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 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 January 31, 2002 was: 14,895,172 shares.
FORM 10-Q INDEX COLUMBUS MCKINNON CORPORATION DECEMBER 30, 2001 PAGE # ------ PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed consolidated balance sheets - December 30, 2001 and March 31, 2001 2 Condensed consolidated statements of income and retained earnings - Three months and nine months ended December 30, 2001 and December 31, 2000 3 Condensed consolidated statements of cash flows - Nine months ended December 30, 2001 and December 31, 2000 4 Condensed consolidated statements of comprehensive income - Three months and nine months ended December 30, 2001 and December 31, 2000 5 Notes to condensed consolidated financial statements - December 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. 20 Item 2. Changes in Securities - none. 20 Item 3. Defaults upon Senior Securities - none. 20 Item 4. Submission of Matters to a Vote of Security Holders - none. 20 Item 5. Other Information 20 Item 6. Exhibits and Reports on Form 8-K 20
PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) <TABLE> <CAPTION> DECEMBER 30, MARCH 31, 2001 2001 ---------- ---------- ASSETS: (IN THOUSANDS) Current assets: <S> <C> <C> Cash and cash equivalents $ - $ 14,015 Trade accounts receivable 117,650 140,234 Unbilled revenues 17,394 26,813 Inventories 101,093 113,218 Net assets held for sale 3 4,270 Prepaid expenses 7,357 5,655 ---------- ---------- Total current assets 243,497 304,205 Property, plant, and equipment, net 79,593 85,272 Goodwill and other intangibles, net 309,950 322,196 Marketable securities 23,992 22,326 Deferred taxes on income 5,589 5,696 Other assets 5,898 7,318 ---------- ---------- Total assets $ 668,519 $ 747,013 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Notes payable to banks $ 3,367 $ 3,012 Trade accounts payable 38,339 44,936 Excess billings 3,379 1,623 Accrued liabilities 42,662 48,465 Current portion of long-term debt 873 3,092 --------- ---------- Total current liabilities 88,620 101,128 Senior debt, less current portion 147,568 204,326 Subordinated debt 199,668 199,628 Other non-current liabilities 31,929 34,067 ---------- ---------- Total liabilities 467,785 539,149 ---------- ---------- Shareholders' equity Common stock 149 149 Additional paid-in capital 105,311 105,418 Retained earnings 116,705 124,806 ESOP debt guarantee (7,017) (7,527) Unearned restricted stock (712) (955) Total accumulated other comprehensive loss (13,702) (14,027) ---------- ---------- Total shareholders' equity 200,734 207,864 ---------- ---------- Total liabilities and shareholders' equity $ 668,519 $ 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 NINE MONTHS ENDED ------------------ ----------------- DECEMBER 30, DECEMBER 31, DECEMBER 30, DECEMBER 31, 2001 2000 2001 2000 ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) <S> <C> <C> <C> <C> Net sales $ 137,747 $ 175,078 $ 485,229 $ 552,450 Cost of products sold 105,759 135,544 385,309 420,712 ----------- ----------- ----------- ----------- Gross profit 31,988 39,534 99,920 131,738 ----------- ----------- ----------- ----------- Selling expenses 10,915 12,523 33,996 37,337 General and administrative expenses 7,857 9,325 23,640 29,626 Restructuring charges (6) - 9,561 - Amortization of intangibles 3,994 4,014 12,040 12,045 ----------- ----------- ----------- ----------- 22,760 25,862 79,237 79,008 ----------- ----------- ----------- ----------- Income from operations 9,228 13,672 20,683 52,730 Interest and debt expense 7,112 9,815 23,913 28,806 Interest and other (expense) income (77) 524 (158) 2,136 ------------ ----------- ------------ ----------- Income (loss) before income taxes 2,039 4,381 (3,388) 26,060 Income tax expense 2,131 3,085 2,697 14,430 ----------- ----------- ----------- ----------- Net (loss) income (92) 1,296 (6,085) 11,630 Retained earnings - beginning of period 116,797 121,915 124,806 113,582 Cash dividends of $0.00, $0.07, $0.14 and $0.21 per share - (1,003) (2,016) (3,004) ----------- ----------- ----------- ----------- Retained earnings - end of period $ 116,705 $ 122,208 $ 116,705 $ 122,208 =========== =========== =========== =========== Earnings (loss) per share data, basic and diluted $(0.01) $0.09 $(0.42) $0.81 ====== ===== ====== ===== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 3 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) <TABLE> <CAPTION> NINE MONTHS ENDED ----------------- DECEMBER 30, DECEMBER 31, 2001 2000 ---------- ---------- (IN THOUSANDS) OPERATING ACTIVITIES: <S> <C> <C> Net (loss) income $ (6,085) $ 11,630 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,648 21,317 Deferred income taxes 1,398 (422) Other 1,099 939 Changes in operating assets and liabilities: Trade accounts receivable 22,378 (41) Unbilled revenues and excess billings 11,175 (15,109) Inventories 12,106 (10,247) Prepaid expenses (1,705) (475) Other assets 101 (793) Trade accounts payable (6,556) (8,767) Accrued and non-current liabilities (8,000) 1,952 ----------- ---------- Net cash provided by (used in) operating activities 47,559 (16) ---------- ----------- INVESTING ACTIVITIES: Purchase of marketable securities, net (1,240) (2,143) Capital expenditures (4,046) (9,065) Net assets held for sale 4,267 1,507 ---------- ---------- Net cash used in investing activities (1,019) (9,701) ---------- ---------- FINANCING ACTIVITIES: Net (payments) borrowings under revolving line-of-credit agreements (55,857) 16,193 Repayment of debt (2,799) (3,231) Dividends paid (2,016) (3,004) Reduction of ESOP debt guarantee 510 625 Other (489) (375) ---------- ----------- Net cash (used in) provided by financing activities (60,651) 10,208 Effect of exchange rate changes on cash (104) (1,443) ----------- ---------- Net decrease in cash and cash equivalents (14,215) (952) Cash and cash equivalents at beginning of period 14,215 7,582 ---------- ---------- Cash and cash equivalents at end of period $ - $ 6,630 ========== ========== </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 NINE MONTHS ENDED ------------------ ----------------- DECEMBER 30, DECEMBER 31, DECEMBER 30, DECEMBER 31, 2001 2000 2001 2000 ---- ---- ---- ---- (IN THOUSANDS) <S> <C> <C> <C> <C> Net (loss) income $ (92) $ 1,296 $ (6,085) $ 11,630 ---------- ---------- ---------- ---------- Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments (1,399) 1,585 493 (1,669) Unrealized loss on derivatives qualifying as hedges (22) - (594) - Unrealized gains (losses) on investments: Unrealized holding gains (losses) arising during the period 1,677 (1,492) 1,426 (3,104) Less: reclassification adjustment for (gains) losses included in net income 362 (335) 1,000 (1,192) ---------- ---------- ---------- ---------- 1,315 (1,157) 426 (1,912) ---------- ---------- ---------- ---------- Total other comprehensive (loss) income (106) 428 325 (3,581) ---------- ---------- ---------- ---------- Comprehensive (loss) income $ (198) $ 1,724 $ (5,760) $ 8,049 ========== ========== ========== ========== </TABLE> SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 5 -
COLUMBUS MCKINNON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 30, 2001 (AMOUNTS IN THOUSANDS) 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 30, 2001, and the results of its operations and its cash flows for the three and nine-month periods ended December 30, 2001 and December 31, 2000, have been included. Results for the period ended December 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: DECEMBER 30, MARCH 31, 2001 2001 ---------- ---------- At cost - FIFO basis: Raw materials.......................... $ 55,345 $ 60,908 Work-in-process........................ 15,870 17,110 Finished goods......................... 37,632 41,850 ---------- ---------- 108,847 119,868 LIFO cost less than FIFO cost............. (7,754) (6,650) ---------- ---------- Net inventories ........................ $ 101,093 $ 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 $75,221 and $65,613 of accumulated depreciation at December 30, 2001 and March 31, 2001, respectively. 4. Goodwill and other intangibles is net of $74,279 and $62,239 of accumulated amortization at December 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 $183,000, which is less than its carrying amount of $199,668. 7. The following table sets forth the computation of basic and diluted earnings per share: <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- DECEMBER 30, DECEMBER 31, DECEMBER 30, DECEMBER 31, 2001 2000 2001 2000 ---- ---- ---- ---- Numerator for basic and diluted earnings per share: <S> <C> <C> <C> <C> Net income $ (92) $ 1,296 $ (6,085) $ 11,630 ======== ======== ======== ======== Denominators: Weighted-average common stock outstanding - denominator for basic EPS 14,423 14,326 14,407 14,307 Effect of dilutive employee stock options - - - - -------- -------- -------- -------- Adjusted weighted-average common stock outstanding and assumed conversions - denominator for diluted EPS 14,423 14,326 14,407 14,307 ======== ======== ======== ======== </TABLE> 8. Income tax expense for the three and nine-month periods ended December 30, 2001 and December 31, 2000, respectively, exceeds the customary relationship between income tax expense and income (loss) before income taxes due to nondeductible amortization of goodwill of $3,075, $3,097, $9,227, and $9,268, 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) income, 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 $22 and $594 for the three and nine-month periods ended December 30, 2001, respectively. The fair value of the derivative at December 30, 2001 was a $990 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 products segment sells hoists, industrial cranes, chain, attachments, and other material handling products principally to third party distributors through diverse distribution channels. The 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 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 nine months ended December 30, 2001 and December 31, 2000, is as follows: <TABLE> <CAPTION> NINE MONTHS ENDED DECEMBER 30, 2001 ----------------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Sales to external customers.................... $ 308,359 $ 42,450 $ 134,420 $ 485,229 Operating income (loss) before amortization and restructuring charges................... 41,152 1,051 81 42,284 Depreciation and amortization.................. 15,276 2,245 4,127 21,648 Total assets................................... 433,050 66,323 169,146 668,519 Capital expenditures........................... 3,229 737 80 4,046 - 8 -
NINE MONTHS ENDED DECEMBER 31, 2000 ----------------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL ----------- ----------- ----------- ----------- Sales to external customers.................... $ 359,408 $ 51,348 $ 141,694 $ 552,450 Operating income before amortization and restructuring charges................... 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 </TABLE> The following schedule provides a reconciliation of operating income before amortization with (loss) income before income taxes: <TABLE> <CAPTION> NINE MONTHS ENDED ----------------- DECEMBER 30, DECEMBER 31, 2001 2000 ---- ---- <S> <C> <C> Operating income before amortization and restructuring charges..................................... $ 42,284 $ 64,775 Restructuring charges........................................ (9,561) - Amortization of intangibles.................................. (12,040) (12,045) Interest and debt expense.................................... (23,913) (28,806) Interest income and other (expense) income................... (158) 2,136 ----------- ----------- (Loss) income before income taxes............................ $ (3,388) $ 26,060 =========== =========== </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- Parent Subsidiaries Subsidiaries tions dated ------------------------------------------------------------------ AS OF DECEMBER 30, 2001 Current assets: <S> <C> <C> <C> <C> <C> Cash and cash equivalents $ (1,421) $ (1,418) $ 2,839 $ - $ - Trade accounts receivable 53,141 41,383 23,126 - 117,650 Unbilled revenues - 17,394 - - 17,394 Inventories 44,959 29,526 27,583 (975) 101,093 Other current assets 5,013 (1,763) 4,110 - 7,360 ------------------------------------------------------------------ Total current assets 101,692 85,122 57,658 (975) 243,497 Property, plant, and equipment, net 33,802 28,553 17,238 - 79,593 Goodwill and other intangibles, net 37,041 227,977 44,932 - 309,950 Intercompany 131,637 (298,498) (58,648) 225,509 - Other assets 226,372 161,046 (1,020) (350,919) 35,479 ------------------------------------------------------------------ Total assets $ 530,544 $ 204,200 $ 60,160 $ (126,385) $ 668,519 ================================================================== Current liabilities $ 36,180 $ 32,520 $ 24,473 $ (4,553) $ 88,620 Long-term debt, less current portion 345,468 1 1,767 - 347,236 Other non-current liabilities 15,580 13,443 2,906 - 31,929 ------------------------------------------------------------------ Total liabilities 397,228 45,964 29,146 (4,553) 467,785 Shareholders' equity 133,316 158,236 31,014 (121,832) 200,734 ------------------------------------------------------------------ Total liabilities and shareholders' equity $ 530,544 $ 204,200 $ 60,160 $ (126,385) $ 668,519 ================================================================== FOR THE NINE MONTHS ENDED DECEMBER 30, 2001 Net sales $ 165,613 $ 255,990 $ 79,610 $ (15,984) $ 485,229 Cost of products sold 118,926 222,578 59,788 (15,983) 385,309 ------------------------------------------------------------------ Gross profit 46,687 33,412 19,822 (1) 99,920 ------------------------------------------------------------------ Selling, general and administrative expenses 24,970 18,111 14,555 - 57,636 Restructuring charges 9,561 - - - 9,561 Amortization of intangibles 1,621 8,607 1,812 - 12,040 ------------------------------------------------------------------ 36,152 26,718 16,367 - 79,237 ------------------------------------------------------------------ Income from operations 10,535 6,694 3,455 (1) 20,683 Interest and debt expense 23,503 7 403 - 23,913 Interest income and other (expense) income (517) 171 188 - (158) ------------------------------------------------------------------ (Loss) income before income taxes (13,485) 6,858 3,240 (1) (3,388) Income tax (benefit) expense (5,060) 6,067 1,690 - 2,697 ------------------------------------------------------------------ Net (loss) income $ (8,425) $ 791 $ 1,550 $ (1) $ (6,085) ================================================================== - 10 -
Domestic Foreign Elimina- Consoli- Parent Subsidiaries Subsidiaries tions dated ------------------------------------------------------------------ FOR THE NINE MONTHS ENDED DECEMBER 30, 2001 OPERATING ACTIVITIES: Net cash provided by (used in) operating activities $ 51,275 $ (4,605) $ 1,822 $ (933) $ 47,559 ------------------------------------------------------------------ INVESTING ACTIVITIES: Purchase of marketable securities, net (1,240) - - - (1,240) Capital expenditures (3,759) 786 (1,073) - (4,046) Other - 4,267 - - 4,267 ------------------------------------------------------------------ Net cash used in investing activities (4,999) 5,053 (1,073) - (1,019) ------------------------------------------------------------------ FINANCING ACTIVITIES: Net payments under revolving line-of-credit agreements (56,200) - 343 - (55,857) Repayment of debt (703) (1) (2,095) - (2,799) Dividends paid (2,016) - (933) 933 (2,016) Other 21 - - - 21 ------------------------------------------------------------------ Net cash (used in) provided by financing activities (58,898) (1) (2,685) 933 (60,651) Effect of exchange rate changes on cash (16) - (88) - (104) ------------------------------------------------------------------ Net change in cash and cash equivalents (12,638) 447 (2,024) - (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 $ (1,421) $ (1,418) $ 2,839 $ - $ - ================================================================== AS OF DECEMBER 31, 2000 Current assets: 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 Property, plant, and equipment, net 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 ================================================================== - 11 -
Domestic Foreign Elimina- Consoli- Parent Subsidiaries Subsidiaries tions dated ------------------------------------------------------------------ FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 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 1,448 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 ================================================================== 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) provided by investing activities (5,559) (3,268) (874) - (9,701) ------------------------------------------------------------------ FINANCING ACTIVITIES: Net borrowings (payments) 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 ================================================================== </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. The Company is currently assessing the Statement and the impact that the requirement to assess impairment upon adoption will have on our consolidated financial statements. Upon Adoption, the Company will stop amortizing goodwill which, based upon current levels of goodwill, would reduce amortization expense by approximately $16 million on an annual basis. The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in June 2001. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This Statement, which is effective for the Company's fiscal year beginning April 1, 2003, may be adopted as of April 1, 2002. The Company is 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. The Company is 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 (AMOUNTS IN THOUSANDS) 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 NINE MONTHS ENDED DECEMBER 30, 2001 AND DECEMBER 31, 2000 Net sales in the fiscal 2002 quarter ended December 30, 2001 were $137,747, a decrease of $37,331 or 21.3% from the fiscal 2001 quarter ended December 31, 2000. Net sales for the nine months ended December 30, 2001 were $485,229, a decrease of $67,221 or 12.2% from the nine months ended December 31, 2000. Sales in the Products segment decreased by $16,651 or 14.8% from the previous year's quarter and $51,049 or 14.2% for the nine months ended December 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 9.8% or $1,607 for the quarter and 17.3% or $8,898 for the nine months ended December 30, 2001 when compared to the same periods in the prior year due to weak industrial markets. The Solutions-Automotive segment had a sales decrease of 41.1% or $19,073 for the quarter and 5.1% or $7,274 for the nine months ended December 30, 2001 when compared to the respective periods in the prior year as a result of softening automotive capital spending. Sales in the individual segments were as follows: <TABLE> <CAPTION> THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- DEC. 30, DEC. 31, CHANGE DEC. 30, DEC. 31, CHANGE ------ ------ 2001 2000 AMOUNT % 2001 2000 AMOUNT % ---- ---- ------ - ---- ---- ------ - <S> <C> <C> <C> <C> <C> <C> <C> <C> Products $ 95,591 $ 112,242 $ (16,651) (14.8) $ 308,359 $ 359,408 $ (51,049) (14.2) Solutions-Industrial 14,815 16,422 (1,607) (9.8) 42,450 51,348 (8,898) (17.3) Solutions-Automotive 27,341 46,414 (19,073) (41.1) 134,420 141,694 (7,274) (5.1) --------- --------- --------- --------- --------- --------- Net sales $ 137,747 $ 175,078 $ (37,331) (21.3) $ 485,229 $ 552,450 $ (67,221) (12.2) ========= ========= ========= ========= ========= ========= </TABLE> - 14 -
The Company's gross profit margins were 23.2%, 22.6%, 20.6%, and 23.8% for the fiscal 2002 and 2001 quarters and the nine-month periods ended December 30, 2001 and December 31, 2000, respectively. The increase in the current quarter margin and decrease in the nine-month period margin relative to the respective periods in the prior year is the result of sales volume mix between the higher margin products segment and the lower margin solutions segments. The gross profit margin in the Products segment was maintained for the quarter ended December 30, 2001 when compared to prior year despite decreasing sales volume as a result of the impact of cost containment measures and strategic initiatives. The gross profit margin in the Products segment for the nine-month period ended December 30, 2001 decreased from the respective period in the prior year as a result of 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 nine-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 nine-month period ended December 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 $10,915, $12,523, $33,996, and $37,337 in the fiscal 2002 and 2001 quarters and the nine-month periods then ended, respectively. As a percentage of consolidated net sales, selling expenses were 7.9%, 7.2%, 7.0%, and 6.8% in the fiscal 2001 and 2000 quarters and the nine-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 $7,857, $9,325, $23,640, and $29,626 in the fiscal 2002 and 2001 quarters and the nine-month periods then ended, respectively. As a percentage of consolidated net sales, general and administrative expenses were 5.7%, 5.3%, 4.9% and 5.4% in the fiscal 2002 and 2001 quarters and the nine-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 $9,561 in the fiscal 2002 nine-month period ended December 30, 2001. The charges consist of costs associated with the closure of the Lister Bolt and Chain Division manufacturing facility in Richmond, British Columbia, Canada and the Forrest City, Arkansas plant. The costs are mainly comprised of property resolution and employee separation costs. Amortization of intangibles was $3,994, $4,014, $12,040, and $12,045 in the fiscal 2002 and 2001 quarters and the nine months then ended, respectively. Interest and debt expense was $7,112, $9,815, $23,913, and $28,806 in the fiscal 2002 and 2001 quarters and the nine-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 5.2%, 5.6%, 4.9%, and 5.2% in the fiscal 2002 and 2001 quarters and the nine-month periods then ended, respectively. - 15 -
Interest and other (expense) income was $(77), $524, $(158), and $2,136 in the fiscal 2002 and 2001 quarters and the nine-month periods then ended, respectively. The decrease in the current year fiscal quarter and year to date results as compared to the respective periods in the prior year is due to lower investment earnings on assets in the Company's captive insurance company. Income taxes as a percentage of income (loss) before income taxes were 104.5%, 70.4%, (79.6)%, and 55.4% in the fiscal 2002 and 2001 quarters and the nine-month periods then ended, respectively. The percentages reflect the effect of nondeductible amortization of goodwill resulting from acquisitions. LIQUIDITY AND CAPITAL RESOURCES The Revolving Credit Facility provides availability up to $225 million, due March 31, 2003, against which $145.8 million was outstanding at December 30, 2001. Interest is payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio amounting to 325 basis points at February 12, 2002. The Revolving Credit Facility is secured by all equipment, inventory, receivables, certain real property, 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, net of original issue discount of $532 and are due March 31, 2008. Interest is payable semi-annually based on an effective rate of 8.45%, considering $1,902 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 are sufficient to fund its ongoing operations and budgeted capital expenditures. The Company was in violation of certain financial covenants as of December 30, 2001 and has obtained a waiver of the violations along with an amendment, which modifies some of these covenants prospectively. The Company expects to be compliant with the amended covenants and to renegotiate its credit facility by June 30, 2002. - 16 -
Net cash provided by operating activities was $47,559 for the nine months ended December 30, 2001 compared to net cash used in operating activities of $16 for the nine months ended December 31, 2000. The difference of $47,575 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 $1,019 for the nine months ended December 30, 2001 from $9,701 for the nine months ended December 31, 2000. The $8,682 difference is primarily the result of the purchase of property and a building in fiscal 2001 of a previously leased facility and proceeds received from the sale of net assets held for sale. Net cash used in financing activities was $60,651 for the nine months ended December 30, 2001 compared to net cash provided by financing activities of $10,208 for the nine months ended December 31, 2000. The $70,859 change is the result of debt payments made from funds freed from working capital during the year and excess cash on hand at 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 nine months ended December 30, 2001 and December 31, 2000 were $4,046 and $9,065, respectively. The decrease from fiscal 2001 is due to the purchase of property and a building in fiscal 2001 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 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. The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets" in June of 2001. SFAS No. 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and the impairment testing and recognition for goodwill and intangible assets. SFAS No. 142 will apply to goodwill and intangible assets arising from transactions completed before and after the effective date. This statement, which will be effective for the Company's fiscal year beginning on April 1, 2002, must be adopted at the beginning of the fiscal year. The Company is currently assessing the Statement and the impact that the requirement to assess impairment upon adoption will have on the consolidated financial statements. Upon Adoption, the Company will stop amortizing goodwill which, based upon current levels of goodwill, would reduce amortization expense by approximately $16 million on an annual basis. The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in June 2001. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This Statement, which is effective for the Company's fiscal year beginning April 1, 2003, may be adopted as of April 1, 2002. We are currently assessing the Statement and the impact, if any, that adoption will have on our 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. - 18 -
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. - 19 -
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 The Company has entered into a consulting agreement with the Chairman of the Board (Exhibit 10.3). Item 6. Exhibits and Reports on Form 8-K. Exhibit 10.1 Eighth Amendment, dated as of November 21, 2001, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent. Exhibit 10.2 Ninth Amendment, dated as of February 12, 2002, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent. Exhibit 10.3 Consulting Agreement as entered into between Columbus McKinnon Corporation and the Chairman of the Board. There are no reports on Form 8-K. - 20 -
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 13, 2002 /S/ ROBERT L. MONTGOMERY, JR. ----------------- ----------------------------- Robert L. Montgomery, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) - 21 -