UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT 1934
For the quarterly period ended December 30, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
------------------- -------------------
Commission File Number: 0-27618
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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 January 31, 2002 was:
14,895,172 shares.
FORM 10-Q INDEX
COLUMBUS MCKINNON CORPORATION
DECEMBER 30, 2001
PAGE #
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets -
December 30, 2001 and March 31, 2001 2
Condensed consolidated statements of income and retained
earnings - Three months and nine months ended
December 30, 2001 and December 31, 2000 3
Condensed consolidated statements of cash flows -
Nine months ended December 30, 2001 and December 31, 2000 4
Condensed consolidated statements of comprehensive
income - Three months and nine months ended
December 30, 2001 and December 31, 2000 5
Notes to condensed consolidated financial statements -
December 30, 2001 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none. 20
Item 2. Changes in Securities - none. 20
Item 3. Defaults upon Senior Securities - none. 20
Item 4. Submission of Matters to a Vote of Security Holders - none. 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
DECEMBER 30, MARCH 31,
2001 2001
---------- ----------
ASSETS: (IN THOUSANDS)
Current assets:
Cash and cash equivalents $ - $ 14,015
Trade accounts receivable 117,650 140,234
Unbilled revenues 17,394 26,813
Inventories 101,093 113,218
Net assets held for sale 3 4,270
Prepaid expenses 7,357 5,655
---------- ----------
Total current assets 243,497 304,205
Property, plant, and equipment, net 79,593 85,272
Goodwill and other intangibles, net 309,950 322,196
Marketable securities 23,992 22,326
Deferred taxes on income 5,589 5,696
Other assets 5,898 7,318
---------- ----------
Total assets $ 668,519 $ 747,013
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 3,367 $ 3,012
Trade accounts payable 38,339 44,936
Excess billings 3,379 1,623
Accrued liabilities 42,662 48,465
Current portion of long-term debt 873 3,092
--------- ----------
Total current liabilities 88,620 101,128
Senior debt, less current portion 147,568 204,326
Subordinated debt 199,668 199,628
Other non-current liabilities 31,929 34,067
---------- ----------
Total liabilities 467,785 539,149
---------- ----------
Shareholders' equity
Common stock 149 149
Additional paid-in capital 105,311 105,418
Retained earnings 116,705 124,806
ESOP debt guarantee (7,017) (7,527)
Unearned restricted stock (712) (955)
Total accumulated other comprehensive loss (13,702) (14,027)
---------- ----------
Total shareholders' equity 200,734 207,864
---------- ----------
Total liabilities and shareholders' equity $ 668,519 $ 747,013
========== ==========
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 30, DECEMBER 31, DECEMBER 30, DECEMBER 31,
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales $ 137,747 $ 175,078 $ 485,229 $ 552,450
Cost of products sold 105,759 135,544 385,309 420,712
----------- ----------- ----------- -----------
Gross profit 31,988 39,534 99,920 131,738
----------- ----------- ----------- -----------
Selling expenses 10,915 12,523 33,996 37,337
General and administrative expenses 7,857 9,325 23,640 29,626
Restructuring charges (6) - 9,561 -
Amortization of intangibles 3,994 4,014 12,040 12,045
----------- ----------- ----------- -----------
22,760 25,862 79,237 79,008
----------- ----------- ----------- -----------
Income from operations 9,228 13,672 20,683 52,730
Interest and debt expense 7,112 9,815 23,913 28,806
Interest and other (expense) income (77) 524 (158) 2,136
------------ ----------- ------------ -----------
Income (loss) before income taxes 2,039 4,381 (3,388) 26,060
Income tax expense 2,131 3,085 2,697 14,430
----------- ----------- ----------- -----------
Net (loss) income (92) 1,296 (6,085) 11,630
Retained earnings - beginning of period 116,797 121,915 124,806 113,582
Cash dividends of $0.00, $0.07, $0.14 and
$0.21 per share - (1,003) (2,016) (3,004)
----------- ----------- ----------- -----------
Retained earnings - end of period $ 116,705 $ 122,208 $ 116,705 $ 122,208
=========== =========== =========== ===========
Earnings (loss) per share
data, basic and diluted $(0.01) $0.09 $(0.42) $0.81
====== ===== ====== =====
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
-----------------
DECEMBER 30, DECEMBER 31,
2001 2000
---------- ----------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net (loss) income $ (6,085) $ 11,630
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 21,648 21,317
Deferred income taxes 1,398 (422)
Other 1,099 939
Changes in operating assets and liabilities:
Trade accounts receivable 22,378 (41)
Unbilled revenues and excess billings 11,175 (15,109)
Inventories 12,106 (10,247)
Prepaid expenses (1,705) (475)
Other assets 101 (793)
Trade accounts payable (6,556) (8,767)
Accrued and non-current liabilities (8,000) 1,952
----------- ----------
Net cash provided by (used in) operating activities 47,559 (16)
---------- -----------
INVESTING ACTIVITIES:
Purchase of marketable securities, net (1,240) (2,143)
Capital expenditures (4,046) (9,065)
Net assets held for sale 4,267 1,507
---------- ----------
Net cash used in investing activities (1,019) (9,701)
---------- ----------
FINANCING ACTIVITIES:
Net (payments) borrowings under revolving line-of-credit agreements (55,857) 16,193
Repayment of debt (2,799) (3,231)
Dividends paid (2,016) (3,004)
Reduction of ESOP debt guarantee 510 625
Other (489) (375)
---------- -----------
Net cash (used in) provided by financing activities (60,651) 10,208
Effect of exchange rate changes on cash (104) (1,443)
----------- ----------
Net decrease in cash and cash equivalents (14,215) (952)
Cash and cash equivalents at beginning of period 14,215 7,582
---------- ----------
Cash and cash equivalents at end of period $ - $ 6,630
========== ==========
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 30, DECEMBER 31, DECEMBER 30, DECEMBER 31,
2001 2000 2001 2000
---- ---- ---- ----
(IN THOUSANDS)
Net (loss) income $ (92) $ 1,296 $ (6,085) $ 11,630
---------- ---------- ---------- ----------
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments (1,399) 1,585 493 (1,669)
Unrealized loss on derivatives
qualifying as hedges (22) - (594) -
Unrealized gains (losses) on investments:
Unrealized holding gains (losses) arising
during the period 1,677 (1,492) 1,426 (3,104)
Less: reclassification adjustment for
(gains) losses included in net income 362 (335) 1,000 (1,192)
---------- ---------- ---------- ----------
1,315 (1,157) 426 (1,912)
---------- ---------- ---------- ----------
Total other comprehensive (loss) income (106) 428 325 (3,581)
---------- ---------- ---------- ----------
Comprehensive (loss) income $ (198) $ 1,724 $ (5,760) $ 8,049
========== ========== ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 5 -
COLUMBUS MCKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 30, 2001
(AMOUNTS IN THOUSANDS)
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the financial position of Columbus McKinnon
Corporation (the Company) at December 30, 2001, and the results of its
operations and its cash flows for the three and nine-month periods ended
December 30, 2001 and December 31, 2000, have been included. Results for
the period ended December 30, 2001 are not necessarily indicative of the
results that may be expected for the year ended March 31, 2002. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Columbus McKinnon Corporation annual report on Form
10-K for the year ended March 31, 2001.
The Company is a broad-line designer, manufacturer and supplier of
sophisticated material handling products that are widely distributed to
industrial, automotive, and consumer markets globally; integrated material
handling solutions for industrial markets; and integrated material handling
solutions for automotive markets. The Company's material handling products
are sold, domestically and internationally, principally to third party
distributors through diverse distribution channels, and to a lesser extent
directly to manufacturers and other end-users. The Company's integrated
material handling solutions industrial businesses deal primarily with end
users and sales are concentrated, domestically and internationally
(primarily Europe), in the consumer products, manufacturing, warehousing
and, to a lesser extent, the steel, construction, automotive and other
industrial markets. The Company's integrated material handling solutions
automotive business primarily deals with end users and sales are
concentrated domestically and internationally (primarily North America), in
the automotive industry.
2. Inventories consisted of the following:
DECEMBER 30, MARCH 31,
2001 2001
---------- ----------
At cost - FIFO basis:
Raw materials.......................... $ 55,345 $ 60,908
Work-in-process........................ 15,870 17,110
Finished goods......................... 37,632 41,850
---------- ----------
108,847 119,868
LIFO cost less than FIFO cost............. (7,754) (6,650)
---------- ----------
Net inventories ........................ $ 101,093 $ 113,218
========== ==========
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory valuation.
- 6 -
3. Property, plant, and equipment is net of $75,221 and $65,613 of accumulated
depreciation at December 30, 2001 and March 31, 2001, respectively.
4. Goodwill and other intangibles is net of $74,279 and $62,239 of accumulated
amortization at December 30, 2001 and March 31, 2001, respectively.
5. General and Product Liability - The accrued general and product liability
costs, which are included in other non-current liabilities, are the
actuarial present value of estimated expenditures based on amounts
determined from loss reports and individual cases filed with the Company,
and an amount, based on experience, for losses incurred but not reported.
The accrual in these condensed consolidated financial statements was
determined by applying a discount factor based on interest rates
customarily used in the insurance industry.
6. The carrying amount of the Company's senior debt instruments approximates
the fair value. The Company's subordinated debt has an approximate fair
value of $183,000, which is less than its carrying amount of $199,668.
7. The following table sets forth the computation of basic and diluted
earnings per share:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DECEMBER 30, DECEMBER 31, DECEMBER 30, DECEMBER 31,
2001 2000 2001 2000
---- ---- ---- ----
Numerator for basic and diluted earnings per share:
Net income $ (92) $ 1,296 $ (6,085) $ 11,630
======== ======== ======== ========
Denominators:
Weighted-average common stock outstanding -
denominator for basic EPS 14,423 14,326 14,407 14,307
Effect of dilutive employee stock options - - - -
-------- -------- -------- --------
Adjusted weighted-average common stock
outstanding and assumed conversions -
denominator for diluted EPS 14,423 14,326 14,407 14,307
======== ======== ======== ========
8. Income tax expense for the three and nine-month periods ended December 30,
2001 and December 31, 2000, respectively, exceeds the customary
relationship between income tax expense and income (loss) before income
taxes due to nondeductible amortization of goodwill of $3,075, $3,097,
$9,227, and $9,268, respectively.
9. On April 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended, which requires companies to carry all
derivatives on the balance sheet at fair value. The Company determines the
fair value of derivatives by reference to quoted market prices. The
accounting for changes in the fair value of a derivative instrument depends
on whether it has been designated and qualifies as part of a hedging
relationship and, if so, the reason for holding it. The Company's use of
derivative instruments is limited to cash flow hedges, as defined in SFAS
No. 133, of certain interest rate risks.
- 7 -
In order to provide interest rate risk protection, the Company entered into
an interest rate swap agreement in June of 2001 to effectively convert $40
million of variable-rate debt to fixed-rate debt. The $40 million interest
rate swap agreement matures in June 2003. The cash flow hedge is considered
effective and the gain or loss on the change in fair value is reported in
other comprehensive (loss) income, net of tax.
The June 2001 interest rate swap is the only derivative instrument held by
the Company, as such there is no impact on the adoption of SFAS No. 133 at
April 1, 2001. The net impact of the derivative instrument was a decrease
to other comprehensive income of $22 and $594 for the three and nine-month
periods ended December 30, 2001, respectively. The fair value of the
derivative at December 30, 2001 was a $990 liability.
10. As a result of the way the Company manages the business, its reportable
segments are strategic business units that offer products with different
characteristics. The most defining characteristic is the extent of
customized engineering required on a per-order basis. In addition, the
segments serve different customer bases through differing methods of
distribution. The Company has three reportable segments: material handling
products, material handling solutions - industrial, and material handling
solutions - automotive. The Company's products segment sells hoists,
industrial cranes, chain, attachments, and other material handling products
principally to third party distributors through diverse distribution
channels. The solutions - industrial segment sells engineered material
handling systems such as conveyors, manipulators, and lift tables primarily
to end-users in the consumer products, manufacturing, warehousing, and, to
a lesser extent, the steel, construction, automotive, and other industrial
markets. The solutions - automotive segment sells engineered material
handling systems, mainly conveyors, primarily to end-users in the
automotive industry. Intersegment sales are not significant. The Company
evaluates performance based on operating income of the respective business
units prior to the effects of amortization.
Segment information as of and for the nine months ended December 30, 2001
and December 31, 2000, is as follows:
NINE MONTHS ENDED DECEMBER 30, 2001
-----------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
----------- ----------- ----------- -----------
Sales to external customers.................... $ 308,359 $ 42,450 $ 134,420 $ 485,229
Operating income (loss) before amortization
and restructuring charges................... 41,152 1,051 81 42,284
Depreciation and amortization.................. 15,276 2,245 4,127 21,648
Total assets................................... 433,050 66,323 169,146 668,519
Capital expenditures........................... 3,229 737 80 4,046
- 8 -
NINE MONTHS ENDED DECEMBER 31, 2000
-----------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
----------- ----------- ----------- -----------
Sales to external customers.................... $ 359,408 $ 51,348 $ 141,694 $ 552,450
Operating income before amortization
and restructuring charges................... 53,083 4,070 7,622 64,775
Depreciation and amortization.................. 15,005 2,098 4,214 21,317
Total assets................................... 490,437 69,388 212,468 772,293
Capital expenditures........................... 8,708 336 21 9,065
The following schedule provides a reconciliation of operating income before
amortization with (loss) income before income taxes:
NINE MONTHS ENDED
-----------------
DECEMBER 30, DECEMBER 31,
2001 2000
---- ----
Operating income before amortization and
restructuring charges..................................... $ 42,284 $ 64,775
Restructuring charges........................................ (9,561) -
Amortization of intangibles.................................. (12,040) (12,045)
Interest and debt expense.................................... (23,913) (28,806)
Interest income and other (expense) income................... (158) 2,136
----------- -----------
(Loss) income before income taxes............................ $ (3,388) $ 26,060
=========== ===========
- 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-
Parent Subsidiaries Subsidiaries tions dated
------------------------------------------------------------------
AS OF DECEMBER 30, 2001
Current assets:
Cash and cash equivalents $ (1,421) $ (1,418) $ 2,839 $ - $ -
Trade accounts receivable 53,141 41,383 23,126 - 117,650
Unbilled revenues - 17,394 - - 17,394
Inventories 44,959 29,526 27,583 (975) 101,093
Other current assets 5,013 (1,763) 4,110 - 7,360
------------------------------------------------------------------
Total current assets 101,692 85,122 57,658 (975) 243,497
Property, plant, and equipment, net 33,802 28,553 17,238 - 79,593
Goodwill and other intangibles, net 37,041 227,977 44,932 - 309,950
Intercompany 131,637 (298,498) (58,648) 225,509 -
Other assets 226,372 161,046 (1,020) (350,919) 35,479
------------------------------------------------------------------
Total assets $ 530,544 $ 204,200 $ 60,160 $ (126,385) $ 668,519
==================================================================
Current liabilities $ 36,180 $ 32,520 $ 24,473 $ (4,553) $ 88,620
Long-term debt, less current portion 345,468 1 1,767 - 347,236
Other non-current liabilities 15,580 13,443 2,906 - 31,929
------------------------------------------------------------------
Total liabilities 397,228 45,964 29,146 (4,553) 467,785
Shareholders' equity 133,316 158,236 31,014 (121,832) 200,734
------------------------------------------------------------------
Total liabilities and shareholders' equity $ 530,544 $ 204,200 $ 60,160 $ (126,385) $ 668,519
==================================================================
FOR THE NINE MONTHS ENDED DECEMBER 30, 2001
Net sales $ 165,613 $ 255,990 $ 79,610 $ (15,984) $ 485,229
Cost of products sold 118,926 222,578 59,788 (15,983) 385,309
------------------------------------------------------------------
Gross profit 46,687 33,412 19,822 (1) 99,920
------------------------------------------------------------------
Selling, general and administrative expenses 24,970 18,111 14,555 - 57,636
Restructuring charges 9,561 - - - 9,561
Amortization of intangibles 1,621 8,607 1,812 - 12,040
------------------------------------------------------------------
36,152 26,718 16,367 - 79,237
------------------------------------------------------------------
Income from operations 10,535 6,694 3,455 (1) 20,683
Interest and debt expense 23,503 7 403 - 23,913
Interest income and other (expense) income (517) 171 188 - (158)
------------------------------------------------------------------
(Loss) income before income taxes (13,485) 6,858 3,240 (1) (3,388)
Income tax (benefit) expense (5,060) 6,067 1,690 - 2,697
------------------------------------------------------------------
Net (loss) income $ (8,425) $ 791 $ 1,550 $ (1) $ (6,085)
==================================================================
- 10 -
Domestic Foreign Elimina- Consoli-
Parent Subsidiaries Subsidiaries tions dated
------------------------------------------------------------------
FOR THE NINE MONTHS ENDED DECEMBER 30, 2001
OPERATING ACTIVITIES:
Net cash provided by (used in) operating
activities $ 51,275 $ (4,605) $ 1,822 $ (933) $ 47,559
------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net (1,240) - - - (1,240)
Capital expenditures (3,759) 786 (1,073) - (4,046)
Other - 4,267 - - 4,267
------------------------------------------------------------------
Net cash used in investing activities (4,999) 5,053 (1,073) - (1,019)
------------------------------------------------------------------
FINANCING ACTIVITIES:
Net payments under revolving line-of-credit
agreements (56,200) - 343 - (55,857)
Repayment of debt (703) (1) (2,095) - (2,799)
Dividends paid (2,016) - (933) 933 (2,016)
Other 21 - - - 21
------------------------------------------------------------------
Net cash (used in) provided by financing
activities (58,898) (1) (2,685) 933 (60,651)
Effect of exchange rate changes on cash (16) - (88) - (104)
------------------------------------------------------------------
Net change in cash and cash equivalents (12,638) 447 (2,024) - (14,215)
Cash and cash equivalents at beginning of period 11,217 (1,865) 4,863 - 14,215
------------------------------------------------------------------
Cash and cash equivalents at end of period $ (1,421) $ (1,418) $ 2,839 $ - $ -
==================================================================
AS OF DECEMBER 31, 2000
Current assets:
Cash and cash equivalents $ 3,261 $ 180 $ 3,189 $ - $ 6,630
Trade accounts receivable 63,211 55,962 24,269 - 143,442
Unbilled revenues - 40,158 - - 40,158
Inventories 51,163 38,591 29,659 (875) 118,538
Other current assets 3,634 6,899 3,888 - 14,421
------------------------------------------------------------------
Total current assets 121,269 141,790 61,005 (875) 323,189
Property, plant, and equipment, net 34,984 33,543 18,563 - 87,090
Goodwill and other intangibles, net 39,436 239,439 48,064 - 326,939
Intercompany 189,178 (351,042) (65,170) 227,034 -
Other assets 226,721 160,960 (1,927) (350,679) 35,075
------------------------------------------------------------------
Total assets $ 611,588 $ 224,690 $ 60,535 $ (124,520) $ 772,293
==================================================================
Current liabilities $ 27,041 $ 54,251 $ 21,443 $ (2,988) $ 99,747
Long-term debt, less current portion 420,586 4 4,172 - 424,762
Other non-current liabilities 16,490 18,474 2,840 - 37,804
------------------------------------------------------------------
Total liabilities 464,117 72,729 28,455 (2,988) 562,313
Shareholders' equity 147,471 151,961 32,080 (121,532) 209,980
------------------------------------------------------------------
Total liabilities and shareholders' equity $ 611,588 $ 224,690 $ 60,535 $ (124,520) $ 772,293
==================================================================
- 11 -
Domestic Foreign Elimina- Consoli-
Parent Subsidiaries Subsidiaries tions dated
------------------------------------------------------------------
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000
Net sales $ 189,191 $ 291,103 $ 89,518 $ (17,362) $ 552,450
Cost of products sold 130,965 239,826 67,291 (17,370) 420,712
------------------------------------------------------------------
Gross profit 58,226 51,277 22,227 8 131,738
------------------------------------------------------------------
Selling, general and administrative expenses 28,684 23,706 14,573 - 66,963
Amortization of intangibles 1,529 8,696 1,820 - 12,045
------------------------------------------------------------------
30,213 32,402 16,393 - 79,008
------------------------------------------------------------------
Income from operations 28,013 18,875 5,834 8 52,730
Interest and debt expense 28,329 43 434 - 28,806
Interest and other income 1,764 214 158 - 2,136
------------------------------------------------------------------
Income before income taxes 1,448 19,046 5,558 8 26,060
Income tax expense 1,358 10,499 2,570 3 14,430
------------------------------------------------------------------
Net income $ 90 $ 8,547 $ 2,988 $ 5 $ 11,630
==================================================================
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000
OPERATING ACTIVITIES:
Net cash (used in) provided by operating
activities $ (7,750) $ 5,169 $ 3,637 $ (1,072) $ (16)
------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net (2,143) - - - (2,143)
Capital expenditures (3,416) (4,775) (874) - (9,065)
Other - 1,507 - - 1,507
------------------------------------------------------------------
Net cash (used in) provided by investing
activities (5,559) (3,268) (874) - (9,701)
------------------------------------------------------------------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving
line-of-credit agreements 15,000 - 1,193 - 16,193
Repayment of debt (1,430) (20) (1,781) - (3,231)
Dividends paid (3,004) - (1,072) 1,072 (3,004)
Other 250 - - - 250
------------------------------------------------------------------
Net cash provided by (used in) financing
activities 10,816 (20) (1,660) 1,072 10,208
Effect of exchange rate changes on cash - - (1,443) - (1,443)
------------------------------------------------------------------
Net change in cash and cash equivalents (2,493) 1,881 (340) - (952)
Cash and cash equivalents at beginning of period 5,754 (1,701) 3,529 - 7,582
------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,261 $ 180 $ 3,189 $ - $ 6,630
==================================================================
- 12 -
12. The Financial Accounting Standards Board (FASB) issued SFAS No. 141,
"Business Combinations" in June 2001. SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business combinations and
modifies the application of the purchase accounting method. The elimination
of the pooling-of-interests method is effective for transactions initiated
after June 30, 2001. The adoption of this Statement did not have an impact
on the consolidated financial statements.
The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets"
in June of 2001. SFAS No. 142 eliminates the current requirement to
amortize goodwill and indefinite-lived intangible assets, addresses the
amortization of intangible assets with a defined life and the impairment
testing and recognition for goodwill and intangible assets. SFAS No. 142
will apply to goodwill and intangible assets arising from transactions
completed before and after the effective date. This statement, which will
be effective for the Company's fiscal year beginning on April 1, 2002, must
be adopted at the beginning of the fiscal year. The Company is currently
assessing the Statement and the impact that the requirement to assess
impairment upon adoption will have on our consolidated financial
statements. Upon Adoption, the Company will stop amortizing goodwill which,
based upon current levels of goodwill, would reduce amortization expense by
approximately $16 million on an annual basis.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations"
in June 2001. SFAS No. 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred. The associated asset retirement costs are capitalized as part of
the carrying amount of the long-lived asset. This Statement, which is
effective for the Company's fiscal year beginning April 1, 2003, may be
adopted as of April 1, 2002. The Company is currently assessing the
Statement and the impact, if any, that adoption will have on our
consolidated financial statements.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" in August 2001. SFAS No. 144 supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," and the accounting and reporting provisions of
APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions." The statement, while
retaining many of the fundamental recognition and measurement provisions of
SFAS No. 121, does change the criteria to be met to classify an asset as
held-for-sale as well as the grouping of long-lived assets and liabilities
that represent the unit of accounting for a long-lived asset to be held and
used. SFAS No. 144 is effective for the Company's fiscal year beginning
April 1, 2002. The Company is currently assessing the Statement and the
impact, if any, that adoption will have on our consolidated financial
statements.
- 13 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(AMOUNTS IN THOUSANDS)
The Company is a broad-line designer, manufacturer, and supplier of
sophisticated material handling products that are distributed to industrial,
automotive and consumer markets globally; integrated material handling solutions
for industrial markets worldwide; and integrated material handling solutions for
automotive markets. The Company's material handling products are sold,
domestically and internationally, principally to third party distributors
through diverse distribution channels. Distribution channels include general
distributors, specialty distributors, crane end users, service-after-sale
distributors, original equipment manufacturers ("OEMs"), government, consumer
and international. The general distributors are comprised of industrial
distributors, rigging shops and crane builders. Specialty distributors include
catalog houses, material handling specialists and entertainment equipment
riggers. The service-after-sale network includes repair parts distribution
centers, chain service centers, and hoist repair centers. Consumer distribution
channels include mass merchandisers, hardware distributors, trucking and
transportation distributors, farm hardware distributors and rental outlets. The
Company's integrated material handling solutions segments primarily deal
directly with end-users. Material handling solutions - industrial sales are
concentrated, domestically and internationally (primarily Europe), in consumer
products manufacturing, warehousing and, to a lesser extent, the steel,
construction, automotive, and other industrial markets. Material handling
solutions - automotive sales are concentrated, domestically and internationally
(primarily North America) in the automotive industry.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED DECEMBER 30, 2001 AND DECEMBER 31, 2000
Net sales in the fiscal 2002 quarter ended December 30, 2001 were $137,747, a
decrease of $37,331 or 21.3% from the fiscal 2001 quarter ended December 31,
2000. Net sales for the nine months ended December 30, 2001 were $485,229, a
decrease of $67,221 or 12.2% from the nine months ended December 31, 2000. Sales
in the Products segment decreased by $16,651 or 14.8% from the previous year's
quarter and $51,049 or 14.2% for the nine months ended December 30, 2001 in
comparison to the prior year period due to continued softness in all industrial
markets (particularly domestically). Sales in the Solutions-Industrial segment
decreased 9.8% or $1,607 for the quarter and 17.3% or $8,898 for the nine months
ended December 30, 2001 when compared to the same periods in the prior year due
to weak industrial markets. The Solutions-Automotive segment had a sales
decrease of 41.1% or $19,073 for the quarter and 5.1% or $7,274 for the nine
months ended December 30, 2001 when compared to the respective periods in the
prior year as a result of softening automotive capital spending.
Sales in the individual segments were as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
DEC. 30, DEC. 31, CHANGE DEC. 30, DEC. 31, CHANGE
------ ------
2001 2000 AMOUNT % 2001 2000 AMOUNT %
---- ---- ------ - ---- ---- ------ -
Products $ 95,591 $ 112,242 $ (16,651) (14.8) $ 308,359 $ 359,408 $ (51,049) (14.2)
Solutions-Industrial 14,815 16,422 (1,607) (9.8) 42,450 51,348 (8,898) (17.3)
Solutions-Automotive 27,341 46,414 (19,073) (41.1) 134,420 141,694 (7,274) (5.1)
--------- --------- --------- --------- --------- ---------
Net sales $ 137,747 $ 175,078 $ (37,331) (21.3) $ 485,229 $ 552,450 $ (67,221) (12.2)
========= ========= ========= ========= ========= =========
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The Company's gross profit margins were 23.2%, 22.6%, 20.6%, and 23.8% for the
fiscal 2002 and 2001 quarters and the nine-month periods ended December 30, 2001
and December 31, 2000, respectively. The increase in the current quarter margin
and decrease in the nine-month period margin relative to the respective periods
in the prior year is the result of sales volume mix between the higher margin
products segment and the lower margin solutions segments. The gross profit
margin in the Products segment was maintained for the quarter ended December 30,
2001 when compared to prior year despite decreasing sales volume as a result of
the impact of cost containment measures and strategic initiatives. The gross
profit margin in the Products segment for the nine-month period ended December
30, 2001 decreased from the respective period in the prior year as a result of
decreased production and sales volume and the effects of a reclassification to
cost of goods sold from general and administrative expense, offset somewhat by
cost control measures. The Solutions-Industrial segment experienced a decrease
in margin for the current quarter and nine-month period when compared to the
respective periods in the prior year as a result of decreased volume. Gross
margins in the Solutions-Automotive segment were lower for the quarter and
nine-month period ended December 30, 2001 due to continuing competitive
pressures and installation/staffing issues with respect to a series of contracts
at a particular site.
Selling expenses were $10,915, $12,523, $33,996, and $37,337 in the fiscal 2002
and 2001 quarters and the nine-month periods then ended, respectively. As a
percentage of consolidated net sales, selling expenses were 7.9%, 7.2%, 7.0%,
and 6.8% in the fiscal 2001 and 2000 quarters and the nine-month periods then
ended, respectively. The reduced expenses are the result of cost control
measures and decreased volume in the Products segment.
General and administrative expenses were $7,857, $9,325, $23,640, and $29,626 in
the fiscal 2002 and 2001 quarters and the nine-month periods then ended,
respectively. As a percentage of consolidated net sales, general and
administrative expenses were 5.7%, 5.3%, 4.9% and 5.4% in the fiscal 2002 and
2001 quarters and the nine-month periods then ended, respectively. The decrease
is the result of a reclassification to costs of goods sold from general and
administrative expense, cost control measures, and lower product liability
expense recorded by the Company's captive insurance company.
In conjunction with the continuation of its strategic integration process, the
Company incurred restructuring charges of $9,561 in the fiscal 2002 nine-month
period ended December 30, 2001. The charges consist of costs associated with the
closure of the Lister Bolt and Chain Division manufacturing facility in
Richmond, British Columbia, Canada and the Forrest City, Arkansas plant. The
costs are mainly comprised of property resolution and employee separation costs.
Amortization of intangibles was $3,994, $4,014, $12,040, and $12,045 in the
fiscal 2002 and 2001 quarters and the nine months then ended, respectively.
Interest and debt expense was $7,112, $9,815, $23,913, and $28,806 in the fiscal
2002 and 2001 quarters and the nine-month periods then ended, respectively. The
fiscal 2002 decrease is the result of the significant reduction in debt and
decreased interest rates. As a percentage of consolidated net sales, interest
and debt expense was 5.2%, 5.6%, 4.9%, and 5.2% in the fiscal 2002 and 2001
quarters and the nine-month periods then ended, respectively.
- 15 -
Interest and other (expense) income was $(77), $524, $(158), and $2,136 in the
fiscal 2002 and 2001 quarters and the nine-month periods then ended,
respectively. The decrease in the current year fiscal quarter and year to date
results as compared to the respective periods in the prior year is due to lower
investment earnings on assets in the Company's captive insurance company.
Income taxes as a percentage of income (loss) before income taxes were 104.5%,
70.4%, (79.6)%, and 55.4% in the fiscal 2002 and 2001 quarters and the
nine-month periods then ended, respectively. The percentages reflect the effect
of nondeductible amortization of goodwill resulting from acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
The Revolving Credit Facility provides availability up to $225 million, due
March 31, 2003, against which $145.8 million was outstanding at December 30,
2001. Interest is payable at varying Eurodollar rates based on LIBOR plus a
spread determined by the Company's leverage ratio amounting to 325 basis points
at February 12, 2002. The Revolving Credit Facility is secured by all equipment,
inventory, receivables, certain real property, subsidiary stock (limited to 65%
for foreign subsidiaries) and intellectual property.
The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199,468, net of original issue discount of $532 and are due March 31, 2008.
Interest is payable semi-annually based on an effective rate of 8.45%,
considering $1,902 of proceeds from rate hedging in advance of the placement.
Provisions of the 8 1/2% Notes include, without limitation, restrictions of
liens, indebtedness, asset sales, and dividends and other restricted payments.
Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the
Company, in whole or in part, at the Make-Whole Price (as defined in the 8 1/2%
Notes agreement). On or after April 1, 2003, they are redeemable at prices
declining annually to 100% on and after April 1, 2006. In the event of a Change
of Control (as defined in the indenture for such notes), each holder of the 8
1/2% Notes may require the Company to repurchase all or a portion of such
holder's 8 1/2% Notes at a purchase price equal to 101% of the principal amount
thereof. The 8 1/2% Notes are guaranteed by certain domestic subsidiaries and
are not subject to any sinking fund requirements.
On April 1, 2001, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, which requires companies to carry all derivatives on
the balance sheet at fair value. The Company's use of derivative instruments is
limited to cash flow hedges, as defined in SFAS No. 133, of certain interest
rate risks. In order to provide interest rate risk protection the Company
entered into an interest rate swap agreement in June of 2001, to effectively
convert $40 million of variable-rate debt to fixed-rate debt. The $40 million
interest rate swap agreement matures in June 2003.
The Company believes that its cash flows and borrowing capacity under its
revolving credit facility are sufficient to fund its ongoing operations and
budgeted capital expenditures. The Company was in violation of certain financial
covenants as of December 30, 2001 and has obtained a waiver of the violations
along with an amendment, which modifies some of these covenants prospectively.
The Company expects to be compliant with the amended covenants and to
renegotiate its credit facility by June 30, 2002.
- 16 -
Net cash provided by operating activities was $47,559 for the nine months ended
December 30, 2001 compared to net cash used in operating activities of $16 for
the nine months ended December 31, 2000. The difference of $47,575 is due to
changes in net working capital components offset by the current year loss from
operations.
Net cash used in investing activities decreased to $1,019 for the nine months
ended December 30, 2001 from $9,701 for the nine months ended December 31, 2000.
The $8,682 difference is primarily the result of the purchase of property and a
building in fiscal 2001 of a previously leased facility and proceeds received
from the sale of net assets held for sale.
Net cash used in financing activities was $60,651 for the nine months ended
December 30, 2001 compared to net cash provided by financing activities of
$10,208 for the nine months ended December 31, 2000. The $70,859 change is the
result of debt payments made from funds freed from working capital during the
year and excess cash on hand at the end of fiscal 2001.
CAPITAL EXPENDITURES
In addition to keeping its current equipment and plants properly maintained, the
Company is committed to replacing, enhancing, and upgrading its property, plant,
and equipment to reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety, and promote ergonomically correct work stations. Consolidated
capital expenditures for the nine months ended December 30, 2001 and December
31, 2000 were $4,046 and $9,065, respectively. The decrease from fiscal 2001 is
due to the purchase of property and a building in fiscal 2001 of a previously
leased facility.
INFLATION AND OTHER MARKET CONDITIONS
The Company's costs are affected by inflation in the U.S. economy, and to a
lesser extent, in foreign economies including those of Europe, Canada, Mexico,
and the Pacific Rim. The Company does not believe that inflation has had a
material effect on results of operations over the periods presented because of
low inflation levels over the periods and because the Company has generally been
able to pass on rising costs through price increases. However, in the future
there can be no assurance that the Company's business will not be affected by
inflation or that it will be able to pass on cost increases.
SEASONALITY AND QUARTERLY RESULTS
Quarterly results may be materially affected by the timing of large customer
orders, by periods of high vacation and holiday concentrations, and by
acquisitions and the magnitude of acquisition costs. Therefore, the operating
results for any particular fiscal quarter are not necessarily indicative of
results for any subsequent fiscal quarter or for the full fiscal year.
- 17 -
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement on Financial
Accounting Standards (SFAS) No. 141, "Business Combinations" in June 2001. SFAS
No. 141 eliminates the pooling-of-interests method of accounting for business
combinations and modifies the application of the purchase accounting method. The
elimination of the pooling-of-interests method is effective for transactions
initiated after June 30, 2001. The adoption of this Statement did not have an
impact on the consolidated financial statements.
The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets" in
June of 2001. SFAS No. 142 eliminates the current requirement to amortize
goodwill and indefinite-lived intangible assets, addresses the amortization of
intangible assets with a defined life and the impairment testing and recognition
for goodwill and intangible assets. SFAS No. 142 will apply to goodwill and
intangible assets arising from transactions completed before and after the
effective date. This statement, which will be effective for the Company's fiscal
year beginning on April 1, 2002, must be adopted at the beginning of the fiscal
year. The Company is currently assessing the Statement and the impact that the
requirement to assess impairment upon adoption will have on the consolidated
financial statements. Upon Adoption, the Company will stop amortizing goodwill
which, based upon current levels of goodwill, would reduce amortization expense
by approximately $16 million on an annual basis.
The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in
June 2001. SFAS No. 143 requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. This Statement, which is effective for the Company's
fiscal year beginning April 1, 2003, may be adopted as of April 1, 2002. We are
currently assessing the Statement and the impact, if any, that adoption will
have on our consolidated financial statements.
The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" in August 2001. SFAS No. 144 supersedes SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." The statement, while retaining many of the fundamental
recognition and measurement provisions of SFAS No. 121, does change the criteria
to be met to classify an asset as held-for-sale as well as the grouping of
long-lived assets and liabilities that represent the unit of accounting for a
long-lived asset to be held and used. SFAS No. 144 is effective for the
Company's fiscal year beginning April 1, 2002. We are currently assessing the
Statement and the impact, if any, that adoption will have on our consolidated
financial statements.
- 18 -
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report may include "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause the actual
results of the Company to differ materially from the results expressed or
implied by such statements, including general economic and business conditions,
conditions affecting the industries served by the Company and its subsidiaries,
conditions affecting the Company's customers and suppliers, competitor responses
to the Company's products and services, the overall market acceptance of such
products and services, the integration of acquisitions and other factors
disclosed in the Company's periodic reports filed with the Commission.
Consequently such forward-looking statements should be regarded as the Company's
current plans, estimates and beliefs. The Company does not undertake and
specifically declines any obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
- 19 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none.
Item 2. Changes in Securities - none.
Item 3. Defaults upon Senior Securities - none.
Item 4. Submission of Matters to a Vote of Security Holders - none.
Item 5. Other Information
The Company has entered into a consulting agreement with the Chairman
of the Board (Exhibit 10.3).
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 10.1 Eighth Amendment, dated as of November 21, 2001,
to the Credit Agreement, dated as of March 31, 1998,
among Columbus McKinnon Corporation, as the
Borrower, the banks, financial institutions and
other institutional lenders named therein, as
Initial Lenders, Fleet National Bank, as the Initial
Issuing Bank, Fleet National Bank, as the Swing Line
Bank and Fleet National Bank, as the Administrative
Agent.
Exhibit 10.2 Ninth Amendment, dated as of February 12, 2002, to
the Credit Agreement, dated as of March 31, 1998,
among Columbus McKinnon Corporation, as the
Borrower, the banks, financial institutions and
other institutional lenders named therein, as
Initial Lenders, Fleet National Bank, as the Initial
Issuing Bank, Fleet National Bank, as the Swing Line
Bank and Fleet National Bank, as the Administrative
Agent.
Exhibit 10.3 Consulting Agreement as entered into between
Columbus McKinnon Corporation and the Chairman of
the Board.
There are no reports on Form 8-K.
- 20 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBUS MCKINNON CORPORATION
-----------------------------
(Registrant)
Date: FEBRUARY 13, 2002 /S/ ROBERT L. MONTGOMERY, JR.
----------------- -----------------------------
Robert L. Montgomery, Jr.
Executive Vice President and
Chief Financial Officer (Principal
Financial Officer)
- 21 -