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 1, 2007
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
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Commission File Number: 0-27618
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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, NY 14228-1197
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(Address of principal executive offices) (Zip code)
(716) 689-5400
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(Registrant's telephone number, including area code)
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(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
Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Act.
Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
The number of shares of common stock outstanding as of July 31, 2007 was:
18,911,034 shares.
FORM 10-Q INDEX
COLUMBUS MCKINNON CORPORATION
JULY 1, 2007
PAGE #
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed consolidated balance sheets -
July 1, 2007 and March 31, 2007 2
Condensed consolidated statements of operations
and retained earnings - Three months ended
July 1, 2007 and July 2, 2006 3
Condensed consolidated statements of cash flows -
Three months ended July 1, 2007 and July 2, 2006 4
Condensed consolidated statements of comprehensive income -
Three months ended July 1, 2007 and July 2, 2006 5
Notes to condensed consolidated financial statements -
July 1, 2007 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none. 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities
and Use of Proceeds - none. 21
Item 3. Defaults upon Senior Securities - none. 21
Item 4. Submission of Matters to a Vote of Security Holders - none. 21
Item 5. Other Information - none. 21
Item 6. Exhibits 21
- 1 -
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 1, MARCH 31,
2007 2007
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ASSETS: (IN THOUSANDS)
Current assets:
Cash and cash equivalents $ 61,898 $ 48,655
Trade accounts receivable 105,136 97,269
Unbilled revenues 7,935 15,050
Inventories 85,164 77,179
Prepaid expenses 17,741 18,029
---------- ----------
Total current assets 277,874 256,182
Property, plant, and equipment, net 55,265 55,231
Goodwill and other intangibles, net 186,044 185,903
Marketable securities 28,808 28,920
Deferred taxes on income 28,841 34,460
Other assets 4,845 4,942
---------- ----------
Total assets $ 581,677 $ 565,638
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Notes payable to banks $ 8,712 $ 9,598
Trade accounts payable 37,624 35,896
Accrued liabilities 53,203 52,344
Restructuring reserve 49 599
Current portion of long-term debt 22,606 297
---------- ----------
Total current liabilities 122,194 98,734
Senior debt, less current portion 7,389 26,168
Subordinated debt 136,000 136,000
Other non-current liabilities 62,833 63,411
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Total liabilities 328,416 324,313
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Shareholders' equity
Common stock 189 188
Additional paid-in capital 175,519 174,654
Retained earnings 94,571 85,237
ESOP debt guarantee (3,275) (3,417)
Accumulated other comprehensive loss (13,743) (15,337)
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Total shareholders' equity 253,261 241,325
---------- ----------
Total liabilities and shareholders' equity $ 581,677 $ 565,638
========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 2 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED
------------------
JULY 1, JULY 2,
2007 2006
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Net sales $ 148,110 $ 146,694
Cost of products sold 104,222 104,411
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Gross profit 43,888 42,283
------------ ------------
Selling expenses 16,121 15,367
General and administrative expenses 9,196 9,089
Restructuring charges 276 4
Amortization of intangibles 28 43
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25,621 24,503
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Income from operations 18,267 17,780
Interest and debt expense 4,178 4,512
Cost of bond redemptions - 4,583
Investment income (294) (474)
Other (income) and expense, net (954) (539)
------------ ------------
Income before income tax expense 15,337 9,698
Income tax expense 5,956 4,265
------------ ------------
Income from continuing operations 9,381 5,433
Income from discontinued operations (net of tax) 139 139
------------ ------------
Net income 9,520 5,572
Retained earnings - beginning of period 85,237 51,152
Change in accounting principle (note 5) (186) -
------------ ------------
Retained earnings - end of period $ 94,571 $ 56,724
============ ============
Basic income per share:
Income from continuing operations $ 0.50 $ 0.29
Income from discontinued operations 0.01 0.01
------------ ------------
Basic income per share $ 0.51 $ 0.30
============ ============
Diluted income per share:
Income from continuing operations $ 0.49 $ 0.28
Income from discontinued operations 0.01 0.01
------------ ------------
Diluted income per share $ 0.50 $ 0.29
============ ============
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
------------------
JULY 1, JULY 2,
2007 2006
---------- ----------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Income from continuing operations $ 9,381 $ 5,433
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 2,209 2,105
Deferred income taxes 5,619 2,235
Gain on sale of real estate/investments (325) (373)
Loss on early retirement of bonds - 3,780
Stock compensation expense 195 798
Amortization/write-off of deferred financing costs 163 980
Changes in operating assets and liabilities:
Trade accounts receivable and unbilled revenues (81) (4,449)
Inventories (7,642) (5,608)
Prepaid expenses 308 (1,925)
Other assets (118) (248)
Trade accounts payable 1,605 3,570
Accrued and non-current liabilities (1,653) (1,509)
---------- ----------
Net cash provided by operating activities 9,661 4,789
---------- ----------
INVESTING ACTIVITIES:
Proceeds from sale of marketable securities 12,776 2,679
Purchases of marketable securities (12,663) (2,632)
Capital expenditures (2,553) (1,903)
Proceeds from sale of facilities and surplus real estate 5,454 -
Proceeds from discontinued operations note receivable 139 139
---------- ----------
Net cash provided (used) by investing activities 3,153 (1,717)
---------- ----------
FINANCING ACTIVITIES:
Proceeds from stock options exercised 569 1,725
Net (payments) borrowings under revolving
line-of-credit agreements (1,034) 11,843
Repayment of debt (56) (42,302)
Deferred financing costs incurred - (325)
Other 142 145
---------- ----------
Net cash used by financing activities (379) (28,914)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 808 171
---------- ----------
Net change in cash and cash equivalents 13,243 (25,671)
Cash and cash equivalents at beginning of period 48,655 45,598
---------- ----------
Cash and cash equivalents at end of period $ 61,898 $ 19,927
========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 4 -
COLUMBUS MCKINNON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED
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JULY 1, JULY 2,
2007 2006
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(IN THOUSANDS)
Net income $ 9,520 $ 5,572
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Other comprehensive income, net of tax:
Foreign currency translation adjustment 1,637 2,350
Unrealized loss on investments:
Unrealized holding gain (loss) arising
during the period 1 (207)
Reclassification adjustment for
gain included in net income (44) (316)
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(43) (523)
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Total other comprehensive income 1,594 1,827
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Comprehensive income $ 11,114 $ 7,399
========== ==========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
- 5 -
COLUMBUS MCKINNON CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
JULY 1, 2007
1. DESCRIPTION OF BUSINESS
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. 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 Columbus McKinnon Corporation (the
Company) at July 1, 2007 and the results of its operations and its cash flows
for the three month periods ended July 1, 2007 and July 2, 2006, have been
included. Results for the period ended July 1, 2007 are not necessarily
indicative of the results that may be expected for the year ended March 31,
2008. The balance sheet at March 31, 2007 has been derived from the audited
consolidated financial statements at that date, but does not include all of the
information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. 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, 2007.
The Company is a leading manufacturer and marketer of material handling
products, systems and services which lift, secure, position and move material
ergonomically, safely, precisely and efficiently. Key products include hoists,
cranes, chain and forged attachments. 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 businesses 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
Inventories consisted of the following:
JULY 1, MARCH 31,
2007 2007
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At cost - FIFO basis:
Raw materials.................................. $ 48,322 $ 45,006
Work-in-process................................ 11,622 9,050
Finished goods................................. 39,014 36,606
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98,958 90,662
LIFO cost less than FIFO cost.................. (13,794) (13,483)
---------- ----------
Net inventories................................ $ 85,164 $ 77,179
========== ==========
An actual valuation of inventory under the LIFO method can be made only at the
end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on management's
estimates of expected year-end inventory levels and costs. Because these are
subject to many forces beyond management's control, interim results are subject
to the final year-end LIFO inventory valuation.
3. RESTRUCTURING CHARGES
During the first three-months of fiscal 2008, the Company recorded restructuring
costs of $276 for severance. All of these costs are related to the Solutions
segment. The liability as of July 1, 2007 was $49, consisting primarily of
environmental remediation costs which were accrued in accordance with SFAS No.
143.
- 6 -
4. NET PERIODIC BENEFIT COST
The following table sets forth the components of net periodic pension cost for
the Company's defined benefit pension plans:
THREE MONTHS ENDED
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JULY 1, JULY 2,
2007 2006
---- ----
Service costs................................. $ 1,094 $ 1,049
Interest cost................................. 2,019 1,879
Expected return on plan assets................ (2,043) (1,831)
Net amortization.............................. 450 623
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Net periodic pension cost..................... $ 1,520 $ 1,720
======= =======
The following table sets forth the components of net periodic postretirement
benefit cost for the Company's defined benefit postretirement plans:
THREE MONTHS ENDED
------------------
JULY 1, JULY 2,
2007 2006
---- ----
Service costs................................. $ 1 $ 2
Interest cost ................................ 146 161
Amortization of plan net losses............... 96 100
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Net periodic postretirement cost.............. $ 243 $ 263
======= =======
For additional information on the Company's defined benefit pension and
postretirement benefit plans, refer to Note 11 in the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended March 31, 2007.
5. INCOME TAXES
Income tax expense as a percentage of income from continuing operations before
income tax expense was 38.8% and 44.0% in the fiscal 2008 and 2007 quarters,
respectively. The fiscal 2007 percentage varies from the U.S. statutory rate due
to $798 of non-deductible stock option expense. As of July 1, 2007, the Company
had U.S. federal net operating loss carry-forwards of approximately $27,500
representing approximately $9,600 of cash tax savings in future periods.
On April 1, 2007, the Company adopted the provisions of Financial Standards
Accounting Board ("FASB") Interpretation ("FIN") No. 48 "Accounting for
Uncertainty in Income Taxes," an interpretation of FASB Statement of Financial
Accounting Standards ("SFAS") No. 109. FIN No. 48 clarifies the accounting for
uncertainty in income taxes recognized under SFAS 109. FIN No. 48 prescribes a
recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return and also provides guidance on various related matters such as
derecognition, interest and penalties, and disclosure.
Upon adoption of FIN No. 48 on April 1, 2007, the Company recorded a reduction
in retained earnings for the cumulative effect adjustment of $186 to its $2,600
of unrecognized tax benefits, all of which would favorably impact the effective
tax rate if recognized. At the end of the first quarter, there was no change in
the balance of unrecognized tax benefits. The Company does not anticipate that
total unrecognized tax benefits will change significantly due to the settlement
of audits or the expiration of statutes of limitations prior to July 1, 2008.
The Company has decided to recognize interest expense or penalties related to
uncertain tax positions as a part of income tax expense in its Consolidated
Statement of Operations. The Company is currently open to audit by the Internal
Revenue Service for the years ending March 31, 2004 through 2007.
- 7 -
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
THREE MONTHS ENDED
------------------
JULY 1, JULY 2,
2007 2006
---- ----
Numerator for basic and diluted earnings per share:
Net income $ 9,520 $ 5,572
========== ==========
Denominators:
Weighted-average common stock outstanding -
denominator for basic EPS 18,638 18,431
Effect of dilutive employee stock options 450 530
---------- ----------
Adjusted weighted-average common stock
outstanding and assumed conversions -
denominator for diluted EPS 19,088 18,961
========== ==========
During the first three months of fiscal 2008, a total of 73 shares of stock were
issued upon the exercising of stock options related to the Company's stock
option plans.
7. 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 two
reportable segments: Products and Solutions. The Company's Products segment
sells hoists, industrial cranes, chain, attachments, and other material handling
products principally to third party distributors through diverse distribution
channels, and to a lesser extent directly to end-users. The Solutions segment
sells engineered material handling systems such as conveyors 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. Intersegment sales are not significant. The Company
evaluates performance based on operating income of the respective business
units.
Segment information as of and for the three months ended July 1, 2007 and July
2, 2006, is as follows:
THREE MONTHS ENDED JULY 1, 2007
-------------------------------
PRODUCTS SOLUTIONS TOTAL
-------- --------- -----
Sales to external customers........... $ 136,766 $ 11,344 $ 148,110
Income from operations................ 18,871 (604) 18,267
Depreciation and amortization......... 2,000 209 2,209
Total assets.......................... 540,581 41,096 581,677
THREE MONTHS ENDED JULY 2, 2006
-------------------------------
PRODUCTS SOLUTIONS TOTAL
-------- --------- -----
Sales to external customers........... $ 128,139 $ 18,555 $ 146,694
Income from operations................ 16,809 971 17,780
Depreciation and amortization......... 1,889 216 2,105
Total assets.......................... 514,909 37,766 552,675
- 8 -
8. SUMMARY FINANCIAL INFORMATION
The following information sets forth the condensed consolidating summary
financial information of the parent and guarantors, which guarantee the 8 7/8%
Senior Subordinated Notes, and the nonguarantors. The guarantors are wholly
owned and the guarantees are full, unconditional, joint and several.
Parent Guarantors Nonguarantors Eliminations Consolidated
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AS OF JULY 1, 2007
Current assets:
Cash and cash equivalents $ 32,834 $ (1,691) $ 30,755 $ - $ 61,898
Trade accounts receivable and unbilled revenues 64,512 150 48,409 - 113,071
Inventories 37,455 18,672 31,197 (2,160) 85,164
Other current assets 6,158 1,708 9,875 - 17,741
--------------------------------------------------------------------
Total current assets 140,959 18,839 120,236 (2,160) 277,874
Property, plant, and equipment, net 24,953 11,302 19,010 - 55,265
Goodwill and other intangibles, net 88,731 57,036 40,277 - 186,044
Intercompany 57,130 (67,370) (63,499) 73,739 -
Other assets 88,673 193,607 30,070 (249,856) 62,494
--------------------------------------------------------------------
Total assets $ 400,446 $ 213,414 $ 146,094 $ (178,277) $ 581,677
====================================================================
Current liabilities $ 59,183 $ 15,777 $ 48,661 $ (1,427) $ 122,194
Long-term debt, less current portion 136,000 3,291 4,098 - 143,389
Other non-current liabilities 25,781 11,859 25,193 - 62,833
--------------------------------------------------------------------
Total liabilities 220,964 30,927 77,952 (1,427) 328,416
Shareholders' equity 179,482 182,487 68,142 (176,850) 253,261
--------------------------------------------------------------------
Total liabilities and shareholders' equity $ 400,446 $ 213,414 $ 146,094 $ (178,277) $ 581,677
====================================================================
FOR THE THREE MONTHS ENDED JULY 1, 2007
Net sales $ 74,263 $ 41,361 $ 41,770 $ (9,284) $ 148,110
Cost of products sold 54,410 30,428 28,668 (9,284) 104,222
--------------------------------------------------------------------
Gross profit 19,853 10,933 13,102 - 43,888
--------------------------------------------------------------------
Selling, general and administrative expenses 12,770 3,195 9,352 - 25,317
Restructuring charges 8 - 268 - 276
Amortization of intangibles 24 1 3 - 28
--------------------------------------------------------------------
12,802 3,196 9,623 - 25,621
--------------------------------------------------------------------
Income from operations 7,051 7,737 3,479 - 18,267
Interest and debt expense 2,920 997 261 - 4,178
Other (income) and expense, net (364) (250) (634) - (1,248)
--------------------------------------------------------------------
Income before income tax expense 4,495 6,990 3,852 - 15,337
Income tax expense 1,827 2,740 1,389 - 5,956
--------------------------------------------------------------------
Income from continuing operations 2,668 4,250 2,463 - 9,381
Income from discontinued operations 139 - - - 139
--------------------------------------------------------------------
Net income $ 2,807 $ 4,250 $ 2,463 $ - $ 9,520
====================================================================
- 9 -
Parent Guarantors Nonguarantors Eliminations Consolidated
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FOR THE THREE MONTHS ENDED JULY 1, 2007
OPERATING ACTIVITIES:
Net cash provided (used) by operating activities $ 15,227 $ (5,260) $ (306) $ - $ 9,661
--------------------------------------------------------------------
INVESTING ACTIVITIES:
Sale of marketable securities, net - - 113 - 113
Capital expenditures (1,609) (699) (245) - (2,553)
Proceeds from sale of facilities and surplus real
estate - 5,454 - - 5,454
Proceeds from discontinued operations note
receivable 139 - - - 139
--------------------------------------------------------------------
Net cash (used) provided by investing activities (1,470) 4,755 (132) - 3,153
--------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from stock options exercised 569 - - - 569
Net borrowings under revolving line-of-credit
agreements - - (1,034) - (1,034)
Repayment of debt - - (56) - (56)
Other 142 - - - 142
--------------------------------------------------------------------
Net cash provided (used) by financing activities 711 - (1,090) - (379)
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (24) 832 - 808
--------------------------------------------------------------------
Net change in cash and cash equivalents 14,468 (529) (696) - 13,243
Cash and cash equivalents at beginning of period 18,366 (1,162) 31,451 - 48,655
--------------------------------------------------------------------
Cash and cash equivalents at end of period $ 32,834 $ (1,691) $ 30,755 $ - $ 61,898
====================================================================
AS OF MARCH 31, 2007
Current assets:
Cash and cash equivalents $ 18,366 $ (1,162) $ 31,451 $ - $ 48,655
Trade accounts receivable and unbilled revenues 64,849 45 47,425 - 112,319
Inventories 34,548 17,175 27,616 (2,160) 77,179
Other current assets 6,237 2,707 9,085 - 18,029
--------------------------------------------------------------------
Total current assets 124,000 18,765 115,577 (2,160) 256,182
Property, plant, and equipment, net 24,662 11,508 19,061 - 55,231
Goodwill and other intangibles, net 88,703 57,037 40,163 - 185,903
Intercompany 66,971 (77,385) (63,602) 74,016 -
Other assets 93,609 194,922 29,647 (249,856) 68,322
--------------------------------------------------------------------
Total assets $ 397,945 $ 204,847 $ 140,846 $ (178,000) $ 565,638
====================================================================
Current liabilities $ 36,388 $ 15,376 $ 48,120 $ (1,150) $ 98,734
Long-term debt, less current portion 158,125 - 4,043 - 162,168
Other non-current liabilities 27,646 11,143 24,622 - 63,411
--------------------------------------------------------------------
Total liabilities 222,159 26,519 76,785 (1,150) 324,313
Shareholders' equity 175,786 178,328 64,061 (176,850) 241,325
--------------------------------------------------------------------
Total liabilities and shareholders' equity $ 397,945 $ 204,847 $ 140,846 $ (178,000) $ 565,638
====================================================================
- 10 -
Parent Guarantors Nonguarantors Eliminations Consolidated
--------------------------------------------------------------------
FOR THE THREE MONTHS ENDED JULY 2, 2006
Net sales $ 71,491 $ 42,498 $ 45,254 $ (12,549) $ 146,694
Cost of products sold 52,145 31,521 33,144 (12,399) 104,411
--------------------------------------------------------------------
Gross profit 19,346 10,977 12,110 (150) 42,283
Selling, general and administrative expenses 11,276 4,286 8,894 - 24,456
Restructuring charges 4 - - - 4
Amortization of intangibles 25 1 17 - 43
--------------------------------------------------------------------
11,305 4,287 8,911 - 24,503
--------------------------------------------------------------------
Income (loss) from operations 8,041 6,690 3,199 (150) 17,780
Interest and debt expense (income) 4,717 (293) 88 - 4,512
Other (income) and expense, net 4,363 (7) (786) - 3,570
--------------------------------------------------------------------
(Loss) income before income tax expense (1,039) 6,990 3,897 (150) 9,698
Income tax expense 144 2,784 1,337 - 4,265
--------------------------------------------------------------------
(Loss) income from continuing operations (1,183) 4,206 2,560 (150) 5,433
Income from discontinued operations 139 - - - 139
--------------------------------------------------------------------
Net (loss) income $ (1,044) $ 4,206 $ 2,560 $ (150) $ 5,572
====================================================================
FOR THE THREE MONTHS ENDED JULY 2, 2006
OPERATING ACTIVITIES:
Net cash provided by operating activities $ 2,021 $ 527 $ 2,241 $ - $ 4,789
--------------------------------------------------------------------
INVESTING ACTIVITIES:
Sale of marketable securities, net - - 47 - 47
Capital expenditures (1,041) (145) (717) - (1,903)
Proceeds from discontinued operations note
receivable 139 - - - 139
--------------------------------------------------------------------
Net cash used by investing activities (902) (145) (670) - (1,717)
--------------------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from stock options exercised 1,725 - - - 1,725
Net borrowings under revolving line-of-credit
agreements 11,632 - 211 - 11,843
Repayment of debt (42,328) - 26 - (42,302)
Deferred financing costs incurred (325) - - - (325)
Other 145 - - - 145
--------------------------------------------------------------------
Net cash (used) provided by financing activities (29,151) - 237 - (28,914)
EFFECT OF EXCHANGE RATE CHANGES ON CASH - (85) 256 - 171
--------------------------------------------------------------------
Net change in cash and cash equivalents (28,032) 297 2,064 - (25,671)
Cash and cash equivalents at beginning of period 27,531 (1,461) 19,528 - 45,598
--------------------------------------------------------------------
Cash and cash equivalents at end of period $ (501) $ (1,164) $ 21,592 $ - $ 19,927
====================================================================
- 11 -
9. LOSS CONTINGENCIES
Like many industrial manufacturers, the Company is involved in asbestos-related
litigation. In continually evaluating costs relating to its estimated
asbestos-related liability, the Company reviews, among other things, the
incidence of past and recent claims, the historical case dismissal rate, the mix
of the claimed illnesses and occupations of the plaintiffs, its recent and
historical resolution of the cases, the number of cases pending against it, the
status and results of broad-based settlement discussions, and the number of
years such activity might continue. Based on this review, the Company has
estimated its share of liability to defend and resolve probable asbestos-related
personal injury claims. This estimate is highly uncertain due to the limitations
of the available data and the difficulty of forecasting with any certainty the
numerous variables that can affect the range of the liability. The Company will
continue to study the variables in light of additional information in order to
identify trends that may become evident and to assess their impact on the range
of liability that is probable and estimable.
Based on actuarial information, the Company has estimated its asbestos-related
aggregate liability through March 31, 2025 and March 31, 2037 to range between
$5,000 and $14,000 using actuarial parameters of continued claims for a period
of 18 to 30 years. The Company's estimation of its asbestos-related aggregate
liability that is probable and estimable, in accordance with U.S. generally
accepted accounting principles approximates $8,400 which has been reflected as a
liability in the consolidated financial statements as of July 1, 2007. The
recorded liability does not consider the impact of any potential favorable
federal legislation. This liability may fluctuate based on the uncertainty in
the number of future claims that will be filed and the cost to resolve those
claims, which may be influenced by a number of factors, including the outcome of
the ongoing broad-based settlement negotiations, defensive strategies, and the
cost to resolve claims outside the broad-based settlement program. Of this
amount, management expects to incur asbestos liability payments of approximately
$325 over the next 12 months. Because payment of the liability is likely to
extend over many years, management believes that the potential additional costs
for claims will not have a material after-tax effect on the financial condition
of the Company or its liquidity, although the net after-tax effect of any future
liabilities recorded could be material to earnings in a future period.
10. NEW ACCOUNTING STANDARDS
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes."
FIN 48 is an interpretation of FASB Statement No. 109 "Accounting for Income
Taxes." The Company adopted FIN 48 on April 1, 2007 as discussed in footnote 5.
In September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, "Fair Value Measurements," to define fair value, establish a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expand disclosures about fair value measurements.
SFAS No. 157 will be effective for fiscal years beginning after November 15,
2007. The Company is assessing the impact the adoption of SFAS No. 157 will have
on the Company's consolidated financial position and results of operations.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106, and 132(R)" (SFAS 158). Among other items, SFAS 158
requires recognition of the overfunded or underfunded status of an entity's
defined benefit postretirement plan as an asset or liability in the financial
statements and requires recognition of the funded status of defined benefit
postretirement plans in other comprehensive income. We adopted all of the
currently required provisions of Statement 158 in fiscal 2007. This statement
also requires an entity to measure a defined benefit postretirement plan's
assets and obligations that determine its funded status as of the end of the
employers' fiscal year. This requirement is effective for fiscal years ending
after December 15, 2008. The Company does not expect the adoption of this
requirement to have a material impact on the Company's consolidated financial
statements.
- 12 -
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities -- Including an Amendment of FASB
Statement No. 115" ("SFAS 159"). SFAS 159 allows the irrevocable election of
fair value as the initial and subsequent measurement attribute for certain
financial assets and liabilities and other items on an instrument-by-instrument
basis. Changes in fair value would be reflected in earnings as they occur. The
objective of SFAS 159 is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS 159 is effective as of the beginning
of the first fiscal year beginning after November 15, 2007. The Company is
currently evaluating if it will elect the fair value option for any of its
eligible financial instruments and other items.
11. SUBSEQUENT EVENTS
On August 1, 2007 the Company used cash on hand to redeem the remaining $22,125
of its outstanding 10% Senior Secured Notes at a price of 105% of the principal
amount. The redemption required a $1,106 premium payment to Note holders and
$337 of unamortized financing costs will be written-off in the fiscal 2008
second quarter ending September 30, 2007.
- 13 -
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(DOLLAR AMOUNTS IN THOUSANDS)
EXECUTIVE OVERVIEW
We are a leading manufacturer and marketer of hoists, cranes, chain, conveyors,
material handling systems, lift tables and component parts serving a wide
variety of commercial and industrial end-user markets. Our products are used to
efficiently and ergonomically move, lift, position or secure objects and loads.
Our Products segment sells a wide variety of powered and manually operated wire
rope and chain hoists, industrial crane systems, chain, hooks and attachments,
actuators and rotary unions. Our Solutions segment designs, manufactures, and
installs application-specific or standard material handling systems and
solutions for end-users to improve work station and facility-wide work flow.
Founded in 1875, we have grown to our current size and leadership position
through organic growth and the acquisition of 14 businesses between February
1994 and April 1999. We have developed our leading market position over our
132-year history by emphasizing technological innovation, manufacturing
excellence and superior after-sale service. In addition, the acquisitions
significantly broadened our product lines and services and expanded our
geographic reach, end-user markets and customer base. Ongoing operation of these
businesses includes improving our productivity and extending our sales
activities to the European and Asian marketplaces. We are executing those
initiatives through our Lean Manufacturing efforts, new product development and
expanded sales activities. Shareholder value will be enhanced through continued
emphasis on improvement of the fundamentals including manufacturing efficiency,
cost containment, efficient capital investment, market expansion and renewed
customer focus.
We maintain a strong domestic market share with significant leading North
American market positions in hoists, lifting and sling chain, and forged
attachments. To broaden our product offering in markets where we have a strong
competitive position as well as to facilitate penetration into new geographic
markets, we have heightened our new product development activities. Over the
past year, this includes the introduction of powered hoist lines in accordance
with international standards, to complement our current offering of hoist
products designed in accordance with U.S. standards. To further expand our
global sales, we are introducing certain of our products that historically have
been distributed only in North America and also introducing new products through
our existing European distribution network. Furthermore, we are working to build
a distribution network in China to capture an anticipated growing demand for
material handling products as that economy continues to industrialize. We have
recently reorganized and expanded our management team to align with these
strategic initiatives. These investments in international markets and new
products are part of our focus on our greatest opportunities for growth. As a
result of these efforts and the continued strong industrial economy in our
important markets of interest, we believe we can sustain our expected Products
segment growth rate in the mid single-digit range for fiscal 2008. Management
monitors U.S. Industrial Capacity Utilization, which has exceeded 80% for the
past year, as an indicator of anticipated demand for our product. In addition,
we continue to monitor the potential impact of other global and domestic trends,
including energy costs, steel price fluctuations, interest rates and activity in
a variety of end-user markets around the globe.
Our Lean Manufacturing efforts continue to fundamentally change our
manufacturing processes to be more responsive to customer demand and improve
on-time delivery and productivity. We are evaluating strategic alternatives of
certain other businesses performing at levels below the corporate average,
including Univeyor, our material handling systems business. During fiscal 2007,
in furtherance of our facility rationalization projects, we completed the sale
of one of our less strategic businesses, a specialty crane manufacturer, and
sold two pieces of excess real estate, generating $4.5 million of proceeds.
During the first quarter of fiscal 2008, we completed the sale and partial
leaseback of a manufacturing facility in Charlotte, North Carolina, generating
$5.2 million of proceeds. The proceeds have been, and will continue to be used
to repay our outstanding debt.
- 14 -
We keep a close watch on the costs for fringe benefits such as health insurance,
workers compensation insurance and pension. Combined, those benefits cost us
over $35,000 in fiscal 2007 and we work diligently to balance cost control with
the need to provide competitive employee benefits packages for our associates.
Another cost area of focus is steel. We utilize approximately $35,000 to $40,000
of steel annually in a variety of forms including rod, wire, bar, structural and
others. With increases in worldwide demand for steel and fluctuating scrap steel
prices, as we experience fluctuations in our costs, we reflect them as price
increases to our customers. We have announced a price increase that will impact
steel-intensive products and take effect early September to capture recent steel
cost increases. We will continue to monitor our costs and reevaluate our pricing
policies. We continue to operate in a highly competitive business environment in
the markets and geographies served. Our performance will be impacted by our
ability to address a variety of challenges and opportunities in those markets
and geographies, including trends towards increased utilization of the global
labor force and the expansion of market opportunities in Asia and other emerging
markets.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 1, 2007 AND JULY 2, 2006
Net sales in the fiscal 2008 quarter ended July 1, 2007 were $148,110, up $1,416
or 1.0% from the fiscal 2007 quarter ended July 2, 2006. Sales in the Products
segment increased by $8,627 or 6.7% from the previous year's quarter. The
increase was due to the continued strength of the U.S. and European industrial
markets, as well as the impact of price increases of $600 in the quarter ended
July 1, 2007. Translation of foreign currencies, particularly the Euro and
Canadian dollar, into U.S. dollars contributed $1,500 toward the Products
segment increase in sales for the quarter ended July 1, 2007. Sales in the
Solutions segment decreased 38.9% or $7,211 from the previous year's quarter.
The quarter's decrease in this segment is primarily due to lower volume in our
European conveyor business as revenue has been intentionally held back as a
result of unacceptable returns on certain projects. Translation of foreign
currencies into U.S. dollars contributed $400 to the Solutions segment sales for
the quarter ended July 1, 2007. Sales in the segments are summarized as follows:
THREE MONTHS ENDED
------------------
JULY 1, JULY 2, CHANGE
2007 2006 AMOUNT %
---- ---- ------ ---
Products......................... $ 136,766 $ 128,139 $ 8,627 6.7
Solutions........................ 11,344 18,555 (7,211) (38.9)
---------- --------- --------
Net sales........................ $ 148,110 $ 146,694 $ 1,416 1.0
========== ========= ========
Gross profit and gross profit margins by operating segment are summarized as
follows:
THREE MONTHS ENDED
------------------
JULY 1, 2007 JULY 2, 2006
------------ ------------
$ % $ %
--- --- --- ---
Products......................... $ 42,099 30.8 $ 39,417 30.8
Solutions........................ 1,789 15.8 2,866 15.4
---------- ---------
Total Gross Profit............ $ 43,888 29.6 $ 42,283 28.8
========== =========
The gross profit margin for the Products segment was consistent in the first
quarter of fiscal 2008 compared to the first quarter of fiscal 2007. The
Solutions segment reflected gross margin improvement due to restructuring
activities undertaken at our Univeyor business. The increase in the overall
gross profit margin was the result of the change in product mix and the
realization of operational leverage.
Selling expenses were $16,121 and $15,367 in the fiscal 2008 and 2007 quarters,
respectively. The change in expense dollars was primarily impacted by increased
investment to support our strategic growth initiatives ($650). As a percentage
of consolidated net sales, selling expenses were 10.9% and 10.5% in the fiscal
2008 and 2007 quarters, respectively.
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General and administrative expenses were $9,196 and $9,089 in the fiscal 2008
and 2007 quarters, respectively. An increase in group health insurance costs
($380) was offset by a decrease in stock based compensation expense ($325). As a
percentage of consolidated net sales, general and administrative expenses were
6.2% in the fiscal 2008 and 2007 quarters.
Restructuring charges were $276 and $4 in the fiscal 2008 and 2007 quarters,
respectively. The 2008 restructuring costs were incurred to reduce ongoing
operating costs and change our Univeyor business model to increase its focus on
offering products as packaged solutions rather than engineered to order systems.
Interest and debt expense was $4,178 and $4,512 in the fiscal 2008 and 2007
quarters, respectively. This decrease is the result of lower debt levels. As a
percentage of consolidated net sales, interest and debt expense was 2.8% and
3.1% in the fiscal 2008 and 2007 quarters, respectively.
Cost of bond redemptions was $0 and $4,583 in the fiscal 2008 and 2007 quarters,
respectively, with the fiscal 2007 charge to redeem some of our 10% notes.
Investment income was $294 and $474 in the fiscal 2008 and 2007 quarters,
respectively.
Other (income) and expense, net was ($954) and ($539) in the fiscal 2008 and
2007 quarters, respectively.
Income tax expense as a percentage of income from continuing operations before
income tax expense was 38.8% and 44.0% in the fiscal 2008 and 2007 quarters,
respectively. The fiscal 2007 percentage varies from the U.S. statutory rate due
to $798 of non-deductible stock option expense. As of July 1, 2007, we had U.S.
federal net operating loss carry-forwards of approximately $27,500, representing
approximately $9,600 of cash tax savings in future periods.
On April 1, 2007, the Company adopted the provisions of Financial Standards
Accounting Board ("FASB") Interpretation ("FIN") No. 48 "Accounting for
Uncertainty in Income Taxes," an interpretation of FASB Statement of Financial
Accounting Standards ("SFAS") No. 109. FIN No. 48 clarifies the accounting for
uncertainty in income taxes recognized under SFAS 109. FIN No. 48 prescribes a
recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return and also provides guidance on various related matters such as
derecognition, interest and penalties, and disclosure.
Upon adoption of FIN No. 48 on April 1, 2007, the Company recorded a reduction
in retained earnings for the cumulative effect adjustment of $186 to its $2,600
of unrecognized tax benefits, all of which would favorably impact the effective
tax rate if recognized. At the end of the first quarter, there was no change in
the balance of unrecognized tax benefits. The Company does not anticipate that
total unrecognized tax benefits will change significantly due to the settlement
of audits or the expiration of statute of limitations prior to July 1, 2008.
The Company has decided to recognize interest expense or penalties related to
uncertain tax positions as a part of income tax expense in its Consolidated
Statement of Operations. The Company is currently open to audit by the Internal
Revenue Service for the years ending March 31, 2004 through 2007.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $61,898 at July 1, 2007, an increase of
$13,243 from the March 31, 2007 balance of $48,655.
Net cash provided by operating activities was $9,661 for the three months ended
July 1, 2007 compared to $4,789 for the three months ended July 2, 2006. The
$4,872 increase is the result of stronger operating performance in fiscal 2008
($2,284) and changes in working capital components. During the fiscal 2008
quarter, changes in working capital components used $7,581, compared to $10,169
used in the fiscal 2007 quarter. Changes in net working capital include a
favorable change of $4,368 on accounts receivables and unbilled revenues as a
result of improved collection results and a favorable change in prepaid expenses
and other assets of $2,363 due to timing of payments. These were offset by an
- 16 -
unfavorable change of $2,034 on inventory (resulting from support for upcoming
new product launches, a surge in demand for larger capacity equipment and timing
of offshore purchases) and an unfavorable change of $2,109 in accounts payable
and accrued and non-current liabilities (resulting from timing of disbursements
and changing product liability reserves).
Net cash provided (used) by investing activities was $3,153 for the three months
ended July 1, 2007 compared to ($1,717) for the three months ended July 2, 2006.
The $4,870 change in net cash provided (used) by investing activities was the
result of $5,454 of proceeds received from the sale of facilities and surplus
real estate in fiscal 2008 compared to $0 in fiscal 2007. This increase was
partially offset by a $650 increase in capital expenditures.
Net cash used in financing activities was $379 for the three months ended July
1, 2007 compared to $28,914 for the three months ended July 2, 2006. The net
cash used in financing activities for the three months ended July 1, 2007
consisted of $1,090 of net debt repayments, partially offset by $569 of proceeds
from stock options exercised. The net cash used in financing activities for the
three months ended July 2, 2006 consisted of $30,459 of net debt repayments,
including the repurchase of $38,548 of our 10% notes, partially offset by $1,725
of proceeds from stock options exercised.
We believe that our cash on hand, cash flows, and borrowing capacity under our
Revolving Credit Facility will be sufficient to fund our ongoing operations and
budgeted capital expenditures for at least the next twelve months. This belief
is dependent upon a steady economy and successful execution of our current
business plan which includes focus on cash generation for debt repayment. The
business plan includes continued implementation of new market penetration, new
product development, lean manufacturing and improving working capital
utilization.
In March 2006, we entered into a Revolving Credit Facility which provides
availability up to $75,000. Provided there is no default, the Company may
request an increase in the availability of the Revolving Credit Facility by an
amount not exceeding $50,000. The Revolving Credit Facility matures February
2011.
The unused portion of the Revolving Credit Facility totaled $64,850, net of
outstanding borrowings of zero and outstanding letters of credit of $10,150 of
July 1, 2007. Interest is payable at a Eurodollar Rate or a prime rate plus an
applicable margin determined by our leverage ratio. At our current leverage
ratio, we qualify for the lowest applicable margin level, which amounts to 87.5
basis points for Eurodollar borrowings and zero basis points for prime rate
based borrowings. The Revolving Credit Facility is secured by all domestic
inventory, receivables, equipment, real property, subsidiary stock (limited to
65% for foreign subsidiaries) and intellectual property. The corresponding
credit agreement associated with the Revolving Credit Facility places certain
debt covenant restrictions on us, including certain financial requirements and a
limitation on dividend payments.
The Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005
amounted to $136,000 and are due November 1, 2013. Provisions of the 8 7/8%
Notes include limitations on indebtedness, asset sales, and dividends and other
restricted payments. Until November 1, 2008, we may redeem up to 35% of the
outstanding notes at a redemption price of 108.875% with the proceeds of equity
offerings, subject to certain restrictions. On or after November 1, 2009, the 8
7/8% Notes are redeemable at the option of the Company, in whole or in part, at
prices declining annually from 104.438% to 100% on and after November 1, 2011.
In the event of a Change of Control (as defined in the indenture for such
notes), each holder of the 8 7/8% Notes may require us to repurchase all or a
portion of such holder's 8 7/8% Notes at a purchase price equal to 101% of the
principal amount thereof. The 8 7/8% Notes are guaranteed by certain existing
and future domestic subsidiaries and are not subject to any sinking fund
requirements.
The Senior Secured 10% Notes (10% Notes) issued on July 22, 2003 amounted to
$22,125 as of July 1, 2007. On August 1, 2007 the Company used cash on hand to
redeem all of the outstanding 10% Notes at a price of 105% of the principal
amount. The redemption required a $1,106 premium payment to Noteholders and $337
of unamortized financing costs will be written-off in the fiscal 2008 second
quarter ending September 30, 2007.
Unsecured and uncommitted lines of credit are available to meet short-term
working capital needs for our subsidiaries operating outside of the United
States. The lines of credit are available on an offering basis, meaning that
transactions under the line of credit will be on such terms and conditions,
including interest rate, maturity, representations, covenants and events of
- 17 -
default, as mutually agreed between our subsidiaries and the local bank at the
time of each specific transaction. As of July 1, 2007, significant credit lines
totaled approximately $10,010 of which $8,565 was drawn.
In addition to the above facilities, our foreign subsidiaries have certain fixed
term bank loans. As of March 31, 2007, significant loans totaled $3,960 of which
$2,868 were secured loans.
CAPITAL EXPENDITURES
In addition to keeping our current equipment and plants properly maintained, we
are committed to replacing, enhancing, and upgrading our property, plant, and
equipment to support new product development, 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
1, 2007 and July 2, 2006 were $2,553 and $1,903, respectively. We expect capital
spending for fiscal 2008 to be approximately $10 to $12 million compared with
$10.7 million in fiscal 2007. Incremental capital expenditures for fiscal 2008
will be primarily directed toward new product development and productivity
improvement.
INFLATION AND OTHER MARKET CONDITIONS
Our costs are affected by inflation in the U.S. economy and, to a lesser extent,
in foreign economies including those of Europe, Canada, Mexico, South America,
and the Pacific Rim. We do not believe that general inflation has had a material
effect on results of operations over the periods presented primarily due to
overall low inflation levels of most costs over such periods and our ability to
generally pass on rising costs through price increases. However, we have been
impacted by fluctuations in steel costs, which vary by type of steel and we
continue to monitor them. In addition, U.S. employee benefits costs such as
health insurance and workers compensation insurance as well as energy costs have
exceeded general inflation levels. We generally incorporate those cost increases
into our sales price increases and consider surcharges on certain products, as
determined necessary. In the future, we may be further affected by inflation
that we may not be able to pass on as price increases or surcharges.
SEASONALITY AND QUARTERLY RESULTS
Quarterly results may be materially affected by the timing of large customer
orders, periods of high vacation and holiday concentrations, gains or losses on
early retirement of bonds, restructuring charges, divestitures and acquisitions.
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
In June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes."
FIN 48 is an interpretation of FASB Statement No. 109 "Accounting for Income
Taxes." We adopted FIN 48 on April 1, 2007 as discussed in footnote 5.
In September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, "Fair Value Measurements," to define fair value, establish a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expand disclosures about fair value measurements.
SFAS No. 157 will be effective for fiscal years beginning after November 15,
2007. We are assessing the impact the adoption of SFAS No. 157 will have on our
consolidated financial position and results of operations.
In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106, and 132(R)" (SFAS 158). Among other items, SFAS 158
requires recognition of the overfunded or underfunded status of an entity's
defined benefit postretirement plan as an asset or liability in the financial
statements and requires recognition of the funded status of defined benefit
postretirement plans in other comprehensive income. We adopted all of the
currently required provisions of Statement 158 in fiscal 2007. This statement
also requires an entity to measure a defined benefit postretirement plan's
- 18 -
assets and obligations that determine its funded status as of the end of the
employers' fiscal year. This requirement is effective for fiscal years ending
after December 15, 2008. We do not expect the adoption of this requirement to
have a material impact on our consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities -- Including an Amendment of FASB
Statements No. 115" ("SFAS 159"). SFAS 159 allows the irrevocable election of
fair value as the initial and subsequent measurement attribute for certain
financial assets and liabilities and other items on an instrument-by-instrument
basis. Changes in fair value would be reflected in earnings as they occur. The
objective of SFAS 159 is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS 159 is effective as of the beginning
of the first fiscal year beginning after November 15, 2007. We are currently
evaluating whether we will elect the fair value option for any of our eligible
financial instruments and other items.
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 our actual
results to differ materially from the results expressed or implied by such
statements, including general economic and business conditions, conditions
affecting the industries served by us and our subsidiaries, conditions affecting
our customers and suppliers, competitor responses to our products and services,
the overall market acceptance of such products and services, the integration of
acquisitions and other factors disclosed in our periodic reports filed with the
Commission. Consequently such forward-looking statements should be regarded as
our current plans, estimates and beliefs. We do not undertake and specifically
decline 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.
- 19 -
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the market risks since the end of Fiscal
2007.
Item 4. Controls and Procedures
As of July 1, 2007, an evaluation was performed under the supervision and with
the participation of the Company's management, including the chief executive
officer and chief financial officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the chief executive officer and
chief financial officer, concluded that the Company's disclosure controls and
procedures were effective as of July 1, 2007. There were no changes in the
Company's internal controls or other factors during our first quarter ended July
1, 2007.
- 20 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - none.
Item 1A. Risk Factors
No material changes from risk factors as previously disclosed in the
Company's Form 10-K for the year ended March 31, 2007.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds - 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
(a) Exhibits:
Exhibit 31.1 Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934; as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a) of the Securities Exchange
Act of 1934; as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
- 21 -
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 10, 2007 /S/ KAREN L. HOWARD
--------------- ------------------------------------------
Karen L. Howard
Vice President and Chief Financial Officer
(Principal Financial Officer)
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