UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from_______to_______
Commission file number 0-27618
COLUMBUS MCKINNON CORPORATION
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(Exact name of registrant as specified in its charter)
NEW YORK 16-0547600
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 JOHN JAMES AUDUBON PARKWAY, AMHERST, N.Y. 14228-1197
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (716) 689-5400
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EXCHANGE ON
TITLE OF CLASS WHICH REGISTERED
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Common Stock, $0.01 Par Value NASDAQ National Market
Securities pursuant to section 12(g) of the Act: NONE
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [X].
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of May 31, 1998 was $306,824,186.
The number of shares of common stock outstanding as of May 31, 1998 was:
13,756,858 shares.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the proxy statement for the annual shareholders meeting to be
held August 17, 1998 are incorporated by reference into Part III of this report.
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COLUMBUS McKINNON CORPORATION
1998 Annual Report on Form 10-K
PART I
This annual report may include "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors that could
cause the actual results of the Company to differ materially from the results
expressed or implied by such statements, including general economic, and
business conditions, conditions affecting the industries served by the Company
and its subsidiaries, conditions affecting the Company's customers and
suppliers, competitor responses to the Company's products and services, the
overall market acceptance of such products and services and other factors
disclosed in the Company's periodic reports filed with the Commission.
Consequently such forward-looking statements should be regarded as the Company's
current plans, estimates and beliefs. The Company does not undertake and
specifically declines any obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
ITEM 1. BUSINESS.
OVERVIEW
Columbus McKinnon ("Columbus McKinnon" or the "Company"), established in
1875, is a leading designer, manufacturer and distributor of a broad range of
material handling, lifting and positioning products. The Company sells its
products both domestically and internationally, primarily to third-party
distributors and, to a lesser extent, directly to manufacturers and end-users
for a wide range of applications. The Company's major commercial markets include
the general manufacturing, crane building, mining, construction, transportation,
entertainment, power generation, waste management, agricultural, marine,
automotive, and logging markets. Additionally, the Company sells its products to
the consumer market through hardware and farm equipment distributors, mass
merchandisers and rental outlets. For the year ended March 31, 1998, the Company
generated net sales and income from operations of $510.7 million and $67.9
million, respectively.
The Company's products include a wide variety of electric, lever, hand and
air-powered hoists; hoist trolleys; alloy, carbon steel and kiln chain;
closed-die forgings, such as hooks, shackles and loadbinders; electric,
hydraulic and pneumatic operator-controlled manipulators; industrial components,
such as mechanical and electromechanical actuators, mechanical jacks and rotary
unions; scissor lifts; below-the-hook lifters; circuit protection devices;
logging tools and chain making and chain repair equipment. Through innovative
design and manufacturing expertise developed by the Company and through
selective acquisitions, the Company has established a leading market share in
many of its product lines. As a result of its recent acquisitions of Univeyor
A/S ("Univeyor") and LICO, Inc. ("LICO"), the Company has also positioned itself
as a leader in the project design, management and implementation of automated
material handling systems. Columbus McKinnon believes it has more overhead
hoists in use in North America than all of its competitors combined. The
Company's products and customer base are highly diversified; no single product
accounted for more than 1% and no individual customer accounted for more than 5%
of net sales for the year ended March 31, 1998.
The Company believes that the demand for its products has increased in
recent years and will continue to increase in the future as a result of several
favorable trends impacting a broad array of industries that have enabled the
Company to expand into new product areas and markets. These trends include:
PRODUCTIVITY ENHANCEMENT. In recent years employers have responded to
competitive pressures by seeking to maximize productivity and efficiency. The
Company's hoists and other lifting and positioning products allow loads to be
lifted and placed quickly, precisely, with little effort, and with fewer people.
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SAFETY REGULATIONS AND CONCERNS. Driven by federal and state workplace
safety regulations such as the Occupational Safety and Health Act ("OSHA") and
the Americans with Disabilities Act, and by the general competitive need to
reduce costs such as health insurance premiums and workers' compensation
expenses, employers seek safer ways to lift and position loads. The Company's
lifting and positioning products enable these tasks to be performed with reduced
risk of personal injury.
WORKFORCE DIVERSITY. The percentages of women, disabled and older persons
in the work force and the tasks they perform are continuing to increase. The
Company's products enable many workplace tasks to be performed safely,
efficiently and with less physical stress. The Company believes that increasing
diversity in the workforce will continue to increase demand for its products.
OUTSOURCING OF MATERIAL HANDLING PROJECT DESIGN AND MANAGEMENT. More of the
Company's customers and end-users are outsourcing non-core business functions to
improve productivity and cost efficiency. This has created opportunities for the
Company to assume the project design, management and implementation
responsibilities for both workstation and facility-wide material handling
systems. The Company's opportunity to capitalize on this trend has been enhanced
by the recent acquisitions of Univeyor and LICO. Through the combination of the
Company's expertise and technological know-how with that of Univeyor and LICO,
the Company believes that it will be able to position itself as a leader in the
project design, management and implementation of automated material handling
systems. As a result, many of the Company's existing products may be utilized in
these systems.
The Company has extended its product lines and penetrated new markets in
recent years through several acquisitions which have been successfully
integrated into the Company. In November 1995 and October 1996, the Company
acquired Lift-Tech International, Inc. ("Lift-Tech") and Yale Industrial
Products, Inc. ("Yale"), respectively, manufacturers of hoist and crane
components, and in December 1996, the Company acquired Lister Bolt & Chain Ltd.
("Lister"), a specialty bolt and chain manufacturer. These, together with other
acquisitions made by the Company, have enhanced the Company's position as the
largest North American manufacturer of overhead hoists, operator-controlled
manipulators and alloy chain. As a result of internal growth and acquisitions,
the Company's net sales and income from operations have increased to $510.7
million and $67.9 million, respectively, for the year ended March 31, 1998 from
$128.3 million and $12.2 million, respectively, in fiscal 1993, representing
compound annual growth rates of approximately 31.8% and 41.0%, respectively.
KEY STRENGTHS
The Company attributes its strong competitive position to the following key
strengths:
LEADING MARKET POSITION. Columbus McKinnon is the largest manufacturer of
hoists, alloy and high strength carbon steel chain and operator-controlled
manipulators in North America. The Company has developed its leading market
position over its 123-year history by emphasizing technological innovation,
manufacturing excellence and superior after-sale service.
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PREFERRED PROVIDER TO MAJOR DISTRIBUTORS. The Company enjoys long-standing
relationships with and is a preferred provider to many of its largest
distributors. Since 1990, during a period of significant consolidation among
distributors of material handling equipment, the Company has benefited from this
consolidation as it has maintained and enhanced its relationships with the
leading distributors. The Company believes that its ability to retain existing
customers and attract new customers is attributable to its ongoing commitment to
customer service and satisfaction. For example, the Company maintains close
contact with its customers and provides prompt aftermarket service to end-users
of its products through a network of independent distributors staffed with
Company-trained professionals at over 300 hoist repair centers, over 100 repair
parts distribution centers and 11 chain service centers. Additionally, to ensure
continuing product development and market awareness, the Company sponsors
advisory boards composed of representatives of its largest distributors and
aftermarket sales and service network.
DIVERSIFIED PRODUCTS, MARKETS, AND CUSTOMER BASE. The Company believes that
it offers the most extensive product line of material handling products in the
markets which it serves. No single product accounted for more than 1% of net
sales for the year ended March 31, 1998. The Company's products are sold to over
10,000 general, specialty and service-after-sale distributors and original
equipment manufacturers ("OEMs") for various applications in the general
manufacturing, overhead crane, construction, transportation, entertainment,
power generation, waste management, agricultural, marine, automotive and logging
markets. Additionally, the Company sells its products for consumer use to over
100 hardware, trucking and transportation, farm hardware and rental outlets. No
single customer accounted for more than 5% of net sales for the year ended March
31, 1998. The Company believes that the breadth of its products, the diversity
of its markets and the strength of its distribution relationships minimize its
dependence on any particular product, market or customer.
LARGE INSTALLED PRODUCT BASE; STRONG BRAND NAMES. Columbus McKinnon
believes it has more overhead hoists in use in North America than all of its
competitors combined. In addition, the Company's brand names, including Big
Orange, Budgit, Chester, CM, Coffing, Cyclone, Duff-Norton, Hammerlok,
Herc-Alloy, Little Mule, Lodestar, Puller, Shaw-Box, Valustar and Yale, are
among the most recognized and respected in the industry. The Company believes
that its strong brand name recognition, together with the Company's large
installed base of products, provide it with a significant competitive advantage
in selling its full product line to existing and new customers as well as
providing repair and replacement parts.
EXPERIENCED MANAGEMENT TEAM WITH SIGNIFICANT OWNERSHIP INTEREST. The
Company's management team provides a depth and continuity of experience. The
Company's directors and executive officers own an aggregate of approximately 21%
of the Company's outstanding common stock. In addition, in April 1997 Columbus
McKinnon implemented economic value added ("EVA(R)") as a performance measure
and is using EVA(R) goals to, among other things, determine incentive-based
compensation for all of its employees.
BUSINESS STRATEGY
The Company's strategic objective is to further enhance its position as a
leading designer, manufacturer and distributor of material handling, lifting and
positioning products both domestically and internationally. The Company plans to
achieve this objective through the continued implementation of the following
three-pronged strategy:
ENHANCE EXISTING BUSINESS. The Company continually strives to enhance its
existing business through the following:
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* Leverage Strong Competitive Position. The Company's position as a
leading provider of material handling equipment has resulted in a
substantial installed base of its products. The Company's close
relationships with its distributors permit it to obtain customer
information and product requirements in order to respond to and
anticipate future needs of end-users of the Company's products, which
the Company believes allows it to maintain its market leadership
position. The repair and replacement of parts and complementary
products for the Company's large installed base of products represents
additional revenue growth potential. The Company believes that it can
expand the market and customer base for new and acquired products by
introducing these products through its existing distribution channels.
In addition, the Company believes it can achieve product and marketing
synergies by selling its products into the markets of acquired
businesses.
* Increase Productivity and Realize Cost Savings. In addition to
developing and introducing new products, the Company focuses on
improving the quality and reliability of its products and increasing
manufacturing efficiency. Fourteen of the Company's existing
manufacturing facilities and six of its distribution facilities have
achieved ISO 9000 certification, and substantially all of the
Company's remaining manufacturing and distribution facilities are in
the process of obtaining such certification. The Company improves
productivity by reducing cycle times, increasing employee involvement
in production and investing in new, more efficient manufacturing
processes, including computer-aided design capabilities. The Company
has implemented EVA(R) to analyze the utilization of its assets and
productivity in order to improve all aspects of the Company's
operations, and to determine incentive-based compensation for its
employees. Further, the Company believes additional cost savings can
be realized through the continued integration of the operations of
recent acquisitions with those of the Company. For example, through
its increased critical mass, the Company has been able to achieve raw
material purchasing efficiencies.
INCREASE PENETRATION OF INTERNATIONAL MARKETS. The Company maintains a
distributor network in approximately 50 countries and has manufacturing
facilities in Canada, Mexico, Germany, Denmark, France and China. The Company
intends to increase its international presence, with a primary focus on
enhancing its existing presence in Europe and expanding its operations into the
Pacific Rim, South America and Africa. The Company intends to accomplish this
growth by strengthening its international distribution network and by making
additional strategic acquisitions and alliances. The recent acquisition of
Univeyor has provided the Company with another European operating location, and
will enable the Company to market Univeyor's material handling systems expertise
to the Company's customer base. The Company has increased its international net
sales from approximately 12.9% ($16.6 million) of net sales in fiscal 1993 to
approximately 21.1% ($107.5 million) of net sales for the year ended March 31,
1998.
PURSUE SELECTIVE ACQUISITIONS. The Company intends to selectively pursue
strategic acquisitions, joint ventures and alliances. Potential strategic
combinations will be evaluated based on their ability to, among other things:
(i) complement existing businesses and further expand product lines; (ii)
strengthen the Company's leadership position in the material handling and
lifting industry; (iii) provide synergistic opportunities; (iv) enhance and
broaden distribution channels; (v) increase the Company's international
presence; and (vi) enhance shareholder value and be EVA(R) positive.
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PRODUCTS AND SERVICES
The Company primarily designs, manufactures and distributes a broad range
of material handling, lifting and positioning products for various applications
in industry and for consumer use. The following table sets forth certain sales
data for the Company's products, expressed as a percentage of net sales, for the
periods presented:
FISCAL YEAR ENDED
MARCH 31,
PRODUCTS 1997 1998
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Hoists.......................................... 57% 58%
Chain........................................... 15 12
Forged products................................. 15 11
Industrial components........................... 5 8
Circuit protection devices...................... 2 4
Scissor lifts................................... 2 3
Manipulators.................................... 2 2
Tire shredders.................................. 2 1
Conveyors....................................... -- 1
-- --
100% 100%
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Hoists. The Company manufactures a variety of hand-operated hoists and
lever tools, air-powered hoists, electric chain hoists, and electric wire rope
hoists. Load capacities for the Company's hoist product lines range from less
than one ton to 100 tons. These products are sold under its Budgit, Chester, CM,
Coffing, Cyclone, Little Mule, Lodestar, Puller, Shaw-Box, Valustar, Yale and
other recognized trademarks. The Company's hoists are sold for use in a variety
of general industrial applications, as well as for use in the entertainment,
consumer, rental, health care and other emerging product markets. The Company
also supplies hoist trolleys, driven manually or by electric motors, for the
industrial, consumer and OEM markets.
The Company also offers a line of custom-designed, below-the-hook tooling.
Below-the-hook tooling is specialized lifting apparatus used in a variety of
lifting activities performed in conjunction with hoist and chain applications.
Chain. The Company manufactures alloy chain for various industrial
applications. Federal regulations in the United States favor the use of alloy
chain, which the Company first developed, for overhead lifting applications
because of its strength and wear characteristics. A line of the Company's alloy
chain is sold under the Herc-Alloy brand name for use in overhead lifting,
pulling and restraining applications. The Company also sells specialized load
chain for use in hoists. Three grades and multiple sizes of carbon steel
welded-link chain are sold by the Company in the industrial and consumer markets
for various load securement and other non-overhead lifting applications. As a
result of the acquisition of Lister, the Company now also manufactures kiln
chain sold primarily to the cement and lime kiln manufacturing market and anchor
and buoy chain sold primarily to the United States and Canadian governments.
The Company also designs and manufactures its own chain making and chain
repair equipment.
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Forged Products. The Company manufactures a complete line of alloy and
carbon steel forgings, including hooks, shackles, hitch pins, master links and
loadbinders. These forgings are used in virtually all types of chain and wire
rope rigging applications in a variety of industries, including transportation,
mining, railroad, construction, marine, logging, petrochemical and agriculture.
The Company also manufactures carbon steel forged and stamped products,
such as loadbinders, hooks, shackles and other securement devices, for sale to
the industrial, consumer and logging markets through industrial distributors,
hardware distributors, mass merchandiser outlets and OEMs.
Industrial Components. The Company, through the Duff-Norton Division of
Yale, designs and manufactures industrial components such as mechanical and
electromechanical actuators, mechanical jacks and rotary unions for sale
domestically and abroad. Actuators are linear motion devices used in a variety
of industries, including the paper, steel and aerospace industries. Mechanical
jacks are heavy duty lifting devices whose uses include the repair and
maintenance of railroad tracks, locomotives and industrial machinery. Rotary
unions are piping devices which introduce heating or cooling liquids into the
interiors of rotating drums in industrial processes in the paper, textiles,
rubber, plastics, printing and machine tool industries.
Circuit Protection Devices. The Mechanical Products Division of Yale
develops circuit protection devices for various aerospace and commercial
applications. Circuit protection devices are sold to manufacturers of private,
commercial and military aircraft, as well as NASA. In addition, they are also
sold to OEMs, electrical distributors and outlets for power supplies for use in
medical equipment, motor vehicles and other electrical components and equipment.
Scissor Lifts. The American Lifts Division of Yale manufactures hydraulic
scissor lift tables and other engineered lifting products. These products
enhance workplace ergonomics and are sold primarily to customers in the
manufacturing, construction, general industrial and air cargo industries.
Manipulators. The Company manufactures a line of sophisticated
operator-controlled manipulators. These products are articulated mechanical arms
with specialized end tooling designed to perform lifting, rotating, turning,
tilting, reaching and positioning tasks in a manufacturing process. Utilizing
various models and size configurations, the Company can offer custom-designed
hydraulic, pneumatic, and electric manipulators for a wide variety of
applications where the user requires multi-axial movement in a harsh or
repetitive environment. The Company also has the capability to manufacture more
sophisticated, semi-robotic manipulators for specialized, repetitive motion
applications and has manufactured simple pick and place robots.
Tire Shredders. The Company manufactures a line of tire shredders, capable
of reducing tires of up to 48 inch diameter to 2 inch or 1 inch square chips.
Tire shredding allows for a broad range of recovery and recycling functions,
including the use of granulated rubber for chips in pavement and in waste
management systems, and as fuel in boilers and cement kilns. Steel in belted
tires also can be recovered and recycled, further reducing waste from disposal
of worn tires. In addition, tire shredding reduces required landfill space.
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Conveyors. Commencing with its January 1998 acquisition of Univeyor, the
Company designs, manufactures and installs automated material handling systems
for a variety of industries including automotive, consumer products
manufacturing and warehousing.
SALES AND MARKETING
The Company supports its commercial and consumer sales through its sales
forces and through independent manufacturing agents worldwide, including
approximately 120 dedicated salespersons who sell hoists, chain, forged
products, manipulators, lift-tables, rotary unions, actuators, jacks, circuit
breakers and related material handling accessories. Consumer sales are supported
through approximately 25 independent manufacturers representative companies.
Commercial and consumer sales are further supported by over 100 Company-trained
customer service correspondents and sales application engineers.
The Company promotes its products by advertising in trade journals and by
participating in more than 50 trade shows each year throughout the United States
and abroad. Trade shows are central to promotion of the Company's products and,
in certain cases, for actual sale of the Company's products, particularly to
hardware retailers. Shows in which the Company participates range from global
events held in Hanover, Germany, Cologne, Germany and Chicago, Illinois to local
"markets" and "open houses" put on by individual hardware and industrial
distributors. The Company also attends specialty shows for the entertainment,
rental, safety, environmental recycling and health care markets, as well as
general purpose industrial and consumer hardware shows. In fiscal 1998, the
Company participated in trade shows in Canada, Mexico, Germany, England, Japan,
Singapore, Malaysia, Greece, South Africa, China and Peru, as well as in the
United States.
The Company's communication program encompasses advertisements in leading
trade journals as well as producing and distributing high quality information
catalogs. On-site distributors and end-user training programs are held worldwide
to promote and reinforce the attributes of the Company's products. The Company
also has a Web site on the Internet (http://www.cmworks.com).
The Company supports its product distribution by running cooperative
"pull-through" advertising in over 60 vertical trade magazines and directories
targeted to the theatrical, international, consumer, medical, tire shredder and
crane builder markets. The Company has separate ads for chain, hoists, forgings,
lifters, manipulators, lift tables, actuators, hydraulic jacks, tire shredders,
mobility systems and hardware programs.
DISTRIBUTION AND MARKETS
Commercial Distribution. In 1998, commercial sales of industrial products
totaled approximately $484.0 million or 95% of total sales, as compared to
approximately $332.7 million or 93% in 1997. Commercial distribution channels
include industrial wholesale distributors, rigging shops, crane builders,
catalog houses, material handling specialists, entertainment equipment riggers,
service-after-sale distributors and other general and specialty distributors.
General Distribution Channels:
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* Industrial distributors sell a variety of products for maintenance,
repair, operation and production ("MROP") applications through their
own direct sales force.
* Rigging shops are distributors who are experts in the rigging,
lifting, positioning and load securement areas of material handling.
Most rigging shops manufacture and distribute chain, wire rope and
synthetic slings and distribute off-the-shelf hoists and attachments,
chain slings and other off-the-shelf products.
* Crane builders design, build and install overhead crane and light-rail
systems for general industry and sell a wide variety of hoists and
lifting attachments.
Specialty Distribution Channels:
* Catalog houses market a variety of MROP supplies and material handling
products either exclusively through large, nationally distributed
catalogs, or through a combination of catalog sales and a field sales
force. The customer base of catalog houses, which traditionally
included smaller industrial companies and consumers, has expanded to
include large industrial accounts and integrated suppliers.
* Material handling specialists design and assemble systems
incorporating hoists, overhead rail systems, trolleys, lift tables,
manipulators, air balancers, jib arms and other products.
* Entertainment equipment riggers design, supply and install a variety
of material handling equipment for concerts, theaters, ice shows,
sports arenas, convention centers and discos.
Service-After-Sale Distribution Channel:
* Service-after-sale distributors include over 100 hoist master parts
depots, 11 chain repair service stations and over 300 hoist and other
product service and repair stations. This service network is designed
for easy parts and service access for the Company's large installed
base of hoists and related equipment in North America.
Other Sales Channels:
* Original equipment manufacturers supply various component parts to
other industrial manufacturers as well as private branding and
packaging of traditional Company products for material handling and
lifting. Sales in this area have grown with the addition of the
Mechanical Products Division of Yale, which manufactures industrial
and commercial circuit breakers, and with the Duff-Norton Division of
Yale, which manufactures rotary unions and actuators.
* Government sales are sold directly by the Company and have expanded
with the acquisition of Lister, which manufactures anchor, buoy and
mooring chain for the United States and Canadian Navies and Coast
Guards.
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Consumer Distribution. The Company's consumer sales, consisting primarily
of carbon steel chain and assemblies, forged attachments and hand-powered
hoists, were approximately $26.8 million or 5% of total sales in 1998 and
approximately $26.7 million or 7% in 1997. Distribution of these products is
primarily comprised of five channels: two-step wholesale hardware distribution
(such as Distribution America and Ace Hardware); one-step distribution (such as
Fastenal and Canadian Tire); trucking and transportation distributors (such as
U-Haul and Fruehauf); farm hardware distributors (such as J. I. Case and Tractor
Supply Company); and rental outlets.
CUSTOMER SERVICE AND TRAINING
The Company maintains well-trained customer service departments for all of
its sales divisions, and regularly schedules product and service training
schools for all customer service representatives and field sales forces. In
addition, training schools for distribution, service stations, and end-users are
held on a regular basis at most of the Company's facilities, as well as in the
field. The Company has more than 300 service stations worldwide that provide
local and regional repair, warranty and general service work for distributors
and end-users. End-user trainees attending various training schools maintained
by the Company include representatives of General Motors, DuPont, 3M, GTE,
Cummins Engine, General Electric and many other large industrial manufacturers.
The Company also provides a variety of collateral material in video,
cassette, CD-ROM, slide and literature format addressing such relevant material
handling topics as the care, use and inspection of chains and hoists, and
overhead lifting and positioning safety.
The Company also sponsors eight separate advisory boards made up of
representatives of its primary distributors and service-after-sale network
members who are invited to participate in discussions focused on improving
products and service. These boards enable the Company and its primary
distributors to exchange product and market information relevant to industry
trends.
RECENT ACQUISITIONS
LICO Acquisition.
On March 31, 1998, the Company acquired all of the outstanding capital
stock of LICO for $155.0 million in cash, adjusted for outstanding borrowings at
closing. Founded in 1981 in Kansas City, Missouri, LICO is a leading designer,
manufacturer and installer of custom conveyers and material handling systems
primarily for the automotive industry and, to a lesser extent, the steel,
construction and other industrial markets.
The Company believes that the LICO Acquisition will complement its recent
acquisition of Univeyor and further strengthen its position as a leader in
providing project design, management and implementation of automated material
handling systems, and will provide the Company with an established platform for
increasing sales of its products to the automotive and industrial manufacturing
markets.
LICO provides custom conveyor and material handling systems for its
customers as either a prime contractor with turnkey responsibility for its
systems, or as a supplier working closely with the customer's general
contractor. LICO concentrates its sales efforts on engineer-to-engineer
interactions. The typical LICO product cycle begins with an initial consultation
between the customer and a LICO engineer or project manager. After the project
parameters have been defined, LICO prepares an estimate and submits a formal bid
to complete the project.
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LICO recognizes revenues from its projects on a percentage of completion
basis. LICO is paid by its customers typically on a progress payment basis upon
achieving certain milestones as specified in the contracts. If a project is
terminated prior to completion, LICO is contractually entitled to recover its
costs plus a profit for work performed. Historically, very few of the projects
undertaken by LICO have been terminated.
To ensure that its bidding estimation process is accurate and that its
products and systems satisfy customer expectations, LICO maintains an active
staff of approximately 130 in-house and contract engineers with backgrounds and
degrees in electrical, structural and mechanical engineering and systems
analysis. Many of LICO's designed systems are proprietary in nature or contain
parts unique to LICO's material handling systems thereby providing it with a
significant competitive advantage. LICO places significant emphasis on the
development of new technology and products, and its designed systems often
include overhead power and free conveyors, inverted power and free conveyors,
electrified monorail systems and robotic indexing systems and automatic body
transfer systems.
LICO's customers have aggressively implemented programs to consolidate
their material handling system suppliers, relying on fewer qualified companies
to bid on and provide these systems. In addition these customers are requiring
qualified suppliers to be able to complete increasingly larger projects. LICO
has become a leading provider of custom conveyors and material handling systems
to many of its customers, including its two largest customers, General Motors
and Ford, which represented approximately 58% and 24%, respectively, of LICO's
sales for the twelve months ended March 31, 1998. In recognition of its quality
service and products, LICO has received several awards from some of its
customers. The automotive manufacturers are an attractive market for LICO's
products and systems, given: (i) the trend by these customers to shorten new
model life cycles and emphasize rapid plant change-overs; (ii) the coordination
of customer demand with manufacturing capacity which requires flexible assembly
operations; and (iii) the expanding international auto manufacturing market. The
consolidation of material handling system suppliers coupled with the favorable
trends impacting the implementation of automated material handling systems by
the automotive manufacturers and other industrial manufacturers, as well as
LICO's preferred provider status for many of these customers, has resulted in
LICO enjoying increased market shares in its respective markets and has
generated significant increases in LICO's backlog. As of March 31, 1998, LICO's
total backlog was $136.3 million, an increase of $44.1 million from its backlog
as of March 31, 1997. LICO's backlog has generally been recognized as revenue
over the next 12 to 18 months.
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The following table sets forth certain information for LICO for the fiscal
periods indicated.
SIX MONTHS
YEAR ENDED SEPTEMBER 30, ENDED MARCH 31,
------------------------------ ------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Revenues.............. $84,137 $129,733 $126,551 $58,609 $97,931
Operating income...... 2,811 3,317 6,919 2,442 7,626
Net income............ 1,799 2,061 3,817 1,273 4,649
Acquisitions since November 1995.
Since November 1995 in addition to LICO, the Company has acquired four
operations:
*In January 1998, the Company acquired Univeyor, which is engaged in the
design and manufacture of automated material handling systems, for
approximately $15.0 million plus assumed liabilities. This transaction
enabled the Company, which previously has designed solutions only for
individual workstations, to offer automated material handling systems,
predominantly using powered roller conveyors, for the entire workplace.
For its latest fiscal year ended June 30, 1997, Univeyor had sales of
approximately $24.8 million.
*In December 1996, the Company acquired Lister, a manufacturer of cement
kiln, anchor and buoy chain and mining bolts, for approximately $7.0
million. This transaction complemented the Company's line of chain
products and provided the Company with access to new markets, particularly
in the international marketplace. Lister's sales for its latest fiscal
year ended December 31, 1996 were approximately $11.6 million.
*In October 1996, the Company acquired the majority of the outstanding
common equity of Yale, a manufacturer of a variety of lifting and
positioning products, including hoists and scissor lifts, industrial
components such as actuators, jacks and rotary unions and circuit
protection devices, for approximately $270.0 million through a cash tender
offer. In January 1997, the Company acquired the remaining common equity
of Yale and effected a merger. This acquisition further complemented the
Company's product line and also provided the Company with international
operations and distribution facilities in Europe, South Africa and China.
For its latest fiscal year ended June 30, 1996, Yale generated sales of
approximately $187.0 million.
*In November 1995, the Company acquired Lift-Tech, a manufacturer and
distributor of hoists and crane components, including wire rope and
air-powered hoists, for approximately $63.0 million. Lift-Tech's products
complemented the Company's existing hoist product lines, thereby enabling
the Company to offer a broader product line to the marketplace.
Lift-Tech's sales for its latest fiscal year ended March 31, 1995 were
approximately $64.4 million.
Acquisitions prior to November 1995.
-12-
<PAGE>
Between February 1994 and October 1995 the Company also acquired (i) the
remaining 51% equity interest in Endor, a Mexican manufacturer of hoists, for
approximately $2.0 million, (ii) certain assets of Cady Lifters, Inc., a
manufacturer of "below the hook" lifters, for approximately $0.8 million, (iii)
the assets of the Conco Division of McGill Industries, Inc., a manufacturer of
manipulators, for approximately $0.8 million and (iv) the assets of
Durbin-Durco, Inc., a manufacturer of load securement equipment and attachments,
for approximately $2.4 million.
COMPETITION
The markets in which the Company operates are highly competitive and the
Company faces competition from a number of different manufacturers in each of
its product areas and geographic markets, domestic and foreign. The Company
competes in the sale of hoists with Demag, Kito-Harrington, Ingersoll-Rand and
Morris Material Handling; in chain with Campbell, Peerless Chain Company and
American Chain and Cable Company; in forged products with the Crosby Group,
Chicago Hardware and Cooper; and in actuators and rotary unions with Deublin and
Joyce-Dayton. The principal competitive factors affecting the market for the
Company's products include performance, functionality, price, brand recognition,
customer service and support and product availability. Some of the Company's
competitors have greater financial and other resources than the Company.
EMPLOYEES
At March 31, 1998, the Company had approximately 4,100 employees, 3,440 in
the United States, 215 in Canada, 120 in Mexico and 325 in Europe. Approximately
1,460 of the Company's employees are represented under twelve separate
collective bargaining agreements which terminate at various times between August
22, 1998 and April 30, 2003. A collective bargaining agreement covering
approximately 130 employees at the Company's Cedar Rapids, Iowa facility expires
on August 22, 1998.
During the past five years, the only interruptions or curtailments of the
Company's business due to labor disputes was a 29-day work stoppage at the
Cobourg, Ontario plant in fiscal 1994, and a five-day work stoppage at a Yale
plant in Charlotte, North Carolina in fiscal 1997. The Company believes that its
relationship with its employees is good. In support of this relationship, the
Company has maintained an Employee Stock Ownership Plan since 1988 and also uses
incentive-based compensation programs that are linked to the Company's
profitability and increase in shareholder value.
BACKLOG
The Company's backlog of orders at March 31, 1998 was approximately $198.2
million compared to approximately $58.9 million at March 31, 1997. The March 31,
1998 amount includes $136.3 million of LICO backlog. The Company's orders for
standard products are generally shipped within one week. Orders for products
that are manufactured to customers' specifications are generally shipped within
four to twelve weeks. Revenues from the Company's contracts for automated
systems are generally recognized within 12 to 18 months. The Company does not
believe that the amount of its backlog orders is a reliable indication of its
future sales.
RAW MATERIALS AND COMPONENTS
-13-
<PAGE>
The principal raw materials used by the Company are structural steel and
processed steel bar, forging bar steel, steel rod and wire, steel pipe and
tubing and tool steel which are available from multiple sources. The Company
purchases these various forms of steel from a number of suppliers under
long-term agreements which are negotiated on a company-wide basis to take
advantage of volume discounts. Although the steel industry is cyclical and steel
prices can be volatile, the Company has not been significantly impacted in
recent years by increases in steel prices.
The Company also purchases components such as motors, bearings and gear
housings and castings. These components are generally available from several
suppliers.
The Company estimates that its total materials cost, including steel
products and components, represented approximately 32% of net sales in fiscal
1998. The Company generally seeks to pass on materials price increases to its
customers, although a lag period often exists. The Company's ability to pass on
these increases is determined by competitive conditions.
ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATION
Like many manufacturing companies, the Company is subject to various
federal, state and local laws relating to the protection of the environment. To
address the requirements of such laws, the Company has adopted a corporate
environmental protection policy which provides that all facilities owned or
leased by the Company shall, and all employees of the Company have the duty to,
comply with all applicable environmental regulatory standards, and the Company
has initiated an environmental auditing program for its facilities to ensure
compliance with such regulatory standards. The Company has also established
managerial responsibilities and internal communication channels for dealing with
environmental compliance issues that may arise in the course of its business.
Because of the complexity and changing nature of environmental regulatory
standards, it is possible that situations will arise from time to time requiring
the Company to incur expenditures in order to ensure environmental regulatory
compliance. However, the Company is not aware of any environmental condition or
any operation at any of its facilities, either individually or in the aggregate,
which would cause expenditures that would result in a material adverse effect on
the Company's results of operations or financial condition and, accordingly, has
not budgeted any material capital expenditures for environmental compliance for
fiscal 1999.
Certain federal and state laws, sometimes referred to as Superfund laws,
require certain companies to remediate sites that are contaminated by hazardous
substances. These laws apply to sites owned or operated by a company, as well as
certain off-site areas for which a company may be jointly and severally liable
with other companies or persons. The required remedial activities are usually
performed in the context of administrative or judicial enforcement proceedings
brought by regulatory authorities. The Company has recently been involved in
eight administrative enforcement proceedings in connection with the remediation
of certain facilities, two of which it owns and operates and six of which it
neither owns nor operates but with regard to which it has been identified as one
of several potentially responsible parties ("PRPs"). The Company has been and is
cooperating with the regulatory authorities in connection with these
environmental proceedings. From the perspective of the Company, with the
exception of the two environmental administrative proceedings discussed below,
these matters have been, and are expected to continue to be, minor matters not
requiring substantial effort or expenditure on the part of the Company.
-14-
<PAGE>
The first environmental administrative proceeding is one in which the
Company has been identified by the New York State Department of Environmental
Conservation ("NYSDEC"), along with other companies, as a PRP at the Frontier
Chemical Site in Pendleton, New York ("Pendleton Site"), a site listed on
NYSDEC's Registry. From 1958 to 1977, the Pendleton Site had been operated as a
commercial waste treatment and disposal facility. The Company sent waste
pickling liquor generated at its facility in Tonawanda, New York to the
Pendleton Site during the period from approximately 1969 to 1977, and the
Company is participating with other PRPs in conducting the remediation of the
Pendleton Site under a consent order with NYSDEC. As a result of a negotiated
cost allocation among the participating PRPs, the Company has paid its pro rata
share of the remediation costs and accrued its share of the ongoing operations
and maintenance costs. As of March 31, 1998, the Company has paid approximately
$1.0 million in remediation and ongoing operations and maintenance costs
associated with the Pendleton Site. The participating PRPs have identified and
commenced a cost recovery action against a number of other parties who sent
hazardous substances to the Pendleton Site. If any of the currently
nonparticipating parties identified by the participating PRPs pay their pro rata
shares of the remediation costs, then the Company's share of total site
remediation costs will decrease. Settlements have been reached with 39 of the
113 defendants in the cost recovery action, and additional settlements are
expected in the future. However, the Company has not yet received payment in
connection with such settlements. The Company also has entered into a settlement
agreement with one of its insurance carriers in the amount of approximately
$734,130 in connection with the Pendleton Site and has received payment in full
of the settlement amount.
The second environmental administrative proceeding involves Mechanical
Products, Inc., a subsidiary of Yale ("MPI"). In 1987, MPI discovered that
groundwater and certain soils at and near its Jackson, Michigan plant contained
certain organic chemical compounds in concentrations above those permitted by
applicable law. MPI conducted an extensive investigation of the site and entered
into an Administrative Order by Consent with the State of Michigan Department of
Natural Resources which provides for further investigation and the development
and implementation of a plan for remedial action. Since 1991, MPI has been
engaged in efforts to investigate and remediate the impacted areas. As of March
31, 1998, the Company has paid approximately $3.4 million in remediation and
ongoing operations and maintenance costs associated with this site.
For all of the currently known environmental matters, the Company has
accrued a total of approximately $4.9 million as of March 31, 1998, which, in
the opinion of the Company's management, is sufficient to deal with such
matters. Further, the Company's management believes that the environmental
matters known to, or anticipated by, the Company should not, individually or in
the aggregate, have a material adverse effect on the Company's cash flow,
results of operations or financial condition. However, there can be no assurance
that potential liabilities and expenditures associated with unknown
environmental matters, unanticipated events, or future compliance with
environmental laws and regulations will not have a material adverse effect on
the Company.
The Company's operations are also governed by many other laws and
regulations, including those relating to workplace safety and worker health,
principally OSHA and regulations thereunder. The Company believes that it is in
material compliance with these laws and regulations and does not believe that
future compliance with such laws and regulations will have a material adverse
effect on its cash flow, results of operations or financial condition.
-15-
<PAGE>
<TABLE>
ITEM 2. PROPERTIES.
The Company maintains its corporate headquarters in Amherst, New York and
conducts its principal manufacturing and distribution operations at the
following facilities:
<CAPTION>
LOCATION UTILIZATION SQUARE FOOTAGE OWNED OR LEASED
- -------- ------------- ---------------- ---------------
UNITED STATES:
<S> <C> <C>
Amherst, NY................... Headquarters 52,000(1) Leased(2)
Muskegon, MI.................. Hoist manufacturing 500,000 Owned
Forrest City, AR.............. Hoist manufacturing 257,000 Leased
Charlotte, NC................. Industrial component manufacturing 250,000 Leased
Tonawanda, NY................. Patient lifter, manipulator and forged product 187,630(3) Owned
Wadesboro, NC................. Hoist manufacturing 180,000 Owned
Lexington, TN................. Chain manufacturing 153,230 Owned
Cedar Rapids, IA.............. Forging 100,000 Owned
Reform, AL.................... Stamping factory 99,760 Owned
Damascus, VA.................. Hoist manufacturing 87,400 Owned
Abingdon, VA.................. Hoist manufacturing 87,000 Owned
Chattanooga, TN............... Forging 77,000 Owned
Greensburg, IN................ Scissor lift manufacturing 60,000 Owned
Jackson, MI................... Circuit device manufacturing 53,000 Owned
Hollywood, MD................. Circuit device manufacturing 53,000 Owned
Laurens, IA................... Manipulator manufacturing 50,350 Owned
Lisbon, OH.................... Hoist manufacturing 37,000 Owned
Kansas City, MO............... Conveyor project administration 33,325 Owned
Chattanooga, TN............... Forging 33,000 Owned
Kansas City, MO............... Conveyor project design, management
and manufacturing 27,630 Owned
Kansas City, MO............... Construction management 25,000 Leased
Sarasota, FL.................. Tire shredder manufacturing 24,954 Owned
Kansas City, MO............... Conveyor manufacturing 22,000 Leased
Kansas City, MO............... Conveyor project design, management and
manufacturing 20,520 Owned
Kansas City, KS............... Conveyor manufacturing 17,000 Leased
Blaine, WA.................... Chain manufacturing 15,800 Owned
Romeoville, IL................ Chain warehouse 12,800 Leased
Ontario, CA................... Chain warehouse 12,600 Leased
Woodland, CA.................. Hoist warehouse 12,000 Leased
Raytown, MO................... Conveyor manufacturing 9,500 Leased
Brighton, MI.................. Engineering 8,400 Leased
Houston, TX................... Chain warehouse 7,800 Leased
Milwaukie, OR................. Warehouse 7,500 Leased
Atlanta, GA................... Chain warehouse 6,679 Leased
Seattle, WA................... Chain warehouse Space as needed Leased
INTERNATIONAL:
Cobourg, Ontario, Canada...... Chain and hoist manufacturing 125,016 Owned
Santiago, Tianguistenco,
Mexico..................... Hoist manufacturing 85,000 Owned
Arden, Denmark................ Project design and conveyor manufacturing 70,500 Owned
Richmond, British
Columbia, Canada........... Chain manufacturing 56,000 Owned
Velbert, Germany.............. Hoist manufacturing 54,000 Leased
Hangzhou, China............... Metal fabrication and textile manufacturing 37,000 Leased
Hangzhou, China............... Textile strapping manufacturing 20,000 Leased
Arden, Denmark................ Project construction 19,500 Leased
Hobro, Denmark................ Electronic control design and manufacturing 15,000 Owned
Vierzon, France............... Hoist manufacturing 14,000 Leased
Cambridge, Ontario,
Canada..................... Warehouse 11,200 Leased
Edmonton, Alberta,
Canada..................... Distribution center 3,150 Leased
Rotterdam, Netherlands........ Distribution center Space as needed Leased
(footnotes on following page)
-16-
<PAGE>
<FN>
(1) Approximately 26,000 square feet of the building is sublet through June 30,
2003.
(2) Title to the property is vested in the Town of Amherst Industrial
Development Agency pursuant to an Industrial Development Bond transaction.
The Company has the right and obligation to purchase the property at the
expiration of the lease term for $1.00.
(3) Approximately 15,000 square feet of this facility is subject to leases
which expire at various times through 2001.
</FN>
</TABLE>
The Company also leases a number of sales offices and minor warehouses
located throughout North America, Europe, Asia and South Africa.
The Company believes that its properties have been adequately maintained,
are in generally good condition and are suitable for the Company's business as
presently conducted. The Company believes its existing facilities provide
sufficient production capacity for its present needs and for its anticipated
needs in the foreseeable future. The Company also believes that upon the
expiration of its current leases, it either will be able to secure renewal terms
or enter into leases for alternative locations at market terms.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is named a defendant in legal actions
arising out of the normal course of business. The Company is not a party to any
pending legal proceeding the resolution of which the management of the Company
believes will have a material adverse effect on the Company's cash flow, results
of operations or financial condition or to any other pending legal proceedings
other than ordinary, routine litigation incidental to its business. The Company
maintains liability insurance against risks arising out of the normal course of
business.
On November 18, 1996, an action entitled Milliken & Company vs. Duff-Norton
Company, Inc. and Industrial Distribution Group, Inc. d/b/a Dixie Industrial
Supply Company was commenced in the Superior Court of Troup County, Georgia. In
its complaint in this action, the plaintiff alleges that a rotary union coupler
manufactured by a subsidiary of Yale failed, causing a fire resulting in alleged
damages to the plaintiff's carpet manufacturing facility and equipment in excess
of $500 million. This action has been turned over to the Company's insurer and
is in the early stages of discovery. The Company's insurance coverage applicable
to this matter is limited to $100 million plus the costs and expenses of
defending the action.
The Company has denied all of the material allegations contained in the
complaint and has asserted certain affirmative defenses and counterclaims. Based
upon the advice of its counsel, the Company believes it has meritorious defenses
to the causes of action specified in the complaint and intends to vigorously
defend this action. Further, the Company believes that its potential liability,
if any, arising out of this action will be within the limits of its insurance
coverage. However, there can be no assurance as to the outcome of this
litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
-17-
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS.
The Company's Common Stock is listed on the National Association of
Securities Dealers Automated Quotation System - National Market System
("NASDAQ") under the trading symbol "CMCO". The following table sets forth, for
the fiscal periods indicated, the high and low closing sale prices per share of
the Company's Common Stock as reported by NASDAQ.
FISCAL 1998 FISCAL 1997
HIGH LOW HIGH LOW
---- --- ---- ---
1st Quarter 19 17 16 3/4 15 1/4
2nd Quarter 26 1/4 18 5/8 15 5/8 13 7/8
3rd Quarter 26 1/2 22 1/2 16 5/8 14 1/4
4th Quarter 27 7/8 22 3/16 18 3/8 15 1/4
As of March 31, 1997, there were 155 holders of record of the Company's
Common Stock. Approximately 2,000 additional shareholders hold shares of the
Company's Common Stock in "street name".
The Company declared total cash dividends of $.28 per share in fiscal 1998
and $.27 per share in fiscal 1997.
-18-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected consolidated financial information
of the Company for each of the five fiscal years in the period ended March 31,
1998. This information includes (i) the results of operations of Lift-Tech since
its acquisition on November 1, 1995, (ii) the results of operations of Yale
since its acquisition on October 17, 1996, (iii) the results of operations of
Lister since its acquisition on December 19, 1996 and (iv) the results of
operations of Univeyor since its acquisition on January 8, 1998. This table
should be read in conjunction with the "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the Consolidated Financial
Statements of the Company, including the notes thereto, included elsewhere
herein. Refer to the "Description of Business and Business Acquisitions" note to
the Consolidated Financial Statements regarding the unaudited pro forma
information presented which reflects the LICO, Univeyor, Yale and Lister
acquisitions and related borrowings and also the private placement of senior
subordinated notes, as if they occurred on April 1, 1996, which is the beginning
of fiscal 1997.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED MARCH 31,
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C>
Net sales.................................................... $142,313 $172,330 $209,837 $359,424 $510,731
Cost of products sold........................................ 103,527 124,492 149,511 251,987 363,117
-------- -------- -------- -------- --------
Gross profit................................................. 38,786 47,838 60,326 107,437 147,614
Selling expenses............................................. 13,828 15,915 19,120 32,550 45,181
General and administrative expenses.......................... 10,105 11,449 13,941 24,636 24,342
Amortization of intangibles.................................. 378 600 791 5,197 10,201
Other charges................................................ 2,055 1,598 672 -- --
------ ------ ---- --- ---
Income from operations....................................... 12,420 18,276 25,802 45,054 67,890
Interest and debt expense.................................... 2,126 2,352 5,292 11,930 23,975
Interest and other income.................................... 371 472 1,134 1,168 1,940
---- ---- ------ ------ -----
Income before income taxes, minority interest, extraordinary
charge, and cumulative effect of accounting change........... 10,665 16,396 21,644 34,292 45,855
Income tax expense........................................... 4,637 5,892 8,657 15,617 22,434
Minority interest............................................ -- -- -- (323) --
Extraordinary charge for early debt extinguishment........... -- -- -- (3,198) (4,520)
Cumulative effect of accounting change....................... 1,001 -- -- -- --
------ --- --- --- ---
Net income................................................... $ 7,029 $ 10,504 $ 12,987 $ 15,154 $ 18,901
======= ======== ========= ========= =========
Earnings per share data, both basic and diluted(1):
Income before extraordinary charge and cumulative
effect of accounting change.......................... $ 0.85 $ 1.48 $ 1.69 $ 1.39 $ 1.75
Net income.............................................. 0.99 1.48 1.69 1.15 1.41
Cash dividend per common share(1) ........................... 0.18 0.21 0.24 0.27 0.28
PRO FORMA STATEMENT OF INCOME DATA:
Net sales.................................................... $ 627,107 $ 693,269
Income from operations....................................... 55,340 80,673
Income before extraordinary charge........................... 7,035 23,508
Net income................................................... 3,837 18,988
Earnings per share data, both basic and diluted(1):
Income before extraordinary charge...................... 0.53 1.75
Net income.............................................. 0.29 1.41
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................................. $ 93,378 $ 97,822 $ 188,734 $ 548,245 $763,748
Total long-term debt (including current maturities).......... 20,222 22,587 9,744 286,288 448,312
Total liabilities............................................ 60,914 56,972 51,112 398,089 597,226
Total shareholders' equity................................... 32,464 40,850 137,622 150,156 166,522
<FN>
(1) Reflects a 17 to 1 stock split of the common stock effected on February 15, 1996
</FN>
</TABLE>
-19-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
OVERVIEW
Excluding the recent acquisitions of LICO and Univeyor on March 31, 1998
and January 7, 1998, respectively, the Company's 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 and OEMs.
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. Company products are also sold to OEMs, and to the U.S.
and Canadian governments. Consumer distribution channels include mass
merchandisers, hardware distributors, trucking and transportation distributors,
farm hardware distributors and rental outlets. LICO and Univeyor sales are made
primarily to end-users. LICO's sales are concentrated in the domestic automotive
industry and, to a lesser extent, the steel, construction and other industrial
markets. Univeyor's sales are made to automotive, consumer products
manufacturing, warehousing and other industrial markets, primarily in Europe.
This section should be read in conjunction with the consolidated financial
statements of the Company included elsewhere herein.
RESULTS OF OPERATIONS
The following table sets forth certain income statement data for the
Company, expressed as a percentage of net sales, for each of the periods
presented:
FISCAL YEARS ENDED MARCH 31,
1998 1997 1996
---- ---- ----
Commercial sales.............................. 94.8% 92.6% 87.8%
Consumer sales................................ 5.2 7.4 12.2
--- ---- ----
Net sales..................................... 100.0 100.0 100.0
Cost of products sold......................... 71.1 70.1 71.3
--- ---- ----
Gross profit.................................. 28.9 29.9 28.7
Selling expenses.............................. 8.8 9.1 9.1
General and administrative expenses........... 4.8 6.9 6.6
Amortization of intangibles................... 2.0 1.4 0.4
Other charges................................. 0.0 0.0 0.3
--- ---- ----
Income from operations........................ 13.3 12.5 12.3
Interest and debt expense..................... 4.7 3.3 2.5
Interest and other income..................... 0.4 0.3 0.5
--- ---- ----
Income before income taxes, minority
interest and extraordinary charge........... 9.0 9.5 10.3
Income tax expense............................ 4.4 4.3 4.1
--- ---- ----
Income before minority interest and
extraordinary charge........................ 4.6% 5.2% 6.2%
==== ==== ====
-20-
<PAGE>
Fiscal Years Ended March 31, 1998, 1997, and 1996
Sales growth during the periods was primarily due to the October 1996 Yale
acquisition and the November 1995 Lift-Tech acquisition as well as increased
volume in nearly all distribution channels. Sales in 1998 of $510,731,000
increased $151,307,000 or 42.1% over 1997, and sales in 1997 of $359,424,000
increased $149,587,000 or 71.3% over 1996. The 1998 sales include $204.5 million
of Yale sales and $86.0 million of Lift-Tech sales; 1997 sales include $88.3
million of Yale sales and $81.5 million of Lift-Tech sales; 1996 sales include
$29.6 million of Lift-Tech sales. In addition, during these periods the Company
introduced list price increases of approximately 4% between November and January
of each year affecting many of its hoist, chain and forged products sold in its
domestic commercial markets. Sales in the commercial and the consumer
distribution channels were as follows, in thousands of dollars and with
percentage changes for each market group:
<TABLE>
<CAPTION>
CHANGE CHANGE
FISCAL YEARS ENDED MARCH 31, 1998 VS 1997 1997 VS 1996
----------------------------------- ------------------ ------------------
1998 1997 1996 AMOUNT % AMOUNT %
---- ---- ---- ------ - ------ -
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Commercial sales
Domestic............... $378,107 $267,426 $152,245 $110,681 41.4 $115,181 75.7
International.......... 105,862 65,302 31,995 40,560 62.1 33,307 104.1
------- ------- ------- ------- ----- ------- -----
483,969 332,728 184,240 151,241 45.5 148,488 80.6
Consumer sales
Domestic............... 25,086 24,022 23,282 1,064 4.4 740 3.2
International.......... 1,676 2,674 2,315 (998) (37.3) 359 15.5
------- ------- ------- ------- ----- ------- -----
26,762 26,696 25,597 66 0.2 1,099 4.3
------- ------- ------- ------- ----- ------- -----
Consolidated net sales...... $510,731 $359,424 $209,837 $151,307 42.1 $149,587 71.3
======== ======== ======== ======== ==== ======== =====
</TABLE>
The 41.4% growth in domestic commercial sales and the 62.1% growth in
international commercial sales in 1998 resulted primarily from the inclusion of
Yale and Lister for the full year, and the addition of Univeyor in January 1998.
These acquisitions contributed to the general distribution, specialty
distribution, service-after-sale and OEM distribution channels. In addition to
the effects of acquisitions, the Company also experienced increased sales volume
through all of its commercial distribution channels due to continued demand in
the marketplace, except for the waste management sector. The only other market
channel experiencing softness in fiscal 1998 was the international consumer
channel due to a shift in demand from small retail hardware stores to larger
do-it-yourself superstores, to which the Company supplies only a small share.
The 75.7% growth in domestic commercial sales in 1997 resulted almost
entirely from the Yale and Lift-Tech acquisitions. The Company also experienced
increased sales volume primarily in the specialty distributors marketing
channel. The 104.1% growth in international commercial sales in 1997 resulted
almost entirely from the addition of the European operations of Yale, and also
from the Company's existing Canadian operations. Consumer sales in fiscal 1997
were strongest in the Company's Canadian markets.
-21-
<PAGE>
The Company's gross profit margins were approximately 28.9%, 29.9% and
28.7% for 1998, 1997 and 1996, respectively. The decrease in gross profit margin
in fiscal 1998 resulted from a change in the classification of approximately
$7.6 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 and had a minimal effect on income from operations.
After isolating the effect of that classification change, the 1998 gross profit
margin increased by .5% compared to 1997; 1997 increased by 1.2% over 1996. The
increase in gross profit margin in each of the periods resulted from the effects
of the Company's cost control efforts, integration of acquisitions and the
economies of scale resulting from increasing production levels.
Selling expenses were $45,181,000, $32,550,000 and $19,120,000 in fiscal
1998, 1997, and 1996, respectively. The 1998 expenses included the full year of
Yale activity; 1997 expenses were impacted by the addition of Yale and the full
year of Lift-Tech activity. As a percentage of consolidated net sales, selling
expenses were 8.8%, 9.1% and 9.1% in fiscal 1998, 1997 and 1996, respectively.
Sales per employee increased to $168,600 in fiscal 1998 from $126,100 in fiscal
1996.
General and administrative expenses were $24,342,000, $24,636,000 and
$13,941,000 in fiscal 1998, 1997 and 1996, respectively. The 1998 expenses
included the full year of Yale activity; 1997 expenses were impacted by the
addition of Yale and the full year of Lift-Tech activity. As a percentage of
consolidated net sales, general and administrative expenses were 4.8%, 6.9% and
6.6% in fiscal 1998, 1997 and 1996, respectively. As noted above, the improved
percentage in fiscal 1998 was due primarily to a change that reclassified
approximately $7.6 million of expenses previously classified as general and
administrative into cost of products sold for intracorporate consistency. The
improved percentage also resulted from the fixed nature of costs in relation to
the increased sales and integration of acquisitions.
Amortization of intangibles was $10,201,000, $5,197,000 and $791,000 in
fiscal 1998, 1997 and 1996, respectively. Fiscal 1998 included a full year of
goodwill amortization resulting from the Yale acquisition; fiscal 1997 included
a partial year of Yale and a full year of goodwill amortization resulting from
the Lift-Tech acquisition; fiscal 1996 included a partial year of Lift-Tech.
Environmental remediation costs were $672,000 in fiscal 1996, and resulted
primarily from the Pendleton, New York site remediation, construction of which
is complete.
Interest and debt expense was $23,975,000, $11,930,000 and $5,292,000 in
fiscal 1998, 1997 and 1996, respectively. The fiscal 1998 and 1997 increases
were primarily due to the financing required to complete the Yale acquisition,
reflecting a full year in 1998. As a percentage of consolidated net sales,
interest and debt expense was 4.7%, 3.3% and 2.5% in fiscal 1998, 1997 and 1996,
respectively.
Interest and other income was $1,940,000, $1,168,000 and $1,134,000 in
fiscal 1998, 1997 and 1996, respectively. The 1998 and 1997 improvements reflect
increases in the investment return on marketable securities held for settlement
of a portion of the Company's general and products liability claims.
Income taxes as a percentage of pre-tax accounting income were 48.9%, 45.5%
and 40.0% in fiscal 1998, 1997 and 1996, respectively. The fiscal 1998 and 1997
percentages reflect the effect of non-deductible goodwill amortization resulting
from the Yale and Lift-Tech acquisitions.
-22-
<PAGE>
In fiscal 1997, the minority interest share of Yale earnings of $323,000
resulted from the fact that the Company acquired 72% of the outstanding Yale
shares on a fully diluted basis in October 1996 and the remainder in January
1997.
As a result of the above, income before extraordinary charges increased
$5,069,000 or 27.6% in 1998 and $5,365,000 or 41.3% in 1997. This is based on
income before extraordinary charges of $23,421,000, $18,352,000 and $12,987,000
or 4.6%, 5.1% and 6.2% as a percentage of consolidated net sales in fiscal 1998,
1997 and 1996, respectively.
In fiscal 1998, the extraordinary charge for early debt extinguishment of
$4,520,000 resulted from the non-cash write-off of unamortized deferred
financing costs upon refinancing of the Company's bank debt effective March 31,
1998. The charge is net of $3,012,000 of tax benefit. In 1997, the extraordinary
charge for early debt extinguishment of $3,198,000 resulted from the tender in
December 1996 for 11.5% acquired Yale notes. The charge consisted of redemption
premiums, costs to exercise the tender offer, and write-off of previously
incurred deferred financing costs, and was net of $2,133,000 of tax benefit.
Net income, therefore, increased $3,747,000 or 24.7% in 1998 and $2,167,000
or 16.7% in 1997. This is based on net income of $18,901,000, $15,154,000 and
$12,987,000 in fiscal 1998, 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
On March 31, 1998, the Company acquired all of the outstanding stock of
LICO for approximately $155 million of cash, which was financed by proceeds from
the Company's new revolving credit facility and a private placement of senior
subordinated notes, both of which also closed effective March 31, 1998. The
Company's previously existing Term Loan A, Term Loan B and revolving credit
facility were repaid and retired on March 31, 1998.
On January 7, 1998, the Company acquired all of the outstanding stock of
Univeyor for approximately $15 million of cash financed by the Company's
revolving credit facility, plus the assumption of certain debt.
The new 1998 Revolving Credit Facility provides availability up to $300
million, due March 31, 2003, against which $240 million was outstanding at March
31, 1998. Interest is payable at varying Eurodollar rates based on LIBOR plus a
spread determined by the Company's leverage ratio, amounting to 125 basis points
at March 31, 1998. The 1998 Revolving Credit Facility is secured by all
equipment, inventory, receivables and subsidiary stock (limited to 65% for
foreign subsidiaries). To manage its exposure to interest rate fluctuations, the
Company has interest rate swaps and caps.
-23-
<PAGE>
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 at a redemption price of 108.5% with the proceeds of equity offerings,
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 increased to $40,217,000 in
fiscal 1998 from $28,886,000 in 1997 and $18,338,000 in 1996. The $11,331,000
increase in net cash provided by operating activities in fiscal 1998 resulted
primarily from increased net income of $3,747,000, increased depreciation and
amortization of $7,804,000, reduced deferred tax expense of $4,818,000 and a
smaller increase in net operating assets than fiscal 1997. The $10,548,000
increase in net cash provided by operating activities in fiscal 1997 resulted
primarily from increased depreciation and amortization of $6,057,000, increased
deferred income tax expense of $3,920,000 and an extraordinary charge for early
debt extinguishment of $3,198,000. Operating assets net of liabilities increased
$2,291,000, $5,905,000 and $1,027,000 in fiscal 1998, 1997 and 1996,
respectively.
Net cash used in investing activities was $176,494,000 in fiscal 1998
compared to $215,851,000 in 1997 and $73,721,000 in 1996. The 1998 amount
includes the acquisitions of LICO and Univeyor for $168,051,000, net of cash
acquired; it is reduced by $4,575,000 of proceeds from the sale of non-operating
assets acquired with Yale in fiscal 1997. The net cash used in investing
activities in fiscal 1997 includes $196,113,000 and $7,464,000 for the Yale and
Lister acquisitions, respectively, net of cash acquired. The 1996 amount
includes $64,927,000 for the acquisition of Lift-Tech, net of cash acquired.
CAPITAL EXPENDITURES
In addition to keeping its current equipment and plants properly
maintained, the Company is committed to replacing, enhancing, and upgrading its
property, plant, and equipment to reduce production costs, increase flexibility
to respond effectively to market fluctuations and changes, meet environmental
requirements, enhance safety, and promote ergonomically correct work stations.
Consolidated capital expenditures for fiscal 1998, 1997 and 1996 were
$10,501,000, $9,392,000 and $6,988,000, respectively, excluding those capital
assets acquired in conjunction with business acquisitions.
INFLATION AND OTHER MARKET CONDITIONS
-24-
<PAGE>
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
Lower than average orders and shipments during the December holiday period
have a slight effect on the Company. In addition, 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 continues to move forward with its Year 2000 readiness project.
This project is addressing all components of its information technology
infrastructure. Currently, corporate-wide assessment is underway with specific
areas already complete. The assessment of Year 2000 on the Company's customized
business information system has been completed with modifications and
enhancements underway. The Company does not believe that the costs associated
with these modifications and enhancements will be material.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income," which the Company
will adopt for the year ended March 31, 1999. Statement No. 130 establishes new
rules for the reporting and display of comprehensive income and its components.
This includes unrealized gains or losses on the Company's available-for-sale
securities, foreign currency translation adjustments, and minimum pension
liability adjustments, which currently are reported in shareholders' equity, and
will be included and disclosed in total comprehensive income upon adoption of
the Statement. The impact of compliance with this Statement will not impact
financial position, net income or cash flows.
The FASB also issued FAS Statement No. 131 "Disclosures about Segments of
an Enterprise and Related Information," which the Company will adopt for the
year ended March 31, 1999. Statement No. 131 superseded FAS Statement No. 14
"Financial Reporting for Segments of a Business Enterprise." Statement No. 131
established new standards for determining segment criteria and annual and
interim reporting of that data. It also established new disclosures about
products, geographic areas and major customers. Currently, the Company reports
one operating segment under Statement No. 14 and, while the impact of compliance
with Statement No. 131 has not yet been determined, the Company expects to
report at least two segments upon its adoption.
-25-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COLUMBUS MCKINNON CORPORATION
Audited Consolidated Financial Statements as of March 31, 1998:
Report of Independent Auditors............................ F-2
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Income......................... F-4
Consolidated Statements of Shareholders' Equity........... F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-7
-26-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Columbus McKinnon Corporation
We have audited the accompanying consolidated balance sheets of Columbus
McKinnon Corporation as of March 31, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended March 31, 1998. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Columbus
McKinnon Corporation at March 31, 1998 and 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1998 in conformity with generally accepted accounting
principles. Also, in our opinion, the financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/S/ ERNST & YOUNG LLP
Buffalo, New York
May 15, 1998
-27-
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................................. $ 22,841 $ 8,907
Trade accounts receivable, less allowance for doubtful accounts
($2,522 and $1,884, respectively).......................................... 113,509 74,446
Unbilled revenues..................................................................... 19,634 --
Inventories........................................................................... 107,673 94,409
Net assets held for sale.............................................................. 10,396 14,971
Prepaid expenses...................................................................... 9,969 13,638
-------- --------
Total current assets....................................................................... 284,022 206,371
Net property, plant, and equipment......................................................... 81,927 63,942
Goodwill and other intangibles, net........................................................ 368,137 250,062
Marketable securities...................................................................... 16,665 13,590
Deferred taxes on income................................................................... 7,534 8,935
Other assets............................................................................... 5,463 5,345
-------- --------
Total assets............................................................................... $763,748 $548,245
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks................................................................ $ 2,801 $ 1,562
Trade accounts payable................................................................ 53,901 28,330
Excess billings....................................................................... 3,290 --
Accrued liabilities................................................................... 43,065 35,761
Current portion of long-term debt..................................................... 1,456 22,344
------- -------
Total current liabilities.................................................................. 104,513 87,997
Senior debt, less current portion.......................................................... 247,388 263,944
Subordinated debt.......................................................................... 199,468 --
Other non-current liabilities.............................................................. 45,857 46,148
------- -------
Total liabilities.......................................................................... 597,226 398,089
------- -------
Shareholders' equity:
Class A voting common stock; 50,000,000 shares authorized;
13,755,858 and 13,748,358 shares issued...................................... 137 137
Additional paid-in capital............................................................ 96,544 95,254
Retained earnings..................................................................... 76,187 60,999
ESOP debt guarantee; 325,092 and 426,508 shares....................................... (3,203) (4,201)
Unearned restricted stock; 134,550 and 134,550 shares................................. (538) (821)
Net unrealized investment gains....................................................... 1,598 1,040
Minimum pension liability adjustment.................................................. (988) (541)
Foreign currency translation adjustment............................................... (3,215) (1,711)
-------- --------
Total shareholders' equity................................................................. 166,522 150,156
-------- --------
Total liabilities and shareholders' equity................................................. $763,748 $548,245
======== ========
See accompanying notes.
-28-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED MARCH 31,
1998 1997 1996
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales............................................................ $510,731 $359,424 $209,837
Cost of products sold................................................ 363,117 251,987 149,511
-------- -------- --------
Gross profit......................................................... 147,614 107,437 60,326
Selling expenses..................................................... 45,181 32,550 19,120
General and administrative expenses.................................. 24,342 24,636 13,941
Amortization of intangibles.......................................... 10,201 5,197 791
Environmental remediation costs...................................... -- -- 672
-------- -------- --------
79,724 62,383 34,524
-------- -------- --------
Income from operations............................................... 67,890 45,054 25,802
Interest and debt expense............................................ 23,975 11,930 5,292
Interest and other income............................................ 1,940 1,168 1,134
-------- -------- --------
Income before income taxes, minority interest and
extraordinary charge.............................................. 45,855 34,292 21,644
Income tax expense................................................... 22,434 15,617 8,657
-------- -------- --------
Income before minority interest and extraordinary charge............. 23,421 18,675 12,987
Minority interest.................................................... -- (323) --
-------- -------- --------
Income before extraordinary charge................................... 23,421 18,352 12,987
Extraordinary charge for early debt extinguishment................... (4,520) (3,198) --
-------- -------- --------
Net income........................................................... $ 18,901 $ 15,154 $ 12,987
======== ======== ========
Earnings per share data, both basic and diluted:
Income before extraordinary charge for debt extinguishment...... $ 1.75 $ 1.39 $ 1.69
Extraordinary charge for debt extinguishment.................... (0.34) (0.24) --
------ ------ ------
Net income...................................................... $ 1.41 $ 1.15 $ 1.69
====== ====== ======
See accompanying notes.
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PREFERRED COMMON ADDI- NET MINIMUM FOREIGN
STOCK AT STOCK TIONAL ESOP UNEARNED UNREALIZED PENSION CURRENCY TREASURY
REDEMPTION ($.01 PAID-IN RETAINED DEBT RESTRICTED INVESTMENT LIABILITY TRANSLATION STOCK
VALUE PAR CAPITAL EARNINGS GUARANTEE STOCK GAINS ADJUSTMENT ADJUSTMENT AT COST
VALUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995.... $ 100 $ 78 $11,876 $38,443 $(6,279) $ (958) $ 273 $ (62) $ (543) $ (2,078)
Earned 122,816 ESOP shares... -- -- 222 -- 1,041 -- -- -- -- --
Issued 108,375 common shares
for purchase of affiliated
company.................... -- -- 319 -- -- -- -- -- -- 1,056
Repurchase of 24,582 common
shares held by ESOP........ -- -- -- -- -- -- -- -- -- (312)
Restricted common stock
canceled, 17,000 shares.... -- -- 9 -- -- 45 -- -- -- (127)
Restricted common stock
granted, 14,450 shares..... -- -- 44 -- -- (183) -- -- -- 139
Earned portion of restricted
stock...................... -- -- -- -- -- 260 -- -- -- --
Restricted stock market
value adjustment........... -- -- 45 -- -- -- -- -- -- --
Sold 850 common shares....... -- -- 3 -- -- -- -- -- -- 9
Exchanged 850 common shares
to retire preferred shares. (100) -- 2 -- -- -- -- -- -- 9
Canceled treasury shares..... -- -- (1,304) -- -- -- -- -- -- 1,304
Issued 6,037,500 common
shares under initial
public offering............ -- 59 83,067 -- -- -- -- -- -- --
Net income 1996.............. -- -- -- 12,987 -- -- -- -- -- --
Net unrealized gain on
investments................ -- -- -- -- -- -- 449 -- -- --
Change in minimum pension
liability adjustment....... -- -- -- -- -- -- -- (368) -- --
Change in foreign currency
translation adjustment..... -- -- -- -- -- -- -- -- 141 --
Preferred dividends declared
$75 per share.............. -- -- -- (7) -- -- -- -- -- --
Common dividends declared
$0.236 per share........... -- -- -- (2,037) -- -- -- -- -- --
------- ------ ------- ------- ------ ------ -------- -------- ------ -------
Balance at March 31, 1996.... -- 137 94,283 49,386 (5,238) (836) 722 (430) (402) --
Earned 105,601 ESOP shares... -- -- 665 -- 1,037 -- -- -- -- --
Restricted common stock
granted, 19,800 shares;
net of 3,111 shares
canceled................... -- -- 289 -- -- (280) -- -- -- --
Earned portion of restricted
stock...................... -- -- 17 -- -- 295 -- -- -- --
Net income 1997.............. -- -- -- 15,154 -- -- -- -- -- --
Net unrealized gain on
investments................ -- -- -- -- -- -- 318 -- -- --
Change in minimum pension
liability adjustment....... -- -- -- -- -- -- -- (111) -- --
Change in foreign currency
translation adjustment..... -- -- -- -- -- -- -- -- (1,309) --
Common dividends declared
$0.27 per share............ -- -- -- (3,541) -- -- -- -- -- --
-------- ------ ------- ------- ------ ------ -------- ------- ------ -------
Balance at March 31, 1997.... -- 137 95,254 60,999 (4,201) (821) 1,040 (541) (1,711) --
Earned 101,416 ESOP shares... -- -- 1,270 -- 998 -- -- -- -- --
Earned portion of restricted
stock...................... -- -- 20 -- -- 283 -- -- -- --
Net income 1998.............. -- -- -- 18,901 -- -- -- -- -- --
Net unrealized gain on
investments................ -- -- -- -- -- -- 558 -- -- --
Change in minimum pension
liability adjustment....... -- -- -- -- -- -- -- (447) -- --
Change in foreign currency
translation adjustment..... -- -- -- -- -- -- -- -- (1,504) --
Common dividends declared
$0.28 per share............ -- -- -- (3,713) -- -- -- -- -- --
-------- ------ ------- ------- ------ ------ -------- ------- ------ -------
Balance at March 31, 1998.... $ -- $ 137 $96,544 $76,187 $(3,203) $(538) $1,598 $(988) $(3,215) $ --
======== ====== ======= ======= ======= ====== ======== ======= ======= ======
See accompanying notes.
</TABLE>
-30-
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS MCKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31,
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income ........................................................................ $ 18,901 $ 15,154 $12,987
Adjustments to reconcile net income to net cash provided by operating
activities:
Extraordinary charge for early debt extinguishment.............................. 4,520 3,198 --
Minority interest............................................................... -- 323 --
Depreciation and amortization................................................... 19,089 11,285 5,228
Deferred income taxes........................................................... (2) 4,816 896
Other ........................................................................ -- 15 254
Changes in operating assets and liabilities net of effects from businesses
purchased:
Trade accounts receivable.................................................. (8,512) (3,320) 567
Inventories................................................................ (4,244) (2,177) (2,365)
Prepaid expenses........................................................... 3,906 (1,721) 1,373
Other assets............................................................... 2,135 (949) 682
Trade accounts payable..................................................... 817 (586) (913)
Accrued and non-current liabilities........................................ 3,607 2,848 (371)
------- ------- -------
Net cash provided by operating activities............................................ 40,217 28,886 18,338
------- ------- -------
INVESTING ACTIVITIES:
Purchase of marketable securities, net............................................... (2,517) (2,098) (1,806)
Capital expenditures................................................................. (10,501) (9,392) (6,988)
Purchase of businesses, net of cash acquired......................................... (168,051) (203,577) (64,927)
Net assets held for sale............................................................. 4,575 (784) --
--------- --------- --------
Net cash used in investing activities................................................ (176,494) (215,851) (73,721)
--------- --------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net.......................................... -- -- 83,126
Net (payments) borrowings under revolving line-of-credit agreements.................. 156,550 75,293 (2,956)
Repayment of debt.................................................................... (196,967) (78,528) (62,944)
Proceeds from issuance of long-term debt, net........................................ 196,120 206,000 50,000
Deferred financing costs incurred.................................................... (1,273) (10,000) (1,405)
Dividends paid....................................................................... (3,713) (4,390) (1,688)
Repurchase of stock.................................................................. -- -- (391)
Change in ESOP debt guarantee........................................................ 998 (1,596) 1,041
--------- --------- --------
Net cash provided by financing activities............................................ 151,715 186,779 64,783
Effect of exchange rate changes on cash.............................................. (1,504) (1,078) 384
--------- --------- --------
Net change in cash and cash equivalents.............................................. 13,934 (1,264) 9,784
Cash and cash equivalents at beginning of year....................................... 8,907 10,171 387
--------- -------- --------
Cash and cash equivalents at end of year............................................. $ 22,841 $ 8,907 $10,171
========= ========= ========
Supplementary cash flows data:
Interest paid................................................................... $ 25,666 $ 8,683 $ 5,256
Income taxes paid............................................................... $ 13,086 $ 14,993 $ 5,555
See accompanying notes.
</TABLE>
-31-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BUSINESS ACQUISITIONS
Columbus McKinnon Corporation (the Company) is a leading designer,
manufacturer and distributor of a broad range of material handling, lifting and
positioning products. The Company sells its products both domestically and
internationally, primarily to third-party distributors and, to a lesser extent,
directly to manufacturers and end-users for a wide range of applications. During
fiscal 1998, approximately 79% of sales were to customers in the United States.
On March 31, 1998, the Company acquired all of the outstanding stock of
LICO, Inc. ("LICO"), a leading designer, manufacturer and installer of custom
conveyor and automated material handling systems primarily for the automotive
industry, and to a lesser extent, the steel, construction and other industrial
markets. The total cost of the acquisition, which was accounted for as a
purchase, was approximately $155 million of cash, which was financed by proceeds
from the Company's new revolving debt facility and a private placement of senior
subordinated notes, both of which also closed effective March 31, 1998. The
consolidated statement of income and the consolidated statement of cash flows
for the year ended March 31, 1998 do not include any LICO activity.
On January 7, 1998, the Company acquired all of the outstanding stock of
Univeyor A/S ("Univeyor"), a Denmark-based designer, manufacturer and
distributor of automated material handling systems, and has accounted for the
acquisition as a purchase. The cost of the acquisition was approximately $15
million of cash financed by the Company's revolving debt facility, plus certain
debt. The consolidated statement of income and the consolidated statement of
cash flows for the year ended March 31, 1998 include Univeyor activity since its
January 7, 1998 acquisition by the Company.
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 lift tables, 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. The consolidated statement of income and the consolidated statement
of cash flows for the year ended March 31, 1997 include Yale activity since its
October 17, 1996 acquisition by the Company. The minority interest share of
Yale's earnings since acquisition through January 3, 1997 has been appropriately
segregated from consolidated net income.
Included with the Yale acquired assets were real estate properties and
equipment retained from Yale's April 19, 1996 sale of two of its subsidiaries in
unrelated businesses. Certain assets were sold during fiscal 1998 and the
remaining assets held for sale are expected to be sold in fiscal 1999. They have
been recorded at their estimated realizable values net of disposal costs,
separately reflected on the consolidated balance sheet and amounting to
$10,396,000 and $14,971,000 as of March 31, 1998 and 1997, respectively.
-32-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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, which was financed by the Company's revolving debt facility.
The consolidated statement of income and the consolidated statement of cash
flows for the year ended March 31, 1997 include Lister activity since its
December 19, 1996 acquisition by the Company.
On November 1, 1995, the Company acquired all of the outstanding stock of
LTI Holdings, Inc., now known as Lift-Tech International ("Lift-Tech"), a hoist
manufacturer, and has accounted for the acquisition as a purchase. The total
cost of the acquisition was approximately $63 million, consisting of $43 million
in cash and $20 million for the refinancing of Lift-Tech bank debt. The
consolidated statement of income and consolidated statement of cash flows for
the year ended March 31, 1996 include Lift-Tech activity since its November 1,
1995 acquisition by the Company.
The following table presents pro forma summary information, which is not
covered by the report of independent auditors, for the years ended March 31,
1998 and 1997, as if the LICO, Univeyor, Yale, and Lister acquisitions and
related borrowings and also the private placement of senior subordinated notes,
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:
YEAR ENDED MARCH 31,
1998 1997
---- ----
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
Pro forma:
Net sales................................. $693,269 $627,107
Income from operations.................... 80,673 55,340
Income before extraordinary charge........ 23,508 7,035
Net income................................ 18,988 3,837
Earnings per share, both basic and diluted:
Income before extraordinary charge........ 1.75 0.53
Extraordinary charge...................... (0.34) (0.24)
Net income................................ 1.41 0.29
2. ACCOUNTING PRINCIPLES AND PRACTICES
Consolidation
These consolidated financial statements include the accounts of the Company
and its domestic and foreign subsidiaries; all significant intercompany accounts
and transactions have been eliminated.
-33-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Foreign Currency Translations
The Company translates foreign currency financial statements as described
in Financial Accounting Standards (FAS) No. 52. Under this method, all items of
income and expense are translated at average exchange rates for the year. All
assets and liabilities are translated at the year-end exchange rate. Gains or
losses on translations are accumulated in the shareholders' equity section of
the balance sheet.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expenses.
Actual results could differ from those estimates.
Revenue Recognition and Concentration of Credit Risk
Sales are recorded when products are shipped to a customer. The Company
performs ongoing credit evaluations of its customers' financial condition, but
generally does not require collateral to support customer receivables. The
credit risk is controlled through credit approvals, limits and monitoring
procedures. The Company established an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific customers, historical
trends and other factors.
LICO and Univeyor recognize contract revenues under the percentage of
completion method, measured by comparing direct costs incurred to total
estimated direct costs. Changes in job performance, job conditions and estimated
profitability, including those arising from final contract settlements, may
result in revisions to costs and income and are recognized in the period in
which the revisions are determined. In the event that a loss is anticipated on
an uncompleted contract, a provision for the estimated loss is made at the time
it is determined. Billings on contracts may precede or lag revenues earned, and
such differences are reported in the balance sheet as current liabilities
(excess billings) and current assets (unbilled revenues), respectively.
As of March 31, 1998, approximately $26 million of trade accounts
receivable was concentrated in the automotive industry, including retainages
amounting to $7,870,000. The accounts receivable included $13,840,000 due from
General Motors.
Concentrations of Labor
Approximately 35% of the Company's employees are represented by twelve
separate domestic and Canadian collective bargaining agreements which terminate
at various times between August 22, 1998 and April 30, 2003. Approximately 5% of
the labor force is covered by collective bargaining agreements that will expire
within one year. In addition, the Company hires union production workers for
field installation under its material handling systems contracts.
-34-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Costs of
approximately 53% and 60% of inventories at March 31, 1998 and 1997,
respectively, have been determined using the LIFO (last-in, first-out) method.
Costs of other inventories have been determined using the FIFO (first-in,
first-out) or average cost method. FIFO cost approximates replacement cost.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and depreciated
principally using the straight-line method over their respective estimated
useful lives (buildings and building equipment--15 to 40 years; machinery and
equipment--3 to 18 years). When depreciable assets are retired, or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in operating results.
Goodwill
It is the Company's policy to account for goodwill and other intangible
assets at the lower of amortized cost, or fair value if indicators of impairment
exist.
As a result of the Lift-Tech, Yale, Lister, Univeyor and LICO acquisitions,
the Company recorded approximately $42 million, $200 million, $2 million, $9
million and $123 million of goodwill, respectively, which is being amortized on
a straight-line basis over twenty-five years. At March 31, 1998 and 1997
accumulated amortization was $14,979,000 and $5,644,000, respectively.
Marketable Securities
All of the Company's investments, which consist of equity securities and
corporate and governmental obligations, have been classified as
available-for-sale securities and are therefore recorded at their fair values
with the unrealized gains and losses, net of tax, reported in a separate
component of shareholders' equity. Estimated fair value is based on published
trading values at the balance sheet dates. The amortized cost of debt securities
is adjusted for amortization of premiums and accretion of discounts to maturity.
The cost of securities sold is based on the specific identification method.
Interest and dividend income are included in interest and other income on the
consolidated statements of income.
The marketable securities are carried as long-term assets since they are
retained for the settlement of a portion of the Company's general liability and
products liability insurance claims filed through CM Insurance Company, Inc., a
wholly owned captive insurance subsidiary.
-35-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fair Value of Financial Instruments
The fair value of interest rate swap and cap agreements is the amount that
the Company would receive or pay to terminate the agreements, based on quoted
market prices and considering current interest rates and remaining maturities.
Research and Development
Research and development costs as defined in FAS No. 2, for the years ended
March 31, 1998, 1997 and 1996 were $1,497,000, $1,283,000 and $662,000,
respectively.
3. UNBILLED REVENUES AND EXCESS BILLINGS
MARCH 31, 1998
--------------
(IN THOUSANDS)
Costs incurred on uncompleted contracts.... $ 194,359
Estimated earnings......................... 38,255
-------
Revenues earned to date.................... 232,614
Less billings to date...................... 216,270
-------
$ 16,344
========
The net amount above is included in the consolidated balance sheet at March 31
under the following captions:
Unbilled revenues.................................... $ 19,634
Excess billings...................................... (3,290)
-------
$ 16,344
========
4. INVENTORIES
Inventories consisted of the following:
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
At cost--FIFO basis:
Raw materials........................... $ 52,158 $43,526
Work-in-process......................... 22,188 17,206
Finished goods.......................... 37,089 36,633
------- -------
111,435 97,365
LIFO cost less than FIFO cost................ (3,762) (2,956)
------- --------
Net inventories.............................. $107,673 $94,409
======== =======
5. MARKETABLE SECURITIES
Marketable securities are retained for the settlement of a portion of the
Company's general liability and products liability insurance claims filed
through CM Insurance Company, Inc. (see Notes 2 and 13). The following is a
summary of available-for-sale securities at March 31, 1998:
-36-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Government securities........................................ $10,180 $ 285 $ 13 $10,452
U. S. corporate securities................................... 1,107 36 1 1,142
------- ------ ---- -------
Total debt securities................................... 11,287 321 14 11,594
Equity securities............................................ 2,847 2,247 23 5,071
------- ------ ---- -------
$14,134 $2,568 $ 37 $16,665
======= ====== ==== =======
</TABLE>
<TABLE>
<CAPTION>
The following is a summary of available-for-sale securities at March 31,
1997:
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Government securities........................................ $ 9,039 $ 74 $ 75 $ 9,038
U. S. corporate securities................................... 738 7 3 742
------- ------- ---- -------
Total debt securities................................... 9,777 81 78 9,780
Equity securities............................................ 2,213 1,600 3 3,810
------- ------- ---- -------
$11,990 $ 1,681 $ 81 $13,590
======= ======= ==== =======
</TABLE>
The amortized cost and estimated fair value of debt and equity securities
at March 31, 1998, by contractual maturity, are shown below:
ESTIMATED
FAIR
COST VALUE
---- -----
(IN THOUSANDS)
Due in one year or less..................... $ 880 $ 880
Due after one year through three years...... 1,101 1,108
Due after three years....................... 9,306 9,606
----- -----
11,287 11,594
Equity securities........................... 2,847 5,071
------- -------
$14,134 $16,665
======= =======
Net unrealized gains included in the balance sheet amounted to $2,531,000
and $1,600,000 at March 31, 1998 and 1997, respectively. The amounts, net of
related income taxes of $933,000 and $560,000 at March 31, 1998 and 1997,
respectively, are reflected as a separate component of equity.
-37-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. PROPERTY, PLANT, AND EQUIPMENT
Consolidated property, plant, and equipment of the Company consisted of the
following:
MARCH 31,
1998 1997
(IN THOUSANDS)
Land and land improvements......................... $ 4,073 $ 2,892
Buildings.......................................... 26,706 14,986
Machinery, equipment, and leasehold improvements... 78,862 65,431
Construction in progress........................... 3,162 3,003
------- ------
112,803 86,312
Less accumulated depreciation...................... 30,876 22,370
------- ------
Net property, plant, and equipment................. $81,927 $63,942
======= =======
7. ACCRUED LIABILITIES AND OTHER NON-CURRENT LIABILITIES
Consolidated accrued liabilities of the Company included the following:
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
Accrued payroll.............................. $ 16,713 $ 12,298
Accrued pension cost......................... 5,195 5,489
Income taxes payable......................... 5,730 2,875
Other accrued liabilities.................... 15,427 15,099
-------- --------
$ 43,065 $ 35,761
======== ========
Consolidated other non-current liabilities of the Company included the
following:
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
Accumulated postretirement benefit obligation...... $ 17,154 $ 17,057
Accrued general and product liability costs........ 11,688 11,874
Other non-current liabilities...................... 17,015 17,217
------ ------
$ 45,857 $ 46,148
======== ========
-38-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. LONG-TERM DEBT
Consolidated long-term debt payable to banks (except as noted) of the
Company consisted of the following:
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
Revolving Credit Facility with availability
up to $300 million, due March 31, 2003 with
interest payable at varying Eurodollar
rates based on LIBOR plus a spread
determined by the Company's leverage ratio,
amounting to 125 basis points at March 31,
1998 (7.0% at March 31, 1998)..................... $240,000 $ --
Term Loan A, Term Loan B and revolving credit
facility repaid and retired March 31,
1998.............................................. -- 277,750
Industrial Development Revenue Bonds payable
annually at $625,000 through 1999, $620,000
thereafter through 2001, $315,000 in 2002,
and $52,000 in 2003 in quarterly sinking
fund installments plus interest payable at
varying effective rates (3.98% and 3.81% at
March 31, 1998 and 1997).......................... 2,232 2,857
Employee Stock Ownership Plan term loans
payable in quarterly installments of
$148,000 plus an annual minimum of $23,000
through July 1999 and $2,854,000 in October
1999 plus interest payable at a Eurodollar
rate based on LIBOR plus a spread
determined by the Company's leverage ratio
(7.34% and 8.06% at March 31, 1998 and
1997)............................................. 3,765 4,682
Other senior debt................................... 2,847 999
----- -----
Total senior debt.............................. 248,844 286,288
8 1/2% Senior Subordinated Notes due March
31, 2008 with interest payable in
semi-annual installments at 8.45% effective
rate, recorded net of unamortized discount
of $532,000....................................... 199,468 --
------- -------
Total............................................... 448,312 286,288
Less current portion................................ 1,456 22,344
------- -------
$446,856 $263,944
======== ========
On March 31, 1998, the Company entered into a new revolving credit facility
("1998 Revolving Credit Facility") with a group of financial institutions.
Concurrently, the Company issued $200 million of 8 1/2% Senior Subordinated
Notes ("the 8 1/2% Notes") due March 31, 2008. Proceeds from both the bank
refinancing and the note offering were used to finance the acquisition of LICO,
and to repay the outstanding balances and retire the Company's then existing
Term Loan A, Term Loan B and revolving credit facility.
The 1998 Revolving Credit Facility is secured by all equipment, inventory,
receivables and subsidiary stock (limited to 65% for foreign subsidiaries). The
corresponding credit agreement places certain debt covenant restrictions on the
Company including, but not limited to, maximum annual cash dividends of $10
million. Upon refinancing its bank debt, the Company wrote off unamortized
financing costs of $7,532,000 and recorded an extraordinary charge of
$4,520,000, which is net of $3,012,000 of tax.
-39-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
To manage its exposure to interest rate fluctuations, the Company has
interest rate swaps with a notional amount of $22 million through January 2,
1999 and $3.5 million from January 2, 1999 through July 2, 2000, both based on
LIBOR at 5.9025%. In order to comply with its credit agreements, the Company
also has LIBOR-based interest rate caps on $40 million of debt through December
16, 1998 and on an additional $49.5 million of debt through December 16, 1999 at
9% and 10%, respectively. Net payments or receipts under the swap and cap
agreements are recorded as adjustments to interest expense. The carrying amount
of the Company's debt instruments approximates the fair values.
The Industrial Development Revenue Bonds are held by institutional
investors and are guaranteed by a bank letter of credit (IDRB letter of credit),
which is collateralized by the assets also securing the 1998 Revolving Credit
Facility. The Employee Stock Ownership Plan term loans (ESOP loans) are
guaranteed by the Company and are collateralized by an equivalent number of
shares of Company common stock. The ESOP loans are not further collateralized.
Provisions of the 8 1/2% Notes include, without limitation, restrictions of
liens, indebtedness, asset sales, and dividends and other restricted payments.
Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the
Company, in whole or in part, at the Make-Whole Price (as defined in the 8 1/2%
Notes agreement). On or after April 1, 2003, they are redeemable at prices
declining annually to 100% on and after April 1, 2006. In addition, on or prior
to April 1, 2001, the Company may redeem up to 35% of the outstanding notes at a
redemption price of 108.5% with the proceeds of equity offerings, subject to
certain restrictions. In the event of a Change of Control (as defined in the
indenture for such notes), each holder of the 8 1/2% Notes may require the
Company to repurchase all or a portion of such holder's 8 1/2% Notes at a
purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes
are guaranteed by certain existing and future domestic subsidiaries and are not
subject to any sinking fund requirements.
The principal payments expected to be made as of March 31, 1998 on the
above debt, for the next five annual periods subsequent thereto, are as follows
(dollars in thousands):
1999.......................................... $ 1,456
2000.......................................... 3,973
2001.......................................... 1,299
2002.......................................... 486
2003.......................................... 240,223
In December 1996, the Company tendered to purchase the outstanding Yale
Senior Secured Notes at a premium and redeemed $69,480,000 of the $70,000,000
face value which was outstanding. The Company recorded an extraordinary charge
of $5,331,000 ($3,198,000 net of taxes), consisting of redemption premiums,
costs to exercise the tender offer, and write-off of deferred financing costs
related to early retirement of debt. The debt extinguishment was funded by the
Company's revolving credit facility.
As of March 31, 1998, the Company had letters of credit outstanding of $7.0
million, including those issued as security for the IDRBs as referred to above.
-40-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. RETIREMENT PLANS
Most domestic employees of the Company, excluding Lift-Tech and Lister
union employees and LICO employees, are covered under defined benefit retirement
plans and most domestic non-union employees, excluding Yale and LICO employees,
are included in an Employee Stock Ownership Plan (See Note 10). Benefits under
the plans vary, based on formulas applied to career earnings, compensation for a
period immediately prior to retirement, compensation at the date benefits are
earned, or pre-established benefit rates.
The Company's funding policy with respect to the plans is to contribute
annually at least the minimum amount required by the Employee Retirement Income
Security Act of 1974 (ERISA).
At March 31, 1998, eight (six at March 31, 1997) of the Company's plans had
market values of plan assets in excess of the accumulated benefits of those
respective plans; the Company's remaining five plans (seven at March 31, 1997)
had accumulated benefits in excess of plan assets. The following table sets
forth the plans' funded status and amounts recognized in the Company's balance
sheets:
<TABLE>
<CAPTION>
MARCH 31,
1998 1998 1997 1997
---- ---- ---- ----
PLANS WITH PLANS WITH PLANS WITH PLANS WITH
ASSETS IN ACCUMULATED ASSETS IN ACCUMULATED
EXCESS BENEFITS IN EXCESS BENEFITS IN
OF ACCUMULATED EXCESS OF OF ACCUMULATED EXCESS OF
BENEFITS ASSETS BENEFITS ASSETS
-------- ------ -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Actuarial present value of obligations:
Accumulated benefit obligation,
vested............................... $ (49,746) $ (10,719) $ (24,551) $ (26,825)
Accumulated benefit obligation,
non-vested........................... (1,530) (592) (1,190) (766)
------- ----- ------- -----
Accumulated benefit obligation......... $ (51,276) $ (11,311) $ (25,741) $ (27,591)
---------- ---------- ---------- ----------
Projected benefit obligation.............. $ (57,530) $ (12,150) $ (32,150) $ (30,172)
Plan assets at fair value................. 60,113 9,090 30,861 23,986
------- ------ ------- ------
Plan assets in excess of (less than)
projected benefit obligation......... 2,583 (3,060) (1,289) (6,186)
Unrecognized transition assets............ (113) -- -- (142)
Unrecognized net (gain) loss from past
experience different from
that assumed........................... (4,757) 1,720 958 1,356
Unrecognized prior service cost........... 305 550 300 1,286
Adjustment required to recognize
additional minimum liability........... -- (2,423) -- (1,772)
--- ------- --- -------
Accrued pension cost included in
accrued liabilities.................. $ (1,982) $ (3,213) $ (31) $ (5,458)
======== ======== ===== ========
</TABLE>
-41-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net periodic pension cost included the following components:
YEAR ENDED MARCH 31,
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
Service costs-benefits earned during the period. $3,244 $2,354 $1,129
Interest cost on projected benefit obligation... 4,787 2,744 1,011
Actual return on plan assets.................... (6,670) (2,966) (1,439)
Net amortization................................ 1,951 475 759
------ ------ ------
Net periodic pension cost....................... $3,312 $2,607 $1,460
====== ====== ======
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation of all of the defined benefit
plans was 7 1/2% and 8% as of March 31, 1998 and 1997, respectively. Future
average compensation increases are assumed to be 4.3% and 5 1/4% per year as of
March 31, 1998 and 1997, respectively. The weighted-average expected long-term
rate of return on plan assets used in determining the expected return on plan
assets included in net periodic pension cost was 8 7/8%, 8 7/8%, and 8 1/2% for
the years ended March 31, 1998, 1997 and 1996, respectively. Plan assets consist
of equities, corporate and government securities, and fixed income annuity
contracts.
10. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The AICPA Statement of Position 93-6, "Employers' Accounting for Employee
Stock Ownership Plans" requires that compensation expense for ESOP shares be
measured based on the fair value of those shares when committed to be released
to employees, rather than based on their original cost. Also, dividends on those
ESOP shares that have not been allocated or committed to be released to ESOP
participants are not reflected as a reduction of retained earnings. Rather,
since those dividends are used for debt service, a charge to compensation
expense is recorded. Furthermore, ESOP shares that have not been allocated or
committed to be released are not considered outstanding for purposes of
calculating earnings per share.
The obligation of the ESOP to repay borrowings incurred previously to
purchase shares of the Company's common stock is guaranteed by the Company; the
unpaid balance of such borrowings, therefore, has been reflected in the
accompanying consolidated balance sheet as a liability. An amount equivalent to
the cost of the collateralized common stock and representing deferred employee
benefits has been recorded as a deduction from shareholders' equity.
Substantially all of the Company's domestic non-union employees, excluding
Yale and LICO employees, are participants in the ESOP. Contributions to the plan
result from the release of collateralized shares as debt service payments are
made. Compensation expense amounting to $2,268,000, $1,704,000 and $1,120,000 in
fiscal 1998, 1997 and 1996, respectively, is recorded based on the guarantee
release of the ESOP shares at their fair market value. Dividends on allocated
ESOP shares are recorded as a reduction of retained earnings and are applied
toward debt service.
-42-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At March 31, 1998 and 1997, 855,337 and 798,528 of ESOP shares,
respectively, were allocated or available to be allocated to participants'
accounts. At March 31, 1998 and 1997, 325,092 and 426,508 of ESOP shares were
pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares at March 31, 1998 amounted to
$8,940,000.
11. POSTRETIREMENT BENEFIT OBLIGATION
The Company sponsors defined benefit postretirement health care plans that
provide medical and life insurance coverage to Yale domestic retirees and their
dependents. Prior to the acquisition of Yale, the Company did not sponsor any
postretirement benefit plans. The Company pays the majority of the medical costs
for retirees and their spouses who are under age 65. For retirees and dependents
of retirees who retired prior to January 1, 1989, and are age 65 or over, the
Company contributes 100% toward the American Association of Retired Persons
("AARP") premium frozen at the 1992 level. For retirees and dependents of
retirees who retired after January 1, 1989, the Company contributes $35 per
month toward the AARP premium. The life insurance plan is noncontributory.
The Company's postretirement health benefit plans are not funded. In
accordance with FAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions," the following table sets forth the plans' combined
accumulated postretirement health benefit obligation recognized in the Company's
balance sheets:
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
Accumulated postemployment benefit obligation:
Current retirees............................. $(10,380) $(10,211)
Employees eligible to retire................. (2,315) (2,159)
Active employees not eligible to retire...... (3,814) (4,687)
-------- --------
(16,509) (17,057)
Unrecognized (gains)/losses....................... (645) --
-------- --------
Total accumulated postretirement benefit obligation,
included in other non-current liabilities. $(17,154) $(17,057)
======== ========
Net periodic postretirement benefit cost included the following components
since the October 17, 1996 Yale acquisition:
YEAR ENDED
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
Service cost-benefits attributed to service
during the period................................... $ 348 $187
Interest cost........................................ 1,203 609
----- ---
Net periodic postretirement benefit cost........ $1,551 $796
====== ====
-43-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For measurement purposes, a 7% annual rate of increase in the per capita
cost of postretirement medical benefits was assumed at the beginning of the
period; the rate was assumed to decrease 0.5% per year to 5.5% by 2001. A 1%
increase in this annual trend rate would have increased the accumulated
postretirement benefit obligation at March 31, 1998 by $997,000 with a
corresponding increase in the 1998 postretirement benefit expense of $120,000.
The discount rate used in determining the accumulated postretirement benefit
obligation was 7 1/2% and 8% as of March 31, 1998 and 1997, respectively.
12. COMMON STOCK, EARNINGS PER SHARE AND STOCK PLANS
Common Stock
Effective February 22, 1996, the Company issued 6,037,500 shares of its
common stock at $15.00 per share in an initial public offering. Proceeds from
the offering, net of commissions and other related expenses totaling
approximately $7.5 million, were approximately $83.1 million. The proceeds were
primarily used to reduce the Company's outstanding indebtedness, a significant
portion of which arose from the Lift-Tech acquisition.
Earnings per Share
In 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS No. 128). FAS
No. 128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very similar
to the previously reported fully diluted earnings per share. All earnings per
share amounts for all periods have been presented, and where necessary, restated
to conform to the FAS No. 128 requirements. The following table sets forth the
computation of basic and diluted earnings per share before extraordinary charge
for debt extinguishment:
YEAR ENDED MARCH 31,
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
Numerator for basic and diluted earnings per share:
Income before extraordinary charge.......... $23,421 $18,352 $12,987
======= ======= =======
Denominators:
Weighted-average common stock outstanding
--denominator for basic EPS............... 13,363 13,210 7,662
Effect of dilutive employee stock options... 58 5 --
------ ------ -----
Adjusted weighted-average common stock
outstanding and assumed conversions
--denominator for diluted EPS............. 13,421 13,215 7,662
====== ====== =====
The weighted-average common stock outstanding shown above is net of
unallocated ESOP shares (see Note 10).
-44-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Plans
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under FAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the grant date, no compensation expense is recognized.
The Company maintains two stock option plans, a Non-Qualified Stock Option
Plan ("Non-Qualified Plan") and an Incentive Stock Option Plan ("Incentive
Plan"). At March 31, 1998, 250,000 shares and 1,050,000 shares were reserved for
grant under the Non-Qualified Plan and Incentive Plan, respectively. Under the
Non-Qualified Plan, options may be granted to officers and other key employees
of the Company as well as to non-employee directors and advisors. The Company
has not granted any options under the Non-Qualified Plan. Options granted under
the Incentive Plan become exercisable over a four-year period at the rate of 25%
per year commencing one year from the date of grant at an exercise price of not
less than 100% of the fair market value of the common stock on the date of
grant. Any option granted under this plan may be exercised not earlier than one
year and not later than ten years from the date such option is granted. During
1997, the Company granted 200,000 options at an exercise price of $15.50 per
share which was the market value on the grant date, representing the only
options outstanding at March 31, 1998 and 1997. Twenty-five percent of those
options became exercisable January 1, 1998 and will expire January 1, 2007; none
were exercised during the year ended March 31, 1998.
Pro forma information regarding net income and earnings per share is
required by FAS No. 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The fair value for those options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for the options issued in fiscal 1997: risk-free interest rate of
5.5%, dividend yield of 1.8%, volatility factor of the expected market price of
the Company's common stock of .245, and a weighted-average expected life of the
option of 4 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
-45-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
YEAR ENDED MARCH 31,
1998 1997
---- ----
(IN THOUSANDS,
EXCEPT FOR EARNINGS
PER SHARE DATA)
Pro forma net income......................... $ 18,791 $15,127
Pro forma earnings per share,
both basic and diluted..................... 1.40 1.14
The Company maintains a Restricted Stock Plan, under which the Company has
reserved 80,200 shares at March 31, 1998. The Company charges unearned
compensation, a component of shareholders' equity, for the market value of
shares, as they're issued. It is then ratably amortized over the restricted
period. Grantees who remain continuously employed with the Company become vested
in their shares five years after the date of the grant.
13. LOSS CONTINGENCIES
General and Product Liability--$9,688,000 of the accrued general and
product liability costs which are included in other non-current liabilities at
March 31, 1998 ($8,262,000 at March 31, 1997) 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 consolidated
financial statements was determined by applying a discount factor based on
interest rates customarily used in the insurance industry, between 6.33% and
8.42%, to the undiscounted reserves of $12,685,000 and $11,154,000 at March 31,
1998 and 1997, respectively. This liability is funded by investments in
marketable securities (see Notes 2 and 5).
Prior to its acquisition by the Company, Yale was self-insured for product
liability claims up to a maximum of $500,000 per occurrence and maintained
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.
-46-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. INCOME TAXES
The following is a reconciliation of the difference between the effective
tax rate and the statutory federal tax rate:
YEAR ENDED MARCH 31,
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
Computed statutory provision............... $16,049 $12,002 $7,575
State income taxes net of federal benefit.. 1,983 1,700 743
Nondeductible goodwill amortization........ 2,858 1,961 --
Foreign taxes greater than
statutory provision...................... 904 301 332
Other...................................... 640 (347) 7
----- ------ -----
Actual tax provision....................... $22,434 $15,617 $8,657
======= ======== ======
The provision for income tax expense consisted of the following:
YEAR ENDED MARCH 31,
1998 1997 1996
---- ---- ----
(IN THOUSANDS)
Current income tax expense:
Federal taxes........................ $16,169 $ 8,399 $6,336
State taxes.......................... 3,082 1,124 975
Foreign.............................. 3,185 1,278 450
Deferred income tax (benefit) expense:
Domestic............................. (248) 4,736 627
Foreign.............................. 246 80 269
------ ------- ------
$22,434 $15,617 $8,657
======= ======= ======
The Company applies the liability method of accounting for income taxes as
required by FAS Statement No. 109, "Accounting for Income Taxes."
The gross composition of the net current deferred tax asset, included in
prepaid expenses within the consolidated balance sheet, is as follows:
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
Inventory........................................ $ (5,557) $ (5,177)
Accrued vacation and incentive costs............. 1,724 2,157
Other............................................ 4,749 3,562
------ ------
Net current deferred tax asset.............. $ 916 $ 542
======= ========
The gross composition of the net non-current deferred tax asset is as
follows:
MARCH 31,
1998 1997
---- ----
(IN THOUSANDS)
Insurance reserves............................... $11,087 $11,711
Property, plant, and equipment................... (7,620) (8,010)
Other............................................ 4,067 5,234
------ -------
Net non-current deferred tax asset.......... $ 7,534 $ 8,935
======== ========
-47-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income before income taxes, minority interest and extraordinary charge
includes foreign subsidiary income of $7,220,000, $3,650,000 and $1,188,000 for
the years ended March 31, 1998, 1997, and 1996 respectively. United States
income taxes have not been provided on unremitted earnings of the Company's
foreign subsidiaries as such earnings are considered to be permanently
reinvested.
15. RENTAL EXPENSE AND LEASE COMMITMENTS
Rental expense for the years ended March 31, 1998, 1997 and 1996 was
$3,714,000, $2,805,000 and $1,668,000, respectively. The following amounts
represent future minimum payment commitments as of March 31, 1998 under
non-cancelable operating leases extending beyond one year (in thousands):
VEHICLES
REAL AND
YEAR ENDED MARCH 31, PROPERTY EQUIPMENT TOTAL
-------------------- -------- --------- ------
1999................................ $ 1,954 $ 1,429 $3,383
2000................................ 1,895 1,284 3,179
2001................................ 1,671 956 2,627
2002................................ 1,585 568 2,153
2003................................ 1,399 29 1,428
-48-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. SUMMARY FINANCIAL INFORMATION
The summary financial information of the parent, domestic subsidiaries
(guarantors) and foreign subsidiaries (nonguarantors) of the 8 1/2% senior
subordinated notes follows:
<TABLE>
<CAPTION>
DOMESTIC FOREIGN
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
As of March 31, 1998:
Current assets:
Cash .................................... $18,035 $ 768 $ 4,038 $ -- $ 22,841
Trade accounts receivable.................... 41,651 71,244 20,248 -- 133,143
Inventories.................................. 47,201 36,912 23,712 (152) 107,673
Other current assets......................... 5,050 12,505 2,810 -- 20,365
------ ------ ------ ----- --------
Total current assets.................... 111,937 121,429 50,808 (152) 284,022
Net property, plant, and equipment................ 32,159 32,135 17,633 -- 81,927
Goodwill and other intangibles, net............... 43,404 275,470 49,263 -- 368,137
Intercompany balances............................. 237,011 (400,381) (66,353) 229,723 --
Other assets ..................................... 214,997 166,167 494 (351,996) 29,662
------- -------- ------ ------- ------
Total assets............................ $639,508 $194,820 $ 51,845 $(122,425) $ 763,748
======== ======== ======== ========= =========
Current liabilities ............................. $ 35,854 $ 47,240 $ 21,158 $ 261 $ 104,513
Long-term debt, less current portion.............. 444,225 483 2,148 -- 446,856
Other non-current liabilities..................... 10,576 30,465 4,816 -- 45,857
------- -------- -------- --------- ---------
Total liabilities....................... 490,655 78,188 28,122 261 597,226
Shareholders' equity.............................. 148,853 116,632 23,723 (122,686) 166,522
------- -------- -------- --------- ---------
Total liabilities and shareholders'
equity............................... $639,508 $194,820 $ 51,845 $(122,425) $ 763,748
======== ======== ======== ========= =========
For the Year Ended March 31, 1998:
Net sales .............................. . $269,677 $171,173 $ 82,515 $ (12,634) $ 510,731
Cost of products sold............................. 192,686 124,958 58,107 (12,634) 363,117
-------- -------- -------- --------- ---------
Gross profit ............................. . 76,991 46,215 24,408 -- 147,614
Selling, general and administrative expenses...... 36,804 17,805 14,914 -- 69,523
Amortization of intangibles....................... 1,892 6,382 1,927 -- 10,201
-------- -------- -------- --------- ---------
38,696 24,187 16,841 -- 79,724
-------- -------- -------- --------- ---------
Income from operations............................ 38,295 22,028 7,567 -- 67,890
Interest and debt expense......................... 24,125 (332) 182 -- 23,975
Interest and other income......................... 1,764 7 169 -- 1,940
-------- -------- -------- --------- ---------
Income before income taxes and extraordinary
charge ..................................... . 15,934 22,367 7,554 -- 45,855
Income tax expense................................ 7,326 11,524 3,584 -- 22,434
-------- -------- -------- --------- ---------
Income before extraordinary charge................ 8,608 10,843 3,970 -- 23,421
Extraordinary charge for early debt
extinguishment................................. (4,520) -- -- -- (4,520)
-------- -------- -------- --------- ---------
Net income ..................................... . $ 4,088 $ 10,843 $ 3,970 $ -- $ 18,901
======== ======== ======== ========= =========
</TABLE>
-49-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DOMESTIC FOREIGN ELIMIN-
PARENT SUBSIDIARIES SUBSIDIARIES ATIONS CONSOLIDATED
------ ------------ ------------ ------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
For the Year Ended March 31, 1998:
OPERATING ACTIVITIES:
Cash provided by (used in) operating
activities............................................. $ 40,272 $ (3,725) $ 3,019 $ 651 $ 40,217
INVESTING ACTIVITIES:
Purchase of marketable securities, net.................... (2,517) -- -- -- (2,517)
Capital expenditures...................................... (6,518) (2,259) (1,724) -- (10,501)
Purchase of businesses, net of cash acquired.............. (170,277) 1,716 510 -- (168,051)
Net assets held for sale.................................. -- 4,575 -- -- 4,575
-------- ------ ------- ----- --------
Net cash (used in) provided by investing
activities............................................. (179,312) 4,032 (1,214) -- (176,494)
FINANCING ACTIVITIES:
Net (payments) borrowings under revolving
line-of-credit agreements.............................. 157,058 -- (508) -- 156,550
Repayment of debt......................................... (196,353) (50) (564) -- (196,967)
Proceeds from issuance of long-term debt,
net.................................................... 196,120 -- -- -- 196,120
Dividends paid............................................ (3,713) -- -- -- (3,713)
Other..................................................... (275) -- 561 (561) (275)
-------- ------ ------- ----- --------
Net cash provided by (used in) financing
activities............................................. 152,837 (50) (511) ( 561) 151,715
Effect of exchange rate changes on cash................... -- -- (1,414) (90) (1,504)
-------- ------ ------- ----- --------
Net change in cash and cash equivalents................... 13,797 257 (120) -- 13,934
Cash and cash equivalents at beginning of
year................................................... 4,238 511 4,158 -- 8,907
-------- ------ ------- ----- --------
Cash and cash equivalents at end of year.................. $18,035 $ 768 $ 4,038 $ -- $ 22,841
======== ====== ======== ===== ========
</TABLE>
<TABLE>
<CAPTION>
17. FOREIGN OPERATIONS
UNITED ELIMIN- CONSOLI-
STATES CANADA EUROPE MEXICO ATIONS DATED
------ ------ ------ ------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Year ended March 31, 1998:
Sales to unaffiliated customers........ $429,792 $36,603 $39,208 $5,128 $ -- $510,731
Transfers between geographic areas..... 10,949 1,574 -- -- (12,523) --
-------- ------- ------- ------ -------- --------
Total net sales........................ $440,741 $38,177 $39,208 $5,128 (12,523) $510,731
======== ======= ======= ====== ======== ========
Income from operations................. $ 60,311 $ 3,124 $ 3,869 $ 586 $-- $ 67,890
Net income............................. 14,910 2,021 1,620 350 -- 18,901
Identifiable and total assets.......... 645,555 23,960 90,036 4,197 -- 763,748
Total liabilities...................... 569,109 3,268 23,576 1,273 -- 597,226
Year ended March 31, 1997:
Sales to unaffiliated customers........ $313,705 $27,951 $14,146 $3,622 $-- $359,424
Transfers between geographic areas..... 10,411 547 -- -- (10,958) --
-------- ------- ------- ------ ------- --------
Total net sales........................ $324,116 $28,498 $14,146 $3,622 (10,958) $359,424
======== ======= ======= ====== ======= ========
Income from operations................. $ 41,190 $ 1,955 $ 1,548 $ 361 $-- $ 45,054
Net income............................. 13,073 1,129 730 222 -- 15,154
Identifiable and total assets.......... 457,501 26,191 61,696 2,857 -- 548,245
Total liabilities...................... 382,762 4,600 9,949 778 -- 398,089
Year ended March 31, 1996:
Sales to unaffiliated customers........ $191,178 $18,659 $ -- $ -- $ -- $209,837
Transfers between geographic areas..... 5,453 1,278 -- -- (6,731) --
-------- ------- ------- ------- ------- --------
Total net sales........................ $196,631 $19,937 $ -- $ -- $(6,731) $209,837
======== ======= ======= ======= ======= ========
Income from operations................. $ 24,451 $ 1,351 $ -- $ -- $-- $ 25,802
Net income............................. 12,489 498 -- -- -- 12,987
Identifiable and total assets.......... 177,055 11,679 -- -- -- 188,734
Total liabilities...................... 47,233 3,879 -- -- -- 51,112
</TABLE>
-50-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
U.S. operations' sales to unaffiliated customers include $26,599,000,
$23,075,000 and $15,074,000 for the years ended March 31, 1998, 1997 and 1996,
respectively, for export. Transfers between geographic areas are recorded at
amounts generally above cost and in accordance with the rules and regulations of
the respective governing tax authorities.
18. EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income," which the Company
will adopt for the year ended March 31, 1999. Statement No. 130 establishes new
rules for the reporting and display of comprehensive income and its components.
This includes unrealized gains or losses on the Company's available-for-sale
securities, foreign currency translation adjustments, and minimum pension
liability adjustments, which currently are reported in shareholders' equity, and
will be included and disclosed in total comprehensive income upon adoption of
the Statement. The impact of compliance with this Statement will not impact the
financial position, net income or cashflows.
The FASB also issued FAS Statement No. 131 "Disclosures about Segments of
an Enterprise and Related Information," which the Company will adopt for the
year ended March 31, 1999. Statement No. 131 superseded FAS Statement No. 14
"Financial Reporting for Segments of a Business Enterprise." Statement No. 131
established new standards for determining segment criteria and annual and
interim reporting of that data. It also established new disclosures about
products, geographic areas and major customers. Currently, the Company reports
one operating segment under Statement No. 14 and, while the impact of compliance
with Statement No. 131 has not yet been determined, the Company may be required
to report more than one segment upon its adoption.
-51-
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------------ ----------
JUNE 29, SEPTEMBER 28, DECEMBER 28, MARCH 31, MARCH 31,
1997 1997 1997 1998(a) 1998(a)
---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales................................ $124,442 $ 123,907 $ 124,093 $138,289 $510,731
Gross profit............................. 35,203 35,836 35,413 41,162 147,614
Income from operations................... 15,146 16,670 15,610 20,464 67,890
Income before extraordinary charge....... 4,431 5,630 5,485 7,875 23,421
Net income............................... 4,431 5,630 5,485 3,355(b) 18,901(b)
Income per share before extraordinary
charge................................ 0.33 0.42 0.41 0.58 1.75
Net income per share..................... 0.33 0.42 0.41 0.25(b) 1.41(b)
THREE MONTHS ENDED YEAR ENDED
------------------------------------------------------------- ----------
JUNE 30, SEPTEMBER 29, DECEMBER 29, MARCH 31, MARCH31,
1996 1996 1996(c, d) 1997(c, d) 1997(c, d)
---- ---- --------- --------- ---------
Net sales................................ $ 65,735 $ 64,426 $ 103,393 $125,870 $359,424
Gross profit............................. 20,017 19,184 30,104 38,132 107,437
Income from operations................... 8,681 8,910 11,240 16,223 45,054
Income before extraordinary charge....... 5,032 5,211 3,219 4,890 18,352
Net income............................... 5,032 5,211 118(e) 4,793(e) 15,154(e)
Income per share before extraordinary
charge................................ 0.38 0.39 0.24 0.37 1.39
Net income per share..................... 0.38 0.39 0.01(e) 0.36(e) 1.15(e)
- --------
<FN>
(a) Includes the results of operations of Univeyor since its acquisition on
January 7, 1998 and related interest on revolver borrowings to finance the
acquisition.
(b) Includes extraordinary charges for early debt extinguishment amounting to
$4,520 in the quarter ended March 31, 1998, net of the tax effect.
(c) Includes the results of operations of Yale since its acquisition on October
17, 1996, except for the minority interest share of earnings amounting to
$323 in the quarter ended December 29, 1996; also reflects the related
interest and debt expense on borrowings to finance the acquisition.
(d) Includes the results of operations of Lister since its acquisition on
December 19, 1996 and related interest on revolver borrowings to finance
the acquisition.
(e) Includes extraordinary charges for early debt extinguishment amounting to
$3,101 and $97 in the quarters ended December 29, 1996 and March 31, 1997,
respectively, net of the tax effect.
</FN>
</TABLE>
-52-
<PAGE>
COLUMBUS MCKINNON CORPORATION
<TABLE>
<CAPTION>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
MARCH 31, 1998, 1997 AND 1996
DOLLARS IN THOUSANDS
ADDITIONS
---------
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- --------- -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts $ 1,884 $1,381 $ 225(4) $ 968(1) $ 2,522
Slow-moving and obsolete inventory 3,356 1,115 335(4) 641(2) 4,165
Reserve against non-current receivable 600 -- -- -- 600
------- ------ ----- ------- -------
Total $ 5,840 $2,496 $ 560 $ 1,609 $ 7,287
======= ====== ===== ======= =======
Reserves on balance sheet:
Accrued general and product liability costs $ 11,973 $1,522 $ -- $ 1,807(3) $11,688
======== ====== ===== ======= =======
Year ended March 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts $ 917 $ 905 $ 1,189(4) $ 1,127(1) $ 1,884
Slow-moving and obsolete inventory 2,467 325 1,770(4) 1,206(2) 3,356
Reserve against non-current receivable 600 -- -- -- 600
-------- ------ ------- ------- -------
Total $ 3,984 $1,230 $ 2,959 $ 2,333 $ 5,840
======== ====== ======= ======= =======
Reserves on balance sheet:
Accrued general and product liability costs $ 7,110 $1,775 $ 3,806(4) $ 718(3) $11,973
======== ====== ======= ======= =======
Year ended March 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $ 537 $ 358 $ 289(4) $ 267(1) $ 917
Slow-moving and obsolete inventory 1,815 487 370(4) 205(2) 2,467
Reserve against non-current receivable -- 600 -- -- 600
-------- ------ ----- ------- -------
Total $ 2,352 $1,445 $ 659 $ 472 $ 3,984
======== ====== ===== ======= =======
Reserves on balance sheet:
Accrued general and product liability costs $ 5,758 $1,555 $ -- $ 203(3) $ 7,110
======== ====== ===== ======= =======
- --------
<FN>
(1) Uncollectible accounts written off, net of recoveries
(2) Obsolete inventory disposals
(3) Insurance claims and expenses paid
(4) Reserves at date of acquisition of subsidiaries
</FN>
</TABLE>
-53-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information regarding Directors and Executive Officers of the
Registrant will be included in a Proxy Statement to be filed with the Commission
prior to July 29, 1998.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding Executive Compensation will be included in a
Proxy Statement to be filed with the Commission prior to July 29, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding Security Ownership of Certain Beneficial Owners
and Management will be included in a Proxy Statement to be filed with the
Commission prior to July 29, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information regarding Certain Relationships and Related Transactions
will be included in a Proxy Statement to be filed with the Commission prior to
July 29, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS:
The following consolidated financial statements of Columbus McKinnon
Corporation are included in Item 8:
REFERENCE PAGE NO.
--------- --------
Report of Independent Auditors 27
-54-
<PAGE>
Consolidated balance sheets - March 31, 1998 and 1997 28
Consolidated statements of income - Years ended
March 31, 1998, 1997 and 1996 29
Consolidated statements of shareholders' equity
- Years ended March 31, 1998, 1997 and 1996 30
Consolidated statements of cash flows - Years
ended March 31, 1998, 1997 and 1996 31
Notes to consolidated financial statements 32 - 52
(a)(2) FINANCIAL STATEMENT SCHEDULE: PAGE NO.
----------------------------- --------
Report of Independent Auditors 27
Schedule II - Valuation and qualifying accounts 53
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
therefore have been omitted.
(a)(3) EXHIBITS:
EXHIBIT
NUMBER
2.1 Agreement and Plan of Merger dated August 24, 1996 among Columbus
McKinnon Corporation, L Acquisition Corporation and Spreckels
Industries, Inc. (known as Yale International, Inc.) (incorporated by
reference to Exhibit (c)(1) to the Company's Tender Offer Statement on
Schedule 14D-1 dated August 30, 1996).
2.2 Offer to Purchase by L Acquisition Corporation dated August 30, 1997,
as revised (incorporated by reference to Exhibit (a)(1) to the
Company's Tender Offer Statement on Schedule 14D-1 dated August 30,
1997, as amended by Amendment No. 1 dated September 18, 1996,
Amendment No. 2 dated September 27, 1996, Amendment No. 3 dated
October 4, 1996, Amendment No. 4 dated October 9, 1996 Amendment No. 5
dated October 13, 1996 and Amendment No. 6 dated October 17, 1996).
3.1 Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 to the Company's Registration Statement
No. 33-80687 on Form S-1 dated December 21, 1995).
3.2 Amended By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
-55-
<PAGE>
4.1 Specimen Common Share Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
4.2 Rights Agreement, dated as of October 20, 1997, between Columbus
McKinnon Corporation and American Stock Transfer & Trust Company, as
Rights Agent (incorporated by reference to Exhibit 4 to the Company's
Current Report on Form 8-K dated October 27, 1997).
4.3 Indenture among Columbus McKinnon Corporation, the guarantors named on
the signature pages thereto and State Street Bank and Trust Company,
N.A., as trustee (incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated April 9, 1998).
4.4 Supplemental Indenture among LICO, Inc., Automatic Systems, Inc., LICO
Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products,
Inc., Mechanical Products, Inc., Minitec Corporation and State Street
Bank and Trust Company, N.A., as trustee, dated March 31, 1998
(incorporated by reference to Exhibit 4.3 to the Company's Current
Report on form 8-K dated April 9, 1998).
4.5 A/B Registration Rights Agreement among Columbus McKinnon Corporation,
the guarantors named on the signature pages thereto and Bear, Stearns
& Co., Inc. and Goldman, Sachs & Co., as initial purchasers
(incorporated by reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K dated April 9, 1998).
10.1 Stock Purchase Agreement by and among Columbus McKinnon Corporation
and all of the shareholders of LTI Holdings, Inc., dated as of
November 1, 1995 (incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
10.2 Amended and Restated Term Loan Agreement by and among Fleet Bank of
New York, Columbus McKinnon Corporation and Kenneth G. McCreadie,
Peter A. Grant and Robert L. Montgomery, Jr., as Trustees under the
Columbus McKinnon Corporation Employee Stock Ownership Trust
Agreement, dated March 31, 1993 (incorporated by reference to Exhibit
10.2 to the Company's Registration Statement No. 33-80687 on Form S-1
dated December 21, 1995).
10.3 Amendment No. 1 to Amended and Restated Term Loan Agreement, dated
March 31, 1993, by and among Fleet Bank of New York, Columbus McKinnon
Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L.
Montgomery, Jr. as trustees under the Columbus McKinnon Corporation
Employee Stock Ownership Trust Agreement, dated October 27, 1994
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
10.4 Amendment No. 2 to Amended and Restated Term Loan Agreement by and
among Fleet Bank, Columbus McKinnon Corporation and Kenneth G.
McCreadie, Peter A. Grant and Robert L. Montgomery, Jr. under the
Columbus McKinnon Corporation Employee Stock Ownership Trust
Agreement, dated November 2, 1995 (incorporated by reference to
Exhibit 10.4 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
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10.5 Loan Agreement by and among Columbus McKinnon Corporation Employee
Stock Ownership Trust, Columbus McKinnon Corporation and Marine
Midland Bank, dated October 27, 1994 (incorporated by reference to
Exhibit 10.5 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
10.6 Agreement by and among Columbus McKinnon Corporation Employee Stock
Ownership Trust, Columbus McKinnon Corporation and Marine Midland
Bank, dated November 2, 1995 (incorporated by reference to Exhibit
10.6 to the Company's Registration Statement No. 33-80687 on Form S-1
dated December 21, 1995).
10.7 Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as Borrower, the banks, financial institutions and other
institutional lenders named therein, as Initial Lenders, Fleet
National Bank, as the Initial Issuing Bank, Fleet National Bank, as
the Swing Line Bank, and Fleet National Bank, as the Administrative
Agent (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K dated April 9, 1998).
10.8 Series Lease, dated as of November 1, 1993, between Town of Amherst
Industrial Development Agency as Lessor and Columbus McKinnon
Corporation as Lessee (incorporated by reference to Exhibit 10.13 to
the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
10.9 Lease Agreement between Warehouse Associates of Texas, as lessor, and
Columbus McKinnon Corporation, as lessee, dated February 8, 1994
(incorporated by reference to Exhibit 10.17 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
10.10 Real Estate Lease between C.M. Realty Company, as lessor, and Columbus
McKinnon Corporation, as lessee, dated April 5, 1993 (incorporated by
reference to Exhibit 10.18 to the Company's Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995).
10.11 Lease between Grub & Ellis Industrial Properties Fund II as lessor,
and Columbus McKinnon Corporation, as lessee, dated June 19, 1992
(incorporated by reference to Exhibit 10.19 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
10.12 Second Amendment to Lease by and between Adaya Asset Archibald, L.P.
(as transferee of Crow-Eaves-Ontario #1 Limited Partnership), as
Landlord, and Columbus McKinnon, as Tenant, dated October 27, 1994;
Amendment to Lease Agreement by and between Crow-Eaves-Ontario #1
Limited Partnership, dated October 1, 1989; Lease Agreement by and
between Crow-Eaves-Ontario Limited Partnership and Columbus McKinnon
Corporation (incorporated by reference to Exhibit 10.20 to the
Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
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10.13 Lease dated September 10, 1986 between Lift-Tech International Cranes
& Hoists, Inc. as lessee and 638037 Ontario Limited, as lessor as
assigned to Lift-Tech International Cranes & Hoists Ltd. by Assignment
of Lease dated April 1, 1991 (incorporated by reference to Exhibit
10.21 to the Company's Registration Statement No. 33-80687 on Form S-1
dated December 21, 1995).
10.14 Lease between Atlanta Structures L.P., as lessor and Lift-Tech
International, Inc., as lessee, dated September 1, 1995. (incorporated
by reference to Exhibit 10.22 to the Company's Registration Statement
No. 33-80687 on Form S-1 dated December 21, 1995).
*10.15 Columbus McKinnon Corporation Employee Stock Ownership Plan
Restatement Effective April 1, 1989 (incorporated by reference to
Exhibit 10.23 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.16 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan as Amended and Restated as of April 1, 1989, dated
March 2, 1995 (incorporated by reference to Exhibit 10.24 to the
Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
*10.17 Columbus McKinnon Corporation Personal Retirement Account Plan Trust
Agreement, dated April 1, 1987 (incorporated by reference to Exhibit
10.25 to the Company's Registration Statement No. 33-80687 on Form S-1
dated December 21, 1995).
*10.18 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock
Ownership Trust Agreement (formerly known as the Columbus McKinnon
Corporation Personal Retirement Account Plan Trust Agreement)
effective November 1, 1988 (incorporated by reference to Exhibit 10.26
to the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
*10.19 Columbus McKinnon Corporation 1995 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.27 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
*10.20 Columbus McKinnon Corporation Restricted Stock Plan (incorporated by
reference to Exhibit 10.28 to the Company's Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995).
*10.21 Columbus McKinnon Corporation Non-Qualified Stock Option Plan
(incorporated by reference to Exhibit 10.29 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
*10.22 Columbus McKinnon Corporation Thrift [401(k) Plan] 1989 Restatement
Effective January 1, 1989 (incorporated by reference to Exhibit 10.30
to the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
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*10.23 Amendment No. 1 to Columbus McKinnon Corporation Thrift [401(k)] Plan
1989 Restatement Effective January 1, 1989 (incorporated by reference
to Exhibit 10.31 to the Company's Registration Statement No. 33-80687
on Form S-1 dated December 21, 1995).
*10.24 Columbus McKinnon Corporation Thrift [401(k)] Plan Trust Agreement
Restatement Effective August 9, 1994 (incorporated by reference to
Exhibit 10.32 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.25 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Tax
Reform Restatement Effective April 1, 1989 (incorporated by reference
to Exhibit 10.33 to the Company's Registration Statement No. 33-80687
on Form S-1 dated December 21, 1995).
*10.26 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Trust
Agreement effective as of April 1, 1987 (incorporated by reference to
Exhibit 10.34 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.27 Columbus McKinnon Corporation Description of Corporate Incentive Plan
(incorporated by reference to Exhibit 10.36 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
*10.28 Amendment No. 1 to the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated March 27, 1996 (incorporated by
reference to Exhibit 10.37 to the Company's annual report on Form 10-K
dated June 27, 1997).
*10.29 Amendment No. 2 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan, dated October 17, 1995 (incorporated by reference to
Exhibit 10.38 to the Company's annual report on Form 10-K dated June
27, 1997).
*10.30 Amendment No. 3 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan, dated March 27, 1996 (incorporated by reference to
Exhibit 10.39 to the Company's annual report on Form 10-K dated June
27, 1997).
*10.31 Amendment No. 2 to the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated March 27, 1996 (incorporated by reference to Exhibit 10.40
to the Company's annual report on Form 10-K dated June 27, 1997).
*10.32 Amendment No. 4 of the Columbus McKinnon Corporation Employee Stock
Ownership Plan as Amended and Restated as of April 1, 1989, dated
September 30, 1996 (incorporated by reference to Exhibit 10.1 to the
Company's quarterly report on form 10-Q for the quarterly period ended
September 30, 1996.)
*#10.33 Form of Change in Control Agreement as entered into between Columbus
McKinnon Corporation and each of Herbert P. Ladds, Jr., Timothy T.
Tevens, Robert L. Montgomery, Jr., Ned T. Librock, Ivan E. Shawvan,
Jr., Karen L. Howard, Lois H. Demler and Timothy R. Harvey.
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10.34 Stock Purchase Agreement, dated as of March 11, 1998, among Columbus
McKinnon Corporation and the shareholders of LICO, Inc. identified on
the signature pages thereto (incorporated by reference to Exhibit 10.1
to the Company's Current Report on Form 8-K dated April 9, 1998).
*#10.35 Amendment No. 3 to the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated March 27, 1998.
*#10.36 Amendment No. 2 to the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated March 13, 1998.
*#10.37 Amendment No. 5 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan as Amended and Restated as of April 1, 1989, dated
August 28, 1997.
*#10.38 Amendment No. 6 to the Columbus McKinnon Corporation Employee Stock
Ownership Plan as Amended and Restated as of April 1, 1989, dated June
24, 1998.
#21.1 Subsidiaries of the Registrant.
#23.1 Consent of Ernst & Young LLP.
#27.1 Financial Data Schedule
#99.1 Form 11-K Columbus McKinnon Corporation Employee Stock Ownership Plan
Annual Report for the year ended March 31, 1998.
- --------------------------------
* Indicates a management contract or compensation plan or arrangement.
# Filed herewith
(b) Reports on Form 8-K:
During the fourth quarter of fiscal 1998, the Company filed a current
Report on form 8-K dated March 23, 1998 announcing that it had entered
into a definitive purchase agreement in connection with its acquisition
of LICO, Inc.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Buffalo,
State of New York on June 29, 1998.
COLUMBUS McKINNON CORPORATION
By: /S/ HERBERT P. LADDS, JR.
---------------------------
Herbert P. Ladds, Jr.
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Herbert P. Ladds, Jr. Chairman of the Board of Directors June 29, 1998
-----------------------
Herbert P. Ladds, Jr. (Principal Executive Officer)
/s/ Timothy T. Tevens President, Chief Operating Officer June 29, 1998
-----------------------
Timothy T. Tevens and Director
/s/ Robert L. Montgomery, Jr. Executive Vice President, Chief June 29, 1998
-----------------------
Robert L. Montgomery, Jr. Financial Officer and Director
(Principal Financial Officer
and Principal Accounting Officer)
/s/ Edward W. Duffy Director June 29, 1998
-----------------------
Edward W. Duffy
/s/ Randolph A. Marks Director June 29, 1998
-----------------------
Randolph A. Marks
/s/ L. David Black Director June 29, 1998
-----------------------
L. David Black
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<PAGE>
EXHIBIT 10.33
PRIVILEGED AND CONFIDENTIAL
Date
[ Name ]
[ Title ]
Columbus McKinnon Corporation
140 John James Audubon Parkway
Amherst, New York l4228-1197
Dear _________:
Columbus McKinnon Corporation (the "Company") considers it essential
to the best interests of its stockholders to foster the continuous employment of
key management personnel. In this connection, the Board of Directors of the
Company (the "Board") recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control of the Company may exist
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including you, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company in your
current executive position, the Company agrees that you shall receive the
severance benefits set forth in this letter agreement (the "Agreement") in the
event your employment in your current executive position with the Company is
terminated under the circumstances described below subsequent to a "change in
control of the Company" (as defined in Section 2).
1. TERM OF AGREEMENT. This agreement shall commence on November 1,
1997, and shall continue in effect through October 31, 1998; provided, however,
that commencing on November 1, 1998, and each November 1 thereafter, the term of
this Agreement shall automatically be extended for one additional year unless,
not later than August 31 of such year, the Company shall have given notice that
it does not wish to extend this Agreement (provided that no such notice may be
given during the pendency of a potential change in control of the Company, as
defined in Section 2); and provided, further, that if a change in control of the
Company, as defined in Section 2, shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect for a
period of not less than thirty-six (36) months beyond the month in which such
change in control occurred. Notwithstanding anything provided herein to the
contrary, the term of this Agreement shall not extend beyond the end of the
month in which you attain "normal retirement age" under the provisions of the
Columbus McKinnon Corporation Monthly Retirement Benefit Plan (or any amendment,
restatement or successor thereto) or any other tax-qualified retirement plan of
the Company or any of its subsidiaries in which you are participating (any such
plan being referred to herein as the "Company Pension Plan").
2. CHANGE IN CONTROL, POTENTIAL CHANGE IN CONTROL. (i) No benefits
shall be payable hereunder unless there shall have been a change in control of
the Company, as set forth below. For purposes of this Agreement, a "change in
control of the Company" shall be deemed to have occurred if
(a) any "Person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any Company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20%
or more of either (i) the then outstanding shares of common stock of
the Company or (ii) the combined voting power of the Company's then
outstanding voting securities;
(b) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at
the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described
in clause (a), (c), (d) or (e) of this Section) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof;
(c) the stockholders of the Company approve a reorganization,
merger or consolidation of the Company with any other Company, other
than (1) a reorganization, merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more
than 50% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
reorganization, merger or consolidation or (2) a reorganization,
merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no "person" (as
hereinabove defined) beneficially owns, directly or indirectly, 20% or
more of the combined voting power of the Company's then outstanding
voting securities;
(d) any Person or Persons acquire all or substantially all of the
assets of the Company, whether in a single transaction or series of
transactions; or
(e) the stockholders of the Company approve a plan of dissolution
or complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
(ii) For purposes of this Agreement, a "potential change in control of
the Company" shall be deemed to have occurred if:
(a) the Company enters in an agreement, the consummation of which
would result in the occurrence of a change in control of the Company;
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a change in control of the Company;
(c) any person (other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), or a person who is then currently properly eligible to file
and has properly filed a Schedule 13G (or any successor filing)
pursuant to the Exchange Act and the rules and regulations thereunder,
indicating beneficial ownership of securities of the Company and
stating that the securities were acquired in the ordinary course of
business and were not acquired with the purpose nor with the effect of
changing or influencing the control of the Company, for so long as
such statement is true and correct) who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the
Company's then outstanding securities and, without the written consent
of the Company, increases within a one-year period his beneficial
ownership of such securities by 3 percentage points or more; or
(d) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the
Company has occurred.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. (i) GENERAL. If any of the
events described in Section 2 constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section
4(iii) upon termination of your employment within thirty-six (36) months
following such a change in control of the Company unless such termination is (a)
because of your death or Disability, (b) by the Company for Cause, or (c) by you
other than for Good Reason. In the event your employment with the Company is
terminated for any reason and subsequently a change in control of the Company
should have occurred, you shall not be entitled to any benefits hereunder.
(ii) DISABILITY. If, as a result of your incapacity due to physical or
mental illness, you shall have been absent from the full-time performance of
your duties with the Company for six (6) consecutive months, and within thirty
(30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability."
(iii) CAUSE. Termination by the Company of your employment for "Cause"
shall mean termination (a) upon the commission by you of a willful serious act,
such as embezzlement, against the Company which is intended to enrich you at the
expense of the Company or upon your conviction of a felony involving moral
turpitude or (b) in the event of willful, gross neglect or willful, gross
misconduct resulting in either case in material harm to the Company. For
purposes of this Subsection, no act, or failure to act, on your part shall be
deemed "willful" unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission was in the best
interest of the Company.
(iv) GOOD REASON. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a change in control
of the Company of any of the following circumstances unless such circumstances
are fully corrected prior to the Date of Termination (as defined in Section
3(vi)) specified in the Notice of Termination (as defined in Section 3(v)) given
in respect thereof:
(a) a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time to
time except for across-the-board salary reductions similarly
affecting, all management personnel of the Company;
(b) the Company's requiring you to be based at a Company office
more than 50 miles from the Company's offices at which you are
principally employed immediately prior to the date of the change in
control except for required travel on the Company's business to an
extent substantially consistent with your present business travel
obligations;
(c) the failure by the Company to pay to you any portion of your
current compensation within seven (7) days of the date such
compensation is due or any portion of your compensation under any
deferred compensation program of the Company within thirty (30) days
of the date such compensation is due;
(d) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (v) hereof (and, if applicable, the
requirements of Subsection (iii) hereof), which purported termination
shall not be effective for purposes of this Agreement; or
(e) the assignment to you of any duties or responsibilities that
are inconsistent with your position, duties, responsibilities or
status immediately preceding such change in control.
Your right to terminate your employment pursuant to this Subsection
shall not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder.
(v) NOTICE OF TERMINATION. Any purported termination of your
employment by the Company or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 6. "Notice of
Termination" shall mean a notice that shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(vi) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (a) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such 30-day period), and (b) if your
employment is terminated pursuant to Subsection (iii) or (iv) hereof or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination for Cause shall not be less
than thirty (30) days from the date such Notice of Termination is given, and in
the case of a termination for Good Reason shall not be less than thirty (30) nor
more than sixty (60) days from the date such Notice of Termination is given);
provided, however, that if within fifteen (15) days after any Notice of
Termination is given, or, if the Notice of Termination is not properly given,
prior to the Date of Termination (as determined without regard to an extension
of such Date of Termination as described in this proviso), the party receiving
such Notice of Termination notifies the other party that a dispute exists
concerning the termination, then the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties or by a binding arbitration award; and provided, further, that the
Date of Termination shall be extended by a notice of dispute only if such notice
is given in good faith and the party giving such notice pursues the resolution
of such dispute with reasonable diligence. During the pendency of any dispute,
(i) the Company will continue to pay you your full compensation in effect when
the notice giving rise to the dispute was given (including, but not limited to,
base salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this Subsection and (ii) you will have no obligation to perform any duties as an
employee of the Company on or after the Date of Termination (as determined
without regard to an extension of such Date of Termination as described in the
preceding sentence). Amounts paid under this Subsection are in addition to all
other amounts due under this Agreement, and shall not be offset against or
reduce any other amounts due under this Agreement and shall not be reduced by
any compensation earned by you as the result of employment by another employer.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following a
change in control of the Company, you shall be entitled to the following
benefits during a period of disability, or upon termination of your employment
as the case may be, provided that such period of disability or termination
occurs during the term of this Agreement:
(i) During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or mental illness,
you shall continue to receive your base salary at the rate in effect at the
commencement of any such period, together with all compensation payable to you
under the Company's disability plan or program or other similar plan during such
period, until this Agreement is terminated pursuant to Section 3(ii) hereof.
Thereafter, or in the event your employment shall be terminated by reason of
your death, your benefits shall be determined under the Company's retirement,
insurance and other compensation programs then in effect in accordance with the
terms of such programs.
(ii) If your employment shall be terminated by the Company for Cause
or by you other than for Good Reason, the Company shall pay you your full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given, plus all other amounts to which you are entitled under
any compensation plan of the Company at the time such payments are due, and the
Company shall have no further obligations to you under this Agreement.
(iii) If your employment by the Company should be terminated by the
Company other than for Cause or Disability or if you should terminate your
employment for Good Reason, you shall be entitled to the benefits provided
below:
(a) the Company shall pay to you your full base salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Company, at the time such payments
are due;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you, at the time specified in Subsection (iv), a lump
sum severance payment (together with the payments provided in
paragraphs (c), (d), (e) and (f) below, the "Severance Payments")
equal to three (3) times the sum of (x) your annual rate of base
salary in effect on the Date of Termination and (y) the greater of (a)
the annual target bonus (annualized in the case of any bonus paid with
respect to a partial year) under the Company's then current Executive
Incentive Plan and Corporate Incentive Plan or any then current
similar plans (the "Management Incentive Plans") in effect on the Date
of Termination or (b) the annual target bonus (annualized in the case
of any bonus paid with respect to a partial year) under the Management
Incentive Plans in effect immediately prior to such change in control;
(c) the Company shall pay to you all reasonable legal fees and
expenses incurred by you as a result of such termination, including
all such fees and expenses, if any, as incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement if you prevail in a legal
or arbitration proceeding with respect thereto on its merits;
(d) for a period of thirty-six (36) months after such
termination, the Company shall (i) arrange to provide you with all
benefits under the Company's medical, prescription, dental, employee
life and group life plans and programs, which are substantially
similar to those which you were receiving immediately prior to the
change in control or (ii) reimburse you for your out-of-pocket costs
for providing yourself with any medical, prescription, dental,
employee life and group life plans and programs which are
substantially similar to those which you were receiving immediately
prior to the change in control;
(e) at your option, you may either elect in writing (i) to
continue to participate in the Company Pension Plan (and be deemed to
have continued to be employed by the Company for a period of three (3)
additional years and deemed to have accumulated three (3) additional
calendar years of compensation (for purposes of determining your
pension benefits under the Company Pension Plan), in an amount equal
to the amount determined under clause (1) of Section 4(iii)(b)
hereof), in which case you would be fully vested under the Company
Pension Plan as of the Date of Termination, but in no event shall you
be deemed to have continued to be employed by the Company after your
normal retirement age, or (ii) to receive from the Company a lump sum
payment, in cash, equal to the actuarial equivalent of the retirement
pension (determined as a straight life annuity commencing at age 65)
which you would have accrued under the terms of the Company Pension
Plan (without regard to the limitations imposed by section 401(a)(17)
of the Internal Revenue Code of 1986, as amended (the "Code"), or any
amendment to the Plan made subsequent to a change in control of the
Company and on or prior to the Date of Termination, which amendment
adversely affects in any manner the computation of retirement benefits
thereunder), determined as if you were fully vested thereunder and had
continued to be employed by the Company (after the Date of
Termination) for three (3) additional years and as if you had
accumulated three (3) additional calendar years of compensation (for
purposes of determining your pension benefits thereunder), each in an
amount equal to the amount determined under clause (1) of Section
4(iii)(b) hereof, but in no event shall you be deemed to have
continued to be employed by the Company after your normal retirement
age. For purposes of this Subsection, "actuarial equivalent" shall be
determined using the same methods and assumptions utilized under the
Company Pension Plan immediately prior to the change in control of the
Company;
(f) the Company shall provide to you outplacement services with
an outplacement firm selected by you for a period of up to six months
and for an amount not to exceed $25,000; and
(g) notwithstanding anything to the contrary contained in any
stock option agreement, you shall be fully vested as of the date of
the change in control in any and all stock options held by you
immediately prior to such change in control; and
(iv) The payments provided for in Subsection (iii) shall be made not
later than the fifth day following the Date of Termination; provided, however,
that if the amounts of such payments cannot be finally determined on or before
such day, the Company shall pay to you on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payments and shall pay
the remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to you payable on the fifth day after demand therefor by the
Company (together with interest at the rate provided in section 1274(b)(2)(B) of
the Code).
(v) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by you to the Company, or otherwise.
(vi) Notwithstanding any provision of this Agreement to the contrary,
the aggregate present value of all "payments in the nature of compensation"
(within the meaning of Section 28OG of the Code) provided to you in connection
with a change in control of the Company or the termination of your employment
shall be one dollar less than the amount that is fully deductible by the Company
under Section 28OG of the Code and, to the extent necessary, payments and
benefits under this Agreement shall be reduced in order that this limitation not
be exceeded. It is the intention of this Subsection (vi) to avoid excise taxes
on you under Section 4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 28OG of the Code.
5. SUCCESSORS, BINDING AGREEMENT. (i) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms to which you would be entitled
hereunder if you terminate your employment for Good Reason following a change in
control of the Company, except that for purposes of implementing the foregoing,
the date on which any such succession becomes effective shall be deemed the Date
of Termination. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
(iii) The Company expressly acknowledges and agrees that you shall
have a contractual right to the benefits provided hereunder, and the Company
expressly waives any ability, if possible, to deny liability for any breach of
its contractual commitment hereunder upon the grounds of lack of consideration,
accord and satisfaction or any other defense. In any dispute arising after a
change in control of the Company as to whether you are entitled to benefits
under this Agreement, there shall be a presumption that you are entitled to such
benefits and the burden of proving otherwise shall be on the Company.
(iv) All benefits to be paid hereunder shall be in addition to any
disability, workers' compensation, or other Company benefit plan distribution,
unpaid vacation or other unpaid benefits that you have at the Date of
Termination.
(v) Notwithstanding anything to the contrary contained in this
Agreement, in the event that the scope or extent of your employment duties or
responsibilities with the Company are reduced as determined by the Company in
its sole discretion, this Agreement shall terminate and the Company shall have
no further obligations to you hereunder. The Company shall deliver to you a
written notice (the "Termination Notice") of such determination and this
Agreement shall terminate effective upon your receipt of the Termination Notice;
provided, however, that no Termination Notice shall be effective if delivered
within thirty (30) days of a change in control of the Company.
6. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
7. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Oklahoma without regard to its conflicts of law
principles. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law. In the event of a change in control of the
Company during the term of this Agreement, the obligations of the Company under
Section 4 shall survive the expiration of the term of this Agreement consistent
with the periods referenced in Section 4.
8. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators in the State of New York, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction; provided, however, that you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and
during the term of the Agreement supersedes the provisions of all prior change
in control agreements entered into between you and the Company and all other
prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto with respect to the subject matter hereof.
12. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within such State, except with respect to the
internal affairs of the Company and its stockholders, which shall be governed by
the General Corporation Law of the State of Delaware.
If this letter sets forth our agreement on the subject matter thereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
COLUMBUS McKINNON CORPORATION
By:
----------------------------
Name:
Title:
Agreed as of the
---------
day of
---------------
- -------------------------------------
Executive
AMENDMENT NO. 3
TO THE
COLUMBUS MCKINNON CORPORATION THRIFT 401(K) PLAN
Columbus McKinnon Corporation (the "Corporation") hereby amends the
Columbus McKinnon Corporation Thrift 401(K) Plan (the "Plan"), as amended and
restated in its entirety effective January 1, 1989 and as amended by Amendment
No. 1 effective February 24, 1995 and Amendment No. 2 effective April 1, 1996,
as permitted under Section 13.1 of the Plan, as follows:
1. New Section 1.8A of the Plan, entitled "Break in Service," is added to
the Plan effective January 1, 1998 to read as follows:
"1.8A "BREAK IN SERVICE."
(a) IN GENERAL. An Employee shall incur a one-year Break in Service for
each 12 month computation period in which an Employee is credited with less than
501 Hours of Service. For purposes of determining Years of Vesting Service the
computation period shall be the calendar year.
(b) SPECIAL RULE FOR MATERNITY OR PATERNITY ABSENCE. Solely for the purpose
of determining whether a Break in Service has occurred, an Employee who is
absent from service by reason of the Employee's pregnancy, the birth of the
Employee's child, the placement of a child with the Employee by reason of
adoption, or care for such child immediately following such birth or adoption,
shall be credited with up to 501 Hours of Service at the rate such Hours of
Service would normally have been credited to the Employee but for such absence.
The Hours of Service shall be credited to the Employee in the computation period
in which the absence commenced if necessary to avoid a Break in Service in that
period or, in any other case, in the immediately following computation period."
2. Section 1.12 of the Plan, entitled "Eligible Employee," is amended
effective April 1, 1998 to read as follows:
"1.12 "ELIGIBLE EMPLOYEE."
(a) IN GENERAL. "Eligible Employee" means any Employee who is employed by
an Employer and who is regularly employed at a facility located within the
United States of America.
<PAGE>
(b) EXCLUSION OF CERTAIN EMPLOYEES. The term "Eligible Employee" shall not
include any employee:
(1) COLLECTIVE BARGAINING EMPLOYEES -- who is employed in any
bargaining unit covered under a collective bargaining agreement which does
not provide for participation by employees of such unit in this Plan;
(2) LEASED EMPLOYEES -- who is employed as a Leased Employee;
(3) CONTRACT EMPLOYEE -- whose services are performed in the capacity
of a consultant or contractor or other capacity pursuant to a written
contract which provides that his services are to be rendered in a capacity
other than as a regular employee, or who is compensated by fees or similar
charges requiring the submission of invoices, as opposed to being
compensated by a regular fixed salary or wage;
(4) EMPLOYEES TEMPORARILY ASSIGNED TO U.S. LOCATIONS -- who [1] is
regularly employed outside the United States, [2] is employed within the
United States by an Employer pursuant to a temporary assignment, [3] was
not covered under the Plan immediately prior to such temporary assignment,
and [4] is continuing to accrue benefits under one or more foreign
retirement plans during such temporary assignment."
3. New Section 1.21A of the Plan, entitled "Matching Contribution," is
added to the Plan effective January 1, 1998 to read as follows:
"1.27A MATCHING CONTRIBUTION means a contribution made for the benefit of a
Participant pursuant to Section 3.3."
4. New Section 1.33 of the Plan, entitled "Year of Vesting Service," is
added to the Plan effective January 1, 1998 to read as follows:
"1.33 "YEAR OF VESTING SERVICE."
(a) IN GENERAL. An Employee shall be credited with a Year of Vesting
Service for each calendar year ending on or after the Employee's 18th birthday
in which the Employee is credited with at least 1,000 Hours of Service, subject
to the exclusions set forth in Section 1.33(b).
<PAGE>
(b) EFFECT OF A BREAK IN SERVICE. In the event that an Employee is
reemployed following a one-year Break in Service, service completed by the
Employee prior to the Break in Service shall be excluded from his Years of
Vesting Service in accordance with this Section 1.33(b):
(1) ONE YEAR HOLD-OUT. If an Employee who has not become partially
vested in his Matching Contribution Account incurs a one-year Break in
Service, the service credited prior to the Break in Service shall
thereafter be excluded from his Years of Vesting Service until the Employee
has completed a Year of Vesting Service after the Break in Service.
(2) FIVE YEAR BREAK IN SERVICE. If an Employee who has not become
partially vested in his Matching Contribution Account incurs a number of
consecutive one-year Breaks in Service which equals or exceeds the greater
of five or the aggregate number of the Employee's prior Years of Vesting
Service (determined without regard to his age but excluding therefrom any
Years of Vesting Service disregarded by reason of any prior Break in
Service), the service credited prior to the Break in Service shall
thereafter be excluded from his Years of Vesting Service."
5. Section 2.1 of the Plan, entitled "In General," is amended effective
April 1, 1998 to read as follows:
"2.1 IN GENERAL. Each Eligible Employee who was not a Participant in the Plan on
March 31, 1998 shall be eligible to become a Participant on the first day of the
month coinciding with or next following the expiration of 90 calendar days since
his Employment Commencement Date, provided he is then an Eligible Employee.
If the first day on which an Eligible Employee may commence participation
occurs during a period the Eligible Employee is not performing any services as
an Eligible Employee for any reason except a termination of employment, then
such Eligible Employee may commence participation as of the date he again begins
performing such services, or as of the first day of any subsequent month,
provided he is then an Eligible Employee."
6. New Section 3.3 of the Plan, entitled "Matching Contributions," is added
to the Plan effective January 1, 1998 to read as follows:
"3.3 MATCHING CONTRIBUTIONS.
<PAGE>
(a) CONTRIBUTION REQUIRED. The Employer of each person who is an Employee
on the last day of a Plan Year and on whose behalf a Salary Reduction
Contribution was made during the Plan Year shall contribute to the Plan on
behalf of such Employee a Matching Contribution in an amount determined under
Section 3.3(b).
(b) AMOUNT OF CONTRIBUTION. The Matching Contribution required to be made
on behalf of an Employee under Section 3.3(a) shall be an amount equal to 50
percent of the Salary Reduction Contributions made on behalf of the Employee
during the Plan Year provided, however, that Matching Contributions shall not
exceed 3 percent of the Employee's Base Pay for the Plan Year.
(c) PAYMENT TO THE TRUSTEE. Matching Contributions shall be transmitted to
the Trustee and credited to each Participant's Matching Contribution Account as
soon as may be reasonably practicable following the last day of the Plan Year
for which the Matching Contributions are made.
(d) NONDISCRIMINATION. Matching Contributions shall satisfy the actual
contribution percentage test of Code Section 401(m). To the extent practicable,
the Committee shall cause Matching Contributions on behalf of a Highly
Compensated Employee to be reduced before the contribution is made to the Trust,
in order to satisfy such test. In the event of excess aggregate contributions
(within the meaning of treasury regulations promulgated under Section 401(m) of
the Code) then, notwithstanding Section 3.3(e), such excess aggregate
contributions shall be forfeited and treated as a forfeiture under Section 8.6
of the Plan.
(d) VESTING. A Participant shall be fully vested in his Matching
Contribution Account upon attaining Normal Retirement Age or in the event the
Participant dies when he is an Employee. In addition, a Participant shall become
vested in his Matching Contribution Account before Normal Retirement Age in
accordance with the
MATCHING CONTRIBUTION ACCOUNT
less than one year 0 percent
one year but less than two years 20 percent
two years but less than three years 40 percent
three years but less than four years 60 percent
four years but less than five years 80 percent
five or more years 100 percent"
7. Section 8.1 of the Plan, entitled "Separation from Service," is amended
effective January 1, 1998 to read as follows:
<PAGE>
"8.1 SEPARATION FROM SERVICE. A Participant shall have a fully vested and
nonforfeitable interest in his Salary Reduction Account and Rollover Account at
all times. Upon a Participant's separation from service with the Corporation and
all Affiliates for any reason except death, and including resignation,
retirement, disability or other termination of employment, his Salary Reduction
Account and Rollover Account, and the vested portion of his Matching
Contribution Account shall be subject to distribution in accordance with Article
IX."
8. Section 8.2 of the Plan, entitled "Death," is amended effective January
1, 1998 to read as follows:
"8.2 DEATH. If a Participant dies before separating from service with the
Corporation and all Affiliates, or after such separation from service but before
his Accounts have been distributed to him in accordance with Article IX, his
Salary Reduction Account and Rollover Account, and the vested portion of his
Matching Contribution Account, shall be distributed to his Beneficiary or
Beneficiaries in accordance with Article IX"
9. New Section 8.6 of the Plan, entitled "Forfeiture of Matching
Contributions," is added to the Plan effective January 1, 1998 to read as
follows:
"8.6 FORFEITURE OF MATCHING CONTRIBUTION ACCOUNT.
(a) FORFEITURE FOLLOWING BREAK IN SERVICE. If a Participant ceases to be an
Employee for any reason other than death before his Matching Contribution
Account has become fully vested in accordance with Section 3.3, the nonvested
portion of his Matching Contribution Account shall be forfeited as of the last
day of the Plan Year in which the Participant receives a distribution (including
a direct rollover) of his vested Account Balances under the Plan or, if sooner,
as of the last day of the Plan Year in which he incurs his fifth consecutive
one-year Break in Service. If the Participant incurs a forfeiture following a
distribution of his vested Account Balances, he shall obtain a restoration of
the forfeited amount by becoming an Employee and repaying to the Plan the amount
distributed before he incurs five consecutive one-year Breaks in Service.
(b) FORFEITURE FOLLOWING DEATH. If a Participant dies before his Matching
Contribution Account has become fully vested in accordance with Section 3.3, the
nonvested portion of his Matching Contribution Account shall be forfeited as of
the last day of the Plan Year in which his death occurs.
<PAGE>
(c) FORFEITURES USED TO REDUCE EMPLOYER CONTRIBUTIONS. The portion of a
Matching Contribution Account that is forfeited under this Section 8.4 shall be
used to reduce Employer contributions required for Matching Contributions in a
manner determined by the Committee."
10. Section 10.3 of the Plan, entitled "Loans," is amended effective April
1, 1998 by amending subsections (c) and (e) thereof to read as follows:
"(c) AMOUNT OF LOAN. A loan must be at least $1,000 and may not exceed the
Participant's Salary Reduction Account balance determined as of the Valuation
Date immediately preceding the date of the loan (adjusted for any subsequent
withdrawals but not for any subsequent additions). In addition, a loan may not
exceed $50,000, reduced by the highest outstanding balance of loans from the
Plan during the one-year period ending on the day before the date on which the
loan will be made. Further, a loan may not exceed one-half of the value of the
borrower's Accounts, exclusive of any rollover account, determined as of the
Valuation Date specified in Section 10.3(d), with adjustment for any
distributions made after such Valuation Date. Loans will be granted only in
increments of $100.
(e) NUMBER OF LOANS. A Participant may have only one loan outstanding at
one time. In addition, a Participant may not take out more than one loan in any
12- month period."
IN WITNESS WHEREOF, this instrument of amendment has been executed by
a duly authorized officer of the Corporation this 27th day of March, 1998.
COLUMBUS McKINNON CORPORATION
ATTEST:/s/ Lois H. Demler By /s/ Robert L. Montgomery
------------------ ------------------------
Title Executive Vice President
------------------------
<PAGE>
AMENDMENT NO. 2
TO THE
COLUMBUS MCKINNON CORPORATION
MONTHLY RETIREMENT BENEFIT PLAN
Columbus McKinnon Corporation (the "Company") hereby amends the
Columbus McKinnon Corporation Monthly Retirement Benefit Plan (the "Plan"), as
amended and restated in its entirety effective April 1, 1989, as permitted under
Section 8.1 of the Plan, as follows:
1. New Section 1.14A, entitled "Covered Compensation", is added
effective as of April 1, 1998 to read as follows:
1.14A "COVERED COMPENSATION."
(a) IN GENERAL. "Covered Compensation" means the average (without
indexing prior taxable wage bases) of the taxable wage bases in effect for each
calendar year during the 35-year period ending with the last day of the calendar
year in which the Participant attains (or will attain) Social Security
Retirement Age.
(b) ASSUMPTIONS AND RULES. In determining a Participant's Covered
Compensation for a given year, the taxable wage base for the current year and
any subsequent year shall be assumed to be the same as the taxable wage base in
effect as of the beginning of the year for which the determination is being
made. A Participant's Covered Compensation for a year after the 35-year period
described in Section is the Participant's Covered Compensation for the year
during which the Participant attained Social Security Retirement Age. A
Participant's Covered Compensation for a year before the 35-year period
described in Section is the taxable wage base in effect at the beginning of that
year. A Participant's Covered Compensation shall be adjusted automatically for
each year.
(c) USE OF TREASURY TABLES. The Committee shall determine Covered
Compensation from tables published by the Secretary of the Treasury that
calculate Covered Compensation to the nearest dollar or by such other method as
the Committee may consider appropriate.
2. New Section 1.14B, entitled "Earnings", is added effective as of
April 1, 1998 to read as follows:
1.14B "EARNINGS."
(a) IN GENERAL. "Earnings" means the total wages and other cash
compensation paid to a Participant during a measuring period (normally, the
calendar year) by his Employer and any Affiliate and reportable on IRS Form W-2
(within the meaning of Treasury Regulation ss.1.415-2(d)(11)(i)).
<PAGE>
(1) SPECIFIC INCLUSIONS. "Earnings" shall include all elective
contributions paid into a cash or deferred arrangement maintained by
the Employer under Code Section 401(k) and all salary reduction
contributions under a cafeteria plan that are excluded from income
under Code Section 125.
(2) SPECIFIC EXCLUSIONS. "Earnings" shall exclude the following
items (even if includible in gross income): reimbursements or other
expense allowances, fringe benefits (cash and noncash), moving
expenses, deferred compensation, welfare benefits, severance pay
(including, without limitation, cash in lieu of vacation), any special
payments, and any amounts treated as wages with respect to restricted
stock granted to a Participant).
(b) CODE SECTION 401(A)(17) LIMITATION. In addition to all other
applicable limitations set forth in the Plan, and notwithstanding any other
provision in the Plan to the contrary, for any Plan Year or other 12-month
period beginning on or after January 1, 1989, the Earnings of each Employee
taken into account under the Plan shall not exceed the "Code Section
401(a)(17) Limit." If a Plan Year or other determination period consists of
fewer than 12 months, the "Code Section 401(a)(17) Limit" shall be
multiplied by a fraction, the numerator of which is the number of months in
the Plan Year or other determination period and the denominator of which is
12.
(1) LIMIT EFFECTIVE JANUARY 1, 1989. The "Code Section 401(a)(17)
Limit" for any Plan Year or other 12-month period commencing on or
after January 1, 1989 shall be $200,000 or such larger amount as the
Secretary of the Treasury may determine for such Plan Year under Code
Section 401(a)(17).
(2) LIMIT EFFECTIVE JANUARY 1, 1994. The "Code Section 401(a)(17)
Limit" for the Plan Year or any other 12-month period beginning in the
1994 calendar year or any subsequent calendar year shall be $150,000
or such larger amount as the Secretary of the Treasury may determine
for such calendar year under Code Section 401(a)(17).1.14A "Covered
Compensation."
<PAGE>
3. New Section 1.19A, entitled "Final Average Earnings", is added
effective as of April 1, 1998 to read as follows:
1.19A "FINAL AVERAGE EARNINGS"
(a) IN GENERAL. "Final Average Earnings" means a Participant's average
12-consecutive month Earnings during the last 60 consecutive months of the
Participant's Benefit Service or, if higher, his average 12- consecutive
month Earnings during the any 60 consecutive month period within the last
120 months of his Benefit Service. Final Average Earnings shall be
calculated using the operating rules in Section 1.19A(b) and shall be
subject to the limitation of Section 1.19A(c).
(b) OPERATING RULES.
(1) EMPLOYEE DURING ENTIRE CALENDAR YEAR: MONTHLY EARNINGS. If a
Participant was an Employee during an entire calendar year, his
Earnings with respect to each month in that calendar year shall equal
his Earnings for the entire calendar year divided by 12.
(2) EMPLOYEE DURING PARTIAL CALENDAR YEAR: MONTHLY EARNINGS. If a
Participant was an Employee during only part of a calendar year, his
Earnings with respect to each month in that partial calendar year
shall equal his Earnings for the partial calendar year divided by the
number of months in that year during which he was an Employee for at
least 15 days.
(3) BREAKS DURING 60-CONSECUTIVE MONTH PERIOD. The Committee
shall establish rules consistent with this Section 1.19A, that are
applied in a uniform and nondiscriminatory manner, to determine the
Final Average Earnings of Participants who [1] are employed for less
than 60 months in the period of employment immediately preceding
retirement; [2] are employed for the full 60 months immediately
preceding retirement but who did not earn Benefit Service for that
entire period; or [3] are employed for the full 60 months immediately
preceding retirement but who did not receive Earnings for that entire
period.
<PAGE>
(c) APPLICATION OF CODE SECTION 401(A)(17) LIMITATION.
(1) IN GENERAL. For purposes of determining a Participant's Final
Average Earnings, the Earnings for any 12- consecutive month period
within the 60-consecutive month period used in Section 1.19A(a) shall
not exceed the Code Section 401(a)(17) Limitation under Section 1.14B
applicable for such 12 month period. If a Participant's Final Average
Earnings are determined after the effective date of Code Section
401(a)(17) (or after the effective date of any amendment thereto) but
the 60- consecutive month period used in Section includes one or more
12-consecutive month periods beginning before such effective date, the
limitation for each such 12-consecutive month period shall be the
limitation in effect as of such effective date. This Section 1.19A(c)
shall be applied in accordance with applicable Treasury Regulations.
(2) PROTECTION OF ACCRUED BENEFITS. The Accrued Benefit of a
Participant whose Final Average Earnings are determined by giving
effect to the limitation in Code Section 401(a)(17), as enacted or as
amended, shall not be less than the Participant's Accrued Benefit
determined as of the day preceding the effective date of such
enactment or amendment.
4. Section 3.1, entitled "Normal Retirement Benefit", is amended
effective as of April 1, 1998 to read as follows:
3.1 NORMAL RETIREMENT BENEFIT.
(a) ELIGIBILITY FOR BENEFIT. A Participant who attains Normal
Retirement Age while he is an Employee shall have a fully vested right to a
normal retirement benefit described in Section 3.1(b).
(b) DESCRIPTION OF BENEFIT. A Participant's normal retirement benefit
shall be an annual benefit commencing as of the Participant's Normal
Retirement Date and payable in the form of a Straight Life Annuity in the
amount determined under Section 3.1(c), or payable in a different form in a
reduced amount as provided under Section 4.3 or 4.4.
(c) AMOUNT OF BENEFIT. The Participant's normal retirement benefit
shall be equal to the sum of [1] his "base benefit" determined under
Section 3.1(c)(1), and [2] his "excess benefit" determined under Section
3.1(c)(2).
<PAGE>
(1) BASE BENEFIT. A Participant's "base benefit" is 1.00 percent
of the Participant's Final Average Earnings multiplied by his years of
Benefit Service (not to exceed 35 years).
(2) EXCESS BENEFIT. A Participant's "excess benefit" is 0.50
percent of the Participant's Final Average Earnings in excess of his
Covered Compensation (determined as of the last day of the Benefit
Service taken into account in determining the benefit) multiplied by
his years of Benefit Service (not to exceed 35 years).
(d) BENEFIT NOT LESS THAN IMMEDIATE EARLY RETIREMENT BENEFIT.
Notwithstanding the foregoing provisions of this Section 3.1, if the
immediate early retirement benefit that the Participant could have
received, if he had retired at any earlier date pursuant to another section
of this Article III, is greater than his normal retirement benefit as
computed above (for reasons other than increases in Social Security
Benefits or Covered Compensation occurring between such earlier retirement
date and his Normal Retirement Date), then his normal retirement benefit
shall be no less than such immediate early retirement benefit.
(e) BENEFIT ACCRUED ON MARCH 31, 1998. The Accrued Benefit of a
Participant on and after April 1, 1998 shall not be less than the Accrued
Benefit of the Participant determined as of March 31, 1998 under the terms
and provisions of the Plan in effect on that date.
IN WITNESS WHEREOF, this instrument of amendment has been
executed by a duly authorized officer of the Corporation this 13th day of March,
1998, to be effective April 1, 1998.
COLUMBUS McKINNON CORPORATION
By: /s/ Robert L. Montgomery
------------------------
Title: Executive Vice President
------------------------
<PAGE>
AMENDMENT NO. 5
TO THE
COLUMBUS MCKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
IRS Technical Amendment
Columbus McKinnon Corporation (the "Corporation") hereby amends the
Columbus McKinnon Corporation Employee Stock Ownership Plan (the "Plan"), as
amended and restated in its entirety effective April 1, 1989, and as further
amended by Amendment Nos. 1-4, in accordance with Section 11.1 of the Plan, as
follows:
1. Subsection (f) of Section 14.2, entitled "Required Aggregation Group",
is amended effective as of April 1, 1989 to read as follows:
"(f) "REQUIRED AGGREGATION GROUP" means [1] each qualified plan of the
Section 416 Employer in which at least one Key Employee participates or
participated at any time during the 5-year period ending on the
Determination Date (regardless of whether the plan has terminated), and [2]
any other qualified plan of the Section 416 Employer which enables a plan
described in [1] to meet the requirements of Sections 401(a)(4) or 410(b)
of the Code."
2. Section 14.7, entitled "Minimum Benefits", is amended effective as of
April 1, 1989 to read as follows:
"14.7 MINIMUM CONTRIBUTIONS. For each Plan Year in which the Plan is a
Top-Heavy Plan, a Participant who is an Employee of a Section 416 Employer
on the last day of the Plan Year shall receive a minimum contribution as
provided in this Section 14.7.
(a) EMPLOYEES WHO DO NOT PARTICIPATE IN A DEFINED BENEFIT PLAN. In the
case of a Participant who is a Non-key Employee and who does not
participate in any defined benefit plan of the Section 416 Employer, the
Section 416 Employer shall provide an additional contribution under this
Plan (or under another defined contribution plan) equal to the difference
between the aggregate contributions made on his behalf under this Plan and
all other defined contribution plans of the Section 416 Employer for the
Plan Year and 3 percent of the Participant's Section 416 Compensation for
the Plan Year (the "minimum contribution").
(b) EMPLOYEES WHO PARTICIPATE IN A DEFINED BENEFIT PLAN.
<PAGE>
(1) ACCRUAL OF MINIMUM BENEFIT UNDER DEFINED BENEFIT PLAN. It is
contemplated that each Participant who is a Non-key Employee and who
participates in a defined benefit plan of the Section 416 Employer
will accrue a minimum benefit under the top-heavy minimum benefit
accrual provisions of the defined benefit plan of the Section 416
Employer.
(2) FAILURE TO ACCRUE MINIMUM BENEFIT UNDER DEFINED BENEFIT PLAN.
In the case of a Participant who is a Non-key Employee, who
participates in a defined benefit plan of the Section 416 Employer,
and who does not accrue a minimum benefit under the top-heavy minimum
benefit provisions of such plan, the Section 416 Employer shall
provide an additional contribution under this Plan (or under another
defined contribution plan) equal to the difference between the
aggregate contributions made on his behalf under this Plan and all
other defined contribution plans of the Section 416 Employer for the
Plan Year and 5 percent of the Participant's Section 416 Compensation
for the Plan Year (the "minimum contribution"). For any Plan Year that
includes the last day of a Limitation Year (as defined in Section
13.2(e)) in which Employer elects to use 1.25 in the denominators of
the defined benefit fraction and defined contribution fraction in
applying Code Section 415(e), the term "7.5 percent" shall be
substituted for "5 percent" in the preceding sentence.
(c) ADDITIONAL RULES. The following additional rules shall apply in
determining the amount of any minimum contribution to be made with respect
to a Participant under this Section 14.7.
(1) SOCIAL SECURITY CONTRIBUTIONS DISREGARDED. The minimum
contribution is determined without regard to any social security
contribution.
(2) MINIMUM SERVICE AND COMPENSATION RULES DISREGARDED. The
minimum contribution shall be made even though, under other Plan
provisions, the Participant would not otherwise be entitled to receive
a contribution, or would have received a lesser contribution of the
year because of [1] the Participant's failure to complete 1,000 Hours
of service (or any equivalent provided in the Plan), or [2]
Compensation less than a stated amount."
<PAGE>
IN WITNESS WHEREOF, this instrument of amendment has been executed by
a duly authorized officer of the Corporation this 28th day of August, 1997.
COLUMBUS McKINNON CORPORATION
By /s/ Ivan E. Shawvan
-------------------
Title V.P. Human Resources
--------------------
<PAGE>
AMENDMENT NO. 6
TO THE
COLUMBUS MCKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
Columbus McKinnon Corporation (the "Corporation") hereby amends the
Columbus McKinnon Corporation Employee Stock Ownership Plan (the "Plan"), as
amended and restated in its entirety effective April 1, 1989, and as further
amended by Amendment Nos. 1-5, in accordance with Section 11.1 of the Plan, as
follows:
1. Section 1.16, entitled "Eligible Employee", is amended effective as of
April 1, 1998 to read as follows:
"1.16 "ELIGIBLE EMPLOYEE."
(a) IN GENERAL. "Eligible Employee" means any Employee who is employed
by an Employer and who is regularly employed at a facility located within
the United States of America.
(b) EXCLUSION OF CERTAIN EMPLOYEES. The term "Eligible Employee" shall
not include any employee:
(1) COLLECTIVE BARGAINING EMPLOYEES -- who is employed in any
bargaining unit covered under a collective bargaining agreement which
does not provide for participation by employees of such unit in this
Plan;
(2) LEASED EMPLOYEES -- who is employed as a Leased Employee;
(3) CONTRACT EMPLOYEE -- whose services are performed in the
capacity of a consultant or contractor or other capacity pursuant to a
written contract which provides that his services are to be rendered
in a capacity other than as a regular employee, and/or who is
compensated by fees or similar charges requiring the submission of
invoices, as opposed to being compensated by a regular fixed salary or
wage;
(4) EMPLOYEES TEMPORARILY ASSIGNED TO U.S. LOCATIONS -- who [1] is
regularly employed outside the United States, [2] is employed within
the United States by an Employer pursuant to a temporary assignment,
and [3] was not covered under the Plan immediately prior to such
temporary assignment."
<PAGE>
IN WITNESS WHEREOF, this instrument of amendment has been executed by
a duly authorized officer of the Corporation this 24th day of June, 1998.
COLUMBUS McKINNON CORPORATION
By /s/Robert L. Montgomery
------------------------
Title Executive Vice President
------------------------
<PAGE>
EXHIBIT 21.1
COLUMBUS MCKINNON CORPORATION
SUBSIDIARIES OF THE REGISTRANT
ASI of Australia Pty. Ltd. (Australia)
Audubon Export, Inc. (FSC) (US)
Automatic Systems, Inc. (US)
Automatic Systems Conveyors Limited (Canada)
CM Insurance Company, Inc. (US)
Columbus McKinnon Limited (Canada)
Columbus McKinnon Finance Corporation (Canada)
Duff-Norton Asia Pacific Pty. Ltd. (Singapore)
Egyptian-American Crane Co. (joint venture) (Egypt)
Endor S.A. de C.V. (Mexico)
Hangzhou (LILA) Lifting and Lashing Co. Ltd. (China)
Kunming Duff-Norton Machinery Co. Ltd. (joint venture) (China)
LICO, Inc. (US)
LICO Conveyor Company (US)
LICO International Corporation (FSC) (US)
LICO Steel, Inc. (US)
Manutention Connection (France)
Mechanical Products, Inc. (US)
Minitec Corporation (US)
Spreckels Development Company, Inc. (US)
Spreckels Land Company, Inc. (US)
Spreckels Water Company, Inc. (US)
Univeyor A/S (Denmark)
Univeyor Conveying Systems Ltd. (England)
Univeyor Electronic A/S (Denmark)
Yale Industrial Products Asia (Thailand) Co. Ltd. (Thailand)
Yale Industrial Products GmbH (Austria)
Yale Industrial Products GmbH (Germany)
Yale Industrial Products, Inc. (US)
Yale Industrial Products, Ltd. (UK)
Yale Industrial Products Pty. Ltd. (South Africa)
-63-
<PAGE>
Exhibit 23 .1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 333-3212) pertaining to the Columbus McKinnon
Corporation 1995 Incentive Stock Option Plan, the Columbus McKinnon Corporation
Non-Qualified Stock Option Plan, the Columbus McKinnon Corporation Restricted
Stock Plan, and the Columbus McKinnon Corporation Employee Stock Ownership Plan
Restatement Effective April 1, 1989 of Columbus McKinnon Corporation of our
report dated May 15, 1998, with respect to the consolidated financial statements
and financial statement schedule of Columbus McKinnon Corporation included in
this Annual Report (Form 10-K) for the year ended March 31, 1998.
/s/ Ernst & Young LLP
Buffalo, New York
June 29, 1998
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year ended March 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Restatement Effective April 1, 1989
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
COLUMBUS McKINNON CORPORATION
140 John James Audubon Parkway
Amherst, NY 14228-1197
<PAGE>
Financial Statements and Schedules
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Years ended March 31, 1998 and 1997
with Report of Independent Auditors
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Financial Statements and Schedules
Years ended March 31, 1998 and 1997
CONTENTS
Report of Independent Auditors ..............................................1
Financial Statements
Statements of Net Assets Available for Plan Benefits.........................2
Statements of Changes in Net Assets Available for Plan Benefits..............3
Notes to Financial Statements................................................4
Schedules
Item 27a - Schedule of Assets Held for Investment Purposes..................10
Item 27d - Schedule of Reportable Transactions..............................11
<PAGE>
Report of Independent Auditors
The Pension Committee
Columbus McKinnon Corporation
Employee Stock Ownership Plan
We have audited the accompanying statements of net assets available for plan
benefits of the Columbus McKinnon Corporation Employee Stock Ownership Plan
(ESOP) as of March 31, 1998 and 1997, and the related statements of changes in
net assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the ESOP's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the ESOP at
March 31, 1998 and 1997, and the changes in its net assets available for plan
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of plan
assets held for investment purposes as of March 31, 1998, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the financial statements. The supplemental schedules have
been subjected to the auditing procedures applied in our audit of the 1998
financial statements and, is our opinion, are fairly stated in all material
respects in relation to the 1998 financial statements taken as a whole.
/S/ ERNST & YOUNG LLP
Buffalo, New York
June 8, 1998
1
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Statements of Net Assets Available for Plan Benefits
MARCH 31
1998 1997
----------------------
ASSETS
Cash $ 50 $ 50
Investments:
Columbus McKinnon Corporation common stock at market:
Allocated (cost - $6,124,294 in 1998
and $5,417,940 in 1997) 23,521,768 14,173,872
Unallocated (cost - $3,202,156 in 1998 and
$4,201,084 in 1997; held in suspense account) 8,940,030 7,570,482
------------------------
32,461,798 21,744,354
Stable asset fund at market 85,604 72,644
Employer contribution receivable 18,116 18,985
Interest receivable 2,127 1,970
------------------------
Total assets $32,567,695 $21,838,003
========================
LIABILITIES AND NET ASSETS
AVAILABLE FOR PLAN BENEFITS
Exempt loans payable $ 3,764,789 $ 4,681,950
Accrued interest payable 18,116 18,985
------------------------
Total liabilities 3,782,905 4,700,935
Net assets available for plan benefits:
Allocated 23,609,549 14,248,536
Unallocated 5,175,241 2,888,532
------------------------
Total net assets available for plan benefits 28,784,790 17,137,068
------------------------
Total liabilities and net assets available for
plan benefits $32,567,695 $ 21,838,003
========================
See accompanying notes.
2
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Statements of Changes in Net Assets Available for Plan Benefits
YEAR ENDED MARCH 31
1998 1997
--------------------------
Additions:
Employer contributions $ 1,007,383 $ 1,081,335
Dividend income 338,861 331,507
Interest income 5,436 2,737
---------------------------------
Total additions 1,351,680 1,415,579
Deductions:
Participant termination payments 923,965 414,376
Interest expense on exempt loans payable 415,383 489,335
Administrative expense 2,814 2,868
---------------------------------
Total deductions 1,342,162 906,579
Net appreciation in fair
value of investments 11,638,204 2,143,810
---------------------------------
Net increase in assets available
for plan benefits 11,647,722 2,652,810
Net assets available for plan benefits:
Beginning of year 17,137,068 14,484,258
---------------------------------
End of year $ 28,784,790 $ 17,137,068
=================================
See accompanying notes.
3
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements
March 31, 1998 and 1997
1. DESCRIPTION OF THE PLAN AND MAJOR PLAN PROVISIONS
The Columbus McKinnon Corporation Employee Stock Ownership Plan (ESOP), a
defined contribution plan, was established as a result of amending the
previously existing Columbus McKinnon Corporation Personal Retirement Account
Plan (PRA Plan), effective November 1, 1988. The PRA Plan was restated and its
assets became part of the ESOP. The ESOP is an employee stock ownership plan and
a stock bonus plan within the meanings of the applicable sections of the
Internal Revenue Code of 1986, as amended. It is also an eligible individual
account plan as defined in the applicable section of the Employee Retirement
Income Security Act of 1974 (ERISA). The plan was amended effective April 1,
1989 to incorporate the Tax Reform Act of 1986 and subsequent legislation, and
to extend coverage to all hourly non-union employees of Columbus McKinnon
Corporation (the Company). The plan was amended effective February 23, 1996 and
October 1, 1996 to incorporate valuation and distribution procedures as required
for a public entity. The plan was amended effective April 1, 1989 to include
IRS-requested amendments in conjunction with qualification review of the plan. A
summary of the ESOP's provisions follows. Refer to the ESOP document or the
summary plan description (SPD) for a complete description of provisions.
PARTICIPATION
Substantially all of the Company's domestic non-union employees are eligible to
participate in the ESOP, excluding domestic employees of certain companies
acquired in fiscal 1997 and 1998.
Eligible employees must have attained age 21 and completed one year of
eligibility service to be a participant.
VESTING OF PARTICIPANTS
A participant will be fully vested and will have a non-forfeitable interest in
the participant's account balance upon completion of five years of vesting
service, excluding any service rendered prior to the calendar year in which
he/she attained age 18, or upon attainment of normal retirement age while in the
employ of the Company or any affiliated company. For participants with prior
employment with the Company in an ineligible classification or with an affiliate
of the Company, such employment shall be included in the calculation of
eligibility and vesting service.
4
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN AND MAJOR PLAN PROVISIONS (CONTINUED)
RETIREMENT AND TERMINATION OF EMPLOYMENT
Upon a vested participant's termination, the value of his/her account will be
distributed if the value of the account is less than $3,500 or, at the
participant's option, either immediately or at any valuation date until
retirement, as provided in the ESOP. A retiree may elect to defer distribution
up to 69 1/2 years of age, where at the following valuation date distribution is
mandatory. Valuation dates for share distribution are September 30 and March 31.
During fiscal 1998, $923,965, or 44,617 shares, were distributed to vested
participants in the form of stock certificates ($406,359 or 25,857 shares
distributed in fiscal 1997). This resulted in the sale of 27 shares held by the
ESOP back to the Company for $578 in fiscal 1998 as a result of fractional
shares (11 shares for $172 in fiscal 1997). At March 31, 1998, $792,339
($521,167 at March 31, 1997) is included in the ESOP assets for future
distribution to terminated participants.
Forfeiture of a non-vested interest shall occur in the fifth consecutive
calendar year following a break in service. The forfeited accounts will be
allocated among the accounts of active participants. At March 31, 1998, the ESOP
assets include $249,682 ($161,569 at March 31, 1997) of undistributed forfeited
accounts.
ALLOCATION TO PARTICIPANT ACCOUNTS
As of each valuation date (March 31), each participant account is appropriately
adjusted to reflect any contributions or stock to be allocated as of such date,
the income of the trust fund during the period and the increase or decrease in
the fair market value of the trust fund during the period. The allocation will
be based on the fraction, the numerator of which is the participant's annual
earnings for the preceding calendar year and the denominator of which is the
aggregate annual earnings for such calendar year of all participants entitled to
an allocation.
5
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
The ESOP's investment in Columbus McKinnon Corporation common stock is at fair
market value as of March 31, 1998 and 1997 based on quoted market prices. The
investment in the Stable Asset Fund is also reported at market value as
determined by open trading.
CONTRIBUTIONS
The Company will contribute to the ESOP such amount as its Board of Directors
shall determine. Each participant (a) who is actively employed as an employee on
the allocation date (December 31) and who has earned at least 1,000 hours of
service as an employee in the calendar year ending on the allocation date, or
(b) who terminates employment on or after January 1 during a plan year after
attaining age 60 and completing at least five years of eligibility service, or
(c) who dies on or after January 1 during a plan year, after attaining age 60
and completing at least five years of eligibility service, shall be entitled to
share in the contributions made for such plan year. Contributions shall be made
in cash or in shares of stock as determined by the Company, and need not be made
out of current or accumulated earnings and profits.
DIVIDENDS
Dividends paid on stock allocated to a participant's stock account will be
allocated to the participant's nonstock account. The pension committee may
direct that such dividends shall be either (a) paid directly to the participant,
former participant, or beneficiary within 90 days after the close of the plan
year in which such dividend was paid, or (b) applied as payment on the exempt
loans. Dividends paid on unallocated stock held by the trustee and acquired with
the proceeds of an exempt loan shall be held by the trustee until the end of the
plan year in which it was paid, and then, along with any interest or earnings,
be applied as payment on the exempt loans which shall trigger a release of stock
from the suspense account.
ESOP TERMINATION
The Company intends to continue the ESOP indefinitely, but reserves the right to
terminate it at any time. If the ESOP is terminated, each participant shall be
fully and nonforfeitably vested in his interest in the ESOP trust fund.
6
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenue and expenses. Actual
results could differ from those estimates.
3. EMPLOYER CONTRIBUTIONS
The employer contribution to the ESOP for the March 31, 1998 plan year end was
$1,007,383 ($1,081,335 in 1997). This includes interest on the exempt loans
payable April 1, 1998; therefore, a contribution receivable from the ESOP
sponsor in the amount of $18,116 has been recognized at March 31, 1998 ($18,985
at March 31, 1997 for interest due April 1, 1997). Participants are not
permitted to make contributions to the ESOP.
4. INVESTMENTS
At March 31, 1998 and 1997, the assets of the ESOP Plan consist of Columbus
McKinnon Corporation common stock and a stable asset fund with Fleet Bank.
The fair value of individual investments that represent 5% or more of the Plan's
assets at the plan years ended March 31, 1998 and 1997, are as follows:
1998 1997
--------------------------
Columbus McKinnon Corporation common stock $ 32,461,798 $ 21,744,354
7
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
5. EXEMPT LOANS PAYABLE
On December 13, 1988, the ESOP purchased 611,524 shares of common stock of the
Company with the debt proceeds, which were recorded by the trustee in the
suspense account. As of March 31, 1998 and 1997, these shares have been
allocated to the participants' accounts.
On October 27, 1994, the ESOP obtained $6,000,000 of new debt ($2,000,000 from
Marine Midland Bank and $4,000,000 from Fleet Bank). The Fleet loan is payable
in quarterly installments of $103,000 through July 1999, and $2,003,089 in
October 1999, plus interest at a Eurodollar rate based on LIBOR plus a spread
determined by the Company's leverage ratio (7.34% at March 31, 1998). The Marine
loan is payable in quarterly installments of $45,000 plus an annual minimum of
$22,917 through July 1999, and $850,783 in October 1999, plus interest at a
Eurodollar rate based on LIBOR plus a spread determined by the Company's
leverage ratio (7.34% at March 31, 1998). Employer contributions of $592,000
($412,000 Fleet and $180,000 Marine) in 1998 and 1997, and $415,383 ($288,632
Fleet and $126,751 Marine) in 1998, and $489,335 ($339,279 Fleet and $150,056
Marine) in 1997 were applied to principal and interest, respectively. Dividend
and interest income of $325,161 ($220,599 Fleet and $104,562 Marine) in 1998 and
$316,725 ($211,394 Fleet and $105,331 Marine) in 1997 was applied to principal.
The loans, which are guaranteed by the Company, are collateralized by an
equivalent number of shares of common stock recorded by the trustees in a
suspense account.
On October 27, 1994, the ESOP purchased 609,144 shares of common stock of the
Company with the debt proceeds, which were recorded by the trustee in the
suspense account. Such stock ceases to be collateral and is released from the
suspense account as the exempt loan is repaid. In each year prior to full
payment of the loan, the number of shares of stock released will equal the
number of shares of stock held as collateral immediately before the release for
such plan year multiplied by the release fraction.
8
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
Notes to Financial Statements (continued)
5. EXEMPT LOANS PAYABLE (CONTINUED)
The numerator of the release fraction is the amount of principal and interest
payments made toward the loan during the plan year and the denominator is the
sum of the numerator plus the principal and interest payments to be made on the
loan in the future, using the interest rate applicable at the end of the plan
year. Shares of stock released from the suspense account for a plan year shall
be held in the trust on an unallocated basis until allocated by the pension
committee as of the last day of that plan year. That allocation shall be
consistent with the method for allocating contributions to participants'
accounts, which is based on a fraction of each participant's annual earnings
during the preceding calendar year to the total earnings of those participants
during such calendar year. The allocation of shares released resulting from
dividends on participants' allocated shares, however, was based upon the
fraction of each participant's allocated shares to the total number of allocated
shares.
As of March 31, 1998, 325,092 shares were held as collateral for the loan
(426,508 shares were held as collateral as of March 31, 1997); 101,416 shares
were released from the suspense account during 1998 (105,603 released in 1997).
These shares were allocated to participant accounts as of March 31, 1998.
6. TAX STATUS
The ESOP is qualified under Section 401(a) of the Internal Revenue Code and
therefore is exempt from Federal income taxes under provisions of Section 501(a)
of the Code. The plan has received a determination letter from the Internal
Revenue Service (IRS) concurring with this qualification dated July 28, 1997,
and effective for the amendments adopted on or before August 28, 1997. The ESOP
is required to operate in conformity with the Code to maintain its
qualification. Management is not aware of any course of action or series of
events that have occurred that might adversely affect the ESOP's qualified
status.
9
<PAGE>
Schedules
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
EIN: 16-0547600
Plan No. 016
Item 27a - Schedule of Assets Held for Investment Purposes
March 31, 1998
Identity of Issue Description of Investment Cost Current Value
- ----------------- ------------------------- ---- -------------
Columbus McKinnon
Corporation Employer Common Stock,
1,180,429 shares $9,326,450 $32,461,798
Fleet Investment
Services Stable Asset Fund $ 85,604 $ 85,604
10
<PAGE>
Columbus McKinnon Corporation
Employee Stock Ownership Plan
EIN: 16-0547600
Plan No. 016
Item 27d - Schedule of Reportable Transactions
For the year ended March 31, 1998
Identity of Description Number of Number Total Total Net
Party Involved of Assets Purchases of Sales Purchases Sales Gain/Loss
- -------------- ---------- --------- -------- --------- ----- ---------
Fleet Bank Fleet Money
Market Deposit
A/C - NY 11 11 $606,096 $606,096 $ -
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
COLUMBUS McKINNON CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
RESTATEMENT EFFECTIVE APRIL 1, 1989
By /s/ Timothy R. Harvey
---------------------
Timothy R. Harvey, Trustee
/s/ Karen L. Howard
-------------------
Karen L. Howard, Trustee
/s/ Robert L. Montgomery, Jr.
----------------------------
Robert L. Montgomery, Jr., Trustee
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001005229
<NAME> COLUMBUS MCKINNON CORPORATION
<MULTIPLIER> 1,000
<S> <C>
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0
0
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