UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT 1934
For the quarterly period ended July 2, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
------------------- -----------------
Commission File Number: 0-27618
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COLUMBUS MCKINNON CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 16-0547600
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
140 JOHN JAMES AUDUBON PARKWAY, AMHERST, NY 14228-1197
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(716) 689-5400
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. : [X] Yes [ ] No
The number of shares of common stock outstanding as of July 31, 2000 was:
14,896,172 shares.
<PAGE>
FORM 10-Q INDEX
COLUMBUS MCKINNON CORPORATION
JULY 2, 2000
PAGE #
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets -
July 2, 2000 and March 31, 2000 2
Condensed consolidated statements of income and retained earnings -
Three months ended July 2, 2000 and July 4, 1999 3
Condensed consolidated statements of cash flows -
Three months ended July 2, 2000 and July 4, 1999 4
Condensed consolidated statements of comprehensive income -
Three months ended July 2, 2000 and July 4, 1999 5
Notes to condensed consolidated financial statements -
July 2, 2000 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none. 16
Item 2. Changes in Securities - none. 16
Item 3. Defaults upon Senior Securities - none. 16
Item 4. Submission of Matters to a Vote of Security Holders - none. 16
Item 5. Other Information - none. 16
Item 6. Exhibits and Reports on Form 8-K - none. 16
- 1 -
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
<TABLE>
<CAPTION>
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JULY 2, MARCH 31,
2000 2000
--------- ---------
ASSETS: (IN THOUSANDS)
Current assets:
<S> <C> <C>
Cash and cash equivalents .................... $ 3,062 $ 7,582
Trade accounts receivable .................... 152,999 143,401
Unbilled revenues ............................ 21,567 24,447
Inventories .................................. 110,682 108,291
Net assets held for sale ..................... 9,530 9,272
Prepaid expenses ............................. 6,419 6,181
--------- ---------
Total current assets ............................... 304,259 299,174
Net property, plant, and equipment ................. 86,100 87,297
Goodwill and other intangibles, net ................ 335,325 339,603
Marketable securities .............................. 23,830 23,193
Deferred taxes on income ........................... 4,333 4,237
Other assets ....................................... 6,433 6,320
--------- ---------
Total assets ....................................... $ 760,280 $ 759,824
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks ....................... $ 3,066 $ 2,677
Trade accounts payable ....................... 42,610 49,621
Excess billings .............................. 6,182 4,288
Accrued liabilities .......................... 46,586 51,246
Current portion of long-term debt ............ 822 3,493
--------- ---------
Total current liabilities .......................... 99,266 111,325
Senior debt, less current portion .................. 216,054 210,684
Subordinated debt .................................. 199,588 199,574
Other non-current liabilities ...................... 36,536 34,788
--------- ---------
Total liabilities .................................. 551,444 556,371
--------- ---------
Shareholders' equity
Common stock ................................. 149 149
Additional paid-in capital ................... 107,023 106,884
Retained earnings ............................ 118,529 113,582
ESOP debt guarantee .......................... (8,494) (8,703)
Unearned restricted stock .................... (2,618) (2,843)
Total accumulated other comprehensive loss ... (5,753) (5,616)
--------- ---------
Total shareholders' equity ......................... 208,836 203,453
--------- ---------
Total liabilities and shareholders' equity ......... $ 760,280 $ 759,824
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 2 -
<PAGE>
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JULY 2, JULY 4,
2000 1999
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net sales ...................................... $ 188,378 $ 181,601
Cost of products sold .......................... 141,164 134,488
--------- ---------
Gross profit ................................... 47,214 47,113
--------- ---------
Selling expenses ............................... 12,482 12,758
General and administrative expenses ............ 10,340 9,487
Amortization of intangibles .................... 4,014 4,002
--------- ---------
26,836 26,247
--------- ---------
Income from operations ......................... 20,378 20,866
Interest and debt expense ...................... 9,281 8,279
Interest and other income ...................... 941 247
--------- ---------
Income before income taxes ..................... 12,038 12,834
Income tax expense ............................. 6,092 6,439
--------- ---------
Net income ..................................... 5,946 6,395
Retained earnings - beginning of period ........ 113,582 100,455
Cash dividends of $0.07 per share .............. (999) (985)
--------- ---------
Retained earnings - end of period .............. $ 118,529 $ 105,865
========= =========
Earnings per share data, basic ................. $ 0.42 $ 0.46
========= =========
Earnings per share data, diluted ............... $ 0.42 $ 0.45
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
<PAGE>
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JULY 2, JULY 4,
2000 1999
-------- --------
(IN THOUSANDS)
OPERATING ACTIVITIES:
<S> <C> <C>
Net income ..................................................... $ 5,946 $ 6,395
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization ............................ 7,140 7,225
Deferred income taxes .................................... (96) 141
Other .................................................... 334 190
Changes in operating assets and liabilities net of effects
from businesses purchased:
Trade accounts receivable ........................... (9,598) 2,919
Unbilled revenues and excess billings ............... 4,774 (1,702)
Inventories ......................................... (2,391) 2,823
Prepaid expenses .................................... (238) (844)
Other assets ........................................ (155) 168
Trade accounts payable .............................. (7,011) (9,775)
Accrued and non-current liabilities ................. (2,547) (4,242)
-------- --------
Net cash (used in) provided by operating activities ............ (3,842) 3,298
-------- --------
INVESTING ACTIVITIES:
Purchase of marketable securities, net of sales ................ (1,065) (2,138)
Capital expenditures ........................................... (1,929) (2,323)
Purchases of businesses, net of cash ........................... - (6,366)
Net assets held for sale ....................................... (258) (71)
-------- --------
Net cash used in investing activities .......................... (3,252) (10,898)
-------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ......................... - 1
Net borrowings under revolving line-of-credit agreements ....... 4,289 4,849
Repayment of debt .............................................. (1,201) (886)
Dividends paid ................................................. (999) (985)
Reduction of ESOP debt guarantee ............................... 209 209
Other .......................................................... - (131)
-------- --------
Net cash provided by financing activities ...................... 2,298 3,057
Effect of exchange rate changes on cash ........................ 276 1,160
-------- --------
Net decrease in cash and cash equivalents ...................... (4,520) (3,383)
Cash and cash equivalents at beginning of period ............... 7,582 6,867
-------- --------
Cash and cash equivalents at end of period ..................... $ 3,062 $ 3,484
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 4 -
<PAGE>
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JULY 2, JULY 4,
2000 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net income ............................................................ $ 5,946 $ 6,395
------- -------
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments ............................ 291 515
Unrealized gains on investments
Unrealized holding gains arising during the period ................ 147 53
Less: reclassification adjustment for gains included in net income (575) -
------- -------
(428) 53
------- -------
Total other comprehensive (loss) income ............................... (137) 568
------- -------
Comprehensive income .................................................. $ 5,809 $ 6,963
======= =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 5 -
<PAGE>
COLUMBUS MCKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JULY 2, 2000
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the financial position of the Company at July 2,
2000, and the results of its operations and its cash flows for the three
month periods ended July 2, 2000 and July 4, 1999, have been included.
Results for the period ended July 2, 2000 are not necessarily indicative of
the results that may be expected for the year ended March 31, 2001. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Columbus McKinnon Corporation annual
report on Form 10-K for the year ended March 31, 2000.
Columbus McKinnon Corporation (the Company) is a broad-line designer,
manufacturer and supplier of sophisticated material handling products that
are widely distributed to industrial, automotive, and consumer markets
worldwide; integrated material handling solutions for the automotive
markets; and integrated material handling solutions for industrial markets.
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 also deal primarily with end users and
sales are concentrated, domestically and internationally (primarily
Europe), in the consumer products, manufacturing, warehousing and, to a
lesser extent, the steel, construction, automotive and other industrial
markets.
2. Inventories consisted of the following:
JULY 2, MARCH 31,
2000 2000
----------- -----------
(IN THOUSANDS)
At cost - FIFO basis:
Raw materials $ 61,479 $ 57,198
Work-in-process 18,933 20,240
Finished goods 37,636 38,329
----------- -----------
118,048 115,767
LIFO cost less than FIFO cost (7,366) (7,476)
------------ ------------
$ 110,682 $ 108,291
=========== ===========
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory valuation.
- 6 -
<PAGE>
3. Property, plant, and equipment is net of $56,013,000 and $52,887,000 of
accumulated depreciation at July 2, 2000 and March 31, 2000, respectively.
4. Goodwill and other intangibles, net includes $50,270,000 and $46,256,000 of
accumulated amortization at July 2, 2000 and March 31, 2000, respectively.
5. General and Product Liability - The accrued general and product liability
costs, which are included in other non-current liabilities, are the
actuarial present value of estimated expenditures based on amounts
determined from loss reports and individual cases filed with the Company,
and an amount, based on past experience, for losses incurred but not
reported. The accrual in these condensed consolidated financial statements
was determined by applying a discount factor based on interest rates
customarily used in the insurance industry.
6. The carrying amount of the Company's senior debt instruments approximates
the fair values. The Company's subordinated debt has an approximate fair
value of $176,000,000 which is less than its carrying amount of
$199,588,000.
7. The following table sets forth the computation of basic and diluted
earnings per share before extraordinary charge for debt extinguishment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JULY 2, JULY 4,
2000 1999
------- -------
(IN THOUSANDS)
Numerator for basic and diluted earnings per share:
<S> <C> <C>
Net income ............................................ $ 5,946 $ 6,395
======= =======
Denominators:
Weighted-average common stock outstanding -
denominator for basic EPS ......................... 14,287 13,972
Effect of dilutive employee stock options ............. -- 222
------- -------
Adjusted weighted-average common stock outstanding
and assumed conversions - denominator for diluted EPS 14,287 14,194
======= =======
</TABLE>
8. Income tax expense for the three-month periods ended July 2, 2000 and July
4, 1999 exceeds the customary relationship between income tax expense and
income before income taxes due to nondeductible amortization of goodwill of
$3,074,000, and $3,076,000, respectively.
9. On April 29, 1999, the Company acquired all of the outstanding stock of
Washington Equipment Company ("WECO"), a regional manufacturer and servicer
of overhead cranes. The total cost of the acquisition, which was accounted
for as a purchase, was approximately $6.4 million of cash and was financed
by proceeds from the Company's revolving debt facility.
- 7 -
<PAGE>
10. 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 quarters ended July 2, 2000 and July
4, 1999, is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 2, 2000
-------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
-------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales to external customers... $125,196 $ 17,513 $ 45,669 $188,378
Operating income before
amortization............... 19,618 1,841 2,933 24,392
Depreciation and amortization. 5,012 729 1,399 7,140
Total assets.................. 493,176 69,943 197,161 760,280
Capital expenditures.......... 1,915 16 (2) 1,929
THREE MONTHS ENDED JULY 4, 1999
-------------------------------
SOLUTIONS - SOLUTIONS -
PRODUCTS INDUSTRIAL AUTOMOTIVE TOTAL
-------- ---------- ---------- --------
(IN THOUSANDS)
Sales to external customers... $131,001 $ 15,052 $ 35,548 $181,601
Operating income
amortization................ 23,105 1,176 587 24,868
Depreciation and amortization. 5,014 788 1,423 7,225
Total assets.................. 514,375 68,656 182,308 765,339
Capital expenditures.......... 2,060 218 45 2,323
</TABLE>
- 8 -
<PAGE>
The following schedule provides a reconciliation of operating income before
amortization with consolidated income before income taxes:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JULY 2, 2000 JULY 4, 1999
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Operating income before amortization.......................... $ 24,392 $ 24,868
Amortization of intangibles................................... (4,014) (4,002)
Interest and debt expense..................................... (9,281) (8,279)
Interest and other income..................................... 941 247
-------- --------
Income before income taxes.................................... $ 12,038 $ 12,834
======== ========
</TABLE>
11. The summary financial information of the parent, domestic subsidiaries
(guarantors) and foreign subsidiaries (nonguarantors of the 8.5% senior
subordinated notes) follows:
<TABLE>
<CAPTION>
Domestic Foreign Elimina- Consoli-
(IN THOUSANDS) Parent subsidiaries subsidiaries tions dated
-------------------------------------------------------------
AS OF JULY 2, 2000 Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents ..................... $ (1,261) $ 299 $ 4,024 $ - $ 3,062
Trade accounts receivable ..................... 61,550 65,485 25,964 - 152,999
Unbilled revenues ............................. - 21,567 - - 21,567
Inventories ................................... 48,203 38,221 25,137 (879) 110,682
Other current assets .......................... 4,025 7,923 4,001 - 15,949
-------------------------------------------------------------
Total current assets ......................... 112,517 133,495 59,126 (879) 304,259
Net property, plant, and equipment ............. 35,262 31,873 18,965 - 86,100
Goodwill and other intangibles, net ............ 40,569 245,230 49,526 - 335,325
Intercompany ................................... 195,212 (358,845) (64,463) 228,096 -
Other assets ................................... 225,603 161,656 (1,984) (350,679) 34,596
-------------------------------------------------------------
Total assets ................................. $ 609,163 $ 213,409 $ 61,170 $(123,462) $ 760,280
=============================================================
Current liabilities ............................ $ 32,860 $ 48,036 $ 20,298 $ (1,928) $ 99,266
Long-term debt, less current portion ........... 409,755 10 5,877 - 415,642
Other non-current liabilities .................. 15,190 18,549 2,797 - 36,536
-------------------------------------------------------------
Total liabilities ............................ 457,805 66,595 28,972 (1,928) 551,444
-------------------------------------------------------------
Shareholders' equity ........................... 151,358 146,814 32,198 (121,534) 208,836
-------------------------------------------------------------
Total liabilities and shareholders' equity.... $ 609,163 $ 213,409 $ 61,170 $(123,462) $ 760,280
=============================================================
FOR THE THREE MONTHS ENDED JULY 2, 2000
Net sales ...................................... $ 66,979 $ 97,534 $ 29,742 $ (5,877) $ 188,378
Cost of products sold .......................... 45,737 79,350 21,958 (5,881) 141,164
-------------------------------------------------------------
Gross profit ................................... 21,242 18,184 7,784 4 47,214
-------------------------------------------------------------
Selling, general and administrative expenses 9,747 8,098 4,977 - 22,822
Amortization of intangibles .................... 508 2,894 612 - 4,014
-------------------------------------------------------------
10,255 10,992 5,589 - 26,836
-------------------------------------------------------------
Income from operations ......................... 10,987 7,192 2,195 4 20,378
Interest and debt expense ...................... 9,130 - 151 - 9,281
Interest and other income ...................... 773 60 108 - 941
-------------------------------------------------------------
Income before income taxes ..................... 2,630 7,252 2,152 4 12,038
Income tax expense ............................. 1,233 3,852 1,006 1 6,092
-------------------------------------------------------------
Net income ..................................... $ 1,397 $ 3,400 $ 1,146 $ 3 $ 5,946
=============================================================
- 9 -
<PAGE>
Domestic Foreign Elimina- Consoli-
(IN THOUSANDS) Parent subsidiaries subsidiaries tions dated
-------------------------------------------------------------
FOR THE THREE MONTHS ENDED JULY 2, 2000
OPERATING ACTIVITIES:
Net cash (used in) provided by operating
activities .................................. $ (7,060) $ 3,061 $ 157 $ - $ (3,842)
-------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net ......... (1,065) - - - (1,065)
Capital expenditures ........................... (865) (794) (270) - (1,929)
Other .......................................... -- (258) - - (258)
-------------------------------------------------------------
Net cash used in investing activities .......... (1,930) (1,052) (270) - (3,252)
-------------------------------------------------------------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving
line-of-credit agreements ................... 3,900 - 389 - 4,289
Repayment of debt .............................. (1,135) (9) (57) - (1,201)
Dividends paid ................................. (999) - - - (999)
Other .......................................... 209 - - - 209
-------------------------------------------------------------
Net cash provided by (used in) financing
activities................................... 1,975 (9) 332 - 2,298
Effect of exchange rate changes on cash ........ - - 276 - 276
-------------------------------------------------------------
Net change in cash and cash equivalents ........ (7,015) 2,000 495 - (4,520)
Cash and cash equivalents at beginning of period 5,754 (1,701) 3,529 - 7,582
-------------------------------------------------------------
Cash and cash equivalents at end of period ..... $ (1,261) $ 299 $ 4,024 $ - $ 3,062
=============================================================
AS OF JULY 4, 1999
Current assets:
Cash and cash equivalents ..................... $ 803 $ 1,143 $ 1,538 $ - $ 3,484
Trade accounts receivable ..................... 54,740 57,287 23,770 - 135,797
Unbilled revenues ............................. - 13,462 - - 13,462
Inventories ................................... 48,372 39,520 27,239 (1,004) 114,127
Other current assets .......................... 3,529 10,322 3,440 - 17,291
-------------------------------------------------------------
Total current assets ......................... 107,444 121,734 55,987 (1,004) 284,161
Net property, plant, and equipment ............. 36,859 33,571 20,009 - 90,439
Goodwill and other intangibles, net ............ 42,499 261,396 53,027 - 356,922
Intercompany ................................... 213,795 (375,176) (65,517) 226,898 -
Other assets ................................... 221,271 162,491 (1,266) (348,679) 33,817
-------------------------------------------------------------
Total assets ................................. $ 621,868 $ 204,016 $ 62,240 $(122,785) $ 765,339
=============================================================
Current liabilities ............................ $ 39,797 $ 48,837 $ 21,666 $ (3,114) $ 107,186
Long-term debt, less current portion ........... 419,725 - 6,523 - 426,248
Other non-current liabilities .................. 11,623 22,042 2,968 - 36,633
-------------------------------------------------------------
Total liabilities ............................ 471,145 70,879 31,157 (3,114) 570,067
-------------------------------------------------------------
Shareholders' equity ........................... 150,723 133,137 31,083 (119,671) 195,272
-------------------------------------------------------------
Total liabilities and shareholders' equity ... $ 621,868 $ 204,016 $ 62,240 $(122,785) $ 765,339
=============================================================
- 10 -
<PAGE>
Domestic Foreign Elimina- Consoli-
(IN THOUSANDS) Parent subsidiaries subsidiaries tions dated
-------------------------------------------------------------
FOR THE THREE MONTHS ENDED JULY 4, 1999
Net sales ...................................... $ 68,814 $ 88,921 $ 29,857 $ (5,991) $ 181,601
Cost of products sold .......................... 46,430 72,563 21,444 (5,949) 134,488
-------------------------------------------------------------
Gross profit ................................... 22,384 16,358 8,413 (42) 47,113
-------------------------------------------------------------
Selling, general and administrative expenses ... 8,715 7,393 6,137 - 22,245
Amortization of intangibles .................... 489 2,861 652 - 4,002
-------------------------------------------------------------
9,204 10,254 6,789 - 26,247
-------------------------------------------------------------
Income from operations ......................... 13,180 6,104 1,624 (42) 20,866
Interest and debt expense ...................... 8,098 2 179 - 8,279
Interest and other income ...................... 113 77 57 - 247
-------------------------------------------------------------
Income before income taxes ..................... 5,195 6,179 1,502 (42) 12,834
Income tax expense ............................. 2,177 3,431 848 (17) 6,439
-------------------------------------------------------------
Net income ..................................... $ 3,018 $ 2,748 $ 654 $ (25) $ 6,395
=============================================================
FOR THE THREE MONTHS ENDED JULY 4, 1999
OPERATING ACTIVITIES:
Net cash (used in) provided by operating
activities .................................. $ (1,824) $ 7,346 $ (2,363) $ 139 $ 3,298
-------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of marketable securities, net ......... (2,138) - - - (2,138)
Capital expenditures ........................... (1,692) (355) (276) - (2,323)
Purchases of businesses, net of cash ........... -- (6,317) - (49) (6,366)
Other .......................................... -- (71) - - (71)
-------------------------------------------------------------
Net cash used in investing activities .......... (3,830) (6,743) (276) (49) (10,898)
-------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock ......... 1 136 - (136) 1
Net borrowings (payments) under revolving
line-of-credit agreements .................... 5,000 - (151) - 4,849
Repayment of debt .............................. (750) - (136) - (886)
Dividends paid ................................. (981) (4) - - (985)
Other .......................................... 78 - - - 78
-------------------------------------------------------------
Net cash provided by (used in) financing
activities...................................... 3,348 132 (287) (136) 3,057
Effect of exchange rate changes on cash ........ - - 1,114 46 1,160
-------------------------------------------------------------
Net change in cash and cash equivalents ........ (2,306) 735 (1,812) - (3,383)
Cash and cash equivalents at beginning of period 3,109 408 3,350 - 6,867
-------------------------------------------------------------
Cash and cash equivalents at end of period ..... $ 803 $ 1,143 $ 1,538 $ - $ 3,484
=============================================================
</TABLE>
12. 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.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company is a broad-line designer, manufacturer, and supplier of
sophisticated material handling products and integrated material handling
solutions that are widely distributed to industrial, automotive and consumer
markets worldwide; integrated material handling solutions for the automotive
markets; and integrated material handling solutions for industrial markets
worldwide. The Company's material handling products are sold, domestically and
internationally, principally to third party distributors 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 solutions automotive sales are
concentrated, domestically and internationally (primarily North America) in the
automotive industry. Material handling solutions industrial sales are
concentrated, domestically and internationally (primarily Europe), in consumer
products manufacturing, warehousing and, to a lesser extent, the steel,
construction, automotive, and other industrial markets.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 2, 2000 AND JULY 4, 1999
Net sales in the fiscal 2001 quarter ended July 2, 2000 were $188,378,000, an
increase of $6,777,000 or 3.7% from the fiscal 2000 quarter ended July 4, 1999.
Sales in the Products segment were down roughly 4.4% as a result of fewer
production/shipping days in the fiscal 2001 quarter and softness in industrial
markets. Sales in the Solutions-Industrial segment increased by 16.3% as a
result of new product offerings and expanding markets. The Solutions-Automotive
segment had a sales increase of 28.5% as a result of improving contract
bookings. Sales in the individual segments were as follows, in thousands of
dollars and with percentage changes for each group:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
JULY 2, JULY 4, CHANGE
2000 1999 AMOUNT %
-------- -------- -------- ----
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C>
Products .................... $125,196 $131,001 $ (5,805) (4.4)
Solutions-Industrial ........ 17,513 15,052 2,461 16.3
Solutions-Automotive ........ 45,669 35,548 10,121 28.5
-------- -------- --------
Consolidated net sales....... $188,378 $181,601 $ 6,777 3.7
======== ======== ========
</TABLE>
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<PAGE>
The Company's gross profit margins were approximately 25.1% and 25.9% for the
fiscal 2001 and 2000 quarters, respectively. The decrease in gross profit margin
is a combination of offsetting fluctuations in the various segments. The gross
profit margin decreased in the Products segment primarily due to a
reclassification of approximately $900,000 of costs from general and
administrative expenses for corporate consistency, and lower sales volume. The
Solutions-Industrial segment experienced increased gross profit margins for the
fiscal 2001 quarter as a result of increased volume. Gross profit margins in the
Solutions-Automotive segment increased for the first quarter of 2001 due to
improved contract pricing, the realization of cost saving methodologies employed
in the middle of the fiscal 2000 year, and the absence of certain low margin
foreign contracts which occurred in the first quarter of fiscal 2000.
Selling expenses were $12,482,000 and $12,758,000 in the fiscal 2001 and 2000
quarters, respectively. As a percentage of consolidated net sales, selling
expenses were 6.6% and 7.0% for the fiscal 2001 and 2000 quarters, respectively.
The reduction is due to cost control efforts and increased sales volume.
General and administrative expenses were $10,340,000, and $9,487,000 in the
fiscal 2001 and 2000 quarters, respectively. As a percentage of consolidated net
sales, general and administrative expenses were 5.5% and 5.2% in the fiscal 2001
and 2000 quarters, respectively. The increase is a result of increased product
liability expense recorded by the Company's captive insurance company. This
increased expense is a result of and offset by the higher investment income
shown on the interest and other income line.
Amortization of intangibles was $4,014,000 and $4,002,000 in the fiscal 2001 and
2000 quarters, respectively.
Income from operations decreased $488,000 or 2.3% in the fiscal 2001 quarter,
compared to the fiscal 2000 quarter. This is based on income from operations of
$20,378,000 and $20,865,000 or 10.8% and 11.5% of consolidated net sales for the
fiscal 2001 and 2000 quarters, respectively.
Interest and debt expense was $9,281,000, and $8,279,000 in the fiscal 2001 and
2000 quarters, respectively. The fiscal 2001 increase is solely the result of
increasing interest rates. As a percentage of consolidated net sales, interest
and debt expense was 4.9% and 4.6% in the fiscal 2001 and 2000 quarters,
respectively.
Interest and other income was $941,000 and $247,000 in the fiscal 2001 and 2000
quarters, respectively. The increase in the current year fiscal quarter is the
result of the investment earnings on assets in the Company's captive insurance
company.
Income taxes as a percentage of income before income taxes were 50.6% and 50.2%
in the fiscal 2001 and 2000 quarters, respectively. The percentages reflect the
effect of nondeductible amortization of goodwill resulting from acquisitions.
Net income, therefore, decreased $449,000 or 7.0% for the quarter ended July 2,
2000. This is based on net income of $5,946,000 and $6,395,000 for the quarters
ended July 2, 2000 and July 4, 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
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 credit facility.
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<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 $208.9 million was outstanding at
July 2, 2000. Interest is payable at varying Eurodollar and Prime rates based on
LIBOR plus a spread determined by the Company's leverage ratio amounting to 200
basis points at July 31, 2000 or the lender's prime rate plus 50 basis points.
The 1998 Revolving Credit Facility is secured by all equipment, inventory,
receivables, subsidiary stock (limited to 65% for foreign subsidiaries) and
intellectual property.
The senior subordinated 8 1/2% Notes issued on March 31, 1998 amounted to
$199,468,000, net of original issue discount of $532,000 and are due March 31,
2008. Interest is payable semi-annually based on an effective rate of 8.45%,
considering $1,902,000 of proceeds from rate hedging in advance of the
placement. Provisions of the 8 1/2% Notes include, without limitation,
restrictions of liens, indebtedness, asset sales, and dividends and other
restricted payments. Prior to April 1, 2003, the 8 1/2% Notes are redeemable at
the option of the Company, in whole or in part, at the Make-Whole Price (as
defined 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 domestic subsidiaries and 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 used by operating activities was $3,842,000 for the three months ended
July 2, 2000 while net cash provided by operating activities was $3,298,000 for
the three months ended July 4, 1999. The $7,140,000 difference is due to changes
in net working capital components, primarily accounts receivable.
Net cash used in investing activities decreased to $3,252,000 for the three
months ended July 2, 2000 from $10,898,000 for the three months ended July 4,
1999. The $7,646,000 decrease is due primarily to the acquisition of WECO in the
first quarter of fiscal 2000.
Net cash provided by financing activities was $2,298,000 for the three months
ended July 2, 2000 versus $3,057,000 for the three months ended July 4, 1999.
CAPITAL EXPENDITURES
In addition to keeping its current equipment and plants properly maintained, the
Company is committed to replacing, enhancing, and upgrading its property, plant,
and equipment to reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety, and promote ergonomically correct work stations. Consolidated
capital expenditures for the three months ended July 2, 2000 and July 4, 1999
were $1,929,000 and $2,323,000, respectively.
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<PAGE>
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.
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 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.
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.
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none.
Item 2. Changes in Securities - none.
Item 3. Defaults upon Senior Securities - none.
Item 4. Submission of Matters to a Vote of Security Holders - none.
Item 5. Other Information - none.
Item 6. Exhibits and Reports on Form 8-K - none.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBUS MCKINNON CORPORATION
-----------------------------
(Registrant)
Date: AUGUST 16, 2000 /S/ ROBERT L. MONTGOMERY, JR.
---------------- -----------------------------
Robert L. Montgomery, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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