UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27618
Date of Report (Date of earliest event reported): March 31, 1998
COLUMBUS McKINNON CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 16-0547600
------------------------------ ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
140 JOHN JAMES AUDUBON PARKWAY, AMHERST, NEW YORK 14228-1197
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 689-5400
--------------
NOT APPLICABLE
-------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
ITEM 2. - ACQUISITION OR DISPOSITION OF ASSETS
(a) On March 11, 1998, the Registrant entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement" among the Registrant, as Buyer, and the
shareholders of LICO, Inc., as Sellers. Effective at the Closing on March 31,
1998, the Sellers sold all of the shares of LICO, Inc. to the Registrant for
$155 million less the greater of (x) the sum of $7.059 million and all costs or
expenses paid by the Registrant or any Subsidiary relating to or incurred in
connection with this Stock Purchase Agreement or (y) Funded Debt of LICO. The
acquisition was financed by the proceeds from the New Credit Agreement and the
Private Placement of 8 1/2% Senior Subordinated Notes due 2008, described in
Item 5 (a) and (b) below, respectively.
(b) LICO, through its subsidiaries, is a designer, manufacturer and installer of
custom conveyor and automated material handling systems with its primary
fabrication facility and headquarters in Kansas City, Missouri.
ITEM 5. - OTHER EVENTS
(A) NEW CREDIT AGREEMENT. On March 31, 1998, the Registrant entered into a
Credit Agreement (the "Credit Agreement") among the Registrant, as 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. The terms of the Credit Agreement provide for a five year
revolving credit facility with initial borrowing availability of $300 million.
The proceeds of borrowings under the Credit Agreement, together with the
proceeds from the sale of the Notes described in (b) below, were used to fund
the acquisition of LICO, Inc. and repay borrowings under the Registrant's former
credit facility.
Borrowings under the Credit Agreement bear interest at a rate per annum
equal to, at the Registrant's option, either (i) the greater of (a) Fleet
National Bank's prime rate or (b) the Federal Funds Rate plus one-half of 1% or
(ii) LIBOR plus a margin (the "Applicable Margin") ranging from 0.375% to 1.25%,
depending upon the Registrant's ratio (the :"Leverage Ratio") of Funded Debt (as
defined) to EBITDA (as defined). The Registrant is also required to pay a
commitment fee at a rate per annum ranging from .125% to .275% of the total
borrowing availability under the Credit Agreement (the "Facility Fee Rate"),
determined on the basis of the Company's Leverage Ratio. Based upon the
Company's most recently determined Leverage Ratio, the Applicable Margin and
Facility Fee Rate are 1.25% and .275% respectively. The Credit Agreement
contains customary affirmative and negative covenants, including financial
covenants requiring the maintenance of specified consolidated interest coverage
and leverage ratios and amounts of consolidated net worth.
Borrowings under the Credit Agreement are secured by a first priority
security interest on all personal property of the Company and certain of its
subsidiaries, and a pledge of stock of stock of subsidiaries (limited to 65% for
foreign subsidiaries). In addition, certain subsidiaries of the Company have
jointly and severally guaranteed the obligations of the Company under the Credit
Agreement.
(B) PRIVATE PLACEMENT OF 8 1/2% SENIOR SUBORDINATED NOTES DUE 2008. On March 31,
1998, the Registrant completed the sale of $200 million principal amount of its
8 1/2% Senior Subordinated Notes due 2008 (the "Notes") in a private placement
under Section 4(2) of the Securities Act of 1933, as amended (the "Act"), and
Rule 144A thereunder, at a purchase price of 99.734% of the face amount thereof.
The net proceeds from the sale of the Notes, together with borrowings under the
Registrant's new credit facility described in (a) above, were used to fund the
acquisition of LICO, Inc. and repay borrowings under the Registrant's former
credit facility. The Notes bear interest at the rate of 8 1/2% per annum,
payable semi-annually, and will mature on April 1, 2008. Upon a change of
Control (as defined) of the Registrant, holders of the Notes will have the
right, subject to certain restrictions and conditions, to require the Registrant
to purchase all or any of their Notes at 101% of the principal amount thereof
plus accrued interest thereon. The Notes are general unsecured obligations of
the Registrant and are subordinated in right of payment to all existing and
future Senior Debt (as defined) of the Registrant. The Notes are guaranteed on a
senior subordinated basis by certain of the Registrant's existing and future
subsidiaries (the "Guarantors"). The Indenture pursuant to which the Notes were
issued contains various restrictive covenants, including covenants restricting
the payment of dividends, the repurchase of capital stock and the making of
certain other Restricted Payments
(2)
(as defined), the incurrence of additional indebtedness, the incurrence of
certain liens and certain mergers, consolidations or sales of assets. Pursuant
to a registration rights agreement relating to the Notes, the Registrant has
agreed to make an offer to exchange the Notes (the "Exchange Offer") for a new
issue of debt securities registered under the Act with terms substantially
identical to those of the Notes. The Registrant will become obligated to pay
specified amounts of liquidated damages to holders of the Notes if the Exchange
Offer is not filed, commenced or consummated by specified dates.
The foregoing summary of the terms of the Notes does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the provisions of the Notes and the Indenture, dated March 31, 1998, among the
Registrant, the Guarantors and State Street Bank and Trust Company, N.A., as
Trustee, pursuant to which the Notes were issued, a copy of which (with the form
of Note certificate) is filed as Exhibit 4.1 to this Current Report.
Pursuant to Rule 135c under the Act, copies of the press releases issued by
the Registrant on March 11, 1998 and March 31, 1998 relating to the offering and
sale of the Notes are filed as Exhibits 99.1 and 99.2, respectively, to this
Current Report.
ITEM 7. - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(3)
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
LICO, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of LICO, Inc.
and Subsidiaries (the Company) as of September 30, 1997, and the related
consolidated statements of income, shareholders' equity and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
LICO, Inc. and Subsidiaries at September 30, 1997, and the consolidated results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Kansas City, Missouri
November 21, 1997,
except for Note 11, as to which the date
is February 13, 1998
(4)
LICO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
Current assets:
Cash.................................................. $ 959,686
Accounts receivable, net, including retainages
of $4,997,093 in 1997............................... 25,992,204
Revenues earned in excess of billings
on uncompleted contracts............................ 13,475,892
Raw materials inventory............................... 3,449,061
Prepaid expenses...................................... 56,159
Deferred income taxes................................. 246,915
----------
Total current assets............................. 44,179,917
Property, plant and equipment, at cost:
Land and buildings.................................... 7,010,020
Machinery and equipment............................... 3,344,080
Office furniture and fixtures......................... 1,709,260
----------
12,063,360
Less accumulated depreciation and amortization (3,029,380)
----------
9,033,980
Cash surrender value of officers' life insurance...... 1,015,331
Deferred income taxes................................. 353,166
Other assets.......................................... 76,000
----------
1,444,497
----------
Total assets..................................... $54,658,394
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable......................................... $ 7,500,000
Current portion of capital leases..................... 90,159
Current portion of long-term debt..................... 517,849
Accounts payable...................................... 17,514,795
Billings in excess of revenues earned on uncompleted
contracts.......................................... 1,867,031
Payroll taxes and fringe benefits accrued
and withheld....................................... 1,141,014
Income taxes payable.................................. 399,711
Accrued compensation and other expenses............... 2,782,187
----------
Total current liabilities........................ 31,812,746
Long-term debt, less current portion....................... 4,248,919
Accrued retirement benefits................................ 872,878
Capital lease obligations, less current portion 102,706
----------
Total liabilities.......................................... 37,037,249
Shareholders' equity:
Preferred stock, $.10 par value:
Authorized shares - 200,000, none issued........... -
Common stock, voting, $.10 par value:
Authorized shares - 300,000
Issued shares - 256,250............................ 25,625
Common stock, nonvoting, $.10 par value:
Authorized shares - 2,700,000
Issued and outstanding shares - 2,306,250.......... 230,625
Additional paid-in capital............................ 119,621
Retained earnings..................................... 17,380,778
Treasury stock, at cost, 2,400 shares................. (135,504)
----------
Total shareholders' equity....................... 17,621,145
----------
Total liabilities and shareholders' equity....... $54,658,394
==========
See accompanying notes.
(5)
LICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1997
Contract revenues..................................... $126,551,381
Contract costs:
Direct costs..................................... 102,812,871
Indirect costs:
Fabrication................................. 1,773,540
Field....................................... 448,144
Engineering................................. 1,526,269
Other....................................... 162,934
-----------
106,723,758
Income from contracts................................. 19,827,623
Selling, general and administrative expenses.......... 11,841,477
Litigation costs...................................... 1,127,600
-----------
Income from operations................................ 6,858,546
Interest expense...................................... (1,396,331)
Other income.......................................... 60,223
-----------
Income before income taxes............................ 5,522,438
Income tax provision.................................. (1,705,009)
-----------
Net income............................................ $ 3,817,429
===========
See accompanying notes.
(6)
LICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED SEPTEMBER 30, 1997
Voting Nonvoting Additional Total
Common Common Paid-In Retained Treasury Shareholders'
Stock Stock Capital Earnings Stock Equity
------ --------- ---------- ---------- -------- -----------
Balance at September 30, 1996........... $25,625 $ - $119,621 $13,793,974 $ (16,444) $13,922,776
Purchase of 2,000 shares of voting
common stock......................... - - - - (119,060) (119,060)
Issuance of 2,306,250 shares of non-
voting common stock.................. - 230,625 - (230,625) - -
Net income.............................. - - - 3,817,429 - 3,817,429
--------------------------------------------------------------------
Balance at September 30, 1997........... $25,625 $230,625 $119,621 $17,380,778 $(135,504) $17,621,145
====================================================================
See accompanying notes.
(7)
LICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1997
OPERATING ACTIVITIES
Net income............................................... $ 3,817,429
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 847,394
Deferred income taxes............................... 760,271
Changes in assets and liabilities:
Accounts receivable............................ 14,985,364
Revenues earned in excess of billings on
uncompleted contracts....................... (8,399,723)
Refundable income taxes........................ 542,678
Raw materials inventory........................ 743,371
Prepaid expenses............................... (1,600)
Accounts payable............................... 1,086,927
Billings in excess of revenues
earned on uncompleted contracts............. (1,069,984)
Income taxes payable........................... 399,711
Accrued expenses............................... (3,797,618)
Accrued retirement benefits.................... 113,623
----------
Net cash provided by operating activities 10,027,843
INVESTING ACTIVITIES
Capital expenditures..................................... (7,547,079)
Increase in cash surrender value of officers'
life insurance...................................... (121,067)
----------
Net cash used in investing activities.................... (7,668,146)
FINANCING ACTIVITIES
Net repayments under line-of-credit agreement (6,650,000)
Proceeds from issuance of long-term debt................. 5,050,000
Principal payments on long-term debt
and capital lease obligations......................... (364,587)
Purchase of common stock for treasury.................... (119,060)
----------
Net cash used in financing activities.................... (2,083,647)
----------
Net increase in cash..................................... 276,050
Cash at beginning of year................................ 683,636
----------
Cash at end of year...................................... $ 959,686
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest............................................ $1,328,110
==========
Income taxes........................................ $ 184,186
==========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES
Additions to property, plant and equipment through
issuance of capital lease obligations................. $ 117,083
==========
Issuance of nonvoting common stock....................... $ 230,625
==========
See accompanying notes.
(8)
LICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of LICO, Inc.
(the Company) and its wholly-owned subsidiaries, LICO Steel, Inc. (LSI), LICO
Conveyor Company (LCC), Automatic Systems Conveyors Limited (ASCL), ASI of
Australia Pty. Ltd. (ASIA), and Automatic Systems, Inc. (ASI), including ASI's
wholly-owned subsidiary, LICO International Corporation (LIC). All significant
intercompany transactions are eliminated.
EARNINGS ON CONTRACTS
ASI, including LIC, is engaged principally in the manufacture and
installation of industrial conveyor systems and other materials handling
products under fixed-price contracts. ASIA is engaged in negotiating customer
contracts on a fixed-price basis of contracting for the installation of products
principally manufactured by ASI in Australia. ASCL acts as a sales agent for ASI
in Canada and is reimbursed for expenses on a cost plus basis. LSI is engaged in
steel erection and general contracting under fixed-price and time and material
contracts. LCC is engaged in the manufacture and installation of portable and
stationary belt conveyors under fixed-price contracts. Contract revenues are
recognized under the percentage of completion method, measured by comparing
direct costs incurred to total estimated direct costs.
Changes in job performance, job conditions and estimated profitability,
including those arising from final contract settlements, may result in revisions
to costs and income and are recognized in the period in which the revisions are
determined. In the event that a loss is anticipated on an uncompleted contract,
a provision for the estimated loss is made at the time it is determined.
Billings on contracts may precede or lag revenues earned, and such
differences are reported in the balance sheet as current liabilities and current
assets, respectively.
INVENTORY
Steel inventory is stated at the lower of cost, determined using the average
cost method, or market. All other inventory is stated at the lower of cost,
using the first-in, first-out method, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. When properties are
retired or otherwise disposed of, the related cost and accumulated depreciation
are removed from the respective accounts and any gain or loss is credited or
charged to income. Maintenance and repairs are charged to expense in the year
incurred, and additions, improvements and betterments are capitalized.
Depreciation and amortization of property and equipment is computed over the
estimated useful lives of the assets using the straight-line method for assets
purchased prior to 1992 and an accelerated method for assets purchased
thereafter. The depreciation and amortization periods range from three to 39
years.
(9)
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, the liability method is used in accounting for income taxes,
whereby deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and are measured using enacted tax rates and laws that will be in effect when
the differences are expected to reverse.
The Company files a consolidated federal income tax return with ASI, LSI and
LCC. LIC, ASCL and ASIA file separate returns.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
2. REVENUES AND BILLINGS ON UNCOMPLETED CONTRACTS
At September 30, 1997 revenues and billings on uncompleted contracts
consisted of:
Costs incurred on uncompleted contracts..... $138,821,673
Estimated earnings.......................... 24,467,281
-----------
Revenues earned to date..................... 163,288,954
Less billings to date....................... 151,680,093
-----------
$ 11,608,861
===========
Such amounts are included in the accompanying consolidated balance sheets
under the following captions at September 30, 1997:
Revenues earned in excess of billings
on uncompleted contracts................ $ 13,475,892
Billings in excess of revenues earned
on uncompleted contracts................ (1,867,031)
-----------
$ 11,608,861
===========
3. NOTES PAYABLE AND LONG-TERM DEBT
The short-term bank note represents the balance due on demand under a
$22,000,000 revolving line of credit which bears interest at the prime rate
(8.5% at September 30, 1997). The credit line is collateralized by accounts
receivable and inventory and is partially guaranteed by certain shareholders of
the Company.
Long-term debt at September 30, 1997 consists of the following:
Real estate note, interest at 8.85%, collateralized
by real estate, maturing November 2006........... $2,426,805
Equipment note, interest at 8.25%, collateralized
by equipment, maturing March 2004................ 1,537,354
Equipment note, interest at 8.15%, collateralized
by equipment, maturing March 2002................ 802,609
---------
4,766,768
Less current maturities.............................. 517,849
---------
$4,248,919
=========
(10)
LICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The aggregated principal amounts of long-term debt maturing in each of the
next five years ending September 30 and thereafter:
1998...................................... $ 517,849
1999...................................... 563,210
2000...................................... 612,550
2001...................................... 666,219
2002...................................... 615,938
Thereafter.............................. $1,791,002
---------
$4,766,768
=========
4. LEASES
The amounts of manufacturing equipment under capital lease obligations
included in property, plant and equipment at September 30, 1997 are as follows:
Cost of assets held under capital leases $405,672
Accumulated amortization................... (196,057)
-------
Net assets held under capital leases $209,615
=======
LICO, Inc. also leases offices and operating facilities, machinery and
equipment, and automobiles under operating leases expiring through July 2001.
Rental payments amounted to $1,930,143 for 1997. Certain property and equipment
was purchased from a partnership owned by certain of the Company's shareholders
during 1997 for $6,350,811, its approximate fair value, and recorded as an
addition to property and equipment for that amount.
Future minimum lease payments under the capital leases and noncancelable
operating leases for the next four years ending September 30 are as follows:
Capital Operating
FISCAL YEARS ENDING Leases Leases
------- ---------
1998.......................................... $ 92,339 $118,835
1999.......................................... 71,106 56,589
2000.......................................... 46,189 14,205
2001.......................................... 8,404 7,750
------- -------
Total minimum lease payments.................. 218,038 $197,379
=======
Less amounts representing interest 25,173
-------
Present value of net minimum lease payments 192,865
Less current portion.......................... 90,159
-------
$102,706
=======
(11)
LICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. These items consist
principally of research and experimentation credits, accrued liabilities,
accrued bonuses, accrued retirement benefits and basis differences in accounts
receivable. The components of the Company's net deferred tax assets and
liabilities at September 30, 1997 are as follows:
Total net deferred assets.......... $600,081
Less current portion............... 246,915
-------
Net noncurrent deferred assets..... $353,166
=======
The income tax provision (benefit) for 1997 consists of the following:
Current:
Federal........................ $ 651,870
State.......................... 282,868
Foreign........................ (10,000)
---------
Total current....................... 944,738
Deferred:
Federal........................ 635,715
State.......................... 124,556
---------
Total deferred...................... 760,271
---------
Total provision for income taxes.... $1,705,009
=========
A reconciliation of the income tax provision to the amounts computed at the
federal statutory rate is as follows:
Provision at statutory rate.................. $1,932,853
State income taxes, net of federal benefit... 180,000
Federal income tax credits................... (560,000)
Other, net................................... 152,156
---------
Net tax provision............................ $1,705,009
=========
At September 30, 1997, the Company has unused research and experimentation
credits of approximately $400,000 for income tax purposes which may be used to
offset future taxable income through the fiscal year ended September 30, 2007.
The Company believes it is more likely than not that the research and
experimentation credits will be utilized prior to their expiration and,
accordingly, has not provided a valuation allowance to reduce the carrying value
of deferred tax assets.
(12)
LICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. SHAREHOLDERS' EQUITY
In September 1997, the Company amended its Articles of Incorporation to
create two classes of common stock designated as Voting Common Stock and
Nonvoting Common Stock. In effect, all existing voting common stock shareholders
were issued nine shares of the newly created Nonvoting Common Stock for every
share of Voting Common Stock owned. Each holder of Voting Common Stock shall be
entitled to one vote for each share of voting stock owned. Holders of Nonvoting
Common Stock shall have no voting rights. Except for voting rights, both classes
of common stock share the same preferences, qualifications, limitations,
restrictions, special rights and general rights.
7. COMMITMENTS AND RELATED-PARTY TRANSACTIONS
STOCK REDEMPTION AGREEMENT
The Company's stock is principally owned by two individuals (major
shareholders) accounting for approximately 80% of the outstanding voting and
nonvoting common stock. Upon the death of any minority shareholder, the Company
will purchase all of the shareholder's shares at the greater of $10 per share or
the book value of such shares. Similarly, upon disability, retirement or
termination without cause of any minority shareholder, the Company may purchase
the shares at book value. The two majority shareholders have entered into a
separate cross purchase agreement to purchase each others stock in the event of
a death of either major shareholder.
RECEIVABLES
Included in accounts receivable at September 30, 1997, is advances of
$42,335 to certain officers and employees.
8. EMPLOYEE BENEFIT PLANS
The Company provides a defined contribution 401(k) plan for all employees
not covered by union-sponsored plans. Under the plan, employees may elect to
contribute a percentage of their annual salary subject to Internal Revenue Code
maximum limitations. Regular accruals are recorded by the Company in amounts up
to one half of the employees' contributions but not exceeding a maximum of 3% of
the employees' base compensation. The Company's contribution for 1997 was
$160,193.
In addition, the Company has an agreement with certain officers under which
the Company is obligated to pay specified amounts upon retirement or lesser
amounts if termination occurs prior to age 60. The Company has acquired certain
life insurance policies that will accumulate cash value to fund this plan. The
Company's liability under this plan is recorded at its present value (assuming a
7.5% interest rate) and presented in the balance sheet as accrued retirement
benefits.
The Company also participates in various multiemployer, union-administered
pension plans that principally cover production workers. Union compensation
arrangements provide a stipulated amount per hour for fringe benefits including
pension benefits. The Company recognizes as an expense the required contribution
for all such fringe benefits, and any amounts due and unpaid are included in
current liabilities. The portion of the total fringe benefits related to pension
benefits has not been separately determined.
9. SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK
At September 30, 1997, substantially all of the Company's receivables are
obligations of automotive manufacturers. The Company generally does not require
collateral or other security on the accounts. The credit risk is controlled
through credit approvals, limits and monitoring procedures.
(13)
LICO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The accounts receivable, including retainage, at September 30, 1997 from
these major customers are as follows:
General Motors................................. $11,476,393
Ford........................................... 5,494,280
Lesco Design and Manufacturing Company
(contractor to Ford)....................... 2,086,529
----------
$19,057,202
==========
Sales to two customers accounted for 52% and 26%, respectively, of contract
revenues in 1997.
10. LITIGATION
During 1997, ASI settled a dispute with a subcontractor regarding breach of
contract. The settlement and related legal fees resulted in a charge to income
from operations of approximately $1,127,600 in excess of amounts accrued in
prior years.
11. SUBSEQUENT EVENTS
Effective February 13, 1998, the Company signed a letter of intent whereby
it agreed to sell all of its outstanding voting and nonvoting common stock to
Columbus McKinnon Corporation for approximately $155 million less the amount of
funded debt existing at closing. This transaction is subject to customary
closing conditions.
(14)
(b) Pro Forma Financial Statements
The pro forma consolidated balance sheet as of December 28, 1997 and the pro
forma consolidated statements of income for the nine months ended December 28,
1997 and the fiscal year ended March 31, 1997 have been prepared to reflect (i)
the consummation of the Offering and the application of the estimated net
proceeds therefrom, (ii) the consummation of the LICO Acquisition, and (iii) the
revisions to the Company's credit facilities. The pro forma balance sheet was
prepared as if such transactions had occurred on December 28, 1997. The pro
forma statements of income were prepared as if such transactions had occurred at
the beginning of the periods reflected thereon. In addition, the pro forma
statement of income for the year ended March 31, 1997 was prepared as if the
acquisitions of Yale and Lister had occurred at the beginning of that year. The
pro forma consolidated financial information is based on the historical
financial statements of the Company and LICO and should be read in conjunction
with those financial statements and notes thereto. The consolidated pro forma
financial information is not necessarily indicative of the financial position or
results of operations which actually would have occurred if such transactions
had been consummated on the dates described, nor does it purport to represent
the Company's future financial position or results of operations.
(15)
COLUMBUS MCKINNON CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 28, 1997
Refinancing and
Columbus Acquisition Offering Pro Forma
McKinnon(1) LICO(2) Adjustments Pro Forma Adjustments As Adjusted
----------- ------- ----------- --------- ----------- -----------
(Dollars in thousands)
ASSETS:
Current assets:
Cash and cash equivalents....... $ 5,883 $ 1,278 $ 7,161 $ 7,161
Trade accounts receivable....... 79,726 46,889 126,615 126,615
Unbilled revenues............... - 16,189 16,189 16,189
Inventories..................... 95,999 3,541 99,540 99,540
Net assets held for sale........ 10,302 - 10,302 10,302
Prepaid expenses................ 6,877 707 7,584 7,584
------- ------ ------- ------- ------- -------
Total current assets................. 198,787 68,604 267,391 267,391
Net property, plant & equipment...... 63,489 9,059 72,548 72,548
Goodwill & other intangibles,
net............................... 241,687 - 450 (3) 356,299 3,848 (7) 352,822
114,162 (4) (7,325)(8)
Marketable securities................ 16,293 - 16,293 16,293
Deferred taxes on income 9,196 353 9,549 9,549
Other assets......................... 5,573 1,463 7,036 7,036
------- ------ ------- ------- ------- -------
Total assets......................... $ 535,025 $ 79,479 $ 114,612 $ 729,116 $ (3,477) $ 725,639
======= ====== ======= ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks.......... $ 445 $ 15,500 $ (15,500)(5) $ 445 $ 445
Trade accounts payable 21,426 23,979 45,405 45,405
Excess billings................. - 6,713 6,713 6,713
Accrued liabilities............. 41,956 6,795 48,751 (2,930) (8) 45,821
Current portion-long-term debt.. 22,504 625 (625)(5) 22,504 (21,000) (9) 1,504
------- ------ ------- ------- ------- -------
Total current liabilities 86,331 53,612 (16,125) 123,818 (23,930) 99,888
Long-term debt, less current
portion........................... 246,016 4,183 151,517 (5) 401,716 (195,620)(10) 227,096
21,000 (9)
Senior subordinated debt............. - - - 199,468 (10) 199,468
Other non-current liabilities........ 39,068 904 39,972 39,972
------- ------ ------- ------- ------- -------
Total liabilities.................... 371,415 58,699 135,392 565,506 918 566,424
Shareholders' equity:
Common stock.................... 137 256 (256)(6) 137 137
Additional paid-in capital...... 96,024 120 (120)(6) 96,024 96,024
Retained earnings............... 73,743 20,539 (20,539)(6) 73,743 (4,395) (8) 69,348
ESOP debt guarantee............. (3,539) - (3,539) (3,539)
Other........................... (2,755) (135) 135 (6) (2,755) (2,755)
------- ------ ------- ------- ------- -------
Total shareholders' equity........... 163,610 20,780 (20,780) 163,610 (4,395) 159,215
------- ------ ------- ------- ------- -------
Total liabilities and shareholders'
equity............................ $ 535,025 $ 79,479 $ 114,612 $ 729,116 $ (3,477) $ 725,639
======= ====== ======= ======= ======= =======
(footnotes on following page)
(16)
<FN>
(1) Represents the Company's consolidated balance sheet as of December 28, 1997.
(2) Represents LICO's consolidated balance sheet as of December 31, 1997.
(3) Represents deferred financing fees on bank debt required for acquisition of
LICO by the Company.
(4) Represents goodwill in the amount of the LICO acquisition price in excess of
the market value of the assets and liabilities acquired.
(5) Represents debt required for the LICO Acquisition by the Company and
refinancing of LICO's debt, based on a purchase price of $155.0 million plus
acquisition costs and financing fees, and including assumed debt.
(6) Represents the elimination of LICO equity upon LICO's acquisition by the
Company in accordance with purchase accounting principles.
(7) Represents deferred financing fees incurred in connection with the Offering,
net of deferred gain realized on Offering hedge.
(8) Represents the write-off of existing deferred financing fees upon
replacement of the existing credit facilities with the New Credit Agreement
and the related reduction in taxes payable.
(9) Represents the reclassification of the current portion of long-term bank
debt to non-current debt under the New Credit Agreement.
(10)Represents the refinancing of bank debt with the proceeds from the Offering,
net of $3.85 million of expenses and realized hedge gain, and $0.5 million
of original issue discount.
</FN>
(17)
COLUMBUS MCKINNON CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
NINE MONTHS ENDED DECEMBER 28, 1997
Refinancing and Pro
Columbus Acquisition Offering Forma
McKinnon(1) LICO(2) Adjustments Pro Forma Adjustments As Adjusted
----------- ------- ----------- --------- ----------- -----------
(Dollars in thousands)
Net sales............................... $372,442 $117,948 $490,390 $ 490,390
Cost of products sold................... 265,990 98,664 364,654 364,654
------- ------- ------- -------
Gross profit............................ 106,452 19,284 125,736 125,736
Selling, general & administrative
expenses.......................... 51,445 9,830 (2,278)(3) 58,997 58,997
Amortization of intangibles............. 7,581 - 3,425 (4) 11,006 11,006
------- ------- ----- ------- -------
59,026 9,830 1,147 70,003 70,003
------- ------- ----- ------- -------
Income from operations.................. 47,426 9,454 (1,147) 55,733 55,733
Interest and debt expense............... 17,729 1,150 7,152 (5) 26,031 (820)(7) 25,211
Interest and other income............... 1,076 56 1,132 1,132
------- ------- ----- ------- ---- -------
Income before income taxes,
Minority interest and extraordinary
charge.............................. 30,773 8,360 (8,299) 30,834 820 31,654
Income tax expense...................... 15,227 2,657 (1,950)(6) 15,934 328 (8) 16,262
------- ------- ----- ------- ---- -------
Income before minority interest and
Extraordinary charge.................... $ 15,546 $ 5,703 $(6,349) $ 14,900 $ 492 $ 15,392
======= ======= ===== ======= ==== =======
EBITDA(9)............................... $ 62,746 $ 10,116 $ 2,278 $ 75,140 $ - $ 75,140
======= ======= ===== ======= ==== =======
<FN>
(1) Represents the Company's consolidated results of operations for the nine
months ended December 28, 1997.
(2) Represents LICO's consolidated results of operations for the nine-month
period ended December 31, 1997.
(3) Represents the portion of LICO owners' compensation expenses which will be
eliminated upon acquisition by Columbus McKinnon.
(4) Represents amortization of goodwill which will result from the acquisition
of LICO by Columbus McKinnon.
(5) Represents the incremental interest and debt expense to finance the
acquisition of LICO by Columbus McKinnon.
(6) Represents the tax effect of LICO pro forma adjustments to selling, general
and administrative expenses and interest and debt expense in items (3) and
(5) above.
(7) Represents the net savings in interest and debt expense resulting from the
effect of the New Credit Agreement at 6.875% and the Offering at 8.50%.
(8) Represents the tax effect of interest and debt expense pro forma adjustment
per (7) above.
(9) EBITDA represents income before interest and debt expense, income tax
expense, depreciation and amortization, minority interest, extraordinary
charge and cumulative effect of accounting change. EBITDA is presented
because it provides useful information regarding the Company's ability to
service and/or incur debt. EBITDA should not be considered in isolation from
or as a substitute for net income, cash flows from operating activities or
other consolidated income or cash flow statement data prepared in accordance
with generally accepted accounting principles or as a measure of
profitability or liquidity.
</FN>
(18)
COLUMBUS MCKINNON CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
YEAR ENDED MARCH 31, 1997
Yale & Lister Refinancing and
Columbus Preacquisition Combined Acquisition Offering Pro Forma
McKinnon(1) Pro Forma(2) Pro Forma LICO(3) Adjustments Pro Forma Adjustments As Adjusted
---------- ----------- --------- ------ ----------- --------- ----------- -----------
(Dollars in thousands)
Net sales....................$359,424 $110,901 $470,325 $134,168 $604,493 $604,493
Cost of products sold........ 251,987 78,405 330,392 121,867 452,259 452,259
------- ------- ------- ------- ------- -------
Gross profit................. 107,437 32,496 139,933 12,301 152,234 152,234
Selling, general &
administrative expenses.... 57,186 17,718 74,904 9,819 (1,892)(4) 82,831 82,831
Amortization of intangibles.. 5,197 4,970 10,167 - 4,566 (5) 14,733 14,733
------- ------- ------- ------- ------ ------- -------
62,383 22,688 85,071 9,819 2,674 97,564 97,564
------- ------- ------- ------- ------ ------- -------
Income from operations....... 45,054 9,808 54,862 2,482 (2,674) 54,670 54,670
Interest and debt expense.... 11,930 12,967 24,897 916 9,947 (6) 35,760 (1,261)(8) 34,499
Interest and other income.... 1,168 - 1,168 75 1,243 1,243
------- ------- ------- ------- ------ ------- ------ -------
Income before income taxes,
minority interest and ex-
traordinary charge......... 34,292 (3,159) 31,133 1,641 (12,621) 20,153 1,261 21,414
Income tax expense........... 15,617 903 16,520 65 (3,222)(7) 13,363 504 (9) 13,867
------- ------- ------- ------- ------ ------- ------ -------
Income before minority
interest and extraordinary
charge.....................$ 18,675 $ (4,062) $ 14,613 $ 1,576 $ (9,399) $ 6,790 $ 757 $ 7,547
======= ======= ======== ======= ====== ======= ====== =======
EBITDA(10)...................$ 57,507 $ 16,727 $ 74,234 $ 3,209 $ 1,892 $ 79,355 $ - $ 79,335
======= ======= ======== ======= ====== ======= ====== =======
<FN>
(1) Represents the Company's consolidated results of operations for the fiscal
year ended March 31, 1997, including Yale and Lister since their acquisition
by the Company on October 17, 1996 and December 19, 1996, respectively.
(2) Represents Yale's and Lister's consolidated results of continuing operations
from April 1, 1996 through their date of acquisition by Columbus McKinnon on
October 17, 1996 and December 19, 1996, respectively, along with the effects
of acquisition. Those pro forma effects include the following: (a) $2.5
million reduction of selling, general and administrative expenses for
elimination of Yale corporate offices and other administrative expenses; (b)
$4.1 million of additional goodwill amortization expense; (c) $8.4 million
incremental interest and debt expense to finance the acquisitions; and (d)
$2.4 million reduction in income tax expense resulting from items (a) and
(c) above.
(3) Represents LICO's consolidated results of operations for the twelve-month
period ended March 31, 1997.
(4) Represents the portion of LICO owners' compensation expenses which will be
eliminated upon acquisition by Columbus McKinnon.
(5) Represents amortization of goodwill which will result from the acquisition
of LICO by Columbus McKinnon.
(6) Represents the incremental interest and debt expense to finance the
acquisition of LICO by Columbus McKinnon.
(7) Represents the tax effect of LICO pro forma adjustments to selling, general
and administrative expenses and interest and debt expense in items (4) and
(6) above.
(8) Represents the net savings in interest and debt expense resulting from the
effect of the New Credit Agreement at 6.875% and the Offering at 8.50%.
(9) Represents the tax effect of interest and debt expense pro forma adjustment
per (8) above.
(10)EBITDA represents income before interest and debt expense, income tax
expense, depreciation and amortization, minority interest, extraordinary
charge and cumulative effect of accounting change. EBITDA is presented
because it provides useful information regarding the Company's ability to
service and/or incur debt. EBITDA should not be considered in isolation from
or as a substitute for net income, cash flows from operating activities or
other consolidated income or cash flow statement data prepared in accordance
with generally accepted accounting principles or as a measure of
profitability or liquidity.
</FN>
(19)
(c) Exhibits:
4.1 Conformed copy of the Indenture, dated as of March 31, 1998, among
Columbus McKinnon Corporation, the Guarantors named on the signature
pages thereto and State Street Bank and Trust Company, N.A., as Trustee,
including the form of Senior Subordinated Notes due 2008.
4.2 A/B Exchange Registration Rights Agreement dated as of March 31, 1998 by
and among Columbus McKinnon Corporation, the Guarantors named on the
signature pages thereto and Bear, Stearns & Co. Inc. and Goldman, Sachs
& Co.
4.3 Supplemental Indenture dated as of March 31, 1998, among LICO, Inc.,
Automatic Systems, Inc., LICO Steel Inc., Columbus McKinnon Corporation
the other Guarantors and State Street Bank and Trust Company, N.A., as
trustee.
10.1 Stock Purchase Agreement dated as of March 11, 1998 among Columbus
McKinnon Corporation, as Buyer, and the shareholders of LICO, Inc., as
Sellers.
10.2 Credit Agreement dated as of March 31, 1998 among Columbus McKinnon
Corporation, as 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.
23.1 Consent of Ernst & Young LLP as Independent Auditors of LICO, Inc.
99.1 Text of Registrant's press release dated March 11, 1998 (incorporated
by reference to Exhibit 99 to the Registrant's Current Report on Form
8-K dated March 11, 1998 and filed on March 23, 1998).
99.2 Text of Registrant's press release dated March 31, 1998.
(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 hereunto duly authorized.
COLUMBUS McKINNON CORPORATION
Dated: April 9, 1998 By: /s/ Robert L. Montgomery
------------- ------------------------
Executive Vice President and
Chief Financial Officer
(21)