INDEX
COLUMBUS McKINNON CORPORATION
Page #
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets - 2
June 30, 1996 and March 31, 1996
Condensed consolidated statements of income and retained earnings - 3
Three months ended June 30, 1996 and July 2, 1995
Condensed consolidated statements of cash flows - 4
Three months ended June 30, 1996 and July 2, 1995
Notes to condensed consolidated financial statements - 5
June 30, 1996
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none. 10
Item 2. Changes in Securities - none. 10
Item 3. Defaults upon Senior Securities - none. 10
Item 4. Submission of Matters to a Vote of Security Holders - none. 10
Item 5. Other Information - none. 10
Item 6. Exhibits and Reports on Form 8-K 10
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, March 31,
1996 1996
--------- ---------
(In thousands)
ASSETS:
Current assets:
Cash and cash equivalents $ 12,989 $ 10,171
Trade accounts receivable 37,002 38,741
Inventories 47,876 48,303
Prepaid expenses 1,715 1,788
----------------------
Total current assets 99,582 99,003
Net property, plant, and equipment 31,101 30,909
Goodwill and other intangibles, net 42,580 42,951
Marketable securities 11,709 11,174
Deferred taxes on income 3,481 2,881
Other assets 1,820 1,816
----------------------
Total assets $190,273 $188,734
======================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 788 $ 1,635
Trade accounts payable 10,960 15,661
Accrued liabilities 18,911 15,803
Current portion of long-term debt 1,280 1,446
---------------------
Total current liabilities 31,939 34,545
Long-term debt, less current portion 7,583 8,298
Other non-current liabilities 8,558 8,269
---------------------
Total liabilities 48,080 51,112
Shareholders' equity:
Common stock 137 137
Additional paid-in capital 94,432 94,283
Retained earnings 53,632 49,386
ESOP debt guarantee (5,007) (5,238)
Other (1,001) (946)
----------------------
Total shareholders' equity 142,193 137,622
----------------------
Total liabilities and shareholders' equity $190,273 $188,734
======================
See accompanying notes to condensed consolidated financial statements.
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COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
-----------------------
June 30, July 2,
1996 1995
-------- --------
(In thousands,
except per share data)
Net sales $65,735 $44,532
Cost of products sold 45,718 32,199
---------------------
Gross profit 20,017 12,333
Selling expenses 6,002 3,936
General and administrative expenses 4,892 3,031
Amortization of intangibles 442 23
---------------------
11,336 6,990
---------------------
Income from operations 8,681 5,343
Interest and debt expense 256 599
Interest and other income 183 120
---------------------
Income before income taxes 8,608 4,864
Income tax expense 3,576 1,862
---------------------
Net income 5,032 3,002
Retained earnings - beginning of period 49,386 38,443
Cash dividends of $0.06 and $0.059 per share (786) (406)
Cash dividends on preferred shares - (2)
---------------------
Retained earnings - end of period $53,632 $41,037
=====================
Earnings per share, both primary and fully diluted $0.38 $0.43
====================
See accompanying notes to condensed consolidated financial statements.
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COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
----------------------
June 30, July 2,
1996 1995
-------- --------
(In thousands)
OPERATING ACTIVITIES:
Net income $ 5,032 $ 3,002
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,636 793
Other 65 14
Changes in operating assets and liabilities net of
effects from Lift-Tech acquisition:
Trade accounts receivable 1,921 445
Inventories 368 (588)
Prepaid expenses 66 (245)
Other assets (659) (22)
Trade accounts payable (4,614) (1,555)
Accrued and non-current liabilities 3,165 (388)
-------------------
Net cash provided by operating activities 6,980 1,456
INVESTING ACTIVITIES:
Acquisition of patents (64) -
Purchases of marketable securities, net of sales (501) (344)
Capital expenditures (1,401) (1,179)
-------------------
Net cash used in investing activities (1,966) (1,523)
FINANCING ACTIVITIES:
Net (payments) borrowings under revolving
line-of-credit agreements (840) 2,136
Repayment of debt (878) (958)
Dividends paid (786) (882)
Reduction of ESOP debt guarantee 380 45
Other - 8
-------------------
Net cash (used in) provided by financing activities (2,124) 349
Effect of exchange rate changes on cash (72) -
-------------------
Net increase in cash and cash equivalents 2,818 282
Cash and cash equivalents at beginning of period 10,171 387
-------------------
Cash and cash equivalents at end of period $12,989 $ 669
===================
See accompanying notes to condensed consolidated financial statements.
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COLUMBUS McKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the financial position of the Company at June 30, 1996, and
the results of its operations and its cash flows for the three month periods
ended June 30, 1996 and July 2, 1995 have been included. Results for the
period ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended March 31, 1997. 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, 1996.
2. Inventories consisted of the following at June 30, 1996 and March 31, 1996
(in thousands):
At cost--FIFO basis:
Raw materials $ 23,245 $ 24,596
Work-in-process 11,830 11,533
Finished goods 15,974 15,180
------ ------
51,049 51,309
LIFO cost less than FIFO cost (3,173) (3,006)
------ ------
$ 47,876 $ 48,303
====== ======
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.
3. Property, plant, and equipment is net of $16,822,000 and $15,656,000 of
accumulated depreciation at June 30, 1996 and March 31, 1996, respectively.
4. The accrued general and product liability costs which are included in other
non-current liabilities are the actuarial present value of estimated reserves
based on an amount determined from loss reports and individual cases filed
with the Company and an amount, based on past experience, for losses incurred
but not reported. The accrual in these condensed consolidated financial
statements was determined by applying a discount factor based on interest
rates customarily used in the insurance industry.
-5-
5. Primary and fully diluted earnings per share were based on the following:
Three Months Ended
June 30, July 2,
1996 1995
Weighted-average common stock
outstanding 13,199,818 7,017,073
Common stock equivalents - -
6. Income tax expense for the three month period ended June 30, 1996 exceeds the
customary relationship between income tax expense and income before income
taxes due to nondeductible goodwill amortization.
7. On November 1, 1995, the Company acquired all of the outstanding stock of
LTI Holdings, Inc. ("Lift-Tech"), a hoist manufacturer, and has accounted for
the acquisition as a purchase. The total cost of the acquisition was
approximately $63 million, consisting of $43 million in cash and $20 million
for the refinancing of Lift-Tech bank debt. The funding required to complete
the transaction was financed through borrowings under bank credit facilities,
which consisted of $50 million of seven-year term debt with interest payable
at prime plus 1% and $25 million revolving debt with interest payable at
prime plus 1/2% which expires November 1, 1998. The obligations outstanding
under these debt instruments were paid in full by application of proceeds
received from the Company's initial public offering which commenced on
February 22, 1996.
The condensed consolidated statement of income and retained earnings and the
condensed consolidated statement of cash flows for the three months ended
June 30, 1996 include the Lift-Tech activity.
The following table presents pro forma summary information for the three
months ended July 2, 1995 as if the Lift-Tech acquisition and related
borrowings, and the initial public offering, had occurred as of April 1,
1995, which is the beginning of fiscal 1996. The pro forma information is
provided for informational purposes only. It is based on historical
information and does not necessarily reflect the actual results that would
have occurred nor is it necessarily indicative of future results of
operations of the combined enterprise:
Three Months Ended
July 2, 1995
------------------
(In thousands,
except per share data)
Pro forma:
Net sales $ 62,504
Income from operations 7,480
Net income 4,599
Earnings per share, both
primary and fully diluted 0.35
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 and July 2, 1995
Sales in the fiscal 1997 quarter ended June 30, 1996 increased $21,203,000 or
47.6% over the fiscal 1996 quarter ended July 2, 1995. Sales growth during the
current period was due primarily to the November 1995 Lift-Tech acquisition
which affected the general distribution, service-after-sale, and original
equipment manufacturers distribution channels. The Company also experienced
increased sales volume to the entertainment channel. In addition, list price
increases of approximately 4% were introduced in November of 1995 affecting many
of the Company's hoist, chain and forged products sold in its domestic
commercial markets. Sales in the commercial and the consumer distribution
channel groups were as follows, in thousands of dollars and with percentage
changes for each group:
Three months ended Change
------------------ ------
June 30, 1996 July 2, 1995 Amount %
------------- ------------ ------ ------
(In thousands, except percentages)
Commerical sales:
Domestic $48,385 $30,739 $17,646 57.4
International 10,312 6,799 3,513 51.7
------------------------ -------
$58,697 $37,538 $21,159 56.4
Consumer sales:
Domestic $ 6,412 $ 6,314 $ 98 1.6
International 626 680 (54) (7.9)
------------------------ -------
$ 7,038 $ 6,994 $ 44 0.6
------------------------ -------
Consolidated net sales $65,735 $44,532 $21,203 47.6
======================== =======
The Company's gross profit margins were approximately 30.5% and 27.7% for the
fiscal 1997 and 1996 quarters, respectively. The increase in gross profit
margin resulted from the effects of the Company's cost control efforts and
slight changes in product mix.
Selling expenses increased to $6,002,000 in the fiscal 1997 quarter from
$3,936,000 in the fiscal 1996 quarter. The 1997 expenses were impacted by the
addition of Lift-Tech sales. As a percentage of consolidated net sales, selling
expenses were 9.1% and 8.8% in the fiscal 1997 and 1996 quarters, respectively.
The higher percentage in fiscal 1997 is due primarily to the timing of various
marketing related expenses.
General and administrative expenses increased to $4,892,000 in the fiscal 1997
quarter from $3,031,000 in the fiscal 1996 quarter. The 1997 expenses were
impacted by the addition of Lift-Tech activities. As a percentage of
consolidated net sales, general and administrative expenses were 7.4% and 6.8%
in the fiscal 1997 and 1996 quarters, respectively. In fiscal 1997, these
expenses include $437,000 for corporate-wide incentive compensation.
Amortization of intangibles increased $419,000 in the fiscal 1997 quarter to
$442,000 due to the goodwill resulting from the acquisition of Lift-Tech.
-7-
Interest and debt expense decreased by $343,000 to $256,000 in the fiscal 1997
quarter from $599,000 in the fiscal 1996 quarter. The fiscal 1997 decrease is
due to debt repayment funded by proceeds from the Company's initial public
offering in February 1996. As a percentage of consolidated net sales, interest
and debt expense was 0.4% and 1.3% in the fiscal 1997 and 1996 quarters,
respectively.
Interest and other income increased by $63,000 to $183,000 in the fiscal 1997
quarter from $120,000 in the fiscal 1996 quarter. The fiscal 1997 increase is
due to increased investment holdings to fund the Company's general and
products liability self-insurance reserves.
Income taxes as a percentage of pre-tax accounting income were 41.5% and 38.3%
in the fiscal 1997 and 1996 quarters, respectively. The fiscal 1997 percentage
reflects the effect of non deductible goodwill amortization resulting from the
Lift-Tech acquisition.
As a result of the above, net income increased $2,030,000 or 67.7%. This is
based on net income of $5,032,000 and $3,002,000 or 7.7% and 6.7% as a
percentage of consolidated net sales in the fiscal 1997 and 1996 quarters,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that its cash on hand, cash flows, and borrowing capacity
under its revolving credit facility will be sufficient to fund its ongoing
operations, budgeted capital expenditures, and business acquisitions for the
next twelve months.
At June 30, 1996 there were no borrowings outstanding under the then existing
revolving credit facilities. By the terms of a credit agreement dated August
1996, a new revolving credit facility totaling $12.5 million replaced the
Company's previously existing revolving credit facilities and will expire in
August 1999. Borrowings under the replacement facility are unsecured and bear
interest at the prime rate or, at the Company's option, LIBOR plus .5%
(which rate varies based on the Company's leverage ratio). Interest rates on
the Company's two existing ESOP loans were similarly adjusted in accordance with
the new revolving credit facility.
Net cash provided by operating activities increased to $6,980,000 in the fiscal
1997 quarter from $1,456,000 in the fiscal 1996 quarter. The $5,524,000
increase in net cash provided by operating activities in the fiscal 1997 quarter
resulted from improved operating results of $2,030,000 and a decrease in net
operating assets in the fiscal 1997 quarter as compared to an increase in the
fiscal 1996 quarter. Net cash used in investing activities increased to
$1,966,000 in the fiscal 1997 quarter from $1,523,000 in the fiscal 1996
quarter. The $443,000 increase is due to additional capital expenditures and
also normal purchases of marketable securities to fund general and products
liability self-insurance reserves.
-8-
Net cash used in financing activities was $2,124,000 in the fiscal 1997 quarter
compared with net cash provided by financing activities of $349,000 in the
fiscal 1996 quarter. The fluctuation is primarily due to a net repayment of
$840,000 under revolving line-of-credit agreements in the fiscal 1997 quarter,
compared to a net borrowing of $2,136,000 in the fiscal 1996 quarter.
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 fiscal 1997 and 1996 quarters were $1,401,000 and
$1,179,000, 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 Canada, Mexico, Europe,
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.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Company adopted FAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which has not
had a material effect on the financial statements.
-9-
Part II. Other Information
Item 1. Legal Proceedings - none.
Item 2. Changes in Securities - none.
Item 3. Defaults upon Senior Securities - none.
Item 4. Submission of Matters to a Vote of Security Holders - none.
Item 5. Other Information - none.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.1 - Credit Agreement By and Among FLEET BANK, MARINE MIDLAND BANK,
FLEET BANK, as Administrative Agent and COLUMBUS McKINNON
CORPORATION Dated as of August 5,1996
Exhibit 11.1 - Columbus McKinnon Corporation Computation of Earnings per Share
There are no Reports on Form 8-K.
-10-
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 therunto duly authorized.
COLUMBUS McKINNON CORPORATION
------------------------------
(Registrant)
Date: August 13, 1996 /s/ Herbert P. Ladds, Jr.
----------------- -------------------------------------
Herbert P. Ladds, Jr.
President and Chief Executive Officer
Date: August 13, 1996 /s/ Robert L. Montgomery, Jr.
----------------- ------------------------------------
Robert L. Montgomery, Jr.
Executive Vice President and Chief
Financial Officer
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EXHIBIT INDEX
EXHIBIT EXHIBIT DESCRIPTION LOCATION
- - ------------------------------------------------------------------------------
10.1 Credit Agreement By and Among FLEET BANK, MARINE MIDLAND BANK,
FLEET BANK, as Administrative Agent and COLUMBUS McKINNON
CORPORATION Dated as of August 5, 1996 E-10.1
11.1 Columbus McKinnon Corporation Computation of
Earnings per Share E-11.1