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 October 1, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
------------------- -------------------
Commission File Number: 0-27618
-------
Columbus McKinnon Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 16-0547600
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 John James Audubon Parkway, Amherst, NY 14228-1197
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(716) 689-5400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
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, 2000 was:
14,896,172 shares.
FORM 10-Q INDEX
COLUMBUS McKINNON CORPORATION
OCTOBER 1, 2000
PAGE #
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets -
October 1, 2000 and March 31, 2000 2
Condensed consolidated statements of income and retained earnings -
Three months and six months ended October 1, 2000
and October 3, 1999 3
Condensed consolidated statements of cash flows -
Six months ended October 1, 2000 and October 3, 1999 4
Condensed consolidated statements of comprehensive income -
Three months and six months ended October 1, 2000
and October 3, 1999 5
Notes to condensed consolidated financial statements -
October 1, 2000 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none. 19
Item 2. Changes in Securities - none. 19
Item 3. Defaults upon Senior Securities - none. 19
Item 4. Submission of Matters to a Vote of Security Holders - none. 19
Item 5. Other Information 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)
OCTOBER 1, MARCH 31,
2000 2000
---------- ---------
ASSETS: (IN THOUSANDS)
Current assets:
Cash and cash equivalents .................... $ 5,446 $ 7,582
Trade accounts receivable .................... 145,923 143,401
Unbilled revenues ............................ 34,581 24,447
Inventories .................................. 111,406 108,291
Net assets held for sale ..................... 9,013 9,272
Prepaid expenses ............................. 6,289 6,181
--------- ---------
Total current assets ............................... 312,658 299,174
Net property, plant, and equipment ................. 88,149 87,297
Goodwill and other intangibles, net ................ 330,040 339,603
Marketable securities .............................. 24,272 23,193
Deferred taxes on income ........................... 4,653 4,237
Other assets ....................................... 6,460 6,320
--------- ---------
Total assets ....................................... $ 766,232 $ 759,824
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks ....................... $ 1,738 $ 2,677
Trade accounts payable ....................... 36,567 49,621
Excess billings .............................. 6,493 4,288
Accrued liabilities .......................... 56,113 51,246
Current portion of long-term debt ............ 811 3,493
--------- ---------
Total current liabilities .......................... 101,722 111,325
Senior debt, less current portion .................. 219,149 210,684
Subordinated debt .................................. 199,601 199,574
Other non-current liabilities ...................... 36,922 34,788
--------- ---------
Total liabilities .................................. 557,394 556,371
--------- ---------
Shareholders' equity:
Common stock ................................. 149 149
Additional paid-in capital ................... 107,080 106,884
Retained earnings ............................ 121,915 113,582
ESOP debt guarantee .......................... (8,285) (8,703)
Unearned restricted stock .................... (2,396) (2,843)
Total accumulated other comprehensive loss ... (9,625) (5,616)
--------- ---------
Total shareholders' equity ......................... 208,838 203,453
--------- ---------
Total liabilities and shareholders' equity ......... $ 766,232 $ 759,824
========= =========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 2 -
COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ -----------------------
OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3,
2000 1999 2000 1999
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales ............................................................ $ 188,994 $ 182,008 $ 377,372 $ 363,609
Cost of products sold ................................................ 144,004 142,276 285,168 276,764
--------- --------- --------- ---------
Gross profit ......................................................... 44,990 39,732 92,204 86,845
--------- --------- --------- ---------
Selling expenses ..................................................... 12,332 12,412 24,814 25,170
General and administrative expenses .................................. 9,961 10,912 20,301 20,269
Proxy contest related expenses ....................................... - 835 - 965
Amortization of intangibles .......................................... 4,017 4,000 8,031 8,002
--------- --------- --------- ---------
26,310 28,159 53,146 54,406
--------- --------- --------- ---------
Income from operations ............................................... 18,680 11,573 39,058 32,439
Interest and debt expense ............................................ 9,710 8,294 18,991 16,573
Interest and other income ............................................ 671 306 1,612 553
--------- --------- --------- ---------
Income before income taxes ........................................... 9,641 3,585 21,679 16,419
Income tax expense ................................................... 5,253 3,074 11,345 9,513
--------- --------- --------- ---------
Net income ........................................................... 4,388 511 10,334 6,906
Retained earnings - beginning of period .............................. 118,529 105,865 113,582 100,455
Cash dividends of $0.07, $0.07, $0.14 and
$0.14 per share ................................................... (1,002) (993) (2,001) (1,978)
--------- --------- --------- ---------
Retained earnings - end of period .................................... $ 121,915 $ 105,383 $ 121,915 $ 105,383
========= ========= ========= =========
Earnings per share data, basic ....................................... $ 0.31 $ 0.04 $ 0.72 $ 0.49
========= ========= ========= =========
Earnings per share data, diluted ..................................... $ 0.31 $ 0.04 $ 0.72 $ 0.49
========= ========= ========= =========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
----------------
OCTOBER 1, OCTOBER 3,
2000 1999
--------- ---------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income ........................................................... $ 10,334 $ 6,906
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................................... 14,190 14,412
Deferred income taxes ........................................... (416) 172
Other ........................................................... 627 436
Changes in operating assets and liabilities net of effects
from businesses purchased:
Trade accounts receivable ................................. (2,522) 5,954
Unbilled revenues and excess billings ..................... (7,929) (4,352)
Inventories ............................................... (3,115) 2,949
Prepaid expenses .......................................... (108) (572)
Other assets .............................................. (219) (92)
Trade accounts payable .................................... (13,054) 7,008
Accrued and non-current liabilities ....................... 7,645 (13,094)
-------- --------
Net cash provided by operating activities ............................ 5,433 19,727
-------- --------
INVESTING ACTIVITIES:
Purchase of marketable securities, net ............................... (1,834) (796)
Capital expenditures ................................................. (7,011) (5,130)
Purchases of businesses, net of cash ................................. - (6,410)
Net assets held for sale ............................................. 259 (589)
-------- --------
Net cash used in investing activities ................................ (8,586) (12,925)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ............................... - 3
Net borrowings under revolving line-of-credit agreements ............. 6,761 7,524
Repayment of debt .................................................... (1,917) (490)
Dividends paid ....................................................... (2,001) (1,978)
Reduction of ESOP debt guarantee ..................................... 418 418
Other ................................................................ - (131)
-------- --------
Net cash provided by financing activities ............................ 3,261 5,346
Effect of exchange rate changes on cash .............................. (2,244) 1,056
-------- --------
Net (decrease) increase in cash and cash equivalents ................. (2,136) 13,204
Cash and cash equivalents at beginning of period ..................... 7,582 6,867
-------- --------
Cash and cash equivalents at end of period ........................... $ 5,446 $ 20,071
======== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 4 -
COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3,
2000 1999 2000 1999
---- ---- ---- ----
(IN THOUSANDS)
Net income ........................................................... $ 4,388 $ 511 $ 10,334 $ 6,906
-------- -------- -------- --------
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments ........................... (3,545) 528 (3,254) 1,043
Unrealized gains on investments:
Unrealized holding gains arising during
the period ..................................................... (45) (455) 102 (402)
Less: reclassification adjustment for gains
included in net income ......................................... (282) (64) (857) (64)
-------- -------- -------- --------
(327) (519) (755) (466)
-------- -------- -------- --------
Total other comprehensive (loss) income .............................. (3,872) 9 (4,009) 577
-------- -------- -------- --------
Comprehensive income ................................................. $ 516 $ 520 $ 6,325 $ 7,483
======== ======== ======== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 5 -
COLUMBUS McKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 1, 2000
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the financial position of the Company at October
1, 2000, and the results of its operations and its cash flows for the three
and six month periods ended October 1, 2000 and October 3, 1999, have been
included. Results for the period ended October 1, 2000 are not necessarily
indicative of the results that may be expected for the year ended March 31,
2001. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Columbus McKinnon
Corporation annual report on Form 10-K for the year ended March 31, 2000.
Columbus McKinnon Corporation (the Company) is a broad-line designer,
manufacturer and supplier of sophisticated material handling products that
are widely distributed to industrial, automotive, and consumer markets
worldwide; integrated material handling solutions for the automotive
markets; and integrated material handling solutions for industrial markets.
The Company's material handling products are sold, domestically and
internationally, principally to third party distributors through diverse
distribution channels, and to a lesser extent directly to manufacturers and
other end-users. The Company's integrated material handling solutions
automotive business primarily deals with end users and sales are
concentrated domestically and internationally (primarily North America), in
the automotive industry. The Company's integrated material handling
solutions industrial businesses also deal primarily with end users and
sales are concentrated, domestically and internationally (primarily
Europe), in the consumer products, manufacturing, warehousing and, to a
lesser extent, the steel, construction, automotive and other industrial
markets.
2. Inventories consisted of the following:
OCTOBER 1, MARCH 31,
2000 2000
----------- -----------
(IN THOUSANDS)
At cost - FIFO basis:
Raw materials $ 62,803 $ 57,198
Work-in-process 19,082 20,240
Finished goods 37,164 38,329
----------- -----------
119,049 115,767
LIFO cost less than FIFO cost (7,643) (7,476)
----------- -----------
$ 111,406 $ 108,291
=========== ===========
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory valuation.
- 6 -
3. Property, plant, and equipment is net of $59,046,000 and $52,887,000 of
accumulated depreciation at October 1, 2000 and March 31, 2000,
respectively.
4. Goodwill and other intangibles, net includes $54,287,000 and $46,256,000 of
accumulated amortization at October 1, 2000 and March 31, 2000,
respectively.
5. General and Product Liability - The accrued general and product liability
costs, which are included in other non-current liabilities, are the
actuarial present value of estimated expenditures based on amounts
determined from loss reports and individual cases filed with the Company,
and an amount, based on past experience, for losses incurred but not
reported. The accrual in these condensed consolidated financial statements
was determined by applying a discount factor based on interest rates
customarily used in the insurance industry.
6. The carrying amount of the Company's senior debt instruments approximates
the fair values. The Company's subordinated debt has an approximate fair
market value of $168,000,000, which is less than its carrying amount of
$199,601,000.
7. The following table sets forth the computation of basic and diluted
earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
OCTOBER 1, OCTOBER 3, OCTOBER 1, OCTOBER 3,
2000 1999 2000 1999
---- ---- ---- ----
(IN THOUSANDS)
Numerator for basic and diluted earnings per
share:
Net income .................................. $ 4,388 $ 511 $10,334 $ 6,906
======= ======= ======= =======
Denominators:
Weighted-average common stock outstanding -
denominator for basic EPS .................. 14,308 14,153 14,298 14,060
Effect of dilutive employee stock options ... - 75 - 150
------- ------- ------- -------
Adjusted weighted-average common stock
outstanding and assumed conversions -
denominator for diluted EPS ................ 14,308 14,228 14,298 14,210
======= ======= ======= =======
8. Income tax expense for the three-month periods ended October 1, 2000 and
October 3, 1999 and also for the six month periods then ended exceeds the
customary relationship between income tax expense and income before income
taxes due to nondeductible amortization of goodwill of $3,097,000,
$3,076,000, $6,171,000, and $6,152,000, respectively.
- 7 -
9. On April 29, 1999, the Company acquired all of the outstanding stock of
Washington Equipment Company ("WECO"), a regional manufacturer and servicer
of overhead cranes. The total cost of the acquisition, which was accounted
for as a purchase, was approximately $6.4 million of cash and was financed
by proceeds from the Company's revolving debt facility.
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
sell engineered material handling systems such as conveyors, manipulators,
and lift tables primarily to end-users in the consumer products,
manufacturing, warehousing, and, to a lesser extent, the steel,
construction, automotive, and other industrial markets. The material
handling solutions - automotive segment sells engineered material handling
systems, mainly conveyors, primarily to end-users in the automotive
industry. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. Intersegment
sales are not significant. The Company evaluates performance based on
operating earnings of the respective business units prior to the effects of
amortization.
Segment information as of and for the six months ended October 1, 2000
and October 3, 1999, is as follows:
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............... 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
SIX MONTHS ENDED OCTOBER 3, 1999
--------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
-------- ---------- ---------- -----
(IN THOUSANDS)
Sales to external customers . $255,872 $ 31,416 $ 76,321 $363,609
Operating income before
amortization............... 39,840 3,230 (2,629) 40,441
Depreciation and amortization 10,014 1,571 2,827 14,412
Total assets ................ 518,195 71,530 187,665 777,390
Capital expenditures ........ 4,471 531 128 5,130
- 8 -
The following schedule provides a reconciliation of operating income before
amortization with consolidated income before income taxes:
SIX MONTHS ENDED
----------------
OCTOBER 1, 2000 OCTOBER 3, 1999
--------------- ---------------
(IN THOUSANDS)
Operating income before amortization......... $ 47,089 $ 40,441
Amortization of intangibles ................. (8,031) (8,002)
Interest and debt expense ................... (18,991) (16,573)
Interest and other income ................... 1,612 553
-------- --------
Income before income taxes .................. $ 21,679 $ 16,419
======== ========
- 9 -
11. The summary financial information of the parent, domestic subsidiaries
(guarantors) and foreign subsidiaries (nonguarantors of the 8.5% senior
subordinated notes) follows:
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries tions dated
-------------------------------------------------------------
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
Net property, plant, and equipment ............. 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
=============================================================
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 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 before income taxes ..................... 3,753 13,658 4,274 (6) 21,679
Income tax expense ............................. 1,899 7,376 2,073 (3) 11,345
-------------------------------------------------------------
Net income ..................................... $ 1,854 $ 6,282 $ 2,201 $ (3) $ 10,334
=============================================================
- 10 -
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries tions dated
-------------------------------------------------------------
FOR THE SIX MONTHS ENDED OCTOBER 1, 2000
OPERATING ACTIVITIES:
Net cash (used in) provided by operating ....... $ (5,524) $ 8,003 $ 2,954 $ - $ 5,433
activities ..................................... -------------------------------------------------------------
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 ....... (4,202) (4,453) 69 - (8,586)
activities -------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ......... - - - - -
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
=============================================================
AS OF OCTOBER 3, 1999
Current assets:
Cash and cash equivalents ..................... $ 9,522 $ 5,264 $ 5,285 $ - $ 20,071
Trade accounts receivable ..................... 51,152 56,998 24,612 - 132,762
Unbilled revenues ............................. - 16,209 - - 16,209
Inventories ................................... 48,308 39,570 27,134 (1,011) 114,001
Other current assets .......................... 2,893 10,966 3,678 - 17,537
-------------------------------------------------------------
Total current assets ......................... 111,875 129,007 60,709 (1,011) 300,580
Net property, plant, and equipment ............. 36,588 33,094 20,377 - 90,059
Goodwill and other intangibles, net ............ 41,849 258,569 53,010 - 353,428
Intercompany ................................... 206,658 (371,663) (67,193) 232,198 -
Other assets ................................... 221,004 162,472 (1,474) (348,679) 33,323
-------------------------------------------------------------
Total assets ................................. $ 617,974 $ 211,479 $ 65,429 $(117,492) $ 777,390
=============================================================
Current liabilities ............................ $ 31,992 $ 56,845 $ 22,859 $ 1,654 $ 113,350
Long-term debt, less current portion ........... 423,280 - 6,816 - 430,096
Other non-current liabilities .................. 12,233 22,055 3,136 - 37,424
-------------------------------------------------------------
Total liabilities ............................ 467,505 78,900 32,811 1,654 580,870
Shareholders' equity ........................... 150,469 132,579 32,618 (119,146) 196,520
-------------------------------------------------------------
Total liabilities and shareholders' equity ... $ 617,974 $ 211,479 $ 65,429 $(117,492) $ 777,390
=============================================================
- 11 -
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries tions dated
-------------------------------------------------------------
FOR THE SIX MONTHS ENDED OCTOBER 3, 1999
Net sales ...................................... $ 132,442 $ 180,063 $ 61,618 $ (10,514) $ 363,609
Cost of products sold .......................... 90,973 152,089 44,179 (10,477) 276,764
-------------------------------------------------------------
Gross profit ................................... 41,469 27,974 17,439 (37) 86,845
-------------------------------------------------------------
Selling, general and administrative expenses ... 19,761 14,867 11,776 - 46,404
Amortization of intangibles .................... 980 5,732 1,290 - 8,002
-------------------------------------------------------------
20,741 20,599 13,066 - 54,406
-------------------------------------------------------------
Income from operations ......................... 20,728 7,375 4,373 (37) 32,439
Interest and debt expense ...................... 16,204 5 364 - 16,573
Interest and other income ...................... 292 157 104 - 553
-------------------------------------------------------------
Income before income taxes ..................... 4,816 7,527 4,113 (37) 16,419
Income tax expense ............................. 2,261 5,311 1,956 (15) 9,513
-------------------------------------------------------------
Net income ..................................... $ 2,555 $ 2,216 $ 2,157 $ (22) $ 6,906
=============================================================
FOR THE SIX MONTHS ENDED OCTOBER 3, 1999
OPERATING ACTIVITIES:
Net cash provided by operating activities ...... $ 3,994 $ 12,720 $ 2,862 $ 151 $ 19,727
--------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net ......... (796) - - - (796)
Capital expenditures ........................... (2,892) (1,045) (1,193) - (5,130)
Purchases of businesses, net of cash ........... - (6,361) - (49) (6,410)
Other .......................................... - (589) - - (589)
--------------------------------------------------------------
Net cash used in investing activities .......... (3,688) (7,995) (1,193) (49) (12,925)
--------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ......... 3 136 - (136) 3
Net payments under revolving
line-of-credit agreements .................... 8,800 - (1,276) - 7,524
Repayment of debt .............................. (1,009) - 519 - (490)
Dividends paid ................................. (1,974) (5) 1 - (1,978)
Other .......................................... 287 - - - 287
-------------------------------------------------------------
Net cash (used in) provided by financing
activities.................................... 6,107 131 (756) (136) 5,346
Effect of exchange rate changes on cash ........ - - 1,022 34 1,056
-------------------------------------------------------------
Net change in cash and cash equivalents ........ 6,413 4,856 1,935 - 13,204
Cash and cash equivalents at beginning of period 3,109 408 3,350 - 6,867
-------------------------------------------------------------
Cash and cash equivalents at end of period ..... $ 9,522 $ 5,264 $ 5,285 $ - $ 20,071
=============================================================
- 12 -
12. The Financial Accounting Standards Board (FASB) issued Statement of
Financial Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities," in June of 1998. The FASB issued SFAS 137 in June of
1999 which defers the effective date of SFAS 133 to fiscal years beginning
after June 15, 2000. Statement No. 133 establishes accounting and reporting
standards for derivatives and hedging activities. It requires that entities
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value.
Compliance with this statement would not have a material impact on the
Company at the present time.
The Securities and Exchange Commission issued Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements (SAB No. 101) in December
of 1999. SAB No. 101 provides the Commission's views in applying generally
accepted accounting principles to selected revenue recognition issues. The
Company has reviewed the requirements of SAB No. 101 and has determined
that it is in compliance with SAB No. 101.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company is a broad-line designer, manufacturer, and supplier of
sophisticated material handling products that are widely distributed to
industrial, automotive and consumer markets worldwide; integrated material
handling solutions for the automotive markets; and integrated material handling
solutions for industrial markets worldwide. 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 - automotive sales are concentrated, domestically and internationally
(primarily North America) in the automotive industry. 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.
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED OCTOBER 1, 2000 AND OCTOBER 3, 1999
Net sales in the fiscal 2001 quarter ended October 1, 2000 were $188,994,000, a
increase of $6,986,000 or 3.8% over the fiscal 2000 quarter ended October 3,
1999. Net sales for the six months ended October 1, 2000 were $377,372,000, an
increase of $13,763,000 or 3.8% over the six months ended October 3, 1999. Sales
in the Products segment decreased by $2,901,000 or 2.3% from the previous year's
quarter and $8,706,000 or 3.4% for the six months ended October 1, 2000 over the
prior year period due to continued softness in the engineered hoist, crane
builder, and general industrial markets. Sales in the Solutions-Industrial
segment rose 6.4% or $1,049,000 for the three months ended October 1, 2000 and
11.2% or $3,510,000 for the six months ended October 1, 2000 as a result of
expanding markets. The Solutions-Automotive segment had a sales increase of
21.7% or $8,838,000 for the quarter and 24.8% or $18,959,000 for the six months
ended October 1, 2000 as its largest customer resumes more normal capital
spending levels.
Sales in the individual segments were as follows, in thousands of dollars and
with percentage changes for each group:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
OCT. 1, OCT. 3, CHANGE OCT. 1, OCT. 3, CHANGE
------ ------
2000 1999 AMOUNT % 2000 1999 AMOUNT %
---- ---- ------ - ---- ---- ------ -
(IN THOUSANDS, EXCEPT PERCENTAGES)
Products ........... $ 121,970 $ 124,871 $ (2,901) (2.3) $ 247,166 $ 255,872 $ (8,706) (3.4)
Solutions-Industrial 17,413 16,364 1,049 6.4 34,926 31,416 3,510 11.2
Solutions-Automotive 49,611 40,773 8,838 21.7 95,280 76,321 18,959 24.8
--------- --------- -------- --------- --------- --------
Net sales ...... $ 188,994 $ 182,008 $ 6,986 3.8 $ 377,372 $ 363,609 $ 13,763 3.8
========= ========= ======== ========= ========= ========
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The Company's gross profit margins were 23.8%, 21.8%, 24.4%, and 23.9% for the
fiscal 2001 and 2000 quarters and the six-month periods then ended,
respectively. The increase in the current quarter and six-month period margins
relative to the respective periods in the prior year is the result of varying
effects among the Company's segments. The gross profit margin in the Products
segment for the quarter and six month periods ended October 1, 2000 showed
continued improvement over the respective periods in the prior year as a result
of the continued integration of acquisitions and in particular the effects of
the purchasing council efforts. 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 contract mix, increased
competition for projects and learning curve associated with turnover in
personnel. Gross margins in the Solutions-Automotive segment increased
significantly for the quarter and six-month period ended October 1, 2000 as a
result of a return to normal volume with its major customer and the absence of
the effects of cost overruns on several foreign jobs that occurred in the second
quarter of the prior fiscal year.
Selling expenses were $12,332,000, $12,412,000, $24,814,000 and $25,170,000 in
the fiscal 2001 and 2000 quarters and the six months then ended, respectively.
As a percentage of consolidated net sales, selling expenses were 6.5%, 6.8%,
6.6%, and 6.9% in the fiscal 2001 and 2000 quarters and the six-month periods
then ended, respectively.
General and administrative expenses were $9,961,000, $10,912,000, $20,301,000,
and $20,269,000 in the fiscal 2001 and 2000 quarters and the six-month periods
then ended, respectively. As a percentage of consolidated net sales, general and
administrative expenses were 5.3%, 6.0%, 5.4% and 5.6% in the fiscal 2001 and
2000 quarters and the six-month periods then ended, respectively.
The Company incurred proxy contest related expenses amounting to $835,000 and
$965,000, respectively in the quarter and six months ended October 3, 1999
relative to the August 16, 1999 annual shareholders meeting and annual director
elections.
Amortization of intangibles was $4,017,000, $4,000,000, $8,031,000 and
$8,002,000 in the fiscal 2001 and 2000 quarters and the six months then ended,
respectively.
As a result of the above, income from operations increased $7,107,000 or 61.4%
in the fiscal 2001 quarter and increased $6,619,000 or 20.4% in the fiscal 2001
six month period compared to the respective periods in fiscal 2000. This is
based on income from operations of $18,680,000, $11,573,000, $39,058,000, and
$32,439,000 in the fiscal 2001 and 2000 quarters and six-month periods then
ended, respectively.
Interest and debt expense was $9,710,000, $8,294,000, $18,991,000, and
$16,573,000 in the fiscal 2001 and 2000 quarters and the six months then ended,
respectively. The fiscal 2001 increase is solely the result of increasing
interest rates. As a percentage of consolidated net sales, interest and debt
expense was 5.1%, 4.6%, 5.0%, and 4.6% in the fiscal 2001 and 2000 quarters and
the six-month periods then ended, respectively.
Interest and other income was $671,000, $306,000, $1,612,000, and $553,000 in
the fiscal 2001 and 2000 quarters and the six months then ended, respectively.
Income taxes as a percentage of income before income taxes were 54.5%, 85.7%,
52.3% and 57.9% in the fiscal 2001 and 2000 quarters and the six months then
ended, respectively. The percentages reflect the effect of nondeductible
amortization of goodwill resulting from acquisitions.
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Net income, therefore, increased $3,877,000 or 758.7% for the quarter ended
October 1, 2000 and increased $3,428,000 or 49.6% for the six months then ended.
This is based on net income of $4,388,000, $511,000, $10,334,000, and $6,906,000
for the quarters and six-month periods ended October 1, 2000 and October 3,
1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
On April 29, 1999, the Company acquired all of the outstanding stock of
Washington Equipment Company (WECO), a regional manufacturer and servicer of
overhead cranes. The total cost of the acquisition, which was accounted for as a
purchase, was approximately $6.4 million and was financed by proceeds from the
Company's revolving credit facility.
The 1998 Revolving Credit Facility provides availability up to $300 million, due
March 31, 2003, reduced to $275 million and $250 million effective March 31,
2001 and 2002, respectively, against which $212.7 million was outstanding at
October 1, 2000. Interest is payable at varying Eurodollar and Prime rates based
on LIBOR plus a spread determined by the Company's leverage ratio, amounting to
225 basis points at November 14, 2000 or the lender's prime rate plus 75 basis
points. The 1998 Revolving Credit Facility is secured by all equipment,
inventory, receivables, subsidiary stock (limited to 65% for foreign
subsidiaries) and intellectual property.
The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199,468,000, net of original issue discount of $532,000 and are due March 31,
2008. Interest is payable semi-annually based on an effective rate of 8.45%,
considering $1,902,000 of proceeds from rate hedging in advance of the
placement. Provisions of the 8 1/2% Notes include, without limitation,
restrictions of liens, indebtedness, asset sales, and dividends and other
restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at
the option of the Company, in whole or in part, at the Make-Whole Price (as
defined in the 8 1/2% Notes agreement). On or after April 1, 2003, they are
redeemable at prices declining annually to 100% on and after April 1, 2006. In
addition, on or prior to April 1, 2001, the Company may redeem up to 35% of the
outstanding notes with the proceeds of equity offerings at a redemption price of
108.5%, subject to certain restrictions. In the event of a Change of Control (as
defined in the indenture for such notes), each holder of the 8 1/2% Notes may
require the Company to repurchase all or a portion of such holder's 8 1/2% Notes
at a purchase price equal to 101% of the principal amount thereof. The 8 1/2%
Notes are guaranteed by certain domestic subsidiaries and are not subject to any
sinking fund requirements.
The Company believes that its cash on hand, cash flows, and borrowing capacity
under its revolving credit facility will be sufficient to fund its ongoing
operations, budgeted capital expenditures, and business acquisitions for the
next twelve months.
Net cash provided by operating activities was $5,433,000 for the six months
ended October 1, 2000, a decrease over the net cash provided by operating
activities for the six months ended October 3, 1999 of $19,727,000. The
difference of $14,294,000 is due to changes in net working capital components,
primarily accounts receivable and inventories.
- 16 -
Net cash used in investing activities decreased to $8,586,000 for the six months
ended October 1, 2000 from $12,925,000 for the six months ended October 3, 1999.
The $4,339,000 difference is due primarily to the acquisition of WECO in fiscal
2000 offset by the increase in capital expenditures for fiscal 2001 as a result
of the decision to purchase property and a building of a previously leased
facility.
Net cash provided by financing activities was $3,261,000 for the six months
ended October 1, 2000 compared to $5,346,000 for the six months ended October 3,
1999. The $2,085,000 change is primarily due to borrowings used to acquire WECO
in the previous year compared to funds used to finance an increase in capital
expenditures for fiscal 2001.
CAPITAL EXPENDITURES
In addition to keeping its current equipment and plants properly maintained, the
Company is committed to replacing, enhancing, and upgrading its property, plant,
and equipment to reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety, and promote ergonomically correct work stations. Consolidated
capital expenditures for the six months ended October 1, 2000 and October 3,
1999 were $7,011,000 and $5,130,000, respectively. The increase in fiscal 2001
is due to the purchase of property and a building of a previously leased
facility.
INFLATION AND OTHER MARKET CONDITIONS
The Company's costs are affected by inflation in the U.S. economy, and to a
lesser extent, in foreign economies including those of Europe, Canada, Mexico,
and the Pacific Rim. The Company does not believe that inflation has had a
material effect on results of operations over the periods presented because of
low inflation levels over the periods and because the Company has generally been
able to pass on rising costs through price increases. However, in the future
there can be no assurance that the Company's business will not be affected by
inflation or that it will be able to pass on cost increases.
SEASONALITY AND QUARTERLY RESULTS
Quarterly results may be materially affected by the timing of large customer
orders, by periods of high vacation and holiday concentrations, and by
acquisitions and the magnitude of acquisition costs. Therefore, the operating
results for any particular fiscal quarter are not necessarily indicative of
results for any subsequent fiscal quarter or for the full fiscal year.
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EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," in June of 1998. The FASB issued SFAS 137 in June 1999 which defers
the effective date of SFAS 133 to fiscal years beginning after June 15, 2000.
Statement No.133 establishes accounting and reporting standards for derivatives
and hedging activities. It requires that entities recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. Compliance with this statement would not have a
material impact on the Company at the present time.
The Securities and Exchange Commission issued Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements (SAB No. 101) in December of 1999.
SAB No. 101 provides the Commission's views in applying generally accepted
accounting principles to selected revenue recognition issues. The Company has
reviewed the requirements of SAB No. 101 and has determined that it is in
compliance with SAB No. 101.
SUBSEQUENT EVENT
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.
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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
In connection with its decision to examine various alternatives to
enhance shareholder value, the Company has entered into stay
agreements (the "Stay Agreements") with Messrs. Tevens, Montgomery and
Librock, Ms. Howard, Mr. Owen and certain other officers and employees
of the Company as outlined in Exhibit10.44 on form 10-K for the fiscal
year ended March 31, 2000. The Stay agreements have been extended
under the same terms and conditions such that no payment under the
Agreements will be due and payable if a Sale does not occur by (a)
June 30, 2001 or (b) by September 30, 2001, provided that on or before
June 30, 2001 negotiations regarding a possible Sale to an identified
purchaser with the requisite financing are taking place.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.1 Fifth Amendment, dated as of September 28, 2000, to
the Credit Agreement, dated as of March 31, 1998,
among Columbus McKinnon Corporation, as the Borrower,
the banks, financial institutions and other
institutional lenders named therein, as Initial
Lenders, Fleet National Bank, as the Initial Issuing
Bank, Fleet National Bank, as the Swing Line Bank and
Fleet National Bank, as the Administrative Agent.
There are no reports on Form 8-K.
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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, 2000 /s/ ROBERT L. MONTGOMERY, JR.
------------------ -----------------------------
Robert L. Montgomery, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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