UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT 1934
For the quarterly period ended October 3, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
------------------- -------------------
Commission File Number: 0-27618
-------
Columbus McKinnon Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 16-0547600
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 John James Audubon Parkway, Amherst, NY 14228-1197
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(716) 689-5400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. : [X] Yes [ ] No
The number of shares of common stock outstanding as of October 31, 1999 was:
14,877,405 shares.
<PAGE>
FORM 10-Q INDEX
COLUMBUS McKINNON CORPORATION
OCTOBER 3, 1999
Page #
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets -
October 3, 1999 and March 31, 1999 2
Condensed consolidated statements of income and retained earnings -
Three months and six months ended October 3, 1999
and September 27, 1998 3
Condensed consolidated statements of cash flows -
Six months ended October 3, 1999 and September 27, 1998 4
Condensed consolidated statements of comprehensive income -
Three months and six months ended October 3, 1999
and September 27, 1998 5
Notes to condensed consolidated financial statements -
October 3, 1999 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none. 22
Item 2. Changes in Securities - none. 22
Item 3. Defaults upon Senior Securities - none. 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information - none. 22
Item 6. Exhibits and Reports on Form 8-K 23
- 1 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
OCTOBER 3, MARCH 31,
1999 1999
--------- ---------
ASSETS: (In thousands)
Current assets:
<S> <C> <C>
Cash and cash equivalents ...................................... $ 20,071 $ 6,867
Trade accounts receivable ...................................... 132,762 136,988
Unbilled revenues .............................................. 16,209 9,821
Inventories .................................................... 114,001 115,979
Net assets held for sale ....................................... 8,803 8,214
Prepaid expenses ............................................... 8,734 8,160
--------- ---------
Total current assets ................................................. 300,580 286,029
Net property, plant, and equipment ................................... 90,059 90,004
Goodwill and other intangibles, net .................................. 353,428 357,727
Marketable securities ................................................ 19,685 19,355
Deferred taxes on income ............................................. 5,520 5,627
Other assets ......................................................... 8,118 8,169
--------- ---------
Total assets ......................................................... $ 777,390 $ 766,911
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks ......................................... $ 3,314 $ 4,590
Trade accounts payable ......................................... 62,958 54,651
Excess billings ................................................ 7,094 5,058
Accrued liabilities ............................................ 38,131 54,331
Current portion of long-term debt .............................. 1,853 1,926
--------- ---------
Total current liabilities ............................................ 113,350 120,556
Senior debt, less current portion .................................... 230,548 222,165
Subordinated debt .................................................... 199,548 199,521
Other non-current liabilities ........................................ 37,424 35,995
--------- ---------
Total liabilities .................................................... 580,870 578,237
Shareholders' equity:
Common stock ................................................... 149 146
Additional paid-in capital ..................................... 107,228 102,313
Retained earnings .............................................. 105,383 100,455
ESOP debt guarantee ............................................ (9,447) (9,865)
Unearned restricted stock ...................................... (4,004) (1,009)
Total accumulated other comprehensive income loss .............. (2,789) (3,366)
--------- ---------
Total shareholders' equity ........................................... 196,520 188,674
--------- ---------
Total liabilities and shareholders' equity ........................... $ 777,390 $ 766,911
========= =========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
- 2 -
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ -------------------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998 1999 1998
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales ............................................................ $ 182,008 $ 185,357 $ 363,609 $ 369,974
Cost of products sold ................................................ 142,276 138,315 276,764 275,618
--------- --------- --------- ---------
Gross profit ......................................................... 39,732 47,042 86,845 94,356
Selling expenses ..................................................... 12,412 12,819 25,170 25,691
General and administrative expenses .................................. 10,912 9,780 20,269 19,219
Proxy contest related expenses ....................................... 835 -- 965 --
Amortization of intangibles .......................................... 4,000 3,865 8,002 7,643
--------- --------- --------- ---------
28,159 26,464 54,406 52,553
Income from operations ............................................... 11,573 20,578 32,439 41,803
Interest and debt expense ............................................ 8,294 9,302 16,573 18,250
Interest and other income ............................................ 306 262 553 633
--------- --------- --------- ---------
Income before income taxes ........................................... 3,585 11,538 16,419 24,186
Income tax expense ................................................... 3,074 5,614 9,513 11,887
--------- --------- --------- ---------
Net income ........................................................... 511 5,924 6,906 12,299
Retained earnings - beginning of period .............................. 105,865 82,179 100,455 76,744
Cash dividends of $0.07, $0.07, $0.14 and
$0.14 per share ................................................... (993) (943) (1,978) (1,883)
--------- --------- --------- ---------
Retained earnings - end of period .................................... $ 105,383 $ 87,160 $ 105,383 $ 87,160
Earnings per share data, basic: ...................................... $ 0.04 $ 0.41 $ 0.49 $ 0.86
Earnings per share data, diluted: .................................... $ 0.04 $ 0.41 $ 0.49 $ 0.85
See accompanying notes to condensed consolidated financial statements.
</TABLE>
- 3 -
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
----------------
OCTOBER 3, SEPTEMBER 27,
1999 1998
---------- ------------
(IN THOUSANDS)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income ........................................................... $ 6,906 $ 12,299
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................................. 14,412 13,570
Deferred income taxes ........................................... 172 (25)
Other .......................................................... 436 115
Changes in operating assets and liabilities net of effects
from businesses purchased:
Trade accounts receivable ................................. 5,954 (21,013)
Unbilled revenues and excess billings ..................... (4,352) 5,318
Inventories ............................................... 2,949 2,255
Prepaid expenses .......................................... (572) 190
Other assets .............................................. (92) (367)
Trade accounts payable .................................... 7,008 (12,877)
Accrued and non-current liabilities ....................... (13,094) 4,715
-------- --------
Net cash provided by operating activities ............................ 19,727 4,180
-------- --------
INVESTING ACTIVITIES:
(Purchase) sale of marketable securities, net ........................ (796) 438
Capital expenditures ................................................. (5,130) (5,621)
Proceeds from sale of businesses ..................................... - 9,301
Purchases of businesses, net of cash ................................. (6,410) (7,323)
Net assets held for sale ............................................. (589) 1,403
-------- --------
Net cash used in investing activities ................................ (12,925) (1,802)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ............................... 3 -
Net borrowings under revolving line-of-credit agreements ............. 7,524 1,594
Repayment of debt .................................................... (490) (6,363)
Dividends paid ....................................................... (1,978) (1,883)
Reduction of ESOP debt guarantee ..................................... 418 436
Other ................................................................ (131) (891)
-------- --------
Net cash provided by (used in) financing activities .................. 5,346 (7,107)
Effect of exchange rate changes on cash .............................. 1,056 (967)
-------- --------
Net increase (decrease) in cash and cash equivalents ................. 13,204 (5,696)
Cash and cash equivalents at beginning of period ..................... 6,867 22,861
-------- --------
Cash and cash equivalents at end of period ........................... $ 20,071 $ 17,165
======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
- 4 -
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998 1999 1998
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income ........................................................... $ 511 $ 5,924 $ 6,906 $ 12,299
-------- -------- -------- --------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments ........................... 528 207 1,043 (62)
Unrealized gains on investments:
Unrealized holding gains arising during
the period ..................................................... (455) (268) (402) (221)
Less: reclassification adjustment for gains
included in net income ......................................... (64) 50 (64) (26)
(519) (218) (466) (247)
-------- -------- -------- --------
Total other comprehensive income (loss) .............................. 9 (11) 577 (309)
-------- -------- -------- --------
Comprehensive income ................................................. $ 520 $ 5,913 $ 7,483 $ 11,990
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
COLUMBUS McKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 3, 1999
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the financial position of the Company at October
3, 1999, and the results of its operations and its cash flows for the three
and six month periods ended October 3, 1999 and September 27, 1998, have
been included. Results for the period ended October 3, 1999 are not
necessarily indicative of the results that may be expected for the year
ended March 31, 2000. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Columbus
McKinnon Corporation annual report on Form 10-K for the year ended March
31, 1999.
Columbus McKinnon Corporation (the Company) is a leading broad-line
designer, manufacturer and supplier of sophisticated material handling
products and integrated material handling solutions that are widely
distributed to industrial, automotive, and consumer markets worldwide. The
Company's material handling products are sold, domestically and
internationally, principally to third party distributors in commercial and
consumer distribution channels, and to a lesser extent directly to
manufacturers and other end-users. The Company's integrated material
handling solutions businesses primarily deal with end users. Material
handling solution sales are concentrated, domestically and internationally
(primarily Europe), in the automotive industry, and consumer products,
manufacturing, warehousing and, to a lesser extent, the steel,
construction, and other industrial markets.
2. Inventories consisted of the following:
OCTOBER 3, MARCH 31,
1999 1999
----------- -----------
(IN THOUSANDS)
At cost - FIFO basis:
Raw materials $ 59,475 $ 54,648
Work-in-process 20,738 21,663
Finished goods 39,163 45,042
----------- -----------
119,376 121,353
LIFO cost less than FIFO cost (5,375) (5,374)
----------- -----------
$ 114,001 $ 115,979
=========== ===========
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory valuation.
- 6 -
<PAGE>
3. Property, plant, and equipment is net of $48,458,000 and $42,048,000 of
accumulated depreciation at October 3, 1999 and March 31, 1999,
respectively.
4. Goodwill and other intangibles, net includes $37,866,000 and $29,864,000 of
accumulated amortization at October 3, 1999 and March 31, 1999,
respectively.
5. General and Product Liability - The accrued general and product liability
costs, which are included in other non-current liabilities, are the
actuarial present value of estimated expenditures based on amounts
determined from loss reports and individual cases filed with the Company,
and an amount, based on past experience, for losses incurred but not
reported. The accrual in these condensed consolidated financial statements
was determined by applying a discount factor based on interest rates
customarily used in the insurance industry.
6. To manage its exposure to interest rate fluctuations, the Company has an
interest rate swap with a notional value of $3.5 million from January 2,
1999 through July 2, 2000, based on LIBOR at 5.9025%. The Company also has
a LIBOR-based interest rate cap on $49.5 million of debt through December
16, 1999 at 10%. Net payments or receipts under the swap and cap agreements
are recorded as adjustments to interest expense. The carrying amount of the
Company's senior debt instruments approximates the fair values. The
Company's subordinated debt has an approximate fair market value of
$168,000,000 which is less than its carrying amount of $199,548,000.
7. The following table sets forth the computation of basic and diluted
earnings per share before extraordinary charge for debt extinguishment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27,
1999 1998 1999 1998
------------------------- ---------- ------------
Numerator for basic and
diluted earnings per share:
<S> <C> <C> <C> <C>
Income before extraordinary charge ... $ 511,000 $ 5,924,000 $ 6,906,000 $12,299,000
=========== =========== =========== ===========
Denominators:
Weighted-average common stock
outstanding - denominator
for basic EPS ....................... 14,153,000 14,353,000 14,060,000 14,341,000
Effect of dilutive employee stock options . 75,000 159,000 150,000 184,000
---------- ---------- ---------- ----------
Adjusted weighted-average common stock
outstanding and assumed conversions -
denominator for diluted EPS ............ 14,228,000 14,512,000 14,210,000 14,525,000
========== ========== ========== ==========
</TABLE>
8. Income tax expense for the three-month periods ended October 3, 1999 and
September 27, 1998 and also for the six month periods then ended exceeds
the customary relationship between income tax expense and income before
income taxes due to nondeductible amortization of goodwill of $4,000,000,
$3,865,000, $8,002,000, and $7,643,000, respectively.
- 7 -
<PAGE>
9. On April 29, 1999, the Company acquired all of the outstanding stock of
Washington Equipment Company ("WECO"), a regional manufacturer and servicer
of overhead cranes. The total cost of the acquisition, which was accounted
for as a purchase, was approximately $6.4 million of cash and was financed
by proceeds from the Company's revolving debt facility.
On March 1, 1999, GL International, Inc. ("GL"), was merged with and into
the Company through the issuance of 897,114 shares of newly issued Company
stock and options to purchase 154,848 shares of Company stock for all
issued and outstanding stock and options of GL. GL is a full-service
designer and builder of industrial overhead bridge and jib cranes and
related components. The merger was accounted for as a pooling of interests
and, accordingly, the fiscal 1999 consolidated financial statements have
been restated to include the accounts of GL from the date of GL's
formation, April 1, 1997. The fair market value of the stock and options
exchanged was approximately $20.6 million.
Net sales and net income of the separate companies were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 27, 1998 SEPTEMBER 27, 1998
------------------ ------------------
(IN THOUSANDS) (IN THOUSANDS)
Net sales:
<S> <C> <C>
Columbus McKinnon, as reported............. $ 168,634 $ 339,138
GL International, Inc...................... 18,542 34,473
Intercompany eliminations.................. (1,819) (3,637)
---------------- ----------------
Combined................................... $ 185,357 $ 369,974
================ ================
Net income:
Columbus McKinnon, as reported............. $ 5,085 $ 11,169
GL International, Inc...................... 791 1,036
Intercompany eliminations.................. 48 94
---------------- ----------------
Combined................................... $ 5,924 $ 12,299
================ ================
</TABLE>
On January 29, 1999, the Company acquired all of the outstanding stock of
Camlok Lifting Clamps Limited ("Camlok") and the net assets of the Tigrip
product line ("Tigrip") for $10.6 million in cash. The acquisition was
accounted for as a purchase and was financed through cash, a revolving
credit facility, and a $4 million term note. Camlok manufactures plate
clamps, crane weighers and related products and is based in Chester,
England, while the Tigrip line of standard and specialized plate clamps is
produced in Germany.
On December 4, 1998, the Company acquired all of the outstanding stock of
Societe D'Exploitation des Raccords Gautier ("Gautier"), a French-based
manufacturer of industrial components. The total cost of the acquisition,
which was accounted for as a purchase, was approximately $3 million in
cash, consisting of $2.4 million financed by proceeds from the Company's
revolving debt facility and the assumption of certain debt.
- 8 -
<PAGE>
On August 21, 1998 the Company acquired the net assets of Abell-Howe Crane
division ("Abell-Howe") of Abell-Howe Company, a regional manufacturer of
jib, gantry, and bridge cranes. The total cost of the acquisition, which
was accounted for as a purchase, was approximately $7 million of cash,
which was financed by proceeds from the Company's revolving debt facility.
On August 7, 1998 the Company sold its Mechanical Products division, a
producer of circuit controls and protection devices, for $11.5 million,
consisting of $9.1 million in cash and a $2.4 million note receivable, to
Mechanical Products' senior management team. The selling price approximated
the net book value of the division.
The following table presents pro forma summary information for the six
month period ended September 27, 1998 as if the fiscal 1999 and 2000
acquisitions and related borrowings and the sale of Mechanical Products had
occurred as of April 1, 1998, which is the beginning of fiscal 1999. The
pro forma information is provided for informational purposes only. It is
based on historical information and does not necessarily reflect the actual
results that would have occurred nor is it necessarily indicative of future
results of operations of the combined enterprise:
SIX MONTHS ENDED
SEPTEMBER 27, 1998
------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Pro forma:
Net sales $ 369,731
Income from operations 41,697
Net income 12,287
Earnings per share, basic 0.86
Earnings per share, diluted 0.85
- 9 -
<PAGE>
10. As a result of the way the Company manages the business, its reportable
segments are strategic business units that offer products and services with
different characteristics. The most defining characteristic is the extent
of customized engineering required on a per-order basis. In addition, the
segments serve different customer bases through differing methods of
distribution. The Company has three reportable segments: material handling
products, integrated material handling solutions - industrial, and
integrated material handling solutions - automotive. The Company's material
handling products segment sells hoists, chain, attachments, and other
material handling products principally to third party distributors in
commercial and consumer distribution channels. The material handling
solutions segments sell engineered material handling systems such as
conveyors, manipulators, and lift tables primarily to end-users in the
automotive segment, general manufacturing, warehousing, and consumer
products manufacturing industries. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. Intersegment sales are not significant. The Company evaluates
performance based on operating earnings of the respective business units
prior to the effects of amortization.
Segment information as of and for the six months ended October 3, 1999
and September 27, 1998, is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED OCTOBER 3, 1999
SOLUTIONS - SOLUTIONS - ELIMINATIONS/
PRODUCTS INDUSTRIAL AUTOMOTIVE OTHER TOTAL
-------- ---------- ---------- ------------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales to external customers . $ 270,552 $ 27,250 $ 76,321 $ (10,514) $ 363,609
Operating income before
amortization .............. 41,577 2,639 (2,629) (1,146) 40,441
Depreciation and amortization 10,034 1,551 2,827 - 14,412
Total assets ................ 520,710 69,015 187,665 - 777,390
Capital expenditures ........ 4,491 511 128 - 5,130
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 27, 1998
SOLUTIONS - SOLUTIONS - ELIMINATIONS/
PRODUCTS INDUSTRIAL AUTOMOTIVE OTHER TOTAL
-------- ---------- ---------- ------------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales to external customers . $260,815 $ 28,032 $ 83,569 $ (2,442) $369,974
Operating income before
amortization............... 36,429 2,602 9,714 701 49,446
Depreciation and amortization 8,917 1,500 2,832 321 13,570
Total assets ................ 517,988 69,288 194,305 - 781,581
Capital expenditures ........ 4,486 997 136 2 5,621
</TABLE>
- 10 -
<PAGE>
The following schedule provides a reconciliation of operating income before
amortization with consolidated income before income taxes:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
OCTOBER 3, 1999 SEPTEMBER 27, 1998
--------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Operating income before amortization $ 40,441 $ 49,446
Amortization of intangibles ........ 8,002 7,643
Interest and debt expense .......... 16,573 18,250
Interest and other income .......... (553) (633)
-------- --------
Income before income taxes ......... $ 16,419 $ 24,186
======== ========
</TABLE>
- 11 -
<PAGE>
11. The summary financial information of the parent, domestic subsidiaries
(guarantors) and foreign subsidiaries (nonguarantors of the 8.5% senior
subordinated notes) follows:
<TABLE>
<CAPTION>
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries Tions dated
------------------------------------------------------------
As of October 3, 1999 Current assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents ..................... $ 9, 522 $ 5,264 $ 5,285 $ - $ 20,071
Trade accounts receivable ..................... 51,152 56,998 24,612 - 132,762
Unbilled revenues ............................. - 16,209 - - 16,209
Inventories ................................... 48,308 39,570 27,134 (1,011) 114,001
Other current assets .......................... 2,893 10,966 3,678 - 17,537
-------------------------------------------------------------
Total current assets ......................... 111,875 129,007 60,709 (1,011) 300,580
Net property, plant, and equipment ............. 36,588 33,094 20,377 - 90,059
Goodwill and other intangibles, net ............ 41,849 258,569 53,010 - 353,428
Intercompany ................................... 206,658 (371,663) (67,193) 232,198 -
Other assets ................................... 221,004 162,472 (1,474) (348,679) 33,323
-------------------------------------------------------------
Total assets ................................. $ 617,974 $ 211,479 $ 65,429 $ (117,492) $ 777,390
=============================================================
Current liabilities ............................ $ 31,992 $ 56,845 $ 22,859 $ 1,654 $ 113,350
Long-term debt, less current portion ........... 423,280 - 6,816 - 430,096
Other non-current liabilities .................. 12,233 22,055 3,136 - 37,424
-------------------------------------------------------------
Total liabilities ............................ 467,505 78,900 32,811 1,654 580,870
Shareholders' equity ........................... 150,469 132,579 32,618 (119,146) 196,520
-------------------------------------------------------------
Total liabilities and shareholders' equity ... $ 617,974 $ 211,479 $ 65,429 $(117,492) $ 777,390
=============================================================
For the Six Months Ended October 3, 1999
Net sales ...................................... $ 132,442 $ 180,063 $ 61,618 $ (10,514) $ 363,609
Cost of products sold .......................... 90,973 152,089 44,179 (10,477) 276,764
-------------------------------------------------------------
Gross profit ................................... 41,469 27,974 17,439 (37) 86,845
-------------------------------------------------------------
Selling, general and administrative expenses ... 19,761 14,867 11,776 - 46,404
Amortization of intangibles .................... 980 5,732 1,290 - 8,002
-------------------------------------------------------------
20,741 20,599 13,066 - 54,406
-------------------------------------------------------------
Income from operations ......................... 20,728 7,375 4,373 (37) 32,439
Interest and debt expense ...................... 16,204 5 364 - 16,573
Interest and other income ...................... 292 157 104 - 553
-------------------------------------------------------------
Income before income taxes ..................... 4,816 7,527 4,113 (37) 16,419
Income tax expense ............................. 2,261 5,311 1,956 (15) 9,513
-------------------------------------------------------------
Net income ..................................... $ 2,555 $ 2,216 $ 2,157 $ (22) $ 6,906
=============================================================
For the Six Months Ended October 3, 1999
Operating activities:
Net cash provided by operating activities ...... $ 3,994 $ 12,720 $ 2,862 $ 151 $ 19,727
-------------------------------------------------------------
Investing activities:
Purchase of marketable securities, net ......... (796) - - - (796)
Capital expenditures ........................... (2,892) (1,045) (1,193) - (5,130)
Purchases of businesses, net of cash ........... - (6,361) - (49) (6,410)
Other .......................................... - (589) - - (589)
-------------------------------------------------------------
Net cash used in investing activities .......... (3,688) (7,995) (1,193) (49) (12,925)
-------------------------------------------------------------
- 12 -
<PAGE>
Financing activities:
Proceeds from issuance of common stock ......... 3 136 - (136) 3
Net borrowings (payments) under revolving
line-of-credit agreements .................... 8,800 - (1,276) - 7,524
Repayment of debt .............................. (1,009) - 519 - (490)
Dividends paid ................................. (1,974) (5) 1 - (1,978)
Other .......................................... 287 - - - 287
-------------------------------------------------------------
Net cash provided by (used in) financing
activities.................................... 6,107 131 (756) (136) 5,346
Effect of exchange rate changes on cash ........ - - 1,022 34 1,056
-------------------------------------------------------------
Net change in cash and cash equivalents ........ 6,413 4,856 1,935 - 13,204
Cash and cash equivalents at beginning of period 3,109 408 3,350 - 6,867
-------------------------------------------------------------
Cash and cash equivalents at end of period ..... $ 9,522 $ 5,264 $ 5,285 $ - $ 20,071
=============================================================
</TABLE>
<TABLE>
<CAPTION>
Domestic Foreign Elimina- Consoli-
(In thousands) Parent Subsidiaries Subsidiaries Tions Dated
---------------------------------------------------------------
As of September 27, 1998 Current assets:
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents ..................... $ 17,038 $ (3,493) $ 3,620 $ - $ 17,165
Trade accounts receivable ..................... 57,073 65,663 23,067 - 145,803
Unbilled revenues ............................. - 16,659 - - 16,659
Inventories ................................... 46,479 41,707 23,551 (996) 110,741
Other current assets .......................... 1,742 10,278 3,865 - 15,885
------------------------------------------------------------
Total current assets ......................... 122,332 130,814 54,103 (996) 306,253
Net property, plant, and equipment ............. 34,567 33,196 18,672 - 86,435
Goodwill and other intangibles, net ............ 43,511 264,816 48,535 - 356,862
Intercompany ................................... 214,865 (380,000) (64,073) 229,208 -
Other assets ................................... 218,229 162,119 (2,184) (346,133) 32,031
-------------------------------------------------------------
Total assets ................................. $ 633,504 $ 210,945 $ 55,053 $(117,921) $ 781,581
=============================================================
Current liabilities ............................ $ 31,098 $ 60,651 $ 21,120 $ (559) $ 112,310
Long-term debt, less current portion ........... 441,088 3,031 3,358 - 447,477
Other non-current liabilities .................. 10,725 25,192 3,537 - 39,454
-------------------------------------------------------------
Total liabilities ............................ 482,911 88,874 28,015 (559) 599,241
Shareholders' equity ........................... 150,593 122,071 27,038 (117,362) 182,340
-------------------------------------------------------------
Total liabilities and shareholders' equity ... $ 633,504 $ 210,945 $ 55,053 $(117,921) $ 781,581
=============================================================
For the Six Months Ended September 27, 1998
Net sales ...................................... $ 130,613 $ 190,376 $ 59,009 $ (10,024) $ 369,974
Cost of products sold .......................... 93,092 149,422 43,282 (10,178) 275,618
-------------------------------------------------------------
Gross profit ................................... 37,521 40,954 15,727 154 94,356
-------------------------------------------------------------
Selling, general and administrative expenses ... 17,372 17,435 10,103 - 44,910
Amortization of intangibles .................... 976 5,613 1,054 - 7,643
-------------------------------------------------------------
18,348 23,048 11,157 - 52,553
-------------------------------------------------------------
Income from operations ......................... 19,173 17,906 4,570 154 41,803
Interest and debt expense ...................... 17,358 618 274 - 18,250
Interest and other income ...................... 752 50 (169) - 633
-------------------------------------------------------------
Income before income taxes ..................... 2,567 17,338 4,127 154 24,186
Income tax expense ............................. 1,375 8,444 2,008 60 11,887
-------------------------------------------------------------
Net income ..................................... $ 1,192 $ 8,894 $ 2,119 $ 94 $ 12,299
=============================================================
- 13 -
<PAGE>
For the Six Months Ended September 27, 1998
Operating activities:
Net cash provided by (used in) operating
activities ................................... $ 5,415 $ (4,256) $ 2,971 $ 50 $ 4,180
-------------------------------------------------------------
Investing activities:
Purchase of marketable securities, net ......... 438 - - - 438
Capital expenditures ........................... (3,720) (768) (1,133) - (5,621)
Proceeds from sale of businesses ............... 9,390 (89) - - 9,301
Purchases of businesses, net of cash ........... (7,000) (323) - - (7,323)
Other .......................................... - 1,403 - - 1,403
-------------------------------------------------------------
Net cash (used in) provided by investing
activities ................................... (892) 223 (1,133) - (1,802)
-------------------------------------------------------------
Financing activities:
Net payments under revolving
line-of-credit agreements .................... (2,600) 5,819 (1,625) - 1,594
Repayment of debt .............................. (537) (6,067) 241 - (6,363)
Dividends paid ................................. (1,883) - - - (1,883)
Other .......................................... (455) - - - (455)
-------------------------------------------------------------
Net cash used in financing activities .......... (5,475) (248) (1,384) - (7,107)
Effect of exchange rate changes on cash ........ (1) - (916) (50) (967)
-------------------------------------------------------------
Net change in cash and cash equivalents ........ (953) (4,281) (462) - (5,696)
Cash and cash equivalents at beginning of period 17,991 788 4,082 - 22,861
-------------------------------------------------------------
Cash and cash equivalents at end of period ..... $ 17,038 $ (3,493) $ 3,620 $ - $ 17,165
=============================================================
</TABLE>
12. In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133). In June 1999, the FASB issued SFAS 137, which
defers the effective date of SFAS 133 to fiscal years beginning after June
15, 2000. SFAS133 establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires that entities
recognize all derivatives as either assets or liabilities in the statement
of financial position and measure those instruments at fair value. The
intended use of the derivative and its designation as either (1) a hedge of
the exposure to changes in the fair value of a recognized asset or
liability or a firm commitment (a fair value hedge) (2) a hedge of the
exposure to variable cash flows of a forecasted transaction (a cash flow
hedge), or (3) a hedge of the foreign currency exposure of a net investment
in a foreign operation (a foreign currency hedge), will determine when the
gains and losses on the derivatives are reported in earnings and when they
are to be reported as a component of other comprehensive income. The
adoption of SFAS 133 is not expected to have a material impact on the
financial position or results of operations of the Company.
13. In its October 26th, 1999 second quarter earnings release, the Company
announced its plan to engage an advisor to explore strategic alternatives
for the Company's Solutions-Automotive segment made up of Automatic
Systems, Inc. ("ASI"). The strategic alternatives to be evaluated include
the sale of ASI, restructuring of its operational focus, and
diversification of the markets it serves. The strategic evaluation and plan
for ASI are expected to be completed within the next two to three months.
- 14 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company is a broad-line designer, manufacturer, and supplier of
sophisticated material handling products and integrated material handling
solutions that are widely distributed to industrial, automotive and consumer
markets worldwide. The Company's material handling products are sold,
domestically and internationally, principally to third party distributors in
commercial and consumer distribution channels, and to a lesser extent directly
to manufacturers and other end-users. Commercial distribution channels include
general distributors, specialty distributors, service-after-sale distributors,
original equipment manufacturers ("OEMs"), and the U.S. and Canadian
governments. The general distributors are comprised of industrial distributors,
rigging shops and crane builders. Specialty distributors include catalog houses,
material handling specialists and entertainment equipment riggers. The
service-after-sale network includes repair parts distribution centers, chain
service centers, and hoist repair centers. Consumer distribution channels
include mass merchandisers, hardware distributors, trucking and transportation
distributors, farm hardware distributors and rental outlets. The Company's
integrated material handling solutions businesses primarily deal with end-users.
Material handling solution sales are concentrated, domestically and
internationally (primarily Europe), in the automotive industry, and consumer
products manufacturing, warehousing and, to a lesser extent, the steel,
construction and other industrial markets.
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED OCTOBER 3, 1999 AND SEPTEMBER 27, 1998
Net sales in the fiscal 2000 quarter ended October 3, 1999 were $182,008,000, a
decrease of $3,349,000 or 1.8% from the fiscal 1999 quarter ended September 27,
1998. Net sales for the six months ended October 3, 1999 were $363,609,000, a
decrease of $6,365,000 or 1.7% from the six months ended September 27, 1998.
Sales in the Products segment were consistent with the previous year's quarter
as the addition of WECO and Abell-Howe offset softness in most industrial
markets. Sales were up $9,737,000 or 3.7% for the six months ended October 3,
1999 over the prior year period, also primarily as a result of the additions of
WECO and Abell-Howe as well as some strength from the first quarter. Sales in
the Solutions-Industrial segment rose 11.8% or $1,479,000 for the three months
ended October 3, 1999 as a result of strength in the Scandinavian markets. Sales
for the six months ended October 3, 1999 are down 2.8% or $782,000 as a result
of a sluggish Scandinavian market in the first quarter and continued softness in
the scissor lift market. The Solutions-Automotive segment had a sales decrease
of 6.0% or $2,618,000 for the quarter and 8.7% or $7,248,000 for the six months
ended October 3, 1999. The decreases are the result of the lagging impact of
General Motors business due to its shifting of capital spending from small car
to truck and Sport Utility Vehicle (SUV) plants. The decrease in the
Eliminations/Other segment for the three and six months ended October 3, 1999 is
a result of the sale of Mechanical Products in August of 1998.
- 15 -
<PAGE>
Sales in the individual segments were as follows, in thousands of dollars and
with percentage changes for each group:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Oct. 3, Sep. 27, Change Oct. 3, Sep. 27, Change
------ ------
1999 1998 Amount % 1999 1998 Amount %
---- ---- ------ - ---- ---- ------ -
(In thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Products $ 131,764 $ 132,300 $ (536) (0.4) $ 270,552 $ 260,815 $ 9,737 3.7
Solutions-Industrial 13,994 12,515 1,479 11.8 27,250 28,032 (782) (2.8)
Solutions-Automotive 40,773 43,391 (2,618) (6.0) 76,321 83,569 (7,248) (8.7)
Eliminations/Other (4,523) (2,849) (1,674) (58.8) (10,514) (2,442) (8,072) (330.5)
--------- --------- ------- ---------- --------- -------
Net sales $ 182,008 $ 185,357 $(3,349) (1.8) $ 363,609 $ 369,974 $(6,365) (1.7)
========= ========= ======= ========== ========= =======
</TABLE>
The Company's gross profit margins were approximately 21.8%, 25.4%, 23.9% and
25.5% for the fiscal 2000 and 1999 quarters and the six months then ended,
respectively. The decrease in the current quarter and six-month period margin
relative to the respective periods in the prior year is the result of varying
effects among the company's segments. The gross profit margin in the Products
segment for the quarter and six month periods ended October 3, 1999 showed
continued improvement over the respective periods in the prior year as a result
of the continued integration of acquisitions including consolidated purchasing
efforts. The Solutions-Industrial segment experienced a slight increase in
margins for the current quarter and six-month periods when compared to the prior
year as a result of the same strategies. Gross margin in the
Solutions-Automotive segment decreased significantly for the quarter and six
month period ended October 3, 1999 as a result of cost overruns on several
foreign jobs and reduced volume created by GM's delay in capital spending due to
a shift in its spending from small car to truck and SUV plants.
Selling expenses were $12,412,000, $12,819,000, $25,170,000 and $25,691,000 in
the fiscal 2000 and 1999 quarters and the six months then ended, respectively.
As a percentage of consolidated net sales, selling expenses were 6.8%, 6.9%,
6.9% and 6.9% in the fiscal 2000 and 1999 quarters and the six month periods
then ended, respectively.
General and administrative expenses were $10,912,000 $9,780,000, $20,269,000,
and $19,219,000 in the fiscal 2000 and 1999 quarters and the six months then
ended, respectively. The fiscal 2000 expenses were impacted by the additions of
WECO and Abell-Howe. As a percentage of consolidated net sales, general and
administrative expenses were 6.0%, 5.3%, 5.6% and 5.2% in the fiscal 2000 and
1999 quarters and the six months then ended, respectively.
The Company incurred proxy contest related expenses amounting to $835,000 and
$965,000, respectively in the quarter and six months ended October 3, 1999
relative to the August 16, 1999 annual shareholders meeting and annual director
elections.
Amortization of intangibles was $4,000,000, $3,865,000, $8,002,000 and
$7,643,000 in the fiscal 2000 and 1999 quarters and the six months then ended,
respectively. The fiscal 2000 increase is due to the amortization of goodwill
resulting from the acquisitions of Abell-Howe, Gautier, Camlok-Tigrip, and WECO.
- 16 -
<PAGE>
As a result of the above, income from operations decreased $9,005,000 or 43.8%
in the fiscal 2000 quarter and decreased $9,364,000 or 22.4% in the fiscal 2000
six month period compared to the respective periods in fiscal 1999. This is
based on income from operations of $11,573,000, $20,578,000, 32,439,000, and
$41,803,000 in the fiscal 2000 and 1999 quarters and six-month periods then
ended, respectively.
Interest and debt expense was $8,294,000, $9,302,000, $16,573,000, and
$18,250,000 in the fiscal 2000 and 1999 quarters and the six months then ended,
respectively. The fiscal 2000 decrease is primarily due to the payment of debt
based on strong operating cash flow over the last 12 months less funds used to
finance acquisitions. As a percentage of consolidated net sales, interest and
debt expense was 4.6%, 5.0%, 4.6%, and 4.9% in the fiscal 2000 and 1999 quarters
and the six months then ended, respectively.
Interest and other income was $306,000, $262,000, $553,000, and $633,000 in the
fiscal 2000 and 1999 quarters and the six months then ended, respectively.
Income taxes as a percentage of income before income taxes were 85.7%, 48.7%,
57.9% and 49.1% in the fiscal 2000 and 1999 quarters and the six months then
ended, respectively. The percentages reflect the effect of nondeductible
amortization of goodwill resulting from acquisitions.
Net income, therefore, decreased $5,413,000 or 91.4% for the quarter ended
October 3, 1999 and decreased $5,393,000 or 43.8% for the six months then ended.
This is based on net income of $511,000, $5,924,000, $6,906,000, and $12,299,000
for the quarters and six-month periods ended October 3, 1999 and September 27,
1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
On April 29, 1999, the Company acquired all of the outstanding stock of
Washington Equipment Company (WECO) for $6.4 million in cash, financed by the
Company's revolving credit facility.
On March 1, 1999, GL was merged with and into the Company through the issuance
of 897,114 shares of newly issued Company stock and options to purchase 154,848
shares of Company stock for all issued and outstanding stock and options of GL.
The fair market value of the stock and options exchanged was approximately $20.6
million.
On January 29, 1999, the Company acquired all of the outstanding stock of Camlok
and the net assets of the Tigrip product line for $10.6 million in cash,
financed by a German subsidiary revolving credit facility and term note.
On December 4, 1998, the Company acquired all of the outstanding stock of
Gautier for $3 million in cash, financed by the Company's revolving credit
facility.
During October 1998, the Company's ESOP borrowed $7,682,000 from the Company and
purchased 479,900 shares of Company common stock on the open market at an
average cost of $16 per share.
On August 21, 1998, the Company acquired the net assets of Abell-Howe for $7
million in cash, financed by the Company's revolving credit facility.
- 17 -
<PAGE>
On August 7, 1998, the Company sold its Mechanical Products division for $11.5
million, consisting of $9.1 million in cash and a $2.4 million note receivable.
The 1998 Revolving Credit Facility provides availability up to $300 million, due
March 31, 2003, against which $221.2 million was outstanding at October 3, 1999.
Interest is payable at varying Eurodollar rates based on LIBOR plus a spread
determined by the Company's leverage ratio, amounting to 200.0 basis points at
November 16, 1999. The 1998 Revolving Credit Facility is secured by all
equipment, inventory, receivables, subsidiary stock (limited to 65% for foreign
subsidiaries) and intellectual property. To manage its exposure to interest rate
fluctuations, the Company has an interest rate swap and cap.
The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199,468,000, net of original issue discount of $532,000 and are due March 31,
2008. Interest is payable semi-annually based on an effective rate of 8.45%,
considering $1,902,000 of proceeds from rate hedging in advance of the
placement. Provisions of the 8 1/2% Notes include, without limitation,
restrictions of liens, indebtedness, asset sales, and dividends and other
restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at
the option of the Company, in whole or in part, at the Make-Whole Price (as
defined). On or after April 1, 2003, they are redeemable at prices declining
annually from 108.5% to 100% on and after April 1, 2006. In addition, on or
prior to April 1, 2001, the Company may redeem up to 35% of the outstanding
notes with the proceeds of equity offerings at a redemption price of 108.5%,
subject to certain restrictions. In the event of a Change of Control (as
defined), each holder of the 8 1/2% Notes may require the Company to repurchase
all or a portion of such holder's 8 1/2% Notes at a purchase price equal to 101%
of the principal amount thereof. The 8 1/2% Notes are not subject to any sinking
fund requirements.
The Company believes that its cash on hand, cash flows, and borrowing capacity
under its revolving credit facility will be sufficient to fund its ongoing
operations, budgeted capital expenditures, and business acquisitions for the
next twelve months.
Net cash provided by operating activities was $19,727,000 for the six months
ended October 3, 1999, an increase of $15,547,000 over the net cash provided by
operating activities for the six months ended September 27, 1998 of $4,180,000.
The significant increase is primarily due to changes in the working capital
needs of Automatic Systems Inc. (ASI), formerly LICO, Inc.
Net cash used in investing activities increased to $12,925,000 for the six
months ended October 3, 1999 from $1,802,000 for the six months ended September
27, 1998. The $11,123,000 difference is due primarily to proceeds received as a
result of the sale of Mechanical Products.
Net cash provided by financing activities was $5,346,000 for the six months
ended October 3, 1999 while net cash used in financing activities was $7,107,000
for the three months ended September 27, 1998. The $12,453,000 change is
primarily due to borrowings used to acquire WECO in the current year, compared
to the proceeds from the Mechanical Products sale net of borrowings for the
Abell-Howe acquisition which were used to pay down debt in the prior year.
- 18 -
<PAGE>
CAPITAL EXPENDITURES
In addition to keeping its current equipment and plants properly maintained, the
Company is committed to replacing, enhancing, and upgrading its property, plant,
and equipment to reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety, and promote ergonomically correct work stations. Consolidated
capital expenditures for the six months ended October 3, 1999 and September 27,
1998 were $5,130,000 and $5,621,000, respectively.
INFLATION AND OTHER MARKET CONDITIONS
The Company's costs are affected by inflation in the U.S. economy, and to a
lesser extent, in foreign economies including those of Europe, Canada, Mexico,
and the Pacific Rim. The Company does not believe that inflation has had a
material effect on results of operations over the periods presented because of
low inflation levels over the periods and because the Company has generally been
able to pass on rising costs through price increases. However, in the future
there can be no assurance that the Company's business will not be affected by
inflation or that it will be able to pass on cost increases.
SEASONALITY AND QUARTERLY RESULTS
Quarterly results may be materially affected by the timing of large customer
orders, by periods of high vacation concentrations, and by acquisitions and the
magnitude of acquisition costs. Therefore, the operating results for any
particular fiscal quarter are not necessarily indicative of results for any
subsequent fiscal quarter or for the full fiscal year.
YEAR 2000 CONVERSIONS
The Company's corporate-wide Year 2000 initiative is being managed by a team of
internal staff and administered by the Director of Information Services. The
Company has completed the assessment phase of its Year 2000 compliance project
and is currently working on remediation of affected components.
The Company has determined that it needs to modify certain portions of its
corporate business information software so that its computer system will
function properly with respect to dates in the year 2000 and beyond. Both
internal and external resources have been dedicated to identifying,
implementing, and testing corrective action in order to make such programs Year
2000 compliant; all such work is planned to be completed by November 1999 and is
currently on schedule. To date the corporate business information software has
been 100% assessed, approximately 98% has been remedially reprogrammed, and
approximately 90% is now certified to be Year 2000 compliant. The Company
believes that, with modifications to existing software, the Year 2000 issue will
not pose significant operational problems for its computer systems.
The Company has completed a corporate-wide assessment of the Year 2000 readiness
of microprocessor-controlled equipment such as robotics, CNC machines, and
security and environmental systems. This assessment has revealed that at least
98% of all microprocessor-controlled equipment is currently compliant. The
remaining 2%, which includes recent acquisitions, is currently under review. Any
necessary upgrades to ensure Year 2000 readiness are expected to be in place by
the end of November 1999. In addition, the Company has determined that all of
its manufactured products are 100% Year 2000 compliant.
- 19 -
<PAGE>
The Company has initiated communications with its suppliers and customers to
determine the extent to which systems, products or services are vulnerable to
failure should those third parties fail to remediate their own Year 2000 issues.
To date the Company has received responses to over 88% of its inquiries and no
Year 2000 compliance problems have been identified from these responses. While
we believe that our Year 2000 compliance plan adequately addresses potential
Year 2000 concerns and to date no significant Year 2000 issues have been
identified with our suppliers and customers, there can be no guarantee that the
systems of other companies on which our operations rely will be compliant an a
timely basis and will not have an effect on our operations.
The Company has conducted preliminary contingency planning and identified the
critical need areas. A high level approach incorporating manual workarounds,
increasing critical inventories, identifying alternate suppliers, and adjusting
staffing levels has been discussed and forms the basis for the initial
contingency planning. The Company believes this level of planning is appropriate
at the current time, however, the planning will be further expanded if warranted
by future events.
The cost of the Year 2000 initiatives is not expected to be material to the
Company's results of operations or financial position.
The forward looking statements contained in the Year 2000 Conversions should be
read in conjunction with the Company's disclosures under the heading "Safe
Harbor Statement under the Private Securities Litigation Reform Act of 1995".
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS
133). In June 1999, the FASB issued SFAS 137, which defers the effective date of
SFAS 133 to fiscal years beginning after June 15, 2000. SFAS133 establishes
accounting and reporting standards for derivative instruments and hedging
activities. It requires that entities recognize all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. The intended use of the derivative and its
designation as either (1) a hedge of the exposure to changes in the fair value
of a recognized asset or liability or a firm commitment (a fair value hedge) (2)
a hedge of the exposure to variable cash flows of a forecasted transaction (a
cash flow hedge), or (3) a hedge of the foreign currency exposure of a net
investment in a foreign operation (a foreign currency hedge), will determine
when the gains and losses on the derivatives are reported in earnings and when
they are to be reported as a component of other comprehensive income. The
adoption of SFAS 133 is not expected to have a material impact on the financial
position or results of operations of the Company.
- 20 -
<PAGE>
SUBSEQUENT EVENT
In its October 26th, 1999 second quarter earnings release, the Company announced
its plan to engage an advisor to explore strategic alternatives for the
Company's Solutions-Automotive segment made up of Automatic Systems, Inc.
("ASI"). The strategic alternatives to be evaluated include the sale of ASI,
restructuring of its operational focus, and diversification of the markets it
serves. The strategic evaluation and plan for ASI are expected to be completed
within the next two to three months.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report may include "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause the actual
results of the Company to differ materially from the results expressed or
implied by such statements, including general economic and business conditions,
conditions affecting the industries served by the Company and its subsidiaries,
conditions affecting the Company's customers and suppliers, competitor responses
to the Company's products and services, the overall market acceptance of such
products and services, the integration of acquisitions and other factors
disclosed in the Company's periodic reports filed with the Commission.
Consequently such forward-looking statements should be regarded as the Company's
current plans, estimates and beliefs. The Company does not undertake and
specifically declines any obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect any
future events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
- 21 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none.
Item 2. Changes in Securities - none.
Item 3. Defaults upon Senior Securities - none.
Item 4. Submission of Matters to a Vote of Security Holders On August
16, 1999, the Annual Meeting of Shareholders was held:
The following directors were elected:
10,198,785 votes cast for: Herbert P. Ladds, Jr.;
10,207,643 votes cast for: Timothy T. Tevens;
10,211,803 votes cast for: Robert L. Montgomery, Jr.;
10,213,003 votes cast for: Randolph A. Marks;
10,212,867 votes cast for: L. David Black and Richard J.
Fleming ;
10,212,903 votes cast for: Carlos Pasqual;
2,916,034 votes cast for: Larry N. Katsoulis; Jonathan
G. Guss; George G. Raymond,
Jr.; Jeffrey E. Schwarz; and
Robert F. Lietzow, Jr.
Proposal to approve the adoption of the Amendment and
Restatement of the Columbus McKinnon Corporation 1995 Incentive
Stock Option Plan:
11,210,347 votes cast for
513,660 votes cast against
1,703,313 abstain
Columbus McKinnon Shareholders Committee (the "dissidents")
proposal to have the shareholders rescind the By-law amendments
adopted by the Board of Directors in May 1999:
4,953,446 votes cast for
8,011,127 votes cast against
462,747 abstain
Item 5. Other Information - none.
- 22 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibit 10.1 Third Amendment, dated as of November 16, 1999, to
the Credit Agreement, dated as of March 31, 1998,
among Columbus McKinnon Corporation, as the
Borrower, the banks, financial institutions and
other institutional lenders named therein, as
Initial Lenders, Fleet National Bank, as the Initial
Issuing Bank, Fleet National Bank, as the Swing Line
Bank and Fleet National Bank, as the Administrative
Agent.
Exhibit 10.2 Fourth Supplemental Indenture among Washington
Equipment Company, G.L. International, Inc., Gaffey,
Inc., Handling Systems and Conveyors, Inc., Larco
Material Handling Inc., Abell-Howe Crane, Inc.,
Automatic Systems, Inc., LICO Steel, Inc., Columbus
McKinnon Corporation, Yale Industrial Products, Inc.
and State Street Bank and Trust Company, N.A., as
trustee, dated as of November 1, 1999.
There are no reports on Form 8-K.
- 23 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBUS McKINNON CORPORATION
-----------------------------
(Registrant)
Date: NOVEMBER 16, 1999 /S/ ROBERT L. MONTGOMERY, JR.
----------------- -----------------------------
Robert L. Montgomery, Jr.
Executive Vice President and
Chief Financial Officer (Principal
Financial Officer)
- 24 -
THIRD AMENDMENT TO CREDIT AGREEMENT AND CONSENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this
"AMENDMENT"), dated as of November 16, 1999, is by and among COLUMBUS MCKINNON
CORPORATION, a New York corporation (the "BORROWER"), the banks, financial
institutions and other institutional lenders which are parties to the Credit
Agreement (as such term is defined below) (the "LENDERS"), FLEET NATIONAL BANK,
as Initial Issuing Bank (the "INITIAL ISSUING BANK"), FLEET NATIONAL BANK, as
the Swing Line Bank (the "SWING LINE BANK"; each of the Lenders, the Initial
Issuing Bank and the Swing Line Bank, individually, a "LENDER PARTY" and,
collectively, the "LENDER PARTIES"), and FLEET NATIONAL BANK, as administrative
agent (together with any successor appointed pursuant to Article VII of the
Credit Agreement, the "ADMINISTRATIVE AGENT") for the Lender Parties.
W I T N E S S E T H :
-------------------
WHEREAS, the Borrower, Lenders, Initial Issuing Bank, Swing Line Bank
and Administrative Agent are party to that certain Credit Agreement, dated as of
March 31, 1998, as amended by that certain First Amendment to Credit Agreement,
dated as of September 23, 1998, and that certain Second Amendment to Credit
Agreement and Consent, dated as of February 12, 1999 (as so amended and as it
may hereafter be further amended, supplemented, restated, extended or otherwise
modified from time to time, the " CREDIT AGREEMENT");
WHEREAS, the Borrower has requested that the Administrative Agent and
Lender Parties amend the Credit Agreement as and to the extent set forth in this
Amendment;
WHEREAS, for administrative simplicity and other reasons, the Borrower
desires to merge Larco Material Handling Inc. ("LARCO") with and into Gaffey,
Inc. ("GAFFEY"), with Gaffey being the surviving corporation (the "LARCO-GAFFEY
MERGER"); and
WHEREAS, the Administrative Agent and Lender Parties are agreeable to
the foregoing, in each instance as and to the extent set forth in this Amendment
and subject to each of the terms and conditions stated herein.
NOW THEREFORE, in consideration of the premises and the mutual
covenants set forth herein and of the loans or other extensions of credit
heretofore, now or hereafter made to, or for the benefit of, the Borrower and
its Subsidiaries by the Lender Parties, the parties hereto hereby agree as
follows:
1. DEFINITIONS. Except to the extent otherwise specified herein, capital-
ized terms used in this Amendment shall have the same meanings ascribed
to them in the Credit Agreement.
2. AMENDMENTS.
2.1. Section 1.01 of the Credit Agreement is amended by deleting
from the definition of "APPLICABLE MARGIN" the entire pricing chart contained
therein and replacing it with the following chart:
<PAGE>
Applicable Margin Applicable Margin Applicable Margin
RATIO OF FUNDED DEBT TO for Prime Rate for Eurodollar for Commitment
EBITDA Advances Rate Advances Fee
- ----------------------- -------- ------------- ---
Equal to or greater than 4.00 0.50% 2.000% 0.375%
Equal to or greater than 3.50
less than 4.00 0.25% 1.750% 0.350%
Equal to or greater than 3.00
less than 3.50 0.00% 1.500% 0.300%
Equal to or greater than 2.50
less than 3.00 0.00% 1.250% 0.200%
Less than 2.50 0.00% 0.875% 0.150%
2.2. Section 1.01 of the Credit Agreement is amended to include the
following definition in the appropriate alphabetical order:
"'CANADIAN DOLLARS' means the lawful currency of Canada."
2.3. Section 1.01 of the Credit Agreement is further amended by
inserting in the definition of "ALTERNATIVE CURRENCY" after the words
"Alternative Currency Letters of Credit," and before the words "the Euro" the
words "Canadian Dollars,".
2.4. Section 1.01 of the Credit Agreement is further amended by
inserting in the definition of "ASSIGNED DOLLAR VALUE" before the words "the
Euro" in clause (b)(ii)(A) thereof the words "Canadian Dollars,".
2.5. Section 1.01 of the Credit Agreement is further amended by
deleting from the definition of "EXCHANGE RATE" the word "and" that appears
before clause (c) of the first sentence of such definition and inserting before
the period at the end of the first sentence of such definition the following:
", (d) with respect to Canadian Dollars, the spot rate at which U.S.
Dollars are offered on such day by the Administrative Agent in London
for Canadian Dollars at approximately 11:00 A.M. (London time) and (e)
with respect to U.S. Dollars in relation to Canadian Dollars, the spot
rate at which Canadian Dollars are offered on such day by the
Administrative Agent in London for U.S. Dollars at approximately 11:00
A.M. (London time)"
2.6. Section 5.02(d)(iii)(4) of the Credit Agreement is amended by
deleting the words "$35,000,000 in the aggregate in any Fiscal Year" and
replacing them with the following:
"$10,000,000 in the aggregate in any Fiscal Year; PROVIDED, HOWEVER,
THAT, in the event that the Consolidated Funded Debt to EBITDA Ratio of
the Borrower (as calculated pursuant to Section 5.04(a)) falls below
3.50 to 1.0 for any period of four fiscal quarters, the sum of all such
amounts shall not exceed $35,000,000 in any Fiscal Year thereafter".
- 2 -
<PAGE>
2.7. Section 5.02(f) of the Credit Agreement is amended by deleting the
number "(vi)" that appears before the clause "Investments consisting of
Permitted Acquisitions" and replacing it with the number "(vii)" and placing
such renumbered clause (vii) in the proper numerical order in such Section
5.02(f).
2.8. Section 5.02(g)(i) of the Credit Agreement is amended by deleting
the figure "$10,000,000" and replacing it with the figure "$5,000,000".
2.9. Section 5.02(i) of the Credit Agreement is amended by inserting
before the period at the end of such Section the following:
"in any manner that would in any material respect impair the ability of
any Loan Party to perform its obligations under any Loan Document or
that would impair in any material respect the rights or interests of
the Administrative Agent or any of the Lender Parties"
2.10. Section 5.04(a) of the Credit Agreement is amended by deleting
from the chart contained therein the dates from and including December 31, 1999
and the corresponding ratios for such dates and replacing them with the
following:
"December 31, 1999 4.50 to 1.0
March 31, 2000 4.50 to 1.0
June 30, 2000 4.25 to 1.0
September 30, 2000 4.00 to 1.0
December 31, 2000 3.75 to 1.0
March 31, 2001 3.75 to 1.0
June 30, 2001 3.50 to 1.0
September 30, 2001 3.50 to 1.0
December 31, 2001 3.50 to 1.0
March 31, 2002 and each fiscal
quarter end thereafter 3.25 to 1.0".
2.11. Section 5.04(b) of the Credit Agreement is amended by deleting
the ratio "3.0 to 1.0" and replacing it with the words "the ratio set forth
below:
FOUR FISCAL QUARTERS ENDING ON: RATIO
------------------------------- -----
December 31, 1999 2.75 to 1.0
March 31, 2000 2.75 to 1.0
June 30, 2000 2.75 to 1.0
September 30, 2000 and each fiscal
quarter end thereafter 3.00 to 1.0".
- 3 -
<PAGE>
2.12. Section 5.04(c) of the Credit Agreement is amended by deleting
from the chart contained therein the words "March 31, 1999 and each fiscal
quarter ending thereafter" and the corresponding ratio "1.50 to 1.00" and
replacing them with the following:
"December 31, 1999 1.25 to 1.0
March 31, 2000 and each fiscal
quarter end thereafter 1.50 to 1.0".
2.13. Section 5.04(d) of the Credit Agreement is amended by deleting
clause (i) thereof and replacing it with "(i) $190,000,000".
3. CONSENT TO LARCO-GAFFEY MERGER.
3.1. Section 5.01(f) of the Credit Agreement, among other things,
requires that the Borrower preserve and maintain, and cause each of its
Subsidiaries to preserve and maintain, its existence, legal structure, legal
name and rights (charter and statutory). Section 5.02(d)(i) of the Credit
Agreement, among other things, prohibits the Borrower or any of its Subsidiaries
from merging into or consolidating with any Person or permitting any Person to
merge into it. Notwithstanding the provisions of Section 5.01(f) and Section
5.02(d)(i), but subject to the conditions precedent set forth in Section 3.2
below and the other terms and conditions of this Amendment, the Administrative
Agent and Lender Parties hereby consent to the Larco-Gaffey Merger.
3.2. The Larco-Gaffey Merger is subject to the satisfaction, as
determined by the Administrative Agent, of each of the following conditions
precedent:
(a) The Borrower shall have caused Gaffey to have executed and
delivered such agreements, instruments and other documents, including,
without limitation, UCC-1 financing statements, UCC-3 amendments to
financing statements and amendments to intellectual property filings,
as shall be necessary or as the Administrative Agent shall have
otherwise requested in order to maintain the perfected first priority
status of the Administrative Agent's security interests in the
Collateral of Gaffey and Larco.
(b) As of the date of the consummation of the Larco-Gaffey
Merger, no Default or Event of Default shall have occurred and be
continuing.
(c) The representations and warranties contained in Section 4
of this Amendment, the Credit Agreement and each other Loan Document
shall be true, correct and complete on and as of the date of the
consummation of the Larco-Gaffey Merger, as though made on such date.
(d) The Borrower shall, and shall have caused its Subsidiaries
to, have taken all such actions and executed and delivered all such
agreements, instruments and other documents as the Administrative
Agent shall have reasonably requested in connection with the
Larco-Gaffey Merger.
- 4 -
<PAGE>
3.3. The foregoing consent in Section 3.1 is only applicable and shall
only be effective in the specific instance and for the specific purpose for
which made. Such consent is expressly limited to the facts and circumstances and
subject to the conditions referred to herein and shall not operate (a) as a
waiver of or consent to non-compliance with any other Section or provision of
the Credit Agreement or any other Loan Document, (b) as a waiver of any right,
power or remedy of either the Administrative Agent or any Lender Party under the
Credit Agreement or any other Loan Document or (c) as a waiver of or consent to
any Event of Default or Default under the Credit Agreement or any other Loan
Document.
4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby
represents and warrants as follows:
4.1. Each of the representations and warranties set forth in the Credit
Agreement, including, without limitation, in Article IV of the Credit Agreement,
and in each other Loan Document, is true, correct and complete on and as of the
date hereof as though made on the date hereof. In addition, the Borrower hereby
represents, warrants and affirms that the Credit Agreement and each of the other
Loan Documents remains in full force and effect.
4.2. As of the date hereof, there exists no Default or Event of Default
under the Credit Agreement or any other Loan Document, and no event which, with
the giving of notice or lapse of time, or both, would constitute a Default or
Event of Default.
4.3. The execution, delivery and performance by each applicable Loan
Party of this Amendment or the reaffirmations and confirmations attached hereto
and each other Loan Document are within such Loan Party's corporate powers, have
been duly authorized by all necessary corporate action, and do not, and will
not, (i) contravene such Loan Party's charter or bylaws, (ii) violate any law
(including, without limitation, the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended), rule, regulation (including,
without limitation, Regulation T, U or X of the Board of Governors of the
Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award, (iii) conflict with or result in the breach of, or
constitute a default under, any material contract, loan agreement, indenture,
mortgage, deed of trust, lease or other material instrument or agreement binding
on or affecting any Loan Party, any of its Subsidiaries or any of their
respective properties or (iv) except for the Liens created under the Collateral
Documents, result in or require the creation or imposition of any Lien upon or
with respect to any of the properties of any Loan Party or any of its
Subsidiaries. Neither any Loan Party nor any of its Subsidiaries is in violation
of any such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or in breach of any such contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument or agreement, the
violation or breach of which could reasonably be expected to have a Material
Adverse Effect.
4.4. Each of this Amendment and each other Loan Document has been duly
executed and delivered by each Loan Party party thereto. Each of this Amendment
and each other Loan Document is the legal, valid and binding obligation of each
Loan Party party thereto, enforceable against such Loan Party in accordance with
its terms.
- 5 -
<PAGE>
4.5. No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other third
party is required for (i) the due execution, delivery, recordation, filing or
performance by any Loan Party of this Amendment, any other Loan Document or any
other agreement or document related hereto or thereto or contemplated hereby or
thereby to which it is or is to be a party or otherwise bound, (ii) the grant by
any Loan Party of the Liens granted by it pursuant to the Collateral Documents,
(iii) the perfection or maintenance of the Liens created by the Collateral
Documents (including the first priority nature thereof) or (iv) the exercise by
the Administrative Agent or any Lender Party of its rights under the Loan
Documents or remedies in respect of the Collateral pursuant to the Collateral
Documents.
5. CONDITIONS PRECEDENT TO THIS AMENDMENT. The effectiveness of this
Amendment is subject to the satisfaction, in form and substance satisfactory to
the Administrative Agent, of each of the following conditions precedent:
5.1. The Borrower, Required Lenders and, as to the amendments contained
in Sections 2.1 through 2.4, the Required Alternative Currency Lenders, shall
have duly executed and delivered this Amendment.
5.2. No Default or Event of Default shall have occurred and be
continuing.
5.3. The representations and warranties contained in Section 4 of this
Amendment, the Credit Agreement and each other Loan Document shall be true,
correct and complete on and as of the closing date of this Amendment as though
made on such date.
5.4. The Borrower shall have paid an amendment fee to the
Administrative Agent, for the account of each Lender which has approved this
Amendment, as evidenced by such Lender's timely execution and delivery of a
counterpart signature page to this Amendment (each such Lender being an
"APPROVING LENDER"), in an amount equal to 0.20% (i.e. 20 basis points) of such
Approving Lender's Revolving Credit Commitment.
5.5. The Borrower and its Subsidiaries shall have delivered such other
documents and taken such other actions as the Administrative Agent may
reasonably request.
6. EFFECTIVENESS OF AMENDMENT. This Amendment shall not become effective
unless and until each of the conditions precedent set forth in Section 5 hereof
has been satisfied.
7. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT AND OTHER LOAN
DOCUMENTS.
7.1. Except as specifically amended in Section 2 above, the Credit
Agreement and each of the other Loan Documents shall remain in full force and
effect and each is hereby ratified and confirmed.
7.2. The execution, delivery and effect of this Amendment shall be
limited precisely as written and shall not be deemed to (a) be a consent to any
waiver of any term or condition or to any amendment or modification of any term
or condition of the Credit Agreement or any other Loan Document, except as
specifically amended in Section 2 above and for the specific consent set forth
in Section 3 above (subject to the terms and conditions of such consent set
- 6 -
<PAGE>
forth herein), or (b) prejudice any right, power or remedy which the
Administrative Agent or any Lender Party now has or may have in the future under
or in connection with the Credit Agreement or any other Loan Document. Upon the
effectiveness of this Amendment, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein" or any other word or words of
similar import shall mean and be a reference to the Credit Agreement as amended
hereby, and each reference in any other Loan Document to the Credit Agreement or
any word or words of similar import shall mean and be a reference to the Credit
Agreement as amended hereby.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, but
all such counterparts shall constitute one and the same instrument. Delivery of
an executed counterpart to this Amendment by telecopier shall be as effective as
delivery of a manually executed counterpart of this Amendment.
9. COSTS AND EXPENSES. The Borrower shall pay on demand all reasonable
fees, costs and expenses incurred by Administrative Agent (including, without
limitation, all reasonable attorneys' fees) in connection with the preparation,
execution and delivery of this Amendment and the taking of any actions by any
Person in connection herewith.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS)
OF THE STATE OF NEW YORK.
11. HEADINGS. Article headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
[Signature Pages Follow]
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized
on the date first above written.
COLUMBUS MCKINNON CORPORATION
By: /s/ R.L. Montgomery
-------------------
Title: Executive Vice President
<PAGE>
The undersigned hereby acknowledge and agree to this Amendment, and
agree that the Guaranty, the Security Agreement, and the Intellectual Property
Security Agreement, and each other Loan Document executed by the undersigned
shall remain in full force and effect and each is hereby ratified and confirmed
by and on behalf of the undersigned, this 16th day of November, 1999.
AUTOMATIC SYSTEMS, INC.
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
LICO STEEL, INC.
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
ABELL-HOWE CRANE, INC.
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
G.L. INTERNATIONAL INC.
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
GAFFEY, INC.
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
HANDLING SYSTEMS AND CONVEYORS, INC.
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
<PAGE>
LARCO MATERIAL HANDLING INC.
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
YALE INDUSTRIAL PRODUCTS, INC.
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
WASHINGTON EQUIPMENT COMPANY
By: /s/ R.L. Montgomery
-------------------
Title: Treasurer
<PAGE>
FLEET NATIONAL BANK, as
Administrative Agent
By: /s/ John G. Tierney
-------------------
Title: Vice President
-------------------
FLEET NATIONAL BANK, as Initial
Issuing Bank
By: /s/ John G. Tierney
-------------------
Title: Vice President
-------------------
FLEET NATIONAL BANK, as Swing Line
Bank
By: /s/ John G. Tierney
-------------------
Title: Vice President
-------------------
Lenders
FLEET NATIONAL BANK
By: /s/ John G. Tierney
-------------------
Title: Vice President
-------------------
<PAGE>
Lenders
ABN-AMRO BANK N.V. NEW YORK
BRANCH, as a Co-Agent and Lender
By: /s/ Donald Sutton
-------------------
Title: Vice President
-------------------
By: /s/ Juliette Mound
-------------------
Title: Assistant Vice President
------------------------
<PAGE>
Lenders
THE BANK OF NOVA SCOTIA, as a
Co-Agent and Lender
By: /s/ J. Alan Edwards
-------------------
Title: Authorized Signatory
--------------------
<PAGE>
Lenders
MANUFACTURERS AND TRADERS TRUST
COMPANY, as a Co-Agent and Lender
By: /s/ Stephen J. Wydysh
---------------------
Title: Vice President
---------------------
<PAGE>
Lenders
HSBC BANK USA (formerly known as
Marine Midland Bank), as a
Co-Agent and Lender
By: /s/ D.C. English
----------------
Title: Associate Director
------------------
<PAGE>
Lenders
COMERICA BANK
By: /s/ Joel Gordon
---------------
Title: Account Representative
----------------------
<PAGE>
Lenders
FIRST UNION NATIONAL BANK
By: /s/ Mark B. Felker
------------------
Title: Senior Vice President
---------------------
<PAGE>
Lenders
KEYBANK NATIONAL ASSOCIATION
By: /s/ Francis Lutz
----------------
Title:Portfolio Manager and Officer
-----------------------------
<PAGE>
Lenders
MELLON BANK, N.A.
By: /s/ Edward J. Kloecker
----------------------
Title: Vice President
--------------
<PAGE>
Lenders
BANKERS TRUST COMPANY
By: /s/ G. Andrew Keith
-------------------
Title: Vice President
-------------------
<PAGE>
Lenders
THE BANK OF NEW YORK
By: /s/ Thomas C. McCrohan
----------------------
Title: Vice President
--------------
<PAGE>
Lenders
NATIONAL BANK OF CANADA
By: /s/ Michael R. Brace
--------------------
Title: Marketing Officer
-----------------
By: /s/ Mark Dzunion
----------------
Title: Credit Analyst
----------------
<PAGE>
Lenders
NATIONAL CITY BANK OF PENNSYLVANIA
By:_______________________________
Title:____________________________
FOURTH SUPPLEMENTAL INDENTURE
FOURTH SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"),
dated as of November 1, 1999, among WASHINGTON EQUIPMENT COMPANY, an Illinois
corporation (the "GUARANTEEING SUBSIDIARY"), a subsidiary of Columbus McKinnon
Corporation (or its permitted successor), a New York corporation (the
"COMPANY"), the Company, the other Guarantors (as defined in the Indenture
referred to herein) and State Street Bank and Trust Company, N.A., as trustee
under the indenture referred to below (the "TRUSTEE").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "INDENTURE"), dated as of March 31, 1998 providing
for the issuance of an aggregate principal amount of up to $300.0 million of 8
1/2% Senior Subordinated Notes due 2008 (thE "NOtes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (a "SUBSIDIARY
GUARANTEE"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary
hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a
Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and
thereof; and
(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
<PAGE>
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce
the same or any other circumstance which might
otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(c) The following is hereby waived: diligence
presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first
against the Company, protest, notice and all demands
whatsoever.
(d) The Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations
contained in the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, the Subsidiary
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture
for the purposes of the Subsidiary Guarantee,
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of the Subsidiary
Guarantee.
(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as
the exercise of such right does not impair the rights
of the Holders under the Subsidiary Guarantee.
(i) Notwithstanding the foregoing, in the event that the
Subsidiary Guarantee would constitute or result in a
violation of any applicable fraudulent conveyance or
2
<PAGE>
similar law of any relevant jurisdiction, the
liability of the Guaranteeing Subsidiary under this
Fourth Supplemental Indenture and the Subsidiary
Guarantee shall be reduced to the maximum amount
permissible under such fraudulent conveyance or
similar law.
3. SUBORDINATION. Payment of principal, premium, if any,
and interest and Liquidated Damages, if any, on the Subsidiary Guarantee is
subordinated to the prior payment in full of Senior Debt on the terms provided
in the Indenture.
4. EXECUTION AND DELIVERY. The Guaranteeing Subsidiary
agrees that the Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
5. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON
CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with
or merge with or into (whether or not such Guarantor
is the surviving Person) another corporation, Person
or entity whether or not affiliated with such
Guarantor unless:
(i) subject to Section 11.05 of the Indenture,
the Person formed by or surviving any such
consolidation or merger (if other than a
Guarantor or the Company) unconditionally
assumes all the obligations of such
Guarantor, pursuant to a supplemental
indenture in form and substance reasonably
satisfactory to the Trustee, under the
Notes, the Indenture and the Subsidiary
Guarantee on the terms set forth herein or
therein; and
(ii) immediately after giving effect to such
transaction, no Default or Event of Default
exists.
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to
the Trustee, of the Subsidiary Guarantee endorsed
upon the Notes and the due and punctual performance
of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as
if it had been named herein as a Guarantor. Such
successor corporation thereupon may cause to be
signed the Subsidiary Guarantee to be endorsed upon
all of the Notes issuable hereunder which theretofore
shall not have been signed by the Company and
delivered to the Trustee. The Subsidiary Guarantee so
issued shall in all respects have the same legal rank
and benefit under the Indenture as the Subsidiary
Guarantee theretofore and thereafter issued in
accordance with the terms of the Indenture as though
the Subsidiary Guarantee had been issued at the date
of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the
Indenture, and notwithstanding clauses (a) and (b)
above, nothing contained in the Indenture or in any
of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or
3
<PAGE>
another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the
Company or another Guarantor.
6. RELEASES.
(a) In the event of a sale or other disposition of all of
the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a
sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital
stock of such Guarantor) or the corporation acquiring
the property (in the event of a sale or other
disposition of all or substantially all of the assets
of such Guarantor) will be released and relieved of
any obligations under its Subsidiary Guarantee;
PROVIDED that the Net Proceeds of such sale or other
disposition are applied in accordance with the
applicable provisions of the Indenture, including
without limitation, Section 4.10 of the Indenture.
Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was
made by the Company in accordance with the provisions
of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall
execute any documents reasonably required in order to
evidence the release of any Guarantor from its
obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under
its Subsidiary Guarantee shall remain liable for the
full amount of principal of and interest on the Notes
and for the other obligations of any Guarantor under
the Indenture as provided in Article 11 of the
Indenture.
7. NO RECOURSE AGAINST OTHERS. No past, present or
future director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver is against
public policy.
8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE
OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
9. COUNTERPARTS. The parties may sign any number of
copies of this Supplemental Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.
10. EFFECT OF HEADINGS. The Section headings herein are
for convenience only and shall not affect the construction hereof.
4
<PAGE>
11. THE TRUSTEE. The Trustee shall not be responsible in
any manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
caused this Fourth Supplemental Indenture to be duly executed and attested, all
as of the date first above written.
Dated: November 1, 1999
WASHINGTON EQUIPMENT COMPANY
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
G.L. INTERNATIONAL INC.
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
GAFFEY, INC.
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
HANDLING SYSTEMS AND CONVEYORS, INC.
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
LARCO MATERIAL HANDLING INC.
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
<PAGE>
ABELL-HOWE CRANE, INC..
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
AUTOMATIC SYSTEMS, INC.
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Treasurer
LICO STEEL, INC.
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Treasurer
COLUMBUS McKINNON CORPORATION
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Executive Vice President
YALE INDUSTRIAL PRODUCTS, INC.
By: /s/ R. L. Montgomery
----------------------------
Name: R. L. Montgomery
Title: Vice President and Treasurer
<PAGE>
STATE STREET BANK AND TRUST COMPANY, N.A.
as Trustee
By: /s/ Cheryl L. Clark
----------------------------
Name: Cheryl L. Clarke
Title: Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001005229
<NAME> COLUMBUS MCKINNON CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> Oct-03-1999
<CASH> 20,071
<SECURITIES> 0
<RECEIVABLES> 132,762
<ALLOWANCES> 0
<INVENTORY> 114,001
<CURRENT-ASSETS> 300,580
<PP&E> 138,517
<DEPRECIATION> 48,458
<TOTAL-ASSETS> 777,390
<CURRENT-LIABILITIES> 113,350
<BONDS> 430,096
0
0
<COMMON> 149
<OTHER-SE> 196,371
<TOTAL-LIABILITY-AND-EQUITY> 777,390
<SALES> 363,609
<TOTAL-REVENUES> 363,609
<CGS> 276,764
<TOTAL-COSTS> 276,764
<OTHER-EXPENSES> 54,406
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,573
<INCOME-PRETAX> 16,419
<INCOME-TAX> 9,513
<INCOME-CONTINUING> 6,906
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,906
<EPS-BASIC> .49
<EPS-DILUTED> .49
</TABLE>
