FORM 10-Q INDEX
COLUMBUS McKINNON CORPORATION
JUNE 29, 1997
Page #
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets - 2
June 29, 1997 and March 31, 1997
Condensed consolidated statements of income and retained earnings - 3
Three months ended June 29, 1997 and June 30, 1996
Condensed consolidated statements of cash flows - 4
Three months ended June 29, 1997 and June 30, 1996
Notes to condensed consolidated financial statements - 5
June 29, 1997
Item 2. Management's Discussion and Analysis of 8
Results of Operations and Financial Condition
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities - none. 11
Item 3. Defaults upon Senior Securities - none. 11
Item 4. Submission of Matters to a Vote of Security Holders - none. 11
Item 5. Other Information - none. 11
Item 6. Exhibits and Reports on Form 8-K 11
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 29, MARCH 31,
1997 1997
-------- --------
ASSETS: (IN THOUSANDS)
Current assets:
Cash and cash equivalents $ 11,079 $ 8,907
Trade accounts receivable 76,655 74,446
Inventories 92,800 94,409
Net assets held for sale 15,217 14,971
Prepaid expenses 11,010 13,638
-------------------------
Total current assets 206,761 206,371
Net property, plant, and equipment 63,241 63,942
Goodwill and other intangibles, net 247,038 250,062
Marketable securities 14,925 13,590
Deferred taxes on income 9,494 8,935
Other assets 5,375 5,345
--------------------------
Total assets $546,834 $548,245
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 129 $ 1,562
Trade accounts payable 22,026 28,330
Accrued liabilities 47,061 35,761
Current portion of long-term debt 22,568 22,344
--------------------------
Total current liabilities 91,784 87,997
Long-term debt, less current portion 262,852 263,944
Other non-current liabilities 38,380 46,148
--------------------------
Total liabilities 393,016 398,089
Shareholders' equity:
Common stock 137 137
Additional paid-in capital 95,444 95,254
Retained earnings 64,497 60,999
ESOP debt guarantee (3,978) (4,201)
Other (2,282) (2,033)
--------------------------
Total shareholders' equity 153,818 150,156
--------------------------
Total liabilities and shareholders' equity $546,834 $548,245
==========================
See accompanying notes to condensed consolidated financial statements.
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COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED
--------------------------
JUNE 29, JUNE 30,
1997 1996
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
Net sales $124,442 $ 65,735
Cost of products sold 89,239 45,718
-------------------------
Gross profit 35,203 20,017
Selling expenses 11,165 6,002
General and administrative expenses 6,343 4,892
Amortization of intangibles 2,549 442
-------------------------
20,057 11,336
-------------------------
Income from operations 15,146 8,681
Interest and debt expense 6,525 256
Interest and other income 316 183
-------------------------
Income before income taxes 8,937 8,608
Income tax expense 4,506 3,576
-------------------------
Net income 4,431 5,032
Retained earnings - beginning of period 60,999 49,386
Cash dividends of $0.07 and $0.06 per share (933) (786)
-------------------------
Retained earnings - end of period $ 64,497 $ 53,632
=========================
Earnings per share, both primary and fully diluted $ 0.33 $ 0.38
=========================
See accompanying notes to condensed consolidated financial statements.
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COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
---------------------
JUNE 29, JUNE 30,
1997 1996
-------- -------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income $ 4,431 $ 5,032
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,760 1,636
Other (79) 65
Changes in operating assets and liabilities:
Trade accounts receivable (2,908) 1,921
Inventories 1,609 368
Prepaid expenses 2,628 66
Other assets (226) (659)
Trade accounts payable (5,438) (4,614)
Accrued and non-current liabilities 3,620 3,165
---------------------
Net cash provided by operating activities 8,397 6,980
INVESTING ACTIVITIES:
Purchases of marketable securities, net of sales (927) (501)
Net assets held for sale (246) -
Capital expenditures (1,509) (1,401)
Other (122) (64)
---------------------
Net cash used in investing activities (2,804) (1,966)
FINANCING ACTIVITIES:
Net payments under revolving line-of-credit agreements (1,433) (840)
Repayment of debt (867) (878)
Dividends paid (933) (786)
Reduction of ESOP debt guarantee 407 380
---------------------
Net cash used in financing activities (2,826) (2,124)
Effect of exchange rate changes on cash (595) (72)
---------------------
Net increase in cash and cash equivalents 2,172 2,818
Cash and cash equivalents at beginning of period 8,907 10,171
---------------------
Cash and cash equivalents at end of period $11,079 $12,989
=====================
See accompanying notes to condensed consolidated financial statements.
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COLUMBUS MCKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 29, 1997
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 June 29,
1997, and the results of its operations and its cash flows for the three
month periods ended June 29, 1997 and June 30, 1996 have been included.
Results for the period ended June 29, 1997 are not necessarily indicative of
the results that may be expected for the year ended March 31, 1998. 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, 1997.
2. Inventories consisted of the following:
June 29, 1997 March 31, 1997
------------- --------------
(in thousands)
At cost--FIFO basis:
Raw materials $ 23,690 $ 35,815
Work-in-process 25,646 17,206
Finished goods 46,973 44,344
------ ------
96,309 97,365
LIFO cost less than FIFO cost (3,509) (2,956)
------ ------
$ 92,800 $ 94,409
====== ======
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.
3. Property, plant, and equipment is net of $24,598,000 and $16,822,000 of
accumulated depreciation at June 29, 1997 and March 31, 1997, respectively.
4. Goodwill and other intangibles, net includes $24,919,000 and $22,370,000 of
accumulated amortization at June 29, 1997 and March 31, 1997, 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 reserves based on an amount 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.
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Yale is self-insured for product liability claims up to a maximum of
$500,000 per occurrence and maintains product liability insurance with a
$100 million cap per occurrence. The Company has been advised that a
customer has alleged that one of Yale's products was the cause of a fire
which occurred in January 1995 at a manufacturing facility, resulting in
losses in excess of Yale's policy limits. A formal complaint has been filed
seeking damages in excess of $500 million. However, it is the opinion of
management that there was no manufacturing defect and that the claim will in
all likelihood be settled within the Company's policy limits.
6. Primary and fully diluted earnings per share were based on the following:
Three Months Ended
-------------------------
June 29, June 30,
1997 1996
---------- ----------
Weighted-average common stock
outstanding 13,325,459 13,199,818
Common stock equivalents - primary 33,333 -
Common stock equivalents - fully diluted 34,211 -
7. Income tax expense for the three month periods ended June 29, 1997 and June
30, 1996 exceeds the customary relationship between income tax expense and
income before income taxes due to nondeductible amortization of goodwill of
$2,549,000 and $442,000, respectively.
8. On October 17, 1996, through a tender offer, the Company acquired
approximately 72% of the outstanding stock (on a fully diluted basis) of
Spreckels Industries, Inc., now known as Yale Industrial Products, Inc.
("Yale"), a manufacturer of a wide range of industrial products, including
hoists, scissor lifts, mechanical jacks, rotating joints, actuators and
circuit protection devices. On January 3, 1997 the Company acquired the
remaining outstanding shares, effected a merger, and has accounted for the
acquisition as a purchase. The total cost of the acquisition was
approximately $270 million, consisting of $200 million of cash and $70
million of acquired Yale debt.
On December 19, 1996, the Company acquired all of the outstanding stock of
Lister Bolt & Chain Ltd. and of Lister Chain & Forge, Inc. (together known
as "Lister"), a chain and forgings manufacturer, and has accounted for the
acquisition as a purchase. The total cost of the acquisition was
approximately $7 million of cash.
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The following table presents pro forma summary information for the three
month period ended June 30, 1996 as if the Yale and Lister acquisitions and
related borrowings had occurred as of April 1, 1996, which is the beginning
of fiscal 1997. 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:
Three Months Ended
------------------
June 30, 1996
------------------
(In thousands, except per share data)
Pro forma:
Net sales $ 116,711
Income from operations 14,447
Net income 4,287
Earnings per share, both
primary and fully diluted 0.32
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 29, 1997 AND JUNE 30, 1996
Net sales in the fiscal 1998 quarter ended June 29, 1997 were $124,442,000,
an increase of $58,707,000 or 89.3% over the fiscal 1997 quarter ended June
30, 1996. Sales growth during the current quarter was due primarily to the
October 1996 Yale acquisition and December 1996 Lister acquisition which
affected the general distribution, specialty distribution,
service-after-sale, and original equipment manufacturers distribution
channels. The Company also experienced increased sales volume to the
consumer and waste management distribution channels. In addition, list price
increases of approximately 4% were introduced in November/December of 1996
affecting many of the Company's hoist, chain and forged products sold in its
domestic commercial markets. Sales in the commercial and the consumer
distribution channel groups were as follows, in thousands of dollars and
with percentage changes for each group:
THREE MONTHS ENDED
--------------------- CHANGE
JUNE 29, JUNE 30, ----------------
1997 1996 AMOUNT %
--------------------- ----------------
(IN THOUSANDS, EXCEPT PERCENTAGES)
Commercial sales:
Domestic $ 89,633 $ 48,385 $ 41,248 85.2
International 27,441 10,312 17,129 166.1
------- ------ ------
117,074 58,697 58,377 99.5
Consumer sales:
Domestic 7,064 6,412 652 10.2
International 304 626 (322) (51.4)
------- ------ ------
7,368 7,038 330 4.7
------- ------ ------
Net sales $124,442 $ 65,735 $ 58,707 89.3
======= ====== ======
The Company's gross profit margins were approximately 28.3% and 30.5% for
the fiscal 1998 and 1997 quarters, respectively. The decrease in gross
profit margin in the current quarter resulted primarily from a change in the
classification of approximately $1.9 million of costs into cost of products
sold which previously had been classified as general and administrative
expenses. This change was made for intracorporate consistency. In addition,
fiscal 1998 gross profit was impacted by a temporary two week slow-down in
production and shipments at one of its facilities during a computer systems
conversion, amounting to approximately $400,000 of gross profit. Also, one
of the Yale facilities acquired in fiscal 1997 is realizing
lower-than-average gross profit due to temporary production workflow
inefficiencies, amounting to approximately $500,000.
Selling expenses were $11,165,000 and $6,002,000 in the fiscal 1998 and 1997
quarters, respectively. The 1998 expenses were impacted by the addition of
Yale and Lister sales. As a percentage of
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consolidated net sales, selling expenses were 9.0% and 9.1% in the fiscal
1998 and 1997 quarters, respectively.
General and administrative expenses were $6,343,000 and $4,892,000 in the
fiscal 1998 and 1997 quarters, respectively. The 1998 expenses were impacted
by the addition of Yale and Lift-Tech activities. As a percentage of
consolidated net sales, general and administrative expenses were 5.1%, and
7.4% in the fiscal 1998 and 1997 quarters, respectively. As noted above, the
improved percentage is due primarily to a change that classifies
approximately $1.9 million of expenses previously classified as general and
administrative into cost of products sold for intracorporate consistency.
The improved percentage also results from the fixed nature of costs in
relation to the increased sales.
Amortization of intangibles was $2,549,000 and $442,000 in the fiscal 1998
and 1997 quarters, respectively; increases are due to the amortization of
goodwill resulting from the acquisitions of Yale and of Lister.
Interest and debt expense was $6,525,000 and $256,000 in the fiscal 1998 and
1997 quarters, respectively. The fiscal 1998 increase is primarily due to
debt incurred to fund the Yale acquisition. As a percentage of consolidated
net sales, interest and debt expense was 5.2% and 0.4% in the fiscal 1998
and 1997 quarters, respectively.
Interest and other income was $316,000 and $183,000 in the fiscal 1998 and
1997 quarters, respectively. The fiscal 1998 increase is due to additional
investment holdings to fund the Company's general and products liability
self-insurance reserves.
Income taxes as a percentage of pre-tax accounting income were 50.4% and
41.5% in the fiscal 1998 and 1997 quarters, respectively. The fiscal 1998
percentage reflects the effect of nondeductible amortization of goodwill
resulting from the Yale, Lister and Lift-Tech acquisitions. The fiscal 1997
percentage reflects the effect of Lift-Tech nondeductible goodwill
amortization.
As a result of the above, net income decreased $601,000 or 11.9% for the
quarter. As a percentage of consolidated net sales, net income was 3.6% and
7.7% in the fiscal 1998 and 1997 quarters, respectively.
LIQUIDITY AND CAPITAL RESOURCES
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.
Effective July 17, 1997 the interest rates on the Company's credit facility
were revised as follows: Term Loan A and the Revolving Credit facility rates
vary based on the Company's leverage ratio, and are currently at a
Eurodollar rate based on LIBOR ("Eurodollar rate") plus 175 basis points;
the Term Loan B rate also varies based on the Company's leverage ratio, and
is currently at a Eurodollar rate plus 225 basis points.
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At June 29, 1997 $83,000,000 was outstanding under the revolving credit
facility.
Net cash provided by operating activities increased to $8,397,000 for the
three months ended June 29, 1997 from $6,980,000 for the three months ended
June 30, 1996. The $1,417,000 increase in net cash provided by operating
activities resulted primarily from an increase in depreciation and
amortization of $3,124,000 mainly as a result of acquiring Yale and Lister.
Net cash used in investing activities increased to $2,804,000 for the three
months ended June 29, 1997 from $1,966,000 for the three months ended June
30, 1996. The $838,000 increase is due primarily to normal purchases of
marketable securities to fund general and products liability self-insurance
reserves.
Net cash used in financing activities increased to $2,826,000 for the three
months ended June 29, 1997 from $2,124,000 for the three months ended June
30, 1996. The $702,000 increase is primarily due to repayment of
indebtedness of subsidiary lines of credit.
CAPITAL EXPENDITURES
In addition to keeping its current equipment and plants properly maintained,
the Company is committed to replacing, enhancing, and upgrading its
property, plant, and equipment to reduce production costs, increase
flexibility to respond effectively to market fluctuations and changes, meet
environmental requirements, enhance safety, and promote ergonomically
correct work stations. Consolidated capital expenditures for the three
months ended June 29, 1997 and June 30, 1996 were $1,509,000 and $1,401,000,
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.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Company will adopt FAS No. 128, "Earnings per Share", which is
not expected to have a material effect on the financial statements.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none other than that previously disclosed
within "Notes to Condensed Consolidated Financial Statements"
footnote number 5 contained herein.
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 11.1 - Columbus McKinnon Corporation Computation of Earnings per Share
There are no Reports on Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBUS MCKINNON CORPORATION
-----------------------------
(Registrant)
Date: August 13, 1997 /s/ Robert L. Montgomery, Jr.
----------------- -----------------------------
Robert L. Montgomery, Jr.
Executive Vice President and Chief
Financial Officer
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EXHIBIT INDEX
EXHIBIT EXHIBIT DESCRIPTION LOCATION
- -------------------------------------------------------------------------------
11.1 Columbus McKinnon Corporation Computation of
Earnings per Share E - 11.1
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EXHIBIT 11.1
COLUMBUS MCKINNON CORPORATION
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED
----------------------------
JUNE 29, 1997 JUNE 30, 1996
Primary: ------------- -------------
Weighted average common shares outstanding 13,325,459 13,199,818
Common Stock Equivalents (stock options) 33,333 0
---------- ----------
Total 13,358,792 13,199,818
========== ==========
Net income applicable to common shareholders $ 4,431,000 $ 5,032,000
Net income per common share (primary) .33 .38
THREE MONTHS ENDED
----------------------------
JUNE 29, 1997 JUNE 30, 1996
Fully Diluted: ----------------------------
Weighted average common shares outstanding 13,325,459 13,199,818
Common Stock Equivalents (stock options) 34,211 0
---------- ----------
Total 13,359,670 13,199,818
Net income applicable to common shareholders $ 4,431,000 $ 5,032,000
Net income per common share (fully diluted) .33 .38
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED
FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> COLUMBUS MCKINNON CORPORATION
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<COMMON> 137
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</TABLE>
