UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT 1934 For the quarterly period ended December 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to ------------------- ------------------- Commission File Number: 0-27618 ------- COLUMBUS MCKINNON CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW YORK 16-0547600 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 140 JOHN JAMES AUDUBON PARKWAY, AMHERST, NY 14228-1197 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (716) 689-5400 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark 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. : [X] Yes [ ] No The number of shares of common stock outstanding as of December 31, 2000 was: 14,896,172 shares.
FORM 10-Q INDEX COLUMBUS MCKINNON CORPORATION DECEMBER 31, 2000 PAGE # ------ PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed consolidated balance sheets - December 31, 2000 and March 31, 2000 2 Condensed consolidated statements of income and retained earnings - Three months and nine months ended December 31, 2000 and January 2, 2000 3 Condensed consolidated statements of cash flows - Nine months ended December 31, 2000 and January 2, 2000 4 Condensed consolidated statements of comprehensive income - Three months and nine months ended December 31, 2000 and January 2, 2000 5 Notes to condensed consolidated financial statements - December 31, 2000 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings - none. 19 Item 2. Changes in Securities - none. 19 Item 3. Defaults upon Senior Securities - none. 19 Item 4. Submission of Matters to a Vote of Security Holders - none. 19 Item 5. Other Information - none. 19 Item 6. Exhibits and Reports on Form 8-K 19 - 1 -
PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) <TABLE> <CAPTION> COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) DECEMBER 31, MARCH 31, 2000 2000 ---------- ----------- ASSETS: (IN THOUSANDS) Current assets: <S> <C> <C> Cash and cash equivalents ......................................... $ 6,630 $ 7,582 Trade accounts receivable ......................................... 143,442 143,401 Unbilled revenues ................................................. 40,158 24,447 Inventories ....................................................... 118,538 108,291 Net assets held for sale .......................................... 7,765 9,272 Prepaid expenses .................................................. 6,656 6,181 ---------- ----------- Total current assets .................................................... 323,189 299,174 Net property, plant, and equipment ...................................... 87,090 87,297 Goodwill and other intangibles, net ..................................... 326,939 339,603 Marketable securities ................................................... 23,424 23,193 Deferred taxes on income ................................................ 4,659 4,237 Other assets ............................................................ 6,992 6,320 ---------- ----------- Total assets ............................................................ $ 772,293 $ 759,824 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Notes payable to banks ............................................ $ 3,870 $ 2,677 Trade accounts payable ............................................ 40,854 49,621 Excess billings ................................................... 4,890 4,288 Accrued liabilities ............................................... 49,335 51,246 Current portion of long-term debt ................................. 798 3,493 ---------- ----------- Total current liabilities ............................................... 99,747 111,325 Senior debt, less current portion ....................................... 225,148 210,684 Subordinated debt ....................................................... 199,614 199,574 Other non-current liabilities ........................................... 37,804 34,788 ---------- ----------- Total liabilities ....................................................... 562,313 556,371 ---------- ----------- Shareholders' equity: Common stock ...................................................... 149 149 Additional paid-in capital ........................................ 107,071 106,884 Retained earnings ................................................. 122,208 113,582 ESOP debt guarantee ............................................... (8,078) (8,703) Unearned restricted stock ......................................... (2,173) (2,843) Total accumulated other comprehensive loss ........................ (9,197) (5,616) ---------- ----------- Total shareholders' equity .............................................. 209,980 203,453 ---------- ----------- Total liabilities and shareholders' equity .............................. $ 772,293 $ 759,824 ========== =========== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 2 -
<TABLE> <CAPTION> COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- DECEMBER 31, JANUARY 2, DECEMBER 31, JANUARY 2, 2000 2000 2000 2000 ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> Net sales ..................................... $ 175,078 $ 174,173 $ 552,450 $ 537,782 Cost of products sold ......................... 135,544 130,768 420,712 407,532 ----------- ----------- ----------- ----------- Gross profit .................................. 39,534 43,405 131,738 130,250 ----------- ----------- ----------- ----------- Selling expenses .............................. 12,523 13,405 37,337 38,575 General and administrative expenses ........... 9,325 9,762 29,626 30,031 Proxy contest related expenses ................ - - - 965 Amortization of intangibles ................... 4,014 4,062 12,045 12,064 ----------- ----------- ----------- ----------- 25,862 27,229 79,008 81,635 ----------- ----------- ----------- ----------- Income from operations ........................ 13,672 16,176 52,730 48,615 Interest and debt expense ..................... 9,815 8,937 28,806 25,510 Interest and other income ..................... 524 638 2,136 1,191 ----------- ----------- ----------- ----------- Income before income taxes .................... 4,381 7,877 26,060 24,296 Income tax expense ............................ 3,085 4,623 14,430 14,136 ----------- ----------- ----------- ----------- Net income .................................... 1,296 3,254 11,630 10,160 Retained earnings - beginning of period ....... 121,915 105,383 113,582 100,455 Cash dividends of $0.07, $0.07, $0.21 and $0.21 per share ............................ (1,003) (995) (3,004) (2,973) ----------- ----------- ----------- ----------- Retained earnings - end of period ............. $ 122,208 $ 107,642 $ 122,208 $ 107,642 =========== =========== =========== =========== Earnings per share data, basic ................ $0.09 $0.23 $0.81 $0.72 ===== ===== ===== ===== Earnings per share data, diluted .............. $0.09 $0.23 $0.81 $0.71 ===== ===== ===== ===== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 3 -
<TABLE> <CAPTION> COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED ----------------- DECEMBER 31, JANUARY 2, 2000 2000 ---- ---- (IN THOUSANDS) OPERATING ACTIVITIES: <S> <C> <C> Net income ............................................................... $ 11,630 $ 10,160 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ....................................... 21,317 21,650 Deferred income taxes ............................................... (422) 561 Other ............................................................... 939 689 Changes in operating assets and liabilities net of effects from businesses purchased: Trade accounts receivable ..................................... (41) 3,898 Unbilled revenues and excess billings ......................... (15,109) (6,610) Inventories ................................................... (10,247) 1,930 Prepaid expenses .............................................. (475) (690) Other assets .................................................. (793) (99) Trade accounts payable ........................................ (8,767) (5,393) Accrued and non-current liabilities ........................... 1,952 (5,993) --------- ---------- Net cash (used in) provided by operating activities ...................... (16) 20,103 --------- ---------- INVESTING ACTIVITIES: Purchase of marketable securities, net ................................... (2,143) (2,519) Capital expenditures ..................................................... (9,065) (5,983) Purchases of businesses, net of cash ..................................... - (6,382) Net assets held for sale ................................................. 1,507 (1,056) --------- ---------- Net cash used in investing activities .................................... (9,701) (15,940) --------- ---------- FINANCING ACTIVITIES: Proceeds from issuance of common stock ................................... - 3 Net borrowings under revolving line-of-credit agreements ................. 16,193 6,422 Repayment of debt ........................................................ (3,231) (1,308) Dividends paid ........................................................... (3,004) (2,973) Reduction of ESOP debt guarantee ......................................... 625 625 Other .................................................................... (375) (916) --------- ---------- Net cash provided by financing activities ................................ 10,208 1,853 Effect of exchange rate changes on cash .................................. (1,443) 1,245 --------- ---------- Net (decrease) increase in cash and cash equivalents ..................... (952) 7,261 Cash and cash equivalents at beginning of period ......................... 7,582 6,867 --------- ---------- Cash and cash equivalents at end of period ............................... $ 6,630 $ 14,128 ========= ========== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 4 -
<TABLE> <CAPTION> COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- DECEMBER 31, JANUARY 2, DECEMBER 31, JANUARY 2, 2000 2000 2000 2000 ---- ---- ---- ---- (IN THOUSANDS) <S> <C> <C> <C> <C> Net income ........................................ $ 1,296 $ 3,254 $ 11,630 $ 10,160 ---------- ---------- ---------- ---------- Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ........ 1,585 (740) (1,669) 303 Unrealized (losses) gains on investments: Unrealized holding (losses) gains arising during the period ........................... (822) 878 (720) 476 Less: reclassification adjustment for gains included in net income ...................... (335) (208) (1,192) (272) ---------- ---------- ---------- ---------- (1,157) 670 (1,912) 204 ---------- ---------- ---------- ---------- Total other comprehensive income (loss) ........... 428 (70) (3,581) 507 ---------- ---------- ---------- ---------- Comprehensive income .............................. $ 1,723 $ 3,184 $ 8,048 $ 10,667 ========== ========== ========== ========== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 5 -
COLUMBUS MCKINNON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2000 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of Columbus McKinnon Corporation (the Company) at December 31, 2000, and the results of its operations and its cash flows for the three and nine-month periods ended December 31, 2000 and January 2, 2000, have been included. Results for the period ended December 31, 2000 are not necessarily indicative of the results that may be expected for the year ended March 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Columbus McKinnon Corporation annual report on Form 10-K for the year ended March 31, 2000. The Company is a broad-line designer, manufacturer and supplier of sophisticated material handling products that are widely distributed to industrial, automotive, and consumer markets worldwide; integrated material handling solutions for the automotive markets; and integrated material handling solutions for industrial markets. 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. The Company's integrated material handling solutions automotive business primarily deals with end users and sales are concentrated domestically and internationally (primarily North America), in the automotive industry. The Company's integrated material handling solutions industrial businesses also 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. 2. Inventories consisted of the following: DECEMBER 31, MARCH 31, 2000 2000 ----------- ----------- (IN THOUSANDS) At cost - FIFO basis: Raw materials $ 62,882 $ 57,198 Work-in-process 20,359 20,240 Finished goods 42,924 38,329 ----------- ----------- 126,165 115,767 LIFO cost less than FIFO cost (7,627) (7,476) ----------- ----------- $ 118,538 $ 108,291 =========== =========== An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Because these are subject to many forces beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. - 6 -
3. Property, plant, and equipment is net of $62,159,000 and $52,887,000 of accumulated depreciation at December 31, 2000 and March 31, 2000, respectively. 4. Goodwill and other intangibles, net includes $58,301,000 and $46,256,000 of accumulated amortization at December 31, 2000 and March 31, 2000, respectively. 5. General and Product Liability - The accrued general and product liability costs, which are included in other non-current liabilities, are the actuarial present value of estimated expenditures based on amounts determined from loss reports and individual cases filed with the Company, and an amount, based on past experience, for losses incurred but not reported. The accrual in these condensed consolidated financial statements was determined by applying a discount factor based on interest rates customarily used in the insurance industry. 6. The carrying amount of the Company's senior debt instruments approximates the fair values. The Company's subordinated debt has an approximate fair market value of $166,000,000, which is less than its carrying amount of $199,614,000. 7. The following table sets forth the computation of basic and diluted earnings per share: <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- DECEMBER 31, JANUARY 2, DECEMBER 31, JANUARY 2, 2000 2000 2000 2000 ---- ---- ---- ---- (IN THOUSANDS) Numerator for basic and diluted earnings per share: <S> <C> <C> <C> <C> Net income ................................... $ 1,296 $ 3,254 $11,630 $10,160 ======= ======= ======= ======= Denominators: Weighted-average common stock outstanding - denominator for basic EPS ................ 14,326 14,209 14,307 14,109 Effect of dilutive employee stock options .... - 12 - 105 ------- ------- ------- ------- Adjusted weighted-average common stock outstanding and assumed conversions - denominator for diluted EPS ............... 14,326 14,221 14,307 14,214 ======= ======= ======= ======= </TABLE> 8. Income tax expense for the three-month periods ended December 31, 2000 and January 2, 2000 and also for the nine month periods then ended exceeds the customary relationship between income tax expense and income before income taxes due to nondeductible amortization of goodwill of $3,097,000 $3,072,000, $9,268,000, and $9,224,000, respectively. 9. 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. - 7 -
10. 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 three reportable segments: material handling products, material handling solutions - industrial, and material handling solutions - automotive. The Company's material handling products segment sells hoists, industrial cranes, chain, attachments, and other material handling products principally to third party distributors through diverse distribution channels. The material handling solutions - industrial 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 material handling solutions - automotive segment sells engineered material handling systems, mainly conveyors, primarily to end-users in the automotive industry. 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 nine months ended December 31, 2000 and January 2, 2000, is as follows: <TABLE> <CAPTION> NINE MONTHS ENDED DECEMBER 31, 2000 ----------------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL ----------- ----------- ----------- ----------- (IN THOUSANDS) <S> <C> <C> <C> <C> Sales to external customers.......... $ 359,408 $ 51,348 $ 141,694 $ 552,450 Operating income before amortization...................... 53,083 4,070 7,622 64,775 Depreciation and amortization........ 15,005 2,098 4,214 21,317 Total assets......................... 490,437 69,388 212,468 772,293 Capital expenditures................. 8,708 336 21 9,065 NINE MONTHS ENDED JANUARY 2, 2000 --------------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL ----------- ----------- ----------- ----------- (IN THOUSANDS) Sales to external customers.......... $ 376,946 $ 49,327 $ 111,509 $ 537,782 Operating income before amortization...................... 56,258 5,391 (970) 60,679 Depreciation and amortization........ 15,063 2,370 4,217 21,650 Total assets......................... 505,217 71,756 194,759 771,732 Capital expenditures................. 5,567 263 153 5,983 </TABLE> - 8 -
The following schedule provides a reconciliation of operating income before amortization with consolidated income before income taxes: NINE MONTHS ENDED ----------------- DECEMBER 31, JANUARY 2, 2000 2000 ----------- ----------- (IN THOUSANDS) Operating income before amortization...... $ 64,775 $ 60,679 Amortization of intangibles............... (12,045) (12,064) Interest and debt expense................. (28,806) (25,510) Interest and other income................. 2,136 1,191 ----------- ----------- Income before income taxes................ $ 26,060 $ 24,296 =========== =========== - 9 -
11. The summary financial information of the parent, domestic subsidiaries (guarantors) and foreign subsidiaries (nonguarantors of the 8.5% senior subordinated notes) follows: <TABLE> <CAPTION> Domestic Foreign Elimina- Consoli- (In thousands) Parent Subsidiaries Subsidiaries tions dated ---------------------------------------------------------------- AS OF DECEMBER 31, 2000 Current assets: <S> <C> <C> <C> <C> <C> Cash and cash equivalents ....................... $ 3,261 $ 180 $ 3,189 $ - $ 6,630 Trade accounts receivable ....................... 63,211 55,962 24,269 - 143,442 Unbilled revenues ............................... - 40,158 - - 40,158 Inventories ..................................... 51,163 38,591 29,659 (875) 118,538 Other current assets ............................ 3,634 6,899 3,888 - 14,421 ---------------------------------------------------------------- Total current assets ........................... 121,269 141,790 61,005 (875) 323,189 Net property, plant, and equipment ............... 34,984 33,543 18,563 - 87,090 Goodwill and other intangibles, net .............. 39,436 239,439 48,064 - 326,939 Intercompany ..................................... 189,178 (351,042) (65,170) 227,034 - Other assets ..................................... 226,721 160,960 (1,927) (350,679) 35,075 ---------------------------------------------------------------- Total assets ................................... $ 611,588 $ 224,690 $ 60,535 $ (124,520) $ 772,293 ================================================================ Current liabilities .............................. $ 27,041 $ 54,251 $ 21,443 $ (2,988) $ 99,747 Long-term debt, less current portion ............. 420,586 4 4,172 - 424,762 Other non-current liabilities .................... 16,490 18,474 2,840 - 37,804 ---------------------------------------------------------------- Total liabilities .............................. 464,117 72,729 28,455 (2,988) 562,313 Shareholders' equity ............................. 147,471 151,961 32,080 (121,532) 209,980 ---------------------------------------------------------------- Total liabilities and shareholders' equity ..... $ 611,588 $ 224,690 $ 60,535 $ (124,520) $ 772,293 ================================================================ Net sales ........................................ $ 189,191 $ 291,103 $ 89,518 $ (17,362) $ 552,450 Cost of products sold ............................ 130,965 239,826 67,291 (17,370) 420,712 ---------------------------------------------------------------- Gross profit ..................................... 58,226 51,277 22,227 8 131,738 ---------------------------------------------------------------- Selling, general and administrative expenses ..... 28,684 23,706 14,573 - 66,963 Amortization of intangibles ...................... 1,529 8,696 1,820 - 12,045 ---------------------------------------------------------------- 30,213 32,402 16,393 - 79,008 ---------------------------------------------------------------- Income from operations ........................... 28,013 18,875 5,834 8 52,730 Interest and debt expense ........................ 28,329 43 434 - 28,806 Interest and other income ........................ 1,764 214 158 - 2,136 ---------------------------------------------------------------- Income before income taxes ....................... 1,488 19,046 5,558 8 26,060 Income tax expense ............................... 1,358 10,499 2,570 3 14,430 ---------------------------------------------------------------- Net income ....................................... $ 90 $ 8,547 $ 2,988 $ 5 $ 11,630 ================================================================ - 10 -
Domestic Foreign Elimina- Consoli- (In thousands) Parent Subsidiaries Subsidiaries tions dated ---------------------------------------------------------------- FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 OPERATING ACTIVITIES: Net cash (used in) provided by operating activities ....................................... $ (7,750) $ 5,169 $ 3,637 $ (1,072) $ (16) ---------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net ........... (2,143) - - - (2,143) Capital expenditures ............................. (3,416) (4,775) (874) - (9,065) Other ............................................ - 1,507 - - 1,507 ---------------------------------------------------------------- Net cash used in investing activities ............ (5,559) (3,268) (874) - (9,701) ---------------------------------------------------------------- FINANCING ACTIVITIES: Net borrowings under revolving line-of-credit agreements ..................................... 15,000 - 1,193 - 16,193 Repayment of debt ................................ (1,430) (20) (1,781) - (3,231) Dividends paid ................................... (3,004) - (1,072) 1,072 (3,004) Other ............................................ 250 - - - 250 ---------------------------------------------------------------- Net cash provided by (used in) financing activities ....................................... 10,816 (20) (1,660) 1,072 10,208 Effect of exchange rate changes on cash .......... - - (1,443) - (1,443) ---------------------------------------------------------------- Net change in cash and cash equivalents .......... (2,493) 1,881 (340) - (952) Cash and cash equivalents at beginning of period . 5,754 (1,701) 3,529 - 7,582 ---------------------------------------------------------------- Cash and cash equivalents at end of period ....... $ 3,261 $ 180 $ 3,189 $ - $ 6,630 ================================================================ AS OF JANUARY 2, 2000 Current assets: Cash and cash equivalents ....................... $ 3,877 $ 5,988 $ 4,263 $ - $ 14,128 Trade accounts receivable ....................... 54,886 54,801 25,131 - 134,818 Unbilled revenues ............................... - 17,620 - - 17,620 Inventories ..................................... 49,468 38,986 27,602 (1,036) 115,020 Other current assets ............................ 3,126 11,308 3,688 - 18,122 ---------------------------------------------------------------- Total current assets ........................... 111,357 128,703 60,684 (1,036) 299,708 Net property, plant, and equipment ............... 35,713 32,339 19,684 - 87,736 Goodwill and other intangibles, net .............. 41,929 255,806 51,473 - 349,208 Intercompany ..................................... 207,974 (371,172) (65,302) 228,500 - Other assets ..................................... 224,892 162,309 (1,442) (350,679) 35,080 ---------------------------------------------------------------- Total assets ................................... $ 621,865 $ 207,985 $ 65,097 $ (123,215) $ 771,732 ================================================================ Current liabilities .............................. $ 34,693 $ 50,301 $ 21,951 $ (1,510) $ 105,435 Long-term debt, less current portion ............. 423,138 - 6,294 - 429,432 Other non-current liabilities .................... 13,057 21,433 3,025 - 37,515 ---------------------------------------------------------------- Total liabilities .............................. 470,888 71,734 31,270 (1,510) 572,382 Shareholders' equity ............................. 150,977 136,251 33,827 (121,705) 199,350 ---------------------------------------------------------------- Total liabilities and shareholders' equity ..... $ 621,865 $ 207,985 $ 65,097 $ (123,215) $ 771,732 ================================================================ - 11 -
Domestic Foreign Elimina- Consoli- (In thousands) Parent Subsidiaries Subsidiaries tions dated ---------------------------------------------------------------- FOR THE NINE MONTHS ENDED JANUARY 2, 2000 Net sales ........................................ $ 194,112 $ 265,648 $ 94,263 $ (16,241) $ 537,782 Cost of products sold ............................ 133,505 222,127 68,102 (16,202) 407,532 ---------------------------------------------------------------- Gross profit ..................................... 60,607 43,521 26,161 (39) 130,250 ---------------------------------------------------------------- Selling, general and administrative expenses ..... 29,323 23,054 17,194 - 69,571 Amortization of intangibles ...................... 1,543 8,600 1,921 - 12,064 ---------------------------------------------------------------- 30,866 31,654 19,115 - 81,635 ---------------------------------------------------------------- Income from operations ........................... 29,741 11,867 7,046 (39) 48,615 Interest and debt expense ........................ 24,960 5 545 - 25,510 Interest and other income ........................ 686 234 271 - 1,191 ---------------------------------------------------------------- Income before income taxes ....................... 5,467 12,096 6,772 (39) 24,296 Income tax expense ............................... 2,720 8,209 3,222 (15) 14,136 ---------------------------------------------------------------- Net income ....................................... $ 2,747 $ 3,887 $ 3,550 $ (24) $ 10,160 ================================================================ FOR THE NINE MONTHS ENDED JANUARY 2, 2000 OPERATING ACTIVITIES: Net cash provided by (used in) operating activities ....................................... $ 2,409 $ 14,277 $ 4,823 $ (1,406) $ 20,103 ---------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net ........... (2,519) - - - (2,519) Capital expenditures ............................. (3,501) (1,439) (1,043) - (5,983) Purchases of businesses, net of cash ............. - (6,333) - (49) (6,382) Other ............................................ - (1,056) - - (1,056) ---------------------------------------------------------------- Net cash used in investing activities ............ (6,020) (8,828) (1,043) (49) (15,940) ---------------------------------------------------------------- FINANCING ACTIVITIES: Proceeds from issuance of common stock ........... 3 136 - (136) 3 Net payments under revolving line-of-credit agreements ...................... 8,800 - (2,378) - 6,422 Repayment of debt ................................ (1,164) - (144) - (1,308) Dividends paid ................................... (2,969) (5) (1,579) 1,580 (2,973) Other ............................................ (291) - - - (291) ---------------------------------------------------------------- Net cash provided by (used in) financing activities ....................................... 4,379 131 (4,101) 1,444 1,853 Effect of exchange rate changes on cash .......... - - 1,234 11 1,245 ---------------------------------------------------------------- Net change in cash and cash equivalents .......... 768 5,580 913 - 7,261 Cash and cash equivalents at beginning of period . 3,109 408 3,350 - 6,867 ---------------------------------------------------------------- Cash and cash equivalents at end of period ....... $ 3,877 $ 5,988 $ 4,263 $ - $ 14,128 ================================================================ </TABLE> - 12 -
12. The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," in June of 1998. The FASB issued SFAS No. 137 in June of 1999 which defers the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. Statement No. 133 establishes accounting and reporting standards for derivatives and hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Compliance with this statement would not have a material impact on the Company at the present time. The Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements" in December of 1999. SAB No. 101 provides the Commission's views in applying generally accepted accounting principles to selected revenue recognition issues. The Company has reviewed the requirements of SAB No. 101 and has determined that it is in compliance with SAB No. 101. - 13 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW The Company is a broad-line designer, manufacturer, and supplier of sophisticated material handling products that are widely distributed to industrial, automotive and consumer markets worldwide; integrated material handling solutions for industrial markets worldwide; and integrated material handling solutions for the automotive markets. The Company's material handling products are sold, domestically and internationally, principally to third party distributors through diverse distribution channels. 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 segments primarily deal directly with end-users. Material handling solutions - industrial sales are concentrated, domestically and internationally (primarily Europe), in consumer products manufacturing, warehousing and, to a lesser extent, the steel, construction, automotive, and other industrial markets. Material handling solutions - automotive sales are concentrated, domestically and internationally (primarily North America) in the automotive industry. RESULTS OF OPERATIONS THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 2000 AND JANUARY 2, 2000 Net sales in the fiscal 2001 quarter ended December 31, 2000 were $175,078,000, a increase of $905,000 or 0.5% over the fiscal 2000 quarter ended January 2, 2000. Net sales for the nine months ended December 31, 2000 were $552,450,000, an increase of $14,668,000 or 2.7% over the nine months ended January 2, 2000. Sales in the Products segment decreased by $8,832,000 or 7.3% from the previous year's quarter and $17,538,000 or 4.7% for the nine months ended December 31, 2000 over the prior year period due to continued softness in the engineered hoist, crane builder, and general industrial markets. Sales in the Solutions-Industrial segment decreased 8.3% or $1,489,000 for the three months ended December 31, 2000 due to weak current markets, but have increased 4.1% or $2,021,000 for the nine months ended December 31, 2000 as a result of stronger markets earlier in the year. The Solutions-Automotive segment had a sales increase of 31.9% or $11,226,000 for the quarter and 27.1% or $30,185,000 for the nine months ended December 31, 2000 as automotive capital spending has resumed to more normal levels. Sales in the individual segments were as follows, in thousands of dollars and with percentage changes for each group: <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- DEC. 31, JAN. 2, CHANGE DEC. 31, JAN. 2, CHANGE ------ ------ 2000 2000 AMOUNT % 2000 2000 AMOUNT % ---- ---- ------ - ---- ---- ------ - (IN THOUSANDS, EXCEPT PERCENTAGES) <S> <C> <C> <C> <C> <C> <C> <C> <C> Products $ 112,242 $ 121,074 $ (8,832) (7.3) $ 359,408 $ 376,946 $ (17,538) (4.7) Solutions-Industrial 16,422 17,911 (1,489) (8.3) 51,348 49,327 2,021 4.1 Solutions-Automotive 46,414 35,188 11,226 31.9 141,694 111,509 30,185 27.1 --------- --------- -------- ---------- --------- -------- Net sales $ 175,078 $ 174,173 $ 905 0.5 $ 552,450 $ 537,782 $14,668 2.7 ========= ========= ======== ========== ========= ======== </TABLE> - 14 -
The Company's gross profit margins were 22.6%, 24.9%, 23.8%, and 24.2% for the fiscal 2001 and 2000 quarters and the nine-month periods then ended, respectively. The decrease in the current quarter and nine-month period margins relative to the respective periods in the prior year is the result of a shift in product mix to higher sales volume in lower margin segments and lower sales volume in the higher margin segment. The gross profit margin in the Products segment for the quarter and nine month periods ended December 31, 2000 decreased from the respective periods in the prior year as a result of the decreased production and sales volume offset somewhat by cost control measures. The Solutions-Industrial segment experienced a decrease in margin for the current quarter and nine-month period when compared to the respective periods in the prior year as a result of contract mix and an increase in turnkey projects, which traditionally carry lower relative risk and margins. Gross margins in the Solutions-Automotive segment increased significantly for the quarter and nine-month period ended December 31, 2000 as the result of a return to normal sales volume and the absence of the effects of cost overruns on several foreign jobs that occurred in the prior fiscal year, offset somewhat by tightening margins due to competitive pricing. Selling expenses were $12,523,000, $13,405,000, $37,337,000 and $38,575,000 in the fiscal 2001 and 2000 quarters and the nine months then ended, respectively. As a percentage of consolidated net sales, selling expenses were 7.2%, 7.7%, 6.8%, and 7.2% in the fiscal 2001 and 2000 quarters and the nine-month periods then ended, respectively. Reduced expenses as a percent of revenues in the current year are due to cost control measures. General and administrative expenses were $9,325,000, $9,762,000, $29,626,000, and $30,031,000 in the fiscal 2001 and 2000 quarters and the nine-month periods then ended, respectively. As a percentage of consolidated net sales, general and administrative expenses were 5.3%, 5.6%, 5.4% and 5.6% in the fiscal 2001 and 2000 quarters and the nine-month periods then ended, respectively. Reduced expenses as a percent of revenues in the current year are due to cost control measures. The Company incurred proxy contest related expenses amounting to $965,000 in the nine months ended January 2, 2000 relative to the August 16, 1999 annual shareholders meeting and annual director elections. Amortization of intangibles was $4,014,000, $4,062,000, $12,045,000 and $12,064,000 in the fiscal 2001 and 2000 quarters and the nine months then ended, respectively. As a result of the above, income from operations decreased $2,504,000 or 15.5% in the fiscal 2001 quarter and increased $4,115,000 or 8.5% in the fiscal 2001 nine month period compared to the respective periods in fiscal 2000. This is based on income from operations of $13,672,000, $16,176,000, $52,730,000, and $48,615,000 in the fiscal 2001 and 2000 quarters and nine-month periods then ended, respectively. Interest and debt expense was $9,815,000, $8,937,000, $28,806,000, and $25,510,000 in the fiscal 2001 and 2000 quarters and the nine months then ended, respectively. The fiscal 2001 increase is solely the result of increased interest rates. As a percentage of consolidated net sales, interest and debt expense was 5.6%, 5.1%, 5.2%, and 4.7% in the fiscal 2001 and 2000 quarters and the nine-month periods then ended, respectively. Interest and other income was $524,000, $638,000, $2,136,000, and $1,191,000 in the fiscal 2001 and 2000 quarters and the nine months then ended, respectively. The increase in the current year is the result of the investment earnings on assets in the Company's captive insurance company. - 15 -
Income taxes as a percentage of income before income taxes were 70.4%, 58.7%, 55.4% and 58.2% in the fiscal 2001 and 2000 quarters and the nine months then ended, respectively. The percentages reflect the effect of nondeductible amortization of goodwill resulting from acquisitions. Net income, therefore, decreased $1,958,000 or 60.2% for the quarter ended December 31, 2000 and increased $1,470,000 or 14.5% for the nine months then ended when compared to the same periods in the previous fiscal year, respectively. This is based on net income of $1,296,000, $3,254,000, $11,630,000, and $10,160,000 for the quarters and nine-month periods ended December 31, 2000 and January 2, 2000, respectively. LIQUIDITY AND CAPITAL RESOURCES 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 credit facility. The 1998 Revolving Credit Facility provides availability up to $250 million, due March 31, 2003, against which $220 million was outstanding at December 31, 2000. Interest is payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 237.5 basis points at February 14, 2001 or the lender's Prime rate plus 75 basis points. The 1998 Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to $199,468,000, net of original issue discount of $532,000 and are due March 31, 2008. Interest is payable semi-annually based on an effective rate of 8.45%, considering $1,902,000 of proceeds from rate hedging in advance of the placement. Provisions of the 8 1/2% Notes include, without limitation, restrictions of 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 addition, on or prior to April 1, 2001, the Company may redeem up to 35% of the outstanding notes with the proceeds of equity offerings at a redemption price of 108.5%, subject to certain restrictions. 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 domestic subsidiaries and are not subject to any sinking fund requirements. The Company believes that its cash on hand, cash flows, and borrowing capacity under its revolving credit facility will be sufficient to fund its ongoing operations, budgeted capital expenditures, and business acquisitions for the next twelve months. Net cash used by operating activities was $16,000 for the nine months ended December 31, 2000 while net cash provided by operating activities was $20,103,000 for the nine months ended January 2, 2000. The difference of $20,129,000 is due to changes in net working capital components, primarily unbilled revenues and excess billings and inventories. - 16 -
Net cash used in investing activities decreased to $9,701,000 for the nine months ended December 31, 2000 from $15,940,000 for the nine months ended January 2, 2000. The $6,239,000 difference is due primarily to the acquisition of WECO in fiscal 2000 offset by the increase in capital expenditures for fiscal 2001 as a result of the decision to purchase property and a building of a previously leased facility. Net cash provided by financing activities was $10,208,000 for the nine months ended December 31, 2000 compared to $1,853,000 for the nine months ended January 2, 2000. The $8,355,000 change is primarily due to funds required for the buildup in working capital and to finance an increase in capital expenditures for fiscal 2001. CAPITAL EXPENDITURES In addition to keeping its current equipment and plants properly maintained, the Company is committed to replacing, enhancing, and upgrading its 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. Consolidated capital expenditures for the nine months ended December 31, 2000 and January 2, 2000 were $9,065,000 and $5,983,000, respectively. The increase in fiscal 2001 is due to the purchase of property and a building of a previously leased facility. INFLATION AND OTHER MARKET CONDITIONS The Company's 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. The Company does not believe that inflation has had a material effect on results of operations over the periods presented because of low inflation levels over the periods and because the Company has generally been able to pass on rising costs through price increases. However, in the future there can be no assurance that the Company's business will not be affected by inflation or that it will be able to pass on cost increases. SEASONALITY AND QUARTERLY RESULTS Quarterly results may be materially affected by the timing of large customer orders, by periods of high vacation and holiday concentrations, and by acquisitions and the magnitude of acquisition 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. - 17 -
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," in June of 1998. The FASB issued SFAS 137 in June 1999 which defers the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. Statement No.133 establishes accounting and reporting standards for derivatives and hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Compliance with this statement would not have a material impact on the Company at the present time. The Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements" in December of 1999. SAB No. 101 provides the Commission's views in applying generally accepted accounting principles to selected revenue recognition issues. The Company has reviewed the requirements of SAB No. 101 and has determined that it is in compliance with SAB No. 101. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report may include "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 the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the integration of acquisitions and other factors disclosed in the Company's periodic reports filed with the Commission. Consequently such forward-looking statements should be regarded as the Company's current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. - 18 -
PART II. OTHER INFORMATION Item 1. Legal Proceedings - none. Item 2. Changes in Securities - none. Item 3. Defaults upon Senior Securities - none. Item 4. Submission of Matters to a Vote of Security Holders - none. Item 5. Other Information - none. Item 6. Exhibits and Reports on Form 8-K Exhibit 10.1 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. Exhibit 10.2 Amendment to Form of Stay Agreement as entered into between Columbus McKinnon Corporation and each of Timothy T. Tevens, Robert L. Montgomery, Jr., Ned T. Librock, Karen L. Howard, and Joseph J. Owen. There are no reports on Form 8-K. - 19 -
SIGNATURES Pursuant to the requirements 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. COLUMBUS MCKINNON CORPORATION ----------------------------- (Registrant) Date: FEBRUARY 14, 2001 /S/ ROBERT L. MONTGOMERY, JR. ------------------ ----------------------------- Robert L. Montgomery, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) - 20 -