10-Q 1 0001.txt FIRST QUARTER OF 2001 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT 1934 For the quarterly period ended July 2, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to ------------------- ----------------- Commission File Number: 0-27618 ------- COLUMBUS MCKINNON CORPORATION -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW YORK 16-0547600 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 140 JOHN JAMES AUDUBON PARKWAY, AMHERST, NY 14228-1197 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (716) 689-5400 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. : [X] Yes [ ] No The number of shares of common stock outstanding as of July 31, 2000 was: 14,896,172 shares. FORM 10-Q INDEX COLUMBUS MCKINNON CORPORATION JULY 2, 2000 PAGE # ------ PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed consolidated balance sheets - July 2, 2000 and March 31, 2000 2 Condensed consolidated statements of income and retained earnings - Three months ended July 2, 2000 and July 4, 1999 3 Condensed consolidated statements of cash flows - Three months ended July 2, 2000 and July 4, 1999 4 Condensed consolidated statements of comprehensive income - Three months ended July 2, 2000 and July 4, 1999 5 Notes to condensed consolidated financial statements - July 2, 2000 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings - none. 16 Item 2. Changes in Securities - none. 16 Item 3. Defaults upon Senior Securities - none. 16 Item 4. Submission of Matters to a Vote of Security Holders - none. 16 Item 5. Other Information - none. 16 Item 6. Exhibits and Reports on Form 8-K - none. 16 - 1 - PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) JULY 2, MARCH 31, 2000 2000 --------- --------- ASSETS: (IN THOUSANDS) Current assets: Cash and cash equivalents .................... $ 3,062 $ 7,582 Trade accounts receivable .................... 152,999 143,401 Unbilled revenues ............................ 21,567 24,447 Inventories .................................. 110,682 108,291 Net assets held for sale ..................... 9,530 9,272 Prepaid expenses ............................. 6,419 6,181 --------- --------- Total current assets ............................... 304,259 299,174 Net property, plant, and equipment ................. 86,100 87,297 Goodwill and other intangibles, net ................ 335,325 339,603 Marketable securities .............................. 23,830 23,193 Deferred taxes on income ........................... 4,333 4,237 Other assets ....................................... 6,433 6,320 --------- --------- Total assets ....................................... $ 760,280 $ 759,824 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Notes payable to banks ....................... $ 3,066 $ 2,677 Trade accounts payable ....................... 42,610 49,621 Excess billings .............................. 6,182 4,288 Accrued liabilities .......................... 46,586 51,246 Current portion of long-term debt ............ 822 3,493 --------- --------- Total current liabilities .......................... 99,266 111,325 Senior debt, less current portion .................. 216,054 210,684 Subordinated debt .................................. 199,588 199,574 Other non-current liabilities ...................... 36,536 34,788 --------- --------- Total liabilities .................................. 551,444 556,371 --------- --------- Shareholders' equity Common stock ................................. 149 149 Additional paid-in capital ................... 107,023 106,884 Retained earnings ............................ 118,529 113,582 ESOP debt guarantee .......................... (8,494) (8,703) Unearned restricted stock .................... (2,618) (2,843) Total accumulated other comprehensive loss ... (5,753) (5,616) --------- --------- Total shareholders' equity ......................... 208,836 203,453 --------- --------- Total liabilities and shareholders' equity ......... $ 760,280 $ 759,824 ========= =========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 2 - COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED)
THREE MONTHS ENDED ------------------ JULY 2, JULY 4, 2000 1999 --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales ...................................... $ 188,378 $ 181,601 Cost of products sold .......................... 141,164 134,488 --------- --------- Gross profit ................................... 47,214 47,113 --------- --------- Selling expenses ............................... 12,482 12,758 General and administrative expenses ............ 10,340 9,487 Amortization of intangibles .................... 4,014 4,002 --------- --------- 26,836 26,247 --------- --------- Income from operations ......................... 20,378 20,866 Interest and debt expense ...................... 9,281 8,279 Interest and other income ...................... 941 247 --------- --------- Income before income taxes ..................... 12,038 12,834 Income tax expense ............................. 6,092 6,439 --------- --------- Net income ..................................... 5,946 6,395 Retained earnings - beginning of period ........ 113,582 100,455 Cash dividends of $0.07 per share .............. (999) (985) --------- --------- Retained earnings - end of period .............. $ 118,529 $ 105,865 ========= ========= Earnings per share data, basic ................. $ 0.42 $ 0.46 ========= ========= Earnings per share data, diluted ............... $ 0.42 $ 0.45 ========= =========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 3 - COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED ------------------ JULY 2, JULY 4, 2000 1999 -------- -------- (IN THOUSANDS) OPERATING ACTIVITIES: Net income ..................................................... $ 5,946 $ 6,395 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization ............................ 7,140 7,225 Deferred income taxes .................................... (96) 141 Other .................................................... 334 190 Changes in operating assets and liabilities net of effects from businesses purchased: Trade accounts receivable ........................... (9,598) 2,919 Unbilled revenues and excess billings ............... 4,774 (1,702) Inventories ......................................... (2,391) 2,823 Prepaid expenses .................................... (238) (844) Other assets ........................................ (155) 168 Trade accounts payable .............................. (7,011) (9,775) Accrued and non-current liabilities ................. (2,547) (4,242) -------- -------- Net cash (used in) provided by operating activities ............ (3,842) 3,298 -------- -------- INVESTING ACTIVITIES: Purchase of marketable securities, net of sales ................ (1,065) (2,138) Capital expenditures ........................................... (1,929) (2,323) Purchases of businesses, net of cash ........................... - (6,366) Net assets held for sale ....................................... (258) (71) -------- -------- Net cash used in investing activities .......................... (3,252) (10,898) -------- -------- FINANCING ACTIVITIES: Proceeds from issuance of common stock ......................... - 1 Net borrowings under revolving line-of-credit agreements ....... 4,289 4,849 Repayment of debt .............................................. (1,201) (886) Dividends paid ................................................. (999) (985) Reduction of ESOP debt guarantee ............................... 209 209 Other .......................................................... - (131) -------- -------- Net cash provided by financing activities ...................... 2,298 3,057 Effect of exchange rate changes on cash ........................ 276 1,160 -------- -------- Net decrease in cash and cash equivalents ...................... (4,520) (3,383) Cash and cash equivalents at beginning of period ............... 7,582 6,867 -------- -------- Cash and cash equivalents at end of period ..................... $ 3,062 $ 3,484 ======== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 4 - COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
THREE MONTHS ENDED ------------------ JULY 2, JULY 4, 2000 1999 ------- ------- (IN THOUSANDS) Net income ............................................................ $ 5,946 $ 6,395 ------- ------- Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments ............................ 291 515 Unrealized gains on investments Unrealized holding gains arising during the period ................ 147 53 Less: reclassification adjustment for gains included in net income (575) - ------- ------- (428) 53 ------- ------- Total other comprehensive (loss) income ............................... (137) 568 ------- ------- Comprehensive income .................................................. $ 5,809 $ 6,963 ======= =======
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 5 - COLUMBUS MCKINNON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JULY 2, 2000 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at July 2, 2000, and the results of its operations and its cash flows for the three month periods ended July 2, 2000 and July 4, 1999, have been included. Results for the period ended July 2, 2000 are not necessarily indicative of the results that may be expected for the year ended March 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Columbus McKinnon Corporation annual report on Form 10-K for the year ended March 31, 2000. Columbus McKinnon Corporation (the Company) is a broad-line designer, manufacturer and supplier of sophisticated material handling products that are widely distributed to industrial, automotive, and consumer markets worldwide; integrated material handling solutions for the automotive markets; and integrated material handling solutions for industrial markets. 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 also deal primarily with end users and sales are concentrated, domestically and internationally (primarily Europe), in the consumer products, manufacturing, warehousing and, to a lesser extent, the steel, construction, automotive and other industrial markets. 2. Inventories consisted of the following: JULY 2, MARCH 31, 2000 2000 ----------- ----------- (IN THOUSANDS) At cost - FIFO basis: Raw materials $ 61,479 $ 57,198 Work-in-process 18,933 20,240 Finished goods 37,636 38,329 ----------- ----------- 118,048 115,767 LIFO cost less than FIFO cost (7,366) (7,476) ------------ ------------ $ 110,682 $ 108,291 =========== =========== An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Because these are subject to many forces beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. - 6 - 3. Property, plant, and equipment is net of $56,013,000 and $52,887,000 of accumulated depreciation at July 2, 2000 and March 31, 2000, respectively. 4. Goodwill and other intangibles, net includes $50,270,000 and $46,256,000 of accumulated amortization at July 2, 2000 and March 31, 2000, respectively. 5. General and Product Liability - The accrued general and product liability costs, which are included in other non-current liabilities, are the actuarial present value of estimated expenditures based on amounts determined from loss reports and individual cases filed with the Company, and an amount, based on past experience, for losses incurred but not reported. The accrual in these condensed consolidated financial statements was determined by applying a discount factor based on interest rates customarily used in the insurance industry. 6. The carrying amount of the Company's senior debt instruments approximates the fair values. The Company's subordinated debt has an approximate fair value of $176,000,000 which is less than its carrying amount of $199,588,000. 7. The following table sets forth the computation of basic and diluted earnings per share before extraordinary charge for debt extinguishment:
THREE MONTHS ENDED ------------------ JULY 2, JULY 4, 2000 1999 ------- ------- (IN THOUSANDS) Numerator for basic and diluted earnings per share: Net income ............................................ $ 5,946 $ 6,395 ======= ======= Denominators: Weighted-average common stock outstanding - denominator for basic EPS ......................... 14,287 13,972 Effect of dilutive employee stock options ............. -- 222 ------- ------- Adjusted weighted-average common stock outstanding and assumed conversions - denominator for diluted EPS 14,287 14,194 ======= =======
8. Income tax expense for the three-month periods ended July 2, 2000 and July 4, 1999 exceeds the customary relationship between income tax expense and income before income taxes due to nondeductible amortization of goodwill of $3,074,000, and $3,076,000, respectively. 9. 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 of cash and was financed by proceeds from the Company's revolving debt facility. - 7 - 10. 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 quarters ended July 2, 2000 and July 4, 1999, is as follows:
THREE MONTHS ENDED JULY 2, 2000 ------------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL -------- ---------- ---------- -------- (IN THOUSANDS) Sales to external customers... $125,196 $ 17,513 $ 45,669 $188,378 Operating income before amortization............... 19,618 1,841 2,933 24,392 Depreciation and amortization. 5,012 729 1,399 7,140 Total assets.................. 493,176 69,943 197,161 760,280 Capital expenditures.......... 1,915 16 (2) 1,929 THREE MONTHS ENDED JULY 4, 1999 ------------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL -------- ---------- ---------- -------- (IN THOUSANDS) Sales to external customers... $131,001 $ 15,052 $ 35,548 $181,601 Operating income amortization................ 23,105 1,176 587 24,868 Depreciation and amortization. 5,014 788 1,423 7,225 Total assets.................. 514,375 68,656 182,308 765,339 Capital expenditures.......... 2,060 218 45 2,323
- 8 - The following schedule provides a reconciliation of operating income before amortization with consolidated income before income taxes:
THREE MONTHS ENDED ------------------ JULY 2, 2000 JULY 4, 1999 ------------ ------------ (IN THOUSANDS) Operating income before amortization.......................... $ 24,392 $ 24,868 Amortization of intangibles................................... (4,014) (4,002) Interest and debt expense..................................... (9,281) (8,279) Interest and other income..................................... 941 247 -------- -------- Income before income taxes.................................... $ 12,038 $ 12,834 ======== ========
11. The summary financial information of the parent, domestic subsidiaries (guarantors) and foreign subsidiaries (nonguarantors of the 8.5% senior subordinated notes) follows:
Domestic Foreign Elimina- Consoli- (IN THOUSANDS) Parent subsidiaries subsidiaries tions dated ------------------------------------------------------------- AS OF JULY 2, 2000 Current assets: Cash and cash equivalents ..................... $ (1,261) $ 299 $ 4,024 $ - $ 3,062 Trade accounts receivable ..................... 61,550 65,485 25,964 - 152,999 Unbilled revenues ............................. - 21,567 - - 21,567 Inventories ................................... 48,203 38,221 25,137 (879) 110,682 Other current assets .......................... 4,025 7,923 4,001 - 15,949 ------------------------------------------------------------- Total current assets ......................... 112,517 133,495 59,126 (879) 304,259 Net property, plant, and equipment ............. 35,262 31,873 18,965 - 86,100 Goodwill and other intangibles, net ............ 40,569 245,230 49,526 - 335,325 Intercompany ................................... 195,212 (358,845) (64,463) 228,096 - Other assets ................................... 225,603 161,656 (1,984) (350,679) 34,596 ------------------------------------------------------------- Total assets ................................. $ 609,163 $ 213,409 $ 61,170 $(123,462) $ 760,280 ============================================================= Current liabilities ............................ $ 32,860 $ 48,036 $ 20,298 $ (1,928) $ 99,266 Long-term debt, less current portion ........... 409,755 10 5,877 - 415,642 Other non-current liabilities .................. 15,190 18,549 2,797 - 36,536 ------------------------------------------------------------- Total liabilities ............................ 457,805 66,595 28,972 (1,928) 551,444 ------------------------------------------------------------- Shareholders' equity ........................... 151,358 146,814 32,198 (121,534) 208,836 ------------------------------------------------------------- Total liabilities and shareholders' equity.... $ 609,163 $ 213,409 $ 61,170 $(123,462) $ 760,280 ============================================================= FOR THE THREE MONTHS ENDED JULY 2, 2000 Net sales ...................................... $ 66,979 $ 97,534 $ 29,742 $ (5,877) $ 188,378 Cost of products sold .......................... 45,737 79,350 21,958 (5,881) 141,164 ------------------------------------------------------------- Gross profit ................................... 21,242 18,184 7,784 4 47,214 ------------------------------------------------------------- Selling, general and administrative expenses 9,747 8,098 4,977 - 22,822 Amortization of intangibles .................... 508 2,894 612 - 4,014 ------------------------------------------------------------- 10,255 10,992 5,589 - 26,836 ------------------------------------------------------------- Income from operations ......................... 10,987 7,192 2,195 4 20,378 Interest and debt expense ...................... 9,130 - 151 - 9,281 Interest and other income ...................... 773 60 108 - 941 ------------------------------------------------------------- Income before income taxes ..................... 2,630 7,252 2,152 4 12,038 Income tax expense ............................. 1,233 3,852 1,006 1 6,092 ------------------------------------------------------------- Net income ..................................... $ 1,397 $ 3,400 $ 1,146 $ 3 $ 5,946 ============================================================= - 9 - Domestic Foreign Elimina- Consoli- (IN THOUSANDS) Parent subsidiaries subsidiaries tions dated ------------------------------------------------------------- FOR THE THREE MONTHS ENDED JULY 2, 2000 OPERATING ACTIVITIES: Net cash (used in) provided by operating activities .................................. $ (7,060) $ 3,061 $ 157 $ - $ (3,842) ------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net ......... (1,065) - - - (1,065) Capital expenditures ........................... (865) (794) (270) - (1,929) Other .......................................... -- (258) - - (258) ------------------------------------------------------------- Net cash used in investing activities .......... (1,930) (1,052) (270) - (3,252) ------------------------------------------------------------- FINANCING ACTIVITIES: Net borrowings (payments) under revolving line-of-credit agreements ................... 3,900 - 389 - 4,289 Repayment of debt .............................. (1,135) (9) (57) - (1,201) Dividends paid ................................. (999) - - - (999) Other .......................................... 209 - - - 209 ------------------------------------------------------------- Net cash provided by (used in) financing activities................................... 1,975 (9) 332 - 2,298 Effect of exchange rate changes on cash ........ - - 276 - 276 ------------------------------------------------------------- Net change in cash and cash equivalents ........ (7,015) 2,000 495 - (4,520) Cash and cash equivalents at beginning of period 5,754 (1,701) 3,529 - 7,582 ------------------------------------------------------------- Cash and cash equivalents at end of period ..... $ (1,261) $ 299 $ 4,024 $ - $ 3,062 ============================================================= AS OF JULY 4, 1999 Current assets: Cash and cash equivalents ..................... $ 803 $ 1,143 $ 1,538 $ - $ 3,484 Trade accounts receivable ..................... 54,740 57,287 23,770 - 135,797 Unbilled revenues ............................. - 13,462 - - 13,462 Inventories ................................... 48,372 39,520 27,239 (1,004) 114,127 Other current assets .......................... 3,529 10,322 3,440 - 17,291 ------------------------------------------------------------- Total current assets ......................... 107,444 121,734 55,987 (1,004) 284,161 Net property, plant, and equipment ............. 36,859 33,571 20,009 - 90,439 Goodwill and other intangibles, net ............ 42,499 261,396 53,027 - 356,922 Intercompany ................................... 213,795 (375,176) (65,517) 226,898 - Other assets ................................... 221,271 162,491 (1,266) (348,679) 33,817 ------------------------------------------------------------- Total assets ................................. $ 621,868 $ 204,016 $ 62,240 $(122,785) $ 765,339 ============================================================= Current liabilities ............................ $ 39,797 $ 48,837 $ 21,666 $ (3,114) $ 107,186 Long-term debt, less current portion ........... 419,725 - 6,523 - 426,248 Other non-current liabilities .................. 11,623 22,042 2,968 - 36,633 ------------------------------------------------------------- Total liabilities ............................ 471,145 70,879 31,157 (3,114) 570,067 ------------------------------------------------------------- Shareholders' equity ........................... 150,723 133,137 31,083 (119,671) 195,272 ------------------------------------------------------------- Total liabilities and shareholders' equity ... $ 621,868 $ 204,016 $ 62,240 $(122,785) $ 765,339 ============================================================= - 10 - Domestic Foreign Elimina- Consoli- (IN THOUSANDS) Parent subsidiaries subsidiaries tions dated ------------------------------------------------------------- FOR THE THREE MONTHS ENDED JULY 4, 1999 Net sales ...................................... $ 68,814 $ 88,921 $ 29,857 $ (5,991) $ 181,601 Cost of products sold .......................... 46,430 72,563 21,444 (5,949) 134,488 ------------------------------------------------------------- Gross profit ................................... 22,384 16,358 8,413 (42) 47,113 ------------------------------------------------------------- Selling, general and administrative expenses ... 8,715 7,393 6,137 - 22,245 Amortization of intangibles .................... 489 2,861 652 - 4,002 ------------------------------------------------------------- 9,204 10,254 6,789 - 26,247 ------------------------------------------------------------- Income from operations ......................... 13,180 6,104 1,624 (42) 20,866 Interest and debt expense ...................... 8,098 2 179 - 8,279 Interest and other income ...................... 113 77 57 - 247 ------------------------------------------------------------- Income before income taxes ..................... 5,195 6,179 1,502 (42) 12,834 Income tax expense ............................. 2,177 3,431 848 (17) 6,439 ------------------------------------------------------------- Net income ..................................... $ 3,018 $ 2,748 $ 654 $ (25) $ 6,395 ============================================================= FOR THE THREE MONTHS ENDED JULY 4, 1999 OPERATING ACTIVITIES: Net cash (used in) provided by operating activities .................................. $ (1,824) $ 7,346 $ (2,363) $ 139 $ 3,298 ------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net ......... (2,138) - - - (2,138) Capital expenditures ........................... (1,692) (355) (276) - (2,323) Purchases of businesses, net of cash ........... -- (6,317) - (49) (6,366) Other .......................................... -- (71) - - (71) ------------------------------------------------------------- Net cash used in investing activities .......... (3,830) (6,743) (276) (49) (10,898) ------------------------------------------------------------- FINANCING ACTIVITIES: Proceeds from issuance of common stock ......... 1 136 - (136) 1 Net borrowings (payments) under revolving line-of-credit agreements .................... 5,000 - (151) - 4,849 Repayment of debt .............................. (750) - (136) - (886) Dividends paid ................................. (981) (4) - - (985) Other .......................................... 78 - - - 78 ------------------------------------------------------------- Net cash provided by (used in) financing activities...................................... 3,348 132 (287) (136) 3,057 Effect of exchange rate changes on cash ........ - - 1,114 46 1,160 ------------------------------------------------------------- Net change in cash and cash equivalents ........ (2,306) 735 (1,812) - (3,383) Cash and cash equivalents at beginning of period 3,109 408 3,350 - 6,867 ------------------------------------------------------------- Cash and cash equivalents at end of period ..... $ 803 $ 1,143 $ 1,538 $ - $ 3,484 =============================================================
12. 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. - 11 - Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW The Company is a broad-line designer, manufacturer, and supplier of sophisticated material handling products and integrated material handling solutions that are widely distributed to industrial, automotive and consumer markets worldwide; integrated material handling solutions for the automotive markets; and integrated material handling solutions for industrial markets worldwide. 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 solutions automotive sales are concentrated, domestically and internationally (primarily North America) in the automotive industry. Material handling solutions industrial sales are concentrated, domestically and internationally (primarily Europe), in consumer products manufacturing, warehousing and, to a lesser extent, the steel, construction, automotive, and other industrial markets. RESULTS OF OPERATIONS THREE MONTHS ENDED JULY 2, 2000 AND JULY 4, 1999 Net sales in the fiscal 2001 quarter ended July 2, 2000 were $188,378,000, an increase of $6,777,000 or 3.7% from the fiscal 2000 quarter ended July 4, 1999. Sales in the Products segment were down roughly 4.4% as a result of fewer production/shipping days in the fiscal 2001 quarter and softness in industrial markets. Sales in the Solutions-Industrial segment increased by 16.3% as a result of new product offerings and expanding markets. The Solutions-Automotive segment had a sales increase of 28.5% as a result of improving contract bookings. Sales in the individual segments were as follows, in thousands of dollars and with percentage changes for each group:
THREE MONTHS ENDED ------------------ JULY 2, JULY 4, CHANGE 2000 1999 AMOUNT % -------- -------- -------- ---- (IN THOUSANDS, EXCEPT PERCENTAGES) Products .................... $125,196 $131,001 $ (5,805) (4.4) Solutions-Industrial ........ 17,513 15,052 2,461 16.3 Solutions-Automotive ........ 45,669 35,548 10,121 28.5 -------- -------- -------- Consolidated net sales....... $188,378 $181,601 $ 6,777 3.7 ======== ======== ========
- 12 - The Company's gross profit margins were approximately 25.1% and 25.9% for the fiscal 2001 and 2000 quarters, respectively. The decrease in gross profit margin is a combination of offsetting fluctuations in the various segments. The gross profit margin decreased in the Products segment primarily due to a reclassification of approximately $900,000 of costs from general and administrative expenses for corporate consistency, and lower sales volume. The Solutions-Industrial segment experienced increased gross profit margins for the fiscal 2001 quarter as a result of increased volume. Gross profit margins in the Solutions-Automotive segment increased for the first quarter of 2001 due to improved contract pricing, the realization of cost saving methodologies employed in the middle of the fiscal 2000 year, and the absence of certain low margin foreign contracts which occurred in the first quarter of fiscal 2000. Selling expenses were $12,482,000 and $12,758,000 in the fiscal 2001 and 2000 quarters, respectively. As a percentage of consolidated net sales, selling expenses were 6.6% and 7.0% for the fiscal 2001 and 2000 quarters, respectively. The reduction is due to cost control efforts and increased sales volume. General and administrative expenses were $10,340,000, and $9,487,000 in the fiscal 2001 and 2000 quarters, respectively. As a percentage of consolidated net sales, general and administrative expenses were 5.5% and 5.2% in the fiscal 2001 and 2000 quarters, respectively. The increase is a result of increased product liability expense recorded by the Company's captive insurance company. This increased expense is a result of and offset by the higher investment income shown on the interest and other income line. Amortization of intangibles was $4,014,000 and $4,002,000 in the fiscal 2001 and 2000 quarters, respectively. Income from operations decreased $488,000 or 2.3% in the fiscal 2001 quarter, compared to the fiscal 2000 quarter. This is based on income from operations of $20,378,000 and $20,865,000 or 10.8% and 11.5% of consolidated net sales for the fiscal 2001 and 2000 quarters, respectively. Interest and debt expense was $9,281,000, and $8,279,000 in the fiscal 2001 and 2000 quarters, respectively. The fiscal 2001 increase is solely the result of increasing interest rates. As a percentage of consolidated net sales, interest and debt expense was 4.9% and 4.6% in the fiscal 2001 and 2000 quarters, respectively. Interest and other income was $941,000 and $247,000 in the fiscal 2001 and 2000 quarters, respectively. The increase in the current year fiscal quarter is the result of the investment earnings on assets in the Company's captive insurance company. Income taxes as a percentage of income before income taxes were 50.6% and 50.2% in the fiscal 2001 and 2000 quarters, respectively. The percentages reflect the effect of nondeductible amortization of goodwill resulting from acquisitions. Net income, therefore, decreased $449,000 or 7.0% for the quarter ended July 2, 2000. This is based on net income of $5,946,000 and $6,395,000 for the quarters ended July 2, 2000 and July 4, 1999, respectively. LIQUIDITY AND CAPITAL RESOURCES 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 credit facility. - 13 - 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 $208.9 million was outstanding at July 2, 2000. Interest is payable at varying Eurodollar and Prime rates based on LIBOR plus a spread determined by the Company's leverage ratio amounting to 200 basis points at July 31, 2000 or the lender's prime rate plus 50 basis points. The 1998 Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to $199,468,000, net of original issue discount of $532,000 and are due March 31, 2008. Interest is payable semi-annually based on an effective rate of 8.45%, considering $1,902,000 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 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 domestic subsidiaries and 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 used by operating activities was $3,842,000 for the three months ended July 2, 2000 while net cash provided by operating activities was $3,298,000 for the three months ended July 4, 1999. The $7,140,000 difference is due to changes in net working capital components, primarily accounts receivable. Net cash used in investing activities decreased to $3,252,000 for the three months ended July 2, 2000 from $10,898,000 for the three months ended July 4, 1999. The $7,646,000 decrease is due primarily to the acquisition of WECO in the first quarter of fiscal 2000. Net cash provided by financing activities was $2,298,000 for the three months ended July 2, 2000 versus $3,057,000 for the three months ended July 4, 1999. CAPITAL EXPENDITURES In addition to keeping its current equipment and plants properly maintained, the Company is committed to replacing, enhancing, and upgrading its property, plant, and equipment to reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet environmental requirements, enhance safety, and promote ergonomically correct work stations. Consolidated capital expenditures for the three months ended July 2, 2000 and July 4, 1999 were $1,929,000 and $2,323,000, respectively. - 14 - 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. 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 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. 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. - 15 - PART II. OTHER INFORMATION Item 1. Legal Proceedings - none. Item 2. Changes in Securities - none. Item 3. Defaults upon Senior Securities - none. Item 4. Submission of Matters to a Vote of Security Holders - none. Item 5. Other Information - none. Item 6. Exhibits and Reports on Form 8-K - none. - 16 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COLUMBUS MCKINNON CORPORATION ----------------------------- (Registrant) Date: AUGUST 16, 2000 /S/ ROBERT L. MONTGOMERY, JR. ---------------- ----------------------------- Robert L. Montgomery, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) - 17 -