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 28, 2003
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
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934): [ ] Yes [X] No
The number of shares of common stock outstanding as of October 31, 2003 was:
14,896,172 shares.
FORM 10-Q INDEX
COLUMBUS MCKINNON CORPORATION
SEPTEMBER 28, 2003
PAGE #
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets -
September 28, 2003 and March 31, 2003 2
Condensed consolidated statements of operations and
accumulated deficit - Three months and six months
ended September 28, 2003 and September 29, 2002 3
Condensed consolidated statements of cash flows - Six
months ended September 28, 2003 and September 29, 2002 4
Condensed consolidated statements of comprehensive
income - Three months and six months ended
September 28, 2003 and September 29, 2002 5
Notes to condensed consolidated financial statements -
September 28, 2003 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Disclosure Controls and Procedures 18
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 28, MARCH 31,
2003 2003
---------- ----------
ASSETS: (IN THOUSANDS)
Current assets:
Cash and cash equivalents $ 13,170 $ 1,943
Trade accounts receivable 75,519 79,335
Unbilled revenues 9,748 8,861
Inventories 73,387 78,613
Net assets held for sale 2,884 1,800
Prepaid expenses 13,448 10,819
---------- ----------
Total current assets 188,156 181,371
Property, plant, and equipment, net 63,639 67,295
Goodwill and other intangibles, net 193,774 195,129
Marketable securities 24,035 21,898
Deferred taxes on income 14,619 15,245
Other assets 5,007 1,668
---------- ----------
Total assets $ 489,230 $ 482,606
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 6,091 $ 2,245
Trade accounts payable 26,028 28,654
Accrued liabilities 56,180 36,540
Restructuring reserve 1,490 2,331
Current portion of long-term debt 4,822 4,981
---------- ----------
Total current liabilities 94,611 74,751
Senior bank debt, less current portion 10,623 109,355
Senior secured debt 117,980 -
Subordinated debt 164,109 199,734
Other non-current liabilities 41,916 46,059
---------- ----------
Total liabilities 429,239 429,899
---------- ----------
Shareholders' equity
Common stock 149 149
Additional paid-in capital 104,170 104,412
Accumulated deficit (24,548) (26,547)
ESOP debt guarantee (5,415) (5,709)
Unearned restricted stock (208) (208)
Accumulated other comprehensive loss (14,157) (19,390)
---------- ----------
Total shareholders' equity 59,991 52,707
---------- ----------
Total liabilities and shareholders' equity $ 489,230 $ 482,606
========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 2 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2003 2002 2003 2002
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales $ 106,584 $ 113,238 $ 213,159 $ 227,129
Cost of products sold 81,517 86,665 162,194 172,926
----------- ----------- ----------- -----------
Gross profit 25,067 26,573 50,965 54,203
----------- ----------- ----------- -----------
Selling expenses 11,536 11,662 23,458 22,985
General and administrative expenses 5,712 6,238 11,479 12,942
Restructuring charges 574 - 1,375 -
Amortization of intangibles 78 134 220 263
----------- ----------- ----------- -----------
17,900 18,034 36,532 36,190
----------- ----------- ----------- -----------
Income from operations 7,167 8,539 14,433 18,013
Interest and debt expense 5,730 7,207 15,402 14,484
Other (income) and expense, net (1,353) (225) (4,447) (3,718)
------------ ----------- ----------- -----------
Income from operations before income tax
expense and cumulative effect of
accounting change 2,790 1,557 3,478 7,247
Income tax expense 1,290 542 1,479 2,733
----------- ----------- ----------- -----------
Income from operations before cumulative
effect of accounting change 1,500 1,015 1,999 4,514
Cumulative effect of accounting change - - - (8,000)
----------- ----------- ----------- -----------
Net income (loss) 1,500 1,015 1,999 (3,486)
Accumulated deficit - beginning of period (26,048) (17,037) (26,547) (12,536)
----------- ----------- ----------- -----------
Accumulated deficit - end of period $ (24,548) $ (16,022) $ (24,548) $ (16,022)
=========== =========== =========== ===========
Earnings per share data, basic and diluted:
Income from operations before cumulative
effect of accounting change $ 0.10 $ 0.07 $ 0.14 $ 0.31
Cumulative effect of accounting change - - - (0.55)
----------- ----------- ----------- -----------
Net income (loss) $ 0.10 $ 0.07 $ 0.14 $ (0.24)
============ =========== =========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
----------------
SEPTEMBER 28, SEPTEMBER 29,
2003 2002
---------- ----------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Income from operations before cumulative effect
of accounting change $ 1,999 $ 4,514
Adjustments to reconcile income from operations to net
cash provided by operating activities:
Depreciation and amortization 5,375 5,702
Deferred income taxes 626 (937)
Gain on sale of real estate/investments (3,282) (2,757)
Other 192 1,237
Changes in operating assets and liabilities:
Trade accounts receivable and unbilled revenues 4,255 2,005
Inventories 6,863 150
Prepaid expenses (1,596) (1,323)
Other assets (241) 26
Trade accounts payable (3,469) (7,232)
Accrued and non-current liabilities 13,843 (730)
---------- ----------
Net cash provided by operating activities 24,565 655
---------- ----------
INVESTING ACTIVITIES:
Purchase of marketable securities, net (811) 1,184
Capital expenditures (2,094) (2,270)
Proceeds from sale of businesses - 15,950
Net assets held for sale 3,282 1,879
---------- ----------
Net cash provided by investing activities 377 16,743
---------- ----------
FINANCING ACTIVITIES:
Net payments under revolving line-of-credit agreements (1,090) (23,366)
Repayment of debt (124,206) (1,531)
Proceeds from issuance of long-term debt 115,000 -
Deferred financing costs incurred (4,011) (1,666)
Other 294 281
---------- ----------
Net cash used in financing activities (14,013) (26,282)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 298 (177)
---------- ----------
Net cash provided by (used in) continuing operations 11,227 (9,061)
NET CASH PROVIDED BY DISCONTINUED OPERATIONS - 504
---------- ----------
Net change in cash and cash equivalents 11,227 (8,557)
Cash and cash equivalents at beginning of period 1,943 13,068
---------- ----------
Cash and cash equivalents at end of period $ 13,170 $ 4,511
========== ==========
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 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2003 2002 2003 2002
---- ---- ---- ----
(IN THOUSANDS)
Net income $ 1,500 $ 1,015 $ 1,999 $ (3,486)
---------- ---------- ---------- ----------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 606 (1,516) 3,716 4,107
Unrealized gain (loss) on derivatives
qualifying as hedges - 33 191 (97)
Unrealized (loss) gain on investments:
Unrealized holding (losses) gains arising
during the period 158 (1,596) 1,435 (2,585)
Reclassification adjustment for
(gains) losses included in net income (323) 229 (109) (1,805)
---------- ---------- ----------- ----------
(165) (1,367) 1,326 (4,390)
---------- ---------- ---------- ----------
Total other comprehensive income (loss) 441 (2,850) 5,233 (380)
---------- ---------- ---------- ----------
Comprehensive income (loss) $ 1,941 $ (1,835) $ 7,232 $ (3,866)
========== ========== ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 5 -
COLUMBUS MCKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(TABULAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 28, 2003
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 28, 2003, and the results of its
operations and its cash flows for the three and six-month periods ended
September 28, 2003 and September 29, 2002, have been included. Results for
the period ended September 28, 2003 are not necessarily indicative of the
results that may be expected for the year ended March 31, 2004. The balance
sheet at March 31, 2003 has been derived from the audited financial
statements at that date, but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. 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, 2003.
The Company is a leading U.S. designer and manufacturer of material
handling products, systems and services which efficiently and ergonomically
move, lift, position and secure material. Key products include hoists,
cranes, chain and forged attachments. 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 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.
2. The Company has two stock option-based employee compensation plans in
effect. The Company accounts for these plans under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations. No stock option-based employee compensation cost is
reflected in net income, as all options granted under these plans had an
exercise price equal to the market value of the underlying common stock on
the date of grant and the number of options granted was fixed. The
following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition of SFAS No. 123
"Accounting for Stock-Based Compensation", to stock-based employee
compensation:
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2003 2002 2003 2002
---------------------------------------------------------------
Net income (loss), as reported.............. $ 1,500 $ 1,015 $ 1,999 $ (3,486)
Deduct: Total stock based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (121) (255) (262) (510)
---------------------------------------------------------------
Net income (loss), pro forma.............. $ 1,379 $ 760 $ 1,737 $ (3,996)
===============================================================
Basic and diluted income (loss) per share:
As reported............................... $ 0.10 $ 0.07 $ 0.14 $ (0.24)
===============================================================
Pro forma................................. $ 0.09 $ 0.05 $ 0.12 $ (0.28)
===============================================================
- 6 -
3. Inventories consisted of the following:
SEPTEMBER 28, MARCH 31,
2003 2003
---------- ----------
At cost - FIFO basis:
Raw materials.................... $ 37,746 $ 42,707
Work-in-process.................. 11,646 10,361
Finished goods................... 31,701 33,072
---------- ----------
81,093 86,140
LIFO cost less than FIFO cost......... (7,706) (7,527)
---------- ----------
Net inventories .................... $ 73,387 $ 78,613
========== ==========
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.
4. On November 21, 2002, the Company refinanced its credit facilities. The new
arrangement consisted of a Revolving Credit Facility, a Term Loan, and a
Senior Second Secured Term Loan. The Revolving Credit Facility provides
availability up to a maximum of $57 million. At September 28, 2003, $5.0
million was outstanding for borrowings and the unused portion totaled $27.4
million. Interest is payable at varying Eurodollar rates based on LIBOR or
prime plus a spread determined by the Company's leverage ratio amounting to
275 (LIBOR) or 150 (prime) basis points, respectively, at September 28,
2003. The Revolving Credit Facility is secured by all domestic and Canadian
inventory, receivables, equipment, real property, subsidiary stock (limited
to 65% for foreign subsidiaries) and intellectual property.
At September 28, 2003, the Term Loan has a balance of $9,500 and requires
quarterly payments of $1,179, which would result in repayment in full on
October 1, 2005. Interest is payable at varying Eurodollar rates based on
LIBOR or prime plus a spread determined by the Company's leverage ratio
amounting to 325 (LIBOR) or 200 (prime) basis points at September 28, 2003.
The Term Loan is secured by all domestic inventory, receivables, equipment,
real property, subsidiary stock (limited to 65% for foreign subsidiaries)
and intellectual property.
On July 22, 2003, the Company issued $115 million of 10% Senior Secured
Notes (10% Notes) due August 1, 2010. Proceeds from this offering were used
for the repayment in full of the Senior Second Secured Term Loan ($66.8
million), the repurchase of $35.7 million of Senior Subordinated Notes at a
discount ($30.1 million), the repayment of a portion of the outstanding
Revolving Credit Facility ($10.0 million), the repayment of a portion of
the Term Loan ($3.9 million), the payment of financing costs ($2.8
million), and the payment of accrued interest ($1.4 million).
The Senior Second Secured Term loan was repaid in its entirety on July 22,
2003. As a result of the repayment occurring prior to the first anniversary
of the loan, $1.1 million of accrued interest expense was reversed in the
second quarter of fiscal 2004 and is reflected as a reduction of interest
expense.
The redemption of the 8 1/2% Senior Subordinated Notes occurred at a
discount resulting in a pre-tax gain on early extinguishment of debt of
$5.6 million. As a result of the repayment of the Senior Second Secured
Term Loan and a portion of the Term Loan and 8 1/2% Senior Subordinated
Notes, $4.9 million of pre-tax deferred financing costs were written-off in
the second quarter of fiscal 2004. The net effect of these two items, a
$0.7 pre-tax million gain, is shown as part of other (income) and expense,
net.
The corresponding credit agreements associated with the Revolving Credit
Facility and the Term Loan place certain debt covenant restrictions on the
Company including certain financial requirements and a restriction on
dividend payments.
- 7 -
From time to time, the Company manages its debt portfolio by using interest
rate swaps to achieve an overall desired position of fixed and floating
rates. In June 2001, the Company entered into an interest rate swap
agreement to effectively convert $40 million of variable-rate debt to
fixed-rate debt, which matured in June 2003. This cash flow hedge was
considered effective and the gain or loss on the change in fair value was
reported in other comprehensive income, net of tax.
Effective August 4, 2003, the Company entered into an interest rate swap
agreement to effectively convert $93.5 million of fixed-rate debt (10%) to
variable-rate debt (LIBOR plus 578.2 basis points) through August 2008 and
$57.5 million from August 2008 through August 2010. This fair value hedge
is considered effective and the change in fair value is recognized in
income as a gain or loss. In addition, the change in the fair value of the
hedged item, the 10% Notes, is also recognized in income as an exactly
offsetting gain or loss resulting in no impact on net income. As of
September 28, 2003, the fair value hedge resulted in the recognition of an
asset of $3.0 million and a corresponding increase in the recorded amount
of the 10% Notes of $3.0 million.
5. Upon the adoption of SFAS No. 142, the Company recorded a one-time,
non-cash charge of $8,000,000 to reduce the carrying value of its goodwill
as of April 1, 2002. Such charge is reflected as a cumulative effect of a
change in accounting principle in the accompanying consolidated statement
of operations. The impairment charge was related to the Cranebuilder
reporting unit in the Products segment and the Univeyor reporting unit in
the Solutions segment. In relation to the initial adoption of SFAS No. 142,
goodwill was allocated among the reporting units so that goodwill was
allocated to the units that benefited from the acquisitions. The Company
will record any future impairment charges as a component of operating
income.
6. During the second quarter of fiscal 2004, the Company continued the
implementation of its Corporate-wide reorganization plan. During the
quarter, the Company recorded restructuring costs of $0.6 million related
to various employee termination benefits. These costs were evenly split
between the Products and Solutions segments and approximately 15 employees
were terminated at a foreign facility. As of September 28, 2003, all of the
terminations had occurred and the liability consists of severance payments
and costs associated with the preparation and maintenance of non-operating
facilities prior to disposal which were accrued prior to the adoption of
SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal
Activities". Currently, we anticipate that our restructuring charges for
the remainder of fiscal 2004 related to these plans to be between $0.2 and
$0.5 million. The Company has several facilities being completely closed
and prepared for disposal, of which one was sold during the second quarter
of fiscal 2004, one is expected to be disposed of in the fourth quarter of
fiscal 2004, and two others in the second half of Fiscal 2005.
The following table provides a reconciliation of the activity related to
restructuring reserves, segregated by year and between employee costs
("employee") and facility closure related costs ("facility"):
FISCAL 2002 FISCAL 2003 FISCAL 2004
----------- ----------- -----------
FACILITY EMPLOYEE FACILITY EMPLOYEE TOTAL
------------------------------------------------------------------------
Reserve at March 31, 2003 $ 360 $ 922 $ 1,049 $ - $ 2,331
Fiscal 2004 first quarter
restructuring charges........ - 41 97 663 801
Cash payments................... (33) (416) (345) (277) (1,071)
------------------------------------------------------------------------
Reserve at June 29, 2003........ 327 547 801 386 2,061
------------------------------------------------------------------------
Fiscal 2004 second quarter
restructuring charges........ - 43 8 523 574
Cash payments................... (44) (293) (109) (699) (1,145)
------------------------------------------------------------------------
Reserve at September 28, 2003 $ 283 $ 297 $ 700 $ 210 $ 1,490
========================================================================
- 8 -
7. Income tax expense as a percentage of income before income tax expense was
46.2%, 34.8%, 42.5% and 37.7% in the fiscal 2004 and 2003 quarters and
six-month periods ended September 28, 2003 and September 29, 2002,
respectively. The percentages vary from the U.S. statutory rate due to
jurisdictional mix and the existence of losses at certain subsidiaries for
which no benefit has been recorded.
8. The following table sets forth the computation of basic and diluted
earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29,
2003 2002 2003 2002
---- ---- ---- ----
Numerator for basic and diluted earnings per share:
Net income (loss) $ 1,500 $ 1,015 $ 1,999 $ (3,486)
========= ========= ========= =========
Denominators:
Weighted-average common stock outstanding -
denominator for basic EPS 14,549 14,487 14,544 14,483
Effect of dilutive employee stock options - - - -
--------- --------- --------- ---------
Adjusted weighted-average common stock
outstanding and assumed conversions -
denominator for diluted EPS 14,549 14,487 14,544 14,483
========= ========= ========= =========
9. 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 two reportable segments: Products and
Solutions. The Company's Products segment sells hoists, cranes, chain,
forged attachments, and other material handling products principally to
third party distributors through diverse distribution channels, and to a
lesser extent directly to manufacturers and other end-users. The Solutions
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. Intersegment sales
are not significant. The Company evaluates performance based on operating
income of the respective business units prior to the effects of
restructuring charges and amortization.
- 9 -
Segment information as of and for the six months ended September 28, 2003
and September 29, 2002, is as follows:
SIX MONTHS ENDED SEPTEMBER 28, 2003
-----------------------------------
PRODUCTS SOLUTIONS TOTAL
----------- ----------- -----------
Sales to external customers...................... $ 186,528 $ 26,631 $ 213,159
Operating income before restructuring
charges and amortization...................... 16,199 (171) 16,028
Depreciation and amortization.................... 4,799 576 5,375
Total assets..................................... 456,729 32,501 489,230
SIX MONTHS ENDED SEPTEMBER 29, 2002
-----------------------------------
PRODUCTS SOLUTIONS TOTAL
----------- ----------- -----------
Sales to external customers...................... $ 194,818 $ 32,311 $ 227,129
Operating income before restructuring
charges and amortization...................... 17,351 925 18,276
Depreciation and amortization.................... 5,190 512 5,702
Total assets..................................... 450,517 36,595 487,112
The following schedule provides a reconciliation of operating income before
restructuring charges and amortization with income from operations before
income tax expense and cumulative effect of accounting change:
SIX MONTHS ENDED
----------------
SEPTEMBER 28, SEPTEMBER 29,
2003 2002
---- ----
Operating income before restructuring
charges and amortization................................... $ 16,028 $ 18,276
Restructuring charges......................................... (1,375) -
Amortization of intangibles................................... (220) (263)
Interest and debt expense..................................... (15,402) (14,484)
Other income and (expense), net............................... 4,447 3,718
----------- -----------
Income from operations before income tax expense
and cumulative effect of accounting change................. $ 3,478 $ 7,247
=========== ===========
- 10 -
10. The summary financial information of the parent, guarantors and
nonguarantors of the 8.5% senior subordinated notes and 10% senior secured
notes is as follows:
Parent Guarantors Nonguarantors Eliminations Consolidated
-------------------------------------------------------------------
AS OF SEPTEMBER 28, 2003
Current assets:
Cash and cash equivalents $ 3,875 $ (760) $ 10,055 $ - $ 13,170
Trade accounts receivable and unbilled revenues 50,359 83 34,825 - 85,267
Inventories 34,635 18,256 21,468 (972) 73,387
Other current assets 9,853 1,000 5,479 - 16,332
-------------------------------------------------------------------
Total current assets 98,722 18,579 71,827 (972) 188,156
Property, plant, and equipment, net 30,355 14,457 18,827 - 63,639
Goodwill and other intangibles, net 97,226 57,363 39,185 - 193,774
Intercompany 53,173 (66,510) (58,703) 72,040 -
Other assets 59,736 208,064 22,565 (246,704) 43,661
-------------------------------------------------------------------
Total assets $ 339,212 $ 231,953 $ 93,701 $ (175,636) $ 489,230
===================================================================
Current liabilities $ 56,397 $ 10,983 $ 30,106 $ (2,875) $ 94,611
Long-term debt, less current portion 286,850 - 5,862 - 292,712
Other non-current liabilities 7,659 12,441 21,816 - 41,916
-------------------------------------------------------------------
Total liabilities 350,906 23,424 57,784 (2,875) 429,239
Shareholders' equity (11,694) 208,529 35,917 (172,761) 59,991
-------------------------------------------------------------------
Total liabilities and shareholders' equity $ 339,212 $ 231,953 $ 93,701 $ (175,636) $ 489,230
===================================================================
FOR THE SIX MONTHS ENDED SEPTEMBER 28, 2003
Net sales $ 107,631 $ 54,487 $ 60,573 $ (9,532) $ 213,159
Cost of products sold 81,634 44,402 45,690 (9,532) 162,194
-------------------------------------------------------------------
Gross profit 25,997 10,085 14,883 - 50,965
-------------------------------------------------------------------
Selling, general and administrative expenses 16,729 6,071 12,137 - 34,937
Restructuring charges 927 - 448 - 1,375
Amortization of intangibles 118 1 101 - 220
-------------------------------------------------------------------
17,774 6,072 12,686 - 36,532
-------------------------------------------------------------------
Income from operations 8,223 4,013 2,197 - 14,433
Interest and debt expense 14,965 (42) 479 - 15,402
Other (income) and expense, net (1,044) (3,287) (116) - (4,447)
-------------------------------------------------------------------
(Loss) income before income tax
(benefit) expense (5,698) 7,342 1,834 - 3,478
Income tax (benefit) expense (2,246) 2,910 815 - 1,479
-------------------------------------------------------------------
Net (loss) income $ (3,452) $ 4,432 $ 1,019 $ - $ 1,999
===================================================================
- 11 -
Parent Guarantors Nonguarantors Eliminations Consolidated
-------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 28, 2003
OPERATING ACTIVITIES:
Net cash provided by (used in) operating
activities $ 17,818 $ (3,067) $ 9,814 $ - $ 24,565
-------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net - - (811) - (811)
Capital expenditures, net (1,810) (224) (60) - (2,094)
Other - 3,282 - - 3,282
-------------------------------------------------------------------
Net cash (used in) provided by investing
activities (1,810) 3,058 (871) - 377
-------------------------------------------------------------------
FINANCING ACTIVITIES:
Net (payments) borrowings under revolving
line-of-credit agreements (9,929) - 8,839 - (1,090)
Repayment of debt (113,468) - (10,738) - (124,206)
Proceeds from issuance of long-term debt 115,000 - - - 115,000
Other (3,717) - - - (3,717)
-------------------------------------------------------------------
Net cash used in financing activities (12,114) - (1,899) - (14,013)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (76) 69 305 - 298
-------------------------------------------------------------------
Net change in cash and cash equivalents 3,818 60 7,349 - 11,227
Cash and cash equivalents at beginning of period 57 (820) 2,706 - 1,943
-------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,875 $ (760) $ 10,055 $ - $ 13,170
===================================================================
AS OF SEPTEMBER 29, 2002
Current assets:
Cash and cash equivalents $ 1,272 $ (1,377) $ 4,616 $ - $ 4,511
Trade accounts receivable and unbilled revenues 58,169 3,603 22,774 - 84,546
Inventories 42,110 21,066 28,897 (972) 91,101
Net assets held for sale 2,300 111 - - 2,411
Other current assets 7,675 (1,410) 4,158 - 10,423
-------------------------------------------------------------------
Total current assets 111,526 21,993 60,445 (972) 192,992
Property, plant, and equipment, net 33,859 17,263 17,155 - 68,277
Goodwill and other intangibles, net 28,566 121,048 44,873 - 194,487
Intercompany 257,103 (269,575) (58,645) 71,117 -
Other assets 52,913 159,483 20,768 (201,808) 31,356
-------------------------------------------------------------------
Total assets $ 483,967 $ 50,212 $ 84,596 $ (131,663) $ 487,112
===================================================================
Current liabilities $ 165,573 $ 1,492 $ 23,828 $ (3,798) $ 187,095
Long-term debt, less current portion 199,707 - 811 - 200,518
Other non-current liabilities (3,621) 11,233 23,815 - 31,427
-------------------------------------------------------------------
Total liabilities 361,659 12,725 48,454 (3,798) 419,040
Shareholders' equity 122,308 37,487 36,142 (127,865) 68,072
-------------------------------------------------------------------
Total liabilities and shareholders' equity $ 483,967 $ 50,212 $ 84,596 $ (131,663) $ 487,112
===================================================================
- 12 -
Parent Guarantors Nonguarantors Eliminations Consolidated
-------------------------------------------------------------------
FOR THE SIX MONTHS ENDED SEPTEMBER 29, 2002
Net sales $ 117,398 $ 62,585 $ 56,332 $ (9,186) $ 227,129
Cost of products sold 88,080 51,143 42,866 (9,163) 172,926
-------------------------------------------------------------------
Gross profit 29,318 11,442 13,466 (23) 54,203
-------------------------------------------------------------------
Selling, general and administrative expenses 18,465 6,125 11,337 - 35,927
Amortization of intangibles 117 2 144 - 263
-------------------------------------------------------------------
18,582 6,127 11,481 - 36,190
-------------------------------------------------------------------
Income from operations 10,736 5,315 1,985 (23) 18,013
Interest and debt expense 14,179 76 229 - 14,484
Other (income) and expense, net (257) (116) (3,345) - 3,718
-------------------------------------------------------------------
(Loss) income before income tax
(benefit) expense (3,186) 5,355 5,101 (23) 7,247
Income tax (benefit) expense (92) 2,160 674 (9) 2,733
-------------------------------------------------------------------
Net (loss) income before cumulative effect of
accounting change (3,094) 3,195 4,427 (14) 4,514
Cumulative effect of change in
accounting principle - (1,930) (6,070) - (8,000)
-------------------------------------------------------------------
Net (loss) income $ (3,094) $ 1,265 $ (1,643) $ (14) $ (3,486)
===================================================================
FOR THE SIX MONTHS ENDED SEPTEMBER 29, 2002
OPERATING ACTIVITIES:
Net cash provided by (used in) operating
activities $ 8,111 $ (6,090) $ (1,366) $ - $ 655
-------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net - - 1,184 - 1,184
Capital expenditures (1,001) (372) (897) - (2,270)
Proceeds from sale of business - 15,950 - - 15,950
Other - 1,879 - - 1,879
-------------------------------------------------------------------
Net cash (used in) provided by investing
activities (1,001) 17,457 287 - 16,743
-------------------------------------------------------------------
FINANCING ACTIVITIES:
Net (payments) borrowings under revolving
line-of-credit agreements (12,049) (11,551) 234 - (23,366)
Repayment of debt (432) - (1,099) - (1,531)
Other (1,385) - - - (1,385)
-------------------------------------------------------------------
Net cash used in financing activities (13,866) (11,551) (865) - (26,282)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 4 4 (185) - (177)
-------------------------------------------------------------------
Net cash used in continuing operations (6,752) (180) (2,129) - (9,061)
NET CASH PROVIDED BY DISCONTINUED OPERATIONS - 504 - - 504
-------------------------------------------------------------------
Net change in cash and cash equivalents (6,752) 324 (2,129) - (8,557)
Cash and cash equivalents at beginning of period 8,024 (1,701) 6,745 - 13,068
-------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,272 $ (1,377) $ 4,616 $ - $ 4,511
===================================================================
- 13 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(AMOUNTS IN THOUSANDS)
The Company is a leading U.S. designer and manufacturer of material handling
products, systems and services which efficiently and ergonomically move, lift,
position or secure material. Key products include hoists, cranes, chain and
forged attachments. 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. Distribution channels include general
distributors, specialty distributors, crane end users, service-after-sale
distributors, original equipment manufacturers (OEMs), government, consumer and
international. The Company's integrated material handling Solutions businesses
primarily deal directly 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.
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 28, 2003 AND SEPTEMBER 29, 2002
Net sales in the fiscal 2004 quarter ended September 28, 2003 were $106,584, a
decrease of $6,654 or 5.9% from the fiscal 2003 quarter ended September 29,
2002. Net sales for the six months ended September 28, 2003 were $213,159, a
decrease of $13,970 or 6.2% from the six months ended September 29, 2002. Sales
in the Products segment decreased by $2,393 or 2.5% from the previous year's
quarter and $8,290 or 4.3% from the previous year's six-month period then ended.
This is primarily due to continued softness in all industrial markets
(particularly domestically), offset by $2.4 million and $5.1 million
attributable to translation of foreign currencies, particularly the Euro and
Canadian dollar, into U.S. dollars for the quarter and six-month period ended
September 28, 2003, respectively. Sales in the Solutions segment decreased 26.2%
or $4,261 for the quarter and 17.6% or $5,680 for the six months ended September
28, 2003 when compared to the same periods in the prior year. The decreases in
this segment are primarily due to continued softness in domestic industrial
markets and the divestiture of a subsidiary on March 31, 2003 ($1.7 million for
the quarter and $3.4 million for the six-month period ended September 28, 2003,
respectively), offset by an increase of $0.8 million and $2.3 million
attributable to translation of the Euro into U.S. dollars for the quarter and
six-month period ended September 28, 2003, respectively. Sales in the individual
segments were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
SEP. 28, SEP. 29, CHANGE SEP. 28, SEP. 29, CHANGE
2003 2002 AMOUNT % 2003 2002 AMOUNT %
---- ---- ------ - ---- ---- ------ -
Products $ 94,571 $ 96,964 $ (2,393) (2.5) $ 186,528 $ 194,818 $ (8,290) (4.3)
Solutions 12,013 16,274 (4,261) (26.2) 26,631 32,311 (5,680) (17.6)
--------- --------- --------- --------- --------- --------
Net sales $ 106,584 $ 113,238 $ (6,654) (5.9) $ 213,159 $ 227,129 $(13,970) (6.2)
========= ========= ========= ========= ========= ========
The Company's gross profit margins were 23.5%, 23.5%, 23.9%, and 23.9% for the
fiscal 2004 and 2003 quarters and the six-month periods ended September 28, 2003
and September 29, 2002, respectively. Gross profit margins in the Products
segment were 25.0%, 24.9%, 25.4%, 25.2% for the fiscal 2004 and 2003 quarters
and the six-month periods ended September 28, 2003 and September 29, 2002,
respectively. The maintenance of gross profit margins in the Products segment
despite lower sales volume is the result of cost containment activities. Gross
profit margins in the Solutions segment were 11.8%, 15.0%, 13.5%, 15.8% for the
fiscal 2004 and 2003 quarters and the six-month periods ended September 28, 2003
and September 29, 2002, respectively. The decrease in the gross profit margins
for the Solutions segment is the result of a shift in sales mix to larger
integrated solutions projects which typically carry lower gross profit margins,
pricing pressure, and the impact of a divestiture of a relatively small
subsidiary on March 31, 2003.
- 14 -
Selling expenses were $11,536, $11,662, $23,458, and $22,985 in the fiscal 2004
and 2003 quarters and the six-month periods then ended, respectively. The
changes in expense dollars were impacted by translation from changes in foreign
exchange rates ($0.5 million and $1.0 million for the quarter and six-month
period ended September 28, 2003, respectively), offset by cost containment
activities. As a percentage of consolidated net sales, selling expenses were
10.8%, 10.3%, 11.0%, and 10.1% in the fiscal 2004 and 2003 quarters and the
six-month periods then ended, respectively. The increase in percentages in
fiscal 2004 is the result of the fixed nature of selling expense, including
investments in new markets, relative to a decrease in sales volume.
General and administrative expenses were $5,712, $6,238, $11,479, and $12,942 in
the fiscal 2004 and 2003 quarters and the six-month periods then ended,
respectively. As a percentage of consolidated net sales, general and
administrative expenses were 5.4%, 5.5%, 5.4% and 5.7% in the fiscal 2004 and
2003 quarters and the six-month periods then ended, respectively. The decrease
in the current quarter is the result of general cost containment. The decrease
in the six-month period expenses are the result of having no bonus expense in
the current year compared to the prior year ($0.4 million), the divestiture of a
subsidiary on March 31, 2003 ($0.5 million) and general cost containment.
During the second quarter of fiscal 2004, the Company continued the
implementation of its Corporate-wide reorganization plan. During the quarter,
the Company recorded restructuring costs of $0.6 million related to various
employee termination benefits. These costs were evenly split between the
Products and Solutions segments and approximately 15 employees were terminated
at a foreign facility. As of September 28, 2003, all of the terminations had
occurred and the outstanding liability consists of severance payments and costs
associated with the preparation and maintenance of facilities prior to disposal
which were accrued prior to the adoption of SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities". We anticipate that our
restructuring charges for the remainder of fiscal 2004 related to these plans to
be between $0.2 and $0.5 million. The company has several facilities being
completely closed and prepared for disposal, of which one was sold during the
second quarter of fiscal 2004, one is expected to be disposed of in the fourth
quarter of fiscal 2004, and two others in the second half of Fiscal 2005.
Amortization of intangibles was $78, $134, $220, and $263 in the fiscal 2004 and
2003 quarters and the six-month periods then ended, respectively.
Interest and debt expense was $5,730, $7,207, $15,402, and $14,484 in the fiscal
2004 and 2003 quarters and the six-month periods then ended, respectively. The
Company renegotiated its credit facility in November of 2002, a portion of which
was subsequently replaced by the July 2003 bond offering. Part of the new credit
facility has a higher effective interest rate than the Company's pre-November
2002 credit facility. The fiscal 2004 quarterly decrease is the result of the
reversal of previously accrued deferred interest expense ($1.1 million) and
lower debt levels, offset by the impact of a higher average effective interest
rate. The higher average effective interest rate for fiscal 2004 caused an
increase in interest expense for the six-month period ended September 28, 2003
in comparison to the prior year, despite decreasing debt levels. As a percentage
of consolidated net sales, interest and debt expense was 5.4%, 6.4%, 7.2%, and
6.4% in the fiscal 2004 and 2003 quarters and the six-month periods then ended,
respectively.
Other (income) and expense, net was $(1,353), $(225), $(4,447), and $(3,718) in
the fiscal 2004 and 2003 quarters and the six-month periods then ended,
respectively. The current quarter income consists primarily of a net $0.7
million consisting of a $5.6 million gain from the early extinguishment of debt
offset by the $4.9 million deferred financing cost write-off associated with
extinguished debt and $0.6 million of realized gains on investments within the
Company's captive insurance company portfolio. For the six-month period ended
September 28, 2003, other income consists primarily of a $3.3 million gain on
the sale of real estate, the net $0.7 million gain from the early extinguishment
of debt described above, and $0.4 million of income from investments within the
Company's captive insurance company. This compares primarily to income of $3.2
million, specifically realized gains, on investments within the Company's
captive insurance company portfolio for the six-month period ended September 29,
2002.
- 15 -
Income tax expense as a percentage of income before income tax expense was
46.2%, 34.8%, 42.5%, and 37.7% in the fiscal 2004 and 2003 quarters and the
six-month periods then ended, respectively. The percentages for fiscal 2004 vary
from the U.S. statutory rate due to jurisdictional mix and the existence of
losses at certain subsidiaries for which no benefit has been recorded.
LIQUIDITY AND CAPITAL RESOURCES
On November 21, 2002, the Company refinanced its credit facilities. The new
arrangement consisted of a Revolving Credit Facility, a Term Loan, and a Senior
Second Secured Term Loan. The Revolving Credit Facility provides availability up
to a maximum of $57 million. At September 28, 2003, $5.0 million was outstanding
for borrowings and the unused portion totaled $27.4 million. Interest is payable
at varying Eurodollar rates based on LIBOR or prime plus a spread determined by
the Company's leverage ratio amounting to 275 (LIBOR) or 150 (prime) basis
points, respectively, at September 28, 2003. The Revolving Credit Facility is
secured by all domestic and Canadian inventory, receivables, equipment, real
property, subsidiary stock (limited to 65% for foreign subsidiaries) and
intellectual property.
At September 28, 2003, the Term Loan has a balance $9,500 and requires quarterly
payments of $1,179, which would result in repayment in full on October 1, 2005.
Interest is payable at varying Eurodollar rates based on LIBOR or prime plus a
spread determined by the Company's leverage ratio amounting to 325 (LIBOR) or
200 (prime) basis points at September 28, 2003. The Term Loan is secured by all
domestic inventory, receivables, equipment, real property, subsidiary stock
(limited to 65% for foreign subsidiaries) and intellectual property.
On July 22, 2003, the Company issued $115 million of 10% Senior Secured Notes
(10% Notes) due August 1, 2010. Proceeds from this offering were used for the
repayment in full of the Senior Second Secured Term Loan ($66.8 million), the
repurchase of $35.7 million of Senior Subordinated Notes at a discount ($30.1
million), the repayment of a portion of the outstanding Revolving Credit
Facility ($10.0 million), the repayment of a portion of the Term Loan ($3.9
million), the payment of financing costs ($2.8 million), and the payment of
accrued interest ($1.4 million).
The Senior Second Secured Term loan was repaid in its entirety on July 22, 2003.
As a result of the repayment occurring prior to the first anniversary of the
loan, $1.1 million of accrued interest expense was reversed in the second
quarter of fiscal 2004 and is reflected as a reduction of interest expense.
The redemption of the 8 1/2% Senior Subordinated Notes occurred at a discount
resulting in a pre-tax gain on early extinguishment of debt of $5.6 million. As
a result of the repayment of the Senior Second Secured Term Loan and a portion
of the Term Loan and 8 1/2% Senior Subordinated Notes, $4.9 million of pre-tax
deferred financing costs were written-off in the second quarter of fiscal 2004.
The net effect of these two items, a $0.7 pre-tax million gain, is shown as part
of other (income) and expense, net.
The corresponding credit agreements associated with the Revolving Credit
Facility and the Term Loan place certain debt covenant restrictions on the
Company including certain financial requirements and a restriction on dividend
payments.
From time to time, the Company manages its debt portfolio by using interest rate
swaps to achieve an overall desired position of fixed and floating rates. In
June 2001, the Company entered into an interest rate swap agreement to
effectively convert $40 million of variable-rate debt to fixed-rate debt, which
matured in June 2003. This cash flow hedge was considered effective and the gain
or loss on the change in fair value was reported in other comprehensive income,
net of tax.
- 16 -
Effective August 4, 2003, the Company entered into an interest rate swap
agreement to effectively convert $93.5 million of fixed-rate debt (10%) to
variable-rate debt (LIBOR plus 578.2 basis points) through August 2008 and $57.5
million from August 2008 through August 2010. This fair value hedge is
considered effective and the change in fair value is recognized in income as a
gain or loss. In addition, the change in the fair value of the hedged item, the
10% Notes, is also recognized in income as an exactly offsetting gain or loss
resulting in no impact on net income. As of September 28, 2003, the fair value
hedge resulted in the recognition of an asset of $3.0 million and a
corresponding increase in the recorded amount of the 10% Notes of $3.0 million.
We believe that our cash on hand, cash flows from operations, and borrowing
capacity under our Revolving Credit Facility will be sufficient to fund our
ongoing operations and budgeted capital expenditures for at least the next
twelve months. This belief is dependent upon a steady economy and successful
execution of our current business plan which is focused on cash generation for
debt repayment. The business plan includes continued implementation of lean
manufacturing, facility rationalization projects, possible divestiture of excess
facilities and certain non-strategic operations, and improving working capital
components, including inventory reductions.
Net cash provided by operating activities was $24,565 for the six months ended
September 28, 2003 compared to $655 for the six months ended September 29, 2002.
The difference of $23,910 is due to changes in net working capital components
particularly inventories ($6.7 million) and accrued and non-current liabilities
($14.6 million).
Net cash provided by investing activities was $377 for the six months ended
September 28, 2003 compared to $16,743 for the six months ended September 29,
2002 as a result of the proceeds from the sale of ASI in fiscal 2003.
Net cash used in financing activities was $14,013 for the six months ended
September 28, 2003 compared to $26,282 for the six months ended September 29,
2002. The $12,269 change is primarily the result of $24.6 million in cash flow
from operations, net of the cash increase of $11.2 million being used to pay
down debt in fiscal 2004 versus $16.0 million of proceeds from the sale of ASI
and a cash decrease of $8.5 million used to pay down debt in fiscal 2003.
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 28, 2003 and September
29, 2002 were $2,094 and $2,270, respectively.
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 general inflation has had
a material effect on results of operations over the periods presented primarily
due to overall low inflation levels over the periods and because the Company has
generally been able to pass on rising costs through price increases. However,
employee benefit costs such as health insurance, workers compensation insurance,
pensions as well as energy and business insurance have exceeded general
inflation levels. In the future, we may be further affected by inflation that we
may not be able to pass on as price increases.
- 17 -
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, by the timing
and extent of restructuring projects, 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.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
From time to time, the Company manages its debt portfolio by using interest rate
swaps to achieve an overall desired position of fixed and floating rates.
Effective August 4, 2003, the Company entered into an interest rate swap
agreement to effectively convert $93.5 million of fixed-rate debt (10%) to
variable-rate debt (LIBOR plus 578.2 basis points) through August 2008 and $57.5
million from August 2008 through August 2010. As a result of this floating rate
basis, changes in short-term interest rates could have a significant impact on
the Company's earnings and funds from operations.
There have been no other material changes in the reported market risks since the
end of Fiscal 2003.
Item 4. Disclosure Controls and Procedures
As of September 28, 2003, an evaluation was performed under the supervision and
with the participation of the Company's management, including the chief
executive officer and chief financial officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the chief executive
officer and chief financial officer, concluded that the Company's disclosure
controls and procedures were effective as of September 28, 2003. There have been
no significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to September 28,
2003.
- 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 18, 2003, the Annual Meeting of Shareholders was held and
the following directors were elected:
13,093,396 votes cast for: Herbert P. Ladds, Jr.;
12,994,414 votes cast for: Timothy T. Tevens;
13,106,901 votes cast for: Robert L. Montgomery, Jr.;
12,724,403 votes cast for: Wallace W. Creek;
12,723,181 votes cast for: Richard J. Fleming;
12,706,231 votes cast for: Carlos Pasqual;
13,011,519 votes cast for: Ernest R. Verebelyi.
Item 5. Other Information - none.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 31.1 Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934; as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934; as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
Exhibit 32 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
(b) Reports on Form 8-K:
On August 14, 2003, the Company filed a Current Report on Form 8-K
with respect to its adoption of an Audit Committee Policy regarding
non-audit fees.
On October 21, 2003, the Company filed a Current Report on Form 8-K
with respect to its financial results for the second quarter of
fiscal 2004.
- 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 12, 2003 /S/ ROBERT L. MONTGOMERY, JR.
------------------ -----------------------------------
Robert L. Montgomery, Jr.
Executive Vice President and
Chief Financial Officer (Principal
Financial Officer)
- 20 -