-----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, QlAqOTRDADgCTGPo0dsi11k2nq8KBhCWDkfZf6f9xPY2AgDgZ5btSgN6C38nNd+C aHzn0q1XjjfABdFn9943dQ== 0001005229-01-500012.txt : 20010702 0001005229-01-500012.hdr.sgml : 20010702 ACCESSION NUMBER: 0001005229-01-500012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBUS MCKINNON CORP CENTRAL INDEX KEY: 0001005229 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 160547600 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-27618 FILM NUMBER: 1671910 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: UNKNOWN SIC - 0000 [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: 1671911 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: UNKNOWN SIC - 0000 [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: 1671912 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: UNKNOWN SIC - 0000 [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: 1671913 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 10-K 1 tenk.txt COLUMBUS MCKINNON 10K FISCAL 2001 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, 2001 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 (ss.229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ ]. The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 31, 2001 was $93,317,505. The number of shares of common stock outstanding as of May 31, 2001 was: 14,895,172 shares. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the proxy statement for the annual shareholders meeting to be held August 20, 2001 are incorporated by reference into Part III of this report. COLUMBUS McKINNON CORPORATION 2001 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, 2001, the Company generated net sales and income from operations of approximately $728.0 million and approximately $70.2 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, 2001. For the year ended March 31, 2001, the Company's Products segment generated net sales and income from operations before amortization of approximately $478.9 million and approximately $72.5 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 also provides 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, light-rail systems, scissor lifts and tire shredders. For the year ended March 31, 2001, the Company's Solutions - Industrial segment generated net sales and income from operations before amortization of approximately $68.1 million and approximately $3.6 million, respectively, and the Company's Solutions - Automotive segment generated net sales and income from operations before amortization of approximately $181.0 million and approximately $10.1 million, respectively. The Company has extended its product lines and penetrated new markets in recent years through several acquisitions. Over the past six 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 $728.0 million and $70.2 million, respectively, for the year ended March 31, 2001 from approximately $209.8 million and $25.8 million, respectively, in fiscal 1996, representing compound annual growth rates of approximately 28.2% and 22.2%, respectively. BUSINESS STRATEGY The Company's strategic objective is to improve its competitiveness by further enhancing 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: FOCUS ON QUALITY, PRODUCTIVITY AND EFFICIENCY - The Company continually focuses on improving its products, manufacturing methods and general operating processes, and has recently enhanced these efforts. o PROCESS AND PRODUCTIVITY IMPROVEMENT - Heightened efforts to improve operations and increase productivity include the following: - Implementing lean manufacturing and business process techniques to facilitate productivity improvement, reduce inventory levels and free-up floor space - 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 2 - 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 - Establishing incentives for all associates to grow revenues, manage operating costs, and use capital wisely - 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 has recently begun rationalization of certain product lines that represented similar offerings across its portfolio of brands. This activity will continue. 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 has recently begun rationalization and consolidation of certain of its existing facilities, which will result in significant fixed cost reductions and improved productivity at the remaining facilities. This activity will continue. 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. 3 NEW PRODUCT DEVELOPMENT - The Company will expand its efforts to develop and introduce new material handling products and services to anticipate customer needs and to enhance its ability to serve its markets. Recent examples include: o LodeRail - a self standing or ceiling mounted light-rail crane system o Steerman - heavy machinery-moving dollies and skates for in-plant machine positioning o New top-running and underhung end trucks, more cost effective, for the crane-builder industry o Bossman Jacks - 50 to 150 ton hydraulic jacks for the mining industry o Access systems - actuator operated security gate openers o Pallet trucks - new hand pallet trucks for warehouse and plant use o A new mini-load crane, a high speed, light weight picking device for warehouse applications 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 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. Efforts have recently been enhanced in Brazil with the establishment of a sales office there. 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 initial Mexican facility, located near Mexico City, currently produces hand-powered and electric hoists and chain for the U.S. and Mexican markets. In addition, the Company recently established a sales office and staging facility in Monterrey to supply and service industrial cranes in that marketplace. 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. The Company also recently began importing pallet trucks for distribution into North America under the American Lifts brand name. In addition, a third Chinese factory is currently under construction. 4 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. 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: 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 Standardizing divisional pricing structures for simplification and administrative ease 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 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 comprehensive catalogs of Columbus McKinnon's hoist and chain products and list prices. In addition, CM currently sponsors an additional 15 brand-name specific web sites and has begun a pilot program to sell hand pallet trucks on one of them. 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 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. o TELESALES - The Company has launched a telesales effort focused on smaller industrial distributors and users of the Company's industrial products. 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 5 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). 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. SEGMENT INFORMATION During fiscal 2001 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. 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. 6 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 2001, net sales of the Products segment were approximately $478.9 million or approximately 65.8% of the Company's net sales, of which approximately $364.4 million (76%) were domestic and $114.5 million (24%) 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 2001: Hoists............................................ 52.9% Chain and forged attachments...................... 24.7 Industrial overhead cranes........................ 14.4 Industrial components............................. 8.0 ---- 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, clamps, pallet trucks and textile strappings. Below-the-hook tooling and clamps are specialized lifting apparatus used in a variety of lifting activities performed in conjunction with hoist and chain applications. Pallet trucks are manual devices used for across-the-floor material handling, frequently in warehouse type settings. Textile strappings are below-the-hook attachments, frequently used in conjunction with hoists. 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. 7 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, which included the Gaffey and Larco brands, in March 1999 and its acquisition of Washington Equipment Company ("WECO") 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. The Company also recently established a presence in Monterrey, Mexico to provide that growing geographic market with its crane systems and service. 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. 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 2001 were approximately $68.1 million or approximately 9.3% of the Company's total net sales, of which approximately $39.2 million (58%) were domestic and approximately $28.9 million (42%) 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 2001: 8 Integrated material handling conveyor systems.............. 51.6% Manipulators and light-rail systems........................ 21.4 Scissor lifts.............................................. 17.4 Other...................................................... 9.6 ----- 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. MANIPULATORS AND LIGHT-RAIL SYSTEMS. 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. The Company recently introduced light-rail systems marketed under its various brand names. Light-rail systems are portable steel overhead beam configurations used at workstations, from which hoists are frequently suspended. 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. 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 2001 were approximately $181.0 million or approximately 24.9% of the Company's total net sales, of which approximately $174.0 million (96%) were domestic and approximately $7.0 million (4%) were international. 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. 9 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 140 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 sales directors, regional sales management and field sales force through a combination of base salary and a commission plan based on top line sales and a pre-established sales quota. o PRODUCT ADVERTISING - 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. 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 40 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 10 markets, as well as general purpose industrial and consumer hardware shows. In fiscal 2001, the Company participated in trade shows in the US, Canada, France, Mexico, Germany, England, Argentina, Australia, China, Colombia and Spain. 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), AHMA (American Hardware Manufacturers Association) and ARA (American Rental 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 electronic catalogs of Columbus McKinnon hoist and chain products and list prices. 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 addition, CM currently sponsors an additional 15 brand-name specific web sites and has begun a pilot program to sell hand pallet trucks on one of them. In the near future, the Company plans to post additional product catalogs, maintenance manuals, pricing information, advertisements, and customer service information on its web sites and ultimately perform e-commerce. SOLUTIONS - INDUSTRIAL SEGMENT The products and services of the Solutions - Industrial segment are sold primarily to large corporate end-users, including Federal Express, UPS, 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 customers and undergoing a competitive bidding process. The Solutions - Industrial segment also sells manipulators, light-rail systems and scissor lifts through its internal sales force and through specialized independent distributors and manufacturers representatives. 11 SOLUTIONS - AUTOMOTIVE SEGMENT ASI's sales are largely concentrated on the automotive OEM market with General Motors and Ford representing approximately 75% 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. 12 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, Gaffey, Larco and WECO) design, manufacture, install and service a variety of cranes ranging in capacity from one ton to 100 tons. 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 11 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. 13 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 John Deere and Tractor Supply Company); and rental outlets (such as Nations Rent and Hertz). 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 manipulators, light-rail systems and scissor lifts 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 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. 14 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. 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 (WECO), 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 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. GL includes Gaffey and Larco, full-service designers and builders of industrial overhead bridge, gantry and jib cranes and related components. 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. 15 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. 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. 16 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. 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 crane building with Mannesman Dematic, KCI Konecranes, Morris Material Handling and R. Stahl; and in industrial components with Deublin, Joyce-Dayton and Nook Industries. 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, 2001, the Company had 3,942 employees, 3,038 in the United States, 292 in Canada, 118 in Mexico and 494 in Europe/Asia. Approximately 1,110 of the Company's employees are represented under 12 separate US or Canadian collective bargaining agreements which terminate at various times between July 2001 and May 2006. 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. 17 BACKLOG PRODUCTS SEGMENT The Company's backlog of orders at March 31, 2001 was approximately $44.3 million compared to approximately $52.5 million at March 31, 2000. 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 Products segment 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, 2001 was approximately $8.4 million compared to approximately $11.3 million at March 31, 2000. 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, 2001 was approximately $110.7 million compared to approximately $85.4 million at March 31, 2000. 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 2001. 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, 18 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 2002. 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 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 United States District Court for the Northern District of Iowa entered the Consent Decree settling the litigation on March 14, 2001, and since then, the Company has paid $60,000 into the U.S. Treasury, thereby consummating the settlement of the matter. Neither the entry of the Consent Decree nor the payment should be construed as an admission of any wrong doing by the Company. The Company has completed the closure of an underground storage tank ("UST") located at its facility in Charlotte, North Carolina. No further expenditures are anticipated in connection with the UST. 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 three 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 19 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, 2001, 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 commenced a cost recovery action against a number of other parties who sent hazardous substances to the Pendleton Site. If 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 111 of the 113 defendants in the cost recovery action, and additional settlements are expected from the remaining two defendants in the future. The Company believes that the two remaining defendants are substantial contributors of waste to the Pendleton Site. However, the Company has not yet received payment in connection with any settlements with individual defendants in the lawsuit. 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 $820,000 as of March 31, 2001, 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. 20 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 79 manufacturing, distribution, sales or service facilities, of which 45 are located in the United States, 7 are located in Canada, 4 are located in Mexico, 16 are located in Europe, 3 are located in Asia, 2 are located in Africa, and 2 are located in Latin/South America. 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 (62 facilities): United States 1,664,517 610,482 2,274,999 International 362,066 239,375 601,441 Solutions - Industrial (10 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 sublet to an unaffiliated party through June 30, 2003.
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. 21 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - ------- ---------------------------------------------------- Not applicable. 22 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 2001 FISCAL 2000 ----------- ----------- HIGH LOW HIGH LOW ---- --- ---- --- 1st Quarter 15.063 12.875 25.063 23.750 2nd Quarter 15.250 13.547 17.625 17.125 3rd Quarter 13.938 8.750 10.125 9.875 4th Quarter 9.672 7.500 13.500 12.813 As of March 31, 2001, there were 328 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 both fiscal 2001 and 2000. 23 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, 2001. This information includes (i) the results of operations of Yale since its acquisition on October 17, 1996, (ii) the results of operations of Lister since its acquisition on December 19, 1996, (iii) the results of operations of Univeyor since its acquisition on January 8, 1998, (iv) the results of operations of ASI since its acquisition on March 31, 1998, (v) the results of operations of Mechanical Products through its divestiture on August 7, 1998, (vi) the results of operations of Abell-Howe since its acquisition on August 21, 1998, (vii) the results of operations of Gautier since its acquisition on December 4, 1998, (viii) the results of operations of Camlok and Tigrip since their acquisition on January 29, 1999, (ix) 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 (x) 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, ---------------------------- 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF INCOME DATA: Net sales............................................. $727,972 $736,254 $735,445 $561,823 $359,424 Cost of products sold................................. 551,381 556,145 542,975 401,669 251,987 ---------------------------------------------------- Gross profit.......................................... 176,591 180,109 192,470 160,154 107,437 Selling expenses...................................... 50,436 50,450 52,059 46,578 32,550 General and administrative expenses................... 39,253 44,260 39,850 33,361 24,636 Amortization of intangibles........................... 15,983 16,392 15,479 10,297 5,197 Other charges......................................... 750 965 -- -- -- ---------------------------------------------------- Income from operations................................ 70,169 68,042 85,082 69,918 45,054 Interest and debt expense............................. 37,642 34,698 35,923 25,104 11,930 Interest and other income............................. 2,217 1,314 1,565 1,940 1,168 ---------------------------------------------------- Income before income taxes, minority interest and extraordinary charge.................................. 34,744 34,658 50,724 46,754 34,292 Income tax expense.................................... 19,525 17,578 23,288 22,776 15,617 Minority interest..................................... - - - - (323) Extraordinary charge for early debt extinguishment.... - - - (4,520) (3,198) ---------------------------------------------------- Net income............................................ $ 15,219 $ 17,080 $ 27,436 $ 19,458 $ 15,154 ==================================================== Net income per common share - diluted................. $1.06 $1.20 $1.92 $1.35 $1.15 Cash dividend per common share........................ 0.28 0.28 0.28 0.28 0.27 BALANCE SHEET DATA (AT END OF PERIOD): Total assets.......................................... $747,013 $759,824 $766,911 $788,862 $548,245 Total long-term debt (including current maturities)... 407,046 413,751 423,612 458,577 286,288 Total liabilities..................................... 539,149 556,371 578,237 617,916 398,089 Total shareholders' equity............................ 207,864 203,453 188,674 170,946 150,156
24 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, 2001, 2000, AND 1999 OVERVIEW 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. 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 automotive segment primarily deals directly 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 segment also deals primarily directly 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. 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, 2001 VS. 2000 2000 VS. 1999 ------------------------------ ------------- ------------- 2001 2000 1999 AMOUNT % AMOUNT % ---- ---- ---- ------ - ------ - (IN THOUSANDS, EXCEPT PERCENTAGES) Products.................. $ 478,898 $ 511,287 $ 508,313 $(32,389) (6.3) $ 2,974 0.6 Solutions-Industrial...... 68,055 68,559 65,689 (504) (0.7) 2,870 4.4 Solutions-Automotive...... 181,019 156,408 161,443 24,611 15.7 (5,035) (3.1) ------------------------------------------------------------------------------ Consolidated net sales.... $ 727,972 $ 736,254 $ 735,445 $ (8,282) (1.1) $ 809 0.1 ==============================================================================
25 Sales fluctuations during the periods were primarily due to changes in the general economy and the automotive industry. Sales in 2001 of $728.0 million decreased by $8.3 million or 1.1% from 2000, and sales in 2000 of $736.3 million increased $0.8 million or 0.1% over 1999. The 6.3% decrease and 0.6% growth in the Products segment in fiscal 2001 and 2000, respectively are primarily the result of soft US industrial markets during the entire period, that declined markedly during the fourth quarter of fiscal 2001. The 0.7% decrease and 4.4% growth in the Solutions--Industrial segment in fiscal 2001 and 2000, respectively, are due to the expansion of European operations offset by soft US industrial markets. The 15.7% increase and 3.1% decline in the Solutions--Automotive segment in fiscal 2001 and 2000, respectively, are due to the effects of a major automotive customer's project focus shifting from small cars to trucks and sport utility vehicles in fiscal 2000 that impacted its plant modification schedule. 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, 2001 2000 1999 ---- ---- ---- Products Segment sales.................. 65.8% 69.5% 69.1% Solutions - Industrial Segment sales.... 9.3 9.3 8.9 Solutions - Automotive Segment sales.... 24.9 21.2 22.0 ---- ---- ---- Net sales............................... 100.0 100.0 100.0 Cost of products sold................... 75.7 75.5 73.8 ---- ---- ---- Gross profit............................ 24.3 24.5 26.2 Selling expenses........................ 6.9 7.0 7.1 General and administrative expenses..... 5.5 6.1 5.4 Amortization of intangibles............. 2.2 2.2 2.1 --- --- --- Income from operations.................. 9.7 9.2 11.6 Interest and debt expense............... 5.2 4.7 4.9 Interest and other income............... 0.3 0.2 0.2 --- --- --- Income before income tax expense........ 4.8 4.7 6.9 Income tax expense...................... 2.7 2.4 3.2 --- --- --- Net income.............................. 2.1% 2.3% 3.7% === === === The Company's gross profit margins were approximately 24.3%, 24.5%, and 26.2% for 2001, 2000 and 1999, respectively. The decreases in gross profit margin for fiscal 2001 and 2000 are the result of varying effects among the Company's segments. The gross profit margin in the Products segment increased during both fiscal years as a result of the company's cost control efforts and integration of acquisitions, despite soft industrial markets and increasing energy costs. There was also a reclassification of certain crane builder expenses to cost of products sold from general and administrative in fiscal 2001. The Solutions--Industrial segment's gross profit margin decreased in fiscal 2001 as a result of low volumes in soft US industrial markets, increasing energy costs, and difficulties encountered at one of the Company's European facilities, while gross profit margin in fiscal 2000 was stable as a result of European expansion offset by softness in US industrial markets. The Solutions--Automotive segment's gross profit margin increased in fiscal 2001 on stronger volume while a decrease in gross profit margin in fiscal 2000 was primarily due to cost overruns on three international ASI projects and competitive pricing pressure. 26 Selling expenses were $50.4 million $50.5 million and $52.1 million in fiscal 2001, 2000, and 1999, respectively. As a percentage of consolidated net sales, selling expenses were 6.9%, 7.0%, and 7.1% in fiscal 2001, 2000 and 1999, respectively. The 2000 improvement reflects cost control efforts as well as a change in classification of certain ASI expenses to general and administrative. General and administrative expenses were $40.0 million, $45.2 million, and $39.9 million in fiscal 2001, 2000 and 1999, respectively. As a percentage of consolidated net sales, general and administrative expenses were 5.5%, 6.1%, and 5.4% in fiscal 2001, 2000 and 1999, respectively. The 2001 expense reduction is the result of cost control measures and reclassification of certain crane builder expenses into cost of products sold, offset by the incurrence of strategic alternatives evaluation expenses. The 2000 expenses were impacted by the additions of WECO and Abell-Howe, a change in classification of certain ASI expenses from selling, and the incurrence of proxy contest related expenses relative to the August 16, 1999 annual shareholders meeting and annual director elections. Amortization of intangibles was $16.0 million, $16.4 million, and $15.5 million in fiscal 2001, 2000 and 1999, respectively. Fiscal 2000 includes goodwill amortization for the WECO acquisition and a full year from the Abell-Howe and Camlok/Tigrip acquisitions. Income from operations increased $2.1 million, or 3.1% in fiscal 2001 and decreased $17.0 million, or 20.0% in fiscal 2000 compared to 1999. This is based on income from operations of $70.2 million, $68.0 million, and $85.1 million, or 9.6%, 9.2%, and 11.6% of consolidated net sales in fiscal 2001, 2000, and 1999, respectively. Interest and debt expense was $37.6 million, $34.7 million, and $35.9 million in fiscal 2001, 2000 and 1999, respectively. As a percentage of consolidated net sales, interest and debt expense was 5.2%, 4.7%, and 4.9% in fiscal 2001, 2000 and 1999, respectively. The fiscal 2001 increase is solely the result of increased interest rates. The fiscal 2000 decrease was primarily due to the payment of debt based on strong operating cash flow less funds used to finance acquisitions offset by increased interest rates. Interest and other income was $2.2 million, $1.3 million, and $1.6 million in fiscal 2001, 2000 and 1999, 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 56.2%, 50.7% and 45.9% in fiscal 2001, 2000 and 1999, respectively. The percentages reflect the effect of non-deductible goodwill amortization resulting from the business acquisitions, offset by the effects of favorable tax strategies. As a result of the above, net income decreased $1.9 million, or 10.9% in fiscal 2001 and $10.4 million or 37.7% in 2000 compared to net income in 1999. This is based on net income of $15.2 million, $17.1 million and $27.4 million or 2.1%, 2.3% and 3.7% of consolidated net sales in fiscal 2001, 2000 and 1999, respectively. 27 RESTRUCTURING COSTS In conjunction with the continuation of its strategic integration process, the Company announced on June 4, 2001 that it will be closing a major hoist manufacturing facility in Forrest City, Arkansas. Cumulative charges including lease termination and separation costs are expected to lead to an $8.8 million pretax charge in the first quarter of fiscal 2002. Pretax annual cost savings associated with the closure are expected to reach $7.25 million per year by fiscal 2003. 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. The Revolving Credit Facility as recently amended provides availability up to $225 million, due March 31, 2003, against which $202 million was outstanding at March 31, 2001. The recent amendment also modified certain financial covenants. Interest is payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 237.5 basis points at March 31, 2001. The Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. 28 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 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 $27.7 million in fiscal 2001, $36.7 million in 2000, and $57.5 million in 1999. The $9.0 million decrease in fiscal 2001 compared to fiscal 2000 is the result of an increase in net working capital components and deferred income taxes. 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. Operating assets net of liabilities used cash of $16.9 in fiscal 2001, $13.3 million in fiscal 2000, and provided cash of $4.4 million in fiscal 1999. Net cash used in investing activities was $7.3 million in fiscal 2001 compared to $18.9 million in 2000 and $23.9 million in 1999. The 2001 amount includes $5.0 million of proceeds from the sale of a portion of land included in net assets held for sale. 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 included in net assets held for sale. 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 2001, 2000 and 1999 were $10.2 million, $8.1 million and $13.0 million, respectively, excluding those capital assets acquired in conjunction with business acquisitions. The increased spending in Fiscal 2001 is the result of the decision to purchase property and a building of a previously leased facility. The lower spending in fiscal 2000 reflects a deferral of certain projects due to soft market conditions. 29 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 (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," in June of 1998. The FASB issued SFAS No. 137 in June of 1999 which defers the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. SFAS 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 would not have a material impact on the Company at the present time. During May 2001, the FASB announced that it has completed its deliberations concerning business combinations and accounting for intangible assets. Two final statements (one addressing business combinations and one addressing goodwill and other intangible assets) are expected to be issued in the latter half of July 2001. The new statement on business combinations will require the use of the purchase method of accounting for all business combinations initiated after June 30, 2001. The statement on goodwill and other intangible assets will require that existing goodwill or newly acquired goodwill and certain intangible assets will no longer be amortized, but will need to be tested for impairment. This statement will be effective for fiscal years beginning after December 15, 2001. Early adoption is permitted for companies with fiscal years beginning after March 15, 2001, provided they have not issued their first quarter financial statements. In all cases the statement must be adopted at the beginning of the fiscal year. At the present time, the Company has not determined the impact of adoption, or its expected date of adoption of the new statement addressing goodwill and other intangible assets. 30 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. 31 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 changes in interest rates. The Company may enter into financial instrument transactions, which attempt to manage and reduce the impact of such changes. 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 has not entered into financial instrument transactions related to raw material costs. Approximately 16% 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 has not invested 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, 2001, the Company does not have any such financial instruments in place. At March 31, 2001, approximately 50% of the Company's outstanding debt has fixed interest rates. At that date, the Company has approximately $205.5 million of variable rate non-current debt and a 1% fluctuation in interest rates would change future interest expense on that debt by approximately $2.1 million. 32 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. - ------- -------------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS COLUMBUS MCKINNON CORPORATION Audited Consolidated Financial Statements as of March 31, 2001: Report of Independent Auditors................................ F-2 Consolidated Balance Sheets................................... F-3 Consolidated Statements of Income............................. F-4 Consolidated Statements of Shareholders' Equity............... F-5 Consolidated Statements of Cash Flows......................... F-6 Notes to Consolidated Financial Statements.................... F-7 F-1 REPORT OF INDEPENDENT AUDITORS Board of Directors Columbus McKinnon Corporation We have audited the accompanying consolidated balance sheets of Columbus McKinnon Corporation as of March 31, 2001 and 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended March 31, 2001. Our audits also include the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Columbus McKinnon Corporation at March 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /S/ ERNST & YOUNG LLP Buffalo, New York June 26, 2001 F-2 COLUMBUS MCKINNON CORPORATION CONSOLIDATED BALANCE SHEETS
MARCH 31, 2001 2000 ----------------------- (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents....................................... $ 14,015 $ 7,582 Trade accounts receivable, less allowance for doubtful accounts ($2,429 and $2,236, respectively).................... 140,234 143,401 Unbilled revenues............................................... 26,813 24,447 Inventories..................................................... 113,218 108,291 Net assets held for sale........................................ 4,270 9,272 Prepaid expenses................................................ 5,655 6,181 ----------------------- Total current assets................................................. 304,205 299,174 Net property, plant, and equipment................................... 85,272 87,297 Goodwill and other intangibles, net.................................. 322,196 339,603 Marketable securities................................................ 22,326 23,193 Deferred taxes on income............................................. 5,696 4,237 Other assets......................................................... 7,318 6,320 ----------------------- Total assets......................................................... $ 747,013 $ 759,824 ======================= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks.......................................... $ 3,012 $ 2,677 Trade accounts payable.......................................... 44,936 49,621 Excess billings................................................. 1,623 4,288 Accrued liabilities............................................. 48,465 51,246 Current portion of long-term debt............................... 3,092 3,493 ----------------------- Total current liabilities............................................ 101,128 111,325 Senior debt, less current portion.................................... 204,326 210,684 Subordinated debt.................................................... 199,628 199,574 Other non-current liabilities........................................ 34,067 34,788 ----------------------- Total liabilities.................................................... 539,149 556,371 Shareholders' equity: Class A voting common stock; 50,000,000 shares authorized; 14,895,172 and 14,877,405 shares issued....................... 149 149 Additional paid-in capital...................................... 105,418 106,884 Retained earnings............................................... 124,806 113,582 ESOP debt guarantee; 504,794 and 606,559 shares................. (7,527) (8,703) Unearned restricted stock; 82,670 and 103,120 shares............ (955) (2,843) Accumulated other comprehensive loss............................ (14,027) (5,616) ----------------------- Total shareholders' equity........................................... 207,864 203,453 ----------------------- Total liabilities and shareholders' equity........................... $ 747,013 $ 759,824 ======================= See accompanying notes.
F-3 COLUMBUS MCKINNON CORPORATION CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED MARCH 31, 2001 2000 1999 ------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales...................................... $ 727,972 $ 736,254 $ 735,445 Cost of products sold.......................... 551,381 556,145 542,975 ------------------------------------------- Gross profit................................... 176,591 180,109 192,470 Selling expenses............................... 50,436 50,450 52,059 General and administrative expenses............ 40,003 45,225 39,850 Amortization of intangibles.................... 15,983 16,392 15,479 ------------------------------------------- 106,422 112,067 107,388 ------------------------------------------- Income from operations......................... 70,169 68,042 85,082 Interest and debt expense...................... 37,642 34,698 35,923 Interest and other income...................... 2,217 1,314 1,565 ------------------------------------------- Income before income tax expense............... 34,744 34,658 50,724 Income tax expense............................. 19,525 17,578 23,288 ------------------------------------------- Net income..................................... $ 15,219 $ 17,080 $ 27,436 =========================================== Earnings per share - basic................ $ 1.06 $ 1.21 $ 1.94 ======================================== Earnings per share - diluted.............. $ 1.06 $ 1.20 $ 1.92 ========================================
See accompanying notes. F-4 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, 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 canceled.................. - 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 Comprehensive income: Net income 2001.................... - - 15,219 - - - 15,219 Change in foreign currency translation adjustment........... - - - - - (5,039) (5,039) Net unrealized loss on investments. - - - - - (2,931) (2,931) Change in minimum pension liability adjustment............. - - - - - (441) (441) --------- Total comprehensive income......... - - - - - - 6,808 Earned 101,765 ESOP shares......... - (56) - 1,176 - - 1,120 Earned portion and adjustment of restricted shares................ - (1,501) - - 1,888 - 387 Stock options exercised, 19,340 shares........................... - 91 - - - - 91 Common dividends declared $0.28 per share.................. - - (3,995) - - - (3,995) ------------------------------------------------------------------------------------------- Balance at March 31, 2001.......... $ 149 $ 105,418 $ 124,806 $ (7,527) $ (955) $ (14,027) $ 207,864 ===========================================================================================
See accompanying notes. F-5 COLUMBUS MCKINNON CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 2001 2000 1999 ------------------------------------------- (IN THOUSANDS) OPERATING ACTIVITIES: Net income.................................................... $ 15,219 $ 17,080 $ 27,436 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................ 28,247 28,536 27,256 Deferred income taxes.................................... (46) 3,600 (2,235) Other.................................................... 1,148 823 624 Changes in operating assets and liabilities net of effects of businesses purchased: Trade accounts receivable, unbilled revenues and excess billings................................... (1,864) (20,081) 37 Inventories......................................... (4,927) 8,659 (865) Prepaid expenses.................................... 526 (164) 1,952 Other assets........................................ (984) 1,334 (96) Trade accounts payable.............................. (4,685) (6,329) (5,940) Accrued and non-current liabilities................. (4,944) 3,263 9,324 ------------------------------------------- Net cash provided by operating activities..................... 27,690 36,721 57,493 ------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net........................ (2,064) (3,318) (1,976) Capital expenditures.......................................... (10,239) (8,102) (12,992) Proceeds from sale of business................................ - - 8,801 Purchase of businesses, net of cash acquired.................. - (6,430) (19,958) Net assets held for sale...................................... 5,002 (1,058) 2,182 ------------------------------------------ Net cash used in investing activities......................... (7,301) (18,908) (23,943) ------------------------------------------ FINANCING ACTIVITIES: Proceeds from issuance of common stock, net................... - 3 - Net payments under revolving line-of-credit agreements........ (2,665) (9,313) (28,194) Repayment of debt............................................. (3,759) (2,514) (8,179) Deferred financing costs incurred............................. (687) (997) (1,272) Dividends paid ............................................... (3,995) (3,953) (3,725) Repurchase of stock by ESOP................................... - - (7,682) Change in ESOP debt guarantee................................. 1,176 1,162 1,020 ------------------------------------------ Net cash used in financing activities......................... (9,930) (15,612) (48,032) Effect of exchange rate changes on cash....................... (4,026) (1,486) (1,512) ------------------------------------------ Net change in cash and cash equivalents....................... 6,433 715 (15,994) Cash and cash equivalents at beginning of year................ 7,582 6,867 22,861 ------------------------------------------ Cash and cash equivalents at end of year...................... $ 14,015 $ 7,582 $ 6,867 ========================================== Supplementary cash flows data: Interest paid............................................ $ 38,077 $ 35,176 $ 27,595 Income taxes paid........................................ $ 20,287 $ 17,614 $ 22,829
See accompanying notes. F-6 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS AND BUSINESS ACQUISITIONS Columbus McKinnon Corporation (the Company) is a 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. During fiscal 2001, approximately 78% 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 prior consolidated financial statements have been restated to include the accounts of GL. 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-7 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. 2. ACCOUNTING PRINCIPLES AND PRACTICES CASH AND CASH EQUIVALENTS The Company considers as cash equivalents all highly liquid investments with an original maturity of three months or less. CONCENTRATIONS OF LABOR Approximately 30% of the Company's employees are represented by twelve separate domestic and Canadian collective bargaining agreements which terminate at various times between July 31, 2001 and March 31, 2004. Approximately 4% of the labor force is covered by collective bargaining agreements that will expire within one year. In addition, the Company hires union production workers for field installation under its material handling systems contracts. F-8 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. ACCOUNTING PRINCIPLES AND PRACTICES (CONTINUED) CONSOLIDATION These consolidated financial statements include the accounts of the Company and its domestic and foreign subsidiaries; all significant intercompany accounts and transactions have been eliminated. 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. Goodwill is amortized on a straight-line basis over twenty-five years. At March 31, 2001 and 2000 accumulated amortization was $62,239,000 and $46,256,000, respectively. INVENTORIES Inventories are valued at the lower of cost or market. Costs of approximately 46% of inventories at March 31, 2001 (48% in 2000) 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-9 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. ACCOUNTING PRINCIPLES AND PRACTICES (CONTINUED) MARKETABLE SECURITIES All of the Company's marketable securities, which consist of equity securities and corporate and governmental obligations, have been classified as available-for-sale securities and are therefore 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 2001 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 2002. They have been recorded at their estimated realizable values net of disposal costs, separately reflected on the consolidated balance sheet and amounting to $4,270,000 and $9,272,000 as of March 31, 2001 and 2000, 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. RESEARCH AND DEVELOPMENT Research and development costs as defined in FAS No. 2, for the years ended March 31, 2001, 2000 and 1999 were $1,507,000, $1,556,000 and $1,663,000, respectively. F-10 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. ACCOUNTING PRINCIPLES AND PRACTICES (CONTINUED) REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK Sales are recorded when title passes to the customer which is generally at time of shipment to the customer, except for long-term construction contracts as described below. The Company performs ongoing credit evaluations of its customers' financial condition, but generally does not require collateral to support customer receivables. The credit risk is controlled through credit approvals, limits and monitoring procedures. The Company established an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other factors. 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, 2001, approximately $33 million ($21 million in 2000) of trade accounts receivable was concentrated in the automotive industry, including retainages amounting to $5,525,000 ($7,484,000 in 2000). The accounts receivable included $23,215,000 ($17,861,000 in 2000) due from General Motors Corporation. This one customer accounted for $108,886,000, $99,097,000, and $96,663,000 or 15%, 13%, and 13% of consolidated net sales which are included within the Solutions - Automotive segment for the years ended March 31, 2001, 2000, and 1999, respectively. SHIPPING AND HANDLING COSTS Shipping and handling costs are a component of cost of goods sold. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. F-11 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. UNBILLED REVENUES AND EXCESS BILLINGS MARCH 31, 2001 2000 ----------------------- (IN THOUSANDS) Costs incurred on uncompleted contracts........ $ 491,373 $ 368,140 Estimated earnings............................. 75,551 64,497 ----------------------- Revenues earned to date........................ 566,924 432,637 Less billings to date.......................... 541,734 412,478 ----------------------- $ 25,190 $ 20,159 ======================= The net amounts above are included in the consolidated balance sheets under the following captions: MARCH 31, 2001 2000 ----------------------- (IN THOUSANDS) Unbilled revenues.............................. $ 26,813 $ 24,447 Excess billings................................ (1,623) (4,288) ----------------------- $ 25,190 $ 20,159 ======================= 4. INVENTORIES Inventories consisted of the following: MARCH 31, 2001 2000 ----------------------- (IN THOUSANDS) At cost--FIFO basis: Raw materials............................. $ 60,908 $ 57,198 Work-in-process........................... 17,110 20,240 Finished goods............................ 41,850 38,329 ----------------------- 119,868 115,767 LIFO cost less than FIFO cost.................. (6,650) (7,476) ----------------------- Net inventories................................ $ 113,218 $ 108,291 ======================= F-12 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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, 2001:
GROSS GROSS ESTIMATED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ------------------------------------------------ (IN THOUSANDS) Government securities......... $ 6,265 $ 305 $ - $ 6,570 Equity securities............. 16,226 3,043 3,513 15,756 ------------------------------------------------ $ 22,491 $ 3,348 $ 3,513 $ 22,326 ================================================
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 ================================================
The amortized cost and estimated fair value of debt and equity securities at March 31, 2001, by contractual maturity, are shown below:
ESTIMATED FAIR COST VALUE ----------------------- (IN THOUSANDS) Due in one year or less............................... $ 1,564 $ 1,564 Due after three years................................. 4,701 5,006 ----------------------- 6,265 6,570 Equity securities..................................... 16,226 15,756 ----------------------- $ 22,491 $ 22,326 =======================
F-13 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. MARKETABLE SECURITIES (CONTINUED) Net unrealized gain or loss included in the balance sheet amounted to $165,000 loss at March 31, 2001 and a $4,720,000 gain at March 31, 2000. The amounts, net of related income taxes of $(66,000) and $1,888,000 at March 31, 2001 and 2000, 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, 2001 2000 ----------------------- (IN THOUSANDS) Land and land improvements................................ $ 6,643 $ 5,032 Buildings................................................. 36,842 33,000 Machinery, equipment, and leasehold improvements.......... 104,588 98,842 Construction in progress.................................. 2,812 3,310 ----------------------- 150,885 140,184 Less accumulated depreciation............................. 65,613 52,887 ----------------------- Net property, plant, and equipment........................ $ 85,272 $ 87,297 ========================
7. ACCRUED LIABILITIES AND OTHER NON-CURRENT LIABILITIES Consolidated accrued liabilities of the Company included the following:
MARCH 31, 2001 2000 ----------------------- (IN THOUSANDS) Accrued payroll........................................... $ 14,195 $ 17,012 Accrued pension cost...................................... 2,579 4,262 Interest payable.......................................... 9,481 9,916 Income taxes payable...................................... 3,331 4,649 Other accrued liabilities................................. 18,879 15,407 ----------------------- $ 48,465 $ 51,246 =======================
F-14 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. ACCRUED LIABILITIES AND OTHER NON-CURRENT LIABILITIES (CONTINUED) Consolidated other non-current liabilities of the Company included the following:
MARCH 31, 2001 2000 ----------------------- (IN THOUSANDS) Accumulated postretirement benefit obligation....................................... $ 12,640 $ 13,970 Accrued general and product liability costs......................................... 15,388 14,550 Other non-current liabilities....................................................... 6,039 6,268 ----------------------- $ 34,067 $ 34,788 =======================
8. LONG-TERM DEBT Consolidated long-term debt of the Company consisted of the following:
MARCH 31, 2001 2000 ----------------------- (IN THOUSANDS) Revolving Credit Facility with availability up to $225 million, due March 31, 2003, with interest payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 237.5 basis points at March 31, 2001 (7.76% and 8.02% at March 31, 2001 and 2000)................................ $ 202,000 $ 205,000 Term loan of foreign subsidiary due December 30, 2001, with interest payable monthly at 4.255%........................................................ 1,870 3,398 Employee Stock Ownership Plan term loans payable in quarterly installments of $148 through January 2002 and $564 in April 2002 plus interest payable at a Eurodollar rate based on LIBOR plus a spread determined by the Company's leverage ratio (8.51% and 8.18% at March 31, 2001 and 2000................................................. 1,415 2,008 Industrial Development Revenue Bonds paid in full during Fiscal 2001................ - 986 Other senior debt................................................................... 2,133 2,785 ----------------------- Total senior debt................................................................... 207,418 214,177 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 $372 ($426 at March 31, 2000)..................... 199,628 199,574 ----------------------- Total............................................................................... 407,046 413,751 Less current portion................................................................ 3,092 3,493 ----------------------- $ 403,954 $ 410,258 =======================
F-15 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. LONG-TERM DEBT (CONTINUED) The Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. The corresponding credit agreement places certain debt covenant restrictions on the Company including, but not limited to, maximum annual cash dividends of $10 million. The 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 $174,000,000 which is less than the carrying cost of $199,628,000. 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 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, 2001 on the above debt, for the next five annual periods subsequent thereto, are as follows (in thousands): 2002.......................................... $ 3,092 2003.......................................... 202,856 2004.......................................... 206 2005.......................................... 145 2006.......................................... 106 It is management's intent to refinance the Revolving Credit Facility when it comes due in fiscal 2003. As of March 31, 2001, the Company had letters of credit outstanding of $3.6 million. F-16 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. RETIREMENT PLANS The Company provides defined benefit pension plans to certain employees. The following provides a reconciliation of benefit obligation, plan assets, and funded status of plans:
MARCH 31, 2001 2000 ------------------------ (IN THOUSANDS) Change in benefit obligation: Benefit obligation at beginning of year................. $ 71,320 $ 70,621 Service cost............................................ 3,772 4,329 Interest cost........................................... 5,099 4,805 Effect of amendments.................................... - 115 Actuarial gain.......................................... (1,821) (5,359) Benefits paid........................................... (3,362) (3,191) ------------------------ Benefit obligation at end of year...................... $ 75,008 $ 71,320 ======================== Change in plan assets: Fair value of plan assets at beginning of year.......... $ 73,464 $ 66,276 Actual return on plan assets............................ 1,079 6,984 Employer contribution................................... 5,001 3,395 Benefits paid........................................... (3,362) (3,191) ------------------------ Fair value of plan assets at end of year................ $ 76,182 $ 73,464 ======================== Funded Status .......................................... $ 1,174 $ 2,144 Unrecognized transition amount.......................... (28) (57) Unrecognized actuarial gain............................. (1,872) (5,353) Unrecognized prior service cost......................... 1,607 1,850 ------------------------ Net amount recognized................................... $ 881 $ (1,416) ======================== Amounts recognized in the consolidated balance sheets are as follows: Intangible asset........................................ $ 1,029 $ 1,158 Accrued liabilities..................................... (2,020) (3,710) Deferred tax effect of equity charge.................... 749 454 Accumulated other comprehensive income.................. 1,123 682 ----------------------- Net amount recognized................................... $ 881 $ (1,416) =======================
F-17 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 9. RETIREMENT PLANS (CONTINUED) Net periodic pension cost included the following components:
YEAR ENDED MARCH 31, 2001 2000 1999 ------------------------------------- (IN THOUSANDS) Service costs--benefits earned during the period.......... $ 3,772 $ 4,329 $ 3,151 Interest cost on projected benefit obligation............. 5,099 4,805 4,489 Expected return on plan assets............................ (6,303) (5,732) (5,124) Net amortization.......................................... 136 251 167 ------------------------------------- Net periodic pension cost................................. $ 2,704 $ 3,653 $ 2,683 =====================================
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 $57,644,000 and $55,546,000, respectively as of March 31, 2001 and $10,992,000 and $8,122,000, respectively as of March 31, 2000. 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 $10,973,000 and $9,363,000, respectively as of March 31, 2001 and $10,237,000 and $8,122,000, respectively as of March 31, 2000. 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% as of March 31, 2001 and 2000. Future average compensation increases are assumed to be 4.5% per year as of March 31, 2001 and 2000. 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, 2001, 2000 and 1999. 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 $2,190,000, $1,660,000 and $1,410,000 for the years ended March 31, 2001, 2000 and 1999, respectively. F-18 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) The AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans" requires that compensation expense for ESOP shares be measured based on the fair value of those shares when committed to be released to employees, rather than based on their original cost. Also, dividends on those ESOP shares that have not been allocated or committed to be released to ESOP participants are not reflected as a reduction of retained earnings. Rather, since those dividends are used for debt service, a charge to compensation expense is recorded. Furthermore, ESOP shares that have not been allocated or committed to be released are not considered outstanding for purposes of calculating earnings per share. The obligation of the ESOP to repay borrowings incurred to purchase shares of the Company's common stock is guaranteed by the Company; the unpaid balance of such borrowings, therefore, has been reflected in the accompanying consolidated balance sheet as a liability. An amount equivalent to the cost of the collateralized common stock and representing deferred employee benefits has been recorded as a deduction from shareholders' equity. Substantially all of the Company's domestic non-union employees are participants in the ESOP. Contributions to the plan result from the release of collateralized shares as debt service payments are made. Compensation expense amounting to $1,120,000, $1,752,000 and $2,128,000 in fiscal 2001, 2000 and 1999, respectively, is recorded based on the guaranteed release of the ESOP shares at their fair market value. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings and are applied toward debt service. 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, 2001 and 2000, 953,851 and 889,555 of ESOP shares, respectively, were allocated or available to be allocated to participants' accounts. At March 31, 2001 and 2000, 504,794 and 606,559 of ESOP shares were pledged as collateral to guarantee the ESOP term loans. The fair market value of unearned ESOP shares at March 31, 2001 amounted to $3,944,000. F-19 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. 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, 2001 2000 ----------------------- (IN THOUSANDS) Change in benefit obligation: Benefit obligation at beginning of year......................... $ 11,640 $ 12,412 Service cost.................................................... 80 84 Interest cost................................................... 820 816 Actuarial loss (gain)........................................... 1,509 (170) Benefits paid................................................... (1,423) (1,502) ----------------------- Benefit obligation at end of year............................... $ 12,626 $ 11,640 ======================= Funded status .................................................. $ (12,626) $ (11,640) Unrecognized actuarial loss..................................... 2,407 898 Unrecognized prior service gain................................. (2,421) (3,228) ----------------------- Net amount recognized in other non-current liabilities.......... $ (12,640) $ (13,970) =======================
Net periodic postretirement benefit cost included the following:
YEAR ENDED MARCH 31, 2001 2000 1999 ------------------------------------- (IN THOUSANDS) Service cost--benefits attributed to service during the period..... $ 80 $ 84 $ 257 Interest cost...................................................... 820 816 1,061 Amortization of prior service gain................................. (807) (807) - ------------------------------------- Net periodic postretirement benefit cost...................... $ 93 $ 93 $ 1,318 =====================================
F-20 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. POSTRETIREMENT BENEFIT OBLIGATION (CONTINUED) For measurement purposes, an 8.0% annual rate of increase in the per capita cost of postretirement medical benefits was assumed at the beginning of the period; the rate was assumed to decrease 1.0% per year to 5.0% by 2004. The discount rate used in determining the accumulated postretirement benefit obligation was 7.5% as of March 31, 2001 and 2000. 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.......... $ 50 $ (45) Effect on postretirement obligation.............................. 589 (536)
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:
YEAR ENDED MARCH 31, 2001 2000 1999 ------------------------------------- (IN THOUSANDS) Numerator for basic and diluted earnings per share: Net income.................................................. $ 15,219 $ 17,080 $ 27,436 ===================================== Denominators: Weighted-average common stock outstanding--denominator for basic EPS............................................. 14,316 14,138 14,137 Effect of dilutive employee stock options................... - 83 157 ------------------------------------- Adjusted weighted-average common stock outstanding and assumed conversions--denominator for diluted EPS.......... 14,316 14,221 14,294 =====================================
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note 10). F-21 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. EARNINGS PER SHARE AND STOCK PLANS (CONTINUED) 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. As of March 31, 2001, all 154,848 options have been exercised. A summary of option transactions during each of the three fiscal years in the period ended March 31, 2001 is as follows:
YEAR ENDED MARCH 31, NUMBER OF SHARES 2001 2000 1999 ---------------- ------------------------------------- Outstanding at beginning of year............ 674,750 353,348 354,848 Granted..................................... 32,700 481,410 31,000 Canceled.................................... (16,575) (7,000) (32,500) Exercised................................... (19,340) (153,008) - ------------------------------------- Outstanding at end of year.................. 671,535 674,750 353,348 ===================================== Exercisable at end of year.................. 241,285 137,840 247,348 Available for grant at end of year.......... 810,965 827,090 1,301,500
F-22 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. EARNINGS PER SHARE AND STOCK PLANS (CONTINUED) Exercise prices for options outstanding as of March 31, 2001, ranged from $9.00 to $29.00. The following table provides certain information with respect to stock options outstanding at March 31, 2001:
WEIGHTED-AVERAGE STOCK OPTIONS WEIGHTED-AVERAGE REMAINING CONTRACTUAL RANGE OF EXERCISE PRICES OUTSTANDING EXERCISE PRICE LIFE ------------------------ ---------------------------------------------------------------- Under $10.00.............. 22,950 $ 9.13 9.8 $10.00 to $20.00.......... 158,100 15.36 5.9 $20.01 to $30.00.......... 490,485 21.26 8.0 ---------------------------------------------------------------- 671,535 $19.46 7.6 ================================================================
The following table provides certain information with respect to stock options exercisable at March 31, 2001:
STOCK OPTIONS WEIGHTED-AVERAGE RANGE OF EXERCISE PRICES OUTSTANDING EXERCISE PRICE ------------------------ -------------------------------------- Under $10.00................... - $ - $10.00 to $20.00............... 150,225 15.50 $20.01 to $30.00............... 91,060 21.89 -------------------------------------- 241,825 $ 17.91 ======================================
The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FAS No. 123, "Accounting for Stock-Based Compensation," requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the grant date and the number of options granted is fixed, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by FAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The Black-Scholes option valuation model was developed for use in 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. F-23 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. EARNINGS PER SHARE AND STOCK PLANS (CONTINUED) 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, 2001 2000 1999 ------------------------------------------- (IN THOUSANDS, EXCEPT FOR ASSUMPTIONS AND EARNINGS PER SHARE DATA) Assumptions: Risk-free interest rate 5.2% 6.1% 5.5% Dividend yield - Incentive Plan 2.9% 1.35% 0.97% Dividend yield - GL conversions N/A N/A 1.33% Volatility factor 0.435 0.352 0.200 Expected life - Incentive Plan 5 years 5 years 4 years Expected life - GL conversions N/A N/A 1 year Pro forma results: Net income $ 14,809 $ 16,099 $ 25,567 Earnings per share, basic 1.03 1.14 1.81 Earnings per share, diluted 1.03 1.13 1.79
The Company maintains a Restricted Stock Plan, under which the Company had no shares reserved for issuance at March 31, 2001 and 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 and 19,500 shares issued during the years ended March 31, 2000 and 1999, respectively. 13. LOSS CONTINGENCIES GENERAL AND PRODUCT LIABILITY - $14,663,000 of the accrued general and product liability costs which are included in other non-current liabilities at March 31, 2001 ($13,118,000 at March 31, 2000) are the actuarial present value of estimated reserves based on an amount determined from loss reports and individual cases filed with the Company and an amount, based on experience, for losses incurred but not reported. The accrual in these consolidated financial statements was determined by applying a discount factor based on interest rates customarily used in the insurance industry, between 6.09% and 8.42%, to the undiscounted reserves of $18,620,000 and $16,866,000 at March 31, 2001 and 2000, respectively. This liability is funded by investments in marketable securities (see Notes 2 and 5). F-24 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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, 2001 2000 1999 ------------------------------------- (IN THOUSANDS) Computed statutory provision............................ $ 12,160 $ 12,121 $ 17,753 State income taxes net of federal benefit............... 1,972 1,974 1,767 Nondeductible goodwill amortization..................... 4,506 4,506 4,540 Foreign taxes greater than statutory provision.......... 931 884 790 Research and development credit......................... (400) (400) (639) Other................................................... 356 (1,507) (923) ------------------------------------- Actual tax provision.................................... $ 19,525 $ 17,578 $ 23,288 =====================================
The provision for income tax expense consisted of the following:
YEAR ENDED MARCH 31, 2001 2000 1999 ------------------------------------- (IN THOUSANDS) Current income tax expense: Federal taxes...................................... $ 13,214 $ 8,391 $ 18,775 State taxes........................................ 2,745 2,253 2,770 Foreign............................................ 3,612 3,334 3,978 Deferred income tax (benefit) expense: Domestic........................................... 392 3,380 (2,298) Foreign............................................ (438) 220 63 ------------------------------------- $ 19,525 $ 17,578 $ 23,288 =====================================
The Company applies the liability method of accounting for income taxes as required by FAS Statement No. 109, "Accounting for Income Taxes." The gross composition of the net current deferred tax liability, included in accrued liabilities within the consolidated balance sheet, is as follows:
MARCH 31, 2001 2000 ---------------------- (IN THOUSANDS) Inventory............................................................. $ (5,935) $ (4,929) Accrued vacation and incentive costs.................................. 1,867 1,757 Other................................................................. 3,326 2,492 ----------------------- Net current deferred tax liability............................... $ (742) $ (680) =======================
F-25 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14. INCOME TAXES (CONTINUED) The gross composition of the net non-current deferred tax asset is as follows:
MARCH 31, 2001 2000 ----------------------- (IN THOUSANDS) Insurance reserves............................... $ 9,560 $ 10,242 Property, plant, and equipment................... (6,524) (6,514) Other............................................ 2,660 509 ----------------------- Net non-current deferred tax asset.......... $ 5,696 $ 4,237 =======================
Income before income tax expense includes foreign subsidiary income of $6,410,000, $7,551,000, and $9,288,000 for the years ended March 31, 2001, 2000, and 1999 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, 2001, 2000 and 1999 was $7,676,000, $6,279,000, and $6,672,000, respectively. The following amounts represent future minimum payment commitments as of March 31, 2001 under non-cancelable operating leases extending beyond one year (in thousands):
VEHICLES AND YEAR ENDED MARCH 31, REAL PROPERTY EQUIPMENT TOTAL -------------------- ------------- --------- ------- 2002..................................... $ 2,143 $ 2,531 $ 4,674 2003..................................... 1,886 1,738 3,624 2004..................................... 1,687 1,299 2,986 2005..................................... 1,555 653 2,208 2006..................................... 1,265 207 1,472
F-26 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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, 2001: DOMESTIC FOREIGN PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------------------------------------------------------------------------- (IN THOUSANDS) AS OF MARCH 31, 2001: Current assets: Cash..................................... $ 11,017 $ (1,865) $ 4,863 $ - $ 14,015 Trade accounts receivable and unbilled revenues...................... 65,932 79,442 21,673 - 167,047 Inventories.............................. 47,012 38,125 29,055 (974) 113,218 Other current assets..................... 5,368 1,369 3,188 - 9,925 -------------------------------------------------------------------------- Total current assets.................. 129,329 117,071 58,779 (974) 304,205 Net property, plant, and equipment............ 34,599 32,722 17,951 - 85,272 Goodwill and other intangibles, net........... 38,992 236,583 46,621 - 322,196 Intercompany balances......................... 168,763 (334,599) (63,864) 229,700 - Other non-current assets...................... 226,711 161,325 (2,017) (350,679) 35,340 -------------------------------------------------------------------------- Total assets.......................... $ 598,394 $ 213,102 $ 57,470 $ (121,953) $ 747,013 =========================================================================== Current liabilities........................... $ 39,673 $ 39,851 $ 21,966 $ (362) $ 101,128 Long-term debt, less current portion.......... 400,137 2 3,815 - 403,954 Other non-current liabilities................. 15,529 15,804 2,734 - 34,067 -------------------------------------------------------------------------- Total liabilities..................... 455,339 55,657 28,515 (362) 539,149 Shareholders' equity.......................... 143,055 157,445 28,955 (121,591) 207,864 -------------------------------------------------------------------------- Total liabilities and shareholders' equity........................... $ 598,394 $ 213,102 $ 57,470 $ (121,953) $ 747,013 ========================================================================== FOR THE YEAR ENDED MARCH 31, 2001: Net sales..................................... $ 252,128 $ 379,477 $ 119,475 $ (23,108) $ 727,972 Cost of products sold......................... 175,181 308,957 90,260 (23,017) 551,381 -------------------------------------------------------------------------- Gross profit.................................. 76,947 70,520 29,215 (91) 176,591 Selling, general and administrative expenses.. 39,800 30,522 20,117 - 90,439 Amortization of intangibles................... 2,011 11,543 2,429 - 15,983 -------------------------------------------------------------------------- 41,811 42,065 22,546 - 106,422 -------------------------------------------------------------------------- Income from operations........................ 35,136 28,455 6,669 (91) 70,169 Interest and debt expense..................... 37,019 45 578 - 37,642 Interest and other income..................... 1,621 293 303 - 2,217 -------------------------------------------------------------------------- Income before income tax expense.............. (262) 28,703 6,394 (91) 34,744 Income tax expense............................ 1,729 14,672 3,161 (37) 19,525 -------------------------------------------------------------------------- Net (loss) income............................. $ (1,991) $ 14,031 $ 3,233 $ (54) $ 15,219 ==========================================================================
F-27 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16. SUMMARY FINANCIAL INFORMATION (CONTINUED)
DOMESTIC FOREIGN PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------------------------------------------------------------------------- (IN THOUSANDS) FOR THE YEAR ENDED MARCH 31, 2001: OPERATING ACTIVITIES: Cash provided by (used in) operating activities.................................. $ 19,831 $ (123) $ 9,054 $ (1,072) $ 27,690 INVESTING ACTIVITIES: Purchase of marketable securities, net........ (2,064) - - - (2,064) Capital expenditures.......................... (4,419) (5,021) (799) - (10,239) Net assets held for sale...................... - 5,002 - - 5,002 --------------------------------------------------------------------------- Net cash used in investing activities......... (6,483) (19) (799) - (7,301) FINANCING ACTIVITIES: Net (payments) borrowings under revolving line-of-credit agreements................... (3,000) - 335 - (2,665) Repayment of debt............................. (1,579) (22) (2,158) - (3,759) Dividends paid................................ (3,995) - (1,072) 1,072 (3,995) Other......................................... 489 - - - 489 -------------------------------------------------------------------------- Net cash (used in) provided by financing activities................................. (8,085) (22) (2,895) 1,072 (9,930) Effect of exchange rate changes on cash....... - - (4,026) - (4,026) -------------------------------------------------------------------------- Net change in cash and cash equivalents....... 5,263 (164) 1,334 - 6,433 Cash and cash equivalents at beginning of year.......................... 5,754 (1,701) 3,529 - 7,582 -------------------------------------------------------------------------- Cash and cash equivalents at end of year...... $ 11,017 $ (1,865) $ 4,863 $ - $ 14,015 ========================================================================== As of and for the year ended March 31, 2000: 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 ==========================================================================
F-28 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16. SUMMARY FINANCIAL INFORMATION (CONTINUED)
DOMESTIC FOREIGN PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED -------------------------------------------------------------------------- (IN THOUSANDS) 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 tax expense.............. 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 ========================================================================== 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 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 (1,580) 1,580 (3,953) Other......................................... 165 - - - 165 -------------------------------------------------------------------------- Net cash (used in) provided by financing activities................................. (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 ==========================================================================
F-29 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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, and to a lesser extent directly to manufacturers and other end-users. 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, 2001, 2000, and 1999, is as follows:
YEAR ENDED MARCH 31, 2001 ------------------------- SOLUTIONS - SOLUTIONS - PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL --------------------------------------------------- (IN THOUSANDS) Sales to external customers................... $ 478,898 $ 68,055 $ 181,019 $ 727,972 Operating income before amortization.......... 72,491 3,597 10,064 86,152 Depreciation and amortization................. 19,859 2,798 5,590 28,247 Total assets.................................. 487,551 64,835 194,627 747,013 Capital expenditures.......................... 9,889 297 53 10,239 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 F-30 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 17. BUSINESS SEGMENT INFORMATION (CONTINUED) 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
The following provides a reconciliation of operating income before amortization to consolidated income before income tax expense:
YEAR ENDED MARCH 31, -------------------- 2001 2000 1999 ------------------------------------- (IN THOUSANDS) Operating income before amortization.......... $ 86,152 $ 84,434 $ 100,561 Amortization of intangibles................... (15,983) (16,392) (15,479) Interest and debt expense..................... (37,642) (34,698) (35,923) Interest and other income..................... 2,217 1,314 1,565 ------------------------------------- Income before income tax expense.............. $ 34,744 $ 34,658 $ 50,724 =====================================
Financial information relating to the Company's operations by geographic area is as follows:
YEAR ENDED MARCH 31, -------------------- 2001 2000 1999 ------------------------------------- (IN THOUSANDS) NET SALES: United States................................. $ 611,999 $ 609,734 $ 613,179 Europe........................................ 71,967 71,076 65,000 Canada........................................ 36,635 49,716 51,653 Other......................................... 7,371 5,728 5,613 ------------------------------------- Total......................................... $ 727,972 $ 736,254 $ 735,445 ===================================== YEAR ENDED MARCH 31, -------------------- 2001 2000 1999 ------------------------------------- (IN THOUSANDS) ASSETS: United States................................. $ 625,679 $ 632,796 $ 634,720 Europe........................................ 94,908 95,601 100,317 Canada........................................ 21,936 27,130 28,265 Other......................................... 4,490 4,297 3,609 ------------------------------------- Total......................................... $ 747,013 $ 759,824 $ 766,911 =====================================
F-31 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED YEAR ENDED ------------------ ---------- JULY 2, OCTOBER 1, DECEMBER 31, MARCH 31, MARCH 31, 2000 2000 2000 2001 2001 ------------------------------------------------------------------ Net sales............................... $ 188,378 $ 188,994 $ 175,078 $ 175,522 $ 727,972 Gross profit............................ 47,214 44,990 39,534 44,853 176,591 Income from operations.................. 20,378 18,680 13,672 17,439 70,169 Net income.............................. 5,946 4,388 1,296 3,589 15,219 Net income per share - basic ........... 0.42 0.31 0.09 0.25 1.06 Net income per share - diluted.......... 0.42 0.31 0.09 0.25 1.06 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 Net income.............................. 6,395 511 3,254 6,920 17,080 Net income per share - basic............ 0.46 0.04 0.23 0.49 1.21 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 Net income.............................. 6,375 5,923 6,445 8,693 27,436 Net income per share - basic............ 0.44 0.41 0.46 0.62 1.94 Net income per share - diluted......... 0.44 0.41 0.46 0.62 1.92
19. ACCUMULATED OTHER COMPREHENSIVE LOSS The components of accumulated other comprehensive loss are as follows:
MARCH 31, 2001 2000 ------------------------ (IN THOUSANDS) Net unrealized investment (losses) gains - net of tax.......... $ (99) $ 2,832 Minimum pension liability adjustment - net of tax.............. (1,123) (682) Foreign currency translation adjustment........................ (12,805) (7,766) ------------------------ Accumulated other comprehensive loss........................... $ (14,027) $ (5,616) ========================
The net tax asset/(liability) associated with items included in accumulated other comprehensive loss was $815,000 and ($1,433,000) for 2001 and 2000, respectively. F-32 COLUMBUS MCKINNON CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 20. EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," in June of 1998. The FASB issued SFAS No. 137 in June of 1999 which defers the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. SFAS 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 would not have a material impact on the Company at the present time. During May 2001, the FASB announced that it has completed its deliberations concerning business combinations and accounting for intangible assets. Two final statements (one addressing business combinations and one addressing goodwill and other intangible assets) are expected to be issued in the latter half of July 2001. The new statement on business combinations will require the use of the purchase method of accounting for all business combinations initiated after June 30, 2001. The statement on goodwill and other intangible assets will require that existing goodwill or newly acquired goodwill and certain intangible assets will no longer be amortized, but will need to be tested for impairment. This statement will be effective for fiscal years beginning after December 15, 2001. Early adoption is permitted for companies with fiscal years beginning after March 15, 2001, provided they have not issued their first quarter financial statements. In all cases the statement must be adopted at the beginning of the fiscal year. At the present time, the Company has not determined the impact of adoption, or its expected date of adoption of the new statement addressing goodwill and other intangible assets. 21. SUBSEQUENT EVENT In conjunction with the continuation of its strategic integration process, the Company announced on June 4, 2001 that it will be closing a major hoist manufacturing facility in Forrest City, Arkansas. Cumulative charges including lease termination and separation costs are expected to lead to an $8.8 million pretax charge in the first quarter of fiscal 2002. Pretax annual cost savings associated with the closure are expected to reach $7.25 million per year by fiscal 2003. F-33 COLUMBUS MCKINNON CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS MARCH 31, 2001, 2000 AND 1999 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, 2001: Deducted from asset accounts: Allowance for doubtful accounts $ 2,236 $ 1,307 $ - $ 1,114(1) $ 2,429 Slow-moving and obsolete inventory 4,185 1,373 - 1,610(2) 3,948 --------- --------- --------- --------- --------- Total $ 6,421 $ 2,680 $ - $ 2,724 $ 6,377 ========= ========= ========= ========= ========= Reserves on balance sheet: Accrued general and product liability costs $ 14,550 $ 2,356 $ - $ 1,518(3) $ 15,388 ========= ========= ========= ========= ========= 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 ========= ========= ========== ========= ========= - -------- (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. 33 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. - -------- --------------------------------------------------- The information regarding Directors and Executive Officers of the Registrant will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2001. ITEM 11. EXECUTIVE COMPENSATION - -------- ---------------------- The information regarding Executive Compensation will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2001. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- -------------------------------------------------------------- The information regarding Security Ownership of Certain Beneficial Owners and Management will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2001. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ---------------------------------------------- The information regarding Certain Relationships and Related Transactions will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2001. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. - -------- ----------------------------------------------------------------- (a)(1) FINANCIAL STATEMENTS: -------------------- The following consolidated financial statements of Columbus McKinnon Corporation are included in Item 8: REFERENCE PAGE NO. --------- -------- Report of Independent Auditors F-2 Consolidated balance sheets - March 31, 2001 and 2000 F-3 Consolidated statements of income - Years ended March 31, 2001, 2000 and 1999 F-4 Consolidated statements of shareholders' equity - Years ended March 31, 2001, 2000 and 1999 F-5 Consolidated statements of cash flows - Years ended March 31, 2001, 2000 and 1999 F-6 Notes to consolidated financial statements F-7 - F-33 34 (a)(2) FINANCIAL STATEMENT SCHEDULE: PAGE NO. ----------------------------- -------- 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. (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). 35 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). 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). 36 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). 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). 37 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). 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 Fifth Amendment, dated as of September 28, 2000, to the Credit Agreement, dated as of March 31,1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended October 1, 2000). 38 10.17 Sixth Amendment, dated as of February 5, 2001, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2000). #10.18 Seventh Amendment, dated as of June 26, 2001, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent. *10.19 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). *10.20 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). *10.21 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). *10.22 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). *10.23 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). *10.24 Amendment No. 5 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated August 28, 1997 (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998). *10.25 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). 39 *10.26 Amendment No. 7 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated April 30, 2000 (incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). *10.27 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). *10.28 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). *10.29 Amended and Restated Columbus McKinnon Corporation Management EVA(R) Incentive Compensation 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, 2000). *10.30 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). *10.31 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). *10.32 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). *10.33 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). *10.34 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). *10.35 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift 401 (K) Plan, dated June 1, 2000 (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 40 *10.36 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). *10.37 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). *10.38 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). *10.39 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). *10.40 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). *10.41 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). 10.42 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). 10.43 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). 10.44 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). 10.45 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). 41 *10.46 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 (incorporated by reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000). 10.47 Amendment to 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 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2000). #21.1 Subsidiaries of the Registrant. #23.1 Consent of Ernst & Young LLP. #99.1 Form 11-K Columbus McKinnon Corporation Employee Stock Ownership Plan Annual Report for the year ended March 31, 2001. * INDICATES A MANAGEMENT CONTRACT OR COMPENSATION PLAN OR ARRANGEMENT. # FILED HEREWITH (b) REPORTS ON FORM 8-K: On February 20, 2001, the Company filed a Current Report on Form 8-K with respect to a press release issued to announce the completion of its previously announced review of strategic alternatives to maximize shareholder value, including a sale or merger of the Company. On June 4, 2001, the Company filed a Current Report on Form 8-K with respect to a press release issued to announce a major step in its facility rationalization program with the closure of its Forrest City, Arkansas plant. 42 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, 2001. 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, 2001 - ------------------------------ Timothy T. Tevens Officer and Director (Principal Executive Officer) /S/ ROBERT L. MONTGOMERY, JR. Executive Vice President, June 29, 2001 - ------------------------------ 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, 2001 - ------------------------------ Herbert P. Ladds, Jr. of Directors /S/ RANDOLPH A. MARKS Director June 29, 2001 - ------------------------------ Randolph A. Marks /S/ L. DAVID BLACK Director June 29, 2001 - ------------------------------ L. David Black /S/ CARLOS PASCUAL Director June 29, 2001 - ------------------------------ Carlos Pascual /S/ RICHARD H. FLEMING Director June 29, 2001 - ------------------------------ Richard H. Fleming 43 EX-10 2 ex10-18.txt SEVENTH AMENDMENT TO CREDIT AGREEMENT SEVENTH AMENDMENT TO CREDIT AGREEMENT AND CONSENT THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this "AMENDMENT"), dated as of June 25, 2001, is by and among COLUMBUS MCKINNON CORPORATION, a New York corporation (the "BORROWER"), the banks, financial institutions and other institutional lenders which are parties to the Credit Agreement (as such term is defined below) (the "LENDERS"), FLEET NATIONAL BANK, as Initial Issuing Bank (the "INITIAL ISSUING BANK"), FLEET NATIONAL BANK, as the Swing Line Bank (the "SWING LINE BANK"; each of the Lenders, the Initial Issuing Bank and the Swing Line Bank, individually, a "LENDER PARTY" and, collectively, the "LENDER PARTIES"), and FLEET NATIONAL BANK, as administrative agent (together with any successor appointed pursuant to Article VII of the Credit Agreement, the "ADMINISTRATIVE AGENT") for the Lender Parties. W I T N E S S E T H : ------------------- WHEREAS, the Borrower, Lenders, Initial Issuing Bank, Swing Line Bank and Administrative Agent are party to that certain Credit Agreement, dated as of March 31, 1998, as amended by that certain First Amendment to Credit Agreement, dated as of September 23, 1998, that certain Second Amendment to Credit Agreement and Consent, dated as of February 12, 1999, that certain Third Amendment to Credit Agreement and Consent, dated as of November 16, 1999, that certain Fourth Amendment to Credit Agreement and Waiver, dated as of February 15, 2000, that certain Fifth Amendment to Credit Agreement, dated as of September 28, 2000, and that certain Sixth Amendment to Credit Agreement and Consent, dated as of February 5, 2001 (as so amended and as it may hereafter be further amended, supplemented, restated, extended or otherwise modified from time to time, the "CREDIT AGREEMENT"); WHEREAS, Events of Default exist under (i) Section 5.04(a) (Funded Debt to EBITDA Ratio) of the Credit Agreement for the period of four fiscal quarters ended March 31, 2001 based on an actual Funded Debt to EBITDA Ratio of 4.04 to 1.0 versus a required Funded Debt to EBITDA Ratio of 4.00 to 1.0 and (ii) Section 5.04(d) (Minimum New Worth) as of March 31, 2001 based on an actual net worth of $207,864,000 versus a required net worth of $209,045,000 (the Events of Default described in clauses (i) and (ii), the "EXISTING EVENTS OF DEFAULT"); WHEREAS, the Borrower has requested that the Administrative Agent and Lender Parties waive the Existing Event of Default; WHEREAS, the Borrower has also requested that the Administrative Agent and Lender Parties amend the Credit Agreement as and to the extent set forth in this Amendment; and WHEREAS, the Administrative Agent and Lender Parties are agreeable to the foregoing, in each instance as and to the extent set forth in this Amendment and subject to each of the terms and conditions stated herein. NOW THEREFORE, in consideration of the premises and the mutual covenants set forth herein and of the loans or other extensions of credit heretofore, now or hereafter made to, or for the benefit of, the Borrower and its Subsidiaries by the Lender Parties, the parties hereto hereby agree as follows: 1. DEFINITIONS. Except to the extent otherwise specified herein, capitalized terms used in this Amendment shall have the same meanings ascribed to them in the Credit Agreement. 2. WAIVER. The Administrative Agent and Lender Parties hereby waive the Existing Events of Default under Sections 5.04(a) and 5.04(d) of the Credit Agreement solely for the period of four fiscal quarters ended March 31, 2001 and as of March 31, 2001, respectively. The foregoing waiver is only applicable and shall only be effective in the specific instance and for the specific purpose for which made. Such waiver is expressly limited to the facts and circumstances referred to herein and shall not operate (a) as a waiver of or consent to non-compliance with any other Section or provision of the Credit Agreement or any other Loan Document, (b) as a waiver of any other right, power or remedy of the Administrative Agent or any Lender Party under the Credit Agreement or any other Loan Document or (c) as a waiver of or consent to any Default or Event of Default under the Credit Agreement or any other Loan Document, other than as expressly provided in this Section 2. 3. AMENDMENTS. 3.1. Section 1.01 of the Credit Agreement is amended by deleting from the definition of "APPLICABLE MARGIN" the entire pricing chart contained therein and replacing it with the following chart:
APPLICABLE MARGIN APPLICABLE MARGIN APPLICABLE MARGIN RATIO OF FUNDED DEBT TO FOR PRIME RATE FOR EURODOLLAR FOR COMMITMENT EBITDA ADVANCES RATE ADVANCES FEE - ----------------------------- ----------------- ----------------- ----------------- Equal to or greater than 4.00 0.875% 2.500% 0.375% Equal to or greater than 3.50 less than 4.00 0.625% 2.250% 0.350% Equal to or greater than 3.00 less than 3.50 0.375% 2.000% 0.300% Equal to or greater than 2.50 less than 3.00 0.125% 1.750% 0.200% Less than 2.50 0.125% 1.375% 0.150%
3.2. Section 1.01 of the Credit Agreement is amended by inserting the following definition in the proper alphabetical order: "SEVENTH AMENDMENT" means that certain Seventh Amendment to Credit Agreement, dated as of June 25, 2001, by and among the Borrower, the Administrative Agent and the Lenders and other Lender Parties. 3.3. Section 1.03 of the Credit Agreement is amended by inserting the following sentence at the end thereof: "Notwithstanding the foregoing, solely for purposes of determining compliance with the financial covenants set forth in Section 5.04 of - 2 - this Agreement, the Borrower may add back to the calculations of Consolidated EBITDA the amount of non-recurring "restructuring charges" (as defined by and determined in accordance with GAAP) that was deducted from such calculations, but in no event shall the amount added back exceed $12,000,000 for the fiscal year ending March 31, 2002 or $8,000,000 for the fiscal year ending March 31, 2003." 3.4. Section 2.05 (b)(i) of the Credit Agreement is amended by inserting the following sentence at the end thereof: "The Revolving Credit Facility shall be automatically and permanently reduced on the closing date of the Seventh Amendment by $25,000,000, such reduction to be made ratably among the Revolving Credit Lenders in accordance with their Revolving Credit Commitments." 3.5. Section 2.06 (b)(i) of the Credit Agreement is amended by inserting the following sentence at the end thereof: "On the closing date of the Seventh Amendment, the Borrower shall prepay the amount, if any, equal to the excess of (A) the aggregate principal amount of the Revolving Credit Advances plus the aggregate Dollar Equivalent of Alternative Currency Revolving Credit Advances plus the aggregate principal amount of Swing Line Advances plus the aggregate principal amount of Letter of Credit Advances plus the aggregate principal amount of Alternative Currency Letter of Credit Advances plus the aggregate Available Amount of all Letters of Credit, including, without limitation, all Existing Letters of Credit, plus the aggregate Available Amount of all Alternative Currency Letters of Credit, in each instance, as then outstanding, after giving effect to any Advances or renewals on such date, over (B) the Revolving Credit Facility after giving effect to the permanent reduction thereof on such date in accordance with Section 2.05(b)(i)." 3.6. Section 5.04(a) of the Credit Agreement is amended by deleting from the chart contained therein the dates from and including June 30, 2001 and the corresponding ratios for such dates and replacing them with the following: FOUR FISCAL QUARTERS ENDING ON: RATIO ------------------------------ ----- June 30, 2001 4.40 to 1.0 September 30, 2001 4.35 to 1.0 December 31, 2001 4.10 to 1.0 March 31, 2002 4.00 to 1.0 June 30, 2002 3.75 to 1.0 September 30, 2002 and each fiscal quarter end thereafter 3.50 to 1.0. 3.7. Section 5.04(b) of the Credit Agreement is amended by deleting from the chart contained therein the dates from and including June 30, 2001 and the corresponding ratios for such dates and replacing them with the following: - 3 - FOUR FISCAL QUARTERS ENDING ON: RATIO ------------------------------ ----- June 30, 2001 2.25 to 1.0 September 30, 2001 2.25 to 1.0 December 31, 2001 2.35 to 1.0 March 31, 2002 2.50 to 1.0 June 30, 2002 2.75 to 1.0 September 30, 2002 and each fiscal quarter end thereafter 3.00 to 1.0. 3.8. Section 5.04(d) of the Credit Agreement is amended be deleting such Section in its entirety and replacing it with the following: "(d) MINIMUM NET WORTH. Maintain, as of the last day of each fiscal quarter, an excess of Consolidated total assets over Consolidated total liabilities of the Borrower and its Subsidiaries of not less than (i) $200,000,000, plus (ii) 75% of Consolidated positive net income (and excluding 100% of Consolidated net losses) of the Borrower and its Subsidiaries since March 31, 2001 to and including each date of determination computed on a cumulative basis for said entire period." 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby represents and warrants as follows: 4.1. Each of the representations and warranties set forth in the Credit Agreement, including, without limitation, in Article IV of the Credit Agreement, and in each other Loan Document, is true, correct and complete on and as of the date hereof as though made on the date hereof. In addition, the Borrower hereby represents, warrants and affirms that the Credit Agreement and each of the other Loan Documents remains in full force and effect. 4.2. As of the date hereof after giving effect to this Amendment, there exists no Default or Event of Default under the Credit Agreement or any other Loan Document, and no event which, with the giving of notice or lapse of time, or both, would constitute a Default or Event of Default. 4.3. The execution, delivery and performance by each applicable Loan Party of this Amendment and/or the reaffirmations and confirmations attached hereto and each other Loan Document and the consummation of each of the transactions consented to in Sections 3.1 and 3.2 of this Amendment by each applicable Loan Party are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not, and will not, (i) contravene such Loan Party's charter or bylaws, (ii) violate any law (including, without limitation, the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended), rule, regulation (including, without limitation, any Regulation of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any material contract, loan agreement, indenture (including, without limitation, the Senior Subordinated Note Indenture), mortgage, deed of trust, lease or other - 4 - material instrument or agreement binding on or affecting any Loan Party, any of its Subsidiaries or any of their respective properties or (iv) except for the Liens created under the Collateral Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. Neither any Loan Party nor any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture (including, without limitation, the Senior Subordinated Note Indenture), mortgage, deed of trust, lease or other instrument or agreement, the violation or breach of which could reasonably be expected to have a Material Adverse Effect. 4.4. Each of this Amendment and each other Loan Document has been duly executed and delivered by each Loan Party party hereto and thereto. Each of this Amendment and each other Loan Document is the legal, valid and binding obligation of each Loan Party party hereto and thereto, enforceable against such Loan Party in accordance with its terms. 4.5. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by any Loan Party of this Amendment, any other Loan Document or any other agreement or document related hereto or thereto or contemplated hereby or thereby to which it is or is to be a party or otherwise bound, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (iii) the perfection or maintenance of the Liens created by the Collateral Documents (including the first priority nature thereof) or (iv) the exercise by the Administrative Agent or any Lender Party of its rights under the Loan Documents or remedies in respect of the Collateral pursuant to the Collateral Documents. 5. CONDITIONS PRECEDENT TO THIS AMENDMENT. The effectiveness of this Amendment is subject to the satisfaction, in form and substance satisfactory to the Administrative Agent, of each of the following conditions precedent: 5.1. The Borrower and Required Lenders shall have duly executed and delivered this Amendment and each other Loan Party shall have duly executed the Acknowledgment and Ratification in connection with this Amendment 5.2. After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing. 5.3. The representations and warranties contained in Section 4 of this Amendment, the Credit Agreement and each other Loan Document shall be true, correct and complete on and as of the closing date of this Amendment as though made on such date. 5.4. The Borrower shall have paid an amendment fee to the Administrative Agent, for the account of each Lender which has approved this Amendment, as evidenced by such Lender's timely execution and delivery of a counterpart signature page to this Amendment (each such Lender being an "APPROVING LENDER"), in an amount equal to 0.20% (i.e. 20 basis points) of such Approving Lender's Revolving Credit Commitment (after giving effect to the $25,000,000 aggregate reduction in Revolving Credit Commitments pursuant to this Amendment). - 5 - 5.5. The Borrower and its Subsidiaries shall have delivered such other documents and taken such other actions as the Administrative Agent may reasonably request. 6. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS. 6.1. Except as specifically amended in Section 3 above, the Credit Agreement and each of the other Loan Documents shall remain in full force and effect and each is hereby ratified and confirmed. 6.2. Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or any other word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference in any other Loan Document to the Credit Agreement or any word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby. 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original, but all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart to this Amendment by telecopier shall be as effective as delivery of a manually executed counterpart of this Amendment. 8. COSTS AND EXPENSES. The Borrower shall pay on demand all reasonable fees, costs and expenses incurred by Administrative Agent (including, without limitation, all reasonable attorneys' fees) in connection with the preparation, execution and delivery of this Amendment and the taking of any actions by any Person in connection herewith. 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. 10. HEADINGS. Article headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. [Signature Pages Follow] - 6 - IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized on the date first above written. COLUMBUS MCKINNON CORPORATION By: /S/ ROBERT L. MONTGOMERY ---------------------------- Robert L. Montgomery Title: Executive Vice President ACKNOWLEDGMENT AND RATIFICATION The undersigned hereby acknowledge and agree to this Amendment, and agree that the Guaranty, the Security Agreement, and the Intellectual Property Security Agreement, and each other Loan Document executed by the undersigned shall remain in full force and effect and each is hereby ratified and confirmed by and on behalf of the undersigned, this 25th day of June 2001. AUTOMATIC SYSTEMS, INC. By: /S/ ROBERT L. MONTGOMERY ---------------------------- Robert L. Montgomery Title: Treasurer LICO STEEL, INC. By: /S/ ROBERT L. MONTGOMERY ---------------------------- Robert L. Montgomery Title: Treasurer GAFFEY, INC. By: /S/ ROBERT L. MONTGOMERY ---------------------------- Robert L. Montgomery Title: Treasurer HANDLING SYSTEMS AND CONVEYORS, INC. By: /S/ ROBERT L. MONTGOMERY ---------------------------- Robert L. Montgomery Title: Treasurer YALE INDUSTRIAL PRODUCTS, INC. By: /S/ ROBERT L. MONTGOMERY ---------------------------- Robert L. Montgomery Title: Treasurer LENDERS FLEET NATIONAL BANK, as Administrative Agent, Initial Issuing Bank, Swing Line Bank and Lender By: /S/ JOHN C. WRIGHT ---------------------------- Name: JOHN C. WRIGHT -------------------------- Title: VICE PRESIDENT ------------------------- LENDERS ABN-AMRO BANK N.V., as a Co-Agent and Lender By: /S/ JULIETTE MOUND --------------------------- Name: JULIETTE MOUND ------------------------- Title: VICE PRESIDENT ------------------------ By: /S/ NANCY W. LANZONI --------------------------- Name: NANCY LANZONI ------------------------- Title: GROUP VICE PRESIDENT ------------------------ LENDERS THE BANK OF NOVA SCOTIA, as a Co-Agent and Lender By: /S/ PHILIP N. ADSETTS --------------------------- Name: PHILIP N. ADSETTS ------------------------- Title: DIRECTOR ------------------------ LENDERS MANUFACTURERS AND TRADERS TRUST COMPANY, as a Co-Agent and Lender By: /S/ JEFFREY P. KENEFICK --------------------------- Name: JEFFREY P. KENEFICK ------------------------- Title: ASSISTANT VICE PRESIDENT ------------------------ LENDERS HSBC BANK USA (formerly known as Marine Midland Bank), as a Co-Agent and Lender By: /S/ TED OEXLE --------------------------- Name: TED OEXLE ------------------------- Title: VICE PRESIDENT ------------------------ LENDERS COMERICA BANK By: /S/ JOEL S. GORDON --------------------------- Name: JOEL S. GORDON ------------------------- Title: ACCOUNT OFFICER ------------------------ LENDERS FIRST UNION NATIONAL BANK By: /S/ JORGE A. GONZALEZ --------------------------- Name: JORGE A. GONZALEZ ------------------------- Title: SENIOR VICE PRESIDENT ------------------------ LENDERS KEYBANK NATIONAL ASSOCIATION By: /S/ MARY K. YOUNG --------------------------- Name: MARY K. YOUNG ------------------------- Title: VICE PRESIDENT ------------------------ LENDERS MELLON BANK, N.A. By: /S/ EDWARD J. KLOECKER --------------------------- Name: EDWARD J. KLOECKER ------------------------- Title: VICE PRESIDENT ------------------------ LENDERS BANKERS TRUST COMPANY By: /S/ SUSAN L. LE FEVRE --------------------------- Name: SUSAN L. LE FEVRE ------------------------- Title: DIRECTOR ------------------------ LENDERS THE BANK OF NEW YORK By: /S/ CHRISTINE T. RIO --------------------------- Name: CHRISTINE T. RIO ------------------------- Title: VICE PRESIDENT ------------------------ LENDERS NATIONAL BANK OF CANADA By: /S/ TIM LOHN --------------------------- Name: TIM LOHN ------------------------- Title: VICE PRESIDENT ------------------------ By: /S/ MARK DZIMIAN --------------------------- Name: MARK DZIMIAN ------------------------- Title: ASSISTANT VICE PRESIDENT ------------------------ LENDERS NATIONAL CITY BANK OF PENNSYLVANIA By: /S/ WILLIAM A. FELDMAN --------------------------- Name: WILLIAM A. FELDMAN ------------------------- Title: VICE PRESIDENT ------------------------ EX-21 3 affiliates.txt SUBSIDIARIES AND AFFILIATES OF THE REGISTRANT EXHIBIT 21.1 COLUMBUS MCKINNON CORPORATION SUBSIDIAIRES AND AFFILIATES OF THE REGISTRANT Audubon Export, Inc. (FSC) (US) Automatic Systems, Inc. (US) ASI of Australia Pty. Ltd. (Australia) Automatic Systems Conveyors Limited (Canada) LICO Steel, Inc. (US) CM Insurance Company, Inc. (US) Columbus McKinnon do Brazil Ltda. (Brazil) Columbus McKinnon Finance Corporation (Canada) Columbus McKinnon Limited (Canada) Crane, Engineering & Service Group, Inc. (US) Handling Systems and Conveyors, Inc. (US) Larco Industrial Services, Ltd. (Canada) Endor, S.A. de C.V. (Mexico) Societe d'Exploitation des Raccords Gautier (France) Univeyor A/S (Denmark) Ejendomsselskabet Lupinvej 11 (Denmark) Univeyor AB (Sweden) Univeyor Conveying Systems Ltd. (England) Univeyor Electronic A/S (Denmark) Yale Industrial Products, Inc. (US) Egyptian-American Crane Co. (Joint Venture)(Egypt) Spreckels Development Company, Inc. (US) Spreckels Land Company, Inc. (US) Spreckels Water Company, Inc. (US) Spreckels Consolidated Industries, Inc. (US) Yale Industrial Products Ltd. (England) Yale Industrial Products GmbH (Germany) Camlok Lifting Clamps Ltd. (England) Hangzhou LILA Lifting and Lashing Co. Ltd. (China) Manutention Connection (France) Yale Elevacion Iberica S.L. (Spain) Yale Hangzhou Industrial Products Ltd. (China) Yale Industrial Products B.V. (The Netherlands) Yale Industrial Products GmbH (Austria) Yale Industrial Products Pty. Ltd. (South Africa) Yale Industrial Products Asia (Thailand) Co. Ltd. (Thailand) Yale Lifting & Mining Products (Pty.) Ltd. (South Africa) EX-23 4 eycons.txt CONSENT OF ERNST AND 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 June 26, 2001, 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, 2001. /S/ ERNST & YOUNG LLP Buffalo, New York June 26, 2001 EX-99 5 elevenk.txt FORM 11K CM ESOP FISCAL 2001 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, 2001 / / 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, 2001 and 2000 with Report of Independent Auditors Columbus McKinnon Corporation Employee Stock Ownership Plan Financial Statements and Schedules Years ended March 31, 2001 and 2000 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 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, 2001 and 2000, 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, 2001 and 2000, 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 at end of year) as of March 31, 2001, 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/ ERNST & YOUNG LLP Buffalo, New York May 25, 2001 1
Columbus McKinnon Corporation Employee Stock Ownership Plan Statements of Net Assets Available for Benefits MARCH 31, 2001 MARCH 31, 2000 ------------------------------------------------------------------------------------------------- ALLOCATED UNALLOCATED TOTAL ALLOCATED UNALLOCATED TOTAL ASSETS Investment in sponsor company common stock, at fair value ... $ 7,452,438 $ 3,943,963 $11,396,401 $11,675,409 $ 7,961,087 $19,636,496 Investment in stable asset fund, at fair value ........... 133,397 - 133,397 110,966 - 110,966 Receivables: Employer contributions ........ 34,929 25,860 60,789 - 10,573 10,573 Interest ...................... 2,676 - 2,676 2,631 - 2,631 Cash ........................... 2,101 - 2,101 4,544 - 4,544 ------------------------------------------------------------------------------------------------- Total assets ................... $ 7,625,541 $ 3,969,823 $11,595,364 $11,793,550 $ 7,971,660 $19,765,210 ------------------------------------------------------------------------------------------------- LIABILITIES Interest payable ............... - 25,860 25,860 - 10,573 10,573 Loans payable .................. - 8,527,301 8,527,301 - 9,516,651 9,516,651 ------------------------------------------------------------------------------------------------- Total liabilities .............. - 8,553,161 8,553,161 - 9,527,224 9,527,224 ------------------------------------------------------------------------------------------------- Net assets available (deficit) for plan benefits ............. $ 7,625,541 $(4,583,338) $ 3,042,203 $11,793,550 $(1,555,564) $10,237,986 =================================================================================================
SEE ACCOMPANYING NOTES. 2
Columbus McKinnon Corporation Employee Stock Ownership Plan Statements of Changes in Net Assets Available for Benefits MARCH 31, 2001 MARCH 31, 2000 --------------------------------------------------------------------------------------- ALLOCATED UNALLOCATED TOTAL ALLOCATED UNALLOCATED TOTAL Investment (loss) income: Net unrealized depreciation in fair value of investments ... $(3,946,992) $ (3,794,966) $ (7,741,958) $ (4,493,413) $ (6,086,506) $(10,579,919) Dividends ..................... 246,335 175,192 421,527 229,970 206,049 436,019 Interest ...................... 8,639 - 8,639 4,346 - 4,346 Employer contributions ......... 34,929 1,456,565 1,491,494 - 1,444,861 1,444,861 ------------------------------------------------------------------------------------------------- Total investment loss .......... (3,657,089) (2,163,209) (5,820,298) (4,259,097) (4,435,596) (8,694,693) ------------------------------------------------------------------------------------------------- Interest expense ............... - 864,565 864,565 - 852,861 852,861 Distributions to participants .. 491,625 - 491,625 1,825,572 - 1,825,572 Transfer to other qualified plan 14,896 - 14,896 65,958 - 65,958 Administrative expense ......... 4,399 - 4,399 7,165 - 7,165 ------------------------------------------------------------------------------------------------- Total deductions ............... 510,920 864,565 1,375,485 1,898,695 852,861 2,751,556 ------------------------------------------------------------------------------------------------- Net decrease ................... (4,168,009) (3,027,774) (7,195,783) (6,157,792) (5,288,457) (11,446,249) Net assets (deficit) available for benefits: Beginning of year .............. 11,793,550 (1,555,564) 10,237,986 17,951,342 3,732,893 21,684,235 ------------------------------------------------------------------------------------------------- End of year .................... $ 7,625,541 $ (4,583,338) $ 3,042,203 $ 11,793,550 $ (1,555,564) $ 10,237,986 =================================================================================================
SEE ACCOMPANYING NOTES. 3 Columbus McKinnon Corporation Employee Stock Ownership Plan Notes to Financial Statements March 31, 2001 and 2000 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 covers all domestic non-union employees of Columbus McKinnon Corporation (the Company/CMC), of Yale Industrial Products, Inc., and Automatic Systems, Inc., subsidiaries of the Company. The Plan was amended to extend coverage to all domestic non-union employees of 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 2001, $14,896 has been transferred to the Company's Thrift 401(k) plan ($65,958 in 2000). 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 Each Plan year (each 12 month period ending March 31) the Company contributes to the ESOP 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. 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. The account of a participant who is not a 5-percent owner and who has not separated from service but has attained the age of 70 1/2 will commence distribution unless the participant elects to defer distribution until employment ceases. Valuation dates for distributions are September 30 or March 31. During 2001, $491,625 or 36,412 shares, were distributed to vested participants in the form of stock certificates ($1,825,572, or 95,108 shares, distributed in 2000). This resulted in the sale of 67 shares held by the ESOP back to the Company for $901 in 2001 as a result of fractional shares (37 shares for $688 in 2000). As of March 31, 2001, $329,625 ($238,763 as of March 31, 2000) 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, 2001, the ESOP assets include $15,740 ($169,782 at March 31, 2000) of undistributed forfeited accounts. ALLOCATION TO PARTICIPANT ACCOUNTS As of each March 31 valuation date, 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 of contributions 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 accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 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, 2001 and 2000, the assets of the ESOP Plan consist of 1,458,646 and 1,496,114, respectively, shares of CMC common stock and 13,140 and 10,164, respectively, shares of 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, 2001 and 2000 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 HSBC and $4,000,000 from Fleet Bank). The Fleet loan is payable in quarterly installments of $103,000 through January 2002, and $406,880 in April 2002, plus interest at a Eurodollar rate based upon LIBOR plus a spread determined by the Company's leverage ratio (8.51% and 8.18% at March 31, 2001 and 2000, respectively). The HSBC loan is payable in quarterly installments of $45,000 through January 2002, and $156,891 in April 2002, plus interest at a Eurodollar rate based upon LIBOR plus a spread determined by the Company's leverage ratio (8.51% and 8.18% at March 31, 2001 and 2000, 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 $21,529 in October 2014, plus interest at the prime rate (8.0% and 9.0% at March 31, 2001 and 2000, 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: 2002 $ 592,000 2003 1,013,771 2004 600,000 2005 600,000 2006 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, 2001, 504,795 shares were held as collateral for the loan (606,559 shares held as of March 31, 2000); 101,764 shares were released from the suspense account in 2001 (101,821 shares released in 2000). These shares were allocated to participant accounts as of March 31, 2001. 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 at End of Year) March 31, 2001 IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST CURRENT VALUE - ------------------------------------------------------------------------------- Columbus McKinnon Employer Common Stock, Corporation* 1,458,646 shares $ 15,565,314 $ 11,396,401 Fleet Investment Stable Asset Fund Services* 13,140 shares 133,397 133,397
* 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, 2001 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* Stable Asset Fund $ 429,597 $ - $ 429,597 $ 429,597 N/A - 438,941 438,941 438,941 - 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/ ROBERT H. MYERS ---------------------------- Robert H. Myers, 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 May 25, 2001, 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, 2001. /S/ ERNST & YOUNG LLP Buffalo, New York June 26, 2001 -----END PRIVACY-ENHANCED MESSAGE-----