-----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, Hlb8fOC+kVn2gaKoRCD2mdjRv19EpW3uh2qXkycmKPg6Z2Fk8M55nr6lcDYojw0k cHOmTBUT3uGHlVj0ndG53g== 0001005229-99-000032.txt : 19991117 0001005229-99-000032.hdr.sgml : 19991117 ACCESSION NUMBER: 0001005229-99-000032 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991003 FILED AS OF DATE: 19991116 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-Q SEC ACT: SEC FILE NUMBER: 000-27618 FILM NUMBER: 99759123 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 INC CENTRAL INDEX KEY: 0001062619 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 431234309 STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-53759-03 FILM NUMBER: 99759124 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: 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-Q SEC ACT: SEC FILE NUMBER: 333-53759-04 FILM NUMBER: 99759125 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-Q SEC ACT: SEC FILE NUMBER: 333-53759-05 FILM NUMBER: 99759126 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-Q SEC ACT: SEC FILE NUMBER: 333-53759-06 FILM NUMBER: 99759127 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 19228-1197 BUSINESS PHONE: 7166895400 10-Q 1 SECOND QUARTER 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934 For the quarterly period ended October 3, 1999 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 The number of shares of common stock outstanding as of October 31, 1999 was: 14,877,405 shares. FORM 10-Q INDEX COLUMBUS McKINNON CORPORATION OCTOBER 3, 1999 Page # ------ PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed consolidated balance sheets - October 3, 1999 and March 31, 1999 2 Condensed consolidated statements of income and retained earnings - Three months and six months ended October 3, 1999 and September 27, 1998 3 Condensed consolidated statements of cash flows - Six months ended October 3, 1999 and September 27, 1998 4 Condensed consolidated statements of comprehensive income - Three months and six months ended October 3, 1999 and September 27, 1998 5 Notes to condensed consolidated financial statements - October 3, 1999 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings - none. 22 Item 2. Changes in Securities - none. 22 Item 3. Defaults upon Senior Securities - none. 22 Item 4. Submission of Matters to a Vote of Security Holders 22 Item 5. Other Information - none. 22 Item 6. Exhibits and Reports on Form 8-K 23 - 1 - PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS McKINNON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) OCTOBER 3, MARCH 31, 1999 1999 --------- --------- ASSETS: (In thousands) Current assets: Cash and cash equivalents ...................................... $ 20,071 $ 6,867 Trade accounts receivable ...................................... 132,762 136,988 Unbilled revenues .............................................. 16,209 9,821 Inventories .................................................... 114,001 115,979 Net assets held for sale ....................................... 8,803 8,214 Prepaid expenses ............................................... 8,734 8,160 --------- --------- Total current assets ................................................. 300,580 286,029 Net property, plant, and equipment ................................... 90,059 90,004 Goodwill and other intangibles, net .................................. 353,428 357,727 Marketable securities ................................................ 19,685 19,355 Deferred taxes on income ............................................. 5,520 5,627 Other assets ......................................................... 8,118 8,169 --------- --------- Total assets ......................................................... $ 777,390 $ 766,911 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Notes payable to banks ......................................... $ 3,314 $ 4,590 Trade accounts payable ......................................... 62,958 54,651 Excess billings ................................................ 7,094 5,058 Accrued liabilities ............................................ 38,131 54,331 Current portion of long-term debt .............................. 1,853 1,926 --------- --------- Total current liabilities ............................................ 113,350 120,556 Senior debt, less current portion .................................... 230,548 222,165 Subordinated debt .................................................... 199,548 199,521 Other non-current liabilities ........................................ 37,424 35,995 --------- --------- Total liabilities .................................................... 580,870 578,237 Shareholders' equity: Common stock ................................................... 149 146 Additional paid-in capital ..................................... 107,228 102,313 Retained earnings .............................................. 105,383 100,455 ESOP debt guarantee ............................................ (9,447) (9,865) Unearned restricted stock ...................................... (4,004) (1,009) Total accumulated other comprehensive income loss .............. (2,789) (3,366) --------- --------- Total shareholders' equity ........................................... 196,520 188,674 --------- --------- Total liabilities and shareholders' equity ........................... $ 777,390 $ 766,911 ========= ========= See accompanying notes to condensed consolidated financial statements.
- 2 -
COLUMBUS McKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED ------------------------ ------------------------- OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, 1999 1998 1999 1998 ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net sales ............................................................ $ 182,008 $ 185,357 $ 363,609 $ 369,974 Cost of products sold ................................................ 142,276 138,315 276,764 275,618 --------- --------- --------- --------- Gross profit ......................................................... 39,732 47,042 86,845 94,356 Selling expenses ..................................................... 12,412 12,819 25,170 25,691 General and administrative expenses .................................. 10,912 9,780 20,269 19,219 Proxy contest related expenses ....................................... 835 -- 965 -- Amortization of intangibles .......................................... 4,000 3,865 8,002 7,643 --------- --------- --------- --------- 28,159 26,464 54,406 52,553 Income from operations ............................................... 11,573 20,578 32,439 41,803 Interest and debt expense ............................................ 8,294 9,302 16,573 18,250 Interest and other income ............................................ 306 262 553 633 --------- --------- --------- --------- Income before income taxes ........................................... 3,585 11,538 16,419 24,186 Income tax expense ................................................... 3,074 5,614 9,513 11,887 --------- --------- --------- --------- Net income ........................................................... 511 5,924 6,906 12,299 Retained earnings - beginning of period .............................. 105,865 82,179 100,455 76,744 Cash dividends of $0.07, $0.07, $0.14 and $0.14 per share ................................................... (993) (943) (1,978) (1,883) --------- --------- --------- --------- Retained earnings - end of period .................................... $ 105,383 $ 87,160 $ 105,383 $ 87,160 Earnings per share data, basic: ...................................... $ 0.04 $ 0.41 $ 0.49 $ 0.86 Earnings per share data, diluted: .................................... $ 0.04 $ 0.41 $ 0.49 $ 0.85 See accompanying notes to condensed consolidated financial statements.
- 3 -
COLUMBUS McKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED ---------------- OCTOBER 3, SEPTEMBER 27, 1999 1998 ---------- ------------ (IN THOUSANDS) OPERATING ACTIVITIES: Net income ........................................................... $ 6,906 $ 12,299 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................................. 14,412 13,570 Deferred income taxes ........................................... 172 (25) Other .......................................................... 436 115 Changes in operating assets and liabilities net of effects from businesses purchased: Trade accounts receivable ................................. 5,954 (21,013) Unbilled revenues and excess billings ..................... (4,352) 5,318 Inventories ............................................... 2,949 2,255 Prepaid expenses .......................................... (572) 190 Other assets .............................................. (92) (367) Trade accounts payable .................................... 7,008 (12,877) Accrued and non-current liabilities ....................... (13,094) 4,715 -------- -------- Net cash provided by operating activities ............................ 19,727 4,180 -------- -------- INVESTING ACTIVITIES: (Purchase) sale of marketable securities, net ........................ (796) 438 Capital expenditures ................................................. (5,130) (5,621) Proceeds from sale of businesses ..................................... - 9,301 Purchases of businesses, net of cash ................................. (6,410) (7,323) Net assets held for sale ............................................. (589) 1,403 -------- -------- Net cash used in investing activities ................................ (12,925) (1,802) -------- -------- FINANCING ACTIVITIES: Proceeds from issuance of common stock ............................... 3 - Net borrowings under revolving line-of-credit agreements ............. 7,524 1,594 Repayment of debt .................................................... (490) (6,363) Dividends paid ....................................................... (1,978) (1,883) Reduction of ESOP debt guarantee ..................................... 418 436 Other ................................................................ (131) (891) -------- -------- Net cash provided by (used in) financing activities .................. 5,346 (7,107) Effect of exchange rate changes on cash .............................. 1,056 (967) -------- -------- Net increase (decrease) in cash and cash equivalents ................. 13,204 (5,696) Cash and cash equivalents at beginning of period ..................... 6,867 22,861 -------- -------- Cash and cash equivalents at end of period ........................... $ 20,071 $ 17,165 ======== ======== 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 ------------------ ---------------- OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, 1999 1998 1999 1998 ---- ---- ---- ---- (IN THOUSANDS) Net income ........................................................... $ 511 $ 5,924 $ 6,906 $ 12,299 -------- -------- -------- -------- Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ........................... 528 207 1,043 (62) Unrealized gains on investments: Unrealized holding gains arising during the period ..................................................... (455) (268) (402) (221) Less: reclassification adjustment for gains included in net income ......................................... (64) 50 (64) (26) (519) (218) (466) (247) -------- -------- -------- -------- Total other comprehensive income (loss) .............................. 9 (11) 577 (309) -------- -------- -------- -------- Comprehensive income ................................................. $ 520 $ 5,913 $ 7,483 $ 11,990 ======== ======== ======== ======== See accompanying notes to condensed consolidated financial statements.
- 5 - COLUMBUS McKINNON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OCTOBER 3, 1999 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at October 3, 1999, and the results of its operations and its cash flows for the three and six month periods ended October 3, 1999 and September 27, 1998, have been included. Results for the period ended October 3, 1999 are not necessarily indicative of the results that may be expected for the year ended March 31, 2000. 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, 1999. Columbus McKinnon Corporation (the Company) is a leading broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions that are widely distributed to industrial, automotive, and consumer markets worldwide. The Company's material handling products are sold, domestically and internationally, principally to third party distributors in commercial and consumer distribution channels, and to a lesser extent directly to manufacturers and other end-users. The Company's integrated material handling solutions businesses primarily deal with end users. Material handling solution sales are concentrated, domestically and internationally (primarily Europe), in the automotive industry, and consumer products, manufacturing, warehousing and, to a lesser extent, the steel, construction, and other industrial markets. 2. Inventories consisted of the following: OCTOBER 3, MARCH 31, 1999 1999 ----------- ----------- (IN THOUSANDS) At cost - FIFO basis: Raw materials $ 59,475 $ 54,648 Work-in-process 20,738 21,663 Finished goods 39,163 45,042 ----------- ----------- 119,376 121,353 LIFO cost less than FIFO cost (5,375) (5,374) ----------- ----------- $ 114,001 $ 115,979 =========== =========== An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations must necessarily be based on management's estimates of expected year-end inventory levels and costs. Because these are subject to many forces beyond management's control, interim results are subject to the final year-end LIFO inventory valuation. - 6 - 3. Property, plant, and equipment is net of $48,458,000 and $42,048,000 of accumulated depreciation at October 3, 1999 and March 31, 1999, respectively. 4. Goodwill and other intangibles, net includes $37,866,000 and $29,864,000 of accumulated amortization at October 3, 1999 and March 31, 1999, respectively. 5. General and Product Liability - The accrued general and product liability costs, which are included in other non-current liabilities, are the actuarial present value of estimated expenditures based on amounts determined from loss reports and individual cases filed with the Company, and an amount, based on past experience, for losses incurred but not reported. The accrual in these condensed consolidated financial statements was determined by applying a discount factor based on interest rates customarily used in the insurance industry. 6. To manage its exposure to interest rate fluctuations, the Company has an interest rate swap with a notional value of $3.5 million from January 2, 1999 through July 2, 2000, based on LIBOR at 5.9025%. The Company also has a LIBOR-based interest rate cap on $49.5 million of debt through December 16, 1999 at 10%. Net payments or receipts under the swap and cap agreements are recorded as adjustments to interest expense. The carrying amount of the Company's senior debt instruments approximates the fair values. The Company's subordinated debt has an approximate fair market value of $168,000,000 which is less than its carrying amount of $199,548,000. 7. The following table sets forth the computation of basic and diluted earnings per share before extraordinary charge for debt extinguishment:
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, 1999 1998 1999 1998 ------------------------- ---------- ------------ Numerator for basic and diluted earnings per share: Income before extraordinary charge ... $ 511,000 $ 5,924,000 $ 6,906,000 $12,299,000 =========== =========== =========== =========== Denominators: Weighted-average common stock outstanding - denominator for basic EPS ....................... 14,153,000 14,353,000 14,060,000 14,341,000 Effect of dilutive employee stock options . 75,000 159,000 150,000 184,000 ---------- ---------- ---------- ---------- Adjusted weighted-average common stock outstanding and assumed conversions - denominator for diluted EPS ............ 14,228,000 14,512,000 14,210,000 14,525,000 ========== ========== ========== ==========
8. Income tax expense for the three-month periods ended October 3, 1999 and September 27, 1998 and also for the six month periods then ended exceeds the customary relationship between income tax expense and income before income taxes due to nondeductible amortization of goodwill of $4,000,000, $3,865,000, $8,002,000, and $7,643,000, respectively. - 7 - 9. On April 29, 1999, the Company acquired all of the outstanding stock of Washington Equipment Company ("WECO"), a regional manufacturer and servicer of overhead cranes. The total cost of the acquisition, which was accounted for as a purchase, was approximately $6.4 million of cash and was financed by proceeds from the Company's revolving debt facility. 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 fiscal 1999 consolidated financial statements have been restated to include the accounts of GL from the date of GL's formation, April 1, 1997. The fair market value of the stock and options exchanged was approximately $20.6 million. Net sales and net income of the separate companies were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 27, 1998 SEPTEMBER 27, 1998 ------------------ ------------------ (IN THOUSANDS) (IN THOUSANDS) Net sales: Columbus McKinnon, as reported............. $ 168,634 $ 339,138 GL International, Inc...................... 18,542 34,473 Intercompany eliminations.................. (1,819) (3,637) ---------------- ---------------- Combined................................... $ 185,357 $ 369,974 ================ ================ Net income: Columbus McKinnon, as reported............. $ 5,085 $ 11,169 GL International, Inc...................... 791 1,036 Intercompany eliminations.................. 48 94 ---------------- ---------------- Combined................................... $ 5,924 $ 12,299 ================ ================
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") 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. 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. - 8 - 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. 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 following table presents pro forma summary information for the six month period ended September 27, 1998 as if the fiscal 1999 and 2000 acquisitions and related borrowings and the sale of Mechanical Products had occurred as of April 1, 1998, which is the beginning of fiscal 1999. The pro forma information is provided for informational purposes only. It is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined enterprise: SIX MONTHS ENDED SEPTEMBER 27, 1998 ------------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) Pro forma: Net sales $ 369,731 Income from operations 41,697 Net income 12,287 Earnings per share, basic 0.86 Earnings per share, diluted 0.85 - 9 - 10. As a result of the way the Company manages the business, its reportable segments are strategic business units that offer products and services 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, integrated material handling solutions - industrial, and integrated material handling solutions - automotive. The Company's material handling products segment sells hoists, chain, attachments, and other material handling products principally to third party distributors in commercial and consumer distribution channels. The material handling solutions segments sell engineered material handling systems such as conveyors, manipulators, and lift tables primarily to end-users in the automotive segment, general manufacturing, warehousing, and consumer products manufacturing industries. 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 six months ended October 3, 1999 and September 27, 1998, is as follows:
SIX MONTHS ENDED OCTOBER 3, 1999 SOLUTIONS - SOLUTIONS - ELIMINATIONS/ PRODUCTS INDUSTRIAL AUTOMOTIVE OTHER TOTAL -------- ---------- ---------- ------------- ------ (IN THOUSANDS) Sales to external customers . $ 270,552 $ 27,250 $ 76,321 $ (10,514) $ 363,609 Operating income before amortization .............. 41,577 2,639 (2,629) (1,146) 40,441 Depreciation and amortization 10,034 1,551 2,827 - 14,412 Total assets ................ 520,710 69,015 187,665 - 777,390 Capital expenditures ........ 4,491 511 128 - 5,130
SIX MONTHS ENDED SEPTEMBER 27, 1998 SOLUTIONS - SOLUTIONS - ELIMINATIONS/ PRODUCTS INDUSTRIAL AUTOMOTIVE OTHER TOTAL -------- ---------- ---------- ------------- ----- (IN THOUSANDS) Sales to external customers . $260,815 $ 28,032 $ 83,569 $ (2,442) $369,974 Operating income before amortization............... 36,429 2,602 9,714 701 49,446 Depreciation and amortization 8,917 1,500 2,832 321 13,570 Total assets ................ 517,988 69,288 194,305 - 781,581 Capital expenditures ........ 4,486 997 136 2 5,621
- 10 - The following schedule provides a reconciliation of operating income before amortization with consolidated income before income taxes:
SIX MONTHS ENDED ---------------- OCTOBER 3, 1999 SEPTEMBER 27, 1998 --------------- ------------------ (IN THOUSANDS) Operating income before amortization $ 40,441 $ 49,446 Amortization of intangibles ........ 8,002 7,643 Interest and debt expense .......... 16,573 18,250 Interest and other income .......... (553) (633) -------- -------- Income before income taxes ......... $ 16,419 $ 24,186 ======== ========
- 11 - 11. The summary financial information of the parent, domestic subsidiaries (guarantors) and foreign subsidiaries (nonguarantors of the 8.5% senior subordinated notes) follows:
Domestic Foreign Elimina- Consoli- (In thousands) Parent Subsidiaries Subsidiaries Tions dated ------------------------------------------------------------ As of October 3, 1999 Current assets: Cash and cash equivalents ..................... $ 9, 522 $ 5,264 $ 5,285 $ - $ 20,071 Trade accounts receivable ..................... 51,152 56,998 24,612 - 132,762 Unbilled revenues ............................. - 16,209 - - 16,209 Inventories ................................... 48,308 39,570 27,134 (1,011) 114,001 Other current assets .......................... 2,893 10,966 3,678 - 17,537 ------------------------------------------------------------- Total current assets ......................... 111,875 129,007 60,709 (1,011) 300,580 Net property, plant, and equipment ............. 36,588 33,094 20,377 - 90,059 Goodwill and other intangibles, net ............ 41,849 258,569 53,010 - 353,428 Intercompany ................................... 206,658 (371,663) (67,193) 232,198 - Other assets ................................... 221,004 162,472 (1,474) (348,679) 33,323 ------------------------------------------------------------- Total assets ................................. $ 617,974 $ 211,479 $ 65,429 $ (117,492) $ 777,390 ============================================================= Current liabilities ............................ $ 31,992 $ 56,845 $ 22,859 $ 1,654 $ 113,350 Long-term debt, less current portion ........... 423,280 - 6,816 - 430,096 Other non-current liabilities .................. 12,233 22,055 3,136 - 37,424 ------------------------------------------------------------- Total liabilities ............................ 467,505 78,900 32,811 1,654 580,870 Shareholders' equity ........................... 150,469 132,579 32,618 (119,146) 196,520 ------------------------------------------------------------- Total liabilities and shareholders' equity ... $ 617,974 $ 211,479 $ 65,429 $(117,492) $ 777,390 ============================================================= For the Six Months Ended October 3, 1999 Net sales ...................................... $ 132,442 $ 180,063 $ 61,618 $ (10,514) $ 363,609 Cost of products sold .......................... 90,973 152,089 44,179 (10,477) 276,764 ------------------------------------------------------------- Gross profit ................................... 41,469 27,974 17,439 (37) 86,845 ------------------------------------------------------------- Selling, general and administrative expenses ... 19,761 14,867 11,776 - 46,404 Amortization of intangibles .................... 980 5,732 1,290 - 8,002 ------------------------------------------------------------- 20,741 20,599 13,066 - 54,406 ------------------------------------------------------------- Income from operations ......................... 20,728 7,375 4,373 (37) 32,439 Interest and debt expense ...................... 16,204 5 364 - 16,573 Interest and other income ...................... 292 157 104 - 553 ------------------------------------------------------------- Income before income taxes ..................... 4,816 7,527 4,113 (37) 16,419 Income tax expense ............................. 2,261 5,311 1,956 (15) 9,513 ------------------------------------------------------------- Net income ..................................... $ 2,555 $ 2,216 $ 2,157 $ (22) $ 6,906 ============================================================= For the Six Months Ended October 3, 1999 Operating activities: Net cash provided by operating activities ...... $ 3,994 $ 12,720 $ 2,862 $ 151 $ 19,727 ------------------------------------------------------------- Investing activities: Purchase of marketable securities, net ......... (796) - - - (796) Capital expenditures ........................... (2,892) (1,045) (1,193) - (5,130) Purchases of businesses, net of cash ........... - (6,361) - (49) (6,410) Other .......................................... - (589) - - (589) ------------------------------------------------------------- Net cash used in investing activities .......... (3,688) (7,995) (1,193) (49) (12,925) ------------------------------------------------------------- - 12 - Financing activities: Proceeds from issuance of common stock ......... 3 136 - (136) 3 Net borrowings (payments) under revolving line-of-credit agreements .................... 8,800 - (1,276) - 7,524 Repayment of debt .............................. (1,009) - 519 - (490) Dividends paid ................................. (1,974) (5) 1 - (1,978) Other .......................................... 287 - - - 287 ------------------------------------------------------------- Net cash provided by (used in) financing activities.................................... 6,107 131 (756) (136) 5,346 Effect of exchange rate changes on cash ........ - - 1,022 34 1,056 ------------------------------------------------------------- Net change in cash and cash equivalents ........ 6,413 4,856 1,935 - 13,204 Cash and cash equivalents at beginning of period 3,109 408 3,350 - 6,867 ------------------------------------------------------------- Cash and cash equivalents at end of period ..... $ 9,522 $ 5,264 $ 5,285 $ - $ 20,071 =============================================================
Domestic Foreign Elimina- Consoli- (In thousands) Parent Subsidiaries Subsidiaries Tions Dated --------------------------------------------------------------- As of September 27, 1998 Current assets: Cash and cash equivalents ..................... $ 17,038 $ (3,493) $ 3,620 $ - $ 17,165 Trade accounts receivable ..................... 57,073 65,663 23,067 - 145,803 Unbilled revenues ............................. - 16,659 - - 16,659 Inventories ................................... 46,479 41,707 23,551 (996) 110,741 Other current assets .......................... 1,742 10,278 3,865 - 15,885 ------------------------------------------------------------ Total current assets ......................... 122,332 130,814 54,103 (996) 306,253 Net property, plant, and equipment ............. 34,567 33,196 18,672 - 86,435 Goodwill and other intangibles, net ............ 43,511 264,816 48,535 - 356,862 Intercompany ................................... 214,865 (380,000) (64,073) 229,208 - Other assets ................................... 218,229 162,119 (2,184) (346,133) 32,031 ------------------------------------------------------------- Total assets ................................. $ 633,504 $ 210,945 $ 55,053 $(117,921) $ 781,581 ============================================================= Current liabilities ............................ $ 31,098 $ 60,651 $ 21,120 $ (559) $ 112,310 Long-term debt, less current portion ........... 441,088 3,031 3,358 - 447,477 Other non-current liabilities .................. 10,725 25,192 3,537 - 39,454 ------------------------------------------------------------- Total liabilities ............................ 482,911 88,874 28,015 (559) 599,241 Shareholders' equity ........................... 150,593 122,071 27,038 (117,362) 182,340 ------------------------------------------------------------- Total liabilities and shareholders' equity ... $ 633,504 $ 210,945 $ 55,053 $(117,921) $ 781,581 ============================================================= For the Six Months Ended September 27, 1998 Net sales ...................................... $ 130,613 $ 190,376 $ 59,009 $ (10,024) $ 369,974 Cost of products sold .......................... 93,092 149,422 43,282 (10,178) 275,618 ------------------------------------------------------------- Gross profit ................................... 37,521 40,954 15,727 154 94,356 ------------------------------------------------------------- Selling, general and administrative expenses ... 17,372 17,435 10,103 - 44,910 Amortization of intangibles .................... 976 5,613 1,054 - 7,643 ------------------------------------------------------------- 18,348 23,048 11,157 - 52,553 ------------------------------------------------------------- Income from operations ......................... 19,173 17,906 4,570 154 41,803 Interest and debt expense ...................... 17,358 618 274 - 18,250 Interest and other income ...................... 752 50 (169) - 633 ------------------------------------------------------------- Income before income taxes ..................... 2,567 17,338 4,127 154 24,186 Income tax expense ............................. 1,375 8,444 2,008 60 11,887 ------------------------------------------------------------- Net income ..................................... $ 1,192 $ 8,894 $ 2,119 $ 94 $ 12,299 ============================================================= - 13 - For the Six Months Ended September 27, 1998 Operating activities: Net cash provided by (used in) operating activities ................................... $ 5,415 $ (4,256) $ 2,971 $ 50 $ 4,180 ------------------------------------------------------------- Investing activities: Purchase of marketable securities, net ......... 438 - - - 438 Capital expenditures ........................... (3,720) (768) (1,133) - (5,621) Proceeds from sale of businesses ............... 9,390 (89) - - 9,301 Purchases of businesses, net of cash ........... (7,000) (323) - - (7,323) Other .......................................... - 1,403 - - 1,403 ------------------------------------------------------------- Net cash (used in) provided by investing activities ................................... (892) 223 (1,133) - (1,802) ------------------------------------------------------------- Financing activities: Net payments under revolving line-of-credit agreements .................... (2,600) 5,819 (1,625) - 1,594 Repayment of debt .............................. (537) (6,067) 241 - (6,363) Dividends paid ................................. (1,883) - - - (1,883) Other .......................................... (455) - - - (455) ------------------------------------------------------------- Net cash used in financing activities .......... (5,475) (248) (1,384) - (7,107) Effect of exchange rate changes on cash ........ (1) - (916) (50) (967) ------------------------------------------------------------- Net change in cash and cash equivalents ........ (953) (4,281) (462) - (5,696) Cash and cash equivalents at beginning of period 17,991 788 4,082 - 22,861 ------------------------------------------------------------- Cash and cash equivalents at end of period ..... $ 17,038 $ (3,493) $ 3,620 $ - $ 17,165 =============================================================
12. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). In June 1999, the FASB issued SFAS 137, which defers the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. SFAS133 establishes accounting and reporting standards for derivative instruments 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. The intended use of the derivative and its designation as either (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (a fair value hedge) (2) a hedge of the exposure to variable cash flows of a forecasted transaction (a cash flow hedge), or (3) a hedge of the foreign currency exposure of a net investment in a foreign operation (a foreign currency hedge), will determine when the gains and losses on the derivatives are reported in earnings and when they are to be reported as a component of other comprehensive income. The adoption of SFAS 133 is not expected to have a material impact on the financial position or results of operations of the Company. 13. In its October 26th, 1999 second quarter earnings release, the Company announced its plan to engage an advisor to explore strategic alternatives for the Company's Solutions-Automotive segment made up of Automatic Systems, Inc. ("ASI"). The strategic alternatives to be evaluated include the sale of ASI, restructuring of its operational focus, and diversification of the markets it serves. The strategic evaluation and plan for ASI are expected to be completed within the next two to three months. - 14 - Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OVERVIEW The Company is a broad-line designer, manufacturer, and supplier of sophisticated material handling products and integrated material handling solutions that are widely distributed to industrial, automotive and consumer markets worldwide. The Company's material handling products are sold, domestically and internationally, principally to third party distributors in commercial and consumer distribution channels, and to a lesser extent directly to manufacturers and other end-users. Commercial distribution channels include general distributors, specialty distributors, service-after-sale distributors, original equipment manufacturers ("OEMs"), and the U.S. and Canadian governments. The general distributors are comprised of industrial distributors, rigging shops and crane builders. Specialty distributors include catalog houses, material handling specialists and entertainment equipment riggers. The service-after-sale network includes repair parts distribution centers, chain service centers, and hoist repair centers. Consumer distribution channels include mass merchandisers, hardware distributors, trucking and transportation distributors, farm hardware distributors and rental outlets. The Company's integrated material handling solutions businesses primarily deal with end-users. Material handling solution sales are concentrated, domestically and internationally (primarily Europe), in the automotive industry, and consumer products manufacturing, warehousing and, to a lesser extent, the steel, construction and other industrial markets. RESULTS OF OPERATIONS THREE MONTHS AND SIX MONTHS ENDED OCTOBER 3, 1999 AND SEPTEMBER 27, 1998 Net sales in the fiscal 2000 quarter ended October 3, 1999 were $182,008,000, a decrease of $3,349,000 or 1.8% from the fiscal 1999 quarter ended September 27, 1998. Net sales for the six months ended October 3, 1999 were $363,609,000, a decrease of $6,365,000 or 1.7% from the six months ended September 27, 1998. Sales in the Products segment were consistent with the previous year's quarter as the addition of WECO and Abell-Howe offset softness in most industrial markets. Sales were up $9,737,000 or 3.7% for the six months ended October 3, 1999 over the prior year period, also primarily as a result of the additions of WECO and Abell-Howe as well as some strength from the first quarter. Sales in the Solutions-Industrial segment rose 11.8% or $1,479,000 for the three months ended October 3, 1999 as a result of strength in the Scandinavian markets. Sales for the six months ended October 3, 1999 are down 2.8% or $782,000 as a result of a sluggish Scandinavian market in the first quarter and continued softness in the scissor lift market. The Solutions-Automotive segment had a sales decrease of 6.0% or $2,618,000 for the quarter and 8.7% or $7,248,000 for the six months ended October 3, 1999. The decreases are the result of the lagging impact of General Motors business due to its shifting of capital spending from small car to truck and Sport Utility Vehicle (SUV) plants. The decrease in the Eliminations/Other segment for the three and six months ended October 3, 1999 is a result of the sale of Mechanical Products in August of 1998. - 15 - Sales in the individual segments were as follows, in thousands of dollars and with percentage changes for each group:
Three Months Ended Six Months Ended ------------------ ---------------- Oct. 3, Sep. 27, Change Oct. 3, Sep. 27, Change ------ ------ 1999 1998 Amount % 1999 1998 Amount % ---- ---- ------ - ---- ---- ------ - (In thousands, except percentages) Products $ 131,764 $ 132,300 $ (536) (0.4) $ 270,552 $ 260,815 $ 9,737 3.7 Solutions-Industrial 13,994 12,515 1,479 11.8 27,250 28,032 (782) (2.8) Solutions-Automotive 40,773 43,391 (2,618) (6.0) 76,321 83,569 (7,248) (8.7) Eliminations/Other (4,523) (2,849) (1,674) (58.8) (10,514) (2,442) (8,072) (330.5) --------- --------- ------- ---------- --------- ------- Net sales $ 182,008 $ 185,357 $(3,349) (1.8) $ 363,609 $ 369,974 $(6,365) (1.7) ========= ========= ======= ========== ========= =======
The Company's gross profit margins were approximately 21.8%, 25.4%, 23.9% and 25.5% for the fiscal 2000 and 1999 quarters and the six months then ended, respectively. The decrease in the current quarter and six-month period margin relative to the respective periods in the prior year is the result of varying effects among the company's segments. The gross profit margin in the Products segment for the quarter and six month periods ended October 3, 1999 showed continued improvement over the respective periods in the prior year as a result of the continued integration of acquisitions including consolidated purchasing efforts. The Solutions-Industrial segment experienced a slight increase in margins for the current quarter and six-month periods when compared to the prior year as a result of the same strategies. Gross margin in the Solutions-Automotive segment decreased significantly for the quarter and six month period ended October 3, 1999 as a result of cost overruns on several foreign jobs and reduced volume created by GM's delay in capital spending due to a shift in its spending from small car to truck and SUV plants. Selling expenses were $12,412,000, $12,819,000, $25,170,000 and $25,691,000 in the fiscal 2000 and 1999 quarters and the six months then ended, respectively. As a percentage of consolidated net sales, selling expenses were 6.8%, 6.9%, 6.9% and 6.9% in the fiscal 2000 and 1999 quarters and the six month periods then ended, respectively. General and administrative expenses were $10,912,000 $9,780,000, $20,269,000, and $19,219,000 in the fiscal 2000 and 1999 quarters and the six months then ended, respectively. The fiscal 2000 expenses were impacted by the additions of WECO and Abell-Howe. As a percentage of consolidated net sales, general and administrative expenses were 6.0%, 5.3%, 5.6% and 5.2% in the fiscal 2000 and 1999 quarters and the six months then ended, respectively. The Company incurred proxy contest related expenses amounting to $835,000 and $965,000, respectively in the quarter and six months ended October 3, 1999 relative to the August 16, 1999 annual shareholders meeting and annual director elections. Amortization of intangibles was $4,000,000, $3,865,000, $8,002,000 and $7,643,000 in the fiscal 2000 and 1999 quarters and the six months then ended, respectively. The fiscal 2000 increase is due to the amortization of goodwill resulting from the acquisitions of Abell-Howe, Gautier, Camlok-Tigrip, and WECO. - 16 - As a result of the above, income from operations decreased $9,005,000 or 43.8% in the fiscal 2000 quarter and decreased $9,364,000 or 22.4% in the fiscal 2000 six month period compared to the respective periods in fiscal 1999. This is based on income from operations of $11,573,000, $20,578,000, 32,439,000, and $41,803,000 in the fiscal 2000 and 1999 quarters and six-month periods then ended, respectively. Interest and debt expense was $8,294,000, $9,302,000, $16,573,000, and $18,250,000 in the fiscal 2000 and 1999 quarters and the six months then ended, respectively. The fiscal 2000 decrease is primarily due to the payment of debt based on strong operating cash flow over the last 12 months less funds used to finance acquisitions. As a percentage of consolidated net sales, interest and debt expense was 4.6%, 5.0%, 4.6%, and 4.9% in the fiscal 2000 and 1999 quarters and the six months then ended, respectively. Interest and other income was $306,000, $262,000, $553,000, and $633,000 in the fiscal 2000 and 1999 quarters and the six months then ended, respectively. Income taxes as a percentage of income before income taxes were 85.7%, 48.7%, 57.9% and 49.1% in the fiscal 2000 and 1999 quarters and the six months then ended, respectively. The percentages reflect the effect of nondeductible amortization of goodwill resulting from acquisitions. Net income, therefore, decreased $5,413,000 or 91.4% for the quarter ended October 3, 1999 and decreased $5,393,000 or 43.8% for the six months then ended. This is based on net income of $511,000, $5,924,000, $6,906,000, and $12,299,000 for the quarters and six-month periods ended October 3, 1999 and September 27, 1998, respectively. 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 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 $7,682,000 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. - 17 - 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 1998 Revolving Credit Facility provides availability up to $300 million, due March 31, 2003, against which $221.2 million was outstanding at October 3, 1999. Interest is payable at varying Eurodollar rates based on LIBOR plus a spread determined by the Company's leverage ratio, amounting to 200.0 basis points at November 16, 1999. The 1998 Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. To manage its exposure to interest rate fluctuations, the Company has an interest rate swap and cap. The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to $199,468,000, net of original issue discount of $532,000 and are due March 31, 2008. Interest is payable semi-annually based on an effective rate of 8.45%, considering $1,902,000 of proceeds from rate hedging in advance of the placement. Provisions of the 8 1/2% Notes include, without limitation, restrictions of liens, indebtedness, asset sales, and dividends and other restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the Company, in whole or in part, at the Make-Whole Price (as defined). On or after April 1, 2003, they are redeemable at prices declining annually from 108.5% to 100% on and after April 1, 2006. In addition, on or prior to April 1, 2001, the Company may redeem up to 35% of the outstanding notes with the proceeds of equity offerings at a redemption price of 108.5%, subject to certain restrictions. In the event of a Change of Control (as defined), each holder of the 8 1/2% Notes may require the Company to repurchase all or a portion of such holder's 8 1/2% Notes at a purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes are not subject to any sinking fund requirements. The Company believes that its cash on hand, cash flows, and borrowing capacity under its revolving credit facility will be sufficient to fund its ongoing operations, budgeted capital expenditures, and business acquisitions for the next twelve months. Net cash provided by operating activities was $19,727,000 for the six months ended October 3, 1999, an increase of $15,547,000 over the net cash provided by operating activities for the six months ended September 27, 1998 of $4,180,000. The significant increase is primarily due to changes in the working capital needs of Automatic Systems Inc. (ASI), formerly LICO, Inc. Net cash used in investing activities increased to $12,925,000 for the six months ended October 3, 1999 from $1,802,000 for the six months ended September 27, 1998. The $11,123,000 difference is due primarily to proceeds received as a result of the sale of Mechanical Products. Net cash provided by financing activities was $5,346,000 for the six months ended October 3, 1999 while net cash used in financing activities was $7,107,000 for the three months ended September 27, 1998. The $12,453,000 change is primarily due to borrowings used to acquire WECO in the current year, compared to the proceeds from the Mechanical Products sale net of borrowings for the Abell-Howe acquisition which were used to pay down debt in the prior year. - 18 - 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 October 3, 1999 and September 27, 1998 were $5,130,000 and $5,621,000, 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 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 concentrations, and by acquisitions and the magnitude of acquisition costs. Therefore, the operating results for any particular fiscal quarter are not necessarily indicative of results for any subsequent fiscal quarter or for the full fiscal year. YEAR 2000 CONVERSIONS The Company's corporate-wide Year 2000 initiative is being managed by a team of internal staff and administered by the Director of Information Services. The Company has completed the assessment phase of its Year 2000 compliance project and is currently working on remediation of affected components. The Company has determined that it needs to modify certain portions of its corporate business information software so that its computer system will function properly with respect to dates in the year 2000 and beyond. Both internal and external resources have been dedicated to identifying, implementing, and testing corrective action in order to make such programs Year 2000 compliant; all such work is planned to be completed by November 1999 and is currently on schedule. To date the corporate business information software has been 100% assessed, approximately 98% has been remedially reprogrammed, and approximately 90% is now certified to be Year 2000 compliant. The Company believes that, with modifications to existing software, the Year 2000 issue will not pose significant operational problems for its computer systems. The Company has completed a corporate-wide assessment of the Year 2000 readiness of microprocessor-controlled equipment such as robotics, CNC machines, and security and environmental systems. This assessment has revealed that at least 98% of all microprocessor-controlled equipment is currently compliant. The remaining 2%, which includes recent acquisitions, is currently under review. Any necessary upgrades to ensure Year 2000 readiness are expected to be in place by the end of November 1999. In addition, the Company has determined that all of its manufactured products are 100% Year 2000 compliant. - 19 - The Company has initiated communications with its suppliers and customers to determine the extent to which systems, products or services are vulnerable to failure should those third parties fail to remediate their own Year 2000 issues. To date the Company has received responses to over 88% of its inquiries and no Year 2000 compliance problems have been identified from these responses. While we believe that our Year 2000 compliance plan adequately addresses potential Year 2000 concerns and to date no significant Year 2000 issues have been identified with our suppliers and customers, there can be no guarantee that the systems of other companies on which our operations rely will be compliant an a timely basis and will not have an effect on our operations. The Company has conducted preliminary contingency planning and identified the critical need areas. A high level approach incorporating manual workarounds, increasing critical inventories, identifying alternate suppliers, and adjusting staffing levels has been discussed and forms the basis for the initial contingency planning. The Company believes this level of planning is appropriate at the current time, however, the planning will be further expanded if warranted by future events. The cost of the Year 2000 initiatives is not expected to be material to the Company's results of operations or financial position. The forward looking statements contained in the Year 2000 Conversions should be read in conjunction with the Company's disclosures under the heading "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995". EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). In June 1999, the FASB issued SFAS 137, which defers the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. SFAS133 establishes accounting and reporting standards for derivative instruments 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. The intended use of the derivative and its designation as either (1) a hedge of the exposure to changes in the fair value of a recognized asset or liability or a firm commitment (a fair value hedge) (2) a hedge of the exposure to variable cash flows of a forecasted transaction (a cash flow hedge), or (3) a hedge of the foreign currency exposure of a net investment in a foreign operation (a foreign currency hedge), will determine when the gains and losses on the derivatives are reported in earnings and when they are to be reported as a component of other comprehensive income. The adoption of SFAS 133 is not expected to have a material impact on the financial position or results of operations of the Company. - 20 - SUBSEQUENT EVENT In its October 26th, 1999 second quarter earnings release, the Company announced its plan to engage an advisor to explore strategic alternatives for the Company's Solutions-Automotive segment made up of Automatic Systems, Inc. ("ASI"). The strategic alternatives to be evaluated include the sale of ASI, restructuring of its operational focus, and diversification of the markets it serves. The strategic evaluation and plan for ASI are expected to be completed within the next two to three months. 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. - 21 - 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 16, 1999, the Annual Meeting of Shareholders was held: The following directors were elected: 10,198,785 votes cast for: Herbert P. Ladds, Jr.; 10,207,643 votes cast for: Timothy T. Tevens; 10,211,803 votes cast for: Robert L. Montgomery, Jr.; 10,213,003 votes cast for: Randolph A. Marks; 10,212,867 votes cast for: L. David Black and Richard J. Fleming ; 10,212,903 votes cast for: Carlos Pasqual; 2,916,034 votes cast for: Larry N. Katsoulis; Jonathan G. Guss; George G. Raymond, Jr.; Jeffrey E. Schwarz; and Robert F. Lietzow, Jr. Proposal to approve the adoption of the Amendment and Restatement of the Columbus McKinnon Corporation 1995 Incentive Stock Option Plan: 11,210,347 votes cast for 513,660 votes cast against 1,703,313 abstain Columbus McKinnon Shareholders Committee (the "dissidents") proposal to have the shareholders rescind the By-law amendments adopted by the Board of Directors in May 1999: 4,953,446 votes cast for 8,011,127 votes cast against 462,747 abstain Item 5. Other Information - none. - 22 - Item 6. Exhibits and Reports on Form 8-K Exhibit 10.1 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. Exhibit 10.2 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. There are no reports on Form 8-K. - 23 - 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 16, 1999 /S/ ROBERT L. MONTGOMERY, JR. ----------------- ----------------------------- Robert L. Montgomery, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) - 24 - EX-10.1 2 THIRD AMENDMENT TO CREDIT AGREEMENT THIRD AMENDMENT TO CREDIT AGREEMENT AND CONSENT THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this "AMENDMENT"), dated as of November 16, 1999, 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, and that certain Second Amendment to Credit Agreement and Consent, dated as of February 12, 1999 (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, the Borrower has requested that the Administrative Agent and Lender Parties amend the Credit Agreement as and to the extent set forth in this Amendment; WHEREAS, for administrative simplicity and other reasons, the Borrower desires to merge Larco Material Handling Inc. ("LARCO") with and into Gaffey, Inc. ("GAFFEY"), with Gaffey being the surviving corporation (the "LARCO-GAFFEY MERGER"); 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, capital- ized terms used in this Amendment shall have the same meanings ascribed to them in the Credit Agreement. 2. AMENDMENTS. 2.1. 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 0.50% 2.000% 0.375% Equal to or greater than 3.50 less than 4.00 0.25% 1.750% 0.350% Equal to or greater than 3.00 less than 3.50 0.00% 1.500% 0.300% Equal to or greater than 2.50 less than 3.00 0.00% 1.250% 0.200% Less than 2.50 0.00% 0.875% 0.150% 2.2. Section 1.01 of the Credit Agreement is amended to include the following definition in the appropriate alphabetical order: "'CANADIAN DOLLARS' means the lawful currency of Canada." 2.3. Section 1.01 of the Credit Agreement is further amended by inserting in the definition of "ALTERNATIVE CURRENCY" after the words "Alternative Currency Letters of Credit," and before the words "the Euro" the words "Canadian Dollars,". 2.4. Section 1.01 of the Credit Agreement is further amended by inserting in the definition of "ASSIGNED DOLLAR VALUE" before the words "the Euro" in clause (b)(ii)(A) thereof the words "Canadian Dollars,". 2.5. Section 1.01 of the Credit Agreement is further amended by deleting from the definition of "EXCHANGE RATE" the word "and" that appears before clause (c) of the first sentence of such definition and inserting before the period at the end of the first sentence of such definition the following: ", (d) with respect to Canadian Dollars, the spot rate at which U.S. Dollars are offered on such day by the Administrative Agent in London for Canadian Dollars at approximately 11:00 A.M. (London time) and (e) with respect to U.S. Dollars in relation to Canadian Dollars, the spot rate at which Canadian Dollars are offered on such day by the Administrative Agent in London for U.S. Dollars at approximately 11:00 A.M. (London time)" 2.6. Section 5.02(d)(iii)(4) of the Credit Agreement is amended by deleting the words "$35,000,000 in the aggregate in any Fiscal Year" and replacing them with the following: "$10,000,000 in the aggregate in any Fiscal Year; PROVIDED, HOWEVER, THAT, in the event that the Consolidated Funded Debt to EBITDA Ratio of the Borrower (as calculated pursuant to Section 5.04(a)) falls below 3.50 to 1.0 for any period of four fiscal quarters, the sum of all such amounts shall not exceed $35,000,000 in any Fiscal Year thereafter". - 2 - 2.7. Section 5.02(f) of the Credit Agreement is amended by deleting the number "(vi)" that appears before the clause "Investments consisting of Permitted Acquisitions" and replacing it with the number "(vii)" and placing such renumbered clause (vii) in the proper numerical order in such Section 5.02(f). 2.8. Section 5.02(g)(i) of the Credit Agreement is amended by deleting the figure "$10,000,000" and replacing it with the figure "$5,000,000". 2.9. Section 5.02(i) of the Credit Agreement is amended by inserting before the period at the end of such Section the following: "in any manner that would in any material respect impair the ability of any Loan Party to perform its obligations under any Loan Document or that would impair in any material respect the rights or interests of the Administrative Agent or any of the Lender Parties" 2.10. Section 5.04(a) of the Credit Agreement is amended by deleting from the chart contained therein the dates from and including December 31, 1999 and the corresponding ratios for such dates and replacing them with the following: "December 31, 1999 4.50 to 1.0 March 31, 2000 4.50 to 1.0 June 30, 2000 4.25 to 1.0 September 30, 2000 4.00 to 1.0 December 31, 2000 3.75 to 1.0 March 31, 2001 3.75 to 1.0 June 30, 2001 3.50 to 1.0 September 30, 2001 3.50 to 1.0 December 31, 2001 3.50 to 1.0 March 31, 2002 and each fiscal quarter end thereafter 3.25 to 1.0". 2.11. Section 5.04(b) of the Credit Agreement is amended by deleting the ratio "3.0 to 1.0" and replacing it with the words "the ratio set forth below: FOUR FISCAL QUARTERS ENDING ON: RATIO ------------------------------- ----- December 31, 1999 2.75 to 1.0 March 31, 2000 2.75 to 1.0 June 30, 2000 2.75 to 1.0 September 30, 2000 and each fiscal quarter end thereafter 3.00 to 1.0". - 3 - 2.12. Section 5.04(c) of the Credit Agreement is amended by deleting from the chart contained therein the words "March 31, 1999 and each fiscal quarter ending thereafter" and the corresponding ratio "1.50 to 1.00" and replacing them with the following: "December 31, 1999 1.25 to 1.0 March 31, 2000 and each fiscal quarter end thereafter 1.50 to 1.0". 2.13. Section 5.04(d) of the Credit Agreement is amended by deleting clause (i) thereof and replacing it with "(i) $190,000,000". 3. CONSENT TO LARCO-GAFFEY MERGER. 3.1. Section 5.01(f) of the Credit Agreement, among other things, requires that the Borrower preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its existence, legal structure, legal name and rights (charter and statutory). Section 5.02(d)(i) of the Credit Agreement, among other things, prohibits the Borrower or any of its Subsidiaries from merging into or consolidating with any Person or permitting any Person to merge into it. Notwithstanding the provisions of Section 5.01(f) and Section 5.02(d)(i), but subject to the conditions precedent set forth in Section 3.2 below and the other terms and conditions of this Amendment, the Administrative Agent and Lender Parties hereby consent to the Larco-Gaffey Merger. 3.2. The Larco-Gaffey Merger is subject to the satisfaction, as determined by the Administrative Agent, of each of the following conditions precedent: (a) The Borrower shall have caused Gaffey to have executed and delivered such agreements, instruments and other documents, including, without limitation, UCC-1 financing statements, UCC-3 amendments to financing statements and amendments to intellectual property filings, as shall be necessary or as the Administrative Agent shall have otherwise requested in order to maintain the perfected first priority status of the Administrative Agent's security interests in the Collateral of Gaffey and Larco. (b) As of the date of the consummation of the Larco-Gaffey Merger, no Default or Event of Default shall have occurred and be continuing. (c) 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 date of the consummation of the Larco-Gaffey Merger, as though made on such date. (d) The Borrower shall, and shall have caused its Subsidiaries to, have taken all such actions and executed and delivered all such agreements, instruments and other documents as the Administrative Agent shall have reasonably requested in connection with the Larco-Gaffey Merger. - 4 - 3.3. The foregoing consent in Section 3.1 is only applicable and shall only be effective in the specific instance and for the specific purpose for which made. Such consent is expressly limited to the facts and circumstances and subject to the conditions 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 right, power or remedy of either 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 Event of Default or Default under the Credit Agreement or any other Loan Document. 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, 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 or the reaffirmations and confirmations attached hereto and each other Loan Document are within such Loan Party's corporate powers, have been duly authorized by all necessary corporate action, and do not, and will not, (i) contravene such Loan Party's charter or bylaws, (ii) violate any law (including, without limitation, the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended), rule, regulation (including, without limitation, Regulation T, U or X 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, mortgage, deed of trust, lease or other material instrument or agreement binding on or affecting any Loan Party, any of its Subsidiaries or any of their respective properties or (iv) except for the Liens created under the Collateral Documents, result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries. Neither any Loan Party nor any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, 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 thereto. Each of this Amendment and each other Loan Document is the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms. - 5 - 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, Required Lenders and, as to the amendments contained in Sections 2.1 through 2.4, the Required Alternative Currency Lenders, shall have duly executed and delivered this Amendment. 5.2. 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. 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. EFFECTIVENESS OF AMENDMENT. This Amendment shall not become effective unless and until each of the conditions precedent set forth in Section 5 hereof has been satisfied. 7. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS. 7.1. Except as specifically amended in Section 2 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. 7.2. The execution, delivery and effect of this Amendment shall be limited precisely as written and shall not be deemed to (a) be a consent to any waiver of any term or condition or to any amendment or modification of any term or condition of the Credit Agreement or any other Loan Document, except as specifically amended in Section 2 above and for the specific consent set forth in Section 3 above (subject to the terms and conditions of such consent set - 6 - forth herein), or (b) prejudice any right, power or remedy which the Administrative Agent or any Lender Party now has or may have in the future under or in connection with the Credit Agreement or any other Loan Document. 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. 8. 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. 9. 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. 10. 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. 11. 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] - 7 - 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/ R.L. Montgomery ------------------- Title: Executive Vice President 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 16th day of November, 1999. AUTOMATIC SYSTEMS, INC. By: /s/ R.L. Montgomery ------------------- Title: Treasurer LICO STEEL, INC. By: /s/ R.L. Montgomery ------------------- Title: Treasurer ABELL-HOWE CRANE, INC. By: /s/ R.L. Montgomery ------------------- Title: Treasurer G.L. INTERNATIONAL INC. By: /s/ R.L. Montgomery ------------------- Title: Treasurer GAFFEY, INC. By: /s/ R.L. Montgomery ------------------- Title: Treasurer HANDLING SYSTEMS AND CONVEYORS, INC. By: /s/ R.L. Montgomery ------------------- Title: Treasurer LARCO MATERIAL HANDLING INC. By: /s/ R.L. Montgomery ------------------- Title: Treasurer YALE INDUSTRIAL PRODUCTS, INC. By: /s/ R.L. Montgomery ------------------- Title: Treasurer WASHINGTON EQUIPMENT COMPANY By: /s/ R.L. Montgomery ------------------- Title: Treasurer FLEET NATIONAL BANK, as Administrative Agent By: /s/ John G. Tierney ------------------- Title: Vice President ------------------- FLEET NATIONAL BANK, as Initial Issuing Bank By: /s/ John G. Tierney ------------------- Title: Vice President ------------------- FLEET NATIONAL BANK, as Swing Line Bank By: /s/ John G. Tierney ------------------- Title: Vice President ------------------- Lenders FLEET NATIONAL BANK By: /s/ John G. Tierney ------------------- Title: Vice President ------------------- Lenders ABN-AMRO BANK N.V. NEW YORK BRANCH, as a Co-Agent and Lender By: /s/ Donald Sutton ------------------- Title: Vice President ------------------- By: /s/ Juliette Mound ------------------- Title: Assistant Vice President ------------------------ Lenders THE BANK OF NOVA SCOTIA, as a Co-Agent and Lender By: /s/ J. Alan Edwards ------------------- Title: Authorized Signatory -------------------- Lenders MANUFACTURERS AND TRADERS TRUST COMPANY, as a Co-Agent and Lender By: /s/ Stephen J. Wydysh --------------------- Title: Vice President --------------------- Lenders HSBC BANK USA (formerly known as Marine Midland Bank), as a Co-Agent and Lender By: /s/ D.C. English ---------------- Title: Associate Director ------------------ Lenders COMERICA BANK By: /s/ Joel Gordon --------------- Title: Account Representative ---------------------- Lenders FIRST UNION NATIONAL BANK By: /s/ Mark B. Felker ------------------ Title: Senior Vice President --------------------- Lenders KEYBANK NATIONAL ASSOCIATION By: /s/ Francis Lutz ---------------- Title:Portfolio Manager and Officer ----------------------------- Lenders MELLON BANK, N.A. By: /s/ Edward J. Kloecker ---------------------- Title: Vice President -------------- Lenders BANKERS TRUST COMPANY By: /s/ G. Andrew Keith ------------------- Title: Vice President ------------------- Lenders THE BANK OF NEW YORK By: /s/ Thomas C. McCrohan ---------------------- Title: Vice President -------------- Lenders NATIONAL BANK OF CANADA By: /s/ Michael R. Brace -------------------- Title: Marketing Officer ----------------- By: /s/ Mark Dzunion ---------------- Title: Credit Analyst ---------------- Lenders NATIONAL CITY BANK OF PENNSYLVANIA By:_______________________________ Title:____________________________ EX-10.2 3 4TH SUPPLEMENTAL INDENTURE FOURTH SUPPLEMENTAL INDENTURE FOURTH SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), dated as of November 1, 1999, among WASHINGTON EQUIPMENT COMPANY, an Illinois corporation (the "GUARANTEEING SUBSIDIARY"), a subsidiary of Columbus McKinnon Corporation (or its permitted successor), a New York corporation (the "COMPANY"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and State Street Bank and Trust Company, N.A., as trustee under the indenture referred to below (the "TRUSTEE"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "INDENTURE"), dated as of March 31, 1998 providing for the issuance of an aggregate principal amount of up to $300.0 million of 8 1/2% Senior Subordinated Notes due 2008 (thE "NOtes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (a "SUBSIDIARY GUARANTEE"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) The Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, the Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of the Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of the Subsidiary Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Subsidiary Guarantee. (i) Notwithstanding the foregoing, in the event that the Subsidiary Guarantee would constitute or result in a violation of any applicable fraudulent conveyance or 2 similar law of any relevant jurisdiction, the liability of the Guaranteeing Subsidiary under this Fourth Supplemental Indenture and the Subsidiary Guarantee shall be reduced to the maximum amount permissible under such fraudulent conveyance or similar law. 3. SUBORDINATION. Payment of principal, premium, if any, and interest and Liquidated Damages, if any, on the Subsidiary Guarantee is subordinated to the prior payment in full of Senior Debt on the terms provided in the Indenture. 4. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary agrees that the Subsidiary Guarantee shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 5. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Section 11.05 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; and (ii) immediately after giving effect to such transaction, no Default or Event of Default exists. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed the Subsidiary Guarantee to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. The Subsidiary Guarantee so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary Guarantee theretofore and thereafter issued in accordance with the terms of the Indenture as though the Subsidiary Guarantee had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or 3 another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. 6. RELEASES. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the capital stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; PROVIDED that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation, Section 4.10 of the Indenture. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 7. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 9. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 10. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 4 11. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. 5 IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: November 1, 1999 WASHINGTON EQUIPMENT COMPANY By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Vice President and Treasurer G.L. INTERNATIONAL INC. By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Vice President and Treasurer GAFFEY, INC. By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Vice President and Treasurer HANDLING SYSTEMS AND CONVEYORS, INC. By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Vice President and Treasurer LARCO MATERIAL HANDLING INC. By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Vice President and Treasurer ABELL-HOWE CRANE, INC.. By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Vice President and Treasurer AUTOMATIC SYSTEMS, INC. By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Treasurer LICO STEEL, INC. By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Treasurer COLUMBUS McKINNON CORPORATION By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Executive Vice President YALE INDUSTRIAL PRODUCTS, INC. By: /s/ R. L. Montgomery ---------------------------- Name: R. L. Montgomery Title: Vice President and Treasurer STATE STREET BANK AND TRUST COMPANY, N.A. as Trustee By: /s/ Cheryl L. Clark ---------------------------- Name: Cheryl L. Clarke Title: Assistant Secretary EX-27 4 FINANCIAL DATA SCHEDULE - 10/03/99
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001005229 COLUMBUS MCKINNON CORPORATION 1,000 6-MOS MAR-31-2000 APR-01-1999 Oct-03-1999 20,071 0 132,762 0 114,001 300,580 138,517 48,458 777,390 113,350 430,096 0 0 149 196,371 777,390 363,609 363,609 276,764 276,764 54,406 0 16,573 16,419 9,513 6,906 0 0 0 6,906 .49 .49
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