-----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, HM1D/GmshLe1izgT43GXWLRxLlaeqhCvX0t2gNn/fCK8t3rsB+acmdTvVEiBCTXZ lYX0gW5ZvrTacRpVWwhQYA== /in/edgar/work/20000629/0001005229-00-000006/0001005229-00-000006.txt : 20000920 0001005229-00-000006.hdr.sgml : 20000920 ACCESSION NUMBER: 0001005229-00-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBUS MCKINNON CORP CENTRAL INDEX KEY: 0001005229 STANDARD INDUSTRIAL CLASSIFICATION: [3531 ] IRS NUMBER: 160547600 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-27618 FILM NUMBER: 665009 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LICO STEEL INC CENTRAL INDEX KEY: 0001062622 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-53759-04 FILM NUMBER: 665010 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTOMATIC SYSTEMS INC CENTRAL INDEX KEY: 0001062623 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 430978181 STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-53759-05 FILM NUMBER: 665011 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 FILER: COMPANY DATA: COMPANY CONFORMED NAME: YALE INDUSTRIAL PRODUCTS INC CENTRAL INDEX KEY: 0001062624 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 710585582 STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 333-53759-06 FILM NUMBER: 665012 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 10-K 1 0001.txt COLUMBUS MCKINNON FORM 10-K FOR 3/31/00 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, 2000 OR ______ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ----------------- ---------------- Commission file number 0-27618 COLUMBUS McKINNON CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 16-0547600 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 140 John James Audubon Parkway, Amherst, N.Y. 14228-1197 - --------------------------------------------- ---------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (716) 689-5400 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of exchange on Title of Class which registered - ----------------------------- ---------------------- Common Stock, $0.01 Par Value NASDAQ National Market Securities pursuant to section 12(g) of the Act: NONE 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 (Sec. 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 [ ]. The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 31, 2000 was $159,282,351. The number of shares of common stock outstanding as of May 31, 2000 was: 14,896,745 shares. Documents Incorporated By Reference ----------------------------------- None COLUMBUS McKINNON CORPORATION 2000 Annual Report on Form 10-K PART I ------ This annual report may include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the integration of acquisitions and other factors disclosed in the Company's periodic reports filed with the Commission. Consequently such forward looking statements should be regarded as the Company's current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Item 1. Business. - ------- --------- Overview Columbus McKinnon ("Columbus McKinnon" or the "Company"), established in 1875, is a broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions that are widely distributed to industrial and consumer markets worldwide. The Company's material handling products are sold, domestically and internationally, principally to third party distributors through diverse channels and, to a lesser extent, directly to manufacturers and other end-users. The Company's integrated material handling solutions businesses primarily deal directly with end-users. For the year ended March 31, 2000, the Company generated net sales and income from operations of approximately $736.3 million and approximately $68.0 million, respectively. The Company's Products segment includes a wide variety of electric, lever, hand and air-powered hoists; hoist trolleys; industrial crane systems, such as bridge, gantry and jib cranes and light-rail systems; 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 lifters. Through innovative design and manufacturing expertise developed by the Company and through selective acquisitions, the Company has established a leading market share in many of its product lines. Columbus McKinnon believes it has more overhead hoists in use in North America than all of its competitors combined. The Company's products and customer base are highly diversified; no single product accounted for more than 1%, and no individual customer accounted for more than 5%, of net Products segment sales for the year ended March 31, 2000. For the year ended March 31, 2000, the Company's Products segment generated net sales and income from operations before amortization of approximately $511.3 million and approximately $75.4 million, respectively. As a result of its fiscal 1998 acquisitions of Univeyor A/S ("Univeyor") and Automatic Systems, Inc ("ASI"), formerly LICO, Inc. , the Company has also positioned itself as a leader in the project design, management and implementation of integrated material handling systems that are designed to meet specific applications of end-users to increase productivity. These businesses have formed the foundation for the Company's two Solutions segments, Solutions - Industrial and Solutions - Automotive. The delivered products of these segments include various types of conveyor systems as well as operator-controlled manipulators and scissor lifts, light-rail systems and tire shredders. For the year ended March 31, 2000, the Company's Solutions - Industrial segment generated net sales and income from operations before amortization of approximately $68.6 million and approximately $6.8 million, respectively, and the Company's Solutions - Automotive segment generated net sales and income from operations before amortization of approximately $156.4 million and approximately $2.3 million, respectively. The Company believes that the demand for material handling products and services has increased in recent years and will continue to increase in the future as a result of several favorable trends which require businesses to devote greater attention and resources to more efficiently manage and control the flow of materials, inventory and finished goods. These trends include: Productivity Enhancement. Companies increasingly need to enhance profitability through productivity improvement and operating cost reductions to remain competitive. At the same time, the changing global buying culture and growth of electronic commerce is increasing customer demands for cheaper, faster, more accurate and customized product delivery. Efficient physical movement of merchandise from producer to consumer has become a priority in order to facilitate the fastest movement of materials and delivery of services at the lowest cost. In response to competitive pressures, and customer demands, companies are demanding more material handling products and services to maximize the productivity and efficiency of their operations. The material handling products and solutions offered by the Company enhance productivity by allowing materials to be lifted, positioned, and moved quickly and accurately while reducing personnel requirements. Safety Regulations and Concerns. In the United States, federal and state workplace safety regulations such as the Occupational Safety and Health Act ("OSHA") and the Americans with Disabilities Act, and the competitive need to reduce costs such as health insurance premiums and workers' compensation expenses, are forcing companies to seek safer, more efficient ways to lift, position and move loads. As a result, U.S. companies are equipping their facilities with more material handling products to enable these tasks to be performed with reduced risk of personal injury. The Company believes that many material handling products, such as those produced by the Company, are essential to any organization that moves objects repetitively and seeks to enhance worker safety. Workforce Diversity. The number of women, disabled and older persons in the U.S. work force is continuing to increase. As a result, companies are equipping their facilities with more material handling products and systems to enable workplace tasks to be performed safely, efficiently and with less physical stress. The Company believes that increasing diversity in the workforce will continue to increase demand for material handling products and solutions. 2 Outsourcing of Material Handling Project Design and Management. To improve productivity and cost efficiency, many businesses are outsourcing non-core business functions. As a result, many companies are increasingly relying on material handling systems integrators and manufacturers to assume the project design, management, implementation and maintenance responsibilities for both workstation and facility-wide material handling systems. The trend toward outsourcing material handling project design and management has expanded the overall demand for material handling products and created opportunities for integrated systems providers who also sell products to include their own products in the systems they design and install. The Company has extended its product lines and penetrated new markets in recent years through several acquisitions which have been successfully integrated into the Company. Over the past five years, the Company has made fourteen acquisitions which have (i) enhanced the Company's position as the largest North American manufacturer of overhead hoists, operator-controlled manipulators and alloy chain, (ii) enabled the Company to broaden its product and service offerings and (iii) provided the Company with cross-selling opportunities into other segments of the material handling and lifting industry. As a result of internal growth and acquisitions, the Company's net sales and income from operations have increased to approximately $736.2 million and $68.0 million, respectively, for the year ended March 31, 2000 from approximately $172.3 million and $18.3 million, respectively, in fiscal 1995, representing compound annual growth rates of approximately 33.7% and 30.0%, respectively. Key Strengths The Company attributes its strong competitive position to the following key strengths: Leading Market Position and Strong Brand Names. The Company has developed its leading market position over its nearly 125-year history by emphasizing technological innovation, manufacturing excellence and superior after-sale service. Columbus McKinnon is the largest manufacturer of hoists, alloy and high strength carbon steel chain and operator-controlled manipulators in North America. The Company believes it has more overhead hoists in use in North America than all of its competitors combined and estimates that 69% of its domestic Products segment sales (approximately 37% of total net sales) are into markets where the Company is the leading supplier. Through its Solutions segments, the Company is also a leading provider of integrated material systems with strong market share in the United States and Europe. The Company's brand names, including Abell-Howe, ASI, American Lifts, Big Orange, Budgit, Chester, CM, Coffing, Duff-Norton, Gaffey, Hammerlok, Herc-Alloy, Larco, Lister, Positech, Shaw-Box, Univeyor and Yale, are among the most recognized and respected in the material handling industry. The Company believes that its strong brand name recognition, together with its large installed base of products and systems, provide it with a significant competitive advantage in selling its full product line to existing and new customers as well as providing repair and replacement parts. Preferred Provider to Major Distributors. The Company enjoys long-standing relationships with, and is a preferred provider to, many of North America's largest distributors of industrial products. Since 1990, during a period of significant consolidation among distributors of material handling equipment, the Company has maintained and enhanced its relationships with leading distributors and distributor groups. The Company believes that its ability to retain existing 3 customers and attract new customers is attributable to its ongoing commitment to customer service and satisfaction. For example, the Company maintains close contact with its customers and provides prompt aftermarket service to end-users of its products through a network of independent distributors staffed with Company-trained professionals at over 450 hoist parts, product, service and repair centers, and 14 chain service centers. Additionally, to ensure continuing product development and market awareness, the Company sponsors advisory boards composed of representatives of its largest distributors and aftermarket sales and service network. The Company believes that it has successfully increased sales and market share by leveraging its strong distribution relationships and increasing the number of Columbus McKinnon products carried by many of its distributors. Diversified Products, Markets, and Customer Base. Among all of its competitors in the material handling industry, the Company believes that it offers the most extensive line of material handling products to the widest range of distribution channels for application in the most diverse range of end markets. No single product accounted for more than 1% of net Products segment sales for the year ended March 31, 2000. In addition, the Company's products are sold to over 20,000 general, specialty and service-after-sale distributors and original equipment manufacturers ("OEMs") for various applications in the following industries: general manufacturing, marine, agricultural, power generation, vehicle assembly, entertainment, construction, mining, crane building, transportation, logging, oil and gas production, pulp and paper, primary metals production and steel processing, warehousing and distribution, and food and beverage. The Company also sells its products for consumer use to several thousand hardware, trucking and transportation, farm hardware and rental outlets. No single end-user, distributor or customer accounted for more than 5% of net Products segment sales for the year ended March 31, 2000. General Motors Corporation, which deals principally with the Company's Solutions - Automotive segment, accounted for approximately 13% of the Company's net sales for the year ended March 31, 2000. The Company believes that the diversity of its product offering, distribution channels and end markets provides significant competitive advantages and minimizes its dependence on any particular product, market, customer or geographic region. Highly Integrated and Synergistically Linked Operations. The Company believes that it will continue to achieve revenue and cost synergies through the increased integration of acquired and existing operations. The Company's diverse operations are currently linked in a number of synergistic ways, including: o Cross-selling and cooperative strategies o Consolidated purchasing activities o Integrated internal supply networks o Centralized internal administration support systems o Integrated capital planning o A Company-wide Enterprise Resource Planning system that supports integrated production and inventory planning, resource allocation and integrated business processes across multiple facilities and functions 4 o A matrix organization consisting of operating groups of manufacturing facilities with similar business processes which are combined with sales and marketing groups to form business units o Cross-operational and cross-functional product and process development capabilities, including 3-D modeling in a multi-functional and facility team environment o Significant human resource sharing among business units and operating groups Limited Exposure to Cyclicality. The Company believes that its exposure to the cyclicality of its end-user markets is mitigated as a result of several factors, including: o Diversified product line, distribution channels and end-user base o Geographic diversity, with approximately 25% of fiscal 2000 net sales outside of the United States o Approximately 75% of the Company's Product segment sales are classified as maintenance, repair, operating and production ("MROP") supplies, which have significantly lower per unit price points than capital goods and are generally considered "must have" items, irrespective of prevailing conditions o Ability to manage in an economic downturn, including (i) the ability to control production in response to changes in demand and avoid unintentional inventory buildup and (ii) the ability to manage the Company's mix of fixed and variable costs Experienced Management Team with Significant Ownership Interest. o Top seven executives have 165 years of relevant industry experience o Management, Directors and insiders collectively own approximately 18% of the Company's outstanding common stock o The Columbus McKinnon ESOP owns approximately 10% of the Company's outstanding common stock and includes substantially all of the Company's domestic, non-union employees Business Strategy The Company's strategic objective is to further enhance its position as a leading designer, manufacturer and distributor of material handling products and solutions, both domestically and internationally. The Company plans to achieve this objective through the continued implementation of its multi-tiered strategy, which includes the following: Leverage Strong Competitive Position - The Company's substantial installed base of products, premier engineering capabilities and close relationships with diverse distribution channels enable it to increase sales and enhance customer service by: 5 o Selling new and acquired products and services to existing customers and distribution channels o Selling existing products and services to new customers and distribution channels, including those served by acquired businesses - Expand the operations of the Solutions - Industrial segment, which has a strong foundation in Europe, to further penetrate North America, Latin America and Asia - Diversify the revenue stream of the Solutions - Automotive segment and generate incremental sales from other U.S. and foreign auto manufacturers, auto parts suppliers and other new industrial customers o Anticipating customer needs and developing new and improved products o Expanding its strong service-after-sale parts, repair, and product replacement business by providing additional services such as field parts stocking and repair capabilities Focus on Quality, Productivity and Efficiency - The Company continually focuses on improving its products, manufacturing methods and general operating processes. o ISO 9000 Certification - Most of the Company's factories and distribution centers are ISO 9000 certified. All others either meet the requirements for certification, or are in process of reaching compliance. o Process and Productivity Improvement - Ongoing efforts to improve operations and increase productivity include the following: - Reducing overall business and production cycle times from receipt of order to collection of cash - Reducing machine set-up times and inventory levels - Establishing efficient facility layouts - Integrating all business functions and facilities into one seamless enterprise resource planning system known as CMBIS (Columbus McKinnon Business Information System) - Continuing to enhance CMBIS to increase productivity and provide timely information - Investing in capital equipment that adds economic as well as customer service value, including productivity enhancing machinery and integrated engineering systems such as 3-D CAD/CAM systems - Providing incentives to all associates to use capital wisely by paying incentive bonuses based upon EVA(R) 6 - Operating in a team environment empowering associates to contribute to the success of the Company and its customers o Purchasing Cost Savings - The Columbus McKinnon Purchasing Council is responsible for Company-wide procurement of most major commodity groups including steel, motors, bearings and other components. Through its Purchasing Council, the Company is leveraging the combined buying power of its diverse operations to source quality components and services at reduced prices. o Product Rationalization - The Company believes that its portfolio of brands with similar offerings in certain product lines provides opportunities for rationalization. o Component Rationalization - The Company is achieving significant cost reductions and increasing product quality by value engineering high volume components used in multiple products. By value engineering components to achieve greater standardization, the Company is improving product manufacturability and enhancing ease of assembly. o Manufacturing Rationalization - Through the creation of "centers of excellence", the Company believes consolidated component manufacturing for multiple products at multiple assembly sites will create additional efficiencies and quality improvements. o Facility Rationalization - The Company believes that significant fixed cost reductions and margin improvements are attainable through continued rationalization and consolidation of certain of its existing facilities. New Product Development - The Company will continue to introduce new material handling products and services developed internally to satisfy customer needs and to enhance its ability to serve its markets. Recent examples include: o A safer air balancer, an operator assisted light load air powered lifting device o A new short handle puller, having less weight and requiring less space, for the utility industry o New top-running and underhung end trucks, more cost effective, for the crane-builder industry o A new mini-load crane, a high speed, light weight picking device for warehouse applications Continue to Implement CraneMart(TM) Strategy - In fiscal 1999, the Company initiated its CraneMart(TM) strategy to build an integrated North American network of fully capable Company-owned and independent crane builders. The acquisitions of Abell-Howe Crane, Inc. in August 1998, the merger with GL International, Inc. in March 1999, and the acquisition of Washington Equipment Company in April 1999 were the Company's first significant steps in the implementation of CraneMart(TM). 7 o CraneMart(TM) participants utilize Columbus McKinnon's products and parts in their own offerings and receive a full range of services from the Company including best pricing and products, parts distribution rights, dedicated technical support and shared resources. o The Company has formed additional strategic alliances by agreement with approximately 50 independent participants, in major North American industrial markets. o The Company believes that CraneMart(TM) will enhance the Company's position as a full-service supplier of hoists, cranes and components and will enable it to expand its product and service offerings to meet the increasing demands of its end-users including timely parts availability and service. Increase Penetration of International Markets - The Company maintains a distributor network in approximately 50 countries and has manufacturing facilities in Canada, Mexico, Germany, The United Kingdom, Denmark, France and China. The Company intends to increase international sales and enhance margins through the implementation of the following initiatives: o Worldwide Parts Distribution - The Company is streamlining its global supply chain of parts and services to end-users in order to increase margins and enhance customer service. o Global Sales and Marketing - The Company's objective is to market and sell its products into Latin America, Asia and Europe and obtain the same leading market share that it has achieved in North America. To execute this strategy, the Company has established sales and service offices in the major market areas of each region. o Mexican Manufacturing Strategy - The Company plans to increase sales and achieve margin improvements by manufacturing and exporting a broader array of high quality, low cost products and components from its facility in Mexico to further penetrate markets in North and South America. The Company's Mexican facility, located near Mexico City, currently produces hand-powered and electric hoists and chain for the U.S. and Mexican markets. o Chinese Manufacturing Strategy - Similar to its Mexican initiative, the Company's Chinese strategy involves capitalizing on China's low cost operating environment by manufacturing and exporting products to markets in Asia, Europe and North America. The Company currently operates two factories in China which produce textile slings, pallet trucks and ratchet lever hoists for delivery and sale into Europe, under the Yale brand name. Penetrate New Distribution Channels - The Company is leveraging its established brand names and leading market position into new distribution channels to generate incremental sales at attractive margins. o The Internet and E-Commerce - The Company's web site at www.cmworks.com currently includes a comprehensive catalog of Columbus McKinnon's hoist products. A team led by executive management is developing the Company's e-commerce strategy and implementation plan, which is being executed by the Company's department of dedicated internet professionals. Pursuant to 8 its strategic plan, the Company will expand its web site to include maintenance manuals, pricing information, advertisements and customer service information. Ultimately, the web site will facilitate e-commerce for all of the Company's sales divisions. One product line is expected to be offered for sale on the web site as a pilot program during fiscal 2001. o Telesales - The Company has launched a telesales effort focused on smaller industrial distributors and users of the Company's industrial products. Pursue Selective Acquisitions - The Company intends to selectively pursue strategic acquisitions, joint ventures and alliances that strengthen the Company's leadership position in the material handling and lifting industry. Potential strategic combinations will be evaluated based on their ability to, among other things: o Complement existing businesses o Expand product lines o Broaden distribution channels o Increase the Company's international presence o Enhance shareholder value and the Company's EVA(R)position Recent Developments In January 2000, the Company retained the services of an investment banking firm to advise it on strategic alternatives to maximize shareholder value, including a sale or merger of the Company. Segment Information During fiscal 2000 the Company classified its operations into the following three business segments: Products. The Company's Products segment designs, manufactures and distributes a broad range of material handling products for various industrial applications and for consumer use. The Products segment includes 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 Company also sells these products to the consumer market through a variety of retailers and wholesalers. 9 Solutions - Industrial. The Company's Solutions - Industrial 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. The products and services of the Solutions - Industrial segment are highly engineered, are generally built to order and are primarily sold directly to end-users for specific applications. Solutions - Automotive. The Solutions - Automotive segment is comprised entirely of the operations of ASI, which was acquired in March 1998. ASI's primary activity is the conception, design and implementation of complex material handling systems, and its primary products include overhead and inverted power-and-free conveyors, as well as state-of-the-art electrified monorail systems, belt skid conveyors and skillet systems. Financial information regarding the business segments is presented in Note 17 to the Company's audited consolidated financial statements included elsewhere herein. Products and Services Products Segment The Company's 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. In fiscal 2000, net sales of the Products segment were approximately $511.3 million or approximately 69.4% of the Company's net sales, of which approximately $380.5 million (74%) were domestic and $130.8 million (26%) were international. The following table sets forth certain sales data for the products of the Products segment, expressed as a percentage of net sales of this segment for fiscal 2000: Hoists...................................... 53.7% Chain and forged attachments................ 24.4 Industrial overhead cranes.................. 14.4 Industrial components....................... 7.5 ----- 100 % ===== Hoists. The Company manufactures a variety of electric chain hoists, electric wire rope hoists, hand-operated hoists, lever tools, air balancers and. air-powered hoists. Load capacities for the Company's hoist product lines range from one-eighth of a ton to 100 tons. These products are sold under its Budgit, Chester, CM, Coffing, Shaw-Box, Yale and other recognized trademarks. The Company's 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 emerging product markets. The Company also supplies hoist trolleys, driven manually or by electric motors, for the industrial, consumer and OEM markets. The Company also offers a line of custom-designed, below-the-hook tooling and clamps. 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. 10 Chain and Forged Attachments. The Company manufactures alloy and carbon steel chain for various industrial and consumer applications. Federal regulations in the United States require the use of alloy chain, which the Company first developed, for overhead lifting applications because of its strength and wear characteristics. A line of the Company's alloy chain is sold under the Herc-Alloy brand name for use in overhead lifting, pulling and restraining applications. The Company also sells specialized load chain for use in hoists, as well as three grades and multiple sizes of carbon steel welded-link chain for various load securement and other non-overhead lifting applications. As a result of the acquisition of Lister Bolt & Chain, Ltd. and Lister Chain & Forge Inc. (collectively, "Lister"), the Company now also manufactures kiln chain sold primarily to the cement manufacturing market and anchor and buoy chain sold primarily to the United States and Canadian governments. The Company also manufactures 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 virtually all types of chain and wire rope rigging applications in a variety of industries, including transportation, mining, railroad, construction, marine, logging, petrochemical and agriculture. In addition, the Company manufactures carbon steel forged and stamped products, such as loadbinders, logging tools and other securement devices, for sale to the industrial, consumer and logging markets through industrial distributors, hardware distributors, mass merchandiser outlets and OEMs. Industrial Overhead Cranes. The Company entered the crane manufacturing market through the August 1998 acquisition of Abell-Howe, a Chicago-based regional manufacturer of jib and overhead bridge cranes. The Company's merger with GL in March 1999 and its acquisition of Washington Equipment Company in April 1999 established the Company as a significant participant in the strategically important crane building and servicing markets. Crane builders represent a specialized distribution channel for electric wire rope hoists and other crane components. Industrial Components. Through the Duff-Norton division of its Yale Industrial Products, Inc. ("Yale") subsidiary, the Company designs and manufactures 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 whose uses include 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 extensively in a variety of industries including pulp and paper, printing, textile and fabric manufacturing, rubber and plastic. The December 1998 acquisition of Gautier, a French rotary union and swivel joint manufacturer, complemented Duff-Norton's product line while expanding its global reach. 11 Solutions - Industrial Segment The Solutions - Industrial 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 lifts and tire shredders. Net sales of the Solutions - Industrial segment in fiscal 2000 were approximately $68.6 million or approximately 9.3% of the Company's total net sales, of which approximately $42.4 million (62%) were domestic and approximately $26.2 million (38%) were international. The following table sets forth certain sales data for the products and services of the Solutions segments, expressed as a percentage of net sales of these segments for fiscal 2000: Integrated material handling conveyor systems........ 54.7% Manipulators......................................... 19.6 Scissor lifts........................................ 17.2 Other................................................ 8.5 ----- 100 % ===== 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. Univeyor specializes in designing computer-controlled and automated powered roller conveyors for use in warehouse operations and distribution systems. The Company's Handling Systems and Conveyors, Inc. subsidiary specializes in designing, manufacturing and servicing overhead power-and-free conveyor systems for industrial customers. Scissor Lifts. The American Lifts division of Yale manufactures hydraulic scissor lift tables and other engineered lifting products. These products enhance workplace ergonomics and are sold primarily to customers in the manufacturing, construction, general industrial and air cargo industries. Manipulators. The Company manufactures 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. Utilizing various models and size configurations, the Company can offer custom-designed hydraulic, pneumatic, and electric manipulators for a wide variety of applications where the user requires multi-axial movement in a harsh or repetitive environment. Solutions - Automotive Segment The Solutions - Automotive segment, through ASI, is engaged primarily in the conception, design and implementation of complex material handling systems and the design, manufacture and distribution of overhead and inverted power-and-free conveyors, state-of-the-art electrified monorail systems, belt skid conveyors and skillet systems. Net sales of the Solutions - Automotive segment in fiscal 2000 were approximately $156.4 million or approximately 21.2% of the Company's total net sales, of which approximately $129.6 million (83%) were domestic and approximately $26.8 million (17%) were international. 12 Overhead and Inverted Power-and-Free Conveyor Systems. ASI's conveyor systems are used primarily in automotive and agri-business equipment plants for assembly and paint operations. These conveyor systems deliver products of various size and weight at moderate speeds to multiple locations within a manufacturing or assembly plant, and can be coded to provide inventory status, carrier location and other information. Electrified Monorail Systems. These fast and efficient material handling systems can reach 300 feet per minute, and are independently powered with the ability to move forward and backward. Monorail systems are cleaner, quieter, more ergonomically correct and require a smaller foot print than traditional power-and-free systems. Monorail systems are generally used in automotive body shop and general assembly plant applications. Fixed Skid, Skillet and Pallet Conveyor Systems. These systems are floor mounted modular conveyors providing high density storage and delivery with horizontal and vertical travel flexibility. They are often used in harsh environments for painting and delivery applications and can be supplied in light-duty belt-driven or heavy duty chain-driven styles. Specialized Products. ASI produces a full range of high lift and low lift forks for automotive body transfers between systems, automatic drop sections and steel mill coil transfer cars. Parts for all Products. ASI offers a complete line of spare parts for all products to meet the maintenance needs of its customers. Sales and Marketing Products Segment The Company's sales and marketing efforts in support of its Products segment consist of the following programs: o Factory-Direct Field Sales and Customer Service - The Company sells its products through its own sales forces and through independent manufacturing agents worldwide, including more than 150 dedicated salespersons who sell hoists, chain, forged attachments, cranes, rotary unions, actuators, jacks, and related material handling accessories. Sales are further supported by over 250 Company-trained customer service correspondents and sales application engineers. The Company compensates its field sales force through a combination of base salary and commission plan based on top line sales and a pre-established sales quota. Sales directors and regional sales management receive a base salary and target EVA(R) annual bonus. o Product Advertising - The Company promotes its products by advertising in leading trade journals as well as producing and distributing high quality information catalogs. The Company supports its product distribution by running cooperative "pull-through" advertising in over 50 vertical trade magazines and directories targeting theatrical, international, consumer and crane builder markets. The Company runs separate advertisements for chain, hoists, forged attachments, scissor lift tables, actuators, hydraulic jacks, hardware programs, cranes and light rail systems. 13 o Trade Show Participation - Trade shows are central to the promotion of the Company's products and, in certain cases, for the actual sale of its products, particularly to hardware retailers. The Company participates in more than 60 regional, national and international trade shows each year. Shows in which the Company participates range from global events held in Hanover, Germany, Cologne, Germany and Chicago, Illinois to local "markets" and "open houses" organized by individual hardware and industrial distributors. The Company also attends specialty shows for the entertainment, rental and safety markets, as well as general purpose industrial and consumer hardware shows. In fiscal 2000, the Company participated in trade shows in the US, Canada, France, Mexico, Germany, England, Argentina and Australia. o Industry Association Membership and Participation - As a recognized industry leader, the Company has a long history of work and participation in a variety of industry associations. Columbus McKinnon management is directly involved at the officer and director levels of numerous industry associations including the following: ASMMA (American Supply and Machinery Manufacturers Association), AWRF (Associated Wire Rope Fabricators), PTDA (Power Transmission and Distributors Association), SCA (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), and AHMA (American Hardware Manufacturers Association). o Product Standards and Safety Training Classes - The Company conducts on-site training programs worldwide for distributors and end-users to promote and reinforce the attributes of the Company's products and their safe use and operation in various material handling applications. o Web Site - The Company's web site at www.cmworks.com currently includes an electronic catalog of Columbus McKinnon hoist products. Potential customers can browse through the Company's diverse product offering or search for specific products by name or classification code and obtain technical product specifications. In the near future, the Company plans to post additional product catalogs, maintenance manuals, pricing information, advertisements, and customer service information on its web site and ultimately perform e-commerce on this web site. One product line is expected to be offered for sale on the web site as a pilot program during fiscal 2001. Solutions - Industrial Segment The products and services of the Solutions - Industrial segment are sold primarily to large corporate end-users, including Federal Express, Volvo, United Biscuits, Lego, Chivas Regal, J.I. Case, John Deere, DuPont, 3M, GTE, Cummins Engine, Steelcase, Boeing, Saturn, General Electric, Waste Management and other industrial companies, system integrators and distributors. In the sale of its integrated material handling conveyor systems, the Company generally acts 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 14 customers and undergoing a competitive bidding process. The Solutions - Industrial segment also sells scissor lifts and manipulators through its internal sales force and through specialized independent distributors and manufacturers representatives. Solutions - Automotive Segment ASI's sales are largely concentrated on the automotive OEM market with General Motors and Ford representing more than 90% of total net sales. Other customers include agricultural equipment OEMs such as John Deere and J.I. Case and foundry customers such as Griffin Wheel. ASI's sales and marketing effort is focused on establishing and maintaining relationships with OEM customers that often involve significant interaction of key engineering and process design personnel. North American sales and marketing operations are conducted from ASI's three main offices: Kansas City, MO; Lansing, MI; and Hamilton, Ontario, Canada. International sales and marketing operations are headquartered in Kansas City and primarily focus on pursuing international business from existing North American customers as they establish operations throughout the world. In addition, ASI has relationships with a number of key suppliers in Europe and Asia to assist in project sales, engineering support and manufacturing and installation activity. ASI also participates in CEMA, the Conveyor Equipment Manufacturing Association. Distribution and Markets Products Segment The distribution channels for the Products segment include a variety of commercial distributors, including general distributors, specialty distributors, service-after-sale distributors and other distributors and end-users. The Company also sells to the consumer market through one-step and two-step wholesalers. In addition, the Products segment sells overhead bridge, jib and gantry cranes, as well as certain forgings and chain assemblies, directly to end-users. General Distribution Channels: o Industrial distributors are traditional mill supply distributors that serve local or regional industrial markets and sell a variety of products for MROP applications through their own direct sales force. o Rigging shops are distributors who are experts in the rigging, lifting, positioning and load securement areas of material handling. 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. o Crane builders design, build, install and service overhead crane and light-rail systems for general industry and sell a wide variety of hoists and lifting attachments. The Company sells electric wire rope hoists and chain hoists as well as crane components, such as end trucks, trolleys, drives and electrification systems to crane builders. Crane End-users: o Crane end-users: The Company sells overhead bridge, jib and gantry cranes, parts and service to end-users through the wholly owned crane builders within the CraneMart(TM) network, The Company's wholly owned crane builders (Abell-Howe, GL and Washington Equipment Company) design, manufacture, install and service a variety of cranes ranging in capacity from one ton to 100 tons. 15 Specialty Distribution Channels: o Catalog houses 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. The customer base served by catalog houses, which traditionally included smaller industrial companies and consumers, has recently grown to include large industrial accounts and integrated suppliers. Typically, catalog houses, particularly W.W. Grainger, Inc., are pursuing e-commerce through their websites. o Material handling specialists design and assemble systems incorporating hoists, overhead rail systems, trolleys, lift tables, manipulators, air balancers, jib arms and other material handling products to provide end-users with solutions to their material handling problems. o Entertainment equipment distributors design, supply and install a variety of material handling equipment for concerts, theaters, ice shows, sports arenas, convention centers and discos. Service-After-Sale Distribution Channel: o Service-after-sale distributors include over 14 chain repair service stations and over 450 hoist parts, product, service and repair stations. This service network is designed for easy parts and service access for the Company's large installed base of hoists and related equipment in North America. OEM/Government Distribution Channels: o Original equipment manufacturers supply various component parts directly to other industrial manufacturers as well as private branding and packaging of traditional Company products for material handling, lifting, positioning and special purpose applications. o Government sales - products are sold directly by the Company and have expanded with the acquisition of Lister, which manufactures anchor, buoy and mooring chain for the United States and Canadian Navies and Coast Guards. Consumer Distribution: o 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 Fastenal and Canadian Tire); trucking and transportation distributors (such as U-Haul and Fruehauf); farm hardware distributors (such as J.I. Case and Tractor Supply Company); and rental outlets. 16 International Distribution: o The Company distributes virtually all of its products in over 50 countries on six continents through a variety of distribution channels. Solutions Segments The products and services of the Solutions segments are sold primarily to OEMs and end-users. In the sale of its integrated material handling conveyor systems, the Company generally acts as a prime contractor with turnkey responsibility for its systems, or a supplier working closely with the customer's general contractor. Sales are generated by in-house sales personnel, and generally developed through engineer-to-engineer interactions. Products, such as scissor lifts and manipulators are sold by Company sales employees and specialized independent distributors. Customer Service and Training Products Segment The Company maintains customer service departments staffed by well-trained personnel for all of its Products segment sales divisions, and regularly schedules product and service training schools for all customer service representatives and field sales personnel. In addition, training schools for distribution and service station personnel, as well as for end-users, are scheduled on a regular basis at most of the Company's facilities and in the field. The Company has more than 450 service stations worldwide that provide local and regional repair, warranty and general service work for distributors and end-users. End-user trainees attending various training schools maintained by the Company include representatives of General Motors, DuPont, 3M, GTE, Cummins Engine, General Electric and many other large industrial and theatrical organizations. The Company also provides, in several languages, a variety of collateral material in video, cassette, CD-ROM, slide and print format addressing such relevant material handling topics as the care, use and inspection of chains and hoists, and overhead lifting and positioning safety. In addition, the Company sponsors five separate advisory boards made up of representatives of its primary distributors and service-after-sale network members who are invited to participate in discussions focused on improving products and service. These boards enable the Company and its primary distributors to exchange product and market information relevant to industry trends. Solutions - Industrial Segment The Solutions - Industrial 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. The Company also offers after-sales services including operator training and maintenance. After-sales services are offered throughout the life of the equipment or system installed. The typical length of after-sales service varies depending on customer requirements, with supplemental training courses offered as needed. 17 Solutions - Automotive Segment The Solutions - Automotive segment utilizes its world-class engineering capabilities, comprehensive databases and sophisticated CAD systems to design specific solutions for its customers' needs. The Company prepares detailed manuals discussing operation, control systems, safety, maintenance and part specifications for each new installation. ASI also provides on-site training as well as after sales services throughout the life of the system installed. The typical length of after-sales service varies depending on customer requirements, with supplemental training courses offered as needed. Recent Acquisitions Since February 1994, the Company has acquired fourteen operations: o In April 1999, the Company acquired Washington Equipment Company, a manufacturer and servicer of overhead cranes, for approximately $6.4 million. This acquisition was an additional step by the Company in furtherance of its CraneMart(R) strategy. o In March 1999, the Company merged with GL, a full-service designer and builder of industrial overhead bridge, gantry and jib cranes and related components, in a pooling of interests transaction in which shares of, and options to purchase, the Company's common stock valued at approximately $20.6 million were exchanged for all outstanding shares and options of GL. This acquisition was the Company's first major step in the implementation of its CraneMart(R) strategy. o In January 1999, the Company acquired Camlok and the Tigrip product line for aggregate consideration of approximately $10.6 million. Camlok, located in the United Kingdom, manufactures plate clamps, crane weighers and related products. The German-based Tigrip produces standard and specialized plate clamps. These acquisitions positioned the Company as a market leader for lifting clamps in Europe. o In December 1998, the Company acquired Gautier, a French manufacturer of rotary unions and swivel joints, for approximately $2.9 million. Gautier's product lines are complementary to those of the Company's Duff-Norton division and provide the Company with additional cross-selling and cross-branding opportunities. o In August 1998, the Company acquired Abell-Howe, a regional manufacturer of jib and other overhead cranes for approximately $7.0 million. This acquisition marked the Company's entry into the complementary crane building product line, creating significant cross-selling opportunities for its existing hoist products. o In March 1998, the Company acquired ASI, a designer, manufacturer and installer of custom conveyors and material handling systems primarily for the automotive industry, for approximately $155.0 million, including outstanding borrowings. This acquisition strengthened the Company's position as a leader in the project design, fabrication and installation of automated material handling systems and provided the Company with an established platform for increasing its sales to the automotive and industrial manufacturing markets. 18 o In January 1998, the Company acquired Univeyor, which is engaged in the design and manufacture of automated material handling systems, for approximately $15.0 million plus assumed liabilities. This transaction enabled the Company, which previously had designed solutions only for individual workstations, to offer automated material handling systems, predominantly using powered roller conveyors, for the entire workplace. o In December 1996, the Company acquired Lister, a manufacturer of cement kiln, anchor and buoy chain and mining bolts, for approximately $7.0 million. This transaction complemented the Company's line of chain products and provided the Company with access to new markets, particularly in the international marketplace. o In October 1996, the Company acquired the majority of the outstanding common equity of Yale Industrial Products, Inc., a manufacturer of a variety of lifting and positioning products, including hoists and scissor lifts and industrial components such as actuators, jacks and rotary unions, for approximately $270.0 million through a cash tender offer. In January 1997, the Company acquired the remaining common equity of Yale and effected a merger. This acquisition further complemented the Company's product line and also provided the Company with international operations and distribution facilities in Europe, South Africa and China. o In November 1995, the Company acquired Lift-Tech International, Inc. ("Lift-Tech"), a manufacturer and distributor of hoists and crane components, including wire rope and air-powered hoists, for approximately $63.0 million. Lift-Tech's products complemented the Company's existing hoist product lines, thereby enabling the Company to offer a broader product line to the marketplace. Between February 1994 and October 1995 the Company also acquired (i) the remaining 51% equity interest in Endor, a Mexican manufacturer of hoists, for approximately $2.0 million, (ii) certain assets of Cady Lifters, Inc., a manufacturer of "below the hook" lifters, for approximately $0.8 million, (iii) the assets of the Conco Division of McGill Industries, Inc., a manufacturer of manipulators, for approximately $0.8 million and (iv) the assets of Durbin-Durco, Inc., a manufacturer of load securement equipment and attachments, for approximately $2.4 million. Competition Despite recent consolidation, the material handling industry remains highly fragmented. The Company faces competition from a wide range of regional, national and international manufacturers across its product and service areas in both domestic and international markets. In addition, the Company often competes with individual operating units of larger, highly diversified companies. The principal competitive factors affecting the market for the products of the Company's Products segment include performance, functionality, price, brand, reputation, reliability, customer service and support and product availability. Other important factors include distributor relationships, territory coverage and the ability to service the distributor with on-time delivery and repair services. 19 The principal competitive factors affecting the market for the products and services of the Company's Solutions segments 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. Within its Products segment, the Company competes in the sale of hoists with Mannesman Dematic, Kito-Harrington, Ingersoll-Rand, KCI Konecranes and Morris Material Handling; in chain with Campbell, Peerless Chain Company and American Chain and Cable Company; in forged attachments with the Crosby Group and BTC; in industrial components with Deublin, Joyce-Dayton and Nook Industries; and in crane building with Mannesman Dematic, KCI Konecranes, Morris Material Handling and R. Stahl. Within its Solutions segments, the Company competes in providing industrial solutions with Rapistan Systems, KCI Konecranes and Jervis B. Webb; and in providing automotive solutions with Rapistan Systems, Jervis B. Webb, Dearborn Mid-West, Allied UniKing, Fata Automation SpA and Daifuku. Employees At March 31, 2000, the Company had approximately 4,145 employees, 3,256 in the United States, 361 in Canada, 120 in Mexico and 408 in Europe. Approximately 1,425 of the Company's employees are represented under 12 separate collective bargaining agreements which terminate at various times between May 2001 and March 2004. During the past five years, the only interruptions or curtailments of the Company's business due to labor disputes was a five-day work stoppage at a Duff-Norton plant in Charlotte, North Carolina in fiscal 1997, prior to its acquisition by the Company. The Company believes that its relationship with its employees is good. In support of this relationship, the Company has maintained an Employee Stock Ownership Plan since 1988 and also uses incentive-based compensation programs that are linked to the Company's profitability and increase in shareholder value. Backlog Products Segment The Company's backlog of orders at March 31, 2000 was approximately $52.5 million compared to approximately $56.6 million at March 31, 1999. The Company's 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. The Company does not believe that the amount of its backlog orders is a reliable indication of its future sales. Solutions - Industrial Segment Revenues from the Company's Solutions - Industrial segment are generally recognized within one to six months. The Company's backlog of orders at March 31, 2000 was approximately $11.3 million compared to approximately $7.5 million at March 31, 1999. 20 Solutions - Automotive Segment Revenues from the Company's contracts for automated systems are generally recognized within 12 to 18 months. The Company's backlog of orders at March 31, 2000 was approximately $85.4 million compared to approximately $102.4 million at March 31, 1999. Raw Materials and Components The principal raw materials used by the Company are structural steel and processed steel bar, forging bar steel, steel rod and wire, steel pipe and tubing and tool steel which are available from multiple sources. The Company purchases most of these raw materials from a limited number of strategic and preferred suppliers under long-term agreements which are negotiated on a company-wide basis to take advantage of volume discounts and to protect the Company from price fluctuations. Although the steel industry is cyclical and steel prices can be volatile, the Company has not been significantly impacted in recent years by increases in steel prices. The Company also purchases components such as motors, bearings and gear housings and castings. These components are generally available from several suppliers. The Company estimates that its total materials cost, including steel products and components, represented approximately 31% of net sales in fiscal 2000. The Company generally seeks to pass on materials price increases to its customers, although a lag period often exists. The Company's ability to pass on these increases is determined by competitive conditions. Environmental and Other Governmental Regulation Like many manufacturing companies, the Company is subject to various federal, state and local laws relating to the protection of the environment. To address the requirements of such laws, the Company has adopted a corporate environmental protection policy which provides that all facilities owned or leased by the Company shall, and all employees of the Company have the duty to, comply with all applicable environmental regulatory standards, and the Company has initiated an environmental auditing program for its facilities to ensure compliance with such regulatory standards. The Company has also established managerial responsibilities and internal communication channels for dealing with environmental compliance issues that may arise in the course of its business. Because of the complexity and changing nature of environmental regulatory standards, it is possible that situations will arise from time to time requiring the Company to incur expenditures in order to ensure environmental regulatory compliance. However, the Company is not aware of any environmental condition or any operation at any of its facilities, either individually or in the aggregate, which would cause expenditures that would result in a material adverse effect on the Company's results of operations or financial condition and, accordingly, has not budgeted any material capital expenditures for environmental compliance for fiscal 2000. On or about February 1, 2000, the Company received notification from the U.S. Attorney's Office for the Northern District of Iowa that the U.S. Attorney intended to file a complaint on behalf of the United States Environmental Protection Agency ("EPA") against the Company for alleged violations of certain chromium air emissions standards under the National Emission Standards for Hazardous Air Pollutants ("NESHAPS") pursuant to the federal Clean Air Act in connection with the Company's facility located in Laurens, Iowa. On or about June 21, 2000, the Company agreed informally to a settlement-in-principle with 21 the U.S. Attorney's Office and EPA, under which the Company agreed to pay a civil penalty of $60,000 to resolve any and all liabilities in connection with the matter. The informal settlement agreement should not be construed as an admission of any liability by the Company. It is anticipated the informal settlement agreement will be memorialized in detailed settlement documents to be negotiated by the Company and the U.S. Attorney's Office, representing EPA. Although the Company believes this matter will be closed within the next several months by the execution of the appropriate settlement documentation and the payment of the indicated settlement amount, there can be no guarantee that the parties will be able to reach agreement on the details of the documentation within a time frame acceptable to the parties. In such an unlikely event, there may be litigation regarding the alleged violations. At this time, it is not possible to determine the extent to which penalties, if any, may be incurred by the Company as a result of any such potential litigation. The Company has agreed to purchase a facility that it has been leasing, located in Charlotte, North Carolina. Under the terms of the purchase agreement, the Company has agreed to undertake appropriate action to close an underground storage tank ("UST") located at the facility, in compliance with applicable regulatory standards. The Company is in the process of determining the appropriate steps required to close the UST. At this early stage of the closure process, it is not possible to determine the costs associated with such closure. 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. The Company has been involved recently in four administrative enforcement proceedings in connection with the remediation of certain facilities, which neither the Company nor any subsidiary of the Company has ever owned or operated but with regard to which the Company or a subsidiary of the Company has been identified as one of several potentially responsible parties ("PRPs"). The Company has cooperated with the regulatory authorities in connection with these environmental proceedings. From the perspective of the Company, with the exception of the one environmental administrative proceeding discussed below, these matters have been, and are expected to continue to be, minor matters not requiring substantial effort or expenditure on the part of the Company. The Company has been identified by the New York State Department of Environmental Conservation ("NYSDEC"), along with other companies, as a PRP at the Frontier Chemical Site in Pendleton, New York ("Pendleton Site"), 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. The Company sent waste pickling liquor generated at its facility in Tonawanda, New York to the Pendleton Site during the period from approximately 1969 to 1977, and the Company is participating 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, the Company has paid its pro rata share of the remediation construction costs and accrued its share of the ongoing operations and maintenance costs. As of March 31, 2000, the Company has paid approximately $1.0 million in remediation and ongoing operations and maintenance costs associated with the Pendleton Site. The participating PRPs have identified and 22 commenced a cost recovery action against a number of other parties who sent hazardous substances to the Pendleton Site. If any of the currently nonparticipating parties identified by the participating PRPs pay their pro rata shares of the remediation costs, then the Company's share of total site remediation costs will decrease. Settlements have been reached with 45 of the 113 defendants in the cost recovery action, and additional settlements are expected from a few of the remaining defendants in the future. However, the Company has not yet received payment in connection with such settlements. The Company also has entered into a settlement agreement with one of its insurance carriers in the amount of $734,130 in connection with the Pendleton Site and has received payment in full of the settlement amount. For all of the currently known environmental matters, the Company has accrued a total of approximately $860,000 as of March 31, 2000, which, in the opinion of the Company's management, is sufficient to deal with such matters. Further, the Company's management believes that the environmental matters known to, or anticipated by, the Company should not, individually or in the aggregate, have a material adverse effect on the Company's cash flow, results of operations 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 the Company. The Company's operations are also governed by many other laws and regulations, including those relating to workplace safety and worker health, principally OSHA and regulations thereunder. The Company believes that it is in material compliance with these laws and regulations and does not believe that future compliance with such laws and regulations will have a material adverse effect on its cash flow, results of operations or financial condition. 23 Item 2. Properties. - ------- ----------- The Company maintains its corporate headquarters in Amherst, New York. The principal properties utilized by the Company for its continuous operations consist of 70 manufacturing and distribution and sales facilities, of which 45 are located in the United States, 7 are located in Canada, 2 are located in Mexico, 11 are located in Europe, 3 are located in Asia and 2 are located in Africa. The following table summarizes the Company's headquarters and principal manufacturing and distribution facilities by business segment:
Approximate Floor Space (in thousands of square feet) Owned Leased Total ----- ------ ----- Corporate Headquarters 52,000(1) - 52,000 Products (54 facilities): United States 1,859,647 598,799 2,458,446 International 399,066 180,230 579,296 Solutions - Industrial (9 facilities): United States 322,934 24,500 347,434 International 85,500 21,250 106,750 Solutions - Automotive (7 facilities): United States 81,475 69,700 151,175 International - 1,900 1,900 - ----------------------- (1) Approximately 26,000 square feet is subject to an unaffiliated party through June 30, 2003.
The Company also leases a number of sales offices and minor warehouses throughout North America, Europe, Asia and South America. The Company believes that its properties have been adequately maintained, are in generally good condition and are suitable for the Company's business as presently conducted. The Company believes its existing facilities provide sufficient production capacity for its present needs and for its anticipated needs in the foreseeable future. The Company also believes that upon the expiration of its current leases, it either 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, the Company is named a defendant in legal actions arising out of the normal course of business. The Company is not a party to any pending legal proceeding the resolution of which the management of the Company believes will have a material adverse effect on the Company's cash flow, results of operations or financial condition or to any other pending legal proceedings other than ordinary, routine litigation incidental to its business. The Company maintains liability insurance against risks arising out of the normal course of business. 24 Item 4. Submission of Matters to a Vote of Security Holders. - ------- ---------------------------------------------------- Not applicable. 25 PART II Item 5. Market for the Company's Common Stock and Related Security Holder - ------- ----------------------------------------------------------------- Matters. -------- The Company's Common Stock is listed on the National Association of Securities Dealers Automated Quotation System - National Market System ("NASDAQ") under the trading symbol "CMCO". The following table sets forth, for the fiscal periods indicated, the high and low closing sale prices per share of the Company's Common Stock as reported by NASDAQ. Fiscal 2000 Fiscal 1999 ----------- ----------- High Low High Low ---- --- ---- --- 1st Quarter 25 1/16 23 3/4 30 1/2 26 1/4 2nd Quarter 17 5/8 17 1/8 28 7/16 15 1/8 3rd Quarter 10 1/8 9 7/8 19 1/4 14 3/8 4th Quarter 13 1/2 12 13/16 22 3/4 17 7/16 As of March 31, 2000, there were 307 holders of record of the Company's Common Stock. Approximately 2,000 additional shareholders hold shares of the Company's Common Stock in "street name". The Company declared total cash dividends of $.28 per share in fiscal 2000 and $.28 per share in fiscal 1999. 26 Item 6. Selected Financial Data. - ------- ------------------------ SELECTED FINANCIAL INFORMATION The following table sets forth selected consolidated financial information of the Company for each of the five fiscal years in the period ended March 31, 2000. This information includes (i) the results of operations of Lift-Tech since its acquisition on November 1, 1995, (ii) the results of operations of Yale since its acquisition on October 17, 1996, (iii) the results of operations of Lister since its acquisition on December 19, 1996, (iv) the results of operations of Univeyor since its acquisition on January 8, 1998, (v) the results of operations of ASI since its acquisition on March 31, 1998, (vi) the results of operations of Mechanical Products through its divestiture on August 7, 1998, (vii) the results of operations of Abell-Howe since its acquisition on August 21, 1998, (viii) the results of operations of Gautier since its acquisition on December 4, 1998, (ix) the results of operations of Camlok and Tigrip since their acquisition on January 29, 1999, (x) the results of operations of GL since its formation on April 1, 1997, including the restatement of Company data reported prior to GL's merger with the Company on March 1, 1999, and (xi) the results of operations of WECO since its acquisition on April 29, 1999. This table should be read in conjunction with the "Management's Discussion and Analysis of Results of Operations and Financial Condition" and the Consolidated Financial Statements of the Company, including the notes thereto, included elsewhere herein.
Fiscal Years Ended March 31, ---------------------------- 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- (Dollars in thousands, except per share data) Statement of Income Data: Net sales ......................................... $ 209,837 $ 359,424 $ 561,823 $ 735,445 $ 736,254 Cost of products sold ............................. 149,511 251,987 401,669 542,975 556,145 --------- --------- --------- --------- --------- Gross profit ...................................... 60,326 107,437 160,154 192,470 180,109 Selling expenses .................................. 19,120 32,550 46,578 52,059 50,450 General and administrative expenses ............... 13,941 24,636 33,361 39,850 44,260 Amortization of intangibles ....................... 791 5,197 10,297 15,479 16,392 Other charges ..................................... 672 - - - 965 --------- --------- --------- --------- --------- Income from operations ............................ 25,802 45,054 69,918 85,082 68,042 Interest and debt expense ......................... 5,292 11,930 25,104 35,923 34,698 Interest and other income ......................... 1,134 1,168 1,940 1,565 1,314 --------- --------- --------- --------- --------- Income before income taxes, minority interest and extraordinary charge ............................. 21,644 34,292 46,754 50,724 34,658 Income tax expense ................................ 8,657 15,617 22,776 23,288 17,578 Minority interest ................................. - (323) - - - Extraordinary charge for early debt extinguishment - (3,198) (4,520) - - --------- --------- --------- --------- --------- Net income ........................................ $ 12,987 $ 15,154 $ 19,458 $ 27,436 $ 17,080 ========= ========= ========= ========= ========= Net income per common share - diluted (a) ......... $ 1.69 $ 1.15 $ 1.35 $ 1.92 $ 1.20 Cash Dividend per common share (a) ................ 0.24 0.27 0.28 0.28 0.28 Balance Sheet Data (at end of period): Total assets ...................................... $ 188,734 $ 548,245 $ 788,862 $ 766,911 $ 759,824 Total long-term debt (including current maturities) 9,744 286,288 458,577 423,612 413,751 Total liabilities ................................. 51,112 398,089 617,916 578,237 556,371 Total shareholders' equity ........................ 137,622 150,156 170,946 188,674 203,453 (a) Reflects a 17 to 1 stock split of the common stock effected on February 15, 1996; fiscal 1996 per share data also impacted by the Company's initial public offering effected on February 22, 1996.
27 Item 7. Management's Discussion and Analysis of Results of Operations and - ------- ----------------------------------------------------------------------- Financial Condition. -------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Fiscal Years Ended March 31, 2000, 1999, and 1998 Overview The Company is a broad-line designer, manufacturer, and supplier of sophisticated material handling products and integrated material handling solutions. The Company's material handling products are sold, domestically and internationally, principally to third party distributors through diverse distribution channels. Distribution channels include general distributors, specialty distributors, crane end users, service-after-sale distributors, original equipment manufacturers ("OEMs"), government, consumer and international. The general distributors are comprised of industrial distributors, rigging shops and crane builders. Specialty distributors include catalog houses, material handling specialists and entertainment equipment riggers. The service-after-sale network includes repair parts distribution centers, chain service centers, and hoist repair centers. Consumer distribution channels include mass merchandisers, hardware distributors, trucking and transportation distributors, farm hardware distributors and rental outlets. The Company's integrated material handling solutions segments primarily deal directly with end-users. Material handling solution sales are concentrated, domestically and internationally (primarily Europe), in the automotive industry, and consumer products manufacturing, warehousing and, to a lesser extent, the steel, construction and other industrial markets. This section should be read in conjunction with the consolidated financial statements of the Company included elsewhere herein. Results of Operations Sales in the Products, Solutions-Industrial and Solutions-Automotive segments were as follows, in thousands of dollars and with percentage changes for each segment:
Change Change Fiscal Years Ended March 31, 2000 vs. 1999 1999 vs. 1998 ---------------------------- ------------- ------------- 2000 1999 1998 Amount % Amount % ---- ---- ---- ------ - ------ - (In thousands, except percentages) Products ............... $ 511,287 $ 508,313 $ 515,893 $ 2,974 0.6 $ (7,580) (1.5) Solutions-Industrial ... 68,559 65,689 45,930 2,870 4.4 19,759 43.0 Solutions-Automotive ... 156,408 161,443 - (5,035) (3.1) 161,443 - --------- --------- --------- ------- --- -------- ---- Consolidated net sales . $ 736,254 $ 735,445 $ 561,823 $ 809 0.1 $173,662 30.9 ========= ========= ========= ======= === ======== ====
Sales fluctuations during the periods were primarily due to the March 1998 ASI acquisition and the January 1998 Univeyor acquisition, offset by the August 1998 Mechanical Products divestiture. Sales in 2000 of $736.3 million increased by $0.8 million or 0.1% over 1999, and sales in 1999 of $735.4 million increased $173.6 million or 30.9% over 1998. On a pro forma basis, considering the effects of fiscal 1999 and 1998 acquisitions and divestiture, the Company experienced a 0.5% decrease in sales in fiscal 1999 compared to 1998. This comparison as well 28 as the comparison of fiscal 2000 to 1999 is impacted by the following economic factors: 1) the lingering effect of the mid-1998 General Motors strike, 2) a shift in a major customer's project focus from small cars to trucks and sport utility vehicles that impacted its plant modification schedule, 3) a relatively soft US industrial market, 4) the impact of the poor Asian and South American economic situations, and 5) a shift in demand from small retail hardware stores to larger do-it-yourself superstores, to which the Company supplies only a small share. The Automotive Solutions segment was formed in fiscal 1999 with the March 1998 acquisition of ASI. The 4.4% and 43.0% growth in the Industrial Solutions segment in fiscal 2000 and 1999, respectively, is due to the January 1998 Univeyor acquisition, offset by soft US industrial markets. The 0.6% growth and 1.5% decrease in the Products segment in fiscal 2000 and 1999, respectively is impacted by several small acquisitions including the April 1999 WECO acquisition, the January 1999 Camlok/Tigrip acquisition, the December 1998 Gautier acquisition, the August 1998 Abell-Howe acquisition, and offset by the August 1998 Mechanical Products divestiture, and soft US industrial markets in general. The following table sets forth certain income statement data for the Company, expressed as a percentage of net sales, for each of the periods presented:
Fiscal Years Ended March 31, ---------------------------- 2000 1999 1998 ---- ---- ---- Products Segment sales........................................... 69.5% 69.1% 92.9% Solutions - Industrial Segment sales............................. 9.3 8.9 7.1 Solutions - Automotive Segment sales............................. 21.2 22.0 - ----- ----- ----- Net sales........................................................ 100.0 100.0 100.0 Cost of products sold............................................ 75.5 73.8 71.5 ----- ----- ----- Gross profit..................................................... 24.5 26.2 28.5 Selling expenses................................................. 7.0 7.1 8.3 General and administrative expenses.............................. 6.1 5.4 5.9 Amortization of intangibles...................................... 2.2 2.1 1.9 ----- ----- ----- Income from operations........................................... 9.2 11.6 12.4 Interest and debt expense........................................ 4.7 4.9 4.4 Interest and other income........................................ 0.2 0.2 0.3 ----- ----- ----- Income before income taxes and extraordinary charge.............. 4.7 6.9 8.3 Income tax expense............................................... 2.4 3.2 4.0 ----- ----- ----- Income before extraordinary charge............................... 2.3% 3.7% 4.3% ===== ===== =====
The Company's gross profit margins were approximately 24.5%, 26.2% and 28.5% for 2000, 1999 and 1998, respectively. The decrease in gross profit margin in fiscal 2000 is primarily due to cost overruns on three international ASI projects, and also due to competitive pricing pressure and product mix. The decrease in gross profit margin in fiscal 1999 is primarily due to the ASI acquisition, which generally produces lower gross profit margins than the other segments. The lower profitability of this segment is offset by a lower capital base required to design and manufacture its products. Offsetting the impact of the items discussed above has been the effects of the Company's cost control efforts and integration of acquisitions. 29 Selling expenses were $50.5 million, $52.1 million and $46.6 million in fiscal 2000, 1999 and 1998, respectively. The 2000 expenses were impacted by the additions of Camlok/Tigrip and Abell-Howe. The 1999 expenses include a full year of ASI activity. As a percentage of consolidated net sales, selling expenses were 7.0%, 7.1% and 8.3% in fiscal 2000, 1999 and 1998, respectively. The 2000 improvement reflects cost control efforts as well as a change in classification of certain ASI expenses to general and administrative. The 1999 improvement reflects a lower level of selling expenses incurred on behalf of the ASI business, relative to sales. General and administrative expenses were $45.2 million, $39.9 million and $33.4 million in fiscal 2000, 1999 and 1998, respectively. The 2000 expenses were impacted by the additions of WECO and Abell-Howe. The 1999 expenses include a full year of ASI activity. As a percentage of consolidated net sales, general and administrative expenses were 6.1%, 5.4% and 5.9% in fiscal 2000, 1999 and 1998, respectively. Fiscal 2000 was negatively impacted by the incurrence of proxy contest related expenses relative to the August 16, 1999 annual shareholders meeting and annual director elections, a change in classification of certain ASI expenses from selling, and also the relationship of fixed expenses to soft revenues. The 1999 improvement reflects a lower level of general and administrative expenses incurred on behalf of the ASI business, relative to sales. Amortization of intangibles was $16.4 million, $15.5 million and $10.3 million in fiscal 2000, 1999 and 1998, respectively. Fiscal 2000 includes goodwill amortization from the WECO acquisition, and a full year from the Abell-Howe and Camlok/Tigrip acquisitions; 1999 includes a full year of goodwill amortization resulting from the ASI acquisition; 1998 includes a full year of goodwill amortization resulting from the Yale acquisition. Interest and debt expense was $34.7 million, $35.9 million and $25.1 million in fiscal 2000, 1999 and 1998, respectively. The fiscal 2000 decrease is primarily due to the payment of debt based on strong operating cash flow less funds used to finance acquisitions, offset by increased interest rates. The fiscal 1999 increase was primarily due to the financing required to complete the ASI acquisition. As a percentage of consolidated net sales, interest and debt expense was 4.7%, 4.9% and 4.4% in fiscal 2000, 1999 and 1998, respectively. Interest and other income was $1.3 million, $1.6 million and $1.9 million in fiscal 2000, 1999 and 1998, respectively. The fluctuations reflect changes in the investment return on marketable securities held for settlement of a portion of the Company's general and products liability claims. Income taxes as a percentage of income before income taxes were 50.7%, 45.9% and 48.7% in fiscal 2000, 1999 and 1998, respectively. The percentages reflect the effect of non-deductible goodwill amortization resulting from the business acquisitions, offset by the effects of favorable tax strategies. In fiscal 1998, the extraordinary charge for early debt extinguishment of $4.5 million resulted from the non-cash write-off of unamortized deferred financing costs upon refinancing of the Company's bank debt effective March 31, 1998. The charge is net of $3.0 million of tax benefit. 30 As a result of the above, net income decreased $10.4 million, or 37.7% in fiscal 2000 and increased $3.5 million or 14.4% in 1999 compared to income before the extraordinary charge for debt extinguishment in 1998. This is based on net income of $17.1 million and $27.4 or 2.3% and 3.7% of consolidated net sales in fiscal 2000 and 1999, respectively, and $24.0 million of income before an extraordinary charge for debt extinguishment in fiscal 1998, or 4.3% of consolidated net sales. Net of the effects of the extraordinary charge, net income increased $8.0 million or 41.0% in 1999, based on net income of $19.5 million, or 3.5% of consolidated revenues in fiscal 1998. Liquidity and Capital Resources On April 29, 1999, the Company acquired all of the outstanding stock of Washington Equipment Company (WECO) for $6.4 million in cash, financed by the Company's revolving credit facility. On March 1, 1999, GL International was merged with and into the Company through the issuance of 897,114 shares of newly issued Company stock and options to purchase 154,848 shares of Company stock for all issued and outstanding stock and options of GL. The fair market value of the stock and options exchanged was approximately $20.6 million. On January 29, 1999, the Company acquired all of the outstanding stock of Camlok and the net assets of the Tigrip product line for $10.6 million in cash, financed by a German subsidiary revolving credit facility and term note. On December 4, 1998, the Company acquired all of the outstanding stock of Gautier for $3 million in cash, financed by the Company's revolving credit facility. During October 1998, the Company's ESOP borrowed $7.7 million from the Company and purchased 479,900 shares of Company common stock on the open market at an average cost of $16 per share. On August 21, 1998, the Company acquired the net assets of Abell-Howe for $7 million in cash, financed by the Company's revolving credit facility. On August 7, 1998, the Company sold its Mechanical Products division for $11.5 million, consisting of $9.1 million in cash and a $2.4 million note receivable. On March 31, 1998, the Company acquired all of the outstanding stock of ASI for approximately $155 million of cash, which was financed by proceeds from the Company's revolving credit facility and a private placement of senior subordinated notes, both of which also closed effective March 31, 1998. The Company's previously existing Term Loan A, Term Loan B and revolving credit facility were repaid and retired on March 31, 1998. On January 7, 1998, the Company acquired all of the outstanding stock of Univeyor for approximately $15 million of cash plus the assumption of certain debt, financed by the Company's revolving credit facility. 31 The 1998 Revolving Credit Facility provides availability up to $300 million, due March 31, 2003, reduced to $275 million and $250 million effective March 31, 2001 and 2002, respectively, against which $202 million was outstanding at March 31, 2000. Interest is payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 200 basis points at March 31, 2000. The 1998 Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. To manage its exposure to interest rate fluctuations, the Company has an interest rate swap. The 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 of liens, indebtedness, asset sales, and dividends and other restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the Company, in whole or in part, at the Make-Whole Price (as defined). On or after April 1, 2003, they are redeemable at prices declining annually from 108.5% to 100% on and after April 1, 2006. In addition, on or prior to April 1, 2001, the Company may redeem up to 35% of the outstanding notes with the proceeds of equity offerings at a redemption price of 108.5%, subject to certain restrictions. In the event of a Change of Control (as defined), 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 not subject to any sinking fund requirements. The Company believes that its cash on hand, cash flows, and borrowing capacity under its revolving credit facility will be sufficient to fund its ongoing operations, budgeted capital expenditures, and business acquisitions for the next twelve months. Net cash provided by operating activities was $36.7 million in fiscal 2000, $57.5 million in 1999, and $38.4 million in 1998. The $20.8 million decrease in fiscal 2000 compared to 1999 results from decreased net income of $10.3 million and an increase in net working capital components, primarily accounts receivable. The $19.1 million increase in fiscal 1999 compared to 1998 results from increased net income of $8.0 million, increased depreciation and amortization of $7.3 million, and a decrease in net working capital components, offset by the extraordinary charge for early debt extinguishment of $4.5 million in 1998. Operating assets net of liabilities used cash of $13.3 million in fiscal 2000, provided cash of $4.4 million in fiscal 1999, and used cash of $5.5 million in fiscal 1998. Net cash used in investing activities was $18.9 million in fiscal 2000 compared to $23.9 million in 1999 and $185.0 million in 1998. The 2000 amount includes the acquisition of WECO for $6.4 million. The 1999 amount includes the acquisitions of Camlok/Tigrip, Gautier, and Abell-Howe for $20.0 million, net of cash acquired; it is reduced by $8.8 million of net proceeds from the Mechanical Products divestiture and $2.2 million of proceeds from the sale of a portion of land acquired with Yale in fiscal 1997. The 1998 amount includes the acquisitions of ASI, Univeyor and a GL business acquisition for $175.7 million, net of cash acquired; it is reduced by $4.6 million of proceeds from the sale of a portion of the non-operating Yale land. 32 Capital Expenditures In addition to keeping its current equipment and plants properly maintained, the Company is committed to replacing, enhancing, and upgrading its property, plant, and equipment to reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet environmental requirements, enhance safety, and promote ergonomically correct work stations. Consolidated capital expenditures for fiscal 2000, 1999 and 1998 were $8.1 million, $13.0 million and $11.4 million, respectively, excluding those capital assets acquired in conjunction with business acquisitions. The lower spending in fiscal 2000 reflects a deferral of certain projects due to soft market conditions. Inflation and Other Market Conditions The Company's costs are affected by inflation in the U.S. economy, and to a lesser extent, in foreign economies including those of Europe, Canada, Mexico, and the Pacific Rim. The Company does not believe that inflation has had a material effect on results of operations over the periods presented because of low inflation levels over the periods and because the Company has generally been able to pass on rising costs through price increases. However, in the future there can be no assurance that the Company's business will not be affected by inflation or that it will be able to pass on cost increases. Seasonality and Quarterly Results Quarterly results may be materially affected by the timing of large customer orders, by periods of high vacation and holiday concentrations, and by acquisitions and the magnitude of acquisition costs. Therefore, the operating results for any particular fiscal quarter are not necessarily indicative of results for any subsequent fiscal quarter or for the full fiscal year. Year 2000 Conversions The Company successfully transitioned into the Year 2000. During the millennium weekend, a corporate-wide team of internal and external resources performed an on-site assessment of business systems, infrastructure, telecommunications components and facilities. No significant issues were identified, nor have any arisen to date. The Company completed its Year 2000 assessment in 1999. By year-end, at least 98% of all computer-controlled equipment and software were Year 2000 ready. The components that were not Year 2000 ready did not pose significant operational concerns for the Company. The remaining modifications were completed in February 2000. All areas are operating as designed, however the Company is continuing to monitor the Year 2000 status of all business units. Additionally, the Company surveyed critical suppliers to assess their level of readiness. To date, none of our suppliers have informed us of any Year 2000 issues impacting their ability to provide us with product or service. 33 The cost of the Year 2000 initiatives is not material to the Company's results of operations or financial position. The forward looking statements contained in "Year 2000 Conversions" should be read in conjunction with the Company's disclosures under the heading "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995". Effects of New Accounting Pronouncements The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," in June of 1998. The FASB issued SFAS 137 in June of 1999 which defers the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. Statement No. 133 establishes accounting and reporting standards for hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Compliance with this statement will not have a material impact on the Company at the present time. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." The Company does not believe that the requirements of SAB No. 101 will have any effect on or require any adjustments to the Company's results of operations and financial position. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This report may include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the integration of acquisitions and other factors disclosed in the Company's periodic reports filed with the Commission. Consequently such forward-looking statements should be regarded as the Company's current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 34 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. The Company is exposed to various market risks, including commodity prices for raw materials, foreign currency exchange rates, and primarily changes in interest rates. The Company has entered into financial instrument transactions which attempt to manage and reduce the impact of changes in interest rates. The Company does not enter into derivatives or other financial instruments for trading or speculative purposes. The Company's primary commodity risk is related to changes in the price of steel. The Company controls 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 its products. The Company does not enter into financial instrument transactions related to raw material costs. Approximately 17% of the Company's sales are from manufacturing plants and sales offices in foreign jurisdictions. The Company manufactures its products in the United States, Canada, Germany, Denmark, the United Kingdom, Mexico, France and China and sells its products and solutions in over 50 countries annually. The Company's results of operations could be affected by such factors as changes in foreign currency rates or weak economic conditions in foreign markets. The Company's operating results are exposed to fluctuations between the US dollar and the Canadian dollar, European currencies, the Mexican peso and the Chinese renminbi. For example, when the US dollar strengthens against the Canadian dollar, the value of sales and net income denominated in Canadian dollars decreases when translated into US dollars for inclusion in the Company's consolidated results. The Company also is exposed to foreign currency fluctuations in relation to purchases denominated in foreign currencies. The Company's foreign currency risk is mitigated since the majority of foreign operations' sales and the related expense transactions are denominated in the same currency. In addition, the majority of export sale transactions are denominated in US dollars. Accordingly, the Company currently does not invest in derivative instruments such as foreign exchange contracts to hedge foreign currency transactions. The Company controls risk related to changes in interest rates through structuring its debt instruments with a combination of fixed and variable interest rates and by periodically entering into financial instrument transactions. At March 31, 2000, approximately 49% of the Company's outstanding debt has fixed interest rates. At that date, the Company has approximately $210.8 million of variable rate non-current debt and has an interest rate swap with a notional amount of $3.5 million maturing in July 2000 based on LIBOR at 5.9025%, plus the applicable margin based on the Company's leverage ratio. Under this agreement, the Company makes or receives payments equal to the difference between fixed and variable interest rate payments on the notional amount. A 1% fluctuation in interest rates would change future interest expense on the $207.3 million of debt that is not covered by the swap agreement by approximately $2.1 million. 35 Item 8. Financial Statements and Supplementary Data. - ------- -------------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Columbus McKinnon Corporation Audited Consolidated Financial Statements as of March 31, 2000: Reports of Independent Auditors................................ F-2 Consolidated Balance Sheets.................................... F-4 Consolidated Statements of Income.............................. F-5 Consolidated Statements of Shareholders' Equity................ F-6 Consolidated Statements of Cash Flows.......................... F-7 Notes to Consolidated Financial Statements..................... F-8 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, 2000 and 1999, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2000. 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 did not audit the GL International, Inc. statements of income and cash flows for the year ended March 31, 1998, which statements reflect total revenues of $59,860,000 for the year ended March 31, 1998. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for GL International, Inc. for 1998, is solely based on the report of such other auditors. 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 and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Columbus McKinnon Corporation at March 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the 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 May 12, 2000 F-2 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of GL International, Inc.: We have audited the consolidated balance sheet of GL International, Inc. and subsidiaries as of March 31, 1998, and the related consolidated statements of income and cash flows for the year then ended (none of which are presented herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GL International, Inc. and subsidiaries at March 31, 1998, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ DELOITTE & TOUCHE LLP Tulsa, Oklahoma August 24, 1998 F-3
COLUMBUS McKINNON CORPORATION CONSOLIDATED BALANCE SHEETS March 31, --------- 2000 1999 ---- ---- (In thousands) ASSETS Current assets: Cash and cash equivalents............................................................. $ 7,582 $ 6,867 Trade accounts receivable, less allowance for doubtful accounts ($2,236 and $2,271 respectively)........................................................... 143,401 136,988 Unbilled revenues..................................................................... 24,447 9,821 Inventories........................................................................... 108,291 115,979 Net assets held for sale.............................................................. 9,272 8,214 Prepaid expenses...................................................................... 6,181 8,160 ------- ------- Total current assets....................................................................... 299,174 286,029 Net property, plant, and equipment......................................................... 87,297 90,004 Goodwill and other intangibles, net........................................................ 339,603 357,727 Marketable securities...................................................................... 23,193 19,355 Deferred taxes on income................................................................... 4,237 5,627 Other assets............................................................................... 6,320 8,169 ------- ------- Total assets............................................................................... $759,824 $766,911 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks................................................................ $ 2,677 $ 4,590 Trade accounts payable................................................................ 49,621 54,651 Excess billings....................................................................... 4,288 5,058 Accrued liabilities................................................................... 51,246 54,331 Current portion of long-term debt..................................................... 3,493 1,926 ------- ------- Total current liabilities.................................................................. 111,325 120,556 Senior debt, less current portion.......................................................... 210,684 222,165 Subordinated debt.......................................................................... 199,574 199,521 Other non-current liabilities.............................................................. 34,788 35,995 ------- ------- Total liabilities.......................................................................... 556,371 578,237 ------- ------- Shareholders' equity: Class A voting common stock; 50,000,000 shares authorized; 14,877,405 and 14,663,697 shares issued....................................................... 149 146 Additional paid-in capital............................................................ 106,884 102,313 Retained earnings..................................................................... 113,582 100,455 ESOP debt guarantee; 606,559 and 708,382 shares....................................... (8,703) (9,865) Unearned restricted stock; 103,120 and 145,550 shares................................. (2,843) (1,009) Accumulated other comprehensive loss.................................................. (5,616) (3,366) ------- ------- Total shareholders' equity................................................................. 203,453 188,674 ------- ------- Total liabilities and shareholders' equity................................................. $759,824 $766,911 ======== ======== See accompanying notes.
F-4
COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF INCOME Year Ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands, except per share data) Net sales..................................................... $736,254 $735,445 $561,823 Cost of products sold......................................... 556,145 542,975 401,669 -------- -------- -------- Gross profit.................................................. 180,109 192,470 160,154 Selling expenses.............................................. 50,450 52,059 46,578 General and administrative expenses........................... 45,225 39,850 33,361 Amortization of intangibles................................... 16,392 15,479 10,297 -------- -------- -------- 112,067 107,388 90,236 -------- -------- -------- Income from operations........................................ 68,042 85,082 69,918 Interest and debt expense..................................... 34,698 35,923 25,104 Interest and other income..................................... 1,314 1,565 1,940 -------- -------- -------- Income before income taxes and extraordinary charge........... 34,658 50,724 46,754 Income tax expense............................................ 17,578 23,288 22,776 -------- -------- -------- Income before extraordinary charge............................ 17,080 27,436 23,978 Extraordinary charge for early debt extinguishment............ - - (4,520) -------- -------- -------- Net income.................................................... $ 17,080 $ 27,436 $ 19,458 ======== ======== ======== Earnings per share data, basic: Income before extraordinary charge for debt extinguishment................................... $ 1.21 $ 1.94 $ 1.69 Extraordinary charge for debt extinguishment............. - - (0.32) ------ ------ ------ Net income............................................... $ 1.21 $ 1.94 $ 1.37 ====== ====== ====== Earnings per share data, diluted: Income before extraordinary charge for debt extinguishment................................... $ 1.20 $ 1.92 $ 1.66 Extraordinary charge for debt extinguishment............. - - (0.31) ------ ------ ------ Net income............................................... $ 1.20 $ 1.92 $ 1.35 ====== ====== ======
See accompanying notes. F-5
COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands, except share and per share data) Common Addi- Accumulated Stock tional ESOP Unearned Other Total ($.01 Paid-in Retained Debt Restricted Comprehensive Shareholders' par value) Capital Earnings Guarantee Stock Income (Loss) Equity --------- ------- -------- --------- ----- ------------ ------ Balance at March 31, 1997.......... $ 137 $ 95,254 $ 60,999 $ (4,201) $ (821) $ (1,212) $150,156 Issued 897,114 common shares....... 9 3,881 - - - - 3,890 Comprehensive income: Net income 1998.................... - - 19,458 - - - 19,458 Change in foreign currency translation adjustment.......... - - - - - (1,527) (1,527) Net unrealized gain on investments. - - - - - 558 558 Change in minimum pension liability adjustment............ - - - - - (447) (447) -------- Total comprehensive income......... - - - - - - 18,042 Earned 101,416 ESOP shares......... - 1,270 - 998 - - 2,268 Earned portion of restricted stock. - 20 - - 283 - 303 Common dividends declared $0.28 per share................. - - (3,713) - - - (3,713) ----- -------- -------- -------- ------ -------- -------- Balance at March 31, 1998.......... $ 146 $100,425 $ 76,744 $ (3,203) $ (538) $ (2,628) $170,946 Comprehensive income: Net income 1999.................... - - 27,436 - - - 27,436 Change in foreign currency translation adjustment.......... - - - - - (1,399) (1,399) Net unrealized gain on investments. - - - - - 714 714 Change in minimum pension liability adjustment............ - - - - - (53) (53) -------- Total comprehensive income......... - - - - - - 26,698 Earned 96,610 ESOP shares.......... - 1,108 - 1,020 - - 2,128 Repurchase of 479,900 common shares by ESOP......................... - - - (7,682) - - (7,682) Restricted common stock granted, 19,500 shares net of 1,275 shares cancelled................ - 780 - - (759) - 21 Earned portion of restricted stock. - - - - 288 - 288 Common dividends declared $0.28 per share.................. - - (3,725) - - - (3,725) ----- -------- -------- -------- -------- -------- -------- 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. - - - - - 520 520 Change in minimum pension liability adjustment............ - - - - - 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 ===== ======== ======== ======== ======== ======== ========
See accompanying notes. F-6
COLUMBUS McKINNON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Year ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Operating activities: Net income........................................................................ $17,080 $ 27,436 $ 19,458 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary charge for early debt extinguishment........................... - - 4,520 Depreciation and amortization................................................ 28,536 27,256 19,896 Deferred income taxes........................................................ 3,600 (2,235) 55 Other........................................................................ 823 624 - Changes in operating assets and liabilities net of effects from businesses purchased: Trade accounts receivable and unbilled revenues......................... (20,081) 37 (8,224) Inventories............................................................. 8,659 (865) (5,454) Prepaid expenses........................................................ (164) 1,952 4,008 Other assets............................................................ 1,334 (96) 2,135 Trade accounts payable and excess billings.............................. (6,329) (5,940) (646) Accrued and non-current liabilities..................................... 3,263 9,324 2,672 ------- ------- ------- Net cash provided by operating activities......................................... 36,721 57,493 38,420 ------- ------- ------- Investing activities: Purchase of marketable securities, net............................................ (3,318) (1,976) (2,517) Capital expenditures.............................................................. (8,102) (12,992) (11,406) Proceeds from sale of business.................................................... - 8,801 - Purchase of businesses, net of cash acquired...................................... (6,430) (19,958) (175,686) Net assets held for sale.......................................................... (1,058) 2,182 4,575 ------- ------- ------- Net cash used in investing activities............................................. (18,908) (23,943) (185,034) ------- ------- ------- Financing activities: Proceeds from issuance of common stock, net....................................... 3 - 1,914 Net (payments) borrowings under revolving line-of-credit agreements..................................................................... (9,313) (28,194) 159,101 Repayment of debt................................................................. (2,514) (8,179) (198,251) Proceeds from issuance of long-term debt, net..................................... - - 203,357 Deferred financing costs incurred................................................. (997) (1,272) (1,313) Dividends paid ................................................................... (3,953) (3,725) (3,713) Repurchase of stock by ESOP....................................................... - (7,682) - Change in ESOP debt guarantee..................................................... 1,162 1,020 998 ------- ------- ------- Net cash (used in) provided by financing activities............................... (15,612) (48,032) 162,093 Effect of exchange rate changes on cash........................................... (1,486) (1,512) (1,525) ------- ------- ------- Net change in cash and cash equivalents........................................... 715 (15,994) 13,954 Cash and cash equivalents at beginning of year.................................... 6,867 22,861 8,907 ------- ------- ------- Cash and cash equivalents at end of year.......................................... $ 7,582 $ 6,867 $ 22,861 ======= ======= ======= Supplementary cash flows data: Interest paid................................................................ $ 35,176 $ 27,595 $ 26,553 Income taxes paid............................................................ $ 17,614 $ 22,829 $ 15,040 See accompanying notes.
F-7 COLUMBUS McKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of Business and Business Acquisitions Columbus McKinnon Corporation (the Company) is a broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions. The Company's material handling products are sold, domestically and internationally, principally to third party distributors through diverse distribution channels, and to a lesser extent directly to manufacturers and other end-users. The Company's integrated material handling solutions automotive business primarily deals with end users and sales are concentrated domestically and internationally (primarily North America) in the automotive industry. The Company's integrated material handling solutions industrial businesses primarily deal 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 2000, approximately 75% of sales were to customers in the United States. 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 income 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. On March 1, 1999, GL International, Inc. ("GL"), was merged with and into the Company through the issuance of 897,114 shares of newly issued Company stock and options to purchase 154,848 shares of Company stock for all issued and outstanding stock and options of GL. GL is a full-service designer and builder of industrial overhead bridge and jib cranes and related components. The merger was accounted for as a pooling of interests and, accordingly, the 1999 and 1998 consolidated financial statements have been restated to include the accounts of GL from the date of GL's formation, April 1, 1997. The fair market value of the stock and options exchanged was approximately $20.6 million. In connection with the merger, the Company incurred $560,000 of merger related costs which were charged to operations during the year ended March 31, 1999. On January 29, 1999, the Company acquired all of the outstanding stock of Camlok Lifting Clamps Limited ("Camlok") and the net assets of the Tigrip product line ("Tigrip") from Schmidt-Krantz & Co. GmbH for $10.6 million in cash. The acquisition was accounted for as a purchase and was financed through cash, a revolving credit facility, and a $4 million term note. Camlok manufactures plate clamps, crane weighers and related products and is based in Chester, England, while the Tigrip line of standard and specialized plate clamps is produced in Germany. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1999 include Camlok and Tigrip activity since their January 29, 1999 acquisition by the Company. F-8 1. Description of Business and Business Acquisitions (continued) On December 4, 1998, the Company acquired all of the outstanding stock of Societe D'Exploitation des Raccords Gautier ("Gautier"), a French-based manufacturer of industrial components. The total cost of the acquisition, which was accounted for as a purchase, was approximately $3 million in cash, consisting of $2.4 million financed by proceeds from the Company's revolving debt facility and the assumption of certain debt. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1999 include Gautier activity since its December 4, 1998 acquisition by the Company. On August 21, 1998 the Company acquired the net assets of Abell-Howe Crane division ("Abell-Howe") of Abell-Howe Company, a regional manufacturer of jib, gantry, and bridge cranes. The total cost of the acquisition, which was accounted for as a purchase, was approximately $7 million of cash, which was financed by proceeds from the Company's revolving debt facility. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1999 include Abell-Howe activity since its August 21, 1998 acquisition by the Company. On August 7, 1998 the Company sold its Mechanical Products division, a producer of circuit controls and protection devices, for $11.5 million, consisting of $9.1 million in cash and a $2.4 million note receivable, to Mechanical Products' senior management team. The selling price approximated the net book value of the division. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1999 include Mechanical Products activity through its August 7, 1998 sale by the Company. On March 31, 1998, the Company acquired all of the outstanding stock of LICO, Inc. (now known as "ASI"), a leading designer, manufacturer and installer of custom conveyor and automated material handling systems primarily for the automotive industry. The total cost of the acquisition, which was accounted for as a purchase, was approximately $155 million of cash, which was financed by proceeds from the Company's revolving credit facility and a private placement of senior subordinated notes, both of which also closed effective March 31, 1998. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1998 do not include any ASI activity. On January 7, 1998, the Company acquired all of the outstanding stock of Univeyor A/S ("Univeyor"), a Denmark-based designer, manufacturer and distributor of automated material handling systems for the industrial market, and has accounted for the acquisition as a purchase. The cost of the acquisition was approximately $15 million of cash plus certain debt, financed by the Company's revolving debt facility. The consolidated statement of income and the consolidated statement of cash flows for the year ended March 31, 1998 include Univeyor activity since its January 7, 1998 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. F-9 2. Accounting Principles and Practices (continued) Concentrations of Labor Approximately 30% of the Company's employees are represented by twelve separate domestic and Canadian collective bargaining agreements which terminate at various times between May 14, 2001 and March 31, 2004. Approximately 2% 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. 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. 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 US dollars at average exchange rates for the year. All assets and liabilities are translated to US 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 continually 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 in accordance with the provisions of SFAS No. 121. As a result of the Univeyor, ASI, Abell-Howe, Gautier, Camlok/Tigrip, and WECO acquisitions, the Company recorded approximately $9 million, $123 million, $3 million, $1 million, $6 million, and $4 million of goodwill, respectively, which is being amortized on a straight-line basis over twenty-five years. As a result of the sale of Mechanical Products, the Company reduced goodwill by approximately $8 million. At March 31, 2000 and 1999 accumulated amortization was $46,256,000 and $29,864,000, respectively. Inventories Inventories are valued at the lower of cost or market. Costs of approximately 48% of inventories at March 31, 2000 and 1999 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. F-10 2. Accounting Principles and Practices (continued) Marketable Securities All of the Company's investments, which consist of equity securities and corporate and governmental obligations, have been classified as available-for-sale securities and are therefore recorded at their fair values with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) within shareholders' equity. 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 interest and other income on the consolidated statements of income. The marketable securities are carried as long-term assets since they are retained 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 properties were sold during fiscal 1998 through fiscal 2000 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 2001. They have been recorded at their estimated realizable values net of disposal costs, separately reflected on the consolidated balance sheet and amounting to $9,272,000 and $8,214,000 as of March 31, 2000 and 1999, respectively. 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. Reclassification Certain reclassifications of the fiscal 1999 and 1998 footnote amounts have been made to conform with the fiscal 2000 presentation. Research and Development Research and development costs as defined in FAS No. 2, for the years ended March 31, 2000, 1999 and 1998 were $1,556,000, $1,663,000 and $1,497,000, respectively. F-11 2. Accounting Principles and Practices (continued) Revenue Recognition and Concentration of Credit Risk Sales are recorded when title passes to the customer which is 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. ASI and Univeyor recognize contract revenues under the percentage of completion method, measured by comparing direct costs incurred to total estimated direct costs. Changes in job performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined. In the event that a loss is anticipated on an uncompleted contract, a provision for the estimated loss is made at the time it is determined. Billings on contracts may precede or lag revenues earned, and such differences are reported in the balance sheet as current liabilities (excess billings) and current assets (unbilled revenues), respectively. As of March 31, 2000, approximately $21 million ($26 million in 1999) of trade accounts receivable was concentrated in the automotive industry, including retainages amounting to $7,484,000 ($9,061,000 in 1999). The accounts receivable included $17,861,000 ($22,007,000 in 1999) due from General Motors Corporation. This one customer accounted for $99,097,000 or 13% of consolidated net sales and is included within the Solutions - Automotive segment for the year ended March 31, 2000 ($96,663,000 or 13% for the year ended March 31, 1999). 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. Unbilled Revenues and Excess Billings
March 31, --------- 2000 1999 ---- ---- (In thousands) Costs incurred on uncompleted contracts............................................ $ 368,140 $ 255,706 Estimated earnings................................................................. 64,497 54,013 --------- --------- Revenues earned to date............................................................ 432,637 309,719 Less billings to date.............................................................. 412,478 304,956 --------- --------- $ 20,159 $ 4,763 ========= =========
F-12 3. Unbilled Revenues and Excess Billings (continued)
The net amounts above are included in the consolidated balance sheets under the following captions: March 31, --------- 2000 1999 ---- ---- (In thousands) Unbilled revenues.................................................................. $24,447 $9,821 Excess billings.................................................................... (4,288) (5,058) -------- ------- $ 20,159 $ 4,763 ======== =======
4. Inventories Inventories consisted of the following:
March 31, -------- 2000 1999 ---- ---- (In thousands) At cost--FIFO basis: Raw materials................................................................... $ 57,198 $ 54,648 Work-in-process................................................................. 20,240 21,663 Finished goods.................................................................. 38,329 45,042 -------- -------- 115,767 121,353 LIFO cost less than FIFO cost........................................................ (7,476) (5,374) -------- -------- Net inventories...................................................................... $108,291 $115,979 ======== ========
5. Marketable Securities Marketable securities are retained for the settlement of a portion of the Company's general liability and products liability insurance claims filed through CM Insurance Company, Inc. (see Notes 2 and 13). The following is a summary of available-for-sale securities at March 31, 2000:
Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- (In thousands) Government securities................................. $ 7,171 $ 75 $ 53 $ 7,193 U. S. corporate securities............................ 1,183 2 35 1,150 ------- ------- ----- ------- Total debt securities............................ 8,354 77 88 8,343 Equity securities..................................... 10,119 5,124 393 14,850 ------- ------- ----- ------- $18,473 $ 5,201 $ 481 $23,193 ======= ======= ===== ======= F-13 5. Marketable Securities (continued) The following is a summary of available-for-sale securities at March 31, 1999: Gross Gross Estimated Unrealized Unrealized Fair Cost Gains Losses Value ---- ----- ------ ----- (In thousands) Government securities................................. $ 7,668 $ 203 $ 1 $ 7,870 U. S. corporate securities............................ 700 31 - 731 ------- ------- ---- ------- Total debt securities............................ 8,368 234 1 8,601 Equity securities..................................... 7,134 3,710 90 10,754 ------- ------- ---- ------- $15,502 $ 3,944 $ 91 $19,355 ======= ======= ==== =======
The amortized cost and estimated fair value of debt and equity securities at March 31, 2000, by contractual maturity, are shown below:
Estimated Fair Cost Value ---- ----- (In thousands) Due in one year or less.................................................... $ 1,296 $ 1,296 Due after one year through three years..................................... 402 401 Due after three years...................................................... 6,656 6,646 ------- ------- 8,354 8,343 Equity securities.......................................................... 10,119 14,850 ------- ------- $18,473 $23,193 ======= =======
Net unrealized gains included in the balance sheet amounted to $4,720,000 and $3,853,000 at March 31, 2000 and 1999, respectively. The amounts, net of related income taxes of $1,888,000 and $1,541,000 at March 31, 2000 and 1999, 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, --------- 2000 1999 ---- ---- (In thousands) Land and land improvements......................................................... $ 5,032 $ 4,592 Buildings.......................................................................... 33,000 31,880 Machinery, equipment, and leasehold improvements................................... 98,842 92,991 Construction in progress........................................................... 3,310 2,589 ------- ------- 140,184 132,052 Less accumulated depreciation...................................................... 52,887 42,048 ------- ------- Net property, plant, and equipment................................................. $87,297 $90,004 ======= ======= F-14 7. Accrued Liabilities and Other Non-current Liabilities Consolidated accrued liabilities of the Company included the following: March 31, --------- 2000 1999 ---- ---- (In thousands) Accrued payroll..................................................................... $17,012 $15,247 Accrued pension cost................................................................ 4,262 4,508 Interest payable.................................................................... 9,916 10,394 Income taxes payable................................................................ 4,649 10,133 Other accrued liabilities........................................................... 15,407 14,049 ------- ------- $51,246 $54,331 ======= ======= Consolidated other non-current liabilities of the Company included the following: March 31, --------- 2000 1999 ---- ---- (In thousands) Accumulated postretirement benefit obligation....................................... $13,970 $15,379 Accrued general and product liability costs......................................... 14,550 11,416 Other non-current liabilities....................................................... 6,268 9,200 ------- ------- $34,788 $35,995 ======= =======
F-15
8. Long-Term Debt Consolidated long-term debt payable to banks (except as noted) of the Company consisted of the following: March 31, --------- 2000 1999 ---- ---- (In thousands) Revolving Credit Facility with availability up to $300 million, due March 31, 2003, reduced to $275 million and $250 million effective March 31, 2001, and 2002, respectively, with interest payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 200 basis points at March 31, 2000 (8.02% and 6.09% at March 31, 2000 and 1999)............................... $205,000 $212,400 Industrial Development Revenue Bonds paid in full on June 1, 2000 with interest at varying effective rates (4.22% and 3.58% at March 31, 2000 and 1999)....................................................................... 986 1,608 Term loan of foreign subsidiary payable in two installments of $1,456,000 and $1,942,000, due on December 30, 2000 and December 30, 2001, respectively; interest payable monthly at 4.255%................................ 3,398 3,825 Employee Stock Ownership Plan term loans payable in quarterly installments of $148,000 through January 2002 and $824,000 in April 2002 plus interest payable at a Eurodollar rate based on LIBOR plus a spread determined by the Company's leverage ratio (8.18% and 6.62% at March 31, 2000 and 1999)............................................................... 2,008 3,173 Other senior debt................................................................... 2,785 3,085 -------- -------- Total senior debt................................................................... 214,177 224,091 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 $426,000 ($479,000 at March 31, 1999)................... 199,574 199,521 -------- -------- Total............................................................................... 413,751 423,612 Less current portion................................................................ 3,493 1,926 -------- -------- $410,258 $421,686 ======== ========
On March 31, 1998, the Company entered into a new revolving credit facility ("1998 Revolving Credit Facility") with a group of financial institutions. Concurrently, the Company issued $200 million of 8 1/2% Senior Subordinated Notes ("the 8 1/2% Notes") due March 31, 2008. Proceeds from both the bank refinancing and the note offering were used to finance the acquisition of ASI, and to repay the outstanding balances and retire the Company's then existing Term Loan A, Term Loan B and revolving credit facility. The 1998 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. Upon refinancing its bank debt in 1998, the Company wrote off unamortized financing costs of $7,532,000 and recorded an extraordinary charge of $4,520,000, which is net of $3,012,000 of tax. F-16 8. Long-Term Debt (continued) To manage its exposure to interest rate fluctuations, the Company has an interest rate swap with a notional amount of $3.5 million from January 2, 1999 through July 2, 2000, based on LIBOR at 5.9025%. Net payments or receipts under the swap agreement are recorded as adjustments to interest expense. 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 $177,000,000 which is less than the carrying cost of $199,574,000. The Industrial Development Revenue Bonds are held by institutional investors and are guaranteed by a bank letter of credit (IDRB letter of credit), which is collateralized by the assets also securing the 1998 Revolving Credit Facility. The Employee Stock Ownership Plan term loans (ESOP loans) are guaranteed by the Company and are collateralized by an equivalent number of shares of Company common stock. The ESOP loans are not further collateralized. Provisions of the 8 1/2% Notes include, without limitation, restrictions of liens, indebtedness, asset sales, and dividends and other restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the Company, in whole or in part, at the Make-Whole Price (as defined in the 8 1/2% Notes agreement). On or after April 1, 2003, they are redeemable at prices declining annually to 100% on and after April 1, 2006. In addition, on or prior to April 1, 2001, the Company may redeem up to 35% of the outstanding notes with the proceeds of equity offerings at a redemption price of 108.5%, subject to certain restrictions. 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, 2000 on the above debt, for the next five annual periods subsequent thereto, are as follows (in thousands): 2001.......................... 3,493 2002.......................... 2,912 2003.......................... 206,142 2004.......................... 240 2005.......................... 167 As of March 31, 2000, the Company had letters of credit outstanding of $3.4 million, including those issued as security for the IDRBs as referred to above. F-17 9. Retirement Plans The Company provides defined benefit pension plans to certain employees. The following provides a reconciliation of benefit obligations, plan assets, and funded status of plans:
March 31, --------- 2000 1999 ---- ---- (In thousands) Change in benefit obligation: Benefit obligation at beginning of year........................................ $ 70,621 $ 69,680 Benefit obligation of sold businesses.......................................... - (9,590) Service cost................................................................... 4,329 3,151 Interest cost.................................................................. 4,805 4,489 Effect of amendments........................................................... 115 - Actuarial (gain) loss.......................................................... (5,359) 5,866 Benefits paid.................................................................. (3,191) (2,975) -------- -------- Benefit obligation at end of year.............................................. $ 71,320 $ 70,621 ======== ======== Change in plan assets: Fair value of plan assets at beginning of year................................. 66,276 69,203 Assets of sold plans........................................................... - (10,348) Actual return on plan assets................................................... 6,984 7,015 Employer contribution.......................................................... 3,395 3,381 Benefits paid.................................................................. (3,191) (2,975) -------- -------- Fair value of plan assets at end of year....................................... $ 73,464 $ 66,276 ======== ======== Funded Status ................................................................. $ 2,144 $ (4,345) Unrecognized transition obligation............................................. (57) (85) Unrecognized actuarial (gain) loss............................................. (5,353) 1,661 Unrecognized prior service cost................................................ 1,850 1,610 -------- -------- Net amount recognized.......................................................... $ (1,416) $ (1,159) ======== ======== Amounts recognized in the consolidated balance sheets are as follows: Intangible asset............................................................... $ 1,158 $ 1,172 Accrued liabilities............................................................ (3,710) (4,066) Deferred tax effect of equity charge........................................... 454 694 Accumulated other comprehensive income......................................... 682 1,041 -------- -------- Net amount recognized.......................................................... $ (1,416) $ (1,159) ======== ========
F-18 9. Retirement Plans (continued) Net periodic pension cost included the following components:
Year Ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Service costs--benefits earned during the period............................ $4,329 $3,151 $3,244 Interest cost on projected benefit obligation.............................. 4,805 4,489 4,787 Expected return on plan assets............................................. (5,732) (5,124) (6,670) Net amortization........................................................... 251 167 1,951 ------ ------ ------ Net periodic pension cost.................................................. $3,653 $2,683 $3,312 ====== ====== ======
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 $10,992,000 and $8,122,000, respectively as of March 31, 2000 and $56,488,000 and $49,040,000, respectively as of March 31, 1999. 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 $10,237,000 and $8,122,000, respectively as of March 31, 2000 and $9,932,000 and $7,293,000, respectively as of March 31, 1999. 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 7.5% and 7% as of March 31, 2000 and 1999, respectively. Future average compensation increases are assumed to be 4.0% per year as of March 31, 2000 and 1999. 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 7/8% for the each of the years ended March 31, 2000, 1999 and 1998. 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. Effective April 1, 1998, these plans provide for employer contributions based primarily on employee participation. The Company recorded a charge for such contributions of approximately $1,660,000 and $1,410,000 for the years ended March 31, 2000 and 1999, respectively. F-19 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 previously 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 $1,752,000, $2,128,000 and $2,268,000 in fiscal 2000, 1999 and 1998, respectively, is recorded based on the guarantee 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. During fiscal 1999, the ESOP borrowed $7,682,000 from the Company and purchased 479,900 shares on the open market at an average cost of $16 per share. At March 31, 2000 and 1999, 889,555 and 886,684 of ESOP shares, respectively, were allocated or available to be allocated to participants' accounts. At March 31, 2000 and 1999, 606,559 and 708,382 of ESOP shares were pledged as collateral to guarantee the ESOP term loans. The fair market value of unearned ESOP shares at March 31, 2000 amounted to $7,961,000. 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-20 11. Postretirement Benefit Obligation (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, --------- 2000 1999 ---- ---- (In thousands) Change in benefit obligation: Benefit obligation at beginning of year....................................... $12,412 $ 16,509 Service cost.................................................................. 84 257 Interest cost................................................................. 816 1,061 Effect of amendments.......................................................... - (4,035) Actuarial (gain) loss ........................................................ (170) 1,713 Benefits paid................................................................. (1,502) (1,475) Curtailment effect............................................................ - (1,618) -------- -------- Benefit obligation at end of year............................................. $ 11,640 $ 12,412 ======== ======== Funded Status ................................................................ $(11,640) $(12,412) Unrecognized actuarial loss................................................... 898 1,068 Unrecognized prior service gain............................................... (3,228) (4,035) -------- -------- Net amount recognized in other non-current liabilities........................ $(13,970) $(15,379) ======== ========
Net periodic postretirement benefit cost included the following: Year Ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Service cost--benefits attributed to service during the period.......... $ 84 $ 257 $ 348 Interest cost........................................................... 816 1,061 1,203 Amortization of prior service gain...................................... (807) - - ---- ------ ------ Net periodic postretirement benefit cost........................... $ 93 $1,318 $1,551 ==== ====== ======
For measurement purposes, a 6.5% 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 0.5% per year to 5.5% by 2001. The discount rate used in determining the accumulated postretirement benefit obligation was 7.5% and 7% as of March 31, 2000 and 1999, 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......... $ 51 $ (46) Effect on postretirement obligation............................. 552 (500)
F-21 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 options, warrants, and convertible securities. The following table sets forth the computation of basic and diluted earnings per share before extraordinary charge for debt extinguishment:
Year Ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Numerator for basic and diluted earnings per share: Income before extraordinary charge..................................... $17,080 $27,436 $23,978 ======= ======= ======= Denominators: Weighted-average common stock outstanding--denominator for basic EPS........................................................ 14,138 14,137 14,221 Effect of dilutive employee stock options.............................. 83 157 206 ------ ------ ------ Adjusted weighted-average common stock outstanding and assumed conversions--denominator for diluted EPS..................... 14,221 14,294 14,427 ====== ====== ======
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 Plan 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 this plan may be exercised not earlier than one year from the date such option is granted. Options granted under the Incentive Plan 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 this plan may be exercised not earlier than one year and not later than ten years from the date such option is granted. In conjunction with the March 1, 1999 merger of GL International, Inc. (see Note 1), outstanding GL options, which were originally issued in fiscal years 1999 and 1998, became fully vested and were converted into options to acquire 154,848 Company shares at prices of $4.34 to $17.36. Those options expire approximately three years after the date of their original issuance, ranging from September 30, 1999 through June 5, 2001. F-22 12. Earnings per Share and Stock Plans (continued) A summary of option transactions during each of the three fiscal years in the period ended March 31, 2000 is as follows:
Year Ended March 31, -------------------- Number of Shares 2000 1999 1998 ---------------- ---- ---- ---- Outstanding at beginning of year 353,348 354,848 325,051 Granted 481,410 31,000 29,797 Canceled (7,000) (32,500) - Exercised (153,008) - - ------- ------- ------- Outstanding at end of year 674,750 353,348 354,848 ======= ======= ======= Exercisable at end of year 137,840 247,348 143,300 Available for grant at end of year 827,090 1,301,500 1,300,000
Exercise prices for options outstanding as of March 31, 2000, ranged from $4.34 to $29.00. The following table provides certain information with respect to stock options outstanding at March 31, 2000:
Weighted-average Stock Options Weighted-average Remaining Contractual Range of Exercise Prices Outstanding Exercise Price Life ------------------------ ----------- -------------- ---- Under $10.00................... 19,340 $ 4.69 0.2 $10.00 to $20.00............... 151,350 15.50 0.8 $20.01 to $30.00............... 504,060 21.25 3.1 ------- ------ --- 674,750 $19.49 2.5 ======= ====== === The following table provides certain information with respect to stock options exercisable at March 31, 2000: Stock Options Weighted-average Range of Exercise Prices Outstanding Exercise Price ------------------------ ----------- -------------- Under $10.00................... 19,340 $ 4.69 $10.00 to $20.00............... 112,500 15.50 $20.01 to $30.00............... 6,000 29.00 ------- ------ 137,840 $14.57 ======= ======
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. F-23 12. Earnings per Share and Stock Plans (continued) 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 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, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands, except for assumptions and earnings per share data) Assumptions: Risk-free interest rate 6.1% 5.5% 5.5% Dividend yield - Incentive Plan 1.35% 0.97% - Dividend yield - GL conversions N/A 1.33% 1.33% Volatility factor 0.352 0.200 0.245 Expected life - Incentive Plan 5 years 4 years - Expected life - GL conversions N/A 1 year 3 years Pro forma results: Net income $ 16,099 $ 25,567 $ 18,605 Earnings per share, basic 1.14 1.81 1.31 Earnings per share, diluted 1.13 1.79 1.29
The Company maintains a Restricted Stock Plan, under which the Company has no shares reserved for issuance at March 31, 2000. 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, 19,500, and 0 shares issued during the years ended March 31, 2000, 1999 and 1998, respectively. F-24 13. Loss Contingencies General and Product Liability--$13,118,000 of the accrued general and product liability costs which are included in other non-current liabilities at March 31, 2000 ($10,392,000 at March 31, 1999) 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 6.83% and 8.20%, to the undiscounted reserves of $16,866,000 and $13,897,000 at March 31, 2000 and 1999, respectively. This liability is funded by investments in marketable securities (see Notes 2 and 5). 14. 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, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Computed statutory provision.............................................. $12,121 $17,753 $16,363 State income taxes net of federal benefit................................. 1,974 1,767 1,945 Nondeductible goodwill amortization....................................... 4,506 4,540 2,870 Foreign taxes greater than statutory provision............................ 884 790 949 Research and development credit........................................... (400) (639) - Other..................................................................... (1,507) (923) 649 ------- ------- ------- Actual tax provision...................................................... $17,578 $23,288 $22,776 ======= ======= ======= The provision for income tax expense consisted of the following: Year Ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Current income tax expense: Federal taxes........................................................ $8,391 $18,775 $15,800 State taxes.......................................................... 2,253 2,770 3,081 Foreign.............................................................. 3,334 3,978 3,840 Deferred income tax (benefit) expense: Domestic............................................................. 3,380 (2,298) (238) Foreign.............................................................. 220 63 293 ------- ------- ------- $17,578 $23,288 $22,776 ======= ======= =======
The Company applies the liability method of accounting for income taxes as required by FAS Statement No. 109, "Accounting for Income Taxes." F-25 14. Income Taxes (continued) The gross composition of the net current deferred tax (liability)/asset, included in (accrued)/prepaid expenses within the consolidated balance sheet, is as follows:
March 31, --------- 2000 1999 ---- ---- (In thousands) Inventory........................................................................... $ (4,929) $ (5,366) Accrued vacation and incentive costs................................................ 1,757 1,596 Other............................................................................... 2,492 5,945 -------- -------- Net current deferred tax (liability) asset..................................... $ (680) $ 2,175 ======== ======== The gross composition of the net non-current deferred tax asset is as follows: March 31, --------- 2000 1999 ---- ---- (In thousands) Insurance reserves.................................................................. $10,242 $10,718 Property, plant, and equipment...................................................... (6,514) (7,438) Other............................................................................... 509 2,347 ------- ------- Net non-current deferred tax asset............................................. $ 4,237 $ 5,627 ======= =======
Income before income taxes and extraordinary charge includes foreign subsidiary income of $7,551,000, $9,288,000, and $9,097,000 for the years ended March 31, 2000, 1999, and 1998 respectively. United States income taxes have not been provided on certain unremitted earnings of the Company's foreign subsidiaries as such earnings are considered to be permanently reinvested. 15. Rental Expense and Lease Commitments Rental expense for the years ended March 31, 2000, 1999 and 1998 was $6,279,000, $6,672,000 and $4,478,000, respectively. The following amounts represent future minimum payment commitments as of March 31, 2000 under non-cancelable operating leases extending beyond one year (in thousands):
Vehicles and Year Ended March 31, Real Property Equipment Total -------------------- ------------- --------- ----- 2001........................................................... $ 2,058 $ 1,964 $ 4,022 2002........................................................... 1,710 1,720 3,430 2003........................................................... 1,572 1,272 2,844 2004........................................................... 1,498 916 2,414 2005........................................................... 1,468 480 1,948
F-26 16. Summary Financial Information The summary financial information of the parent, domestic subsidiaries (guarantors) and foreign subsidiaries (nonguarantors) of the 8 1/2% senior subordinated notes follows: As of and for the year ended March 31, 2000:
Domestic Foreign Parent Subsidiaries Subsidiaries Eliminations Consolidated ------ ------------ ------------ ------------ ------------ (In thousands) As of March 31, 2000: Current assets: Cash..................................... $ 5,754 $ (1,701) $ 3,529 $ - $ 7,582 Trade accounts receivable and unbilled revenues.............................. 67,186 76,325 24,337 - 167,848 Inventories.............................. 47,238 34,552 27,384 (883) 108,291 Other current assets..................... 3,402 7,714 4,337 - 15,453 -------- -------- -------- --------- -------- Total current assets.................. 123,580 116,890 59,587 (883) 299,174 Net property, plant, and equipment............ 35,807 32,218 19,272 - 87,297 Goodwill and other intangibles, net........... 41,336 248,121 50,146 - 339,603 Intercompany balances......................... 188,479 (351,292) (66,245) 229,058 - Other non-current assets...................... 224,823 161,583 (1,977) (350,679) 33,750 -------- -------- -------- --------- -------- Total assets.......................... $614,025 $207,520 $ 60,783 $(122,504) $759,824 ======== ======== ======== ========= ======== Current liabilities........................... $ 45,663 $ 45,304 $ 21,325 $ (967) $111,325 Long-term debt, less current portion.......... 404,269 13 5,976 - 410,258 Other non-current liabilities................. 14,026 18,042 2,720 - 34,788 -------- -------- -------- --------- -------- Total liabilities..................... 463,958 63,359 30,021 (967) 556,371 Shareholders' equity.......................... 150,067 144,161 30,762 (121,537) 203,453 -------- -------- -------- --------- -------- Total liabilities and shareholders' equity.......................... $614,025 $207,520 $ 60,783 $(122,504) $759,824 ======== ======== ======== ========= ======== For the Year Ended March 31, 2000: Net sales..................................... $265,163 $367,421 $126,520 $ (22,850) $736,254 Cost of products sold......................... 186,225 300,332 92,514 (22,926) 556,145 -------- -------- -------- --------- -------- Gross profit.................................. 78,938 67,089 34,006 76 180,109 Selling, general and administrative expenses.. 41,216 30,876 23,583 - 95,675 Amortization of intangibles................... 2,148 11,701 2,543 - 16,392 -------- -------- -------- --------- -------- 43,364 42,577 26,126 - 112,067 -------- -------- -------- --------- -------- Income from operations........................ 35,574 24,512 7,880 76 68,042 Interest and debt expense..................... 34,010 44 644 - 34,698 Interest and other income..................... 791 236 287 - 1,314 -------- -------- -------- --------- -------- Income before income taxes.................... 2,355 24,704 7,523 76 34,658 Income tax expense............................ 1,110 12,929 3,569 (30) 17,578 -------- -------- -------- --------- -------- Net income.................................... $ 1,245 $ 11,775 $ 3,954 $ 106 $ 17,080 ======== ======== ======== ========= ======== F-27 16. Summary Financial Information (continued) Domestic Foreign Parent Subsidiaries Subsidiaries Eliminations Consolidated ------ ------------ ------------ ------------ ------------ (In thousands) For the Year Ended March 31, 2000: Operating activities: Cash provided by (used in) operating activities............................ $ 23,591 $ 7,575 $ 7,135 $ (1,580) $ 36,721 Investing activities: Purchase of marketable securities, net........ (3,318) - - - (3,318) Capital expenditures.......................... (4,660) (2,262) (1,180) - (8,102) Purchase of businesses, net of cash acquired.. - (6,381) - (49) (6,430) Net assets held for sale...................... - (1,058) - - (1,058) -------- -------- -------- --------- -------- Net cash used in investing activities......... (7,978) (9,701) (1,180) (49) (18,908) Financing activities: Proceeds from issuance of common stock........ 3 - - - 3 Net (payments) borrowings under revolving line-of-credit agreements............. (7,400) - (1,913) - (9,313) Repayment of debt............................. (1,783) 17 (748) - (2,514) Dividends paid................................ (3,953) - (1,580) 1,580 (3,953) Other......................................... 165 - - - 165 -------- -------- -------- --------- -------- Net cash (used in) provided by financing activites............................. (12,968) 17 (4,241) 1,580 (15,612) Effect of exchange rate changes on cash....... - - (1,535) 49 (1,486) -------- -------- -------- --------- -------- Net change in cash and cash equivalents....... 2,645 (2,109) 179 - 715 Cash and cash equivalents at beginning of year.................................. 3,109 408 3,350 - 6,867 -------- -------- -------- --------- -------- Cash and cash equivalents at end of year...... $ 5,754 $ (1,701) $ 3,529 $ - $ 7,582 ======== ======== ======== ========= ======== As of and for the year ended March 31, 1999: Domestic Foreign Parent Subsidiaries Subsidiaries Eliminations Consolidated ------ ------------ ------------ ------------ ------------ (In thousands) As of March 31, 1999: Current assets: Cash..................................... $ 3,109 $ 408 $ 3,350 $ - $ 6,867 Trade accounts receivable and unbilled revenues..................... 55,749 66,556 24,774 - 146,809 Inventories.............................. 47,792 41,707 27,488 (1,008) 115,979 Other current assets..................... 3,168 10,645 2,561 - 16,374 -------- -------- -------- -------- -------- Total current assets.................. 109,548 119,316 58,173 (1,008) 286,029 Net property, plant, and equipment............ 36,649 33,058 20,297 - 90,004 Goodwill and other intangibles, net........... 42,993 260,406 54,328 - 357,727 Intercompany balances......................... 205,830 (368,479) (66,710) 229,359 - Other non-current assets...................... 220,453 162,153 (833) (348,622) 33,151 -------- -------- -------- -------- -------- Total assets.......................... $615,473 $206,454 $ 65,255 $(120,271) $766,911 ======== ======== ======== ======== ======== Current liabilities........................... $ 41,010 $ 54,336 $ 25,846 $ (636) $120,556 Long-term debt, less current portion.......... 415,096 - 6,590 - 421,686 Other non-current liabilities................. 11,311 21,849 2,835 - 35,995 -------- -------- -------- -------- -------- Total liabilities..................... 467,417 76,185 35,271 (636) 578,237 Shareholders' equity.......................... 148,056 130,269 29,984 (119,635) 188,674 -------- -------- -------- -------- -------- Total liabilities and shareholders' equity.......................... $615,473 $206,454 $ 65,255 $(120,271) $766,911 ======== ======== ======== ======== ======== F-28 16. Summary Financial Information (continued) For the Year Ended March 31, 1999: Net sales..................................... $265,284 $368,716 $122,300 $(20,855) $735,445 Cost of products sold......................... 184,781 291,446 87,744 (20,996) 542,975 -------- -------- -------- -------- -------- Gross profit.................................. 80,503 77,270 34,556 141 192,470 Selling, general and administrative expenses.. 35,147 34,436 22,326 - 91,909 Amortization of intangibles................... 1,961 11,349 2,169 - 15,479 -------- -------- -------- -------- -------- 37,108 45,785 24,495 - 107,388 -------- -------- -------- -------- -------- Income from operations........................ 43,395 31,485 10,061 141 85,082 Interest and debt expense..................... 34,349 947 627 - 35,923 Interest and other income..................... 1,531 249 (215) - 1,565 -------- -------- -------- -------- -------- Income before income taxes.................... 10,577 30,787 9,219 141 50,724 Income tax expense............................ 4,521 14,709 4,006 52 23,288 -------- -------- -------- -------- -------- Net income.................................... $ 6,056 $ 16,078 $ 5,213 $ 89 $ 27,436 ======== ======== ======== ======== ======== Domestic Foreign Parent Subsidiaries Subsidiaries Eliminations Consolidated ------ ------------ ------------ ------------ ------------ (In thousands) For the Year Ended March 31, 1999: Operating activities: Cash provided by operating activities......... $ 36,147 $ 10,776 $ 9,878 $ 692 $ 57,493 Investing activities: Purchase of marketable securities, net........ (1,976) - - - (1,976) Capital expenditures.......................... (8,414) (2,809) (1,769) - (12,992) Proceeds from sale of business................ 9,390 (589) - - 8,801 Purchase of businesses, net of cash acquired.. (9,597) (1,313) (8,861) (187) (19,958) Net assets held for sale...................... - 2,182 - - 2,182 -------- -------- -------- -------- ------- Net cash used in investing activities......... (10,597) (2,529) (10,630) (187) (23,943) Financing activities: Proceeds from issuance of common stock........ - - 1,449 (1,449) - Net (payments) borrowings under revolving line-of-credit agreements............. (27,600) (1,340) 746 - (28,194) Repayment of debt............................. (1,216) (8,365) 1,402 - (8,179) Dividends paid................................ (3,725) 1,078 (2,071) 993 (3,725) Other......................................... (7,934) - - - (7,934) -------- -------- -------- -------- ------- Net cash (used in) provided by financing activites............................. (40,475) (8,627) 1,526 (456) (48,032) Effect of exchange rate changes on cash....... (1) - (1,462) (49) (1,512) -------- -------- -------- -------- ------- Net change in cash and cash equivalents....... (14,926) (380) (688) - (15,994) Cash and cash equivalents at beginning of year.................................. 18,035 788 4,038 - 22,861 -------- -------- -------- -------- -------- Cash and cash equivalents at end of year...... $ 3,109 $ 408 $ 3,350 $ - $ 6,867 ======== ======== ======== ======== ========
F-29 17. 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 three reportable segments: material handling products, material handling solutions - industrial, and material handling solutions - automotive. The Company's material handling products segment sells hoists, industrial cranes, chain, attachments, and other material handling products principally to third party distributors through diverse distribution channels. The material handling solutions industrial - segment sells engineered material handling systems such as conveyors, manipulators, and lift tables primarily to end-users in the consumer products, manufacturing, warehousing, and, to a lesser extent, the steel, construction, automotive, and other industrial markets. The material handling solutions - automotive segment sells engineered material handling systems, mainly conveyors, primarily to end-users in the automotive industry. 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, 2000, 1999, and 1998, is as follows:
Year Ended March 31, 2000 ------------------------- Solutions - Solutions - Products Industrial Automotive Total -------- ----------- ----------- ----- (In thousands) Sales to external customers.............. $511,287 $ 68,559 $156,408 $736,254 Operating income before amortization..... 75,371 6,771 2,292 84,434 Depreciation and amortization............ 19,843 3,077 5,616 28,536 Total assets............................. 505,461 65,994 188,369 759,824 Capital expenditures..................... 7,805 122 175 8,102 Year Ended March 31, 1999 ------------------------- Solutions - Solutions - Products Industrial Automotive Total -------- ----------- ----------- ----- (In thousands) Sales to external customers.............. $508,313 $ 65,689 $161,443 $735,445 Operating income before amortization..... 78,945 6,691 14,925 100,561 Depreciation and amortization............ 18,559 3,045 5,652 27,256 Total assets............................. 517,774 68,520 180,617 766,911 Capital expenditures..................... 11,203 1,468 321 12,992 F-30 17. Business Segment Information (continued) Year Ended March 31, 1998 ------------------------- Solutions - Solutions - Products Industrial Automotive Total -------- ----------- ----------- ----- (In thousands) Sales to external customers.............. $521,978 $ 39,845 $ - $561,823 Operating income before amortization..... 76,223 3,992 - 80,215 Depreciation and amortization............ 17,939 1,957 - 19,896 Total assets............................. 533,754 71,499 183,609 788,862 Capital expenditures..................... 10,694 712 - 11,406
The following provides a reconciliation of operating income before amortization to consolidated income before income tax, minority interest, and extraordinary charge:
Year Ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Operating income before amortization............................... $ 84,434 $100,561 $ 80,215 Amortization of intangibles........................................ 16,392 15,479 10,297 Interest and debt expense.......................................... 34,698 35,923 25,104 Interest and other income.......................................... (1,314) (1,565) (1,940) -------- -------- -------- Income before income taxes and extraordinary charge................ $ 34,658 $ 50,724 $ 46,754 ======== ======== ======== Financial information relating to the Company's operations by geographic area is as follows: Year Ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Net sales: United States...................................................... $609,734 $613,179 $462,120 Europe............................................................. 71,076 65,000 39,208 Canada............................................................. 49,716 51,653 55,367 Other.............................................................. 5,728 5,613 5,128 -------- -------- -------- Total.............................................................. $736,254 $735,445 $561,823 ======== ======== ======== Year Ended March 31, -------------------- 2000 1999 1998 ---- ---- ---- (In thousands) Assets: United States...................................................... $632,796 $634,720 $662,371 Europe............................................................. 95,601 100,317 90,036 Canada............................................................. 27,130 28,265 32,258 Other.............................................................. 4,297 3,609 4,197 -------- -------- -------- Total.............................................................. $759,824 $766,911 $788,862 ======== ======== ========
F-31 18. Selected Quarterly Financial Data (Unaudited)
(In thousands, except per share data) Three Months Ended Year Ended ------------------ ---------- July 4, October 3, January 2, March 31, March 31, 1999 1999 2000 2000 2000 ---- ---- ---- ---- ---- Net sales................................ $181,601 $182,008 $174,173 $198,472 $736,254 Gross profit............................. 47,113 39,732 43,405 49,859 180,109 Income from operations................... 20,866 11,573 16,176 19,427 68,042 Income before extraordinary charge....... 6,395 511 3,254 6,920 17,080 Net income............................... 6,395 511 3,254 6,920 17,080 Income per share before extraordinary charge........................... 0.45 0.04 0.23 0.49 1.20 Net income per share - diluted........... 0.45 0.04 0.23 0.49 1.20 Three Months Ended Year Ended ------------------ ---------- June 28, September 27, December 27, March 31, March 31, 1998 1998 1998 1999 1999 ---- ---- ---- ---- ---- Net sales................................ $184,616 $185,357 $186,995 $178,477 $735,445 Gross profit............................. 47,313 47,042 47,396 50,719 192,470 Income from operations................... 21,223 20,578 21,402 21,879 85,082 Income before extraordinary charge....... 6,375 5,923 6,445 8,693 27,436 Net income............................... 6,375 5,923 6,445 8,693 27,436 Income per share before extraordinary charge........................... 0.44 0.41 0.46 0.62 1.92 Net income per share - diluted........... 0.44 0.41 0.46 0.62 1.92 Three Months Ended Year Ended ------------------ ---------- June 29, September 28, December 28, March 31, March 31, 1997 1997 1997 1998 1998 ---- ---- ---- ---- ---- Net sales................................ $136,858 $136,060 $137,329 $151,576 $561,823 Gross profit............................. 38,273 39,008 38,634 44,239 160,154 Income from operations................... 15,663 17,312 16,112 20,831 69,918 Income before extraordinary charge....... 4,579 5,850 5,619 7,930 23,978 Net income............................... 4,579 5,850 5,619 3,410(a) 19,458(a) Income per share before extraordinary charge........................... 0.32 0.41 0.39 0.55 1.66 Net income per share - diluted........... 0.32 0.41 0.39 0.24(a) 1.35(a) - -------- (a) Includes extraordinary charges for early debt extinguishment amounting to $4,520,000 in the quarter and year ended March 31, 1998, net of the tax effect.
F-32 19. Accumulated Other Comprehensive Income (Loss) The components of accumulated other comprehensive income (loss) are as follows:
March 31, --------- 2000 1999 ---- ---- (In thousands) Net unrealized investment gains - net of tax....................................... $ 2,832 $ 2,312 Minimum pension liability adjustment - net of tax.................................. (682) (1,041) Foreign currency translation adjustment............................................ (7,766) (4,637) -------- -------- Accumulated other comprehensive loss............................................... $ (5,616) $ (3,366) ======== ========
The net tax liability associated with items included in comprehensive income (loss) was $1,433,000 and $847,000 for 2000 and 1999, respectively. 20. Effects of New Accounting Pronouncements The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities," in June of 1998. The FASB issued SFAS 137 in June of 1999 which defers the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. Statement No. 133 establishes accounting and reporting standards for derivatives and hedging activities. It requires that entities recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Compliance with this statement will not have a material impact on the Company at the present time. In December of 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." The Company does not believe that the requirements of SAB No. 101 will have any effect on or require any adjustments to the Company's results of operations and financial position. F-33 COLUMBUS McKINNON CORPORATION SCHEDULE II--Valuation and qualifying accounts March 31, 2000, 1999 and 1998 Dollars in thousands
Additions Balance at Charged to Charged to Balance at Beginning Costs and Other End of Description of Period Expenses Accounts Deductions Period Year ended March 31, 2000: Deducted from asset accounts: Allowance for doubtful accounts $ 2,271 $ 979 $ - $ 1,014(1) $ 2,236 Slow-moving and obsolete inventory 4,295 1,776 112(4) 1,998(2) 4,185 ------- ------- ------ ------- ------- Total $ 6,566 $ 2,755 $ 112 $ 3,012 $ 6,421 ======= ======= ====== ======= Reserves on balance sheet: Accrued general and product liability costs $11,416 $ 3,368 $ - $ 234(3) $14,550 ======= ======= ====== ======= Year ended March 31, 1999: Deducted from asset accounts: Allowance for doubtful accounts $ 2,511 $ 743 $ (27)(5) $ 956(1) $ 2,271 Slow-moving and obsolete inventory 4,684 1,884 (592)(5) 1,681(2) 4,295 Reserve against non-current receivable 600 -- - 600(6) - ------- ------- ------ ------- ------- Total $ 7,795 $ 2,627 $ (619) $ 3,237 $ 6,566 ======= ======= ====== ======= ======= Reserves on balance sheet: Accrued general and product liability costs $11,688 $ 3,265 $ - $ 3,537(3) $11,416 ======= ======= ====== ======= ======= Year ended March 31, 1998: Deducted from asset accounts: Allowance for doubtful accounts $ 1,884 $ 1,677 $ 470(4) $ 1,520(1) $ 2,511 Slow-moving and obsolete inventory 3,356 1,115 854(4) 641(2) 4,684 Reserve against non-current receivable 600 - - - 600 ------- ------- ------ ------- ------- Total $ 5,840 $ 2,792 $1,324 $ 2,161 $ 7,795 ======= ======= ====== ======= ======= Reserves on balance sheet: Accrued general and product liability costs $11,973 $ 1,522 $ - $ 1,807(3) $11,688 ======= ======= ====== ======= ======= - -------- (1) Uncollectible accounts written off, net of recoveries (2) Obsolete inventory disposals (3) Insurance claims and expenses paid (4) Reserves at date of acquisition of subsidiaries (5) Reserves at date of disposal of subsidiary (6) Receivable deemed to be collectible in its entirety
F-34 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. - -------- --------------------------------------------------- DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY Directors and Executive Officers The following table sets forth certain information regarding the Directors and executive officers of the Company: Name Age Position(s) Held ---- --- ---------------- Herbert P. Ladds, Jr. 67 Chairman of the Board Timothy T. Tevens 44 President, Chief Executive Officer and Director Robert L. Montgomery, Jr. 62 Executive Vice President, Chief Financial Officer and Director Ned T. Librock 47 Vice President-Sales and Marketing Karen L. Howard 38 Vice President-Controller Joseph J. Owen 39 Vice President-Strategic Integration Ernst K. H. Marburg 65 Vice President-Total Quality and Standards Lois H. Demler 62 Corporate Secretary Randolph A. Marks 64 Director L. David Black 63 Director Carlos Pascual 54 Director Richard H. Fleming 52 Director All officers of the Company are elected annually at the first meeting of the Board of Directors following the Annual Meeting of Shareholders and serve at the discretion of the Board of Directors. There are no family relationships between any officers or Directors of the Company. Recent business experience of the Directors and executive officers is as follows: Herbert P. Ladds, Jr. has been a Director of the Company since 1973 and was elected Chairman of the Board of Directors of the Company in January 1998. He served as Chief Executive Officer of the Company from 1986 until his retirement in July 1998. He was President of the Company from 1982 until January 1998 and was Executive Vice President of the Company from 1981 to 1982 and Vice President--Sales & Marketing from 1971 to 1980. Mr. Ladds is also a director of Utica Mutual Insurance Company, Eastman Worldwide and R.P. Adams Company, Inc. and Fibron Products, Inc. 36 Timothy T. Tevens was elected President and a Director of the Company in January 1998 and assumed the duties of Chief Executive Officer in July 1998. From May 1991 to January 1998 he served as Vice President--Information Services of the Company and was elected Chief Operating Officer in October 1996. From 1980 to 1991, Mr. Tevens was employed by Ernst & Young LLP in various management consulting capacities. Robert L. Montgomery, Jr. joined the Company in 1974 and has served as Executive Vice President and Chief Financial Officer since 1987 and as a Director of the Company since 1982. Prior thereto he was employed as a certified public accountant by PricewaterhouseCoopers LLP. Ned T. Librock was elected Vice President-Sales and Marketing in November 1995. Mr. Librock has been employed by the Company since 1990 in various sales management capacities. Prior to 1990, Mr. Librock was employed by Dynabrade Inc., a manufacturer of power tools, as director of Sales and Marketing. Karen L. Howard was elected Vice President-Controller in January 1997. From June 1995 to January 1997, Ms. Howard was employed by the Company in various financial and accounting capacities. Prior to June 1995, Ms. Howard was employed by Ernst & Young LLP as a certified public accountant. Joseph J. Owen was appointed Vice President-Strategic Integration in August 1999. From April 1997 to August 1999, Mr. Owen was employed by the Company as Corporate Director-Materials Management. Prior thereto, he was employed by Ernst & Young LLP in various management consulting capacities. Ernst K. H. Marburg has been employed by the Company since May 1980. Prior to his election as Vice President-Total Quality and Standards in October 1996, Mr. Marburg served the Company as Manager of Product Standards and Services for nearly fifteen years. Lois H. Demler has been employed by the Company since 1963. She has been the Corporate Secretary of the Company since 1987. Randolph A. Marks has been a Director of the Company since 1986. Mr. Marks is a private investor and is a retired Chairman of the Board of American Brass Company. He also serves as a director of Computer Task Group, Inc. and Delaware North Companies, Inc. L. David Black has been a Director of the Company since 1995. Mr. Black has been the Chairman of the Board and Chief Executive Officer of JLG Industries, Inc., a manufacturer of construction equipment since 1993, and he served additionally as President from 1993 to 1999. Prior thereto, he served as President of JLG Industries, Inc. Carlos Pascual has been a Director of the Company since 1998. Since August 1999, Mr. Pascual has been Executive Vice President and President of Developing Markets Operations for Xerox. From January 1999 to August 1999, he served as Deputy Executive Officer of Xerox's Industry Solutions Operations. From August 1995 to January 1999, he served as President of Xerox Corporation's United States Customer Operations, and from July 1997 to January 1999 he also served as a Senior Vice President of Xerox Corporation. Prior thereto, since 1968 he has served in various capacities with Xerox Corporation. Richard H. Fleming was appointed a Director of the Company in March 1999. In February 1999, Mr. Fleming was appointed Executive Vice President and Chief Financial Officer of USG Corporation. Prior thereto, Mr. Fleming has served USG Corporation in various executive financial capacities since 1989, including Senior Vice President and Chief Financial Officer from January 1995 to February 1999 and Vice President and Chief Financial Officer from January 1994 to January 1995. 37 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's Directors and executive officers, and persons who own more than 10% of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission and NASDAQ initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, Directors and greater than 10% shareholders are required to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended March 31, 2000 all Section 16(a) filing requirements applicable to its officers, Directors and greater than 10% beneficial owners were complied with. Item 11. Executive Compensation - -------- ---------------------- COMPENSATION OF EXECUTIVE OFFICERS The following Summary Compensation Table sets forth certain information with respect to the compensation paid by the Company for services rendered during the fiscal years ended March 31, 1998, 1999 and 2000 for the chief executive officer and the other four most highly compensated executive officers of the Company. The amounts shown include compensation for services in all compensation capacities.
Annual Compensation Long-Term Compensation Awards ------------------- ---------------------- Securities Restricted Underlying Fiscal Other Annual Stock Options/ All Other Name and Principal Position Year Salary Bonus Compensation Awards(1) SARs(2) Compensation(3) --------------------------- ---- ------ ----- ------------ --------- ------- --------------- Timothy T. Tevens, 2000 $ 448,769 $ - $ - 2,488 54,000 $ 9,485 President and Chief 1999 410,385 36,511 - - - 9,834 Executive Officer 1998 220,000 75,000 - - - 31,952 Robert L. Montgomery, Jr., 2000 373,923 - - 2,417 - 12,238 Executive Vice President 1999 339,115 52,609 - - - 12,703 And Chief Financial Officer 1998 317,000 97,575 - - - 19,597 Ned T. Librock, 2000 209,538 - 68,553(4) 1,386 36,000 15,316 Vice President - 1999 195,905 34,272 - - - 14,938 Sales Marketing 1998 186,655 65,625 - - - 18,984 Karen L. Howard, 2000 163,240 - - 1,031 36,000 15,474 Vice President - 1999 144,636 23,125 - 8,500 - 13,154 Controller 1998 124,999 43,630 - - - 14,559 Joesph J. Owen 2000 160,500 - - 1,016 18,000 11,758 Vice President - 1999 142,500 22,625 - - 1,000 7,460 Strategic Integration 1998 122,500 1,050 - - - 1,166 - -------------------------------------- (1) Mr. Tevens was granted 2,488 shares of restricted Common Stock on June 10, 1999, which had a value on such date of $61,900. As of March 31, 2000, the number of restricted shares of Common Stock held by Mr. Tevens was 2,488, and the value of such restricted shares was $32,655. Mr. Montgomery was granted 2,417 shares of restricted Common Stock on June 10, 1999, which had a value on such date of $60,100, and a value as of March 31, 2000 of $31,723. Mr. Librock was granted 1,386 shares of restricted Common Stock on June 10, 1999, which had a value on such date of $34,500, 11,900 shares of restricted Common Stock on July 22, 1996, which had a value on such date of $166,600, and 38 5,100 shares of restricted Common Stock on August 1, 1994, which had a value on such date of $48,996. The restrictions on 5,100 of Mr. Librock's restricted shares of Common Stock lapsed on July 31, 1999, on which date such shares had a value of $116,981. As of March 31, 2000, the number of restricted shares of Common Stock held by Mr. Librock was 13,286, and the value of such restricted shares was $174,379. Ms. Howard was granted 1,031 shares of restricted Common Stock on June 10, 1999, which had a value on such date of $25,650, 8,500 shares of restricted Common Stock on August 17, 1998, which had a value on such date of $196,563, and 8,500 shares of restricted Common Stock on June 1, 1995, which had a value on such date of $107,875. As of March 31, 2000, the number of restricted shares of Common Stock held by Ms. Howard was 18,031, and the value of such restricted shares was $236,657. Mr. Owen was granted 1,016 shares of restricted Common Stock on June 10, 1999, which had a value on such date of $25,300, and 5,000 shares of restricted Common Stock on April 14, 1997, which had a value on such date of $95,000. As of March 31, 2000, the number of restricted shares of Common Stock held by Mr. Owen was 6,016, and the value of such restricted shares was $78,960. None of the other officers listed in the above table hold any restricted shares of Common Stock. The Company does not pay dividends on its outstanding shares of restricted Common Stock, but makes payments of additional compensation in lieu of such dividends. See footnote (3) below. (2) Represents options granted to Messrs. Tevens and Librock, Ms. Howard and Mr. Owen pursuant to the Company's Incentive Stock Option Plan (the "Incentive Plan") in amounts of 23,810, 22,345, 22,345, and 18,000 respectively and options granted to Messrs. Tevens and Librock and Mrs. Howard pursuant to the Company's Non-Qualified Stock Option Plan (the "Non-Qualified Plan") in the amounts of 30,190, 13,655 and 13,655, respectively. (3) Comprised of: (i) the value of shares of Common Stock allocated in fiscal 2000 under the Company's Employee Stock Ownership Plan (the "ESOP") to accounts for Messrs. Tevens, Montgomery, Librock, Ms. Howard and Mr. Owen in the amounts of $3,980, $6,750, $4,006, $3,179 and $2,945, respectively, (ii) premiums for group term life insurance policies insuring the lives of Messrs. Tevens, Montgomery, Librock, Ms. Howard and Mr. Owen in the amount of $108 each, (iii) compensation in lieu of dividends on restricted shares of Common Stock paid to Messrs. Tevens, Montgomery, Librock, Ms. Howard and Mr. Owen in the amounts of $597, $580, $6,402, $7,387 and $4,038, respectively and (iv) the Company's matching contributions under its 401(k) plan for Messrs. Tevens, Montgomery, Librock, Ms. Howard and Mr. Owen in the amounts of $4,800, $4,800, $4,800, $4,800 and $4,667, respectively. (4) Represents tax reimbursement payments made by the Company to Mr. Librock in fiscal 2000 to offset the income tax effects of the expiration of the restrictions on 5,100 shares of restricted Common Stock granted to him in fiscal 1995. See footnote (1) above.
Options Granted in Last Fiscal Year The following table contains information concerning the grant of stock options to the named executives in fiscal 2000. The exercise price of all such options is equal to the market value of Common Stock on the date of the grant.
Percentage of Total Options Potential Realizable Value at Granted to Exercise Assumed Annual Rates of Option Employees in Price Per Expiration Stock Price Appreciation Name and Principal Position Grants(1) Fiscal Year Share Date For Option Term --------------------------- -------- ----------- ----- ---- --------------- 5%(2) 10%(3) ----- ------ Timothy T. Tevens, 54,000 11.06% $20.60 4/1/09 $699,840 $1,772,820 Robert L. Montgomery, Jr., - - - - - - Ned T. Librock, 36,000 7.38% 20.60 4/1/09 466,560 1,181,880 Karen L. Howard, 36,000 7.38% 20.60 4/1/09 466,560 1,181,880 Joseph J. Owen 18,000 3.69% 20.60 4/1/09 233,280 590,940 Vice President - Strategic Integration - --------------------------------- 39 (1) Options granted pursuant to the Incentive Plan and the Non-Qualified Plan become exercisable in cumulative annual increments of 25% beginning one year from the date of grant; however, in the event of certain extraordinary transactions, including a change of control of the Company, the vesting of such options would automatically accelerate. (2) Represents the potential appreciation of the options, determined by assuming an annual compounded rate of appreciation of 5% per year over the ten-year term of the grants, as prescribed by the rules. The amount set forth above is not intended to forecast future appreciation, if any, of the stock price. There can be no assurance that the appreciation reflected in this table will be achieved. (3) Represents the potential appreciation of the options, determined by assuming an annual compounded rate of appreciation of 10% per year over the ten-year term of the grant, as prescribed by the rules. The amounts set forth above are not intended to forecast future appreciation, if any, of the stock price. There can be no assurance that the appreciation reflected in this table will be achieved.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The following table sets forth information with respect to the named executives concerning the exercise of options during fiscal 2000 and unexercised options held at the end of fiscal 2000.
Value of Unexercised Shares Number of Unexercised in the Money Options Acquired Value Options At Fiscal Year End At Fiscal Year End(1) -------------------------- --------------------- On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ----------- -------- ----------- ------------- ----------- ------------- Timothy T. Tevens, President and Chief Executive Officer $ - $ - 46,500 57,500 $ - $ - Robert L. Montgomery, Jr., Executive Vice President and Chief Financial Officer - - - - - - Ned T. Librock, Vice President - Sales and Marketing - - 43,500 42,500 - - Karen L. Howard, Vice President - Controller - - 43,500 42,500 - - Joseph J. Owen, Vice President - Strategic Integration - - 3,500 15,500 - - - -------------------------------- (1) The closing market value of Common Stock as of March 31, 2000 of $13.125 was less than the exercise prices of the options.
40 Employee Plans Employee Stock Ownership Plan. The Company maintains the ESOP for the benefit of certain of its salaried and non-union hourly employees. The ESOP is intended to be an employee stock ownership plan within the meaning of Section 4975 (e)(7) of the Internal Revenue Code of 1986, as amended (the "Code") and an eligible individual account plan within the meaning of Section 407(d)(3) of the Code. From 1988 through 1998, the ESOP has purchased from the Company 1,373,549 shares of Common Stock (the "ESOP Shares") for the aggregate sum of approximately $10.5 million. The proceeds of certain institutional loans (the "ESOP Loans") were used to fund such purchases. The ESOP Loans are secured by the ESOP Shares, and are guaranteed by the Company. The ESOP acquired 479,900 shares of Common Stock in October 1998 for the aggregate sum of approximately $7.7 million. The proceeds of a loan from the Company were used to fund the purchase. On a quarterly basis, the Company makes a contribution to the ESOP in an amount determined by the Company's Board of Directors. In fiscal 2000, the Company's cash contribution was $1,434,288. The ESOP trustees utilize the entire contribution to make payments of principal and interest on the ESOP Loans. Common Stock not allocated to ESOP participants ("ESOP Shares") is recorded in an ESOP suspense account and is held as collateral for repayment of the ESOP Loans. As payments of principal and interest are received by the lenders, ESOP Shares are released from the ESOP suspense account annually and are then allocated to the ESOP participants in the same proportion as a participant's compensation for such year bears to total compensation of all participants. An ESOP participant becomes 100% vested in all amounts allocated to him or her after five years of service. The shares of Common Stock held by the participants in the ESOP represent a registration-type class of securities and are voted by the participants in the same manner as any other share of Common Stock. In general, Common Stock allocated to a participant's account is distributed upon his or her termination of employment at normal retirement (age 65) or death. The distribution is made in whole shares of Common Stock plus cash in lieu of any fractional shares. Robert L. Montgomery, Jr., Karen L. Howard, Neal E. Wixson and Timothy R. Harvey serve as Trustees of the ESOP. As of March 31, 2000, the ESOP owned approximately 1,496,109 shares of Common Stock. Common Stock allocated pursuant to the ESOP to Messrs. Tevens, Montgomery and Librock, Ms. Howard and Mr. Owen as of March 31, 2000 is 3,847 shares, 13,582 shares, 3,927 shares, 1,033 shares and 404 shares, respectively. Pension Plan. The Company has a non-contributory, defined benefit pension plan (the "Pension Plan") which provides certain of its employees with retirement benefits. For each year of Plan Participation (as defined in the "Pension Plan") limited to 35 years, a participant earns an annual pension benefit equal to 1.00% of his Final Average Earnings (as defined in the Pension Plan) plus .50% of that part, if any, of such compensation in excess of his Covered Compensation (as defined in the Pension Plan). Pension benefits are not subject to reduction for social security or other offset amounts. If Messrs. Tevens, Montgomery and Librock, Ms. Howard and Mr. Owen continue at their current levels of compensation and retire at age 65, the total estimated annual pension benefits under the Pension Plan for them would be approximately $61,110, $41,678, $56,077, $64,143 and $55,604, respectively. Non-Qualified Stock Option Plan. In October 1995, the Company adopted the Columbus McKinnon Corporation Non-Qualified Stock Option Plan (the "Non-Qualified Plan") and reserved, subject to certain requirements, an aggregate of 250,000 shares of Common Stock for issuance thereunder. Under the terms of 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. In fiscal 2000, the Company granted options to purchase 120,020 shares of Common Stock under the Non-Qualified Plan. 41 Incentive Stock Option Plan. The Company's Columbus McKinnon Corporation Incentive Stock Option Plan (the "Incentive Plan"), which was adopted in October 1995, authorizes grants to officers and other key employees of the Company and its subsidiaries of stock options that are intended to qualify as "incentive stock options" within the meaning of Section 422 of the Code. The Incentive Plan reserved, subject to certain adjustments, an aggregate of 1,250,000 shares of Common Stock to be issued thereunder. Options granted under the Incentive Plan 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 thereunder may be exercised not earlier than one year and not later than ten years from the date such option is granted. In the event of certain extraordinary transactions, including a change of control of the Company, the vesting of such options would automatically accelerate. In fiscal 2000 the Company granted options to purchase 361,390 shares of Common Stock under the Incentive Plan. Restricted Stock Plan. The Company adopted the Columbus McKinnon Corporation Restricted Stock Plan (the "Restricted Stock Plan") in October 1995 and reserved, subject to certain adjustments, an aggregate of 100,000 shares of Common Stock to be issued upon the grant of restricted stock awards thereunder. Under the terms of the Restricted Stock Plan, the Compensation Committee may grant to employees of the Company and its subsidiaries restricted stock awards to purchase shares of Common Stock at a purchase price of not less than $.01 per share. Shares of Common Stock issued under the Restricted Stock Plan are subject to certain transfer restrictions and, subject to certain exceptions, shall be forfeited if the grantee's employment with the Company or any of its subsidiaries is terminated at any time prior to the date the transfer restrictions have lapsed. Grantees who remain continuously employed with the Company or its subsidiaries become vested in their shares five years after the date of the grant, or earlier upon death, disability, retirement or other special circumstances. The restrictions on any such stock awards automatically lapse in the event of certain extraordinary transactions, including a change of control of the Company. In fiscal 2000, the Company awarded 60,700 shares of Common Stock under the Restricted Stock Plan. EVA(R) Incentive Plan. In fiscal 1998, the Company adopted the Columbus McKinnon Corporation EVA(R) Incentive Compensation Plan (the "EVA(R) Plan") which is based upon Stern Stewart Economic Value Added ("EVA(R)") concepts. Under the EVA(R) Plan, for each fiscal year, each employee of the Company is assigned a target bonus by management ranging from 3% to 30% of base compensation, depending upon job classification. The actual bonus to be paid to an employee will be equal to his target bonus times a bonus multiple, which can be greater or less than 100%, based upon the relationship between actual EVA(R) results and targeted EVA(R) results. Payments under the EVA(R) Plan will be made within two and one half months of the completion of the applicable fiscal year. In fiscal 2000, bonuses earned under this plan by Messrs. Tevens, Montgomery and Librock, Ms. Howard and Mr. Owen were awarded in the form of restricted stock as set forth in Note 1 to the Summary Compensation Table. 401(k) Plan. The Company maintains a 401(k) retirement savings plan (the "401(k) Plan") which covers all non-union salaried and hourly employees in the United States who have completed at least 90 days of service. Employees may contribute up to 15% of their annual compensation (8% for highly compensated employees), subject to an annual limitation as adjusted by the Code. Employee contributions are matched by the Company in amount equal to 50% of the employee's Salary Reduction Contributions (as defined in the 401(k) Plan). The Company's matching contributions are limited to 3% of the employee's base pay and vest at the rate of 20% per year. 42 Change in Control Agreements The Company has entered into change in control agreements (the "Change in Control Agreements") with Messrs. Tevens, Montgomery and Librock, Ms. Howard, Mr. Owen and certain other officers and employees of the Company. The Change in Control Agreements provide for an initial term of one year, which, absent delivery of notice of termination, is automatically renewed annually for an additional one year term. Generally, each officer or employee is entitled to receive, upon termination of employment within thirty-six months of a "Change in Control" (unless such termination is because of death or disability, by the Company for "Cause" (as defined in the Change in Control Agreements), or by an officer or employee other than for "Good Reason" (as defined in the Change in Control Agreements)), (i) a lump sum severance payment equal to three times the sum of (A) his or her annual salary and (B) the greater of (1) the annual target bonus under the EVA(R) Plan in effect on the date of termination and (2) the annual target bonus under the EVA(R) Plan in effect immediately prior to the Change in Control, (ii) continued coverage for thirty-six months under the Company's medical and life insurance plans, (iii) at the option of the executive or employee, either three additional years of deemed participation in the Company's tax-qualified retirement plans or a lump sum payment equal to the actuarial equivalent of the pension payment which he or she would have accrued under the Company's tax-qualified retirement plans had he or she continued to be employed by the Company for three additional years and (iv) certain other specified payments. Aggregate "payments in the nature of compensation" (within the meaning of Section 280(G) of the Internal Revenue Code) payable to any executive or employee under the Change in Control Agreements is limited to the amount that is fully deductible by the Company under Section 280(G) of the Internal Revenue Code less one Dollar. The events that trigger a Change in Control under the Change in Control Agreements include (i) the acquisition of 20% or more of the Company's outstanding Common Stock by certain persons, (ii) certain changes in the membership of the Company's Board of Directors, (iii) certain mergers or consolidations, (iv) certain sales or transfers of substantially all of the Company's assets and (v) the approval of the shareholders of the Company of a plan of dissolution or liquidation. Stay Agreements In connection with its decision to examine various alternatives to enhance shareholder value, the Company has entered into stay agreements (the "Stay Agreements") with Messrs. Tevens, Montgomery and Librock, Ms. Howard, Mr. Owen and certain other officers and employees of the Company. The Stay Agreements provide for the maintenance of salary and benefits levels for such officers and employees for a period of six months after the consummation of a "Sale" (as defined in the Stay Agreements). In addition, each such officer or employee is entitled to receive a bonus in the amount of $1,000,000, $700,000, $500,000, $500,000 and $500,000 for Messrs. Tevens, Montgomery and Librock, Ms. Howard and Mr. Owen, respectively, and ranging from $30,000 to $300,000 for other officers and employees of the Company. An additional bonus may also be payable to Messrs. Tevens, Montgomery and Librock, Ms. Howard and Mr. Owen under the Stay Agreements if the consideration to be received in connection with the Sale 43 exceeds certain limits. Payments under the Stay Agreements are contingent upon the continued employment of the officer or employee through the closing date of a Sale and are payable one-half on such closing date and one-half on the six month anniversary of such closing; provided, however, that if the employment of the officer or employee is terminated by such six month anniversary date, he or she will not be entitled to receive the second payment due on such anniversary date. No payment under the Stay Agreements will be due and payable if a Sale does not occur by (a) December 31, 2000 or (b) by March 31, 2001, provided that on or before December 31, 2000 negotiations regarding a possible Sale to an identified purchaser with the requisite financing are taking place. For purposes of the Stay Agreements, a "Sale" is deemed to occur upon (a) a sale of 90% or more of the Company's outstanding common stock or (b) the sale of all or substantially all of the Company's assets. COMPENSATION AND NOMINATION/SUCCESSION COMMITTEE REPORT ON EXECUTIVE COMPENSATION Compensation for the executive officers of the Company is administered by the Compensation and Nomination/Succession Committee which currently consists of three independent (non-employee) Directors. The Compensation and Nomination/Succession Committee approves the compensation arrangements of the Chief Executive Officer and other officers of the Company. The following objectives, established by the Compensation and Nomination/Succession Committee, are the basis for the Company's executive compensation program: o providing a comprehensive program with components including base salary, performance incentives, and benefits that support and align with the Company's goal of providing superior value to customers and shareholders; and o ensuring that the Company is competitive and can attract and retain qualified and experienced executive officers and other key personnel; and o appropriately motivating its executive officers and other key personnel to seek to attain short term, intermediate term and long term corporate and divisional performance goals and to manage the Company for sustained long term growth. The Board of Directors of the Company has delegated to the Compensation and Nomination/Succession Committee responsibility for establishing and administering the compensation programs for the Chief Executive Officer and other executive officers. The Compensation and Nomination/Succession Committee reviews compensation policy and specific levels of compensation paid to the Chief Executive Officer and other executive officers of the Company and reports and makes recommendations to the Board of Directors regarding executive compensation, policies and programs. The Compensation and Nomination/Succession Committee is assisted in these efforts, when required by an independent outside consultant, and by the Company's internal staff, who provide the Compensation and Nomination/Succession Committee with relevant information and recommendations regarding compensation policies and specific compensation matters. 44 Annual Compensation Programs Executive base salaries are compared to manufacturing companies included in a periodic management survey completed by outside compensation consultants; all data has been regressed to revenues equivalent to the Company's. This survey is used because it reflects companies in the same revenue size and industry sectors as the Company. The Compensation and Nomination/ Succession Committee believes salaries should be targeted toward the median of the surveyed salaries reported, depending upon the relative experience and individual performance of the executive. Salary adjustments are governed by guidelines covering three factors (1) the individual officer's performance (merit), (2) market parity (to adjust salaries of high performing individuals based on the competitive market), and (3) promotions (to reflect increases in responsibility). In assessing market parity, the Company targets groups of companies surveyed and referred to above. Each executive officer's corporate position is assigned a title classification reflecting the Company's evaluation of the position's overall contribution to corporate goals and the value the labor market places on the associated job skills. A range of appropriate salaries is then assigned to that title classification. Each April, the salary ranges may be adjusted to reflect market conditions, including changes in comparison companies, inflation, and supply and demand in the market. The midpoint of the salary range corresponds to a "market rate" salary which the Compensation and Nomination/Succession Committee believes is appropriate for an experienced executive who is performing satisfactorily, with salaries in excess of the salary range midpoint appropriate for executives whose performance is superior or outstanding. The Compensation and Nomination/Succession Committee has recommended that any progression or regression within the salary range for an executive officer shall depend upon a formal annual review of job performance, accomplishments and progress toward individual and/or overall goals and objectives for the segments of the Company that such officer oversees as well as his contributions to the overall direction of the Company. Long term growth in shareholder value is an important factor. The results of executive officers' performance evaluations will form a part of the basis of the Compensation and Nomination/Succession Committee's decision to approve, at its discretion, future adjustments in base salaries of executive officers. Chief Executive Officer Compensation Compensation decisions affecting the Chief Executive Officer were based on quantitative and qualitative factors. These factors were accumulated by an external compensation consulting firm and included comparisons of the Company's fiscal 1999 financial statistics to peer companies, strategic achievements such as acquisitions and their integration, comparisons of the base salary level to the median for comparable companies in published compensation surveys, as well as assessments prepared internally by other members of executive management. The bonus cited below was based on the Company's consolidated EVA(R) performance for fiscal 1999. There was no adjustment to Mr. Tevens' base salary effective April 2000. In fiscal 2000, Mr. Tevens received a bonus of 2,488 shares of restricted stock based upon fiscal 1999 EVA(R) results. 45 Section 162(m) of Internal Revenue Code Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to public companies for compensation in excess of $1,000,000 paid to a Company's chief executive officer and any one of the four other most highly paid executive officers during its taxable year. Qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. Based upon the compensation paid to the Company's executive officers in fiscal 2000, it does not appear that the Section 162(m) limitation will have a significant impact on the Company in the near term. However, the Compensation and Nomination/Succession Committee plans to review this matter periodically and to take such actions as are necessary to comply with the new statute to avoid non-deductible compensation payments. Randolph A. Marks Carlos Pascual Richard H. Fleming 46 PERFORMANCE GRAPH The Performance Graph shown below compares the cumulative total shareholder return on Common Stock, based on the market price of the Common Stock, with the total return of the S & P MidCap 400 Index and the NASDAQ National Market Industrials Index. The comparison of total return assumes that a fixed investment of $100 was invested on February 22, 1996 (the effective date of the Company's initial public offering) in Common Stock and in each of the foregoing indices and further assumes the reinvestment of dividends. The stock price performance shown on the graph is not necessarily indicative of future price performance. [ILLUSTRATION OF PERFORMANCE GRAPH]
2/23/96 1996 1997 1998 1999 2000 ------- ---- ---- ---- ---- ---- Columbus McKinnon Corporation ............. 100 107 121 190 141 93 S&P Midcap 400 Index ...................... 100 105 116 173 166 230 Dow Jones Industrial - Diversified Index .. 100 107 125 182 180 207
47 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation and Nomination/ Succession Committee is composed of Randolph A. Marks, Carlos Pascual and Richard H. Fleming, each an outside director of the Company. None of the members of the Compensation and Nomination/ Succession Committee was, during fiscal 2000 or prior thereto, an officer or employee of the Company or any of its subsidiaries. In fiscal 2000, none of the executive officers of the Company served on the Compensation Committee of another entity or on any other committee of the Board of Directors of another entity performing similar functions during such period, except that Mr. Ladds served on the Compensation Committee of the Board of Directors of Utica Mutual Insurance Company. COMPENSATION OF DIRECTORS The Company pays an annual retainer of $20,000 to its Chairman of the Board and an annual retainer of $15,000 to each of its other outside directors. Directors who are employees of the Company do not receive an annual retainer. The Chairman of the Audit Committee and Compensation and Nomination/Succession Committee each receive an additional annual retainer of $2,500. In addition, each non-employee director also receives a fee of $1,000 for each Board of Directors and committee meeting attended and is reimbursed for any reasonable expenses incurred in attending such meetings. Item 12. Security Ownership of Certain Beneficial Owners and Management - -------- -------------------------------------------------------------- SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS The following table sets forth certain information as of May 31, 2000 regarding the beneficial ownership of the Company's Common Stock by (a) each person who is known by the Company to own beneficially more than 5% of the Company's Common Stock; (b) by each Director; (c) by each of the executive officers named in the Summary Compensation Table; and (d) by all executive officers and Directors of the Company as a group.
Number Percentage Of Shares(1) Of Class ------------ -------- Directors, Officers and 5% Shareholders - --------------------------------------- Herbert P. Ladds, Jr.(2)(3)..................................................... 1,056,610 7.09 Timothy T. Tevens(2)(4)......................................................... 74,644 * Robert L. Montgomery, Jr.(2)(5)................................................. 1,151,327 7.73 Randolph A. Marks(2)............................................................ 238,340 1.60 L. David Black(2)............................................................... 1,700 * Carlos Pascual (2).............................................................. 1,500 * Richard H. Fleming (2).......................................................... 1,500 * Ned T. Librock(2)(6)............................................................ 66,968 * Karen L. Howard (2)(7).......................................................... 63,829 * Joseph J. Owen(2)(8)............................................................ 13,562 * Ernst K. H. Marburg(2)(9)....................................................... 18,295 * Columbus McKinnon Corporation Employee Stock Ownership Plan (2)................. 1,496,109 10.04 All Directors and Executive Officers as a Group (12 persons)(10)................ 2,706,015 18.17 Capital Group International, Inc.(11)........................................... 1,347,200 9.04 Gilchrist B. Berg(12)........................................................... 1,015,292 6.82 - --------
* Less than 1%. (1) Rounded to the nearest whole share. Unless otherwise indicated in the footnotes, each of the shareholders named in this table has sole voting and investment power with respect to the shares shown as beneficially owned by him, except to the extent that authority is shared by spouses under applicable law. (2) The address of each of the executive officers and directors and the Columbus McKinnon Employee Stock Ownership Plan is c/o Columbus McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York 14228-1197. 48 (3) Includes (i) 875,465 shares of Common Stock owned directly, (ii) 163,705 shares of Common Stock owned directly by Mr. Ladds' spouse, and (iii) 17,440 shares of Common Stock held by Mr. Ladds' spouse as trustee for the grandchildren of Mr. Ladds. (4) Includes (i) 17,247 shares of Common Stock directly, (ii) 7,000 shares of Common Stock owned directly by Mr. Tevens' spouse, (iii) 50 shares of Common Stock owned by Mr. Tevens' son, (iv) 3,847 shares of Common Stock allocated to Mr. Tevens' ESOP account and (v) 42,354 shares of Common Stock issuable under currently exercisable options granted to Mr. Tevens under the Incentive Plan and 4,146 shares of Common Stock issuable under currently exercisable options granted to Mr. Tevens under the Non-Qualified Plan. Excludes 31,456 shares of Common Stock issuable under options granted to Mr. Tevens under the Incentive Plan and 26,044 shares of Common Stock issuable under options granted to Mr. Tevens under the Non-Qualified Plan which are not exercisable within 60 days. (5) Includes (i) 1,052,745 shares of Common Stock owned directly, (ii) 85,000 shares of Common Stock owned directly by Mr. Montgomery's spouse and (iii) 13,582 shares of Common Stock allocated to Mr. Montgomery's ESOP account. Excludes 1,482,527 additional shares of Common Stock owned by the ESOP for which Mr. Montgomery serves as one of four trustees and for which he disclaims any beneficial ownership. (6) Includes (i) 19,390 shares of Common Stock owned directly, (ii) 152 shares of Common Stock owned by Mr. Librock's son, (iii) 3,926 shares of Common Stock allocated to Mr. Librock's ESOP account and (iv) 42,354 shares of Common Stock issuable under currently exercisable options granted to Mr. Librock under the Incentive Plan and 1,146 shares of Common Stock issuable under currently exercisable options granted to Mr. Librock under the Non-Qualified Plan. Excludes 29,991 shares of Common Stock issuable under options granted to Mr. Librock under the Incentive Plan and 12,509 shares of Common Stock issuable under options granted to Mr. Librock under the Non-Qualified Plan which are not exercisable within 60 days. (7) Includes (i) 19,296 shares of Common Stock owned directly, (ii) 1,033 shares allocated to Ms. Howard's ESOP account, and (iii) 42,354 shares of Common Stock issuable under currently exercisable options granted to Ms. Howard under the Incentive Plan and 1,146 shares of Common Stock issuable under currently exercisable options granted to Ms. Howard under the Non-Qualified Plan. Excludes (i) 1,495,076 additional shares of Common Stock owned by the ESOP for which Ms. Howard serves as one of four trustees and for which she disclaims any beneficial ownership and (ii) 29,991 shares of Common Stock issuable under options granted to Ms. Howard under the Incentive Plan and 12,509 shares of Common Stock issuable under options granted to Ms. Howard under the Non-Qualified Plan which are not exercisable within 60 days. (8) Includes (i) 8,383 shares of Common Stock owned directly, (ii) 1,275 shares of Common Stock owned by Mr. Owen's spouse, (iii) 404 shares of Common Stock allocated to Mr. Owen's ESOP account, and (iv) 3,500 shares of Common Stock issuable under currently exercisable options granted to Mr. Owen under the Incentive Plan. Excludes 15,500 shares of Common Stock issuable under options granted to Mr. Owen under the Incentive Plan. (9) Includes (i) 9,282 shares of Common Stock owned directly, (ii) 6,263 shares of Common Stock allocated to Mr. Marburg's ESOP account, and (iii) 2,750 shares of Common Stock issuable under currently exercisable options granted to Mr. Marburg under the Incentive Plan. Excludes 11,750 shares of Common Stock issuable under options granted to Mr. Marburg under the Incentive Plan which are not exercisable within 60 days. (10) Includes (i) options to purchase an aggregate of 142,000 shares of Common Stock issuable to certain executive officers under the Incentive Plan, all of which are exercisable within 60 days. Excludes the shares of Common Stock owned by the ESOP as to which Mr. Montgomery and Ms. Howard serve as trustees, except for an aggregate of 38,093 shares allocated to the respective ESOP accounts of the executive officers of the Company and (ii) options to purchase an aggregate of 181,000 shares of Common Stock issued to certain executive officers under the Incentive Plan and Non-Qualified Plan, none of which are exercisable within 60 days. (11) Based on information set forth in Schedule 13G filed with the Commission by Capital Group International, Inc. on February 10, 2000. (12) Based on information set forth in Schedule 13G to be filed with the Commission by Gilchrist B. Berg on June 29, 2000. The stated business address for Mr. Berg is 225 Water Street, Suite 1987, Jacksonville, Florida 32202 49 Item 13. Certain Relationships and Related Transactions - -------- ---------------------------------------------- None 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 - Ernst & Young LLP F-2 Report of Independent Auditors - Deloitte & Touche LLP F-3 Consolidated balance sheets - March 31, 2000 and 1999 F-4 Consolidated statements of income - Years ended March 31, 2000, 1999 and 1998 F-5 Consolidated statements of shareholders' equity - Years ended March 31, 2000, 1999 and 1998 F-6 Consolidated statements of cash flows - Years ended March 31, 2000, 1999 and 1998 F-7 Notes to consolidated financial statements F-8 - F33 (a)(2) Financial Statement Schedule: Page No. ----------------------------- -------- Report of Independent Auditors F-2 Schedule II - Valuation and qualifying accounts F-34 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. 50 (a)(3) Exhibits: --------- Exhibit Number - ------ 2.1 Agreement and Plan of Merger dated August 24, 1996 among Columbus McKinnon Corporation, L Acquisition Corporation and Spreckels Industries, Inc. (known as Yale International, Inc.) (incorporated by reference to Exhibit (c)(1) to the Company's Tender Offer Statement on Schedule 14D-1 dated August 30, 1996). 2.2 Offer to Purchase by L Acquisition Corporation dated August 30, 1997, as revised (incorporated by reference to Exhibit (a)(1) to the Company's Tender Offer Statement on Schedule 14D-1 dated August 30, 1997, as amended by Amendment No. 1 dated September 18, 1996, Amendment No. 2 dated September 27, 1996, Amendment No. 3 dated October 4, 1996, Amendment No. 4 dated October 9, 1996 Amendment No. 5 dated October 13, 1996 and Amendment No. 6 dated October 17, 1996). 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 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 A/B Registration Rights Agreement among Columbus McKinnon Corporation, the guarantors named on the signature pages thereto and Bear, Stearns & Co., Inc. and Goldman, Sachs & Co., as initial purchasers (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K dated April 9, 1998). 4.6 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). 51 4.7 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). 4.8 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). 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 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 Loan Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland Bank, dated October 27, 1994 (incorporated by reference to Exhibit 10.5 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). 52 10.6 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). 10.7 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). 10.8 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). 10.9 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). 10.10 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). 10.11 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). 10.12 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). 10.13 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 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). 53 10.14 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). 10.15 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). 10.16 Series Lease, dated as of November 1, 1993, between Town of Amherst Industrial Development Agency as Lessor and Columbus McKinnon Corporation as Lessee (incorporated by reference to Exhibit 10.13 to the Company's Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995). *10.17 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). *10.18 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). *10.19 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). *10.20 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). *10.21 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). *10.22 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). 54 *10.23 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). #*10.24 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. *10.25 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). *10.26 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). #*10.27 Amended and Restated Columbus McKinnon Corporation Management EVA(R)Incentive Compensation Plan. *10.28 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). *10.29 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). *10.30 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). *10.31 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). *10.32 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). #*10.33 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift 401 (K) Plan, dated June 1, 2000. 55 *10.34 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). *10.35 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). *10.36 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). *10.37 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). *10.38 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). *10.39 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). 10.40 Stock Purchase Agreement, dated as of March 11, 1998, among Columbus McKinnon Corporation and the shareholders of LICO, Inc. identified on the signature pages thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated April 9, 1998). 10.41 Agreement and Plan of Merger, dated as of February 16, 1999, by and among Columbus McKinnon Corporation, GL International, Inc. and Larco Industrial Services, Ltd. (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.42 Columbus McKinnon Corporation - GL International Inc. 1997 Stock Option Plan (incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). 10.43 Columbus McKinnon Corporation - Larco Industrial services, Ltd. 1997 Stock Option Plan (incorporated by reference to Exhibit 10.39 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999). #*10.44 Form of Stay Agreement as entered into between Columbus McKinnon Corporation and each of Timothy T. Tevens, Robert L. Montgomery, Jr., Ned T. Librock, Karen L. Howard, and Joseph J. Owen. 56 #21.1 Subsidiaries of the Registrant. #23.1 Consent of Ernst & Young LLP. #23.2 Consent of Deloitte & Touche LLP. #27.1 Financial Data Schedule. #99.1 Form 11-K Columbus McKinnon Corporation Employee Stock Ownership Plan Annual Report for the year ended March 31, 2000. * Indicates a management contract or compensation plan or arrangement. # Filed herewith (b) Reports on Form 8-K: During the fourth quarter of fiscal 2000, the Company did not file any Current Reports on Form 8-K. 57 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Buffalo, State of New York on June 29, 2000. COLUMBUS McKINNON CORPORATION By: /s/ Timothy T. Tevens ----------------------------------- Timothy T. Tevens President and Chief Executive Officer 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. Signature Title Date --------- ----- ---- /s/ Timothy T. Tevens President, Chief Executive June 29, 2000 - --------------------- Timothy T. Tevens Officer and Director (Principal Executive Officer) /s/ Robert L. Montgomery, Jr. Executive Vice President, June 29, 2000 - ----------------------------- Robert L. Montgomery, Jr. Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer) /s/ Herbert P. Ladds, Jr. Chairman of the Board June 29, 2000 - ------------------------- Herbert P. Ladds, Jr. of Directors /s/ Randolph A. Marks Director June 29, 2000 - --------------------- Randolph A. Marks /s/ L. David Black Director June 29, 2000 - ------------------ L. David Black /s/ Carlos Pascual Director June 29, 2000 - ------------------ Carlos Pascual /s/ Richard H. Fleming Director June 29, 2000 - ---------------------- Richard H. Fleming 58 EX-10.24 2 0002.txt AMENDMENT NO. 7 TO ESOP AMENDMENT NO. 7 TO THE COLUMBUS McKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN 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. 1-6, in accordance with Section 11.1 of the Plan, as follows: 1. Section 1.6, entitled "Annual Earnings", is amended effective as of April 1, 1997 by deleting Section 1.6(b)(3) entitled "Family Aggregation." 2. Section 1.18, entitled "Employer", is amended effective as of September 1, 1999 to read as follows: 1.18 "Employer" means the Corporation and each Affiliate that participates in the Plan in accordance with Article XII. Any Affiliate that becomes an Employer shall be listed in Schedule A attached to and made a part of this Plan. 3. Section 1.16, entitled "Eligible Employee," is amended effective April 1, 2000 by renumbering "subsection (b)" to be "subsection (c)" and inserting a new subsection (b) to read as follows: (b) Employees Temporarily Transferred Abroad. An Eligible Employee who is transferred to a facility outside the United States on a temporary basis (for less than five years) shall continue to be an Eligible Employee during such period, provided that the Employee remains on the payroll of an Employer." 4. Section 1.24, entitled "Highly Compensated Employee," is amended effective April 1, 1997 to read as follows: 1.24 Highly Compensated Employee. (a) In General. The term Highly Compensated Employee includes highly compensated active Employees and highly compensated former Employees. Columbus McKinnon Corporation Employee Stock Ownership Plan Page 2 of Amendment No. 7 of 1989 Restatement (1) Active Employees. A highly compensated active employee means any Employee who: (A) was a 5-percent owner (as defined in Section 416(i)(1) of the Code) of the Employer or Affiliate at any time during the current or preceding year, or (B) for the preceding year had compensation from the Employer and all Affiliates in excess of $80,000 (as adjusted by the Secretary of the Treasury pursuant to Section 415(d) of the Code, except that the base period shall be the calendar quarter ending September 30, 1996). (2) Former Employees. A former Employee shall be highly compensated employee if: (A) the Employee was a Highly Compensated Employee when the Employee separated from service, or (B) the Employee was a Highly Compensated Employee at any time after attaining age 55. (b) Meaning of "Compensation". For the purpose of this Section 1.24, the term "compensation" means compensation within the meaning of Section 415(c)(3) of the Code. For Plan Years beginning before January 1, 1998, the determination of "compensation" shall be made without regard to Sections 125, 402(e)(3), and 402(h)(1)(B) of the Code and, in the case of employer contributions made pursuant to a salary reduction agreement, without regard to Section 403(b) of the Code. (c) Application of Code and Regulations. The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, shall be made in accordance with Section 414(q) of the Code and the regulations thereunder. (d) Effective Date. Section 1.24 in the form set forth hereinabove shall be effective April 1, 1997. Columbus McKinnon Corporation Employee Stock Ownership Plan Page 3 of Amendment No. 7 of 1989 Restatement 5. Section 1.24, entitled "Highly Compensated Employee," is amended by adding new Section 1.24(a)(3) thereto, effective April 1, 1999, to read as follows: (3) Calendar Year Data Election. Effective April 1, 1999, for purposes of Section 1.24(a)(1)(B), 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. 6. Section 1.26, entitled "Leased Employee" is amended effective April 1, 1997 to read as follows: 1.26 Leased Employee. (a) In General. "Leased Employee" means any person who is not an employee under common law of any Employer or Affiliate and who provides services to an Employer or an Affiliate ("recipient") if: [1] such services are provided to the recipient pursuant to an agreement between the recipient and any other person ("leasing organization"), [2] such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of at least one year, and [3] such services are performed under the primary direction or control of the Employer. (b) Treatment of Leased Employees. Once an individual becomes a Leased Employee, the individual shall be taken into account in determining whether the Plan satisfies the coverage requirements of Section 410(b) of the Code, and service as a Leased Employee shall be counted as service for purposes of eligibility to participate and vesting, but Leased Employees shall not be eligible to participate in the Plan. 7. Section 1.29, entitled "Normal Retirement Age", is amended effective April 1, 1999 to read as follows: 1.29 "Normal Retirement Age" means the day on which a Participant attains age 65 or, if later, the earlier of the 5th anniversary of the day on which the Participant commenced participation in the Plan or the 5th anniversary of the day on which the Participant commenced participation in the Columbus McKinnon Corporation Monthly Retirement Benefit Plan. Columbus McKinnon Corporation Employee Stock Ownership Plan Page 4 of Amendment No. 7 of 1989 Restatement 8. Section 1.36, entitled "Thrift Plan", has been amended effective April 1, 1989 to read as follows: 1.36 "Thrift Plan" means the Columbus McKinnon Corporation Thrift 401(k) Plan effective as of August 1, 1984, as amended from time to time. 9. Section 3.4, entitled "Allocation of Contributions", is amended effective April 1, 1998 by changing subsection (a) thereof to read as follows: (a) Persons Entitled to Share in Contributions. Each Participant [1] who is an Eligible Employee on the Allocation Date within a Plan Year and who has earned at least 1,000 Hours of Service in the calendar year ending on the Allocation Date, or [2] who dies or terminates employment on or after April 1, 1998 during a Plan Year after attaining age 55 and completing at least five Years of Vesting service (provided the Participant was an Eligible Employee immediately prior to such death or termination of employment), shall be entitled to share in the Contributions made for such Plan Year. 10. Section 7.1, entitled "Time of Distribution", is amended effective April 1, 1998 by changing Section 7.1(d)(1) to read as follows: (1) Requirement of Participant's Consent. If the aggregate value of a Participant's Account Balance exceeds $5,000 (or exceeded $5,000 at the time of any previous distribution), no distribution to the Participant shall be made before the Participant attains Normal Retirement Age unless the Participant is given the notice described in Section 7.1(d)(1)(A) and consents in writing to earlier payment. Such notice and consent shall not be required after the death of the Participant. 11. Section 7.1, entitled "Time of Distribution", is amended effective April 1, 1998 by changing Section 7.1(e) to read as follows: (e) Participant May Defer Distribution. A Participant who ceases to be an Employee after attaining his Normal Retirement Age, or after attaining age 55 if he has earned 5 Years of Vesting Service, may elect to defer distribution of his Account Balance until a designated Valuation Date that is not later than the April 1 following the calendar year in which he will attain age 69 1/2. Such election shall be made by notice filed with the Committee and shall be irrevocable. Columbus McKinnon Corporation Employee Stock Ownership Plan Page 5 of Amendment No. 7 of 1989 Restatement 12. Section 7.9, entitled "Required Minimum Distributions" is amended effective April 1, 1997 to read as follows: 7.9 Required Minimum Distributions. (a) General Rule. Payment of a Participant's benefit shall commence no later than April 1 of the calendar year following the calendar year in which the Participant attains age 70-1/2. Benefits payable during any calendar year following the calendar year in which the Participant attains age 70-1/2 and before actual retirement shall be recomputed as of the first day of such calendar year and shall be increased (but not decreased) to reflect any additional year of Benefit Service completed during the immediately preceding calendar year. (b) Election To Defer Benefits. Notwithstanding Section 7.9(a), a Participant who is not a "5-Percent Owner" and who continues to be an Employee after attaining age 70-1/2 may elect to defer the commencement of benefits until the he ceases to be an Employee. The election shall be made at the time and in the manner determined by the Committee. The benefit payable to the Participant upon actual retirement shall be determined under Section 7.9(a). For purposes of this Section 7.9, a Participant is a "5-percent owner" if he is a 5-percent owner of the Corporation or any Affiliate within the meaning of Code Section 416(i) at any time during the Plan Year ending with the calendar year in which he attains age 66-1/2 or any subsequent Plan Year. (c) Required Distributions. Notwithstanding any other provision in this Plan, all distributions under the Plan shall be made in accordance with Code Section 401(a)(9) (concerning required distributions) and the Treasury Regulations issued thereunder, including the minimum distribution incidental benefit requirements set forth in Proposed Treasury Regulation Section 1.401(a)(9)-2 (or any successor section). Code Section 401(a)(9) and the regulations thereunder shall supersede any distribution option or benefit deferral provision under the Plan that is inconsistent therewith. Columbus McKinnon Corporation Employee Stock Ownership Plan Page 6 of Amendment No. 7 of 1989 Restatement (d) Effective Date. Section 7.9, in the form set forth hereinabove, shall be effective for Plan Years beginning on and after April 1, 1997. 13. Section 13.1, entitled "Summary", is amended effective April 1, 1998 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 $30,000 (as adjusted) or 25 percent of the Participant's Section 415 Compensation. If the Participant receives contributions and/or benefits under more than one qualified plan of the Corporation (and all Affiliates), all such contributions and benefits 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. 14. Section 13.2, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 1998 by changing subsection (f) to read as follows: (f) "Maximum Dollar Amount" means for any Limitation Year, $30,000, as may be increased pursuant to Section 415(d) of the Code. 15. Section 13.2, entitled "Definitions and Rules of Interpretation", is amended effective April 1, 1998 by changing subsection (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. Effective January 1, 1998, Section 415 Compensation shall include elective deferrals (as defined in Code Section 402(g)(3)) and salary reduction contributions under a cafeteria plan that are excluded from gross income under Code Section 125. Effective April 1, 1994, Section 415 Compensation shall be limited to $150,000 (subject to annual adjustment) in accordance with Code Section 401(a)(17). Columbus McKinnon Corporation Employee Stock Ownership Plan Page 7 of Amendment No. 7 of 1989 Restatement 16. Section 13.4, entitled "Participation in a Defined benefit Plan", is amended effective April 1, 2000 by adding new subsection (f) thereto to read as follows: (f) Section Ineffective After 1999 Limitation Year. This Section 13.4 shall become ineffective on and after April 1, 2000. Accordingly, allocations made under the Plan on and after that date shall not be limited on account of a Participant accruing or having accrued a benefit under a defined benefit plan of the Corporation or any Affiliate. Allocations made under the Plan before that date shall not be adjusted on account of this Section 13.4(f). 17. New Section 15.9, entitled "Uniformed Services Employment and Reemployment Rights Act", is added to the Plan effective December 12, 1994 to read as follows: 15.9 Uniformed Services Employment and Reemployment Rights Act. Notwithstanding any provision in the Plan to the contrary, contributions, credit and benefits with respect to qualified military service will be provided in accordance with Section 414(u) of the Code. This Section is effective December 12, 1994. 18. New Schedule A, entitled "Employers Participating in the Plan", is added to the Plan effective as of September 1, 1999 to read as follows: Schedule A Participating Employers and Eligible Employees Reflecting Amendment of the Plan through November 1, 1999 1. Columbus McKinnon Corporation (April 1, 1987) Columbus McKinnon Corporation established the Plan as a profit sharing plan covering certain salaried employees effective April 1, 1987. The Plan was restated as an ESOP effective November 1, 1988. Columbus McKinnon Corporation Employee Stock Ownership Plan Page 8 of Amendment No. 7 of 1989 Restatement o The Plan was again restated effective April 1, 1989 and at that time the Plan covered nonunion salaried employees, office employees and nonunion factory employees at Columbus McKinnon Corporation's Tonawanda facility. o The Plan was amended effective October 1, 1994 to extend coverage to all other nonunion hourly employees of Columbus McKinnon Corporation. o The Plan was amended effective February 24, 1995 to exclude salaried employees of the Positech and Durbin Durco Divisions of Columbus McKinnon Corporation. These division had been non- participating subsidiary corporations which merged into Columbus McKinnon on that date. o 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. 2. Lift-Tech International, Inc. (April 1, 1996) 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 Section 2.1 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. 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 Section 2.1 of the Plan. Employees of Yale Industrial Products, Inc. who may be Eligible Employees include all nonunion Employees. Such Employees are granted Eligibility Service and Vesting Service under the Plan for service with Duff-Norton Company, Inc. and its affiliates prior to January 3, 1997. Columbus McKinnon Corporation Employee Stock Ownership Plan Page 9 of Amendment No. 7 of 1989 Restatement 4. Automatic Systems, Inc. (April 1, 1999) Columbus McKinnon Corporation acquired LICO, Inc. and its subsidiaries, including 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 are eligible to enter the Plan on or after April 1, 1999 in accordance with Section 2.1 of the Plan. Employees of Automatic Systems, Inc. who may be Eligible Employees include all nonunion Employees. Such Employees are granted Eligibility Service and Vesting Service under the Plan for service with Automatic Systems, Inc. and its affiliates prior to March 31, 1998. 5. 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, who meet the age and service requirements under the Plan and satisfy the definition of "Eligible Employee" shall be eligible to enter the Plan on or after January 1, 2000 in accordance with Section 2.1 of the Plan. Employees of Washington Equipment Company who may be Eligible Employees include all nonunion Employees. Such Employees are granted Eligibility Service and Vesting Service under the Plan for service with Washington Equipment Company and its affiliates prior to April 29, 1999. 5. 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. on January 1, 2000, 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 January 1, 2000 in accordance with Section 2.1 of the Plan. Columbus McKinnon Corporation Employee Stock Ownership Plan Page 10 of Amendment No. 7 of 1989 Restatement Employees of Gaffey, Inc. who may be Eligible Employees include all nonunion Employees. Such Employees are granted Eligibility Service and Vesting Service under the Plan for service with Gaffey, Inc. and its affiliates prior to March 1, 1999. 6. Handling Systems and Conveyors, Inc. (January 1, 2000) Handling Systems and Conveyors, Inc. (HSC) 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 HSC became a subsidiary of Columbus McKinnon Corporation on that date. Persons employed as nonunion Employees of HSC on January 1, 2000, 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 January 1, 2000 in accordance with Section 2.1 of the Plan. Employees of this corporation who may be Eligible Employees include all nonunion employees. Such employees are granted Eligibility Service and Vesting Service under the Plan for service with HSC and its affiliates prior to March 1, 1999. IN WITNESS WHEREOF, this instrument of amendment has been executed by a duly authorized officer of the Corporation this 30th day of April 2000. COLUMBUS McKINNON CORPORATION ATTEST: /s/ Lois H. Demler By: /s/ R.L. Montgomery ------------------ ------------------- Title: Executive Vice President ------------------------ EX-10.27 3 0003.txt EVA INCENTIVE COMPENSATION PLAN COLUMBUS MCKINNON CORPORATION ----------------------------- EVA(R) INCENTIVE COMPENSATION PLAN ---------------------------------- ARTICLE I STATEMENT OF PURPOSE -------------------- 1.1 The purpose of the Plan is to provide a system of incentive compensation, which will promote the maximization of EVA over the long-term. In order to align associate incentives with shareholder and lender interests, incentive compensation will reward the creation of value. This Plan will tie incentive compensation to Economic Value Added ("EVA") and, thereby, reward for creating value and penalize for destroying value. 1.2 EVA is the performance measure of value creation for Columbus McKinnon Corporation. EVA reflects the benefits and costs of capital employment. Associates create value when they use capital in an endeavor that generates a return that exceeds the cost of the capital employed. Conversely value is destroyed when capital is used in an endeavor that generates a return that is less than the cost of capital employed. By imputing the cost of capital upon the operating profits generated by a business group, EVA measures the total value created (or destroyed). The Plan will reward increases in EVA and penalize decreases over time. EVA = NET OPERATING PROFIT AFTER TAX - CAPITAL CHARGE 1.3 Each Plan Participant is placed in a classification. Each classification has a prescribed target bonus. The bonus acquired in any one year is the result of multiplying the Actual Bonus Percentage times the Participant's total earnings as defined in the Plan and a positive balance is distributed each year through the payroll system. ARTICLE II DEFINITION OF EVA AND THE COMPONENTS OF EVA ------------------------------------------- Unless the context provides a different meaning, the following terms shall have the following meanings: 2.1 OPERATING GROUP means a group of business divisions that are uniquely identified for the purpose of calculating EVA and EVA based bonus awards. 2.2 PARTICIPATING UNIT means a single division that is uniquely identified for the purpose of calculating EVA and EVA based bonus awards. 2.3 CAPITAL means the investments made by shareholders (measured by Shareholders' Equity) and lenders (measured by our debt obligations). The total of invested Capital is used to acquire all of the assets needed to run our business - Working Capital (including Accounts Receivable and Inventory reduced by Trade Accounts Payable and Accrued Liabilities), Property, Plant, and Equipment, and Goodwill. The amount of Capital used by an operation is measured by the average monthly value of the specific assets acquired by Capital that are needed to support that operation. - 1 - 2.4 COST OF CAPITAL or "C" means the weighted average of: (i) the cost of BORROWED capital, which is interest, net of tax, and, (ii) the cost of EQUITY capital, which is equal to the return that investors expect from a similar investment. The Cost of Capital is reviewed annually and revised if it has changed significantly. CM's current Cost of Capital is 11%. 2.5 CAPITAL CHARGE means the Cost of Capital times the value of the assets provided by Capital actually employed by each Participating Unit, Operating Group, or the Company as a whole. The Capital Charge is computed as follows: CAPITAL CHARGE = CAPITAL X COST OF CAPITAL ("C") 2.6 NOPAT stands for Net Operating Profit After Tax and represents the after-tax economic operating profit of the business. NOPAT is calculated by adjusting pre-tax profit from an accounting to an economic basis. 2.7 EVA means Economic Value Added as described in Article I, EVA may be positive or negative. 2.8 PARTICIPANT means an individual that has been selected to participate in the Plan. 2.9 EXCOM means the Executive Committee of Columbus McKinnon Corporation. ARTICLE III DEFINITION AND COMPUTATION OF TARGET BONUS VALUE ------------------------------------------------ 3.1 ACTUAL EVA means the EVA as calculated for the Company, each Participating Group, and each Participating Unit for the fiscal year. 3.2 TARGET EVA means the level of EVA that is expected in order for the Participating Unit to receive the Target Bonus. The Target EVA for the first year is set at the average of the prior year actual EVA and Budget EVA + Expected Improvement in EVA. After the first year, the Target EVA is revised according to the following formula: TARGET EVA = (LAST YEAR ACTUAL EVA + LAST YEAR TARGET EVA) /2 + EXPECTED IMPROVEMENT IN EVA 3.3 EXPECTED IMPROVEMENT IN EVA means the constant EVA improvement that is added to move the target up each year. It is based upon overall long-term shareholder expectation for the total Company growth in EVA per year. The total Company expected improvement is allocated to operative groups and units. The amount will be reviewed periodically by EXCOM. 3.4 TARGET BONUS means the "Target Bonus Percentage" times a Participant's Total Earnings as defined in Section 3.5 3.5 PARTICIPANT'S TOTAL EARNINGS means the total calendar year earnings for a Participant, including 40l(k) (or equivalent) deferred wages and excluding Company contributions to 401(k), certain non-cash amounts included in payroll taxable earnings, EVA and other bonuses, adjustment for the release of restrictions on CM Stock, reimbursement for relocation expenses, Worker's Compensation or long-term disability payments and any other exclusion as deemed appropriate by EXCOM. - 2 - 3.6 TARGET BONUS PERCENTAGE is determined by a Participant's Classification as assigned. 3.7 DECLARED BONUS means the bonus earned by a Participant and is computed as the Actual Bonus Multiple times a Participant's Target Bonus. 3.8 ACTUAL BONUS MULTIPLE is calculated by taking the difference between the Actual EVA and the Target EVA divided by the Leverage Factor plus 1.0. Actual Bonus Multiple = (ACTUAL EVA - TARGET EVA) + 1 ------------------------- Leverage Factor 3.9 LEVERAGE FACTOR is the negative (positive) deviation from Target EVA necessary before a zero (two times Target) bonus is earned. This factor will be reviewed periodically by EXCOM. 3.10 RETIREMENT is defined in the terms of the Participant's Monthly Retirement Benefit Pension Plan or any succeeding Plan. 3.11 PARTICIPANT'S CLASSIFICATION each Participating Unit manager will establish a Participant's classification. All classifications are subject to approval by EXCOM. ARTICLE IV BONUS DISTRIBUTION DATE ----------------------- 4.1 Bonus distributions for the preceding fiscal year will be paid on or before two and one half months following the close of the fiscal year. ARTICLE V PLAN PARTICIPATION, TRANSFERS AND TERMINATIONS ---------------------------------------------- 5.1 PARTICIPANT: The EXCOM will have sole discretion in determining who shall participate in the EVA Incentive Plan. 5.2 VESTING: A Participant who has earnings from working in the prior calendar year and is in the employ of CM on May 1st of the following year will be eligible for a bonus distribution. Those Participants who have terminated prior to May 1st, either voluntarily or with or without cause will NOT be eligible for a bonus distribution. Those Participants who have died, retired or are receiving short-term disability benefits as of May 1st will be eligible for a bonus distribution. Those Participants who are earning Workers' Compensation benefits or long-term disability benefits or are on an approved leave of absence or laid-off and subject to recall as of May 1st, will be eligible for a bonus distribution IF, they return to work within two years of the commencement of their Workers' Compensation benefits, long-term disability benefits or their approved leave or layoff, as the case may be. Such bonus would be payable upon their return to work. 5.3 TRANSFERS: A Participant who transfers his employment from one Participating Unit to another or transfers from one job title to another with a different classification will be eligible to receive future EVA Plan awards in accordance with the provisions of the EVA Incentive Plan. The effective date of the transfer for EVA purposes will be the first day of the following calendar year. - 3 - 5.4 NO GUARANTEE: Selection as a Participant or a Participant's classification is no guarantee that payments under the Plan will be paid or that selection as a Participant or a Participant's classification will be made in any subsequent fiscal year. ARTICLE VI GENERAL PROVISIONS ------------------ 6.1 WITHHOLDING OF TAXES: The Company shall have the right and responsibility to withhold the amount of taxes which, in the determination of the Company, are required under law with respect to any amount due or paid under the Plan. 6.2 EXPENSES: All expenses and costs in connection with the adoption and administration of the Plan shall be borne by the Company. 6.3 NO PRIOR RIGHT OR OFFER: Except and until expressly granted pursuant to the Plan, nothing in the Plan shall be deemed to give any associate any contractual or other right to participate in the benefits of the Plan. 6.4 CLAIMS FOR BENEFITS: In the event a Participant (a "Claimant") desires to make a claim with respect to this EVA Plan provided hereunder, the Claimant shall submit evidence satisfactory to the EXCOM of facts establishing his entitlement to a payment under the Plan. Any claim with respect to any of the benefits provided under the Plan shall be made in writing within ninety (90) days of the event which the Claimant asserts entitles him to benefits. Failure by the Claimant to submit his claim within such ninety (90) day period shall bar the Claimant from any claim for benefits under the Plan. In the event that a claim, which is made by a Claimant, is wholly or partially denied, the Claimant will receive from EXCOM a written explanation of the reason for denial. The Claimant or his/her duly authorized representative may appeal the denial of the claim to EXCOM at any time within ninety (90) days after the receipt by the Claimant of written notice from EXCOM of the denial of the claim. In connection therewith, the Claimant or his/her duly authorized representative may request a review of the denied claim; may review pertinent documents; and may submit issues and comments in writing. EXCOM shall make a decision with respect to an appeal no later than sixty (60) days after receipt of a request for review. EXCOM shall furnish the Claimant with a decision on review in writing, including the specific reasons for the decision. The decision shall be written in a manner designed to be understood by the Claimant, as well as specific reference to the pertinent provisions of the Plan upon which the decision is based. In reaching its decision, EXCOM shall have complete discretionary authority to determine all questions arising in the interpretation and administration of the Plan and to construe the terms of the Plan, including any doubtful or disputed terms and the eligibility of a Participant for benefits. 6.5 ACTION TAKEN IN GOOD FAITH: INDEMNIFICATION EXCOM may employ attorneys, consultants, accountants or other persons and the Company's directors and officers shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by EXCOM in good faith shall be final and binding upon all associates who have received awards, Claimants, the Company and all other interested parties. No member of EXCOM, nor any officer, director, associate or representative of the Company, or any of its affiliates acting on behalf of or in conjunction with EXCOM, shall be personally liable for any action, determination, or interpretation, whether of commission or omission, taken or made with respect to the Plan, except in indemnification as they may have as members of the Company's Board of Directors, as members of EXCOM or as officers or associates of the Company. All members of EXCOM and any officer, associate or representative of the Company or any of its - 4 - subsidiaries acting on their behalf shall be fully indemnified and protected by the Company with respect to any such action, determination or interpretation against the reasonable expenses, including attorneys fees actually and necessarily incurred in the connection with the defense of any civil or criminal action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or an award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding, that such person claiming indemnification shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. Expenses (including attorneys fees) incurred in defending a civil or criminal action, suit or proceeding shall by paid by the Company in advance of the final disposition of such action, suit or proceeding if such person claiming indemnification is entitled to be indemnified as provided in this Section. 6.6 RIGHTS PERSONAL TO ASSOCIATE: Any rights provided to an associate under the Plan shall be personal to such associate, shall not be transferable (except by will or pursuant to the laws of descent or distribution), and shall be exercisable, during his/her lifetime, only by such associate. 6.7 NON-ALLOCATION OF AWARD: In the event of a suspension of the Plan in any Plan Year, the current bonus for the subject Plan year shall be deemed forfeited and no portion thereof shall be allocated to Participants. Any such forfeiture shall not affect the calculation of EVA or bonus award allocation in any subsequent year. ARTICLE VII LIMITATIONS ----------- 7.1 NO CONTINUED EMPLOYMENT: Neither the establishment of the Plan, nor the grant of an award hereunder, nor anything contained herein, shall provide any associate with any right to continued employment or shall be deemed to constitute an express or implied contract of employment for any period of time or in any way abridge the rights of the Company and its Participating Units to determine the terms and conditions of employment or whether to terminate the employment of any associate with or without cause at any time. 7.2 NO PART OF OTHER BENEFITS: The benefits provided in this Plan shall not be deemed a part of any other benefit provided by the Company to its associates. The Company assumes no obligation to Plan Participants except as specified herein. This is a complete statement, along with the exhibits attached hereto, of the terms and conditions of the Plan. 7.3 OTHER PLANS: Nothing contained herein shall limit the Company's or the Board of Directors' power to grant bonuses to associates of the Company, whether or not Participants in this Plan. 7.4 UNFUNDED PLAN: This Plan is unfunded and is maintained by the Company in part to provide an incentive for associates. Nothing herein shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant. - 5 - ARTICLE VIII AUTHORITY --------- 8.1 EXCOM AUTHORITY: Except as otherwise expressly provided herein, full power and authority to interpret and administer this Plan shall be vested in EXCOM. EXCOM may, from time to time, make such decisions and adopt such rules and regulations for implementing the Plan, as it deems appropriate for any Participant under the Plan. Any decision taken by EXCOM arising out of or in connection with the construction, administration, interpretation and effect of the Plan shall be final, conclusive and binding upon all Participants and any person claiming under or through them. 8.2 BOARD OF DIRECTORS AUTHORITY: The Board has the ultimate responsibility for administration of the Plan. References made herein to "EXCOM" indicate that the Board of Directors approved EXCOM to administer the Plan. In the event EXCOM is not so designated, the Board shall administer the Plan directly. The Board or EXCOM, as appropriate, shall work with the CEO of the Company in all aspects of the administration of the Plan. ARTICLE IX NOTICE ------ 9.1 Any notice to be given pursuant to the provisions of the Plan shall be in writing and directed to the appropriate recipient thereof at his/her business address or office location. ARTICLE X EFFECTIVE DATE -------------- 10.1 This Plan shall be effective July 1, 1998, and will be administered on a fiscal year basis, consistent with the Company's March 31st year end. ARTICLE XI AMENDMENTS ---------- 11.1 This Plan may be amended, suspended or terminated at any time at the sole discretion of the Board of Directors. Provided, however, that no such change in the Plan shall be effective to eliminate or diminish any award that has been allocated to the Bank of a Participant prior to the date of such amendment, suspension or termination. Notice of any such amendment, suspension or termination shall be given promptly to each Participant. - 6- ARTICLE XII APPLICABLE LAW -------------- 12.1 This Plan shall be construed in accordance with the State of New York law and any dispute will be adjudicated in the State of New York. PLAN REVISED AS OF JANUARY 2000 WITH REVISIONS TO BE EFFECTIVE FOR THE PLAN YEAR BEGINNING APRIL 1, 2000. - 7 - EVA(R) INCENTIVE PLAN ADDENDUM FOR MANAGEMENT PARTICIPANTS DESCRIPTION OF BONUS BANKS -------------------------- 1.1 ESTABLISHMENT OF A BONUS BANK: To encourage a long-term commitment by Participants to the Company, a portion of the declared bonuses shall be credited to "at risk" deferred accounts ("Bonus Banks") with the level of distribution contingent on sustained high performance and improvements and continued employment as provided herein. 1.2 NEGATIVE BONUS BANK: Although a Bonus Bank may, as a result of negative EVA, have a deficit, no Plan Participant shall be required, at any time, to reimburse his/her Bonus Bank. 1.3 BONUS BANK means, with respect to each Participant, a bookkeeping record of an account to which amounts are credited, or debited as the case may be, from time to time under the Plan and from which bonus payments to such Participant are debited. 1.4 BANK BALANCE means with respect to each Participant, a bookkeeping record of the net balance of the amounts credited to and debited against such Participant's Bonus Bank. A Participant's Bank Balance shall initially be equal to zero. 1.5 DISTRIBUTION RULE: The Plan Administrator will add the Declared Bonus (including negative bonuses) to the Bonus Bank, pay out the lesser of Target Bonus or Bank Balance + 1/3 of the remaining Bonus Bank and carry the remaining Bank Balance (positive or negative) forward to the next year. 1.6 PARTICIPANT: A Bonus Bank Participant is defined as a management associate at a classification level established by EXCOM. PLAN PARTICIPATION, TRANSFERS AND TERMINATIONS ---------------------------------------------- 2.1 TRANSFERS: A Participant who transfers his/her employment from one Participating Unit of the Company to another shall retain his Bonus Bank and will be eligible to receive future EVA Plan awards in accordance with the provisions of the EVA Incentive Plan. 2.2 RETIREMENT OR DISABILITY: A Participant who terminates employment with the Company by virtue of retirement or suffers a "disability" as such term is defined in the Company's long-term disability benefits program, while in the Company's employ shall be eligible to receive the balance of his/her Bonus Bank. The Participant will receive his/her balance as soon as practical after retirement or qualifying for benefit payments under the Company's long-term disability benefits program. 2.3 INVOLUNTARY TERMINATION WITHOUT CAUSE OR DEATH: A participant who is terminated without cause or who dies shall receive any positive Bonus Bank balance. Such payments will be made as soon as is practical. 2.4 VOLUNTARY TERMINATION: In the event that a Participant voluntarily terminates employment with the Company, he/she shall be eligible to receive the balance of his/her Bonus Bank subject to a five (5) year vesting period in the EVA Incentive Plan. - 8 - 2.5 INVOLUNTARY TERMINATION FOR CAUSE: In the event of termination of employment for cause, the right of the Participant to the Bonus Bank shall be forfeited. "CAUSE" Shall Mean: (i) any act or acts of the Participant constituting a felony under the laws of the United States of America, or any state thereof or any jurisdiction; (ii) any material breach by the Participant of any employment agreement with the Company or the policies of the Company or the willful and persistent (after written notice to the Participant) failure or refusal of the Participant to comply with any lawful directives of the Board; (iii) a course of conduct amounting to gross neglect, willful misconduct or dishonesty; or (iv) any misappropriation of material property of the Company by the Participant or any misappropriation of a corporate or business opportunity of the Company by the Participant. 2.6 BREACH OF AGREEMENT: Notwithstanding any other provision of the Plan or any other agreement, in the event that a Participant shall breach any non-competition agreement with the Company or breach any agreement, with respect to the post-employment conduct of such Participant, the Bonus Bank held for such Participant shall be forfeited. GENERAL PROVISIONS ------------------ 3.1 TERMINATION OF THE PLAN: Upon termination of the Plan or suspension for a period of more than ninety (90) days, the Bank Balance of each Participant shall be distributed as soon as practicable but in no event later than ninety (90) days from such event. EXCOM, in it sole discretion, may accelerate distribution of the Bank Balance, in whole or in part, at any time without penalty. 3.2 NO VESTED RIGHTS: Except as otherwise provided herein, no associate or other person shall have any claim of right (legal, equitable, or otherwise) to any award, allocation, or distribution or any right, title, or vested interest in any amounts in his/her Bonus Bank and no officer or associate of the Company or any Participating Unit or Group or any other person shall have any authority to make representations or agreements to the contrary. No interest conferred herein to a Participant shall be assigned or subject to claim by Participant's creditors. The right of the Participant to receive a distribution thereunder shall be an unsecured claim against the general assets of the Company and the Participant shall have no rights in or against any specific assets of the Company as the result of Participation hereunder. ADDENDUM REVISED AS OF JANUARY 2000 WITH REVISIONS TO BE EFFECTIVE FOR THE PLAN YEAR BEGINNING APRIL 1, 2000. (TOTAL 10 PAGES) - 9 -
COLUMBUS McKINNON EVA(R) BONUS ELIGIBILITY Effective April 1, 2000 Associates' Plan Year Work Requirements in Associates' Bonus Status on May 1st. of Eligibility Date Calendar Year Following Calendar Year for Bonus Payable Calculation - --------------------------- ----------------------- ----------- ------- ----------- Worked Full or Partial Year Died YES 6/16 of Plan Year Pro Rata Worked Full or Partial Year Long Term Disability YES, if return Earlier of 6/16 or to work within return to work date two years. if after June 16th. Pro Rata Worked Full or Partial Year Earning Short Term 6/16 of Disability Benefits YES Plan Year Pro Rata Worked Full or Partial Year Earning Worker's YES, if return Earlier of 6/16 or Compensation Benefits to work within return to work date two years. if after June 16th. Pro Rata Worked Full or Partial Year On FMLA or Other Approved YES, if return Earlier of 6/16 or Leave of Absence to work within return to work date two years. if after June 16th. Pro Rata Worked Full or Partial Year Laid off and Subject to Recall YES, if return Earlier of 6/16 or to work within return to work date two years. if after June 16th. Pro Rata Worked Full or Partial Year Terminated prior to May 1st NO either voluntarily or with or ---------- without cause. Worked Full or Partial Year Retired YES 6/16 of Plan Year Pro Rata
EX-10.33 4 0004.txt AMENDMENT #2 TO 401(K) THRIFT PLAN COLUMBUS MCKINNON CORPORATION THRIFT 401(K) PLAN AMENDMENT NO. 2 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 April 1, 1998, and as further amended by Amendment No. 1, as permitted under Section 14.1 of the Plan, as follows: 1. Section 1.14, entitled "Eligible Employee", is amended effective January 1, 1999 by changing subsection (a) to read as follows: " (a) IN GENERAL. "Eligible Employee" means any Employee who is employed by an Employer and who is regularly employed at a facility located within the United States of America. (1) EMPLOYEES TEMPORARILY TRANSFERRED ABROAD. An Eligible Employee who is transferred to a facility outside the United States on a temporary basis (for less than five years) shall continue to be an Eligible Employee during such period, provided that the Employee remains on the payroll of an Employer." 2. New Section 1.19A, entitled "Hour of Service", is added to the Plan effective January 1, 1998 to read as follows: 1.19A "HOUR OF SERVICE" means: (a) PERIOD WHEN DUTIES ARE PERFORMED. Each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer or an Affiliate during the applicable computation period; (b) PERIOD WHEN NO DUTIES ARE PERFORMED. Each hour for which an Employee is paid or entitled to payment, by the Employer or an Affiliate on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability) lay-off, jury duty, military duty or leave of absence. For purposes of this Section 1.19A, a payment shall be deemed made or due from the Employer or an Affiliate regardless of whether such payment is made by or due from the Employer or Affiliate directly, or indirectly through, among others, a trust, fund or insurer, to which the Employer or Affiliate contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer or other entity are for the benefit of particular Employees or are on behalf of a group of Employees in the aggregate. Notwithstanding the foregoing: Columbus McKinnon Corporation Thrift 401(k) Plan Page 2 of Amendment No. 2 of 1998 Plan Restatement (1) No more than 501 Hours of Service shall be credited to an Employee on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single year); (2) An hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed shall not be credited to the Employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, or unemployment compensation or disability insurance laws; and (3) Hours of Service shall not be credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. (4) No Hours of Service shall be awarded for any period with respect to which severance benefits are paid. (c) PERIOD FOR WHICH BACK PAY IS AWARDED. Each hour for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by the Employer or an Affiliate. The same Hours of Service shall not be credited under Section 1.19A(a) or Section 1.19A(b) as the case may be and this Section 1.19A(c). Crediting of Hours of Service for back pay awarded or agreed to with respect to periods described in Section 1.19A(b) shall be subject to the limitations set forth in that section. (d) EQUIVALENCY FOR REGULAR FULL-TIME EMPLOYEE. An Employee who is not a regular full-time Employee as defined in the next sentence shall be credited with his actual Hours of Service, determined in accordance with the foregoing subsections of this Section 1.19A. Notwithstanding his actual Hours of Service, a regular full-time employee (an employee whose employment is on a permanent rather than temporary basis and who is expected to work a full regular work week of 40 hours and to have at least 2000 actual Hours of Service in a Plan Year) shall be credited with 45 Hours of Service for each week in which he has at least one actual Hour of Service. During the period of an Authorized Absence for which he is not directly or indirectly paid or Columbus McKinnon Corporation Thrift 401(k) Plan Page 3 of Amendment No. 2 of 1998 Plan Restatement entitled to payment, a regular full-time employee shall be credited with eight Hours of Service per day but not more than 40 Hours of Service per week, for each day that he would have been scheduled to perform duties had he not been on Authorized Absence, provided that no Hours of Service will be credited under this sentence for a 12-month computation period in which the Employee has already been credited with more than 500 Hours of Service, nor shall more than 501 Hours of Service be credited under this sentence for any 12-month computation period. (e) APPLICATION OF LAW AND REGULATIONS. Hours of Service shall be credited in accordance with applicable law and regulations, including Department of Labor Regulations ss.2530.200b-2(b) and ss.2530.200b-2(c) which are incorporated herein by this reference, and such law and regulations shall govern over any inconsistent provision in the Plan. 3. Section 3.2, entitled "Matching Contributions", is amended effective January 1, 1998 by amending subsection (a) to read as follows: " (a) CONTRIBUTION REQUIRED. The Employer of each Employee on whose behalf a Salary Reduction Contribution was made during the Plan Year shall contribute to the Plan on behalf of such Employee a Matching Contribution in an amount determined under Section 3.2(b) provided that such Employee [1] is an Employee on the last day of a Plan Year, or [2] retired during the Plan Year after having attained age 65, or after having attained age 55 and having completed 5 Years of Vesting Service." 4. Schedule A is amended effective September 1, 1999 to read as follows: "SCHEDULE A PARTICIPATING EMPLOYERS AND ELIGIBLE EMPLOYEES Reflecting Amendment of the Plan through June 1, 2000 1. COLUMBUS MCKINNON CORPORATION (APRIL 1, 1987) Columbus McKinnon Corporation established the Plan as a profit sharing plan covering certain salaried employees effective April 1, 1987. The Plan was restated as an ESOP effective November 1, 1988. The Plan was restated effective April 1, 1989 and at that time covered nonunion salaried employees, office employees and nonunion factory employees at Columbus McKinnon Corporation Thrift 401(k) Plan Page 4 of Amendment No. 2 of 1998 Plan Restatement Columbus McKinnon Corporation's Tonawanda facility. The Plan was amended effective October 1, 1994 to extend coverage to all other nonunion hourly employees of Columbus McKinnon Corporation. The Plan was amended effective February 24, 1995 to exclude salaried employees of the Positech and Durbin Durco Divisions of Columbus McKinnon Corporation. The Plan was amended effective April 1, 1998 to extend coverage to all nonunion employees of Columbus McKinnon Corporation who satisfy the definition of "Eligible Employee". Employees of Columbus McKinnon Corporation who may be Eligible Employees include all nonunion Employees. 2. LIFT-TECH INTERNATIONAL, INC. (APRIL 1, 1996) 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 Section 2.1 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. 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 Section 2.1 of the Plan. Employees of Yale Industrial Products, Inc. who may be Eligible Employees include all nonunion Employees. Such Employees are granted Years of Vesting Service under the Plan for service with Duff-Norton Company, Inc. and its affiliates prior to January 3, 1997. 4. ABELL-HOWE CRANE, INC. (SEPTEMBER 1, 1998) Columbus McKinnon Corporation acquired the assets of Abell-Howe Company on August 21, 1998 by means of a wholly-owned subsidiary subsequently renamed "Abell-Howe Crane, Inc." Nonunion employees of Abell-Howe Columbus McKinnon Corporation Thrift 401(k) Plan Page 5 of Amendment No. 2 of 1998 Plan Restatement Crane, 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 September 1, 1998 in accordance with Schedule C of the Plan. Employees of Abell-Howe Crane, Inc. who may be Eligible Employees include all nonunion Employees. Such Employees are granted Years of Vesting Service under the Plan for service with Abell-Howe Company and its affiliates prior to September 1, 1998. 5. AUTOMATIC SYSTEMS, INC. (JUNE 1, 2000) Columbus McKinnon Corporation acquired LICO, Inc. and its subsidiaries, including Automatic Systems, Inc., on March 31, 1998. Persons employed as nonunion Employees by Automatic Systems, Inc. on December 31, 1998 became eligible to become active participants in the Columbus McKinnon Corporation Retirement and Savings Plan- Nonunion Portion (the "Retirement and Savings Plan") on or after January 1, 1999. The Retirement and Savings Plan will be merged into the Plan effective June 1, 2000. Accordingly, Automatic Systems, Inc. will become an Employer under the Plan on June 1, 2000. Employees of Automatic Systems, Inc. who may be Eligible Employees include all nonunion Employees. Such Employees are granted Years of Vesting Service under the Plan for service with Automatic Systems, Inc. and its affiliates prior to March 31, 1998. 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 October 1, 1999, became eligible to become active participants in the Columbus McKinnon Corporation Retirement and Savings Plan- Nonunion Portion (the "Retirement and savings Plan") on or after October 1, 1999. The Retirement and Savings Plan will be merged into the Plan effective June 1, 2000. Accordingly, Washington Equipment Company will become an Employer under the Plan on June 1, 2000. Employees of Washington Equipment Company who may be Eligible Employees include nonunion Employees. Such Employees are granted Years of Vesting Service under the Plan for service with Washington Equipment Company and its affiliates prior to April 29, 1999. Columbus McKinnon Corporation Thrift 401(k) Plan Page 6 of Amendment No. 2 of 1998 Plan Restatement 7. GAFFEY, INC. (JANUARY 1, 2000) Gaffey, Inc. was a wholly-owned subsidiary of GL International Inc. GL International Inc. was merged into 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. on January 1, 2000 became eligible to become active participants in the Columbus McKinnon Corporation Retirement and Savings Plan- Nonunion Portion (the "Retirement and savings Plan") on or after January 1, 2000. The Retirement and Savings Plan will be merged into the Plan effective June 1, 2000. Accordingly, Gaffey, Inc. will become an Employer under the Plan on June 1, 2000. Employees of Gaffey, Inc. who may be Eligible Employees include all nonunion Employees. Such Employees are granted Years of Vesting Service under the Plan for service with Gaffey, Inc. and its affiliates prior to March 1, 1999. 8. HANDLING SYSTEMS AND CONVEYORS, INC. (JANUARY 1, 2000) Handling Systems and Conveyors, Inc. (HSC) was a wholly-owned subsidiary of GL International Inc. GL International Inc. was merged into Columbus McKinnon Corporation on March 1, 1999 with the result that HSC became a subsidiary of Columbus McKinnon Corporation on that date. Persons employed as nonunion Employees by HSC on January 1, 2000 became eligible to become active participants in the Columbus McKinnon Corporation Retirement and Savings Plan- Nonunion Portion (the "Retirement and savings Plan") on or after January 1, 2000. The Retirement and Savings Plan will be merged into the Plan effective June 1, 2000. Accordingly, HSC will become an Employer under the Plan on June 1, 2000. Employees of HSC who may be Eligible Employees- All nonunion employees. Such employees are granted Years of Vesting Service under the Plan for service with HSC and its affiliates prior to March 1, 1999." Columbus McKinnon Corporation Thrift 401(k) Plan Page 7 of Amendment No. 2 of 1998 Plan Restatement 5. Schedule B added to the Plan by Amendment No. 1 is retitled "Schedule C", and a new Schedule B, entitled "Annuity Rules", is attached to and made a part of the Plan effective June 1, 2000, and shall read as follows: "SCHEDULE B ANNUITY RULES SB.1 DEFINITIONS AND REFERENCES. References to Sections that begin with "SB" are to Sections of this Schedule B; otherwise references to Sections or Articles are to the Plan document exclusive of this Schedule. Capitalized terms used in this Schedule B shall have the meaning provided in the Plan document unless a different meaning is expressly given in this Schedule B. For purposes of this Schedule B, the following terms shall have following meanings: (a) "ANNUITY STARTING DATE" means the first day of the first period for which an amount is payable as an annuity or, in the case of a an amount not payable as an annuity, the day on which the amount is paid. (b) "NUMBERED SCHEDULE" means any one of the numbered Schedules attached to the Plan and made a part thereof, such as Schedule 1, which concern the merger of other qualified plans into the Plan. (c) "QUALIFIED JOINT AND SURVIVOR ANNUITY" means an annuity that provides equal monthly payments during the life of the Participant and, if the Participant is survived by his spouse, provides equal monthly payments during the life of the spouse (after the death of the Participant) which is equal to 50% of the monthly payment provided during the life of the Participant. (d) "QUALIFIED PRERETIREMENT SURVIVOR ANNUITY" means an annuity that provides equal monthly payments during the life of the Participant's surviving spouse and no payment after the death of the spouse. (e) "STRAIGHT LIFE ANNUITY" means an annuity that provides equal monthly payments during the life of the Participant and no payment after the death of the Participant. (f) "TRANSFERRED PLAN ACCOUNT" means that portion of a Participant's Account balance, if any, attributable to an amount transferred into the Plan from another qualified plan on behalf of the Participant in accordance with the provisions of one of the Numbered Schedules. Columbus McKinnon Corporation Thrift 401(k) Plan Page 8 of Amendment No. 2 of 1998 Plan Restatement SB.2 APPLICATION OF ANNUITY RULES. This Schedule B may apply to any Participant who has a Transferred Plan Account that is subject to the annuity rules of Code Section 401(a)(11) and 417. The actual application of this Schedule B to a specific distribution to or for a specific Participant shall be governed by the provisions of the Numbered Schedule that governs the Participant's Transferred Plan Account. SB.3 DISTRIBUTIONS FROM TRANSFERRED PLAN ACCOUNTS. (a) IN GENERAL. Notwithstanding any contrary provision in the Plan, any distribution from a Participant's Transferred Plan Account that is subject to this Schedule B shall be paid in the applicable normal form of distribution described in Section SB.3(b) unless the Participant makes an election of an optional form of distribution described in the applicable Numbered Schedule and such election is in effect on the Annuity Starting Date. An election of an optional form of distribution must comply with the election procedures set forth in Section SB.3(c) and shall be subject to the spousal consent requirement set forth in Section SB.3(d). (b) NORMAL FORM OF DISTRIBUTION. The following are the normal forms of distribution: (1) MARRIED PARTICIPANTS. If the Participant is married on the Annuity Starting Date, his normal form of distribution shall be a Qualified Joint and Survivor Annuity purchased from an insurance company licensed to do business in New York for an amount equal to the portion of the Participant's Transferred Plan Account that is to be distributed. (2) UNMARRIED PARTICIPANTS. If the Participant is not married on the Annuity Starting Date, his normal form of distribution shall be a Straight Life Annuity purchased from an insurance company licensed to do business in New York for an amount equal to the portion of the Participant's Transferred Plan Account that is to be distributed. (c) ELECTION PROCEDURES. An election of an optional form of distribution shall comply with the following election procedures: (1) NOTICE OF RIGHT TO MAKE ELECTION. The Thrift Plan Committee shall give a Participant notice of his right to waive the normal form of distribution and elect an optional form of distribution at least 30 but not more than 90 days before the Annuity Starting Date. Columbus McKinnon Corporation Thrift 401(k) Plan Page 9 of Amendment No. 2 of 1998 Plan Restatement (2) CONTENTS OF NOTICE. The notice referred to in Section SB.3(c)(1) shall be in writing and shall: (A) explain the terms and conditions of the normal form of distribution and each optional form of distribution; (B) include an estimate of the relative value of the normal form and each optional form; (C) describe the Participant's right to make, and the effect of, an election under this Section SB.3(c); (D) describe the requirement that the Participant's spouse consent to the election in accordance with Section SB.3(d); and (E) describe the Participant's right to make, and the effect of, a revocation of his election. (3) MANNER OF ELECTION. An election under this Section SB.3(c) shall be made on a form prescribed for that purpose by the Thrift Plan Committee, executed by the Participant, and submitted to the Thrift Plan Committee during the 90 day period ending on the Annuity Starting Date, but not submitted before the Participant has been given the notice described in Section SB.3(c)(1). The election shall specify the optional form of distribution and the Beneficiary, if any, designated by the Participant and such other information as the Thrift Plan Committee may require. (4) REVOCATION OF AN ELECTION. An election may be revoked in writing, executed by the Participant, and submitted to the Thrift Plan Committee on or before the Annuity Starting Date. A revocation shall have the effect of reinstating the normal form of distribution. However, the Participant may make a new election in accordance with this Section SB.3(c). (d) SPOUSAL CONSENT REQUIREMENT. An election of an optional form of distribution under Section SB.3(c) shall not be valid in the case of a Participant who is married on his Annuity Starting Date unless his spouse consents to the election in accordance with the procedures set forth in this Section SB.3(d). (1) FORM OF CONSENT. A spouse's consent shall: [1] be made in writing on a form prescribed by the Thrift Plan Committee, [2] specify the optional form of distribution, [3] specify the Beneficiary, if any, designated by the Participant, [4] acknowledge the effect of Columbus McKinnon Corporation Thrift 401(k) Plan Page 10 of Amendment No. 2 of 1998 Plan Restatement the election, and [5] be witnessed by a Plan representative or notary public. (2) EFFECT OF CONSENT. A spouse's consent shall be irrevocable but shall apply only with respect to the spouse who gave the consent and shall apply only with respect to the specific optional form of distribution and the specific Beneficiary described in the consent. (3) WHEN SPOUSAL CONSENT IS UNNECESSARY. No consent shall be required under this Section SB.3(d) if it is established to the satisfaction of the Thrift Plan Committee that there is no spouse or that the spouse cannot be located, or because of such other circumstances as may be prescribed in Treasury Regulations. No consent shall be required in order for the Participant to revoke an election. SB.4 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. (a) SPOUSE'S RIGHT TO SURVIVOR ANNUITY. Notwithstanding any contrary provision in the Plan, if a married Participant dies before his Annuity Starting Date and his Transferred Plan Account is subject to the Qualified Preretirement Survivor Annuity provisions of this Section SB.4, his spouse shall receive a Qualified Preretirement Survivor Annuity purchased from an insurance company licensed to do business in New York for an amount equal to his Transferred Plan Account balance, and the Participant's Account balance distributable to other Beneficiaries shall be correspondingly reduced, unless the Participant has waived such an annuity in accordance with Section SB.4(c) and his spouse has consented to the waiver in accordance with Section SB.4(d). (b) MEANING OF "SPOUSE." For purposes of this Section SB.4, an individual shall not be treated as the Participant's spouse unless such individual has been married to the Participant for at least one year on the date of the Participant's death. (c) WAIVER OF ANNUITY. A Participant may waive payment of his Transferred Plan Account balance in the form of a Qualified Preretirement Survivor Annuity. The waiver must comply with the following procedures: (1) NOTICE OF RIGHT TO WAIVE ANNUITY. The Thrift Plan Committee shall give a Participant notice within the applicable period of his right to waive the annuity. Columbus McKinnon Corporation Thrift 401(k) Plan Page 11 of Amendment No. 2 of 1998 Plan Restatement (A) Except as provided in Section SB.4(c)(1)(B), the "applicable period" means, with respect to a Participant, whichever of the following periods ends last: (i) The period beginning on the first day of the Plan Year in which the Participant attains age 32 and ending with the close of the Plan Year in which the Participant attains age 35; or (ii) The one year period ending on the first anniversary of the date on which the individual became a Participant. (B) In the case of a Participant who separates from service before attaining age 35, the "applicable period" means the period beginning one year before the separation from service and ending one year after the separation from service. If the Participant returns to service, the Plan must comply with Section SB.4(c)(1)(A). (2) CONTENTS OF NOTICE. The notice referred to in Section SB.4(c)(1) shall be in writing and shall: (A) include a general description of the eligibility conditions and other material features of the Qualified Preretirement Survivor Annuity and the optional forms of distribution in the event of the Participant's death before distribution of his Transferred Plan Account; (B) describe the Participant's right to make, and the effect of, a waiver under this Section SB.4(c); (C) describe the requirement that the Participant's spouse consent to the waiver in accordance with Section SB.4(d); and (D) describe the Participant's right to make, and the effect of, a revocation of his waiver. (3) MANNER OF WAIVER. A waiver under this Section SB.4(c) shall be made on a prescribed form filed with the Thrift Plan Committee at any time beginning on the first day of the Plan year in which the Participant attains age 35 and ending on the date of his death. The waiver shall specify the nonspouse Beneficiary (including any class of Beneficiaries or any contingent Beneficiaries) designated by the Participant, but need not specify any optional form for of Columbus McKinnon Corporation Thrift 401(k) Plan Page 12 of Amendment No. 2 of 1998 Plan Restatement benefit, and such other information as the Thrift Plan Committee may require. (4) REVOCATION OF A WAIVER. A waiver may be revoked in writing, executed by the Participant, and submitted to the Thrift Plan Committee before the Participant's death. A revocation shall have the effect of reinstating the Qualified Preretirement Survivor Annuity. However, the Participant may make a new waiver in accordance with this Section SB.4(c). (e) SPOUSAL CONSENT REQUIREMENT. The waiver of a Qualified Preretirement Survivor Annuity shall not be valid as respects the spouse married to the Participant on the date of the Participant's death unless such spouse has consented to the waiver in accordance with the procedures set forth in this Section SB.4(d). (1) FORM OF CONSENT. A spouse's consent shall: [1] be made in writing on a form prescribed by the Thrift Plan Committee, [2] specify the Beneficiary(ies) designated by the Participant, [3] acknowledge the effect of the election, and [4] be witnessed by a Plan representative or notary public. Alternatively, a spouse's consent may be a general consent that permits the Participant to change the designated Beneficiary without further consent of the spouse. In order to be valid, a general consent must acknowledge that the spouse has the right to limit consent to a specific Beneficiary and that the spouse voluntarily elects to relinquish such right. (2) EFFECT OF CONSENT. A spouse's consent shall be irrevocable but shall apply only with respect to the spouse who gave the consent and shall apply only with respect to the specific Beneficiary described in the consent (unless the consent is a general consent as described in Section SB.4(d)(1)). (3) WHEN SPOUSAL CONSENT IS UNNECESSARY. No consent shall be required under this Section SB.4(d) if it is established to the satisfaction of the Thrift Plan Committee that there is no spouse, that the spouse cannot be located, that the Participant and spouse are legally separated and the Participant has a court order to such effect (unless there is a QDRO that provides otherwise), or because of such other circumstances as may be prescribed in Treasury Regulations. No consent shall be required in order for the Participant to revoke an election." 6. Schedule B added to the Plan by Amendment No. 1 is retitled "Schedule C", and is amended effective September 1, 1998 to read as follows: Columbus McKinnon Corporation Thrift 401(k) Plan Page 13 of Amendment No. 2 of 1998 Plan Restatement "SCHEDULE C SPECIAL RULES FOR ACQUIRED EMPLOYEES SC.1 EMPLOYEES OF ABELL-HOWE CRANE, INC. Each Employee who is an Employee of Abell-Howe Crane, Inc. on September 1, 1998 and who was a nonunion employee of Abell-Howe Company when the assets of that entity were acquired by Abell-Howe crane, Inc.(a subsidiary of the Corporation) in August 1998-- (a) SPECIAL PARTICIPATION RULE-- shall be eligible to become a Participant in the Plan on September 1, 1998 or, if later, on the first day of the month coinciding with or next following the expiration of 90 calendar days since the first day on which the Employee was entitled to payment for the performance of duties by Abell-Howe Company, and (b) SPECIAL VESTING RULE-- shall be credited with Years of Vesting Service calculated on the assumption that Hours of Service earned as an employee of Abell- Howe Company before September 1, 1998 were Hours of Service earned as an Employee of the Corporation." 7. New Schedule 2, entitled Merger into the Plan of the Columbus McKinnon Corporation Savings and Retirement Plan- Nonunion Portion, is added to the Plan effective June 1, 2000, to read as follows: COLUMBUS MCKINNON CORPORATION THRIFT 401(K) PLAN SCHEDULE 2 MERGER INTO THE PLAN OF THE COLUMBUS MCKINNON CORPORATION SAVINGS AND RETIREMENT PLAN- NONUNION PORTION S2.1 DEFINITIONS AND REFERENCES. References to Sections that begin with "S2" are to Sections of this Schedule 2; otherwise references to Sections or Articles are to the Plan document exclusive of this Schedule 2. Capitalized terms used in this Schedule 2 shall have the meaning provided in the Plan document unless a different meaning is expressly given in this Schedule 2. The following terms shall have the following meanings in this Schedule 2: Columbus McKinnon Corporation Thrift 401(k) Plan Page 14 of Amendment No. 2 of 1998 Plan Restatement (a) "MERGER DATE" means the date on which the Savings and Retirement Plan is merged into the Plan as determined under this Schedule 2. (b) "SAVINGS AND RETIREMENT PLAN" means the Columbus McKinnon Corporation Savings and Retirement Plan-- Nonunion Portion. The Savings and Retirement Plan was originally adopted effective October 1, 1987 as the "Lift-Tech International, Inc. Savings and Retirement Plan" by execution of an individually designed plan. The Savings and Retirement Plan was amended from time to time thereafter and was most recently amended and restated effective January 1, 1999 by execution of two individually designed plan documents on that date-- one document covering collective bargaining employees and referred to as the "Union Employees Plan Document" and one document covering nonunion employees and referred to as the "Non-Union Employees Plan Document" which is the document referred to in this Schedule 2 as the "Savings and Retirement Plan". Contributions under the Savings and Retirement Plan Plan were discontinued effective June 1, 2000. (c) "SAVINGS AND RETIREMENT PLAN ACCOUNT" means a participant's account balance under the Savings and Retirement Plan which is transferred to the Plan as a result of the merger of the Savings and Retirement Plan into the Plan and all income and loss attributable to such account balance after the merger. (d) "SAVINGS AND RETIREMENT PLAN PARTICIPANT" means a person who has a Savings and Retirement Plan Account, regardless of whether such person is otherwise a participant in a qualified plan maintained by an Employer. S2.2 PURPOSE AND EFFECT OF THIS SCHEDULE 2. (a) PURPOSE. The purpose of this Schedule 2 is to provide for the merger of the Savings and Retirement Plan into the Plan and to provide special rules governing protected distribution options and other matters relating to persons who participated in the Savings and Retirement Plan. (b) EFFECT. The provisions of this Schedule 2 shall govern over any inconsistent provision of the Plan document exclusive of this Schedule 2. Except as specifically provided in this Schedule 2, Savings and Retirement Plan participants shall be subject to all of the provisions of the Plan document with respect to their Savings and Retirement Plan Accounts (as hereinafter defined). Columbus McKinnon Corporation Thrift 401(k) Plan Page 15 of Amendment No. 2 of 1998 Plan Restatement S2.3 PARTICIPATION IN PLAN BY SAVINGS AND RETIREMENT PLAN PARTICIPANTS. Employees who are active participants in the Savings and Retirement Plan on May 31, 2000, and who would be Eligible Employees if the company employing them became an Employer under the Plan, shall be eligible to participate in the Plan effective June 1, 2000. Such Employees shall be granted Years of Vesting Service for service prior to June 1, 2000 to the extent provided in Schedule A or as otherwise required by Section 414(a) of the Code. S2.4 MERGER OF THE SAVINGS AND RETIREMENT PLAN INTO THE PLAN. Effective as of June 1, 2000 (the "Merger Date"), the Savings and Retirement Plan shall be merged into and become part of the Plan. As of the Merger Date: (a) the assets of the Savings and Retirement Plan shall be transferred to and held by the Trustee as assets of the Plan; and (b) the account balances of participants under the Savings and Retirement Plan shall be converted to Account balances under the Plan subject to the special rules of this Schedule 2. S2.5 SPECIAL RULES APPLICABLE TO SAVINGS AND RETIREMENT PLAN PARTICIPANTS. (a) ESTABLISHMENT OF SAVINGS AND RETIREMENT PLAN ACCOUNTS. (1) ESTABLISHMENT OF ACCOUNTS. Effective as of the Merger Date, the Thrift Plan Committee shall establish and maintain for each Participant, who had an account balance under the Savings and Retirement Plan, a separate Account under the Plan designated his "Savings and Retirement Plan Account", to which shall be credited his account balance under the Savings and Retirement Plan and all future the earnings thereon. (2) SUBACCOUNTS. Each Participant's Savings and Retirement Plan Account shall be further divided into the following subaccounts (as applicable): (A) The portion of the Account attributable to salary reduction contributions and earnings thereon shall constitute his "Savings and Retirement Plan Salary Reduction Subaccount." A Participant's Savings and Retirement Plan Salary Reduction Subaccount shall be fully vested and shall available for borrowing by the Participant in the same manner as his Salary Reduction Contribution Account, as provided under Section 10.4 of the Plan. Columbus McKinnon Corporation Thrift 401(k) Plan Page 16 of Amendment No. 2 of 1998 Plan Restatement (B) The portion of the Account attributable to matching contributions shall constitute his "Savings and Retirement Plan Matching Contribution Subaccount." A Participant's Savings and Retirement Plan Matching Contribution Subaccount shall be subject to the same vesting and forfeiture rules as apply to his Matching Contribution Account under Sections 3.2 and 8.5 of the Plan. (C) The portion of the Account attributable to rollover contributions shall constitute his "Savings and Retirement Plan Rollover Subaccount" and shall be fully vested. (b) REINVESTMENT OF EXISTING INVESTMENTS. (1) IN GENERAL. A Participant's investments under the Savings and Retirement Plan as of the Merger Date shall be liquidated and the proceeds therefrom reinvested in Investment Funds available under the Plan as the Participant shall elect in accordance with the election procedures under the Plan. Each subaccount of a Participant's Savings and Retirement Plan Account shall be invested in the same portions in the same Investment Funds. The liquidation and reinvestment shall be done as soon as practicable as determined the Thrift Plan Committee giving due regard to the avoidance of unnecessary fees and expenses. (2) DEFAULT ELECTION. If a Participant fails to make a timely investment election under Section S2.5(b)(1), his Savings and Retirement Plan Account shall be invested as provided under Section 7.4 of the Plan. (c) PROTECTED DISTRIBUTION OPTIONS (1) SAVINGS AND RETIREMENT PLAN OPTIONS. A Participant who is eligible for distribution of his Accounts pursuant to Article VIII, may elect, in addition to any distribution option available under Article XI of the Plan, the following Retirement and Savings Plan distribution options: (A) Option 1 -- INSTALLMENTS. Distribution of the Participant's Accounts will be made in approximately equal monthly or annual installments over a period certain that does not exceed the life expectancy of the Participant, or the combined life expectancy of the Participant and his designated Beneficiary (where the life expectancy is determined at the commencement of distributions and is not redetermined thereafter). The Participant must elect whether installments Columbus McKinnon Corporation Thrift 401(k) Plan Page 17 of Amendment No. 2 of 1998 Plan Restatement will be monthly or annual, and must elect the period certain over which installments are paid. (B) Option 2 -- STRAIGHT LIFE ANNUITY. A Straight Life Annuity (C) Option 3 -- SINGLE LIFE ANNUITY WITH A GUARANTEED MINIMUM NUMBER OF PAYMENTS. A modified single life annuity payable in equal monthly payments during the Participant's life with the provision that, if the Participant does not live to receive a guaranteed number of monthly payments, the balance of such payments shall be made to the Beneficiary designated by him or, if the Beneficiary predeceases him, to his estate. The Participant must specify the guaranteed number of monthly payments and that number may not exceed the number of months in the Participant's life expectancy. (D) Option 4 -- SINGLE LIFE ANNUITY WITH INSTALLMENT REFUND. A modified single life annuity payable in equal monthly payments during the Participant's life with the provision that, if the Participant dies after the Annuity Starting Date and before monthly payments to him total the annuity premium, then monthly payments will continue to the Beneficiary designated by the Participant until the total of monthly payments made equal the annuity premium. (E) Option 5 -- JOINT AND SURVIVOR ANNUITY WITH INSTALLMENT REFUND. A modified joint and survivor annuity payable in equal monthly payments during the Participant's life, with a survivor annuity payable in equal monthly payments after the Participant's death to the contingent annuitant designated by the Participant during the contingent annuitant's lifetime, with the provision that, if the Participant and the contingent annuitant die after the Annuity Starting Date and before monthly payments to them total the annuity premium, then monthly payments will continue to a Beneficiary designated by the Participant until the total of monthly payments made equal the annuity premium. The monthly payments to the Beneficiary shall be in the same amount as the last monthly payment made before payment to the Beneficiary is due. The Participant may elect to have the payments to the contingent annuitant equal to 50%, 66-2/3% or 100% of the monthly payments made to the Participant. (2) RULES APPLICABLE TO SAVINGS AND RETIREMENT PLAN OPTIONS. The following rules apply with respect to Savings and Retirement Plan Options, in addition to all other rules under the Plan Columbus McKinnon Corporation Thrift 401(k) Plan Page 18 of Amendment No. 2 of 1998 Plan Restatement that are not inconsistent with this Section S2.5(c)(2): (A) Any Savings and Retirement Plan Option elected under Section S2.5(c)(1) shall apply with respect to the Participant's entire Savings and Retirement Plan Account. (B) If the Participant elects a life annuity form of Savings and Retirement Plan Option (Options 2, 3, 4 or 5), the Participant's Savings and Retirement Plan Account shall thereafter be subject to the annuity rules of Section S2.6. (C) Any Savings and Retirement Plan life annuity option shall be provided in the form of a non-transferable annuity purchased by the Plan from an insurance company licensed to conduct business in New York, selected by the Benefits Administrative Board, with the balance of the Participant's Savings and Retirement Plan Account. (d) BENEFICIARY DESIGNATIONS. Death beneficiary designations filed with respect to the Plan shall apply to all of the Participant's Accounts (including his Savings and Retirement Plan Account) until a new designation is filed with the Thrift Plan Committee pursuant to Section 8.3, but shall be subject to the spousal consent requirements of Section 8.3(b). S2.6 ANNUITY RULES. (a) PARTICIPANTS SUBJECT TO THE RULES. This Section S2.6 shall be applicable with respect to any distribution from a Participant's Savings and Retirement Plan Account if the Participant's entire Account balance (including all Accounts under the Plan) exceeds $5,000. Notwithstanding the foregoing, this Section shall be applicable ONLY IF the Participant elects or has previously elected a life annuity form of distribution from his Savings and Retirement Plan Account. (b) APPLICATION OF JOINT AND SURVIVOR ANNUITY RULES. If this Section S2.6 is applicable, any distribution of a Participant's Savings and Retirement Plan Account shall be made in the normal form as provided in Section SB.3 of Schedule B unless the Participant waives the normal form of distribution and elects and optional form (described in Section S2.5(c)) and the Participant's spouse (if any) consents to the waiver, as provided in Section SB.3 of Schedule B. Columbus McKinnon Corporation Thrift 401(k) Plan Page 19 of Amendment No. 2 of 1998 Plan Restatement (c) APPLICATION OF PRERETIREMENT SURVIVOR ANNUITY RULES. A Participant's Savings and Retirement Plan Account is not subject to the Qualified Preretirement Survivor Annuity rules of Section SB.4 of Schedule B insofar as 100% of the Participant's Account balance is payable to his spouse in the event the Participant dies before it is distributed." 8. New Schedule 3, entitled Merger into the Plan of the Washington Equipment Company 401(k) Retirement & Savings Plan, is added to the Plan effective June 1, 2000, to read as follows: "COLUMBUS MCKINNON CORPORATION THRIFT 401(K) PLAN SCHEDULE 3 MERGER INTO THE PLAN OF THE WASHINGTON EQUIPMENT COMPANY 401(K) RETIREMENT & SAVINGS PLAN S3.1 DEFINITIONS AND REFERENCES. References to Sections that begin with "S3" are to Sections of this Schedule 3; otherwise references to Sections or Articles are to the Plan document exclusive of this Schedule 3. Capitalized terms used in this Schedule 3 shall have the meaning provided in the Plan document unless a different meaning is expressly given in this Schedule 3. The following terms shall have the following meanings in this Schedule 3: (a) "MERGER DATE" means the date on which the WECO Plan is merged into the Plan as determined under this Schedule 3. (b) "WECO PLAN" means the Washington Equipment Company 401(k) Retirement & Savings Plan. The WECO Plan was adopted effective January 1, 1992 by execution of a Dearborn Life Insurance Company prototype plan. The WECO Plan was amended from time to time thereafter and was most recently amended and restated effective January 26, 1995. Contributions under the WECO Plan were discontinued effective October 1, 1999. (c) "WECO PLAN ACCOUNT" means a participant's account balance under the WECO Plan which is transferred to the Plan as a result of the merger of the WECO Plan into the Plan and all income and loss attributable to such account balance after the merger. Columbus McKinnon Corporation Thrift 401(k) Plan Page 20 of Amendment No. 2 of 1998 Plan Restatement (d) "WECO PLAN PARTICIPANT" means a person who has a WECO Plan Account, regardless of whether such person is otherwise a participant in a qualified plan maintained by an Employer. S3.2 PURPOSE AND EFFECT OF THIS SCHEDULE 3. (a) PURPOSE. The purpose of this Schedule 3 is to provide for the merger of the WECO Plan into the Plan and to provide special rules governing protected distribution options and other matters relating to WECO Plan Participants. (b) EFFECT. The provisions of this Schedule 3 shall govern over any inconsistent provision of the Plan document exclusive of this Schedule 3. Except as specifically provided in this Schedule 3, WECO Plan Participants shall be subject to all of the provisions of the Plan document with respect to their WECO Plan Accounts. S3.3 PARTICIPATION IN PLAN BY WECO PLAN PARTICIPANTS. A WECO Plan Participant shall be a Participant in the Plan on and after the Merger Date so long as he continues to have a WECO Plan Account under the Plan. Active participation in the Plan (eligibility for additional contributions) by a WECO Plan Participant shall be determined under Schedule A and the other provisions of the Plan outside this Schedule 3. S3.4 MERGER OF THE WECO PLAN INTO THE PLAN. Effective as of June 1, 2000 (the "Merger Date"), the WECO Plan shall be merged into and become part of the Plan. As of the Merger Date: (a) the assets of the WECO Plan shall be transferred to and held by the Trustee as assets of the Plan; and (b) the account balances of participants under the WECO Plan shall be converted to Account balances under the Plan subject to the special rules of this Schedule 3. S3.5 SPECIAL RULES APPLICABLE TO WECO PLAN PARTICIPANTS. (a) ESTABLISHMENT OF WECO PLAN ACCOUNTS. (1) ESTABLISHMENT OF ACCOUNTS. Effective as of the Merger Date, the Thrift Plan Committee shall establish and maintain for each WECO Plan Participant a separate Account under the Plan, designated his "WECO Plan Account", to which shall be credited his account balance transferred from the WECO Plan and all future the earnings thereon. Columbus McKinnon Corporation Thrift 401(k) Plan Page 21 of Amendment No. 2 of 1998 Plan Restatement (2) SUBACCOUNTS. Each WECO Plan Participant's WECO Plan Account shall be further divided into the following subaccounts (as applicable): (A) The portion of the Account attributable to salary reduction contributions and earnings thereon shall constitute his "WECO Plan Salary Reduction Subaccount." A Participant's WECO Plan Salary Reduction Subaccount shall be fully vested and shall available for borrowing by the Participant in the same manner as his Salary Reduction Contribution Account, as provided under Section 10.4 of the Plan. (B) The portion of the Account attributable to rollover contributions shall constitute his "WECO Plan Rollover Subaccount" and shall be fully vested. (b) REINVESTMENT OF EXISTING INVESTMENTS. (1) IN GENERAL. A Participant's investments under the WECO Plan as of the Merger Date shall be liquidated and the proceeds therefrom reinvested in Investment Funds available under the Plan as the Participant shall elect in accordance with the election procedures under the Plan. Each subaccount of a Participant's WECO Plan Account shall be invested in the same portions in the same Investment Funds. The liquidation and reinvestment shall be done as soon as practicable as determined the Thrift Plan Committee giving due regard to the avoidance of unnecessary fees and expenses. (2) DEFAULT ELECTION. If a Participant fails to make a timely investment election under Section S3.5(b)(1), his WECO Plan Account shall be invested as provided under Section 7.4 of the Plan. (c) PROTECTED DISTRIBUTION OPTIONS (1) WECO PLAN OPTIONS. A Participant who is eligible for distribution of his Accounts pursuant to Article VIII, may elect, in addition to any distribution option available under Article XI of the Plan, the following WECO Plan distribution options: (A) Option 1 -- A LIFE ANNUITY. A Straight Life Annuity (B) Option 2 -- A LIFE ANNUITY WITH 10 OR 20 YEARS GUARANTEED. A modified single life annuity payable in equal monthly payments during the Participant's life with the provision that, if the Participant does not live to receive Columbus McKinnon Corporation Thrift 401(k) Plan Page 22 of Amendment No. 2 of 1998 Plan Restatement the guaranteed number of monthly payments (120 or 240, as elected by the Participant), the balance of such payments shall be made to the Beneficiary designated by him or, if the Beneficiary predeceases him, to his estate. (C) Option 3 -- JOINT AND 100% SURVIVOR ANNUITY. A joint and survivor annuity payable in equal monthly payments during the Participant's life, with a survivor annuity payable in equal monthly payments after the Participant's death to the contingent annuitant designated by the Participant during the contingent annuitant's lifetime. The monthly payments to the contingent annuitant shall equal 100% of the monthly payments made to the Participant. (D) Option 4 -- JOINT AND 100% SURVIVOR ANNUITY WITH 10 OR 20 YEARS GUARANTEED. A joint and survivor annuity similar to Option 3 but with the provision that, if both the Participant and the contingent annuitant die before a guaranteed number of monthly payments (120 or 240, as elected by the Participant) are paid, the balance of such payments shall be made to the Beneficiary designated by the survivor of the Participant and contingent annuitant or, if the Beneficiary predeceases such survivor, to the survivor's estate. (2) RULES APPLICABLE TO WECO PLAN OPTIONS. The following rules apply with respect to WECO Plan Options, in addition to all other rules under the Plan that are not inconsistent with this Section S3.5(c)(2): (A) Any WECO Plan Option elected under Section S3.5(c)(1) shall apply with respect to the Participant's entire WECO Plan Account. (B) If the Participant elects a life annuity form of WECO Plan Option (Options 1, 2, 3 or 4), the Participant's WECO Plan Account shall thereafter be subject to the annuity rules of Section S3.6. (C) Any WECO Plan life annuity option shall be provided in the form of a non-transferable annuity purchased by the Plan from an insurance company licensed to conduct business in New York, selected by the Benefits Administrative Board, with the balance of the Participant's WECO Plan Account. (d) BENEFICIARY DESIGNATIONS. Death beneficiary designations filed with respect to the Plan shall apply to all of the Participant's Accounts (including his WECO Plan Account) until Columbus McKinnon Corporation Thrift 401(k) Plan Page 23 of Amendment No. 2 of 1998 Plan Restatement a new designation is filed with the Thrift Plan Committee pursuant to Section 8.3, but shall be subject to the spousal consent requirements of Section 8.3(b). S3.6 ANNUITY RULES. (a) PARTICIPANTS SUBJECT TO THE RULES. This Section S3.6 shall be applicable with respect to any distribution from a Participant's WECO Plan Account if the Participant's entire Account balance (including his WECO Plan Account and any other account under the Plan) exceeds $5,000. Notwithstanding the foregoing, this Section shall be applicable ONLY IF the Participant elects or has previously elected a life annuity form of distribution from his WECO Plan Account. (b) APPLICATION OF JOINT AND SURVIVOR ANNUITY RULES. If this Section S3.6 is applicable, any distribution of a Participant's WECO Plan Account shall be made in the normal form as provided in Section SB.3 of Schedule B unless the Participant waives the normal form of distribution and elects and optional form (described in Section S3.5(c)) and the Participant's spouse (if any) consents to the waiver, as provided in Section SB.3 of Schedule B. (c) APPLICATION OF PRERETIREMENT SURVIVOR ANNUITY RULES. A Participant's WECO Plan Account is not subject to the Qualified Preretirement Survivor Annuity rules of Section SB.4 of Schedule B insofar as 100% of the Participant's Account balance is payable to his spouse in the event the Participant dies before it is distributed." 9. New Schedule 4, entitled "Merger into the Plan of the Automatic Systems, Inc. 401(k) Savings Plan", is added to the Plan effective June 1, 2000, to read as follows: "COLUMBUS MCKINNON CORPORATION THRIFT 401(K) PLAN SCHEDULE 4 MERGER INTO THE PLAN OF THE AUTOMATIC SYSTEMS, INC. 401(K) SAVINGS PLAN Columbus McKinnon Corporation Thrift 401(k) Plan Page 24 of Amendment No. 2 of 1998 Plan Restatement S4.1 DEFINITIONS AND REFERENCES. References to Sections that begin with "S4" are to Sections of this Schedule 4; otherwise references to Sections or Articles are to the Plan document exclusive of this Schedule 4. Capitalized terms used in this Schedule 4 shall have the meaning provided in the Plan document unless a different meaning is expressly given in this Schedule 4. The following terms shall have the following meanings in this Schedule 4: (a) "MERGER DATE" means the date on which the ASI Plan is merged into the Plan as determined under this Schedule 4. (a) "ASI PLAN" means the Automatic Systems, Inc. 401(k) Savings Plan. The ASI Plan was adopted effective January 1, 1980 by execution of a Principal Group individually designed plan. The ASI Plan was amended from time to time thereafter and was most recently amended and restated on April 28, 1995. Contributions under the ASI Plan were discontinued effective March 31, 1999. (b) "ASI PLAN ACCOUNT" means a participant's account balance under the ASI Plan which is transferred to the Plan as a result of the merger of the ASI Plan into the Plan and all income and loss attributable to such account balance after the merger. (c) "ASI PLAN PARTICIPANT" means a person who has a ASI Plan Account, regardless of whether such person is otherwise a participant in a qualified plan maintained by an Employer. S4.2 PURPOSE AND EFFECT OF THIS SCHEDULE 4. (a) PURPOSE. The purpose of this Schedule 4 is to provide for the merger of the ASI Plan into the Plan and to provide special rules governing protected distribution options and other matters relating to ASI Plan Participants. (b) EFFECT. The provisions of this Schedule 4 shall govern over any inconsistent provision of the Plan document exclusive of this Schedule 4. Except as specifically provided in this Schedule 4, ASI Plan Participants shall be subject to all of the provisions of the Plan document with respect to their ASI Plan Accounts. S4.4 PARTICIPATION IN PLAN BY ASI PLAN PARTICIPANTS. A ASI Plan Participant shall be a Participant in the Plan on and after the Merger Date so long as he continues to have a ASI Plan Account under the Plan. Active participation in the Plan (eligibility for additional contributions) by a ASI Plan Participant shall be determined under Schedule A and the other provisions of the Plan outside this Schedule 4. Columbus McKinnon Corporation Thrift 401(k) Plan Page 25 of Amendment No. 2 of 1998 Plan Restatement S4.4 MERGER OF THE ASI PLAN INTO THE PLAN. Effective on the date determined in writing by the Thrift Plan Committee which shall be on or after June 1, 2000 (the "Merger Date"), the ASI Plan shall be merged into and become part of the Plan. As of the Merger Date: (a) the assets of the ASI Plan shall be transferred to and held by the Trustee as assets of the Plan; and (b) the account balances of participants under the ASI Plan shall be converted to Account balances under the Plan subject to the special rules of this Schedule 4. S4.5 SPECIAL RULES APPLICABLE TO ASI PLAN PARTICIPANTS. (a) ESTABLISHMENT OF ASI PLAN ACCOUNTS. (1) ESTABLISHMENT OF ACCOUNTS. Effective as of the Merger Date, the Thrift Plan Committee shall establish and maintain for each ASI Plan Participant a separate Account under the Plan, designated his "ASI Plan Account", to which shall be credited his account balance transferred from the ASI Plan and all future the earnings thereon. (2) SUBACCOUNTS. Each ASI Plan Participant's ASI Plan Account shall be further divided into the following subaccounts (as applicable): (A) The portion of the Account attributable to salary reduction contributions and earnings thereon shall constitute his "ASI Plan Salary Reduction Subaccount." A Participant's ASI Plan Salary Reduction Subaccount shall be fully vested and shall available for borrowing by the Participant in the same manner as his Salary Reduction Contribution Account, as provided under Section 10.4 of the Plan. (B) The portion of the Account attributable to matching contributions shall constitute his "ASI Plan Matching Contribution Subaccount" and shall vest in accordance with the terms of the Plan outside this Schedule 4 but in all events shall vest as rapidly as under the terms of the ASI Plan on the Merger Date. (C) The portion of the Account attributable to rollover contributions shall constitute his "ASI Plan Rollover Subaccount" and shall be fully vested. Columbus McKinnon Corporation Thrift 401(k) Plan Page 26 of Amendment No. 2 of 1998 Plan Restatement (b) REINVESTMENT OF EXISTING INVESTMENTS. (1) IN GENERAL. A Participant's investments under the ASI Plan as of the Merger Date shall be liquidated and the proceeds therefrom reinvested in Investment Funds available under the Plan as the Participant shall elect in accordance with the election procedures under the Plan. Each subaccount of a Participant's ASI Plan Account shall be invested in the same portions in the same Investment Funds. The liquidation and reinvestment shall be done as soon as practicable as determined the Thrift Plan Committee giving due regard to the avoidance of unnecessary fees and expenses. (2) DEFAULT ELECTION. If a Participant fails to make a timely investment election under Section S4.5(b)(1), his ASI Plan Account shall be invested as provided under Section 7.4 of the Plan. (c) PROTECTED DISTRIBUTION OPTIONS (1) ASI PLAN OPTIONS. A Participant who is eligible for distribution of his Accounts pursuant to Article VIII, may elect, in addition to any distribution option available under Article XI of the Plan, the following ASI Plan distribution options: (A) Option 1 -- A LIFE ANNUITY. A Straight Life Annuity (B) Option 2 -- A LIFE ANNUITY WITH 5, 10 OR 15 YEARS GUARANTEED. A modified single life annuity payable in equal monthly payments during the Participant's life with the provision that, if the Participant does not live to receive the guaranteed number of monthly payments (60, 120 or 180, as elected by the Participant), the balance of such payments shall be made to the Beneficiary designated by him or, if the Beneficiary predeceases him, to his estate. (C) Option 3 -- SINGLE LIFE ANNUITY WITH INSTALLMENT REFUND. A modified single life annuity payable in equal monthly payments during the Participant's life with the provision that, if the Participant dies after the Annuity Starting Date and before monthly payments to him total the annuity premium, then monthly payments will continue to the Beneficiary designated by the Participant until the total of monthly payments made equal the annuity premium. Columbus McKinnon Corporation Thrift 401(k) Plan Page 27 of Amendment No. 2 of 1998 Plan Restatement (D) Option 4 -- JOINT AND 50%, 66-2/3% OR 100% SURVIVOR ANNUITY. A joint and survivor annuity payable in equal monthly payments during the Participant's life, with a survivor annuity payable in equal monthly payments after the Participant's death to the contingent annuitant designated by the Participant during the contingent annuitant's lifetime. The monthly payments to the contingent annuitant shall equal 50%, 66-2/3% or 100% (as elected by the Participant) of the monthly payments made to the Participant. (E) Option 5 -- INSTALLMENTS. Distribution of the Participant's Accounts will be made in approximately equal monthly installments over a period certain that is not less than 60 months nor more than the life expectancy of the Participant, or the combined life expectancy of the Participant and his designated Beneficiary (where the life expectancy is determined at the commencement of distributions and is not redetermined thereafter). The Participant must elect the period certain over which installments are paid. (2) RULES APPLICABLE TO ASI PLAN OPTIONS. The following rules apply with respect to ASI Plan Options, in addition to all other rules under the Plan that are not inconsistent with this Section S4.5(c)(2): (A) Any ASI Plan Option elected under Section S4.5(c)(1) shall apply with respect to the Participant's entire ASI Plan Account. (B) If the Participant elects a life annuity form of ASI Plan Option (Options 1, 2, 3 or 4), the Participant's ASI Plan Account shall thereafter be subject to the annuity rules of Section S4.6. (C) Any ASI Plan life annuity option shall be provided in the form of a non-transferable annuity purchased by the Plan from an insurance company licensed to conduct business in New York, selected by the Benefits Administrative Board, with the balance of the Participant's ASI Plan Account. (d) BENEFICIARY DESIGNATIONS. Death beneficiary designations filed with respect to the Plan shall apply to all of the Participant's Accounts (including his ASI Plan Account) until a new designation is filed with the Thrift Plan Committee pursuant to Section 8.4, but shall be subject to the spousal consent requirements of Section 8.4(b). Columbus McKinnon Corporation Thrift 401(k) Plan Page 28 of Amendment No. 2 of 1998 Plan Restatement S4.6 ANNUITY RULES. (a) PARTICIPANTS SUBJECT TO THE RULES. This Section S4.6 shall be applicable with respect to any distribution from a Participant's ASI Plan Account if the Participant's entire Account balance (including his ASI Plan Account and any other account under the Plan) exceeds $5,000. Notwithstanding the foregoing, this Section shall be applicable ONLY IF the Participant elects or has previously elected a life annuity form of distribution from his ASI Plan Account. (b) APPLICATION OF JOINT AND SURVIVOR ANNUITY RULES. If this Section S4.6 is applicable, any distribution of a Participant's ASI Plan Account shall be made in the normal form as provided in Section SB.3 of Schedule B unless the Participant waives the normal form of distribution and elects and optional form (described in Section S4.5(c)) and the Participant's spouse (if any) consents to the waiver, as provided in Section SB.3 of Schedule B. (c) APPLICATION OF PRERETIREMENT SURVIVOR ANNUITY RULES. A Participant's ASI Plan Account is not subject to the Qualified Preretirement Survivor Annuity rules of Section SB.4 of Schedule B insofar as 100% of the Participant's Account balance is payable to his spouse in the event the Participant dies before it is distributed." 10. New Schedule 5, entitled "Merger into the Plan of the Gaffey, Inc. 401(k) Profit Sharing Plan", is added to the Plan effective June 1, 2000, to read as follows: "COLUMBUS MCKINNON CORPORATION THRIFT 401(K) PLAN SCHEDULE 5 MERGER INTO THE PLAN OF THE GAFFEY, INC. 401(K) PROFIT SHARING PLAN S5.1 DEFINITIONS AND REFERENCES. References to Sections that begin with "S5" are to Sections of this Schedule 5; otherwise references to Sections or Articles are to the Plan document exclusive of this Schedule 5. Capitalized terms used in this Schedule 5 shall have the meaning provided in the Plan document unless a different meaning is expressly given in this Schedule 5. The following terms shall have the following meanings in this Schedule 5: Columbus McKinnon Corporation Thrift 401(k) Plan Page 29 of Amendment No. 2 of 1998 Plan Restatement (a) "MERGER DATE" means the date on which the Gaffey Plan is merged into the Plan as determined under this Schedule 5. (b) "GAFFEY PLAN" means the Gaffey, Inc. 401(k) Profit Sharing Plan. The Gaffey Plan was adopted effective October 1, 1990 by execution of a Merrill Lynch prototype plan. The Gaffey Plan was amended from time to time thereafter and was most recently amended and restated on September 29, 1994. Contributions under the Gaffey Plan were discontinued effective January 1, 2000. (c) "GAFFEY PLAN ACCOUNT" means a participant's account balance under the Gaffey Plan which is transferred to the Plan as a result of the merger of the Gaffey Plan into the Plan and all income and loss attributable to such account balance after the merger. (d) "GAFFEY PLAN PARTICIPANT" means a person who has a Gaffey Plan Account, regardless of whether such person is otherwise a participant in a qualified plan maintained by an Employer. S5.2 PURPOSE AND EFFECT OF THIS SCHEDULE 5. (a) PURPOSE. The purpose of this Schedule 5 is to provide for the merger of the Gaffey Plan into the Plan and to provide special rules governing protected distribution options and other matters relating to Gaffey Plan Participants. (b) EFFECT. The provisions of this Schedule 5 shall govern over any inconsistent provision of the Plan document exclusive of this Schedule 5. Except as specifically provided in this Schedule 5, Gaffey Plan Participants shall be subject to all of the provisions of the Plan document with respect to their Gaffey Plan Accounts. S5.5 PARTICIPATION IN PLAN BY GAFFEY PLAN PARTICIPANTS. A Gaffey Plan Participant shall be a Participant in the Plan on and after the Merger Date so long as he continues to have a Gaffey Plan Account under the Plan. Active participation in the Plan (eligibility for additional contributions) by a Gaffey Plan Participant shall be determined under Schedule A and the other provisions of the Plan outside this Schedule 5. S5.5 MERGER OF THE GAFFEY PLAN INTO THE PLAN. Effective on the date determined in writing by the Thrift Plan Committee which shall be on or after June 1, 2000 (the "Merger Date"), the Gaffey Plan shall be merged into and become part of the Plan. As of the Merger Date: Columbus McKinnon Corporation Thrift 401(k) Plan Page 30 of Amendment No. 2 of 1998 Plan Restatement (a) the assets of the Gaffey Plan shall be transferred to and held by the Trustee as assets of the Plan; and (b) the account balances of participants under the Gaffey Plan shall be converted to Account balances under the Plan subject to the special rules of this Schedule 5. S5.5 SPECIAL RULES APPLICABLE TO GAFFEY PLAN PARTICIPANTS. (a) ESTABLISHMENT OF GAFFEY PLAN ACCOUNTS. (1) ESTABLISHMENT OF ACCOUNTS. Effective as of the Merger Date, the Thrift Plan Committee shall establish and maintain for each Gaffey Plan Participant a separate Account under the Plan, designated his "Gaffey Plan Account", to which shall be credited his account balance transferred from the Gaffey Plan and all future the earnings thereon. (2) SUBACCOUNTS. Each Gaffey Plan Participant's Gaffey Plan Account shall be further divided into the following subaccounts (as applicable): (A) The portion of the Account attributable to salary reduction contributions and earnings thereon shall constitute his "Gaffey Plan Salary Reduction Subaccount." A Participant's Gaffey Plan Salary Reduction Subaccount shall be fully vested and shall available for borrowing by the Participant in the same manner as his Salary Reduction Contribution Account, as provided under Section 10.5 of the Plan. (B) The portion of the Account attributable to profit sharing contributions shall constitute his "Gaffey Plan Matching Contribution Subaccount" and shall vest in accordance with the terms of the Plan outside this Schedule 5 but in all events shall vest as rapidly as under the terms of the Gaffey Plan on the Merger Date. (C) The portion of the Account attributable to rollover contributions shall constitute his "Gaffey Plan Rollover Subaccount" and shall be fully vested. (b) REINVESTMENT OF EXISTING INVESTMENTS. (1) IN GENERAL. A Participant's investments under the Gaffey Plan as of the Merger Date shall be liquidated and the proceeds there from reinvested in Investment Funds available under the Plan as Columbus McKinnon Corporation Thrift 401(k) Plan Page 31 of Amendment No. 2 of 1998 Plan Restatement the Participant shall elect in accordance with the election procedures under the Plan. Each subaccount of a Participant's Gaffey Plan Account shall be invested in the same portions in the same Investment Funds. The liquidation and reinvestment shall be done as soon as practicable as determined the Thrift Plan Committee giving due regard to the avoidance of unnecessary fees and expenses. (2) DEFAULT ELECTION. If a Participant fails to make a timely investment election under Section S5.5(b)(1), his Gaffey Plan Account shall be invested as provided under Section 7.5 of the Plan. (c) BENEFICIARY DESIGNATIONS. Death beneficiary designations filed with respect to the Plan shall apply to all of the Participant's Accounts (including his Gaffey Plan Account) until a new designation is filed with the Thrift Plan Committee pursuant to Section 8.5, but shall be subject to the spousal consent requirements of Section 8.5(b)." IN WITNESS WHEREOF, this instrument of amendment has been executed by a duly authorized officer of the Corporation this 1st day of June, 2000. COLUMBUS McKINNON CORPORATION By /s/ R. L. Montgomery ------------------------ Title Executive Vice President ------------------------ EX-10.44 5 0005.txt STAY AGREEMENT FORM LETTER January 27, 2000 CM with price incentive and CIC Offset -------------------------------------- Mr. ------------------ - ---------------------- Columbus McKinnon Corporation 140 John James Audubon Parkway Amherst, New York 14228 Dear : ----------------- As you are aware, Columbus McKinnon Corporation ("CM") is examining various restructuring alternatives in an effort to enhance shareholder value. In this regard, one of the restructuring alternatives being examined is a sale of the issued and outstanding stock of CM. You are important to the success of CM's business and your active involvement during a sale and a transition period subsequent to such sale is essential. Accordingly, it is in CM's best interests to have an understanding with you regarding your continued employment. Based on the above, CM will provide, and will require any party that acquires CM to provide, you with the following rights and benefits: 1. Your salary and benefits, both contributory and non-contributory, will be maintained at levels which are not less than the levels which are in effect as of December 31, 1999, for a period of six (6) months following the date on which a "Sale" (as hereinafter defined) occurs (such date being hereinafter referred to as the "Closing Date"). For purposes of this letter, a "Sale" will be deemed to occur upon: (a) the sale (including a transfer occurring as a result of a tender offer, an exchange offer or the consummation of a plan of merger or consolidation) of ninety percent (90%) or more of CM's issued and outstanding stock or (b) the sale of all or substantially all of the CM's assets with the buyer assuming all or substantially all of its liabilities, to any person or group (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended). 2. In order to receive any of the payments which are provided for by this letter and are contingent upon the occurrence of Sale, the Sale must either: (a) occur on or before December 31, 2000 or (b) occur on or before March 31, 2001, provided that, as of December 31, 2000, negotiations regarding a February 4, 2000 Page 2 possible Sale to an identified prospective purchaser with sufficient financial resources are taking place. 3. If a Sale which satisfies either of the requirements of paragraph 2 above occurs, you will, subject to your compliance with the terms of this letter, be entitled to receive an amount equal to -------------------------- (such amount being hereinafter referred to as the "Basic Stay Bonus"). 4. In addition to the Basic Stay Bonus, if the price of CM's common stock which is payable in connection with the Sale (hereinafter the "Purchase Price") is more than $21.00 per share, an amount (hereinafter the "Additional Stay Bonus") will be paid to you. The amount of the Additional Stay Bonus will be equal to the sum of: (a) Twenty Five Thousand Dollars ($25,000) multiplied by the number of whole Dollars, up to a maximum of three (3), by which the Purchase Price exceeds $21.00 per share; plus (b) Fifty Thousand Dollars ($50,000) multiplied by the number of whole Dollars by which the Purchase Price exceeds $24.00 per share. If the Purchase Price is less than $21.00 per share, you will not be entitled to payment of any Additional Stay Bonus. 5. Your active employment with CM, or, if applicable, your active employment with the purchaser or any of its affiliates ("Purchaser") is herein referred to as "Your Active Employment." Your right to receive any payment described herein that becomes payable to you on the Closing Date is contingent upon the continuation of Your Active Employment through the Closing Date. Similarly, your right to receive any payment described herein that becomes payable to you at the end of the six (6) month period following the Closing Date ("Six-Month Anniversary") is contingent upon the continuation of Your Active Employment through the Six-Month Anniversary. If, for any reason, Your Active Employment is terminated before the Closing Date, you will not be entitled to receive any payment that would otherwise become payable to you on the Closing Date. Similarly, if, for any reason, Your Active Employment is terminated before the Six-Month Anniversary, you will not be entitled to any payment that would otherwise become payable to you on the Six-Month Anniversary. February 4, 2000 Page 3 6. If a Sale which satisfies either of the requirements of paragraph 2 above occurs, and you have satisfied the requirements of paragraph 5, one-half of the amount of the Basic Stay Bonus will become payable and will be paid to you in one lump sum on the Closing Date and the remaining one-half of the Basic Stay Bonus will become payable and will be paid to you in one lump sum on the Six-Month Anniversary. In addition, the amount of any Additional Stay Bonus will become payable and will be paid to you in one lump sum on the Closing Date. 7. If a Sale does not occur in a manner which satisfies either of the requirements set forth in Paragraph 2 above, the Basic Stay Bonus and the Additional Stay Bonus described above in this letter will not be payable. 8. The fact that CM has agreed, by the terms of this letter, to make payments to you as provided for in this letter, is strictly confidential. As a result, you are expressly prohibited from disclosing or revealing to any person or entity, any information regarding the specific terms of this letter or the existence of CM's agreement, as contained in this letter, to make payments to you which are conditioned, in part, on the occurrence of a Sale and your continued active employment with CM or a Purchaser. If it is determined that you have violated the provisions of this paragraph 8, you will not be entitled to receive any payment of the amounts described above in this letter. 9. As you know, on , CM entered into an agreement ------------------ (hereinafter the "Change in Control Agreement") providing for the payment to you of certain amounts in the event that your employment with CM is terminated under certain specified conditions following a change in control of CM (as defined in such Change in Control Agreement). It is CM's intent that you will not be entitled to receive both the second half of the Basic Stay Bonus as provided for by this letter and the full amount of the payments provided for by the Change in Control Agreement. Accordingly, by your execution of this letter as provided for at the end hereof, you will be deemed to expressly agree that the Change in Control Agreement will be deemed and construed to be amended, by this letter (and this letter will be deemed to constitute an amendment to the Change in Control Agreement), to provide that, if and to the extent that you are paid the second half of the Basic Stay Bonus provided for by this letter, the amount of February 4, 2000 Page 4 any payments you may thereafter become entitled to receive under the terms of the Change in Control Agreement will be reduced by an amount equal to the second half of the Basic Stay Bonus provided for by this letter. 10. Your right to receive the Basic Stay Bonus and, if applicable, the Additional Stay Bonus will only apply to one Sale. Therefore, you will not have any right to receive payment of a second Basic Stay Bonus or a second Additional Stay Bonus if, after the closing of the Sale, a sale of all or substantially all the assets of CM or a sale of any portion of the issued and outstanding stock of CM occurs. Thank you for your cooperation and support in completing a sale of CM. We will do all that is possible to enable a smooth and responsible transition. Yours truly, By: ---------------------- Agreed to and Acknowledged this day of , 2000. --- ----------- - --------------------------------- EX-21.1 6 0006.txt SUBSIDIARIES OF THE REGISTRANT Exhibit 21.1 Columbus McKinnon Corporation Subsidiaries and Affiliates of the Registrant Abell-Howe Crane, Inc. (US) ASI of Australia Pty. Ltd. (Australia) Audubon Export, Inc. (FSC) (US) Automatic Systems, Inc. (US) Automatic Systems Conveyors Limited (Canada) Camlok Lifting Clamps Ltd. (England) CM Insurance Company, Inc. (US) Columbus McKinnon Limited (Canada) Columbus McKinnon Finance Corporation (Canada) Egyptian-American Crane Co. (joint venture) (Egypt) Endor S.A. de C.V. (Mexico) G.L. International inc. (US) Gaffey, Inc. (US) Handling Systems and Conveyors, Inc. (US) Hangzhou (LILA) Lifting and Lashing Co. Ltd. (China) Larco Industrial Services, Ltd. (Canada) LICO Steel, Inc. (US) Manutention Connection (France) Societe d'Exploitation des Raccords Gautier (France) Spreckels Consolidated Industries, Inc. (US) Spreckels Development Company, Inc. (US) Spreckels Land Company, Inc. (US) Spreckels Water Company, Inc. (US) Univeyor A/S (Denmark) Univeyor Conveying Systems Ltd. (England) Univeyor Electronic A/S (Denmark) Univeyor AB (Sweden) Washington Equipment Company (US) Yale Hangzhou Industrial Products Ltd. (China) Yale Industrial Products, Inc. (US) Yale Industrial Products Asia (Thailand) Co. Ltd. (Thailand) Yale Industrial Products GmbH (Austria) Yale Industrial Products GmbH (Germany) Yale Industrial Products, Ltd. (UK) Yale Industrial Products Pty. Ltd. (South Africa) Yale Lifting & Mining Products (Pty.) Ltd. (South Africa) EX-23.1 7 0007.txt CONSENT OF ERNST & YOUNG LLP 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 May 12, 2000, with respect to the consolidated financial statements and financial statement schedule of Columbus McKinnon Corporation included in this Annual Report (Form 10-K) for the year ended March 31, 2000. /s/ ERNST & YOUNG LLP Buffalo, New York June 29, 2000 EX-23.2 8 0008.txt CONSENT OF DELOITTE & TOUCHE LLP INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement No. 333-81719 of Columbus McKinnon Corporation on Form S-8 dated August 24, 1998, on the March 31, 1998 financial statements of GL International, Inc. appearing in the Annual Report on Form 10-K of Columbus McKinnon Corporation for the year ended March 31, 2000. /s/ DELOITTE & TOUCHE LLP Tulsa, Oklahoma June 28, 2000 EX-27.1 9 0009.txt FINANCIAL DATA SCHEDULE - 3/31/00
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001005229 COLUMBUS MCKINNON CORPORATION 1,000 12-MOS MAR-31-2000 APR-01-1999 MAR-31-2000 7,582 0 143,401 2,236 108,291 299,174 87,297 52,887 759,824 111,325 410,258 0 0 149 203,304 759,824 736,254 736,254 556,145 556,145 112,067 0 34,698 34,658 17,578 17,080 0 0 0 17,080 1.21 1.20
EX-99.1 10 0010.txt FORM 11-K EMPLOYEE STOCK OWNERSHIP ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 11-K /X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended March 31, 2000 / / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to Commission file number A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: COLUMBUS McKINNON CORPORATION 140 John James Audubon Parkway Amherst, NY 14228-1197 Financial Statements and Schedules Columbus McKinnon Corporation Employee Stock Ownership Plan Years ended March 31, 2000 and 1999 with Report of Independent Auditors Columbus McKinnon Corporation Employee Stock Ownership Plan Financial Statements and Schedules Years ended March 31, 2000 and 1999 CONTENTS Report of Independent Auditors ..............................................1 Financial Statements Statements of Net Assets Available for Benefits..............................2 Statements of Changes in Net Assets Available for Benefits...................3 Notes to Financial Statements................................................4 Schedules Schedule H, Line 4(i) - Schedule of Assets Held for Investment Purposes at End of Year...........................................................10 Schedule H, Line 4(j) - Schedule of Reportable Transactions.................11 Report of Independent Auditors The Pension Committee Columbus McKinnon Corporation Employee Stock Ownership Plan We have audited the accompanying statements of net assets available for benefits of the Columbus McKinnon Corporation Employee Stock Ownership Plan as of March 31, 2000 and 1999, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the ESOP's management. Our responsibility is to express an opinion on these financial statements 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, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Columbus McKinnon Corporation Employee Stock Ownership Plan at March 31, 2000 and 1999, and the changes in its net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes at end of year as of March 31, 2000, and reportable transactions for the year then ended, are presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ ENRST & YOUNG LLP Buffalo, New York June 9, 2000 1
Columbus McKinnon Corporation Employee Stock Ownership Plan Statements of Net Assets Available for Benefits MARCH 31 2000 1999 --------------------------------------------------------------------------------------------- ALLOCATED UNALLOCATED TOTAL ALLOCATED UNALLOCATED TOTAL ASSETS Investment in sponsor company common stock, at fair value ...... $11,675,409 $ 7,961,087 $19,636,496 $17,844,495 $14,256,148 $32,100,643 Investment in stable asset fund, at fair value ................... 110,966 - 110,966 100,166 - 100,166 Receivables: Employer contributions ........... - 10,573 10,573 - 29,975 29,975 Interest ......................... 2,631 - 2,631 2,137 - 2,137 Cash .............................. 4,544 - 4,544 4,544 - 4,544 -------------------------------------------------------------------------------------------- Total assets ...................... $11,793,550 $ 7,971,660 $19,765,210 $17,951,342 $14,286,123 $32,237,465 -------------------------------------------------------------------------------------------- LIABILITIES Interest payable .................. - 10,573 10,573 - 29,975 29,975 Loans payable ..................... - 9,516,651 9,516,651 - 10,523,255 10,523,255 -------------------------------------------------------------------------------------------- Total liabilities ................. - 9,527,224 9,527,224 - 10,553,230 10,553,230 -------------------------------------------------------------------------------------------- Net assets available (deficit) for plan benefits ................ $11,793,550 $(1,555,564) $10,237,986 $17,951,342 $ 3,732,893 $21,684,235 ============================================================================================ See accompanying notes.
2
Columbus McKinnon Corporation Employee Stock Ownership Plan Statements of Changes in Net Assets Available for Benefits MARCH 31 2000 1999 -------------------------------------------------------------------------------------------- ALLOCATED UNALLOCATED TOTAL ALLOCATED UNALLOCATED TOTAL Investment (loss) income: Net unrealized depreciation in fair market value of investments .................. $(4,493,413) $(6,086,506) $(10,579,919) $(4,397,730) $(2,163,162) $(6,560,892) Dividends ........................ 229,970 206,049 436,019 226,694 128,814 355,508 Interest ......................... 4,346 - 4,346 3,219 - 3,219 Employer contributions ............ - 1,444,861 1,444,861 - 1,186,271 1,186,271 -------------------------------------------------------------------------------------------- Total investment loss ............. (4,259,097) (4,435,596) (8,694,693) (4,167,817) (848,077) (5,015,894) -------------------------------------------------------------------------------------------- Interest expense .................. - 852,861 852,861 - 594,271 594,271 Distributions to participants ..... 1,825,572 - 1,825,572 1,383,517 - 1,383,517 Transfer to other qualified plan .. 65,958 - 65,958 101,600 - 101,600 Administrative expense ............ 7,165 - 7,165 5,273 - 5,273 -------------------------------------------------------------------------------------------- Total deductions .................. 1,898,695 852,861 2,751,556 1,490,390 594,271 2,084,661 -------------------------------------------------------------------------------------------- Net decrease ...................... (6,157,792) (5,288,457) (11,446,249) (5,658,207) (1,442,348) (7,100,555) -------------------------------------------------------------------------------------------- Net assets (deficit) available for benefits: Beginning of year ................. 17,951,342 3,732,893 21,684,235 23,609,549 5,175,241 28,784,790 -------------------------------------------------------------------------------------------- End of year ....................... $11,793,550 $(1,555,564) $ 10,237,986 $17,951,342 $ 3,732,893 $21,684,235 ============================================================================================ See accompanying notes.
3 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements March 31, 2000 and 1999 1. DESCRIPTION OF THE PLAN The Columbus McKinnon Corporation Employee Stock Ownership Plan (ESOP or the Plan), is a defined contribution employee stock ownership plan and a stock bonus plan within the meanings of the applicable sections of the Internal Revenue Code of 1986, as amended. It is also an eligible individual account plan as defined in the applicable section of the Employee Retirement Income Security Act of 1974 (ERISA). Refer to the Plan Document or the Summary Plan Description for a complete description of the ESOP's provisions. The Plan was amended effective April 1, 1998, to extend coverage to all domestic non-union employees of Columbus McKinnon Corporation (the Company/CMC), and all domestic non-union employees of Yale Industrial Products, Inc., a subsidiary of the Company. The Plan was also amended to extend coverage to all domestic non-union employees of Automatic Systems, Inc., a subsidiary of the Company, effective April 1, 1999; Abell-Howe Crane, Inc., a subsidiary of the Company, effective September 1, 1999; Washington Equipment Company, a subsidiary of the Company, effective January 1, 2000; and Gaffey, Inc. and Handling Systems and Conveyors, Inc., subsidiaries of GL International, which in turn is a subsidiary of the Company, effective January 1, 2000. In accordance with the Plan document, employees who have attained 55 years of age and ten years of participation in the Plan have the option to diversify the investments in their stock accounts by selling a specified percentage of their shares at the current market value and transferring the sale proceeds to another defined contribution plan maintained by the Company. In 2000, $65,958 has been transferred to the Company's Thrift 401(k) plan ($101,600 in 1999). A summary of the ESOP's provisions is as follows: PARTICIPATION Substantially all of the Company's domestic non-union employees are eligible to participate in the ESOP. 4 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 1. DESCRIPTION OF THE PLAN (CONTINUED) ELIGIBILITY Eligible employees must have attained age 21 and completed one year of service (minimum of 1,000 hours) to be a participant. CONTRIBUTIONS The Company contributes to the ESOP on the allocation date (March 31) for each participant (a) who is actively employed as an employee on December 31 and who has earned at least 1,000 hours of service as an employee in the calendar year ending December 31, or (b) who terminates employment on or after January 1 during a plan year after attaining age 55 and completing at least five years of eligibility service, or (c) who dies on or after January 1 during a plan year, after attaining age 60 and completing at least five years of eligibility service. Contributions shall be made in cash or in shares of stock as determined by the Company, and need not be made out of current or accumulated earnings and profits. VESTING A participant's account balance shall become fully vested and non-forfeitable on the date the participant completes five years of vesting service (excluding any service rendered prior to the calendar year in which the participant attained age 18), or if sooner, on the date the participant attains normal retirement age while in the employ of the Company or any affiliated company. DISTRIBUTIONS Upon a vested participant's termination, the value of his/her account will be distributed if the value of the account is less than $5,000 or, at the participant's option, either immediately or at any valuation date until retirement, as provided in the ESOP. A retiree may elect to defer distribution up to 70 1/2 years of age. Valuation dates for distributions are September 30 or March 31. During 2000, $1,825,572 or 95,108 shares, were distributed to vested participants in the form of stock certificates ($1,383,517, or 58,739 shares, distributed in 1999). This resulted in the sale of 37 shares held by the ESOP back to the Company for $688 in 2000 as a result of fractional shares (27 shares for $637 in 1999). As of March 31, 2000, $238,763 ($1,249,077 as of March 31, 1999) is included in the ESOP assets for terminated participants who have requested distributions. 5 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 1. DESCRIPTION OF THE PLAN (CONTINUED) Forfeiture of a non-vested interest shall occur in the fifth consecutive calendar year following a break in service. The forfeited accounts will be allocated among the accounts of active participants. At March 31, 2000, the ESOP assets include $169,782 ($218,335 at March 31, 1999) of undistributed forfeited accounts. ALLOCATION TO PARTICIPANT ACCOUNTS As of each valuation date (March 31), each participant account is appropriately adjusted to reflect any contributions or stock to be allocated as of such date, the income of the trust fund during the period and the increase or decrease in the fair market value of the trust fund during the period. The allocation is based on the fraction, the numerator of which is the participant's annual earnings for the preceding calendar year and the denominator of which is the aggregate annual earnings for such calendar year of all participants entitled to an allocation. DIVIDENDS Dividends paid on stock allocated to a participant's stock account will be allocated to the participant's nonstock account. The pension committee may direct that such dividends shall be either (a) paid directly to the participant, former participant, or beneficiary within 90 days after the close of the plan year in which such dividend was paid, or (b) applied as payment on the exempt loans. Dividends paid on unallocated stock held by the trustee and acquired with the proceeds of an exempt loan shall be held by the trustee until the end of the plan year in which it was paid, and then, along with any interest or earnings, be applied as payment on the exempt loans which shall trigger a release of stock from the suspense account. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. RECLASSIFICATION Prior year amounts have been reclassified to conform with current year presentation. 6 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 3. PLAN TERMINATION The Company intends to continue the ESOP indefinitely, but reserves the right to terminate the Plan at any time. If the ESOP is terminated, each participant shall be fully and nonforfeitably vested in his interest in the ESOP trust fund. 4. INVESTMENTS At March 31, 2000 and 1999, the assets of the ESOP Plan consist of CMC common stock and a stable asset fund with Fleet Bank. The ESOP's investment in CMC common stock is reported at fair market value as of March 31, 2000 and 1999 based on quoted market prices. The investment in the stable asset fund is also reported at fair market value as determined by open trading. 5. LOANS PAYABLE AND SHARE RELEASE On October 27, 1994, the ESOP obtained $6,000,000 of new debt ($2,000,000 from Marine Midland Bank and $4,000,000 from Fleet Bank). The Fleet loan is payable in quarterly installments of $103,000 through January 2002, and $770,627 in April 2002, plus interest at a Eurodollar rate based upon LIBOR plus a spread determined by the Company's leverage ratio (8.18% and 6.62% at March 31, 2000 and 1999, respectively). The Marine loan is payable in quarterly installments of $45,000 through January 2002, and $328,257 in April 2002, plus interest at a Eurodollar rate based upon LIBOR plus a spread determined by the Company's leverage ratio (8.18% and 6.62% at March 31, 2000 and 1999, respectively). On October 13, 1998, the ESOP obtained $7,682,281 of new debt from the Company. The CMC loan is payable in quarterly installments of interest only through April 2002, and thereafter quarterly installments of $150,000 through July 2014, and $298,371 in October 2014, plus interest at the prime rate (9.0% and 7.75% at March 31, 2000 and 1999, respectively). In October 1994 and October 1998, the ESOP purchased 609,144 and 479,900 shares, respectively, of common stock of the Company with the debt proceeds, which were recorded by the trustee in the suspense account. Such stock ceases to be collateral and is released from the suspense account as the loans are repaid. In each year prior to full payment of the loans, the number of shares of stock released will equal the number of shares of stock held as collateral immediately before the release for such plan year multiplied by the release fraction. 7 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 5. LOANS PAYABLE AND SHARE RELEASE (CONTINUED) The loans, which are guaranteed by the Company, are collateralized by an equivalent number of shares of common stock recorded by the trustees in a suspense account. Maturities of loans payable are as follows: 2001 $ 592,000 2002 592,000 2003 1,273,576 2004 600,000 2005 600,000 The numerator of the release fraction is the amount of principal and interest payments made toward the loan during the plan year and the denominator is the sum of the numerator plus the principal and interest payments to be made on the loan in the future, using the interest rate applicable at the end of the plan year. Shares of stock released from the suspense account for a plan year shall be held in the trust on an unallocated basis until allocated by the pension committee as of the last day of that plan year. That allocation shall be consistent with the method for allocating contributions to participants' accounts, which is based on a fraction of each participant's annual earnings during the preceding calendar year to the total earnings of those participants during such calendar year. The allocation of shares released resulting from dividends on participants' allocated shares, however, was based upon the fraction of each participant's allocated shares to the total number of allocated shares. As of March 31, 2000, 606,559 shares were held as collateral for the loan (708,382 shares held as of March 31, 1999); 101,821 shares were released from the suspense account in 2000 (96,610 shares released in 1999). These shares were allocated to participant accounts as of March 31, 2000. 8 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements (continued) 6. TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated July 28, 1997, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code of 1986 (the "Code") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan was amended subsequent to the IRS determination letter. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt. 9 Schedules Columbus McKinnon Corporation Employee Stock Ownership Plan EIN: 16-0547600 Plan No. 016 Schedule H, Line 4(i) - Schedule of Assets Held for Investment Purposes at End of Year March 31, 2000 IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST CURRENT VALUE - ----------------- ------------------------- ------------ ------------- Columbus McKinnon Employer Common Stock, Corporation* 1,496,114 shares $ 15,875,055 $ 19,636,496 Fleet Investment Stable Asset Fund 110,966 110,966 Services* 10,164 shares * Parties-in-interest 10
Columbus McKinnon Corporation Employee Stock Ownership Plan EIN: 16-0547600 Plan No. 016 Schedule H, Line 4(j) - Schedule of Reportable Transactions For the year ended March 31, 2000 Current Value Identity of Description Purchase Selling Cost of Asset on Net Party Involved of Assets Price Price of Asset Transaction Date Gain (Loss) - ------------------------------------------------------------------------------------------------------------------------------------ CATEGORY (III) - SERIES OF TRANSACTIONS IN EXCESS OF 5% OF PLAN ASSETS - ---------------------------------------------------------------------- Fleet National Bank* Money Market $ 795,366 $ - $ 795,366 $ 795,366 $ N/A Deposit Account - 795,366 795,366 795,366 - Fleet National Bank* Stable Asset Fund 452,778 - 452,778 452,778 N/A - 788,148 788,148 788,148 -
There were no category (i), (ii) or (iv) transactions during the year. *Parties-in-interest 11 SIGNATURES The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. COLUMBUS McKINNON CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN RESTATEMENT EFFECTIVE APRIL 1, 1989 By: /s/ Timothy R. Harvey ---------------------------------- Timothy R. Harvey, Trustee /s/ Karen L. Howard ---------------------------------- Karen L. Howard, Trustee /s/ Robert L. Montgomery, Jr. ---------------------------------- Robert L. Montgomery, Jr., Trustee /s/ Neal E. Wixson ---------------------------------- Neal E. Wixson, Trustee 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 G.L. International Inc. 1997 Stock Option Plan and the Larco Industrial Services Ltd. 1997 Stock Option Plan of our report dated June 9, 2000, with respect to the financial statements and schedules of the Columbus McKinnon Corporation Employee Stock Ownership Plan included in this Annual Report (Form 11-K) for the year ended March 31, 2000. /s/ Ernst & Young LLP Buffalo, New York June 29, 2000 -----END PRIVACY-ENHANCED MESSAGE-----