10-Q 1 q204.txt 10Q SECOND QUARTER OF FISCAL 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT 1934 For the quarterly period ended September 28, 2003 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to ------------------- -------------------- Commission File Number: 0-27618 ------- COLUMBUS MCKINNON CORPORATION -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW YORK 16-0547600 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 140 JOHN JAMES AUDUBON PARKWAY, AMHERST, NY 14228-1197 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (716) 689-5400 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. : [X] Yes [ ] No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934): [ ] Yes [X] No The number of shares of common stock outstanding as of October 31, 2003 was: 14,896,172 shares. FORM 10-Q INDEX COLUMBUS MCKINNON CORPORATION SEPTEMBER 28, 2003 PAGE # ------ PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed consolidated balance sheets - September 28, 2003 and March 31, 2003 2 Condensed consolidated statements of operations and accumulated deficit - Three months and six months ended September 28, 2003 and September 29, 2002 3 Condensed consolidated statements of cash flows - Six months ended September 28, 2003 and September 29, 2002 4 Condensed consolidated statements of comprehensive income - Three months and six months ended September 28, 2003 and September 29, 2002 5 Notes to condensed consolidated financial statements - September 28, 2003 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 Item 4. Disclosure Controls and Procedures 18 PART II. OTHER INFORMATION Item 1. Legal Proceedings - none. 19 Item 2. Changes in Securities - none. 19 Item 3. Defaults upon Senior Securities - none. 19 Item 4. Submission of Matters to a Vote of Security Holders 19 Item 5. Other Information - none. 19 Item 6. Exhibits and Reports on Form 8-K 19 - 1 - PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) SEPTEMBER 28, MARCH 31, 2003 2003 ---------- ---------- ASSETS: (IN THOUSANDS) Current assets: Cash and cash equivalents $ 13,170 $ 1,943 Trade accounts receivable 75,519 79,335 Unbilled revenues 9,748 8,861 Inventories 73,387 78,613 Net assets held for sale 2,884 1,800 Prepaid expenses 13,448 10,819 ---------- ---------- Total current assets 188,156 181,371 Property, plant, and equipment, net 63,639 67,295 Goodwill and other intangibles, net 193,774 195,129 Marketable securities 24,035 21,898 Deferred taxes on income 14,619 15,245 Other assets 5,007 1,668 ---------- ---------- Total assets $ 489,230 $ 482,606 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Notes payable to banks $ 6,091 $ 2,245 Trade accounts payable 26,028 28,654 Accrued liabilities 56,180 36,540 Restructuring reserve 1,490 2,331 Current portion of long-term debt 4,822 4,981 ---------- ---------- Total current liabilities 94,611 74,751 Senior bank debt, less current portion 10,623 109,355 Senior secured debt 117,980 - Subordinated debt 164,109 199,734 Other non-current liabilities 41,916 46,059 ---------- ---------- Total liabilities 429,239 429,899 ---------- ---------- Shareholders' equity Common stock 149 149 Additional paid-in capital 104,170 104,412 Accumulated deficit (24,548) (26,547) ESOP debt guarantee (5,415) (5,709) Unearned restricted stock (208) (208) Accumulated other comprehensive loss (14,157) (19,390) ---------- ---------- Total shareholders' equity 59,991 52,707 ---------- ---------- Total liabilities and shareholders' equity $ 489,230 $ 482,606 ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 2 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2003 2002 2003 2002 ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales $ 106,584 $ 113,238 $ 213,159 $ 227,129 Cost of products sold 81,517 86,665 162,194 172,926 ----------- ----------- ----------- ----------- Gross profit 25,067 26,573 50,965 54,203 ----------- ----------- ----------- ----------- Selling expenses 11,536 11,662 23,458 22,985 General and administrative expenses 5,712 6,238 11,479 12,942 Restructuring charges 574 - 1,375 - Amortization of intangibles 78 134 220 263 ----------- ----------- ----------- ----------- 17,900 18,034 36,532 36,190 ----------- ----------- ----------- ----------- Income from operations 7,167 8,539 14,433 18,013 Interest and debt expense 5,730 7,207 15,402 14,484 Other (income) and expense, net (1,353) (225) (4,447) (3,718) ------------ ----------- ----------- ----------- Income from operations before income tax expense and cumulative effect of accounting change 2,790 1,557 3,478 7,247 Income tax expense 1,290 542 1,479 2,733 ----------- ----------- ----------- ----------- Income from operations before cumulative effect of accounting change 1,500 1,015 1,999 4,514 Cumulative effect of accounting change - - - (8,000) ----------- ----------- ----------- ----------- Net income (loss) 1,500 1,015 1,999 (3,486) Accumulated deficit - beginning of period (26,048) (17,037) (26,547) (12,536) ----------- ----------- ----------- ----------- Accumulated deficit - end of period $ (24,548) $ (16,022) $ (24,548) $ (16,022) =========== =========== =========== =========== Earnings per share data, basic and diluted: Income from operations before cumulative effect of accounting change $ 0.10 $ 0.07 $ 0.14 $ 0.31 Cumulative effect of accounting change - - - (0.55) ----------- ----------- ----------- ----------- Net income (loss) $ 0.10 $ 0.07 $ 0.14 $ (0.24) ============ =========== =========== ===========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 3 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED ---------------- SEPTEMBER 28, SEPTEMBER 29, 2003 2002 ---------- ---------- (IN THOUSANDS) OPERATING ACTIVITIES: Income from operations before cumulative effect of accounting change $ 1,999 $ 4,514 Adjustments to reconcile income from operations to net cash provided by operating activities: Depreciation and amortization 5,375 5,702 Deferred income taxes 626 (937) Gain on sale of real estate/investments (3,282) (2,757) Other 192 1,237 Changes in operating assets and liabilities: Trade accounts receivable and unbilled revenues 4,255 2,005 Inventories 6,863 150 Prepaid expenses (1,596) (1,323) Other assets (241) 26 Trade accounts payable (3,469) (7,232) Accrued and non-current liabilities 13,843 (730) ---------- ---------- Net cash provided by operating activities 24,565 655 ---------- ---------- INVESTING ACTIVITIES: Purchase of marketable securities, net (811) 1,184 Capital expenditures (2,094) (2,270) Proceeds from sale of businesses - 15,950 Net assets held for sale 3,282 1,879 ---------- ---------- Net cash provided by investing activities 377 16,743 ---------- ---------- FINANCING ACTIVITIES: Net payments under revolving line-of-credit agreements (1,090) (23,366) Repayment of debt (124,206) (1,531) Proceeds from issuance of long-term debt 115,000 - Deferred financing costs incurred (4,011) (1,666) Other 294 281 ---------- ---------- Net cash used in financing activities (14,013) (26,282) EFFECT OF EXCHANGE RATE CHANGES ON CASH 298 (177) ---------- ---------- Net cash provided by (used in) continuing operations 11,227 (9,061) NET CASH PROVIDED BY DISCONTINUED OPERATIONS - 504 ---------- ---------- Net change in cash and cash equivalents 11,227 (8,557) Cash and cash equivalents at beginning of period 1,943 13,068 ---------- ---------- Cash and cash equivalents at end of period $ 13,170 $ 4,511 ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 4 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2003 2002 2003 2002 ---- ---- ---- ---- (IN THOUSANDS) Net income $ 1,500 $ 1,015 $ 1,999 $ (3,486) ---------- ---------- ---------- ---------- Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 606 (1,516) 3,716 4,107 Unrealized gain (loss) on derivatives qualifying as hedges - 33 191 (97) Unrealized (loss) gain on investments: Unrealized holding (losses) gains arising during the period 158 (1,596) 1,435 (2,585) Reclassification adjustment for (gains) losses included in net income (323) 229 (109) (1,805) ---------- ---------- ----------- ---------- (165) (1,367) 1,326 (4,390) ---------- ---------- ---------- ---------- Total other comprehensive income (loss) 441 (2,850) 5,233 (380) ---------- ---------- ---------- ---------- Comprehensive income (loss) $ 1,941 $ (1,835) $ 7,232 $ (3,866) ========== ========== ========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 5 - COLUMBUS MCKINNON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (TABULAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) SEPTEMBER 28, 2003 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of Columbus McKinnon Corporation (the Company) at September 28, 2003, and the results of its operations and its cash flows for the three and six-month periods ended September 28, 2003 and September 29, 2002, have been included. Results for the period ended September 28, 2003 are not necessarily indicative of the results that may be expected for the year ended March 31, 2004. The balance sheet at March 31, 2003 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Columbus McKinnon Corporation annual report on Form 10-K for the year ended March 31, 2003. The Company is a leading U.S. designer and manufacturer of material handling products, systems and services which efficiently and ergonomically move, lift, position and secure material. Key products include hoists, cranes, chain and forged attachments. 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 businesses deal primarily with end users and sales are concentrated, domestically and internationally (primarily Europe), in the consumer products, manufacturing, warehousing and, to a lesser extent, the steel, construction, automotive and other industrial markets. 2. The Company has two stock option-based employee compensation plans in effect. The Company accounts for these plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations. No stock option-based employee compensation cost is reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant and the number of options granted was fixed. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition of SFAS No. 123 "Accounting for Stock-Based Compensation", to stock-based employee compensation:
THREE MONTHS ENDED SIX MONTHS ENDED --------------------------------------------------------------- SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2003 2002 2003 2002 --------------------------------------------------------------- Net income (loss), as reported.............. $ 1,500 $ 1,015 $ 1,999 $ (3,486) Deduct: Total stock based employee compensation expense determined under fair value based method for all awards, net of related tax effects (121) (255) (262) (510) --------------------------------------------------------------- Net income (loss), pro forma.............. $ 1,379 $ 760 $ 1,737 $ (3,996) =============================================================== Basic and diluted income (loss) per share: As reported............................... $ 0.10 $ 0.07 $ 0.14 $ (0.24) =============================================================== Pro forma................................. $ 0.09 $ 0.05 $ 0.12 $ (0.28) ===============================================================
- 6 - 3. Inventories consisted of the following: SEPTEMBER 28, MARCH 31, 2003 2003 ---------- ---------- At cost - FIFO basis: Raw materials.................... $ 37,746 $ 42,707 Work-in-process.................. 11,646 10,361 Finished goods................... 31,701 33,072 ---------- ---------- 81,093 86,140 LIFO cost less than FIFO cost......... (7,706) (7,527) ---------- ---------- Net inventories .................... $ 73,387 $ 78,613 ========== ========== An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Because these are subject to many forces beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. 4. On November 21, 2002, the Company refinanced its credit facilities. The new arrangement consisted of a Revolving Credit Facility, a Term Loan, and a Senior Second Secured Term Loan. The Revolving Credit Facility provides availability up to a maximum of $57 million. At September 28, 2003, $5.0 million was outstanding for borrowings and the unused portion totaled $27.4 million. Interest is payable at varying Eurodollar rates based on LIBOR or prime plus a spread determined by the Company's leverage ratio amounting to 275 (LIBOR) or 150 (prime) basis points, respectively, at September 28, 2003. The Revolving Credit Facility is secured by all domestic and Canadian inventory, receivables, equipment, real property, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. At September 28, 2003, the Term Loan has a balance of $9,500 and requires quarterly payments of $1,179, which would result in repayment in full on October 1, 2005. Interest is payable at varying Eurodollar rates based on LIBOR or prime plus a spread determined by the Company's leverage ratio amounting to 325 (LIBOR) or 200 (prime) basis points at September 28, 2003. The Term Loan is secured by all domestic inventory, receivables, equipment, real property, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. On July 22, 2003, the Company issued $115 million of 10% Senior Secured Notes (10% Notes) due August 1, 2010. Proceeds from this offering were used for the repayment in full of the Senior Second Secured Term Loan ($66.8 million), the repurchase of $35.7 million of Senior Subordinated Notes at a discount ($30.1 million), the repayment of a portion of the outstanding Revolving Credit Facility ($10.0 million), the repayment of a portion of the Term Loan ($3.9 million), the payment of financing costs ($2.8 million), and the payment of accrued interest ($1.4 million). The Senior Second Secured Term loan was repaid in its entirety on July 22, 2003. As a result of the repayment occurring prior to the first anniversary of the loan, $1.1 million of accrued interest expense was reversed in the second quarter of fiscal 2004 and is reflected as a reduction of interest expense. The redemption of the 8 1/2% Senior Subordinated Notes occurred at a discount resulting in a pre-tax gain on early extinguishment of debt of $5.6 million. As a result of the repayment of the Senior Second Secured Term Loan and a portion of the Term Loan and 8 1/2% Senior Subordinated Notes, $4.9 million of pre-tax deferred financing costs were written-off in the second quarter of fiscal 2004. The net effect of these two items, a $0.7 pre-tax million gain, is shown as part of other (income) and expense, net. The corresponding credit agreements associated with the Revolving Credit Facility and the Term Loan place certain debt covenant restrictions on the Company including certain financial requirements and a restriction on dividend payments. - 7 - From time to time, the Company manages its debt portfolio by using interest rate swaps to achieve an overall desired position of fixed and floating rates. In June 2001, the Company entered into an interest rate swap agreement to effectively convert $40 million of variable-rate debt to fixed-rate debt, which matured in June 2003. This cash flow hedge was considered effective and the gain or loss on the change in fair value was reported in other comprehensive income, net of tax. Effective August 4, 2003, the Company entered into an interest rate swap agreement to effectively convert $93.5 million of fixed-rate debt (10%) to variable-rate debt (LIBOR plus 578.2 basis points) through August 2008 and $57.5 million from August 2008 through August 2010. This fair value hedge is considered effective and the change in fair value is recognized in income as a gain or loss. In addition, the change in the fair value of the hedged item, the 10% Notes, is also recognized in income as an exactly offsetting gain or loss resulting in no impact on net income. As of September 28, 2003, the fair value hedge resulted in the recognition of an asset of $3.0 million and a corresponding increase in the recorded amount of the 10% Notes of $3.0 million. 5. Upon the adoption of SFAS No. 142, the Company recorded a one-time, non-cash charge of $8,000,000 to reduce the carrying value of its goodwill as of April 1, 2002. Such charge is reflected as a cumulative effect of a change in accounting principle in the accompanying consolidated statement of operations. The impairment charge was related to the Cranebuilder reporting unit in the Products segment and the Univeyor reporting unit in the Solutions segment. In relation to the initial adoption of SFAS No. 142, goodwill was allocated among the reporting units so that goodwill was allocated to the units that benefited from the acquisitions. The Company will record any future impairment charges as a component of operating income. 6. During the second quarter of fiscal 2004, the Company continued the implementation of its Corporate-wide reorganization plan. During the quarter, the Company recorded restructuring costs of $0.6 million related to various employee termination benefits. These costs were evenly split between the Products and Solutions segments and approximately 15 employees were terminated at a foreign facility. As of September 28, 2003, all of the terminations had occurred and the liability consists of severance payments and costs associated with the preparation and maintenance of non-operating facilities prior to disposal which were accrued prior to the adoption of SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities". Currently, we anticipate that our restructuring charges for the remainder of fiscal 2004 related to these plans to be between $0.2 and $0.5 million. The Company has several facilities being completely closed and prepared for disposal, of which one was sold during the second quarter of fiscal 2004, one is expected to be disposed of in the fourth quarter of fiscal 2004, and two others in the second half of Fiscal 2005. The following table provides a reconciliation of the activity related to restructuring reserves, segregated by year and between employee costs ("employee") and facility closure related costs ("facility"):
FISCAL 2002 FISCAL 2003 FISCAL 2004 ----------- ----------- ----------- FACILITY EMPLOYEE FACILITY EMPLOYEE TOTAL ------------------------------------------------------------------------ Reserve at March 31, 2003 $ 360 $ 922 $ 1,049 $ - $ 2,331 Fiscal 2004 first quarter restructuring charges........ - 41 97 663 801 Cash payments................... (33) (416) (345) (277) (1,071) ------------------------------------------------------------------------ Reserve at June 29, 2003........ 327 547 801 386 2,061 ------------------------------------------------------------------------ Fiscal 2004 second quarter restructuring charges........ - 43 8 523 574 Cash payments................... (44) (293) (109) (699) (1,145) ------------------------------------------------------------------------ Reserve at September 28, 2003 $ 283 $ 297 $ 700 $ 210 $ 1,490 ========================================================================
- 8 - 7. Income tax expense as a percentage of income before income tax expense was 46.2%, 34.8%, 42.5% and 37.7% in the fiscal 2004 and 2003 quarters and six-month periods ended September 28, 2003 and September 29, 2002, respectively. The percentages vary from the U.S. statutory rate due to jurisdictional mix and the existence of losses at certain subsidiaries for which no benefit has been recorded. 8. The following table sets forth the computation of basic and diluted earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2003 2002 2003 2002 ---- ---- ---- ---- Numerator for basic and diluted earnings per share: Net income (loss) $ 1,500 $ 1,015 $ 1,999 $ (3,486) ========= ========= ========= ========= Denominators: Weighted-average common stock outstanding - denominator for basic EPS 14,549 14,487 14,544 14,483 Effect of dilutive employee stock options - - - - --------- --------- --------- --------- Adjusted weighted-average common stock outstanding and assumed conversions - denominator for diluted EPS 14,549 14,487 14,544 14,483 ========= ========= ========= =========
9. As a result of the way the Company manages the business, its reportable segments are strategic business units that offer products with different characteristics. The most defining characteristic is the extent of customized engineering required on a per-order basis. In addition, the segments serve different customer bases through differing methods of distribution. The Company has two reportable segments: Products and Solutions. The Company's Products segment sells hoists, cranes, chain, forged attachments, and other material handling products principally to third party distributors through diverse distribution channels, and to a lesser extent directly to manufacturers and other end-users. The Solutions segment sells engineered material handling systems such as conveyors, manipulators, and lift tables primarily to end-users in the consumer products, manufacturing, warehousing, and, to a lesser extent, the steel, construction, automotive, and other industrial markets. Intersegment sales are not significant. The Company evaluates performance based on operating income of the respective business units prior to the effects of restructuring charges and amortization. - 9 - Segment information as of and for the six months ended September 28, 2003 and September 29, 2002, is as follows:
SIX MONTHS ENDED SEPTEMBER 28, 2003 ----------------------------------- PRODUCTS SOLUTIONS TOTAL ----------- ----------- ----------- Sales to external customers...................... $ 186,528 $ 26,631 $ 213,159 Operating income before restructuring charges and amortization...................... 16,199 (171) 16,028 Depreciation and amortization.................... 4,799 576 5,375 Total assets..................................... 456,729 32,501 489,230 SIX MONTHS ENDED SEPTEMBER 29, 2002 ----------------------------------- PRODUCTS SOLUTIONS TOTAL ----------- ----------- ----------- Sales to external customers...................... $ 194,818 $ 32,311 $ 227,129 Operating income before restructuring charges and amortization...................... 17,351 925 18,276 Depreciation and amortization.................... 5,190 512 5,702 Total assets..................................... 450,517 36,595 487,112
The following schedule provides a reconciliation of operating income before restructuring charges and amortization with income from operations before income tax expense and cumulative effect of accounting change:
SIX MONTHS ENDED ---------------- SEPTEMBER 28, SEPTEMBER 29, 2003 2002 ---- ---- Operating income before restructuring charges and amortization................................... $ 16,028 $ 18,276 Restructuring charges......................................... (1,375) - Amortization of intangibles................................... (220) (263) Interest and debt expense..................................... (15,402) (14,484) Other income and (expense), net............................... 4,447 3,718 ----------- ----------- Income from operations before income tax expense and cumulative effect of accounting change................. $ 3,478 $ 7,247 =========== ===========
- 10 - 10. The summary financial information of the parent, guarantors and nonguarantors of the 8.5% senior subordinated notes and 10% senior secured notes is as follows:
Parent Guarantors Nonguarantors Eliminations Consolidated ------------------------------------------------------------------- AS OF SEPTEMBER 28, 2003 Current assets: Cash and cash equivalents $ 3,875 $ (760) $ 10,055 $ - $ 13,170 Trade accounts receivable and unbilled revenues 50,359 83 34,825 - 85,267 Inventories 34,635 18,256 21,468 (972) 73,387 Other current assets 9,853 1,000 5,479 - 16,332 ------------------------------------------------------------------- Total current assets 98,722 18,579 71,827 (972) 188,156 Property, plant, and equipment, net 30,355 14,457 18,827 - 63,639 Goodwill and other intangibles, net 97,226 57,363 39,185 - 193,774 Intercompany 53,173 (66,510) (58,703) 72,040 - Other assets 59,736 208,064 22,565 (246,704) 43,661 ------------------------------------------------------------------- Total assets $ 339,212 $ 231,953 $ 93,701 $ (175,636) $ 489,230 =================================================================== Current liabilities $ 56,397 $ 10,983 $ 30,106 $ (2,875) $ 94,611 Long-term debt, less current portion 286,850 - 5,862 - 292,712 Other non-current liabilities 7,659 12,441 21,816 - 41,916 ------------------------------------------------------------------- Total liabilities 350,906 23,424 57,784 (2,875) 429,239 Shareholders' equity (11,694) 208,529 35,917 (172,761) 59,991 ------------------------------------------------------------------- Total liabilities and shareholders' equity $ 339,212 $ 231,953 $ 93,701 $ (175,636) $ 489,230 =================================================================== FOR THE SIX MONTHS ENDED SEPTEMBER 28, 2003 Net sales $ 107,631 $ 54,487 $ 60,573 $ (9,532) $ 213,159 Cost of products sold 81,634 44,402 45,690 (9,532) 162,194 ------------------------------------------------------------------- Gross profit 25,997 10,085 14,883 - 50,965 ------------------------------------------------------------------- Selling, general and administrative expenses 16,729 6,071 12,137 - 34,937 Restructuring charges 927 - 448 - 1,375 Amortization of intangibles 118 1 101 - 220 ------------------------------------------------------------------- 17,774 6,072 12,686 - 36,532 ------------------------------------------------------------------- Income from operations 8,223 4,013 2,197 - 14,433 Interest and debt expense 14,965 (42) 479 - 15,402 Other (income) and expense, net (1,044) (3,287) (116) - (4,447) ------------------------------------------------------------------- (Loss) income before income tax (benefit) expense (5,698) 7,342 1,834 - 3,478 Income tax (benefit) expense (2,246) 2,910 815 - 1,479 ------------------------------------------------------------------- Net (loss) income $ (3,452) $ 4,432 $ 1,019 $ - $ 1,999 =================================================================== - 11 - Parent Guarantors Nonguarantors Eliminations Consolidated ------------------------------------------------------------------- FOR THE SIX MONTHS ENDED SEPTEMBER 28, 2003 OPERATING ACTIVITIES: Net cash provided by (used in) operating activities $ 17,818 $ (3,067) $ 9,814 $ - $ 24,565 ------------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net - - (811) - (811) Capital expenditures, net (1,810) (224) (60) - (2,094) Other - 3,282 - - 3,282 ------------------------------------------------------------------- Net cash (used in) provided by investing activities (1,810) 3,058 (871) - 377 ------------------------------------------------------------------- FINANCING ACTIVITIES: Net (payments) borrowings under revolving line-of-credit agreements (9,929) - 8,839 - (1,090) Repayment of debt (113,468) - (10,738) - (124,206) Proceeds from issuance of long-term debt 115,000 - - - 115,000 Other (3,717) - - - (3,717) ------------------------------------------------------------------- Net cash used in financing activities (12,114) - (1,899) - (14,013) EFFECT OF EXCHANGE RATE CHANGES ON CASH (76) 69 305 - 298 ------------------------------------------------------------------- Net change in cash and cash equivalents 3,818 60 7,349 - 11,227 Cash and cash equivalents at beginning of period 57 (820) 2,706 - 1,943 ------------------------------------------------------------------- Cash and cash equivalents at end of period $ 3,875 $ (760) $ 10,055 $ - $ 13,170 =================================================================== AS OF SEPTEMBER 29, 2002 Current assets: Cash and cash equivalents $ 1,272 $ (1,377) $ 4,616 $ - $ 4,511 Trade accounts receivable and unbilled revenues 58,169 3,603 22,774 - 84,546 Inventories 42,110 21,066 28,897 (972) 91,101 Net assets held for sale 2,300 111 - - 2,411 Other current assets 7,675 (1,410) 4,158 - 10,423 ------------------------------------------------------------------- Total current assets 111,526 21,993 60,445 (972) 192,992 Property, plant, and equipment, net 33,859 17,263 17,155 - 68,277 Goodwill and other intangibles, net 28,566 121,048 44,873 - 194,487 Intercompany 257,103 (269,575) (58,645) 71,117 - Other assets 52,913 159,483 20,768 (201,808) 31,356 ------------------------------------------------------------------- Total assets $ 483,967 $ 50,212 $ 84,596 $ (131,663) $ 487,112 =================================================================== Current liabilities $ 165,573 $ 1,492 $ 23,828 $ (3,798) $ 187,095 Long-term debt, less current portion 199,707 - 811 - 200,518 Other non-current liabilities (3,621) 11,233 23,815 - 31,427 ------------------------------------------------------------------- Total liabilities 361,659 12,725 48,454 (3,798) 419,040 Shareholders' equity 122,308 37,487 36,142 (127,865) 68,072 ------------------------------------------------------------------- Total liabilities and shareholders' equity $ 483,967 $ 50,212 $ 84,596 $ (131,663) $ 487,112 =================================================================== - 12 - Parent Guarantors Nonguarantors Eliminations Consolidated ------------------------------------------------------------------- FOR THE SIX MONTHS ENDED SEPTEMBER 29, 2002 Net sales $ 117,398 $ 62,585 $ 56,332 $ (9,186) $ 227,129 Cost of products sold 88,080 51,143 42,866 (9,163) 172,926 ------------------------------------------------------------------- Gross profit 29,318 11,442 13,466 (23) 54,203 ------------------------------------------------------------------- Selling, general and administrative expenses 18,465 6,125 11,337 - 35,927 Amortization of intangibles 117 2 144 - 263 ------------------------------------------------------------------- 18,582 6,127 11,481 - 36,190 ------------------------------------------------------------------- Income from operations 10,736 5,315 1,985 (23) 18,013 Interest and debt expense 14,179 76 229 - 14,484 Other (income) and expense, net (257) (116) (3,345) - 3,718 ------------------------------------------------------------------- (Loss) income before income tax (benefit) expense (3,186) 5,355 5,101 (23) 7,247 Income tax (benefit) expense (92) 2,160 674 (9) 2,733 ------------------------------------------------------------------- Net (loss) income before cumulative effect of accounting change (3,094) 3,195 4,427 (14) 4,514 Cumulative effect of change in accounting principle - (1,930) (6,070) - (8,000) ------------------------------------------------------------------- Net (loss) income $ (3,094) $ 1,265 $ (1,643) $ (14) $ (3,486) =================================================================== FOR THE SIX MONTHS ENDED SEPTEMBER 29, 2002 OPERATING ACTIVITIES: Net cash provided by (used in) operating activities $ 8,111 $ (6,090) $ (1,366) $ - $ 655 ------------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net - - 1,184 - 1,184 Capital expenditures (1,001) (372) (897) - (2,270) Proceeds from sale of business - 15,950 - - 15,950 Other - 1,879 - - 1,879 ------------------------------------------------------------------- Net cash (used in) provided by investing activities (1,001) 17,457 287 - 16,743 ------------------------------------------------------------------- FINANCING ACTIVITIES: Net (payments) borrowings under revolving line-of-credit agreements (12,049) (11,551) 234 - (23,366) Repayment of debt (432) - (1,099) - (1,531) Other (1,385) - - - (1,385) ------------------------------------------------------------------- Net cash used in financing activities (13,866) (11,551) (865) - (26,282) EFFECT OF EXCHANGE RATE CHANGES ON CASH 4 4 (185) - (177) ------------------------------------------------------------------- Net cash used in continuing operations (6,752) (180) (2,129) - (9,061) NET CASH PROVIDED BY DISCONTINUED OPERATIONS - 504 - - 504 ------------------------------------------------------------------- Net change in cash and cash equivalents (6,752) 324 (2,129) - (8,557) Cash and cash equivalents at beginning of period 8,024 (1,701) 6,745 - 13,068 ------------------------------------------------------------------- Cash and cash equivalents at end of period $ 1,272 $ (1,377) $ 4,616 $ - $ 4,511 ===================================================================
- 13 - Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (AMOUNTS IN THOUSANDS) The Company is a leading U.S. designer and manufacturer of material handling products, systems and services which efficiently and ergonomically move, lift, position or secure material. Key products include hoists, cranes, chain and forged attachments. The Company'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 Company's integrated material handling Solutions businesses primarily deal 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. RESULTS OF OPERATIONS THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 28, 2003 AND SEPTEMBER 29, 2002 Net sales in the fiscal 2004 quarter ended September 28, 2003 were $106,584, a decrease of $6,654 or 5.9% from the fiscal 2003 quarter ended September 29, 2002. Net sales for the six months ended September 28, 2003 were $213,159, a decrease of $13,970 or 6.2% from the six months ended September 29, 2002. Sales in the Products segment decreased by $2,393 or 2.5% from the previous year's quarter and $8,290 or 4.3% from the previous year's six-month period then ended. This is primarily due to continued softness in all industrial markets (particularly domestically), offset by $2.4 million and $5.1 million attributable to translation of foreign currencies, particularly the Euro and Canadian dollar, into U.S. dollars for the quarter and six-month period ended September 28, 2003, respectively. Sales in the Solutions segment decreased 26.2% or $4,261 for the quarter and 17.6% or $5,680 for the six months ended September 28, 2003 when compared to the same periods in the prior year. The decreases in this segment are primarily due to continued softness in domestic industrial markets and the divestiture of a subsidiary on March 31, 2003 ($1.7 million for the quarter and $3.4 million for the six-month period ended September 28, 2003, respectively), offset by an increase of $0.8 million and $2.3 million attributable to translation of the Euro into U.S. dollars for the quarter and six-month period ended September 28, 2003, respectively. Sales in the individual segments were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- SEP. 28, SEP. 29, CHANGE SEP. 28, SEP. 29, CHANGE 2003 2002 AMOUNT % 2003 2002 AMOUNT % ---- ---- ------ - ---- ---- ------ - Products $ 94,571 $ 96,964 $ (2,393) (2.5) $ 186,528 $ 194,818 $ (8,290) (4.3) Solutions 12,013 16,274 (4,261) (26.2) 26,631 32,311 (5,680) (17.6) --------- --------- --------- --------- --------- -------- Net sales $ 106,584 $ 113,238 $ (6,654) (5.9) $ 213,159 $ 227,129 $(13,970) (6.2) ========= ========= ========= ========= ========= ========
The Company's gross profit margins were 23.5%, 23.5%, 23.9%, and 23.9% for the fiscal 2004 and 2003 quarters and the six-month periods ended September 28, 2003 and September 29, 2002, respectively. Gross profit margins in the Products segment were 25.0%, 24.9%, 25.4%, 25.2% for the fiscal 2004 and 2003 quarters and the six-month periods ended September 28, 2003 and September 29, 2002, respectively. The maintenance of gross profit margins in the Products segment despite lower sales volume is the result of cost containment activities. Gross profit margins in the Solutions segment were 11.8%, 15.0%, 13.5%, 15.8% for the fiscal 2004 and 2003 quarters and the six-month periods ended September 28, 2003 and September 29, 2002, respectively. The decrease in the gross profit margins for the Solutions segment is the result of a shift in sales mix to larger integrated solutions projects which typically carry lower gross profit margins, pricing pressure, and the impact of a divestiture of a relatively small subsidiary on March 31, 2003. - 14 - Selling expenses were $11,536, $11,662, $23,458, and $22,985 in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. The changes in expense dollars were impacted by translation from changes in foreign exchange rates ($0.5 million and $1.0 million for the quarter and six-month period ended September 28, 2003, respectively), offset by cost containment activities. As a percentage of consolidated net sales, selling expenses were 10.8%, 10.3%, 11.0%, and 10.1% in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. The increase in percentages in fiscal 2004 is the result of the fixed nature of selling expense, including investments in new markets, relative to a decrease in sales volume. General and administrative expenses were $5,712, $6,238, $11,479, and $12,942 in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. As a percentage of consolidated net sales, general and administrative expenses were 5.4%, 5.5%, 5.4% and 5.7% in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. The decrease in the current quarter is the result of general cost containment. The decrease in the six-month period expenses are the result of having no bonus expense in the current year compared to the prior year ($0.4 million), the divestiture of a subsidiary on March 31, 2003 ($0.5 million) and general cost containment. During the second quarter of fiscal 2004, the Company continued the implementation of its Corporate-wide reorganization plan. During the quarter, the Company recorded restructuring costs of $0.6 million related to various employee termination benefits. These costs were evenly split between the Products and Solutions segments and approximately 15 employees were terminated at a foreign facility. As of September 28, 2003, all of the terminations had occurred and the outstanding liability consists of severance payments and costs associated with the preparation and maintenance of facilities prior to disposal which were accrued prior to the adoption of SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities". We anticipate that our restructuring charges for the remainder of fiscal 2004 related to these plans to be between $0.2 and $0.5 million. The company has several facilities being completely closed and prepared for disposal, of which one was sold during the second quarter of fiscal 2004, one is expected to be disposed of in the fourth quarter of fiscal 2004, and two others in the second half of Fiscal 2005. Amortization of intangibles was $78, $134, $220, and $263 in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. Interest and debt expense was $5,730, $7,207, $15,402, and $14,484 in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. The Company renegotiated its credit facility in November of 2002, a portion of which was subsequently replaced by the July 2003 bond offering. Part of the new credit facility has a higher effective interest rate than the Company's pre-November 2002 credit facility. The fiscal 2004 quarterly decrease is the result of the reversal of previously accrued deferred interest expense ($1.1 million) and lower debt levels, offset by the impact of a higher average effective interest rate. The higher average effective interest rate for fiscal 2004 caused an increase in interest expense for the six-month period ended September 28, 2003 in comparison to the prior year, despite decreasing debt levels. As a percentage of consolidated net sales, interest and debt expense was 5.4%, 6.4%, 7.2%, and 6.4% in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. Other (income) and expense, net was $(1,353), $(225), $(4,447), and $(3,718) in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. The current quarter income consists primarily of a net $0.7 million consisting of a $5.6 million gain from the early extinguishment of debt offset by the $4.9 million deferred financing cost write-off associated with extinguished debt and $0.6 million of realized gains on investments within the Company's captive insurance company portfolio. For the six-month period ended September 28, 2003, other income consists primarily of a $3.3 million gain on the sale of real estate, the net $0.7 million gain from the early extinguishment of debt described above, and $0.4 million of income from investments within the Company's captive insurance company. This compares primarily to income of $3.2 million, specifically realized gains, on investments within the Company's captive insurance company portfolio for the six-month period ended September 29, 2002. - 15 - Income tax expense as a percentage of income before income tax expense was 46.2%, 34.8%, 42.5%, and 37.7% in the fiscal 2004 and 2003 quarters and the six-month periods then ended, respectively. The percentages for fiscal 2004 vary from the U.S. statutory rate due to jurisdictional mix and the existence of losses at certain subsidiaries for which no benefit has been recorded. LIQUIDITY AND CAPITAL RESOURCES On November 21, 2002, the Company refinanced its credit facilities. The new arrangement consisted of a Revolving Credit Facility, a Term Loan, and a Senior Second Secured Term Loan. The Revolving Credit Facility provides availability up to a maximum of $57 million. At September 28, 2003, $5.0 million was outstanding for borrowings and the unused portion totaled $27.4 million. Interest is payable at varying Eurodollar rates based on LIBOR or prime plus a spread determined by the Company's leverage ratio amounting to 275 (LIBOR) or 150 (prime) basis points, respectively, at September 28, 2003. The Revolving Credit Facility is secured by all domestic and Canadian inventory, receivables, equipment, real property, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. At September 28, 2003, the Term Loan has a balance $9,500 and requires quarterly payments of $1,179, which would result in repayment in full on October 1, 2005. Interest is payable at varying Eurodollar rates based on LIBOR or prime plus a spread determined by the Company's leverage ratio amounting to 325 (LIBOR) or 200 (prime) basis points at September 28, 2003. The Term Loan is secured by all domestic inventory, receivables, equipment, real property, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. On July 22, 2003, the Company issued $115 million of 10% Senior Secured Notes (10% Notes) due August 1, 2010. Proceeds from this offering were used for the repayment in full of the Senior Second Secured Term Loan ($66.8 million), the repurchase of $35.7 million of Senior Subordinated Notes at a discount ($30.1 million), the repayment of a portion of the outstanding Revolving Credit Facility ($10.0 million), the repayment of a portion of the Term Loan ($3.9 million), the payment of financing costs ($2.8 million), and the payment of accrued interest ($1.4 million). The Senior Second Secured Term loan was repaid in its entirety on July 22, 2003. As a result of the repayment occurring prior to the first anniversary of the loan, $1.1 million of accrued interest expense was reversed in the second quarter of fiscal 2004 and is reflected as a reduction of interest expense. The redemption of the 8 1/2% Senior Subordinated Notes occurred at a discount resulting in a pre-tax gain on early extinguishment of debt of $5.6 million. As a result of the repayment of the Senior Second Secured Term Loan and a portion of the Term Loan and 8 1/2% Senior Subordinated Notes, $4.9 million of pre-tax deferred financing costs were written-off in the second quarter of fiscal 2004. The net effect of these two items, a $0.7 pre-tax million gain, is shown as part of other (income) and expense, net. The corresponding credit agreements associated with the Revolving Credit Facility and the Term Loan place certain debt covenant restrictions on the Company including certain financial requirements and a restriction on dividend payments. From time to time, the Company manages its debt portfolio by using interest rate swaps to achieve an overall desired position of fixed and floating rates. In June 2001, the Company entered into an interest rate swap agreement to effectively convert $40 million of variable-rate debt to fixed-rate debt, which matured in June 2003. This cash flow hedge was considered effective and the gain or loss on the change in fair value was reported in other comprehensive income, net of tax. - 16 - Effective August 4, 2003, the Company entered into an interest rate swap agreement to effectively convert $93.5 million of fixed-rate debt (10%) to variable-rate debt (LIBOR plus 578.2 basis points) through August 2008 and $57.5 million from August 2008 through August 2010. This fair value hedge is considered effective and the change in fair value is recognized in income as a gain or loss. In addition, the change in the fair value of the hedged item, the 10% Notes, is also recognized in income as an exactly offsetting gain or loss resulting in no impact on net income. As of September 28, 2003, the fair value hedge resulted in the recognition of an asset of $3.0 million and a corresponding increase in the recorded amount of the 10% Notes of $3.0 million. We believe that our cash on hand, cash flows from operations, and borrowing capacity under our Revolving Credit Facility will be sufficient to fund our ongoing operations and budgeted capital expenditures for at least the next twelve months. This belief is dependent upon a steady economy and successful execution of our current business plan which is focused on cash generation for debt repayment. The business plan includes continued implementation of lean manufacturing, facility rationalization projects, possible divestiture of excess facilities and certain non-strategic operations, and improving working capital components, including inventory reductions. Net cash provided by operating activities was $24,565 for the six months ended September 28, 2003 compared to $655 for the six months ended September 29, 2002. The difference of $23,910 is due to changes in net working capital components particularly inventories ($6.7 million) and accrued and non-current liabilities ($14.6 million). Net cash provided by investing activities was $377 for the six months ended September 28, 2003 compared to $16,743 for the six months ended September 29, 2002 as a result of the proceeds from the sale of ASI in fiscal 2003. Net cash used in financing activities was $14,013 for the six months ended September 28, 2003 compared to $26,282 for the six months ended September 29, 2002. The $12,269 change is primarily the result of $24.6 million in cash flow from operations, net of the cash increase of $11.2 million being used to pay down debt in fiscal 2004 versus $16.0 million of proceeds from the sale of ASI and a cash decrease of $8.5 million used to pay down debt in fiscal 2003. CAPITAL EXPENDITURES In addition to keeping its current equipment and plants properly maintained, the Company is committed to replacing, enhancing, and upgrading its property, plant, and equipment to reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet environmental requirements, enhance safety, and promote ergonomically correct work stations. Consolidated capital expenditures for the six months ended September 28, 2003 and September 29, 2002 were $2,094 and $2,270, respectively. 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 general inflation has had a material effect on results of operations over the periods presented primarily due to overall low inflation levels over the periods and because the Company has generally been able to pass on rising costs through price increases. However, employee benefit costs such as health insurance, workers compensation insurance, pensions as well as energy and business insurance have exceeded general inflation levels. In the future, we may be further affected by inflation that we may not be able to pass on as price increases. - 17 - 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, by the timing and extent of restructuring projects, 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. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk From time to time, the Company manages its debt portfolio by using interest rate swaps to achieve an overall desired position of fixed and floating rates. Effective August 4, 2003, the Company entered into an interest rate swap agreement to effectively convert $93.5 million of fixed-rate debt (10%) to variable-rate debt (LIBOR plus 578.2 basis points) through August 2008 and $57.5 million from August 2008 through August 2010. As a result of this floating rate basis, changes in short-term interest rates could have a significant impact on the Company's earnings and funds from operations. There have been no other material changes in the reported market risks since the end of Fiscal 2003. Item 4. Disclosure Controls and Procedures As of September 28, 2003, an evaluation was performed under the supervision and with the participation of the Company's management, including the chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the chief executive officer and chief financial officer, concluded that the Company's disclosure controls and procedures were effective as of September 28, 2003. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to September 28, 2003. - 18 - PART II. OTHER INFORMATION Item 1. Legal Proceedings - none. Item 2. Changes in Securities - none. Item 3. Defaults upon Senior Securities - none. Item 4. Submission of Matters to a Vote of Security Holders On August 18, 2003, the Annual Meeting of Shareholders was held and the following directors were elected: 13,093,396 votes cast for: Herbert P. Ladds, Jr.; 12,994,414 votes cast for: Timothy T. Tevens; 13,106,901 votes cast for: Robert L. Montgomery, Jr.; 12,724,403 votes cast for: Wallace W. Creek; 12,723,181 votes cast for: Richard J. Fleming; 12,706,231 votes cast for: Carlos Pasqual; 13,011,519 votes cast for: Ernest R. Verebelyi. Item 5. Other Information - none. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934; as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934; as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. (b) Reports on Form 8-K: On August 14, 2003, the Company filed a Current Report on Form 8-K with respect to its adoption of an Audit Committee Policy regarding non-audit fees. On October 21, 2003, the Company filed a Current Report on Form 8-K with respect to its financial results for the second quarter of fiscal 2004. - 19 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COLUMBUS MCKINNON CORPORATION ----------------------------------- (Registrant) Date: NOVEMBER 12, 2003 /S/ ROBERT L. MONTGOMERY, JR. ------------------ ----------------------------------- Robert L. Montgomery, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) - 20 -