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 September 30, 2001 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 October 31, 2001 was: 14,895,172 shares.
FORM 10-Q INDEX COLUMBUS MCKINNON CORPORATION SEPTEMBER 30, 2001 PAGE # ------ PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed consolidated balance sheets - September 30, 2001 and March 31, 2001 2 Condensed consolidated statements of income and retained earnings -Three months and six months ended September 30, 2001 and October 1, 2000 3 Condensed consolidated statements of cash flows - Six months ended September 30, 2001 and October 1, 2000 4 Condensed consolidated statements of comprehensive income - Three months and six months ended September 30, 2001 and October 1, 2000 5 Notes to condensed consolidated financial statements - September 30, 2001 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 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) COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) <TABLE> <CAPTION> SEPTEMBER 30, MARCH 31, 2001 2001 ---------- ----------- ASSETS: (IN THOUSANDS) Current assets: <S> <C> <C> Cash and cash equivalents $ - $ 14,015 Trade accounts receivable 115,432 140,234 Unbilled revenues 23,246 26,813 Inventories 104,161 113,218 Net assets held for sale 4,112 4,270 Prepaid expenses 6,734 5,655 ---------- ---------- Total current assets 253,685 304,205 Property, plant, and equipment, net 82,146 85,272 Goodwill and other intangibles, net 314,624 322,196 Marketable securities 21,462 22,326 Deferred taxes on income 7,345 5,696 Other assets 6,304 7,318 ---------- ---------- Total assets $ 685,566 $ 747,013 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Notes payable to banks $ 2,649 $ 3,012 Trade accounts payable 52,504 44,936 Excess billings 2,886 1,623 Accrued liabilities 50,385 48,465 Current portion of long-term debt 1,046 3,092 ---------- ---------- Total current liabilities 109,470 101,128 Senior debt, less current portion 141,885 204,326 Subordinated debt 199,654 199,628 Other non-current liabilities 33,812 34,067 ---------- ---------- Total liabilities 484,821 539,149 ---------- ---------- Shareholders' equity Common stock 149 149 Additional paid-in capital 105,345 105,418 Retained earnings 116,797 124,806 ESOP debt guarantee (7,157) (7,527) Unearned restricted stock (793) (955) Total accumulated other comprehensive loss (13,596) (14,027) ---------- ---------- Total shareholders' equity 200,745 207,864 ---------- ---------- Total liabilities and shareholders' equity $ 685,566 $ 747,013 ========== ========== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 2 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2001 2000 2001 2000 ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> Net sales $ 171,577 $ 188,994 $ 347,482 $ 377,372 Cost of products sold 138,603 144,004 279,550 285,168 ----------- ----------- ----------- ----------- Gross profit 32,974 44,990 67,932 92,204 ----------- ----------- ----------- ----------- Selling expenses 11,447 12,332 23,081 24,814 General and administrative expenses 8,416 9,961 15,783 20,301 Restructuring charges 727 - 9,567 - Amortization of intangibles 4,013 4,017 8,046 8,031 ----------- ----------- ----------- ----------- 24,603 26,310 56,477 53,146 ----------- ----------- ----------- ----------- Income from operations 8,371 18,680 11,455 39,058 Interest and debt expense 8,225 9,710 16,801 18,991 Interest and other income (expense) 31 671 (81) 1,612 ----------- ----------- ------------ ----------- Income (loss) before income taxes 177 9,641 (5,427) 21,679 Income tax expense 1,509 5,253 566 11,345 ----------- ----------- ----------- ----------- Net (loss) income (1,332) 4,388 (5,993) 10,334 Retained earnings - beginning of period 119,139 118,529 124,806 113,582 Cash dividends of $0.07, $0.07, $0.14 and $0.14 per share (1,010) (1,002) (2,016) (2,001) ----------- ----------- ----------- ----------- Retained earnings - end of period $ 116,797 $ 121,915 $ 116,797 $ 121,915 =========== =========== =========== =========== Earnings per share data, basic and diluted $(0.09) $0.31 $(0.42) $0.72 ====== ===== ====== ===== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 3 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) <TABLE> <CAPTION> SIX MONTHS ENDED ---------------- SEPTEMBER 30, OCTOBER 1, 2001 2000 ---------- ----------- (IN THOUSANDS) OPERATING ACTIVITIES: <S> <C> <C> Net (loss) income $ (5,993) $ 10,334 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,525 14,190 Deferred income taxes (358) (416) Other 730 627 Changes in operating assets and liabilities: Trade accounts receivable 24,792 (2,522) Unbilled revenues and excess billings 4,830 (7,929) Inventories 9,310 (3,115) Prepaid expenses (1,076) (108) Other assets (172) (219) Trade accounts payable 7,506 (13,054) Accrued and non-current liabilities 1,409 7,645 ---------- ---------- Net cash provided by operating activities 55,503 5,433 ---------- ---------- INVESTING ACTIVITIES: Purchase of marketable securities, net (25) (1,834) Capital expenditures (3,264) (7,011) Net assets held for sale 158 259 ---------- ---------- Net cash used in investing activities (3,131) (8,586) ---------- ---------- FINANCING ACTIVITIES: Net (payments) borrowings under revolving line-of-credit agreements (64,408) 6,761 Repayment of debt (560) (1,917) Dividends paid (2,016) (2,001) Reduction of ESOP debt guarantee 370 418 Other (489) - ---------- ---------- Net cash (used in) provided by financing activities (67,103) 3,261 Effect of exchange rate changes on cash 516 (2,244) ---------- ---------- Net decrease in cash and cash equivalents (14,215) (2,136) Cash and cash equivalents at beginning of period 14,215 7,582 ---------- ---------- Cash and cash equivalents at end of period $ - $ 5,446 ========== ========== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 4 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2001 2000 2001 2000 ---- ---- ---- ---- (IN THOUSANDS) <S> <C> <C> <C> <C> Net (loss) income $ (1,332) $ 4,388 $ (5,993) $ 10,334 ----------- ----------- ----------- ----------- Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments 2,133 (3,545) 1,892 (3,254) Unrealized loss on derivatives qualifying as hedges (695) - (572) - Unrealized losses on investments: Unrealized holding (losses) gains arising during the period (1,726) (45) (1,527) 102 Less: reclassification adjustment for (gains) losses included in net income 241 (282) 638 (857) ---------- ----------- ---------- ----------- (1,485) (327) (889) (755) ---------- ----------- ---------- ----------- Total other comprehensive (loss) income (47) (3,872) 431 (4,009) ---------- ----------- ---------- ----------- Comprehensive (loss) income $ (1,379) $ 516 $ (5,562) $ 6,325 ========== =========== =========== =========== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 5 -
COLUMBUS MCKINNON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2001 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 September 30, 2001, and the results of its operations and its cash flows for the three and six-month periods ended September 30, 2001 and October 1, 2000, have been included. Results for the period ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ended March 31, 2002. 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, 2001. 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 globally; integrated material handling solutions for industrial markets; and integrated material handling solutions for automotive 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 industrial 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. 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. 2. Inventories consisted of the following: SEPTEMBER 30, MARCH 31, 2001 2001 ---------- ---------- (IN THOUSANDS) At cost - FIFO basis: Raw materials......................... $ 56,251 $ 60,908 Work-in-process....................... 16,946 17,110 Finished goods........................ 38,581 41,850 ---------- ---------- 111,778 119,868 LIFO cost less than FIFO cost............ (7,617) (6,650) ---------- ---------- Net inventories ....................... $ 104,161 $ 113,218 ========== ========== 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 $72,092,000 and $65,613,000 of accumulated depreciation at September 30, 2001 and March 31, 2001, respectively. 4. Goodwill and other intangibles is net of $70,285,000 and $62,239,000 of accumulated amortization at September 30, 2001 and March 31, 2001, 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 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 value. The Company's subordinated debt has an approximate fair value of $174,000,000, which is less than its carrying amount of $199,654,000. 7. The following table sets forth the computation of basic and diluted earnings per share: <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2000 2000 2000 2000 ---- ---- ---- ---- (IN THOUSANDS) Numerator for basic and diluted earnings per share: <S> <C> <C> <C> <C> Net income $ (1,332) $ 4,388 $ (5,993) $ 10,334 ======== ======== ======== ======== Denominators: Weighted-average common stock outstanding - denominator for basic EPS 14,407 14,308 14,399 14,298 Effect of dilutive employee stock options 2 - 1 - -------- -------- -------- -------- Adjusted weighted-average common stock outstanding and assumed conversions - denominator for diluted EPS 14,409 14,308 14,400 14,298 ======== ======== ======== ======== </TABLE> 8. Income tax expense for the three and six-month periods ended September 30, 2001 and October 1, 2000, respectively, exceeds the customary relationship between income tax expense and income (loss) before income taxes due to nondeductible amortization of goodwill of $3,076,000 $3,097,000, $6,152,000, and $6,171,000, respectively. 9. On April 1, 2001, the Company 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 the balance sheet at fair value. The Company determines the fair value of derivatives by reference to quoted market prices. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, the reason for holding it. The Company's use of derivative instruments is limited to cash flow hedges, as defined in SFAS No. 133, of certain interest rate risks. - 7 -
In order to provide interest rate risk protection, the Company entered into an interest rate swap agreement in June of 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. The cash flow hedge is considered effective and the gain or loss on the change in fair value is reported in other comprehensive loss, net of tax. The June 2001 interest rate swap is the only derivative instrument held by the Company, as such there is no impact on the adoption of SFAS No. 133 at April 1, 2001. The net impact of the derivative instrument was a decrease to other comprehensive income of $695,000 and $572,000 for the three and six-month periods ended September 30, 2001, respectively. The fair value of the derivative at September 30, 2001 was a $954,000 liability. 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. Intersegment sales are not significant. The Company evaluates performance based on operating income of the respective business units prior to the effects of amortization. Segment information as of and for the six months ended September 30, 2001 and October 1, 2000, is as follows: <TABLE> <CAPTION> SIX MONTHS ENDED SEPTEMBER 30, 2001 ----------------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL ---------- ---------- ---------- ---------- (IN THOUSANDS) <S> <C> <C> <C> <C> Sales to external customers................. $ 212,768 $ 27,635 $ 107,079 $ 347,482 Operating income (loss) before amortization and restructuring charges... 29,199 365 (496) 29,068 Depreciation and amortization............... 10,258 1,515 2,752 14,525 Total assets................................ 447,881 63,358 174,327 685,566 Capital expenditures........................ 2,663 519 82 3,264 - 8 -
SIX MONTHS ENDED OCTOBER 1, 2000 -------------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL ---------- ---------- ---------- ---------- (IN THOUSANDS) Sales to external customers................. $ 247,166 $ 34,926 $ 95,280 $ 377,372 Operating income before amortization and restructuring charges... 38,626 3,135 5,328 47,089 Depreciation and amortization............... 9,955 1,426 2,809 14,190 Total assets................................ 492,671 65,781 207,780 766,232 Capital expenditures........................ 7,230 (232) 13 7,011 </TABLE> The following schedule provides a reconciliation of operating income before amortization with (loss) income before income taxes: <TABLE> <CAPTION> SIX MONTHS ENDED ---------------- SEPTEMBER 30, OCTOBER 1, 2001 2000 ---- ---- (IN THOUSANDS) <S> <C> <C> Operating income before amortization and restructuring charges........................................ $ 29,068 $ 47,089 Restructuring charges........................................... (9,567) - Amortization of intangibles..................................... (8,046) (8,031) Interest and debt expense....................................... (16,801) (18,991) Interest income and other (expense) income...................... (81) 1,612 ------------ ----------- (Loss) income before income taxes............................... $ (5,427) $ 21,679 =========== =========== </TABLE> - 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 SEPTEMBER 30, 2001 Current assets: <S> <C> <C> <C> <C> <C> Cash and cash equivalents $ 570 $ (3,393) $ 2,823 $ - $ - Trade accounts receivable 53,331 40,660 21,441 - 115,432 Unbilled revenues - 23,246 - - 23,246 Inventories 46,294 30,273 28,556 (962) 104,161 Other current assets 5,903 1,251 3,692 - 10,846 ------------------------------------------------------------------ Total current assets 106,098 92,037 56,512 (962) 253,685 Property, plant, and equipment, net 33,276 30,667 18,203 - 82,146 Goodwill and other intangibles, net 37,842 230,838 45,944 - 314,624 Intercompany 123,354 (291,193) (59,100) 226,939 - Other assets 226,025 161,325 (1,350) (350,889) 35,111 ------------------------------------------------------------------ Total assets $ 526,595 $ 223,674 $ 60,209 $ (124,912) $ 685,566 ================================================================== Current liabilities $ 41,154 $ 50,256 $ 21,178 $ (3,118) $ 109,470 Long-term debt, less current portion 337,654 1 3,884 - 341,539 Other non-current liabilities 15,946 14,887 2,979 - 33,812 ------------------------------------------------------------------ Total liabilities 394,754 65,144 28,041 (3,118) 484,821 Shareholders' equity 131,841 158,530 32,168 (121,794) 200,745 ------------------------------------------------------------------ Total liabilities and shareholders' equity $ 526,595 $ 223,674 $ 60,209 $ (124,912) $ 685,566 ================================================================== FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001 Net sales $ 111,779 $ 193,027 $ 53,764 $ (11,088) $ 347,482 Cost of products sold 80,723 169,522 40,405 (11,100) 279,550 ------------------------------------------------------------------ Gross profit 31,056 23,505 13,359 12 67,932 ------------------------------------------------------------------ Selling, general and administrative expenses 16,851 12,368 9,645 - 38,864 Restructuring charges 9,567 - - - 9,567 Amortization of intangibles 1,093 5,747 1,206 - 8,046 ------------------------------------------------------------------ 27,511 18,115 10,851 - 56,477 ------------------------------------------------------------------ Income from operations 3,545 5,390 2,508 12 11,455 Interest and debt expense 16,509 2 290 - 16,801 Interest income and other (expense) income (324) 114 129 - (81) ------------------------------------------------------------------ (Loss) income before income taxes (13,288) 5,502 2,347 12 (5,427) Income tax (benefit) expense (4,917) 4,417 1,061 5 566 ------------------------------------------------------------------ Net (loss) income $ (8,371) $ 1,085 $ 1,286 $ 7 $ (5,993) ================================================================== - 10 -
Domestic Foreign Elimina- Consoli- (In thousands) Parent Subsidiaries Subsidiaries tions dated -------------------------------------------------------------------- FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001 OPERATING ACTIVITIES: Net cash provided by (used in) operating activities $ 57,776 $ (1,487) $ (786) $ - $ 55,503 ------------------------------------------------------------------ INVESTING ACTIVITIES: Purchase of marketable securities, net (25) - - - (25) Capital expenditures (1,673) (198) (1,393) - (3,264) Other - 158 - - 158 ------------------------------------------------------------------ Net cash used in investing activities (1,698) (40) (1,393) - (3,131) ------------------------------------------------------------------ FINANCING ACTIVITIES: Net payments under revolving line-of-credit agreements (64,000) - (408) - (64,408) Repayment of debt (555) (1) (4) - (560) Dividends paid (2,016) - - - (2,016) Other (119) - - - (119) ------------------------------------------------------------------ Net cash (used in) provided by financing activities (66,690) (1) (412) - (67,103) Effect of exchange rate changes on cash (35) - 551 - 516 ------------------------------------------------------------------ Net change in cash and cash equivalents (10,647) (1,528) (2,040) - (14,215) Cash and cash equivalents at beginning of period 11,217 (1,865) 4,863 - 14,215 ------------------------------------------------------------------ Cash and cash equivalents at end of period $ 570 $ (3,393) $ 2,823 $ - $ - ================================================================== AS OF OCTOBER 1, 2000 Current assets: Cash and cash equivalents $ 863 $ 1,832 $ 2,751 $ - $ 5,446 Trade accounts receivable 59,840 60,657 25,426 - 145,923 Unbilled revenues - 34,581 - - 34,581 Inventories 49,558 38,410 24,327 (889) 111,406 Other current assets 3,661 7,498 4,143 - 15,302 ------------------------------------------------------------------ Total current assets 113,922 142,978 56,647 (889) 312,658 Property, plant, and equipment, net 35,348 34,691 18,110 - 88,149 Goodwill and other intangibles, net 39,831 242,329 47,880 - 330,040 Intercompany 202,121 (363,801) (65,044) 226,724 - Other assets 226,327 161,626 (1,889) (350,679) 35,385 ------------------------------------------------------------------ Total assets $ 617,549 $ 217,823 $ 55,704 $ (124,844) $ 766,232 ================================================================== Current liabilities $ 37,393 $ 49,589 $ 18,044 $ (3,304) $ 101,722 Long-term debt, less current portion 413,421 6 5,323 - 418,750 Other non-current liabilities 15,761 18,532 2,629 - 36,922 ------------------------------------------------------------------ Total liabilities 466,575 68,127 25,996 (3,304) 557,394 Shareholders' equity 150,974 149,696 29,708 (121,540) 208,838 ------------------------------------------------------------------ Total liabilities and shareholders' equity $ 617,549 $ 217,823 $ 55,704 $ (124,844) $ 766,232 ================================================================== - 11 -
Domestic Foreign Elimina- Consoli- (In thousands) Parent Subsidiaries Subsidiaries tions dated ------------------------------------------------------------------ FOR THE SIX MONTHS ENDED OCTOBER 1, 2000 Net sales $ 130,369 $ 198,520 $ 60,087 $ (11,604) $ 377,372 Cost of products sold 89,330 162,662 44,774 (11,598) 285,168 ------------------------------------------------------------------ Gross profit 41,039 35,858 15,313 (6) 92,204 ------------------------------------------------------------------ Selling, general and administrative expenses 18,870 16,482 9,763 - 45,115 Amortization of intangibles 1,019 5,794 1,218 - 8,031 ------------------------------------------------------------------ 19,889 22,276 10,981 - 53,146 ------------------------------------------------------------------ Income (loss) from operations 21,150 13,582 4,332 (6) 39,058 Interest and debt expense 18,648 44 299 - 18,991 Interest and other income 1,251 120 241 - 1,612 ------------------------------------------------------------------ Income (loss) before income taxes 3,753 13,658 4,274 (6) 21,679 Income tax expense (benefit) 1,899 7,376 2,073 (3) 11,345 ------------------------------------------------------------------ Net income (loss) $ 1,854 $ 6,282 $ 2,201 $ (3) $ 10,334 ================================================================== FOR THE SIX MONTHS ENDED OCTOBER, 2000 OPERATING ACTIVITIES: Net cash (used in) provided by operating activities $ (5,524) $ 8,003 $ 2,954 $ - $ 5,433 ------------------------------------------------------------------ INVESTING ACTIVITIES: Purchase of marketable securities, net (1,834) - - - (1,834) Capital expenditures (2,368) (4,712) 69 - (7,011) Other - 259 - - 259 ------------------------------------------------------------------ Net cash (used in) provided by investing activities (4,202) (4,453) 69 - (8,586) ------------------------------------------------------------------ FINANCING ACTIVITIES: Net borrowings (payments) under revolving line-of-credit agreements 7,700 - (939) - 6,761 Repayment of debt (1,282) (17) (618) - (1,917) Dividends paid (2,001) - - - (2,001) Other 418 - - - 418 ------------------------------------------------------------------ Net cash provided by (used in) financing activities 4,835 (17) (1,557) - 3,261 Effect of exchange rate changes on cash - - (2,244) - (2,244) ------------------------------------------------------------------ Net change in cash and cash equivalents (4,891) 3,533 (778) - (2,136) Cash and cash equivalents at beginning of period 5,754 (1,701) 3,529 - 7,582 ------------------------------------------------------------------ Cash and cash equivalents at end of period $ 863 $ 1,832 $ 2,751 $ - $ 5,446 ================================================================== </TABLE> - 12 -
12. The Financial Accounting Standards Board (FASB) issued 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 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. We are currently assessing the Statement and the impact that adoption will have on our consolidated financial statements. 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 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, does change 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 consolidated financial statements. - 13 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The Company is a broad-line designer, manufacturer, and supplier of sophisticated material handling products that are distributed to industrial, automotive and consumer markets globally; integrated material handling solutions for industrial markets worldwide; and integrated material handling solutions for 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 SIX MONTHS ENDED SEPTEMBER 31, 2001 AND OCTOBER 1, 2000 (DOLLARS IN THOUSANDS) Net sales in the fiscal 2002 quarter ended September 30, 2001 were $171,577, a decrease of $17,417 or 9.2% from the fiscal 2001 quarter ended October 1, 2000. Net sales for the six months ended September 30, 2001 were $347,482, a decrease of $29,890 or 7.9% from the six months ended October 1, 2000. Sales in the Products segment decreased by $18,820 or 15.4% from the previous year's quarter and $34,398 or 13.9% for the six months ended September 30, 2001 in comparison to the prior year period due to continued softness in all industrial markets (particularly domestically). Sales in the Solutions-Industrial segment decreased 19.5% or $3,400 for the quarter and 20.9% or $7,291 for the six months ended September 30, 2001when compared to the same periods in the prior year due to weak industrial markets. The Solutions-Automotive segment had a sales increase of 9.7% or $4,803 for the quarter and 12.4% or $11,799 for the six months ended September 30, 2001 when compared to the respective periods in the prior year as a result of increased automotive capital spending. Sales in the individual segments were as follows, in thousands of dollars and with percentage changes for each group: <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- SEP. 30, OCT. 1, CHANGE SEP. 30, OCT. 1, CHANGE ------ ------ 2001 2000 AMOUNT % 2001 2000 AMOUNT % ---- ---- ------ - ---- ---- ------ - (IN THOUSANDS, EXCEPT PERCENTAGES) <S> <C> <C> <C> <C> <C> <C> <C> <C> Products $ 103,150 $ 121,970 $ (18,820) (15.4) $ 212,768 $ 247,166 $ (34,398) (13.9) Solutions-Industrial 14,013 17,413 (3,400) (19.5) 27,635 34,926 (7,291) (20.9) Solutions-Automotive 54,414 49,611 4,803 9.7 107,079 95,280 11,799 12.4 --------- --------- --------- --------- --------- --------- Net sales $ 171,577 $ 188,994 $ (17,417) (9.2) $ 347,482 $ 377,372 $ (29,890) (7.9) ========= ========= ========= ========= ========= ========= </TABLE> - 14 -
The Company's gross profit margins were 19.2%, 23.8%, 19.5%, and 24.4% for the fiscal 2002 and 2001 quarters and the six-month periods ended September 30, 2001 and October 1, 2000, respectively. The decrease in the current quarter and six-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 six month periods ended September 30, 2001 decreased from the respective periods in the prior year as a result of the decreased production and sales volume and the effects of a reclassification to cost of goods sold from general and administrative expense, offset somewhat by cost control measures. The Solutions-Industrial segment experienced a decrease in margin for the current quarter and six-month period when compared to the respective periods in the prior year as a result of decreased volume. Gross margins in the Solutions-Automotive segment were lower for the quarter and six-month period ended September 30, 2001 due to continuing competitive pressures and installation/staffing issues with respect to a series of contracts at a particular site. Selling expenses were $11,447, $12,332, $23,081, and $24,814 in the fiscal 2002 and 2001 quarters and the six-month periods then ended, respectively. As a percentage of consolidated net sales, selling expenses were 6.7%, 6.5%, 6.6%, and 6.6% in the fiscal 2001 and 2000 quarters and the six-month periods then ended, respectively. The reduced expenses are the result of cost control measures and decreased volume in the Products segment. General and administrative expenses were $8,416, $9,961, $15,783, and $20,301 in the fiscal 2002 and 2001 quarters and the six-month periods then ended, respectively. As a percentage of consolidated net sales, general and administrative expenses were 4.9%, 5.3%, 4.5% and 5.4% in the fiscal 2002 and 2001 quarters and the six-month periods then ended, respectively. The decrease is the result of a reclassification to costs of goods sold from general and administrative expense, cost control measures, and lower product liability expense recorded by the Company's captive insurance company. In conjunction with the continuation of its strategic integration process, the Company incurred restructuring charges of $727 and $9,567 in the fiscal 2002 quarter and the six-month period ended September 30, 2001, respectively. The charges for the quarter consist of costs associated with the closure of the Lister Bolt and Chain Division manufacturing facility in Richmond, British Columbia, Canada and year to date charges include those costs associated with the closure of the Forrest City, Arkansas plant as well. The charges consist mainly of property resolution and employee separation costs. Amortization of intangibles was $4,013, $4,017, $8,046, and $8,031 in the fiscal 2002 and 2001 quarters and the six months then ended, respectively. Interest and debt expense was $8,225, $9,710, $16,801, and $18,991 in the fiscal 2002 and 2001 quarters and the six-month periods then ended, respectively. The fiscal 2002 decrease is the result of the significant reduction in debt and decreased interest rates. As a percentage of consolidated net sales, interest and debt expense was 4.8%, 5.1%, 4.8%, and 5.0% in the fiscal 2002 and 2001 quarters and the six-month periods then ended, respectively. Interest and other income (expense) was $31, $671, $(81), and $1,612 in the fiscal 2002 and 2001 quarters and the six-month periods then ended, respectively. The decrease in the current year fiscal quarter and year to date results is due to lower investment earnings on assets in the Company's captive insurance company. - 15 -
Income taxes as a percentage of income (loss) before income taxes were 852.5%, 54.5%, (10.4)%, and 52.3% in the fiscal 2002 and 2001 quarters and the six-month periods then ended, respectively. The percentages reflect the effect of nondeductible amortization of goodwill resulting from acquisitions and the proximity of income before income taxes to zero for the fiscal 2002 quarter. LIQUIDITY AND CAPITAL RESOURCES The Revolving Credit Facility provides availability up to $225 million, due March 31, 2003, against which $138 million was outstanding at September 30, 2001. Interest is payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio amounting to 250 basis points at October 31, 2001. The 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 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. On April 1, 2001, the Company 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 the balance sheet at fair value. The Company's 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 the Company entered into an interest rate swap agreement in June of 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. The Company believes that its 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 provided by operating activities was $55,498,000 for the six months ended September 30, 2001 compared to $5,433,000 for the six months ended October 1, 2000. The difference of $50,065,000 is due to changes in net working capital components offset by the current year loss from operations. Net cash used in investing activities decreased to $3,131,000 for the six months ended September 30, 2001 from $8,586,000 for the six months ended October 1, 2000. The $5,455,000 difference is primarily the result of the purchase of property and a building in fiscal 2001 of a previously leased facility. - 16 -
Net cash used in financing activities was $67,103,000 for the six months ended September 30, 2001 compared to net cash provided by financing activities of $3,261,000 for the six months ended October 1, 2000. The $70,364,000 change is the result of debt payments made from funds freed from working capital during the year and excess cash from the end of 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 six months ended September 30, 2001 and October 1, 2000 were $3,264,000 and $7,011,000, respectively. The decrease from fiscal 2001 is due to the purchase of property and a building in fiscal 2001of 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. 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 the consolidated financial statements. - 17 -
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 adoption will have on the consolidated financial statements. 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 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, does change 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 consolidated financial statements. 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 On August 20, 2001, the Annual Meeting of Shareholders was held: The following directors were elected: 13,686,972 votes cast for: Herbert P. Ladds, Jr.; 13,672,177 votes cast for: Timothy T. Tevens; 13,684,378 votes cast for: Robert L. Montgomery, Jr.; 13,686,224 votes cast for: Randolph A. Marks; 13,684,443 votes cast for: L. David Black; 13,684,443 votes cast for: Richard J. Fleming; 13,686,303 votes cast for: Carlos Pasqual. Item 5. Other Information - none. Item 6. Exhibits and Reports on Form 8-K There are no exhibits. On August 16, 2001, the Company filed a Current Report on Form 8-K with respect to a press release issued to announce another major step in its facility rationalization program with the closure of its Lister Bolt and Chain Division manufacturing facility in Richmond, BC, Canada. - 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: NOVEMBER 14, 2001 /S/ ROBERT L. MONTGOMERY, JR. ------------------ ----------------------------- Robert L. Montgomery, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) - 20 -