-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GnB80AkJ16nkqtL5yfIQbh9j8YLtk/my2zgqq7UzWyQLMCzkJ4fe8bYpFizQwqvP BR+pX0Q1cVxvfUmjXfQVeQ== 0000950130-02-004303.txt : 20020612 0000950130-02-004303.hdr.sgml : 20020612 20020611203959 ACCESSION NUMBER: 0000950130-02-004303 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020612 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBUS MCKINNON CORP CENTRAL INDEX KEY: 0001005229 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 160547600 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27618 FILM NUMBER: 02676818 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PKWY CITY: AMHERST STATE: NY ZIP: 14228-1197 BUSINESS PHONE: 7166895400 MAIL ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 14228-1197 10-K 1 d10k.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended March 31, 2002 Commission file number 0-27618 ----------------- COLUMBUS McKINNON CORPORATION (Exact name of Registrant as specified in its charter) New York 16-0547600 (State of Incorporation) (I.R.S. Employer Identification Number) 140 John James Audubon Parkway Amherst, New York 14228-1197 (Address of principal executive offices, including zip code) (716) 689-5400 (Registrant's telephone number, including area code) ----------------- Securities pursuant to section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value (and rights attached thereto) Indicate by checkmark 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. Yes [X] No[ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of May 31, 2002 was $115,345,490. The number of shares of the Registrant's common stock outstanding as of May 31, 2002 was: 14,895,172 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's proxy statement for its 2002 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the Registrant's fiscal year ended March 31, 2002 are incorporated by reference into Part III of this report. COLUMBUS McKINNON CORPORATION 2002 Annual Report on Form 10-K This annual report contains "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 our actual results to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by us and our subsidiaries, conditions affecting our customers and suppliers, competitor responses to the our products and services, the overall market acceptance of such products and services, the integration of acquisitions and other factors set forth herein under "Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors Affecting Our Operating Results." We use words like "will," "may," "should," "plan," "believe," "expect," "anticipate," "intend," "future" and other similar expressions to identify forward looking statements. These forward looking statements speak only as of their respective dates and we do not undertake and specifically decline 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. Our actual operating results could differ materially from those predicted in these forward-looking statements, and any other events anticipated in the forward looking statements may not actually occur. PART I Item 1. Business. - ------- --------- General We are a leading manufacturer and marketer of hoists, cranes, chain and component parts serving a wide variety of commercial and industrial end markets. Our products are used to efficiently and ergonomically move, lift, position or secure objects and loads. We are the domestic market leader in hoists, our principal line of products, which we believe provides us with a strategic advantage in selling our other products. We have achieved this leadership position through strategic acquisitions, our extensive and well-established distribution channels and our commitment to product innovation and quality. We have one of the most comprehensive product offerings in the industry and we believe we have more overhead hoists in use in North America than all of our competitors combined. Our brand names, including CM, Coffing, Duff-Norton, Shaw-Box and Yale, are among the most recognized and well-respected in our marketplace. The Building of Our Business Founded in 1875, we have grown to our current size and leadership position largely as the result of 14 businesses we acquired since February 1994. These acquisitions have significantly broadened our product lines and services and expanded our geographic, end-user market and our customer base. Our senior management has substantial experience in the acquisition and integration of businesses, aggressive cost management, efficient manufacturing techniques and global operations, all of which are critical to our long-term growth strategy. We have a proven track record of acquiring complementary businesses and product lines, integrating their activities into our organization, and aggressively managing their cost structures to improve operating efficiencies. The history of our Products and Solutions acquisitions since 1994 is outlined below (purchase price in millions):
Date of Acquisition Acquired Company Purchase Price Products/Services - ----------- ---------------- -------------- ----------------- April 1999 Washington Equipment Company $ 6.4 Overhead cranes March 1999 GL International (1) 20.6 Overhead cranes January 1999 Camlok/Tigrip 10.6 Plate clamps and crane weighers December 1998 Gautier 2.9 Rotary unions and swivel joints August 1998 Abell-Howe Crane 7.0 Overhead cranes March 1998 ASI (2) 155.0 Design and manufacture of custom conveyor systems January 1998 Univeyor 15.0 Design and manufacture of powered roller conveyor systems December 1996 Lister 7.0 Cement kiln, anchor and buoy chain October 1996 Yale (3) 270.0 Hoists, scissor lift tables, actuators, jacks and rotary unions
November 1995 Lift-Tech 63.0 Hoists October 1995 Endor 2.0 Hoists January 1995 Cady Lifters 0.8 Below-the-hook lifters December 1994 Conco 0.8 Operator controlled manipulators February 1994 Durbin-Durco 2.4 Load securing equipment and attachments
- ---------------------- (1) In January 2002, we sold Handling Systems & Conveyors, Inc., a subsidiary of GL International. (2) In May 2002, we sold substantially all of the assets of Automatic Systems, Inc. ("ASI"). (3) In August 1998, we sold the Mechanical Products division of Yale. Our Position in the Industry The U.S. material handling industry is generally divided into the following sectors: o overhead material handling and lifting devices; o continuous materials movement; o wheeled handling devices; o pallets, containers and packaging; o storage equipment and shop furniture; o automation systems and robots; and o services and unbundled software. The breadth of our products and services enable us to participate in each of these sectors, except for pallets, containers and packaging and storage equipment and shop furniture. This diversification, together with our extensive and varied distribution channels, minimizes our dependence on any particular product, market or customer. We believe that none of our competitors offers the variety of products or services in the markets we serve. We believe that the demand for our products and services will increase in the future as a result of several favorable trends. These trends include: o Productivity Enhancement. In recent years employers have responded to competitive pressures by seeking to maximize productivity and efficiency. Our hoists and other lifting and positioning products allow loads to be lifted and placed quickly, precisely, with little effort and fewer people, thereby increasing productivity and reducing cycle time. o Safety Regulations and Concerns. Driven by federal and state workplace safety regulations such as the Occupational Safety and Health Act and the Americans with Disabilities Act, and by the general competitive need to reduce costs such as health insurance premiums and workers' compensation expenses, employers seek safer ways to lift and position loads. Our lifting and positioning products enable these tasks to be performed with reduced risk of personal injury. o Consolidation of Suppliers. In an effort to reduce costs and increase productivity, our customers and end-users are increasingly consolidating their suppliers. We believe that our competitive strengths will enable us to benefit from this consolidation and enhance our market share. o Outsourcing of Material Handling Project Design and Management. More of our customers and end-users are outsourcing non-core business functions to improve productivity and cost efficiency. This has created opportunities for us to assume the project design, management and implementation responsibilities for both workstation and facility-wide material handling systems. o Workforce Diversity. The percentages of women, disabled and older persons in the work force and the tasks they perform are continuing to increase. Our products enable many workplace tasks to be performed safely, efficiently and with less physical stress. We believe that increasing diversity in the workforce will continue to increase demand for our products. Our Competitive Strengths o Comprehensive Product Line and Strong Brand Name Recognition. We believe we offer the most 2 comprehensive product lines in the markets we serve. The breadth of product lines enables us to provide a "one-stop shop" to many of our distributors who are looking to consolidate their suppliers. In addition, our brand names, including Big Orange, Budgit, Chester, CM, Coffing, Cyclone, Duff-Norton, Hammerlok, Herc-Alloy, Little Mule, Lodestar, Puller, Shaw-Box, Valustar and Yale, are among the most recognized and respected in the industry. We believe that our strong brand name recognition has created customer loyalty and helps us maintain existing business, as well as capture additional business. o Leading Market Position and Reputation. We are the largest manufacturer of hoists, alloy and high strength carbon steel chain and operator-controlled manipulators in North America. We have developed our leading market position over our 125-year history by emphasizing technological innovation, manufacturing excellence and superior after-sale service. Over 60% of our domestic net sales in fiscal 2002 were from product categories in which we that we believe we hold the leading market share. We believe that the strength of our established products and brands and our leading market position provide us with significant competitive advantages, including preferred supplier status with a majority of our largest customers. Our large installed base of products also provides us with a significant competitive advantage in selling our products to existing customers as well as providing repair and replacement parts. o Low-Cost Manufacturing Capability. We believe we are a low-cost manufacturer and we will continue to consolidate our manufacturing operations and reduce our manufacturing costs through the following initiatives: - Rationalization and Consolidation. In fiscal 2002, we closed five manufacturing plants and one warehouse, consolidated a number of similar product lines and standardized certain component parts. We have identified five additional manufacturing facilities for consolidation within the next 12 months. - Lean Manufacturing. In fiscal 2002, we instituted Lean Manufacturing at 13 of our facilities, resulting in substantial inventory reductions, a significant decline in required manufacturing floor area, decreased product lead time and improved productivity. - Purchasing Council. We continue to leverage our company-wide purchasing power through our Purchasing Council to reduce our costs. - Vertical Integration. We manufacture many of the parts and components used in our manufacture of hoists and cranes, resulting in reduced costs. - International Expansion. Our continued expansion of our manufacturing facilities in China and Mexico provides us with another cost efficient platform to manufacture certain of our products. o Distribution Channel Diversity and Strength. Our products are sold to over 20,000 general and specialty distributors and OEMs, as well as to over 100 consumer outlets. We enjoy long-standing relationships with, and are a preferred provider to, the majority of our largest distributors and industrial buying groups. Over the past decade, there has been significant consolidation among distributors of material handling equipment. We have benefited from this consolidation and have maintained and enhanced our relationships with our leading distributors, as well as formed new relationships. We believe our extensive North American distribution channels provide a significant competitive advantage and allow us to effectively market new product line extensions and promote cross-selling. o Strong After-Market Sales and Support. We believe that we retain customers and attract new customers due to our ongoing commitment to customer service and satisfaction. We have a large installed base of hoists and chain that drives our after-market sales for components and repair parts and is a stable source of higher margin business. We maintain strong relationships with our customers and provide prompt aftermarket service to end-users of our products through our authorized network of 13 chain repair stations and over 350 hoist service and repair stations. o Experienced Management Team. Our senior management team provides a depth and continuity of experience in the material handling industry, with our top six executives possessing an average of over 19 years of experience with us. Our management has experience in aggressive cost management, efficient manufacturing 3 techniques, acquiring and integrating businesses and global operations, all of which are critical to our long-term growth. Our Strategy o Increase Our Domestic Organic Growth. We intend to use our completive advantages to increase our domestic and international market share across all of our product lines through the following initiatives: - Leverage Strong Competitive Position. Our large diversified customer base, our extensive distribution channels and our close relationship with our distributors provide us with insights into customer preferences and product requirements that allow us to anticipate and address the future needs of end-users. Additionally, we continue to implement our CraneMart(TM)initiative launched in 1999 to build an integrated North American network of independent and company-owned crane builders. CraneMart(TM)participants purchase our products and parts for incorporation in their products as well as for distribution and are provided a full range of services, including best pricing, parts distribution rights, technical support and shared resources. - Introduce New Products. We continue to expand our business by developing new material handling products and services and expand the breadth of our product lines to address customer needs. Recent new product introductions include: o global wire rope hoists used in overhead cranes; o lifting clamps used for lifting large plates of steel; o self-standing or ceiling-mounted, light-rail crane systems used in work station material handling applications; o top-running and underhung end-trucks used in the crane builder industry; o hand pallet trucks used in warehouse and factory applications; and o high speed, light-weight, mini-load cranes used in warehouse applications. o Increase Our Penetration of International Markets. Our international sales comprised 29.4% of our net sales in fiscal 2002 and grew at a compounded annual rate of 26.5%, from $34.3 million in fiscal 1996 to $140.9 million in fiscal 2002. We sell to distributors in approximately 50 countries and have manufacturing facilities in Canada, Mexico, Germany, the United Kingdom, Denmark, France and China. In addition to new product introductions, we intend to increase international sales and enhance margins by: - Expanding Our Sales and Service Presence. We are expanding our sales and service presence in the major market areas of Europe, Asia and South America. We have recently added four new sales offices and warehouse facilities in Europe, one in Brazil and one in Mexico. - Increasing Sales and Improving Margins. We intend to increase our sales and improve our margins by manufacturing and exporting a broader array of high quality, low-cost products and components from our facilities in Mexico and China. We have recently constructed a third manufacturing facility in China and are expanding our manufacturing capacity and distribution channels in Mexico. o Reduce Our Operating Costs. Our objective is to remain a low-cost producer. We continuously seek ways to reduce our operating costs and increase our manufacturing productivity. In furtherance of this objective, we have undertaken the following: - Rationalization of Facilities. Consolidating acquired operations is an integral part of our acquisition strategy. We closed five manufacturing plants and one warehouse in fiscal 2002 and have identified five additional facilities for consolidation within the next 12 months. When completed, we believe these consolidations will result in annual fixed cost reductions of approximately $20 million. - Implementation of Lean Manufacturing. Through fiscal 2002, we have instituted Lean Manufacturing at 13 of our major facilities. In fiscal 2002, largely as a result of our Lean 4 Manufacturing initiatives, we recaptured approximately 185,000 square feet of manufacturing floor area and consolidated an additional 345,000 square feet of closed facilities. Additionally, we reduced inventories by approximately $19 million, improved productivity and achieved significant reductions in product lead time. We expect to introduce Lean Manufacturing in five additional facilities in fiscal 2003. Our Lean Manufacturing initiative complements our strategy of integrating and consolidating our manufacturing facilities. - Leverage Purchasing Power. The Columbus McKinnon Purchasing Council was formed in fiscal 1998 to centralize and leverage our overall purchasing power, which has grown through acquisitions. This has resulted in annualized savings of approximately $16.3 million since its inception, including approximately $3.8 million in fiscal 2002. o Pursue Selective Acquisitions. We are negotiating and have received a term sheet regarding a new bank credit agreement to replace our existing bank credit agreement which terminates on March 31, 2003. The closing of our new credit agreement is one of the first steps in our plan to improve our capital structure. This, together with our other strategies, will better position us to seek accretive and complementary acquisitions at some time in the future. Our Segments We currently report our operations in two business segments, Products and Solutions. Our Products segment designs, manufactures and distributes a broad range of material handling products for various industrial applications and for consumer use. Products in this segment include a wide variety of electric, lever, hand and air-powered hoists; hoist trolleys; industrial crane systems such as bridge, gantry and jib cranes; alloy, carbon steel and kiln chain; closed-die forged attachments, such as hooks, shackles, logging tools and loadbinders; industrial components, such as mechanical and electromechanical actuators, mechanical jacks and rotary unions; and below-the-hook special purpose lifters. These products are typically manufactured for stock and are sold through a variety of commercial distributors and to end-users. The end-users of our products are in manufacturing plants, power utility facilities and warehouses. Some of our products have farming, mining and logging applications, and we serve a niche market for large entertainment productions. We also sell some of our products to the consumer market through a variety of retailers and wholesalers. Our Solutions segment is engaged primarily in the design, fabrication and installation of integrated workstation and facility-wide material handling systems and in the design and manufacture of operator-controlled manipulators and tire shredders. This segment also includes our LICO steel erection operation. The products and services of this segment are highly engineered, are typically built to order and are primarily sold directly to end-users for specific applications in a variety of industries. Note 18 to our consolidated financial statements included elsewhere in this annual report provides information related to our business segments in accordance with generally accepted accounting principles. Summary information concerning our business segments for fiscal 2000, 2001 and 2002 is set forth below.
Fiscal Years Ended March 31, ---------------------------------------------------------------------------------- 2000 2001 2002 ---- ---- ---- (Dollars in millions) % of Total % of Total % of Total ---------- ---------- ---------- Amount Sales Amount Sales Amount Sales ------ ----- ------ ----- ------ ----- Net Sales Products....................... $511.3 83.9 $478.9 81.7 $404.7 84.3 Solutions...................... 97.9 16.1 107.3 18.3 75.3 15.7 ---- ----- ---- Total..................... $609.2 $586.2 $480.0 ====== ====== ======
5
% of % of ---- ----- Amount % of Segment Segment Segment ------ ------------- ------- ------- Sales Amount Sales Amount Sales ----- ------ ----- ------ ----- Income from Operations before Restructuring Charges and Amortization Products $75.4 14.7 $73.1 15.3 $47.0 11.6 Solutions 7.8 8.0 3.8 3.5 1.7 2.2 --- --- --- --- --- --- Total $83.2 13.7 $76.9 13.1 $48.7 10.1 ===== ==== ===== ==== ===== ====
Products Segment Products Our Products segment primarily designs, manufactures and distributes a broad range of material handling, lifting and positioning products for various applications in industry and for consumer use. These products are typically manufactured for stock and are sold through a variety of distributors. Approximately 75% of our Products segment net sales is derived from the sale of products that we sell at a unit price of less than $5,000. In fiscal 2002, net sales of the Products segment were approximately $404.7 million or approximately 84.3% of our net sales, from continuing operations, of which approximately $293.2 million, or 72.4%, were domestic and $111.5 million, or 27.6%, were international. The following table sets forth certain sales data for the products of our Products segment, expressed as a percentage of net sales of this segment for fiscal 2001 and 2002: Year Ended March 31, ---------------------------------- 2001 2002 ---- ---- Hoists 53% 52% Chain and forged attachments 25 25 Industrial cranes 14 15 Industrial components 8 8 -- -- 100% 100% ==== ==== o Hoists. We manufacture a variety of electric chain hoists, electric wire rope hoists, hand-operated hoists, lever tools, air-powered balancers and hoists. Load capacities for our hoist product lines range from one-eighth of a ton to 100 tons. These products are sold under our Budgit, Chester, CM, Coffing, Shaw-Box, Yale and other recognized trademarks. Our hoists are sold for use in a variety of general industrial applications, as well as for use in the entertainment, consumer, rental, health care and other markets. We also supply hoist trolleys, driven manually or by electric motors, for the industrial, consumer and OEM markets. We offer a line of custom-designed, below-the-hook tooling, clamps, pallet trucks and textile strappings. Below-the-hook tooling and clamps are specialized lifting apparatus used in a variety of lifting activities performed in conjunction with hoist and chain applications. Pallet trucks are manual devices used for across-the-floor material handling, frequently in warehouse settings. Textile strappings are below-the-hook attachments, frequently used in conjunction with hoists. o Chain and Forged Attachments. We manufacture alloy and carbon steel chain for various industrial and consumer applications. Federal regulations require the use of alloy chain, which we first developed, for overhead lifting applications because of its strength and wear characteristics. A line of our alloy chain is sold under the Herc-Alloy brand name for use in overhead lifting, pulling and restraining applications. In addition, we also sell specialized load chain for use in hoists, as well as three grades and multiple sizes of carbon steel welded-link chain for various load securing and other non-overhead lifting applications. We also manufacture kiln chain sold primarily to the cement manufacturing market and anchor and buoy chain sold primarily to the United States and Canadian governments. We also produce a complete line of alloy and carbon steel closed-die forged attachments, including hooks, shackles, hitch pins, master links and loadbinders. These forged attachments are used in all chain and wire rope rigging applications in a variety of industries, including transportation, mining, railroad, construction, marine, logging, petrochemical and agriculture. In addition, we manufacture carbon steel forged and stamped products, such as loadbinders, logging tools and other securing devices, for sale to the industrial, consumer and logging markets through industrial distributors, hardware distributors, mass merchandiser outlets and OEMs. 6 o Industrial Cranes. We entered the crane manufacturing market through our August 1998 acquisition of Abell-Howe, a Chicago-based regional manufacturer of jib and overhead bridge cranes. Our March 1999 acquisition of GL International, which included the Gaffey and Larco brands, and our April 1999 acquisition of Washington Equipment Company established us as a significant participant in the crane building and servicing markets. Crane builders represent a specialized distribution channel for electric wire rope hoists and other crane components. We have also established a presence in Monterrey, Mexico to provide that growing geographic market with crane systems and service. o Industrial Components. Through our Duff-Norton division, we design and manufacture industrial components such as mechanical and electromechanical actuators, mechanical jacks and rotary unions for sale domestically and abroad. Actuators are linear motion devices used in a variety of industries, including the paper, steel and aerospace industries. Mechanical jacks are heavy duty lifting devices used in the repair and maintenance of railroad equipment, locomotives and industrial machinery. Rotary unions are devices that transfer a liquid or gas from a fixed pipe or hose to a rotating drum, cylinder or other device. These unions are unique in that they connect a moving or rotating component of a machine to fixed plumbing without major spillage or leakage. Rotary unions are used in a variety of industries including pulp and paper, printing, textile and fabric manufacturing, rubber and plastic. Sales and Marketing Our sales and marketing efforts in support of our Products segment consist of the following programs: o Factory-Direct Field Sales and Customer Service. We sell our products through our direct sales forces of more than 140 salespersons and through independent sales agents worldwide. Our sales are further supported by our more than 250 company-trained customer service correspondents and sales application engineers. We compensate our sales force through a combination of base salary and a commission plan based on top line sales and a pre-established sales quota. o Product Advertising. We promote our products by regular advertising in leading trade journals as well as producing and distributing high quality information catalogs. We support our product distribution by running cooperative "pull-through" advertising in over 15 vertical trade magazines and directories directed at theatrical, international, consumer and crane builder markets. We run targeted advertisements for chain, hoists, forged attachments, scissor lift tables, actuators, hydraulic jacks, hardware programs, cranes and light-rail systems. o Trade Show Participation. Trade shows are central to the promotion of our products, and we participate in more than 40 regional, national and international trade shows each year. Shows in which we participate range from global events held in Germany to local "markets" and "open houses" organized by individual hardware and industrial distributors. We also attend specialty shows for the entertainment, rental and safety markets, as well as general purpose industrial and consumer hardware shows. In fiscal 2002, we participated in trade shows in the U.S., Canada, France, Mexico, Germany, England, Brazil, Australia, China and Spain. o Industry Association Membership and Participation. As a recognized industry leader, we have a long history of work and participation in a variety of industry associations. Our management is directly involved at the officer and director levels of numerous industry associations including the following: ISMA (Industrial Supply Manufacturers Association), AWRF (Associated Wire Rope Fabricators), PTDA (Power Transmission and Distributors Association), SCRA (Specialty Carriers and Riggers Association), WSTDA (Web Sling and Tie Down Association), MHI (Material Handling Institute), HMI (Hoist Manufacturers Institute), CMAA (Crane Manufacturers Association of America), ESTA (Entertainment Services and Technology Association), NACM (National Association of Chain Manufacturers), AHMA (American Hardware Manufacturers Association) and ARA (American Rental Association). o Product Standards and Safety Training Classes. We conduct on-site training programs worldwide for distributors and end-users to promote and reinforce the attributes of our products and their safe use and operation in various material handling applications. 7 o Web Site. Our web site at www.cmworks.com currently includes electronic catalogs of Columbus McKinnon hoist and chain products and list prices. Current and potential customers can browse through our diverse product offering or search for specific products by name or classification code and obtain technical product specifications. In addition, we currently sponsor an additional 19 brand specific web sites and have begun a pilot program to sell hand pallet trucks on one of these sites. We continue to add additional product catalogs, maintenance manuals, advertisements and customer service information on our web sites. Many of the web sites allow distributors to search for personalized pricing information, order status and product serial number data. Distribution and Markets The distribution channels for the Products segment include a variety of commercial distributors. In addition, the Products segment sells overhead bridge, jib and gantry cranes, as well as certain forgings and chain assemblies, directly to end-users. We also sell to the consumer market through wholesalers. Our products are sold through the following distribution channels: o General Distribution Channels. Our general distribution channels consist of: - Industrial distributors that serve local or regional industrial markets and sell a variety of products for maintenance, repair, operating and production, or MROP, applications through their own direct sales force. - Rigging shops that are distributors with expertise in rigging, lifting, positioning and load securing. Most rigging shops assemble and distribute chain, wire rope and synthetic slings and distribute off-the-shelf hoists and attachments, chain slings and other off-the-shelf products. - Crane builders that design, build, install and service overhead crane and light-rail systems for general industry and also sell a wide variety of hoists and lifting attachments. We sell electric wire rope hoists and chain hoists as well as crane components, such as end trucks, trolleys, drives and electrification systems to crane builders o Crane End-Users. We sell overhead bridge, jib and gantry cranes, parts and service to end-users through our wholly owned crane builders within the CraneMart(TM) network. Our wholly owned crane builders (Abell-Howe, Gaffey, Larco and Washington Equipment) design, manufacture, install and service a variety of cranes with capacities up to 100 tons. o Specialty Distribution Channels. Our specialty distribution channels consist of: - Catalog houses that market a variety of MROP supplies, including material handling products, either exclusively through large, nationally distributed catalogs, or through a combination of catalog and internet sales and a field sales force. More recently, catalog houses, particularly W.W. Grainger, Inc., are pursuing e-commerce through their web sites. The customer base served by catalog houses, which traditionally included smaller industrial companies and consumers, has grown to include large industrial accounts and integrated suppliers. - Material handling specialists and integrators that design and assemble systems incorporating hoists, overhead rail systems, trolleys, scissor lift tables, manipulators, air balancers, jib arms and other material handling products to provide end-users with solutions to their material handling problems. - Entertainment equipment distributors that design, supply and install a variety of material handling and rigging equipment for concerts, theaters, ice shows, sports arenas, convention centers and discos. o Service-After-Sale Distribution Channel. Service-after-sale distributors include our authorized network of 13 chain repair service stations and over 350 hoist service and repair stations. This service network is designed for easy parts and service access for our large installed base of hoists and related equipment in North America. o OEM/Government Distribution Channels. This channel consists of: 8 - OEMs that supply various component parts directly to other industrial manufacturers as well as private branding and packaging of our traditional products for material handling, lifting, positioning and special purpose applications. - Government agencies, including the United States and Canadian Navies and Coast Guards, that purchase primarily anchor, buoy and mooring chain and forged attachments. o Consumer Distribution. Consumer sales, consisting primarily of carbon steel chain and assemblies, forged attachments and hand powered hoists, are made through five distribution channels: two-step wholesale hardware distribution (such as Distribution America and Ace Hardware); one-step distribution (such as Canadian Tire); trucking and transportation distributors (such as U-Haul and Fruehauf); farm hardware distributors (such as John Deere and Tractor Supply Company); and rental outlets (such as Hertz). o International Distribution. We distribute virtually all of our products in over 50 countries on six continents through a variety of distribution channels. Customer Service and Training We maintain customer service departments staffed by trained personnel for all of our Products segment sales divisions, and regularly schedule product and service training schools for all customer service representatives and field sales personnel. Training programs for distribution and service station personnel, as well as for end-users, are scheduled on a regular basis at most of our facilities and in the field. We have more than 350 service stations worldwide that provide local and regional repair, warranty and general service work for distributors and end-users. End-user trainees attending our various programs include representatives of General Motors, DuPont, 3M, GTE, Cummins Engine, General Electric and many other industrial organizations. We also provide, in multiple languages, a variety of collateral material in video, cassette, CD-ROM, slide and print format addressing relevant material handling topics such as the care, use and inspection of chains and hoists, and overhead lifting and positioning safety. In addition, we sponsor advisory boards made up of representatives of our primary distributors and service-after-sale network members who are invited to participate in discussions focused on improving products and service. These boards enable us and our primary distributors to exchange product and market information relevant to industry trends. Backlog Our Products segment backlog of orders at March 31, 2002 was approximately $41.3 million compared to approximately $44.3 million at March 31, 2001. Our orders for standard products are generally shipped within one week. Orders for products that are manufactured to customers' specifications are generally shipped within four to twelve weeks. We do not believe that the amount of our Products segment backlog of orders is a reliable indication of our future sales. Competition Despite recent consolidation, the material handling industry remains highly fragmented. We face competition from a wide range of regional, national and international manufacturers in both domestic and international markets. In addition, we often compete with individual operating units of larger, highly diversified companies. The principal competitive factors affecting our Products segment include product performance, functionality, price, brand, reputation, reliability and availability, as well as customer service and support. Other important factors include distributor relationships, territory coverage and the ability to service the distributor with on-time delivery and repair services. Our Products segment competes in hoists with Siemens Dematic, Kito-Harrington, Ingersoll-Rand, KCI Konecranes and Morris Material Handling; in chain with Cooper Industries, Peerless Chain Company and American Chain and Cable Company; in forged attachments with the Crosby Group and Cooper Industries; in crane building with Siemens Dematic, KCI Konecranes, Morris Material Handling and R. Stahl; and in industrial components with Deublin, Joyce-Dayton and Nook Industries. 9 Solutions Segment The Solutions segment is engaged primarily in the design, fabrication and installation of integrated work station and facility-wide material handling systems and in the manufacture and distribution of operator-controlled manipulators, scissor lift tables and tire shredders. Net sales of the Solutions segment in fiscal 2002 were approximately $75.3 million, or approximately 15.7% of our total net sales from continuing operations, of which approximately $46.0 million, or 61.1%, were domestic and approximately $29.3 million, or 38.9% were international. The following table sets forth certain sales data for the products and services of our Solutions segment, expressed as a percentage of this segment's net sales for fiscal 2001 and 2002:
Fiscal Years Ended March 31, --------------------------------------------- 2001 2002 ---- ---- Integrated material handling conveyor systems 33% 40% Steel erection 36 24 Manipulators and light-rail systems 14 17 Scissor lift tables 11 11 Other 6 8 -- -- 100% 100% ==== ====
Products and Services o Integrated Material Handling Conveyor Systems. Conveyors are the most important component of a material handling system, reflecting their high functionality for transporting material throughout manufacturing and warehouse facilities. We specialize in designing computer-controlled and automated powered roller conveyors for use in warehouse operations and distribution systems. o Steel Erection. Through our LICO Steel operation, we erect structural steel in commercial buildings. We primarily act as a subcontractor in the construction of manufacturing plants and warehouse facilities in the Kansas City area. o Manipulators and Light-Rail Systems. We manufacture two lines of sophisticated operator-controlled manipulators under the names Positech and Conco. These products are articulated mechanical arms with specialized end tooling designed to perform lifting, rotating, turning, tilting, reaching and positioning tasks in a manufacturing process. We can offer custom-designed hydraulic, pneumatic, and electric manipulators utilizing various models and size configurations for a wide variety of applications where the user requires multi-axial movement in a harsh or repetitive environment. In fiscal 2001, we introduced light-rail systems that are portable steel overhead beam configurations used at workstations, from which hoists are frequently suspended. o Scissor Lift Tables. Our American Lifts division manufactures powered scissor lift tables. These products enhance workplace ergonomics and are sold primarily to customers in the manufacturing, construction, general industrial and air cargo industries. Sales and Marketing The products and services of the Solutions segment are sold primarily to large sophisticated corporate end-users, including Federal Express, UPS, United Biscuits, Lego, John Deere, Lowe's and other industrial companies, systems integrators and distributors. In the sale of our integrated material handling conveyor systems, we act as a prime contractor with turnkey responsibility or as a supplier working closely with the customer's general contractor. Sales are generated by internal sales personnel and rely heavily on engineer-to-engineer interactions with the customer. The process of generating client contract awards for integrated conveyor systems generally entails receiving a request-for-quotation from customers and undergoing a competitive bidding process. The Solutions segment also sells manipulators, light-rail systems and scissor lift tables through its internal sales force and through specialized independent distributors and manufacturers representatives. Customer Service and Training 10 The Solutions segment offers a wide range of value-added services to customers including: an engineering review of the customer's processes; an engineering solution for identified material handling problems; project management; and custom design, manufacturing and installation services. We also offer after-sales services including operator training and maintenance. The typical length of after-sales service varies depending on customer requirements and supplemental training courses are offered as needed. Backlog Revenues from our Solutions segment are generally recognized within one to six months. Our backlog of orders at March 31, 2002 was approximately $15.0 million compared to approximately $13.5 million at March 31, 2001. Competition The principal competitive factors affecting the market for the products and services of our Solutions segment include application solutions, performance and price. The process of generating client contract awards for these businesses generally entails receiving a request-for-quotation from end-users and undergoing a competitive bidding process. Our Solutions segment competes primarily with Crisplant, Diafuku, Swisslog, Gorbel and Southworth. Employees At March 31, 2002, our continuing operations had 3,074 employees; 2,263 in the U.S., 224 in Canada, 106 in Mexico and 481 in Europe and Asia. Approximately 800 of our employees are represented under nine separate U.S. or Canadian collective bargaining agreements which terminate at various times between August 2002 and April 2007. We believe that our relationship with our employees is good. Raw Materials and Components Our principal raw materials and components are steel, consisting of structural steel, processed steel bar, forging bar steel, steel rod and wire, steel pipe and tubing and tool steel; electric motors; bearings; and gear reducers; castings; and electro-mechanical components. These commodities are all available from multiple sources. We purchase most of these raw materials and components from a limited number of strategic and preferred suppliers under long-term agreements which are negotiated on a company-wide basis through our Purchasing Council to take advantage of volume discounts and to protect us from price increases. Although the steel industry is cyclical and steel prices can fluctuate, we have not been significantly impacted in recent years by increases in steel prices. We estimate the recently enacted U.S. steel tariffs will result in a 3% increase in our steel raw materials costs. We generally seek to pass on materials price increases to our customers, although a lag period often exists. Our ability to pass on these increases is determined by competitive conditions. Manufacturing We manufacture approximately 90% of the products we sell. Additionally, we outsource components and finished goods from an established global network of suppliers. We regularly upgrade our manufacturing facilities and invest in tooling, equipment and technology. We have implemented Lean Manufacturing in our plants which has resulted in inventory reductions, reductions in required manufacturing floor area, shorter product lead time and increased productivity. Our manufacturing operations are highly integrated. Although raw materials and some components such as motors, bearings, gear reducers, castings and electro-mechanical components, are purchased, our vertical integration enables us to produce many of the components used in the manufacturing of our products. We manufacture hoist lifting chain, steelforged gear blanks, lift wheels, trolley wheels, hooks and other attachments for incorporation into our hoist products. These products are also sold as spare parts for hoist repair. Additionally, our hoists are used as components in the manufacture of crane systems by us and by our end-users. We believe this vertical integration results in lower production costs, greater manufacturing flexibility and higher product quality, and reduces our reliance on outside suppliers. Environmental and Other Governmental Regulation Like many manufacturing companies, we are subject to various federal, state and local laws relating to the protection of the environment. To address the requirements of such laws, we have adopted a corporate environmental 11 protection policy which provides that all of our owned or leased facilities shall, and all of our employees have the duty to, comply with all applicable environmental regulatory standards, and we have initiated an environmental auditing program for our facilities to ensure compliance with such regulatory standards. We have also established managerial responsibilities and internal communication channels for dealing with environmental compliance issues that may arise in the course of our business. Because of the complexity and changing nature of environmental regulatory standards, it is possible that situations will arise from time to time requiring us to incur expenditures in order to ensure environmental regulatory compliance. However, we are not aware of any environmental condition or any operation at any of our facilities, either individually or in the aggregate, which would cause expenditures having a material adverse effect on our results of operations or financial condition and, accordingly, have not budgeted any material capital expenditures for environmental compliance for fiscal 2002. Certain federal and state laws, sometimes referred to as Superfund laws, require certain companies to remediate sites that are contaminated by hazardous substances. These laws apply to sites owned or operated by a company, as well as certain off-site areas for which a company may be jointly and severally liable with other companies or persons. The required remedial activities are usually performed in the context of administrative or judicial enforcement proceedings brought by regulatory authorities. We have been identified by the New York State Department of Environmental Conservation, or NYSDEC, along with other companies, as a potentially responsible party, or PRP, at the Frontier Chemical Site in Pendleton, New York, a site listed on NYSDEC's Registry. From 1958 to 1977, the Pendleton Site had been operated as a commercial waste treatment and disposal facility. We sent waste pickling liquor generated at our facility in Tonawanda, New York, to the Pendleton Site during the period from approximately 1969 to 1977, and we participated with other PRPs in conducting the remediation of the Pendleton Site under a consent order with NYSDEC. Construction in connection with the remediation has been completed and this project is currently in its operations and maintenance phase. As a result of a negotiated cost allocation among the participating PRPs, we have paid our pro rata share of the remediation construction costs and accrued our share of the ongoing operations and maintenance costs. As of March 31, 2002, we have paid approximately $1.0 million in remediation and ongoing operations and maintenance costs associated with the Pendleton Site. The participating PRPs have identified and commenced a cost recovery action against a number of other parties who sent hazardous substances to the Pendleton Site. If the currently non-participating parties identified by the participating PRPs pay their pro rata shares of the remediation costs, then our share of total site remediation costs will decrease. Full settlements have been reached with 111 of the 113 defendants in the cost recovery action, and settlements in principle have been reached with the remaining two defendants. All settlement payments in connection with the Pendleton Site are being held in a trust account pending a final allocation. We have also entered into a settlement agreement with one of our insurance carriers in the amount of $0.7 million in connection with the Pendleton Site and have received payment in full of the settlement amount. For all of the currently known environmental matters, we have accrued a total of approximately $0.7 million as of March 31, 2002, which, in our opinion, is sufficient to deal with such matters. Further, our management believes that the environmental matters known to, or anticipated by, us should not, individually or in the aggregate, have a material adverse effect on our operating results or financial condition. However, there can be no assurance that potential liabilities and expenditures associated with unknown environmental matters, unanticipated events, or future compliance with environmental laws and regulations will not have a material adverse effect on us. Our operations are also governed by many other laws and regulations, including those relating to workplace safety and worker health, principally OSHA and regulations thereunder. We believe that we are in material compliance with these laws and regulations and do not believe that future compliance with such laws and regulations will have a material adverse effect on our operating results or financial condition. Item 2. Properties. - ------- ----------- We maintain our corporate headquarters in Amherst, New York and conduct our principal manufacturing at the following facilities:
Square Owned or Business ------ -------- -------- Location Type of Facility Footage Leased Segment -------- ---------------- ------- ------ ------- United States: - -------------- Muskegon, MI Hoists 500,000 Owned Products Charlotte, NC Industrial components 250,000 Owned Products Tonawanda, NY Manipulators, light-rail and forged products 187,600 Owned Solutions Wadesboro, NC Hoists 180,000 Owned Products Lexington, TN Chain 153,200 Owned Products Forest Park, IL Cranes 116,000 Owned Products Cedar Rapids, IA Forged attachments 100,000 Owned Products Reform, AL Stampings 99,800 Owned Products Eureka, IL Cranes 91,300 Owned Products Damascus, VA Hoists 87,400 Owned Products Chattanooga, TN Forged attachments 77,000 Owned Products Greensburg, IN Scissor lifts 60,000 Owned Solutions Laurens, IA Manipulators 50,400 Owned Solutions Claremore, OK Cranes 42,000 Owned Products Lisbon, OH Hoist manufacturing 37,000 Owned Products Cleveland, TX Cranes 35,000 Owned Products Chattanooga, TN Forged attachments 33,000 Owned Products Sarasota, FL Tire shredders 25,000 Owned Solutions Blaine, WA Chains 15,800 Owned Products
12
Square Owned or Business ------ -------- -------- Location Type of Facility Footage Leased Segment -------- ---------------- ------- ------ ------- International: - ------------- Cobourg, Ontario, Canada Chain and hoists 125,000 Owned Products Santiago, Tianguistenco, Mexico Hoists and chain 85,000 Owned Products Arden, Denmark Project design and conveyors 70,500 Owned Solutions Velbert, Germany Hoists 56,000 Leased Products Chester, United Kingdom Plate clamp manufacturing (Camlok) 47,900 Leased Products Stoney Creek, Ontario, Canada Crane manufacturing 42,400 Owned Products Hangzhou, China Metal fabrication, textiles and textile 37,000 Leased Products strappings Chester, United Kingdom Plate clamps 25,400 Owned Products Romeny-sur-Marne, France Rotary unions 21,600 Owned Products Hangzhou, China Textile strappings 20,000 Leased Products Arden, Denmark Project construction 19,500 Leased Solutions Vierzon, France Hoists 14,000 Leased Products Hangzhou, China Hoists and hand pallet trucks 7,200 Leased Products
In addition, we have a total of 32 sales offices, distribution centers and warehouses. We believe that our properties have been adequately maintained, are in generally good condition and are suitable for our business as presently conducted. We also believe our existing facilities provide sufficient production capacity for our present needs and for our anticipated needs in the foreseeable future. Upon the expiration of our current leases, we believe that either we will be able to secure renewal terms or enter into leases for alternative locations at market terms. Item 3. Legal Proceedings. - ------- ------------------ From time to time, we are named a defendant in legal actions arising out of the normal course of business. We are not a party to any pending legal proceeding other than ordinary, routine litigation incidental to our business. We do not believe that any of our pending litigation will have a material impact on our business. We maintain liability insurance against risks arising out of the normal course of business. This insurance coverage is obtained through our wholly-owned insurance subsidiary of which we are the sole policy holder. The limits of this coverage are $2.0 million per occurrence and $5.0 million aggregate per year. We obtain additional insurance coverage from independent insurers in excess of these limits. Item 4. Submission of Matters to a Vote of Security Holders. - ------- ---------------------------------------------------- 13 Not applicable. 14 PART II Item 5. Market for the Company's Common Stock and Related Security - ------- Holder Matters. ---------------------------------------------------------- Our common stock is traded on the Nasdaq National Market under the symbol "CMCO." As of May 31, 2002, there were 493 holders of record of our common stock. We paid quarterly cash dividends on our common stock from 1988 through the second quarter of fiscal 2002. In January 2002, we announced that we were indefinitely suspending the payment of cash dividends on our common stock in order to dedicate our cash resources to the repayment of outstanding indebtedness. We may reconsider or revise this policy from time to time based upon conditions then existing, including, without limitation, our earnings, financial condition, capital requirements or other conditions our Board of Directors may deem relevant. The following table sets forth, for the fiscal periods indicated, the high and low sale prices per share for our common stock as reported on the Nasdaq National Market and our dividend history.
Price Range of Dividend Common Stock Per Share ------------ ---------- High Low Year Ended March 31, 2000 First Quarter............................... $ 29.00 $ 18.88 $ 0.07 Second Quarter.............................. 25.25 17.12 0.07 Third Quarter............................... 17.44 9.87 0.07 Fourth Quarter.............................. 15.75 10.00 0.07 Year Ended March 31, 2001 First Quarter............................... $ 15.06 $ 12.87 $ 0.07 Second Quarter.............................. 15.25 13.55 0.07 Third Quarter............................... 13.94 8.75 0.07 Fourth Quarter.............................. 9.67 7.50 0.07 Year Ended March 31, 2002 First Quarter............................... $ 11.25 $ 6.96 $ 0.07 Second Quarter.............................. 10.40 9.36 0.07 Third Quarter............................... 10.15 7.45 0.00 Fourth Quarter.............................. 12.80 9.31 0.00
On June 10, 2002, the last reported sale price of our common stock on the Nasdaq National Market was $9.29 per share. Item 6. Selected Financial Data. - ------- ------------------------ The following financial data represent our continuing operations and reflect the May 2002 sale of substantially all of the assets of ASI. The consolidated balance sheets as of March 31, 2001 and 2002 and the related statements of operations, cash flows and shareholders' equity for the three years ended March 31, 2002 and notes thereto appear elsewhere in this annual report. The selected consolidated financial data presented below should be read in conjunction with, and are qualified in their entirety by, "Management's Discussion and Analysis of Results of Operations and Financial Condition," our consolidated financial statements and the notes thereto and other financial information included elsewhere in this annual report. 15
Fiscal Years Ended March 31, ----------------------------- 1998 1999 2000 2001 2002 ---- ---- ---- ---- ---- (Amounts in millions, except per share data) Statement of Operations Data: Net sales $ 561.8 $ 594.0 $ 609.2 $ 586.2 $ 480.0 Cost of products sold 401.7 424.5 436.8 426.7 359.6 ----------- ------------ ----------- ----------- ----------- Gross profit 160.2 169.5 172.4 159.5 120.5 Selling expenses 46.6 47.6 48.7 48.4 43.5 General and administrative expenses 33.4 36.6 40.5 34.3 28.2 ----------- ------------ ----------- ----------- ----------- Income from operations before restructuring 80.2 85.3 83.2 76.9 48.7 charges and amortization Restructuring charges - - - - 9.6 Amortization of intangibles 10.3 10.6 11.4 11.0 11.0 ----------- ------------ ----------- ----------- ----------- Income from operations 69.9 74.7 71.8 65.9 28.1 Interest and debt expense 25.1 34.7 33.5 36.3 29.4 Other (income) and expense, net (1) (1.9) (1.5) (1.3) (2.2) 2.5 ----------- ------------ ----------- ----------- ----------- Income (loss) before income taxes 46.8 41.6 39.7 31.7 (3.7) Income tax expense 22.8 18.5 17.6 16.8 2.3 ----------- ------------ ----------- ----------- ----------- Income (loss) from continuing operations (2) $ 24.0 $ 23.1 $ 22.1 $ 14.9 $ (6.0) =========== ============ =========== =========== =========== Diluted earnings (loss) per share from $1.66 $1.61 $1.55 $1.04 $ (0.42) continuing operations Basic earnings (loss) per share from continuing operations $1.69 $1.63 $1.56 $1.04 $ (0.42) Weighted average shares outstanding - assuming dilution 14.4 14.3 14.2 14.3 14.4 Weighted average shares outstanding - basic 14.2 14.1 14.1 14.3 14.4 Balance Sheet Data (at end of period): Total assets (3) $ 762.7 $ 741.3 $ 731.8 $ 722.4 $ 524.3 Total debt 458.6 423.6 413.8 407.0 347.9 Total shareholders' equity 170.9 188.7 203.5 207.9 71.6 Other Financial Data: EBITDA (4) $ 91.9 $ 97.8 $ 96.1 $ 90.7 $ 62.0 Cash provided by operating activities 38.4 52.2 44.3 38.3 49.8 Capital expenditures 11.4 12.8 7.9 10.2 4.8 Cash dividends per common share 0.28 0.28 0.28 0.28 0.14
- ------------------- (1) Other (income) and expense, net includes the following unusual items in fiscal 2002: (i) $2.8 for an unrealized, non-cash, mark-to-market loss recognized on certain marketable equity securities held by our captive insurance subsidiary; (ii) $1.5 loss on the January 2002 sale of a small subsidiary; and (iii) $1.9 gain on the sale of assets held for sale. (2) Income (loss) from continuing operations and earnings per share data are presented prior to an extraordinary charge for early debt extinguishment of $4.5 in fiscal 1998. (3) Total assets includes net assets of discontinued operations of $150.3, $149.9, $152.6, $163.5 and $21.5 as of March 31, 1998, 1999, 2000, 2001 and 2002, respectively. (4) EBITDA is defined as the sum of income from continuing operations before income taxes, interest and debt expense, depreciation expense, amortization of intangible assets (including goodwill), non-recurring restructuring charges and certain non-cash charges included in other (income) and expense, net as described in clauses (i) and (ii) of note 1. EBITDA is commonly used as an analytical indicator and also serves as a 16 measure of leverage capacity and debt servicing ability. EBITDA should not be considered as a measure of financial performance under accounting principles generally accepted in the United States. The items excluded from EBITDA are significant components in understanding and assessing financial performance. EBITDA should not be considered in isolation or as an alternative to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity. EBITDA as measured in this annual report is not necessarily comparable with similarly titled measures for other companies. Item 7. Management's Discussion And Analysis Of Results Of Operations And ----------------------------------------------------------------- Financial Condition ------------------- This section should be read in conjunction with our consolidated financial statements included elsewhere in this annual report. Comments on the results of operations and financial condition below refer to our continuing operations, except in the section entitled "Discontinued Operations." Overview We are a leading manufacturer and marketer of hoists, cranes, chain and component parts serving a wide variety of commercial and industrial end markets. Our products are used to efficiently and ergonomically move, lift, position or secure objects and loads. Our Products segment sells a wide variety of powered and manually operated wire rope and chain hoists, industrial crane systems, chain, hooks and attachments. Our Solutions segment designs, manufactures, and installs application-specific material handling systems and solutions for end-users to improve work station and facility-wide work flow. Founded in 1875, we have grown to our current size and leadership position largely as the result of the 14 businesses we acquired between February 1994 and April 1999. These acquisitions have significantly broadened our product lines and services and expanded our geographic reach, end-user markets and customer base. As a result of these acquisitions and internal growth, our revenues have increased from approximately $209.8 million in fiscal 1996, the year of our initial public offering, to approximately $480.0 million in fiscal 2002. The operations of our acquired businesses have been substantially integrated with our existing businesses. We converted nearly all of our acquired North American businesses onto our computer system which integrates all of our applications from order entry to production planning to accounting, facilitating company-wide information flow. Further acquisition integration activities included cost reductions resulting from internally supplying chain and forged attachments to acquired hoist businesses we've acquired, consolidating purchasing efforts through our Purchasing Council, reducing duplicative sales and marketing activities, eliminating administrative headcount and consolidating treasury and accounts receivable functions. Our acquisition integration activities also included revenue enhancements through cross-selling of products between existing and acquired businesses. The next phase of the integration of these businesses includes reducing our excess manufacturing capacity and improving our productivity. This phase is currently in progress through our facility rationalization program and Lean Manufacturing efforts. The latter phase of these integration activities was delayed for a period of approximately two years, from early 1999 through early 2001, due to difficulties encountered with the assimilation of our 1998 ASI acquisition. Substantially all of the assets of that business, which formerly comprised our Solutions - Automotive segment, were sold in May 2002. ASI did not prove to be a good fit for us mainly because of the highly volatile nature of its business, its significant dependence on the auto industry and its heavy use of working capital. Despite the fact that the write-off associated with that disposition increased our financial leverage, the proceeds furthered our efforts to reduce debt and future interest expense, which has recently been one of our primary objectives. Many of the U.S. industrial sectors that we serve have been impacted by soft economic conditions since mid-1998. These conditions deteriorated significantly in our fiscal 2001 fourth quarter and continued to decline throughout fiscal 2002, impacting our net sales and financial performance. After reaching a historical high of $609.2 million in fiscal 2000, our net sales declined 3.8% to $586.2 million in fiscal 2001, and further by 18.1% to $480.0 million in fiscal 2002, primarily due to this downturn in the business cycle. Despite these economic conditions and their impact on our operating results, we maintained our leading market share, generated positive cash flow from operations and repaid $6.4 million and $59.7 million of debt in fiscal 2001 and 2002, respectively. Our positive cash flow was favorably impacted by our Lean Manufacturing efforts, which began in fiscal 2002. These efforts are fundamentally changing our manufacturing processes, resulting in significant inventory reductions. 17 Results of Operations Net sales of the Products and Solutions segments, in millions of dollars and with percentage changes for each segment, were as follows:
Change Change Fiscal Years Ended March 31, 2002 vs. 2001 2001 vs. 2000 ---------------------------- ------------- ------------- 2002 2001 2000 Amount % Amount % ---- ---- ---- ------ - ------ - Products segment......... $404.7 $478.9 $511.3 $(74.2) (15.5) $(32.4) (6.3) Solutions segment........ 75.3 107.3 97.9 (32.0) (29.8) 9.4 9.6 ---- ----- ---- ------ ------ --- --- Total net sales..... $480.0 $586.2 $609.2 $(106.2) (18.1) $(23.0) (3.8) ====== ====== ====== ======== ====== ======= =====
Sales fluctuations during the periods were primarily due to the downturn in the general economy and the industrial sectors in particular. Net sales in fiscal 2002 of $480.0 million decreased by $106.2 million, or 18.1%, from fiscal 2001, and sales in fiscal 2001 of $586.2 million decreased $23.0 million, or 3.8%, from fiscal 2000. Our Products segment net sales declined 15.5% and 6.3% in fiscal 2002 and 2001, respectively, primarily due to decreased unit sales resulting from the soft U.S. industrial markets. Our Solutions segment net sales decreased 29.8% and increased 9.6% in fiscal 2002 and 2001, respectively. The decline in fiscal 2002 was primarily due to soft U.S. industrial markets and our decision to exit our domestic general contracting business, which had net sales of $1.4 million and $____ million in fiscal 2002 and 2001, respectively. The growth in fiscal 2001 was primarily due to the expansion of our European operations, partially offset by soft U.S. industrial markets. Gross profit of the Products and Solutions segments, in millions of dollars and as a percentage of total segment net sales, were as follows:
Fiscal Years Ended March 31, -------------------------------------------------------------- 2002 2001 2000 ---- ---- ---- Amount % Amount % Amount % ------ - ------ - ------ - Products segment................ $109.3 27.0 $145.1 30.3 $153.9 30.1 Solutions segment............... 11.2 14.9 14.4 13.4 18.5 18.9 ---- ---- ---- ---- ---- ---- Total gross profit......... $120.5 25.1 $159.5 27.2 $172.4 28.3 ====== ==== ====== ==== ====== ====
Our gross profit margins were approximately 25.1%, 27.2% and 28.3% for fiscal 2002, 2001 and 2000, respectively. The decreases in gross profit margin for fiscal 2002 and 2001 were primarily the result of the significant decline in net sales over the years presented and the resulting decrease in absorption of fixed production costs, partially offset by discretionary cost control measures. The gross profit margin in our Products segment decreased in fiscal 2002 due to the 15.5% decrease in net sales and resulting decrease in production cost absorption, the lack of a general price increase to offset inflationary costs especially insurance costs, and a $3.8 million reclassification of certain crane builder expenses to cost of products sold from general and administrative expenses in fiscal 2002. Despite soft industrial markets, increasing energy costs and a $3.5 million reclassification of certain crane builder expenses to cost of products sold from general and administrative expenses in fiscal 2001, the gross profit margin in the Products segment increased in fiscal 2001. This increase primarily resulted from our cost control efforts and the integration of acquisitions. The gross profit margin in our Solutions segment increased in fiscal 2002 despite the 29.8% decrease in net sales and the resulting decrease in production cost absorption. This decrease was primarily attributable to weak margins in fiscal 2001. The Solutions segment's gross profit margin decreased in fiscal 2001 primarily as a result of relatively low sales volumes in soft U.S. industrial markets and increasing energy costs. Additionally, our margins were adversely impacted by unprofitable operations in our general contracting business, a service we no longer provide, and operational inefficiencies at one of our European facilities that was consolidated. Selling expenses were $43.5 million, $48.4 million and $48.7 million in fiscal 2002, 2001 and 2000, respectively. As a percentage of net sales, selling expenses were 9.1%, 8.3% and 8.0% in fiscal 2002, 2001 and 2000, respectively. The fiscal 2002 and 2001 reductions reflect cost control efforts due to soft economic conditions as well as the variable nature of some expenses, particularly commissions, travel expenses and sales office costs. 18 General and administrative expenses were $28.2 million, $34.3 million and $40.5 million in fiscal 2002, 2001 and 2000, respectively. As a percentage of net sales, general and administrative expenses were 5.9%, 5.8% and 6.6% in fiscal 2002, 2001 and 2000, respectively. The expense reductions resulted from cost control measures and the reclassification of $3.8 million and $3.5 million of crane builder expenses into cost of products sold in fiscal 2002 and 2001, respectively, partially offset by sales office expansions into new geographic regions and the expenses associated with our strategic alternatives evaluation in fiscal 2001. Restructuring charges of $9.6 million, or 2.0% of net sales, in fiscal 2002 were attributable to the closure of manufacturing facilities in fiscal 2002. We anticipate that our restructuring charges for fiscal 2003 in connection with our ongoing facility rationalization initiative will be between $8.5 million to $9.5 million. Amortization of intangibles was $11.0 million, $11.0 million and $11.4 million in fiscal 2002, 2001 and 2000, respectively, relating primarily to non-tax deductible goodwill amortization. Interest and debt expense was $29.4 million, $36.3 million and $33.5 million in fiscal 2002, 2001 and 2000, respectively. As a percentage of net sales, interest and debt expense was 6.1%, 6.2% and 5.5% in fiscal 2002, 2001 and 2000, respectively. The fiscal 2002 decrease was the result of a paydown of senior bank debt of $59.7 million and a reduction in interest rates. The fiscal 2001 increase was primarily the result of increased interest rates. Other (income) and expense, net was $2.5 million, $2.2 million and $1.3 million in fiscal 2002, 2001 and 2000, respectively. The expense in fiscal 2002 included an unrealized, non-cash, mark-to-market loss recognized on certain marketable equity securities held by our captive insurance subsidiary; a loss on the January 2002 sale of a small subsidiary; and a gain on the sale of assets held for sale. The remaining fluctuations were due to the sale of marketable securities by our captive insurance subsidiary for settlement of a portion of our general and products liability claims. Income taxes as a percentage of income before income taxes were not meaningful in fiscal 2002 and were 52.9% and 44.3% in fiscal 2001 and 2000, respectively. The percentages reflected the effect of non-deductible goodwill amortization resulting from business acquisitions, offset by the impact of tax credits and other tax items. As a result of the above, income (loss) from continuing operations was (1.3%), 2.5% and 3.6% as a percentage of net sales in fiscal 2002, 2001 and 2000, respectively. Liquidity and Capital Resources Our existing bank credit agreement, as recently amended, provides availability up to $150 million and matures on March 31, 2003. Since the expiration date is within one year from the balance sheet date in our current financial statements, outstanding balances are classified as current liabilities in our March 31, 2002 consolidated balance sheet. At March 31, 2002, $145.8 million was outstanding under our bank credit agreement. Subsequently, $17.6 million of proceeds resulting from the May 10, 2002 sale of substantially all of the assets of ASI were applied to further reduce the outstanding balance. The recent amendment also waived and modified certain financial covenants. Interest is payable at varying Eurodollar rates based on LIBOR plus a spread determined by our leverage ratio, amounting to 375 basis points at May 20, 2002. Our obligations under the bank credit agreement are secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. Our senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to $199.5 million, net of original issue discount of $0.5 million, and are due March 31, 2008. Interest is payable semi-annually based on an effective rate of 8.45%, considering $1.9 million of proceeds from rate hedging in advance of the placement. Provisions of the 8 1/2% Notes include, without limitation, restrictions on liens, indebtedness, asset sales and dividends and other restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at our option, in whole or in part, at the Make-Whole Price (as defined in the Indenture for the Notes). On or after April 1, 2003, they are redeemable at prices declining annually from 104.25% to 100% on and after April 1, 2006. In the event of a Change of Control (as defined), each holder of the 8 1/2% Notes may require us to repurchase all or a portion of such holder's 8 1/2% Notes at a purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes are not subject to any sinking fund requirements. On April 1, 2001, we adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, which requires companies to carry all derivatives on 19 the balance sheet at fair value. Our use of derivative instruments is limited to cash flow hedges, as defined in SFAS No. 133, of certain interest rate risks. In order to provide interest rate risk protection we entered into an interest rate swap agreement in June 2001, to effectively convert $40 million of variable rate debt to fixed rate debt. The $40 million interest rate swap agreement matures in June 2003. Net cash provided by operating activities was $49.8 million, $38.3 million and $44.3 million in fiscal 2002, 2001 and 2000, respectively. The $11.5 million increase in fiscal 2002 was the result of a reduction in working capital components, especially inventory, despite decreased income from continuing operations. The $6.0 million decrease in fiscal 2001 compared to fiscal 2000 was the result of an increase in net working capital components and deferred income taxes. Operating assets net of liabilities provided cash of $28.3 million in fiscal 2002, used cash of $0.6 million in fiscal 2001 and used cash of $5.0 million in fiscal 2000. Net cash used in investing activities was $1.6 million $7.2 million and $18.7 million in fiscal 2002, 2001 and 2000, respectively. The fiscal 2002 and 2001 amounts included $2.3 million and $5.0 million, respectively, of proceeds from the sale of a portion of land included in net assets held for sale. The fiscal 2000 amount included the acquisition of WECO for $6.4 million. Net cash used in financing activities was $48.5 million, $19.5 million and $24.2 million in fiscal 2002, 2001 and 2000, respectively. Those amounts included $46.7 million, $16.0 million and $20.5 million of debt repayment as well as $2.0 million, $4.0 million and $4.0 million of dividends paid in fiscal 2002, 2001 and 2000, respectively. Our existing bank credit agreement terminates on March 31, 2003 and if we are unable to enter into a new bank credit agreement prior to such termination, our ability to fund our operations will be significantly impaired. We have received a term sheet for a new bank credit agreement that provides for borrowings up to $95 million and will mature in 2006. However, the term sheet is not binding on the lenders, and we may not be able to negotiate this agreement on commercially reasonable terms, or at all. We anticipate the closing of the new bank credit agreement will occur prior to the termination of our existing bank credit agreement. We believe that the reduced availability of $95 million contemplated under the term sheet, will be, together with cash on hand, cash provided by operations and cash provided by the future sales of securities, sufficient to fund our ongoing operations and budgeted capital expenditures for the next twelve months. We believe our history of positive cash flow and the assets we have available as collateral will help us finalize a new bank credit agreement. As proposed in the term sheet, our new bank credit agreement would result in a decrease in the interest rate of our bank debt. Borrowings under our new bank credit agreement will be secured by a first priority security interest in all of our personal property, mortgages on certain of our real property and a pledge of the capital stock of our subsidiaries (limited to 65% for our foreign subsidiaries), and will contain covenants restricting our ability to incur additional indebtedness, to sell a substantial portion of our assets, to merge or to make acquisitions or investments. It will also obligate us to meet certain financial requirements and will restrict our ability to pay dividends. We were in default of certain financial covenants under our existing bank credit agreement as of March 31, 2002. We have obtained a waiver of the defaults along with an amendment that modifies certain covenants prospectively. Capital Expenditures In addition to keeping our current equipment and plants properly maintained, we are committed to replacing, enhancing and upgrading our 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. Further, our facility rationalization program currently in progress reduces our annual capital expenditure requirements and also provides for transfers of equipment from the rationalized facilities to other operating facilities. Our capital expenditures for fiscal 2002, 2001 and 2000 were $4.8 million, $10.2 million and $7.9 million, respectively. The decreased spending in fiscal 2002 reflects a deferral of certain projects due to soft market conditions as well as reduced needs resulting from our facility rationalization program. The increased spending in fiscal 2001 was the result of our decision to purchase real estate that was previously leased. Inflation and Other Market Conditions Our 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. We do not believe that inflation has had a material effect on 20 our results of operations over the periods presented primarily due to low inflation levels over such periods and our ability to generally pass on rising costs through price increases. We did not implement a general price increase in fiscal 2002 due to the soft economic conditions. In the future, there can be no assurance that our business will not be further affected by inflation or that we will be able to pass on cost increases. Seasonality and Quarterly Results Our quarterly results may be materially affected by the timing of large customer orders, periods of high vacation and holiday concentrations, restructuring charges attributable to our facility rationalization program, acquisitions and the magnitude of acquisition integration 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. Discontinued Operations In May 2002, we completed the divestiture of substantially all of the assets of ASI which comprised the principal business unit in our former Solutions - Automotive segment. Proceeds from this sale included cash of $20.6 million and an 8% subordinated note in the principal amount of $6.8 million payable over 10 years. We may also receive additional payments of up to $2.0 million from the proceeds of certain designated receivables and up to $10.0 million over the next two years based on the financial performance of the ASI business. Accordingly, the ASI operation was reflected as discontinued operations in our financial statements and prior periods have been restated. The income (loss) from discontinued operations was ($7.9) million, $0.3 million and ($5.0) million in fiscal 2002, 2001 and 2000, respectively. The fluctuations were primarily due to the volatility of the automobile industry and the ASI operation's dependence on certain significant customers. The loss on the sale of the discontinued operations was $121.5 million and was reflected in our fiscal 2002 statement of operations. Cash used by discontinued operations was $0.3 million and $1.1 million in fiscal 2002 and 2001, respectively, and provided by discontinued operations was $0.9 million in fiscal 2000. The net current assets of discontinued operations of $21.5 million were reflected on the March 31, 2002 balance sheet. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We continually evaluate the estimates and their underlying assumptions, which form the basis for making judgments about the carrying value of our assets and liabilities. Actual results inevitably will differ from those estimates. We have identified below the accounting policies involving estimates that are critical to our financial statements. Other accounting policies are more fully described in note 2 of notes to our consolidated financial statements. Pension and Other Postretirement Benefits.The determination of the obligations and expense for pension and postretirement benefits is dependent on our selection of certain assumptions that are used by actuaries in calculating such amounts. Those assumptions are disclosed in Notes 9 and 11, respectively, to our consolidated financial statements and include the discount rates, expected long-term rate of return on plan assets and rates of future increases in compensation and healthcare costs. Insurance Reserves. Our accrued general and product liability reserves as described in Note 13 to our consolidated financial statements involve actuarial techniques including the methods selected to estimate ultimate claims, and assumptions including emergence patterns, payment patterns, initial expected losses and increased limit factors. Other insurance reserves such as workers compensation and group health insurance are based on actual historical and current claim data provided by third party administrators or internally maintained. Inventory and Accounts Receivable Reserves. Slow-moving and obsolete inventory reserves are judgmentally determined based on historical and expected future usage within a reasonable timeframe. Allowances for doubtful accounts and credit memo reserves are also judgmentally determined based on historical bad debt write-offs and credit memos issued, assessing potentially uncollectible customer accounts and analyzing the accounts receivable agings. 21 Long-Lived Assets. Property, plants and equipment and goodwill and other intangibles are depreciated or amortized over their assigned lives. These assets are also periodically measured for impairment. The assigned lives and the projected cash flows used to test impairment are subjective. If actual lives are shorter than anticipated or if future cash flows are less than anticipated, we could incur a future impairment charge or a loss on disposal relating to these assets. Effects of New Accounting Pronouncements The Financial Accounting Standards Board ("FASB") issued Statement on Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" in June 2001. SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations and modifies the application of the purchase accounting method. The elimination of the pooling-of-interests method is effective for transactions initiated after June 30, 2001. The adoption of this statement did not have an impact on our consolidated financial statements. The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets" in June of 2001. SFAS No. 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and the impairment testing and recognition for goodwill and intangible assets. SFAS No. 142 will apply to goodwill and intangible assets arising from transactions completed before and after the effective date. This statement, which will be effective for our fiscal year beginning on April 1, 2002, must be adopted at the beginning of the fiscal year. We are currently assessing the statement and the impact that adoption will have on our fiscal 2003 consolidated financial statements. Upon adoption, we will stop amortizing goodwill which, based upon current levels of goodwill for continuing operations, would reduce amortization expense by approximately $11 million on an annual basis. The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in June 2001. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This statement, which is effective for our fiscal year beginning April 1, 2003, may be adopted as of April 1, 2002. We are currently assessing the statement and the impact, if any, that adoption will have on our fiscal 2003 consolidated financial statements. The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" in August 2001. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The statement, while retaining many of the fundamental recognition and measurement provisions of SFAS No. 121, changes the criteria to be met to classify an asset as held-for-sale as well as the grouping of long-lived assets and liabilities that represent the unit of accounting for a long-lived asset to be held and used. SFAS No. 144 is effective for our fiscal year beginning April 1, 2002. We are currently assessing the statement and the impact, if any, that adoption will have on our fiscal 2003 consolidated financial statements. Factors Affecting Our Operating Results The success of our business is affected by industrial economic conditions. Periods of industrial economic slowdown or recession in the United States or other countries, or the public perception that one may occur, could decrease the demand for our products, affect the availability and cost of our products and adversely impact our business. In fiscal 2001, for example, we were negatively impacted by the general slowing in the economy. That impact has continued, and in fiscal 2002 we experienced a loss. Our significant indebtedness could limit our operational and financial flexibility. We have incurred indebtedness that is substantial in relation to our shareholders' equity. As of March 31, 2002, we had total funded debt of approximately $347.9 million. This represents approximately 83% of our total capitalization at that date. We may need to incur additional debt to fund our continued growth. We may not be able to service or refinance our debt at maturity on terms that are acceptable to us. Our debt service, consisting of interest expense and required principal payments, was $32.4 million in fiscal 2002. The degree to which we are leveraged could have other important consequences to holders of our common stock, including the following: 22 o we must dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our debt, which reduces the funds available for our operations; o a portion of our debt is at variable rates of interest, which makes us vulnerable to increases in interest rates; for example, interest expense in fiscal 2002 would have increased $1.4 million for every percentage point increase in interest rates, based upon average variable rate debt outstanding; and o our debt instruments contain numerous financial and other restrictive covenants, such as restrictions on paying dividends, incurring additional debt, selling assets and making capital expenditures. Our existing bank credit agreement, which had outstanding borrowings of $145.8 million at March 31, 2002, terminates on March 31, 2003. We have received a term sheet for a new bank credit agreement providing for aggregate borrowings up to $95 million that we anticipate the closing of the new bank credit agreement will occur prior to the termination of our existing bank credit agreement. However, the term sheet is not binding on the lenders, and we cannot assure you that we will be able to negotiate this agreement on commercially reasonable terms, or at all. For instance, a new bank credit agreement could result in an increase in the interest rate of our bank debt over the rate we currently pay or more restrictive covenants than our existing bank credit agreement currently contains. If we are unable to enter into a new bank credit agreement by March 31, 2003, our ability to fund our operations will be significantly impaired. A write-off of all or part of our goodwill could adversely affect our operating results and net worth and cause us to violate covenants in our bank credit agreement. In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 Business Combinations and Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets. FAS 141 requires that all business combinations be accounted for under the purchase method only and that certain acquired intangible assets in a business combination be recognized as assets apart from goodwill. FAS 142 requires that ratable amortization of goodwill be replaced with periodic tests of the goodwill's impairment and that intangible assets other than goodwill should be amortized over their useful lives. As a result of our prior acquisitions, we have a material amount of goodwill recorded on our financial statements. At March 31, 2002 our recorded goodwill was approximately $200.8 million, or approximately 38% of our total assets. We may have to write-off all or a portion of our goodwill if its value becomes impaired. Although any such write-off would be a non-cash charge, it could reduce our earnings and net worth significantly. A write-off of goodwill could also cause us to violate covenants contained in our bank credit agreement that require a minimum level of net worth. Any such violation could disqualify us from making additional borrowings under our bank credit agreement and could require us to refinance or renegotiate the terms of our bank indebtedness. We may not be able to successfully integrate our acquired companies. Historically, a significant portion of our growth has been attributable to acquisitions. Our acquired companies have and will continue to place significant demands on our management, operational and financial resources. Realization of the benefits of acquisitions often requires integration of some or all of the acquired companies' sales and marketing, distribution, manufacturing, engineering, finance and administrative organizations. The integration of our acquired companies will continue to demand substantial attention from our senior management and the management of the acquired companies. We cannot assure you that we will be able to successfully integrate our acquired companies, that these companies will operate profitably or that we will realize the potential benefits from these acquisitions. We may be adversely impacted by our inability to identify and finance future acquisitions. Although we have not made any acquisitions since April 1999, we intend to pursue strategic acquisitions again in the future. We cannot provide any assurance that we will be able to identify appropriate future acquisition candidates or, if we do, that we will be able to successfully negotiate the terms of an acquisition, finance the acquisition or integrate the acquired business effectively and profitably into our existing operations. Consummating an acquisition could require us to raise additional funds through additional equity or debt financing. Additional equity financing could depress the market price of our common stock. Additional debt financing could require us to accept covenants that would, among other things, limit our ability to pay dividends. Our international operations pose certain risks that may adversely impact sales and earnings. 23 We have operations and assets located outside of the United States, primarily in Canada, Mexico, Germany, Denmark, France and China. In addition, we import a portion of our hoist product line from China and Japan, and sell our products to distributors located in approximately 50 countries. Our international operations are subject to a number of special risks, including currency exchange rate fluctuations, trade barriers, exchange controls, risk of governmental expropriation, political risks and risks of increases in taxes. Also, in some foreign jurisdictions we may be subject to laws limiting the right and ability of entities organized or operating therein to pay dividends or remit earnings to affiliated companies unless specified conditions are met. These factors may adversely affect our future profits. Our business is highly competitive and increased competition could reduce our income and profitability. The principal markets that we serve are highly competitive. Competition is based primarily on performance, functionality, price, brand recognition, customer service and support, and product availability. Our competition in the markets in which we participate comes from companies of various sizes, some of which have greater financial and other resources than we do. Increased competition could force us to lower our prices or to offer additional services at a higher cost to us, which could reduce our gross margins and net income. Our certificate of incorporation, by-laws and Rights Agreement, as well as the New York Business Corporation Law, contain provisions that could have the effect of deterring takeovers or delaying or preventing changes in control or management of our company. Provisions of our certificate of incorporation and by-laws, our Rights Agreement and applicable New York law may discourage, delay or prevent a change in control that shareholders may consider favorable or may impede the ability of the holders of our common stock to change our management. The provisions of our certificate of incorporation and by-laws will: o authorize our Board of Directors to issue preferred stock in one or more series, without shareholder approval; o regulate how shareholders may present proposals or nominate directors for election at annual meetings of shareholders; and o limit the right of shareholders to remove a director. Our Rights Agreement and applicable provisions of New York law impose limitations on persons proposing to acquire us in a transaction not approved by our Board of Directors. Our future operating results may be affected by fluctuations in steel prices. We may not be able to pass on increases in raw material costs to our customers. The principal raw material used in our specialty chain and forging operations is steel. The steel industry as a whole is very cyclical, and at times pricing can be volatile due to a number of factors beyond our control, including general economic conditions, labor costs, competition, import duties, tariffs and currency exchange rates. This volatility can significantly affect our raw material costs. Through our Purchasing Council, we purchase steel on a regular basis in an effort to maintain our inventory at levels that we believe are sufficient to satisfy the anticipated needs of our customers based upon historic buying practices and market conditions. In an environment of increasing raw material prices, competitive conditions will determine how much of the steel price increases we can pass on to our customers. To the extent we are unable to pass on any price increases to our customers, our profitability could be adversely affected. We depend on our senior management team and the loss of any member could adversely affect our operations. Our success is dependent on the management and leadership skills of our senior management team. The loss of any of these individuals or an inability to attract, retain and maintain additional personnel could prevent us from implementing our business strategy. We cannot assure you that we will be able to retain our existing senior management personnel or to attract additional qualified personnel when needed. We have not entered into employment agreements with any of our senior management personnel. 24 We are subject to various environmental laws which may require us to expend significant capital and incur substantial cost. Our facilities are subject to many federal, state and local requirements relating to the protection of the environment and we have made, and will continue to make, expenditures to comply with such provisions. Failure to comply with environmental laws, regulations and permits, or changes in such laws, including the imposition of more stringent standards for discharges into the environment, could result in substantial operating costs and capital expenditures in order to maintain compliance and could also include fines and civil and criminal sanctions, third party claims for property damage or personal injury, clean-up costs or temporary or permanent discontinuance of operations. Certain of our facilities have been in operation for many years and, over time, we and other predecessor operators of such facilities have generated, used, handled and disposed of hazardous and other regulated wastes. Environmental liabilities could exist, including clean-up obligations at these or other locations where materials from our operations were disposed of, which could result in substantial future expenditures that cannot be currently quantified and which could reduce our profits. Item 7A. Quantitative and Qualitative Disclosures About Market Risk - -------- ---------------------------------------------------------- Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. We are exposed to various market risks, including commodity prices for raw materials, foreign currency exchange rates and changes in interest rates. We may enter into financial instrument transactions, which attempt to manage and reduce the impact of such changes. We do not enter into derivatives or other financial instruments for trading or speculative purposes. Our primary commodity risk is related to changes in the price of steel. We control this risk through negotiating purchase contracts on a consolidated basis and by attempting to build changes in raw material costs into the selling prices of our products. We have not entered into financial instrument transactions related to raw material costs. In fiscal 2002, approximately 22.5% of our net sales were from manufacturing plants and sales offices in foreign jurisdictions. We manufacture our products in the United States, Canada, Germany, Denmark, the United Kingdom, Mexico, France and China and sell our products and solutions in over 50 countries. Our results of operations could be affected by factors such as changes in foreign currency rates or weak economic conditions in foreign markets. Our operating results are exposed to fluctuations between the U.S. dollar and the Canadian dollar, European currencies, the Mexican peso and the Chinese renminbi. For example, when the U.S. dollar strengthens against the Canadian dollar, the value of our net sales and net income denominated in Canadian dollars decreases when translated into U.S. dollars for inclusion in our consolidated results. We are also exposed to foreign currency fluctuations in relation to purchases denominated in foreign currencies. Our foreign currency risk is mitigated since the majority of our foreign operations' net sales and the related expense transactions are denominated in the same currency. In addition, the majority of our export sale transactions are denominated in U.S. dollars. Accordingly, we currently have not invested in derivative instruments, such as foreign exchange contracts, to hedge foreign currency transactions. We control risk related to changes in interest rates by structuring our debt instruments with a combination of fixed and variable interest rates and by periodically entering into financial instrument transactions. At March 31, 2002, we had one interest rate swap agreement in effect which converts $40 million of variable rate debt to fixed rate debt. This swap agreement matures in June 2003. We do not have any other swap agreements or similar financial instruments in place. Including the effect of our existing swap agreement, at March 31, 2002, approximately 68% of our outstanding debt had fixed interest rates. At that date, we had approximately $110.7 million of outstanding variable rate debt. A 1% fluctuation in interest rates in fiscal 2002 would have changed interest expense on that outstanding variable rate debt by approximately $1.4 million. 25 Item 8. Financial Statements and Supplementary Data. - ------- -------------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation Audited Consolidated Financial Statements as of March 31, 2002: Report of Independent Auditors.................................................. F-2 Consolidated Balance Sheets..................................................... F-3 Consolidated Statements of Operations........................................... F-4 Consolidated Statements of Shareholders' Equity................................. F-5 Consolidated Statements of Cash Flows........................................... F-6 Notes to Consolidated Financial Statements...................................... F-7
F-1 Report of Independent Auditors Board of Directors Columbus McKinnon Corporation We have audited the accompanying consolidated balance sheets of Columbus McKinnon Corporation as of March 31, 2002 and 2001, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2002. Our audits also include the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 audits provide a reasonable basis for our opinion. In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Columbus McKinnon Corporation at March 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /S/ ERNST & YOUNG LLP Buffalo, New York June 6, 2002 F-2 COLUMBUS McKINNON CORPORATION CONSOLIDATED BALANCE SHEETS
March 31, -------------------- 2002 2001 -------- -------- (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents................................................... $ 13,068 $ 14,015 Trade accounts receivable, less allowance for doubtful accounts ($2,337 and $2,305, respectively)..................................................... 82,266 99,873 Inventories................................................................. 89,656 108,913 Net assets held for sale.................................................... 4,290 4,270 Net current assets of discontinued operations............................... 21,497 46,874 Prepaid expenses............................................................ 8,543 5,637 -------- -------- Total current assets........................................................... 219,320 279,582 Net property, plant, and equipment............................................. 70,742 77,762 Goodwill and other intangibles, net............................................ 200,801 213,301 Marketable securities.......................................................... 24,634 22,326 Deferred taxes on income....................................................... 3,133 5,441 Net non-current assets of discontinued operations.............................. -- 116,658 Other assets................................................................... 5,665 7,318 -------- -------- Total assets................................................................... $524,295 $722,388 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks...................................................... $ 2,518 $ 3,012 Trade accounts payable...................................................... 31,617 28,525 Accrued liabilities......................................................... 39,533 41,876 Restructuring reserve....................................................... 949 -- Current portion of debt..................................................... 146,663 3,092 -------- -------- Total current liabilities...................................................... 221,280 76,505 Senior debt, less current portion.............................................. 1,509 204,324 Subordinated debt.............................................................. 199,681 199,628 Other non-current liabilities.................................................. 30,214 34,067 -------- -------- Total liabilities.............................................................. 452,684 514,524 Shareholders' equity: Voting common stock; 50,000,000 shares authorized; 14,895,172 shares issued. 149 149 Additional paid-in capital.................................................. 104,920 105,418 (Accumulated deficit) retained earnings..................................... (12,536) 124,806 ESOP debt guarantee; 417,854 and 504,794 shares............................. (6,514) (7,527) Unearned restricted stock; 47,318 and 82,670 shares......................... (414) (955) Accumulated other comprehensive loss........................................ (13,994) (14,027) -------- -------- Total shareholders' equity..................................................... 71,611 207,864 -------- -------- Total liabilities and shareholders' equity..................................... $524,295 $722,388 ======== ========
See accompanying notes. F-3 COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31, ------------------------------------ 2002 2001 2000 --------- -------- -------- (In thousands, except per share data) Net sales........................................... $ 480,028 $586,168 $609,178 Cost of products sold............................... 359,551 426,659 436,814 --------- -------- -------- Gross profit........................................ 120,477 159,509 172,364 Selling expenses.................................... 43,522 48,393 48,699 General and administrative expenses................. 28,245 34,251 40,468 --------- -------- -------- Income from operations before restructuring charges and amortization.......................... 48,710 76,865 83,197 Restructuring charges............................... 9,569 -- -- Amortization of intangibles......................... 11,013 10,975 11,384 --------- -------- -------- Income from operations.............................. 28,128 65,890 71,813 Interest and debt expense........................... 29,381 36,329 33,451 Other (income) and expense, net..................... 2,464 (2,160) (1,320) --------- -------- -------- (Loss) income from continuing operations before income tax expense................................ (3,717) 31,721 39,682 Income tax expense.................................. 2,301 16,794 17,583 --------- -------- -------- (Loss) income from continuing operations............ (6,018) 14,927 22,099 (Loss) income from discontinued operations.......... (7,873) 292 (5,019) Loss on disposition of discontinued operations...... (121,475) -- -- --------- -------- -------- Total (loss) income from discontinued operations.... (129,348) 292 (5,019) --------- -------- -------- Net (loss) income................................... $(135,366) $ 15,219 $ 17,080 ========= ======== ======== Average basic shares outstanding.................... 14,414 14,316 14,138 Basic (loss) income per share: (Loss) income from continuing operations........ $ (0.41) $ 1.04 $ 1.57 (Loss) income from discontinued operations...... (0.55) 0.02 (0.36) Loss on disposition of discontinued operations.. (8.43) -- -- --------- -------- -------- Basic (loss) income per share................... $ (9.39) $ 1.06 $ 1.21 ========= ======== ======== Average diluted shares outstanding.................. 14,414 14,316 14,221 Diluted (loss) income per share: (Loss) income from continuing operations........ $ (0.41) $ 1.04 $ 1.55 (Loss) income from discontinued operations...... (0.55) 0.02 (0.35) Loss on disposition of discontinued operations.. (8.43) -- -- --------- -------- -------- Diluted (loss) income per share................. $ (9.39) $ 1.06 $ 1.20 ========= ======== ========
See accompanying notes. F-4 COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands, except share and per share data)
Common Addi- Retained Accumulated Stock tional Earnings ESOP Unearned Other Total ($.01 Paid-in (Accumulated Debt Restricted Comprehensive Shareholders' par value) Capital Deficit) Guarantee Stock Income (Loss) Equity ---------- -------- ------------ --------- ---------- ------------- ------------- Balance at March 31, 1999.............. $146 $102,313 $ 100,455 $(9,865) $(1,009) $ (3,366) $ 188,674 Comprehensive income: Net income 2000........................ -- -- 17,080 -- -- -- 17,080 Change in foreign currency translation adjustment................ -- -- -- -- -- (3,129) (3,129) Net unrealized gain on investments, net of tax expense of $347................ -- -- -- -- -- 520 520 Change in minimum pension liability adjustment, net of tax expense of $239................... -- -- -- -- -- 359 359 ---- -------- --------- ------- ------- -------- --------- Total comprehensive income............. -- -- -- -- -- -- 14,830 Earned 101,822 ESOP shares............. -- 590 -- 1,162 -- -- 1,752 Restricted common stock granted, 60,700 shares......................... 1 2,871 -- -- (2,872) -- -- Earned portion of restricted stock..... -- -- -- -- 1,038 -- 1,038 Stock options exercised, 153,008 shares........................ 2 1,110 -- -- -- -- 1,112 Common dividends declared $0.28 per share....................... -- -- (3,953) -- -- -- (3,953) ---- -------- --------- ------- ------- -------- --------- Balance at March 31, 2000.............. $149 $106,884 $ 113,582 $(8,703) $(2,843) $ (5,616) $ 203,453 Comprehensive income: Net income 2001........................ -- -- 15,219 -- -- -- 15,219 Change in foreign currency translation adjustment................ -- -- -- -- -- (5,039) (5,039) Net unrealized loss on investments, net of tax benefit of $1,954.......... -- -- -- -- -- (2,931) (2,931) Change in minimum pension liability adjustment, net of tax benefit of $294................... -- -- -- -- -- (441) (441) ---- -------- --------- ------- ------- -------- --------- Total comprehensive income............. -- -- -- -- -- -- 6,808 Earned 101,765 ESOP shares............. -- (56) -- 1,176 -- -- 1,120 Earned portion and adjustment of restricted shares..................... -- (1,501) -- -- 1,888 -- 387 Stock options exercised, 19,340 shares......................... -- 91 -- -- -- -- 91 Common dividends declared $0.28 per share....................... -- -- (3,995) -- -- -- (3,995) ---- -------- --------- ------- ------- -------- --------- Balance at March 31, 2001.............. $149 $105,418 $ 124,806 $(7,527) $ (955) $(14,027) $ 207,864 Comprehensive income: Net loss 2002.......................... -- -- (135,366) -- -- -- (135,366) Change in foreign currency translation adjustment................ -- -- -- -- -- 216 216 Net unrealized gain on investments, net of tax expense of $1,445.......... -- -- -- -- -- 2,168 2,168 Unrealized loss on derivatives qualifying as hedges, net of tax benefit of $282................... -- -- -- -- -- (424) (424) Change in minimum pension liability adjustment, net of tax benefit of $1,285................. -- -- -- -- -- (1,927) (1,927) ---- -------- --------- ------- ------- -------- --------- Total comprehensive loss............... (135,333) Earned 86,939 ESOP shares.............. -- (169) -- 1,013 -- -- 844 Earned portion and adjustment of restricted shares..................... -- (329) -- -- 541 -- 212 Common dividends declared $0.14 per share....................... -- -- (1,976) -- -- -- (1,976) ---- -------- --------- ------- ------- -------- --------- Balance at March 31, 2002.............. $149 $104,920 $ (12,536) $(6,514) $ (414) $(13,994) $ 71,611 ==== ======== ========= ======= ======= ======== =========
See accompanying notes. F-5 COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31, ---------------------------- 2002 2001 2000 -------- -------- -------- (In thousands) Operating activities: Net (loss) income from continuing operations.................................. $ (6,018) $ 14,927 $ 22,099 Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities: Depreciation and amortization.............................................. 22,462 22,675 22,935 Deferred income taxes...................................................... 166 84 3,586 Unrealized loss on investments............................................. 2,757 -- -- Other...................................................................... 2,177 1,148 687 Changes in operating assets and liabilities net of effects from businesses purchased: Trade accounts receivable.............................................. 14,644 12,449 (10,520) Inventories............................................................ 18,876 (4,433) 9,127 Prepaid expenses....................................................... (1,276) 622 (221) Other assets........................................................... 1,328 (985) 1,284 Trade accounts payable................................................. 3,677 (1,152) (9,240) Accrued and non-current liabilities.................................... (8,996) (7,065) 4,527 -------- -------- -------- Net cash provided by operating activities of continuing operations............ 49,797 38,270 44,264 -------- -------- -------- Investing activities: Purchase of marketable securities, net........................................ (1,794) (2,064) (3,318) Capital expenditures.......................................................... (4,753) (10,179) (7,923) Proceeds from sale of business................................................ 890 -- -- Proceeds from sale of property, plant, and equipment.......................... 1,750 -- -- Purchase of businesses, net of cash acquired.................................. -- -- (6,430) Net assets held for sale...................................................... 2,280 5,002 (1,058) -------- -------- -------- Net cash used in investing activities of continuing operations................ (1,627) (7,241) (18,729) -------- -------- -------- Financing activities: Proceeds from issuance of common stock, net................................... -- -- 3 Net payments under revolving line-of-credit agreements........................ (43,678) (12,262) (17,922) Repayment of debt............................................................. (3,047) (3,737) (2,538) Payment of deferred financing costs........................................... (794) (687) (997) Dividends paid................................................................ (1,976) (3,995) (3,953) Change in ESOP debt guarantee................................................. 1,013 1,176 1,162 -------- -------- -------- Net cash used in financing activities of continuing operations................ (48,482) (19,505) (24,245) Effect of exchange rate changes on cash....................................... (306) (4,026) (1,486) -------- -------- -------- Net cash (used in) provided by continuing operations.......................... (618) 7,498 (196) Net cash (used in) provided by discontinued operations........................ (329) (1,065) 911 -------- -------- -------- Net change in cash and cash equivalents....................................... (947) 6,433 715 Cash and cash equivalents at beginning of year................................ 14,015 7,582 6,867 -------- -------- -------- Cash and cash equivalents at end of year...................................... $ 13,068 $ 14,015 $ 7,582 ======== ======== ======== Supplementary cash flows data: Interest paid.............................................................. $ 29,887 $ 36,764 $ 33,929 Income taxes paid.......................................................... $ 3,262 $ 20,381 $ 16,818
See accompanying notes. F-6 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business and Business Acquisitions Columbus McKinnon Corporation (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 is focused on commercial and industrial applications that require the safety and quality provided by its superior design and engineering know-how. 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 general distributors are comprised of industrial distributors, rigging shops and crane builders. Specialty distributors include catalog houses, material handling specialists and entertainment equipment riggers. The service-after-sale network includes repair parts distribution centers, chain service centers and hoist repair centers. Consumer distribution channels include mass merchandisers, hardware distributors, trucking and transportation distributors, farm hardware distributors and rental outlets. The Company's integrated material handling solutions 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. During fiscal 2002, approximately 71% of sales were to customers in the United States. The operations of Automatic Systems, Inc. (ASI) have been reflected as a discontinued operation and as more fully described in Note 3, the consolidated financial statements for all periods presented have been restated to reflect this change. On April 29, 1999, the Company acquired all of the outstanding stock of Washington Equipment Company (WECO), a regional manufacturer and servicer of overhead cranes. The total cost of the acquisition, which was accounted for as a purchase, was approximately $6.4 million and was financed by proceeds from the Company's revolving debt facility. The consolidated statement of operations and the consolidated statement of cash flows for the year ended March 31, 2000 include WECO activity since its April 29, 1999 acquisition by the Company. 2. Accounting Principles and Practices Cash and Cash Equivalents The Company considers as cash equivalents all highly liquid investments with an original maturity of three months or less. Concentrations of Labor Approximately 26% of the Company's employees are represented by nine separate domestic and Canadian collective bargaining agreements which terminate at various times between August 2002 and April 2007. Approximately 6% of the labor force is covered by collective bargaining agreements that will expire within one year. In addition, the Company hires union production workers for field installation under its material handling systems contracts. F-7 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Consolidation These consolidated financial statements include the accounts of the Company and its domestic and foreign subsidiaries; all significant intercompany accounts and transactions have been eliminated. Derivative Financial Instruments Derivative instruments held by the Company are designated as hedges, have high correlation with the underlying exposure and are highly effective in offsetting underlying price movements. Accordingly, gains and losses from changes in derivatives fair values are deferred until the underlying transaction occurs at which point they are then recognized in the statement of operations. All derivates are carried at fair value in the balance sheet. The fair value of derivatives are determined by reference to quoted market prices. The Company's use of derivative instruments is limited to cash flow hedges of certain interest rate risks. Foreign Currency Translations The Company translates foreign currency financial statements as described in Financial Accounting Standards (FAS) No. 52. Under this method, all items of income and expense are translated to U.S. dollars at average exchange rates for the year. All assets and liabilities are translated to U.S. dollars at the year-end exchange rate. Gains or losses on translations are recorded in accumulated other comprehensive income (loss) in the shareholders' equity section of the balance sheet. Goodwill It is the Company's policy to account for goodwill and other intangible assets at the lower of amortized cost or fair value based on discounted cash flows, if indicators of impairment exist. The Company evaluates the existence of goodwill impairment on the basis of whether the goodwill is fully recoverable from projected, undiscounted net cash flows of the related businesses. Goodwill is amortized on a straight-line basis over twenty-five years. At March 31, 2002 and 2001 accumulated amortization was $58,343,000 and $47,330,000, respectively. As more fully disclosed in Note 21, effective April 1, 2003 the Company will account for goodwill in accordance with Statement of Financial Accounting Standards No. 142. Inventories Inventories are valued at the lower of cost or market. Costs of approximately 56% of inventories at March 31, 2002 (48% in 2001) have been determined using the LIFO (last-in, first-out) method. Costs of other inventories have been determined using the FIFO (first-in, first-out) or average cost method. FIFO cost approximates replacement cost. Marketable Securities All of the Company's marketable securities, which consist of equity securities and corporate and governmental obligations, have been classified as available-for-sale securities and are therefore F-8 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) recorded at their fair values with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) within shareholders' equity unless unrealized losses are deemed to be other than temporary. In such instance, the unrealized losses are reported in the statement of operations within other income and expense, net. Estimated fair value is based on published trading values at the balance sheet dates. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. The cost of securities sold is based on the specific identification method. Interest and dividend income are included in other income and expense, net on the consolidated statements of operations. The marketable securities are carried as long-term assets since they are held for the settlement of a portion of the Company's general liability and products liability insurance claims filed through CM Insurance Company, Inc., a wholly owned captive insurance subsidiary. Net Assets Held for Sale Certain non-operating real estate properties and equipment were acquired as part of the 1996 acquisition of Yale Industrial Products, Inc. Certain of these properties were sold during fiscal 1998 through fiscal 2002 and additional monies were advanced to further the development of the properties with the remaining assets held for sale expected to be sold in fiscal 2003. They have been recorded at the lower of cost or their estimated realizable values net of disposal costs on the consolidated balance sheet and amount to $1,990,000 and $4,270,000 as of March 31, 2002 and 2001, respectively. In addition at March 31, 2002, net assets held for sale includes $2,300,000 as the carrying value of a recently closed and vacated facility which is currently for sale. Property, Plant, and Equipment Property, plant, and equipment are stated at cost and depreciated principally using the straight-line method over their respective estimated useful lives (buildings and building equipment--15 to 40 years; machinery and equipment--3 to 18 years). When depreciable assets are retired, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operating results. Related Party Transactions The Company entered into a consulting agreement with the Chairman of the Board of Directors on October 1, 2001. The agreement provides compensation at a monthly rate of $23,750 and continues through December 31, 2003. Research and Development Research and development costs as defined in FAS No. 2, for the years ended March 31, 2002, 2001 and 2000 were $1,328,000, $975,000 and $1,156,000, respectively. F-9 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Revenue Recognition and Concentration of Credit Risk Sales are recorded when title passes to the customer which is generally at time of shipment to the customer, except for long-term construction contracts as described below. The Company performs ongoing credit evaluations of its customers' financial condition, but generally does not require collateral to support customer receivables. The credit risk is controlled through credit approvals, limits and monitoring procedures. The Company established an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other factors. The Company recognizes contract revenues on construction contracts 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. Shipping and Handling Costs Shipping and handling costs are a component of cost of goods sold. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3. Discontinued Operations In May 2002, the Company sold substantially all of the assets of ASI. The ASI business was the principal business unit in the Company's former Solutions - - Automotive segment. The Company received $20,600,000 in cash and an 8% subordinated note in the principal amount of $6,800,000 which is payable over 10 years. The Company may also receive additional payments of up to $1,960,000 from proceeds of certain ASI accounts receivable and up to an aggregate of $10,000,000 over the next two years based on the financial performance of the ASI business. The measurement date for this discontinued operation was April 10, 2002, prior to the issuance of the fiscal 2002 consolidated financial statements. Accordingly, the impact of the prospective transaction has been recorded in fiscal 2002. The Company recorded an after-tax loss of $121,475,000 or $8.43 per diluted share and reflected ASI as a discontinued operation in the fourth quarter of fiscal 2002. The impairment loss included closing costs from the transaction and estimated operating losses of the discontinued operation from April 1, 2002 through May 10, 2002, the date of the sale. The impairment loss was due primarily to the write-off of $104,000,000 of goodwill and a $17,475,000 loss related to the write-off of the remaining net assets in excess of the selling price. The net current assets of discontinued operations at March 31, 2002 represent the net cash proceeds received upon disposal as well as the realized tax benefit. The consolidated financial statements and related notes for all periods presented have been restated, where applicable, to reflect the ASI business as a discontinued operation. F-10 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In accordance with Emerging Issues Task Force (EITF) 87-24, "Allocation of Interest to Discontinued Operations," the Company allocated interest to the discontinued operations based upon the net principal amount of debt that was paid down with the proceeds from the sale of such operation. This resulted in an interest allocation of approximately $905,000, $1,280,000 and $1,325,000 for the years ended March 31, 2002, 2001, and 2000, respectively. Operating results of discontinued operations were as follows:
Year Ended March 31, ------------------------------------ 2002 2001 2000 --------- -------- -------- (In thousands, except per share data) Net revenue................................................. $ 137,070 $141,804 $127,076 --------- -------- -------- (Loss) income before income taxes........................... (9,350) 3,023 (5,024) Income tax (benefit) expense................................ (1,477) 2,731 (5) --------- -------- -------- (Loss) income from operations of discontinued business...... (7,873) 292 (5,019) Loss on disposal of business (net of tax benefit of $9,464). (121,475) -- -- --------- -------- -------- (Loss) income from discontinued operations.................. $(129,348) $ 292 $ (5,019) ========= ======== ======== Diluted (loss) income per share from discontinued operations $ (8.98) $ .02 $ (.35) ========= ======== ========
4. Inventories Inventories consisted of the following:
March 31, ----------------- 2002 2001 ------- -------- (In thousands) At cost--FIFO basis: Raw materials............ $48,477 $ 56,603 Work-in-process.......... 13,735 17,110 Finished goods........... 34,417 41,850 ------- -------- 96,629 115,563 LIFO cost less than FIFO cost (6,973) (6,650) ------- -------- Net inventories.............. $89,656 $108,913 ======= ========
5. Marketable Securities Marketable securities are held for the settlement of a portion of the Company's general liability and products liability insurance claims filed through the Company's subsidiary, CM Insurance Company, Inc. (see Notes 2 and 13). The following is a summary of available-for-sale securities at March 31, 2002:
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value ------- ---------- ---------- --------- (In thousands) Government securities $ 6,353 $ 258 $ 6 $ 6,605 Equity securities.... 14,833 3,447 251 18,029 ------- ------ ---- ------- $21,186 $3,705 $257 $24,634 ======= ====== ==== =======
F-11 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) At March 31, 2002, in accordance with FAS No. 115, the Company reduced the cost bases of certain equity securities since it was determined that the unrealized losses on those securities were other than temporary in nature. This determination resulted in the recognition of a pre-tax charge to earnings of $2,757,000 for the year ended March 31, 2002, classified within other (income) and expense, net. The above schedule reflects the reduced cost base. In April 2002, all securities in the portfolio were sold and reinvested in short-term cash equivalents. The following is a summary of available-for-sale securities at March 31, 2001:
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value ------- ---------- ---------- --------- (In thousands) Government securities $ 6,265 $ 305 $ -- $ 6,570 Equity securities.... 16,226 3,043 3,513 15,756 ------- ------ ------ ------- $22,491 $3,348 $3,513 $22,326 ======= ====== ====== =======
Net unrealized gain or loss included in the balance sheet amounted to a $3,448,000 gain at March 31, 2002 and a $165,000 loss at March 31, 2001. The amounts, net of related income taxes of $1,379,000 and $(66,000) at March 31, 2002 and 2001, respectively, are reflected as a component of accumulated other comprehensive income (loss) within shareholders' equity. 6. Property, Plant, and Equipment Consolidated property, plant, and equipment of the Company consisted of the following:
March 31, ----------------- 2002 2001 -------- -------- (In thousands) Land and land improvements...................... $ 5,812 $ 5,845 Buildings....................................... 31,472 30,613 Machinery, equipment, and leasehold improvements 99,198 99,243 Construction in progress........................ 3,677 2,812 -------- -------- 140,159 138,513 Less accumulated depreciation................... 69,417 60,751 -------- -------- Net property, plant, and equipment.............. $ 70,742 $ 77,762 ======== ========
Depreciation expense from continuing operations was $11,449,000, $11,700,000, and $11,551,000 for the years ended March 31, 2002, 2001, and 2000, respectively. F-12 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. Accrued Liabilities and Other Non-current Liabilities Consolidated accrued liabilities of the Company consisted the following:
March 31, --------------- 2002 2001 ------- ------- (In thousands) Accrued payroll............. $10,915 $13,361 Accrued pension cost........ 5,434 2,579 Interest payable............ 8,975 9,481 Accrued workers compensation 4,070 3,068 Income taxes payable........ -- 2,362 Other accrued liabilities... 10,139 11,025 ------- ------- $39,533 $41,876 ======= =======
Consolidated other non-current liabilities of the Company consisted the following:
March 31, --------------- 2002 2001 ------- ------- (In thousands) Accumulated postretirement benefit obligation $10,181 $12,640 Accrued general and product liability costs.. 16,274 15,388 Other non-current liabilities................ 3,759 6,039 ------- ------- $30,214 $34,067 ======= =======
8. Debt Consolidated debt of the Company consisted of the following:
March 31, ----------------- 2002 2001 -------- -------- (In thousands) Revolving Credit Facility with availability up to $150,000,000, due March 31, 2003, with interest payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 325 basis points at March 31, 2002 (5.49% and 7.76% at March 31, 2002 and 2001)..................... $145,800 $202,000 Other senior debt.................................................. 2,372 5,416 -------- -------- Total senior debt.................................................. 148,172 207,416 8 1/2% Senior Subordinated Notes due March 31, 2008 with interest payable in semi-annual installments at 8.45% effective rate, recorded net of unamortized discount of $319 ($372 at March 31, 2001) 199,681 199,628 -------- -------- Total.............................................................. 347,853 407,044 Less current portion............................................... 146,663 3,092 -------- -------- $201,190 $403,952 ======== ========
F-13 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. The corresponding credit agreement places certain debt covenant restrictions on the Company including, but not limited to, maximum annual cash dividends of $10 million. The Company did not comply with certain of the financial covenants as of March 31, 2002. Effective June 6, 2002, the senior lenders agreed to waive the non-compliance as of March 31, 2002 and amended the financial covenants for the quarters ended June 30, September 30, and December 31, 2002. The Company believes that they will be able to comply with the amended covenants. The Company manages its debt portfolio by using interest rate swaps to achieve an overall desired position of fixed and floating rates. The Company entered into an interest rate swap agreement to effectively convert $40 million of variable-rate debt to fixed-rate debt which matures in June 2003. The cash flow hedge is considered effective and the gain or loss on the change in fair value is reported in other comprehensive (loss) income, net of tax. The fair value of the derivative at March 31, 2002 was a $706,000 liability. The carrying amount of the Company's senior debt instruments approximates the fair value. The Company's subordinated debt has an approximate fair market value of $183,000,000 which is less than the carrying cost of $199,681,000. Provisions of the 8 1/2% Notes include, without limitation, restrictions on liens, indebtedness, asset sales, and dividends and other restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the Company, in whole or in part, at the Make-Whole Price (as defined in the 8 1/2% Notes agreement). On or after April 1, 2003, they are redeemable at prices declining annually to 100% on and after April 1, 2006. In the event of a Change of Control (as defined in the indenture for such notes), each holder of the 8 1/2% Notes may require the Company to repurchase all or a portion of such holder's 8 1/2% Notes at a purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes are guaranteed by certain existing and future domestic subsidiaries and are not subject to any sinking fund requirements. The principal payments scheduled to be made as of March 31, 2002 on the above debt, for the next five annual periods subsequent thereto, are as follows (in thousands): 2003.................................... $146,663 2004.................................... 224 2005.................................... 162 2006.................................... 123 2007.................................... 122
It is management's intent to refinance the Revolving Credit Facility prior to its expiration on March 31, 2003. As of March 31, 2002, the Company had letters of credit outstanding of $6.8 million. F-14 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 9. Retirement Plans The Company provides defined benefit pension plans to certain employees. The following provides a reconciliation of benefit obligation, plan assets, and funded status of plans:
March 31, ----------------- 2002 2001 -------- ------- (In thousands) Change in benefit obligation: Benefit obligation at beginning of year......... $ 75,008 $71,320 Service cost.................................... 3,961 3,772 Interest cost................................... 5,580 5,099 Actuarial loss (gain)........................... 3,373 (1,821) Benefits paid................................... (4,905) (3,362) -------- ------- Benefit obligation at end of year............... $ 83,017 $75,008 ======== ======= Change in plan assets: Fair value of plan assets at beginning of year.. $ 76,182 $73,464 Actual (loss) return on plan assets............. (4,349) 1,079 Employer contribution........................... 3,578 5,001 Benefits paid................................... (4,905) (3,362) -------- ------- Fair value of plan assets at end of year........ $ 70,506 $76,182 ======== ======= Funded Status................................... $(12,511) $ 1,174 Unrecognized transition amount.................. -- (28) Unrecognized actuarial loss (gain).............. 12,373 (1,872) Unrecognized prior service cost................. 1,191 1,607 -------- ------- Net amount recognized........................... $ 1,053 $ 881 ======== =======
Amounts recognized in the consolidated balance sheets are as follows: Intangible asset.................... $ 903 $ 1,029 Accrued liabilities................. (4,933) (2,020) Accumulated other comprehensive loss 5,083 1,872 ------- ------- Net amount recognized............... $ 1,053 $ 881 ======= =======
F-15 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Net periodic pension cost included the following components:
Year Ended March 31, ------------------------- 2002 2001 2000 ------- ------- ------- (In thousands) Service costs--benefits earned during the period $ 3,961 $ 3,772 $ 4,329 Interest cost on projected benefit obligation... 5,580 5,099 4,805 Expected return on plan assets.................. (6,526) (6,303) (5,732) Net amortization................................ 213 136 251 ------- ------- ------- Net periodic pension cost....................... $ 3,228 $ 2,704 $ 3,653 ======= ======= =======
The aggregate projected benefit obligation and aggregate fair value of plan assets for the pension plans with projected benefit obligations in excess of plan assets were $76,652,000 and $62,507,000, respectively, as of March 31, 2002 and $57,644,000 and $55,546,000, respectively, as of March 31, 2001. The aggregate accumulated benefit obligation and aggregate fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $69,363,000 and $61,734,000 respectively as of March 31, 2002 and $10,973,000 and $9,363,000, respectively as of March 31, 2001. The unrecognized transition obligation is being amortized on a straight-line basis over 20 years. Unrecognized gains and losses are amortized on a straight-line basis over the average remaining service period of active participants. The weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation of all of the defined benefit plans was 7.25% and 7.5% as of March 31, 2002 and 2001, respectively. Future average compensation increases are assumed to be 4.0% and 4.5% per year as of March 31, 2002 and 2001, respectively. The weighted-average expected long-term rate of return on plan assets used in determining the expected return on plan assets included in net periodic pension cost was 8 5/8% for the year ended March 31, 2002 and 8 7/8% for both of the years ended March 31, 2001 and 2000. Plan assets consist of equities, corporate and government securities, and fixed income annuity contracts. The Company's funding policy with respect to the defined benefit pension plans is to contribute annually at least the minimum amount required by the Employee Retirement Income Security Act of 1974 (ERISA). The Company also sponsors defined contribution plans covering substantially all domestic employees. Participants may elect to contribute basic contributions. These plans provide for employer contributions based primarily on employee participation. The Company recorded a charge for such contributions of approximately $1,790,000, $2,190,000 and $1,660,000 for the years ended March 31, 2002, 2001 and 2000, respectively. F-16 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 10. Employee Stock Ownership Plan (ESOP) The AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" requires that compensation expense for ESOP shares be measured based on the fair value of those shares when committed to be released to employees, rather than based on their original cost. Also, dividends on those ESOP shares that have not been allocated or committed to be released to ESOP participants are not reflected as a reduction of retained earnings. Rather, since those dividends are used for debt service, a charge to compensation expense is recorded. Furthermore, ESOP shares that have not been allocated or committed to be released are not considered outstanding for purposes of calculating earnings per share. The obligation of the ESOP to repay borrowings incurred to purchase shares of the Company's common stock is guaranteed by the Company; the unpaid balance of such borrowings, therefore, has been reflected in the accompanying consolidated balance sheet as a liability. An amount equivalent to the cost of the collateralized common stock and representing deferred employee benefits has been recorded as a deduction from shareholders' equity. Substantially all of the Company's domestic non-union employees are participants in the ESOP. Contributions to the plan result from the release of collateralized shares as debt service payments are made. Compensation expense amounting to $845,000, $1,120,000 and $1,752,000 in fiscal 2002, 2001 and 2000, respectively, is recorded based on the guaranteed release of the ESOP shares at their fair market value. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings and are applied toward debt service. At March 31, 2002 and 2001, 966,769 and 953,851 of ESOP shares, respectively, were allocated or available to be allocated to participants' accounts. At March 31, 2002 and 2001, 417,854 and 504,794 of ESOP shares were pledged as collateral to guarantee the ESOP term loans. The fair market value of unearned ESOP shares at March 31, 2002 amounted to $5,349,000. 11. Postretirement Benefit Obligation The Company sponsors defined benefit postretirement health care plans that provide medical and life insurance coverage to Yale domestic retirees and their dependents. Prior to the acquisition of Yale, the Company did not sponsor any postretirement benefit plans. The Company pays the majority of the medical costs for Yale retirees and their spouses who are under age 65. For retirees and dependents of retirees who retired prior to January 1, 1989, and are age 65 or over, the Company contributes 100% toward the American Association of Retired Persons ("AARP") premium frozen at the 1992 level. For retirees and dependents of retirees who retired after January 1, 1989, the Company contributes $35 per month toward the AARP premium. The life insurance plan is noncontributory. F-17 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company's postretirement health benefit plans are not funded. In accordance with FAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits," the following sets forth a reconciliation of benefit obligations and the funded status of the plan:
March 31, ------------------ 2002 2001 -------- -------- (In thousands) Change in benefit obligation: Benefit obligation at beginning of year................. $ 12,626 $ 11,640 Service cost............................................ 82 80 Interest cost........................................... 891 820 Actuarial loss.......................................... 1,255 1,509 Benefits paid........................................... (1,480) (1,423) Impact of curtailment................................... (836) -- -------- -------- Benefit obligation at end of year....................... $ 12,538 $ 12,626 ======== ======== Funded status........................................... $(12,538) $(12,626) Unrecognized actuarial loss............................. 2,664 2,407 Unrecognized prior service gain......................... (307) (2,421) -------- -------- Net amount recognized in other non-current liabilities.. $(10,181) $(12,640) ======== ========
Net periodic postretirement benefit cost included the following:
Year Ended March 31, --------------------- 2002 2001 2000 ------- ----- ----- (In thousands) Service cost--benefits attributed to service during the period $ 82 $ 80 $ 84 Interest cost................................................. 891 820 816 Amortization of prior service gain............................ (807) (807) (807) Amortization of plan net losses............................... 162 -- -- Curtailment gain.............................................. (1,307) -- -- ------- ----- ----- Net periodic postretirement benefit cost.................. $ (979) $ 93 $ 93 ======= ===== =====
For measurement purposes, a 9.0% annual rate of increase in the per capita cost of postretirement medical benefits was assumed at the beginning of the period; the rate was assumed to decrease 1.0% per year to 5.0% by 2006. The discount rate used in determining the accumulated postretirement benefit obligation was 7.25% and 7.5% as of March 31, 2002 and 2001, respectively. Assumed medical claims cost trend rates have an effect on the amounts reported for the health care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
One Percentage One Percentage Point Increase Point Decrease -------------- -------------- (In thousands) Effect on total of service and interest cost components $ 54 $ (49) Effect on postretirement obligation.................... 532 (486)
F-18 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 12. Earnings per Share and Stock Plans Earnings per Share The Company calculates earnings per share in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share" (FAS No. 128). Basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share includes any dilutive effects of stock options. The effect of dilutive employee stock options has not been included for the year ended March 31, 2002 since this would be antidilutive as a result of the Company's net loss. The following table sets forth the computation of basic and diluted earnings per share:
Year Ended March 31, -------------------------- 2002 2001 2000 --------- ------- ------- (In thousands) Numerator for basic and diluted earnings per share: (Loss) income from continuing operations..................... $ (6,018) $14,927 $22,099 Total (loss) income from discontinued operations............. (129,348) 292 (5,019) --------- ------- ------- Net (loss) income............................................ $(135,366) $15,219 $17,080 ========= ======= ======= Denominators: Weighted-average common stock outstanding - denominator for basic EPS.................................................. 14,414 14,316 14,138 Effect of dilutive employee stock options.................... -- -- 83 --------- ------- ------- Adjusted weighted-average common stock outstanding and assumed conversions - denominator for diluted EPS.......... 14,414 14,316 14,221 ========= ======= =======
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note 10). Stock Plans The Company maintains two stock option plans, a Non-Qualified Stock Option Plan (Non-Qualified Plan) and an Incentive Stock Option Plan (Incentive Plan). Under the Non-Qualified Plan, options may be granted to officers and other key employees of the Company as well as to non-employee directors and advisors. Options granted under the Non-Qualified and Incentive Plans become exercisable over a four-year period at the rate of 25% per year commencing one year from the date of grant at an exercise price of not less than 100% of the fair market value of the common stock on the date of grant. Any option granted under the Non-Qualified plan may be exercised not earlier than one year from the date such option is granted. Any option granted under the Incentive Plan may be exercised not earlier than one year and not later than 10 years from the date such option is granted. F-19 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) A summary of option transactions during each of the three fiscal years in the period ended March 31, 2002 is as follows:
Year Ended March 31, ---------------------------- Number of Shares 2002 2001 2000 ---------------- --------- ------- -------- Outstanding at beginning of year.. 671,535 674,750 353,348 Granted........................... 762,000 32,700 481,410 Canceled.......................... (27,375) (16,575) (7,000) Exercised......................... -- (19,340) (153,008) --------- ------- -------- Outstanding at end of year........ 1,406,160 671,535 674,750 ========= ======= ======== Exercisable at end of year........ 394,153 241,285 137,840 Available for grant at end of year 76,340 810,965 827,090
Exercise prices for options outstanding as of March 31, 2002, ranged from $9.00 to $29.00. The following table provides certain information with respect to stock options outstanding at March 31, 2002:
Weighted-average Stock Options Weighted-average Remaining Range of Exercise Prices Outstanding Exercise Price Contractual Life ------------------------ ------------- ---------------- ---------------- Up to $10.00........ 748,950 $ 9.97 9.4 $10.01 to $20.00.... 194,100 14.63 5.9 $20.01 to $30.00.... 463,110 21.27 7.0 --------- ------ --- 1,406,160 $14.34 8.1 ========= ====== ===
The following table provides certain information with respect to stock options exercisable at March 31, 2002:
Stock Options Weighted-average Range of Exercise Prices Outstanding Exercise Price ------------------------ ------------- ---------------- Up to $10.00........ 5,737 $ 9.13 $10.01 to $20.00.... 152,361 15.47 $20.01 to $30.00.... 236,055 21.44 ------- ------ 394,153 $18.95 ======= ======
The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FAS No. 123, "Accounting for Stock-Based Compensation," requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the grant date and the number of options granted is fixed, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by FAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The Black-Scholes option valuation model was developed for use in F-20 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The fair value for issued options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions and yielding the following pro forma results:
Year Ended March 31, ------------------------------------ 2002 2001 2000 --------- -------- -------- (In thousands, except for assumptions and earnings per share data) Assumptions: Risk-free interest rate............. 4.5% 5.2% 6.1% Dividend yield--Incentive Plan...... 0.0% 2.9% 1.35% Volatility factor................... 444 0.435 0.352 Expected life--Incentive Plan....... 5 years 5 years 5 years Pro forma results: Net (loss) income................... $(136,697) $ 14,809 $ 16,099 (Loss) earnings per share, basic.... (9.48) 1.03 1.14 (Loss) earnings per share, diluted.. (9.48) 1.03 1.13
The weighted-average fair value of options granted in 2002, 2001, and 2000 was $4.66, $4.42 and $7.56 per share, respectively. The Company maintains a Restricted Stock Plan, under which the Company had no shares reserved for issuance at March 31, 2002 and 2001. The Company charges unearned compensation, a component of shareholders' equity, for the market value of shares, as they are issued. It is then ratably amortized over the restricted period. Grantees who remain continuously employed with the Company become vested in their shares five years after the date of the grant. There were 60,700 shares issued during the year ended March 31, 2000. 13. Loss Contingencies General and Product Liability--$15,603,000 of the accrued general and product liability costs which are included in other non-current liabilities at March 31, 2002 ($14,663,000 at March 31, 2001) 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 experience, for losses incurred but not reported. The accrual in these consolidated financial statements was determined by applying a discount factor based on interest rates customarily used in the insurance industry, between 6.09% and F-21 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 8.42%, to the undiscounted reserves of $19,510,000 and $18,620,000 at March 31, 2002 and 2001, respectively. This liability is funded by investments in marketable securities (see Notes 2 and 5). 14. Restructuring Charges In June 2001, the Company recorded an $8.8 million pre-tax charge to cover costs associated with the closure of its hoist manufacturing facility in Forrest City, Arkansas. The charges consisted mainly of plant closing charges ($6.0 million), accrued compensation and employee benefits ($2.0 million), and other restructuring costs ($0.8 million). In August 2001, the Company recorded a $0.7 million pre-tax charge to cover costs associated with the closure of its chain manufacturing facility in Richmond, British Columbia, Canada. The charges consisted mainly of accrued compensation and employee benefits ($0.4 million), plant closing charges ($0.2 million), and other restructuring costs ($0.1 million). Restructuring reserves at March 31, 2002 consist mainly of severance and employee benefits. The net carrying value of the recently closed and vacated Forrest City facility is included in assets held for sale (see Note 2) at March 31, 2002. The manufacturing facilities in Forrest City, Arkansas and Richmond, British Columbia, Canada were both included in the Products segment. 15. Income Taxes The following is a reconciliation of the difference between the effective tax rate and the statutory federal tax rate:
Year Ended March 31, ------------------------- 2002 2001 2000 ------- ------- ------- (In thousands) Computed statutory provision.................. $(1,301) $11,102 $13,889 State income taxes net of federal benefit..... 501 1,075 1,909 Nondeductible goodwill amortization........... 2,752 2,753 2,753 Foreign taxes greater than statutory provision 922 923 878 Research and development credit............... (1,031) (400) (400) Other......................................... 458 1,341 (1,446) ------- ------- ------- Actual tax provision.......................... $ 2,301 $16,794 $17,583 ======= ======= =======
F-22 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The provision for income tax expense consisted of the following:
Year Ended March 31, ------------------------ 2002 2001 2000 ------ ------- ------- (In thousands) Current income tax expense: Federal taxes..................... $ (198) $11,893 $ 8,249 State taxes....................... 1,012 1,345 2,136 Foreign........................... 1,483 3,599 3,319 Deferred income tax (benefit) expense: Domestic.......................... (317) 395 3,658 Foreign........................... 321 (438) 221 ------ ------- ------- $2,301 $16,794 $17,583 ====== ======= =======
The Company applies the liability method of accounting for income taxes as required by FAS Statement No. 109, "Accounting for Income Taxes." The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
March 31, - ------------------ 2002 2001 -------- -------- (In thousands) Deferred tax assets: Insurance reserves.......................... $ 8,589 $ 9,560 Accrued vacation and incentive costs........ 1,387 1,867 Other....................................... 6,435 6,015 -------- -------- Total gross deferred tax assets......... 16,411 17,442 -------- -------- Deferred tax liabilities: Insurance reserves.......................... (4,661) (5,935) Property, plant, and equipment.............. (6,349) (6,757) -------- -------- Total gross deferred tax liabilities.... (11,010) (12,692) -------- -------- Net deferred tax asset................ $ 5,401 $ 4,750 ======== ========
Deferred income taxes are presented within the consolidated balance sheet as follows:
March 31, --------------- 2002 2001 ------- ------- (In thousands) Current deferred tax asset (liability) $ 2,268 $ (691) Net non-current deferred tax asset.... 3,133 5,441 ------- ------- Net deferred tax asset.......... $ 5,401 $ 4,750 ======= =======
The current deferred tax asset (liability) is included in prepaid expense (accrued liabilities). F-23 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Income before income tax expense includes foreign subsidiary income of $2,436,000, $6,394,000, and $7,602,000 for the years ended March 31, 2002, 2001, and 2000, respectively. United States income taxes have not been provided on certain unremitted earnings of approximately $25,000,000 at March 31, 2002 of the Company's foreign subsidiaries as such earnings are considered to be permanently reinvested. 16. Rental Expense and Lease Commitments Rental expense for the years ended March 31, 2002, 2001 and 2000 was $3,225,000, $5,103,000, and $3,763,000, respectively. The following amounts represent future minimum payment commitments as of March 31, 2002 under non-cancelable operating leases extending beyond one year (in thousands):
Real Vehicles and Year Ended March 31, Property Equipment Total -------------------- -------- ------------ ------ 2003........ $724 $1,877 $2,601 2004........ 729 1,596 2,325 2005........ 700 1,271 1,971 2006........ 474 592 1,066 2007........ 135 238 373
17. Summary Financial Information The following information sets forth the condensed consolidating summary financial information of the parent and domestic subsidiaries (guarantors), which guarantee the 81/2% senior subordinated notes, and the foreign subsidiaries (nonguarantors). The domestic subsidiaries are wholly owned and the guarantees are full, unconditional, joint and several. As of and for the year ended March 31, 2002:
Domestic Foreign Parent Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ (In thousands) As of March 31, 2002: Current assets: Cash.............................................. $ 8,024 $ (1,701) $ 6,745 $ -- $ 13,068 Trade accounts receivable......................... 53,724 6,895 21,647 -- 82,266 Inventories....................................... 43,357 23,525 23,723 (949) 89,656 Net assets held for sale.......................... 2,300 1,990 -- -- 4,290 Net current assets of discontinued operations..... -- 21,497 -- -- 21,497 Other current assets.............................. 6,647 (1,682) 3,578 -- 8,543 -------- --------- -------- --------- -------- Total current assets........................... 114,052 50,524 55,693 (949) 219,320 Net property, plant, and equipment................... 35,893 18,385 16,464 -- 70,742 Goodwill and other intangibles, net.................. 36,370 121,051 43,380 -- 200,801 Intercompany balances................................ 277,846 (292,844) (59,486) 74,484 -- Other non-current assets............................. 76,893 159,710 (1,408) (201,763) 33,432 -------- --------- -------- --------- -------- Total assets................................... $541,054 $ 56,826 $ 54,643 $(128,228) $524,295 ======== ========= ======== ========= ======== Current liabilities.................................. $190,014 $ 11,335 $ 20,353 $ (422) $221,280 Debt, less current portion........................... 199,536 -- 1,654 -- 201,190 Other non-current liabilities........................ 16,196 11,203 2,815 -- 30,214 -------- --------- -------- --------- -------- Total liabilities.............................. 405,746 22,538 24,822 (422) 452,684 Shareholders' equity................................. 135,308 34,288 29,821 (127,806) 71,611 -------- --------- -------- --------- -------- Total liabilities and shareholders' equity..... $541,054 $ 56,826 $ 54,643 $(128,228) $524,295 ======== ========= ======== ========= ========
F-24 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Domestic Foreign Parent Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ (In thousands) For the Year Ended March 31, 2002: Net sales................................................. $222,957 $ 170,265 $107,944 $(21,138) $ 480,028 Cost of products sold..................................... 164,150 134,031 82,533 (21,163) 359,551 -------- --------- -------- -------- --------- Gross profit.............................................. 58,807 36,234 25,411 25 120,477 -------- --------- -------- -------- --------- Selling, general and administrative expenses.............. 34,539 17,163 20,065 -- 71,767 Restructuring charges..................................... 9,416 -- 153 -- 9,569 Amortization of intangibles............................... 2,140 6,461 2,412 -- 11,013 -------- --------- -------- -------- --------- 46,095 23,624 22,630 -- 92,349 -------- --------- -------- -------- --------- Income from operations.................................... 12,712 12,610 2,781 25 28,128 Interest and debt expense................................. 28,869 -- 512 -- 29,381 Other (income) and expense, net........................... 4,773 (2,076) (233) -- 2,464 -------- --------- -------- -------- --------- (Loss) income from continuing operations before income tax expense.................................................. (20,930) 14,686 2,502 25 (3,717) Income tax expense........................................ (6,838) 7,419 1,710 10 2,301 -------- --------- -------- -------- --------- (Loss) income from continuing operations.................. (14,092) 7,267 792 15 (6,018) (Loss) on discontinued operations......................... -- (7,873) -- -- (7,873) (Loss) on disposal of discontinued operations............. -- (121,475) -- -- (121,475) -------- --------- -------- -------- --------- Net (loss) income......................................... $(14,092) $(122,081) $ 792 $ 15 $(135,366) ======== ========= ======== ======== ========= For the Year Ended March 31, 2002: Operating activities: Cash provided by (used in) operating activities........... $ 63,500 $ (17,965) $ 5,914 $ (1,652) $ 49,797 Investing activities: Purchase of marketable securities, net.................... (1,794) -- -- -- (1,794) Capital expenditures...................................... (6,923) 3,162 (992) -- (4,753) Proceeds from sale of business............................ 890 -- -- -- 890 Proceeds from sale of property, plant and equipment....... -- -- 1,750 -- 1,750 Net assets held for sale.................................. -- 2,280 -- -- 2,280 -------- --------- -------- -------- --------- Net cash (used in) provided by investing activities....... (7,827) 5,442 758 -- (1,627) Financing activities: Net (payments) borrowings under revolving line-of-credit agreements................................ (56,200) 13,016 (494) -- (43,678) Repayment of debt......................................... (851) -- (2,196) -- (3,047) Dividends paid............................................ (1,808) -- (1,820) 1,652 (1,976) Other..................................................... 219 -- -- -- 219 -------- --------- -------- -------- --------- Net cash (used in) provided by financing activities....... (58,640) 13,016 (4,510) 1,652 (48,482) Effect of exchange rate changes on cash................... (26) -- (280) -- (306) -------- --------- -------- -------- --------- Net cash (used in) provided by continuing operations...... (2,993) 493 1,882 -- (618) Net cash used in discontinued operations.................. -- (329) -- -- (329) -------- --------- -------- -------- --------- Net change in cash and cash equivalents................... (2,993) 164 1,882 -- (947) Cash and cash equivalents at beginning of year............ 11,017 (1,865) 4,863 -- 14,015 -------- --------- -------- -------- --------- Cash and cash equivalents at end of year.................. $ 8,024 $ (1,701) $ 6,745 $ -- $ 13,068 ======== ========= ======== ======== =========
F-25 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As of and for the year ended March 31, 2001: Domestic Foreign Parent Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ (In thousands) As of March 31, 2001: Current assets: Cash................................................... $ 11,017 $ (1,865) $ 4,863 $ $ 14,015 Trade accounts receivable and unbilled revenues........ 65,932 12,268 21,673 -- 99,873 Inventories............................................ 47,012 33,820 29,055 (974) 108,913 Net assets held for sale............................... -- 4,270 -- -- 4,270 Net current assets of discontinued operations.......... -- 46,874 -- -- 46,874 Other current assets................................... 5,368 (2,919) 3,188 -- 5,637 -------- --------- -------- --------- -------- Total current assets................................ 129,329 92,448 58,779 (974) 279,582 Net property, plant, and equipment........................ 34,599 25,212 17,951 -- 77,762 Goodwill and other intangibles, net....................... 38,992 127,688 46,621 -- 213,301 Intercompany balances..................................... 168,763 (334,599) (63,864) 229,700 -- Net non-current assets of discontinued operations......... -- 116,658 -- -- 116,658 Other non-current assets.................................. 226,711 161,070 (2,017) (350,679) 35,085 -------- --------- -------- --------- -------- Total assets........................................ $598,394 $ 188,477 $ 57,470 $(121,953) $722,388 ======== ========= ======== ========= ======== Current liabilities....................................... $ 39,673 $ 15,228 $ 21,966 $ (362) $ 76,505 Debt, less current portion................................ 400,137 -- 3,815 -- 403,952 Other non-current liabilities............................. 15,529 15,804 2,734 -- 34,067 -------- --------- -------- --------- -------- Total liabilities................................... 455,339 31,032 28,515 (362) 514,524 Shareholders' equity...................................... 143,055 157,445 28,955 (121,591) 207,864 -------- --------- -------- --------- -------- Total liabilities and shareholders' equity.......... $598,394 $ 188,477 $ 57,470 $(121,953) $722,388 ======== ========= ======== ========= ======== For the Year Ended March 31, 2001: Net sales................................................. $252,128 $ 237,673 $119,475 $ (23,108) $586,168 Cost of products sold..................................... 175,181 184,235 90,260 (23,017) 426,659 -------- --------- -------- --------- -------- Gross profit.............................................. 76,947 53,438 29,215 (91) 159,509 -------- --------- -------- --------- -------- Selling, general and administrative expenses.............. 39,196 23,331 20,117 -- 82,644 Amortization of intangibles............................... 2,011 6,535 2,429 -- 10,975 -------- --------- -------- --------- -------- 41,207 29,866 22,546 -- 93,619 -------- --------- -------- --------- -------- Income (loss) from operations............................. 35,740 23,572 6,669 (91) 65,890 Interest and debt expense................................. 35,783 (32) 578 -- 36,329 Other (income) and expense, net........................... (1,621) (236) (303) -- (2,160) -------- --------- -------- --------- -------- Income (loss) from continuing operations before income tax expense.................................................. 1,578 23,840 6,394 (91) 31,721 Income tax expense........................................ 2,326 11,344 3,161 (37) 16,794 -------- --------- -------- --------- -------- (Loss) income from continuing operations.................. (748) 12,496 3,233 (54) 14,927 Income from discontinued operations....................... -- 292 -- -- 292 -------- --------- -------- --------- -------- Net (loss) income......................................... $ (748) $ 12,788 $ 3,233 $ (54) $ 15,219 ======== ========= ======== ========= ========
F-26 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Domestic Foreign Parent Subsidiaries Subsidiaries Eliminations Consolidated ------- ------------ ------------ ------------ ------------ (In thousands) For the Year Ended March 31, 2001: Operating activities: Cash provided by (used in) operating activities......... $19,831 $10,457 $ 9,054 $(1,072) $ 38,270 Investing activities: Purchase of marketable securities, net.................. (2,064) -- -- -- (2,064) Capital expenditures.................................... (4,419) (4,961) (799) -- (10,179) Net assets held for sale................................ -- 5,002 -- -- 5,002 ------- ------- ------- ------- -------- Net cash (used in) provided by investing activities..... (6,483) 41 (799) -- (7,241) Financing activities: Net (payments) borrowings under revolving line-of-credit agreements............................................. (3,000) (9,597) 335 -- (12,262) Repayment of debt....................................... (1,579) -- (2,158) -- (3,737) Dividends paid.......................................... (3,995) -- (1,072) 1,072 (3,995) Other................................................... 489 -- -- -- 489 ------- ------- ------- ------- -------- Net cash (used in) provided by financing activities..... (8,085) (9,597) (2,895) 1,072 (19,505) Effect of exchange rate changes on cash................. -- -- (4,026) -- (4,026) ------- ------- ------- ------- -------- Net cash provided by continuing operations.............. 5,263 901 1,334 -- 7,498 Net cash used in discontinued operations................ -- (1,065) -- -- (1,065) ------- ------- ------- ------- -------- Net change in cash and cash equivalents................. 5,263 (164) 1,334 -- 6,433 Cash and cash equivalents at beginning of year.......... 5,754 (1,701) 3,529 -- 7,582 ------- ------- ------- ------- -------- Cash and cash equivalents at end of year................ $11,017 $(1,865) $ 4,863 $ -- $ 14,015 ======= ======= ======= ======= ========
18. Business Segment Information 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, industrial cranes, chain, 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. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales are not significant. The Company evaluates performance based on operating earnings of the respective business units prior to the effects of amortization. Segment information as of and for the years ended March 31, 2002, 2001, and 2000 is as follows:
Year Ended March 31, 2002 --------------------------- Products Solutions Total -------- --------- -------- (In thousands) Sales to external customers...................... $404,731 $75,297 $480,028 Operating income before restructuring charges and amortization................................... 47,045 1,665 48,710 Depreciation and amortization.................... 19,515 2,947 22,462 Total assets..................................... 438,294 64,504 502,798 Capital expenditures............................. 3,904 849 4,753
F-27 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Year Ended March 31, 2001 --------------------------- Products Solutions Total -------- --------- -------- (In thousands) Sales to external customers.................. $478,898 $107,270 $586,168 Operating income before restructuring charges and amortization........................... 73,096 3,769 76,865 Depreciation and amortization................ 19,859 2,816 22,675 Total assets................................. 487,551 71,305 558,856 Capital expenditures......................... 9,889 290 10,179
Year Ended March 31, 2000 --------------------------- Products Solutions Total -------- --------- -------- (In thousands) Sales to external customers.................. $511,287 $97,891 $609,178 Operating income before restructuring charges and amortization........................... 75,371 7,826 83,197 Depreciation and amortization................ 19,843 3,092 22,935 Total assets................................. 505,461 73,801 579,262 Capital expenditures......................... 7,805 118 7,923
The following provides a reconciliation of operating income before restructuring charges and amortization to consolidated income before income tax expense:
Year Ended March 31, ---------------------------- 2002 2001 2000 -------- -------- -------- (In thousands) Operating income before restructuring charges and amortization............................. $ 48,710 $ 76,865 $ 83,197 Restructuring charges of Products segment...... (9,569) -- -- Amortization of intangibles.................... (11,013) (10,975) (11,384) Interest and debt expense...................... (29,381) (36,329) (33,451) Other income and (expense)..................... (2,464) 2,160 1,320 -------- -------- -------- (Loss) income from continuing operations before income tax expense........................... $ (3,717) $ 31,721 $ 39,682 ======== ======== ========
Financial information relating to the Company's operations by geographic area is as follows:
Year Ended March 31, -------------------------- 2002 2001 2000 -------- -------- -------- (In thousands) Net sales: United States $374,070 $470,195 $482,658 Europe....... 70,097 71,967 71,076 Canada....... 29,340 36,635 49,716 Other........ 6,521 7,371 5,728 -------- -------- -------- Total.... $480,028 $586,168 $609,178 ======== ======== ========
F-28 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Year Ended March 31, -------------------------- 2002 2001 2000 -------- -------- -------- (In thousands) Assets: United States.................... $388,669 $437,522 $452,234 Europe........................... 92,541 94,908 95,601 Canada........................... 17,071 21,936 27,130 Other............................ 4,517 4,490 4,297 -------- -------- -------- Assets of continuing operations.. 502,798 558,856 579,262 Assets of discontinued operations 21,497 163,532 152,575 -------- -------- -------- Total........................ $524,295 $722,388 $731,837 ======== ======== ========
19. Selected Quarterly Financial Data (Unaudited) As a result of the restatement related to the discontinued operations as discussed in Note 3, the quarterly information set forth below for net sales, gross profit, income from operations, and income (loss) from continuing operations does not agree to the amounts previously reported in the quarterly Form 10-Qs filed during fiscal year 2002. As previously reported:
Three Months Ended ----------------------------------- July 1, September 30, December 30, 2001 2001 2001 -------- ------------- ------------ (In thousands, except per share data) Net sales..................................... $175,905 $171,577 $137,747 Gross profit.................................. 34,958 32,974 31,988 Income from operations........................ 3,084 8,371 9,228 Net (loss) income............................. $ (4,661) $ (1,332) $ (92) ======== ======== ======== Net (loss) income per share--basic and diluted $ (0.32) $ (0.09) $ (0.01) ======== ======== ========
Restated to reflect discontinued operations presentation:
Three Months Ended ---------------------------------------------- July 1, September 30, December 30, March 31, 2001 2001 2001 2002 -------- ------------- ------------ --------- (In thousands, except per share data) Net sales....................................... $129,086 $122,542 $113,922 $ 114,478 Gross profit.................................... 33,473 31,194 29,924 25,886 Income from operations.......................... 4,922 9,840 10,293 3,073 (Loss) income from continuing operations........ (2,819) 268 1,244 (4,711) Loss from discontinued operations............... (1,842) (1,600) (1,336) (3,095) Loss on disposal of discontinued operations..... -- -- -- (121,475) Net (loss) income............................... $ (4,661) $ (1,332) $ (92) $(129,281) ======== ======== ======== ========= Net (loss) income per share--basic and diluted: Continuing operations........................... $ (0.19) $ 0.02 $ 0.09 $ (0.34) Discontinued operations......................... (0.13) (0.11) (0.10) (0.21) Loss on disposal of discontinued operations..... -- -- -- (8.41) -------- -------- -------- --------- Net loss (income)............................... $ (0.32) $ (0.09) $ (0.01) $ (8.96) ======== ======== ======== =========
F-29 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) As previously reported:
Three Months Ended ------------------------------------------ July 2, October 1, December 31, March 31, 2000 2000 2000 2001 -------- ---------- ------------ --------- (In thousands, except per share data) Net sales.............................. $188,378 $188,994 $175,078 $143,141 Gross profit........................... 47,214 44,990 39,534 40,919 Income from operations................. 20,378 18,680 13,672 16,949 Net income............................. $ 5,946 $ 4,388 $ 1,296 $ 3,879 ======== ======== ======== ======== Net income per share--basic and diluted $ 0.42 $ 0.31 $ 0.09 $ 0.25 ======== ======== ======== ========
Restated to reflect discontinued operations presentation:
Three Months Ended ----------------------------------------- July 2, October 1, December 31, March 31, 2000 2000 2000 2001 -------- ---------- ------------ --------- (In thousands, except per share data) Net sales...................................... $152,499 $150,738 $139,790 $143,141 Gross profit................................... 42,897 40,255 35,438 40,919 Income from operations......................... 19,024 17,149 12,768 16,949 Income from continuing operation............... 5,682 4,037 1,329 3,879 Income (loss) from discontinued operations..... 264 351 (33) (290) Net income..................................... $ 5,946 $ 4,388 $ 1,296 $ 3,589 ======== ======== ======== ======== Net income (loss) per share--basic and diluted: Continuing operations.......................... $ 0.40 $ 0.29 $ 0.09 $ 0.27 Discontinued operations........................ 0.02 0.02 (0.00) (0.02) -------- -------- -------- -------- Net income..................................... $ 0.42 $ 0.31 $ 0.09 $ 0.25 ======== ======== ======== ========
20. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are as follows:
March 31, ------------------ 2002 2001 -------- -------- (In thousands) Net unrealized investment (losses) gains--net of tax $ 2,069 $ (99) Derivatives qualifying as hedges--net of tax........ (424) -- Minimum pension liability adjustment--net of tax.... (3,050) (1,123) Foreign currency translation adjustment............. (12,589) (12,805) -------- -------- Accumulated other comprehensive loss................ $(13,994) $(14,027) ======== ========
21. Effects of New Accounting Pronouncements The Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 141, "Business Combinations" in June 2001. SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations and modifies the application of F-30 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) the purchase accounting method. The elimination of the pooling-of-interests method is effective for transactions initiated after June 30, 2001. The adoption of this Statement did not have an impact on the consolidated financial statements. The FASB also issued SFAS No. 142, "Goodwill and Other Intangible Assets" in June of 2001. SFAS No. 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and the impairment testing and recognition for goodwill and intangible assets. SFAS No. 142 will apply to goodwill and intangible assets arising from transactions completed before and after the effective date. This statement, which will be effective for the Company's fiscal year beginning on April 1, 2002, must be adopted at the beginning of the fiscal year. The Company is currently assessing the Statement and the impact that the requirement to assess impairment upon adoption will have on the fiscal 2003 consolidated financial statements. Upon adoption, the Company will stop amortizing goodwill which, based upon current levels of goodwill for continuing operations, would reduce amortization expense by approximately $11 million on an annual basis. The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" in June 2001. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This Statement, which is effective for the Company's fiscal year beginning April 1, 2003, may be adopted as of April 1, 2002. We are currently assessing the Statement and the impact, if any, that adoption will have on our fiscal 2003 consolidated financial statements. The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" in August 2001. SFAS No. 144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The statement, while retaining many of the fundamental recognition and measurement provisions of SFAS No. 121, changes the criteria to be met to classify an asset as held-for-sale as well as the grouping of long-lived assets and liabilities that represent the unit of accounting for a long-lived asset to be held and used. SFAS No. 144 is effective for the Company's fiscal year beginning April 1, 2002. We are currently assessing the Statement and the impact, if any, that adoption will have on our fiscal 2003 consolidated financial statements. F-31 Item 9. Changes in and Disagreements with Accountants on Accounting ----------------------------------------------------------- and Financial Disclosures ------------------------- None. PART III -------- Item 10. Directors and Executive Officers of the Registrant. - -------- --------------------------------------------------- The information regarding Directors and Executive Officers of the Registrant will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2002 and upon the filing of such Proxy Statement, is incorporated by reference herein. Item 11. Executive Compensation - -------- ---------------------- The information regarding Executive Compensation will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2002 and upon the filing of such Proxy Statement, is incorporated by reference herein. Item 12. Security Ownership of Certain Beneficial Owners and Management - -------- -------------------------------------------------------------- The information regarding Security Ownership of Certain Beneficial Owners and Management will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2002 and upon the filing of such Proxy Statement, is incorporated by reference herein. Item 13. Certain Relationships and Related Transactions - -------- ---------------------------------------------- The information regarding Certain Relationships and Related Transactions will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2002 and upon the filing of such Proxy Statement, is incorporated by reference herein. PART IV ------- Item 14. Exhibits, Financial Statement Schedules, and Reports on - ------- Form 8-K. ------------------------------------------------------- (a)(1) Financial Statements: --------------------- The following consolidated financial statements of Columbus McKinnon Corporation are included in Item 8:
Reference Page No. --------- -------- Report of Independent Auditors F-2 Consolidated balance sheets - March 31, 2002 and 2001 F-3 Consolidated statements of operations - Years ended March 31, 2002 and 2001 F-4 Consolidated statements of shareholders' equity - Years ended March 31, 2002, F-5 2001 and 2000 Consolidated statements of cash flows - Years ended March 31, 2002, 2001 and F-6 2000 Notes to consolidated financial statements F-7 to F-33 (a)(2) Financial Statement Schedule: ----------------------------- Schedule II - Valuation and qualifying accounts F-34
33 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. (a)(3) Exhibits: Exhibit Number ------- 3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 3.2 Amended By-Laws of the Registrant (incorporated by reference to Exhibit 3 to the Company's Current Report on Form 8-K dated May 17, 1999). 4.1 Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 4.2 First Amendment and Restatement of Rights Agreement, dated as of October 1, 1998, between Columbus McKinnon Corporation and American Stock Transfer & Trust Company, as Rights Agent (incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K dated October 29, 1998). 4.3 Indenture among Columbus McKinnon Corporation, the guarantors named on the signature pages thereto and State Street Bank and Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated April 9, 1998). 4.4 Supplemental Indenture among LICO, Inc., Automatic Systems, Inc., LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products, Inc., Mechanical Products, Inc., Minitec Corporation and State Street Bank and Trust Company, N.A., as trustee, dated March 31, 1998 (incorporated by reference to Exhibit 4.3 to the Company's Current Report on form 8-K dated April 9, 1998). 4.5 Second Supplemental Indenture among Abell-Howe Crane, Inc., LICO, Inc., Automatic Systems, Inc. LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products Inc. and State Street Bank and Trust Company, N.A., as trustee, dated as of February 12, 1999 (incorporated by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 4.6 Third Supplemental Indenture among G.L. International, Inc., Gaffey, Inc., Handling Systems and Conveyors, Inc., Larco Material Handling Inc., Abell-Howe Crane, Inc., LICO, Inc., Automatic Systems, Inc., LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products, Inc. and State Street Bank and Trust Company, N.A., as trustee, dated as of March 1, 1999 (incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 4.7 Fourth Supplemental Indenture among Washington Equipment Company, G.L. International, Inc., Gaffey, Inc., Handling Systems and Conveyors, Inc., Larco Material Handling Inc., Abell-Howe Crane, Inc., Automatic Systems, Inc., LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products, Inc. and State Street Bank and Trust Company, N.A., as trustee, dated as of November 1, 1999 (incorporated by reference to Exhibit 10.2 to the Company's quarterly report on form 10-Q for the quarterly period ended October 3, 1999). # 4.8 Fifth Supplemental Indenture among Columbus McKinnon Corporation, Crane Equipment & Service, Inc., Automatic Systems, Inc., LICO Steel, Inc., Yale Industrial Products, Inc. and State Street Bank and Trust Company, N.A., as trustee, dated as of April 4, 2002. 10.1 Amended and Restated Term Loan Agreement by and among Fleet Bank of New York, Columbus McKinnon Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L. Montgomery, Jr., as Trustees under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement, dated March 31, 1993 (incorporated by reference to Exhibit 10.2 to the Company's Registration Statement No. 33-80687 on Form S-1 34 dated December 21, 1995). 10.2 Amendment No. 1 to Amended and Restated Term Loan Agreement, dated March 31, 1993, by and among Fleet Bank of New York, Columbus McKinnon Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L. Montgomery, Jr. as trustees under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement, dated October 27, 1994 (incorporated by reference to Exhibit 10.3 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 10.3 Amendment No. 2 to Amended and Restated Term Loan Agreement by and among Fleet Bank, Columbus McKinnon Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L. Montgomery, Jr. under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement, dated November 2, 1995 (incorporated by reference to Exhibit 10.4 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 10.4 Amendment No. 3 to Amended and Restated Term Loan Agreement by and among Fleet Bank, Columbus McKinnon Corporation and Karen L. Howard, Timothy R. Harvey, and Robert L. Montgomery, Jr. as trustees under the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.5 Amended and Restated Term Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated August 5, 1996 (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.6 First Amendment to Amended and Restated Term Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated October 16, 1996 (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.7 Second Amendment to Amended and Restated Term Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated March 31, 1998 (incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.8 Third Amendment to Amended and Restated Term Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated November 30, 1998 (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.9 Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated November 2, 1995 (incorporated by reference to Exhibit 10.6 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 10.10 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 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated April 9, 1998). 10.11 First Amendment, dated as of September 23, 1998, to the 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 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 27, 1998). 10.12 Second Amendment, dated as of February 12, 1999, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as Borrower, the banks, financial institutions and other institutional 35 leaders 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 (incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.13 Third Amendment dated as of November 16, 1999, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 3, 1999). 10.14 Fourth Amendment and Waiver, dated as of February 15, 2000, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended January 2, 2000). 10.15 Fifth Amendment, dated as of September 28, 2000, to the Credit Agreement, dated as of March 31,1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 1, 2000). 10.16 Sixth Amendment, dated as of February 5, 2001, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2000). 10.17 Seventh Amendment, dated as of June 26, 2001, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2001). 10.18 Eighth Amendment, dated as of November 21, 2001, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 2001). 10.19 Ninth Amendment, dated as of February 12, 2002, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 2001). #10.20 Tenth Amendment, dated as of April 16, 2002, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent. #10.21 Eleventh Amendment, dated as of June 6, 2002, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent. 36
*10.22 Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 (incorporated by reference to Exhibit 10.23 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.23 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated March 2, 1995 (incorporated by reference to Exhibit 10.24 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.24 Amendment No. 2 to the Columbus McKinnon Corporation Employee Stock Ownership Plan, dated October 17, 1995 (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). *10.25 Amendment No. 3 to the Columbus McKinnon Corporation Employee Stock Ownership Plan, dated March 27, 1996 (incorporated by reference to Exhibit 10.39 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1997). *10.26 Amendment No. 4 of the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated September 30, 1996 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996). *10.27 Amendment No. 5 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated August 28, 1997 (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). *10.28 Amendment No. 6 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated June 24, 1998 (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). *10.29 Amendment No. 7 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated April 30, 2000 (incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). #*10.30 Amendment No. 8 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated March 26, 2002. *10.31 Columbus McKinnon Corporation Personal Retirement Account Plan Trust Agreement, dated April 1, 1987 (incorporated by reference to Exhibit 10.25 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.32 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement (formerly known as the Columbus McKinnon Corporation Personal Retirement Account Plan Trust Agreement) effective November 1, 1988 (incorporated by reference to Exhibit 10.26 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.33 Amendment and Restatement of Columbus McKinnon Corporation 1995 Incentive Stock Option Plan (incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). *10.34 Columbus McKinnon Corporation Restricted Stock Plan (incorporated by reference to Exhibit 10.28 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.35 Amendment and Restatement of Columbus McKinnon Corporation Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). *10.36 Columbus McKinnon Corporation Thrift [401(k) Plan] 1989 Restatement Effective January 1, 1998 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 27, 1998).
37 *10.37 Amendment No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift 401(k) Plan, dated December 10, 1998 (incorporated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). *10.38 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift 401(k) Plan, dated June 1, 2000 (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). #*10.39 Amendment No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift 401(k) Plan, dated March 26, 2002. *10.40 Columbus McKinnon Corporation Thrift 401(k) Plan Trust Agreement Restatement Effective August 9, 1994 (incorporated by reference to Exhibit 10.32 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.41 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Restatement Effective April 1, 1998 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 27, 1998). *10.42 Amendment No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated December 10, 1998 (incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). *10.43 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated May 26, 1999 (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). #*10.44 Amendment No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated March 26, 2002. *10.45 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Trust Agreement effective as of April 1, 1987 (incorporated by reference to Exhibit 10.34 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.46 Form of Change in Control Agreement as entered into between Columbus McKinnon Corporation and each of Timothy T. Tevens, Robert L. Montgomery, Jr., Ned T. Librock, Karen L. Howard, Lois H. Demler, Timothy R. Harvey, John Hansen and Neal Wixson (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended March, 31, 1998). *10.47 Columbus McKinnon Corporation Corporate Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 1, 2001). *10.48 Consulting Agreement dated as of October 1, 2001 between Columbus McKinnon Corporation and Herbert P. Ladds, Jr. (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 30, 2001). 10.49 Asset Purchase Agreement dated as of May 10, 2002 by and among Automatic Systems, Inc., Columbus McKinnon Corporation and ASI Acquisition Corp. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated May 29, 2002). #21.1 Subsidiaries of the Registrant. #23.1 Consent of Ernst & Young LLP. * Indicates a management contract or compensation plan or arrangement. # Filed herewith 38 (b) Reports on Form 8-K: On March 8, 2002, the Company filed a Current Report on Form 8-K with respect to a press release issued to announce the solicitation of consents from the holders of its outstanding 8 1/2% Senior Subordinated Notes due 2008 to amend certain provisions of the Indenture pursuant to which such notes were issued. 39 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Date: June 11, 2002 COLUMBUS McKINNON CORPORATION By: /s/ Timothy T. Tevens ---------------------- Timothy T. Tevens President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- S/ TIMOTHY T. TEVENS President and Chief Executive Officer June 11, 2002 - ------------------------------------ (Principal Executive Officer) Timothy T. Tevens S/ ROBERT L. MONTGOMERY, JR. Executive Vice President, Chief Financial - ------------------------------------ Officer and Director June 11, 2002 Robert L. Montgomery, Jr. (Principal Financial Officer and Principal Accounting Officer) S/ HERBERT P. LADDS, JR. Chairman of the Board of Directors June 11, 2002 - ------------------------------------ Herbert P. Ladds, Jr. S/ L. DAVID BLACK Director June 11, 2002 - ------------------------------------ L. David Black S/ CARLOS PASCUAL Director June 11, 2002 - ------------------------------------ Carlos Pascual S/ RICHARD H. FLEMING Director June 11, 2002 - ------------------------------------ Richard H. Fleming
40 EX-4.8 3 dex48.txt FIFTH SUPPLEMENTAL INDENTURE Exhibit 4.8 FIFTH SUPPLEMENTAL INDENTURE FIFTH SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of April 4, 2002, among Columbus McKinnon Corporation, a New York corporation, the Guarantors (as defined in the Indenture referred to herein) and State Street Bank and Trust Company, N.A., as trustee under the indenture referred to herein (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an Indenture (the "Original Indenture"), dated as of March 31, 1998 providing for the issuance of an aggregate principal amount of up to $300.0 million of 8 1/2% Senior Subordinated Notes due 2008 (the "Notes"); WHEREAS, the Company, the Guarantors and the Trustee amended the Original Indenture by entering into a Supplemental Indenture dated as of March 31, 1998, a Second Supplemental Indenture dated as of February 12, 1999, a Third Supplemental Indenture dated as of March 1, 1999 and a Fourth Supplemental Indenture dated as of November 1, 1999 in order to add certain entities as guarantors and to reflect the merger or disposition of certain Guarantors (the Original Indenture, as supplemented by the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture and the Fourth Supplemental Indenture, the "Indenture"); and WHEREAS, Section 9.02 of the Indenture provides that the Company, the Guarantors and the Trustee may amend or supplement the Indenture with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding; and WHEREAS, the Company, the Guarantors and the Trustee desire to amend the Indenture as set forth in Section 2 hereof; and WHEREAS, the Company has received consents to the amendments effected by this Fifth Supplemental Indenture from the Holders of at least a majority in principal amount of the Notes outstanding; and WHEREAS, this Fifth Supplemental Indenture has been duly authorized by all necessary corporate action on the part of the Company and the Guarantors; and WHEREAS, all conditions precedent provided for in the Indenture relating to this Fifth Supplemental Indenture have been complied with; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Guarantors and the Trustee mutually covenant and agree for the benefit of each other and for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AMENDMENT TO INDENTURE. Section 5.01 of the Indenture is amended and restated in its entirety to read as follows: "SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS (a) Neither the Company nor any Guarantor shall consolidate or merge with or into (whether or not the Company or such Guarantor is the surviving corporation), nor shall the Company sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company or such Guarantor is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company or such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company or such Guarantor) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee and under the Registration Rights Agreement; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company or such Guarantor), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (a) shall have Consolidated Net Worth immediately after the transaction equal to or greater than the consolidated net worth of the Company immediately preceding the transaction and (b) shall, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. (b) No Guarantor shall sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless immediately after such transaction no Default or Event of Default exists." 3. EFFECTIVENESS AND EFFECT. (a) This Fifth Supplemental Indenture shall take effect on the date hereof (the "Effective Date"). (b) As of the Effective Date, the Indenture shall be modified and amended in accordance with the provisions of this Fifth Supplemental Indenture, and all the terms and conditions of the Indenture and this Fifth Supplemental Indenture shall be read together as though they constitute one instrument, except that, in the case of conflict, the provisions of this Fifth Supplemental Indenture will control. All references to the Indenture in the Indenture or in any other agreement, document or instrument delivered in connection therewith or pursuant thereto shall be deemed to refer to the Indenture as amended by this Fifth Supplemental Indenture. The Indenture, as modified and amended by this Fifth Supplemental Indenture, is hereby ratified and confirmed in all respects and shall be binding upon all Holders. 4. CONFLICT WITH TRUST INDENTURE ACT. If any provision of this Fifth Supplemental Indenture limits, qualifies or conflicts with any provision of the TIA that is required under the TIA to be part of and govern any provision of this Fifth Supplemental Indenture, the provisions of the TIA shall control. If any provision of this Fifth Supplemental Indenture modifies or excludes any provision of the TIA that may be modified or excluded, the provision of the TIA shall be deemed to (i) be applicable to the Indenture as so modified or (ii) be excluded by this Fifth Supplemental Indenture, as the case may be. 5. SEVERABILITY. In the event any provision of this Fifth Supplemental Indenture shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 6. SUCCESSORS. All covenants and agreements in this Fifth Supplemental Indenture of the Company, the Guarantors and the Trustee shall bind their successors and assigns, whether so expressed or not. 7. NEW YORK LAW TO GOVERN. This Fifth Supplemental Indenture shall be governed by and construed in accordance with the internal laws of the State of New York, as applied to contracts made and performed with in the State of New York, without regard to principles of conflicts of law. 8. COUNTERPARTS. The parties may sign any number of copies of this Fifth Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. EFFECT OF HEADINGS. The section headings herein are for convenience only and shall not affect the construction hereof. 10. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Fifth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company and the Guarantors. In entering into this Fifth Supplemental Indenture, the Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct or affecting the liability or affording protection to the Trustee, whether or not explicitly provided herein. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be duly executed and attested, all as of the date first above written. COLUMBUS McKINNON CORPORATION By: /s/ Robert L. Montgomery ----------------------------- Name: Robert L. Montgomery Title: Executive Vice President CRANE, ENGINEERING & SERVICE GROUP, INC. By: /s/ Robert L. Montgomery ----------------------------- Name: Robert L. Montgomery Title: Vice President AUTOMATIC SYSTEMS, INC. By: /s/ Robert L. Montgomery ----------------------------- Name: Robert L. Montgomery Title: Treasurer LICO STEEL, INC. By: /s/ Robert L. Montgomery ----------------------------- Name: Robert L. Montgomery Title: Treasurer YALE INDUSTRIAL PRODUCTS, INC. By: /s/ Robert L. Montgomery ----------------------------- Name: Robert L. Montgomery Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY, N.A., as Trustee By: /s/ Jason G. Gregory ----------------------------- Name: Jason G. Gregory Title: Assistant Vice President EX-10.20 4 dex1020.txt TENTH AMENDMENT TO CREDIT AGREEMENT Exhibit 10.20 TENTH AMENDMENT TO CREDIT AGREEMENT THIS TENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of April 16, 2002, is by and among COLUMBUS MCKINNON CORPORATION, a New York corporation (the "Borrower"), the banks, financial institutions and other institutional lenders which are parties to the Credit Agreement (as such term is defined below) (the "Lenders"), FLEET NATIONAL BANK, as Initial Issuing Bank (the "Initial Issuing Bank"), FLEET NATIONAL BANK, as the Swing Line Bank (the "Swing Line Bank"; each of the Lenders, the Initial Issuing Bank and the Swing Line Bank, individually, a "Lender Party" and, collectively, the "Lender Parties"), and FLEET NATIONAL BANK, as administrative agent (together with any successor appointed pursuant to Article VII of the Credit Agreement, the "Administrative Agent") for the Lender Parties. W I T N E S S E T H : WHEREAS, the Borrower, Lenders, Initial Issuing Bank, Swing Line Bank and Administrative Agent are party to that certain Credit Agreement, dated as of March 31, 1998, as amended by that certain First Amendment to Credit Agreement, dated as of September 23, 1998, that certain Second Amendment to Credit Agreement and Consent, dated as of February 12, 1999, that certain Third Amendment to Credit Agreement and Consent, dated as of November 16, 1999, that certain Fourth Amendment to Credit Agreement and Waiver, dated as of February 15, 2000, that certain Fifth Amendment to Credit Agreement, dated as of September 28, 2000, that certain Sixth Amendment to Credit Agreement and Consent, dated as of February 5, 2001, that certain Seventh Amendment to Credit Agreement and Consent, dated as of June 26, 2001, that certain Eighth Amendment to Credit Agreement, dated as of November 21, 2001, and the certain Ninth Amendment to Credit Agreement (the "Ninth Amendment"), dated as of February 12, 2002 (as so amended and as it may hereafter be further amended, supplemented, restated, extended or otherwise modified from time to time, the "Credit Agreement"); WHEREAS, pursuant to the Ninth Amendment, the Lenders consented to the sale of the Borrower's subsidiary, Automatic Systems, Inc. ("ASI"), subject to certain conditions set forth therein (such sale, as consented to in the Ninth Amendment, the "ASI Sale"); WHEREAS, Borrower has requested that certain of the conditions to the ASI Sale be modified; WHEREAS, Defaults or Events of Default exist under the financial covenants set forth in Section 5.04 of the Credit Agreement as at and for the period ended March 31, 2002 (the Defaults or Events of Default described in the preceding clauses, the "Existing Events of Default"); WHEREAS, the Borrower has requested that, notwithstanding the Existing Events of Default, the Lenders continue to make Revolving Credit Advances and Alternative Currency Revolving Credit Advances, the Swing Line Bank continue to make Swing Line Advances and the Issuing Bank continue to issue Letters of Credit and Alternative Currency Letters of Credit in an aggregate outstanding amount not to exceed $10,000,000 between the date of this Amendment and June 30, 2002; WHEREAS, the Administrative Agent and Lender Parties are agreeable to the foregoing as and to the extent set forth in this Amendment and subject to each of the terms and conditions stated herein. NOW THEREFORE, in consideration of the premises and the mutual covenants set forth herein and of the loans or other extensions of credit heretofore, now or hereafter made to, or for the benefit of, the Borrower and its Subsidiaries by the Lender Parties, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. Except to the extent otherwise specified herein, capitalized terms used in this Amendment shall have the same meanings ascribed to them in the Credit Agreement. 2. Consent to Modifications to Conditions of ASI Sale. The Administrative Agent and Lender Parties hereby consent to the following modifications to the conditions of the ASI Sale, as set forth in the Ninth Amendment: (a) the ASI Sale may be structured as a sale of the assets of ASI and (b) the total amount of cash to be paid to the Borrower at the closing of the ASI Sale shall be at least $16,000,000. Except as so modified, all of the conditions to the ASI Sale as set forth in the Ninth Amendment shall remain in full and force and effect, shall not be deemed to have been waived or modified in any respect and are hereby ratified and confirmed. 3. Consent to Additional Advances and Issuances of Letters of Credit. Notwithstanding the Existing Events of Default, the Administrative Agent and the Lender Parties hereby consent to the making of Revolving Credit Advances, Alternative Currency Revolving Credit Advances and Swing Line Advances and the issuance of Letters of Credit and Alternative Currency Letters of Credit to or for the account of the Borrower during the period from the date hereof until June 30, 2002; provided, that the aggregate principal amount of the Revolving Credit Advances plus the Assigned Dollar Value of Alternative Currency Revolving Credit Advances plus the aggregate principal amount of the Swing Line Advances plus the aggregate Available Amount of all Letters of Credit and Alternative Currency Letters of Credit made or issued during such period shall not exceed $10,000,000. The consent set forth in the immediately preceding sentence is a limited consent, limited to its express terms, and is not a consent with respect to any other provision or matter relating to the Credit Agreement or any other Loan Document. Such consent is not a waiver of any of the Existing Events of Default or an agreement or understanding to waive at any future time any of the Existing Events of Default. 4. Amendments. 4.1. Section 1.01 of the Credit Agreement is amended by deleting from the definition of "Applicable Margin" the entire pricing chart contained therein and replacing it with the following chart: -2-
Applicable Margin for Applicable Margin for Applicable Margin for Ratio of Funded Debt to EBITDA Prime Rate Advances Eurodollar Rate Advances Commitment Fee - ------------------------------ --------------------- ------------------------ --------------------- Equal to or greater than 5.50 2.500% 3.750% 0.500% Equal to or greater than 5.00 less 2.250% 3.500% 0.500% than 5.50 Equal to or greater than 4.50 less 2.000% 3.250% 0.500% than 5.00 Equal to or greater than 4.00 less than 4.50 1.750% 3.000% 0.500% Equal to or greater than 3.50 less than 4.00 1.500% 2.750% 0.500% Equal to or greater than 3.00 less than 3.50 1.250% 2.500% 0.500% Less than 3.00 1.000% 2.250% 0.400%
4.2. As of the effective date of this Amendment, the Applicable Margins shall automatically be set at the levels set forth above for a Ratio of Funded Debt to EBITDA equal to or greater than 5.00 and less than 5.50. Thereafter, the Applicable Margins shall be subject to future adjustment as and at the times set forth in the last paragraph of the definition of "Applicable Margin". 5. Conditions Precedent to this Amendment. The effectiveness of this Amendment is subject to the satisfaction, in form and substance satisfactory to the Administrative Agent, of each of the following conditions precedent: 5.1. The Borrower and Required Lenders shall have duly executed and delivered this Amendment and each other Loan Party shall have duly executed the attached Acknowledgment and Ratification in connection with this Amendment 5.2. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. 5.3. The Borrower shall have paid an amendment fee to the Administrative Agent, for the account of each Lender which has approved this Amendment, as evidenced by such Lender's timely execution and delivery of a counterpart signature page to this Amendment (each such Lender being an "Approving Lender"), in an amount equal to 0.05% (i.e. 5 basis points) of such Approving Lender's Revolving Credit Commitment. 6. Reference to and Effect Upon the Credit Agreement and other Loan Documents. 6.1. Except for the specific consents set forth in Sections 2 and 3 above, the Credit Agreement and each of the other Loan Documents shall remain in full force and effect and each is hereby ratified and confirmed. -3- 6.2. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or any other word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference in any other Loan Document to the Credit Agreement or any word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby. 7. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original, but all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart to this Amendment by telecopier shall be as effective as delivery of a manually executed counterpart of this Amendment. 8. Costs and Expenses. The Borrower shall pay on demand all reasonable fees, costs and expenses incurred by Administrative Agent (including, without limitation, all reasonable attorneys' fees) in connection with the preparation, execution and delivery of this Amendment and the taking of any actions by any Person in connection herewith. 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 10. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. [signature pages follow] -4- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized on the date first above written. COLUMBUS MCKINNON CORPORATION By: /s/ Robert L. Montgomery ------------------------------ Robert L. Montgomery Title: Executive Vice President ACKNOWLEDGMENT AND RATIFICATION The undersigned hereby acknowledge and agree to this Amendment, and agree that the Guaranty, the Security Agreement and the Intellectual Property Security Agreement, and each other Loan Document executed by the undersigned shall remain in full force and effect and each is hereby ratified and confirmed by and on behalf of the undersigned, this 12th day of February, 2002. AUTOMATIC SYSTEMS, INC. By: /s/ Robert L. Montgomery ------------------------------ Robert L. Montgomery Title: Treasurer LICO STEEL, INC. By: /s/ Robert L. Montgomery ------------------------------ Robert L. Montgomery Title: Treasurer CRANE EQUIPMENT & SERVICE, INC. By: /s/ Robert L. Montgomery ------------------------------ Robert L. Montgomery Title: Treasurer YALE INDUSTRIAL PRODUCTS, INC. By: /s/ Robert L. Montgomery ------------------------------ Robert L. Montgomery Title: Treasurer Lenders FLEET NATIONAL BANK, as Administrative Agent, Initial Issuing Bank, Swing Line Bank and Lender By: /s/ John C. Wright ---------------------------------- Name: John C. Wright Title: Vice President Lenders ABN-AMRO BANK N.V. NEW YORK BRANCH, as a Co-Agent and Lender By: /s/ Sean P. Giglio ---------------------------------- Name: Sean P. Giglio Title: Vice President By: /s/ Craig W. Trantwein ---------------------------------- Name: Craig W. Trantwein Title: Vice President Lenders THE BANK OF NOVA SCOTIA, as a Co-Agent and Lender By: /s/ Todd S. Meller ---------------------------------- Name: Todd S. Meller Title: Managing Director Lenders MANUFACTURERS AND TRADERS TRUST COMPANY, as a Co-Agent and Lender By: /s/ Jeffrey P. Kapefick ---------------------------------- Name: Jeffrey P. Kapefick Title: Vice President Lenders HSBC BANK USA (formerly known as Marine Midland Bank), as a Co-Agent and Lender By: /s/ John G. Tiarney ---------------------------------- Name: John G. Tiarney Title: Vice President Lenders COMERICA BANK By: /s/ Joel S. Gordon ---------------------------------- Name: Joel s. Gordon Title: Account Officer Lenders FIRST UNION NATIONAL BANK By:______________________________ Name: ___________________________ Title: ____________________________ Lenders KEYBANK NATIONAL ASSOCIATION By: /s/ Mary K. Young ---------------------------------- Name: Mary K. Young Title: Vice President Lenders CITIZENS BANK OF PENNSYLVANIA By: /s/ Brian V. Ciaverella ---------------------------------- Name: Brian V. Ciaverella Title: Vice President Lenders BANKERS TRUST COMPANY By:______________________________ Name: ___________________________ Title: ____________________________ Lenders THE BANK OF NEW YORK By: /s/ Christine T. Rio ---------------------------------- Name: Christine T. Rio Title: Vice President Lenders PNC BANK, NATIONAL ASSOCIATION By: /s/ Stephen W. Boyd ---------------------------------- Name: Stephen W. Boyd Title: Vice President Lenders NATIONAL CITY BANK OF PENNSYLVANIA By:______________________________ Name: ___________________________ Title: ____________________________ EX-10.21 5 dex1021.txt ELEVENTH AMENDMENT TO CREDIT AGREEMENT Exhibit 10.21 ELEVENTH AMENDMENT TO CREDIT AGREEMENT THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of June 6, 2002, is by and among COLUMBUS MCKINNON CORPORATION, a New York corporation (the "Borrower"), the banks, financial institutions and other institutional lenders which are parties to the Credit Agreement (as such term is defined below) (the "Lenders"), FLEET NATIONAL BANK, as Initial Issuing Bank (the "Initial Issuing Bank"), FLEET NATIONAL BANK, as the Swing Line Bank (the "Swing Line Bank"; each of the Lenders, the Initial Issuing Bank and the Swing Line Bank, individually, a "Lender Party" and, collectively, the "Lender Parties"), and FLEET NATIONAL BANK, as administrative agent (together with any successor appointed pursuant to Article VII of the Credit Agreement, the "Administrative Agent") for the Lender Parties. W I T N E S S E T H : ------------------- WHEREAS, the Borrower, Lenders, Initial Issuing Bank, Swing Line Bank and Administrative Agent are party to that certain Credit Agreement, dated as of March 31, 1998, as amended by that certain First Amendment to Credit Agreement, dated as of September 23, 1998, that certain Second Amendment to Credit Agreement and Consent, dated as of February 12, 1999, that certain Third Amendment to Credit Agreement and Consent, dated as of November 16, 1999, that certain Fourth Amendment to Credit Agreement and Waiver, dated as of February 15, 2000, that certain Fifth Amendment to Credit Agreement, dated as of September 28, 2000, that certain Sixth Amendment to Credit Agreement and Consent, dated as of February 5, 2001, that certain Seventh Amendment to Credit Agreement and Consent, dated as of June 26, 2001, that certain Eighth Amendment to Credit Agreement, dated as of November 21, 2001, that certain Ninth Amendment to Credit Agreement, dated as of February 12, 2002, and that certain Tenth Amendment to Credit Agreement, dated as of April 16, 2002 (as so amended and as it may hereafter be further amended, supplemented, restated, extended or otherwise modified from time to time, the "Credit Agreement"); WHEREAS, Events of Default exist under (i) Section 5.04(a) (Maximum Funded Debt to EBITDA Ratio) of the Credit Agreement for the period of four fiscal quarters ended March 31, 2002, (ii) Section 5.04(d) (Minimum Net Worth) as of March 31, 2002 and (iii) Section 5.04(e) (Minimum EBITDA) for the period of one fiscal quarter ended March 31, 2002 (such Events of Default being the "Existing Events of Default"); WHEREAS, the Borrower has requested that the Administrative Agent and Lender Parties waive the Existing Events of Default; WHEREAS, the Borrower has requested that the Revolving Credit Facility be reduced to $150,000,000; WHEREAS, the Borrower, for the Borrower's valid business reasons, has requested that the Administrative Agent and Lenders consent to (i) the creation of a new Subsidiary, Audubon Europe S.a.r.l. ("Audubon Luxembourg"), to be incorporated in Luxembourg and to be a wholly-owned Subsidiary of Yale Industrial Products, Inc. ("Yale US"), (ii) the transfer by the Borrower of all of the shares of stock of Columbus McKinnon Limited ("CM Canada") to Yale US and (iii) the transfer by Yale US of all of the shares of stock of CM Canada, Yale Industrial Products Ltd. ("Yale UK") and Yale Industrial Products GmbH ("Yale Germany") to Audubon Luxembourg; WHEREAS, the Borrower has also requested that the Administrative Agent and Lender Parties otherwise amend the Credit Agreement as and to the extent set forth in this Amendment; and WHEREAS, the Administrative Agent and Lender Parties are agreeable to the foregoing as and to the extent set forth in this Amendment and subject to each of the terms and conditions stated herein. NOW THEREFORE, in consideration of the premises and the mutual covenants set forth herein and of the loans or other extensions of credit heretofore, now or hereafter made to, or for the benefit of, the Borrower and its Subsidiaries by the Lender Parties, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. Except to the extent otherwise specified herein, capitalized terms used in this Amendment shall have the same meanings ascribed to them in the Credit Agreement. 2. Consent. 2.1. The Administrative Agent and Lender Parties hereby consent to the creation of Audubon Luxembourg; provided, that Audubon Luxembourg complies with the provisions of Section 5.02(o) of the Credit Agreement, i.e., Audubon Luxembourg shall become a Guarantor pursuant to the terms of the Guaranty and an additional grantor pursuant to the terms of the Security Agreement and Intellectual Property Security Agreement and all (100%) shares of the capital stock of Audubon Luxembourg shall be pledged to the Administrative Agent. 2.2. Notwithstanding the provisions of Section 5.02(e) (Sales, Etc. of Assets) or any other provision of the Credit Agreement, the Administrative Agent and Lender Parties hereby consent to (i) the transfer by the Borrower of all of the shares of stock of CM Canada to Yale US and (ii) the transfer by Yale US of all of the shares of stock of CM Canada, Yale UK and Yale Germany to Audubon Luxembourg; provided, that, at least 65% of the outstanding shares of capital stock of CM Canada and Yale Germany shall be pledged to the Administrative Agent. 2.3. Notwithstanding any provisions of any Loan Document, the Administrative Agent and the Lender Parties hereby consent to a restriction on the transferability of the stock of both Yale US and Audubon Luxembourg such that in connection with the transfer of the stock of either company, the stock of the other company is also required to be transferred. 2.4. The consents set forth in Sections 2.1, 2.2 and 2.3 are subject to the additional condition that the Borrower shall have delivered to the Administrative Agent a copy of the opinion letter of Ernst & Young to the Borrower with respect to the tax consequences of the transactions described in Sections 2.1, 2.2 and 2.3, such opinion letter to be in form and substance satisfactory to the Administrative Agent. -2- 3. Waiver. The Administrative Agent and Lender Parties hereby waive the Existing Events of Default under Sections 5.04(a), 5.04(d) and 5.04(e) of the Credit Agreement solely for the period ended March 31, 2002 or as of March 31, 2002, as applicable. The foregoing waiver is only applicable and shall only be effective in the specific instance and for the specific purpose for which made. Such waiver is expressly limited to the facts and circumstances referred to herein and shall not operate (a) as a waiver of or consent to non-compliance with any other Section or provision of the Credit Agreement or any other Loan Document, (b) as a waiver of any other right, power or remedy of the Administrative Agent or any Lender Party under the Credit Agreement or any other Loan Document or (c) as a waiver of or consent to any Default or Event of Default under the Credit Agreement or any other Loan Document, other than as expressly provided in this Section 3. 4. Amendments. 4.1. The Revolving Credit Commitments of each of the Revolving Credit Lenders are hereby reduced on a pro rata basis such that the Revolving Credit Facility shall be reduced to $150,000,000. 4.2. The following definitions are inserted in the appropriate alphabetical order in Section 1.01 of the Credit Agreement: "Audubon Luxembourg" means a wholly-owned Subsidiary of Yale Industrial Products, Inc. to be incorporated under the laws of Luxembourg. "Debt Issuance" means any issuance or sale or other incurrence by the Borrower or any of its Subsidiaries of any Debt; provided, however, that, other than Debt permitted under Sections 5.02(b)(vi) or (ix), the term "Debt Issuance" shall not include the incurrence of Debt expressly permitted under Section 5.02(b). "Equity Issuance" means any sale or issuance for cash by the Borrower or any of its Subsidiaries of any capital stock or other ownership of profit interest, any securities convertible or exchangeable for capital stock or other ownership or profit interest or any warrants, rights or options to acquire capital stock or other ownership or profit interest; provided, however, that the term "Equity Issuance" shall not include the issuance of stock permitted under clauses (x), (y) or (z) of Section 5.02(r)(i). 4.3. The following is inserted as a new clause (C) at the end of the definition of "EBITDA" in Section 1.01 of the Credit Agreement: "plus (C) to the extent deducted from the calculation of net income for such period, the amount of the loss realized by the Borrower from the sale of Handling Systems and Conveyors, Inc." 4.4. The definition of "Net Cash Proceeds" in Section 1.01 of the Credit Agreement is amended by inserting after the words "or any Extraordinary Receipt" and before the words "received by or paid to or for the account of any Person," the words ", any Debt Issuance or any Equity Issuance". -3- 4.5. Section 2.05(b)(ii) of the Credit Agreement is amended as follows: (a) The word "or" appearing after the words "Section 2.06(b)(ii)" and before the word "(iii)" is deleted and replaced with a comma. (b) The words "or (vi)" are inserted after the word "(iii)". 4.6. Section 2.06(b)(iv) of the Credit Agreement is amended as follows: (a) The word "or" appearing after the word "(ii)" and before the word "(iii)" is deleted and replaced with a comma. (b) The words "or (vi)" are inserted after the word "(iii)". 4.7. The following is inserted as a new Section 2.06(b)(vi) of the Credit Agreement: "(vi) Within one (1) Business Day after receipt by any Loan Party or any of its Subsidiaries of Net Cash Proceeds from any Debt Issuance or Equity Issuance, the Borrower shall prepay the then outstanding Advances in an amount equal to one hundred percent (100%) of such Net Cash Proceeds." 4.8. The following are inserted as new Sections 5.03(v) and 5.03(w) of the Credit Agreement: "(v) Monthly Financials. As soon as available and in any event within twenty (20) days after the end of each fiscal month, a Consolidated statement of income of the Borrower and its Subsidiaries and a consolidating statement of income of the Borrower and its Significant Subsidiaries, for (i) the period commencing at the end of the previous fiscal month and ending with the end of such fiscal month and (ii) the period commencing at the end of the previous Fiscal Year and ending with the end of such fiscal month, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding Fiscal Year and the corresponding figures from the budgeted forecasts delivered pursuant to Section 5.03(e) for such period and for the Fiscal Year which includes such period, all in reasonable detail and duly certified by the chief financial officer of the Borrower as having been prepared in accordance with GAAP (subject to normal quarterly adjustments and year-end audit adjustments), together with a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto. (w) Monthly Accounts Receivable Aging. As soon as available and in any event within ten (10) days after the end of each of fiscal month, a monthly trial balance showing accounts receivable, as controlled by CMBIS, aged from invoice date as follows: 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more, accompanied by such supporting detail and documentation as shall be requested by the Administrative Agent in its reasonable discretion." -4- 4.9. The following is inserted as a new clause (x) at the end of Section 5.02(b) of the Credit Agreement (Debt): "(x) in the case of the Borrower, Debt owed to Audubon Luxembourg, provided, that (A) the amount of such Debt shall not exceed the amount of cash actually received by the Borrower from Audubon Luxembourg, (B) such Debt is evidenced by a promissory note or notes, (C) such promissory note or notes are pledged to the Administrative Agent pursuant to the terms of the Security Agreement and (D) no payments of principal under such note or notes shall be payable in cash prior to the later of (x) the Termination Date and (y) June 6, 2007." 4.10. Section 5.04(a) of the Credit Agreement (Funded Debt to EBITDA Ratio) is amended by resetting the financial covenants contained therein for the periods provided below to the new levels set forth below: Four Fiscal Quarters ending on: Ratio ------------------------------- ----- June 30, 2002 6.00 to 1.0 September 29, 2002 6.15 to 1.0 December 29, 2002 6.25 to 1.0 4.11. Section 5.04(b) of the Credit Agreement (Interest Coverage Ratio) is amended by resetting the financial covenants contained therein for the periods provided below to the new levels set forth below: Four Fiscal Quarters ending on: Ratio ------------------------------- ----- June 30, 2002 1.75 to 1.0 September 29, 2002 1.75 to 1.0 December 29, 2002 1.75 to 1.0 4.12. Section 5.04(c) of the Credit Agreement (Fixed Charge Coverage Ratio) is amended by resetting the financial covenants contained therein for the periods provided below to the new levels set forth below: Four Fiscal Quarters ending on: Ratio ------------------------------- ----- June 30, 2002 1.35 to 1.0 September 29, 2002 1.35 to 1.0 December 29, 2002 1.40 to 1.0 4.13. Section 5.04(d) of the Credit Agreement (Minimum Net Worth) is amended and restated in its entirety to read as set forth below: "(d) Minimum Net Worth. Maintain, as of the last day of each fiscal quarter, an excess of Consolidated total assets over Consolidated total liabilities of the Borrower and -5- its Subsidiaries of not less than (i) $66,600,000 plus (ii) 75% of Consolidated positive net income (and excluding 100% of Consolidated net losses) of the Borrower and its Subsidiaries since March 30, 2002 to and including each date of determination computed on a cumulative basis for said entire period." 4.14. Section 5.04(e) of the Credit Agreement (Minimum EBITDA) is amended by resetting the financial covenants contained therein for the fiscal quarters provided below to the new levels set forth below: Fiscal Quarter ending on: Amount ------------------------- ------ June 30, 2002 $12,000,000 September 29, 2002 $12,250,000 December 29, 2002 $12,500,000" 5. Additional Covenants. 5.1. If the Borrower has not prepaid the Revolving Credit Advances by at least $50,000,000 and correspondingly permanently reduced the Revolving Credit Facility by at least $50,000,000 on or before September 29, 2002, then: (a) on September 29, 2002, the Borrower and each of its Domestic Subsidiaries shall enter into a new cash management system, which shall include a cash collateral account, with the Administrative Agent and each bank at which the Borrower or such Subsidiary maintains a bank account, such cash management system to be in form and substance satisfactory to the Administrative Agent; and (b) from and after September 29, 2002, the Borrower shall permit the Administrative Agent to conduct at any time and from time to time such commercial finance examinations and/or Collateral audits of the Borrower and its Subsidiaries as the Administrative Agent may request. 6. Pricing. 6.1. On the date of this Amendment, the Borrower shall pay an amendment fee to the Administrative Agent, for the account of each Lender which has approved this Amendment, as evidenced by such Lender's timely execution and delivery of a counterpart signature page to this Amendment (each such Lender being an "Approving Lender"), in an amount equal to 0.10% (i.e. 10.0 basis points) of such Approving Lender's Revolving Credit Commitment immediately after giving effect to the reduction of the Revolving Credit Commitments set forth in Section 4.1 of this Amendment. 6.2. On September 29, 2002, (a) the Borrower shall pay to the Administrative Agent, for the benefit of the Lenders, a fee in the amount of $187,500 and (b) all of the Applicable Margins then in effect shall automatically be increased by 0.25% (i.e., 25 basis points); provided, however, that, if the Borrower has prepaid the Revolving Credit Advances by at least -6- $50,000,000 and correspondingly permanently reduced the Revolving Credit Facility by at least $50,000,000 on or before September 29, 2002, then such fee shall not be payable and such pricing change shall not become effective. 6.3. On December 29, 2002, (a) the Borrower shall pay to the Administrative Agent, for the benefit of the Lenders, a fee in the amount of $187,500 and (b) all of the Applicable Margins then in effect shall automatically be increased by 0.25% (i.e., 25 basis points); provided, however, that, if the Borrower has prepaid the Revolving Credit Advances by at least $50,000,000 and correspondingly permanently reduced the Revolving Credit Facility by at least $50,000,000 on or before December 29, 2002, then such fee shall not be payable and such pricing change shall not become effective. 7. Possible Transactions. 7.1. Notwithstanding any other provision of the Credit Agreement or any other Loan Document to the contrary, the Administrative Agent and Lender Parties hereby consent to the sale by the Borrower of common stock or the issuance by the Borrower of senior unsecured debt or subordinated debt; provided, that, all of the following conditions are met with respect to any such transaction (any such transaction being a "Possible Transaction"): (a) The entire Net Cash Proceeds from any such Possible Transaction shall be used to prepay Advances under the Credit Agreement, such prepayment to result in a corresponding permanent reduction of the Revolving Credit Facility in the amount of such prepayment. (b) As to any such Possible Transaction which is an issuance of common stock of the Borrower, such transaction shall be consummated in compliance with the terms of the Credit Agreement, including, without limitation, Section 5.02(r)(ii) of the Credit Agreement. (c) As to any such Possible Transaction which is an issuance of senior unsecured or subordinated debt, the terms and conditions of such transaction and such senior unsecured or subordinated debt, including, without limitation, the subordination provisions thereof, shall be satisfactory in form and substance to the Administrative Agent. (d) Any such Possible Transaction is conducted and consummated in compliance with the Senior Subordinated Note Documents. 8. Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows: 8.1. Each of the representations and warranties set forth in the Credit Agreement, including, without limitation, in Article IV of the Credit Agreement, and in each other Loan Document, is true, correct and complete on and as of the date hereof as though made on the date hereof. In addition, the Borrower hereby represents, warrants and affirms that the Credit Agreement and each of the other Loan Documents remains in full force and effect. -7- 8.2. As of the date hereof and after giving effect to this Amendment, there exists no Default or Event of Default under the Credit Agreement or any other Loan Document, and no event which, with the giving of notice or lapse of time, or both, would constitute a Default or Event of Default. 8.3. The execution, delivery and performance by each applicable Loan Party of this Amendment and/or the reaffirmations and confirmations attached hereto and each other Loan Document are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not, and will not, (i) contravene such Loan Party's charter or bylaws, (ii) violate any law (including, without limitation, the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended), rule, regulation (including, without limitation, any Regulation of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any material contract, loan agreement, indenture (including, without limitation, the Senior Subordinated Note Indenture), mortgage, deed of trust, lease or other material instrument or agreement binding on or affecting any Loan Party, any of its Subsidiaries or any of their respective properties or (iv) except for the Liens created under the Collateral Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. Neither any Loan Party nor any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture (including, without limitation, the Senior Subordinated Note Indenture), mortgage, deed of trust, lease or other instrument or agreement, the violation or breach of which could reasonably be expected to have a Material Adverse Effect. 8.4. Each of this Amendment and each other Loan Document has been duly executed and delivered by each Loan Party party hereto and thereto. Each of this Amendment and each other Loan Document is the legal, valid and binding obligation of each Loan Party party hereto and thereto, enforceable against such Loan Party in accordance with its terms. 8.5. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Amendment, any other Loan Document or any other agreement or document related hereto or thereto or contemplated hereby or thereby to which it is or is to be a party or otherwise bound, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by the Administrative Agent or any Lender Party of its rights under the Loan Documents or remedies in respect of the Collateral pursuant to the Collateral Documents. -8- 9. Conditions Precedent to this Amendment. The effectiveness of this Amendment is subject to the satisfaction, in form and substance satisfactory to the Administrative Agent, of each of the following conditions precedent: 9.1. The Borrower and Lenders shall have duly executed and delivered this Amendment and each other Loan Party shall have duly executed the attached Acknowledgment and Ratification in connection with this Amendment 9.2. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. 9.3. The representations and warranties contained in Section 8 of this Amendment, the Credit Agreement and each other Loan Document shall be true, correct and complete on and as of the closing date of this Amendment as though made on such date. 9.4. The Borrower shall have paid the amendment fee provided for in Section 6.1 of this Amendment. 9.5. The Borrower and the other Loan Parties shall have taken all such other actions and executed and delivered all such other agreements, instruments, certificates and documents, if any, as the Administrative Agent shall have reasonably requested. 10. Reference to and Effect Upon the Credit Agreement and other Loan Documents. 10.1. Except as specifically set forth in this Amendment, the Credit Agreement and each of the other Loan Documents shall remain in full force and effect and each is hereby ratified and confirmed. 10.2. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or any other word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference in any other Loan Document to the Credit Agreement or any word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby. 11. Counterparts. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original, but all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart to this Amendment by telecopier shall be as effective as delivery of a manually executed counterpart of this Amendment. 12. Costs and Expenses. The Borrower shall pay on demand all reasonable fees, costs and expenses incurred by Administrative Agent (including, without limitation, all reasonable attorneys' fees) in connection with the preparation, execution and delivery of this Amendment and the taking of any actions by any Person in connection herewith. -9- 13. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 14. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. [signature pages follow] -10- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized on the date first above written. COLUMBUS MCKINNON CORPORATION By: /s/ Robert L. Montgomery ------------------------------- Robert L. Montgomery Title: Executive Vice President ACKNOWLEDGMENT AND RATIFICATION The undersigned hereby acknowledge and agree to this Amendment, and agree that the Guaranty, the Security Agreement and the Intellectual Property Security Agreement, and each other Loan Document executed by the undersigned shall remain in full force and effect and each is hereby ratified and confirmed by and on behalf of the undersigned, this 6th day of June 2002. AUDUBON WEST, INC. By: /s/ Robert L. Montgomery ------------------------------- Robert L. Montgomery Title: Treasurer LICO STEEL, INC. By: /s/ Robert L. Montgomery ------------------------------- Robert L. Montgomery Title: Treasurer CRANE EQUIPMENT & SERVICE, INC. By: /s/ Robert L. Montgomery ------------------------------- Robert L. Montgomery Title: Treasurer YALE INDUSTRIAL PRODUCTS, INC. By: /s/ Robert L. Montgomery ------------------------------- Robert L. Montgomery Title: Treasurer Lenders FLEET NATIONAL BANK, as Administrative Agent, Initial Issuing Bank, Swing Line Bank and Lender By: /s/ John C. Wright ------------------------------- Name: John C. Wright Title: Vice President Lenders ABN-AMRO BANK N.V. NEW YORK BRANCH, as a Co-Agent and Lender By: /s/ Sean P. Giglio ------------------------------- Name: Sean P. Giglio ----------------------------- Title: Vice President ---------------------------- By: /s/ Craig W. Trantwein ------------------------------- Name: Craig W. Trantwein ----------------------------- Title: Vice President ---------------------------- Lenders THE BANK OF NOVA SCOTIA, as a Co-Agent and Lender By: /s/ Todd S. Meller ------------------------------- Name: Todd S. Meller ----------------------------- Title: Managing Director ---------------------------- Lenders MANUFACTURERS AND TRADERS TRUST COMPANY, as a Co-Agent and Lender By: /s/ Juffray P. Kapefick ------------------------------- Name: Juffray P. Kapefick ----------------------------- Title: Vice President ---------------------------- Lenders HSBC BANK USA (formerly known as Marine Midland Bank), as a Co-Agent and Lender By: /s/ John G. Tiarney ------------------------------- Name: John G. Tiarney ----------------------------- Title: Vice President ---------------------------- Lenders COMERICA BANK By: /s/ Joel S. Gordon ------------------------------- Name: Joel S. Gordon ----------------------------- Title: Account Officer ---------------------------- Lenders WACHOVIA BANK, NA By: /s/ Robert Brown ------------------------------- Name: Robert Brown ----------------------------- Title: Director ---------------------------- Lenders KEYBANK NATIONAL ASSOCIATION By: /s/ Mary K. Young ------------------------------- Name: Mary K. Young ----------------------------- Title: Vice President ---------------------------- Lenders CITIZENS BANK OF PENNSYLVANIA By: /s/ Brian V. Ciaverella ------------------------------- Name: Brian V. Ciaverella ----------------------------- Title: Vice President ---------------------------- Lenders DEUTSCHE BANK TRUST COMPANY AMERICAS By: /s/ Diane F. Rolfe ------------------------------- Name: Diane F. Rolfe ----------------------------- Title: Vice President ---------------------------- Lenders THE BANK OF NEW YORK By: /s/ Christine T. Rio ------------------------------- Name: Christine T. Rio ----------------------------- Title: Vice President ---------------------------- Lenders PNC BANK, NATIONAL ASSOCIATION By: /s/ Stephen W. Boyd ------------------------------- Name: Stephen W. Boyd ----------------------------- Title: Vice President ---------------------------- Lenders NATIONAL CITY BANK OF PENNSYLVANIA By: ------------------------------- Name: ----------------------------- Title: ---------------------------- EX-10.30 6 dex1030.txt ESOP AMENDMENT #8 Exhibit 10.30 COLUMBUS McKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN AMENDMENT NO. 8 OF THE 1989 PLAN RESTATEMENT Columbus McKinnon Corporation (the "Corporation") hereby amends the Columbus McKinnon Corporation Employee Stock Ownership Plan (the "Plan"), as amended and restated in its entirety effective April 1, 1989, and as further amended by Amendment Nos. 1 through 7, as permitted under Section 11.1 of the Plan, as follows: Amendments Effective Before 2001 1. Section 4.3, entitled "Allocation of Exempt Loan Stock", is amended effective April 1, 1989 by renumbering Paragraphs (2) and (3) of Section 4.3(c) as Paragraphs (3) and (4), and by adding new Section 4.3(c)(2) to read as follows: "(2) Dividends on Unallocated Stock Used to Make Exempt Loan Payments. Exempt Loan Stock released from the Loan Suspense Account on account of payment of the Exempt Loan with funds taken from cash dividends paid with respect to unallocated Exempt Loan Stock shall be allocated to the same Participants and in the same manner that the Contributions for such Plan Year would have been allocated under Section 3.4." 2. Section 5.2, entitled "Allocation of Trust Income or Loss", is amended effective April 1, 1989 to change Section 5.2(b) to read as follows: "(b) Determination of Income or Loss. The net income (or loss) of the Trust includes the increase (or decrease) in the fair market value of Trust assets (other than Stock), interest, dividends and other income and gains (or losses) attributable to Trust assets (other than dividends on Stock used to make payments on Exempt Loans) since the preceding Valuation Date, reduced by any expenses charged to the Trust assets for that Plan Year. The determination of the net income (or loss) of the Trust shall not take into account any interest paid by the Trust under an Exempt Loan." 3. Section 7.4, entitled "Eligible Rollover Distribution", is amended effective January 1, 2000 by changing Section 7.4(a)(1) to read as follows: (1) "Eligible Rollover Distribution." An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the Columbus McKinnon Corporation Employee Stock Ownership Plan Page 2 of Amendment No. 8 of 1989 Plan Restatement joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; effective after December 31, 1999, any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV); and the portion of any distribution that is not included in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). 4. Section 13.2, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2000 by changing Section 13.2(c) to read as follows: "(c) "Defined Benefit Plan" [Deleted]" 5. Section 13.2, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2000 by changing Section 13.2(g) to read as follows: "(g) "Projected Annual Benefit" [Deleted]" 6. Section 13.2, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2000 by changing Section 13.2(i) to read as follows: "(i) Aggregation of Section 415 Employer's Defined Contribution Plans. For the purpose of this ARTICLE 13, all Defined Contribution Plans (whether terminated or not) ever maintained by the Section 415 Employer shall be treated as one Defined Contribution Plan." 7. Section 13.4, entitled "Participation in a Defined Benefit Plan", is amended effective April 1, 2000 to read as follows: "13.4 "Participation in a Defined Benefit Plan" [Deleted]" Amendments Effective April 1, 2001 8. Section 1.6, entitled "Annual Earnings", is amended effective April 1, 2001 by amending Section 1.6(a)(2) to read as follows: "(2) Specific Inclusions. "Annual Earnings" shall include all amounts that would have been paid to the Employee by the Corporation and each of its Affiliates during the Plan Year or other period but for any salary reduction agreement and that are excluded from the gross income of the Columbus McKinnon Corporation Employee Stock Ownership Plan Page 3 of Amendment No. 8 of 1989 Plan Restatement Employee under any one of the Code sections referred to in Code Section 414(s)(2) (concerning 401(k) plans, cafeteria plans, qualified transportation fringes and certain other deferred compensation arrangements)." Amendments Effective January 1, 2002 9. Section 1.6, entitled "Annual Earnings", is amended effective April 1, 2002 by changing Section 1.6(b) to read as follows: "(b) Code Section 401(a)(17) Limit. In addition to all other applicable limitations set forth in the Plan, and notwithstanding any other provision in the Plan to the contrary, for any Plan Year or other 12-month period beginning on or after January 1, 1989, the Annual Earnings of each Employee taken into account under the Plan shall not exceed the "Code Section 401(a)(17) Limit." If a Plan Year or other determination period consists of fewer than 12 months, the "Code Section 401(a)(17) Limit" shall be multiplied by a fraction, the numerator of which is the number of months in the Plan Year or other determination period and the denominator of which is 12. (1) Limit Effective January 1, 1989. The "Code Section 401(a)(17) Limit" for the Plan Year or any other 12-month period beginning in the 1989 calendar year or any subsequent calendar year shall be $200,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17). (2) Limit Effective January 1, 1994. The "Code Section 401(a)(17) Limit" for the Plan Year or any other 12-month period beginning in the 1994 calendar year or any subsequent calendar year shall be $150,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17). (3) Limit Effective January 1, 2002. The "Code Section 401(a)(17) Limit" for the Plan Year or any other 12-month period beginning in the 2002 calendar year or any subsequent calendar year shall be $200,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17)." Columbus McKinnon Corporation Employee Stock Ownership Plan Page 4 of Amendment No. 8 of 1989 Plan Restatement 10. Section 7.4, entitled "Eligible Rollover Distributions", is amended effective January 1, 2002 by adding new Section 7.4(e) to read as follows: "(e) EGTRRA Amendment. (1) Effective Date. This subsection (e) shall apply to distributions made after December 31, 2001. (2) Modification of Definition of Eligible Retirement Plan. For purposes of the direct rollover provisions in this Section 7.4, an Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a Qualified Domestic Relation Order. (3) Modification of Definition of Eligible Rollover Distribution to Exclude Hardship Distributions. For purposes of the direct rollover provisions in this Section 7.4, any amount that is distributed on account of hardship shall not be an eligible rollover distribution and the distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan. (4) Modification of Definition of Eligible Rollover Distribution To Include After-tax Employee Contributions. For purposes of the direct rollover provisions in this Section 7.4, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible " Columbus McKinnon Corporation Employee Stock Ownership Plan Page 5 of Amendment No. 8 of 1989 Plan Restatement 11. Section 13.1, entitled "Summary", is amended effective April 1, 2002 to read as follows: "13.1 Summary. The total contributions allocated to the Accounts of any Participant for a Limitation Year with respect to the Corporation and all Affiliates may not exceed the lesser of $40,000 (as adjusted) or 100 percent of the Participant's Section 415 Compensation. If the Participant receives contributions under more than one defined contribution plan of the Corporation (and all Affiliates), all such contributions must be taken into account in applying this limitation. The rules applying this limitation are set forth in detail in the subsequent sections of this ARTICLE 13 and these sections override any inconsistent provision in this Section 13.1." 12. Section 13.2, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2002 by changing Section 3.2(f) to read as follows: "(f) "Maximum Dollar Amount" means for any Limitation Year, $40,000, as may be increased pursuant to Section 415(d) of the Code." 13. Section 13.2, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2002 by changing Section 3.2(h) to read as follows: "(h) "Section 415 Compensation" means with respect to a Limitation Year, "participant's compensation" as defined under Code Section 415(c)(3) and the Treasury Regulations thereunder. In no event shall a Participant's Section 415 Compensation for a Limitation Year beginning on or after April 1, 1989 exceed the applicable Code Section 401(a)(17) Limit set forth in Section 1.6(b)." 14. Section 13.3, entitled "Limitation on Annual Additions", is amended effective April 1, 2002 by inserting "100% of his Section 415 Compensation" in place of "25% of his Section 415 Compensation". 15. Section 14.8, entitled "Effective Date", is replaced effective April 1, 2002 with a new Section 14.8 which shall read as follows: "14.8 EGTRRA Amendment. (a) Effective date. This Section 14.8 shall apply for purposes of determining whether the Plan is a top-heavy plan under Section 416(g) of the Code for Plan Years beginning after March 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Section 416(c) of the Code Columbus McKinnon Corporation Employee Stock Ownership Plan Page 6 of Amendment No. 8 of 1989 Plan Restatement for such years. This section shall govern over any contrary provision in this Article 14. (b) Determination of Top-Heavy Status. (1) Key Employee. Key Employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code for plan years beginning after March 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder. (2) Determination of Present Values and Amounts. This Section 14.8(b)(2) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the Determination Date. (A) Distributions during year ending on the determination date. The present values of accrued benefits and the amounts of account balances of an employee as of the Determination Date shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting 5-year period for 1-year period. (B) Employees not performing services during year ending on the Determination Date. The accrued benefits and accounts of any individual who has not performed services for Columbus McKinnon Corporation Employee Stock Ownership Plan Page 7 of Amendment No. 8 of 1989 Plan Restatement the Employer during the 1-year period ending on the Determination Date shall not be taken into account. (c) Minimum Benefits. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements of section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of section 401(m) of the Code." IN WITNESS WHEREOF, this instrument of amendment has been executed by a duly authorized officer of the Corporation this 26th day of March, 2002. COLUMBUS McKINNON CORPORATION By /s/ Robert L. Montgomery ----------------------------------- Title Executive Vice President -------------------------------- EX-10.39 7 dex1039.txt THRIFT 401K PLAN Exhibit 10.39 COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN AMENDMENT NO. 3 OF THE 1998 PLAN RESTATEMENT Columbus McKinnon Corporation (the "Corporation") hereby amends the Columbus McKinnon Corporation Thrift 401(K) Plan (the "Plan"), as amended and restated in its entirety effective January 1, 1998, and as further amended by Amendment Nos. 1 and 2, as permitted under Section 14.1 of the Plan, as follows: Amendments Effective Before 2001 1. Section 1.3, entitled "Actual Contribution Percentage Test or ACP Test", is amended effective January 1, 1997 by deleting Section 1.3(c) (Use of Contribution Percentage from Preceding Plan Year). 2. Section 1.4, entitled "Actual Deferral Percentage Test or ADP Test", is amended effective January 1, 1997 by deleting Section 1.4(c) (Use of Deferral Percentage from Preceding Plan Year). 3. Section 1.14, entitled "Eligible Employee" is amended effective January 1, 1998 by adding the following heading to Section 1.14(d): "Exclusion of Certain Employees Before April 1, 1998". 4. Section 1.19, entitled "Highly Compensated Employee", is amended effective January 1, 1997 by renumbering Section 1.19(b)(1) as Section 1.19(b)(2) and adding new Section 1.19(b)(1) to read as follows: "(1) Meaning of "Compensation". For the purpose of determining whether an Employee is a Highly Compensated Employee, "Compensation" has the meaning given such term in Code Section 415(c)(3) (e.g., W-2 wages increased by elective deferrals etc. and not reduced by any items)." 5. Section 1.38, entitled "A Year of Vesting Service", is amended effective January 1, 1998 by deleting Section 1.38(b)(2) and substituting the following Sections 1.38(b)(2) and 1.38(b)(3): "(2) Five Year Break in Service. If an Employee incurs five (5) consecutive one-year Breaks in Service, Years of Vesting Service completed after such Breaks in Service shall not be taken into account in determining the Employee's nonforfeitable percentage in his Account Balance derived from Matching Contributions made before such 5-year period. COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 2 of Amendment No. 3 of the 1998 Plan Restatement (3) Rule of Parity. If an Employee who has not become partially vested in his Matching Contribution Account incurs a number of consecutive one-year Breaks in Service which equals or exceeds the greater of five or the aggregate number of the Employee's prior Years of Vesting Service (determined without regard to his age but excluding therefrom any Years of Vesting Service disregarded by reason of any prior Break in Service), the service credited prior to the Break in Service shall thereafter be excluded from his Years of Vesting Service." 6. Section 4.4, entitled "Distribution of Excess Contributions" is amended effective January 1, 1997 to read as follows: "4.4 Distribution of Excess Contributions. (a) Required Distribution. If the Actual Deferral Percentage Test has not been satisfied for the Plan Year after all contributions have been made under the Plan for the Plan Year, the Committee shall, as soon as practicable but in no event later than the close of the following Plan Year, distribute the excess contributions, as defined in Section 4.4(b), to the Highly Compensated Employees in the manner provided in Section 4.4(c) together with an allocable share of income determined in accordance with Section 4.4(d). The Committee shall make every reasonable effort to make any distribution under this Section 4.4 on or before March 15 of the Plan Year following the Plan Year for which the ADP Test was not satisfied. If such distribution includes contributions which qualified for Matching Contributions, the Matching Contributions attributable thereto shall be forfeited. (b) Calculation of Excess Contributions. For purposes of this Section 4.4, the term "excess contributions" means the excess of-- (1) the aggregate amount of Salary Reduction Contributions actually paid over to the Trust on behalf of Highly Compensated Employees for the Plan Year, over (2) the maximum amount of such contributions permitted under the ADP Test (determined by reducing contributions made on behalf of Highly Compensated Employees in the order of the actual deferral percentages beginning with the highest of such percentages). (c) Distribution of Excess Contributions. Any distribution of excess contributions shall be made to the Highly Compensated Employee(s) with the highest dollar amount of Salary Reduction Contributions for the Plan Year in such manner that no Highly Compensated Employee receives a distribution of COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 3 of Amendment No. 3 of the 1998 Plan Restatement excess contributions until the higher dollar amounts of Salary Reduction Contributions of all other Highly Compensated Employees (if any) have been distributed first. Any Matching Contributions that are attributable to excess contributions distributed pursuant to this Section 4.4 shall be forfeited and used to reduce Employer contributions or used to pay Plan administration expenses. (d) Income (or Loss) Allocable to Excess Contributions. (1) Standard Allocation Method. The income (or loss) allocable to excess contributions that were distributed in accordance with Section 4.4(c) shall be determined by multiplying the income (or loss) allocable to the Participant's Salary Reduction Contribution Account for the Plan Year by a fraction [1] the numerator of which is the excess contributions distributed to the Participant and [2] the denominator of which is the account balance of the Participant's Salary Reduction Contribution Account as of the beginning of the Plan Year increased by the Participant's Salary Reduction Contributions for such Plan Year. (2) Alternative Allocation Method. As an alternative to the standard method of allocating income (or loss) to excess contributions described in Section 4.4(d)(1), the Committee may use any reasonable method for computing income allocable to excess contributions provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all corrective distributions under the Plan for that Plan Year, is used for allocating income to Participants' Accounts, and/or satisfies such other requirements as may be set forth in Treasury Regulations." 7. Section 4.5, entitled "Distribution of Excess Aggregate Contributions" is amended effective January 1, 1997 to read as follows: "4.5 Distribution of Excess Aggregate Contributions. (a) Required Distribution. If Matching Contributions for a Plan Year do not satisfy the Actual Contribution Percentage Test after all contributions have been made under the Plan for such Plan Year, the Committee shall, as soon as practicable but in no event later than the last day of the following Plan Year, distribute the excess aggregate contributions, as defined in Section 4.5(b), and income (or loss) allocable thereto to the Participants on whose behalf such excess aggregate contributions were made in accordance with Section 401(m)(6) of the Code and Treasury Regulations thereunder. The Committee shall make every reasonable effort to make any distribution under this Section 4.5 on or before March 15 of the Plan Year following the Plan Year for which the Actual Contribution Percentage Test was not satisfied. COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 4 of Amendment No. 3 of the 1998 Plan Restatement (b) Calculation of Excess Aggregate Contributions. For purposes of this Section 4.5, the term "excess aggregate contributions" means the excess of-- (1) the aggregate amount of Matching Contributions actually paid over to the Trust on behalf of Highly Compensated Employees for the Plan Year, over (2) the maximum amount of such contributions permitted under the ACP Test (determined by reducing contributions made on behalf of Highly Compensated Employees in the order of the actual contribution percentages beginning with the highest of such percentages). (c) Distribution of Excess Aggregate Contributions. Any distribution of excess aggregate contributions shall be made to the Highly Compensated Employee(s) with the highest dollar amount of Matching Contributions for the Plan Year in such manner that no Highly Compensated Employee receives a distribution of excess contributions until the higher dollar amounts of Matching Contributions of all other Highly Compensated Employees (if any) have been distributed first. (d) Income or Loss Allocable to Excess Aggregate Contributions. The income or loss allocable to excess aggregate contributions for the Plan Year shall be determined in a manner similar to the determination of income or loss allocable to excess contributions under Section 4.4(b)." 8. Section 7.4, entitled "Investment Elections", is amended effective January 28, 2000 to read as follows: "7.4 Investment Elections. (a) Initial Election. (a) Salary Reduction Contributions. Each Participant shall submit an investment election designating that his future Salary Reduction Contributions are to be invested in one or more of the Investment Funds, in multiples of 5%, or in multiples of such other percentage as may be authorized by the Committee. The investment election shall be submitted in a manner prescribed by the Committee. If a Participant fails to submit an investment election, the Participant shall be deemed to have elected 100% Guaranteed Investment Contract (GIC) Fund or such other default Investment Fund as may be selected by the Committee. An election under this Section 7.4(a) shall be effective as of the effective date of the Participant's participation in the Plan, and shall remain in effect until changed in accordance with Section 7.4(b). COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 5 of Amendment No. 3 of the 1998 Plan Restatement (b) Matching Contributions. A Participant's Matching Contributions shall be invested in the same percentages and the same Investment Funds as his Salary Reduction Contributions. (c) Rollover Contribution. Each Participant who makes a rollover contribution shall designate in writing one or more Investment Funds in which such contribution is to be invested, in multiples of 5%, or in multiples of such other percentage as may be authorized by the Committee. Such designation shall be provided to the Committee at least 15 days before the rollover is made. (b) Change of Election. A Participant may change his investment election for future Salary Reduction Contributions by submitting a new investment election in a manner prescribed by the Committee. Such change in investment election shall be effective as soon as administratively reasonable, as determined by the Committee. (c) Reinvestment of Existing Balances. (1) In General. A Participant (including a former Employee who has not received complete distribution of his Accounts) may direct that all or a portion of his existing balances in any Investment Fund be reinvested in one or more different Investment Funds, in such percentages or fractions permitted under Section 7.4(a) as he shall specify. (2) When Reinvestment Becomes Effective. Transfers out of or into any Investment Fund (subject to restrictions imposed by individual Investment Funds) shall be given effect as soon as administratively reasonable after the Participant has submitted the relevant change in investment election. (3) Limitations on Reinvestment. The Committee by rule of general application may limit the number of elections pursuant to this Section 7.4(c) that may be made during a Plan Year or other period." 9. Schedule A, entitled "Participating Employers and Eligible Employees", is amended effective September 1, 1999 by amending Section 1 thereof to read as follows: "1. Columbus McKinnon Corporation (April 1, 1984) Columbus McKinnon Corporation established the Plan effective August 1, 1984. The Plan was amended effective April 1, 1998 to cover nonunion employees of Columbus McKinnon Corporation who satisfy the definition of "Eligible Employee". Prior to April 1, 1998, the Plan covered selected groups of nonunion employees of Columbus McKinnon Corporation, as follows: COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 6 of Amendment No. 3 of the 1998 Plan Restatement (i) as of April 1, 1984, any Employee compensated on the basis of a regular fixed weekly, bi-weekly, monthly or semi-monthly salary as opposed to an hourly wage (but including office Employees regardless of how compensated); (ii) as of January 1, 1989, any nonunion factory Employee regularly employed in the Corporation's Tonawanda, New York facility, regardless of how compensated; (iii) as of December 31, 1989, any person employed by Positech Corporation, regardless of how compensated and (iv) as of January 1, 1992, any nonunion factory Employee regularly employed in the Corporation's Lexington, Tennessee, Manatee, Florida or Chattanooga, Tennessee facility, regardless of how compensated; (iv) as of February 24, 1995, any person regularly employed at the Positech division of the Corporation, regardless of how compensated; and (v) as of April 1, 1995, any Employee regularly employed by the Corporation's Durbin Durco Division in Reform, Alabama who is compensated on the basis of a regular fixed weekly, bi-weekly, monthly or semi-monthly salary and who is exempt from overtime pay under the Fair Labor Standards Act. Employees of Columbus McKinnon Corporation who may be Eligible Employees include all nonunion Employees." 10. Schedule A, entitled "Participating Employers and Eligible Employees", is amended effective September 1, 1999 by amending the heading of Section 6 thereof to read as follows: "6. Washington Equipment Company (June 1, 2000)" 11. Schedule A, entitled "Participating Employers and Eligible Employees, is amended effective September 1, 1999 by amending the heading of Section 7 thereof to read as follows: "7. Gaffey, Inc. (June 1, 2000)" 12. Schedule A, entitled "Participating Employers and Eligible Employees", is amended effective September 1, 1999 by amending the heading of Section 8 thereof to read as follows: COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 7 of Amendment No. 3 of the 1998 Plan Restatement "8. Handling Systems and Conveyors, Inc. (June 1, 2000)" 13. Section 9.4, entitled "Eligible Rollover Distribution", is amended effective January 1, 2000 by changing Section 9.4(a)(1) to read as follows: (1) "Eligible Rollover Distribution." An "eligible rollover distribution" is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of 10 years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; effective after December 31, 1999, any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV); and the portion of any distribution that is not included in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). 14. Section 12.4, entitled "Return of Contributions", is amended effective January 1, 1998 to add the words "was made" at the end of Section 12.4(a) and to delete the sentence "If such Employee receive a contribution returned pursuant to this Section 12.4, it shall pay any portion of the amount returned that represents a salary Reduction Contribution to the Participant on whose behalf of the contribution was made." from Section 12.4(b). 15. Section 15.5, entitled "Application of Top-Heavy Rules", is amended effective January 1, 1998 by changing Section 15.5(d) to read as follows: (d) Special Vesting. The vesting schedule set forth at Section ?(d) shall not change if the Plan becomes a Top-Heavy Plan. Amendments Effective January 1, 2001 16. Section 1.6, entitled "Base Pay", is amended effective January 1, 2001 by amending Section 1.6(a) to read as follows: "(a) In General. "Base Pay" means, with respect to a Participant for a pay period or other period, the Participant's compensation as defined in Code Section 415(c)(3) and Treasury Regulation ss. 1.415-2(d)(11)(i) ("wages" reported on Form W-2), which is paid to the Participant on any pay day with respect to such pay period or other period by one or more Employers. The phrase "aggregate Base Pay" with respect to a Plan Year or other period means the sum of the periodic payments of Base Pay made to a Participant during such Plan Year or other period. COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 8 of Amendment No. 3 of the 1998 Plan Restatement (1) Base Pay is increased by elective deferrals as defined in Code Section 402(g)(3) and by amounts excludable from the Participant's gross income pursuant to Code Sections 125, 132(f)(4) or 457. (2) Base Pay is reduced by reimbursements or other expense allowances, cash and noncash fringe benefits, moving expenses, deferred compensation and welfare benefits, any special payments, and any amounts treated as wages with respect to restricted stock granted to a Participant (even if the foregoing items are includible in the Participant's gross income)." 17. Section 1.33, entitled "Testing Compensation", is amended effective January 1, 2001 by amending Section 1.33(a) to read as follows: "(a) In General. "Testing Compensation" means, with respect to each Employee, and for each Plan Year or other period, the Employee's compensation as defined in Code Section 415(c)(3) and Treasury Regulation ss.1.415-2(d)(11)(i) ("wages" reported on Form W-2), which is paid to the Employee by the Corporation and each Affiliate during the Plan Year or other period. (1) Testing Compensation is increased by elective deferrals as defined in Code Section 402(g)(3) and by amounts excludable from the Employee's gross income pursuant to Code Sections 125, 132(f)(4) or 457. (2) Testing Compensation is reduced by reimbursements or other expense allowances, cash and noncash fringe benefits, moving expenses, deferred compensation and welfare benefits, any special payments, and any amounts treated as wages with respect to restricted stock granted to a Participant (even if the foregoing items are includable in the Employee's gross income)." 18. Schedule 2, entitled Merger into the Plan of the Columbus McKinnon Corporation Savings and Retirement Plan - Nonunion Portion, is amended effective January 1, 2001 by replacing the text in Sections S2.5(c) and S2.6 with the word "Deleted". 19. Schedule 3, entitled Merger into the Plan of the Washington Equipment Company 401(k) Retirement & Savings Plan, is amended effective January 1, 2001 by replacing the text in Sections S3.5(c) and S3.6 with the word "Deleted". 20. Schedule 4, entitled "Merger into the Plan of the Automatic Systems, Inc. 401(k) Savings Plan", is amended effective January 1, 2001 by replacing the text in Sections S4.5(c) and S4.6 with the word "Deleted". Amendments Effective January 1, 2002 21. Section 1.6, entitled "Base Pay", is amended effective January 1, 2002 by changing Section 1.6(b) to read as follows: COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 9 of Amendment No. 3 of the 1998 Plan Restatement "(b) Code Section 401(a)(17) Limit. In addition to all other applicable limitations set forth in the Plan, and notwithstanding any other provision in the Plan to the contrary, for any Plan Year or other 12-month period beginning on or after January 1, 1989, the Base Pay of each Employee taken into account under the Plan shall not exceed the "Code Section 401(a)(17) Limit." If a Plan Year or other determination period consists of fewer than 12 months, the "Code Section 401(a)(17) Limit" shall be multiplied by a fraction, the numerator of which is the number of months in the Plan Year or other determination period and the denominator of which is 12. (1) Limit Effective January 1, 1989 to December 31, 1993. The "Code Section 401(a)(17) Limit" for any Plan Year or other 12-month period beginning between January 1, 1989 and December 31, 1993, inclusive, shall be $200,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17). (2) Limit Effective January 1, 1994 to December 31, 2001. The "Code Section 401(a)(17) Limit" for any Plan Year or other 12-month period beginning between January 1, 1994 and December 31, 2001, inclusive, shall be $150,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17). (3) Limit Effective on and after January 1, 2002. The "Code Section 401(a)(17) Limit" for any Plan Year or other 12-month period beginning after December 31, 2001 shall be $200,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17)." 22. New Section 1.9A, entitled "Catch-up Contribution", is added effective January 1, 2002 to read as follows: "1.9A "Catch-up Contribution" means a contribution described in Section 3.4." 23. Section 1.33, entitled "Testing Compensation", is amended effective January 1, 2002 by changing Section 1.33(b) to read as follows: (b) Code Section 401(a)(17) Limit. Testing Compensation shall be subject to the same limit under Code Section 401(a)(17) as Base Pay, as set forth in Section 1.6(b)." 24. Section 3.1, entitled Salary Reduction Contribution, is amended effective January 1, 2002 to change "15 percent" where it appears therein to "30 percent". COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 10 of Amendment No. 3 of the 1998 Plan Restatement 25. New Section 3.4, entitled "EGTRRA Catch-up Contributions" is added to the Plan effective January 1, 2002, to read as follows: "3.4 Catch-up Contributions. (a) Contributions Permitted. All Employees who are eligible to have Salary Reduction Contributions made on their behalf under Section 3.1 and who will attain age 50 on or before the last day of any calendar year coincident with or preceding the Plan Year shall be eligible to make Catch-up Contributions in accordance with, and subject to the limitations of, Code Section 414(v). (b) Treated as Salary Reduction Contributions. Catch-up Contributions shall be treated as additional Salary Reduction Contributions for all purposes of the Plan except as otherwise provided in Code Section 414(v), regulations and other guidance issued thereunder, and this Section 3.4. (c) Certain Limits Inapplicable. Catch-up Contributions shall not be taken into account for purposes of the provisions of the Plan implementing the limitations of Sections 402(g) and 415 of the Code. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Section 401(k)(3) , 401(k)(11), 401(k)(12), 410(b), or 416 of the Code, as applicable, by reason of the making of such Catch-up Contributions. (d) Plan Administrative Procedures. The Committee shall implement appropriate administrative procedures to deal with Catch-up Contributions including, without limitation, rules regarding whether such contributions can be made in a single sum and/or pro rata during the year. (e) Effective Date. This Section 3.4 shall be effective as of January 1, 2002 or such later date, determined by the Committee in its discretion, when appropriate Plan administrative procedures have been implemented." 26. Section 4.1, entitled "Maximum Amount of Contributions", is amended effective January 1, 2002 to read as follows: "4.1 Maximum Amount of Contributions. (a) Limitation on Annual Additions. In no event shall the sum of contributions credited to a Participant's Accounts for any Limitation Year be in an amount that would cause the Annual Addition for such Participant to exceed the amount permitted under Section 5.1, except to the extent permitted under Section 3.4 and Code Section 414(v) with respect to Catch-up Contributions. (b) Limitation Based on Employer Deductions. In no event shall contributions under the Plan in any taxable year of the Employer exceed the COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 11 of Amendment No. 3 of the 1998 Plan Restatement maximum amount deductible under Code Section 404. All contributions under the Plan that must be taken into account for purposes of applying the Code Section 404 limitation on Employer deductions are conditioned on their deductibility under Code Section 404. (c) Limitation on Salary Reduction Contributions. In no event shall Salary Reduction Contributions made on behalf of any Participant for any taxable year exceed the dollar limitation contained in Code Section 402(g) in effect for such taxable year, except to the extent permitted under Section 3.4 and Code Section 414(v) with respect to Catch-up Contributions. (d) Special Nondiscrimination Limitations. In no event shall Salary Reduction Contributions or Matching Contributions made by or on behalf of a Highly Compensated Employee for any Plan Year exceed the limits under Section 4.2, except to the extent permitted under Section 3.4 and Code Section 414(v) with respect to Catch-up Contributions." 27. Section 4.2, entitled "Nondiscrimination Requirements", is amended effective January 1, 2002 by changing Section 4.2(c)(6) to read as follows: "(6) No Multiple Use of Alternative Limitations. The prohibition against multiple use of alternative limitations shall not apply with respect to Plan Years beginning on or after January 1, 2002." 28. Article 5, entitled "Limitation on Annual Additions", is amended effective January 1, 2002 to read as follows: "ARTICLE 5 LIMITATION ON ANNUAL ADDITIONS 5.1 Limitation on Annual Additions. Except to the extent permitted under Section 3.4 of the Plan and Code Section 414(v) with respect to Catch-up Contributions, if applicable, the Annual Addition that may be contributed or allocated to a Participant's Account under the Plan for any Limitation Year shall not exceed the lesser of: (1) $40,000, as adjusted for increases in the cost-of-living under Code Section 415(d), or (2) 100 percent of the Participant's Taxable Compensation, for the Limitation Year. The compensation limit referred to in this Paragraph (2) shall not apply to any contribution for medical benefits after separation from service (within the meaning of section 401(h) or COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 12 of Amendment No. 3 of the 1998 Plan Restatement section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition. This Section 5.1 shall be effective for Limitation Years beginning after December 31, 2001. 5.2 Definitions. The following terms shall have the following meanings for the purpose of this ARTICLE 5: (a) "Annual Addition" means, in the case of any Participant and with respect to this Plan, the sum for any Limitation Year of all Contributions credited to the Participant's Accounts for such year, unreduced by any distributions under Section 4.4 (excess contributions), Section 4.5 (excess aggregate contributions or Section 4.6 (excess deferrals) (except as provided in Treasury Regulations under Code Section 415(c)(2)). "Annual Addition" means, in the case of any Participant and with respect to all other defined contribution plans maintained by the Corporation or any Affiliate, the sum for any Limitation Year of all (i) employer contributions, employee contributions, and forfeitures, as described in Section 415(c)(2) of the Code and Treasury regulations thereunder, unreduced by any distributions of excess contributions, excess aggregate contributions, or excess deferrals (except as provided in Treasury Regulations under Code Section 415(c)(2)), and (ii) amounts described under Section 415(l)(1) and Section 419(d)(2) of the Code credited to the Participant's accounts for the Limitation Year. (b) "Affiliate" means an "Affiliate" as defined in Section 1.5 except that, for purposes of this Article 5, membership in a controlled group of corporations shall be determined on the basis of a 50% control test rather than an 80% control test. (c) "Taxable Compensation" means, with respect to a Participant for each Limitation Year, compensation as defined under Code Section 415(c)(3) and the Treasury Regulations thereunder. In no event shall a Participant's Taxable Compensation for a Limitation Year beginning on or after January 1, 1989 exceed the applicable Code Section 401(a)(17) Limit set forth in Section 1.6(b) 5.3 Adjustment to Reduce Annual Addition. A Participant's Annual Addition under the Plan shall be reduced to satisfy the limitation of Section 5.1 as follows: (a) Any Salary Reduction Contribution not yet paid to the Trustee for the Limitation Year shall not be made. The Salary Reduction Contribution shall be paid instead to the Participant. (b) Any Salary Reduction Contribution already paid to the Trustee for the Limitation Year shall, to the extent permitted by the Code and Treasury COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 13 of Amendment No. 3 of the 1998 Plan Restatement Regulations, be withdrawn from the Trust Fund and distributed to the Participant together with gains attributable to such Salary Reduction Contribution. (c) If the Annual Addition for any Participant exceeds the limitations of Section 5.1 after the adjustments described in Section 5.3(a) and Section 5.3(b), the excess amounts in the Participant's Accounts shall be held unallocated in a suspense account and used to reduce Salary Reduction Contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for the Participant if that Participant is covered by the Plan as of the end of the Limitation Year. However, if the Participant is not covered by the Plan as of the end of the Limitation Year, then the excess amounts shall be held unallocated in a suspense account for the Limitation Year and allocated and reallocated in the next Limitation Year to all of the remaining Participants in the Plan so as to reduce Salary Reduction Contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for all of the remaining Participants. If a suspense account is in existence at any time during a particular Limitation Year, other than the Limitation Year described in the preceding sentence, all amounts in the suspense account shall be allocated and reallocated to the Participants before any Salary Reduction Contributions are made under the Plan for the Limitation Year. 5.4 Application of Code Section 415. No Annual Addition payable under the Plan shall exceed the applicable limitations set forth in Code Section 415 and the regulations thereunder, which are incorporated herein by this reference. Code Section 415 shall govern over any contrary provision in this Article 5." 29. Section 8.4, entitled "Restrictions on Distribution" is amended effective January 1, 2002 to read as follows: 8.4 Restrictions on Distributions. Not withstanding any provision in the Plan to the contrary, no distribution of a Participant's Salary Reduction Account shall occur earlier than [1] severance from employment, death or disability, [2] termination of the Plan, [3] the Participant's attainment of age 59-1/2, or [4] upon hardship of the Participant within the meaning of Code Section 401(k)(2)(B)(IV) and Treasury Regulations promulgated thereunder." 30. Section 9.4, entitled "Eligible Rollover Distributions", is amended effective January 1, 2002 by adding new Section 9.4(f) to read as follows: "(f) EGTRRA Amendment. (1) Effective Date. This subsection (f) shall apply to distributions made after December 31, 2001. COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 14 of Amendment No. 3 of the 1998 Plan Restatement (2) Modification of Definition of Eligible Retirement Plan. For purposes of the direct rollover provisions in this Section 9.4, an Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a Qualified Domestic Relation Order. (3) Modification of Definition of Eligible Rollover Distribution to Exclude Hardship Distributions. For purposes of the direct rollover provisions in this Section 9.4, any amount that is distributed on account of hardship shall not be an eligible rollover distribution and the distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan. (4) Modification of Definition of Eligible Rollover Distribution To Include After-tax Employee Contributions. For purposes of the direct rollover provisions in this Section 9.4, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible" 31. Section 10.3, entitled "Hardship Withdrawals", is amended effective January 1, 2002 to substitute "6-month period" for "twelve-month period" wherever it appears in Section 10.3(e)(2). 32. Section 15.7, entitled "Change in the Law", is replaced effective January 1, 2002 with a new Section 15.7 which shall read as follows: "15.7 EGTRRA Amendment. (a) Effective date. This Section 15.7 shall apply for purposes of determining whether the Plan is a top-heavy plan under Section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 15 of Amendment No. 3 of the 1998 Plan Restatement satisfies the minimum benefits requirements of Section 416(c) of the Code for such years. This section shall govern over any contrary provision in this Article 15. (b) Determination of Top-Heavy Status. (1) Key Employee. Key Employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code for plan years beginning after December 31, 2002), a 5-percent owner of the employer, or a 1 percent owner of the employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder. (2) Determination of Present Values and Amounts. This Section 15.7(b)(2) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the Determination Date. (A) Distributions during year ending on the determination date. The present values of accrued benefits and the amounts of account balances of an employee as of the Determination Date shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting 5-year period for 1-year period. (B) Employees not performing services during year ending on the Determination Date. The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account. (c) Minimum Benefits. Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution COLUMBUS McKINNON CORPORATION THRIFT 401(K) PLAN Page 16 of Amendment No. 3 of the 1998 Plan Restatement requirements of section 416(c)(2) of the Code and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the plan provides that the minimum contribution requirement shall be met in another plan, such other plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and other requirements of section 401(m) of the Code." IN WITNESS WHEREOF, this instrument of amendment has been executed by a duly authorized officer of the Corporation this 21st day of February, 2002. COLUMBUS McKINNON CORPORATION By /s/ R.L. Montgomery ----------------------------- Title Executive Vice President --------------------------- Lenders DEUTSCHE BANK TRUST COMPANY AMERICAS By: /s/ Diane F. Rolfe ----------------------------- Name: Diane F. Rolfe Title: Vice President EX-10.44 8 dex1044.txt MONTHLY RETIREMENT PLAN Exhibit 10.44 COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Amendment No. 3 of the 1998 Plan Restatement Columbus McKinnon Corporation (the "Company") hereby amends the Columbus McKinnon Corporation Monthly Retirement Benefit Plan (the "Plan"), as amended and restated in its entirety effective April 1, 1998, and as further amended by Amendment Nos. 1 and 2, as permitted under Section 10.1 of the Plan, as follows: Amendments Effective Before 2002 1. Section 1.4, entitled "Actuarial Present Value" is amended effective April 1, 1998 by changing Section 1.4(b) to read as follows: "(b) Cash-out of Amounts $5,000 or Less. In computing the Actuarial Present Value of a benefit to determine whether it can be paid immediately in a lump sum under Code Section 411(a)(11) or Code Section 417(e) (cash-outs of benefits not greater than $5,000), and to determine the amount to be paid, the mortality table and interest rate used shall be the "Applicable Mortality Table" and the "Applicable Interest Rate". (1) "Applicable Mortality Table" means the table prescribed by the Secretary of the Treasury that is based on the prevailing commissioners' standard table (described in Code Section 807(d)(5)(A)) used to determine reserves for group annuity contracts issued on the date as of which present value is being determined (without regard to any other subparagraph of Code Section 807(d)(5)). (2) "Applicable Interest Rate" means the annual rate of interest on 30-year Treasury Securities, or such other rate determined by the Secretary of Treasury for purposes of Code Section 417(e), determined for the month of February preceding the Plan Year in which occurs the Annuity Starting Date." 2. Section 1.15, entitled "Earnings", is amended by changing Section 1.15(a)(1) to read as follows: "(1) Specific Inclusions. "Earnings" shall include all elective contributions paid into a cash or deferred arrangement maintained by the Employer under Code Section 401(k), all salary reduction contributions under a cafeteria plan that are excluded from income under Code Section 125, and any amount excluded from gross COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 2 of Amendment No. 3 of 1998 Plan Restatement income pursuant to Code Section 132(f)(4) (qualified transportation fringes)." 3. Section 1.19, entitled "Employer", is amended effective April 1, 1998 to read as follows: "1.19 "Employer" means the Corporation and each Affiliate that participates in the Plan in accordance with Section 9.1. Any Affiliate that becomes an Employer shall be listed in Schedule A attached to and made a part of this Plan." 4. Section 1.22, entitled "Highly Compensated Employee", is amended effective April 1, 1999 by adding new Section 1.22(a)(3) to read as follows: "(3) Calendar Year Data Election. Effective April 1, 1999, for purposes of Section 1.22(a)(2), the term "preceding year" shall mean the calendar year beginning with or within the Plan Year (look-back year) immediately preceding the Plan Year (determination year) for which the Highly Compensated Employee status of an Employee is being determined." 5. Section 2.3, entitled "Benefit Service", is amended effective April 1, 1998 by changing Section 2.3(b)(1) to read as follows: "(1) Service Completed Before Participation. Hours of Service included in Vesting Service completed by an Employee before he has become a Participant shall be excluded from Benefit Service." 6. Section 4.6, entitled "Deferred Vested Benefit", is amended effective April 1, 1998 by deleting Section 4.6(a) and renumbering Sections 4.6(b) and (c) as Sections 4.6(a) and (b). 7. Section 5.6, entitled "Eligible Rollover Distributions", is amended effective January 1, 2000 by adding the following language to Section 5.6(a)(1) after the reference therein to section 401(a)(9) of the Code: "effective after December 31, 1999, any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV)" 8. Section 11.1, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2000 by changing Section 11.1(a) to read as follows: COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 3 of Amendment No. 3 of 1998 Plan Restatement " (a) "Annual Addition" [Deleted]" 9. Section 11.1, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2000 by changing Section 11.1(j) to read as follows: "(j) Aggregation of Section 415 Employer's Defined Benefit Plans. For the purpose of this Article XI, all defined benefit plans (whether terminated or not) ever maintained by the Section 415 Employer shall be aggregated with the Plan and treated as one defined benefit plan." 10. Section 11.4, entitled "Participation in a Defined Contribution Plan", is amended effective April 1, 2000 to read as follows: "11.4 Participation in a Defined Contribution Plan. [Deleted]" 11. New Schedule A, entitled "Participating Employers and Eligible Employees", is added to the Plan effective September 1, 1999 to read as follows: "Schedule A Participating Employers and Eligible Employees Any conflict between the information in this Schedule A and a numbered Schedule annexed to the Plan shall be resolved in favor of the numbered Schedule. Reflecting Amendment of the Plan through January 1, 2000 1. Columbus McKinnon Corporation (April 1, 1987) The Plan was established April 1, 1977 as the Retirement Plan for Salaried Employees of the Dixie Industries Division of Columbus McKinnon Corporation. Columbus McKinnon Corporation amended and restated the Plan as the Columbus McKinnon Corporation Monthly Benefit Retirement Plan covering certain salaried employees effective April 1, 1987. The Plan was amended effective April 1, 1998 to extend coverage to all nonunion employees of Columbus McKinnon Corporation who are regularly employed at a facility in the United States. Special rules regarding Columbus McKinnon Corporation employees participating in the Plan are set forth in Schedule 1. 2. Lift-Tech International, Inc. (April 1, 1996 - February 28, 1997) COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 4 of Amendment No. 3 of 1998 Plan Restatement Columbus McKinnon Corporation acquired Lift-tech International, Inc. (Lift-Tech) on November 1, 1995 and merged Lift-Tech into Columbus McKinnon Corporation on March 1, 1997. Nonunion employees of Lift-Tech who meet the age and service requirements under the Plan and satisfy the definition of "Eligible Employee" are eligible to enter the Plan on or after April 1, 1996 in accordance with the provisions of the Plan. Such Employees are granted Eligibility Service and Vesting Service under the Plan for service with Lift-Tech International, Inc. and its affiliates prior to November 1, 1995. Special rules regarding Lift-Tech employees participating in the Plan are set forth in Schedule 1. 3. Yale Industrial Products, Inc. (April 1, 1998) Columbus McKinnon Corporation acquired Spreckels Industries, Inc. and its subsidiaries on January 3, 1997. Effective March 31, 1997, Spreckels was merged into its subsidiary, Duff-Norton Company, Inc., and the subsidiary was renamed "Yale Industrial Products, Inc.". Nonunion employees of Yale Industrial Products, Inc. who meet the age and service requirements under the Plan and satisfy the definition of "Eligible Employee" are eligible to enter the Plan on or after April 1, 1998 in accordance with the provisions of the Plan. Special rules regarding Yale Industrial Products, Inc. employees participating in the Plan are set forth in Schedules 3, 4, 5 and 6. 4. Automatic Systems, Inc. (September 1, 1999) Columbus McKinnon Corporation acquired Automatic Systems, Inc., on March 31, 1998. Persons employed as nonunion Employees by Automatic Systems, Inc. on September 1, 1999, who meet the age and service requirements under the Plan and satisfy the definition of "Eligible Employee" on or after April 1, 1999 shall be eligible to participate in the Plan on or after April 1, 1999 in accordance with Section 3.1 of the Plan, shall be granted Eligibility Service and Vesting Service under the Plan for service with Automatic Systems, Inc. and its affiliates prior to March 31, 1998, and shall be granted Benefit Service under the Plan for service with Automatic Systems, Inc. after March 31, 1999. The Final Average Earnings of an Employee whose employment terminates after five years of Vesting Service but before five years of Benefit Service shall be based on Vesting Service to the extent necessary to ensure an average based on five years of Earnings. COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 5 of Amendment No. 3 of 1998 Plan Restatement 5. Abell-Howe Crane, Inc. (September 1, 1999) The Corporation approves the adoption of the Plan by Abell-Howe Crane, Inc. in accordance with Section 9.1 of the Plan, effective September 1, 1999. 6. Washington Equipment Company (January 1, 2000) Columbus McKinnon Corporation acquired Washington Equipment Company on April 29, 1999. Persons employed as nonunion Employees by Washington Equipment Company on January 1, 2000 shall be eligible to participate in the Plan on or after January 1, 2000 in accordance with Section 3.1 of the Plan, and shall be granted Eligibility Service and Vesting Service (but not Benefit Service) under the Plan for service with Washington Equipment Company and its affiliates prior to April 29, 1999. The Final Average Earnings of an Employee whose employment terminates after five years of Vesting Service but before five years of Benefit Service shall be based on Vesting Service to the extent necessary to ensure an average based on five years of Earnings. 7. Gaffey, Inc. (January 1, 2000) Gaffey, Inc. was a wholly-owned subsidiary of GL International Inc. GL International Inc. was merged into a subsidiary of Columbus McKinnon Corporation on March 1, 1999 with the result that Gaffey, Inc. became a subsidiary of Columbus McKinnon Corporation on that date. Persons employed as nonunion Employees by Gaffey, Inc. or Handling Systems and Conveyors, Inc. on January 1, 2000 shall be eligible to participate in the Plan on or after January 1, 2000 in accordance with Section 3.1 of the Plan, and shall be granted Eligibility Service and Vesting Service (but not Benefit Service) under the Plan for service with Gaffey, Inc. or Handling Systems and Conveyors, Inc. or their affiliates prior to March 1, 1999. The Final Average Earnings of an Employee whose employment terminates after five years of Vesting Service but before five years of Benefit Service shall be based on Vesting Service to the extent necessary to ensure an average based on five years of Earnings." Amendments Effective After 2001 COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 6 of Amendment No. 3 of 1998 Plan Restatement 12. Section 1.15, entitled "Earnings", is amended effective April 1, 2002 by changing Section 1.15(b) to read as follows: "(b) Code Section 401(a)(17) Limitation. In addition to all other applicable limits set forth in the Plan, and notwithstanding any other provision in the Plan to the contrary, for any Plan Year or other 12-month period beginning on or after January 1, 1989, the Earnings of each Employee taken into account under the Plan shall not exceed the "Code Section 401(a)(17) Limit." If a Plan Year or other determination period consists of fewer than 12 months, the "Code Section 401(a)(17) Limitation" shall be multiplied by a fraction, the numerator of which is the number of months in the Plan Year or other determination period and the denominator of which is 12. (1) Limit Effective January 1, 1989. The "Code Section 401(a)(17) Limit" for the Plan Year or any other 12-month period beginning in the 1989 calendar year or any subsequent calendar year shall be $200,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17). (2) Limit Effective January 1, 1994. The "Code Section 401(a)(17) Limit" for the Plan Year or any other 12-month period beginning in the 1994 calendar year or any subsequent calendar year shall be $150,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17). (3) Limit Effective January 1, 2002. The "Code Section 401(a)(17) Limit" for the Plan Year or any other 12-month period beginning in the 2002 calendar year or any subsequent calendar year shall be $200,000 or such larger amount as the Secretary of the Treasury may determine for such calendar year under Code Section 401(a)(17)." 13. Section 1.21, entitled "Final Average Earnings", is amended effective April 1, 2002 by changing Section 1.21(c)(1) to read as follows: "(1) In General. For purposes of determining a Participant's Final Average Earnings, the Earnings for any 12-consecutive month period within the 60-consecutive month period used in Section 1.21(a) shall not exceed the Code Section 401(a)(17) Limitation under Section 1.15(b) applicable for such 12 month period. If a Participant's COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 7 of Amendment No. 3 of 1998 Plan Restatement Final Average Earnings are determined after the effective date of Code Section 401(a)(17) (or after the effective date of any amendment thereto) but the 60-consecutive month period used in Section 1.21(a) includes one or more 12-consecutive month periods beginning before such effective date, the limitation for each such 12-consecutive month period shall, to the extent required by Treasury Regulations, be the lesser of limitation in effect during such 12-consecutive month period or the limitation in effect as of such effective date." 14 Section 5.6, entitled "Eligible Rollover Distributions", is amended effective January 1, 2002 by adding new Section 5.6(f) to read as follows: "(f) EGTRRA Amendment. (1) Effective Date. This subsection (f) shall apply to distributions made after December 31, 2001. (2) Modification of Definition of Eligible Retirement Plan. For purposes of the direct rollover provisions in this Section 5.6, an Eligible Retirement Plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a Qualified Domestic Relation Order. (3) Modification of Definition of Eligible Rollover Distribution to Exclude Hardship Distributions. For purposes of the direct rollover provisions in this Section 5.6, any amount that is distributed on account of hardship shall not be an eligible rollover distribution and the distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan. (4) Modification of Definition of Eligible Rollover Distribution To Include After-tax Employee Contributions. For purposes of the direct rollover provisions in this Section 5.6, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 8 of Amendment No. 3 of 1998 Plan Restatement portion consists of after-tax employee contributions which are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in section 408(a) or (b) of the Code, or to a qualified defined contribution plan described in section 401(a) or 403(a) of the Code that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible." 15. Section 11.1, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2002 by changing Section 11.1(g) to read as follows: "(g) "Section 415 Compensation" means with respect to a Limitation Year, "participant's compensation" as defined under Code Section 415(c)(3) and the Treasury Regulations thereunder. In no event shall a Participant's Section 415 Compensation for a Limitation Year beginning on or after April 1, 1989 exceed the applicable Code Section 401(a)(17) Limit set forth in the definition of "Earnings" under Section 1.15(b)." 16. Section 11.1, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 2002 by changing Section 11.1(i) to read as follows: "(a) "Social Security Retirement Age" [Deleted]" 17. Section 11.2, entitled "Maximum Annual Benefit", is amended effective April 1, 2002 by changing the "$90,000" in Section 11.2(a)(1) to "$160,000". 18. Section 11.2, entitled "Maximum Annual Benefit", is amended effective April 1, 2002 by changing Section 11.2(b)(2) to read as follows: "(1) Benefits Commencing Before Age 62. If the benefit of a Participant begins prior to age 65 but after age 62, the Dollar Limit applicable to the Participant shall not be adjusted except as provided in Section 11.2(b)(4), if required. If the benefit of a Participant begins prior to age 62, the Dollar Limit applicable to the Participant at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the earlier age that is the Actuarial Equivalent of the Dollar Limit applicable to the Participant at age 62 (adjusted under Section 11.2(b)(4), if required). For the purpose of determining Actuarial Equivalence, the interest rate shall be the greater of 5 percent or the rate set forth in Section 1.4(c) and the mortality table COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 9 of Amendment No. 3 of 1998 Plan Restatement shall be the table described in Section 1.4(b) provided, however, that the mortality decrement shall be ignored to the extent that a forfeiture does not occur at death." 19. Section 11.2, entitled "Maximum Annual Benefit", is amended effective April 1, 2002 by changing Section 11.2(b)(3) to read as follows: "(3) Benefits Commencing After Age 65. If the benefit of a Participant begins after age 65, the Dollar Limit applicable to the Participant at such later age is an annual benefit payable in the form of a straight life annuity beginning at the later age that is the Actuarial Equivalent of the Dollar Limit applicable to the Participant at age 65 (adjusted under Section 11.2(b)(4), if required). For the purpose of determining Actuarial Equivalence, the interest rate shall be the lesser of 5 percent or the rate set forth in Section 1.4(c) and the mortality table shall be the table described in Section 1.4(b) provided, however, that the mortality decrement shall be ignored to the extent that a forfeiture does not occur at death." 20. New Section 12.8, entitled "EGTRRA Amendment", is added effective April 1, 2002 to read as follows: 12.8 EGTRRA Amendment. (a) Effective date. This Section 12.8 shall apply for purposes of determining whether the Plan is a top-heavy plan under section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of section 416(c) of the Code for such years. This section shall govern over any contrary provision in this Article 12. (b) Determination of Top-Heavy Status. (1) Key Employee. Key Employee means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under section 416(i)(1) of the Code for plan years beginning after December 31, 2002), a 5-percent owner of the employer, or a 1-percent owner of the employer having annual COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 10 of Amendment No. 3 of 1998 Plan Restatement compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder. (2) Determination of Present Values and Amounts. This Section 12.8(b)(2) shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the Determination Date. (A) Distributions during year ending on the determination date. The present values of accrued benefits and the amounts of account balances of an employee as of the Determination Date shall be increased by the distributions made with respect to the employee under the Plan and any plan aggregated with the Plan under section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by substituting 5-year period for 1-year period. (B) Employees not performing services during year ending on the Determination Date. The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account. (c) Minimum Benefits. For purposes of satisfying the minimum benefit requirements of section 416(c)(1) of the Code and the Plan, in determining years of service with the Employer, any service with the Employer shall be disregarded to the extent that such service occurs during a Plan Year when the plan benefits (within the meaning of section 410(b) of the Code) no Key Employee or former Key Employee. COLUMBUS McKINNON CORPORATION MONTHLY RETIREMENT BENEFIT PLAN Page 11 of Amendment No. 3 of 1998 Plan Restatement IN WITNESS WHEREOF, this instrument of amendment has been executed by a duly authorized officer of the Corporation this day of March, 2002, to be effective as of the dates recited herein. COLUMBUS McKINNON CORPORATION By: /s/ Robert L. Montgomery -------------------------------------------- Title: Executive Vice President ----------------------------------------- EX-21.1 9 dex211.txt SUBSIDIARIES Exhibit 21.1 Columbus McKinnon Corporation Subsidiaries and Affiliates of the Registrant Audubon West, Inc. (US) LICO Steel, Inc. (US) CM Insurance Company, Inc. (US) Columbus McKinnon do Brazil Ltda. (Brazil) Columbus McKinnon Finance Corporation (Canada) Columbus McKinnon Limited (Canada) Crane, Engineering & Service Group, Inc. (US) Larco Industrial Services, Ltd. (Canada) Endor, S.A. de C.V. (Mexico) Societe d'Exploitation des Raccords Gautier (France) Univeyor A/S (Denmark) Ejendomsselskabet Lupinvej 11 (Denmark) Univeyor AB (Sweden) Univeyor Conveying Systems Ltd. (England) Univeyor Electronic A/S (Denmark) Yale Industrial Products, Inc. (US) Egyptian-American Crane Co. (Joint Venture)(Egypt) Spreckels Development Company, Inc. (US) Spreckels Land Company, Inc. (US) Spreckels Water Company, Inc. (US) Spreckels Consolidated Industries, Inc. (US) Yale Industrial Products Ltd. (England) Yale Industrial Products GmbH (Germany) Camlok Lifting Clamps Ltd. (England) Hangzhou LILA Lifting and Lashing Co. Ltd. (China) Manutention Connection (France) Yale Elevacion Iberica S.L. (Spain) Yale Hangzhou Industrial Products Ltd. (China) Yale Industrial Products B.V. (The Netherlands) Yale Industrial Products GmbH (Austria) Yale Industrial Products Pty. Ltd. (South Africa) Yale Industrial Products Asia (Thailand) Co. Ltd. (Thailand) Yale Lifting & Mining Products (Pty.) Ltd. (South Africa) EX-23.1 10 dex231.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 23.1 Consent of Independent Auditors We consent to the incorporation by reference in (a) the Registration Statement (Form S-8 No. 333-3212) pertaining to the Columbus McKinnon Corporation 1995 Incentive Stock Option Plan, the Columbus McKinnon Corporation Non-Qualified Stock Option Plan, the Columbus McKinnon Corporation Restricted Stock Plan and the Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 of Columbus McKinnon Corporation and (b) the Registration Statement (Form S-8 No. 333-81719) pertaining to the Options assumed by Columbus McKinnon Corporation originally granted under the GL International, Inc. 1997 Stock Option Plan and the Larco Industrial Services Ltd. 1997 Stock Option Plan of our report dated June 6, 2002, with respect to the consolidated financial statements and financial statement schedule of Columbus McKinnon Corporation included in the Annual Report (Form 10-K) for the year ended March 31, 2002. /s/ Ernst & Young LLP Buffalo, New York June 11, 2002 -----END PRIVACY-ENHANCED MESSAGE-----