UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT 1934
For the quarterly period ended December 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
------------------- -------------------
Commission File Number: 0-27618
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COLUMBUS MCKINNON CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 16-0547600
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 JOHN JAMES AUDUBON PARKWAY, AMHERST, NY 14228-1197
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(Address of principal executive offices) (Zip code)
(716) 689-5400
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. : [X] Yes [ ] No
The number of shares of common stock outstanding as of December 31, 2000 was:
14,896,172 shares.
FORM 10-Q INDEX
COLUMBUS MCKINNON CORPORATION
DECEMBER 31, 2000
PAGE #
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets -
December 31, 2000 and March 31, 2000 2
Condensed consolidated statements of income and retained earnings -
Three months and nine months ended December 31, 2000
and January 2, 2000 3
Condensed consolidated statements of cash flows -
Nine months ended December 31, 2000 and January 2, 2000 4
Condensed consolidated statements of comprehensive income -
Three months and nine months ended December 31, 2000
and January 2, 2000 5
Notes to condensed consolidated financial statements -
December 31, 2000 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none. 19
Item 2. Changes in Securities - none. 19
Item 3. Defaults upon Senior Securities - none. 19
Item 4. Submission of Matters to a Vote of Security Holders - none. 19
Item 5. Other Information - none. 19
Item 6. Exhibits and Reports on Form 8-K 19
- 1 -
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
DECEMBER 31, MARCH 31,
2000 2000
---------- -----------
ASSETS: (IN THOUSANDS)
Current assets:
Cash and cash equivalents ......................................... $ 6,630 $ 7,582
Trade accounts receivable ......................................... 143,442 143,401
Unbilled revenues ................................................. 40,158 24,447
Inventories ....................................................... 118,538 108,291
Net assets held for sale .......................................... 7,765 9,272
Prepaid expenses .................................................. 6,656 6,181
---------- -----------
Total current assets .................................................... 323,189 299,174
Net property, plant, and equipment ...................................... 87,090 87,297
Goodwill and other intangibles, net ..................................... 326,939 339,603
Marketable securities ................................................... 23,424 23,193
Deferred taxes on income ................................................ 4,659 4,237
Other assets ............................................................ 6,992 6,320
---------- -----------
Total assets ............................................................ $ 772,293 $ 759,824
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks ............................................ $ 3,870 $ 2,677
Trade accounts payable ............................................ 40,854 49,621
Excess billings ................................................... 4,890 4,288
Accrued liabilities ............................................... 49,335 51,246
Current portion of long-term debt ................................. 798 3,493
---------- -----------
Total current liabilities ............................................... 99,747 111,325
Senior debt, less current portion ....................................... 225,148 210,684
Subordinated debt ....................................................... 199,614 199,574
Other non-current liabilities ........................................... 37,804 34,788
---------- -----------
Total liabilities ....................................................... 562,313 556,371
---------- -----------
Shareholders' equity:
Common stock ...................................................... 149 149
Additional paid-in capital ........................................ 107,071 106,884
Retained earnings ................................................. 122,208 113,582
ESOP debt guarantee ............................................... (8,078) (8,703)
Unearned restricted stock ......................................... (2,173) (2,843)
Total accumulated other comprehensive loss ........................ (9,197) (5,616)
---------- -----------
Total shareholders' equity .............................................. 209,980 203,453
---------- -----------
Total liabilities and shareholders' equity .............................. $ 772,293 $ 759,824
========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 2 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DECEMBER 31, JANUARY 2, DECEMBER 31, JANUARY 2,
2000 2000 2000 2000
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales ..................................... $ 175,078 $ 174,173 $ 552,450 $ 537,782
Cost of products sold ......................... 135,544 130,768 420,712 407,532
----------- ----------- ----------- -----------
Gross profit .................................. 39,534 43,405 131,738 130,250
----------- ----------- ----------- -----------
Selling expenses .............................. 12,523 13,405 37,337 38,575
General and administrative expenses ........... 9,325 9,762 29,626 30,031
Proxy contest related expenses ................ - - - 965
Amortization of intangibles ................... 4,014 4,062 12,045 12,064
----------- ----------- ----------- -----------
25,862 27,229 79,008 81,635
----------- ----------- ----------- -----------
Income from operations ........................ 13,672 16,176 52,730 48,615
Interest and debt expense ..................... 9,815 8,937 28,806 25,510
Interest and other income ..................... 524 638 2,136 1,191
----------- ----------- ----------- -----------
Income before income taxes .................... 4,381 7,877 26,060 24,296
Income tax expense ............................ 3,085 4,623 14,430 14,136
----------- ----------- ----------- -----------
Net income .................................... 1,296 3,254 11,630 10,160
Retained earnings - beginning of period ....... 121,915 105,383 113,582 100,455
Cash dividends of $0.07, $0.07, $0.21 and
$0.21 per share ............................ (1,003) (995) (3,004) (2,973)
----------- ----------- ----------- -----------
Retained earnings - end of period ............. $ 122,208 $ 107,642 $ 122,208 $ 107,642
=========== =========== =========== ===========
Earnings per share data, basic ................ $0.09 $0.23 $0.81 $0.72
===== ===== ===== =====
Earnings per share data, diluted .............. $0.09 $0.23 $0.81 $0.71
===== ===== ===== =====
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
-----------------
DECEMBER 31, JANUARY 2,
2000 2000
---- ----
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income ............................................................... $ 11,630 $ 10,160
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ....................................... 21,317 21,650
Deferred income taxes ............................................... (422) 561
Other ............................................................... 939 689
Changes in operating assets and liabilities net of effects
from businesses purchased:
Trade accounts receivable ..................................... (41) 3,898
Unbilled revenues and excess billings ......................... (15,109) (6,610)
Inventories ................................................... (10,247) 1,930
Prepaid expenses .............................................. (475) (690)
Other assets .................................................. (793) (99)
Trade accounts payable ........................................ (8,767) (5,393)
Accrued and non-current liabilities ........................... 1,952 (5,993)
--------- ----------
Net cash (used in) provided by operating activities ...................... (16) 20,103
--------- ----------
INVESTING ACTIVITIES:
Purchase of marketable securities, net ................................... (2,143) (2,519)
Capital expenditures ..................................................... (9,065) (5,983)
Purchases of businesses, net of cash ..................................... - (6,382)
Net assets held for sale ................................................. 1,507 (1,056)
--------- ----------
Net cash used in investing activities .................................... (9,701) (15,940)
--------- ----------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ................................... - 3
Net borrowings under revolving line-of-credit agreements ................. 16,193 6,422
Repayment of debt ........................................................ (3,231) (1,308)
Dividends paid ........................................................... (3,004) (2,973)
Reduction of ESOP debt guarantee ......................................... 625 625
Other .................................................................... (375) (916)
--------- ----------
Net cash provided by financing activities ................................ 10,208 1,853
Effect of exchange rate changes on cash .................................. (1,443) 1,245
--------- ----------
Net (decrease) increase in cash and cash equivalents ..................... (952) 7,261
Cash and cash equivalents at beginning of period ......................... 7,582 6,867
--------- ----------
Cash and cash equivalents at end of period ............................... $ 6,630 $ 14,128
========= ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 4 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DECEMBER 31, JANUARY 2, DECEMBER 31, JANUARY 2,
2000 2000 2000 2000
---- ---- ---- ----
(IN THOUSANDS)
Net income ........................................ $ 1,296 $ 3,254 $ 11,630 $ 10,160
---------- ---------- ---------- ----------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ........ 1,585 (740) (1,669) 303
Unrealized (losses) gains on investments:
Unrealized holding (losses) gains arising
during the period ........................... (822) 878 (720) 476
Less: reclassification adjustment for gains
included in net income ...................... (335) (208) (1,192) (272)
---------- ---------- ---------- ----------
(1,157) 670 (1,912) 204
---------- ---------- ---------- ----------
Total other comprehensive income (loss) ........... 428 (70) (3,581) 507
---------- ---------- ---------- ----------
Comprehensive income .............................. $ 1,723 $ 3,184 $ 8,048 $ 10,667
========== ========== ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 5 -
COLUMBUS MCKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 2000
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the financial position of Columbus McKinnon
Corporation (the Company) at December 31, 2000, and the results of its
operations and its cash flows for the three and nine-month periods ended
December 31, 2000 and January 2, 2000, have been included. Results for the
period ended December 31, 2000 are not necessarily indicative of the
results that may be expected for the year ended March 31, 2001. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Columbus McKinnon Corporation annual report on Form
10-K for the year ended March 31, 2000.
The Company is a broad-line designer, manufacturer and supplier of
sophisticated material handling products that are widely distributed to
industrial, automotive, and consumer markets worldwide; integrated material
handling solutions for the automotive markets; and integrated material
handling solutions for industrial markets. The Company's material handling
products are sold, domestically and internationally, principally to third
party distributors through diverse distribution channels, and to a lesser
extent directly to manufacturers and other end-users. The Company's
integrated material handling solutions automotive business primarily deals
with end users and sales are concentrated domestically and internationally
(primarily North America), in the automotive industry. The Company's
integrated material handling solutions industrial businesses also deal
primarily with end users and sales are concentrated, domestically and
internationally (primarily Europe), in the consumer products,
manufacturing, warehousing and, to a lesser extent, the steel,
construction, automotive and other industrial markets.
2. Inventories consisted of the following:
DECEMBER 31, MARCH 31,
2000 2000
----------- -----------
(IN THOUSANDS)
At cost - FIFO basis:
Raw materials $ 62,882 $ 57,198
Work-in-process 20,359 20,240
Finished goods 42,924 38,329
----------- -----------
126,165 115,767
LIFO cost less than FIFO cost (7,627) (7,476)
----------- -----------
$ 118,538 $ 108,291
=========== ===========
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory valuation.
- 6 -
3. Property, plant, and equipment is net of $62,159,000 and $52,887,000 of
accumulated depreciation at December 31, 2000 and March 31, 2000,
respectively.
4. Goodwill and other intangibles, net includes $58,301,000 and $46,256,000 of
accumulated amortization at December 31, 2000 and March 31, 2000,
respectively.
5. General and Product Liability - The accrued general and product liability
costs, which are included in other non-current liabilities, are the
actuarial present value of estimated expenditures based on amounts
determined from loss reports and individual cases filed with the Company,
and an amount, based on past experience, for losses incurred but not
reported. The accrual in these condensed consolidated financial statements
was determined by applying a discount factor based on interest rates
customarily used in the insurance industry.
6. The carrying amount of the Company's senior debt instruments approximates
the fair values. The Company's subordinated debt has an approximate fair
market value of $166,000,000, which is less than its carrying amount of
$199,614,000.
7. The following table sets forth the computation of basic and diluted
earnings per share:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DECEMBER 31, JANUARY 2, DECEMBER 31, JANUARY 2,
2000 2000 2000 2000
---- ---- ---- ----
(IN THOUSANDS)
Numerator for basic and diluted earnings per share:
Net income ................................... $ 1,296 $ 3,254 $11,630 $10,160
======= ======= ======= =======
Denominators:
Weighted-average common stock outstanding -
denominator for basic EPS ................ 14,326 14,209 14,307 14,109
Effect of dilutive employee stock options .... - 12 - 105
------- ------- ------- -------
Adjusted weighted-average common stock
outstanding and assumed conversions -
denominator for diluted EPS ............... 14,326 14,221 14,307 14,214
======= ======= ======= =======
8. Income tax expense for the three-month periods ended December 31, 2000 and
January 2, 2000 and also for the nine month periods then ended exceeds the
customary relationship between income tax expense and income before income
taxes due to nondeductible amortization of goodwill of $3,097,000
$3,072,000, $9,268,000, and $9,224,000, respectively.
9. On April 29, 1999, the Company acquired all of the outstanding stock of
Washington Equipment Company ("WECO"), a regional manufacturer and servicer
of overhead cranes. The total cost of the acquisition, which was accounted
for as a purchase, was approximately $6.4 million and was financed by
proceeds from the Company's revolving debt facility.
- 7 -
10. As a result of the way the Company manages the business, its reportable
segments are strategic business units that offer products with different
characteristics. The most defining characteristic is the extent of
customized engineering required on a per-order basis. In addition, the
segments serve different customer bases through differing methods of
distribution. The Company has three reportable segments: material handling
products, material handling solutions - industrial, and material handling
solutions - automotive. The Company's material handling products segment
sells hoists, industrial cranes, chain, attachments, and other material
handling products principally to third party distributors through diverse
distribution channels. The material handling solutions - industrial segment
sells engineered material handling systems such as conveyors, manipulators,
and lift tables primarily to end-users in the consumer products,
manufacturing, warehousing, and, to a lesser extent, the steel,
construction, automotive, and other industrial markets. The material
handling solutions - automotive segment sells engineered material handling
systems, mainly conveyors, primarily to end-users in the automotive
industry. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. Intersegment
sales are not significant. The Company evaluates performance based on
operating earnings of the respective business units prior to the effects of
amortization.
Segment information as of and for the nine months ended December 31, 2000
and January 2, 2000, is as follows:
NINE MONTHS ENDED DECEMBER 31, 2000
-----------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
----------- ----------- ----------- -----------
(IN THOUSANDS)
Sales to external customers.......... $ 359,408 $ 51,348 $ 141,694 $ 552,450
Operating income before
amortization...................... 53,083 4,070 7,622 64,775
Depreciation and amortization........ 15,005 2,098 4,214 21,317
Total assets......................... 490,437 69,388 212,468 772,293
Capital expenditures................. 8,708 336 21 9,065
NINE MONTHS ENDED JANUARY 2, 2000
---------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
----------- ----------- ----------- -----------
(IN THOUSANDS)
Sales to external customers.......... $ 376,946 $ 49,327 $ 111,509 $ 537,782
Operating income before
amortization...................... 56,258 5,391 (970) 60,679
Depreciation and amortization........ 15,063 2,370 4,217 21,650
Total assets......................... 505,217 71,756 194,759 771,732
Capital expenditures................. 5,567 263 153 5,983
- 8 -
The following schedule provides a reconciliation of operating income before
amortization with consolidated income before income taxes:
NINE MONTHS ENDED
-----------------
DECEMBER 31, JANUARY 2,
2000 2000
----------- -----------
(IN THOUSANDS)
Operating income before amortization...... $ 64,775 $ 60,679
Amortization of intangibles............... (12,045) (12,064)
Interest and debt expense................. (28,806) (25,510)
Interest and other income................. 2,136 1,191
----------- -----------
Income before income taxes................ $ 26,060 $ 24,296
=========== ===========
- 9 -
11. The summary financial information of the parent, domestic subsidiaries
(guarantors) and foreign subsidiaries (nonguarantors of the 8.5% senior
subordinated notes) follows:
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries tions dated
----------------------------------------------------------------
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
Net property, plant, and equipment ............... 34,984 33,543 18,563 - 87,090
Goodwill and other intangibles, net .............. 39,436 239,439 48,064 - 326,939
Intercompany ..................................... 189,178 (351,042) (65,170) 227,034 -
Other assets ..................................... 226,721 160,960 (1,927) (350,679) 35,075
----------------------------------------------------------------
Total assets ................................... $ 611,588 $ 224,690 $ 60,535 $ (124,520) $ 772,293
================================================================
Current liabilities .............................. $ 27,041 $ 54,251 $ 21,443 $ (2,988) $ 99,747
Long-term debt, less current portion ............. 420,586 4 4,172 - 424,762
Other non-current liabilities .................... 16,490 18,474 2,840 - 37,804
----------------------------------------------------------------
Total liabilities .............................. 464,117 72,729 28,455 (2,988) 562,313
Shareholders' equity ............................. 147,471 151,961 32,080 (121,532) 209,980
----------------------------------------------------------------
Total liabilities and shareholders' equity ..... $ 611,588 $ 224,690 $ 60,535 $ (124,520) $ 772,293
================================================================
Net sales ........................................ $ 189,191 $ 291,103 $ 89,518 $ (17,362) $ 552,450
Cost of products sold ............................ 130,965 239,826 67,291 (17,370) 420,712
----------------------------------------------------------------
Gross profit ..................................... 58,226 51,277 22,227 8 131,738
----------------------------------------------------------------
Selling, general and administrative expenses ..... 28,684 23,706 14,573 - 66,963
Amortization of intangibles ...................... 1,529 8,696 1,820 - 12,045
----------------------------------------------------------------
30,213 32,402 16,393 - 79,008
----------------------------------------------------------------
Income from operations ........................... 28,013 18,875 5,834 8 52,730
Interest and debt expense ........................ 28,329 43 434 - 28,806
Interest and other income ........................ 1,764 214 158 - 2,136
----------------------------------------------------------------
Income before income taxes ....................... 1,488 19,046 5,558 8 26,060
Income tax expense ............................... 1,358 10,499 2,570 3 14,430
----------------------------------------------------------------
Net income ....................................... $ 90 $ 8,547 $ 2,988 $ 5 $ 11,630
================================================================
- 10 -
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries tions dated
----------------------------------------------------------------
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000
OPERATING ACTIVITIES:
Net cash (used in) provided by operating
activities ....................................... $ (7,750) $ 5,169 $ 3,637 $ (1,072) $ (16)
----------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net ........... (2,143) - - - (2,143)
Capital expenditures ............................. (3,416) (4,775) (874) - (9,065)
Other ............................................ - 1,507 - - 1,507
----------------------------------------------------------------
Net cash used in investing activities ............ (5,559) (3,268) (874) - (9,701)
----------------------------------------------------------------
FINANCING ACTIVITIES:
Net borrowings under revolving line-of-credit
agreements ..................................... 15,000 - 1,193 - 16,193
Repayment of debt ................................ (1,430) (20) (1,781) - (3,231)
Dividends paid ................................... (3,004) - (1,072) 1,072 (3,004)
Other ............................................ 250 - - - 250
----------------------------------------------------------------
Net cash provided by (used in) financing
activities ....................................... 10,816 (20) (1,660) 1,072 10,208
Effect of exchange rate changes on cash .......... - - (1,443) - (1,443)
----------------------------------------------------------------
Net change in cash and cash equivalents .......... (2,493) 1,881 (340) - (952)
Cash and cash equivalents at beginning of period . 5,754 (1,701) 3,529 - 7,582
----------------------------------------------------------------
Cash and cash equivalents at end of period ....... $ 3,261 $ 180 $ 3,189 $ - $ 6,630
================================================================
AS OF JANUARY 2, 2000 Current assets:
Cash and cash equivalents ....................... $ 3,877 $ 5,988 $ 4,263 $ - $ 14,128
Trade accounts receivable ....................... 54,886 54,801 25,131 - 134,818
Unbilled revenues ............................... - 17,620 - - 17,620
Inventories ..................................... 49,468 38,986 27,602 (1,036) 115,020
Other current assets ............................ 3,126 11,308 3,688 - 18,122
----------------------------------------------------------------
Total current assets ........................... 111,357 128,703 60,684 (1,036) 299,708
Net property, plant, and equipment ............... 35,713 32,339 19,684 - 87,736
Goodwill and other intangibles, net .............. 41,929 255,806 51,473 - 349,208
Intercompany ..................................... 207,974 (371,172) (65,302) 228,500 -
Other assets ..................................... 224,892 162,309 (1,442) (350,679) 35,080
----------------------------------------------------------------
Total assets ................................... $ 621,865 $ 207,985 $ 65,097 $ (123,215) $ 771,732
================================================================
Current liabilities .............................. $ 34,693 $ 50,301 $ 21,951 $ (1,510) $ 105,435
Long-term debt, less current portion ............. 423,138 - 6,294 - 429,432
Other non-current liabilities .................... 13,057 21,433 3,025 - 37,515
----------------------------------------------------------------
Total liabilities .............................. 470,888 71,734 31,270 (1,510) 572,382
Shareholders' equity ............................. 150,977 136,251 33,827 (121,705) 199,350
----------------------------------------------------------------
Total liabilities and shareholders' equity ..... $ 621,865 $ 207,985 $ 65,097 $ (123,215) $ 771,732
================================================================
- 11 -
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries tions dated
----------------------------------------------------------------
FOR THE NINE MONTHS ENDED JANUARY 2, 2000
Net sales ........................................ $ 194,112 $ 265,648 $ 94,263 $ (16,241) $ 537,782
Cost of products sold ............................ 133,505 222,127 68,102 (16,202) 407,532
----------------------------------------------------------------
Gross profit ..................................... 60,607 43,521 26,161 (39) 130,250
----------------------------------------------------------------
Selling, general and administrative expenses ..... 29,323 23,054 17,194 - 69,571
Amortization of intangibles ...................... 1,543 8,600 1,921 - 12,064
----------------------------------------------------------------
30,866 31,654 19,115 - 81,635
----------------------------------------------------------------
Income from operations ........................... 29,741 11,867 7,046 (39) 48,615
Interest and debt expense ........................ 24,960 5 545 - 25,510
Interest and other income ........................ 686 234 271 - 1,191
----------------------------------------------------------------
Income before income taxes ....................... 5,467 12,096 6,772 (39) 24,296
Income tax expense ............................... 2,720 8,209 3,222 (15) 14,136
----------------------------------------------------------------
Net income ....................................... $ 2,747 $ 3,887 $ 3,550 $ (24) $ 10,160
================================================================
FOR THE NINE MONTHS ENDED JANUARY 2, 2000
OPERATING ACTIVITIES:
Net cash provided by (used in) operating
activities ....................................... $ 2,409 $ 14,277 $ 4,823 $ (1,406) $ 20,103
----------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net ........... (2,519) - - - (2,519)
Capital expenditures ............................. (3,501) (1,439) (1,043) - (5,983)
Purchases of businesses, net of cash ............. - (6,333) - (49) (6,382)
Other ............................................ - (1,056) - - (1,056)
----------------------------------------------------------------
Net cash used in investing activities ............ (6,020) (8,828) (1,043) (49) (15,940)
----------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ........... 3 136 - (136) 3
Net payments under revolving
line-of-credit agreements ...................... 8,800 - (2,378) - 6,422
Repayment of debt ................................ (1,164) - (144) - (1,308)
Dividends paid ................................... (2,969) (5) (1,579) 1,580 (2,973)
Other ............................................ (291) - - - (291)
----------------------------------------------------------------
Net cash provided by (used in) financing
activities ....................................... 4,379 131 (4,101) 1,444 1,853
Effect of exchange rate changes on cash .......... - - 1,234 11 1,245
----------------------------------------------------------------
Net change in cash and cash equivalents .......... 768 5,580 913 - 7,261
Cash and cash equivalents at beginning of period . 3,109 408 3,350 - 6,867
----------------------------------------------------------------
Cash and cash equivalents at end of period ....... $ 3,877 $ 5,988 $ 4,263 $ - $ 14,128
================================================================
- 12 -
12. The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," in June of 1998. The FASB issued SFAS
No. 137 in June of 1999 which defers the effective date of SFAS No. 133 to
fiscal years beginning after June 15, 2000. Statement No. 133 establishes
accounting and reporting standards for derivatives and hedging activities.
It requires that entities recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. Compliance with this statement would not have a
material impact on the Company at the present time.
The Securities and Exchange Commission issued Staff Accounting Bulletin
(SAB) No. 101, "Revenue Recognition in Financial Statements" in December of
1999. SAB No. 101 provides the Commission's views in applying generally
accepted accounting principles to selected revenue recognition issues. The
Company has reviewed the requirements of SAB No. 101 and has determined
that it is in compliance with SAB No. 101.
- 13 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company is a broad-line designer, manufacturer, and supplier of
sophisticated material handling products that are widely distributed to
industrial, automotive and consumer markets worldwide; integrated material
handling solutions for industrial markets worldwide; and integrated material
handling solutions for the automotive markets. The Company's material handling
products are sold, domestically and internationally, principally to third party
distributors through diverse distribution channels. Distribution channels
include general distributors, specialty distributors, crane end users,
service-after-sale distributors, original equipment manufacturers ("OEMs"),
government, consumer and international. The general distributors are comprised
of industrial distributors, rigging shops and crane builders. Specialty
distributors include catalog houses, material handling specialists and
entertainment equipment riggers. The service-after-sale network includes repair
parts distribution centers, chain service centers, and hoist repair centers.
Consumer distribution channels include mass merchandisers, hardware
distributors, trucking and transportation distributors, farm hardware
distributors and rental outlets. The Company's integrated material handling
solutions segments primarily deal directly with end-users. Material handling
solutions - industrial sales are concentrated, domestically and internationally
(primarily Europe), in consumer products manufacturing, warehousing and, to a
lesser extent, the steel, construction, automotive, and other industrial
markets. Material handling solutions - automotive sales are concentrated,
domestically and internationally (primarily North America) in the automotive
industry.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 2000 AND JANUARY 2, 2000
Net sales in the fiscal 2001 quarter ended December 31, 2000 were $175,078,000,
a increase of $905,000 or 0.5% over the fiscal 2000 quarter ended January 2,
2000. Net sales for the nine months ended December 31, 2000 were $552,450,000,
an increase of $14,668,000 or 2.7% over the nine months ended January 2, 2000.
Sales in the Products segment decreased by $8,832,000 or 7.3% from the previous
year's quarter and $17,538,000 or 4.7% for the nine months ended December 31,
2000 over the prior year period due to continued softness in the engineered
hoist, crane builder, and general industrial markets. Sales in the
Solutions-Industrial segment decreased 8.3% or $1,489,000 for the three months
ended December 31, 2000 due to weak current markets, but have increased 4.1% or
$2,021,000 for the nine months ended December 31, 2000 as a result of stronger
markets earlier in the year. The Solutions-Automotive segment had a sales
increase of 31.9% or $11,226,000 for the quarter and 27.1% or $30,185,000 for
the nine months ended December 31, 2000 as automotive capital spending has
resumed to more normal levels.
Sales in the individual segments were as follows, in thousands of dollars and
with percentage changes for each group:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DEC. 31, JAN. 2, CHANGE DEC. 31, JAN. 2, CHANGE
------ ------
2000 2000 AMOUNT % 2000 2000 AMOUNT %
---- ---- ------ - ---- ---- ------ -
(IN THOUSANDS, EXCEPT PERCENTAGES)
Products $ 112,242 $ 121,074 $ (8,832) (7.3) $ 359,408 $ 376,946 $ (17,538) (4.7)
Solutions-Industrial 16,422 17,911 (1,489) (8.3) 51,348 49,327 2,021 4.1
Solutions-Automotive 46,414 35,188 11,226 31.9 141,694 111,509 30,185 27.1
--------- --------- -------- ---------- --------- --------
Net sales $ 175,078 $ 174,173 $ 905 0.5 $ 552,450 $ 537,782 $14,668 2.7
========= ========= ======== ========== ========= ========
- 14 -
The Company's gross profit margins were 22.6%, 24.9%, 23.8%, and 24.2% for the
fiscal 2001 and 2000 quarters and the nine-month periods then ended,
respectively. The decrease in the current quarter and nine-month period margins
relative to the respective periods in the prior year is the result of a shift in
product mix to higher sales volume in lower margin segments and lower sales
volume in the higher margin segment. The gross profit margin in the Products
segment for the quarter and nine month periods ended December 31, 2000 decreased
from the respective periods in the prior year as a result of the decreased
production and sales volume offset somewhat by cost control measures. The
Solutions-Industrial segment experienced a decrease in margin for the current
quarter and nine-month period when compared to the respective periods in the
prior year as a result of contract mix and an increase in turnkey projects,
which traditionally carry lower relative risk and margins. Gross margins in the
Solutions-Automotive segment increased significantly for the quarter and
nine-month period ended December 31, 2000 as the result of a return to normal
sales volume and the absence of the effects of cost overruns on several foreign
jobs that occurred in the prior fiscal year, offset somewhat by tightening
margins due to competitive pricing.
Selling expenses were $12,523,000, $13,405,000, $37,337,000 and $38,575,000 in
the fiscal 2001 and 2000 quarters and the nine months then ended, respectively.
As a percentage of consolidated net sales, selling expenses were 7.2%, 7.7%,
6.8%, and 7.2% in the fiscal 2001 and 2000 quarters and the nine-month periods
then ended, respectively. Reduced expenses as a percent of revenues in the
current year are due to cost control measures.
General and administrative expenses were $9,325,000, $9,762,000, $29,626,000,
and $30,031,000 in the fiscal 2001 and 2000 quarters and the nine-month periods
then ended, respectively. As a percentage of consolidated net sales, general and
administrative expenses were 5.3%, 5.6%, 5.4% and 5.6% in the fiscal 2001 and
2000 quarters and the nine-month periods then ended, respectively. Reduced
expenses as a percent of revenues in the current year are due to cost control
measures.
The Company incurred proxy contest related expenses amounting to $965,000 in the
nine months ended January 2, 2000 relative to the August 16, 1999 annual
shareholders meeting and annual director elections.
Amortization of intangibles was $4,014,000, $4,062,000, $12,045,000 and
$12,064,000 in the fiscal 2001 and 2000 quarters and the nine months then ended,
respectively.
As a result of the above, income from operations decreased $2,504,000 or 15.5%
in the fiscal 2001 quarter and increased $4,115,000 or 8.5% in the fiscal 2001
nine month period compared to the respective periods in fiscal 2000. This is
based on income from operations of $13,672,000, $16,176,000, $52,730,000, and
$48,615,000 in the fiscal 2001 and 2000 quarters and nine-month periods then
ended, respectively.
Interest and debt expense was $9,815,000, $8,937,000, $28,806,000, and
$25,510,000 in the fiscal 2001 and 2000 quarters and the nine months then ended,
respectively. The fiscal 2001 increase is solely the result of increased
interest rates. As a percentage of consolidated net sales, interest and debt
expense was 5.6%, 5.1%, 5.2%, and 4.7% in the fiscal 2001 and 2000 quarters and
the nine-month periods then ended, respectively.
Interest and other income was $524,000, $638,000, $2,136,000, and $1,191,000 in
the fiscal 2001 and 2000 quarters and the nine months then ended, respectively.
The increase in the current year is the result of the investment earnings on
assets in the Company's captive insurance company.
- 15 -
Income taxes as a percentage of income before income taxes were 70.4%, 58.7%,
55.4% and 58.2% in the fiscal 2001 and 2000 quarters and the nine months then
ended, respectively. The percentages reflect the effect of nondeductible
amortization of goodwill resulting from acquisitions.
Net income, therefore, decreased $1,958,000 or 60.2% for the quarter ended
December 31, 2000 and increased $1,470,000 or 14.5% for the nine months then
ended when compared to the same periods in the previous fiscal year,
respectively. This is based on net income of $1,296,000, $3,254,000,
$11,630,000, and $10,160,000 for the quarters and nine-month periods ended
December 31, 2000 and January 2, 2000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
On April 29, 1999, the Company acquired all of the outstanding stock of
Washington Equipment Company (WECO), a regional manufacturer and servicer of
overhead cranes. The total cost of the acquisition, which was accounted for as a
purchase, was approximately $6.4 million and was financed by proceeds from the
Company's revolving credit facility.
The 1998 Revolving Credit Facility provides availability up to $250 million, due
March 31, 2003, against which $220 million was outstanding at December 31, 2000.
Interest is payable at varying Eurodollar rates based on LIBOR plus a spread
determined by the Company's leverage ratio, amounting to 237.5 basis points at
February 14, 2001 or the lender's Prime rate plus 75 basis points. The 1998
Revolving Credit Facility is secured by all equipment, inventory, receivables,
subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual
property.
The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199,468,000, net of original issue discount of $532,000 and are due March 31,
2008. Interest is payable semi-annually based on an effective rate of 8.45%,
considering $1,902,000 of proceeds from rate hedging in advance of the
placement. Provisions of the 8 1/2% Notes include, without limitation,
restrictions of liens, indebtedness, asset sales, and dividends and other
restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at
the option of the Company, in whole or in part, at the Make-Whole Price (as
defined in the 8 1/2% Notes agreement). On or after April 1, 2003, they are
redeemable at prices declining annually to 100% on and after April 1, 2006. In
addition, on or prior to April 1, 2001, the Company may redeem up to 35% of the
outstanding notes with the proceeds of equity offerings at a redemption price of
108.5%, subject to certain restrictions. In the event of a Change of Control (as
defined in the indenture for such notes), each holder of the 8 1/2% Notes may
require the Company to repurchase all or a portion of such holder's 8 1/2% Notes
at a purchase price equal to 101% of the principal amount thereof. The 8 1/2%
Notes are guaranteed by certain domestic subsidiaries and are not subject to any
sinking fund requirements.
The Company believes that its cash on hand, cash flows, and borrowing capacity
under its revolving credit facility will be sufficient to fund its ongoing
operations, budgeted capital expenditures, and business acquisitions for the
next twelve months.
Net cash used by operating activities was $16,000 for the nine months ended
December 31, 2000 while net cash provided by operating activities was
$20,103,000 for the nine months ended January 2, 2000. The difference of
$20,129,000 is due to changes in net working capital components, primarily
unbilled revenues and excess billings and inventories.
- 16 -
Net cash used in investing activities decreased to $9,701,000 for the nine
months ended December 31, 2000 from $15,940,000 for the nine months ended
January 2, 2000. The $6,239,000 difference is due primarily to the acquisition
of WECO in fiscal 2000 offset by the increase in capital expenditures for fiscal
2001 as a result of the decision to purchase property and a building of a
previously leased facility.
Net cash provided by financing activities was $10,208,000 for the nine months
ended December 31, 2000 compared to $1,853,000 for the nine months ended January
2, 2000. The $8,355,000 change is primarily due to funds required for the
buildup in working capital and to finance an increase in capital expenditures
for fiscal 2001.
CAPITAL EXPENDITURES
In addition to keeping its current equipment and plants properly maintained, the
Company is committed to replacing, enhancing, and upgrading its property, plant,
and equipment to reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety, and promote ergonomically correct work stations. Consolidated
capital expenditures for the nine months ended December 31, 2000 and January 2,
2000 were $9,065,000 and $5,983,000, respectively. The increase in fiscal 2001
is due to the purchase of property and a building of a previously leased
facility.
INFLATION AND OTHER MARKET CONDITIONS
The Company's costs are affected by inflation in the U.S. economy, and to a
lesser extent, in foreign economies including those of Europe, Canada, Mexico,
and the Pacific Rim. The Company does not believe that inflation has had a
material effect on results of operations over the periods presented because of
low inflation levels over the periods and because the Company has generally been
able to pass on rising costs through price increases. However, in the future
there can be no assurance that the Company's business will not be affected by
inflation or that it will be able to pass on cost increases.
SEASONALITY AND QUARTERLY RESULTS
Quarterly results may be materially affected by the timing of large customer
orders, by periods of high vacation and holiday concentrations, and by
acquisitions and the magnitude of acquisition costs. Therefore, the operating
results for any particular fiscal quarter are not necessarily indicative of
results for any subsequent fiscal quarter or for the full fiscal year.
- 17 -
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," in June of 1998. The FASB issued SFAS 137 in June 1999
which defers the effective date of SFAS 133 to fiscal years beginning after June
15, 2000. Statement No.133 establishes accounting and reporting standards for
derivatives and hedging activities. It requires that entities recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Compliance with this
statement would not have a material impact on the Company at the present time.
The Securities and Exchange Commission issued Staff Accounting Bulletin (SAB)
No. 101, "Revenue Recognition in Financial Statements" in December of 1999. SAB
No. 101 provides the Commission's views in applying generally accepted
accounting principles to selected revenue recognition issues. The Company has
reviewed the requirements of SAB No. 101 and has determined that it is in
compliance with SAB No. 101.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report may include "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause the actual
results of the Company to differ materially from the results expressed or
implied by such statements, including general economic and business conditions,
conditions affecting the industries served by the Company and its subsidiaries,
conditions affecting the Company's customers and suppliers, competitor responses
to the Company's products and services, the overall market acceptance of such
products and services, the integration of acquisitions and other factors
disclosed in the Company's periodic reports filed with the Commission.
Consequently such forward-looking statements should be regarded as the Company's
current plans, estimates and beliefs. The Company does not undertake and
specifically declines any obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
- 18 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none.
Item 2. Changes in Securities - none.
Item 3. Defaults upon Senior Securities - none.
Item 4. Submission of Matters to a Vote of Security Holders - none.
Item 5. Other Information - none.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.1 Sixth Amendment, dated as of February 5, 2001, to the
Credit Agreement, dated as of March 31, 1998, among
Columbus McKinnon Corporation, as the Borrower, the
banks, financial institutions and other institutional
lenders named therein, as Initial Lenders, Fleet
National Bank, as the Initial Issuing Bank, Fleet
National Bank, as the Swing Line Bank and Fleet
National Bank, as the Administrative Agent.
Exhibit 10.2 Amendment to Form of Stay Agreement as entered into
between Columbus McKinnon Corporation and each of
Timothy T. Tevens, Robert L. Montgomery, Jr., Ned T.
Librock, Karen L. Howard, and Joseph J. Owen.
There are no reports on Form 8-K.
- 19 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBUS MCKINNON CORPORATION
-----------------------------
(Registrant)
Date: FEBRUARY 14, 2001 /S/ ROBERT L. MONTGOMERY, JR.
------------------ -----------------------------
Robert L. Montgomery, Jr.
Executive Vice President and
Chief Financial Officer (Principal
Financial Officer)
- 20 -