-----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, VqpzFyf/QAeoQi1w5tCr2bj/fl0PpU7Jn53HZQa2z9O/YJq3Fspk/JD2MROQpkX7 qXuJ/JEkjaKoQ4bP4y4+rg== 0001005229-00-000004.txt : 20000217 0001005229-00-000004.hdr.sgml : 20000217 ACCESSION NUMBER: 0001005229-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000102 FILED AS OF DATE: 20000216 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: 547161 BUSINESS ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PKWY CITY: AMHERST STATE: NY ZIP: 14228-1197 BUSINESS PHONE: 7166895400 MAIL ADDRESS: STREET 1: 140 JOHN JAMES AUDUBON PARKWAY CITY: AMHERST STATE: NY ZIP: 14228-1197 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LICO STEEL INC CENTRAL INDEX KEY: 0001062622 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MO FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-53759-04 FILM NUMBER: 547162 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: 547163 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: 547164 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 OF 1934 For the quarterly period ended January 2, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from to ------------------- ------------------- Commission File Number: 0-27618 ------- COLUMBUS MCKINNON CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NEW YORK 16-0547600 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer 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 January 30, 2000 was: 14,877,405 shares. FORM 10-Q INDEX COLUMBUS MCKINNON CORPORATION JANUARY 2, 2000 PAGE # ------ PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) Condensed consolidated balance sheets - January 2, 2000 and March 31, 1999 2 Condensed consolidated statements of income and retained earnings - Three months and nine months ended January 2, 2000 and December 27, 1998 3 Condensed consolidated statements of cash flows - Nine months ended January 2, 2000 and December 27, 1998 4 Condensed consolidated statements of comprehensive income - Three months and nine months ended January 2, 2000 and December 27, 1998 5 Notes to condensed consolidated financial statements - January 2, 2000 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. 21 Item 2. Changes in Securities - none. 21 Item 3. Defaults upon Senior Securities - none. 21 Item 4. Submission of Matters to a Vote of Security Holders - none. 21 Item 5. Other Information - none. 21 Item 6. Exhibits and Reports on Form 8-K 21 - 1 - PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) JANUARY 2, MARCH 31, 2000 1999 --------- --------- ASSETS: (IN THOUSANDS) Current assets: Cash and cash equivalents ....................... $ 14,128 $ 6,867 Trade accounts receivable ....................... 134,818 136,988 Unbilled revenues ............................... 17,620 9,821 Inventories ..................................... 115,020 115,979 Net assets held for sale ........................ 9,270 8,214 Prepaid expenses ................................ 8,852 8,160 --------- --------- Total current assets .................................. 299,708 286,029 Net property, plant, and equipment .................... 87,736 90,004 Goodwill and other intangibles, net ................... 349,208 357,727 Marketable securities ................................. 22,078 19,355 Deferred taxes on income .............................. 5,131 5,627 Other assets .......................................... 7,871 8,169 --------- --------- Total assets .......................................... $ 771,732 $ 766,911 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Notes payable to banks .......................... $ 2,212 $ 4,590 Trade accounts payable .......................... 50,557 54,651 Excess billings ................................. 6,247 5,058 Accrued liabilities ............................. 44,707 54,331 Current portion of long-term debt ............... 1,712 1,926 --------- --------- Total current liabilities ............................. 105,435 120,556 Senior debt, less current portion ..................... 229,871 222,165 Subordinated debt ..................................... 199,561 199,521 Other non-current liabilities ......................... 37,515 35,995 --------- --------- Total liabilities ..................................... 572,382 578,237 Shareholders' equity: Common stock .................................... 149 146 Additional paid-in capital ...................... 107,271 102,313 Retained earnings ............................... 107,642 100,455 ESOP debt guarantee ............................. (9,240) (9,865) Unearned restricted stock ....................... (3,613) (1,009) Total accumulated other comprehensive income loss (2,859) (3,366) --------- --------- Total shareholders' equity ............................ 199,350 188,674 --------- --------- Total liabilities and shareholders' equity ............ $ 771,732 $ 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 NINE MONTHS ENDED ------------------ ----------------- JANUARY 2, DECEMBER 27, JANUARY 2, DECEMBER 27, 2000 1998 2000 1998 ---- ---- ---- ---- (In thousands, except per share data) Net sales ............................... $ 174,173 $ 186,994 $ 537,782 $ 556,968 Cost of products sold ................... 130,768 139,599 407,532 415,217 --------- --------- --------- --------- Gross profit ............................ 43,405 47,395 130,250 141,751 --------- --------- --------- --------- Selling expenses ........................ 13,405 12,838 38,575 38,529 General and administrative expenses ..... 9,762 9,477 30,031 28,696 Proxy contest related expenses .......... - - 965 - Amortization of intangibles ............. 4,062 3,680 12,064 11,323 --------- --------- --------- --------- 27,229 25,995 81,635 78,548 --------- --------- --------- --------- Income from operations .................. 16,176 21,400 48,615 63,203 Interest and debt expense ............... 8,937 9,253 25,510 27,503 Interest and other income ............... 638 233 1,191 867 --------- --------- --------- --------- Income before income taxes .............. 7,877 12,380 24,296 36,567 Income tax expense ...................... 4,623 5,936 14,136 17,824 --------- --------- --------- --------- Net income .............................. 3,254 6,444 10,160 18,743 Retained earnings - beginning of period . 105,383 87,160 100,455 76,744 Cash dividends of $0.07, $0.07, $0.21 and $0.21 per share ...................... (995) (944) (2,973) (2,827) --------- --------- --------- --------- Retained earnings - end of period ...... $107,642 $92,660 $ 107,642 $ 92,660 ========= ========= ========= ========= Earnings per share data, basic: ......... $ 0.23 $ 0.46 $ 0.72 $ 1.32 ========= ========= ========= ========= Earnings per share data, diluted: ....... $ 0.23 $ 0.46 $ 0.71 $ 1.30 ========= ========= ========= =========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 3 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) NINE MONTHS ENDED ----------------- JANUARY 2, DECEMBER 27, 2000 1998 -------- -------- (IN THOUSANDS) OPERATING ACTIVITIES: Net income ..................................................... $ 10,160 $ 18,743 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ............................ 21,650 20,166 Deferred income taxes ..................................... 561 920 Other .................................................... 689 438 Changes in operating assets and liabilities net of effects from businesses purchased: Trade accounts receivable ........................... 3,898 (22,725) Unbilled revenues and excess billings ............... (6,610) 2,209 Inventories ......................................... 1,930 (1,078) Prepaid expenses .................................... (690) (229) Other assets ........................................ (99) (434) Trade accounts payable .............................. (5,393) (7,248) Accrued and non-current liabilities ................. (5,993) 1,293 -------- -------- Net cash provided by operating activities ...................... 20,103 12,055 -------- -------- INVESTING ACTIVITIES: Purchase of marketable securities, net ......................... (2,519) (834) Capital expenditures ........................................... (5,983) (10,156) Proceeds from sale of businesses ............................... - 9,301 Purchases of businesses, net of cash ........................... (6,382) (7,323) Net assets held for sale ....................................... (1,056) 3,104 -------- -------- Net cash used in investing activities .......................... (15,940) (5,908) -------- -------- FINANCING ACTIVITIES: Proceeds from issuance of common stock ......................... 3 - Net borrowings under revolving line-of-credit agreements ....... 6,422 1,514 Repayment of debt .............................................. (1,308) (7,065) Dividends paid ................................................. (2,973) (2,827) Reduction of ESOP debt guarantee ............................... 625 (7,032) Other .......................................................... (916) (985) -------- -------- Net cash provided by (used in) financing activities ............ 1,853 (16,395) Effect of exchange rate changes on cash ........................ 1,245 (1,491) -------- -------- Net increase (decrease) in cash and cash equivalents ........... 7,261 (11,739) Cash and cash equivalents at beginning of period ............... 6,867 22,861 -------- -------- Cash and cash equivalents at end of period ..................... $ 14,128 $ 11,122 ======== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 4 -
COLUMBUS MCKINNON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- JANUARY 2, DECEMBER 27, JANUARY 2, DECEMBER 27, 2000 1998 2000 1998 ---- ---- ---- ---- (IN THOUSANDS) Net income ..................................... $ 3,254 $ 6,444 $ 10,160 $ 18,743 -------- -------- -------- -------- Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ..... (740) (555) 303 (617) Unrealized gains on investments: Unrealized holding gains arising during the period ............................... 878 899 476 678 Less: reclassification adjustment for gains included in net income ................... (208) 22 (272) (4) -------- -------- -------- -------- 670 921 204 674 -------- -------- -------- -------- Total other comprehensive income (loss) ........ (70) 366 507 57 -------- -------- -------- -------- Comprehensive income ........................... $ 3,184 $ 6,810 $ 10,667 $ 18,800 ======== ======== ======== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. - 5 - COLUMBUS MCKINNON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JANUARY 2, 2000 1. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position of the Company at January 2, 2000, and the results of its operations and its cash flows for the three and nine month periods ended January 2, 2000 and December 27, 1998, have been included. Results for the period ended January 2, 2000 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 that are widely distributed to industrial, automotive, and consumer markets worldwide; integrated material handling solutions for the automotive markets; and integrated material handling solutions for industrial markets. The Company's material handling products are sold, domestically and internationally, principally to third party distributors 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 automotive business primarily deals with end users and sales are concentrated domestically and internationally (primarily North America) in the automotive industry. The Company's integrated material handling solutions industrial businesses also deal primarily with end users and sales are concentrated, domestically and internationally (primarily Europe), in the consumer products, manufacturing, warehousing and, to a lesser extent, the steel, construction, automotive and other industrial markets. 2. Inventories consisted of the following: JANUARY 2, MARCH 31, 2000 1999 ------------------------------ (IN THOUSANDS) At cost - FIFO basis: Raw materials $ 61,076 $ 54,648 Work-in-process 19,251 21,663 Finished goods 41,065 45,042 ----------- ----------- 121,392 121,353 LIFO cost less than FIFO cost (6,372) (5,374) ----------- ----------- $ 115,020 $ 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 $51,634,000 and $42,048,000 of accumulated depreciation at January 2, 2000 and March 31, 1999, respectively. 4. Goodwill and other intangibles, net includes $41,928,000 and $29,864,000 of accumulated amortization at January 2, 2000 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%. Net payments or receipts under the swap agreement are recorded as adjustments to interest expense. The carrying amount of the Company's senior debt instruments approximates the fair value. The Company's subordinated debt has an approximate fair market value of $177,000,000 which is less than its carrying amount of $199,561,000. 7. The following table sets forth the computation of basic and diluted earnings per share:
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- JANUARY 2, DECEMBER 27, JANUARY 2, DECEMBER 27, 2000 1998 2000 1998 ---- ---- ---- ---- Numerator for basic and diluted earnings per share: Net income ................................ $ 3,254,000 $ 6,444,000 $10,160,000 $18,743,000 =========== =========== =========== =========== Denominators: Weighted-average common stock outstanding - denominator for basic EPS ............. 14,209,000 13,951,000 14,109,000 14,210,000 Effect of dilutive employee stock options . 12,000 112,000 105,000 160,000 ----------- ----------- ----------- ---------- Adjusted weighted-average common stock outstanding and assumed conversions - denominator for diluted EPS ............ 14,221,000 14,063,000 14,214,000 14,370,000 =========== =========== =========== ===========
8. Income tax expense for the three month periods ended January 2, 2000 and December 27, 1998 and also for the nine month periods then ended exceeds the customary relationship between income tax expense and income before income taxes due to nondeductible amortization of goodwill of $4,062,000, $3,680,000, $12,064,000, and $11,323,000, respectively. 9. On April 29, 1999, the Company acquired all of the outstanding stock of Washington Equipment Company ("WECO"), a regional manufacturer and servicer of overhead cranes. The total cost of the acquisition, which was accounted for as a purchase, was approximately $6.4 million of cash and was financed by proceeds from the Company's revolving debt facility. - 7 - 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 NINE MONTHS ENDED DECEMBER 27, 1998 DECEMBER 27, 1998 ----------------- ----------------- (IN THOUSANDS) (IN THOUSANDS) Net sales: Columbus McKinnon, as reported .. $ 171,727 $ 510,865 GL International, Inc. .......... 17,085 51,558 Intercompany eliminations ....... (1,818) (5,455) --------- --------- Combined ........................ $ 186,994 $ 556,968 ========= ========= Net income: Columbus McKinnon, as reported .. $ 5,698 $ 16,865 GL International, Inc. .......... 700 1,736 Intercompany eliminations ....... 46 142 --------- --------- Combined ........................ $ 6,444 $ 18,743 ========= =========
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. 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. - 8 - 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 nine month period ended December 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: NINE MONTHS ENDED DECEMBER 27, 1998 ----------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Pro forma: Net sales $ 558,393 Income from operations 63,419 Net income 18,865 Earnings per share, basic 1.33 Earnings per share, diluted 1.31 - 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 automotive segment sells engineered material handling systems such as conveyors primarily to end-users in the automotive segment. The material handling solutions segment sells 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 nine months ended January 2, 2000 and December 27, 1998, is as follows:
NINE MONTHS ENDED JANUARY 2, 2000 --------------------------------- SOLUTIONS - SOLUTIONS - ELIMINATIONS/ PRODUCTS INDUSTRIAL AUTOMOTIVE OTHER TOTAL -------- ----------- ----------- ------------- ----- (IN THOUSANDS) Sales to external customers....... $400,205 $ 42,309 $ 111,509 $ (16,241) $537,782 Operating income before amortization................... 58,561 4,498 (970) (1,410) 60,679 Depreciation and amortization..... 15,093 2,340 4,217 - 21,650 Total assets...................... 508,544 68,429 194,759 - 771,732 Capital expenditures.............. 5,605 225 153 - 5,983 NINE MONTHS ENDED DECEMBER 27, 1998 ----------------------------------- SOLUTIONS - SOLUTIONS - ELIMINATIONS/ PRODUCTS INDUSTRIAL AUTOMOTIVE OTHER TOTAL -------- ----------- ----------- ------------- ----- (IN THOUSANDS) Sales to external customers....... $391,315 $ 42,262 $131,792 $(8,401) $556,968 Operating income before amortization................... 56,000 3,929 14,474 123 74,526 Depreciation and amortization..... 13,270 2,338 4,237 321 20,166 Total assets...................... 508,775 69,125 201,761 - 779,661 Capital expenditures.............. 8,563 1,359 232 2 10,156
- 10 - The following schedule provides a reconciliation of operating income before amortization with consolidated income before income taxes:
NINE MONTHS ENDED ----------------- JANUARY 2, 2000 DECEMBER 27, 1998 --------------- ----------------- (IN THOUSANDS) Operating income before amortization...................... $ 60,679 $ 74,526 Amortization of intangibles............................... (12,064) (11,323) Interest and debt expense................................. (25,510) (27,503) Interest and other income................................. 1,191 867 ------ ------- Income before income taxes................................ $24,296 $36,567 ======= =======
- 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 JANUARY 2, 2000 Current assets: Cash and cash equivalents ................................. $ 3,877 $ 5,988 $ 4,263 $ - $ 14,128 Trade accounts receivable ................................. 54,886 54,801 25,131 - 134,818 Unbilled revenues ......................................... - 17,620 - - 17,620 Inventories ............................................... 49,468 38,986 27,602 (1,036) 115,020 Other current assets ...................................... 3,126 11,308 3,688 - 18,122 ------------------------------------------------------------- Total current assets ..................................... 111,357 128,703 60,684 (1,036) 299,708 Net property, plant, and equipment ......................... 35,713 32,339 19,684 - 87,736 Goodwill and other intangibles, net ........................ 41,929 255,806 51,473 - 349,208 Intercompany ............................................... 207,974 (371,172) (65,302) 228,500 - Other assets ............................................... 224,892 162,309 (1,442) (350,679) 35,080 ------------------------------------------------------------- Total assets ............................................. $ 621,865 $ 207,985 $ 65,097 $ (123,215 $ 771,732 ============================================================= Current liabilities ........................................ $ 34,693 $ 50,301 $ 21,951 $ (1,510) $ 105,435 Long-term debt, less current portion ....................... 423,138 - 6,294 - 429,432 Other non-current liabilities .............................. 13,057 21,433 3,025 - 37,515 ------------------------------------------------------------- Total liabilities ........................................ 470,888 71,734 31,270 (1,510) 572,382 Shareholders' equity ....................................... 150,977 136,251 33,827 (121,705) 199,350 ------------------------------------------------------------- Total liabilities and shareholders' equity ............... $ 621,865 $ 207,985 $ 65,097 $(123,215) $ 771,732 ============================================================= Net sales .................................................. $ 194,112 $ 265,648 $ 94,263 $ (16,241) $ 537,782 Cost of products sold ...................................... 133,505 222,127 68,102 (16,202) 407,532 ------------------------------------------------------------- Gross profit ............................................... 60,607 43,521 26,161 (39) 130,250 ------------------------------------------------------------- Selling, general and administrative expenses ............... 29,323 23,054 17,194 - 69,571 Amortization of intangibles ................................ 1,543 8,600 1,921 - 12,064 ------------------------------------------------------------- 30,866 31,654 19,115 - 81,635 ------------------------------------------------------------- Income from operations ..................................... 29,741 11,867 7,046 (39) 48,615 Interest and debt expense .................................. 24,960 5 545 - 25,510 Interest and other income .................................. 686 234 271 - 1,191 ------------------------------------------------------------- Income before income taxes ................................. 5,467 12,096 6,772 (39) 24,296 Income tax expense ......................................... 2,720 8,209 3,222 (15) 14,136 ------------------------------------------------------------- Net income ................................................. $ 2,747 $ 3,887 $ 3,550 $ (24) $ 10,160 ============================================================= FOR THE NINE MONTHS ENDED JANUARY 2, 2000 OPERATING ACTIVITIES: Net cash provided by operating activities .................. $ 2,409 $ 14,277 $ 4,823 $ (1,406) $ 20,103 ------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net ..................... (2,519) - - - (2,519) Capital expenditures ....................................... (3,501) (1,439) (1,043) - (5,983) Purchases of businesses, net of cash ....................... - (6,333) - (49) (6,382) Other ...................................................... - (1,056) - - (1,056) ------------------------------------------------------------- Net cash used in investing activities ...................... (6,020) (8,828) (1,043) (49) (15,940) ------------------------------------------------------------- - 12 - FINANCING ACTIVITIES: Proceeds from issuance of common stock ..................... 3 136 - (136) 3 Net borrowings (payments) under revolving line-of-credit agreements ................................ 8,800 - (2,378) - 6,422 Repayment of debt .......................................... (1,164) - (144) - (1,308) Dividends paid ............................................. (2,969) (5) (1,579) 1,580 (2,973) Other ...................................................... (291) - - - (291) ------------------------------------------------------------- Net cash provided by (used in) financing ................... 4,379 131 (4,101) 1,444 1,853 activities Effect of exchange rate changes on cash .................... - - 1,234 11 1,245 ------------------------------------------------------------- Net change in cash and cash equivalents .................... 768 5,580 913 - 7,261 Cash and cash equivalents at beginning of period ........... 3,109 408 3,350 - 6,867 ------------------------------------------------------------- Cash and cash equivalents at end of period ................. $ 3,877 $ 5,988 $ 4,263 $ - $ 14,128 ============================================================= Domestic Foreign Elimina- Consoli- (In thousands) Parent Subsidiaries Subididiaries tions dated ------------------------------------------------------------- AS OF DECEMBER 27, 1998 Current assets: Cash and cash equivalents ................................. $ 6,627 $ (1,462) $ 5,957 $ - $ 11,122 Trade accounts receivable ................................. 55,583 70,649 21,283 - 147,515 Unbilled revenues ......................................... - 17,986 - - 17,986 Inventories ............................................... 46,218 43,556 25,356 (1,056) 114,074 Other current assets ...................................... 1,696 8,630 4,277 - 14,603 ------------------------------------------------------------- Total current assets ..................................... 110,124 139,359 56,873 (1,056) 305,300 Net property, plant, and equipment ......................... 36,257 33,368 18,430 - 88,055 Goodwill and other intangibles, net ........................ 42,967 262,051 47,959 - 352,977 Intercompany ............................................... 208,358 (373,211) (65,684) 230,537 - Other assets ............................................... 218,002 163,582 (2,122) (346,133) 33,329 ------------------------------------------------------------- Total assets ............................................. $ 615,708 $ 225,149 $ 55,456 $(116,652) $ 779,661 ============================================================= Current liabilities ........................................ $ 18,230 $ 71,625 $ 21,361 $ 738 $ 111,954 Long-term debt, less current portion ....................... 440,843 2,753 3,230 - 446,826 Other non-current liabilities .............................. 11,909 24,888 3,114 - 39,911 ------------------------------------------------------------- Total liabilities ........................................ 470,982 99,266 27,705 738 598,691 Shareholders' equity ....................................... 144,726 125,883 27,751 (117,390) 180,970 ------------------------------------------------------------- Total liabilities and shareholders' equity ............... $ 615,708 $ 225,149 $ 55,456 $(116,652) $ 779,661 ============================================================= FOR THE NINE MONTHS ENDED DECEMBER 27, 1998 Net sales .................................................. $ 196,972 $ 288,401 $ 87,578 $ (15,983) $ 556,968 Cost of products sold ...................................... 139,632 228,483 63,161 (16,059) 415,217 ------------------------------------------------------------- Gross profit ............................................... 57,340 59,918 24,417 76 141,751 ------------------------------------------------------------- Selling, general and administrative expenses ............... 25,447 26,057 15,721 - 67,225 Amortization of intangibles ................................ 1,467 8,269 1,587 - 11,323 ------------------------------------------------------------- 26,914 34,326 17,308 - 78,548 ------------------------------------------------------------- Income from operations ..................................... 30,426 25,592 7,109 76 63,203 Interest and debt expense .................................. 26,144 919 440 - 27,503 Interest and other income .................................. 934 144 (211) - 867 ------------------------------------------------------------- Income before income taxes ................................. 5,216 24,817 6,458 76 36,567 Income tax expense ......................................... 2,625 12,181 2,990 28 17,824 ------------------------------------------------------------- Net income ................................................. $ 2,591 $ 12,636 $ 3,468 $ 48 $ 18,743 ============================================================= - 13 - FOR THE NINE MONTHS ENDED DECEMBER 27, 1998 OPERATING ACTIVITIES: Net cash provided by (used in) operating activities......... $ 8,102 $ (2,421) $ 6,342 $ 32 $ 12,055 ------------------------------------------------------------- INVESTING ACTIVITIES: Purchase of marketable securities, net ..................... (834) - - - (834) Capital expenditures ....................................... (6,755) (2,074) (1,327) - (10,156) Proceeds from sale of businesses ........................... 9,390 (89) - - 9,301 Purchases of businesses, net of cash ....................... (7,000) (323) - - (7,323) Other ...................................................... - 3,104 - - 3,104 ------------------------------------------------------------- Net cash (used in) provided by investing activities......... (5,199) 618 (1,327) - (5,908) ------------------------------------------------------------- FINANCING ACTIVITIES: Net borrowings (payments) under revolving line-of-credit agreements ................................ (2,600) 5,898 (1,784) - 1,514 Repayment of debt .......................................... (822) (6,345) 102 - (7,065) Dividends paid ............................................. (2,827) - - - (2,827) Other ...................................................... (8,017) - - - (8,017) ------------------------------------------------------------- Net cash used in financing activities ...................... (14,266) (447) (1,682) - (16,395) Effect of exchange rate changes on cash .................... (1) - (1,458) (32) (1,491) ------------------------------------------------------------- Net change in cash and cash equivalents .................... (11,364) (2,250) 1,875 - (11,739) Cash and cash equivalents at beginning of period ........... 17,991 788 4,082 - 22,861 ------------------------------------------------------------- Cash and cash equivalents at end of period ................. $ 6,627 $ (1,462) $ 5,957 $ - $ 11,122 =============================================================
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 a January 11, 2000 press release, the Company announced that it has retained Bear, Stearns & Co. Inc. to advise it on strategic alternatives to maximize shareholder value, including a sale or merger of the Company. The Company had previously announced in its October 26, 1999 second quarter earnings release, 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 is in process. - 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 that are widely distributed to industrial, automotive and consumer markets worldwide; integrated material handling solutions for the automotive markets; and integrated material handling solutions for industrial markets worldwide. The Company's material handling products are sold, domestically and internationally, principally to third party distributors 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 automotive business primarily deals with end-users and sales are concentrated, domestically and internationally (primarily North America) in the automotive industry. The Company's integrated material handling solutions industrial businesses also deal primarily with end-users and sales are concentrated, domestically and internationally (primarily Europe), in consumer products manufacturing, warehousing and, to a lesser extent, the steel, construction, automotive, and other industrial markets. RESULTS OF OPERATIONS THREE MONTHS AND NINE MONTHS ENDED JANUARY 2, 2000 AND DECEMBER 27, 1998 Net sales in the fiscal 2000 quarter ended January 2, 2000 were $174,173,000, a decrease of $12,821,000 or 6.9% from the fiscal 1999 quarter ended December 27, 1998. Net sales for the nine months ended January 2, 2000 were $537,782,000, a decrease of $19,186,000 or 3.4% from the nine months ended December 27, 1998. Sales in the Products segment were consistent with the previous year's quarter as a result of continued softness in most industrial markets. Products segment sales were up $8,890,000 or 2.3% for the nine months ended January 2, 2000 over the prior year period, primarily as a result of the additions of WECO and Abell-Howe offset by softness in most industrial markets. Sales in the Solutions-Industrial segment rose 5.8% or $829,000 for the three months ended January 2, 2000 as a result of strength in the Scandinavian markets. Sales for the nine months ended January 2, 2000 are consistent with the previous year-to-date period as strength in most markets was offset by continued sluggishness in the scissor lift market. The Solutions-Automotive segment had a sales decrease of 27.0% or $13,034,000 for the quarter and 15.4% or $20,283,000 for the nine months ended January 2, 2000. The decreases are the result of the impact of lagging business from a major customer due to a shift in capital spending from small car to truck and Sport Utility Vehicle (SUV) plants. The decrease in the Eliminations/Other segment for the nine months ended January 2, 2000 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 NINE MONTHS ENDED ------------------ ----------------- JAN. 2, DEC. 27, CHANGE JAN. 2, DEC. 27, CHANGE ------- -------- ------ ------ -------- ------ 2000 1998 AMOUNT % 2000 1998 AMOUNT % ---- ---- ------ - ---- ---- ------ - (IN THOUSANDS, EXCEPT PERCENTAGES) Products ........... $ 129,653 $ 130,501 $ (848) (0.6) $ 400,205 $ 391,315 $ 8,890 2.3 Solutions-Industrial 15,059 14,230 829 5.8 42,309 42,262 47 0.1 Solutions-Automotive 35,188 48,222 (13,034) (27.0) 111,509 131,792 (20,283) (15.4) Eliminations/Other . (5,727) (5,959) 232 3.9 (16,241) (8,401) (7,840) (93.3) --------- --------- --------- ----- --------- --------- --------- ----- Net sales ...... $ 174,173 $ 186,994 $(12,821) (6.9) $ 537,782 $ 556,968 $ (19,186) (3.4) ========= ========= ========= ========= ========= =========
The Company's gross profit margins were approximately 24.9% and 25.3% for the fiscal 2000 and 1999 quarters, respectively, and 24.2% and 25.5% for the nine months ended January 2, 2000 and December 27, 1998, respectively. The decrease in the current quarter and nine 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 was down slightly from the previous year's quarter due to a lower number of shipping days in the current fiscal quarter and the lower margin attributed to crane builder sales which are now a larger part of the Products segment. For the nine month period ended January 2, 2000 for the Products segment, the gross profit margin showed continued improvement over the respective period in the prior year as a result of the continued integration of acquisitions, particularly consolidated purchasing efforts. The Solutions-Industrial segment experienced a slight increase in margins for the current quarter and nine month periods when compared to the prior year as a result of increased sales volume. Gross margin in the Solutions-Automotive segment decreased significantly for the quarter and nine month period ended January 2, 2000 as a result of reduced volume created by a major customer's delay in capital expenditures due to a shift in its spending from small car to truck and SUV plants and cost overruns on several foreign jobs during the second quarter of fiscal 2000. Selling expenses were $13,405,000 and $12,838,000 for the fiscal 2000 and 1999 quarters, respectively, and $38,575,000 and $38,529,000 for the nine months ended January 2, 2000 and December 27, 1998, respectively. As a percentage of consolidated net sales, selling expenses were 7.7% and 6.9% for the fiscal 2000 and 1999 quarters, respectively, and 7.2% and 6.9% for the nine months ended January 2, 2000 and December 27, 1998, respectively. Increased percentages in the current year periods resulted from the relationship of expenses to soft revenues. General and administrative expenses were $9,762,000 and $9,477,000 000 for the fiscal 2000 and 1999 quarters, respectively, and $30,031,000, and $28,696,000 for the nine months ended January 2, 2000 and December 27, 1998, 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 5.6% and 5.1% for the fiscal 2000 and 1999 quarters, respectively, and 5.6% and 5.2% for the nine months ended January 2, 2000 and December 27, 1998, respectively. Increased percentages in the current year periods resulted from the relationship of expenses to soft revenues. The Company incurred proxy contest related expenses amounting to $965,000 for the nine months ended January 2, 2000 relative to the August 16, 1999 annual shareholders meeting and annual director elections. - 16 - Amortization of intangibles was $4,062,000 and $3,680,000 for the fiscal 2000 and 1999 quarters, respectively, and $12,064,000 and $11,323,000 for the nine months ended January 2, 2000 and December 27, 1998, respectively. The fiscal 2000 increase is due to the amortization of goodwill resulting from the acquisitions of Abell-Howe, Gautier, Camlok-Tigrip, and WECO. As a result of the above, income from operations decreased $5,224,000 or 24.4% for the fiscal 2000 quarter and decreased $14,588,000 or 23.1% for the fiscal 2000 nine month period compared to the respective periods in fiscal 1999. This is based on income from operations of $16,176,000 and $21,400,000 for the fiscal 2000 and 1999 quarters, respectively, and $48,615,000, and $63,203,000 for the nine months ended January 2, 2000 and December 27, 1998, respectively. Interest and debt expense was $8,937,000 and $9,253,000 for the fiscal 2000 and 1999 quarters, respectively, and $25,510,000 and $27,503,000 for the nine months ended January 2, 2000 and December 27, 1998, 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 5.1% and 4.9% for the fiscal 2000 and 1999 quarters, respectively, and 4.7% and 4.9% for the nine months ended January 2, 2000 and December 27, 1998, respectively. Interest and other income was $638,000 and $233,000 for the fiscal 2000 and 1999 quarters, respectively, and $1,191,000 and $867,000 for the nine months ended January 2, 2000 and December 27, 1998, respectively. Income taxes as a percentage of income before income taxes were 58.7% and 47.9% for the fiscal 2000 and 1999 quarters, respectively, and 58.2% and 48.7% for the nine months ended January 2, 2000 and December 27, 1998, respectively. The percentages reflect the effect of nondeductible amortization of goodwill resulting from acquisitions. Net income, therefore, decreased $3,190,000 or 49.5% for the quarter ended January 2, 2000 and decreased $8,583,000 or 45.8% for the nine months then ended. This is based on net income of $3,254,000, and $6,444,000 for the fiscal 2000 and 1999 quarters, respectively, and $10,160,000 and $18,743,000 for the nine months ended January 2, 2000 and December 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. - 17 - 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. 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 January 2, 2000. 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 February 16, 2000. The 1998 Revolving Credit Facility is secured by all equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual property. To manage its exposure to interest rate fluctuations, the Company has an interest rate swap. The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to $199,468,000, 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 $20,103,000 for the nine months ended January 2, 2000, an increase of $8,048,000 over the net cash provided by operating activities for the nine months ended December 27, 1998 of $12,055,000. The significant increase is primarily due to changes in the working capital needs of Automatic Systems Inc., formerly LICO, Inc. Net cash used in investing activities increased to $15,940,000 for the nine months ended January 2, 2000 from $5,908,000 for the nine months ended December 27, 1998. The $10,032,000 difference is due primarily to proceeds received as a result of the sale of Mechanical Products in the prior year. Net cash provided by financing activities was $1,853,000 for the nine months ended January 2, 2000 while net cash used in financing activities was $16,395,000 for the nine months ended December 27, 1998. The $18,248,000 change is due to several factors including the following: borrowings used to acquire WECO in the current year, the repurchase of common stock on behalf of the Company's ESOP in the prior year, and the net repayment of 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 nine months ended January 2, 2000 and December 27, 1998 were $5,983,000 and $10,156,000, respectively. The lower spending in the current year reflects a deferral of certain projects due to soft market conditions. INFLATION AND OTHER MARKET CONDITIONS The Company's costs are affected by inflation in the U.S. economy, and to a lesser extent, in foreign economies including those of Europe, Canada, Mexico, and the Pacific Rim. The Company does not believe that inflation has had a material effect on results of operations over the periods presented because of low inflation levels over the periods and because the Company has generally been able to pass on rising costs through price increases. However, in the future there can be no assurance that the Company's business will not be affected by inflation or that it will be able to pass on cost increases. SEASONALITY AND QUARTERLY RESULTS Quarterly results may be materially affected by the timing of large customer orders, by periods of high vacation concentrations, and by acquisitions and the magnitude of acquisition costs. Therefore, the operating results for any particular fiscal quarter are not necessarily indicative of results for any subsequent fiscal quarter or for the full fiscal year. YEAR 2000 CONVERSIONS The Company successfully transitioned into the Year 2000. During the millennium weekend, a corporate-wide team of internal and external resources performed an on-site assessment of business systems, infrastructure, telecommunications components and facilities. No significant issues were identified, nor have any arisen to date. The Company completed its Y2K assessment in 1999. By year-end, at least 98% of all computer-controlled equipment and software were Y2K ready. The components that were not Y2K ready did not pose significant operational concerns for the Company. The remaining modifications are scheduled for completion by February 2000. All areas are operating as designed, however the Company is continuing to monitor the Y2K status of all business units. Additionally, the Company surveyed critical suppliers to assess their level of readiness. To date, none of our suppliers have informed us of any Year 2000 issues impacting their ability to provide us with product or service. The cost of the Year 2000 initiatives is not material to the Company's results of operations or financial position. - 19 - The forward looking statements contained in "YEAR 2000 CONVERSIONS" should be read in conjunction with the Company's disclosures under the heading "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995". EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS 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. SUBSEQUENT EVENT In a January 11, 2000 press release, the Company announced that it has retained Bear, Stearns & Co. Inc. to advise it on strategic alternatives to maximize shareholder value, including a sale or merger of the Company. 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. - 20 - PART II. OTHER INFORMATION Item 1. Legal Proceedings - none. Item 2. Changes in Securities - none. Item 3. Defaults upon Senior Securities - none. Item 4. Submission of Matters to a Vote of Security Holders - none. Item 5. Other Information - none. Item 6. Exhibits and Reports on Form 8-K Exhibit 10.1 Fourth Amendment and Waiver, dated as of February 15, 2000, to the Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon Corporation, as the Borrower, the banks, financial institutions and other institutional lenders named therein, as Initial Lenders, Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing Line Bank and Fleet National Bank, as the Administrative Agent. There are no reports on Form 8-K. - 21 - 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: FEBRUARY 16, 2000 /S/ ROBERT L. MONTGOMERY, JR. ------------------ ----------------------------- Robert L. Montgomery, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer) EX-10.1 2 FOURTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT FOURTH AMENDMENT AND WAIVER --------------------------- THIS FOURTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER, dated as of February 15, 2000 (this "AMENDMENT AND WAIVER"), to the Credit Agreement, dated as of March 31, 1998 and as previously amended to date, is by and among Columbus McKinnon Corporation, a New York corporation (the "BORROWER"), the Lenders party thereto and Fleet National Bank, as the Initial Issuing Bank, the Swing Line Bank and the Administrative Agent. PRELIMINARY STATEMENTS ---------------------- (A) The Borrower, the Lenders and Fleet National Bank, as the Initial Issuing Bank, the Swing Line Bank and the Administrative Agent, are parties to the Credit Agreement, dated as of March 31, 1998, as amended by the First Amendment to Credit Agreement, dated as of September 23, 1998, the Second Amendment to Credit Agreement and Consent, dated as of February 12, 1999, and the Third Amendment to Credit Agreement, dated as of November 16, 1999 (as it may be further amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"). (B) Gaffey, Inc., a subsidiary of the Borrower and Guarantor, is in the process of selling its facility (a service center and office structure), located on 12th Street in Tulsa, Oklahoma at fair market value for an aggregate cash purchase price not to exceed $800,000 (the "Sale of Assets"), as permitted by Section 5.02(e)(iii) of the Credit Agreement. (C) Section 2.06(b)(ii) of the Credit Agreement requires that the Net Cash Proceeds from the Sale of Assets be applied to make a mandatory prepayment of the then outstanding Advances. (D) The Administrative Agent and Lenders desire to waive the requirements of Section 2.06(b)(ii) of the Credit Agreement and to amend Sections 5.03(b), 5.03(c), 5.03(d) and 5.04(d) of the Credit Agreement as set forth herein. Terms defined in the Credit Agreement and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE 1. WAIVER. Subject to the satisfaction of the conditions set forth in Article 4 hereof: (a) The Administrative Agent and Lenders hereby waive any prepayment required by Section 2.06(b)(ii) of the Credit Agreement in connection with the Sale of Assets and consent to the use of the Net Cash Proceeds from the Sale of Assets for working capital and other general corporate purposes; PROVIDED, THAT, the Sale of Assets complies with the provisions of Section 5.02(e)(iii) of the Credit Agreement; and, FURTHER PROVIDED, THAT, the Net Cash Proceeds from the Sale of Assets do not exceed $800,000. 1 (b) The foregoing waiver is only applicable and shall only be effective in the specific instance and for the specific purpose for which made. The waiver is expressly limited to the facts and circumstances referred to herein and shall not operate (i) as a waiver of or consent to non-compliance with any other Section or provision of the Credit Agreement or any other Loan Document or (ii) as a waiver of any other right, power or remedy of either the Administrative Agent or any Lender Party under the Credit Agreement or any other Loan Document. ARTICLE 2. AMENDMENTS. Section 2.1 Section 5.03(b) of the Credit Agreement is deleted in its entirety and replaced by the following: "(b) QUARTERLY FINANCIALS. As soon as available and in any event within forty-five (45) days after the end of each of the first, second and third fiscal quarters of each Fiscal Year, and as soon as available and in any event within ninety (90) days after the end of the fourth fiscal quarter of each Fiscal Year, a Consolidated balance sheet of the Borrower and its Subsidiaries, as of the end of such quarter and a Consolidated statement of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries, and consolidating statements of income of the Borrower and its Significant Subsidiaries, for the period commencing at the end of the previous fiscal quarter and ending with the end of such fiscal quarter and a Consolidated statement of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries, and consolidating statements of income of the Borrower and its Significant Subsidiaries, for the period commencing at the end of the previous Fiscal Year and ending with the end of such fiscal quarter, setting forth in each case in comparative form the corresponding figures for the corresponding period of the preceding Fiscal Year and the corresponding figures from the budgeted forecasts delivered pursuant to Section 5.03(e) for such period and for the Fiscal Year which includes such period, all in reasonable detail and duly certified by the chief financial officer of the Borrower as having been prepared in accordance with GAAP (subject to normal year-end audit adjustments), together with (i) a certificate of said officer stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto and (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by the Borrower in determining compliance with the financial covenants contained in Sections 5.04(a) through (d), PROVIDED, that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP. In connection with the Borrower's delivery of all quarterly financial statements pursuant to the foregoing, the Borrower shall also furnish to the Administrative Agent and Lender Parties a contract progress report with respect to each and every ongoing contracted for project in process of the Borrower, LICO or any of their respective Subsidiaries which involves aggregate payments during the life of such contract in excess of $5,000,000. All such contract in progress reports shall be prepared in a manner and presented in a form reasonably acceptable to the Administrative Agent." 2 Section 2.2 Section 5.03(c) of the Credit Agreement is deleted in its entirety and replaced by the following: "(c) ANNUAL FINANCIALS. As soon as available and in any event within one hundred and five (105) days after the end of each Fiscal Year, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, including therein a Consolidated balance sheet of the Borrower and its Subsidiaries, as of the end of such Fiscal Year and a Consolidated statement of income and a Consolidated statement of cash flows of the Borrower and its Subsidiaries, and consolidating statements of income of the Borrower and its Significant Subsidiaries, for such Fiscal Year, in each case setting forth in comparative form the corresponding figures for the prior Fiscal Year and the corresponding figures from the budgeted forecasts delivered pursuant to Section 5.03(e) for such Fiscal Year and in each case accompanied (in the case of such Consolidated financial statements) by an opinion acceptable to the Administrative Agent, with the consent of the Required Lenders, of Ernst & Young LLP or other independent certified public accountants of recognized national standing acceptable to the Administrative Agent, with the consent of the Required Lenders, together with (i) a letter of such accounting firm to the Administrative Agent and Lender Parties stating that in the course of the regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted by such accounting firm in accordance with generally accepted auditing standards, such accounting firm has obtained no knowledge that a Default has occurred and is continuing, or if, in the opinion of such accounting firm, a Default has occurred and is continuing, a statement as to the nature thereof, (ii) a schedule in form satisfactory to the Administrative Agent of the computations used by such accountants in determining, as of the end of such Fiscal Year, compliance with the covenants contained in Sections 5.04(a) through (d), PROVIDED, that in the event of any change in GAAP used in the preparation of such financial statements, the Borrower shall also provide, if necessary for the determination of compliance with Section 5.04, a statement of reconciliation conforming such financial statements to GAAP and (iii) a certificate of the chief financial officer of the Borrower stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Borrower has taken and proposes to take with respect thereto." Section 2.3 Section 5.03(d) of the Credit Agreement is deleted in its entirety and replaced by the following: "(d) PRO FORMA FINANCIALS. In connection with the delivery of all financial statements delivered under Section 5.03(b) or 5.03(c) above, pro forma statements of income reflecting the acquisition of LICO and all other acquisitions made by the Borrower or one of its Subsidiaries at any time during such period, such pro forma statement of income to be prepared both (i) for the period commencing at the end of the previous Fiscal Year and ending with the end of such fiscal quarter or Fiscal Year, as the case may be, as if the acquisition of LICO and all such other acquisitions had occurred at the beginning of such period and (ii) for the corresponding period of the preceding Fiscal Year, setting forth the corresponding figures for such corresponding period of the preceding Fiscal Year, as if the acquisition of LICO and all such other acquisitions had occurred at the beginning of such corresponding period. All such pro forma statements of income shall be prepared as if the acquisition of LICO and all such other acquisitions had occurred at the beginning of the 3 relevant periods reflected therein. All pro forma statements of income shall be prepared on a basis and presented in a form reasonably acceptable to the Administrative Agent. The requirements set forth in this Section 5.03(d) to deliver pro forma statements of income with respect to the acquisition of LICO or any other acquisition made by the Borrower or one of its Subsidiaries, as the case may be, shall continue until such time as the acquisition of LICO or such other acquisition, as the case may be, has been fully reflected for all relevant time periods in the financial statements delivered under Section 5.03(b) or 5.03(c) above, as appropriate, whereupon the requirements to deliver pro forma statements of income with respect to the acquisition of LICO or such other acquisition, as the case may be, shall cease with respect to the acquisition of LICO or such other acquisition, as the case may be, only, but shall continue with respect to any and all acquisitions of the Borrower or one of its Subsidiaries other than the acquisition of LICO or such other acquisition, as the case may be." Section 2.4 Section 5.04(d)(ii) of the Credit Agreement is amended by deleting therefrom the words "March 31, 1998" and by replacing them with the words "October 3, 1999". ARTICLE 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants to the Lenders and Administrative Agent that: Section 3.1 EXISTING REPRESENTATIONS. Each of the representa- tions and warranties contained in Article IV of the Credit Agreement is true in all respects on, and as though made as of, the date hereof, other than any such representation or warranty that, by its terms, refers to a specific date, in which case, as of such specific date. Section 3.2 NO DEFAULT. As of the date hereof, there exists no Default or Event of Default under the Credit Agreement and no event which, with the giving of notice or lapse of time, or both, would constitute a Default or Event of Default. ARTICLE 4. CONDITIONS TO AMENDMENT AND WAIVER.The effectiveness of the waiver contained in Article 1 and the amendments contained in Article 2 shall be subject to the fulfillment of the following conditions precedent: (a) The Borrower, Administrative Agent and Lenders shall have executed and delivered to the Administrative Agent this Amendment and Waiver. ARTICLE 5. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT AND OTHER LOAN AGREEMENTS. Section 5.1 Except as specifically waived or amended herein, the Credit Agreement and each of the other Loan Documents shall remain in full force and effect in accordance with their respective terms and are hereby ratified and confirmed in all respects. Section 5.2 The execution, delivery and effect of this Amendment and Waiver shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition, or to any amendment or modification of any term or condition (except as specifically waived pursuant to Section 1 herein or amended pursuant to Section 2 herein), of the Credit Agreement or any other Loan Document or (ii) prejudice any right, power or remedy which any Agent or any Lender now has or may have in the future under or 4 in connection with the Credit Agreement, the Notes or any other Loan Document. 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 be and mean a reference to the Credit Agreement as amended hereby. ARTICLE 6. MISCELLANEOUS. Section 6.1 GOVERNING LAW. THIS AMENDMENT AND WAIVER 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. Section 6.2 COUNTERPARTS. This Amendment and Waiver may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed signature page to this Amendment and Waiver by facsimile shall be as effective as delivery of an original executed signature page. Section 6.3 BINDING EFFECT;ASSIGNMENT. This Amendment and Waiver shall be binding upon and inure to the benefit of the Borrower and its respective successors and to the benefit of the Administrative Agent and the Lenders and their respective successors and assigns. Section 6.4 FEES AND EXPENSES. The Borrower shall pay the Administrative Agent for all reasonable expenses, including reasonable fees of legal counsel, incurred by the Administrative Agent in connection with the preparation, negotiation and execution of this Amendment and Waiver and any related matters. [SIGNATURE PAGES FOLLOW] 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Waiver 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 Waiver, 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 15th day of February, 2000. 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 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/ WILLIAM R. COLLINS ------------------------------- Title: Managing Director 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/ KRISTINE L. VIGLIOTTI ------------------------------- Title: Assistant Vice President LENDERS FIRST UNION NATIONAL BANK By: /S/ MARK B. FELKER ------------------------------- Title: Senior Vice President LENDERS KEYBANK NATIONAL ASSOCIATION By: /S/ FRANCIS W. LUTZ, JR. ------------------------------- Title: Portfolio Officer LENDERS MELLON BANK, N.A. By: /S/ ED KLOECKER ------------------------------- Title: Vice President LENDERS BANKERS TRUST COMPANY By: ------------------------------- Title: LENDERS THE BANK OF NEW YORK By: /S/ THOMAS C. MCCROHAN ------------------------------- Title: Vice President LENDERS NATIONAL BANK OF CANADA By: /S/ ROBERT UHRIG ------------------------------- Title: Vice President and Manager By: /S/ MICHAEL S. WOODARD ------------------------------- Title: Vice President LENDERS NATIONAL CITY BANK OF PENNSYLVANIA By: /S/ WILLIAM A. FELDMANN ------------------------------- Title: Vice President EX-27 3 FINANCIAL DATA SCHEDULE - 1/02/00
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 9-MOS MAR-31-2000 APR-01-1999 JAN-02-2000 14,128 0 134,818 0 115,020 299,708 139,370 51,634 771,732 105,435 429,432 0 0 149 199,201 771,732 537,782 537,782 407,532 407,532 81,635 0 25,510 24,296 14,136 10,160 0 0 0 10,160 .72 .71
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