the LIFO (last-in, first-out) method. Costs of other
inventories have been determined using the FIFO (first-in, first-out) or
average cost method. FIFO cost approximates replacement cost.
Marketable Securities
All of the Company's marketable securities, which consist of equity
securities and corporate and governmental obligations, have been classified as
available-for-sale securities and are therefore
F-8
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
recorded at their fair values with the unrealized gains and losses, net of tax,
reported in accumulated other comprehensive income (loss) within shareholders'
equity unless unrealized losses are deemed to be other than temporary. In such
instance, the unrealized losses are reported in the statement of operations
within other income and expense, net. Estimated fair value is based on
published trading values at the balance sheet dates. The amortized cost of debt
securities is adjusted for amortization of premiums and accretion of discounts
to maturity. The cost of securities sold is based on the specific
identification method. Interest and dividend income are included in other
income and expense, net on the consolidated statements of operations.
The marketable securities are carried as long-term assets since they are
held for the settlement of a portion of the Company's general liability and
products liability insurance claims filed through CM Insurance Company, Inc., a
wholly owned captive insurance subsidiary.
Net Assets Held for Sale
Certain non-operating real estate properties and equipment were acquired as
part of the 1996 acquisition of Yale Industrial Products, Inc. Certain of these
properties were sold during fiscal 1998 through fiscal 2002 and additional
monies were advanced to further the development of the properties with the
remaining assets held for sale expected to be sold in fiscal 2003. They have
been recorded at the lower of cost or their estimated realizable values net of
disposal costs on the consolidated balance sheet and amount to $1,990,000 and
$4,270,000 as of March 31, 2002 and 2001, respectively.
In addition at March 31, 2002, net assets held for sale includes $2,300,000
as the carrying value of a recently closed and vacated facility which is
currently for sale.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and depreciated
principally using the straight-line method over their respective estimated
useful lives (buildings and building equipment--15 to 40 years; machinery and
equipment--3 to 18 years). When depreciable assets are retired, or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in operating results.
Related Party Transactions
The Company entered into a consulting agreement with the Chairman of the
Board of Directors on October 1, 2001. The agreement provides compensation at a
monthly rate of $23,750 and continues through December 31, 2003.
Research and Development
Research and development costs as defined in FAS No. 2, for the years ended
March 31, 2002, 2001 and 2000 were $1,328,000, $975,000 and $1,156,000,
respectively.
F-9
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Revenue Recognition and Concentration of Credit Risk
Sales are recorded when title passes to the customer which is generally at
time of shipment to the customer, except for long-term construction contracts
as described below. The Company performs ongoing credit evaluations of its
customers' financial condition, but generally does not require collateral to
support customer receivables. The credit risk is controlled through credit
approvals, limits and monitoring procedures. The Company established an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other factors.
The Company recognizes contract revenues on construction contracts under the
percentage of completion method, measured by comparing direct costs incurred to
total estimated direct costs. Changes in job performance, job conditions and
estimated profitability, including those arising from final contract
settlements, may result in revisions to costs and income and are recognized in
the period in which the revisions are determined. In the event that a loss is
anticipated on an uncompleted contract, a provision for the estimated loss is
made at the time it is determined.
Shipping and Handling Costs
Shipping and handling costs are a component of cost of goods sold.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Discontinued Operations
In May 2002, the Company sold substantially all of the assets of ASI. The
ASI business was the principal business unit in the Company's former Solutions
- - Automotive segment. The Company received $20,600,000 in cash and an 8%
subordinated note in the principal amount of $6,800,000 which is payable over
10 years. The Company may also receive additional payments of up to $1,960,000
from proceeds of certain ASI accounts receivable and up to an aggregate of
$10,000,000 over the next two years based on the financial performance of the
ASI business. The measurement date for this discontinued operation was April
10, 2002, prior to the issuance of the fiscal 2002 consolidated financial
statements. Accordingly, the impact of the prospective transaction has been
recorded in fiscal 2002. The Company recorded an after-tax loss of $121,475,000
or $8.43 per diluted share and reflected ASI as a discontinued operation in the
fourth quarter of fiscal 2002. The impairment loss included closing costs from
the transaction and estimated operating losses of the discontinued operation
from April 1, 2002 through May 10, 2002, the date of the sale. The impairment
loss was due primarily to the write-off of $104,000,000 of goodwill and a
$17,475,000 loss related to the write-off of the remaining net assets in excess
of the selling price. The net current assets of discontinued operations at
March 31, 2002 represent the net cash proceeds received upon disposal as well
as the realized tax benefit. The consolidated financial statements and related
notes for all periods presented have been restated, where applicable, to
reflect the ASI business as a discontinued operation.
F-10
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In accordance with Emerging Issues Task Force (EITF) 87-24, "Allocation of
Interest to Discontinued Operations," the Company allocated interest to the
discontinued operations based upon the net principal amount of debt that was
paid down with the proceeds from the sale of such operation. This resulted in
an interest allocation of approximately $905,000, $1,280,000 and $1,325,000 for
the years ended March 31, 2002, 2001, and 2000, respectively.
Operating results of discontinued operations were as follows:
Year Ended March 31,
------------------------------------
2002 2001 2000
--------- -------- --------
(In thousands, except per share data)
Net revenue................................................. $ 137,070 $141,804 $127,076
--------- -------- --------
(Loss) income before income taxes........................... (9,350) 3,023 (5,024)
Income tax (benefit) expense................................ (1,477) 2,731 (5)
--------- -------- --------
(Loss) income from operations of discontinued business...... (7,873) 292 (5,019)
Loss on disposal of business (net of tax benefit of $9,464). (121,475) -- --
--------- -------- --------
(Loss) income from discontinued operations.................. $(129,348) $ 292 $ (5,019)
========= ======== ========
Diluted (loss) income per share from discontinued operations $ (8.98) $ .02 $ (.35)
========= ======== ========
4. Inventories
Inventories consisted of the following:
March 31,
-----------------
2002 2001
------- --------
(In thousands)
At cost--FIFO basis:
Raw materials............ $48,477 $ 56,603
Work-in-process.......... 13,735 17,110
Finished goods........... 34,417 41,850
------- --------
96,629 115,563
LIFO cost less than FIFO cost (6,973) (6,650)
------- --------
Net inventories.............. $89,656 $108,913
======= ========
5. Marketable Securities
Marketable securities are held for the settlement of a portion of the
Company's general liability and products liability insurance claims filed
through the Company's subsidiary, CM Insurance Company, Inc. (see Notes 2 and
13).
The following is a summary of available-for-sale securities at March 31,
2002:
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
------- ---------- ---------- ---------
(In thousands)
Government securities $ 6,353 $ 258 $ 6 $ 6,605
Equity securities.... 14,833 3,447 251 18,029
------- ------ ---- -------
$21,186 $3,705 $257 $24,634
======= ====== ==== =======
F-11
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At March 31, 2002, in accordance with FAS No. 115, the Company reduced the
cost bases of certain equity securities since it was determined that the
unrealized losses on those securities were other than temporary in nature. This
determination resulted in the recognition of a pre-tax charge to earnings of
$2,757,000 for the year ended March 31, 2002, classified within other (income)
and expense, net. The above schedule reflects the reduced cost base.
In April 2002, all securities in the portfolio were sold and reinvested in
short-term cash equivalents.
The following is a summary of available-for-sale securities at March 31,
2001:
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
------- ---------- ---------- ---------
(In thousands)
Government securities $ 6,265 $ 305 $ -- $ 6,570
Equity securities.... 16,226 3,043 3,513 15,756
------- ------ ------ -------
$22,491 $3,348 $3,513 $22,326
======= ====== ====== =======
Net unrealized gain or loss included in the balance sheet amounted to a
$3,448,000 gain at March 31, 2002 and a $165,000 loss at March 31, 2001. The
amounts, net of related income taxes of $1,379,000 and $(66,000) at March 31,
2002 and 2001, respectively, are reflected as a component of accumulated other
comprehensive income (loss) within shareholders' equity.
6. Property, Plant, and Equipment
Consolidated property, plant, and equipment of the Company consisted of the
following:
March 31,
-----------------
2002 2001
-------- --------
(In thousands)
Land and land improvements...................... $ 5,812 $ 5,845
Buildings....................................... 31,472 30,613
Machinery, equipment, and leasehold improvements 99,198 99,243
Construction in progress........................ 3,677 2,812
-------- --------
140,159 138,513
Less accumulated depreciation................... 69,417 60,751
-------- --------
Net property, plant, and equipment.............. $ 70,742 $ 77,762
======== ========
Depreciation expense from continuing operations was $11,449,000,
$11,700,000, and $11,551,000 for the years ended March 31, 2002, 2001, and
2000, respectively.
F-12
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Accrued Liabilities and Other Non-current Liabilities
Consolidated accrued liabilities of the Company consisted the following:
March 31,
---------------
2002 2001
------- -------
(In thousands)
Accrued payroll............. $10,915 $13,361
Accrued pension cost........ 5,434 2,579
Interest payable............ 8,975 9,481
Accrued workers compensation 4,070 3,068
Income taxes payable........ -- 2,362
Other accrued liabilities... 10,139 11,025
------- -------
$39,533 $41,876
======= =======
Consolidated other non-current liabilities of the Company consisted the
following:
March 31,
---------------
2002 2001
------- -------
(In thousands)
Accumulated postretirement benefit obligation $10,181 $12,640
Accrued general and product liability costs.. 16,274 15,388
Other non-current liabilities................ 3,759 6,039
------- -------
$30,214 $34,067
======= =======
8. Debt
Consolidated debt of the Company consisted of the following:
March 31,
-----------------
2002 2001
-------- --------
(In thousands)
Revolving Credit Facility with availability up to $150,000,000, due
March 31, 2003, with interest payable at varying Eurodollar rates
based on LIBOR plus a spread determined by the Company's
leverage ratio, amounting to 325 basis points at March 31, 2002
(5.49% and 7.76% at March 31, 2002 and 2001)..................... $145,800 $202,000
Other senior debt.................................................. 2,372 5,416
-------- --------
Total senior debt.................................................. 148,172 207,416
8 1/2% Senior Subordinated Notes due March 31, 2008
with interest payable in semi-annual installments at 8.45%
effective rate, recorded net of unamortized discount of $319
($372 at March 31, 2001) 199,681 199,628
-------- --------
Total.............................................................. 347,853 407,044
Less current portion............................................... 146,663 3,092
-------- --------
$201,190 $403,952
======== ========
F-13
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Revolving Credit Facility is secured by all equipment, inventory,
receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and
intellectual property. The corresponding credit agreement places certain debt
covenant restrictions on the Company including, but not limited to, maximum
annual cash dividends of $10 million.
The Company did not comply with certain of the financial covenants as of
March 31, 2002. Effective June 6, 2002, the senior lenders agreed to waive the
non-compliance as of March 31, 2002 and amended the financial covenants for the
quarters ended June 30, September 30, and December 31, 2002. The Company
believes that they will be able to comply with the amended covenants.
The Company manages its debt portfolio by using interest rate swaps to
achieve an overall desired position of fixed and floating rates. The Company
entered into an interest rate swap agreement to effectively convert $40 million
of variable-rate debt to fixed-rate debt which matures in June 2003. The cash
flow hedge is considered effective and the gain or loss on the change in fair
value is reported in other comprehensive (loss) income, net of tax. The fair
value of the derivative at March 31, 2002 was a $706,000 liability.
The carrying amount of the Company's senior debt instruments approximates
the fair value. The Company's subordinated debt has an approximate fair market
value of $183,000,000 which is less than the carrying cost of $199,681,000.
Provisions of the 8 1/2% Notes include, without limitation, restrictions on
liens, indebtedness, asset sales, and dividends and other restricted payments.
Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the
Company, in whole or in part, at the Make-Whole Price (as defined in the 8 1/2%
Notes agreement). On or after April 1, 2003, they are redeemable at prices
declining annually to 100% on and after April 1, 2006. In the event of a Change
of Control (as defined in the indenture for such notes), each holder of the
8 1/2% Notes may require the Company to repurchase all or a portion of such
holder's 8 1/2% Notes at a purchase price equal to 101% of the principal amount
thereof. The 8 1/2% Notes are guaranteed by certain existing and future
domestic subsidiaries and are not subject to any sinking fund requirements.
The principal payments scheduled to be made as of March 31, 2002 on the
above debt, for the next five annual periods subsequent thereto, are as follows
(in thousands):
2003.................................... $146,663
2004.................................... 224
2005.................................... 162
2006.................................... 123
2007.................................... 122
It is management's intent to refinance the Revolving Credit Facility prior
to its expiration on March 31, 2003.
As of March 31, 2002, the Company had letters of credit outstanding of $6.8
million.
F-14
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Retirement Plans
The Company provides defined benefit pension plans to certain employees. The
following provides a reconciliation of benefit obligation, plan assets, and
funded status of plans:
March 31,
-----------------
2002 2001
-------- -------
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year......... $ 75,008 $71,320
Service cost.................................... 3,961 3,772
Interest cost................................... 5,580 5,099
Actuarial loss (gain)........................... 3,373 (1,821)
Benefits paid................................... (4,905) (3,362)
-------- -------
Benefit obligation at end of year............... $ 83,017 $75,008
======== =======
Change in plan assets:
Fair value of plan assets at beginning of year.. $ 76,182 $73,464
Actual (loss) return on plan assets............. (4,349) 1,079
Employer contribution........................... 3,578 5,001
Benefits paid................................... (4,905) (3,362)
-------- -------
Fair value of plan assets at end of year........ $ 70,506 $76,182
======== =======
Funded Status................................... $(12,511) $ 1,174
Unrecognized transition amount.................. -- (28)
Unrecognized actuarial loss (gain).............. 12,373 (1,872)
Unrecognized prior service cost................. 1,191 1,607
-------- -------
Net amount recognized........................... $ 1,053 $ 881
======== =======
Amounts recognized in the consolidated balance sheets are as follows:
Intangible asset.................... $ 903 $ 1,029
Accrued liabilities................. (4,933) (2,020)
Accumulated other comprehensive loss 5,083 1,872
------- -------
Net amount recognized............... $ 1,053 $ 881
======= =======
F-15
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Net periodic pension cost included the following components:
Year Ended March 31,
-------------------------
2002 2001 2000
------- ------- -------
(In thousands)
Service costs--benefits earned during the period $ 3,961 $ 3,772 $ 4,329
Interest cost on projected benefit obligation... 5,580 5,099 4,805
Expected return on plan assets.................. (6,526) (6,303) (5,732)
Net amortization................................ 213 136 251
------- ------- -------
Net periodic pension cost....................... $ 3,228 $ 2,704 $ 3,653
======= ======= =======
The aggregate projected benefit obligation and aggregate fair value of plan
assets for the pension plans with projected benefit obligations in excess of
plan assets were $76,652,000 and $62,507,000, respectively, as of March 31,
2002 and $57,644,000 and $55,546,000, respectively, as of March 31, 2001.
The aggregate accumulated benefit obligation and aggregate fair value of
plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $69,363,000 and $61,734,000 respectively as of March
31, 2002 and $10,973,000 and $9,363,000, respectively as of March 31, 2001.
The unrecognized transition obligation is being amortized on a straight-line
basis over 20 years. Unrecognized gains and losses are amortized on a
straight-line basis over the average remaining service period of active
participants.
The weighted-average discount rate used in determining the actuarial present
value of the projected benefit obligation of all of the defined benefit plans
was 7.25% and 7.5% as of March 31, 2002 and 2001, respectively. Future average
compensation increases are assumed to be 4.0% and 4.5% per year as of March 31,
2002 and 2001, respectively. The weighted-average expected long-term rate of
return on plan assets used in determining the expected return on plan assets
included in net periodic pension cost was 8 5/8% for the year ended March 31,
2002 and 8 7/8% for both of the years ended March 31, 2001 and 2000. Plan
assets consist of equities, corporate and government securities, and fixed
income annuity contracts.
The Company's funding policy with respect to the defined benefit pension
plans is to contribute annually at least the minimum amount required by the
Employee Retirement Income Security Act of 1974 (ERISA).
The Company also sponsors defined contribution plans covering substantially
all domestic employees. Participants may elect to contribute basic
contributions. These plans provide for employer contributions based primarily
on employee participation. The Company recorded a charge for such contributions
of approximately $1,790,000, $2,190,000 and $1,660,000 for the years ended
March 31, 2002, 2001 and 2000, respectively.
F-16
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Employee Stock Ownership Plan (ESOP)
The AICPA Statement of Position 93-6, "Employers' Accounting for Employee
Stock Ownership Plans" requires that compensation expense for ESOP shares be
measured based on the fair value of those shares when committed to be released
to employees, rather than based on their original cost. Also, dividends on
those ESOP shares that have not been allocated or committed to be released to
ESOP participants are not reflected as a reduction of retained earnings.
Rather, since those dividends are used for debt service, a charge to
compensation expense is recorded. Furthermore, ESOP shares that have not been
allocated or committed to be released are not considered outstanding for
purposes of calculating earnings per share.
The obligation of the ESOP to repay borrowings incurred to purchase shares
of the Company's common stock is guaranteed by the Company; the unpaid balance
of such borrowings, therefore, has been reflected in the accompanying
consolidated balance sheet as a liability. An amount equivalent to the cost of
the collateralized common stock and representing deferred employee benefits has
been recorded as a deduction from shareholders' equity.
Substantially all of the Company's domestic non-union employees are
participants in the ESOP. Contributions to the plan result from the release of
collateralized shares as debt service payments are made. Compensation expense
amounting to $845,000, $1,120,000 and $1,752,000 in fiscal 2002, 2001 and 2000,
respectively, is recorded based on the guaranteed release of the ESOP shares at
their fair market value. Dividends on allocated ESOP shares are recorded as a
reduction of retained earnings and are applied toward debt service.
At March 31, 2002 and 2001, 966,769 and 953,851 of ESOP shares,
respectively, were allocated or available to be allocated to participants'
accounts. At March 31, 2002 and 2001, 417,854 and 504,794 of ESOP shares were
pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares at March 31, 2002 amounted to
$5,349,000.
11. Postretirement Benefit Obligation
The Company sponsors defined benefit postretirement health care plans that
provide medical and life insurance coverage to Yale domestic retirees and their
dependents. Prior to the acquisition of Yale, the Company did not sponsor any
postretirement benefit plans. The Company pays the majority of the medical
costs for Yale retirees and their spouses who are under age 65. For retirees
and dependents of retirees who retired prior to January 1, 1989, and are age 65
or over, the Company contributes 100% toward the American Association of
Retired Persons ("AARP") premium frozen at the 1992 level. For retirees and
dependents of retirees who retired after January 1, 1989, the Company
contributes $35 per month toward the AARP premium. The life insurance plan is
noncontributory.
F-17
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's postretirement health benefit plans are not funded. In
accordance with FAS No. 132 "Employers' Disclosures about Pensions and Other
Postretirement Benefits," the following sets forth a reconciliation of benefit
obligations and the funded status of the plan:
March 31,
------------------
2002 2001
-------- --------
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year................. $ 12,626 $ 11,640
Service cost............................................ 82 80
Interest cost........................................... 891 820
Actuarial loss.......................................... 1,255 1,509
Benefits paid........................................... (1,480) (1,423)
Impact of curtailment................................... (836) --
-------- --------
Benefit obligation at end of year....................... $ 12,538 $ 12,626
======== ========
Funded status........................................... $(12,538) $(12,626)
Unrecognized actuarial loss............................. 2,664 2,407
Unrecognized prior service gain......................... (307) (2,421)
-------- --------
Net amount recognized in other non-current liabilities.. $(10,181) $(12,640)
======== ========
Net periodic postretirement benefit cost included the following:
Year Ended March 31,
---------------------
2002 2001 2000
------- ----- -----
(In thousands)
Service cost--benefits attributed to service during the period $ 82 $ 80 $ 84
Interest cost................................................. 891 820 816
Amortization of prior service gain............................ (807) (807) (807)
Amortization of plan net losses............................... 162 -- --
Curtailment gain.............................................. (1,307) -- --
------- ----- -----
Net periodic postretirement benefit cost.................. $ (979) $ 93 $ 93
======= ===== =====
For measurement purposes, a 9.0% annual rate of increase in the per capita
cost of postretirement medical benefits was assumed at the beginning of the
period; the rate was assumed to decrease 1.0% per year to 5.0% by 2006. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.25% and 7.5% as of March 31, 2002 and 2001, respectively.
Assumed medical claims cost trend rates have an effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
One Percentage One Percentage
Point Increase Point Decrease
-------------- --------------
(In thousands)
Effect on total of service and interest cost components $ 54 $ (49)
Effect on postretirement obligation.................... 532 (486)
F-18
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Earnings per Share and Stock Plans
Earnings per Share
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS No. 128).
Basic earnings per share excludes any dilutive effects of options, warrants,
and convertible securities. Diluted earnings per share includes any dilutive
effects of stock options. The effect of dilutive employee stock options has not
been included for the year ended March 31, 2002 since this would be
antidilutive as a result of the Company's net loss.
The following table sets forth the computation of basic and diluted earnings
per share:
Year Ended March 31,
--------------------------
2002 2001 2000
--------- ------- -------
(In thousands)
Numerator for basic and diluted earnings per share:
(Loss) income from continuing operations..................... $ (6,018) $14,927 $22,099
Total (loss) income from discontinued operations............. (129,348) 292 (5,019)
--------- ------- -------
Net (loss) income............................................ $(135,366) $15,219 $17,080
========= ======= =======
Denominators:
Weighted-average common stock outstanding - denominator for
basic EPS.................................................. 14,414 14,316 14,138
Effect of dilutive employee stock options.................... -- -- 83
--------- ------- -------
Adjusted weighted-average common stock outstanding and
assumed conversions - denominator for diluted EPS.......... 14,414 14,316 14,221
========= ======= =======
The weighted-average common stock outstanding shown above is net of
unallocated ESOP shares (see Note 10).
Stock Plans
The Company maintains two stock option plans, a Non-Qualified Stock Option
Plan (Non-Qualified Plan) and an Incentive Stock Option Plan (Incentive Plan).
Under the Non-Qualified Plan, options may be granted to officers and other key
employees of the Company as well as to non-employee directors and advisors.
Options granted under the Non-Qualified and Incentive Plans become exercisable
over a four-year period at the rate of 25% per year commencing one year from
the date of grant at an exercise price of not less than 100% of the fair market
value of the common stock on the date of grant. Any option granted under the
Non-Qualified plan may be exercised not earlier than one year from the date
such option is granted. Any option granted under the Incentive Plan may be
exercised not earlier than one year and not later than 10 years from the date
such option is granted.
F-19
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of option transactions during each of the three fiscal years in
the period ended March 31, 2002 is as follows:
Year Ended March 31,
----------------------------
Number of Shares 2002 2001 2000
---------------- --------- ------- --------
Outstanding at beginning of year.. 671,535 674,750 353,348
Granted........................... 762,000 32,700 481,410
Canceled.......................... (27,375) (16,575) (7,000)
Exercised......................... -- (19,340) (153,008)
--------- ------- --------
Outstanding at end of year........ 1,406,160 671,535 674,750
========= ======= ========
Exercisable at end of year........ 394,153 241,285 137,840
Available for grant at end of year 76,340 810,965 827,090
Exercise prices for options outstanding as of March 31, 2002, ranged from
$9.00 to $29.00. The following table provides certain information with respect
to stock options outstanding at March 31, 2002:
Weighted-average
Stock Options Weighted-average Remaining
Range of Exercise Prices Outstanding Exercise Price Contractual Life
------------------------ ------------- ---------------- ----------------
Up to $10.00........ 748,950 $ 9.97 9.4
$10.01 to $20.00.... 194,100 14.63 5.9
$20.01 to $30.00.... 463,110 21.27 7.0
--------- ------ ---
1,406,160 $14.34 8.1
========= ====== ===
The following table provides certain information with respect to stock
options exercisable at March 31, 2002:
Stock Options Weighted-average
Range of Exercise Prices Outstanding Exercise Price
------------------------ ------------- ----------------
Up to $10.00........ 5,737 $ 9.13
$10.01 to $20.00.... 152,361 15.47
$20.01 to $30.00.... 236,055 21.44
------- ------
394,153 $18.95
======= ======
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under FAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the grant date and the number of options granted is fixed,
no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by FAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The Black-Scholes option valuation model was developed for use in
F-20
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The fair
value for issued options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions and yielding the following pro forma results:
Year Ended March 31,
------------------------------------
2002 2001 2000
--------- -------- --------
(In thousands, except for assumptions
and earnings per share data)
Assumptions:
Risk-free interest rate............. 4.5% 5.2% 6.1%
Dividend yield--Incentive Plan...... 0.0% 2.9% 1.35%
Volatility factor................... 444 0.435 0.352
Expected life--Incentive Plan....... 5 years 5 years 5 years
Pro forma results:
Net (loss) income................... $(136,697) $ 14,809 $ 16,099
(Loss) earnings per share, basic.... (9.48) 1.03 1.14
(Loss) earnings per share, diluted.. (9.48) 1.03 1.13
The weighted-average fair value of options granted in 2002, 2001, and 2000
was $4.66, $4.42 and $7.56 per share, respectively.
The Company maintains a Restricted Stock Plan, under which the Company had
no shares reserved for issuance at March 31, 2002 and 2001. The Company charges
unearned compensation, a component of shareholders' equity, for the market
value of shares, as they are issued. It is then ratably amortized over the
restricted period. Grantees who remain continuously employed with the Company
become vested in their shares five years after the date of the grant. There
were 60,700 shares issued during the year ended March 31, 2000.
13. Loss Contingencies
General and Product Liability--$15,603,000 of the accrued general and
product liability costs which are included in other non-current liabilities at
March 31, 2002 ($14,663,000 at March 31, 2001) are the actuarial present value
of estimated reserves based on an amount determined from loss reports and
individual cases filed with the Company and an amount, based on experience, for
losses incurred but not reported. The accrual in these consolidated financial
statements was determined by applying a discount factor based on interest rates
customarily used in the insurance industry, between 6.09% and
F-21
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8.42%, to the undiscounted reserves of $19,510,000 and $18,620,000 at March 31,
2002 and 2001, respectively. This liability is funded by investments in
marketable securities (see Notes 2 and 5).
14. Restructuring Charges
In June 2001, the Company recorded an $8.8 million pre-tax charge to cover
costs associated with the closure of its hoist manufacturing facility in
Forrest City, Arkansas. The charges consisted mainly of plant closing charges
($6.0 million), accrued compensation and employee benefits ($2.0 million), and
other restructuring costs ($0.8 million).
In August 2001, the Company recorded a $0.7 million pre-tax charge to cover
costs associated with the closure of its chain manufacturing facility in
Richmond, British Columbia, Canada. The charges consisted mainly of accrued
compensation and employee benefits ($0.4 million), plant closing charges ($0.2
million), and other restructuring costs ($0.1 million).
Restructuring reserves at March 31, 2002 consist mainly of severance and
employee benefits. The net carrying value of the recently closed and vacated
Forrest City facility is included in assets held for sale (see Note 2) at March
31, 2002.
The manufacturing facilities in Forrest City, Arkansas and Richmond, British
Columbia, Canada were both included in the Products segment.
15. Income Taxes
The following is a reconciliation of the difference between the effective
tax rate and the statutory federal tax rate:
Year Ended March 31,
-------------------------
2002 2001 2000
------- ------- -------
(In thousands)
Computed statutory provision.................. $(1,301) $11,102 $13,889
State income taxes net of federal benefit..... 501 1,075 1,909
Nondeductible goodwill amortization........... 2,752 2,753 2,753
Foreign taxes greater than statutory provision 922 923 878
Research and development credit............... (1,031) (400) (400)
Other......................................... 458 1,341 (1,446)
------- ------- -------
Actual tax provision.......................... $ 2,301 $16,794 $17,583
======= ======= =======
F-22
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The provision for income tax expense consisted of the following:
Year Ended March 31,
------------------------
2002 2001 2000
------ ------- -------
(In thousands)
Current income tax expense:
Federal taxes..................... $ (198) $11,893 $ 8,249
State taxes....................... 1,012 1,345 2,136
Foreign........................... 1,483 3,599 3,319
Deferred income tax (benefit) expense:
Domestic.......................... (317) 395 3,658
Foreign........................... 321 (438) 221
------ ------- -------
$2,301 $16,794 $17,583
====== ======= =======
The Company applies the liability method of accounting for income taxes as
required by FAS Statement No. 109, "Accounting for Income Taxes." The tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities are as follows:
March 31,
- ------------------
2002 2001
-------- --------
(In thousands)
Deferred tax assets:
Insurance reserves.......................... $ 8,589 $ 9,560
Accrued vacation and incentive costs........ 1,387 1,867
Other....................................... 6,435 6,015
-------- --------
Total gross deferred tax assets......... 16,411 17,442
-------- --------
Deferred tax liabilities:
Insurance reserves.......................... (4,661) (5,935)
Property, plant, and equipment.............. (6,349) (6,757)
-------- --------
Total gross deferred tax liabilities.... (11,010) (12,692)
-------- --------
Net deferred tax asset................ $ 5,401 $ 4,750
======== ========
Deferred income taxes are presented within the consolidated balance sheet as
follows:
March 31,
---------------
2002 2001
------- -------
(In thousands)
Current deferred tax asset (liability) $ 2,268 $ (691)
Net non-current deferred tax asset.... 3,133 5,441
------- -------
Net deferred tax asset.......... $ 5,401 $ 4,750
======= =======
The current deferred tax asset (liability) is included in prepaid expense
(accrued liabilities).
F-23
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income before income tax expense includes foreign subsidiary income of
$2,436,000, $6,394,000, and $7,602,000 for the years ended March 31, 2002,
2001, and 2000, respectively. United States income taxes have not been provided
on certain unremitted earnings of approximately $25,000,000 at March 31, 2002
of the Company's foreign subsidiaries as such earnings are considered to be
permanently reinvested.
16. Rental Expense and Lease Commitments
Rental expense for the years ended March 31, 2002, 2001 and 2000 was
$3,225,000, $5,103,000, and $3,763,000, respectively. The following amounts
represent future minimum payment commitments as of March 31, 2002 under
non-cancelable operating leases extending beyond one year (in thousands):
Real Vehicles and
Year Ended March 31, Property Equipment Total
-------------------- -------- ------------ ------
2003........ $724 $1,877 $2,601
2004........ 729 1,596 2,325
2005........ 700 1,271 1,971
2006........ 474 592 1,066
2007........ 135 238 373
17. Summary Financial Information
The following information sets forth the condensed consolidating summary
financial information of the parent and domestic subsidiaries (guarantors),
which guarantee the 81/2% senior subordinated notes, and the foreign
subsidiaries (nonguarantors). The domestic subsidiaries are wholly owned and
the guarantees are full, unconditional, joint and several.
As of and for the year ended March 31, 2002:
Domestic Foreign
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
(In thousands)
As of March 31, 2002:
Current assets:
Cash.............................................. $ 8,024 $ (1,701) $ 6,745 $ -- $ 13,068
Trade accounts receivable......................... 53,724 6,895 21,647 -- 82,266
Inventories....................................... 43,357 23,525 23,723 (949) 89,656
Net assets held for sale.......................... 2,300 1,990 -- -- 4,290
Net current assets of discontinued operations..... -- 21,497 -- -- 21,497
Other current assets.............................. 6,647 (1,682) 3,578 -- 8,543
-------- --------- -------- --------- --------
Total current assets........................... 114,052 50,524 55,693 (949) 219,320
Net property, plant, and equipment................... 35,893 18,385 16,464 -- 70,742
Goodwill and other intangibles, net.................. 36,370 121,051 43,380 -- 200,801
Intercompany balances................................ 277,846 (292,844) (59,486) 74,484 --
Other non-current assets............................. 76,893 159,710 (1,408) (201,763) 33,432
-------- --------- -------- --------- --------
Total assets................................... $541,054 $ 56,826 $ 54,643 $(128,228) $524,295
======== ========= ======== ========= ========
Current liabilities.................................. $190,014 $ 11,335 $ 20,353 $ (422) $221,280
Debt, less current portion........................... 199,536 -- 1,654 -- 201,190
Other non-current liabilities........................ 16,196 11,203 2,815 -- 30,214
-------- --------- -------- --------- --------
Total liabilities.............................. 405,746 22,538 24,822 (422) 452,684
Shareholders' equity................................. 135,308 34,288 29,821 (127,806) 71,611
-------- --------- -------- --------- --------
Total liabilities and shareholders' equity..... $541,054 $ 56,826 $ 54,643 $(128,228) $524,295
======== ========= ======== ========= ========
F-24
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Domestic Foreign
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
(In thousands)
For the Year Ended March 31, 2002:
Net sales................................................. $222,957 $ 170,265 $107,944 $(21,138) $ 480,028
Cost of products sold..................................... 164,150 134,031 82,533 (21,163) 359,551
-------- --------- -------- -------- ---------
Gross profit.............................................. 58,807 36,234 25,411 25 120,477
-------- --------- -------- -------- ---------
Selling, general and administrative expenses.............. 34,539 17,163 20,065 -- 71,767
Restructuring charges..................................... 9,416 -- 153 -- 9,569
Amortization of intangibles............................... 2,140 6,461 2,412 -- 11,013
-------- --------- -------- -------- ---------
46,095 23,624 22,630 -- 92,349
-------- --------- -------- -------- ---------
Income from operations.................................... 12,712 12,610 2,781 25 28,128
Interest and debt expense................................. 28,869 -- 512 -- 29,381
Other (income) and expense, net........................... 4,773 (2,076) (233) -- 2,464
-------- --------- -------- -------- ---------
(Loss) income from continuing operations before income tax
expense.................................................. (20,930) 14,686 2,502 25 (3,717)
Income tax expense........................................ (6,838) 7,419 1,710 10 2,301
-------- --------- -------- -------- ---------
(Loss) income from continuing operations.................. (14,092) 7,267 792 15 (6,018)
(Loss) on discontinued operations......................... -- (7,873) -- -- (7,873)
(Loss) on disposal of discontinued operations............. -- (121,475) -- -- (121,475)
-------- --------- -------- -------- ---------
Net (loss) income......................................... $(14,092) $(122,081) $ 792 $ 15 $(135,366)
======== ========= ======== ======== =========
For the Year Ended March 31, 2002:
Operating activities:
Cash provided by (used in) operating activities........... $ 63,500 $ (17,965) $ 5,914 $ (1,652) $ 49,797
Investing activities:
Purchase of marketable securities, net.................... (1,794) -- -- -- (1,794)
Capital expenditures...................................... (6,923) 3,162 (992) -- (4,753)
Proceeds from sale of business............................ 890 -- -- -- 890
Proceeds from sale of property, plant and equipment....... -- -- 1,750 -- 1,750
Net assets held for sale.................................. -- 2,280 -- -- 2,280
-------- --------- -------- -------- ---------
Net cash (used in) provided by investing activities....... (7,827) 5,442 758 -- (1,627)
Financing activities:
Net (payments) borrowings under revolving
line-of-credit agreements................................ (56,200) 13,016 (494) -- (43,678)
Repayment of debt......................................... (851) -- (2,196) -- (3,047)
Dividends paid............................................ (1,808) -- (1,820) 1,652 (1,976)
Other..................................................... 219 -- -- -- 219
-------- --------- -------- -------- ---------
Net cash (used in) provided by financing activities....... (58,640) 13,016 (4,510) 1,652 (48,482)
Effect of exchange rate changes on cash................... (26) -- (280) -- (306)
-------- --------- -------- -------- ---------
Net cash (used in) provided by continuing operations...... (2,993) 493 1,882 -- (618)
Net cash used in discontinued operations.................. -- (329) -- -- (329)
-------- --------- -------- -------- ---------
Net change in cash and cash equivalents................... (2,993) 164 1,882 -- (947)
Cash and cash equivalents at beginning of year............ 11,017 (1,865) 4,863 -- 14,015
-------- --------- -------- -------- ---------
Cash and cash equivalents at end of year.................. $ 8,024 $ (1,701) $ 6,745 $ -- $ 13,068
======== ========= ======== ======== =========
F-25
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of and for the year ended March 31, 2001:
Domestic Foreign
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
(In thousands)
As of March 31, 2001:
Current assets:
Cash................................................... $ 11,017 $ (1,865) $ 4,863 $ $ 14,015
Trade accounts receivable and unbilled revenues........ 65,932 12,268 21,673 -- 99,873
Inventories............................................ 47,012 33,820 29,055 (974) 108,913
Net assets held for sale............................... -- 4,270 -- -- 4,270
Net current assets of discontinued operations.......... -- 46,874 -- -- 46,874
Other current assets................................... 5,368 (2,919) 3,188 -- 5,637
-------- --------- -------- --------- --------
Total current assets................................ 129,329 92,448 58,779 (974) 279,582
Net property, plant, and equipment........................ 34,599 25,212 17,951 -- 77,762
Goodwill and other intangibles, net....................... 38,992 127,688 46,621 -- 213,301
Intercompany balances..................................... 168,763 (334,599) (63,864) 229,700 --
Net non-current assets of discontinued operations......... -- 116,658 -- -- 116,658
Other non-current assets.................................. 226,711 161,070 (2,017) (350,679) 35,085
-------- --------- -------- --------- --------
Total assets........................................ $598,394 $ 188,477 $ 57,470 $(121,953) $722,388
======== ========= ======== ========= ========
Current liabilities....................................... $ 39,673 $ 15,228 $ 21,966 $ (362) $ 76,505
Debt, less current portion................................ 400,137 -- 3,815 -- 403,952
Other non-current liabilities............................. 15,529 15,804 2,734 -- 34,067
-------- --------- -------- --------- --------
Total liabilities................................... 455,339 31,032 28,515 (362) 514,524
Shareholders' equity...................................... 143,055 157,445 28,955 (121,591) 207,864
-------- --------- -------- --------- --------
Total liabilities and shareholders' equity.......... $598,394 $ 188,477 $ 57,470 $(121,953) $722,388
======== ========= ======== ========= ========
For the Year Ended March 31, 2001:
Net sales................................................. $252,128 $ 237,673 $119,475 $ (23,108) $586,168
Cost of products sold..................................... 175,181 184,235 90,260 (23,017) 426,659
-------- --------- -------- --------- --------
Gross profit.............................................. 76,947 53,438 29,215 (91) 159,509
-------- --------- -------- --------- --------
Selling, general and administrative expenses.............. 39,196 23,331 20,117 -- 82,644
Amortization of intangibles............................... 2,011 6,535 2,429 -- 10,975
-------- --------- -------- --------- --------
41,207 29,866 22,546 -- 93,619
-------- --------- -------- --------- --------
Income (loss) from operations............................. 35,740 23,572 6,669 (91) 65,890
Interest and debt expense................................. 35,783 (32) 578 -- 36,329
Other (income) and expense, net........................... (1,621) (236) (303) -- (2,160)
-------- --------- -------- --------- --------
Income (loss) from continuing operations before income tax
expense.................................................. 1,578 23,840 6,394 (91) 31,721
Income tax expense........................................ 2,326 11,344 3,161 (37) 16,794
-------- --------- -------- --------- --------
(Loss) income from continuing operations.................. (748) 12,496 3,233 (54) 14,927
Income from discontinued operations....................... -- 292 -- -- 292
-------- --------- -------- --------- --------
Net (loss) income......................................... $ (748) $ 12,788 $ 3,233 $ (54) $ 15,219
======== ========= ======== ========= ========
F-26
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Domestic Foreign
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
(In thousands)
For the Year Ended March 31, 2001:
Operating activities:
Cash provided by (used in) operating activities......... $19,831 $10,457 $ 9,054 $(1,072) $ 38,270
Investing activities:
Purchase of marketable securities, net.................. (2,064) -- -- -- (2,064)
Capital expenditures.................................... (4,419) (4,961) (799) -- (10,179)
Net assets held for sale................................ -- 5,002 -- -- 5,002
------- ------- ------- ------- --------
Net cash (used in) provided by investing activities..... (6,483) 41 (799) -- (7,241)
Financing activities:
Net (payments) borrowings under revolving line-of-credit
agreements............................................. (3,000) (9,597) 335 -- (12,262)
Repayment of debt....................................... (1,579) -- (2,158) -- (3,737)
Dividends paid.......................................... (3,995) -- (1,072) 1,072 (3,995)
Other................................................... 489 -- -- -- 489
------- ------- ------- ------- --------
Net cash (used in) provided by financing activities..... (8,085) (9,597) (2,895) 1,072 (19,505)
Effect of exchange rate changes on cash................. -- -- (4,026) -- (4,026)
------- ------- ------- ------- --------
Net cash provided by continuing operations.............. 5,263 901 1,334 -- 7,498
Net cash used in discontinued operations................ -- (1,065) -- -- (1,065)
------- ------- ------- ------- --------
Net change in cash and cash equivalents................. 5,263 (164) 1,334 -- 6,433
Cash and cash equivalents at beginning of year.......... 5,754 (1,701) 3,529 -- 7,582
------- ------- ------- ------- --------
Cash and cash equivalents at end of year................ $11,017 $(1,865) $ 4,863 $ -- $ 14,015
======= ======= ======= ======= ========
18. Business Segment Information
As a result of the way the Company manages the business, its reportable
segments are strategic business units that offer products with different
characteristics. The most defining characteristic is the extent of customized
engineering required on a per-order basis. In addition, the segments serve
different customer bases through differing methods of distribution. The Company
has two reportable segments: Products and Solutions. The Company's Products
segment sells hoists, industrial cranes, chain, attachments, and other material
handling products principally to third party distributors through diverse
distribution channels, and to a lesser extent directly to manufacturers and
other end-users. The Solutions segment sells engineered material handling
systems such as conveyors, manipulators, and lift tables primarily to end-users
in the consumer products, manufacturing, warehousing, and, to a lesser extent,
the steel, construction, automotive, and other industrial markets. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Intersegment sales are not
significant. The Company evaluates performance based on operating earnings of
the respective business units prior to the effects of amortization.
Segment information as of and for the years ended March 31, 2002, 2001, and
2000 is as follows:
Year Ended March 31, 2002
---------------------------
Products Solutions Total
-------- --------- --------
(In thousands)
Sales to external customers...................... $404,731 $75,297 $480,028
Operating income before restructuring charges and
amortization................................... 47,045 1,665 48,710
Depreciation and amortization.................... 19,515 2,947 22,462
Total assets..................................... 438,294 64,504 502,798
Capital expenditures............................. 3,904 849 4,753
F-27
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Year Ended March 31, 2001
---------------------------
Products Solutions Total
-------- --------- --------
(In thousands)
Sales to external customers.................. $478,898 $107,270 $586,168
Operating income before restructuring charges
and amortization........................... 73,096 3,769 76,865
Depreciation and amortization................ 19,859 2,816 22,675
Total assets................................. 487,551 71,305 558,856
Capital expenditures......................... 9,889 290 10,179
Year Ended March 31, 2000
---------------------------
Products Solutions Total
-------- --------- --------
(In thousands)
Sales to external customers.................. $511,287 $97,891 $609,178
Operating income before restructuring charges
and amortization........................... 75,371 7,826 83,197
Depreciation and amortization................ 19,843 3,092 22,935
Total assets................................. 505,461 73,801 579,262
Capital expenditures......................... 7,805 118 7,923
The following provides a reconciliation of operating income before
restructuring charges and amortization to consolidated income before income tax
expense:
Year Ended March 31,
----------------------------
2002 2001 2000
-------- -------- --------
(In thousands)
Operating income before restructuring charges
and amortization............................. $ 48,710 $ 76,865 $ 83,197
Restructuring charges of Products segment...... (9,569) -- --
Amortization of intangibles.................... (11,013) (10,975) (11,384)
Interest and debt expense...................... (29,381) (36,329) (33,451)
Other income and (expense)..................... (2,464) 2,160 1,320
-------- -------- --------
(Loss) income from continuing operations before
income tax expense........................... $ (3,717) $ 31,721 $ 39,682
======== ======== ========
Financial information relating to the Company's operations by geographic
area is as follows:
Year Ended March 31,
--------------------------
2002 2001 2000
-------- -------- --------
(In thousands)
Net sales:
United States $374,070 $470,195 $482,658
Europe....... 70,097 71,967 71,076
Canada....... 29,340 36,635 49,716
Other........ 6,521 7,371 5,728
-------- -------- --------
Total.... $480,028 $586,168 $609,178
======== ======== ========
F-28
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Year Ended March 31,
--------------------------
2002 2001 2000
-------- -------- --------
(In thousands)
Assets:
United States.................... $388,669 $437,522 $452,234
Europe........................... 92,541 94,908 95,601
Canada........................... 17,071 21,936 27,130
Other............................ 4,517 4,490 4,297
-------- -------- --------
Assets of continuing operations.. 502,798 558,856 579,262
Assets of discontinued operations 21,497 163,532 152,575
-------- -------- --------
Total........................ $524,295 $722,388 $731,837
======== ======== ========
19. Selected Quarterly Financial Data (Unaudited)
As a result of the restatement related to the discontinued operations as
discussed in Note 3, the quarterly information set forth below for net sales,
gross profit, income from operations, and income (loss) from continuing
operations does not agree to the amounts previously reported in the quarterly
Form 10-Qs filed during fiscal year 2002.
As previously reported:
Three Months Ended
-----------------------------------
July 1, September 30, December 30,
2001 2001 2001
-------- ------------- ------------
(In thousands, except per share data)
Net sales..................................... $175,905 $171,577 $137,747
Gross profit.................................. 34,958 32,974 31,988
Income from operations........................ 3,084 8,371 9,228
Net (loss) income............................. $ (4,661) $ (1,332) $ (92)
======== ======== ========
Net (loss) income per share--basic and diluted $ (0.32) $ (0.09) $ (0.01)
======== ======== ========
Restated to reflect discontinued operations presentation:
Three Months Ended
----------------------------------------------
July 1, September 30, December 30, March 31,
2001 2001 2001 2002
-------- ------------- ------------ ---------
(In thousands, except per share data)
Net sales....................................... $129,086 $122,542 $113,922 $ 114,478
Gross profit.................................... 33,473 31,194 29,924 25,886
Income from operations.......................... 4,922 9,840 10,293 3,073
(Loss) income from continuing operations........ (2,819) 268 1,244 (4,711)
Loss from discontinued operations............... (1,842) (1,600) (1,336) (3,095)
Loss on disposal of discontinued operations..... -- -- -- (121,475)
Net (loss) income............................... $ (4,661) $ (1,332) $ (92) $(129,281)
======== ======== ======== =========
Net (loss) income per share--basic and diluted:
Continuing operations........................... $ (0.19) $ 0.02 $ 0.09 $ (0.34)
Discontinued operations......................... (0.13) (0.11) (0.10) (0.21)
Loss on disposal of discontinued operations..... -- -- -- (8.41)
-------- -------- -------- ---------
Net loss (income)............................... $ (0.32) $ (0.09) $ (0.01) $ (8.96)
======== ======== ======== =========
F-29
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As previously reported:
Three Months Ended
------------------------------------------
July 2, October 1, December 31, March 31,
2000 2000 2000 2001
-------- ---------- ------------ ---------
(In thousands, except per share data)
Net sales.............................. $188,378 $188,994 $175,078 $143,141
Gross profit........................... 47,214 44,990 39,534 40,919
Income from operations................. 20,378 18,680 13,672 16,949
Net income............................. $ 5,946 $ 4,388 $ 1,296 $ 3,879
======== ======== ======== ========
Net income per share--basic and diluted $ 0.42 $ 0.31 $ 0.09 $ 0.25
======== ======== ======== ========
Restated to reflect discontinued operations presentation:
Three Months Ended
-----------------------------------------
July 2, October 1, December 31, March 31,
2000 2000 2000 2001
-------- ---------- ------------ ---------
(In thousands, except per share data)
Net sales...................................... $152,499 $150,738 $139,790 $143,141
Gross profit................................... 42,897 40,255 35,438 40,919
Income from operations......................... 19,024 17,149 12,768 16,949
Income from continuing operation............... 5,682 4,037 1,329 3,879
Income (loss) from discontinued operations..... 264 351 (33) (290)
Net income..................................... $ 5,946 $ 4,388 $ 1,296 $ 3,589
======== ======== ======== ========
Net income (loss) per share--basic and diluted:
Continuing operations.......................... $ 0.40 $ 0.29 $ 0.09 $ 0.27
Discontinued operations........................ 0.02 0.02 (0.00) (0.02)
-------- -------- -------- --------
Net income..................................... $ 0.42 $ 0.31 $ 0.09 $ 0.25
======== ======== ======== ========
20. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
March 31,
------------------
2002 2001
-------- --------
(In thousands)
Net unrealized investment (losses) gains--net of tax $ 2,069 $ (99)
Derivatives qualifying as hedges--net of tax........ (424) --
Minimum pension liability adjustment--net of tax.... (3,050) (1,123)
Foreign currency translation adjustment............. (12,589) (12,805)
-------- --------
Accumulated other comprehensive loss................ $(13,994) $(14,027)
======== ========
21. Effects of New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement on
Financial Accounting Standards (SFAS) No. 141, "Business Combinations" in June
2001. SFAS No. 141 eliminates the pooling-of-interests method of accounting for
business combinations and modifies the application of
F-30
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the purchase accounting method. The elimination of the pooling-of-interests
method is effective for transactions initiated after June 30, 2001. The
adoption of this Statement did not have an impact on the consolidated financial
statements.
The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets" in
June of 2001. SFAS No. 142 eliminates the current requirement to amortize
goodwill and indefinite-lived intangible assets, addresses the amortization of
intangible assets with a defined life and the impairment testing and
recognition for goodwill and intangible assets. SFAS No. 142 will apply to
goodwill and intangible assets arising from transactions completed before and
after the effective date. This statement, which will be effective for the
Company's fiscal year beginning on April 1, 2002, must be adopted at the
beginning of the fiscal year. The Company is currently assessing the Statement
and the impact that the requirement to assess impairment upon adoption will
have on the fiscal 2003 consolidated financial statements. Upon adoption, the
Company will stop amortizing goodwill which, based upon current levels of
goodwill for continuing operations, would reduce amortization expense by
approximately $11 million on an annual basis.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations"
in June 2001. SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is
incurred. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. This Statement, which is effective for
the Company's fiscal year beginning April 1, 2003, may be adopted as of April
1, 2002. We are currently assessing the Statement and the impact, if any, that
adoption will have on our fiscal 2003 consolidated financial statements.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" in August 2001. SFAS No. 144 supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," and the accounting and reporting provisions of APB Opinion
No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." The statement, while retaining many of the
fundamental recognition and measurement provisions of SFAS No. 121, changes the
criteria to be met to classify an asset as held-for-sale as well as the
grouping of long-lived assets and liabilities that represent the unit of
accounting for a long-lived asset to be held and used. SFAS No. 144 is
effective for the Company's fiscal year beginning April 1, 2002. We are
currently assessing the Statement and the impact, if any, that adoption will
have on our fiscal 2003 consolidated financial statements.
F-31
Item 9. Changes in and Disagreements with Accountants on Accounting
-----------------------------------------------------------
and Financial Disclosures
-------------------------
None.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
- -------- ---------------------------------------------------
The information regarding Directors and Executive Officers of the
Registrant will be included in a Proxy Statement to be filed with the Commission
prior to July 29, 2002 and upon the filing of such Proxy Statement, is
incorporated by reference herein.
Item 11. Executive Compensation
- -------- ----------------------
The information regarding Executive Compensation will be included in a
Proxy Statement to be filed with the Commission prior to July 29, 2002 and upon
the filing of such Proxy Statement, is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The information regarding Security Ownership of Certain Beneficial Owners
and Management will be included in a Proxy Statement to be filed with the
Commission prior to July 29, 2002 and upon the filing of such Proxy Statement,
is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The information regarding Certain Relationships and Related Transactions
will be included in a Proxy Statement to be filed with the Commission prior to
July 29, 2002 and upon the filing of such Proxy Statement, is incorporated by
reference herein.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Reports on
- ------- Form 8-K.
-------------------------------------------------------
(a)(1) Financial Statements:
---------------------
The following consolidated financial statements of Columbus McKinnon
Corporation are included in Item 8:
Reference Page No.
--------- --------
Report of Independent Auditors F-2
Consolidated balance sheets - March 31, 2002 and 2001 F-3
Consolidated statements of operations - Years ended March 31, 2002 and 2001 F-4
Consolidated statements of shareholders' equity - Years ended March 31, 2002, F-5
2001 and 2000
Consolidated statements of cash flows - Years ended March 31, 2002, 2001 and F-6
2000
Notes to consolidated financial statements F-7 to F-33
(a)(2) Financial Statement Schedule:
-----------------------------
Schedule II - Valuation and qualifying accounts F-34
33
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and
therefore have been omitted.
(a)(3) Exhibits:
Exhibit
Number
-------
3.1 Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement No. 33-80687 on Form S-1
dated December 21, 1995).
3.2 Amended By-Laws of the Registrant (incorporated by reference
to Exhibit 3 to the Company's Current Report on Form 8-K dated
May 17, 1999).
4.1 Specimen Common Share Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement No. 33-80687
on Form S-1 dated December 21, 1995).
4.2 First Amendment and Restatement of Rights Agreement, dated as of
October 1, 1998, between Columbus McKinnon Corporation and
American Stock Transfer & Trust Company, as Rights Agent
(incorporated by reference to Exhibit 4 to the Company's Current
Report on Form 8-K dated October 29, 1998).
4.3 Indenture among Columbus McKinnon Corporation, the guarantors
named on the signature pages thereto and State Street Bank and
Trust Company, N.A., as trustee (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K dated
April 9, 1998).
4.4 Supplemental Indenture among LICO, Inc., Automatic Systems, Inc.,
LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial
Products, Inc., Mechanical Products, Inc., Minitec Corporation
and State Street Bank and Trust Company, N.A., as trustee,
dated March 31, 1998 (incorporated by reference to Exhibit 4.3 to
the Company's Current Report on form 8-K dated April 9, 1998).
4.5 Second Supplemental Indenture among Abell-Howe Crane, Inc.,
LICO, Inc., Automatic Systems, Inc. LICO Steel, Inc., Columbus
McKinnon Corporation, Yale Industrial Products Inc. and State
Street Bank and Trust Company, N.A., as trustee, dated as of
February 12, 1999 (incorporated by reference to Exhibit 4.6 to
the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999).
4.6 Third Supplemental Indenture among G.L. International, Inc.,
Gaffey, Inc., Handling Systems and Conveyors,
Inc., Larco Material Handling Inc., Abell-Howe Crane, Inc.,
LICO, Inc., Automatic Systems, Inc., LICO Steel,
Inc., Columbus McKinnon Corporation, Yale Industrial Products,
Inc. and State Street Bank and Trust Company,
N.A., as trustee, dated as of March 1, 1999 (incorporated by
reference to Exhibit 4.7 to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1999).
4.7 Fourth Supplemental Indenture among Washington Equipment
Company, G.L. International, Inc., Gaffey, Inc., Handling
Systems and Conveyors, Inc., Larco Material Handling Inc.,
Abell-Howe Crane, Inc., Automatic Systems, Inc., LICO Steel,
Inc., Columbus McKinnon Corporation, Yale Industrial Products,
Inc. and State Street Bank and Trust Company, N.A., as trustee,
dated as of November 1, 1999 (incorporated by reference to
Exhibit 10.2 to the Company's quarterly report on form 10-Q
for the quarterly period ended October 3, 1999).
# 4.8 Fifth Supplemental Indenture among Columbus McKinnon
Corporation, Crane Equipment & Service, Inc., Automatic
Systems, Inc., LICO Steel, Inc., Yale Industrial Products, Inc.
and State Street Bank and Trust Company, N.A., as trustee,
dated as of April 4, 2002.
10.1 Amended and Restated Term Loan Agreement by and among Fleet
Bank of New York, Columbus McKinnon Corporation and Kenneth G.
McCreadie, Peter A. Grant and Robert L. Montgomery, Jr., as
Trustees under the Columbus McKinnon Corporation Employee Stock
Ownership Trust Agreement, dated March 31, 1993 (incorporated by
reference to Exhibit 10.2 to the Company's Registration
Statement No. 33-80687 on Form S-1
34
dated December 21, 1995).
10.2 Amendment No. 1 to Amended and Restated Term Loan Agreement,
dated March 31, 1993, by and among Fleet Bank of
New York, Columbus McKinnon Corporation and Kenneth G. McCreadie,
Peter A. Grant and Robert L. Montgomery, Jr. as trustees under
the Columbus McKinnon Corporation Employee Stock Ownership Trust
Agreement, dated October 27, 1994 (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995).
10.3 Amendment No. 2 to Amended and Restated Term Loan Agreement by
and among Fleet Bank, Columbus McKinnon Corporation and
Kenneth G. McCreadie, Peter A. Grant and Robert L. Montgomery,
Jr. under the Columbus McKinnon Corporation Employee Stock
Ownership Trust Agreement, dated November 2, 1995 (incorporated
by reference to Exhibit 10.4 to the Company's Registration
Statement No. 33-80687 on Form S-1 dated December 21, 1995).
10.4 Amendment No. 3 to Amended and Restated Term Loan Agreement
by and among Fleet Bank, Columbus McKinnon Corporation and Karen
L. Howard, Timothy R. Harvey, and Robert L. Montgomery, Jr. as
trustees under the Columbus McKinnon Corporation Employee Stock
Ownership Trust Agreement (incorporated by reference to Exhibit
10.4 to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1999).
10.5 Amended and Restated Term Loan Agreement by and among Columbus
McKinnon Corporation Employee Stock Ownership Trust, Columbus
McKinnon Corporation and Marine Midland Bank, dated August 5,
1996 (incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1999).
10.6 First Amendment to Amended and Restated Term Loan Agreement by
and among Columbus McKinnon Corporation Employee Stock Ownership
Trust, Columbus McKinnon Corporation and Marine Midland Bank,
dated October 16, 1996 (incorporated by reference to Exhibit 10.7
to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999).
10.7 Second Amendment to Amended and Restated Term Loan Agreement by
and among Columbus McKinnon Corporation Employee Stock Ownership
Trust, Columbus McKinnon Corporation and Marine Midland Bank,
dated March 31, 1998 (incorporated by reference to Exhibit 10.8
to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999).
10.8 Third Amendment to Amended and Restated Term Loan Agreement by
and among Columbus McKinnon Corporation Employee Stock Ownership
Trust, Columbus McKinnon Corporation and Marine Midland Bank,
dated November 30, 1998 (incorporated by reference to Exhibit
10.9 to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1999).
10.9 Agreement by and among Columbus McKinnon Corporation Employee
Stock Ownership Trust, Columbus McKinnon Corporation and Marine
Midland Bank, dated November 2, 1995 (incorporated by reference
to Exhibit 10.6 to the Company's Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995).
10.10 Credit Agreement, dated as of March 31, 1998, among Columbus
McKinnon Corporation, as Borrower, the banks, financial
institutions and other institutional lenders named therein, as
Initial Lenders, Fleet National Bank, as the Initial Issuing
Bank, Fleet National Bank, as the Swing Line Bank, and Fleet
National Bank, as the Administrative Agent (incorporated by
reference to Exhibit 10.2 to the Company's Current Report on Form
8-K dated April 9, 1998).
10.11 First Amendment, dated as of September 23, 1998, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as Borrower, the banks, financial institutions and
other institutional lenders named therein, as Initial Lenders,
Fleet National Bank, as the Initial Issuing Bank, Fleet National
Bank, as the Swing Line Bank and Fleet National Bank, as the
Administrative Agent (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 27, 1998).
10.12 Second Amendment, dated as of February 12, 1999, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as Borrower, the banks, financial institutions and
other institutional
35
leaders named therein, as Initial Lenders,
Fleet National Bank, as the Initial Issuing Bank, Fleet National
Bank, as the Swing Line Bank and Fleet National Bank, as the
Administrative Agent (incorporated by reference to Exhibit 10.13
to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999).
10.13 Third Amendment dated as of November 16, 1999, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet National Bank, as
the Administrative Agent (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended October 3, 1999).
10.14 Fourth Amendment and Waiver, dated as of February 15, 2000, to
the Credit Agreement, dated as of March 31, 1998, among Columbus
McKinnon Corporation, as the Borrower, the banks, financial
institutions and other institutional lenders named therein, as
Initial Lenders, Fleet National Bank, as the Initial Issuing
Bank, Fleet National Bank, as the Swing Line Bank and Fleet
National Bank, as the Administrative Agent (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended January 2, 2000).
10.15 Fifth Amendment, dated as of September 28, 2000, to the Credit
Agreement, dated as of March 31,1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet National Bank, as
the Administrative Agent (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended October 1, 2000).
10.16 Sixth Amendment, dated as of February 5, 2001, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet National Bank, as
the Administrative Agent (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 31, 2000).
10.17 Seventh Amendment, dated as of June 26, 2001, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet National Bank, as
the Administrative Agent (incorporated by reference to Exhibit
10.18 to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 2001).
10.18 Eighth Amendment, dated as of November 21, 2001, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet National Bank, as
the Administrative Agent (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 30, 2001).
10.19 Ninth Amendment, dated as of February 12, 2002, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet National Bank, as
the Administrative Agent (incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 30, 2001).
#10.20 Tenth Amendment, dated as of April 16, 2002, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet National Bank, as
the Administrative Agent.
#10.21 Eleventh Amendment, dated as of June 6, 2002, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet National Bank, as
the Administrative Agent.
36
*10.22 Columbus McKinnon Corporation Employee Stock Ownership Plan
Restatement Effective April 1, 1989 (incorporated
by reference to Exhibit 10.23 to the Company's Registration
Statement No. 33-80687 on Form S-1 dated December 21, 1995).
*10.23 Amendment No. 1 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as
of April 1, 1989, dated March 2, 1995 (incorporated by reference
to Exhibit 10.24 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
*10.24 Amendment No. 2 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan, dated October 17, 1995 (incorporated by
reference to Exhibit 10.38 to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1997).
*10.25 Amendment No. 3 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan, dated March 27, 1996 (incorporated by
reference to Exhibit 10.39 to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1997).
*10.26 Amendment No. 4 of the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989,
dated September 30, 1996 (incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996).
*10.27 Amendment No. 5 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989,
dated August 28, 1997 (incorporated by reference to Exhibit 10.37
to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998).
*10.28 Amendment No. 6 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989,
dated June 24, 1998 (incorporated by reference to Exhibit 10.38
to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998).
*10.29 Amendment No. 7 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989,
dated April 30, 2000 (incorporated by reference to Exhibit 10.24
to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2000).
#*10.30 Amendment No. 8 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as
of April 1, 1989, dated March 26, 2002.
*10.31 Columbus McKinnon Corporation Personal Retirement Account Plan
Trust Agreement, dated April 1, 1987 (incorporated by reference
to Exhibit 10.25 to the Company's Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995).
*10.32 Amendment No. 1 to the Columbus McKinnon Corporation Employee
Stock Ownership Trust Agreement (formerly known as the Columbus
McKinnon Corporation Personal Retirement Account Plan Trust
Agreement) effective November 1, 1988 (incorporated by
reference to Exhibit 10.26 to the Company's Registration
Statement No. 33-80687 on Form S-1 dated December 21, 1995).
*10.33 Amendment and Restatement of Columbus McKinnon Corporation 1995
Incentive Stock Option Plan (incorporated by reference to Exhibit
10.25 to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1999).
*10.34 Columbus McKinnon Corporation Restricted Stock Plan
(incorporated by reference to Exhibit 10.28 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
*10.35 Amendment and Restatement of Columbus McKinnon Corporation
Non-Qualified Stock Option Plan (incorporated by reference to
Exhibit 10.27 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1999).
*10.36 Columbus McKinnon Corporation Thrift [401(k) Plan] 1989
Restatement Effective January 1, 1998 (incorporated by reference
to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended December 27, 1998).
37
*10.37 Amendment No. 1 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Thrift 401(k) Plan, dated December 10, 1998
(incorporated by reference to Exhibit 10.29 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1999).
*10.38 Amendment No. 2 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Thrift 401(k) Plan, dated June 1, 2000
(incorporated by reference to Exhibit 10.33 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
2000).
#*10.39 Amendment No. 3 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Thrift 401(k) Plan, dated
March 26, 2002.
*10.40 Columbus McKinnon Corporation Thrift 401(k) Plan Trust Agreement
Restatement Effective August 9, 1994 (incorporated by reference
to Exhibit 10.32 to the Company's Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995).
*10.41 Columbus McKinnon Corporation Monthly Retirement Benefit Plan
Restatement Effective April 1, 1998 (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended December 27, 1998).
*10.42 Amendment No. 1 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Monthly Retirement Benefit Plan, dated
December 10, 1998 (incorporated by reference to Exhibit 10.32 to
the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999).
*10.43 Amendment No. 2 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Monthly Retirement Benefit Plan, dated May
26, 1999 (incorporated by reference to Exhibit 10.33 to the
Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1999).
#*10.44 Amendment No. 3 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Monthly Retirement Benefit
Plan, dated March 26, 2002.
*10.45 Columbus McKinnon Corporation Monthly Retirement Benefit Plan
Trust Agreement effective as of April 1, 1987 (incorporated by
reference to Exhibit 10.34 to the Company's Registration
Statement No. 33-80687 on Form S-1 dated December 21, 1995).
*10.46 Form of Change in Control Agreement as entered into between
Columbus McKinnon Corporation and each of Timothy
T. Tevens, Robert L. Montgomery, Jr., Ned T. Librock,
Karen L. Howard, Lois H. Demler, Timothy R. Harvey,
John Hansen and Neal Wixson (incorporated by reference to
Exhibit 10.33 to the Company's Annual Report on
Form 10-K for the fiscal year ended March, 31, 1998).
*10.47 Columbus McKinnon Corporation Corporate Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended July
1, 2001).
*10.48 Consulting Agreement dated as of October 1, 2001 between
Columbus McKinnon Corporation and Herbert P. Ladds,
Jr. (incorporated by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
December 30, 2001).
10.49 Asset Purchase Agreement dated as of May 10, 2002 by and
among Automatic Systems, Inc., Columbus McKinnon
Corporation and ASI Acquisition Corp. (incorporated by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K dated
May 29, 2002).
#21.1 Subsidiaries of the Registrant.
#23.1 Consent of Ernst & Young LLP.
* Indicates a management contract or compensation plan or arrangement.
# Filed herewith
38
(b) Reports on Form 8-K:
On March 8, 2002, the Company filed a Current Report on Form 8-K
with respect to a press release issued to announce the solicitation of
consents from the holders of its outstanding 8 1/2% Senior Subordinated
Notes due 2008 to amend certain provisions of the Indenture pursuant to
which such notes were issued.
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: June 11, 2002
COLUMBUS McKINNON CORPORATION
By: /s/ Timothy T. Tevens
----------------------
Timothy T. Tevens
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
S/ TIMOTHY T. TEVENS President and Chief Executive Officer June 11, 2002
- ------------------------------------ (Principal Executive Officer)
Timothy T. Tevens
S/ ROBERT L. MONTGOMERY, JR. Executive Vice President, Chief Financial
- ------------------------------------ Officer and Director June 11, 2002
Robert L. Montgomery, Jr. (Principal Financial Officer and
Principal Accounting Officer)
S/ HERBERT P. LADDS, JR. Chairman of the Board of Directors June 11, 2002
- ------------------------------------
Herbert P. Ladds, Jr.
S/ L. DAVID BLACK Director June 11, 2002
- ------------------------------------
L. David Black
S/ CARLOS PASCUAL Director June 11, 2002
- ------------------------------------
Carlos Pascual
S/ RICHARD H. FLEMING Director June 11, 2002
- ------------------------------------
Richard H. Fleming
40