UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 2000
OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-27618
COLUMBUS McKINNON CORPORATION
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(Exact name of registrant as specified in its charter)
New York 16-0547600
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
140 John James Audubon Parkway, Amherst, N.Y. 14228-1197
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (716) 689-5400
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Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of Class which registered
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Common Stock, $0.01 Par Value NASDAQ National Market
Securities pursuant to section 12(g) of the Act: NONE
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of May 31, 2000 was $159,282,351.
The number of shares of common stock outstanding as of May 31, 2000
was: 14,896,745 shares.
Documents Incorporated By Reference
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None
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COLUMBUS McKINNON CORPORATION
2000 Annual Report on Form 10-K
PART I
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This annual report may include "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors that could
cause the actual results of the Company to differ materially from the results
expressed or implied by such statements, including general economic and business
conditions, conditions affecting the industries served by the Company and its
subsidiaries, conditions affecting the Company's customers and suppliers,
competitor responses to the Company's products and services, the overall market
acceptance of such products and services, 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.
Item 1. Business.
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Overview
Columbus McKinnon ("Columbus McKinnon" or the "Company"), established in
1875, is a broad-line designer, manufacturer and supplier of sophisticated
material handling products and integrated material handling solutions that are
widely distributed to industrial and consumer markets worldwide. The Company's
material handling products are sold, domestically and internationally,
principally to third party distributors through diverse channels and, to a
lesser extent, directly to manufacturers and other end-users. The Company's
integrated material handling solutions businesses primarily deal directly with
end-users. For the year ended March 31, 2000, the Company generated net sales
and income from operations of approximately $736.3 million and approximately
$68.0 million, respectively.
The Company's Products segment includes a wide variety of electric, lever,
hand and air-powered hoists; hoist trolleys; industrial crane systems, such as
bridge, gantry and jib cranes and light-rail systems; alloy, carbon steel and
kiln chain; closed-die forged attachments, such as hooks, shackles, logging
tools and loadbinders; industrial components, such as mechanical and
electromechanical actuators, mechanical jacks and rotary unions; and
below-the-hook lifters. Through innovative design and manufacturing expertise
developed by the Company and through selective acquisitions, the Company has
established a leading market share in many of its product lines. Columbus
McKinnon believes it has more overhead hoists in use in North America than all
of its competitors combined. The Company's products and customer base are highly
diversified; no single product accounted for more than 1%, and no individual
customer accounted for more than 5%, of net Products segment sales for the year
ended March 31, 2000. For the year ended March 31, 2000, the Company's Products
segment generated net sales and income from operations before amortization of
approximately $511.3 million and approximately $75.4 million, respectively.
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As a result of its fiscal 1998 acquisitions of Univeyor A/S ("Univeyor")
and Automatic Systems, Inc ("ASI"), formerly LICO, Inc. , the Company has also
positioned itself as a leader in the project design, management and
implementation of integrated material handling systems that are designed to meet
specific applications of end-users to increase productivity. These businesses
have formed the foundation for the Company's two Solutions segments, Solutions -
Industrial and Solutions - Automotive. The delivered products of these segments
include various types of conveyor systems as well as operator-controlled
manipulators and scissor lifts, light-rail systems and tire shredders. For the
year ended March 31, 2000, the Company's Solutions - Industrial segment
generated net sales and income from operations before amortization of
approximately $68.6 million and approximately $6.8 million, respectively, and
the Company's Solutions - Automotive segment generated net sales and income from
operations before amortization of approximately $156.4 million and approximately
$2.3 million, respectively.
The Company believes that the demand for material handling products and
services has increased in recent years and will continue to increase in the
future as a result of several favorable trends which require businesses to
devote greater attention and resources to more efficiently manage and control
the flow of materials, inventory and finished goods. These trends include:
Productivity Enhancement. Companies increasingly need to enhance
profitability through productivity improvement and operating cost reductions to
remain competitive. At the same time, the changing global buying culture and
growth of electronic commerce is increasing customer demands for cheaper,
faster, more accurate and customized product delivery. Efficient physical
movement of merchandise from producer to consumer has become a priority in order
to facilitate the fastest movement of materials and delivery of services at the
lowest cost. In response to competitive pressures, and customer demands,
companies are demanding more material handling products and services to maximize
the productivity and efficiency of their operations. The material handling
products and solutions offered by the Company enhance productivity by allowing
materials to be lifted, positioned, and moved quickly and accurately while
reducing personnel requirements.
Safety Regulations and Concerns. In the United States, federal and state
workplace safety regulations such as the Occupational Safety and Health Act
("OSHA") and the Americans with Disabilities Act, and the competitive need to
reduce costs such as health insurance premiums and workers' compensation
expenses, are forcing companies to seek safer, more efficient ways to lift,
position and move loads. As a result, U.S. companies are equipping their
facilities with more material handling products to enable these tasks to be
performed with reduced risk of personal injury. The Company believes that many
material handling products, such as those produced by the Company, are essential
to any organization that moves objects repetitively and seeks to enhance worker
safety.
Workforce Diversity. The number of women, disabled and older persons in the
U.S. work force is continuing to increase. As a result, companies are equipping
their facilities with more material handling products and systems to enable
workplace tasks to be performed safely, efficiently and with less physical
stress. The Company believes that increasing diversity in the workforce will
continue to increase demand for material handling products and solutions.
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Outsourcing of Material Handling Project Design and Management. To improve
productivity and cost efficiency, many businesses are outsourcing non-core
business functions. As a result, many companies are increasingly relying on
material handling systems integrators and manufacturers to assume the project
design, management, implementation and maintenance responsibilities for both
workstation and facility-wide material handling systems. The trend toward
outsourcing material handling project design and management has expanded the
overall demand for material handling products and created opportunities for
integrated systems providers who also sell products to include their own
products in the systems they design and install.
The Company has extended its product lines and penetrated new markets in
recent years through several acquisitions which have been successfully
integrated into the Company. Over the past five years, the Company has made
fourteen acquisitions which have (i) enhanced the Company's position as the
largest North American manufacturer of overhead hoists, operator-controlled
manipulators and alloy chain, (ii) enabled the Company to broaden its product
and service offerings and (iii) provided the Company with cross-selling
opportunities into other segments of the material handling and lifting industry.
As a result of internal growth and acquisitions, the Company's net sales and
income from operations have increased to approximately $736.2 million and $68.0
million, respectively, for the year ended March 31, 2000 from approximately
$172.3 million and $18.3 million, respectively, in fiscal 1995, representing
compound annual growth rates of approximately 33.7% and 30.0%, respectively.
Key Strengths
The Company attributes its strong competitive position to the following key
strengths:
Leading Market Position and Strong Brand Names. The Company has developed
its leading market position over its nearly 125-year history by emphasizing
technological innovation, manufacturing excellence and superior after-sale
service. Columbus McKinnon is the largest manufacturer of hoists, alloy and high
strength carbon steel chain and operator-controlled manipulators in North
America. The Company believes it has more overhead hoists in use in North
America than all of its competitors combined and estimates that 69% of its
domestic Products segment sales (approximately 37% of total net sales) are into
markets where the Company is the leading supplier. Through its Solutions
segments, the Company is also a leading provider of integrated material systems
with strong market share in the United States and Europe. The Company's brand
names, including Abell-Howe, ASI, American Lifts, Big Orange, Budgit, Chester,
CM, Coffing, Duff-Norton, Gaffey, Hammerlok, Herc-Alloy, Larco, Lister,
Positech, Shaw-Box, Univeyor and Yale, are among the most recognized and
respected in the material handling industry. The Company believes that its
strong brand name recognition, together with its large installed base of
products and systems, provide it with a significant competitive advantage in
selling its full product line to existing and new customers as well as providing
repair and replacement parts.
Preferred Provider to Major Distributors. The Company enjoys long-standing
relationships with, and is a preferred provider to, many of North America's
largest distributors of industrial products. Since 1990, during a period of
significant consolidation among distributors of material handling equipment, the
Company has maintained and enhanced its relationships with leading distributors
and distributor groups. The Company believes that its ability to retain existing
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customers and attract new customers is attributable to its ongoing commitment to
customer service and satisfaction. For example, the Company maintains close
contact with its customers and provides prompt aftermarket service to end-users
of its products through a network of independent distributors staffed with
Company-trained professionals at over 450 hoist parts, product, service and
repair centers, and 14 chain service centers. Additionally, to ensure continuing
product development and market awareness, the Company sponsors advisory boards
composed of representatives of its largest distributors and aftermarket sales
and service network. The Company believes that it has successfully increased
sales and market share by leveraging its strong distribution relationships and
increasing the number of Columbus McKinnon products carried by many of its
distributors.
Diversified Products, Markets, and Customer Base. Among all of its
competitors in the material handling industry, the Company believes that it
offers the most extensive line of material handling products to the widest range
of distribution channels for application in the most diverse range of end
markets. No single product accounted for more than 1% of net Products segment
sales for the year ended March 31, 2000. In addition, the Company's products are
sold to over 20,000 general, specialty and service-after-sale distributors and
original equipment manufacturers ("OEMs") for various applications in the
following industries: general manufacturing, marine, agricultural, power
generation, vehicle assembly, entertainment, construction, mining, crane
building, transportation, logging, oil and gas production, pulp and paper,
primary metals production and steel processing, warehousing and distribution,
and food and beverage. The Company also sells its products for consumer use to
several thousand hardware, trucking and transportation, farm hardware and rental
outlets. No single end-user, distributor or customer accounted for more than 5%
of net Products segment sales for the year ended March 31, 2000. General Motors
Corporation, which deals principally with the Company's Solutions - Automotive
segment, accounted for approximately 13% of the Company's net sales for the year
ended March 31, 2000. The Company believes that the diversity of its product
offering, distribution channels and end markets provides significant competitive
advantages and minimizes its dependence on any particular product, market,
customer or geographic region.
Highly Integrated and Synergistically Linked Operations. The Company
believes that it will continue to achieve revenue and cost synergies through the
increased integration of acquired and existing operations. The Company's diverse
operations are currently linked in a number of synergistic ways, including:
o Cross-selling and cooperative strategies
o Consolidated purchasing activities
o Integrated internal supply networks
o Centralized internal administration support systems
o Integrated capital planning
o A Company-wide Enterprise Resource Planning system that supports
integrated production and inventory planning, resource allocation and
integrated business processes across multiple facilities and functions
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o A matrix organization consisting of operating groups of manufacturing
facilities with similar business processes which are combined with sales
and marketing groups to form business units
o Cross-operational and cross-functional product and process development
capabilities, including 3-D modeling in a multi-functional and facility
team environment
o Significant human resource sharing among business units and operating
groups
Limited Exposure to Cyclicality. The Company believes that its exposure to
the cyclicality of its end-user markets is mitigated as a result of several
factors, including:
o Diversified product line, distribution channels and end-user base
o Geographic diversity, with approximately 25% of fiscal 2000 net sales
outside of the United States
o Approximately 75% of the Company's Product segment sales are classified
as maintenance, repair, operating and production ("MROP") supplies, which
have significantly lower per unit price points than capital goods and are
generally considered "must have" items, irrespective of prevailing
conditions
o Ability to manage in an economic downturn, including (i) the ability to
control production in response to changes in demand and avoid
unintentional inventory buildup and (ii) the ability to manage the
Company's mix of fixed and variable costs
Experienced Management Team with Significant Ownership Interest.
o Top seven executives have 165 years of relevant industry experience
o Management, Directors and insiders collectively own approximately 18% of
the Company's outstanding common stock
o The Columbus McKinnon ESOP owns approximately 10% of the Company's
outstanding common stock and includes substantially all of the Company's
domestic, non-union employees
Business Strategy
The Company's strategic objective is to further enhance its position as a
leading designer, manufacturer and distributor of material handling products and
solutions, both domestically and internationally. The Company plans to achieve
this objective through the continued implementation of its multi-tiered
strategy, which includes the following:
Leverage Strong Competitive Position - The Company's substantial installed
base of products, premier engineering capabilities and close relationships with
diverse distribution channels enable it to increase sales and enhance customer
service by:
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o Selling new and acquired products and services to existing customers and
distribution channels
o Selling existing products and services to new customers and distribution
channels, including those served by acquired businesses
- Expand the operations of the Solutions - Industrial segment, which has
a strong foundation in Europe, to further penetrate North America,
Latin America and Asia
- Diversify the revenue stream of the Solutions - Automotive segment and
generate incremental sales from other U.S. and foreign auto
manufacturers, auto parts suppliers and other new industrial customers
o Anticipating customer needs and developing new and improved products
o Expanding its strong service-after-sale parts, repair, and product
replacement business by providing additional services such as field parts
stocking and repair capabilities
Focus on Quality, Productivity and Efficiency - The Company continually
focuses on improving its products, manufacturing methods and general operating
processes.
o ISO 9000 Certification - Most of the Company's factories and distribution
centers are ISO 9000 certified. All others either meet the requirements
for certification, or are in process of reaching compliance.
o Process and Productivity Improvement - Ongoing efforts to improve
operations and increase productivity include the following:
- Reducing overall business and production cycle times from receipt of
order to collection of cash
- Reducing machine set-up times and inventory levels
- Establishing efficient facility layouts
- Integrating all business functions and facilities into one seamless
enterprise resource planning system known as CMBIS (Columbus McKinnon
Business Information System)
- Continuing to enhance CMBIS to increase productivity and provide
timely information
- Investing in capital equipment that adds economic as well as
customer service value, including productivity enhancing machinery and
integrated engineering systems such as 3-D CAD/CAM systems
- Providing incentives to all associates to use capital wisely by paying
incentive bonuses based upon EVA(R)
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- Operating in a team environment empowering associates to contribute to
the success of the Company and its customers
o Purchasing Cost Savings - The Columbus McKinnon Purchasing Council is
responsible for Company-wide procurement of most major commodity groups
including steel, motors, bearings and other components. Through its
Purchasing Council, the Company is leveraging the combined buying power
of its diverse operations to source quality components and services at
reduced prices.
o Product Rationalization - The Company believes that its portfolio of
brands with similar offerings in certain product lines provides
opportunities for rationalization.
o Component Rationalization - The Company is achieving significant cost
reductions and increasing product quality by value engineering high
volume components used in multiple products. By value engineering
components to achieve greater standardization, the Company is improving
product manufacturability and enhancing ease of assembly.
o Manufacturing Rationalization - Through the creation of "centers of
excellence", the Company believes consolidated component manufacturing
for multiple products at multiple assembly sites will create additional
efficiencies and quality improvements.
o Facility Rationalization - The Company believes that significant fixed
cost reductions and margin improvements are attainable through continued
rationalization and consolidation of certain of its existing facilities.
New Product Development - The Company will continue to introduce new
material handling products and services developed internally to satisfy customer
needs and to enhance its ability to serve its markets. Recent examples include:
o A safer air balancer, an operator assisted light load air powered lifting
device
o A new short handle puller, having less weight and requiring less space,
for the utility industry
o New top-running and underhung end trucks, more cost effective, for the
crane-builder industry
o A new mini-load crane, a high speed, light weight picking device for
warehouse applications
Continue to Implement CraneMart(TM) Strategy - In fiscal 1999, the Company
initiated its CraneMart(TM) strategy to build an integrated North American
network of fully capable Company-owned and independent crane builders. The
acquisitions of Abell-Howe Crane, Inc. in August 1998, the merger with GL
International, Inc. in March 1999, and the acquisition of Washington Equipment
Company in April 1999 were the Company's first significant steps in the
implementation of CraneMart(TM).
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o CraneMart(TM) participants utilize Columbus McKinnon's products and parts
in their own offerings and receive a full range of services from the
Company including best pricing and products, parts distribution rights,
dedicated technical support and shared resources.
o The Company has formed additional strategic alliances by agreement with
approximately 50 independent participants, in major North American
industrial markets.
o The Company believes that CraneMart(TM) will enhance the Company's
position as a full-service supplier of hoists, cranes and components and
will enable it to expand its product and service offerings to meet the
increasing demands of its end-users including timely parts availability
and service.
Increase Penetration of International Markets - The Company maintains a
distributor network in approximately 50 countries and has manufacturing
facilities in Canada, Mexico, Germany, The United Kingdom, Denmark, France and
China. The Company intends to increase international sales and enhance margins
through the implementation of the following initiatives:
o Worldwide Parts Distribution - The Company is streamlining its global
supply chain of parts and services to end-users in order to increase
margins and enhance customer service.
o Global Sales and Marketing - The Company's objective is to market and
sell its products into Latin America, Asia and Europe and obtain the same
leading market share that it has achieved in North America. To execute
this strategy, the Company has established sales and service offices in
the major market areas of each region.
o Mexican Manufacturing Strategy - The Company plans to increase sales and
achieve margin improvements by manufacturing and exporting a broader
array of high quality, low cost products and components from its facility
in Mexico to further penetrate markets in North and South America. The
Company's Mexican facility, located near Mexico City, currently produces
hand-powered and electric hoists and chain for the U.S. and Mexican
markets.
o Chinese Manufacturing Strategy - Similar to its Mexican initiative, the
Company's Chinese strategy involves capitalizing on China's low cost
operating environment by manufacturing and exporting products to markets
in Asia, Europe and North America. The Company currently operates two
factories in China which produce textile slings, pallet trucks and
ratchet lever hoists for delivery and sale into Europe, under the Yale
brand name.
Penetrate New Distribution Channels - The Company is leveraging its
established brand names and leading market position into new distribution
channels to generate incremental sales at attractive margins.
o The Internet and E-Commerce - The Company's web site at www.cmworks.com
currently includes a comprehensive catalog of Columbus McKinnon's hoist
products. A team led by executive management is developing the Company's
e-commerce strategy and implementation plan, which is being executed by
the Company's department of dedicated internet professionals. Pursuant to
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its strategic plan, the Company will expand its web site to include
maintenance manuals, pricing information, advertisements and customer
service information. Ultimately, the web site will facilitate e-commerce
for all of the Company's sales divisions. One product line is expected to
be offered for sale on the web site as a pilot program during fiscal
2001.
o Telesales - The Company has launched a telesales effort focused on
smaller industrial distributors and users of the Company's industrial
products.
Pursue Selective Acquisitions - The Company intends to selectively pursue
strategic acquisitions, joint ventures and alliances that strengthen the
Company's leadership position in the material handling and lifting industry.
Potential strategic combinations will be evaluated based on their ability to,
among other things:
o Complement existing businesses
o Expand product lines
o Broaden distribution channels
o Increase the Company's international presence
o Enhance shareholder value and the Company's EVA(R)position
Recent Developments
In January 2000, the Company retained the services of an investment banking
firm to advise it on strategic alternatives to maximize shareholder value,
including a sale or merger of the Company.
Segment Information
During fiscal 2000 the Company classified its operations into the following
three business segments:
Products. The Company's Products segment designs, manufactures and
distributes a broad range of material handling products for various industrial
applications and for consumer use. The Products segment includes a wide variety
of electric, lever, hand and air-powered hoists; hoist trolleys; industrial
crane systems such as bridge, gantry and jib cranes; alloy, carbon steel and
kiln chain; closed-die forged attachments, such as hooks, shackles, logging
tools and loadbinders; industrial components, such as mechanical and
electromechanical actuators, mechanical jacks and rotary unions; and
below-the-hook special purpose lifters. These products are typically
manufactured for stock and are sold through a variety of commercial distributors
and to end-users. The Company also sells these products to the consumer market
through a variety of retailers and wholesalers.
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Solutions - Industrial. The Company's Solutions - Industrial segment
is engaged primarily in the design, fabrication and installation of integrated
workstation and facility-wide material handling systems and in the design and
manufacture of operator-controlled manipulators and tire shredders. The products
and services of the Solutions - Industrial segment are highly engineered, are
generally built to order and are primarily sold directly to end-users for
specific applications.
Solutions - Automotive. The Solutions - Automotive segment is
comprised entirely of the operations of ASI, which was acquired in March 1998.
ASI's primary activity is the conception, design and implementation of complex
material handling systems, and its primary products include overhead and
inverted power-and-free conveyors, as well as state-of-the-art electrified
monorail systems, belt skid conveyors and skillet systems.
Financial information regarding the business segments is presented in Note
17 to the Company's audited consolidated financial statements included elsewhere
herein.
Products and Services
Products Segment
The Company's Products segment primarily designs, manufactures and
distributes a broad range of material handling, lifting and positioning products
for various applications in industry and for consumer use. These products are
typically manufactured for stock and are sold through a variety of distributors.
In fiscal 2000, net sales of the Products segment were approximately $511.3
million or approximately 69.4% of the Company's net sales, of which
approximately $380.5 million (74%) were domestic and $130.8 million (26%) were
international. The following table sets forth certain sales data for the
products of the Products segment, expressed as a percentage of net sales of this
segment for fiscal 2000:
Hoists...................................... 53.7%
Chain and forged attachments................ 24.4
Industrial overhead cranes.................. 14.4
Industrial components....................... 7.5
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100 %
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Hoists. The Company manufactures a variety of electric chain hoists,
electric wire rope hoists, hand-operated hoists, lever tools, air balancers and.
air-powered hoists. Load capacities for the Company's hoist product lines range
from one-eighth of a ton to 100 tons. These products are sold under its Budgit,
Chester, CM, Coffing, Shaw-Box, Yale and other recognized trademarks. The
Company's hoists are sold for use in a variety of general industrial
applications, as well as for use in the entertainment, consumer, rental, health
care and other emerging product markets. The Company also supplies hoist
trolleys, driven manually or by electric motors, for the industrial, consumer
and OEM markets.
The Company also offers a line of custom-designed, below-the-hook tooling
and clamps. Below-the-hook tooling and clamps are specialized lifting apparatus
used in a variety of lifting activities performed in conjunction with hoist and
chain applications.
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Chain and Forged Attachments. The Company manufactures alloy and carbon
steel chain for various industrial and consumer applications. Federal
regulations in the United States require the use of alloy chain, which the
Company first developed, for overhead lifting applications because of its
strength and wear characteristics. A line of the Company's alloy chain is sold
under the Herc-Alloy brand name for use in overhead lifting, pulling and
restraining applications. The Company also sells specialized load chain for use
in hoists, as well as three grades and multiple sizes of carbon steel
welded-link chain for various load securement and other non-overhead lifting
applications. As a result of the acquisition of Lister Bolt & Chain, Ltd. and
Lister Chain & Forge Inc. (collectively, "Lister"), the Company now also
manufactures kiln chain sold primarily to the cement manufacturing market and
anchor and buoy chain sold primarily to the United States and Canadian
governments.
The Company also manufactures a complete line of alloy and carbon steel
closed-die forged attachments, including hooks, shackles, hitch pins, master
links and loadbinders. These forged attachments are used in virtually all types
of chain and wire rope rigging applications in a variety of industries,
including transportation, mining, railroad, construction, marine, logging,
petrochemical and agriculture.
In addition, the Company manufactures carbon steel forged and stamped
products, such as loadbinders, logging tools and other securement devices, for
sale to the industrial, consumer and logging markets through industrial
distributors, hardware distributors, mass merchandiser outlets and OEMs.
Industrial Overhead Cranes. The Company entered the crane manufacturing
market through the August 1998 acquisition of Abell-Howe, a Chicago-based
regional manufacturer of jib and overhead bridge cranes. The Company's merger
with GL in March 1999 and its acquisition of Washington Equipment Company in
April 1999 established the Company as a significant participant in the
strategically important crane building and servicing markets. Crane builders
represent a specialized distribution channel for electric wire rope hoists and
other crane components.
Industrial Components. Through the Duff-Norton division of its Yale
Industrial Products, Inc. ("Yale") subsidiary, the Company designs and
manufactures industrial components such as mechanical and electromechanical
actuators, mechanical jacks and rotary unions for sale domestically and abroad.
Actuators are linear motion devices used in a variety of industries, including
the paper, steel and aerospace industries. Mechanical jacks are heavy duty
lifting devices whose uses include the repair and maintenance of railroad
equipment, locomotives and industrial machinery. Rotary unions are devices that
transfer a liquid or gas from a fixed pipe or hose to a rotating drum, cylinder
or other device. These unions are unique in that they connect a moving or
rotating component of a machine to fixed plumbing without major spillage or
leakage. Rotary unions are used extensively in a variety of industries including
pulp and paper, printing, textile and fabric manufacturing, rubber and plastic.
The December 1998 acquisition of Gautier, a French rotary union and swivel joint
manufacturer, complemented Duff-Norton's product line while expanding its global
reach.
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Solutions - Industrial Segment
The Solutions - Industrial segment is engaged primarily in the design,
fabrication and installation of integrated work station and facility-wide
material handling systems and in the manufacture and distribution of
operator-controlled manipulators, scissor lifts and tire shredders. Net sales of
the Solutions - Industrial segment in fiscal 2000 were approximately $68.6
million or approximately 9.3% of the Company's total net sales, of which
approximately $42.4 million (62%) were domestic and approximately $26.2 million
(38%) were international. The following table sets forth certain sales data for
the products and services of the Solutions segments, expressed as a percentage
of net sales of these segments for fiscal 2000:
Integrated material handling conveyor systems........ 54.7%
Manipulators......................................... 19.6
Scissor lifts........................................ 17.2
Other................................................ 8.5
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100 %
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Integrated Material Handling Conveyor Systems. Conveyors are the most
important component of a material handling system, reflecting their high
functionality for transporting material throughout manufacturing and warehouse
facilities. Univeyor specializes in designing computer-controlled and automated
powered roller conveyors for use in warehouse operations and distribution
systems. The Company's Handling Systems and Conveyors, Inc. subsidiary
specializes in designing, manufacturing and servicing overhead power-and-free
conveyor systems for industrial customers.
Scissor Lifts. The American Lifts division of Yale manufactures hydraulic
scissor lift tables and other engineered lifting products. These products
enhance workplace ergonomics and are sold primarily to customers in the
manufacturing, construction, general industrial and air cargo industries.
Manipulators. The Company manufactures two lines of sophisticated
operator-controlled manipulators under the names Positech and Conco. These
products are articulated mechanical arms with specialized end tooling designed
to perform lifting, rotating, turning, tilting, reaching and positioning tasks
in a manufacturing process. Utilizing various models and size configurations,
the Company can offer custom-designed hydraulic, pneumatic, and electric
manipulators for a wide variety of applications where the user requires
multi-axial movement in a harsh or repetitive environment.
Solutions - Automotive Segment
The Solutions - Automotive segment, through ASI, is engaged primarily in
the conception, design and implementation of complex material handling systems
and the design, manufacture and distribution of overhead and inverted
power-and-free conveyors, state-of-the-art electrified monorail systems, belt
skid conveyors and skillet systems. Net sales of the Solutions - Automotive
segment in fiscal 2000 were approximately $156.4 million or approximately 21.2%
of the Company's total net sales, of which approximately $129.6 million (83%)
were domestic and approximately $26.8 million (17%) were international.
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Overhead and Inverted Power-and-Free Conveyor Systems. ASI's conveyor
systems are used primarily in automotive and agri-business equipment plants for
assembly and paint operations. These conveyor systems deliver products of
various size and weight at moderate speeds to multiple locations within a
manufacturing or assembly plant, and can be coded to provide inventory status,
carrier location and other information.
Electrified Monorail Systems. These fast and efficient material handling
systems can reach 300 feet per minute, and are independently powered with the
ability to move forward and backward. Monorail systems are cleaner, quieter,
more ergonomically correct and require a smaller foot print than traditional
power-and-free systems. Monorail systems are generally used in automotive body
shop and general assembly plant applications.
Fixed Skid, Skillet and Pallet Conveyor Systems. These systems are floor
mounted modular conveyors providing high density storage and delivery with
horizontal and vertical travel flexibility. They are often used in harsh
environments for painting and delivery applications and can be supplied in
light-duty belt-driven or heavy duty chain-driven styles.
Specialized Products. ASI produces a full range of high lift and low lift
forks for automotive body transfers between systems, automatic drop sections and
steel mill coil transfer cars.
Parts for all Products. ASI offers a complete line of spare parts for all
products to meet the maintenance needs of its customers.
Sales and Marketing
Products Segment
The Company's sales and marketing efforts in support of its Products
segment consist of the following programs:
o Factory-Direct Field Sales and Customer Service - The Company sells its
products through its own sales forces and through independent
manufacturing agents worldwide, including more than 150 dedicated
salespersons who sell hoists, chain, forged attachments, cranes, rotary
unions, actuators, jacks, and related material handling accessories.
Sales are further supported by over 250 Company-trained customer service
correspondents and sales application engineers. The Company compensates
its field sales force through a combination of base salary and commission
plan based on top line sales and a pre-established sales quota. Sales
directors and regional sales management receive a base salary and target
EVA(R) annual bonus.
o Product Advertising - The Company promotes its products by advertising in
leading trade journals as well as producing and distributing high quality
information catalogs. The Company supports its product distribution by
running cooperative "pull-through" advertising in over 50 vertical trade
magazines and directories targeting theatrical, international, consumer
and crane builder markets. The Company runs separate advertisements for
chain, hoists, forged attachments, scissor lift tables, actuators,
hydraulic jacks, hardware programs, cranes and light rail systems.
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o Trade Show Participation - Trade shows are central to the promotion of
the Company's products and, in certain cases, for the actual sale of its
products, particularly to hardware retailers. The Company participates in
more than 60 regional, national and international trade shows each year.
Shows in which the Company participates range from global events held in
Hanover, Germany, Cologne, Germany and Chicago, Illinois to local
"markets" and "open houses" organized by individual hardware and
industrial distributors. The Company also attends specialty shows for the
entertainment, rental and safety markets, as well as general purpose
industrial and consumer hardware shows. In fiscal 2000, the Company
participated in trade shows in the US, Canada, France, Mexico, Germany,
England, Argentina and Australia.
o Industry Association Membership and Participation - As a recognized
industry leader, the Company has a long history of work and participation
in a variety of industry associations. Columbus McKinnon management is
directly involved at the officer and director levels of numerous industry
associations including the following: ASMMA (American Supply and
Machinery Manufacturers Association), AWRF (Associated Wire Rope
Fabricators), PTDA (Power Transmission and Distributors Association), SCA
(Specialty Carriers and Riggers Association), WSTDA (Web Sling and Tie
Down Association), MHI (Material Handling Institute), HMI (Hoist
Manufacturers Institute), CMAA (Crane Manufacturers Association of
America), ESTA (Entertainment Services and Technology Association), NACM
(National Association of Chain Manufacturers), and AHMA (American
Hardware Manufacturers Association).
o Product Standards and Safety Training Classes - The Company conducts
on-site training programs worldwide for distributors and end-users to
promote and reinforce the attributes of the Company's products and their
safe use and operation in various material handling applications.
o Web Site - The Company's web site at www.cmworks.com currently includes
an electronic catalog of Columbus McKinnon hoist products. Potential
customers can browse through the Company's diverse product offering or
search for specific products by name or classification code and obtain
technical product specifications. In the near future, the Company plans
to post additional product catalogs, maintenance manuals, pricing
information, advertisements, and customer service information on its web
site and ultimately perform e-commerce on this web site. One product line
is expected to be offered for sale on the web site as a pilot program
during fiscal 2001.
Solutions - Industrial Segment
The products and services of the Solutions - Industrial segment are sold
primarily to large corporate end-users, including Federal Express, Volvo, United
Biscuits, Lego, Chivas Regal, J.I. Case, John Deere, DuPont, 3M, GTE, Cummins
Engine, Steelcase, Boeing, Saturn, General Electric, Waste Management and other
industrial companies, system integrators and distributors. In the sale of its
integrated material handling conveyor systems, the Company generally acts as a
prime contractor with turnkey responsibility, or as a supplier working closely
with the customer's general contractor. Sales are generated by internal sales
personnel and rely heavily on engineer-to-engineer interactions with the
customer. The process of generating client contract awards for integrated
conveyor systems generally entails receiving a request-for-quotation from
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customers and undergoing a competitive bidding process. The Solutions -
Industrial segment also sells scissor lifts and manipulators through its
internal sales force and through specialized independent distributors and
manufacturers representatives.
Solutions - Automotive Segment
ASI's sales are largely concentrated on the automotive OEM market with
General Motors and Ford representing more than 90% of total net sales. Other
customers include agricultural equipment OEMs such as John Deere and J.I. Case
and foundry customers such as Griffin Wheel. ASI's sales and marketing effort is
focused on establishing and maintaining relationships with OEM customers that
often involve significant interaction of key engineering and process design
personnel. North American sales and marketing operations are conducted from
ASI's three main offices: Kansas City, MO; Lansing, MI; and Hamilton, Ontario,
Canada. International sales and marketing operations are headquartered in Kansas
City and primarily focus on pursuing international business from existing North
American customers as they establish operations throughout the world. In
addition, ASI has relationships with a number of key suppliers in Europe and
Asia to assist in project sales, engineering support and manufacturing and
installation activity. ASI also participates in CEMA, the Conveyor Equipment
Manufacturing Association.
Distribution and Markets
Products Segment
The distribution channels for the Products segment include a variety of
commercial distributors, including general distributors, specialty distributors,
service-after-sale distributors and other distributors and end-users. The
Company also sells to the consumer market through one-step and two-step
wholesalers. In addition, the Products segment sells overhead bridge, jib and
gantry cranes, as well as certain forgings and chain assemblies, directly to
end-users.
General Distribution Channels:
o Industrial distributors are traditional mill supply distributors that
serve local or regional industrial markets and sell a variety of products
for MROP applications through their own direct sales force.
o Rigging shops are distributors who are experts in the rigging, lifting,
positioning and load securement areas of material handling. Most rigging
shops assemble and distribute chain, wire rope and synthetic slings and
distribute off-the-shelf hoists and attachments, chain slings and other
off-the-shelf products.
o Crane builders design, build, install and service overhead crane and
light-rail systems for general industry and sell a wide variety of hoists
and lifting attachments. The Company sells electric wire rope hoists and
chain hoists as well as crane components, such as end trucks, trolleys,
drives and electrification systems to crane builders.
Crane End-users:
o Crane end-users: The Company sells overhead bridge, jib and gantry
cranes, parts and service to end-users through the wholly owned crane
builders within the CraneMart(TM) network, The Company's wholly owned
crane builders (Abell-Howe, GL and Washington Equipment Company) design,
manufacture, install and service a variety of cranes ranging in capacity
from one ton to 100 tons.
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<PAGE>
Specialty Distribution Channels:
o Catalog houses market a variety of MROP supplies, including material
handling products, either exclusively through large, nationally
distributed catalogs, or through a combination of catalog and internet
sales and a field sales force. The customer base served by catalog
houses, which traditionally included smaller industrial companies and
consumers, has recently grown to include large industrial accounts and
integrated suppliers. Typically, catalog houses, particularly W.W.
Grainger, Inc., are pursuing e-commerce through their websites.
o Material handling specialists design and assemble systems incorporating
hoists, overhead rail systems, trolleys, lift tables, manipulators, air
balancers, jib arms and other material handling products to provide
end-users with solutions to their material handling problems.
o Entertainment equipment distributors design, supply and install a variety
of material handling equipment for concerts, theaters, ice shows, sports
arenas, convention centers and discos.
Service-After-Sale Distribution Channel:
o Service-after-sale distributors include over 14 chain repair service
stations and over 450 hoist parts, product, service and repair stations.
This service network is designed for easy parts and service access for
the Company's large installed base of hoists and related equipment in
North America.
OEM/Government Distribution Channels:
o Original equipment manufacturers supply various component parts directly
to other industrial manufacturers as well as private branding and
packaging of traditional Company products for material handling, lifting,
positioning and special purpose applications.
o Government sales - products are sold directly by the Company and have
expanded with the acquisition of Lister, which manufactures anchor, buoy
and mooring chain for the United States and Canadian Navies and Coast
Guards.
Consumer Distribution:
o Consumer sales, consisting primarily of carbon steel chain and
assemblies, forged attachments and hand powered hoists, are made through
five distribution channels: two-step wholesale hardware distribution
(such as Distribution America and Ace Hardware); one-step distribution
(such as Fastenal and Canadian Tire); trucking and transportation
distributors (such as U-Haul and Fruehauf); farm hardware distributors
(such as J.I. Case and Tractor Supply Company); and rental outlets.
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<PAGE>
International Distribution:
o The Company distributes virtually all of its products in over 50
countries on six continents through a variety of distribution channels.
Solutions Segments
The products and services of the Solutions segments are sold primarily to
OEMs and end-users. In the sale of its integrated material handling conveyor
systems, the Company generally acts as a prime contractor with turnkey
responsibility for its systems, or a supplier working closely with the
customer's general contractor. Sales are generated by in-house sales personnel,
and generally developed through engineer-to-engineer interactions. Products,
such as scissor lifts and manipulators are sold by Company sales employees and
specialized independent distributors.
Customer Service and Training
Products Segment
The Company maintains customer service departments staffed by well-trained
personnel for all of its Products segment sales divisions, and regularly
schedules product and service training schools for all customer service
representatives and field sales personnel. In addition, training schools for
distribution and service station personnel, as well as for end-users, are
scheduled on a regular basis at most of the Company's facilities and in the
field. The Company has more than 450 service stations worldwide that provide
local and regional repair, warranty and general service work for distributors
and end-users. End-user trainees attending various training schools maintained
by the Company include representatives of General Motors, DuPont, 3M, GTE,
Cummins Engine, General Electric and many other large industrial and theatrical
organizations.
The Company also provides, in several languages, a variety of collateral
material in video, cassette, CD-ROM, slide and print format addressing such
relevant material handling topics as the care, use and inspection of chains and
hoists, and overhead lifting and positioning safety. In addition, the Company
sponsors five separate advisory boards made up of representatives of its primary
distributors and service-after-sale network members who are invited to
participate in discussions focused on improving products and service. These
boards enable the Company and its primary distributors to exchange product and
market information relevant to industry trends.
Solutions - Industrial Segment
The Solutions - Industrial segment offers a wide range of value-added
services to customers including: an engineering review of the customer's
processes; an engineering solution for identified material handling problems;
project management; and custom design, manufacturing and installation services.
The Company also offers after-sales services including operator training and
maintenance. After-sales services are offered throughout the life of the
equipment or system installed. The typical length of after-sales service varies
depending on customer requirements, with supplemental training courses offered
as needed.
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Solutions - Automotive Segment
The Solutions - Automotive segment utilizes its world-class engineering
capabilities, comprehensive databases and sophisticated CAD systems to design
specific solutions for its customers' needs. The Company prepares detailed
manuals discussing operation, control systems, safety, maintenance and part
specifications for each new installation. ASI also provides on-site training as
well as after sales services throughout the life of the system installed. The
typical length of after-sales service varies depending on customer requirements,
with supplemental training courses offered as needed.
Recent Acquisitions
Since February 1994, the Company has acquired fourteen operations:
o In April 1999, the Company acquired Washington Equipment Company, a
manufacturer and servicer of overhead cranes, for approximately $6.4
million. This acquisition was an additional step by the Company in
furtherance of its CraneMart(R) strategy.
o In March 1999, the Company merged with GL, a full-service designer and
builder of industrial overhead bridge, gantry and jib cranes and related
components, in a pooling of interests transaction in which shares of, and
options to purchase, the Company's common stock valued at approximately
$20.6 million were exchanged for all outstanding shares and options of
GL. This acquisition was the Company's first major step in the
implementation of its CraneMart(R) strategy.
o In January 1999, the Company acquired Camlok and the Tigrip product line
for aggregate consideration of approximately $10.6 million. Camlok,
located in the United Kingdom, manufactures plate clamps, crane weighers
and related products. The German-based Tigrip produces standard and
specialized plate clamps. These acquisitions positioned the Company as a
market leader for lifting clamps in Europe.
o In December 1998, the Company acquired Gautier, a French manufacturer of
rotary unions and swivel joints, for approximately $2.9 million.
Gautier's product lines are complementary to those of the Company's
Duff-Norton division and provide the Company with additional
cross-selling and cross-branding opportunities.
o In August 1998, the Company acquired Abell-Howe, a regional manufacturer
of jib and other overhead cranes for approximately $7.0 million. This
acquisition marked the Company's entry into the complementary crane
building product line, creating significant cross-selling opportunities
for its existing hoist products.
o In March 1998, the Company acquired ASI, a designer, manufacturer and
installer of custom conveyors and material handling systems primarily for
the automotive industry, for approximately $155.0 million, including
outstanding borrowings. This acquisition strengthened the Company's
position as a leader in the project design, fabrication and installation
of automated material handling systems and provided the Company with an
established platform for increasing its sales to the automotive and
industrial manufacturing markets.
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o In January 1998, the Company acquired Univeyor, which is engaged in the
design and manufacture of automated material handling systems, for
approximately $15.0 million plus assumed liabilities. This transaction
enabled the Company, which previously had designed solutions only for
individual workstations, to offer automated material handling systems,
predominantly using powered roller conveyors, for the entire workplace.
o In December 1996, the Company acquired Lister, a manufacturer of cement
kiln, anchor and buoy chain and mining bolts, for approximately $7.0
million. This transaction complemented the Company's line of chain
products and provided the Company with access to new markets,
particularly in the international marketplace.
o In October 1996, the Company acquired the majority of the outstanding
common equity of Yale Industrial Products, Inc., a manufacturer of a
variety of lifting and positioning products, including hoists and scissor
lifts and industrial components such as actuators, jacks and rotary
unions, for approximately $270.0 million through a cash tender offer. In
January 1997, the Company acquired the remaining common equity of Yale
and effected a merger. This acquisition further complemented the
Company's product line and also provided the Company with international
operations and distribution facilities in Europe, South Africa and China.
o In November 1995, the Company acquired Lift-Tech International, Inc.
("Lift-Tech"), a manufacturer and distributor of hoists and crane
components, including wire rope and air-powered hoists, for approximately
$63.0 million. Lift-Tech's products complemented the Company's existing
hoist product lines, thereby enabling the Company to offer a broader
product line to the marketplace.
Between February 1994 and October 1995 the Company also acquired (i) the
remaining 51% equity interest in Endor, a Mexican manufacturer of hoists, for
approximately $2.0 million, (ii) certain assets of Cady Lifters, Inc., a
manufacturer of "below the hook" lifters, for approximately $0.8 million, (iii)
the assets of the Conco Division of McGill Industries, Inc., a manufacturer of
manipulators, for approximately $0.8 million and (iv) the assets of
Durbin-Durco, Inc., a manufacturer of load securement equipment and attachments,
for approximately $2.4 million.
Competition
Despite recent consolidation, the material handling industry remains highly
fragmented. The Company faces competition from a wide range of regional,
national and international manufacturers across its product and service areas in
both domestic and international markets. In addition, the Company often competes
with individual operating units of larger, highly diversified companies.
The principal competitive factors affecting the market for the products of
the Company's Products segment include performance, functionality, price, brand,
reputation, reliability, customer service and support and product availability.
Other important factors include distributor relationships, territory coverage
and the ability to service the distributor with on-time delivery and repair
services.
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The principal competitive factors affecting the market for the products and
services of the Company's Solutions segments include application solutions,
performance and price. The process of generating client contract awards for
these businesses generally entails receiving a request-for-quotation from
end-users and undergoing a competitive bidding process.
Within its Products segment, the Company competes in the sale of hoists
with Mannesman Dematic, Kito-Harrington, Ingersoll-Rand, KCI Konecranes and
Morris Material Handling; in chain with Campbell, Peerless Chain Company and
American Chain and Cable Company; in forged attachments with the Crosby Group
and BTC; in industrial components with Deublin, Joyce-Dayton and Nook
Industries; and in crane building with Mannesman Dematic, KCI Konecranes, Morris
Material Handling and R. Stahl. Within its Solutions segments, the Company
competes in providing industrial solutions with Rapistan Systems, KCI Konecranes
and Jervis B. Webb; and in providing automotive solutions with Rapistan Systems,
Jervis B. Webb, Dearborn Mid-West, Allied UniKing, Fata Automation SpA and
Daifuku.
Employees
At March 31, 2000, the Company had approximately 4,145 employees, 3,256 in
the United States, 361 in Canada, 120 in Mexico and 408 in Europe. Approximately
1,425 of the Company's employees are represented under 12 separate collective
bargaining agreements which terminate at various times between May 2001 and
March 2004.
During the past five years, the only interruptions or curtailments of the
Company's business due to labor disputes was a five-day work stoppage at a
Duff-Norton plant in Charlotte, North Carolina in fiscal 1997, prior to its
acquisition by the Company. The Company believes that its relationship with its
employees is good. In support of this relationship, the Company has maintained
an Employee Stock Ownership Plan since 1988 and also uses incentive-based
compensation programs that are linked to the Company's profitability and
increase in shareholder value.
Backlog
Products Segment
The Company's backlog of orders at March 31, 2000 was approximately $52.5
million compared to approximately $56.6 million at March 31, 1999. The Company's
orders for standard products are generally shipped within one week. Orders for
products that are manufactured to customers' specifications are generally
shipped within four to twelve weeks. The Company does not believe that the
amount of its backlog orders is a reliable indication of its future sales.
Solutions - Industrial Segment
Revenues from the Company's Solutions - Industrial segment are generally
recognized within one to six months. The Company's backlog of orders at March
31, 2000 was approximately $11.3 million compared to approximately $7.5 million
at March 31, 1999.
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Solutions - Automotive Segment
Revenues from the Company's contracts for automated systems are generally
recognized within 12 to 18 months. The Company's backlog of orders at March 31,
2000 was approximately $85.4 million compared to approximately $102.4 million at
March 31, 1999.
Raw Materials and Components
The principal raw materials used by the Company are structural steel and
processed steel bar, forging bar steel, steel rod and wire, steel pipe and
tubing and tool steel which are available from multiple sources. The Company
purchases most of these raw materials from a limited number of strategic and
preferred suppliers under long-term agreements which are negotiated on a
company-wide basis to take advantage of volume discounts and to protect the
Company from price fluctuations. Although the steel industry is cyclical and
steel prices can be volatile, the Company has not been significantly impacted in
recent years by increases in steel prices.
The Company also purchases components such as motors, bearings and gear
housings and castings. These components are generally available from several
suppliers.
The Company estimates that its total materials cost, including steel
products and components, represented approximately 31% of net sales in fiscal
2000. The Company generally seeks to pass on materials price increases to its
customers, although a lag period often exists. The Company's ability to pass on
these increases is determined by competitive conditions.
Environmental and Other Governmental Regulation
Like many manufacturing companies, the Company is subject to various
federal, state and local laws relating to the protection of the environment. To
address the requirements of such laws, the Company has adopted a corporate
environmental protection policy which provides that all facilities owned or
leased by the Company shall, and all employees of the Company have the duty to,
comply with all applicable environmental regulatory standards, and the Company
has initiated an environmental auditing program for its facilities to ensure
compliance with such regulatory standards. The Company has also established
managerial responsibilities and internal communication channels for dealing with
environmental compliance issues that may arise in the course of its business.
Because of the complexity and changing nature of environmental regulatory
standards, it is possible that situations will arise from time to time requiring
the Company to incur expenditures in order to ensure environmental regulatory
compliance. However, the Company is not aware of any environmental condition or
any operation at any of its facilities, either individually or in the aggregate,
which would cause expenditures that would result in a material adverse effect on
the Company's results of operations or financial condition and, accordingly, has
not budgeted any material capital expenditures for environmental compliance for
fiscal 2000.
On or about February 1, 2000, the Company received notification from the
U.S. Attorney's Office for the Northern District of Iowa that the U.S. Attorney
intended to file a complaint on behalf of the United States Environmental
Protection Agency ("EPA") against the Company for alleged violations of certain
chromium air emissions standards under the National Emission Standards for
Hazardous Air Pollutants ("NESHAPS") pursuant to the federal Clean Air Act in
connection with the Company's facility located in Laurens, Iowa. On or about
June 21, 2000, the Company agreed informally to a settlement-in-principle with
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the U.S. Attorney's Office and EPA, under which the Company agreed to pay a
civil penalty of $60,000 to resolve any and all liabilities in connection with
the matter. The informal settlement agreement should not be construed as an
admission of any liability by the Company. It is anticipated the informal
settlement agreement will be memorialized in detailed settlement documents to be
negotiated by the Company and the U.S. Attorney's Office, representing EPA.
Although the Company believes this matter will be closed within the next several
months by the execution of the appropriate settlement documentation and the
payment of the indicated settlement amount, there can be no guarantee that the
parties will be able to reach agreement on the details of the documentation
within a time frame acceptable to the parties. In such an unlikely event, there
may be litigation regarding the alleged violations. At this time, it is not
possible to determine the extent to which penalties, if any, may be incurred by
the Company as a result of any such potential litigation.
The Company has agreed to purchase a facility that it has been leasing,
located in Charlotte, North Carolina. Under the terms of the purchase agreement,
the Company has agreed to undertake appropriate action to close an underground
storage tank ("UST") located at the facility, in compliance with applicable
regulatory standards. The Company is in the process of determining the
appropriate steps required to close the UST. At this early stage of the closure
process, it is not possible to determine the costs associated with such closure.
Certain federal and state laws, sometimes referred to as Superfund laws,
require certain companies to remediate sites that are contaminated by hazardous
substances. These laws apply to sites owned or operated by a company, as well as
certain off-site areas for which a company may be jointly and severally liable
with other companies or persons. The required remedial activities are usually
performed in the context of administrative or judicial enforcement proceedings
brought by regulatory authorities. The Company has been involved recently in
four administrative enforcement proceedings in connection with the remediation
of certain facilities, which neither the Company nor any subsidiary of the
Company has ever owned or operated but with regard to which the Company or a
subsidiary of the Company has been identified as one of several potentially
responsible parties ("PRPs"). The Company has cooperated with the regulatory
authorities in connection with these environmental proceedings. From the
perspective of the Company, with the exception of the one environmental
administrative proceeding discussed below, these matters have been, and are
expected to continue to be, minor matters not requiring substantial effort or
expenditure on the part of the Company.
The Company has been identified by the New York State Department of
Environmental Conservation ("NYSDEC"), along with other companies, as a PRP at
the Frontier Chemical Site in Pendleton, New York ("Pendleton Site"), a site
listed on NYSDEC's Registry. From 1958 to 1977, the Pendleton Site had been
operated as a commercial waste treatment and disposal facility. The Company sent
waste pickling liquor generated at its facility in Tonawanda, New York to the
Pendleton Site during the period from approximately 1969 to 1977, and the
Company is participating with other PRPs in conducting the remediation of the
Pendleton Site under a consent order with NYSDEC. Construction in connection
with the remediation has been completed and this project is currently in its
operations and maintenance phase. As a result of a negotiated cost allocation
among the participating PRPs, the Company has paid its pro rata share of the
remediation construction costs and accrued its share of the ongoing operations
and maintenance costs. As of March 31, 2000, the Company has paid approximately
$1.0 million in remediation and ongoing operations and maintenance costs
associated with the Pendleton Site. The participating PRPs have identified and
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commenced a cost recovery action against a number of other parties who sent
hazardous substances to the Pendleton Site. If any of the currently
nonparticipating parties identified by the participating PRPs pay their pro rata
shares of the remediation costs, then the Company's share of total site
remediation costs will decrease. Settlements have been reached with 45 of the
113 defendants in the cost recovery action, and additional settlements are
expected from a few of the remaining defendants in the future. However, the
Company has not yet received payment in connection with such settlements. The
Company also has entered into a settlement agreement with one of its insurance
carriers in the amount of $734,130 in connection with the Pendleton Site and has
received payment in full of the settlement amount.
For all of the currently known environmental matters, the Company has
accrued a total of approximately $860,000 as of March 31, 2000, which, in the
opinion of the Company's management, is sufficient to deal with such matters.
Further, the Company's management believes that the environmental matters known
to, or anticipated by, the Company should not, individually or in the aggregate,
have a material adverse effect on the Company's cash flow, results of operations
or financial condition. However, there can be no assurance that potential
liabilities and expenditures associated with unknown environmental matters,
unanticipated events, or future compliance with environmental laws and
regulations will not have a material adverse effect on the Company.
The Company's operations are also governed by many other laws and
regulations, including those relating to workplace safety and worker health,
principally OSHA and regulations thereunder. The Company believes that it is in
material compliance with these laws and regulations and does not believe that
future compliance with such laws and regulations will have a material adverse
effect on its cash flow, results of operations or financial condition.
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Item 2. Properties.
------- -----------
The Company maintains its corporate headquarters in Amherst, New York. The
principal properties utilized by the Company for its continuous operations
consist of 70 manufacturing and distribution and sales facilities, of which 45
are located in the United States, 7 are located in Canada, 2 are located in
Mexico, 11 are located in Europe, 3 are located in Asia and 2 are located in
Africa. The following table summarizes the Company's headquarters and principal
manufacturing and distribution facilities by business segment:
<TABLE>
<CAPTION>
Approximate Floor Space
(in thousands of square feet)
Owned Leased Total
----- ------ -----
<S> <C> <C> <C>
Corporate Headquarters 52,000(1) - 52,000
Products (54 facilities):
United States 1,859,647 598,799 2,458,446
International 399,066 180,230 579,296
Solutions - Industrial (9 facilities):
United States 322,934 24,500 347,434
International 85,500 21,250 106,750
Solutions - Automotive (7 facilities):
United States 81,475 69,700 151,175
International - 1,900 1,900
-----------------------
(1) Approximately 26,000 square feet is subject to an unaffiliated party through
June 30, 2003.
</TABLE>
The Company also leases a number of sales offices and minor warehouses
throughout North America, Europe, Asia and South America.
The Company believes that its properties have been adequately maintained,
are in generally good condition and are suitable for the Company's business as
presently conducted. The Company believes its existing facilities provide
sufficient production capacity for its present needs and for its anticipated
needs in the foreseeable future. The Company also believes that upon the
expiration of its current leases, it either will be able to secure renewal terms
or enter into leases for alternative locations at market terms.
Item 3. Legal Proceedings.
------- ------------------
From time to time, the Company is named a defendant in legal actions
arising out of the normal course of business. The Company is not a party to any
pending legal proceeding the resolution of which the management of the Company
believes will have a material adverse effect on the Company's cash flow, results
of operations or financial condition or to any other pending legal proceedings
other than ordinary, routine litigation incidental to its business. The Company
maintains liability insurance against risks arising out of the normal course of
business.
24
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
------- ----------------------------------------------------
Not applicable.
25
<PAGE>
PART II
Item 5. Market for the Company's Common Stock and Related Security Holder
------- -----------------------------------------------------------------
Matters.
--------
The Company's Common Stock is listed on the National Association of
Securities Dealers Automated Quotation System - National Market System
("NASDAQ") under the trading symbol "CMCO". The following table sets forth, for
the fiscal periods indicated, the high and low closing sale prices per share of
the Company's Common Stock as reported by NASDAQ.
Fiscal 2000 Fiscal 1999
----------- -----------
High Low High Low
---- --- ---- ---
1st Quarter 25 1/16 23 3/4 30 1/2 26 1/4
2nd Quarter 17 5/8 17 1/8 28 7/16 15 1/8
3rd Quarter 10 1/8 9 7/8 19 1/4 14 3/8
4th Quarter 13 1/2 12 13/16 22 3/4 17 7/16
As of March 31, 2000, there were 307 holders of record of the Company's
Common Stock. Approximately 2,000 additional shareholders hold shares of the
Company's Common Stock in "street name".
The Company declared total cash dividends of $.28 per share in fiscal 2000
and $.28 per share in fiscal 1999.
26
<PAGE>
Item 6. Selected Financial Data.
------- ------------------------
SELECTED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
of the Company for each of the five fiscal years in the period ended March 31,
2000. This information includes (i) the results of operations of Lift-Tech since
its acquisition on November 1, 1995, (ii) the results of operations of Yale
since its acquisition on October 17, 1996, (iii) the results of operations of
Lister since its acquisition on December 19, 1996, (iv) the results of
operations of Univeyor since its acquisition on January 8, 1998, (v) the results
of operations of ASI since its acquisition on March 31, 1998, (vi) the results
of operations of Mechanical Products through its divestiture on August 7, 1998,
(vii) the results of operations of Abell-Howe since its acquisition on August
21, 1998, (viii) the results of operations of Gautier since its acquisition on
December 4, 1998, (ix) the results of operations of Camlok and Tigrip since
their acquisition on January 29, 1999, (x) the results of operations of GL since
its formation on April 1, 1997, including the restatement of Company data
reported prior to GL's merger with the Company on March 1, 1999, and (xi) the
results of operations of WECO since its acquisition on April 29, 1999. This
table should be read in conjunction with the "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and the Consolidated
Financial Statements of the Company, including the notes thereto, included
elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Years Ended March 31,
----------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
(Dollars in thousands, except per share data)
Statement of Income Data:
Net sales ......................................... $ 209,837 $ 359,424 $ 561,823 $ 735,445 $ 736,254
Cost of products sold ............................. 149,511 251,987 401,669 542,975 556,145
--------- --------- --------- --------- ---------
Gross profit ...................................... 60,326 107,437 160,154 192,470 180,109
Selling expenses .................................. 19,120 32,550 46,578 52,059 50,450
General and administrative expenses ............... 13,941 24,636 33,361 39,850 44,260
Amortization of intangibles ....................... 791 5,197 10,297 15,479 16,392
Other charges ..................................... 672 - - - 965
--------- --------- --------- --------- ---------
Income from operations ............................ 25,802 45,054 69,918 85,082 68,042
Interest and debt expense ......................... 5,292 11,930 25,104 35,923 34,698
Interest and other income ......................... 1,134 1,168 1,940 1,565 1,314
--------- --------- --------- --------- ---------
Income before income taxes, minority interest and
extraordinary charge ............................. 21,644 34,292 46,754 50,724 34,658
Income tax expense ................................ 8,657 15,617 22,776 23,288 17,578
Minority interest ................................. - (323) - - -
Extraordinary charge for early debt extinguishment - (3,198) (4,520) - -
--------- --------- --------- --------- ---------
Net income ........................................ $ 12,987 $ 15,154 $ 19,458 $ 27,436 $ 17,080
========= ========= ========= ========= =========
Net income per common share - diluted (a) ......... $ 1.69 $ 1.15 $ 1.35 $ 1.92 $ 1.20
Cash Dividend per common share (a) ................ 0.24 0.27 0.28 0.28 0.28
Balance Sheet Data (at end of period):
Total assets ...................................... $ 188,734 $ 548,245 $ 788,862 $ 766,911 $ 759,824
Total long-term debt (including current maturities) 9,744 286,288 458,577 423,612 413,751
Total liabilities ................................. 51,112 398,089 617,916 578,237 556,371
Total shareholders' equity ........................ 137,622 150,156 170,946 188,674 203,453
(a) Reflects a 17 to 1 stock split of the common stock effected on February 15,
1996; fiscal 1996 per share data also impacted by the Company's initial
public offering effected on February 22, 1996.
</TABLE>
27
<PAGE>
Item 7. Management's Discussion and Analysis of Results of Operations and
------- -----------------------------------------------------------------------
Financial Condition.
--------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Fiscal Years Ended March 31, 2000, 1999, and 1998
Overview
The Company is a broad-line designer, manufacturer, and supplier of
sophisticated material handling products and integrated material handling
solutions. The Company's material handling products are sold, domestically and
internationally, principally to third party distributors through diverse
distribution channels. Distribution channels include general distributors,
specialty distributors, crane end users, service-after-sale distributors,
original equipment manufacturers ("OEMs"), government, consumer and
international. 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 segments primarily deal
directly 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.
This section should be read in conjunction with the consolidated financial
statements of the Company included elsewhere herein.
Results of Operations
Sales in the Products, Solutions-Industrial and Solutions-Automotive
segments were as follows, in thousands of dollars and with percentage changes
for each segment:
<TABLE>
<CAPTION>
Change Change
Fiscal Years Ended March 31, 2000 vs. 1999 1999 vs. 1998
---------------------------- ------------- -------------
2000 1999 1998 Amount % Amount %
---- ---- ---- ------ - ------ -
<S> <C> <C> <C> <C> <C> <C> <C>
(In thousands, except percentages)
Products ............... $ 511,287 $ 508,313 $ 515,893 $ 2,974 0.6 $ (7,580) (1.5)
Solutions-Industrial ... 68,559 65,689 45,930 2,870 4.4 19,759 43.0
Solutions-Automotive ... 156,408 161,443 - (5,035) (3.1) 161,443 -
--------- --------- --------- ------- --- -------- ----
Consolidated net sales . $ 736,254 $ 735,445 $ 561,823 $ 809 0.1 $173,662 30.9
========= ========= ========= ======= === ======== ====
</TABLE>
Sales fluctuations during the periods were primarily due to the March 1998
ASI acquisition and the January 1998 Univeyor acquisition, offset by the August
1998 Mechanical Products divestiture. Sales in 2000 of $736.3 million increased
by $0.8 million or 0.1% over 1999, and sales in 1999 of $735.4 million increased
$173.6 million or 30.9% over 1998. On a pro forma basis, considering the effects
of fiscal 1999 and 1998 acquisitions and divestiture, the Company experienced a
0.5% decrease in sales in fiscal 1999 compared to 1998. This comparison as well
28
<PAGE>
as the comparison of fiscal 2000 to 1999 is impacted by the following economic
factors: 1) the lingering effect of the mid-1998 General Motors strike, 2) a
shift in a major customer's project focus from small cars to trucks and sport
utility vehicles that impacted its plant modification schedule, 3) a relatively
soft US industrial market, 4) the impact of the poor Asian and South American
economic situations, and 5) a shift in demand from small retail hardware stores
to larger do-it-yourself superstores, to which the Company supplies only a small
share.
The Automotive Solutions segment was formed in fiscal 1999 with the March
1998 acquisition of ASI. The 4.4% and 43.0% growth in the Industrial Solutions
segment in fiscal 2000 and 1999, respectively, is due to the January 1998
Univeyor acquisition, offset by soft US industrial markets. The 0.6% growth and
1.5% decrease in the Products segment in fiscal 2000 and 1999, respectively is
impacted by several small acquisitions including the April 1999 WECO
acquisition, the January 1999 Camlok/Tigrip acquisition, the December 1998
Gautier acquisition, the August 1998 Abell-Howe acquisition, and offset by the
August 1998 Mechanical Products divestiture, and soft US industrial markets in
general.
The following table sets forth certain income statement data for the
Company, expressed as a percentage of net sales, for each of the periods
presented:
<TABLE>
<CAPTION>
Fiscal Years Ended March 31,
----------------------------
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Products Segment sales........................................... 69.5% 69.1% 92.9%
Solutions - Industrial Segment sales............................. 9.3 8.9 7.1
Solutions - Automotive Segment sales............................. 21.2 22.0 -
----- ----- -----
Net sales........................................................ 100.0 100.0 100.0
Cost of products sold............................................ 75.5 73.8 71.5
----- ----- -----
Gross profit..................................................... 24.5 26.2 28.5
Selling expenses................................................. 7.0 7.1 8.3
General and administrative expenses.............................. 6.1 5.4 5.9
Amortization of intangibles...................................... 2.2 2.1 1.9
----- ----- -----
Income from operations........................................... 9.2 11.6 12.4
Interest and debt expense........................................ 4.7 4.9 4.4
Interest and other income........................................ 0.2 0.2 0.3
----- ----- -----
Income before income taxes and extraordinary charge.............. 4.7 6.9 8.3
Income tax expense............................................... 2.4 3.2 4.0
----- ----- -----
Income before extraordinary charge............................... 2.3% 3.7% 4.3%
===== ===== =====
</TABLE>
The Company's gross profit margins were approximately 24.5%, 26.2% and
28.5% for 2000, 1999 and 1998, respectively. The decrease in gross profit margin
in fiscal 2000 is primarily due to cost overruns on three international ASI
projects, and also due to competitive pricing pressure and product mix. The
decrease in gross profit margin in fiscal 1999 is primarily due to the ASI
acquisition, which generally produces lower gross profit margins than the other
segments. The lower profitability of this segment is offset by a lower capital
base required to design and manufacture its products. Offsetting the impact of
the items discussed above has been the effects of the Company's cost control
efforts and integration of acquisitions.
29
<PAGE>
Selling expenses were $50.5 million, $52.1 million and $46.6 million in
fiscal 2000, 1999 and 1998, respectively. The 2000 expenses were impacted by the
additions of Camlok/Tigrip and Abell-Howe. The 1999 expenses include a full year
of ASI activity. As a percentage of consolidated net sales, selling expenses
were 7.0%, 7.1% and 8.3% in fiscal 2000, 1999 and 1998, respectively. The 2000
improvement reflects cost control efforts as well as a change in classification
of certain ASI expenses to general and administrative. The 1999 improvement
reflects a lower level of selling expenses incurred on behalf of the ASI
business, relative to sales.
General and administrative expenses were $45.2 million, $39.9 million and
$33.4 million in fiscal 2000, 1999 and 1998, respectively. The 2000 expenses
were impacted by the additions of WECO and Abell-Howe. The 1999 expenses include
a full year of ASI activity. As a percentage of consolidated net sales, general
and administrative expenses were 6.1%, 5.4% and 5.9% in fiscal 2000, 1999 and
1998, respectively. Fiscal 2000 was negatively impacted by the incurrence of
proxy contest related expenses relative to the August 16, 1999 annual
shareholders meeting and annual director elections, a change in classification
of certain ASI expenses from selling, and also the relationship of fixed
expenses to soft revenues. The 1999 improvement reflects a lower level of
general and administrative expenses incurred on behalf of the ASI business,
relative to sales.
Amortization of intangibles was $16.4 million, $15.5 million and $10.3
million in fiscal 2000, 1999 and 1998, respectively. Fiscal 2000 includes
goodwill amortization from the WECO acquisition, and a full year from the
Abell-Howe and Camlok/Tigrip acquisitions; 1999 includes a full year of goodwill
amortization resulting from the ASI acquisition; 1998 includes a full year of
goodwill amortization resulting from the Yale acquisition.
Interest and debt expense was $34.7 million, $35.9 million and $25.1
million in fiscal 2000, 1999 and 1998, respectively. The fiscal 2000 decrease is
primarily due to the payment of debt based on strong operating cash flow less
funds used to finance acquisitions, offset by increased interest rates. The
fiscal 1999 increase was primarily due to the financing required to complete the
ASI acquisition. As a percentage of consolidated net sales, interest and debt
expense was 4.7%, 4.9% and 4.4% in fiscal 2000, 1999 and 1998, respectively.
Interest and other income was $1.3 million, $1.6 million and $1.9 million
in fiscal 2000, 1999 and 1998, respectively. The fluctuations reflect changes in
the investment return on marketable securities held for settlement of a portion
of the Company's general and products liability claims.
Income taxes as a percentage of income before income taxes were 50.7%,
45.9% and 48.7% in fiscal 2000, 1999 and 1998, respectively. The percentages
reflect the effect of non-deductible goodwill amortization resulting from the
business acquisitions, offset by the effects of favorable tax strategies.
In fiscal 1998, the extraordinary charge for early debt extinguishment of
$4.5 million resulted from the non-cash write-off of unamortized deferred
financing costs upon refinancing of the Company's bank debt effective March 31,
1998. The charge is net of $3.0 million of tax benefit.
30
<PAGE>
As a result of the above, net income decreased $10.4 million, or 37.7% in
fiscal 2000 and increased $3.5 million or 14.4% in 1999 compared to income
before the extraordinary charge for debt extinguishment in 1998. This is based
on net income of $17.1 million and $27.4 or 2.3% and 3.7% of consolidated net
sales in fiscal 2000 and 1999, respectively, and $24.0 million of income before
an extraordinary charge for debt extinguishment in fiscal 1998, or 4.3% of
consolidated net sales. Net of the effects of the extraordinary charge, net
income increased $8.0 million or 41.0% in 1999, based on net income of $19.5
million, or 3.5% of consolidated revenues in fiscal 1998.
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 International 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 $7.7 million from the
Company and purchased 479,900 shares of Company common stock on the open market
at an average cost of $16 per share.
On August 21, 1998, the Company acquired the net assets of Abell-Howe for
$7 million in cash, financed by the Company's revolving credit facility.
On August 7, 1998, the Company sold its Mechanical Products division for
$11.5 million, consisting of $9.1 million in cash and a $2.4 million note
receivable.
On March 31, 1998, the Company acquired all of the outstanding stock of ASI
for approximately $155 million of cash, which was financed by proceeds from the
Company's revolving credit facility and a private placement of senior
subordinated notes, both of which also closed effective March 31, 1998. The
Company's previously existing Term Loan A, Term Loan B and revolving credit
facility were repaid and retired on March 31, 1998.
On January 7, 1998, the Company acquired all of the outstanding stock of
Univeyor for approximately $15 million of cash plus the assumption of certain
debt, financed by the Company's revolving credit facility.
31
<PAGE>
The 1998 Revolving Credit Facility provides availability up to $300
million, due March 31, 2003, reduced to $275 million and $250 million effective
March 31, 2001 and 2002, respectively, against which $202 million was
outstanding at March 31, 2000. Interest is payable at varying Eurodollar rates
based on LIBOR plus a spread determined by the Company's leverage ratio,
amounting to 200 basis points at March 31, 2000. The 1998 Revolving Credit
Facility is secured by all equipment, inventory, receivables, subsidiary stock
(limited to 65% for foreign subsidiaries) and intellectual property. To manage
its exposure to interest rate fluctuations, the Company has an interest rate
swap.
The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199.5 million, net of original issue discount of $0.5 million and are due March
31, 2008. Interest is payable semi-annually based on an effective rate of 8.45%,
considering $1.9 million 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 $36.7 million in fiscal 2000,
$57.5 million in 1999, and $38.4 million in 1998. The $20.8 million decrease in
fiscal 2000 compared to 1999 results from decreased net income of $10.3 million
and an increase in net working capital components, primarily accounts
receivable. The $19.1 million increase in fiscal 1999 compared to 1998 results
from increased net income of $8.0 million, increased depreciation and
amortization of $7.3 million, and a decrease in net working capital components,
offset by the extraordinary charge for early debt extinguishment of $4.5 million
in 1998. Operating assets net of liabilities used cash of $13.3 million in
fiscal 2000, provided cash of $4.4 million in fiscal 1999, and used cash of $5.5
million in fiscal 1998.
Net cash used in investing activities was $18.9 million in fiscal 2000
compared to $23.9 million in 1999 and $185.0 million in 1998. The 2000 amount
includes the acquisition of WECO for $6.4 million. The 1999 amount includes the
acquisitions of Camlok/Tigrip, Gautier, and Abell-Howe for $20.0 million, net of
cash acquired; it is reduced by $8.8 million of net proceeds from the Mechanical
Products divestiture and $2.2 million of proceeds from the sale of a portion of
land acquired with Yale in fiscal 1997. The 1998 amount includes the
acquisitions of ASI, Univeyor and a GL business acquisition for $175.7 million,
net of cash acquired; it is reduced by $4.6 million of proceeds from the sale of
a portion of the non-operating Yale land.
32
<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 fiscal 2000, 1999 and 1998 were $8.1
million, $13.0 million and $11.4 million, respectively, excluding those capital
assets acquired in conjunction with business acquisitions. The lower spending in
fiscal 2000 reflects a deferral of certain projects due to soft market
conditions.
Inflation and Other Market Conditions
The Company's costs are affected by inflation in the U.S. economy, and to a
lesser extent, in foreign economies including those of Europe, Canada, Mexico,
and the Pacific Rim. The Company does not believe that inflation has had a
material effect on results of operations over the periods presented because of
low inflation levels over the periods and because the Company has generally been
able to pass on rising costs through price increases. However, in the future
there can be no assurance that the Company's business will not be affected by
inflation or that it will be able to pass on cost increases.
Seasonality and Quarterly Results
Quarterly results may be materially affected by the timing of large
customer orders, by periods of high vacation and holiday concentrations, and by
acquisitions and the magnitude of acquisition costs. Therefore, the operating
results for any particular fiscal quarter are not necessarily indicative of
results for any subsequent fiscal quarter or for the full fiscal year.
Year 2000 Conversions
The Company successfully transitioned into the Year 2000. During the
millennium weekend, a corporate-wide team of internal and external resources
performed an on-site assessment of business systems, infrastructure,
telecommunications components and facilities. No significant issues were
identified, nor have any arisen to date.
The Company completed its Year 2000 assessment in 1999. By year-end, at
least 98% of all computer-controlled equipment and software were Year 2000
ready. The components that were not Year 2000 ready did not pose significant
operational concerns for the Company. The remaining modifications were completed
in February 2000. All areas are operating as designed, however the Company is
continuing to monitor the Year 2000 status of all business units.
Additionally, the Company surveyed critical suppliers to assess their level
of readiness. To date, none of our suppliers have informed us of any Year 2000
issues impacting their ability to provide us with product or service.
33
<PAGE>
The cost of the Year 2000 initiatives is not material to the Company's
results of operations or financial position.
The forward looking statements contained in "Year 2000 Conversions" should
be read in conjunction with the Company's disclosures under the heading "Safe
Harbor Statement under the Private Securities Litigation Reform Act of 1995".
Effects of New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities," in June of 1998. The FASB issued SFAS 137 in June of
1999 which defers the effective date of SFAS 133 to fiscal years beginning after
June 15, 2000. Statement No. 133 establishes accounting and reporting standards
for 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. Compliance with this statement will not have a
material impact on the Company at the present time.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." The Company does not believe that the requirements of SAB No. 101
will have any effect on or require any adjustments to the Company's results of
operations and financial position.
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.
34
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------- ----------------------------------------------------------
Market risk is the potential loss arising from adverse changes in market
rates and prices, such as interest rates. The Company is exposed to various
market risks, including commodity prices for raw materials, foreign currency
exchange rates, and primarily changes in interest rates. The Company has entered
into financial instrument transactions which attempt to manage and reduce the
impact of changes in interest rates. The Company does not enter into derivatives
or other financial instruments for trading or speculative purposes.
The Company's primary commodity risk is related to changes in the price of
steel. The Company controls this risk through negotiating purchase contracts on
a consolidated basis and by attempting to build changes in raw material costs
into the selling prices of its products. The Company does not enter into
financial instrument transactions related to raw material costs.
Approximately 17% of the Company's sales are from manufacturing plants and
sales offices in foreign jurisdictions. The Company manufactures its products in
the United States, Canada, Germany, Denmark, the United Kingdom, Mexico, France
and China and sells its products and solutions in over 50 countries annually.
The Company's results of operations could be affected by such factors as changes
in foreign currency rates or weak economic conditions in foreign markets. The
Company's operating results are exposed to fluctuations between the US dollar
and the Canadian dollar, European currencies, the Mexican peso and the Chinese
renminbi. For example, when the US dollar strengthens against the Canadian
dollar, the value of sales and net income denominated in Canadian dollars
decreases when translated into US dollars for inclusion in the Company's
consolidated results. The Company also is exposed to foreign currency
fluctuations in relation to purchases denominated in foreign currencies. The
Company's foreign currency risk is mitigated since the majority of foreign
operations' sales and the related expense transactions are denominated in the
same currency. In addition, the majority of export sale transactions are
denominated in US dollars. Accordingly, the Company currently does not invest in
derivative instruments such as foreign exchange contracts to hedge foreign
currency transactions.
The Company controls risk related to changes in interest rates through
structuring its debt instruments with a combination of fixed and variable
interest rates and by periodically entering into financial instrument
transactions. At March 31, 2000, approximately 49% of the Company's outstanding
debt has fixed interest rates. At that date, the Company has approximately
$210.8 million of variable rate non-current debt and has an interest rate swap
with a notional amount of $3.5 million maturing in July 2000 based on LIBOR at
5.9025%, plus the applicable margin based on the Company's leverage ratio. Under
this agreement, the Company makes or receives payments equal to the difference
between fixed and variable interest rate payments on the notional amount. A 1%
fluctuation in interest rates would change future interest expense on the $207.3
million of debt that is not covered by the swap agreement by approximately $2.1
million.
35
<PAGE>
Item 8. Financial Statements and Supplementary Data.
------- --------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 2000:
Reports of Independent Auditors................................ F-2
Consolidated Balance Sheets.................................... F-4
Consolidated Statements of Income.............................. F-5
Consolidated Statements of Shareholders' Equity................ F-6
Consolidated Statements of Cash Flows.......................... F-7
Notes to Consolidated Financial Statements..................... F-8
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Columbus McKinnon Corporation
We have audited the accompanying consolidated balance sheets of Columbus
McKinnon Corporation as of March 31, 2000 and 1999, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended March 31, 2000. Our audits also include the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the GL International, Inc.
statements of income and cash flows for the year ended March 31, 1998, which
statements reflect total revenues of $59,860,000 for the year ended March 31,
1998. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for GL International, Inc. for 1998, is solely based on the report of such other
auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Columbus McKinnon Corporation at March
31, 2000 and 1999, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended March 31, 2000, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Buffalo, New York
May 12, 2000
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
GL International, Inc.:
We have audited the consolidated balance sheet of GL International, Inc. and
subsidiaries as of March 31, 1998, and the related consolidated statements of
income and cash flows for the year then ended (none of which are presented
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of GL International,
Inc. and subsidiaries at March 31, 1998, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
Tulsa, Oklahoma
August 24, 1998
F-3
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
---------
2000 1999
---- ----
(In thousands)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................................. $ 7,582 $ 6,867
Trade accounts receivable, less allowance for doubtful accounts ($2,236
and $2,271 respectively)........................................................... 143,401 136,988
Unbilled revenues..................................................................... 24,447 9,821
Inventories........................................................................... 108,291 115,979
Net assets held for sale.............................................................. 9,272 8,214
Prepaid expenses...................................................................... 6,181 8,160
------- -------
Total current assets....................................................................... 299,174 286,029
Net property, plant, and equipment......................................................... 87,297 90,004
Goodwill and other intangibles, net........................................................ 339,603 357,727
Marketable securities...................................................................... 23,193 19,355
Deferred taxes on income................................................................... 4,237 5,627
Other assets............................................................................... 6,320 8,169
------- -------
Total assets............................................................................... $759,824 $766,911
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks................................................................ $ 2,677 $ 4,590
Trade accounts payable................................................................ 49,621 54,651
Excess billings....................................................................... 4,288 5,058
Accrued liabilities................................................................... 51,246 54,331
Current portion of long-term debt..................................................... 3,493 1,926
------- -------
Total current liabilities.................................................................. 111,325 120,556
Senior debt, less current portion.......................................................... 210,684 222,165
Subordinated debt.......................................................................... 199,574 199,521
Other non-current liabilities.............................................................. 34,788 35,995
------- -------
Total liabilities.......................................................................... 556,371 578,237
------- -------
Shareholders' equity:
Class A voting common stock; 50,000,000 shares authorized; 14,877,405
and 14,663,697 shares issued....................................................... 149 146
Additional paid-in capital............................................................ 106,884 102,313
Retained earnings..................................................................... 113,582 100,455
ESOP debt guarantee; 606,559 and 708,382 shares....................................... (8,703) (9,865)
Unearned restricted stock; 103,120 and 145,550 shares................................. (2,843) (1,009)
Accumulated other comprehensive loss.................................................. (5,616) (3,366)
------- -------
Total shareholders' equity................................................................. 203,453 188,674
------- -------
Total liabilities and shareholders' equity................................................. $759,824 $766,911
======== ========
See accompanying notes.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands,
except per share data)
<S> <C> <C> <C>
Net sales..................................................... $736,254 $735,445 $561,823
Cost of products sold......................................... 556,145 542,975 401,669
-------- -------- --------
Gross profit.................................................. 180,109 192,470 160,154
Selling expenses.............................................. 50,450 52,059 46,578
General and administrative expenses........................... 45,225 39,850 33,361
Amortization of intangibles................................... 16,392 15,479 10,297
-------- -------- --------
112,067 107,388 90,236
-------- -------- --------
Income from operations........................................ 68,042 85,082 69,918
Interest and debt expense..................................... 34,698 35,923 25,104
Interest and other income..................................... 1,314 1,565 1,940
-------- -------- --------
Income before income taxes and extraordinary charge........... 34,658 50,724 46,754
Income tax expense............................................ 17,578 23,288 22,776
-------- -------- --------
Income before extraordinary charge............................ 17,080 27,436 23,978
Extraordinary charge for early debt extinguishment............ - - (4,520)
-------- -------- --------
Net income.................................................... $ 17,080 $ 27,436 $ 19,458
======== ======== ========
Earnings per share data, basic:
Income before extraordinary charge for
debt extinguishment................................... $ 1.21 $ 1.94 $ 1.69
Extraordinary charge for debt extinguishment............. - - (0.32)
------ ------ ------
Net income............................................... $ 1.21 $ 1.94 $ 1.37
====== ====== ======
Earnings per share data, diluted:
Income before extraordinary charge for
debt extinguishment................................... $ 1.20 $ 1.92 $ 1.66
Extraordinary charge for debt extinguishment............. - - (0.31)
------ ------ ------
Net income............................................... $ 1.20 $ 1.92 $ 1.35
====== ====== ======
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share data)
Common Addi- Accumulated
Stock tional ESOP Unearned Other Total
($.01 Paid-in Retained Debt Restricted Comprehensive Shareholders'
par value) Capital Earnings Guarantee Stock Income (Loss) Equity
--------- ------- -------- --------- ----- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1997.......... $ 137 $ 95,254 $ 60,999 $ (4,201) $ (821) $ (1,212) $150,156
Issued 897,114 common shares....... 9 3,881 - - - - 3,890
Comprehensive income:
Net income 1998.................... - - 19,458 - - - 19,458
Change in foreign currency
translation adjustment.......... - - - - - (1,527) (1,527)
Net unrealized gain on investments. - - - - - 558 558
Change in minimum pension
liability adjustment............ - - - - - (447) (447)
--------
Total comprehensive income......... - - - - - - 18,042
Earned 101,416 ESOP shares......... - 1,270 - 998 - - 2,268
Earned portion of restricted stock. - 20 - - 283 - 303
Common dividends declared
$0.28 per share................. - - (3,713) - - - (3,713)
----- -------- -------- -------- ------ -------- --------
Balance at March 31, 1998.......... $ 146 $100,425 $ 76,744 $ (3,203) $ (538) $ (2,628) $170,946
Comprehensive income:
Net income 1999.................... - - 27,436 - - - 27,436
Change in foreign currency
translation adjustment.......... - - - - - (1,399) (1,399)
Net unrealized gain on investments. - - - - - 714 714
Change in minimum pension
liability adjustment............ - - - - - (53) (53)
--------
Total comprehensive income......... - - - - - - 26,698
Earned 96,610 ESOP shares.......... - 1,108 - 1,020 - - 2,128
Repurchase of 479,900 common shares
by ESOP......................... - - - (7,682) - - (7,682)
Restricted common stock granted,
19,500 shares net of 1,275
shares cancelled................ - 780 - - (759) - 21
Earned portion of restricted stock. - - - - 288 - 288
Common dividends declared
$0.28 per share.................. - - (3,725) - - - (3,725)
----- -------- -------- -------- -------- -------- --------
Balance at March 31, 1999.......... $ 146 $102,313 $100,455 $ (9,865) $ (1,009) $ (3,366) $188,674
Comprehensive income:
Net income 2000.................... - - 17,080 - - - 17,080
Change in foreign currency
translation adjustment........... - - - - - (3,129) (3,129)
Net unrealized gain on investments. - - - - - 520 520
Change in minimum pension
liability adjustment............ - - - - - 359 359
--------
Total comprehensive income......... - - - - - - 14,830
Earned 101,822 ESOP shares......... - 590 - 1,162 - - 1,752
Restricted common stock granted,
60,700 shares................... 1 2,871 - - (2,872) - -
Earned portion of restricted stock. - - - - 1,038 - 1,038
Stock options exercised,
153,008 shares 2 1,110 - - - - 1,112
Common dividends declared
$0.28 per share.................. - - (3,953) - - - (3,953)
----- -------- -------- -------- -------- -------- --------
Balance at March 31, 2000.......... $ 149 $106,884 $113,582 $ (8,703) $ (2,843) $ (5,616) $203,453
===== ======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
<TABLE>
<CAPTION>
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
Operating activities:
<S> <C> <C> <C>
Net income........................................................................ $17,080 $ 27,436 $ 19,458
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary charge for early debt extinguishment........................... - - 4,520
Depreciation and amortization................................................ 28,536 27,256 19,896
Deferred income taxes........................................................ 3,600 (2,235) 55
Other........................................................................ 823 624 -
Changes in operating assets and liabilities net of effects from
businesses purchased:
Trade accounts receivable and unbilled revenues......................... (20,081) 37 (8,224)
Inventories............................................................. 8,659 (865) (5,454)
Prepaid expenses........................................................ (164) 1,952 4,008
Other assets............................................................ 1,334 (96) 2,135
Trade accounts payable and excess billings.............................. (6,329) (5,940) (646)
Accrued and non-current liabilities..................................... 3,263 9,324 2,672
------- ------- -------
Net cash provided by operating activities......................................... 36,721 57,493 38,420
------- ------- -------
Investing activities:
Purchase of marketable securities, net............................................ (3,318) (1,976) (2,517)
Capital expenditures.............................................................. (8,102) (12,992) (11,406)
Proceeds from sale of business.................................................... - 8,801 -
Purchase of businesses, net of cash acquired...................................... (6,430) (19,958) (175,686)
Net assets held for sale.......................................................... (1,058) 2,182 4,575
------- ------- -------
Net cash used in investing activities............................................. (18,908) (23,943) (185,034)
------- ------- -------
Financing activities:
Proceeds from issuance of common stock, net....................................... 3 - 1,914
Net (payments) borrowings under revolving line-of-credit
agreements..................................................................... (9,313) (28,194) 159,101
Repayment of debt................................................................. (2,514) (8,179) (198,251)
Proceeds from issuance of long-term debt, net..................................... - - 203,357
Deferred financing costs incurred................................................. (997) (1,272) (1,313)
Dividends paid ................................................................... (3,953) (3,725) (3,713)
Repurchase of stock by ESOP....................................................... - (7,682) -
Change in ESOP debt guarantee..................................................... 1,162 1,020 998
------- ------- -------
Net cash (used in) provided by financing activities............................... (15,612) (48,032) 162,093
Effect of exchange rate changes on cash........................................... (1,486) (1,512) (1,525)
------- ------- -------
Net change in cash and cash equivalents........................................... 715 (15,994) 13,954
Cash and cash equivalents at beginning of year.................................... 6,867 22,861 8,907
------- ------- -------
Cash and cash equivalents at end of year.......................................... $ 7,582 $ 6,867 $ 22,861
======= ======= =======
Supplementary cash flows data:
Interest paid................................................................ $ 35,176 $ 27,595 $ 26,553
Income taxes paid............................................................ $ 17,614 $ 22,829 $ 15,040
See accompanying notes.
</TABLE>
F-7
<PAGE>
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Business Acquisitions
Columbus McKinnon Corporation (the Company) is a broad-line designer,
manufacturer and supplier of sophisticated material handling products and
integrated material handling solutions. The Company's material handling products
are sold, domestically and internationally, principally to third party
distributors through diverse distribution channels, and to a lesser extent
directly to manufacturers and other end-users. The Company's integrated material
handling solutions automotive business primarily deals with end users and sales
are concentrated domestically and internationally (primarily North America) in
the automotive industry. The Company's integrated material handling solutions
industrial businesses primarily deal with end users and sales are concentrated,
domestically and internationally (primarily Europe) in the consumer products,
manufacturing, warehousing, and, to a lesser extent, the steel, construction,
automotive, and other industrial markets. During fiscal 2000, approximately 75%
of sales were to customers in the United States.
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 and was financed by proceeds from the
Company's revolving debt facility. The consolidated statement of income and the
consolidated statement of cash flows for the year ended March 31, 2000 include
WECO activity since its April 29, 1999 acquisition by the Company.
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 1999 and 1998
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. In connection with
the merger, the Company incurred $560,000 of merger related costs which were
charged to operations during the year ended March 31, 1999.
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") from Schmidt-Krantz & Co. GmbH 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. The consolidated statement of income and the
consolidated statement of cash flows for the year ended March 31, 1999 include
Camlok and Tigrip activity since their January 29, 1999 acquisition by the
Company.
F-8
<PAGE>
1. Description of Business and Business Acquisitions (continued)
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. The consolidated statement of
income and the consolidated statement of cash flows for the year ended March 31,
1999 include Gautier activity since its December 4, 1998 acquisition by the
Company.
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. The
consolidated statement of income and the consolidated statement of cash flows
for the year ended March 31, 1999 include Abell-Howe activity since its August
21, 1998 acquisition by the Company.
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 consolidated statement of income and the
consolidated statement of cash flows for the year ended March 31, 1999 include
Mechanical Products activity through its August 7, 1998 sale by the Company.
On March 31, 1998, the Company acquired all of the outstanding stock of
LICO, Inc. (now known as "ASI"), a leading designer, manufacturer and installer
of custom conveyor and automated material handling systems primarily for the
automotive industry. The total cost of the acquisition, which was accounted for
as a purchase, was approximately $155 million of cash, which was financed by
proceeds from the Company's revolving credit facility and a private placement of
senior subordinated notes, both of which also closed effective March 31, 1998.
The consolidated statement of income and the consolidated statement of cash
flows for the year ended March 31, 1998 do not include any ASI activity.
On January 7, 1998, the Company acquired all of the outstanding stock of
Univeyor A/S ("Univeyor"), a Denmark-based designer, manufacturer and
distributor of automated material handling systems for the industrial market,
and has accounted for the acquisition as a purchase. The cost of the acquisition
was approximately $15 million of cash plus certain debt, financed by the
Company's revolving debt facility. The consolidated statement of income and the
consolidated statement of cash flows for the year ended March 31, 1998 include
Univeyor activity since its January 7, 1998 acquisition by the Company.
2. Accounting Principles and Practices
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.
F-9
<PAGE>
2. Accounting Principles and Practices (continued)
Concentrations of Labor
Approximately 30% of the Company's employees are represented by twelve
separate domestic and Canadian collective bargaining agreements which terminate
at various times between May 14, 2001 and March 31, 2004. Approximately 2% of
the labor force is covered by collective bargaining agreements that will expire
within one year. In addition, the Company hires union production workers for
field installation under its material handling systems contracts.
Consolidation
These consolidated financial statements include the accounts of the Company
and its domestic and foreign subsidiaries; all significant intercompany accounts
and transactions have been eliminated.
Foreign Currency Translations
The Company translates foreign currency financial statements as described
in Financial Accounting Standards (FAS) No. 52. Under this method, all items of
income and expense are translated to US dollars at average exchange rates for
the year. All assets and liabilities are translated to US dollars at the
year-end exchange rate. Gains or losses on translations are recorded in
accumulated other comprehensive income (loss) in the shareholders' equity
section of the balance sheet.
Goodwill
It is the Company's policy to account for goodwill and other intangible
assets at the lower of amortized cost or fair value based on discounted cash
flows, if indicators of impairment exist. The Company continually evaluates the
existence of goodwill impairment on the basis of whether the goodwill is fully
recoverable from projected, undiscounted net cash flows of the related
businesses in accordance with the provisions of SFAS No. 121. As a result of the
Univeyor, ASI, Abell-Howe, Gautier, Camlok/Tigrip, and WECO acquisitions, the
Company recorded approximately $9 million, $123 million, $3 million, $1 million,
$6 million, and $4 million of goodwill, respectively, which is being amortized
on a straight-line basis over twenty-five years. As a result of the sale of
Mechanical Products, the Company reduced goodwill by approximately $8 million.
At March 31, 2000 and 1999 accumulated amortization was $46,256,000 and
$29,864,000, respectively.
Inventories
Inventories are valued at the lower of cost or market. Costs of
approximately 48% of inventories at March 31, 2000 and 1999 have been determined
using the LIFO (last-in, first-out) method. Costs of other inventories have been
determined using the FIFO (first-in, first-out) or average cost method. FIFO
cost approximates replacement cost.
F-10
<PAGE>
2. Accounting Principles and Practices (continued)
Marketable Securities
All of the Company's investments, which consist of equity securities and
corporate and governmental obligations, have been classified as
available-for-sale securities and are therefore recorded at their fair values
with the unrealized gains and losses, net of tax, reported in accumulated other
comprehensive income (loss) within shareholders' equity. Estimated fair value is
based on published trading values at the balance sheet dates. The amortized cost
of debt securities is adjusted for amortization of premiums and accretion of
discounts to maturity. The cost of securities sold is based on the specific
identification method. Interest and dividend income are included in interest and
other income on the consolidated statements of income.
The marketable securities are carried as long-term assets since they are
retained for the settlement of a portion of the Company's general liability and
products liability insurance claims filed through CM Insurance Company, Inc., a
wholly owned captive insurance subsidiary.
Net Assets Held for Sale
Certain non-operating real estate properties and equipment were acquired as
part of the 1996 acquisition of Yale Industrial Products, Inc. Certain
properties were sold during fiscal 1998 through fiscal 2000 and additional
monies were advanced to further the development of the properties with the
remaining assets held for sale expected to be sold in fiscal 2001. They have
been recorded at their estimated realizable values net of disposal costs,
separately reflected on the consolidated balance sheet and amounting to
$9,272,000 and $8,214,000 as of March 31, 2000 and 1999, respectively.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and depreciated
principally using the straight-line method over their respective estimated
useful lives (buildings and building equipment--15 to 40 years; machinery and
equipment--3 to 18 years). When depreciable assets are retired, or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is reflected in operating results.
Reclassification
Certain reclassifications of the fiscal 1999 and 1998 footnote amounts have
been made to conform with the fiscal 2000 presentation.
Research and Development
Research and development costs as defined in FAS No. 2, for the years ended
March 31, 2000, 1999 and 1998 were $1,556,000, $1,663,000 and $1,497,000,
respectively.
F-11
<PAGE>
2. Accounting Principles and Practices (continued)
Revenue Recognition and Concentration of Credit Risk
Sales are recorded when title passes to the customer which is at time of
shipment to the customer, except for long-term construction contracts as
described below. The Company performs ongoing credit evaluations of its
customers' financial condition, but generally does not require collateral to
support customer receivables. The credit risk is controlled through credit
approvals, limits and monitoring procedures. The Company established an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other factors.
ASI and Univeyor recognize contract revenues under the percentage of
completion method, measured by comparing direct costs incurred to total
estimated direct costs. Changes in job performance, job conditions and estimated
profitability, including those arising from final contract settlements, may
result in revisions to costs and income and are recognized in the period in
which the revisions are determined. In the event that a loss is anticipated on
an uncompleted contract, a provision for the estimated loss is made at the time
it is determined. Billings on contracts may precede or lag revenues earned, and
such differences are reported in the balance sheet as current liabilities
(excess billings) and current assets (unbilled revenues), respectively.
As of March 31, 2000, approximately $21 million ($26 million in 1999) of
trade accounts receivable was concentrated in the automotive industry, including
retainages amounting to $7,484,000 ($9,061,000 in 1999). The accounts receivable
included $17,861,000 ($22,007,000 in 1999) due from General Motors Corporation.
This one customer accounted for $99,097,000 or 13% of consolidated net sales and
is included within the Solutions - Automotive segment for the year ended March
31, 2000 ($96,663,000 or 13% for the year ended March 31, 1999).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
3. Unbilled Revenues and Excess Billings
<TABLE>
<CAPTION>
March 31,
---------
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Costs incurred on uncompleted contracts............................................ $ 368,140 $ 255,706
Estimated earnings................................................................. 64,497 54,013
--------- ---------
Revenues earned to date............................................................ 432,637 309,719
Less billings to date.............................................................. 412,478 304,956
--------- ---------
$ 20,159 $ 4,763
========= =========
</TABLE>
F-12
<PAGE>
3. Unbilled Revenues and Excess Billings (continued)
<TABLE>
<CAPTION>
The net amounts above are included in the consolidated balance sheets under the following captions:
March 31,
---------
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Unbilled revenues.................................................................. $24,447 $9,821
Excess billings.................................................................... (4,288) (5,058)
-------- -------
$ 20,159 $ 4,763
======== =======
</TABLE>
4. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31,
--------
2000 1999
---- ----
(In thousands)
At cost--FIFO basis:
<S> <C> <C>
Raw materials................................................................... $ 57,198 $ 54,648
Work-in-process................................................................. 20,240 21,663
Finished goods.................................................................. 38,329 45,042
-------- --------
115,767 121,353
LIFO cost less than FIFO cost........................................................ (7,476) (5,374)
-------- --------
Net inventories...................................................................... $108,291 $115,979
======== ========
</TABLE>
5. Marketable Securities
Marketable securities are retained for the settlement of a portion of the
Company's general liability and products liability insurance claims filed
through CM Insurance Company, Inc. (see Notes 2 and 13). The following is a
summary of available-for-sale securities at March 31, 2000:
<TABLE>
<CAPTION>
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)
<S> <C> <C> <C> <C>
Government securities................................. $ 7,171 $ 75 $ 53 $ 7,193
U. S. corporate securities............................ 1,183 2 35 1,150
------- ------- ----- -------
Total debt securities............................ 8,354 77 88 8,343
Equity securities..................................... 10,119 5,124 393 14,850
------- ------- ----- -------
$18,473 $ 5,201 $ 481 $23,193
======= ======= ===== =======
F-13
<PAGE>
5. Marketable Securities (continued)
The following is a summary of available-for-sale securities at March 31, 1999:
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
(In thousands)
Government securities................................. $ 7,668 $ 203 $ 1 $ 7,870
U. S. corporate securities............................ 700 31 - 731
------- ------- ---- -------
Total debt securities............................ 8,368 234 1 8,601
Equity securities..................................... 7,134 3,710 90 10,754
------- ------- ---- -------
$15,502 $ 3,944 $ 91 $19,355
======= ======= ==== =======
</TABLE>
The amortized cost and estimated fair value of debt and equity securities
at March 31, 2000, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
Estimated
Fair
Cost Value
---- -----
(In thousands)
<S> <C> <C>
Due in one year or less.................................................... $ 1,296 $ 1,296
Due after one year through three years..................................... 402 401
Due after three years...................................................... 6,656 6,646
------- -------
8,354 8,343
Equity securities.......................................................... 10,119 14,850
------- -------
$18,473 $23,193
======= =======
</TABLE>
Net unrealized gains included in the balance sheet amounted to $4,720,000
and $3,853,000 at March 31, 2000 and 1999, respectively. The amounts, net of
related income taxes of $1,888,000 and $1,541,000 at March 31, 2000 and 1999,
respectively, are reflected as a component of accumulated other comprehensive
income (loss) within shareholders' equity.
6. Property, Plant, and Equipment
Consolidated property, plant, and equipment of the Company consisted of the
following:
<TABLE>
<CAPTION>
March 31,
---------
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Land and land improvements......................................................... $ 5,032 $ 4,592
Buildings.......................................................................... 33,000 31,880
Machinery, equipment, and leasehold improvements................................... 98,842 92,991
Construction in progress........................................................... 3,310 2,589
------- -------
140,184 132,052
Less accumulated depreciation...................................................... 52,887 42,048
------- -------
Net property, plant, and equipment................................................. $87,297 $90,004
======= =======
F-14
<PAGE>
7. Accrued Liabilities and Other Non-current Liabilities
Consolidated accrued liabilities of the Company included the following:
March 31,
---------
2000 1999
---- ----
(In thousands)
Accrued payroll..................................................................... $17,012 $15,247
Accrued pension cost................................................................ 4,262 4,508
Interest payable.................................................................... 9,916 10,394
Income taxes payable................................................................ 4,649 10,133
Other accrued liabilities........................................................... 15,407 14,049
------- -------
$51,246 $54,331
======= =======
Consolidated other non-current liabilities of the Company included the
following:
March 31,
---------
2000 1999
---- ----
(In thousands)
Accumulated postretirement benefit obligation....................................... $13,970 $15,379
Accrued general and product liability costs......................................... 14,550 11,416
Other non-current liabilities....................................................... 6,268 9,200
------- -------
$34,788 $35,995
======= =======
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
8. Long-Term Debt
Consolidated long-term debt payable to banks (except as noted) of the Company consisted of the following:
March 31,
---------
2000 1999
---- ----
<S> <C> <C>
(In thousands)
Revolving Credit Facility with availability up to $300 million, due March
31, 2003, reduced to $275 million and $250 million effective March 31,
2001, and 2002, respectively, with interest payable at varying
Eurodollar rates based on LIBOR plus a spread determined by the
Company's leverage ratio, amounting to 200 basis points at March 31,
2000 (8.02% and 6.09% at March 31, 2000 and 1999)............................... $205,000 $212,400
Industrial Development Revenue Bonds paid in full on June 1, 2000 with
interest at varying effective rates (4.22% and 3.58% at March 31, 2000
and 1999)....................................................................... 986 1,608
Term loan of foreign subsidiary payable in two installments of $1,456,000
and $1,942,000, due on December 30, 2000 and December 30, 2001,
respectively; interest payable monthly at 4.255%................................ 3,398 3,825
Employee Stock Ownership Plan term loans payable in quarterly installments
of $148,000 through January 2002 and $824,000 in April 2002 plus
interest payable at a Eurodollar rate based on LIBOR plus a spread
determined by the Company's leverage ratio (8.18% and 6.62% at March
31, 2000 and 1999)............................................................... 2,008 3,173
Other senior debt................................................................... 2,785 3,085
-------- --------
Total senior debt................................................................... 214,177 224,091
8 1/2% Senior Subordinated Notes due March 31, 2008 with interest payable
in semi-annual installments at 8.45% effective rate, recorded net of
unamortized discount of $426,000 ($479,000 at March 31, 1999)................... 199,574 199,521
-------- --------
Total............................................................................... 413,751 423,612
Less current portion................................................................ 3,493 1,926
-------- --------
$410,258 $421,686
======== ========
</TABLE>
On March 31, 1998, the Company entered into a new revolving credit facility
("1998 Revolving Credit Facility") with a group of financial institutions.
Concurrently, the Company issued $200 million of 8 1/2% Senior Subordinated
Notes ("the 8 1/2% Notes") due March 31, 2008. Proceeds from both the bank
refinancing and the note offering were used to finance the acquisition of ASI,
and to repay the outstanding balances and retire the Company's then existing
Term Loan A, Term Loan B and revolving credit facility.
The 1998 Revolving Credit Facility is secured by all equipment, inventory,
receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and
intellectual property. The corresponding credit agreement places certain debt
covenant restrictions on the Company including, but not limited to, maximum
annual cash dividends of $10 million. Upon refinancing its bank debt in 1998,
the Company wrote off unamortized financing costs of $7,532,000 and recorded an
extraordinary charge of $4,520,000, which is net of $3,012,000 of tax.
F-16
<PAGE>
8. Long-Term Debt (continued)
To manage its exposure to interest rate fluctuations, the Company has an
interest rate swap with a notional amount of $3.5 million from January 2, 1999
through July 2, 2000, based on LIBOR at 5.9025%. Net payments or receipts under
the swap agreement are recorded as adjustments to interest expense. The carrying
amount of the Company's senior debt instruments approximates the fair value. The
Company's subordinated debt has an approximate fair market value of $177,000,000
which is less than the carrying cost of $199,574,000.
The Industrial Development Revenue Bonds are held by institutional
investors and are guaranteed by a bank letter of credit (IDRB letter of credit),
which is collateralized by the assets also securing the 1998 Revolving Credit
Facility. The Employee Stock Ownership Plan term loans (ESOP loans) are
guaranteed by the Company and are collateralized by an equivalent number of
shares of Company common stock. The ESOP loans are not further collateralized.
Provisions of the 8 1/2% Notes include, without limitation, restrictions of
liens, indebtedness, asset sales, and dividends and other restricted payments.
Prior to April 1, 2003, the 8 1/2% Notes are redeemable at the option of the
Company, in whole or in part, at the Make-Whole Price (as defined in the 8 1/2%
Notes agreement). On or after April 1, 2003, they are redeemable at prices
declining annually to 100% on and after April 1, 2006. In addition, on or prior
to April 1, 2001, the Company may redeem up to 35% of the outstanding notes 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 in the
indenture for such notes), each holder of the 8 1/2% Notes may require the
Company to repurchase all or a portion of such holder's 8 1/2% Notes at a
purchase price equal to 101% of the principal amount thereof. The 8 1/2% Notes
are guaranteed by certain existing and future domestic subsidiaries and are not
subject to any sinking fund requirements.
The principal payments scheduled to be made as of March 31, 2000 on the
above debt, for the next five annual periods subsequent thereto, are as follows
(in thousands):
2001.......................... 3,493
2002.......................... 2,912
2003.......................... 206,142
2004.......................... 240
2005.......................... 167
As of March 31, 2000, the Company had letters of credit outstanding of $3.4
million, including those issued as security for the IDRBs as referred to above.
F-17
<PAGE>
9. Retirement Plans
The Company provides defined benefit pension plans to certain employees.
The following provides a reconciliation of benefit obligations, plan assets, and
funded status of plans:
<TABLE>
<CAPTION>
March 31,
---------
2000 1999
---- ----
(In thousands)
Change in benefit obligation:
<S> <C> <C>
Benefit obligation at beginning of year........................................ $ 70,621 $ 69,680
Benefit obligation of sold businesses.......................................... - (9,590)
Service cost................................................................... 4,329 3,151
Interest cost.................................................................. 4,805 4,489
Effect of amendments........................................................... 115 -
Actuarial (gain) loss.......................................................... (5,359) 5,866
Benefits paid.................................................................. (3,191) (2,975)
-------- --------
Benefit obligation at end of year.............................................. $ 71,320 $ 70,621
======== ========
Change in plan assets:
Fair value of plan assets at beginning of year................................. 66,276 69,203
Assets of sold plans........................................................... - (10,348)
Actual return on plan assets................................................... 6,984 7,015
Employer contribution.......................................................... 3,395 3,381
Benefits paid.................................................................. (3,191) (2,975)
-------- --------
Fair value of plan assets at end of year....................................... $ 73,464 $ 66,276
======== ========
Funded Status ................................................................. $ 2,144 $ (4,345)
Unrecognized transition obligation............................................. (57) (85)
Unrecognized actuarial (gain) loss............................................. (5,353) 1,661
Unrecognized prior service cost................................................ 1,850 1,610
-------- --------
Net amount recognized.......................................................... $ (1,416) $ (1,159)
======== ========
Amounts recognized in the consolidated balance sheets are as follows:
Intangible asset............................................................... $ 1,158 $ 1,172
Accrued liabilities............................................................ (3,710) (4,066)
Deferred tax effect of equity charge........................................... 454 694
Accumulated other comprehensive income......................................... 682 1,041
-------- --------
Net amount recognized.......................................................... $ (1,416) $ (1,159)
======== ========
</TABLE>
F-18
<PAGE>
9. Retirement Plans (continued)
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Service costs--benefits earned during the period............................ $4,329 $3,151 $3,244
Interest cost on projected benefit obligation.............................. 4,805 4,489 4,787
Expected return on plan assets............................................. (5,732) (5,124) (6,670)
Net amortization........................................................... 251 167 1,951
------ ------ ------
Net periodic pension cost.................................................. $3,653 $2,683 $3,312
====== ====== ======
</TABLE>
The aggregate projected benefit obligation and aggregate fair value of plan
assets for the pension plans with projected benefit obligations in excess of
plan assets were $10,992,000 and $8,122,000, respectively as of March 31, 2000
and $56,488,000 and $49,040,000, respectively as of March 31, 1999.
The aggregate accumulated benefit obligation and aggregate fair value of
plan assets for the pension plans with accumulated benefit obligations in excess
of plan assets were $10,237,000 and $8,122,000, respectively as of March 31,
2000 and $9,932,000 and $7,293,000, respectively as of March 31, 1999.
The unrecognized transition obligation is being amortized on a
straight-line basis over 20 years. Unrecognized gains and losses are amortized
on a straight-line basis over the average remaining service period of active
participants.
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation of all of the defined benefit
plans was 7.5% and 7% as of March 31, 2000 and 1999, respectively. Future
average compensation increases are assumed to be 4.0% per year as of March 31,
2000 and 1999. The weighted-average expected long-term rate of return on plan
assets used in determining the expected return on plan assets included in net
periodic pension cost was 8 7/8% for the each of the years ended March 31, 2000,
1999 and 1998. Plan assets consist of equities, corporate and government
securities, and fixed income annuity contracts.
The Company's funding policy with respect to the defined benefit pension
plans is to contribute annually at least the minimum amount required by the
Employee Retirement Income Security Act of 1974 (ERISA).
The Company also sponsors defined contribution plans covering substantially
all domestic employees. Participants may elect to contribute basic
contributions. Effective April 1, 1998, these plans provide for employer
contributions based primarily on employee participation. The Company recorded a
charge for such contributions of approximately $1,660,000 and $1,410,000 for the
years ended March 31, 2000 and 1999, respectively.
F-19
<PAGE>
10. Employee Stock Ownership Plan (ESOP)
The AICPA Statement of Position 93-6, "Employers' Accounting for Employee
Stock Ownership Plans" requires that compensation expense for ESOP shares be
measured based on the fair value of those shares when committed to be released
to employees, rather than based on their original cost. Also, dividends on those
ESOP shares that have not been allocated or committed to be released to ESOP
participants are not reflected as a reduction of retained earnings. Rather,
since those dividends are used for debt service, a charge to compensation
expense is recorded. Furthermore, ESOP shares that have not been allocated or
committed to be released are not considered outstanding for purposes of
calculating earnings per share.
The obligation of the ESOP to repay borrowings incurred previously to
purchase shares of the Company's common stock is guaranteed by the Company; the
unpaid balance of such borrowings, therefore, has been reflected in the
accompanying consolidated balance sheet as a liability. An amount equivalent to
the cost of the collateralized common stock and representing deferred employee
benefits has been recorded as a deduction from shareholders' equity.
Substantially all of the Company's domestic non-union employees are
participants in the ESOP. Contributions to the plan result from the release of
collateralized shares as debt service payments are made. Compensation expense
amounting to $1,752,000, $2,128,000 and $2,268,000 in fiscal 2000, 1999 and
1998, respectively, is recorded based on the guarantee release of the ESOP
shares at their fair market value. Dividends on allocated ESOP shares are
recorded as a reduction of retained earnings and are applied toward debt
service.
During fiscal 1999, the ESOP borrowed $7,682,000 from the Company and
purchased 479,900 shares on the open market at an average cost of $16 per share.
At March 31, 2000 and 1999, 889,555 and 886,684 of ESOP shares,
respectively, were allocated or available to be allocated to participants'
accounts. At March 31, 2000 and 1999, 606,559 and 708,382 of ESOP shares were
pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares at March 31, 2000 amounted to
$7,961,000.
11. Postretirement Benefit Obligation
The Company sponsors defined benefit postretirement health care plans that
provide medical and life insurance coverage to Yale domestic retirees and their
dependents. Prior to the acquisition of Yale, the Company did not sponsor any
postretirement benefit plans. The Company pays the majority of the medical costs
for Yale retirees and their spouses who are under age 65. For retirees and
dependents of retirees who retired prior to January 1, 1989, and are age 65 or
over, the Company contributes 100% toward the American Association of Retired
Persons ("AARP") premium frozen at the 1992 level. For retirees and dependents
of retirees who retired after January 1, 1989, the Company contributes $35 per
month toward the AARP premium. The life insurance plan is noncontributory.
F-20
<PAGE>
11. Postretirement Benefit Obligation (continued)
The Company's postretirement health benefit plans are not funded. In
accordance with FAS No. 132 "Employers' Disclosures about Pensions and Other
Postretirement Benefits," the following sets forth a reconciliation of benefit
obligations and the funded status of the plan:
<TABLE>
<CAPTION>
March 31,
---------
2000 1999
---- ----
(In thousands)
Change in benefit obligation:
<S> <C> <C>
Benefit obligation at beginning of year....................................... $12,412 $ 16,509
Service cost.................................................................. 84 257
Interest cost................................................................. 816 1,061
Effect of amendments.......................................................... - (4,035)
Actuarial (gain) loss ........................................................ (170) 1,713
Benefits paid................................................................. (1,502) (1,475)
Curtailment effect............................................................ - (1,618)
-------- --------
Benefit obligation at end of year............................................. $ 11,640 $ 12,412
======== ========
Funded Status ................................................................ $(11,640) $(12,412)
Unrecognized actuarial loss................................................... 898 1,068
Unrecognized prior service gain............................................... (3,228) (4,035)
-------- --------
Net amount recognized in other non-current liabilities........................ $(13,970) $(15,379)
======== ========
</TABLE>
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost included the following:
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Service cost--benefits attributed to service during the period.......... $ 84 $ 257 $ 348
Interest cost........................................................... 816 1,061 1,203
Amortization of prior service gain...................................... (807) - -
---- ------ ------
Net periodic postretirement benefit cost........................... $ 93 $1,318 $1,551
==== ====== ======
</TABLE>
For measurement purposes, a 6.5% annual rate of increase in the per capita
cost of postretirement medical benefits was assumed at the beginning of the
period; the rate was assumed to decrease 0.5% per year to 5.5% by 2001. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 7% as of March 31, 2000 and 1999, respectively.
Assumed medical claims cost trend rates have an effect on the amounts
reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
One Percentage One Percentage
Point Increase Point Decrease
(In thousands)
<S> <C> <C>
Effect on total of service and interest cost components......... $ 51 $ (46)
Effect on postretirement obligation............................. 552 (500)
</TABLE>
F-21
<PAGE>
12. Earnings per Share and Stock Plans
Earnings per Share
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (FAS No. 128).
Basic earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share includes any dilutive effects
of options, warrants, and convertible securities. The following table sets forth
the computation of basic and diluted earnings per share before extraordinary
charge for debt extinguishment:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
Numerator for basic and diluted earnings per share:
<S> <C> <C> <C>
Income before extraordinary charge..................................... $17,080 $27,436 $23,978
======= ======= =======
Denominators:
Weighted-average common stock outstanding--denominator
for basic EPS........................................................ 14,138 14,137 14,221
Effect of dilutive employee stock options.............................. 83 157 206
------ ------ ------
Adjusted weighted-average common stock outstanding and
assumed conversions--denominator for diluted EPS..................... 14,221 14,294 14,427
====== ====== ======
</TABLE>
The weighted-average common stock outstanding shown above is net of
unallocated ESOP shares (see Note 10).
Stock Plans
The Company maintains two stock option plans, a Non-Qualified Stock Option
Plan ("Non-Qualified Plan") and an Incentive Stock Option Plan ("Incentive
Plan"). Under the Non-Qualified Plan, options may be granted to officers and
other key employees of the Company as well as to non-employee directors and
advisors. Options granted under the Non-Qualified Plan become exercisable over a
four-year period at the rate of 25% per year commencing one year from the date
of grant at an exercise price of not less than 100% of the fair market value of
the common stock on the date of grant. Any option granted under this plan may be
exercised not earlier than one year from the date such option is granted.
Options granted under the Incentive Plan become exercisable over a four-year
period at the rate of 25% per year commencing one year from the date of grant at
an exercise price of not less than 100% of the fair market value of the common
stock on the date of grant. Any option granted under this plan may be exercised
not earlier than one year and not later than ten years from the date such option
is granted.
In conjunction with the March 1, 1999 merger of GL International, Inc. (see
Note 1), outstanding GL options, which were originally issued in fiscal years
1999 and 1998, became fully vested and were converted into options to acquire
154,848 Company shares at prices of $4.34 to $17.36. Those options expire
approximately three years after the date of their original issuance, ranging
from September 30, 1999 through June 5, 2001.
F-22
<PAGE>
12. Earnings per Share and Stock Plans (continued)
A summary of option transactions during each of the three fiscal years in
the period ended March 31, 2000 is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
Number of Shares 2000 1999 1998
---------------- ---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning of year 353,348 354,848 325,051
Granted 481,410 31,000 29,797
Canceled (7,000) (32,500) -
Exercised (153,008) - -
------- ------- -------
Outstanding at end of year 674,750 353,348 354,848
======= ======= =======
Exercisable at end of year 137,840 247,348 143,300
Available for grant at end of year 827,090 1,301,500 1,300,000
</TABLE>
Exercise prices for options outstanding as of March 31, 2000, ranged from $4.34
to $29.00. The following table provides certain information with respect to
stock options outstanding at March 31, 2000:
<TABLE>
<CAPTION>
Weighted-average
Stock Options Weighted-average Remaining Contractual
Range of Exercise Prices Outstanding Exercise Price Life
------------------------ ----------- -------------- ----
<S> <C> <C> <C>
Under $10.00................... 19,340 $ 4.69 0.2
$10.00 to $20.00............... 151,350 15.50 0.8
$20.01 to $30.00............... 504,060 21.25 3.1
------- ------ ---
674,750 $19.49 2.5
======= ====== ===
The following table provides certain information with respect to stock options
exercisable at March 31, 2000:
Stock Options Weighted-average
Range of Exercise Prices Outstanding Exercise Price
------------------------ ----------- --------------
Under $10.00................... 19,340 $ 4.69
$10.00 to $20.00............... 112,500 15.50
$20.01 to $30.00............... 6,000 29.00
------- ------
137,840 $14.57
======= ======
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) in accounting for its
employee stock options because, as discussed below, the alternative fair value
accounting provided for under FAS No. 123, "Accounting for Stock-Based
Compensation," requires use of option valuation models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the grant date and the number of options granted is fixed,
no compensation expense is recognized.
F-23
<PAGE>
12. Earnings per Share and Stock Plans (continued)
Pro forma information regarding net income and earnings per share is
required by FAS No. 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The fair value
for issued options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions and
yielding the following pro forma results:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands, except for assumptions
and earnings per share data)
Assumptions:
<S> <C> <C> <C>
Risk-free interest rate 6.1% 5.5% 5.5%
Dividend yield - Incentive Plan 1.35% 0.97% -
Dividend yield - GL conversions N/A 1.33% 1.33%
Volatility factor 0.352 0.200 0.245
Expected life - Incentive Plan 5 years 4 years -
Expected life - GL conversions N/A 1 year 3 years
Pro forma results:
Net income $ 16,099 $ 25,567 $ 18,605
Earnings per share, basic 1.14 1.81 1.31
Earnings per share, diluted 1.13 1.79 1.29
</TABLE>
The Company maintains a Restricted Stock Plan, under which the Company has
no shares reserved for issuance at March 31, 2000. The Company charges unearned
compensation, a component of shareholders' equity, for the market value of
shares, as they are issued. It is then ratably amortized over the restricted
period. Grantees who remain continuously employed with the Company become vested
in their shares five years after the date of the grant. There were 60,700,
19,500, and 0 shares issued during the years ended March 31, 2000, 1999 and
1998, respectively.
F-24
<PAGE>
13. Loss Contingencies
General and Product Liability--$13,118,000 of the accrued general and
product liability costs which are included in other non-current liabilities at
March 31, 2000 ($10,392,000 at March 31, 1999) are the actuarial present value
of estimated reserves based on an amount determined from loss reports and
individual cases filed with the Company and an amount, based on experience, for
losses incurred but not reported. The accrual in these consolidated financial
statements was determined by applying a discount factor based on interest rates
customarily used in the insurance industry, between 6.83% and 8.20%, to the
undiscounted reserves of $16,866,000 and $13,897,000 at March 31, 2000 and 1999,
respectively. This liability is funded by investments in marketable securities
(see Notes 2 and 5).
14. Income Taxes
<TABLE>
<CAPTION>
The following is a reconciliation of the difference between the effective tax rate and the statutory federal tax rate:
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Computed statutory provision.............................................. $12,121 $17,753 $16,363
State income taxes net of federal benefit................................. 1,974 1,767 1,945
Nondeductible goodwill amortization....................................... 4,506 4,540 2,870
Foreign taxes greater than statutory provision............................ 884 790 949
Research and development credit........................................... (400) (639) -
Other..................................................................... (1,507) (923) 649
------- ------- -------
Actual tax provision...................................................... $17,578 $23,288 $22,776
======= ======= =======
The provision for income tax expense consisted of the following:
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
Current income tax expense:
Federal taxes........................................................ $8,391 $18,775 $15,800
State taxes.......................................................... 2,253 2,770 3,081
Foreign.............................................................. 3,334 3,978 3,840
Deferred income tax (benefit) expense:
Domestic............................................................. 3,380 (2,298) (238)
Foreign.............................................................. 220 63 293
------- ------- -------
$17,578 $23,288 $22,776
======= ======= =======
</TABLE>
The Company applies the liability method of accounting for income taxes as
required by FAS Statement No. 109, "Accounting for Income Taxes."
F-25
<PAGE>
14. Income Taxes (continued)
The gross composition of the net current deferred tax (liability)/asset,
included in (accrued)/prepaid expenses within the consolidated balance sheet, is
as follows:
<TABLE>
<CAPTION>
March 31,
---------
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Inventory........................................................................... $ (4,929) $ (5,366)
Accrued vacation and incentive costs................................................ 1,757 1,596
Other............................................................................... 2,492 5,945
-------- --------
Net current deferred tax (liability) asset..................................... $ (680) $ 2,175
======== ========
The gross composition of the net non-current deferred tax asset is as
follows:
March 31,
---------
2000 1999
---- ----
(In thousands)
Insurance reserves.................................................................. $10,242 $10,718
Property, plant, and equipment...................................................... (6,514) (7,438)
Other............................................................................... 509 2,347
------- -------
Net non-current deferred tax asset............................................. $ 4,237 $ 5,627
======= =======
</TABLE>
Income before income taxes and extraordinary charge includes foreign
subsidiary income of $7,551,000, $9,288,000, and $9,097,000 for the years ended
March 31, 2000, 1999, and 1998 respectively. United States income taxes have not
been provided on certain unremitted earnings of the Company's foreign
subsidiaries as such earnings are considered to be permanently reinvested.
15. Rental Expense and Lease Commitments
Rental expense for the years ended March 31, 2000, 1999 and 1998 was
$6,279,000, $6,672,000 and $4,478,000, respectively. The following amounts
represent future minimum payment commitments as of March 31, 2000 under
non-cancelable operating leases extending beyond one year (in thousands):
<TABLE>
<CAPTION>
Vehicles and
Year Ended March 31, Real Property Equipment Total
-------------------- ------------- --------- -----
<S> <C> <C> <C>
2001........................................................... $ 2,058 $ 1,964 $ 4,022
2002........................................................... 1,710 1,720 3,430
2003........................................................... 1,572 1,272 2,844
2004........................................................... 1,498 916 2,414
2005........................................................... 1,468 480 1,948
</TABLE>
F-26
<PAGE>
16. Summary Financial Information
The summary financial information of the parent, domestic subsidiaries
(guarantors) and foreign subsidiaries (nonguarantors) of the 8 1/2% senior
subordinated notes follows:
As of and for the year ended March 31, 2000:
<TABLE>
<CAPTION>
Domestic Foreign
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
(In thousands)
As of March 31, 2000:
Current assets:
<S> <C> <C> <C> <C> <C>
Cash..................................... $ 5,754 $ (1,701) $ 3,529 $ - $ 7,582
Trade accounts receivable and unbilled
revenues.............................. 67,186 76,325 24,337 - 167,848
Inventories.............................. 47,238 34,552 27,384 (883) 108,291
Other current assets..................... 3,402 7,714 4,337 - 15,453
-------- -------- -------- --------- --------
Total current assets.................. 123,580 116,890 59,587 (883) 299,174
Net property, plant, and equipment............ 35,807 32,218 19,272 - 87,297
Goodwill and other intangibles, net........... 41,336 248,121 50,146 - 339,603
Intercompany balances......................... 188,479 (351,292) (66,245) 229,058 -
Other non-current assets...................... 224,823 161,583 (1,977) (350,679) 33,750
-------- -------- -------- --------- --------
Total assets.......................... $614,025 $207,520 $ 60,783 $(122,504) $759,824
======== ======== ======== ========= ========
Current liabilities........................... $ 45,663 $ 45,304 $ 21,325 $ (967) $111,325
Long-term debt, less current portion.......... 404,269 13 5,976 - 410,258
Other non-current liabilities................. 14,026 18,042 2,720 - 34,788
-------- -------- -------- --------- --------
Total liabilities..................... 463,958 63,359 30,021 (967) 556,371
Shareholders' equity.......................... 150,067 144,161 30,762 (121,537) 203,453
-------- -------- -------- --------- --------
Total liabilities and shareholders'
equity.......................... $614,025 $207,520 $ 60,783 $(122,504) $759,824
======== ======== ======== ========= ========
For the Year Ended March 31, 2000:
Net sales..................................... $265,163 $367,421 $126,520 $ (22,850) $736,254
Cost of products sold......................... 186,225 300,332 92,514 (22,926) 556,145
-------- -------- -------- --------- --------
Gross profit.................................. 78,938 67,089 34,006 76 180,109
Selling, general and administrative expenses.. 41,216 30,876 23,583 - 95,675
Amortization of intangibles................... 2,148 11,701 2,543 - 16,392
-------- -------- -------- --------- --------
43,364 42,577 26,126 - 112,067
-------- -------- -------- --------- --------
Income from operations........................ 35,574 24,512 7,880 76 68,042
Interest and debt expense..................... 34,010 44 644 - 34,698
Interest and other income..................... 791 236 287 - 1,314
-------- -------- -------- --------- --------
Income before income taxes.................... 2,355 24,704 7,523 76 34,658
Income tax expense............................ 1,110 12,929 3,569 (30) 17,578
-------- -------- -------- --------- --------
Net income.................................... $ 1,245 $ 11,775 $ 3,954 $ 106 $ 17,080
======== ======== ======== ========= ========
F-27
<PAGE>
16. Summary Financial Information (continued)
Domestic Foreign
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
(In thousands)
For the Year Ended March 31, 2000:
Operating activities:
Cash provided by (used in) operating
activities............................ $ 23,591 $ 7,575 $ 7,135 $ (1,580) $ 36,721
Investing activities:
Purchase of marketable securities, net........ (3,318) - - - (3,318)
Capital expenditures.......................... (4,660) (2,262) (1,180) - (8,102)
Purchase of businesses, net of cash acquired.. - (6,381) - (49) (6,430)
Net assets held for sale...................... - (1,058) - - (1,058)
-------- -------- -------- --------- --------
Net cash used in investing activities......... (7,978) (9,701) (1,180) (49) (18,908)
Financing activities:
Proceeds from issuance of common stock........ 3 - - - 3
Net (payments) borrowings under revolving
line-of-credit agreements............. (7,400) - (1,913) - (9,313)
Repayment of debt............................. (1,783) 17 (748) - (2,514)
Dividends paid................................ (3,953) - (1,580) 1,580 (3,953)
Other......................................... 165 - - - 165
-------- -------- -------- --------- --------
Net cash (used in) provided by financing
activites............................. (12,968) 17 (4,241) 1,580 (15,612)
Effect of exchange rate changes on cash....... - - (1,535) 49 (1,486)
-------- -------- -------- --------- --------
Net change in cash and cash equivalents....... 2,645 (2,109) 179 - 715
Cash and cash equivalents at beginning of
year.................................. 3,109 408 3,350 - 6,867
-------- -------- -------- --------- --------
Cash and cash equivalents at end of year...... $ 5,754 $ (1,701) $ 3,529 $ - $ 7,582
======== ======== ======== ========= ========
As of and for the year ended March 31, 1999:
Domestic Foreign
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
(In thousands)
As of March 31, 1999:
Current assets:
Cash..................................... $ 3,109 $ 408 $ 3,350 $ - $ 6,867
Trade accounts receivable and
unbilled revenues..................... 55,749 66,556 24,774 - 146,809
Inventories.............................. 47,792 41,707 27,488 (1,008) 115,979
Other current assets..................... 3,168 10,645 2,561 - 16,374
-------- -------- -------- -------- --------
Total current assets.................. 109,548 119,316 58,173 (1,008) 286,029
Net property, plant, and equipment............ 36,649 33,058 20,297 - 90,004
Goodwill and other intangibles, net........... 42,993 260,406 54,328 - 357,727
Intercompany balances......................... 205,830 (368,479) (66,710) 229,359 -
Other non-current assets...................... 220,453 162,153 (833) (348,622) 33,151
-------- -------- -------- -------- --------
Total assets.......................... $615,473 $206,454 $ 65,255 $(120,271) $766,911
======== ======== ======== ======== ========
Current liabilities........................... $ 41,010 $ 54,336 $ 25,846 $ (636) $120,556
Long-term debt, less current portion.......... 415,096 - 6,590 - 421,686
Other non-current liabilities................. 11,311 21,849 2,835 - 35,995
-------- -------- -------- -------- --------
Total liabilities..................... 467,417 76,185 35,271 (636) 578,237
Shareholders' equity.......................... 148,056 130,269 29,984 (119,635) 188,674
-------- -------- -------- -------- --------
Total liabilities and shareholders'
equity.......................... $615,473 $206,454 $ 65,255 $(120,271) $766,911
======== ======== ======== ======== ========
F-28
<PAGE>
16. Summary Financial Information (continued)
For the Year Ended March 31, 1999:
Net sales..................................... $265,284 $368,716 $122,300 $(20,855) $735,445
Cost of products sold......................... 184,781 291,446 87,744 (20,996) 542,975
-------- -------- -------- -------- --------
Gross profit.................................. 80,503 77,270 34,556 141 192,470
Selling, general and administrative expenses.. 35,147 34,436 22,326 - 91,909
Amortization of intangibles................... 1,961 11,349 2,169 - 15,479
-------- -------- -------- -------- --------
37,108 45,785 24,495 - 107,388
-------- -------- -------- -------- --------
Income from operations........................ 43,395 31,485 10,061 141 85,082
Interest and debt expense..................... 34,349 947 627 - 35,923
Interest and other income..................... 1,531 249 (215) - 1,565
-------- -------- -------- -------- --------
Income before income taxes.................... 10,577 30,787 9,219 141 50,724
Income tax expense............................ 4,521 14,709 4,006 52 23,288
-------- -------- -------- -------- --------
Net income.................................... $ 6,056 $ 16,078 $ 5,213 $ 89 $ 27,436
======== ======== ======== ======== ========
Domestic Foreign
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
(In thousands)
For the Year Ended March 31, 1999:
Operating activities:
Cash provided by operating activities......... $ 36,147 $ 10,776 $ 9,878 $ 692 $ 57,493
Investing activities:
Purchase of marketable securities, net........ (1,976) - - - (1,976)
Capital expenditures.......................... (8,414) (2,809) (1,769) - (12,992)
Proceeds from sale of business................ 9,390 (589) - - 8,801
Purchase of businesses, net of cash acquired.. (9,597) (1,313) (8,861) (187) (19,958)
Net assets held for sale...................... - 2,182 - - 2,182
-------- -------- -------- -------- -------
Net cash used in investing activities......... (10,597) (2,529) (10,630) (187) (23,943)
Financing activities:
Proceeds from issuance of common stock........ - - 1,449 (1,449) -
Net (payments) borrowings under revolving
line-of-credit agreements............. (27,600) (1,340) 746 - (28,194)
Repayment of debt............................. (1,216) (8,365) 1,402 - (8,179)
Dividends paid................................ (3,725) 1,078 (2,071) 993 (3,725)
Other......................................... (7,934) - - - (7,934)
-------- -------- -------- -------- -------
Net cash (used in) provided by financing
activites............................. (40,475) (8,627) 1,526 (456) (48,032)
Effect of exchange rate changes on cash....... (1) - (1,462) (49) (1,512)
-------- -------- -------- -------- -------
Net change in cash and cash equivalents....... (14,926) (380) (688) - (15,994)
Cash and cash equivalents at beginning of
year.................................. 18,035 788 4,038 - 22,861
-------- -------- -------- -------- --------
Cash and cash equivalents at end of year...... $ 3,109 $ 408 $ 3,350 $ - $ 6,867
======== ======== ======== ======== ========
</TABLE>
F-29
<PAGE>
17. Business Segment Information
As a result of the way the Company manages the business, its reportable
segments are strategic business units that offer products 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, material handling
solutions - industrial, and material handling solutions - automotive. The
Company's material handling products segment sells hoists, industrial cranes,
chain, attachments, and other material handling products principally to third
party distributors through diverse distribution channels. The material handling
solutions industrial - segment sells engineered material handling systems such
as conveyors, manipulators, and lift tables primarily to end-users in the
consumer products, manufacturing, warehousing, and, to a lesser extent, the
steel, construction, automotive, and other industrial markets. The material
handling solutions - automotive segment sells engineered material handling
systems, mainly conveyors, primarily to end-users in the automotive industry.
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 years ended March 31, 2000, 1999, and
1998, is as follows:
<TABLE>
<CAPTION>
Year Ended March 31, 2000
-------------------------
Solutions - Solutions -
Products Industrial Automotive Total
-------- ----------- ----------- -----
(In thousands)
<S> <C> <C> <C> <C>
Sales to external customers.............. $511,287 $ 68,559 $156,408 $736,254
Operating income before amortization..... 75,371 6,771 2,292 84,434
Depreciation and amortization............ 19,843 3,077 5,616 28,536
Total assets............................. 505,461 65,994 188,369 759,824
Capital expenditures..................... 7,805 122 175 8,102
Year Ended March 31, 1999
-------------------------
Solutions - Solutions -
Products Industrial Automotive Total
-------- ----------- ----------- -----
(In thousands)
Sales to external customers.............. $508,313 $ 65,689 $161,443 $735,445
Operating income before amortization..... 78,945 6,691 14,925 100,561
Depreciation and amortization............ 18,559 3,045 5,652 27,256
Total assets............................. 517,774 68,520 180,617 766,911
Capital expenditures..................... 11,203 1,468 321 12,992
F-30
<PAGE>
17. Business Segment Information (continued)
Year Ended March 31, 1998
-------------------------
Solutions - Solutions -
Products Industrial Automotive Total
-------- ----------- ----------- -----
(In thousands)
Sales to external customers.............. $521,978 $ 39,845 $ - $561,823
Operating income before amortization..... 76,223 3,992 - 80,215
Depreciation and amortization............ 17,939 1,957 - 19,896
Total assets............................. 533,754 71,499 183,609 788,862
Capital expenditures..................... 10,694 712 - 11,406
</TABLE>
The following provides a reconciliation of operating income before
amortization to consolidated income before income tax, minority interest, and
extraordinary charge:
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Operating income before amortization............................... $ 84,434 $100,561 $ 80,215
Amortization of intangibles........................................ 16,392 15,479 10,297
Interest and debt expense.......................................... 34,698 35,923 25,104
Interest and other income.......................................... (1,314) (1,565) (1,940)
-------- -------- --------
Income before income taxes and extraordinary charge................ $ 34,658 $ 50,724 $ 46,754
======== ======== ========
Financial information relating to the Company's operations by geographic
area is as follows:
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
Net sales:
United States...................................................... $609,734 $613,179 $462,120
Europe............................................................. 71,076 65,000 39,208
Canada............................................................. 49,716 51,653 55,367
Other.............................................................. 5,728 5,613 5,128
-------- -------- --------
Total.............................................................. $736,254 $735,445 $561,823
======== ======== ========
Year Ended March 31,
--------------------
2000 1999 1998
---- ---- ----
(In thousands)
Assets:
United States...................................................... $632,796 $634,720 $662,371
Europe............................................................. 95,601 100,317 90,036
Canada............................................................. 27,130 28,265 32,258
Other.............................................................. 4,297 3,609 4,197
-------- -------- --------
Total.............................................................. $759,824 $766,911 $788,862
======== ======== ========
</TABLE>
F-31
<PAGE>
18. Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended Year Ended
------------------ ----------
July 4, October 3, January 2, March 31, March 31,
1999 1999 2000 2000 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales................................ $181,601 $182,008 $174,173 $198,472 $736,254
Gross profit............................. 47,113 39,732 43,405 49,859 180,109
Income from operations................... 20,866 11,573 16,176 19,427 68,042
Income before extraordinary charge....... 6,395 511 3,254 6,920 17,080
Net income............................... 6,395 511 3,254 6,920 17,080
Income per share before extraordinary
charge........................... 0.45 0.04 0.23 0.49 1.20
Net income per share - diluted........... 0.45 0.04 0.23 0.49 1.20
Three Months Ended Year Ended
------------------ ----------
June 28, September 27, December 27, March 31, March 31,
1998 1998 1998 1999 1999
---- ---- ---- ---- ----
Net sales................................ $184,616 $185,357 $186,995 $178,477 $735,445
Gross profit............................. 47,313 47,042 47,396 50,719 192,470
Income from operations................... 21,223 20,578 21,402 21,879 85,082
Income before extraordinary charge....... 6,375 5,923 6,445 8,693 27,436
Net income............................... 6,375 5,923 6,445 8,693 27,436
Income per share before extraordinary
charge........................... 0.44 0.41 0.46 0.62 1.92
Net income per share - diluted........... 0.44 0.41 0.46 0.62 1.92
Three Months Ended Year Ended
------------------ ----------
June 29, September 28, December 28, March 31, March 31,
1997 1997 1997 1998 1998
---- ---- ---- ---- ----
Net sales................................ $136,858 $136,060 $137,329 $151,576 $561,823
Gross profit............................. 38,273 39,008 38,634 44,239 160,154
Income from operations................... 15,663 17,312 16,112 20,831 69,918
Income before extraordinary charge....... 4,579 5,850 5,619 7,930 23,978
Net income............................... 4,579 5,850 5,619 3,410(a) 19,458(a)
Income per share before extraordinary
charge........................... 0.32 0.41 0.39 0.55 1.66
Net income per share - diluted........... 0.32 0.41 0.39 0.24(a) 1.35(a)
--------
(a) Includes extraordinary charges for early debt extinguishment amounting to
$4,520,000 in the quarter and year ended March 31, 1998, net of the tax
effect.
</TABLE>
F-32
<PAGE>
19. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) are as
follows:
<TABLE>
<CAPTION>
March 31,
---------
2000 1999
---- ----
(In thousands)
<S> <C> <C>
Net unrealized investment gains - net of tax....................................... $ 2,832 $ 2,312
Minimum pension liability adjustment - net of tax.................................. (682) (1,041)
Foreign currency translation adjustment............................................ (7,766) (4,637)
-------- --------
Accumulated other comprehensive loss............................................... $ (5,616) $ (3,366)
======== ========
</TABLE>
The net tax liability associated with items included in comprehensive
income (loss) was $1,433,000 and $847,000 for 2000 and 1999, respectively.
20. Effects of New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities," in June of 1998. The FASB issued SFAS 137 in June of
1999 which defers the effective date of SFAS 133 to fiscal years beginning after
June 15, 2000. Statement No. 133 establishes accounting and reporting standards
for derivatives 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. Compliance with this
statement will not have a material impact on the Company at the present time.
In December of 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." The Company does not believe that the requirements of SAB No. 101
will have any effect on or require any adjustments to the Company's results of
operations and financial position.
F-33
<PAGE>
COLUMBUS McKINNON CORPORATION
SCHEDULE II--Valuation and qualifying accounts
March 31, 2000, 1999 and 1998
Dollars in thousands
<TABLE>
<CAPTION>
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
Year ended March 31, 2000: Deducted from asset accounts:
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 2,271 $ 979 $ - $ 1,014(1) $ 2,236
Slow-moving and obsolete inventory 4,295 1,776 112(4) 1,998(2) 4,185
------- ------- ------ ------- -------
Total $ 6,566 $ 2,755 $ 112 $ 3,012 $ 6,421
======= ======= ====== =======
Reserves on balance sheet:
Accrued general and product liability costs $11,416 $ 3,368 $ - $ 234(3) $14,550
======= ======= ====== =======
Year ended March 31, 1999: Deducted from asset accounts:
Allowance for doubtful accounts $ 2,511 $ 743 $ (27)(5) $ 956(1) $ 2,271
Slow-moving and obsolete inventory 4,684 1,884 (592)(5) 1,681(2) 4,295
Reserve against non-current receivable 600 -- - 600(6) -
------- ------- ------ ------- -------
Total $ 7,795 $ 2,627 $ (619) $ 3,237 $ 6,566
======= ======= ====== ======= =======
Reserves on balance sheet:
Accrued general and product liability costs $11,688 $ 3,265 $ - $ 3,537(3) $11,416
======= ======= ====== ======= =======
Year ended March 31, 1998: Deducted from asset accounts:
Allowance for doubtful accounts $ 1,884 $ 1,677 $ 470(4) $ 1,520(1) $ 2,511
Slow-moving and obsolete inventory 3,356 1,115 854(4) 641(2) 4,684
Reserve against non-current receivable 600 - - - 600
------- ------- ------ ------- -------
Total $ 5,840 $ 2,792 $1,324 $ 2,161 $ 7,795
======= ======= ====== ======= =======
Reserves on balance sheet:
Accrued general and product liability costs $11,973 $ 1,522 $ - $ 1,807(3) $11,688
======= ======= ====== ======= =======
--------
(1) Uncollectible accounts written off, net of recoveries
(2) Obsolete inventory disposals
(3) Insurance claims and expenses paid
(4) Reserves at date of acquisition of subsidiaries
(5) Reserves at date of disposal of subsidiary
(6) Receivable deemed to be collectible in its entirety
</TABLE>
F-34
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
------- -----------------------------------------------------------------------
Financial Disclosures
---------------------
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
-------- ---------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Directors and Executive Officers
The following table sets forth certain information regarding the Directors and
executive officers of the Company:
Name Age Position(s) Held
---- --- ----------------
Herbert P. Ladds, Jr. 67 Chairman of the Board
Timothy T. Tevens 44 President, Chief Executive Officer
and Director
Robert L. Montgomery, Jr. 62 Executive Vice President, Chief
Financial Officer and Director
Ned T. Librock 47 Vice President-Sales and Marketing
Karen L. Howard 38 Vice President-Controller
Joseph J. Owen 39 Vice President-Strategic
Integration
Ernst K. H. Marburg 65 Vice President-Total Quality and
Standards
Lois H. Demler 62 Corporate Secretary
Randolph A. Marks 64 Director
L. David Black 63 Director
Carlos Pascual 54 Director
Richard H. Fleming 52 Director
All officers of the Company are elected annually at the first meeting of
the Board of Directors following the Annual Meeting of Shareholders and serve at
the discretion of the Board of Directors. There are no family relationships
between any officers or Directors of the Company. Recent business experience of
the Directors and executive officers is as follows:
Herbert P. Ladds, Jr. has been a Director of the Company since 1973 and was
elected Chairman of the Board of Directors of the Company in January 1998. He
served as Chief Executive Officer of the Company from 1986 until his retirement
in July 1998. He was President of the Company from 1982 until January 1998 and
was Executive Vice President of the Company from 1981 to 1982 and Vice
President--Sales & Marketing from 1971 to 1980. Mr. Ladds is also a director of
Utica Mutual Insurance Company, Eastman Worldwide and R.P. Adams Company, Inc.
and Fibron Products, Inc.
36
<PAGE>
Timothy T. Tevens was elected President and a Director of the Company in
January 1998 and assumed the duties of Chief Executive Officer in July 1998.
From May 1991 to January 1998 he served as Vice President--Information Services
of the Company and was elected Chief Operating Officer in October 1996. From
1980 to 1991, Mr. Tevens was employed by Ernst & Young LLP in various management
consulting capacities.
Robert L. Montgomery, Jr. joined the Company in 1974 and has served as
Executive Vice President and Chief Financial Officer since 1987 and as a
Director of the Company since 1982. Prior thereto he was employed as a certified
public accountant by PricewaterhouseCoopers LLP.
Ned T. Librock was elected Vice President-Sales and Marketing in November
1995. Mr. Librock has been employed by the Company since 1990 in various sales
management capacities. Prior to 1990, Mr. Librock was employed by Dynabrade
Inc., a manufacturer of power tools, as director of Sales and Marketing.
Karen L. Howard was elected Vice President-Controller in January 1997. From
June 1995 to January 1997, Ms. Howard was employed by the Company in various
financial and accounting capacities. Prior to June 1995, Ms. Howard was employed
by Ernst & Young LLP as a certified public accountant.
Joseph J. Owen was appointed Vice President-Strategic Integration in August
1999. From April 1997 to August 1999, Mr. Owen was employed by the Company as
Corporate Director-Materials Management. Prior thereto, he was employed by Ernst
& Young LLP in various management consulting capacities.
Ernst K. H. Marburg has been employed by the Company since May 1980. Prior
to his election as Vice President-Total Quality and Standards in October 1996,
Mr. Marburg served the Company as Manager of Product Standards and Services for
nearly fifteen years.
Lois H. Demler has been employed by the Company since 1963. She has been
the Corporate Secretary of the Company since 1987.
Randolph A. Marks has been a Director of the Company since 1986. Mr. Marks
is a private investor and is a retired Chairman of the Board of American Brass
Company. He also serves as a director of Computer Task Group, Inc. and Delaware
North Companies, Inc.
L. David Black has been a Director of the Company since 1995. Mr. Black has
been the Chairman of the Board and Chief Executive Officer of JLG Industries,
Inc., a manufacturer of construction equipment since 1993, and he served
additionally as President from 1993 to 1999. Prior thereto, he served as
President of JLG Industries, Inc.
Carlos Pascual has been a Director of the Company since 1998. Since August
1999, Mr. Pascual has been Executive Vice President and President of Developing
Markets Operations for Xerox. From January 1999 to August 1999, he served as
Deputy Executive Officer of Xerox's Industry Solutions Operations. From August
1995 to January 1999, he served as President of Xerox Corporation's United
States Customer Operations, and from July 1997 to January 1999 he also served as
a Senior Vice President of Xerox Corporation. Prior thereto, since 1968 he has
served in various capacities with Xerox Corporation.
Richard H. Fleming was appointed a Director of the Company in March 1999.
In February 1999, Mr. Fleming was appointed Executive Vice President and Chief
Financial Officer of USG Corporation. Prior thereto, Mr. Fleming has served USG
Corporation in various executive financial capacities since 1989, including
Senior Vice President and Chief Financial Officer from January 1995 to February
1999 and Vice President and Chief Financial Officer from January 1994 to January
1995.
37
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission and NASDAQ initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, Directors and greater than 10% shareholders are required
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended March 31, 2000 all Section
16(a) filing requirements applicable to its officers, Directors and greater than
10% beneficial owners were complied with.
Item 11. Executive Compensation
-------- ----------------------
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth certain information
with respect to the compensation paid by the Company for services rendered
during the fiscal years ended March 31, 1998, 1999 and 2000 for the chief
executive officer and the other four most highly compensated executive officers
of the Company. The amounts shown include compensation for services in all
compensation capacities.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation Awards
------------------- ----------------------
Securities
Restricted Underlying
Fiscal Other Annual Stock Options/ All Other
Name and Principal Position Year Salary Bonus Compensation Awards(1) SARs(2) Compensation(3)
--------------------------- ---- ------ ----- ------------ --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Timothy T. Tevens, 2000 $ 448,769 $ - $ - 2,488 54,000 $ 9,485
President and Chief 1999 410,385 36,511 - - - 9,834
Executive Officer 1998 220,000 75,000 - - - 31,952
Robert L. Montgomery, Jr., 2000 373,923 - - 2,417 - 12,238
Executive Vice President 1999 339,115 52,609 - - - 12,703
And Chief Financial Officer 1998 317,000 97,575 - - - 19,597
Ned T. Librock, 2000 209,538 - 68,553(4) 1,386 36,000 15,316
Vice President - 1999 195,905 34,272 - - - 14,938
Sales Marketing 1998 186,655 65,625 - - - 18,984
Karen L. Howard, 2000 163,240 - - 1,031 36,000 15,474
Vice President - 1999 144,636 23,125 - 8,500 - 13,154
Controller 1998 124,999 43,630 - - - 14,559
Joesph J. Owen 2000 160,500 - - 1,016 18,000 11,758
Vice President - 1999 142,500 22,625 - - 1,000 7,460
Strategic Integration 1998 122,500 1,050 - - - 1,166
--------------------------------------
(1) Mr. Tevens was granted 2,488 shares of restricted Common Stock on June 10, 1999, which had a value on such date of
$61,900. As of March 31, 2000, the number of restricted shares of Common Stock held by Mr. Tevens was 2,488, and
the value of such restricted shares was $32,655. Mr. Montgomery was granted 2,417 shares of restricted Common Stock
on June 10, 1999, which had a value on such date of $60,100, and a value as of March 31, 2000 of $31,723. Mr.
Librock was granted 1,386 shares of restricted Common Stock on June 10, 1999, which had a value on such date of
$34,500, 11,900 shares of restricted Common Stock on July 22, 1996, which had a value on such date of $166,600, and
38
<PAGE>
5,100 shares of restricted Common Stock on August 1, 1994, which had a value on such date of $48,996. The
restrictions on 5,100 of Mr. Librock's restricted shares of Common Stock lapsed on July 31, 1999, on which date
such shares had a value of $116,981. As of March 31, 2000, the number of restricted shares of Common Stock held by
Mr. Librock was 13,286, and the value of such restricted shares was $174,379. Ms. Howard was granted 1,031 shares
of restricted Common Stock on June 10, 1999, which had a value on such date of $25,650, 8,500 shares of restricted
Common Stock on August 17, 1998, which had a value on such date of $196,563, and 8,500 shares of restricted Common
Stock on June 1, 1995, which had a value on such date of $107,875. As of March 31, 2000, the number of restricted
shares of Common Stock held by Ms. Howard was 18,031, and the value of such restricted shares was $236,657. Mr.
Owen was granted 1,016 shares of restricted Common Stock on June 10, 1999, which had a value on such date of
$25,300, and 5,000 shares of restricted Common Stock on April 14, 1997, which had a value on such date of $95,000.
As of March 31, 2000, the number of restricted shares of Common Stock held by Mr. Owen was 6,016, and the value of
such restricted shares was $78,960. None of the other officers listed in the above table hold any restricted shares
of Common Stock. The Company does not pay dividends on its outstanding shares of restricted Common Stock, but makes
payments of additional compensation in lieu of such dividends. See footnote (3) below.
(2) Represents options granted to Messrs. Tevens and Librock, Ms. Howard and Mr. Owen pursuant to the Company's
Incentive Stock Option Plan (the "Incentive Plan") in amounts of 23,810, 22,345, 22,345, and 18,000 respectively
and options granted to Messrs. Tevens and Librock and Mrs. Howard pursuant to the Company's Non-Qualified Stock
Option Plan (the "Non-Qualified Plan") in the amounts of 30,190, 13,655 and 13,655, respectively.
(3) Comprised of: (i) the value of shares of Common Stock allocated in fiscal 2000 under the Company's Employee Stock
Ownership Plan (the "ESOP") to accounts for Messrs. Tevens, Montgomery, Librock, Ms. Howard and Mr. Owen in the
amounts of $3,980, $6,750, $4,006, $3,179 and $2,945, respectively, (ii) premiums for group term life insurance
policies insuring the lives of Messrs. Tevens, Montgomery, Librock, Ms. Howard and Mr. Owen in the amount of $108
each, (iii) compensation in lieu of dividends on restricted shares of Common Stock paid to Messrs. Tevens,
Montgomery, Librock, Ms. Howard and Mr. Owen in the amounts of $597, $580, $6,402, $7,387 and $4,038, respectively
and (iv) the Company's matching contributions under its 401(k) plan for Messrs. Tevens, Montgomery, Librock, Ms.
Howard and Mr. Owen in the amounts of $4,800, $4,800, $4,800, $4,800 and $4,667, respectively.
(4) Represents tax reimbursement payments made by the Company to Mr. Librock in fiscal 2000 to offset the income tax
effects of the expiration of the restrictions on 5,100 shares of restricted Common Stock granted to him in fiscal
1995. See footnote (1) above.
</TABLE>
Options Granted in Last Fiscal Year
The following table contains information concerning the grant of stock
options to the named executives in fiscal 2000. The exercise price of all such
options is equal to the market value of Common Stock on the date of the grant.
<TABLE>
<CAPTION>
Percentage of
Total Options Potential Realizable Value at
Granted to Exercise Assumed Annual Rates of
Option Employees in Price Per Expiration Stock Price Appreciation
Name and Principal Position Grants(1) Fiscal Year Share Date For Option Term
--------------------------- -------- ----------- ----- ---- ---------------
5%(2) 10%(3)
----- ------
<S> <C> <C> <C> <C> <C> <C>
Timothy T. Tevens, 54,000 11.06% $20.60 4/1/09 $699,840 $1,772,820
Robert L. Montgomery, Jr., - - - - - -
Ned T. Librock, 36,000 7.38% 20.60 4/1/09 466,560 1,181,880
Karen L. Howard, 36,000 7.38% 20.60 4/1/09 466,560 1,181,880
Joseph J. Owen 18,000 3.69% 20.60 4/1/09 233,280 590,940
Vice President -
Strategic Integration
---------------------------------
39
<PAGE>
(1) Options granted pursuant to the Incentive Plan and the Non-Qualified Plan become exercisable
in cumulative annual increments of 25% beginning one year from the date of grant; however, in
the event of certain extraordinary transactions, including a change of control of the Company,
the vesting of such options would automatically accelerate.
(2) Represents the potential appreciation of the options, determined by assuming an annual
compounded rate of appreciation of 5% per year over the ten-year term of the grants, as
prescribed by the rules. The amount set forth above is not intended to forecast future
appreciation, if any, of the stock price. There can be no assurance that the appreciation
reflected in this table will be achieved.
(3) Represents the potential appreciation of the options, determined by assuming an annual
compounded rate of appreciation of 10% per year over the ten-year term of the grant, as
prescribed by the rules. The amounts set forth above are not intended to forecast future
appreciation, if any, of the stock price. There can be no assurance that the appreciation
reflected in this table will be achieved.
</TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
The following table sets forth information with respect to the named
executives concerning the exercise of options during fiscal 2000 and unexercised
options held at the end of fiscal 2000.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised in the Money Options
Acquired Value Options At Fiscal Year End At Fiscal Year End(1)
-------------------------- ---------------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy T. Tevens,
President and Chief
Executive Officer $ - $ - 46,500 57,500 $ - $ -
Robert L. Montgomery, Jr.,
Executive Vice President
and Chief Financial Officer - - - - - -
Ned T. Librock,
Vice President -
Sales and Marketing - - 43,500 42,500 - -
Karen L. Howard,
Vice President -
Controller - - 43,500 42,500 - -
Joseph J. Owen,
Vice President -
Strategic Integration - - 3,500 15,500 - -
--------------------------------
(1) The closing market value of Common Stock as of March 31, 2000 of $13.125 was
less than the exercise prices of the options.
</TABLE>
40
<PAGE>
Employee Plans
Employee Stock Ownership Plan. The Company maintains the ESOP for the
benefit of certain of its salaried and non-union hourly employees. The ESOP is
intended to be an employee stock ownership plan within the meaning of Section
4975 (e)(7) of the Internal Revenue Code of 1986, as amended (the "Code") and an
eligible individual account plan within the meaning of Section 407(d)(3) of the
Code. From 1988 through 1998, the ESOP has purchased from the Company 1,373,549
shares of Common Stock (the "ESOP Shares") for the aggregate sum of
approximately $10.5 million. The proceeds of certain institutional loans (the
"ESOP Loans") were used to fund such purchases. The ESOP Loans are secured by
the ESOP Shares, and are guaranteed by the Company. The ESOP acquired 479,900
shares of Common Stock in October 1998 for the aggregate sum of approximately
$7.7 million. The proceeds of a loan from the Company were used to fund the
purchase.
On a quarterly basis, the Company makes a contribution to the ESOP in an
amount determined by the Company's Board of Directors. In fiscal 2000, the
Company's cash contribution was $1,434,288. The ESOP trustees utilize the entire
contribution to make payments of principal and interest on the ESOP Loans.
Common Stock not allocated to ESOP participants ("ESOP Shares") is recorded
in an ESOP suspense account and is held as collateral for repayment of the ESOP
Loans. As payments of principal and interest are received by the lenders, ESOP
Shares are released from the ESOP suspense account annually and are then
allocated to the ESOP participants in the same proportion as a participant's
compensation for such year bears to total compensation of all participants.
An ESOP participant becomes 100% vested in all amounts allocated to him or
her after five years of service. The shares of Common Stock held by the
participants in the ESOP represent a registration-type class of securities and
are voted by the participants in the same manner as any other share of Common
Stock.
In general, Common Stock allocated to a participant's account is
distributed upon his or her termination of employment at normal retirement (age
65) or death. The distribution is made in whole shares of Common Stock plus cash
in lieu of any fractional shares.
Robert L. Montgomery, Jr., Karen L. Howard, Neal E. Wixson and Timothy R.
Harvey serve as Trustees of the ESOP. As of March 31, 2000, the ESOP owned
approximately 1,496,109 shares of Common Stock. Common Stock allocated pursuant
to the ESOP to Messrs. Tevens, Montgomery and Librock, Ms. Howard and Mr. Owen
as of March 31, 2000 is 3,847 shares, 13,582 shares, 3,927 shares, 1,033 shares
and 404 shares, respectively.
Pension Plan. The Company has a non-contributory, defined benefit pension
plan (the "Pension Plan") which provides certain of its employees with
retirement benefits. For each year of Plan Participation (as defined in the
"Pension Plan") limited to 35 years, a participant earns an annual pension
benefit equal to 1.00% of his Final Average Earnings (as defined in the Pension
Plan) plus .50% of that part, if any, of such compensation in excess of his
Covered Compensation (as defined in the Pension Plan). Pension benefits are not
subject to reduction for social security or other offset amounts. If Messrs.
Tevens, Montgomery and Librock, Ms. Howard and Mr. Owen continue at their
current levels of compensation and retire at age 65, the total estimated annual
pension benefits under the Pension Plan for them would be approximately $61,110,
$41,678, $56,077, $64,143 and $55,604, respectively.
Non-Qualified Stock Option Plan. In October 1995, the Company adopted the
Columbus McKinnon Corporation Non-Qualified Stock Option Plan (the
"Non-Qualified Plan") and reserved, subject to certain requirements, an
aggregate of 250,000 shares of Common Stock for issuance thereunder. Under the
terms of the Non-Qualified Plan, options may be granted to officers and other
key employees of the Company as well as to non-employee directors and advisors.
In fiscal 2000, the Company granted options to purchase 120,020 shares of Common
Stock under the Non-Qualified Plan.
41
<PAGE>
Incentive Stock Option Plan. The Company's Columbus McKinnon Corporation
Incentive Stock Option Plan (the "Incentive Plan"), which was adopted in October
1995, authorizes grants to officers and other key employees of the Company and
its subsidiaries of stock options that are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Code. The Incentive Plan
reserved, subject to certain adjustments, an aggregate of 1,250,000 shares of
Common Stock to be issued thereunder. Options granted under the Incentive Plan
become exercisable over a four-year period at the rate of 25% per year
commencing one year from the date of grant at an exercise price of not less than
100% of the fair market value of the Common Stock on the date of grant. Any
option granted thereunder may be exercised not earlier than one year and not
later than ten years from the date such option is granted. In the event of
certain extraordinary transactions, including a change of control of the
Company, the vesting of such options would automatically accelerate. In fiscal
2000 the Company granted options to purchase 361,390 shares of Common Stock
under the Incentive Plan.
Restricted Stock Plan. The Company adopted the Columbus McKinnon
Corporation Restricted Stock Plan (the "Restricted Stock Plan") in October 1995
and reserved, subject to certain adjustments, an aggregate of 100,000 shares of
Common Stock to be issued upon the grant of restricted stock awards thereunder.
Under the terms of the Restricted Stock Plan, the Compensation Committee may
grant to employees of the Company and its subsidiaries restricted stock awards
to purchase shares of Common Stock at a purchase price of not less than $.01 per
share. Shares of Common Stock issued under the Restricted Stock Plan are subject
to certain transfer restrictions and, subject to certain exceptions, shall be
forfeited if the grantee's employment with the Company or any of its
subsidiaries is terminated at any time prior to the date the transfer
restrictions have lapsed. Grantees who remain continuously employed with the
Company or its subsidiaries become vested in their shares five years after the
date of the grant, or earlier upon death, disability, retirement or other
special circumstances. The restrictions on any such stock awards automatically
lapse in the event of certain extraordinary transactions, including a change of
control of the Company. In fiscal 2000, the Company awarded 60,700 shares of
Common Stock under the Restricted Stock Plan.
EVA(R) Incentive Plan. In fiscal 1998, the Company adopted the Columbus
McKinnon Corporation EVA(R) Incentive Compensation Plan (the "EVA(R) Plan")
which is based upon Stern Stewart Economic Value Added ("EVA(R)") concepts.
Under the EVA(R) Plan, for each fiscal year, each employee of the Company is
assigned a target bonus by management ranging from 3% to 30% of base
compensation, depending upon job classification. The actual bonus to be paid to
an employee will be equal to his target bonus times a bonus multiple, which can
be greater or less than 100%, based upon the relationship between actual EVA(R)
results and targeted EVA(R) results. Payments under the EVA(R) Plan will be made
within two and one half months of the completion of the applicable fiscal year.
In fiscal 2000, bonuses earned under this plan by Messrs. Tevens, Montgomery and
Librock, Ms. Howard and Mr. Owen were awarded in the form of restricted stock as
set forth in Note 1 to the Summary Compensation Table.
401(k) Plan. The Company maintains a 401(k) retirement savings plan (the
"401(k) Plan") which covers all non-union salaried and hourly employees in the
United States who have completed at least 90 days of service. Employees may
contribute up to 15% of their annual compensation (8% for highly compensated
employees), subject to an annual limitation as adjusted by the Code. Employee
contributions are matched by the Company in amount equal to 50% of the
employee's Salary Reduction Contributions (as defined in the 401(k) Plan). The
Company's matching contributions are limited to 3% of the employee's base pay
and vest at the rate of 20% per year.
42
<PAGE>
Change in Control Agreements
The Company has entered into change in control agreements (the "Change in
Control Agreements") with Messrs. Tevens, Montgomery and Librock, Ms. Howard,
Mr. Owen and certain other officers and employees of the Company. The Change in
Control Agreements provide for an initial term of one year, which, absent
delivery of notice of termination, is automatically renewed annually for an
additional one year term. Generally, each officer or employee is entitled to
receive, upon termination of employment within thirty-six months of a "Change in
Control" (unless such termination is because of death or disability, by the
Company for "Cause" (as defined in the Change in Control Agreements), or by an
officer or employee other than for "Good Reason" (as defined in the Change in
Control Agreements)), (i) a lump sum severance payment equal to three times the
sum of (A) his or her annual salary and (B) the greater of (1) the annual target
bonus under the EVA(R) Plan in effect on the date of termination and (2) the
annual target bonus under the EVA(R) Plan in effect immediately prior to the
Change in Control, (ii) continued coverage for thirty-six months under the
Company's medical and life insurance plans, (iii) at the option of the executive
or employee, either three additional years of deemed participation in the
Company's tax-qualified retirement plans or a lump sum payment equal to the
actuarial equivalent of the pension payment which he or she would have accrued
under the Company's tax-qualified retirement plans had he or she continued to be
employed by the Company for three additional years and (iv) certain other
specified payments. Aggregate "payments in the nature of compensation" (within
the meaning of Section 280(G) of the Internal Revenue Code) payable to any
executive or employee under the Change in Control Agreements is limited to the
amount that is fully deductible by the Company under Section 280(G) of the
Internal Revenue Code less one Dollar. The events that trigger a Change in
Control under the Change in Control Agreements include (i) the acquisition of
20% or more of the Company's outstanding Common Stock by certain persons, (ii)
certain changes in the membership of the Company's Board of Directors, (iii)
certain mergers or consolidations, (iv) certain sales or transfers of
substantially all of the Company's assets and (v) the approval of the
shareholders of the Company of a plan of dissolution or liquidation.
Stay Agreements
In connection with its decision to examine various alternatives to enhance
shareholder value, the Company has entered into stay agreements (the "Stay
Agreements") with Messrs. Tevens, Montgomery and Librock, Ms. Howard, Mr. Owen
and certain other officers and employees of the Company. The Stay Agreements
provide for the maintenance of salary and benefits levels for such officers and
employees for a period of six months after the consummation of a "Sale" (as
defined in the Stay Agreements). In addition, each such officer or employee is
entitled to receive a bonus in the amount of $1,000,000, $700,000, $500,000,
$500,000 and $500,000 for Messrs. Tevens, Montgomery and Librock, Ms. Howard and
Mr. Owen, respectively, and ranging from $30,000 to $300,000 for other officers
and employees of the Company. An additional bonus may also be payable to Messrs.
Tevens, Montgomery and Librock, Ms. Howard and Mr. Owen under the Stay
Agreements if the consideration to be received in connection with the Sale
43
<PAGE>
exceeds certain limits. Payments under the Stay Agreements are contingent upon
the continued employment of the officer or employee through the closing date of
a Sale and are payable one-half on such closing date and one-half on the six
month anniversary of such closing; provided, however, that if the employment of
the officer or employee is terminated by such six month anniversary date, he or
she will not be entitled to receive the second payment due on such anniversary
date. No payment under the Stay Agreements will be due and payable if a Sale
does not occur by (a) December 31, 2000 or (b) by March 31, 2001, provided that
on or before December 31, 2000 negotiations regarding a possible Sale to an
identified purchaser with the requisite financing are taking place.
For purposes of the Stay Agreements, a "Sale" is deemed to occur upon (a) a
sale of 90% or more of the Company's outstanding common stock or (b) the sale of
all or substantially all of the Company's assets.
COMPENSATION AND NOMINATION/SUCCESSION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation for the executive officers of the Company is administered by
the Compensation and Nomination/Succession Committee which currently consists of
three independent (non-employee) Directors. The Compensation and
Nomination/Succession Committee approves the compensation arrangements of the
Chief Executive Officer and other officers of the Company.
The following objectives, established by the Compensation and
Nomination/Succession Committee, are the basis for the Company's executive
compensation program:
o providing a comprehensive program with components including base
salary, performance incentives, and benefits that support and align
with the Company's goal of providing superior value to customers and
shareholders; and
o ensuring that the Company is competitive and can attract and retain
qualified and experienced executive officers and other key personnel;
and
o appropriately motivating its executive officers and other key personnel
to seek to attain short term, intermediate term and long term corporate
and divisional performance goals and to manage the Company for
sustained long term growth.
The Board of Directors of the Company has delegated to the Compensation and
Nomination/Succession Committee responsibility for establishing and
administering the compensation programs for the Chief Executive Officer and
other executive officers.
The Compensation and Nomination/Succession Committee reviews compensation
policy and specific levels of compensation paid to the Chief Executive Officer
and other executive officers of the Company and reports and makes
recommendations to the Board of Directors regarding executive compensation,
policies and programs.
The Compensation and Nomination/Succession Committee is assisted in these
efforts, when required by an independent outside consultant, and by the
Company's internal staff, who provide the Compensation and Nomination/Succession
Committee with relevant information and recommendations regarding compensation
policies and specific compensation matters.
44
<PAGE>
Annual Compensation Programs
Executive base salaries are compared to manufacturing companies included in
a periodic management survey completed by outside compensation consultants; all
data has been regressed to revenues equivalent to the Company's. This survey is
used because it reflects companies in the same revenue size and industry sectors
as the Company. The Compensation and Nomination/ Succession Committee believes
salaries should be targeted toward the median of the surveyed salaries reported,
depending upon the relative experience and individual performance of the
executive.
Salary adjustments are governed by guidelines covering three factors (1)
the individual officer's performance (merit), (2) market parity (to adjust
salaries of high performing individuals based on the competitive market), and
(3) promotions (to reflect increases in responsibility). In assessing market
parity, the Company targets groups of companies surveyed and referred to above.
Each executive officer's corporate position is assigned a title
classification reflecting the Company's evaluation of the position's overall
contribution to corporate goals and the value the labor market places on the
associated job skills. A range of appropriate salaries is then assigned to that
title classification. Each April, the salary ranges may be adjusted to reflect
market conditions, including changes in comparison companies, inflation, and
supply and demand in the market. The midpoint of the salary range corresponds to
a "market rate" salary which the Compensation and Nomination/Succession
Committee believes is appropriate for an experienced executive who is performing
satisfactorily, with salaries in excess of the salary range midpoint appropriate
for executives whose performance is superior or outstanding.
The Compensation and Nomination/Succession Committee has recommended that
any progression or regression within the salary range for an executive officer
shall depend upon a formal annual review of job performance, accomplishments and
progress toward individual and/or overall goals and objectives for the segments
of the Company that such officer oversees as well as his contributions to the
overall direction of the Company. Long term growth in shareholder value is an
important factor. The results of executive officers' performance evaluations
will form a part of the basis of the Compensation and Nomination/Succession
Committee's decision to approve, at its discretion, future adjustments in base
salaries of executive officers.
Chief Executive Officer Compensation
Compensation decisions affecting the Chief Executive Officer were based on
quantitative and qualitative factors. These factors were accumulated by an
external compensation consulting firm and included comparisons of the Company's
fiscal 1999 financial statistics to peer companies, strategic achievements such
as acquisitions and their integration, comparisons of the base salary level to
the median for comparable companies in published compensation surveys, as well
as assessments prepared internally by other members of executive management. The
bonus cited below was based on the Company's consolidated EVA(R) performance for
fiscal 1999.
There was no adjustment to Mr. Tevens' base salary effective April 2000.
In fiscal 2000, Mr. Tevens received a bonus of 2,488 shares of restricted
stock based upon fiscal 1999 EVA(R) results.
45
<PAGE>
Section 162(m) of Internal Revenue Code
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation in excess of
$1,000,000 paid to a Company's chief executive officer and any one of the four
other most highly paid executive officers during its taxable year. Qualifying
performance-based compensation is not subject to the deduction limit if certain
requirements are met. Based upon the compensation paid to the Company's
executive officers in fiscal 2000, it does not appear that the Section 162(m)
limitation will have a significant impact on the Company in the near term.
However, the Compensation and Nomination/Succession Committee plans to review
this matter periodically and to take such actions as are necessary to comply
with the new statute to avoid non-deductible compensation payments.
Randolph A. Marks
Carlos Pascual
Richard H. Fleming
46
<PAGE>
PERFORMANCE GRAPH
The Performance Graph shown below compares the cumulative total shareholder
return on Common Stock, based on the market price of the Common Stock, with the
total return of the S & P MidCap 400 Index and the NASDAQ National Market
Industrials Index. The comparison of total return assumes that a fixed
investment of $100 was invested on February 22, 1996 (the effective date of the
Company's initial public offering) in Common Stock and in each of the foregoing
indices and further assumes the reinvestment of dividends. The stock price
performance shown on the graph is not necessarily indicative of future price
performance.
[ILLUSTRATION OF PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
2/23/96 1996 1997 1998 1999 2000
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Columbus McKinnon Corporation ............. 100 107 121 190 141 93
S&P Midcap 400 Index ...................... 100 105 116 173 166 230
Dow Jones Industrial - Diversified Index .. 100 107 125 182 180 207
</TABLE>
47
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Nomination/ Succession Committee is composed of
Randolph A. Marks, Carlos Pascual and Richard H. Fleming, each an outside
director of the Company. None of the members of the Compensation and Nomination/
Succession Committee was, during fiscal 2000 or prior thereto, an officer or
employee of the Company or any of its subsidiaries. In fiscal 2000, none of the
executive officers of the Company served on the Compensation Committee of
another entity or on any other committee of the Board of Directors of another
entity performing similar functions during such period, except that Mr. Ladds
served on the Compensation Committee of the Board of Directors of Utica Mutual
Insurance Company.
COMPENSATION OF DIRECTORS
The Company pays an annual retainer of $20,000 to its Chairman of the Board
and an annual retainer of $15,000 to each of its other outside directors.
Directors who are employees of the Company do not receive an annual retainer.
The Chairman of the Audit Committee and Compensation and Nomination/Succession
Committee each receive an additional annual retainer of $2,500. In addition,
each non-employee director also receives a fee of $1,000 for each Board of
Directors and committee meeting attended and is reimbursed for any reasonable
expenses incurred in attending such meetings.
Item 12. Security Ownership of Certain Beneficial Owners and Management
-------- --------------------------------------------------------------
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of May 31, 2000
regarding the beneficial ownership of the Company's Common Stock by (a) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock; (b) by each Director; (c) by each of the executive
officers named in the Summary Compensation Table; and (d) by all executive
officers and Directors of the Company as a group.
<TABLE>
<CAPTION>
Number Percentage
Of Shares(1) Of Class
------------ --------
Directors, Officers and 5% Shareholders
---------------------------------------
<S> <C> <C> <C>
Herbert P. Ladds, Jr.(2)(3)..................................................... 1,056,610 7.09
Timothy T. Tevens(2)(4)......................................................... 74,644 *
Robert L. Montgomery, Jr.(2)(5)................................................. 1,151,327 7.73
Randolph A. Marks(2)............................................................ 238,340 1.60
L. David Black(2)............................................................... 1,700 *
Carlos Pascual (2).............................................................. 1,500 *
Richard H. Fleming (2).......................................................... 1,500 *
Ned T. Librock(2)(6)............................................................ 66,968 *
Karen L. Howard (2)(7).......................................................... 63,829 *
Joseph J. Owen(2)(8)............................................................ 13,562 *
Ernst K. H. Marburg(2)(9)....................................................... 18,295 *
Columbus McKinnon Corporation Employee Stock Ownership Plan (2)................. 1,496,109 10.04
All Directors and Executive Officers as a Group (12 persons)(10)................ 2,706,015 18.17
Capital Group International, Inc.(11)........................................... 1,347,200 9.04
Gilchrist B. Berg(12)........................................................... 1,015,292 6.82
--------
</TABLE>
* Less than 1%.
(1) Rounded to the nearest whole share. Unless otherwise indicated in the
footnotes, each of the shareholders named in this table has sole voting
and investment power with respect to the shares shown as beneficially
owned by him, except to the extent that authority is shared by spouses
under applicable law.
(2) The address of each of the executive officers and directors and the
Columbus McKinnon Employee Stock Ownership Plan is c/o Columbus
McKinnon Corporation, 140 John James Audubon Parkway, Amherst, New York
14228-1197.
48
<PAGE>
(3) Includes (i) 875,465 shares of Common Stock owned directly, (ii)
163,705 shares of Common Stock owned directly by Mr. Ladds' spouse, and
(iii) 17,440 shares of Common Stock held by Mr. Ladds' spouse as
trustee for the grandchildren of Mr. Ladds.
(4) Includes (i) 17,247 shares of Common Stock directly, (ii) 7,000 shares
of Common Stock owned directly by Mr. Tevens' spouse, (iii) 50 shares
of Common Stock owned by Mr. Tevens' son, (iv) 3,847 shares of Common
Stock allocated to Mr. Tevens' ESOP account and (v) 42,354 shares of
Common Stock issuable under currently exercisable options granted to
Mr. Tevens under the Incentive Plan and 4,146 shares of Common Stock
issuable under currently exercisable options granted to Mr. Tevens
under the Non-Qualified Plan. Excludes 31,456 shares of Common Stock
issuable under options granted to Mr. Tevens under the Incentive Plan
and 26,044 shares of Common Stock issuable under options granted to Mr.
Tevens under the Non-Qualified Plan which are not exercisable within 60
days.
(5) Includes (i) 1,052,745 shares of Common Stock owned directly, (ii)
85,000 shares of Common Stock owned directly by Mr. Montgomery's spouse
and (iii) 13,582 shares of Common Stock allocated to Mr. Montgomery's
ESOP account. Excludes 1,482,527 additional shares of Common Stock
owned by the ESOP for which Mr. Montgomery serves as one of four
trustees and for which he disclaims any beneficial ownership.
(6) Includes (i) 19,390 shares of Common Stock owned directly, (ii) 152
shares of Common Stock owned by Mr. Librock's son, (iii) 3,926 shares
of Common Stock allocated to Mr. Librock's ESOP account and (iv) 42,354
shares of Common Stock issuable under currently exercisable options
granted to Mr. Librock under the Incentive Plan and 1,146 shares of
Common Stock issuable under currently exercisable options granted to
Mr. Librock under the Non-Qualified Plan. Excludes 29,991 shares of
Common Stock issuable under options granted to Mr. Librock under the
Incentive Plan and 12,509 shares of Common Stock issuable under options
granted to Mr. Librock under the Non-Qualified Plan which are not
exercisable within 60 days.
(7) Includes (i) 19,296 shares of Common Stock owned directly, (ii) 1,033
shares allocated to Ms. Howard's ESOP account, and (iii) 42,354 shares
of Common Stock issuable under currently exercisable options granted to
Ms. Howard under the Incentive Plan and 1,146 shares of Common Stock
issuable under currently exercisable options granted to Ms. Howard
under the Non-Qualified Plan. Excludes (i) 1,495,076 additional shares
of Common Stock owned by the ESOP for which Ms. Howard serves as one of
four trustees and for which she disclaims any beneficial ownership and
(ii) 29,991 shares of Common Stock issuable under options granted to
Ms. Howard under the Incentive Plan and 12,509 shares of Common Stock
issuable under options granted to Ms. Howard under the Non-Qualified
Plan which are not exercisable within 60 days.
(8) Includes (i) 8,383 shares of Common Stock owned directly, (ii) 1,275
shares of Common Stock owned by Mr. Owen's spouse, (iii) 404 shares of
Common Stock allocated to Mr. Owen's ESOP account, and (iv) 3,500
shares of Common Stock issuable under currently exercisable options
granted to Mr. Owen under the Incentive Plan. Excludes 15,500 shares of
Common Stock issuable under options granted to Mr. Owen under the
Incentive Plan.
(9) Includes (i) 9,282 shares of Common Stock owned directly, (ii) 6,263
shares of Common Stock allocated to Mr. Marburg's ESOP account, and
(iii) 2,750 shares of Common Stock issuable under currently exercisable
options granted to Mr. Marburg under the Incentive Plan. Excludes
11,750 shares of Common Stock issuable under options granted to Mr.
Marburg under the Incentive Plan which are not exercisable within 60
days.
(10) Includes (i) options to purchase an aggregate of 142,000 shares of
Common Stock issuable to certain executive officers under the Incentive
Plan, all of which are exercisable within 60 days. Excludes the shares
of Common Stock owned by the ESOP as to which Mr. Montgomery and Ms.
Howard serve as trustees, except for an aggregate of 38,093 shares
allocated to the respective ESOP accounts of the executive officers of
the Company and (ii) options to purchase an aggregate of 181,000 shares
of Common Stock issued to certain executive officers under the
Incentive Plan and Non-Qualified Plan, none of which are exercisable
within 60 days.
(11) Based on information set forth in Schedule 13G filed with the
Commission by Capital Group International, Inc. on February 10, 2000.
(12) Based on information set forth in Schedule 13G to be filed with the
Commission by Gilchrist B. Berg on June 29, 2000. The stated business
address for Mr. Berg is 225 Water Street, Suite 1987, Jacksonville,
Florida 32202
49
<PAGE>
Item 13. Certain Relationships and Related Transactions
-------- ----------------------------------------------
None
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
-------- -----------------------------------------------------------------
(a)(1) Financial Statements:
---------------------
The following consolidated financial statements of Columbus McKinnon
Corporation are included in Item 8:
Reference Page No.
--------- --------
Report of Independent Auditors - Ernst & Young LLP F-2
Report of Independent Auditors - Deloitte & Touche LLP F-3
Consolidated balance sheets - March 31, 2000 and 1999 F-4
Consolidated statements of income - Years ended
March 31, 2000, 1999 and 1998 F-5
Consolidated statements of shareholders' equity - Years ended
March 31, 2000, 1999 and 1998 F-6
Consolidated statements of cash flows - Years ended
March 31, 2000, 1999 and 1998 F-7
Notes to consolidated financial statements F-8 - F33
(a)(2) Financial Statement Schedule: Page No.
----------------------------- --------
Report of Independent Auditors F-2
Schedule II - Valuation and qualifying accounts F-34
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
therefore have been omitted.
50
<PAGE>
(a)(3) Exhibits:
---------
Exhibit
Number
------
2.1 Agreement and Plan of Merger dated August 24, 1996 among Columbus
McKinnon Corporation, L Acquisition Corporation and Spreckels
Industries, Inc. (known as Yale International, Inc.) (incorporated by
reference to Exhibit (c)(1) to the Company's Tender Offer Statement on
Schedule 14D-1 dated August 30, 1996).
2.2 Offer to Purchase by L Acquisition Corporation dated August 30,
1997, as revised (incorporated by reference to Exhibit (a)(1) to the
Company's Tender Offer Statement on Schedule 14D-1 dated August 30,
1997, as amended by Amendment No. 1 dated September 18, 1996, Amendment
No. 2 dated September 27, 1996, Amendment No. 3 dated October 4, 1996,
Amendment No. 4 dated October 9, 1996 Amendment No. 5 dated October 13,
1996 and Amendment No. 6 dated October 17, 1996).
3.1 Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Company's Registration
Statement No. 33-80687 on Form S-1 dated December 21, 1995).
3.2 Amended By-Laws of the Registrant (incorporated by reference to
Exhibit 3 the Company's Current Report on Form 8-K dated May 17, 1999).
4.1 Specimen Common Share Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
4.2 First Amendment and Restatement of Rights Agreement, dated as of
October 1, 1998, between Columbus McKinnon Corporation and American
Stock Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4 to the Company's Current Report on Form 8-K
dated October 29, 1998).
4.3 Indenture among Columbus McKinnon Corporation, the guarantors
named on the signature pages thereto and State Street Bank and Trust
Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to
the Company's Current Report on Form 8-K dated April 9, 1998).
4.4 Supplemental Indenture among LICO, Inc., Automatic Systems, Inc.,
LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial
Products, Inc., Mechanical Products, Inc., Minitec Corporation and
State Street Bank and Trust Company, N.A., as trustee, dated March 31,
1998 (incorporated by reference to Exhibit 4.3 to the Company's Current
Report on form 8-K dated April 9, 1998).
4.5 A/B Registration Rights Agreement among Columbus McKinnon
Corporation, the guarantors named on the signature pages thereto and
Bear, Stearns & Co., Inc. and Goldman, Sachs & Co., as initial
purchasers (incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K dated April 9, 1998).
4.6 Second Supplemental Indenture among Abell-Howe Crane, Inc., LICO,
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 February 12, 1999
(incorporated by reference to Exhibit 4.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1999).
51
<PAGE>
4.7 Third Supplemental Indenture among G.L. International, Inc.,
Gaffey, Inc., Handling Systems and Conveyors, Inc., Larco Material
Handling Inc., Abell-Howe Crane, Inc., LICO, 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 March 1, 1999 (incorporated by reference to
Exhibit 4.7 to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1999).
4.8 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 (incorporated by
reference to Exhibit 10.2 to the Company's quarterly report on form
10-Q for the quarterly period ended October 3, 1999).
10.1 Amended and Restated Term Loan Agreement by and among Fleet Bank
of New York, Columbus McKinnon Corporation and Kenneth G. McCreadie,
Peter A. Grant and Robert L. Montgomery, Jr., as Trustees under the
Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement,
dated March 31, 1993 (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
10.2 Amendment No. 1 to Amended and Restated Term Loan Agreement, dated
March 31, 1993, by and among Fleet Bank of New York, Columbus McKinnon
Corporation and Kenneth G. McCreadie, Peter A. Grant and Robert L.
Montgomery, Jr. as trustees under the Columbus McKinnon Corporation
Employee Stock Ownership Trust Agreement, dated October 27, 1994
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
10.3 Amendment No. 2 to Amended and Restated Term Loan Agreement by and
among Fleet Bank, Columbus McKinnon Corporation and Kenneth G.
McCreadie, Peter A. Grant and Robert L. Montgomery, Jr. under the
Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement,
dated November 2, 1995 (incorporated by reference to Exhibit 10.4 to
the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
10.4 Amendment No. 3 to Amended and Restated Term Loan Agreement by and
among Fleet Bank, Columbus McKinnon Corporation and Karen L. Howard,
Timothy R. Harvey, and Robert L. Montgomery, Jr. as trustees under the
Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement
(incorporated by reference to Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1999).
10.5 Loan Agreement by and among Columbus McKinnon Corporation
Employee Stock Ownership Trust, Columbus McKinnon Corporation and
Marine Midland Bank, dated October 27, 1994 (incorporated by reference
to Exhibit 10.5 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
52
<PAGE>
10.6 Amended and Restated Term Loan Agreement by and among Columbus
McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon
Corporation and Marine Midland Bank, dated August 5, 1996 (incorporated
by reference to Exhibit 10.6 to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1999).
10.7 First Amendment to Amended and Restated Term Loan Agreement by and
among Columbus McKinnon Corporation Employee Stock Ownership Trust,
Columbus McKinnon Corporation and Marine Midland Bank, dated October
16, 1996 (incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
10.8 Second Amendment to Amended and Restated Term Loan Agreement by
and among Columbus McKinnon Corporation Employee Stock Ownership Trust,
Columbus McKinnon Corporation and Marine Midland Bank, dated March 31,
1998 (incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1999).
10.9 Third Amendment to Amended and Restated Term Loan Agreement by and
among Columbus McKinnon Corporation Employee Stock Ownership Trust,
Columbus McKinnon Corporation and Marine Midland Bank, dated November
30, 1998 (incorporated by reference to Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
10.10 Agreement by and among Columbus McKinnon Corporation Employee
Stock Ownership Trust, Columbus McKinnon Corporation and Marine Midland
Bank, dated November 2, 1995 (incorporated by reference to Exhibit 10.6
to the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
10.11 Credit Agreement, dated as of March 31, 1998, among Columbus
McKinnon Corporation, as Borrower, the banks, financial institutions
and other institutional lenders named therein, as Initial Lenders,
Fleet National Bank, as the Initial Issuing Bank, Fleet National Bank,
as the Swing Line Bank, and Fleet National Bank, as the Administrative
Agent (incorporated by reference to Exhibit 10.2 to the Company's
Current Report on Form 8-K dated April 9, 1998).
10.12 First Amendment, dated as of September 23, 1998, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as Borrower, the banks, financial institutions and other
institutional lenders named therein, as Initial Lenders, Fleet National
Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing
Line Bank and Fleet National Bank, as the Administrative Agent
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 27, 1998).
10.13 Second Amendment, dated as of February 12, 1999, to the Credit
Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as Borrower, the banks, financial institutions and other
institutional leaders named therein, as Initial Lenders, Fleet National
Bank, as the Initial Issuing Bank, Fleet National Bank, as the Swing
Line Bank and Fleet National Bank, as the Administrative Agent
(incorporated by reference to Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1999).
53
<PAGE>
10.14 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
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended October 3, 1999).
10.15 Fourth Amendment and Waiver, dated as of February 15, 2000, to the
Credit Agreement, dated as of March 31, 1998, among Columbus McKinnon
Corporation, as the Borrower, the banks, financial institutions and
other institutional lenders named therein, as Initial Lenders, Fleet
National Bank, as the Initial Issuing Bank, Fleet National Bank, as the
Swing Line Bank and Fleet National Bank, as the Administrative Agent
(incorporated by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended January 2, 2000).
10.16 Series Lease, dated as of November 1, 1993, between Town of
Amherst Industrial Development Agency as Lessor and Columbus McKinnon
Corporation as Lessee (incorporated by reference to Exhibit 10.13 to
the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
*10.17 Columbus McKinnon Corporation Employee Stock Ownership Plan
Restatement Effective April 1, 1989 (incorporated by reference to
Exhibit 10.23 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.18 Amendment No. 1 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated
March 2, 1995 (incorporated by reference to Exhibit 10.24 to the
Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
*10.19 Amendment No. 2 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan, dated October 17, 1995 (incorporated by reference
to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997).
*10.20 Amendment No. 3 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan, dated March 27, 1996 (incorporated by reference
to Exhibit 10.39 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997).
*10.21 Amendment No. 4 of the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated
September 30, 1996 (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1996).
*10.22 Amendment No. 5 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated
August 28, 1997 (incorporated by reference to Exhibit 10.37 to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1998).
54
<PAGE>
*10.23 Amendment No. 6 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated
June 24, 1998 (incorporated by reference to Exhibit 10.38 to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1998).
#*10.24 Amendment No. 7 to the Columbus McKinnon Corporation Employee
Stock Ownership Plan as Amended and Restated as of April 1, 1989, dated
April 30, 2000.
*10.25 Columbus McKinnon Corporation Personal Retirement Account Plan
Trust Agreement, dated April 1, 1987 (incorporated by reference to
Exhibit 10.25 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.26 Amendment No. 1 to the Columbus McKinnon Corporation Employee
Stock Ownership Trust Agreement (formerly known as the Columbus
McKinnon Corporation Personal Retirement Account Plan Trust Agreement)
effective November 1, 1988 (incorporated by reference to Exhibit 10.26
to the Company's Registration Statement No. 33-80687 on Form S-1 dated
December 21, 1995).
#*10.27 Amended and Restated Columbus McKinnon Corporation Management
EVA(R)Incentive Compensation Plan.
*10.28 Amendment and Restatement of Columbus McKinnon Corporation 1995
Incentive Stock Option Plan (incorporated by reference to Exhibit 10.25
to the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1999).
*10.29 Columbus McKinnon Corporation Restricted Stock Plan (incorporated
by reference to Exhibit 10.28 to the Company's Registration Statement
No. 33-80687 on Form S-1 dated December 21, 1995).
*10.30 Amendment and Restatement of Columbus McKinnon Corporation
Non-Qualified Stock Option Plan (incorporated by reference to Exhibit
10.27 to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999).
*10.31 Columbus McKinnon Corporation Thrift [401(k) Plan] 1989
Restatement Effective January 1, 1998 (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 27, 1998).
*10.32 Amendment No. 1 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Thrift 401(K) Plan, dated December 10, 1998
(incorporated by reference to Exhibit 10.29 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1999).
#*10.33 Amendment No. 2 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Thrift 401 (K) Plan, dated June 1, 2000.
55
<PAGE>
*10.34 Columbus McKinnon Corporation Thrift [401(k)] Plan Trust Agreement
Restatement Effective August 9, 1994 (incorporated by reference to
Exhibit 10.32 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.35 Columbus McKinnon Corporation Monthly Retirement Benefit Plan
Restatement Effective April 1, 1998 (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended December 27, 1998).
*10.36 Amendment No. 1 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Monthly Retirement Benefit Plan, dated December
10, 1998 (incorporated by reference to Exhibit 10.32 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
*10.37 Amendment No. 2 to the 1998 Plan Restatement of the Columbus
McKinnon Corporation Monthly Retirement Benefit Plan, dated May 26,
1999 (incorporated by reference to Exhibit 10.33 to the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
*10.38 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Trust
Agreement effective as of April 1, 1987 (incorporated by reference to
Exhibit 10.34 to the Company's Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
*10.39 Form of change in Control Agreement as entered into between
Columbus McKinnon Corporation and each of Timothy T. Tevens, Robert L.
Montgomery, Jr., Ned T. Librock, Karen L. Howard, Lois H. Demler,
Timothy R. Harvey, John Hansen and Neal Wixson (incorporated by
reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K
for the fiscal year ended March, 31, 1998).
10.40 Stock Purchase Agreement, dated as of March 11, 1998, among
Columbus McKinnon Corporation and the shareholders of LICO, Inc.
identified on the signature pages thereto (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K dated April 9,
1998).
10.41 Agreement and Plan of Merger, dated as of February 16, 1999, by
and among Columbus McKinnon Corporation, GL International, Inc. and
Larco Industrial Services, Ltd. (incorporated by reference to Exhibit
10.37 to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1999).
10.42 Columbus McKinnon Corporation - GL International Inc. 1997 Stock
Option Plan (incorporated by reference to Exhibit 10.38 to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1999).
10.43 Columbus McKinnon Corporation - Larco Industrial services, Ltd.
1997 Stock Option Plan (incorporated by reference to Exhibit 10.39 to
the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1999).
#*10.44 Form of Stay Agreement as entered into between Columbus McKinnon
Corporation and each of Timothy T. Tevens, Robert L. Montgomery, Jr.,
Ned T. Librock, Karen L. Howard, and Joseph J. Owen.
56
<PAGE>
#21.1 Subsidiaries of the Registrant.
#23.1 Consent of Ernst & Young LLP.
#23.2 Consent of Deloitte & Touche LLP.
#27.1 Financial Data Schedule.
#99.1 Form 11-K Columbus McKinnon Corporation Employee Stock Ownership
Plan Annual Report for the year ended March 31, 2000.
* Indicates a management contract or compensation plan or arrangement.
# Filed herewith
(b) Reports on Form 8-K:
During the fourth quarter of fiscal 2000, the Company did not file any
Current Reports on Form 8-K.
57
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Buffalo,
State of New York on June 29, 2000.
COLUMBUS McKINNON CORPORATION
By: /s/ Timothy T. Tevens
-----------------------------------
Timothy T. Tevens
President and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
--------- ----- ----
/s/ Timothy T. Tevens President, Chief Executive June 29, 2000
---------------------
Timothy T. Tevens Officer and Director
(Principal Executive Officer)
/s/ Robert L. Montgomery, Jr. Executive Vice President, June 29, 2000
-----------------------------
Robert L. Montgomery, Jr. Chief Financial Officer
and Director (Principal
Financial Officer and
Principal Accounting Officer)
/s/ Herbert P. Ladds, Jr. Chairman of the Board June 29, 2000
-------------------------
Herbert P. Ladds, Jr. of Directors
/s/ Randolph A. Marks Director June 29, 2000
---------------------
Randolph A. Marks
/s/ L. David Black Director June 29, 2000
------------------
L. David Black
/s/ Carlos Pascual Director June 29, 2000
------------------
Carlos Pascual
/s/ Richard H. Fleming Director June 29, 2000
----------------------
Richard H. Fleming
58
