UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT 1934
For the quarterly period ended September 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
-------------------- --------------------
Commission File Number: 0-27618
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COLUMBUS MCKINNON CORPORATION
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(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 October 31, 2001 was:
14,895,172 shares.
FORM 10-Q INDEX
COLUMBUS MCKINNON CORPORATION
SEPTEMBER 30, 2001
PAGE #
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets -
September 30, 2001 and March 31, 2001 2
Condensed consolidated statements of income and retained
earnings -Three months and six months ended
September 30, 2001 and October 1, 2000 3
Condensed consolidated statements of cash flows -
Six months ended September 30, 2001 and October 1, 2000 4
Condensed consolidated statements of comprehensive
income - Three months and six months ended
September 30, 2001 and October 1, 2000 5
Notes to condensed consolidated financial statements -
September 30, 2001 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none. 19
Item 2. Changes in Securities - none. 19
Item 3. Defaults upon Senior Securities - none. 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information - none. 19
Item 6. Exhibits and Reports on Form 8-K 19
- 1 -
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, MARCH 31,
2001 2001
---------- -----------
ASSETS: (IN THOUSANDS)
Current assets:
Cash and cash equivalents $ - $ 14,015
Trade accounts receivable 115,432 140,234
Unbilled revenues 23,246 26,813
Inventories 104,161 113,218
Net assets held for sale 4,112 4,270
Prepaid expenses 6,734 5,655
---------- ----------
Total current assets 253,685 304,205
Property, plant, and equipment, net 82,146 85,272
Goodwill and other intangibles, net 314,624 322,196
Marketable securities 21,462 22,326
Deferred taxes on income 7,345 5,696
Other assets 6,304 7,318
---------- ----------
Total assets $ 685,566 $ 747,013
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 2,649 $ 3,012
Trade accounts payable 52,504 44,936
Excess billings 2,886 1,623
Accrued liabilities 50,385 48,465
Current portion of long-term debt 1,046 3,092
---------- ----------
Total current liabilities 109,470 101,128
Senior debt, less current portion 141,885 204,326
Subordinated debt 199,654 199,628
Other non-current liabilities 33,812 34,067
---------- ----------
Total liabilities 484,821 539,149
---------- ----------
Shareholders' equity
Common stock 149 149
Additional paid-in capital 105,345 105,418
Retained earnings 116,797 124,806
ESOP debt guarantee (7,157) (7,527)
Unearned restricted stock (793) (955)
Total accumulated other comprehensive loss (13,596) (14,027)
---------- ----------
Total shareholders' equity 200,745 207,864
---------- ----------
Total liabilities and shareholders' equity $ 685,566 $ 747,013
========== ==========
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
------------------ ----------------
SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1,
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales $ 171,577 $ 188,994 $ 347,482 $ 377,372
Cost of products sold 138,603 144,004 279,550 285,168
----------- ----------- ----------- -----------
Gross profit 32,974 44,990 67,932 92,204
----------- ----------- ----------- -----------
Selling expenses 11,447 12,332 23,081 24,814
General and administrative expenses 8,416 9,961 15,783 20,301
Restructuring charges 727 - 9,567 -
Amortization of intangibles 4,013 4,017 8,046 8,031
----------- ----------- ----------- -----------
24,603 26,310 56,477 53,146
----------- ----------- ----------- -----------
Income from operations 8,371 18,680 11,455 39,058
Interest and debt expense 8,225 9,710 16,801 18,991
Interest and other income (expense) 31 671 (81) 1,612
----------- ----------- ------------ -----------
Income (loss) before income taxes 177 9,641 (5,427) 21,679
Income tax expense 1,509 5,253 566 11,345
----------- ----------- ----------- -----------
Net (loss) income (1,332) 4,388 (5,993) 10,334
Retained earnings - beginning of period 119,139 118,529 124,806 113,582
Cash dividends of $0.07, $0.07, $0.14 and
$0.14 per share (1,010) (1,002) (2,016) (2,001)
----------- ----------- ----------- -----------
Retained earnings - end of period $ 116,797 $ 121,915 $ 116,797 $ 121,915
=========== =========== =========== ===========
Earnings per share data, basic and diluted $(0.09) $0.31 $(0.42) $0.72
====== ===== ====== =====
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
----------------
SEPTEMBER 30, OCTOBER 1,
2001 2000
---------- -----------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net (loss) income $ (5,993) $ 10,334
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,525 14,190
Deferred income taxes (358) (416)
Other 730 627
Changes in operating assets and liabilities:
Trade accounts receivable 24,792 (2,522)
Unbilled revenues and excess billings 4,830 (7,929)
Inventories 9,310 (3,115)
Prepaid expenses (1,076) (108)
Other assets (172) (219)
Trade accounts payable 7,506 (13,054)
Accrued and non-current liabilities 1,409 7,645
---------- ----------
Net cash provided by operating activities 55,503 5,433
---------- ----------
INVESTING ACTIVITIES:
Purchase of marketable securities, net (25) (1,834)
Capital expenditures (3,264) (7,011)
Net assets held for sale 158 259
---------- ----------
Net cash used in investing activities (3,131) (8,586)
---------- ----------
FINANCING ACTIVITIES:
Net (payments) borrowings under revolving line-of-credit agreements (64,408) 6,761
Repayment of debt (560) (1,917)
Dividends paid (2,016) (2,001)
Reduction of ESOP debt guarantee 370 418
Other (489) -
---------- ----------
Net cash (used in) provided by financing activities (67,103) 3,261
Effect of exchange rate changes on cash 516 (2,244)
---------- ----------
Net decrease in cash and cash equivalents (14,215) (2,136)
Cash and cash equivalents at beginning of period 14,215 7,582
---------- ----------
Cash and cash equivalents at end of period $ - $ 5,446
========== ==========
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
------------------ ----------------
SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1,
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS)
Net (loss) income $ (1,332) $ 4,388 $ (5,993) $ 10,334
----------- ----------- ----------- -----------
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments 2,133 (3,545) 1,892 (3,254)
Unrealized loss on derivatives
qualifying as hedges (695) - (572) -
Unrealized losses on investments:
Unrealized holding (losses) gains arising
during the period (1,726) (45) (1,527) 102
Less: reclassification adjustment for
(gains) losses included in net income 241 (282) 638 (857)
---------- ----------- ---------- -----------
(1,485) (327) (889) (755)
---------- ----------- ---------- -----------
Total other comprehensive (loss) income (47) (3,872) 431 (4,009)
---------- ----------- ---------- -----------
Comprehensive (loss) income $ (1,379) $ 516 $ (5,562) $ 6,325
========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 5 -
COLUMBUS MCKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2001
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the financial position of Columbus McKinnon
Corporation (the Company) at September 30, 2001, and the results of its
operations and its cash flows for the three and six-month periods ended
September 30, 2001 and October 1, 2000, have been included. Results for the
period ended September 30, 2001 are not necessarily indicative of the
results that may be expected for the year ended March 31, 2002. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Columbus McKinnon Corporation annual report on Form
10-K for the year ended March 31, 2001.
The Company is a broad-line designer, manufacturer and supplier of
sophisticated material handling products that are widely distributed to
industrial, automotive, and consumer markets globally; integrated material
handling solutions for industrial markets; and integrated material handling
solutions for automotive markets. The Company's material handling products
are sold, domestically and internationally, principally to third party
distributors through diverse distribution channels, and to a lesser extent
directly to manufacturers and other end-users. The Company's integrated
material handling solutions industrial businesses deal primarily with end
users and sales are concentrated, domestically and internationally
(primarily Europe), in the consumer products, manufacturing, warehousing
and, to a lesser extent, the steel, construction, automotive and other
industrial markets. The Company's integrated material handling solutions
automotive business primarily deals with end users and sales are
concentrated domestically and internationally (primarily North America), in
the automotive industry.
2. Inventories consisted of the following:
SEPTEMBER 30, MARCH 31,
2001 2001
---------- ----------
(IN THOUSANDS)
At cost - FIFO basis:
Raw materials......................... $ 56,251 $ 60,908
Work-in-process....................... 16,946 17,110
Finished goods........................ 38,581 41,850
---------- ----------
111,778 119,868
LIFO cost less than FIFO cost............ (7,617) (6,650)
---------- ----------
Net inventories ....................... $ 104,161 $ 113,218
========== ==========
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory valuation.
- 6 -
3. Property, plant, and equipment is net of $72,092,000 and $65,613,000 of
accumulated depreciation at September 30, 2001 and March 31, 2001,
respectively.
4. Goodwill and other intangibles is net of $70,285,000 and $62,239,000 of
accumulated amortization at September 30, 2001 and March 31, 2001,
respectively.
5. General and Product Liability - The accrued general and product liability
costs, which are included in other non-current liabilities, are the
actuarial present value of estimated expenditures based on amounts
determined from loss reports and individual cases filed with the Company,
and an amount, based on experience, for losses incurred but not reported.
The accrual in these condensed consolidated financial statements was
determined by applying a discount factor based on interest rates
customarily used in the insurance industry.
6. The carrying amount of the Company's senior debt instruments approximates
the fair value. The Company's subordinated debt has an approximate fair
value of $174,000,000, which is less than its carrying amount of
$199,654,000.
7. The following table sets forth the computation of basic and diluted
earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1,
2000 2000 2000 2000
---- ---- ---- ----
(IN THOUSANDS)
Numerator for basic and diluted earnings per share:
Net income $ (1,332) $ 4,388 $ (5,993) $ 10,334
======== ======== ======== ========
Denominators:
Weighted-average common stock outstanding -
denominator for basic EPS 14,407 14,308 14,399 14,298
Effect of dilutive employee stock options 2 - 1 -
-------- -------- -------- --------
Adjusted weighted-average common stock
outstanding and assumed conversions -
denominator for diluted EPS 14,409 14,308 14,400 14,298
======== ======== ======== ========
8. Income tax expense for the three and six-month periods ended September 30,
2001 and October 1, 2000, respectively, exceeds the customary relationship
between income tax expense and income (loss) before income taxes due to
nondeductible amortization of goodwill of $3,076,000 $3,097,000,
$6,152,000, and $6,171,000, respectively.
9. On April 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended, which requires companies to carry all
derivatives on the balance sheet at fair value. The Company determines the
fair value of derivatives by reference to quoted market prices. The
accounting for changes in the fair value of a derivative instrument depends
on whether it has been designated and qualifies as part of a hedging
relationship and, if so, the reason for holding it. The Company's use of
derivative instruments is limited to cash flow hedges, as defined in SFAS
No. 133, of certain interest rate risks.
- 7 -
In order to provide interest rate risk protection, the Company entered into
an interest rate swap agreement in June of 2001 to effectively convert $40
million of variable-rate debt to fixed-rate debt. The $40 million interest
rate swap agreement matures in June 2003. The cash flow hedge is considered
effective and the gain or loss on the change in fair value is reported in
other comprehensive loss, net of tax.
The June 2001 interest rate swap is the only derivative instrument held by
the Company, as such there is no impact on the adoption of SFAS No. 133 at
April 1, 2001. The net impact of the derivative instrument was a decrease
to other comprehensive income of $695,000 and $572,000 for the three and
six-month periods ended September 30, 2001, respectively. The fair value of
the derivative at September 30, 2001 was a $954,000 liability.
10. As a result of the way the Company manages the business, its reportable
segments are strategic business units that offer products with different
characteristics. The most defining characteristic is the extent of
customized engineering required on a per-order basis. In addition, the
segments serve different customer bases through differing methods of
distribution. The Company has three reportable segments: material handling
products, material handling solutions - industrial, and material handling
solutions - automotive. The Company's material handling products segment
sells hoists, industrial cranes, chain, attachments, and other material
handling products principally to third party distributors through diverse
distribution channels. The material handling solutions - industrial segment
sells engineered material handling systems such as conveyors, manipulators,
and lift tables primarily to end-users in the consumer products,
manufacturing, warehousing, and, to a lesser extent, the steel,
construction, automotive, and other industrial markets. The material
handling solutions - automotive segment sells engineered material handling
systems, mainly conveyors, primarily to end-users in the automotive
industry. Intersegment sales are not significant. The Company evaluates
performance based on operating income of the respective business units
prior to the effects of amortization.
Segment information as of and for the six months ended September 30, 2001
and October 1, 2000, is as follows:
SIX MONTHS ENDED SEPTEMBER 30, 2001
-----------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
---------- ---------- ---------- ----------
(IN THOUSANDS)
Sales to external customers................. $ 212,768 $ 27,635 $ 107,079 $ 347,482
Operating income (loss) before
amortization and restructuring charges... 29,199 365 (496) 29,068
Depreciation and amortization............... 10,258 1,515 2,752 14,525
Total assets................................ 447,881 63,358 174,327 685,566
Capital expenditures........................ 2,663 519 82 3,264
- 8 -
SIX MONTHS ENDED OCTOBER 1, 2000
--------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
---------- ---------- ---------- ----------
(IN THOUSANDS)
Sales to external customers................. $ 247,166 $ 34,926 $ 95,280 $ 377,372
Operating income before
amortization and restructuring charges... 38,626 3,135 5,328 47,089
Depreciation and amortization............... 9,955 1,426 2,809 14,190
Total assets................................ 492,671 65,781 207,780 766,232
Capital expenditures........................ 7,230 (232) 13 7,011
The following schedule provides a reconciliation of operating income before
amortization with (loss) income before income taxes:
SIX MONTHS ENDED
----------------
SEPTEMBER 30, OCTOBER 1,
2001 2000
---- ----
(IN THOUSANDS)
Operating income before amortization and
restructuring charges........................................ $ 29,068 $ 47,089
Restructuring charges........................................... (9,567) -
Amortization of intangibles..................................... (8,046) (8,031)
Interest and debt expense....................................... (16,801) (18,991)
Interest income and other (expense) income...................... (81) 1,612
------------ -----------
(Loss) income before income taxes............................... $ (5,427) $ 21,679
=========== ===========
- 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 SEPTEMBER 30, 2001
Current assets:
Cash and cash equivalents $ 570 $ (3,393) $ 2,823 $ - $ -
Trade accounts receivable 53,331 40,660 21,441 - 115,432
Unbilled revenues - 23,246 - - 23,246
Inventories 46,294 30,273 28,556 (962) 104,161
Other current assets 5,903 1,251 3,692 - 10,846
------------------------------------------------------------------
Total current assets 106,098 92,037 56,512 (962) 253,685
Property, plant, and equipment, net 33,276 30,667 18,203 - 82,146
Goodwill and other intangibles, net 37,842 230,838 45,944 - 314,624
Intercompany 123,354 (291,193) (59,100) 226,939 -
Other assets 226,025 161,325 (1,350) (350,889) 35,111
------------------------------------------------------------------
Total assets $ 526,595 $ 223,674 $ 60,209 $ (124,912) $ 685,566
==================================================================
Current liabilities $ 41,154 $ 50,256 $ 21,178 $ (3,118) $ 109,470
Long-term debt, less current portion 337,654 1 3,884 - 341,539
Other non-current liabilities 15,946 14,887 2,979 - 33,812
------------------------------------------------------------------
Total liabilities 394,754 65,144 28,041 (3,118) 484,821
Shareholders' equity 131,841 158,530 32,168 (121,794) 200,745
------------------------------------------------------------------
Total liabilities and shareholders' equity $ 526,595 $ 223,674 $ 60,209 $ (124,912) $ 685,566
==================================================================
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001
Net sales $ 111,779 $ 193,027 $ 53,764 $ (11,088) $ 347,482
Cost of products sold 80,723 169,522 40,405 (11,100) 279,550
------------------------------------------------------------------
Gross profit 31,056 23,505 13,359 12 67,932
------------------------------------------------------------------
Selling, general and administrative expenses 16,851 12,368 9,645 - 38,864
Restructuring charges 9,567 - - - 9,567
Amortization of intangibles 1,093 5,747 1,206 - 8,046
------------------------------------------------------------------
27,511 18,115 10,851 - 56,477
------------------------------------------------------------------
Income from operations 3,545 5,390 2,508 12 11,455
Interest and debt expense 16,509 2 290 - 16,801
Interest income and other (expense) income (324) 114 129 - (81)
------------------------------------------------------------------
(Loss) income before income taxes (13,288) 5,502 2,347 12 (5,427)
Income tax (benefit) expense (4,917) 4,417 1,061 5 566
------------------------------------------------------------------
Net (loss) income $ (8,371) $ 1,085 $ 1,286 $ 7 $ (5,993)
==================================================================
- 10 -
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries tions dated
--------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2001
OPERATING ACTIVITIES:
Net cash provided by (used in) operating
activities $ 57,776 $ (1,487) $ (786) $ - $ 55,503
------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net (25) - - - (25)
Capital expenditures (1,673) (198) (1,393) - (3,264)
Other - 158 - - 158
------------------------------------------------------------------
Net cash used in investing activities (1,698) (40) (1,393) - (3,131)
------------------------------------------------------------------
FINANCING ACTIVITIES:
Net payments under revolving line-of-credit
agreements (64,000) - (408) - (64,408)
Repayment of debt (555) (1) (4) - (560)
Dividends paid (2,016) - - - (2,016)
Other (119) - - - (119)
------------------------------------------------------------------
Net cash (used in) provided by financing
activities (66,690) (1) (412) - (67,103)
Effect of exchange rate changes on cash (35) - 551 - 516
------------------------------------------------------------------
Net change in cash and cash equivalents (10,647) (1,528) (2,040) - (14,215)
Cash and cash equivalents at beginning of period 11,217 (1,865) 4,863 - 14,215
------------------------------------------------------------------
Cash and cash equivalents at end of period $ 570 $ (3,393) $ 2,823 $ - $ -
==================================================================
AS OF OCTOBER 1, 2000
Current assets:
Cash and cash equivalents $ 863 $ 1,832 $ 2,751 $ - $ 5,446
Trade accounts receivable 59,840 60,657 25,426 - 145,923
Unbilled revenues - 34,581 - - 34,581
Inventories 49,558 38,410 24,327 (889) 111,406
Other current assets 3,661 7,498 4,143 - 15,302
------------------------------------------------------------------
Total current assets 113,922 142,978 56,647 (889) 312,658
Property, plant, and equipment, net 35,348 34,691 18,110 - 88,149
Goodwill and other intangibles, net 39,831 242,329 47,880 - 330,040
Intercompany 202,121 (363,801) (65,044) 226,724 -
Other assets 226,327 161,626 (1,889) (350,679) 35,385
------------------------------------------------------------------
Total assets $ 617,549 $ 217,823 $ 55,704 $ (124,844) $ 766,232
==================================================================
Current liabilities $ 37,393 $ 49,589 $ 18,044 $ (3,304) $ 101,722
Long-term debt, less current portion 413,421 6 5,323 - 418,750
Other non-current liabilities 15,761 18,532 2,629 - 36,922
------------------------------------------------------------------
Total liabilities 466,575 68,127 25,996 (3,304) 557,394
Shareholders' equity 150,974 149,696 29,708 (121,540) 208,838
------------------------------------------------------------------
Total liabilities and shareholders' equity $ 617,549 $ 217,823 $ 55,704 $ (124,844) $ 766,232
==================================================================
- 11 -
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries tions dated
------------------------------------------------------------------
FOR THE SIX MONTHS ENDED OCTOBER 1, 2000
Net sales $ 130,369 $ 198,520 $ 60,087 $ (11,604) $ 377,372
Cost of products sold 89,330 162,662 44,774 (11,598) 285,168
------------------------------------------------------------------
Gross profit 41,039 35,858 15,313 (6) 92,204
------------------------------------------------------------------
Selling, general and administrative expenses 18,870 16,482 9,763 - 45,115
Amortization of intangibles 1,019 5,794 1,218 - 8,031
------------------------------------------------------------------
19,889 22,276 10,981 - 53,146
------------------------------------------------------------------
Income (loss) from operations 21,150 13,582 4,332 (6) 39,058
Interest and debt expense 18,648 44 299 - 18,991
Interest and other income 1,251 120 241 - 1,612
------------------------------------------------------------------
Income (loss) before income taxes 3,753 13,658 4,274 (6) 21,679
Income tax expense (benefit) 1,899 7,376 2,073 (3) 11,345
------------------------------------------------------------------
Net income (loss) $ 1,854 $ 6,282 $ 2,201 $ (3) $ 10,334
==================================================================
FOR THE SIX MONTHS ENDED OCTOBER, 2000
OPERATING ACTIVITIES:
Net cash (used in) provided by operating
activities $ (5,524) $ 8,003 $ 2,954 $ - $ 5,433
------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net (1,834) - - - (1,834)
Capital expenditures (2,368) (4,712) 69 - (7,011)
Other - 259 - - 259
------------------------------------------------------------------
Net cash (used in) provided by investing
activities (4,202) (4,453) 69 - (8,586)
------------------------------------------------------------------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving
line-of-credit agreements 7,700 - (939) - 6,761
Repayment of debt (1,282) (17) (618) - (1,917)
Dividends paid (2,001) - - - (2,001)
Other 418 - - - 418
------------------------------------------------------------------
Net cash provided by (used in) financing
activities 4,835 (17) (1,557) - 3,261
Effect of exchange rate changes on cash - - (2,244) - (2,244)
------------------------------------------------------------------
Net change in cash and cash equivalents (4,891) 3,533 (778) - (2,136)
Cash and cash equivalents at beginning of period 5,754 (1,701) 3,529 - 7,582
------------------------------------------------------------------
Cash and cash equivalents at end of period $ 863 $ 1,832 $ 2,751 $ - $ 5,446
==================================================================
- 12 -
12. The Financial Accounting Standards Board (FASB) issued SFAS No. 141,
"Business Combinations" in June 2001. SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business combinations and
modifies the application of the purchase accounting method. The elimination
of the pooling-of-interests method is effective for transactions initiated
after June 30, 2001. The adoption of this Statement did not have an impact
on the consolidated financial statements.
The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets"
in June of 2001. SFAS No. 142 eliminates the current requirement to
amortize goodwill and indefinite-lived intangible assets, addresses the
amortization of intangible assets with a defined life and the impairment
testing and recognition for goodwill and intangible assets. SFAS No. 142
will apply to goodwill and intangible assets arising from transactions
completed before and after the effective date. This statement, which will
be effective for the Company's fiscal year beginning on April 1, 2002, must
be adopted at the beginning of the fiscal year. We are currently assessing
the Statement and the impact that adoption will have on our consolidated
financial statements.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations"
in June 2001. SFAS No. 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred. The associated asset retirement costs are capitalized as part of
the carrying amount of the long-lived asset. This Statement, which is
effective for the Company's fiscal year beginning April 1, 2003, may be
adopted as of April 1, 2002. We are currently assessing the Statement and
the impact, if any, that adoption will have on our consolidated financial
statements.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" in August 2001. SFAS No. 144 supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," and the accounting and reporting provisions of
APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions." The statement, while
retaining many of the fundamental recognition and measurement provisions of
SFAS No. 121, does change the criteria to be met to classify an asset as
held-for-sale as well as the grouping of long-lived assets and liabilities
that represent the unit of accounting for a long-lived asset to be held and
used. SFAS No. 144 is effective for the Company's fiscal year beginning
April 1, 2002. We are currently assessing the Statement and the impact, if
any, that adoption will have on our consolidated financial statements.
- 13 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The Company is a broad-line designer, manufacturer, and supplier of
sophisticated material handling products that are distributed to industrial,
automotive and consumer markets globally; integrated material handling solutions
for industrial markets worldwide; and integrated material handling solutions for
automotive markets. The Company's material handling products are sold,
domestically and internationally, principally to third party distributors
through diverse distribution channels. Distribution channels include general
distributors, specialty distributors, crane end users, service-after-sale
distributors, original equipment manufacturers ("OEMs"), government, consumer
and international. The general distributors are comprised of industrial
distributors, rigging shops and crane builders. Specialty distributors include
catalog houses, material handling specialists and entertainment equipment
riggers. The service-after-sale network includes repair parts distribution
centers, chain service centers, and hoist repair centers. Consumer distribution
channels include mass merchandisers, hardware distributors, trucking and
transportation distributors, farm hardware distributors and rental outlets. The
Company's integrated material handling solutions segments primarily deal
directly with end-users. Material handling solutions - industrial sales are
concentrated, domestically and internationally (primarily Europe), in consumer
products manufacturing, warehousing and, to a lesser extent, the steel,
construction, automotive, and other industrial markets. Material handling
solutions - automotive sales are concentrated, domestically and internationally
(primarily North America) in the automotive industry.
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 31, 2001 AND OCTOBER 1, 2000
(DOLLARS IN THOUSANDS)
Net sales in the fiscal 2002 quarter ended September 30, 2001 were $171,577, a
decrease of $17,417 or 9.2% from the fiscal 2001 quarter ended October 1, 2000.
Net sales for the six months ended September 30, 2001 were $347,482, a decrease
of $29,890 or 7.9% from the six months ended October 1, 2000. Sales in the
Products segment decreased by $18,820 or 15.4% from the previous year's quarter
and $34,398 or 13.9% for the six months ended September 30, 2001 in comparison
to the prior year period due to continued softness in all industrial markets
(particularly domestically). Sales in the Solutions-Industrial segment decreased
19.5% or $3,400 for the quarter and 20.9% or $7,291 for the six months ended
September 30, 2001when compared to the same periods in the prior year due to
weak industrial markets. The Solutions-Automotive segment had a sales increase
of 9.7% or $4,803 for the quarter and 12.4% or $11,799 for the six months ended
September 30, 2001 when compared to the respective periods in the prior year as
a result of increased automotive capital spending.
Sales in the individual segments were as follows, in thousands of dollars and
with percentage changes for each group:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEP. 30, OCT. 1, CHANGE SEP. 30, OCT. 1, CHANGE
------ ------
2001 2000 AMOUNT % 2001 2000 AMOUNT %
---- ---- ------ - ---- ---- ------ -
(IN THOUSANDS, EXCEPT PERCENTAGES)
Products $ 103,150 $ 121,970 $ (18,820) (15.4) $ 212,768 $ 247,166 $ (34,398) (13.9)
Solutions-Industrial 14,013 17,413 (3,400) (19.5) 27,635 34,926 (7,291) (20.9)
Solutions-Automotive 54,414 49,611 4,803 9.7 107,079 95,280 11,799 12.4
--------- --------- --------- --------- --------- ---------
Net sales $ 171,577 $ 188,994 $ (17,417) (9.2) $ 347,482 $ 377,372 $ (29,890) (7.9)
========= ========= ========= ========= ========= =========
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The Company's gross profit margins were 19.2%, 23.8%, 19.5%, and 24.4% for the
fiscal 2002 and 2001 quarters and the six-month periods ended September 30, 2001
and October 1, 2000, respectively. The decrease in the current quarter and
six-month period margins relative to the respective periods in the prior year is
the result of a shift in product mix to higher sales volume in lower margin
segments and lower sales volume in the higher margin segment. The gross profit
margin in the Products segment for the quarter and six month periods ended
September 30, 2001 decreased from the respective periods in the prior year as a
result of the decreased production and sales volume and the effects of a
reclassification to cost of goods sold from general and administrative expense,
offset somewhat by cost control measures. The Solutions-Industrial segment
experienced a decrease in margin for the current quarter and six-month period
when compared to the respective periods in the prior year as a result of
decreased volume. Gross margins in the Solutions-Automotive segment were lower
for the quarter and six-month period ended September 30, 2001 due to continuing
competitive pressures and installation/staffing issues with respect to a series
of contracts at a particular site.
Selling expenses were $11,447, $12,332, $23,081, and $24,814 in the fiscal 2002
and 2001 quarters and the six-month periods then ended, respectively. As a
percentage of consolidated net sales, selling expenses were 6.7%, 6.5%, 6.6%,
and 6.6% in the fiscal 2001 and 2000 quarters and the six-month periods then
ended, respectively. The reduced expenses are the result of cost control
measures and decreased volume in the Products segment.
General and administrative expenses were $8,416, $9,961, $15,783, and $20,301 in
the fiscal 2002 and 2001 quarters and the six-month periods then ended,
respectively. As a percentage of consolidated net sales, general and
administrative expenses were 4.9%, 5.3%, 4.5% and 5.4% in the fiscal 2002 and
2001 quarters and the six-month periods then ended, respectively. The decrease
is the result of a reclassification to costs of goods sold from general and
administrative expense, cost control measures, and lower product liability
expense recorded by the Company's captive insurance company.
In conjunction with the continuation of its strategic integration process, the
Company incurred restructuring charges of $727 and $9,567 in the fiscal 2002
quarter and the six-month period ended September 30, 2001, respectively. The
charges for the quarter consist of costs associated with the closure of the
Lister Bolt and Chain Division manufacturing facility in Richmond, British
Columbia, Canada and year to date charges include those costs associated with
the closure of the Forrest City, Arkansas plant as well. The charges consist
mainly of property resolution and employee separation costs.
Amortization of intangibles was $4,013, $4,017, $8,046, and $8,031 in the fiscal
2002 and 2001 quarters and the six months then ended, respectively.
Interest and debt expense was $8,225, $9,710, $16,801, and $18,991 in the fiscal
2002 and 2001 quarters and the six-month periods then ended, respectively. The
fiscal 2002 decrease is the result of the significant reduction in debt and
decreased interest rates. As a percentage of consolidated net sales, interest
and debt expense was 4.8%, 5.1%, 4.8%, and 5.0% in the fiscal 2002 and 2001
quarters and the six-month periods then ended, respectively.
Interest and other income (expense) was $31, $671, $(81), and $1,612 in the
fiscal 2002 and 2001 quarters and the six-month periods then ended,
respectively. The decrease in the current year fiscal quarter and year to date
results is due to lower investment earnings on assets in the Company's captive
insurance company.
- 15 -
Income taxes as a percentage of income (loss) before income taxes were 852.5%,
54.5%, (10.4)%, and 52.3% in the fiscal 2002 and 2001 quarters and the six-month
periods then ended, respectively. The percentages reflect the effect of
nondeductible amortization of goodwill resulting from acquisitions and the
proximity of income before income taxes to zero for the fiscal 2002 quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Revolving Credit Facility provides availability up to $225 million, due
March 31, 2003, against which $138 million was outstanding at September 30,
2001. Interest is payable at varying Eurodollar rates based on LIBOR plus a
spread determined by the Company's leverage ratio amounting to 250 basis points
at October 31, 2001. The Revolving Credit Facility is secured by all equipment,
inventory, receivables, subsidiary stock (limited to 65% for foreign
subsidiaries) and intellectual property.
The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199,468,000, net of original issue discount of $532,000 and are due March 31,
2008. Interest is payable semi-annually based on an effective rate of 8.45%,
considering $1,902,000 of proceeds from rate hedging in advance of the
placement. Provisions of the 8 1/2% Notes include, without limitation,
restrictions of liens, indebtedness, asset sales, and dividends and other
restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at
the option of the Company, in whole or in part, at the Make-Whole Price (as
defined in the 8 1/2% Notes agreement). On or after April 1, 2003, they are
redeemable at prices declining annually to 100% on and after April 1, 2006. In
the event of a Change of Control (as defined in the indenture for such notes),
each holder of the 8 1/2% Notes may require the Company to repurchase all or a
portion of such holder's 8 1/2% Notes at a purchase price equal to 101% of the
principal amount thereof. The 8 1/2% Notes are guaranteed by certain domestic
subsidiaries and are not subject to any sinking fund requirements.
On April 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, which requires companies to carry all derivatives on
the balance sheet at fair value. The Company's use of derivative instruments is
limited to cash flow hedges, as defined in SFAS No. 133, of certain interest
rate risks. In order to provide interest rate risk protection the Company
entered into an interest rate swap agreement in June of 2001, to effectively
convert $40 million of variable-rate debt to fixed-rate debt. The $40 million
interest rate swap agreement matures in June 2003.
The Company believes that its cash flows and borrowing capacity under its
revolving credit facility will be sufficient to fund its ongoing operations,
budgeted capital expenditures, and business acquisitions for the next twelve
months.
Net cash provided by operating activities was $55,498,000 for the six months
ended September 30, 2001 compared to $5,433,000 for the six months ended October
1, 2000. The difference of $50,065,000 is due to changes in net working capital
components offset by the current year loss from operations.
Net cash used in investing activities decreased to $3,131,000 for the six months
ended September 30, 2001 from $8,586,000 for the six months ended October 1,
2000. The $5,455,000 difference is primarily the result of the purchase of
property and a building in fiscal 2001 of a previously leased facility.
- 16 -
Net cash used in financing activities was $67,103,000 for the six months ended
September 30, 2001 compared to net cash provided by financing activities of
$3,261,000 for the six months ended October 1, 2000. The $70,364,000 change is
the result of debt payments made from funds freed from working capital during
the year and excess cash from the end of fiscal 2001.
CAPITAL EXPENDITURES
In addition to keeping its current equipment and plants properly maintained, the
Company is committed to replacing, enhancing, and upgrading its property, plant,
and equipment to reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety, and promote ergonomically correct work stations. Consolidated
capital expenditures for the six months ended September 30, 2001 and October 1,
2000 were $3,264,000 and $7,011,000, respectively. The decrease from fiscal 2001
is due to the purchase of property and a building in fiscal 2001of a previously
leased facility.
INFLATION AND OTHER MARKET CONDITIONS
The Company's costs are affected by inflation in the U.S. economy, and to a
lesser extent, in foreign economies including those of Europe, Canada, Mexico,
and the Pacific Rim. The Company does not believe that inflation has had a
material effect on results of operations over the periods presented because of
low inflation levels over the periods and because the Company has generally been
able to pass on rising costs through price increases. However, in the future
there can be no assurance that the Company's business will not be affected by
inflation or that it will be able to pass on cost increases.
SEASONALITY AND QUARTERLY RESULTS
Quarterly results may be materially affected by the timing of large customer
orders, by periods of high vacation and holiday concentrations, and by
acquisitions and the magnitude of acquisition costs. Therefore, the operating
results for any particular fiscal quarter are not necessarily indicative of
results for any subsequent fiscal quarter or for the full fiscal year.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement on Financial
Accounting Standards (SFAS) No. 141, "Business Combinations" in June 2001. SFAS
No. 141 eliminates the pooling-of-interests method of accounting for business
combinations and modifies the application of the purchase accounting method. The
elimination of the pooling-of-interests method is effective for transactions
initiated after June 30, 2001. The adoption of this Statement did not have an
impact on the consolidated financial statements.
- 17 -
The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets" in
June of 2001. SFAS No. 142 eliminates the current requirement to amortize
goodwill and indefinite-lived intangible assets, addresses the amortization of
intangible assets with a defined life and the impairment testing and recognition
for goodwill and intangible assets. SFAS No. 142 will apply to goodwill and
intangible assets arising from transactions completed before and after the
effective date. This statement, which will be effective for the Company's fiscal
year beginning on April 1, 2002, must be adopted at the beginning of the fiscal
year. The Company is currently assessing the Statement and the impact that
adoption will have on the consolidated financial statements.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in
June 2001. SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. This Statement, which is effective for the Company's
fiscal year beginning April 1, 2003, may be adopted as of April 1, 2002. We are
currently assessing the Statement and the impact, if any, that adoption will
have on our consolidated financial statements.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" in August 2001. SFAS No. 144 supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." The statement, while retaining many of the fundamental
recognition and measurement provisions of SFAS No. 121, does change the criteria
to be met to classify an asset as held-for-sale as well as the grouping of
long-lived assets and liabilities that represent the unit of accounting for a
long-lived asset to be held and used. SFAS No. 144 is effective for the
Company's fiscal year beginning April 1, 2002. We are currently assessing the
Statement and the impact, if any, that adoption will have on our consolidated
financial statements.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report may include "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause the actual
results of the Company to differ materially from the results expressed or
implied by such statements, including general economic and business conditions,
conditions affecting the industries served by the Company and its subsidiaries,
conditions affecting the Company's customers and suppliers, competitor responses
to the Company's products and services, the overall market acceptance of such
products and services, the integration of acquisitions and other factors
disclosed in the Company's periodic reports filed with the Commission.
Consequently such forward-looking statements should be regarded as the Company's
current plans, estimates and beliefs. The Company does not undertake and
specifically declines any obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
- 18 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none.
Item 2. Changes in Securities - none.
Item 3. Defaults upon Senior Securities - none.
Item 4. Submission of Matters to a Vote of Security Holders
On August 20, 2001, the Annual Meeting of Shareholders was held:
The following directors were elected:
13,686,972 votes cast for: Herbert P. Ladds, Jr.;
13,672,177 votes cast for: Timothy T. Tevens;
13,684,378 votes cast for: Robert L. Montgomery, Jr.;
13,686,224 votes cast for: Randolph A. Marks;
13,684,443 votes cast for: L. David Black;
13,684,443 votes cast for: Richard J. Fleming;
13,686,303 votes cast for: Carlos Pasqual.
Item 5. Other Information - none.
Item 6. Exhibits and Reports on Form 8-K
There are no exhibits.
On August 16, 2001, the Company filed a Current Report on Form 8-K
with respect to a press release issued to announce another major step
in its facility rationalization program with the closure of its
Lister Bolt and Chain Division manufacturing facility in Richmond,
BC, Canada.
- 19 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBUS MCKINNON CORPORATION
-----------------------------
(Registrant)
Date: NOVEMBER 14, 2001 /S/ ROBERT L. MONTGOMERY, JR.
------------------ -----------------------------
Robert L. Montgomery, Jr.
Executive Vice President and
Chief Financial Officer (Principal
Financial Officer)
- 20 -