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material Handling for Global business.
2008 AnnuAl RepoRt
31˚ 8’ 00˝ N 104˚ 24’ 00˝ E
DeYAnG, CHInA
Columbus McKinnon hoist and rigging products help
to construct windmills bound for massive wind farms
throughout China
52˚ 22’ 00˝ N 9˚ 43’ 00˝ E
HAnoveR, GeRmAnY
Yale Vigo electric chain hoist, designed to FEM international
standards, launches at the CeMAT 2008 trade show
36˚ 10’ 30˝ N 115˚ 08’ 11˝ W
lAs veGAs, nevADA
CM PowerStar hoist enables pioneering “flying deck”
high-rise construction technique
32˚ 46’ 50˝ N 96˚ 48’ 14˝ W
DAllAs, texAs
Duff-Norton actuators position and rotate solar panels
to maximize capturing the sun’s rays
59˚ 56’ 00˝ N 30˚ 20’ 00˝ E
st. peteRsbuRG, RussIA
New office drives Russian sales of globally proven
energy and natural resource products
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Table of Contents
Letter to Shareholders
Performance Highlights
Growth Strategy
Long-Term Goals
Investment Considerations
1
2
3
4
5
Corporate Information & Vision 6
Executive Officers
Board of Directors
Financial Summary
7
8
9
Dear Fellow Shareholders:
During fiscal 2008, Columbus McKinnon continued to deliver profitable top-
line growth while investing for the future in new products and markets as we
improved our capital structure. These achievements were made possible by
our superior products, our market leadership in the United States, Europe and
other key regions, our relationships with more than 20,000 leading distributors
and customers around the world, and over 3,200 highly trained and motivated
Columbus McKinnon associates located in 16 countries.
We have continued to implement our strategic plan this past year and have
accomplished a great deal, including: growing top line revenue by nearly 6%
overall and 10% internationally, improving gross margin by 170 basis points,
generating $37.3 million in profit, net of a $2.5 million one-time charge, and
delivering record operating cash flow of nearly $60 million.
At the same time, our customers’ needs to increase productivity while operating
safely are the key drivers of our business and have, in fact, accelerated. Servicing
our customers is of preeminent importance to meet our long-term vision “to become
the material handling champion of the world.” This vision, along with our growth
strategy, rests on Columbus McKinnon’s long-standing and timeless core values.
Above all, we value our customers, our associates, quality and corporate health.
SEC Form 10-K Document
10
FY2008 Results
Fiscal 2008 net sales totaled $623.3 million, increasing $33.5 million, or 5.7%,
over the prior year’s revenue of $589.8 million, which included $9.0 million in
revenue from the Larco Industrial Services unit we sold at the end of fiscal 2007.
Columbus McKinnon’s international sales grew to $217.9 million, increasing $19.3
million, or 10% for the year, continuing our positive international growth trend.
Fiscal 2008 net income was $37.3 million, or $1.95 per share. Univeyor, the
largest business in our Solutions segment, had a negative effect on Columbus
McKinnon in fiscal 2008. In January 2008
we announced our intent to divest Univeyor,
which is currently underway. On a pro forma
basis – excluding the Univeyor results and
a non-cash $2.5 million Univeyor asset
impairment charge, as well as favorable
tax adjustments – diluted earnings per
share increased 14.4% to $2.38 in fiscal
2008, compared with $2.08 in fiscal 2007.
In spite of Univeyor’s negative impact,
we achieved an 11.4% operating income
margin. On that same pro forma basis,
operating margin would be 13.6%. Our
long-term operating income margin goal of
12% to 14% is clearly attainable and our
focus remains on reinforcing the foundation
of this performance and elevating our
aspirations to even higher levels once this
divestiture is consummated.
CMCO hoist and rigging products are
used for construction and maintenance
of windmills around the world, including
those manufactured in Deyang for wind
farms throughout China and Mongolia
31° 8’ 00” N 104° 24’ 00” E
DEYaNg, ChiNa
1
Gross margin continued to benefit from our Lean manufacturing processes and
quality improvements, increasing 170 basis points to 29.6% during fiscal 2008.
Our operating cash flow was superb this past year, growing 31% for the year, and
33% on a compound annual basis since fiscal 2003. This is clearly one of our
strengths and indicative of the Company’s fundamental operating performance
and potential. Cash from operations increased to a record $59.6 million, or $3.11
per diluted share, in fiscal 2008 from $45.5 million, or $2.40 per diluted share,
the prior year.
Continued strong performance by Columbus McKinnon’s Products segment,
which represented 91.4% of total 2008 revenue, offset the decline of the Solutions
segment’s Univeyor business that comprised about 4.7% of consolidated sales.
The Products segment grew its top line by 8.1% to $570.0 million in fiscal 2008
on strong demand for our hoists, cranes and rigging products around the world.
Products segment backlog remained strong at $55.8 million on March 31, 2008
compared with $53.2 million at March 31, 2007.
Looking ahead, our customers’ robust ordering patterns and thriving industrial
markets do not reflect the softness being reported in other areas of the U.S. and
global economies. We read the same news reports on the state of the economy as
our shareholders and experience the same cost pressures in areas such as health
care, energy, transportation and various commodities. Still, in fiscal 2008 and into
fiscal 2009, our customers and the markets we serve around the world continued
to grow. We are also pleased to see that industrial capacity utilization in the USA,
a driver of our business, has remained in the 78% to 80% area, which bodes well
for the markets we serve.
gRowiNg iNTERNaTioNal PRESENCE
Canada – 5%
Europe – 21%
United States – 65%
Rest of world – 4%
Mexico & Latin America – 5%
In addition to continued vitality and growth in the global industrial markets,
we see that our end users remain subject to powerful competitive pressures
to maximize productivity and efficiency, making Columbus McKinnon’s prod-
ucts highly desirable. In North America, Western Europe and other established
markets, companies are unrelenting in their desire to lift and place loads ever
more quickly, easily, and safely. In some of our newer markets around the globe,
there is growing awareness of the importance of worker safety, both in terms of
the welfare of individual employees and the impact on productivity. Accordingly,
there is growing interest in Columbus McKinnon as a leading source of product
solutions in these areas.
Performance highlights –
Fiscal Year 2008
Products segment sales advanced
8.1% to $570.0 million on strong
global demand for hoists, cranes
and rigging products
International sales grew by 10%
to 35% of total sales
Net sales were $623.3 million,
up $33.5 million compared with
fiscal 2007
Gross profit increased by 12.1%
to $184.6 million, a 170 basis point
improvement in gross profit margin
to 29.6%
Opened sales offices and warehouses
in Colón, Panama; Milan, Italy; Beijing,
China and St. Petersburg, Russia
52˚ 22’ 00” N 9˚ 43’ 00” E
haNovER, gERmaNY
The Vigo electric chain hoist, designed to
international standards, launched at the
2008 Hanover Fair
2
growth Strategy
Grow revenue by investing in new
markets around the world and devel-
oping new and innovative material
handling products
Improve operating margins by con-
tinuing to implement Lean concepts
and continuing to invest in our people
De-lever our balance sheet and
maintain a stable capital structure
While our business and our customers’ behavior give us cause for continued
optimism, we have deliberately fortified Columbus McKinnon to weather more
challenging economic conditions, should they materialize. Since the last
downturn faced by Columbus McKinnon in fiscal 2001 through fiscal 2003,
we have substantially de-levered the Company’s balance sheet, improved its
working capital utilization, diversified its revenue sources by geography, shifted
much of its cost structure from fixed to variable costs, improved productivity by
transferring select manufacturing processes to low-cost regions, and embraced
Lean and quality improvement techniques.
We are in a wonderful position to continue to grow profitably. Our strong balance
sheet and excellent cash flow, along with our market leadership position and
diverse revenue base, provide us with unique opportunities.
Complement our organic growth with
synergistic, bolt-on acquisitions
growth Strategy
First, we will continue to grow our business around the world by:
• Leveraging our existing distribution and customer relationships
• Extending existing products into new markets
• Developing and promoting new products
• Capturing new geographic markets
We recently worked closely with one of our longtime distributors to adapt one of our
proven hoists to help high-rise construction contractors increase their productivity.
Our new hoist is a critical component of the rigging used to “fly” entire floors out
the side of a structure and up to the next level to speed multi-story construction,
making the technique much more productive than traditional methods. To be used
safely and effectively, a hoist must be extremely reliable, powerful and durable. Our
new hoist has more than met that need.
36° 10’ 30” N 115° 8’ 11” w
laS vEgaS, NEvaDa
we recently worked closely with one of our
longtime distributors to adapt one of our
proven hoists to help high-rise construction
contractors increase their productivity.
Additionally, to strengthen our global positioning and market penetration, we have
developed and launched new hoists in accordance with international standards.
These hoists complement our broad hoist product offering, historically designed
to meet U.S. standards, to now satisfy the preferences of non-U.S. markets. One of
these lines, the Vigo electric chain hoist, was recently launched at a global material
handling show in Germany.
A second component of our growth strategy is to build on recent years’ gains
in operating margins and operating leverage, and continue implementing Lean
The Company’s Little Mule lever
tools are widely used by utility
linesmen in power distribution
The Company’s brands are often
combined, as is the case with
this Abell-Howe overhead crane
and CM hoist
3
CM’s PowerStar hoist, was re-engineered specifically
for high-rise construction
processes and quality improvements. As
we grow the top line, we will not back away
from our cost-reduction and containment
discipline, while continuing to implement
Lean manufacturing techniques to further
improve productivity and competitiveness.
A third component, as noted above, is
de-levering our balance sheet and manag-
ing a stable capital structure to provide a
foundation for our global growth strategy. We have made tremendous progress
in this regard and are well positioned to weather challenging economic condi-
tions and grow Columbus McKinnon through the highs and lows of long-term
business cycles.
The fourth component of our growth strategy is active exploration of potential
acquisitions, joint ventures and alliances, particularly outside the United States.
While we are not seeking deals for the sake of doing them, we do think that current
conditions present opportunities for well-capitalized and growing companies such
as Columbus McKinnon. Any transactions are likely to be relatively small, bolt-on
acquisitions of companies with about $50 million in revenue, which can be accretive
within about a year. We are especially interested in opportunities that will increase
Columbus McKinnon’s penetration in geographies outside the United States,
expand our product lines, or ideally, both.
long-Term goals
The timing and extent to which we undertake acquisition activity will help dictate
the speed with which we achieve Columbus McKinnon’s long-term revenue,
profitability and capital structure goals.
Our long-term revenue goal is $1 billion, with roughly $100 million to $200 million
of our top-line target achieved through acquisition. Organic growth will also be
critical to achieving $1 billion, fueled by North American sales increases at or
above the rate of U.S. gross domestic product growth and international revenue
growth of 10% to 11%. We expect that reaching our revenue goal will also require
new products to generate at least 20% of annual revenue, up from 16% in fiscal
2008, and non-U.S. sales to reach about 50% of revenue.
The United States will remain our single largest geographic market for many years
to come. We certainly do not take for granted our strong and long-standing U.S.
distributor and end user customer relationships, many of which are decades
old. We will continue to make the investments necessary to maintain our market
leadership and satisfy customers in our core markets. Clearly, however, interna-
tional sales will be essential to driving further profitable top-line growth, both in
long-established Columbus McKinnon markets such as Canada, Mexico, other
Latin American countries, and Western Europe as well as newer markets such as
China, other Asia-Pacific regions, Eastern Europe, the Middle East and Russia.
Our new St. Petersburg, Russia office is focused on introducing our wide range of
proven products for energy and natural resources to distributors and end users
long-Term goals
Become a $1 billion revenue
company with
• Acquisitions contributing $100 to
$200 million in revenue growth
• International markets contributing
approximately 50% of revenue
• New products developed in the
last three years representing 20%
of revenue
Achieve operating leverage of 20% to
30% and generate operating margins
of 12% to 14%
Sustain debt to total capitalization of
30%, flexing to 50% to accommodate
acquisitions
Manage working capital to 15% of
revenue, improving inventory turns to
6 to 7 times and maintaining DSOs of
less than 60 days
Having global resources in place to
execute the strategic plan
Applications are diverse,
including this Coffing electric
chain hoist that is lifting and
positioning this load of lumber
4
investment Considerations
Record operating cash flow of $59.6
million or $3.11 per share for FY 2008
Solid financial position with debt to
total capitalization of 33.4%
Leading U.S. market share for many
material handling products
69% of U.S. sales into markets where
company has #1 share
Largest installed base of hoists in
North America
Comprehensive product offering, with
no SKU more than 1% of Products
segment sales
Growing global presence with 35% of
sales outside of U.S.
75% of Products segment sales sell for
less than $5,000
Liquidity, average daily trading volume
greater than 200,000 shares
Experienced management team
with equity ownership
32˚ 46’ 50” N 96˚ 48’ 14” w
DallaS, TExaS
Duff-Norton actuators are used in the fast-growing
solar energy market to position panels to capture the
sun’s rays
in that market. We also recently opened an
office in Beijing, China with further plans for
additional offices in China to service that
vast industrializing region. In addition, we
are considering locations to meet demand
for our products in other emerging markets
in Eastern Europe and the Middle East.
In terms of profitability, Columbus McKinnon’s long-term goal is to achieve
operating leverage of 20% to 30% in order to consistently deliver operating
margins of 12% to 14%, up from 11.4% in fiscal 2008.
Our long-term capital structure goals include lowering debt to 30% of total
capitalization, down from 33.4% at the end of fiscal 2008, while allowing
ourselves to flex up to about 50% of total capitalization if required by acquisition
activity. We have a long-term working capital goal of 15% of revenue, compared
with 18.4% and 20.1% at the end of fiscal 2008 and 2007, respectively. To
achieve this target, we believe we need 6 to 7 annual inventory turns, compared
with 5.5 turns for fiscal 2008. In addition, we want to keep receivable days sales
outstanding below 60, which is the level we have maintained since fiscal 2005,
closing fiscal 2008 at 52.5 days.
59˚ 56’ 00” N 30˚ 20’ 00” E
ST. PETERSbuRg, RuSSia
our new St. Petersburg office is focused on
our wide range of proven products for energy
and natural resources.
In addition to providing shareholders with benchmarks by which to judge
Columbus McKinnon’s success, we believe these long-term goals demonstrate
our confidence in what this Company is capable of achieving under a variety of
economic conditions. Fiscal 2008 was marked by profitable growth, outstanding
operating cash flow, further strengthening of our balance sheet, and maintaining
or enhancing our market leadership in key industries and geographies around the
world. We thank all of our stakeholders, especially our associates for their hard
work and commitment to achieve those successes. We further expect to make
significant strides toward our long-term goals in fiscal 2009, and look forward
to updating you on our progress. As always, we appreciate your support and
investment in Columbus McKinnon.
CMCO hoists are widely used in live sports,
music, theater and other entertainment
venues worldwide, to suspend signage,
speakers, lighting systems and the like
5
Timothy T. Tevens
President and Chief Executive Officer
Ernest R. Verebelyi
Chairman of the Board of Directors
Common Stock
investor Relations
Columbus McKinnon’s common stock is traded on NASDAQ
under the symbol CMCO. As of April 30, 2008, there were
450 shareholders of record of the Company’s common stock.
According to the March 31, 2008 SEC filings, about 168
institutional investors own approximately 92% of Columbus
McKinnon’s outstanding common shares.
Karen L. Howard
Vice President – Finance and Chief Financial Officer
716-689-5550
E-mail: karen.howard@cmworks.com
Investor information is available on the
Company’s web site: www.cmworks.com
annual meeting of Shareholders
Corporate headquarters
July 28, 2008; 10:00 am Eastern Time
Ramada Hotel and Conference Center
2402 North Forest Road
Amherst, NY 14226
Columbus McKinnon Corporation
140 John James Audubon Parkway
Amherst, NY 14228-1197
716-689-5400
independent auditors
Ernst & Young LLP
50 Fountain Plaza, 14th floor
Buffalo, NY 14202-2297
Transfer agent
Please direct questions about lost certificates, change of
address and consolidation of accounts to the Company’s
transfer agent and registrar:
American Stock Transfer & Trust Company
59 Maiden Lane, Plaza Level
New York, NY 10038
(800) 937-5449
(718) 921-8200
www.amstock.com
vision: become the material
handling Champion of the world
Our Goal
Superior Customer Excellence
Our Initiatives
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Our Values
We value each other and our diverse backgrounds
We value our corporate health
We value innovation, quality and craftsmanship in all aspects of performance
We value helping our customers succeed
6
Executive officers
Timothy T. Tevens
President and Chief Executive Officer
Mr. Tevens was elected President, Chief Executive Officer and appointed a Director of Columbus McKinnon in
1998. Mr. Tevens joined the Company in May 1991 as Vice President – Information Services and was elected its
Chief Operating Officer in October 1996. Prior to joining the Company, Mr. Tevens was a management consultant
with Ernst & Young LLP. Mr. Tevens is also a director of Zep, Inc. (NYSE: ZEP).
Derwin R. Gilbreath
Vice President and Chief Operating Officer
Mr. Gilbreath joined Columbus McKinnon as Vice President and Chief Operating Officer in 2005. He has more
than thirty years of experience in industrial operations and management, including Chief Operating Officer of the
Metalworking Solutions and Services Group of Kennametal, Inc. (NYSE: KMT) and senior operations management
positions at General Signal Corporation and NL Industries.
Timothy R. Harvey
General Counsel and Secretary
Mr. Harvey has been with the Company since 1996, initially serving as Manager – Legal Affairs, until his election
as Secretary in 2003. Prior to 1996, Mr. Harvey was engaged in the private practice of law in Buffalo, New York.
Karen L. Howard
Vice President – Finance and Chief Financial Officer
Ms. Howard was elected CFO in 2006, having served Columbus McKinnon as interim CFO, Treasurer, Controller
and in other financial and accounting capacities since joining the Company in 1995. Previously, she was a certified
public accountant with Ernst & Young LLP.
Joseph J. Owen
Vice President and Hoist Group Leader
Before being named Vice President in 1999, Mr. Owen served as Corporate Director – Materials Management.
Previously, he was a management consultant with Ernst & Young LLP.
Richard A. Steinberg
Vice President – Human Resources
Mr. Steinberg joined Columbus McKinnon in 2005 after serving Praxair Inc. in various human resources capacities,
most recently as a Region Leader and Human Resource Manager. Prior to joining Praxair in 1995,
he was Human Resources Manager at Computer Task Group Inc. and Organizational Development Leader at
The Goodyear Tire and Rubber Company.
Wolfgang Wegener
Vice President and Managing Director – Columbus McKinnon Europe
Prior to being elected Vice President in 2006, Mr. Wegener served as Managing Director of Columbus McKinnon’s
Yale Industrial Products GmbH subsidiary. Previously, he served in various financial management positions at Yale.
7
board of Directors
Ernest R. Verebelyi was elected Chairman of Columbus McKinnon’s Board of Directors in 2005 and has
served as a Director of the Company since 2003. Mr. Verebelyi retired as Group President with Terex Corporation
(NYSE: TEX) in October 2002. He also serves as a director of CH Energy Group, Inc. (NYSE: CHG).
Timothy T. Tevens was elected President, Chief Executive Officer and appointed a Director of Columbus McKinnon
in 1998. Mr. Tevens is also a director of Zep, Inc. (NYSE: ZEP).
Richard H. Fleming was appointed a Director of the Company in 1999. Mr. Fleming is Executive Vice President
and Chief Financial Officer of USG Corporation (NYSE: USG).
Board Committees: Audit (Chairman), Compensation and Succession
Wallace W. Creek was appointed a Director of the Company in 2003. Mr. Creek served as a senior financial
executive with Collins & Aikman and Controller of General Motors (NYSE: GM). He also serves as a director of CF
Industries Holdings, Inc. (NYSE: CF).
Board Committees: Corporate Governance and Nomination (Chairman), Audit
Linda A. Goodspeed was appointed a Director of the Company in 2004. Ms. Goodspeed currently serves as Vice
President of Information Systems with Nissan North America, Inc. She also serves as a director of American
Electric Power Co., Inc. (NYSE: AEP).
Board Committees: Corporate Governance and Nomination, Audit
Stephen Rabinowitz was appointed a Director of the Company in 2004. He is the retired Chairman and
Chief Executive Officer of General Cable Corporation (NYSE: BGC). Mr. Rabinowitz is also a director of
Energy Conversion Devices, Inc. (NASDAQ: ENER) and Microheat, Inc.
Board Committees: Compensation and Succession (Chairman), Audit
Nicholas T. Pinchuk became a Director of the Company in January 2007. Mr. Pinchuk is President, Chief Executive
Officer and a Director of Snap-on Incorporated (NYSE: SNA).
Board Committees: Compensation and Succession, Corporate Governance and Nomination
8
Financial Summary
(In thousands, except per share, percent change, margin and ratio data)
Data as of or for the years ended March 31, 2008 and March 31, 2007.
income Statement Data
2008
2007
Change
Net sales
Gross profit
Gross margin
$623,334
$589,848
5.7%
184,553
164,600
12.1%
29.6%
27.9%
Income from operations
71,148
68,456
3.9%
Operating margin
Net income
11.4%
11.6%
37,349
34,085
Net income per diluted share
$1.95
$1.80
9.6%
8.3%
Pro forma net income
per diluted share*
balance Sheet Data
Total assets
Total liabilities
$2.38
$2.08
14.4%
590,035
565,638
294,554
324,313
4.3%
-9.2%
Total funded debt
147,902
172,063
-14.0%
Funded debt, net of cash
71,908
123,408
-41.7%
Total shareholders’ equity
295,481
241,325
22.4%
Funded debt/capitalization
33.4%
41.6%
Funded debt,
net of cash/capitalization
19.6%
33.8%
other Data
Operating cash flow
59,590
45,495
Operating cash flow per share
3.11
2.40
31.0%
29.6%
Depreciation, amortization
and impairment
Capital expenditures
Inventory turns
Working capital/revenue
11,325
13,066
5.5
18.4%
8,289
36.6%
10,653
5.8
20.1%
22.7%
-5.2%
*Excludes unusual items; a reconciliation of the unusual items affecting net income in both years
is provided in the Company’s fiscal 2008 fourth quarter and full year earnings release which is
available on the corporate website at www.cmworks.com.
Strong Cash Flow From operations
($ in millions)
60
59.6
46.4
45.5
30
26.4
17.2
0
04
05
06
07
08
our growing global Presence
($ in millions)
Net Sales
700
350
0
556.0
589.8
623.3
514.8
444.6
04
05
06
07
08
international Sales
250
125
0
191.3
198.3
198.5
217.9
158.6
04
05
06
07
08
growing Profitability
($ in millions)
income from operations
80
68.5
71.1*
57.9
40.7
40
29.9
0
04
05
06
07
08
operating margin
12
6
0
11.6%
11.4%*
10.4%
7.9%
6.7%
04
05
06
07
08
*Including operating losses of the Univeyor
business slated for sale and a non-cash
$2.5 million Univeyor asset impairment charge.
Continued Debt Reduction
($ in millions)
Debt, Net of Cash
282.3
300
261.5
164.2
123.4
71.9
04
05
06
07
08
150
0
9
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 2008
Commission file number 0-27618
_________________
COLUMBUS McKINNON CORPORATION
(Exact name of Registrant as specified in its charter)
New York
(State of Incorporation)
16-0547600
(I.R.S. Employer Identification Number)
140 John James Audubon Parkway
Amherst, New York 14228-1197
(Address of principal executive offices, including zip code)
(716) 689-5400
(Registrant’s telephone number, including area code)
_________________
Securities pursuant to section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value (and rights attached thereto)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)
of the Exchange Act. Yes [ ] No [ X ]
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405
of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X].
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Act.
Large accelerated filer [ ]
Accelerated filer [ X]
Non-accelerated filer [ ]
Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [ ] No [X]
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30,
2007 was approximately $452 million, based upon the closing price of the Company’s common shares as quoted on
the Nasdaq Stock Market on such date. The number of shares of the Registrant’s common stock outstanding as of
April 30, 2008 was 18,989,413 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s proxy statement for its 2008 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the
Registrant’s fiscal year ended March 31, 2008 are incorporated by reference into Part III of this report.
COLUMBUS McKINNON CORPORATION
2008 Annual Report on Form 10-K
This annual report contains “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 set forth herein under “Risk Factors.” We use words like “will,” “may,” “should,” “plan,”
“believe,” “expect,” “anticipate,” “intend,” “future” and other similar expressions to identify forward looking statements. These
forward looking statements speak only as of their respective dates and 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
changes. Our actual operating results could differ materially from those predicted in these forward-looking statements, and any
other events anticipated in the forward-looking statements may not actually occur.
Item 1.
Business
General
PART I
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. We are the U.S. market leader in hoists, our principal line of
products, which we believe provides us with a strategic advantage in selling our other products. We have achieved this leadership
position through strategic acquisitions, our extensive, diverse and well-established distribution channels and our commitment to
product innovation and quality. We have one of the most comprehensive product offerings in the industry and we believe we
have more overhead hoists in use in North America than all of our competitors combined. Our brand names, including CM,
Coffing, Duff-Norton, Shaw-Box and Yale, are among the most recognized and well-respected in our marketplace.
The Building of Our Business
Founded in 1875, we have grown to our current size and leadership position through organic growth and acquiring 14
businesses between 1994 and 1999. Those acquisitions significantly broadened our product lines and services and expanded our
geographic reach, end-user markets and our customer base. Our senior management has substantial experience in the acquisition
and integration of businesses, aggressive cost management, efficient manufacturing techniques and global operations, all of
which are critical to our long-term growth strategy. We have a proven track record of acquiring complementary businesses and
product lines, integrating their activities into our organization, and aggressively managing their cost structures to improve
operating efficiencies. The history of our acquisitions between 1994 and 1999 is outlined below (purchase price in millions):
1
Date of Acquisition
April 1999
March 1999
January 1999
December 1998
August 1998
March 1998
January 1998
Acquired Company
Washington Equipment
Company
GL International (2),(6)
Camlok/Tigrip
Gautier
Abell-Howe Crane (5)
ASI (3)
Univeyor
December 1996
October 1996
Lister (4)
Yale (1)
November 1995
October 1995
January 1995
December 1994
February 1994
Lift-Tech
Endor
Cady Lifters
Conco
Durbin-Durco
Purchase
Price
$ 6.4
Products/Services
Overhead cranes
20.6
10.6
2.9
7.0
155.0
15.0
7.0
270.0
63.0
2.0
0.8
0.8
2.4
Overhead cranes
Plate clamps, crane weighers
Rotary unions, swivel joints
Overhead cranes
Design and manufacture of custom conveyor systems
Design and manufacture of powered roller conveyor
systems
Cement kiln, anchor and buoy chain
Hoists, scissor lift tables, actuators, jacks and rotary
unions
Hoists
Hoists
Below-the-hook lifters
Operator controlled manipulators
Load securing equipment and attachments
The following is a summary of our divestitures and property sales relating to the above acquisitions which occurred between
1998 and 2007 as we focus on our core businesses and major business segments as well as reduce our operating costs.
(1)
(2)
(3)
(4)
(5)
(6)
In August 1998, we sold the Mechanical Products division of Yale.
In January 2002, we sold Handling Systems & Conveyors, Inc., a subsidiary of GL International.
In May 2002, we sold substantially all of the assets of Automatic Systems, Inc. (“ASI”) and in March 2003, we sold
LICO Steel, Inc., a subsidiary of Audubon West, formerly ASI.
In February 2004, we sold the assets of the Lister Chain & Forge division.
In January 2005, we sold a Chicago area property.
In March 2007, we sold LARCO Inc., a subsidiary of Crane, Equipment, & Service, Inc.
Our Position in the Industry
The broad, global material handling industry includes the following sectors:
•
•
•
•
•
•
•
overhead material handling and lifting devices;
continuous materials movement;
wheeled handling devices;
pallets, containers and packaging;
storage equipment and shop furniture;
automation systems and robots; and
services and unbundled software.
The breadth of our products and services enables us to participate in each of these sectors, except for pallets, containers and
packaging and storage equipment and shop furniture. This diversification, together with our extensive and varied distribution
channels, minimizes our dependence on any particular product, market or customer. We believe that none of our competitors
offers the variety of products or services in the markets we serve.
We believe that the demand for our products and services has increased during the last twelve months and we believe the
demand will continue to increase in the future as a result of several macro-economic growth drivers. These drivers include:
Favorable Industry Trends. The U.S. industrial economy improved since 2003 and the Eurozone industrial economy has
improved since 2005. Industrial capacity utilization is currently around 80% in both regions, generally indicative of capital
expansion and favorable industrial activity. Additionally, we monitor other leading indicators so that we can be responsive to
economic conditions that could impact our markets. Our business performance is influenced by the state of the U.S. and
Eurozone industrial economies, as well as those in emerging areas.
2
Productivity Enhancement. We believe employers respond to competitive pressures by seeking to maximize productivity
and efficiency, among other actions. Our hoists and other lifting and positioning products allow loads to be lifted and placed
quickly, precisely, with little effort and fewer people, thereby increasing productivity and reducing cycle time.
Safety Regulations and Concerns. Driven by workplace safety regulations such as the Occupational Safety and Health
Act and the Americans with Disabilities Act in the U.S., and by the general competitive need to reduce costs such as health
insurance premiums and workers’ compensation expenses, employers seek safer ways to lift and position loads. Our lifting and
positioning products enable these tasks to be performed with reduced risk of personal injury.
Consolidation of Suppliers. In an effort to reduce costs and increase productivity, our customers and end-users are
increasingly consolidating their suppliers. We believe that our competitive strengths will enable us to benefit from this
consolidation and enhance our market share.
Our Competitive Strengths
Leading Market Positions. We are a leading manufacturer of hoists and alloy and high strength carbon steel chain and
attachments in North America. We have developed our leading market positions over our 133-year history by emphasizing
technological innovation, manufacturing excellence and superior after-sale service. Approximately 69% of our U.S. net sales for
the year ended March 31, 2008 were from product categories in which we believe we hold the number one market share. We
believe that the strength of our established products and brands and our leading market positions provide us with significant
competitive advantages, including preferred supplier status with a majority of our largest customers. Our large installed base of
products also provides us with a significant competitive advantage in selling our products to existing customers as well as
providing repair and replacement parts.
The following table summarizes the product categories where we believe we are the U.S. market leader:
Product Category
Powered Hoists (1)
Manual Hoists & Trolleys (1)
Forged Attachments (1)
Lifting and Sling Chains (1)
Hoist Parts (2)
Mechanical Actuators (3)
Tire Shredders (4)
Jib Cranes (5)
_____________
U.S. Market Share
48%
59%
40%
64%
60%
40%
80%
25%
U.S. Market Position
#1
#1
#1
#1
#1
#1
#1
#1
Percentage of
U.S. Net Sales
27%
13%
7%
4%
9%
4%
3%
2%
69%
(1) Market share and market position data are internal estimates derived from survey information collected and provided by our trade associations in 2007.
(2) Market share and market position data are internal estimates based on our market shares of Powered Hoists and Manual Hoists & Trolleys, which we
believe are good proxies for our Hoist Parts market share because we believe most end-users purchase Hoist Parts from the original equipment
supplier.
(3) Market share and market position data are internal estimates derived by comparison of our net sales to net sales of one of our competitors and to
estimates of total market sales from a trade association in 2007.
(4) Market share and market position data are internal estimates derived by comparing the number of our tire shredders in use and their capacity to
estimates of the total number of tires shredded published by a trade association in 2007.
(5) Market share and market position are internal estimates derived from both the number of bids we win as a percentage of the total projects for which we
submit bids and from estimates of our competitors’ net sales based on their relative position in distributor catalogues in 2007.
Comprehensive Product Lines and Strong Brand Name Recognition. We believe we offer the most comprehensive
product lines in the markets we serve. We are the only major supplier of material handling equipment offering full lines of
hoists, chain and attachments. Our capability as a full-line supplier has allowed us to (i) provide our customers with “one-stop
shopping” for material handling equipment, which meets some customers’ desires to reduce the number of their supply
relationships in order to lower their costs, (ii) leverage our engineering, product development and marketing costs over a larger
sales base and (iii) achieve purchasing efficiencies on common materials used across our product lines.
3
In addition, our brand names, including Budgit, Chester, CM, Coffing, Duff-Norton, Little Mule, Shaw-Box and Yale, are
among the most recognized and respected in the industry. The CM name has been synonymous with overhead hoists since
manual hoists were first developed and marketed under the name in the early 1900s. We believe that our strong brand name
recognition has created customer loyalty and helps us maintain existing business, as well as capture additional business. No
single SKU comprises more than 1% of our sales, a testament to our broad and diversified product offering.
Distribution Channel Diversity and Strength. Our products are sold to over 20,000 general and specialty distributors and
OEMs globally. We enjoy long-standing relationships with, and are a preferred provider to, the majority of our largest
distributors and industrial buying groups. There has been consolidation among distributors of material handling equipment and
we have benefited from this consolidation by maintaining and enhancing our relationships with our leading distributors, as well
as forming new relationships. We believe our extensive distribution channels provide a significant competitive advantage and
allow us to effectively market new product line extensions and promote cross-selling.
Expanding International Markets. We have significantly grown our international sales since becoming a public company
in 1996. Our international sales have grown from $34.3 million (representing 16% of total sales) in fiscal 1996 to $217.9 million
(representing 35% of our total sales) during the year ended March 31, 2008. This growth has occurred primarily in Europe, Latin
America and Asia-Pacific where we have recently expanded our sales presence. Our international business has provided us, and
we believe will continue to provide us, with significant growth opportunities and new markets for our products.
Low-Cost Manufacturing with Significant Operating Leverage. We believe we are a low-cost manufacturer and we have
and will continue to generate significant operating leverage due to the initiatives summarized below. Our operating leverage goal
is for each incremental sales dollar to generate 20%-30% of operating income.
—
—
—
—
—
Rationalization and Consolidation. We have a successful history of consolidating manufacturing facilities
and optimizing warehouse utilization and location resulting in lower annual operating costs and improving our
fixed-variable cost relationship. We continue to evaluate existing operations for further opportunities.
Lean Manufacturing. We have initiated Lean Manufacturing techniques, facilitating inventory reductions, a
significant decline in required manufacturing floor space, a decrease in product lead time and improved
productivity and on-time deliveries. We believe continued application of lean manufacturing tools will
generate benefits for many years to come.
International Expansion. Our continued expansion of our manufacturing facilities in China, Mexico and
Hungary provides us with another cost efficient platform to manufacture and distribute certain of our products
and components. We now operate 25 manufacturing facilities in eight countries, with 32 stand alone sales
and service offices in 16 countries, and 10 stand alone warehouse facilities in five countries.
Purchasing Council. We continue to leverage our company-wide purchasing power through our Purchasing
Council to reduce our costs and manage fluctuations in commodity pricing, including steel.
Selective Vertical Integration. We manufacture many of the critical parts and components used in the
manufacture of our hoists and cranes, resulting in reduced costs.
Strong After-Market Sales and Support. We believe that we retain customers and attract new customers due to our
ongoing commitment to customer service and satisfaction. We have a large installed base of hoists and chain that drives our
after-market sales for components and repair parts and is a stable source of higher margin business. We maintain strong
relationships with our customers and provide prompt aftermarket service to end-users of our products through our authorized
network of 16 chain repair stations and approximately 400 hoist service and repair stations.
Long History of Free Cash Flow Generation and Significant Debt Reduction. We have consistently generated positive
free cash flow (which we define as net cash provided by operating activities less capital expenditures) by continually controlling
our costs, improving our working capital management, and reducing the capital intensity of our manufacturing operations. In the
past five years, we have reduced total debt by $168.4 million, from $316.3 million to $147.9 million and continued to grow our
cash balance.
Experienced Management Team with Equity Ownership. Our senior management team provides a depth and continuity
of experience in the material handling industry. Our management has experience in aggressive cost management, balance sheet
management, efficient manufacturing techniques, acquiring and integrating businesses and global operations, all of which are
critical to our long-term growth. Our directors and executive officers, as a group, own an aggregate of approximately 3% of our
4
outstanding common stock.
Our Strategy
Grow our Core Business. We intend to leverage our strong competitive advantages to increase our market shares across
all of our product lines and geographies by:
—
—
—
Leveraging Our Strong Competitive Position. Our large, diversified, global customer base, our extensive
distribution channels and our close relationships with our distributors provide us with insights into customer
preferences and product requirements that allow us to anticipate and address the future needs of end-users.
Introducing New and Cross-Branded Products. We continue to expand our business by developing new
material handling products and services and expanding the breadth of our product lines to address material
handling needs. We have a dedicated hoist product development team and recently formed a similar group for
our rigging products (chain and forged attachments). The majority of the powered hoist products under
development are guided by the Federation of European Manufacturing, or FEM, standard. We believe these
FEM hoist products, as well as other international design products will facilitate our global sales expansion
strategy as well as improve our cost competitiveness against internationally made products imported into the
U.S. New product sales (as defined by new items introduced within the last three years) amounted to $89.0
million, $79.5 million, and $81.5 million in fiscal 2008, 2007, and 2006, respectively.
Leveraging Our Brand Portfolio to Maximize Market Coverage. Most industrial distributors carry one or
two lines of material handling products on a semi-exclusive basis. Unlike many of our competitors, we have
developed and acquired multiple well-recognized brands that are viewed by both distributors and end-users as
discrete product lines. As a result, we are able to sell our products to multiple distributors in the same
geographic area. This strategy maximizes our market coverage and provides the largest number of end-users
with access to our products.
Continue to Grow in International Markets. Our international sales of $217.9 million comprised 35% of our net sales for
the year ended March 31, 2008, as compared to $34.3 million, or 16% of our net sales, in fiscal 1996, the year we became a
public company. We sell to distributors in over 50 countries and have our primary international manufacturing facilities in
China, Mexico, Germany, Denmark, the United Kingdom, France, and Hungary. In addition to new product introductions, we
continue to expand our sales and service presence in the major and developing market areas of Europe, Asia-Pacific and Latin
America including through our sales offices and warehouse facilities in Canada, various countries in Western and Eastern
Europe, China, Thailand, Brazil, Uruguay, Panama and Mexico. We intend to increase our sales by manufacturing and exporting
a broader array of high quality, low-cost products and components from our facilities in Mexico, China and Hungary for
distribution in Europe, Latin America and Asia-Pacific. We have developed and are continuing to expand upon new hoist and
other products in compliance with FEM standards and international designs to enhance our global distribution.
Further Reduce Our Operating Costs and Increase Manufacturing Productivity. Our objective is to remain a low-cost
producer. We continually seek ways to reduce our operating costs and increase our manufacturing productivity including
through our on-going expansion of our manufacturing capacity in low-cost regions, including Mexico, China and Hungary. In
furtherance of this objective, we have undertaken the following:
—
—
—
Implementation of Lean Manufacturing. We continuously identify potential efficiencies in our operations
through Lean Manufacturing, initiated in fiscal 2002. Additionally, we reinvigorated our Lean initiative
during fiscal 2008 to take these activities to the next level globally.
Rationalization of Facilities. We have a successful history of consolidating manufacturing facilities and
optimizing warehouse utilization and location resulting in lower annual operating costs and improving our
fixed-variable cost relationship. We have sufficient capacity to meet current and future demand and we
periodically investigate opportunities for further facility rationalization.
Leveraging of Our Purchasing Power. Our Purchasing Council was formed in fiscal 1998 to centralize and
leverage our overall purchasing power and has resulted in significant savings for our company as well as
management of fluctuations in commodity pricing, including steel.
5
Drive EPS Growth through De-leveraging. We intend to continue our focus on cash generation for debt reduction
through the following initiatives:
—
—
Increase Operating Cash Flow. As a result of the execution of our strategies to control our operating costs,
increase our U.S. organic growth and increase our penetration of international markets, we believe that we
will continue to realize favorable operating leverage. Our operating leverage goal is for each incremental
sales dollar to generate 20%-30% of operating income. We believe that such operating leverage will result in
increased operating cash flow available for debt reduction, as well as investment in new products and new
markets, organically and via acquisitions.
Reduce Working Capital. As described above, we believe that our Lean Manufacturing activities are
facilitating inventory reduction, improving product lead times and increasing our productivity. We have other
initiatives underway to further improve other routine working capital components, including accounts
payable, all initiatives driving toward our long-term goal of total working capital (excluding cash and debt) of
15% of latest 12 months’ revenues. We believe our improved working capital management and increased
productivity will further result in increased free cash flow.
Pursue Strategic Acquisitions and Alliances. We intend to pursue synergistic acquisitions to complement our organic
growth. Priorities for such acquisitions include: 1) increasing international geographic penetration, particularly in the Asia-
Pacific region, and 2) further broadening our offering with complementary products frequently used in conjunction with hoists.
Additionally, we continually challenge the long-term fit of underperforming businesses for potential divestiture and
redeployment of capital.
Our Segments
We currently report our operations in two business segments, Products and Solutions.
Our Products segment designs, manufactures and distributes a broad range of material handling products for various
applications. Products in this segment include a wide variety of electric, lever, hand and air-powered hoists; hoist trolleys;
industrial crane systems such as bridge, gantry and jib cranes; alloy, carbon steel and kiln chain; closed-die forged attachments,
such as hooks, shackles, logging tools and loadbinders; industrial components, such as mechanical and electromechanical
actuators, mechanical jacks and rotary unions; and below-the-hook special purpose lifters. These products are typically
manufactured for stock or assembled to order from standard components and are sold primarily through a variety of commercial
distributors. The diverse end-users of our products are in manufacturing plants, power utility facilities and warehouses, on
construction sites, oil rigs, ships and tractor trailers. Some of our products have farming, mining and logging applications, and we
serve a niche market for the entertainment industry.
Our Solutions segment is engaged primarily in the design, fabrication and installation of integrated workstation and facility-
wide material handling systems and in the design and manufacture of tire shredders, lift tables and light-rail systems. These
products and services have historically been highly engineered, built to order and primarily sold directly to end-users for specific
applications in a variety of industries. The material handling systems business within this segment is currently undergoing the
process for divestiture.
Note 19 to our consolidated financial statements included elsewhere herein provides information related to our business
segments in accordance with U.S. generally accepted accounting principles. Summary information concerning our business
segments for fiscal 2008, 2007 and 2006 is set forth below.
6
2008
2007
2006
Fiscal Years Ended March 31,
Amount
% of
Total
Sales
% of
Total
Sales
Amount
(Dollars in millions)
Amount
Net Sales
Products ................................
Solutions ................................
Total................................$
$
570.0
53.3
623.3
91.4
8.6
100.0
$
$
527.1
62.7
589.8
89.4
10.6
100.0
$
$
493.9
62.1
556.0
% of
Segment
/Total
Sales
% of
Segment
/Total
Sales
Amount
Amount
Amount
% of
Total
Sales
88.8
11.2
100.0
% of
Segment
/Total
Sales
Income (loss) from
Operations
Products ................................
Solutions ................................
Total................................$
$
Products Segment
Products
78.4
(7.3)
71.1
13.8
(13.6)
11.4
$
$
71.5
(3.0)
68.5
13.6
(4.8)
11.6
$
$
55.9
2.0
57.9
11.3
3.2
10.4
Our Products segment primarily designs, manufactures and distributes a broad range of material handling, lifting and
positioning products for various applications and has total assets of approximately $560.1 million as of March 31, 2008. These
products are typically manufactured for stock or assembled to order from standard components and are sold through a variety of
distributors. In excess of 75% of our Products segment net sales is derived from the sale of products that we sell at a unit price of
less than $5,000. In fiscal 2008, net sales of the Products segment were $570.0 million or approximately 91.4% of our net sales.
Of these sales, $391.7 million, or 68.7% were U.S. and $178.3 million, or 31.3% were international. The following table sets
forth certain sales data for the products of our Products segment, expressed as a percentage of net sales of this segment for fiscal
2008 and 2007:
Hoists ......................................................................................
Chain .......................................................................................
Forged attachments .................................................................
Industrial cranes ......................................................................
Industrial components .............................................................
Fiscal Years Ended March 31,
2008
57%
14
11
11
7
100%
2007
54%
14
11
13
8
100%
Hoists. We manufacture a variety of electric chain hoists, electric wire rope hoists, hand-operated hoists, lever tools and
air-powered balancers and hoists. Load capacities for our hoist product lines range from one-eighth of a ton to 100 tons. These
products are sold under our Budgit, Chester, CM, Coffing, Little Mule, Shaw-Box, Yale and other recognized trademarks. Our
hoists are sold for use in numerous general industrial applications, as well as for use in the construction, energy, mining, food
services, entertainment and other markets. We also supply hoist trolleys, driven manually or by electric motors, for the industrial,
consumer and OEM markets.
We also currently offer several lines of custom-designed, below-the-hook tooling, clamps, pallet trucks and textile
strappings. Below-the-hook tooling and clamps are specialized lifting apparatus used in a variety of lifting activities performed in
conjunction with hoist and chain applications. Textile strappings are below-the-hook attachments, frequently used in conjunction
with hoists.
7
Chain. We manufacture alloy and carbon steel chain for various industrial and consumer applications. Federal regulations
require the use of alloy chain, which we first developed, for overhead lifting applications because of its strength and wear
characteristics. A line of our alloy chain is sold under the Herc-Alloy brand name for use in overhead lifting, pulling and
restraining applications. In addition, we also sell specialized load chain for use in hoists, as well as three grades and multiple
sizes of carbon steel welded-link chain for various load securing and other non-overhead lifting applications. We also
manufacture kiln chain sold primarily to the cement manufacturing market.
Forged Attachments. We produce a broad line of alloy and carbon steel closed-die forged attachments, including hooks,
shackles, hitch pins and master links. These forged attachments are used in chain, wire rope and textile rigging applications in a
variety of industries, including transportation, mining, construction, marine, logging, petrochemical and agriculture.
In addition, we manufacture carbon steel forged and stamped products, such as loadbinders, logging tools and other
securing devices, for sale to the industrial, consumer and logging markets through industrial distributors, hardware distributors,
mass merchandiser outlets and OEMs.
Industrial Cranes. We entered the U.S. crane manufacturing market through our August 1998 acquisition of Abell-Howe,
a Chicago-based regional manufacturer of jib and overhead bridge cranes. Our March 1999 acquisition of GL International,
which included the Gaffey and Larco brands, and our April 1999 acquisition of Washington Equipment Company established us
as a significant participant in the U.S. crane building and servicing markets. Crane builders represent a specific distribution
channel for electric wire rope hoists, chain hoists and other crane components. We divested of our Larco business in March 2007,
which business provided cranes and service primarily to the steel industry in southern Ontario, Canada.
Industrial Components. Through our Duff-Norton division, we design and manufacture industrial components such as
mechanical and electromechanical actuators and rotary unions. Actuators are linear motion devices used in a variety of industries,
including the paper, steel and aerospace industries. Rotary unions are devices that transfer a liquid or gas from a fixed pipe or
hose to a rotating drum, cylinder or other device. Rotary unions are used in a variety of industries including pulp and paper,
printing, textile and fabric manufacturing, rubber and plastic.
Sales and Marketing
Our sales and marketing efforts in support of our Products segment consist of the following programs:
Factory-Direct Field Sales and Customer Service. We sell our products through our sales force of more than 125
salespersons and through independent sales agents worldwide. Our sales are further supported by approximately 400 company-
trained customer service correspondents and sales application engineers. We compensate our sales force through a combination
of base salary and a commission plan based on top line sales and a pre-established sales quota.
Product Advertising. We promote our products by advertising in leading trade journals as well as producing and
distributing high quality information catalogs. We run targeted advertisements for hoists, chain, forged attachments, actuators,
and cranes.
Target Marketing. We provide marketing literature to target specific end-user market sectors including construction,
energy, mining, food service, and others. This literature displays our broad product offering applicable to those sectors to
enhance awareness at the end-user level within those sectors.
Trade Show Participation. Trade shows are central to the promotion of our products, and we participate in more than 40
regional, national and international trade shows each year. Shows in which we participate range from global events held in
Germany to local “markets” and “open houses” organized by individual hardware and industrial distributors. We also attend
specialty shows for the entertainment, rental and safety markets, construction, as well as general purpose industrial and hardware
shows. In fiscal 2008, we participated in trade shows in the U.S., Canada, Mexico, Germany, the United Kingdom, France,
China, Brazil, Australia, Korea, Chile, Argentina, and the United Arab Emirates.
Industry Association Membership and Participation. As a recognized industry leader, we have a long history of work and
participation in a variety of industry associations. Our management is directly involved at the officer and director levels of
numerous industry associations including the following: ISA (Industrial Supply Association), AWRF (Associated Wire Rope
Fabricators), PTDA (Power Transmission and Distributors Association), SCRA (Specialty Carriers and Riggers Association),
WSTDA (Web Sling and Tie Down Association), MHI (Material Handling Institute), HMI (Hoist Manufacturers Institute),
CMAA (Crane Manufacturers Association of America), ESTA (Entertainment Services and Technology Association), NACM
(National Association of Chain Manufacturers) and ARA (American Rental Association).
8
Product Standards and Safety Training Classes. We conduct on-site training programs worldwide for distributors and
end-users to promote and reinforce the attributes of our products and their safe use and operation in various material handling
applications.
Web Sites. In addition to our main corporate web site at www.cmworks.com, we currently sponsor an additional 29 brand
specific web sites and sell hand pallet trucks on one of these sites. Several of our brand web sites include electronic catalogs of
our various products and list prices. Current and potential customers can browse through our diverse product offering or search
for specific products by name or classification code and obtain technical product specifications. We continue to add additional
product catalogs, maintenance manuals, advertisements and customer service information on our various web sites. Many of the
web sites allow distributors to search for personalized pricing information, order status and product serial number data and to
enter sales orders.
Distribution and Markets
The distribution channels for the Products segment include a variety of commercial distributors. In addition, the Products
segment sells overhead bridge, jib and gantry cranes directly to end-users. We also sell to the consumer market through
wholesalers. The following describes our global distribution channels:
General Distribution Channels. Our global general distribution channels consist of:
—
—
—
Industrial distributors that serve local or regional industrial markets and sell a variety of products for
maintenance, repair, operating and production, or MROP, applications through their own direct sales force.
Rigging shops that are distributors with expertise in rigging, lifting, positioning and load securing. Most
rigging shops assemble and distribute chain, wire rope and synthetic slings and distribute off-the-shelf
hoists and attachments, chain slings and other off-the-shelf products.
Independent crane builders that design, build, install and service overhead crane and light-rail systems for
general industry and also distribute a wide variety of hoists and lifting attachments. We sell electric wire
rope hoists and chain hoists as well as crane components, such as end trucks, trolleys, drives and
electrification systems to crane builders.
Crane End-Users. We sell overhead bridge, jib and gantry cranes, parts and service to end-users through our wholly
owned crane builder, Crane Equipment & Service, Inc. (“CES”) within the CraneMart™ network. CES which includes Abell-
Howe, Gaffey and Washington Equipment brands designs, manufactures, installs and services a variety of cranes with capacities
up to 100 tons.
Specialty Distribution Channels. Our global specialty distribution channels consist of:
—
National distributors that market a variety of MROP supplies, including material handling products, either
exclusively through large, nationally distributed catalogs, or through a combination of catalog, internet and
branch sales and a field sales force. The customer base served by national distributors such as W. W.
Grainger, which traditionally included smaller industrial companies and consumers, has grown to include
large industrial accounts and integrated suppliers.
— Material handling specialists and integrators that design and assemble systems incorporating hoists,
overhead rail systems, trolleys, scissor lift tables, manipulators, air balancers, jib arms and other material
handling products to provide end-users with solutions to their material handling problems.
—
Entertainment equipment distributors that design, supply and install a variety of material handling and
rigging equipment for concerts, theaters, ice shows, sports arenas, convention centers and night clubs.
Service-After-Sale Distribution Channel. Service-after-sale distributors include our authorized network of 16 chain repair
service stations and approximately 400 hoist service and repair stations. This service network is designed for easy parts and
service access for our large installed base of hoists and related equipment in North America.
9
OEM/Government Distribution Channels. This channel consists of:
—
—
OEMs that supply various component parts directly to other industrial manufacturers as well as private
branding and packaging of our traditional products for material handling, lifting, positioning and special
purpose applications.
Government agencies, including the U.S. and Canadian Navies and Coast Guards, that purchase primarily
load securing chain and forged attachments.
Customer Service and Training
We maintain customer service departments staffed by trained personnel for all of our Products segment sales divisions, and
regularly schedule product and service training schools for all customer service representatives and field sales personnel.
Training programs for distribution and service station personnel, as well as for end-users, are scheduled on a regular basis at most
of our facilities and in the field. We have approximately 400 service and repair stations worldwide that provide local and regional
repair, warranty and general service work for distributors and end-users. End-user trainees attending our various programs
include representatives of 3M, Cummins Engine, DuPont, GTE, General Electric, General Motors and many other industrial and
entertainment organizations.
We also provide, in multiple languages, a variety of collateral material in video, cassette, CD-ROM, slide and print format
addressing relevant material handling topics such as the care, use and inspection of chains and hoists, and overhead lifting and
positioning safety. In addition, we sponsor advisory boards made up of representatives of our primary distributors and service-
after-sale network members who are invited to participate in discussions focused on improving products and service. These
boards enable us and our primary distributors to exchange product and market information relevant to industry trends.
Backlog
Our Products segment backlog of orders at March 31, 2008 was approximately $55.8 million compared to approximately
$53.2 million at March 31, 2007. Our orders for standard products are generally shipped within one week. Orders for products
that are manufactured to customers’ specifications are generally shipped within four to twelve weeks. Given the short product
lead times, we do not believe that the amount of our Products segment backlog of orders is a reliable indication of our future
sales.
Competition
The material handling industry remains highly fragmented. We face competition from a wide range of regional, national and
international manufacturers in both U.S. and international markets. In addition, we often compete with individual operating units
of larger, highly diversified companies.
The principal competitive factors affecting our Products segment include customer service and support as well as product
availability, performance, functionality, brand reputation, reliability and price. Other important factors include distributor
relationships and territory coverage.
Major competitors with our Products segment for hoists are Konecranes, Demag Cranes & Components and Kito-
Harrington; for chain are Campbell Chain, Peerless Chain Company and American Chain and Cable Company; for forged
attachments are The Crosby Group and Brewer Tichner Company; for cranes are Konecranes, Demag Cranes & Components and
a variety of independent crane builders; and for industrial components are Deublin, Joyce-Dayton and Nook Industries.
Solutions Segment
The Solutions segment is engaged primarily in the design, fabrication and installation of integrated workstation and facility-
wide material handling systems and in the design and manufacture of tire shredders, lift tables and light-rail systems and has total
assets of approximately $30 million as of March 31, 2008. Net sales of the Solutions segment in fiscal 2008 were $53.3 million,
or 8.6% of our total net sales, of which $13.8 million, or 25.9% were U.S. and $39.5 million, or 74.1% were international. The
following table sets forth certain sales data for the products and services of our Solutions segment, expressed as a percentage of
this segment’s net sales for fiscal 2008 and 2007:
10
Integrated material handling conveyor systems and service ...
Tire shredders..........................................................................
Lift tables ................................................................................
Light-rail systems....................................................................
Fiscal Years Ended March 31,
2008
55%
26
14
5
100%
2007
63%
20
13
4
100%
Products and Services
Integrated Material Handling Conveyor Systems and Service. Through our Univeyor business, we have historically
specialized in designing highly customized, computer-controlled and automated powered roller conveyors for use in warehouse
operations and distribution systems. In recent years, we have focused on more standardized products and service to reduce its
volatility and improve its profitability and return on invested capital. This business is currently in the process of divestiture.
Tire Shredders. We have developed and patented a line of heavy equipment that shreds worn tires, with the byproducts
useful for fuel and recycled products including aggregate filler, playgrounds, sports surfaces, landscaping and other such
applications, as well as scrap steel.
Lift Tables. Our American Lifts division manufactures powered lift tables. These products enhance workplace ergonomics
and are sold primarily to customers in the general manufacturing, construction, and air cargo industries.
Light-Rail Systems. Introduced in fiscal 2001, light-rail systems are portable steel overhead beam configurations used at
workstations, from which hoists are frequently suspended.
Sales and Marketing
The products and services of the Solutions segment are sold primarily to large sophisticated corporate end-users, including
Federal Express, John Deere, Boeing, Lockheed Martin, Proctor & Gamble, Toyota, Honda and other industrial companies,
systems integrators and distributors. Sales are generated by internal sales personnel and rely heavily on engineer-to-engineer
interactions with the customer or a large systems integrator. The process of generating client contract awards for integrated
conveyor systems generally entails receiving a request-for-quotation from customers and undergoing a competitive bidding
process. The Solutions segment also sells tire shredders, scissor lift tables and light-rail systems through its internal sales force
and through specialized independent distributors and manufacturers representatives.
Customer Service and Training
The Solutions segment offers a wide range of value-added services to customers including: an engineering review of the
customer’s processes; an engineering solution for identified material handling problems; project management; and custom
design, manufacturing and installation services. We also offer after-sales services including operator training, maintenance and
hot-line support. The typical length of after-sales service varies depending on customer requirements and supplemental training
courses are offered as needed.
Backlog
Revenues from our Solutions segment are generally recognized within one to six months. Our backlog of orders at March
31, 2008 was approximately $11.8 million compared to approximately $9.6 million at March 31, 2007.
Competition
The principal competitive factors affecting the market for the products and services of our Solutions segment include
application solutions, performance and price. The process of generating client contract awards for these businesses generally
entails receiving a request-for-quotation from end-users and undergoing a competitive bidding process. Our Solutions segment
competes primarily with Crisplant, Gorbel, Moving, Schaffer, Southworth and Swisslog.
11
Employees
At March 31, 2008, we had 3,233 employees; 2,111 in the U.S./Canada, 213 in Latin America, 572 in Europe and 337 in
Asia. Approximately 724 of our employees are represented under seven separate U.S. or Canadian collective bargaining
agreements which terminate at various times between September 2008 and March 2012. The contract which expires in
September 2008 currently covers 67 employees. We believe that our relationship with our employees is good.
Raw Materials and Components
Our principal raw materials and components are steel, consisting of structural steel, processed steel bar, forging bar steel,
steel rod and wire, steel pipe and tubing and tool steel; electric motors; bearings; gear reducers; castings; and electro-mechanical
components. These commodities are all available from multiple sources. We purchase most of these raw materials and
components from a limited number of strategic and preferred suppliers under long-term agreements which are negotiated on a
company-wide basis through our Purchasing Council to take advantage of volume discounts. We generally seek to pass on
materials price increases to our distribution channel partners and end-user customers. We will continue to monitor our costs and
reevaluate our pricing policies. Our ability to pass on these increases is determined by market conditions.
Manufacturing
We manufacture a significant percentage of the products we sell. We complement our own manufacturing by outsourcing
components and finished goods from an established global network of suppliers. We regularly upgrade our global manufacturing
facilities and invest in tooling, equipment and technology. In 2001, we began implementing Lean Manufacturing in our plants
which has resulted in inventory reductions, reductions in required manufacturing floor area, shorter product lead time and
increased productivity.
Our manufacturing operations are highly integrated. Although raw materials and some components such as motors,
bearings, gear reducers, castings and electro-mechanical components are purchased, our vertical integration enables us to produce
many of the components used in the manufacturing of our products. We manufacture hoist lifting chain, steel forged gear blanks,
lift wheels, trolley wheels, and hooks and other attachments for incorporation into our hoist products. These products are also
sold as spare parts for hoist repair. Additionally, our hoists are used as components in the manufacture of crane systems by us as
well as our crane-builder customers. We believe this vertical integration results in lower production costs, greater manufacturing
flexibility and higher product quality, and reduces our reliance on outside suppliers.
Environmental and Other Governmental Regulation
Like most manufacturing companies, we are subject to various federal, state and local laws relating to the protection of the
environment. To address the requirements of such laws, we have adopted a corporate environmental protection policy which
provides that all of our owned or leased facilities shall, and all of our employees have the duty to, comply with all applicable
environmental regulatory standards, and we have initiated an environmental auditing program for our facilities to ensure
compliance with such regulatory standards. We have also established managerial responsibilities and internal communication
channels for dealing with environmental compliance issues that may arise in the course of our business. We have made and could
be required to continue to make significant expenditures to comply with environmental requirements. Because of the complexity
and changing nature of environmental regulatory standards, it is possible that situations will arise from time to time requiring us
to incur additional expenditures in order to ensure environmental regulatory compliance. However, we are not aware of any
environmental condition or any operation at any of our facilities, either individually or in the aggregate, which would cause
expenditures having a material adverse effect on our results of operations, financial condition or cash flows and, accordingly,
have not budgeted any material capital expenditures for environmental compliance for fiscal 2008.
We have completed our investigation of past waste disposal activities at a facility in Cleveland, Texas, operated by our
subsidiary, Crane Equipment and Service, Inc. Remediation activities under the terms of the voluntary agreement with the Texas
Commission on Environmental Quality (“TCEQ”) have been completed and we are awaiting final regulatory approval from the
TCEQ.
In addition, we have notified the North Carolina Department of Environment and Natural Resources (the “DENR”) of the
presence of certain contaminants in excess of regulatory standards at our Coffing Hoist facility in Wadesboro, North Carolina.
We filed an application with the DENR to enter its voluntary cleanup program and were accepted. We are currently investigating
under the terms of the DENR Registered Environmental Consultant (“”the REC”) and, if appropriate, will remediate site
12
conditions at the facility. At this time, investigative and remediation costs are expected to not exceed $250,000.
We also discovered the presence of certain contaminants in excess of regulatory standards at our Damascus, Virginia hoist
plant and have notified the Virginia Department of Environmental Quality (the “DEQ”). We filed an application with the DEQ
to participate in its voluntary remediation program and have been accepted. We are currently investigating under the terms of
the DEQ Voluntary Remediation Program and, if appropriate, will remediate site conditions at the facility. At this time,
investigative and remediation costs are expected to not exceed $65,000.
In June of 2007, we were identified by the New York State Department of Environmental Conservation (“the DEC”), along
with other companies, as a potential responsible party (“PRP”) at the Frontier Chemical Royal Avenue Site in Niagara Falls, New
York. From 1974 to 1992, the Frontier Royal Avenue Site had been operated as a commercial waste treatment and disposal
facility. We sent waste pickle liquor generated at our facility in Tonawanda, New York to the Frontier Royal Avenue Site during
the period from approximately 1982 to 1984. We have joined with other PRP members known as the Frontier Chemical Site
Joint Defense Alliance Group to conduct investigation and, if appropriate, remediation activities at the site. At this early stage,
we do not have an estimate of likely remediation costs, if any, but do not believe that such costs would have a material adverse
effect on our financial condition or operating results.
For all of the currently known environmental matters, we have accrued a total of $0.9 million as of March 31, 2008, which,
in our opinion, is sufficient to deal with such matters. Further, our management believes that the environmental matters known to,
or anticipated by, us should not, individually or in the aggregate, have a material adverse effect on our operating results or
financial condition. However, there can be no assurance that potential liabilities and expenditures associated with unknown
environmental matters, unanticipated events, or future compliance with environmental laws and regulations will not have a
material adverse effect on us.
Our operations are also governed by many other laws and regulations, including those relating to workplace safety and
worker health, principally OSHA in the U.S. and regulations thereunder. We believe that we are in material compliance with
these laws and regulations and do not believe that future compliance with such laws and regulations will have a material adverse
effect on our operating results or financial condition.
Available Information
Our internet address is www.cmworks.com. We make available free of charge through our website our Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after
such documents are electronically filed with, or furnished to, the Securities and Exchange Commission.
Item 1A.
Risk Factors
Columbus McKinnon is subject to a number of risk factors that could negatively affect our results from business operations
or cause actual results to differ materially from those projected or indicated in any forward looking statement. Such factors
include, but are not limited to, the following:
Our business is cyclical and is affected by industrial economic conditions.
Many of the end-users of our products are in highly cyclical industries, such as general manufacturing and construction that
are sensitive to changes in general economic conditions. Their demand for our products, and thus our results of operations, is
directly related to the level of production in their facilities, which changes as a result of changes in general economic conditions
and other factors beyond our control. Between fiscal 2000 and fiscal 2004 for example, we experienced significantly reduced
demand for our products, generally as a result of the global economic slowdown, and more specifically as a result of the dramatic
decline in capital goods spending in the industries in which our end-users operate. These lower levels of demand and the impact
of divested businesses resulted in a significant decline in net sales as well as income from operations during that period. If the
current economic stability does not continue or if there is deterioration in the general economy or in the industries we serve, our
business, results of operations and financial condition could be materially adversely affected. In addition, the cyclical nature of
our business could at times also adversely affect our liquidity and ability to borrow under our revolving credit facility.
13
We rely in large part on independent distributors for sales of our products.
We depend on independent distributors to sell our products and provide service and aftermarket support to our end-user
customers. Distributors play a significant role in determining which of our products are stocked at the branch locations, and
hence are most readily accessible to aftermarket buyers, and the price at which these products are sold. Almost all of the
distributors with whom we transact business offer competitive products and services to our end-user customers. For the most
part, we do not have written agreements with our distributors located in the United States. The loss of a substantial number of
these distributors or an increase in the distributors’ sales of our competitors’ products to our ultimate customers could materially
reduce our sales and profits.
We are subject to currency fluctuations from our international sales.
Our products are sold in many countries around the world. Thus, a portion of our revenues (approximately $175 million in
fiscal year 2008) is generated in foreign currencies, including principally the euro, the Canadian dollar, and the Danish Krone,
and while much of the costs incurred to generate those revenues are incurred in the same currency, a portion is incurred in other
currencies. Since our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S.
dollar and other currencies have had, and will continue to have, an impact on our earnings. We currently do not have exchange
rate hedges in place to reduce the risk of an adverse currency exchange movement. Currency fluctuations may impact our
financial performance in the future.
Our international operations pose certain risks that may adversely impact sales and earnings.
We have operations and assets located outside of the United States, primarily in China, Mexico, Germany, Denmark, the
United Kingdom, France, and Hungary. In addition, we import a portion of our hoist product line from Asia, and sell our
products to distributors located in approximately 50 countries. In fiscal year 2008, approximately 35% of our net sales were
derived from non-U.S. markets. These international operations are subject to a number of special risks, in addition to the risks of
our U.S. business, including currency exchange rate fluctuations, differing protections of intellectual property, trade barriers,
labor unrest, exchange controls, regional economic uncertainty, differing (and possibly more stringent) labor regulation, risk of
governmental expropriation, U.S. and foreign customs and tariffs, current and changing regulatory environments, difficulty in
obtaining distribution support, difficulty in staffing and managing widespread operations, differences in the availability and terms
of financing, political instability and risks of increases in taxes. Also, in some foreign jurisdictions we may be subject to laws
limiting the right and ability of entities organized or operating therein to pay dividends or remit earnings to affiliated companies
unless specified conditions are met. These factors may adversely affect our future profits.
Part of our strategy is to expand our worldwide market share and reduce costs by strengthening our international distribution
capabilities and sourcing basic components in foreign countries, in particular in Mexico, China and Hungary. Implementation of
this strategy may increase the impact of the risks described above, and we cannot assure you that such risks will not have an
adverse effect on our business, results of operations or financial condition.
Our business is highly competitive and increased competition could reduce our sales, earnings and profitability.
The principal markets that we serve within the material handling industry are fragmented and highly competitive.
Competition is based primarily on customer service and support as well as product availability, performance, functionality, brand
reputation, reliability and price. Our competition in the markets in which we participate comes from companies of various sizes,
some of which have greater financial and other resources than we do. Increased competition could force us to lower our prices or
to offer additional services at a higher cost to us, which could reduce our gross margins and net income.
The greater financial resources or the lower amount of debt of certain of our competitors may enable them to commit larger
amounts of capital in response to changing market conditions. Certain competitors may also have the ability to develop product
or service innovations that could put us at a disadvantage. In addition, some of our competitors have achieved substantially more
market penetration in certain of the markets in which we operate, including crane building. If we are unable to compete
successfully against other manufacturers of material handling equipment, we could lose customers and our revenues may decline.
There can also be no assurance that customers will continue to regard our products favorably, that we will be able to develop
new products that appeal to customers, that we will be able to improve or maintain our profit margins on sales to our customers
or that we will be able to continue to compete successfully in our core markets.
14
Our products involve risks of personal injury and property damage, which exposes us to potential liability.
Our business exposes us to possible claims for personal injury or death and property damage resulting from the products that
we sell. We maintain insurance through a combination of self-insurance retentions and excess insurance coverage. We monitor
claims and potential claims of which we become aware and establish accrued liability reserves for the self-insurance amounts
based on our liability estimates for such claims. We cannot give any assurance that existing or future claims will not exceed our
estimates for self-insurance or the amount of our excess insurance coverage. In addition, we cannot give any assurance that
insurance will continue to be available to us on economically reasonable terms or that our insurers would not require us to
increase our self-insurance amounts. Claims brought against us that are not covered by insurance or that result in recoveries in
excess of insurance coverage could have a material adverse effect on our results and financial condition.
Our future operating results may be affected by fluctuations in steel or other material prices. We may not be able to pass on
increases in raw material costs to our customers.
The principal raw material used in our chain, forging and crane building operations is steel. The steel industry as a whole is
highly cyclical, and at times pricing and availability can be volatile due to a number of factors beyond our control, including
general economic conditions, labor costs, competition, import duties, tariffs and currency exchange rates. This volatility can
significantly affect our raw material costs. In an environment of increasing raw material prices, competitive conditions will
determine how much of the steel price increases we can pass on to our customers. During historical rising cost periods, we were
successful in adding and maintaining a surcharge to the prices of our high steel content products or incorporating them into price
increases, with a goal of margin neutrality. In the future, to the extent we are unable to pass on any steel price increases to our
customers, our profitability could be adversely affected.
We depend on our senior management team and the loss of any member could adversely affect our operations.
Our success is dependent on the management and leadership skills of our senior management team. The loss of any of these
individuals or an inability to attract, retain and maintain additional personnel could prevent us from implementing our business
strategy. We cannot assure you that we will be able to retain our existing senior management personnel or to attract additional
qualified personnel when needed. We have not entered into employment agreements with any of our senior management
personnel with the exception of Wolfgang Wegener, our Vice President and Managing Director of Columbus McKinnon Europe.
We are subject to various environmental laws which may require us to expend significant capital and incur substantial cost.
Our operations and facilities are subject to various federal, state, local and foreign requirements relating to the protection of
the environment, including those governing the discharges of pollutants in the air and water, the generation, management and
disposal of hazardous substances and wastes and the cleanup of contaminated sites. We have made, and will continue to make,
expenditures to comply with such requirements. Violations of, or liabilities under, environmental laws and regulations, or
changes in such laws and regulations (such as the imposition of more stringent standards for discharges into the environment),
could result in substantial costs to us, including operating costs and capital expenditures, fines and civil and criminal sanctions,
third party claims for property damage or personal injury, clean-up costs or costs relating to the temporary or permanent
discontinuance of operations. Certain of our facilities have been in operation for many years, and we have remediated
contamination at some of our facilities. Over time, we and other predecessor operators of such facilities have generated, used,
handled and disposed of hazardous and other regulated wastes. Additional environmental liabilities could exist, including clean-
up obligations at these locations or other sites at which materials from our operations were disposed, which could result in
substantial future expenditures that cannot be currently quantified and which could reduce our profits or have an adverse effect
on our financial condition.
We make estimates in accounting for long-term contracts.
We have long-term contracts with some of our customers in our European material handling systems business. These
contracts are accounted for using the percentage of completion, cost-to-cost method of accounting in accordance with the
American Institute of Certified Public Accountants’ Statement of Position 81-1, “Accounting for Performance of Construction-
Type and Certain Production-Type Contacts”. We recognize revenue on contracts using the percentage of completion, cost-to-
cost method of accounting as work progresses toward completion as determined by the ratio of cumulative costs incurred to date
to estimated total contact costs at completion, multiplied by the total estimated contract revenue, less cumulative revenue
recognized in prior periods.
15
Changes in estimates affecting sales, costs, and profits are recognized in the period in which the change becomes known using
the cumulative catch-up method of accounting, resulting in cumulative effect changes reflected in the period. A significant
change in an estimate on one or more contracts could have a material effect on our results of operations. For contracts with
anticipated losses at completion, we establish a provision for the entire amount of the estimated remaining loss and charge it
against income in the period in which the loss becomes known. Amounts representing penalties, contract claims, or change
orders are considered in estimating revenues, costs, and profits when they can be reliably estimated and realization is considered
probable.
We rely on subcontractors or suppliers to perform their contractual obligations.
Some of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services we
must provide to our customers. There is a risk that we may have disputes with our subcontractors, including disputes regarding
the quality and timeliness of work performed by our subcontractor or customer concerns about the subcontractor. Failure by our
subcontractors to satisfactorily provide on a timely basis the agreed-upon supplies or perform the agreed upon services may
materially and adversely impact our ability to perform our obligations as the prime contractor. A delay in our ability to obtain
components and equipment parts from our suppliers may affect our ability to meet our customers’ needs and may have an adverse
effect upon our profitability.
We enter into fixed-price contracts.
We have fixed price contracts with some of our customers, particularly in our European material handling systems business.
On fixed-price contracts, we agree to perform the scope of work specified in the contract for a predetermined price. Depending
on the fixed price negotiated, these contracts may provide us with an opportunity to achieve higher profits based on the
relationship between our total contract cost and the contract’s fixed price. However, we bear the risk that increased or
unexpected costs may reduce our profit or cause us to incur a loss on the contract which would reduce our net sales and net
earnings.
Item 1B.
Unresolved Staff Comments
None.
16
We maintain our corporate headquarters in Amherst, New York and, as of March 31, 2008, conducted our principal
manufacturing at the following facilities:
Properties
Item 2.
Location
United States:
Muskegon, MI
Wadesboro, NC
Lexington, TN
Charlotte, NC
Cedar Rapids, IA
Eureka, IL
Damascus, VA
Chattanooga, TN
Greensburg, IN
Chattanooga, TN
Lisbon, OH
Cleveland, TX
Tonawanda, NY
Sarasota, FL
Products/Operations
Hoists
Hoists
Chain
Industrial components
Forged attachments
Cranes
Hoists
Forged attachments
Scissor lifts
Forged attachments
Hoists and below-the-hook tooling
Cranes
Light-rail crane systems
Tire shredders
Square
Footage
Owned or
Leased
Business
Segment
441,000
186,000
165,000
146,000
100,000
91,000
90,000
81,000
70,000
59,000
37,000
35,000
35,000
25,000
Owned
Owned
Owned
Leased
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Owned
Products
Products
Products
Products
Products
Products
Products
Products
Solutions
Products
Products
Products
Solutions
Solutions
International:
Velbert, Germany
Santiago, Tianguistenco, Mexico
Hangzhou, China
Arden, Denmark
Hangzhou, China
Hangzhou, China
Chester, United Kingdom
Chester, United Kingdom
Romeny-sur-Marne, France
Arden, Denmark
Szekesfeher, Hungary
Hoists
Hoists and chain
Hoists and hand pallet trucks
Project design, conveyors, Layer Picker,
EmptiCon
Textile strappings
Metal fabrication, textiles and textile strappings
Plate clamps
Plate clamps
Rotary unions
Project construction
Textiles and textile strappings
108,000
91,000
78,000
Leased
Owned
Leased
Products
Products
Products
72,000
58,000
51,000
48,000
28,000
22,000
20,000
18,000
Owned
Leased
Leased
Leased
Owned
Owned
Leased
Leased
Solutions
Products
Products
Products
Products
Products
Solutions
Products
In addition, we have a total of 42 sales offices, distribution centers and warehouses. We believe that our properties have
been adequately maintained, are in generally good condition and are suitable for our business as presently conducted. We also
believe our existing facilities provide sufficient production capacity for our present needs and for our anticipated needs in the
foreseeable future. Upon the expiration of our current leases, we believe that either we will be able to secure renewal terms or
enter into leases for alternative locations at market terms.
Item 3.
Legal Proceedings
From time to time, we are named a defendant in legal actions arising out of the normal course of business. We are not a
party to any pending legal proceeding other than ordinary, routine litigation incidental to our business. We do not believe that any
of our pending litigation will have a material impact on our business. We maintain comprehensive general liability insurance
against risks arising out of the normal course of business through our wholly-owned insurance subsidiary of which we are the
sole policy holder. The limits of this coverage are currently $3.0 million per occurrence ($2.0 million through March 31, 2003)
and $6.0 million aggregate ($5.0 million through March 31, 2003) per year. We obtain additional insurance coverage from
independent insurers to cover potential losses in excess of these limits.
Item 4.
Submission of Matters to a Vote of Security Holders
None.
17
Item 5.
PART II
Market for the Company’s Common Stock and Related Security Holder Matters
Our common stock is traded on the Nasdaq Stock Market under the symbol ‘‘CMCO.” As of April 30, 2008, there were 450
holders of record of our common stock.
We do not currently pay cash dividends. Our current credit agreement allows, but limits our ability to pay dividends. We may
reconsider or revise this policy from time to time based upon conditions then existing, including, without limitation, our earnings,
financial condition, capital requirements, restrictions under credit agreements or other conditions our Board of Directors may deem
relevant.
We did not repurchase any shares of our company stock during the fourth quarter of fiscal 2008.
The following table sets forth, for the fiscal periods indicated, the high and low sale prices per share for our common stock as
reported on the Nasdaq Stock Market.
Price Range of
Common Stock
Low
High
Year Ended March 31, 2007
First Quarter............................................................$
Second Quarter .......................................................
Third Quarter ..........................................................
Fourth Quarter ........................................................
30.56
22.70
25.00
25.71
$ 20.15
16.50
17.11
20.65
Year Ended March 31, 2008
First Quarter............................................................$
Second Quarter .......................................................
Third Quarter ..........................................................
Fourth Quarter ........................................................
33.68
34.30
33.85
33.34
$ 21.84
22.55
24.46
22.00
On April 30, 2008, the closing price of our common stock on the Nasdaq Stock Market was $28.31 per share.
18
PERFORMANCE GRAPH
The Performance Graph shown below compares the cumulative total shareholder return on our common stock based on its
market price, with the total return of the S&P MidCap 400 Index and the Dow Jones US Diversified Industrials. The comparison of
total return assumes that a fixed investment of $100 was invested on March 31, 2003 in our common stock and in each of the
foregoing indices and further assumes the reinvestment of dividends. The stock price performance shown on the graph is not
necessarily indicative of future price performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Columbus McKinnon Corporation, The S&P Midcap 400 Index
And The Dow Jones US Diversified Industrials Index
$2,500
$2,000
$1,500
$1,000
$500
$0
3/03
3/04
3/05
3/06
3/07
3/08
Columbus McKinnon Corporation
S&P Midcap 400
Dow Jones US Diversified Industrials
* $100 invested on 3/31/03 in stock or index-including reinvestment of dividends.
Fiscal year ending March 31.
Copyright © 2008, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
19
The consolidated balance sheets as of March 31, 2008 and 2007 and the related statements of income, cash flows and
shareholders’ equity for the three years ended March 31, 2008 and notes thereto appear elsewhere in this annual report. The
selected consolidated financial data presented below should be read in conjunction with, and are qualified in their entirety by
“Management’s Discussion and Analysis of Results of Operations and Financial Condition,” our consolidated financial
statements and the notes thereto and other financial information included elsewhere in this annual report.
Selected Financial Data
Item 6.
Statements of Income Data:
Net sales
Cost of products sold
Gross profit
Selling expenses
General and administrative expenses
Restructuring charges (1)
Impairment loss (2)
Write-off/amortization of intangibles
Income from operations
Interest and debt expense
Other (income) and expense, net
Income before income taxes
Income tax expense (benefit)
Income from continuing operations
Income from discontinued operations (3)
Net income
Diluted earnings per share from continuing
operations
Basic earnings per share from continuing
operations
Weighted average shares outstanding – assuming
dilution
Weighted average shares outstanding – basic
Balance Sheet Data (at end of period):
Total assets
Total debt (4)
Total shareholders’ equity
Other Financial Data:
$
$
$
$
$
2008
Fiscal Years Ended March 31,
2005
2006
(Amounts in millions, except per share data)
2007
623.3 $
438.8
184.5
72.0
37.6
1.2
2.5
0.1
71.1
14.6
(3.0)
59.5
22.7
36.8
0.5
37.3 $
1.92
1.96
$
$
589.8 $
425.2
164.6
61.7
34.1
0.1
—
0.2
68.5
16.5
(1.9)
53.9
20.5
33.4
0.7
34.1 $
556.0 $
408.4
147.6
54.3
33.6
1.6
—
0.2
57.9
24.7
5.0
28.2
(30.9)
59.1
0.7
59.8 $
1.76 $
3.56
$
1.80 $
3.69
$
19.2
18.7
19.0
18.5
16.6
16.1
$
514.8
388.9
125.9
52.3
31.7
0.9
—
0.3
40.7
27.6
(5.2)
18.3
2.2
16.1
0.6
16.7 $
1.09
1.10
14.8
14.6
$
$
$
590.0 $
147.9
295.5
565.6 $
172.1
241.3
566.0 $
209.8
204.4
480.9
270.9
81.8
Net cash provided by operating activities
Net cash (used) provided by investing activities
Net cash used in financing activities
Capital expenditures
Cash dividends per common share
59.6
(8.6)
(28.6)
13.1
0.00
45.5
(3.4)
(39.9)
10.7
0.00
46.4
(6.4)
(4.2)
8.4
0.00
17.2
3.1
(21.9)
5.9
0.00
_____________
20
2004
444.6
339.8
104.8
48.3
25.0
1.2
—
0.4
29.9
28.9
(4.2)
5.2
4.0
1.2
—
1.2
0.08
0.08
14.6
14.6
473.4
293.4
63.0
26.4
4.3
(21.5)
3.6
0.00
(1) Refer to “Results of Operations” in “Item 7. Management’s Discussion and Analysis of Results of Operations and
Financial Condition” for a discussion of the restructuring charges related to fiscal 2008, 2007, and 2006. The fiscal
2005 restructuring charges consist of $0.5 million of costs related to facility rationalizations being expensed on an as
incurred basis as a result of the project timing being subsequent to the adoption of SFAS No. 144. Fiscal 2005 also
included $0.3 million of write-down on the net realizable value of a facility based on changes in market conditions and a
reassessment of its net realizable value. During fiscal 2004, restructuring charges of $1.2 million were recorded related
to various employee termination benefits and facility costs as a result of our continued closure, merging and
reorganization and completion of two open projects from fiscal 2003.
(2) As a result of the recurring losses and decreasing cash flows associated with our Univeyor business, the Company
recorded a $2.5 million impairment charge in accordance with SFAS 144 during fiscal 2008. Refer to Note 2 to our
consolidated financial statements for additional information on Impairment of Long-Lived Assets.
(3) In May 2002, the Company sold substantially all of the assets of ASI. The Company received $20,600,000 in cash and
an 8% subordinated note in the principal amount of $6,800,000 which is payable over 10 years beginning in August
2004. The full amount of this note has been reserved due to the uncertainty of collection. Principal payments received
on the note are recorded as income from discontinued operations at the time of receipt. All interest and principal
payments required under the note have been made to date. Refer to Note 3 to our consolidated financial statements for
additional information on Discontinued Operations.
(4) Total debt includes long-term debt, including the current portion, notes payable and subordinated debt.
Item 7.
Management’s Discussion And Analysis Of Results Of Operations And Financial Condition
This section should be read in conjunction with our consolidated financial statements included elsewhere in this annual
report. Comments on the results of operations and financial condition below refer to our continuing operations, except in the
section entitled “Discontinued Operations.”
EXECUTIVE OVERVIEW
We are a leading manufacturer and marketer of hoists, cranes, chain, conveyors, material handling systems, lift tables and
industrial 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 workstation 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 operations include improving our productivity and increased penetration of the European, Latin American, and Asian
marketplaces. We are executing those initiatives through our Lean Manufacturing efforts, new product development and
expanded sales and marketing activities. Shareholder value will be enhanced through continued emphasis on the improvement of
the fundamentals including manufacturing efficiency, cost containment, efficient capital investment, market expansion and
excellent customer satisfaction.
We maintain a strong North American market share with significant leading 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 continue expand our new product development activities. During
fiscal 2008, this included the completion of our product line offering of wire rope hoist lines in accordance with international
standards which began in fiscal 2006, to complement our current offering of hoist products designed in accordance with U.S.
standards. Our efforts to expand our global sales will be accomplished through the introduction of certain of our products that
historically have been distributed only in North America and also by introducing new products through our existing European
distribution network. Furthermore, we continue to expand our on-the-ground sales forces as well as the distribution relationships
in China to capture the anticipated growing demand for material handling products as that economy continues to industrialize.
Our internal organization supports these strategic initiatives through division of responsibility for North America, Europe, Latin
21
America and Asia Pacific. The investments in international markets and new products are part of our focus on our greatest
opportunities for growth. We are also looking for opportunities for growth via acquisitions or joint ventures. The focus of our
acquisition strategy centers on opportunities for international revenue growth and product line expansion in alignment with our
existing core offering.
Management believes that the growth rate of total sales may moderate in future periods due to more difficult comparisons
with our fiscal 2008 periods and a slower rate of U.S. economic growth. We monitor such indicators as U.S. Industrial Capacity
Utilization, which increased since July 2003, as an indicator of anticipated demand for our product in the U.S. In addition, we
continue to monitor leading indicators of the potential impact of global and U.S. trends, including energy costs, steel price
fluctuations, rising interest rates, currency impact and activity in a variety of end-user markets around the globe.
We constantly explore ways in which to enhance our operating margins and leverage as well as further improve our
productivity and competitiveness. We have specific initiatives related to improved customer satisfaction, reduction of defects,
shortened lead times, improved inventory turns and on-time deliveries, reduction of warranty costs, and improved working
capital utilization. The initiatives are being driven by the continued implementation of our Lean Manufacturing efforts which are
fundamentally changing our manufacturing processes to be more responsive to customer demand and improving on-time delivery
and productivity. In addition to Lean manufacturing, we are working to achieve these strategic initiatives through product
simplification, the creation of centers of excellence, and improved supply chain management.
We continue to operate in a highly competitive and global business environment. Accordingly, we face 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
Net sales of our Products and Solutions segments, in millions of dollars and with percentage changes for each segment,
were as follows:
Fiscal Years Ended March 31,
2006
2007
2008
Change
2008 vs. 2007
%
Amount
Change
2007 vs. 2006
%
Amount
Products segment.....................
Solutions segment....................
Total net sales.....................
$ 570.0
53.3
$ 623.3
$ 527.1 $ 493.9
62.1
$ 556.0
62.7
$ 589.8
$ 42.9
(9.4)
$ 33.5
8.1
(15.0)
5.7
$
$
33.2
0.6
33.8
6.7
1.0
6.1
During fiscal 2008, the Company saw continued strength in the North American economy as well as increased demand in
Europe, Latin America and Asia. This growth was a continuation of improvement in the industrial sector that began in fiscal
2005 through the current period. In addition, sales growth continues to be fostered by the expansion of international selling
efforts. Net sales for fiscal 2008 of $623.3 increased by $33.5 million or 5.7% from fiscal 2007, and net sales for fiscal 2007 of
$589.8 million increased by $33.8 million, or 6.1%, from fiscal 2006. The Products segment for fiscal 2008 experienced a net
sales increase of 8.1% over the prior year. The increase was due to a combination of increased volume on the continued growth
of the global industrial economy and international market share gains as well as price increases ($9.8 million). Fiscal 2008 was
impacted by the continued weakness of the U.S. dollar relative to other currencies, particularly the euro, and reported Products
segment sales were favorably affected by $11.3 million. The Products segment for fiscal 2007 experienced a net sales increase of
6.7% over the prior year. The increase was due to a combination of increased volume on the continued growth of the global
industrial economy and increasing penetration in our European markets as well as price increases ($7.9 million). Fiscal 2007 was
impacted by the continued weakness of the U.S. dollar relative to other currencies, particularly the euro, and reported Products
segment sales were favorably affected by $4.2 million. Our fiscal 2008 Solutions segment net sales were down $9.4 million, or
15%. The intentional downsizing of our European material handling systems business resulting from our decision to be more
selective in the projects we choose to accept due to a challenging market and pricing environment resulted in a 25% reduction in
the sales of this business while the remaining solutions businesses were up 1.6%. Fiscal 2008 foreign currency fluctuations of
the U.S. dollar relative to the Danish Krone resulted in a favorable impact of $2.9 million. Our fiscal 2007 Solutions segment net
sales were flat as increased volume in our U.S. operations was offset by a downsizing of our European material handling systems
business resulting from our decision to be more selective in the projects we choose to accept due to a challenging market and
pricing environment. Fiscal 2007 foreign currency fluctuations of the U.S. dollar relative to the Danish Krone resulted in a
favorable impact of $2.0 million.
22
Gross profit of the Products and Solutions segments, in millions of dollars and as a percentage of total segment net sales,
was as follows:
Fiscal Years Ended March 31,
2007
2006
2008
Amount
%
Amount
%
Amount
%
Products segment ...................
Solutions segment..................
Total gross profit ..............
$ 178.4
6.1
$ 184.5
31.3
11.4
29.6
$ 159.2
5.4
$ 164.6
30.2
8.6
27.9
$ 138.1
9.5
$ 147.6
28.0
15.3
26.5
Our gross profit margins were approximately 29.6%, 27.9% and 26.5% in fiscal 2008, 2007 and 2006, respectively. The
Products segment for fiscal 2008 and fiscal 2007 continues to see improved gross margins as a result of operational leverage at
increased volumes from the prior years across all businesses, the proportion of that increase in our most profitable products sales
(hoists), and the impact of previous facility rationalization projects and ongoing lean manufacturing activities. The Solutions
segment’s gross profit margins increased in Fiscal 2008 as a result of timing of one large order on an international tire shredder
system sale, offsetting losses at our European material handling systems business. The European systems business losses were
the result of performance issues and cost overruns on certain projects, declining sales volumes and an unfavorable mix of projects
with regards to resale versus proprietary product componentry. The Solutions segment’s gross profit margins decreased in
fiscal 2007 as favorable leverage on volume increases at our U.S. operations was offset by losses at our European material
handling systems business. The European systems business losses were the result of performance issues and cost overruns on
certain projects, a challenging pricing environment and an unfavorable sales mix of projects.
Selling expenses were $72.0 million, $61.7 million and $54.3 million in fiscal 2008, 2007 and 2006, respectively. As a
percentage of net sales, selling expenses were 11.5%, 10.5% and 9.8% in fiscal 2008, 2007 and 2006, respectively. In
furtherance of our continuing strategic growth initiatives, the fiscal 2008 increase includes additional salaries ($1.9 million),
increased advertising, marketing, and travel ($2.4 million), investments in new markets ($2.3 million), translation of foreign
currencies ($2.3 million), and a one-time commission expense associated with a particularly large sale in our Solutions business
($1.5 million). The fiscal 2007 increase, driven by our strategic growth initiatives, includes additional salaries ($2.5 million),
increased advertising, marketing, warehousing and travel ($1.4 million), investments in new markets ($1.6 million), translation of
foreign currencies ($1.1 million), and commission expense on higher revenue ($0.5 million).
General and administrative expenses were $37.6 million, $34.1 million and $33.6 million in fiscal 2008, 2007 and 2006,
respectively. As a percentage of net sales, general and administrative expenses were 6.0%, 5.8% and 6.1% in fiscal 2008, 2007
and 2006, respectively. Fiscal 2008 includes increases in personnel costs for new market investment and organizational capacity
expansion ($1.6 million), increased research and development costs ($0.5 million), and translation of foreign currencies ($1.2
million). Fiscal 2007 includes increases in personnel costs for new market investment ($1.3 million), increased research and
development costs ($1.0 million), and increased healthcare costs ($0.8 million), offset by lower variable compensation costs
($2.5 million).
Restructuring charges of $1.2 million, $0.1 million and $1.6 million, or 0.2%, 0.0% and 0.3% of net sales in fiscal 2008,
2007 and 2006, respectively, were primarily attributable to the ongoing organizational rationalizations occurring at the company.
The fiscal 2008 charges consist of demolition costs of the unused portion of a facility ($0.8 million) being expensed on an as-
incurred basis and severance costs related to the continued reorganization of our European systems business ($0.4 million). The
fiscal 2007 charges represent severance costs related to the reorganization of our European systems business ($0.3 million) and
demolition costs of the unused portion of the facility referenced above ($0.2 million) being expensed on an as-incurred basis,
offset by a recovery of a portion of previous write-downs ($0.4 million) on a vacant facility that was sold during fiscal 2007. The
fiscal 2006 charges consist of the cost of removal of certain environmentally hazardous materials ($0.6 million), inventory
disposal costs related to the rationalization of certain product families within our mechanical jack lines ($0.4 million), the
ongoing maintenance costs of a non-operating facility accrued based on anticipated sale date ($0.3 million) and other facility
rationalization projects ($0.3 million).
Fiscal 2008 includes an impairment charge of $2.5 million related to our European material handling systems business.
Refer to Note 2 to our consolidated financial statements for additional information on Impairment of Long-Lived Assets.
Amortization of intangibles was $0.1 million, $0.2 million and $0.2 million in fiscal 2008, 2007 and 2006, respectively.
23
Interest and debt expense was $14.6 million, $16.4 million and $24.7 million in fiscal 2008, 2007 and 2006, respectively.
As a percentage of net sales, interest and debt expense was 2.3%, 2.8% and 4.4% in fiscal 2008, 2007 and 2006, respectively.
The fiscal 2008 and 2007 decreases primarily resulted from lower debt levels as we continue to execute our strategy of debt
reduction and increased financial flexibility.
The Company incurred $1.8 million, $5.2 million, and $9.2 million in fiscal 2008, 2007, and 2006, respectively related to
redemption costs associated with the repurchase of outstanding long-term debt.
The Company recorded $1.2 million, $5.3 million, and $2.0 million of investment income related to assets held in the
Company’s wholly owned captive insurance subsidiary in fiscal 2008, 2007, and 2006, respectively.
Other income and expense, net was $3.6 million, $1.8 million and $2.1 million in fiscal 2008, 2007 and 2006, respectively.
Fiscal 2008 includes $2.2 million of investment and interest income, $0.6 million from product line/real estate sales, and $0.6
million of exchange gains offset. Fiscal 2007 includes $1.2 million of interest income and $0.5 million of gain from a business
divestiture. Fiscal 2006 includes $1.1 million of interest income and $0.8 million of gains from sales of real estate.
Income taxes as a percentage of income from continuing operations before income taxes for fiscal 2008 and fiscal 2007
were 38.2% and 38.1%, respectively. Income taxes as a percentage of income before income taxes were not reflective of U.S
statutory rates in fiscal 2006. A valuation allowance of $50.5 million existed at March 31, 2005 due to the uncertainty of
whether our U.S. federal net operating loss carryforwards (“NOLs”), deferred tax assets and capital loss carryforwards might
ultimately be realized. We utilized $14.9 million of the U.S. federal NOLs in fiscal 2006 reducing the valuation allowance by
$5.2 million. As a result of our improved operating performance during fiscal 2006, we re-evaluated the certainty as to whether
our remaining U.S. federal NOLs and other deferred tax assets may ultimately be realized. As a result of the determination that it
is more likely than not that nearly all of the remaining deferred tax assets would be realized, $38.6 million of the remaining
valuation allowance was reversed as of March 31, 2006. The U.S. NOLs were fully utilized in fiscal 2008.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $76.0 million at March 31, 2008, an increase of $27.3 million from the March 31, 2007
balance of $48.7 million.
Net cash provided by operating activities was $59.6 million, $45.5 million and $46.4 million in fiscal 2008, 2007 and 2006,
respectively. The $14.1 million increase in fiscal 2008 relative to fiscal 2007 was primarily due to stronger operating
performance in fiscal 2008 ($10.4 million) and improved working capital components ($3.7 million). Changes in net working
capital include favorable changes of $11.2 in accounts receivable and unbilled revenues (downsizing of our European material
handling systems business) and $8.6 in accounts payable (resulting from timing of disbursements and increased volume of
business) offset by an unfavorable change of $7.4 million in inventory (resulting from support for increase in new product
launches and new market penetration) and an unfavorable change of $9.3 million in accrued and non-current liabilities (funding
of pension liabilities). The $0.9 million decrease in fiscal 2007 relative to fiscal 2006 was primarily due to stronger operating
performance in fiscal 2007 ($16.2 million) offset by increased working capital components ($17.1 million). Changes in net
working capital include an unfavorable change of $4.8 million 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
$20.4 million in accounts payable and accrued and non-current liabilities (resulting from timing of disbursements, changing
product liability reserves, and decreased variable compensation accruals). These were offset by a favorable change of $7.5
million on accounts receivables and unbilled revenues as a result of improved collections.
Net cash used by investing activities was $8.6 million, $3.4 million and $6.4 million in fiscal 2008, 2007 and 2006,
respectively. The fiscal 2008 change in cash used by investing activities is the result of increased capital expenditures and net
purchases of marketable securities offset by proceeds from the sale of properties and assets. The fiscal 2007 change in cash used
by investing activities is the result of increased capital expenditures, offset by increased net proceeds from the sale of marketable
securities and greater proceeds from asset sales. The fiscal 2008, 2007 and 2006 amounts included $5.5 million, $5.4 million and
$2.1 million, respectively, from business, property and asset divestitures.
24
Net cash used in financing activities was $28.6 million, $39.9 million and $4.2 million in fiscal 2008, 2007 and 2006,
respectively. Fiscal 2008 and 2007 include $1.4 million and $2.6 million, respectively, of proceeds from the exercise of
employee stock options. Fiscal 2006 includes $56.6 million of proceeds from the November 2005 stock offering, $7.1 million
from the exercise of employee stock options, and $2.2 million of tax benefit from the exercise of stock options. The fiscal 2008,
2007 and 2006 amounts included $31.1 million, $42.9 million and $67.8 million of debt repayment, respectively. We also paid
$2.8 million of financing costs in fiscal 2006 to effect the capital transaction previously described.
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 cash generation for debt repayment.
The business plan focuses on continued implementation of lean manufacturing, improving working capital utilization, including
inventory management, and new market and new product development.
In March 2006, we entered into a Revolving credit facility, which provides availability up to $75 million. 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 million, subject to lender approval. The Revolving Credit Facility matures February 2011.
At March 31, 2008, the Revolving Credit Facility was not drawn and the available amount, net of outstanding letters of
credit of $11.2 million, totaled $63.8 million. 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 U.S. 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, with
which we were in compliance as of March 31, 2008.
The Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005 amounted to $129.9 million at March
31, 2008 and are due November 1, 2013. Provisions of the 8 7/8% Notes include, without limitation, restrictions 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 U.S. subsidiaries and are not subject to any sinking fund requirements.
In November 2005, we registered an additional 3,350,000 shares of our common stock which were sold at $20.00 per share.
The number of shares offered by us was 3,000,000 and 350,000 were offered by a selling shareholder. We did not receive any
proceeds from the sale of shares by the selling shareholder. This secondary stock offering increased our weighted average
common stock outstanding by 1.8 million shares for the year ended March 31, 2006.
Unsecured and uncommitted lines of credit are available to meet short-term working capital needs for certain of our
subsidiaries operating outside of the U.S. 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
default, as mutually agreed between our subsidiaries and the local bank at the time of each specific transaction. As of March 31,
2008, significant credit lines totaled approximately $12.7 million, of which $11.3 million was drawn.
In addition to the above facilities, our foreign subsidiaries have certain fixed term bank loans. As of March 31, 2008,
significant secured term loans totaled $3.3 million. There were no significant unsecured loans outstanding at March 31, 2008.
CONTRACTUAL OBLIGATIONS
The following table reflects a summary of our contractual obligations in millions of dollars as of March 31, 2008, by period
of estimated payments due:
25
Long-term debt obligations (a)
Operating lease obligations (b)
Purchase obligations (c) .........
Interest obligations (d).............
Letter of credit obligations ......
Uncertain tax positions............
Other
long-term
reflected on
balance sheet under GAAP (e)
Total ...................................
liabilities
the Company’s
Total
$ 136.6
19.0
--
67.7
11.2
2.4
Fiscal
2009
$ 0.5
5.1
--
12.1
11.2
0.2
Fiscal 2010-
Fiscal 2011
$ 0.9
7.4
--
24.3
--
0.2
Fiscal 2012- More Than
Fiscal 2013
0.9
$
3.6
--
23.5
--
2.0
Five Years
$ 134.3
2.9
--
7.8
--
0.0
48.8
$ 285.7
0.0
$ 29.1
27.4
$ 60.2
14.8
$ 44.8
6.6
$ 151.6
(a) As described in note 10 to our consolidated financial statements.
(b) As described in note 17 to our consolidated financial statements.
(c) We have no purchase obligations specifying fixed or minimum quantities to be purchased. We estimate that, at any
given point in time, our open purchase orders to be executed in the normal course of business approximate $40 million.
(d) Estimated for our Senior Subordinated Notes due 11/1/13.
(e) As described in note 9 to our consolidated financial statements.
We have no additional off-balance sheet obligations that are not reflected above.
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, improve productivity and customer
responsiveness, reduce production costs, increase flexibility to respond effectively to market fluctuations and changes, meet
environmental requirements, enhance safety and promote ergonomically correct work stations. Our capital expenditures for fiscal
2008, 2007 and 2006 were $13.1 million, $10.7 million and $8.4 million, respectively. Higher capital expenditures in fiscal 2008
and 2007 were the result of new product development and productivity enhancing equipment along with normal maintenance
items. We expect capital expenditure spending in fiscal 2009 to be in the range of $14-$15 million.
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 Asia-Pacific. We do not believe that general inflation has had a material effect on
our results of operations over the periods presented primarily due to overall low inflation levels over such periods and our ability
to generally pass on rising costs through annual price increases and surcharges. However, employee benefits costs such as health
insurance, workers compensation insurance, pensions as well as energy and business insurance have exceeded general inflation
levels. In the future, we may be further affected by inflation that we may not be able to pass on as price increases. With changes
in worldwide demand for steel and fluctuating scrap steel prices over the past several years, we experienced fluctuations in our
costs that we have reflected as price increases and surcharges to our customers. We believe we have been successful in
instituting surcharges and price increases to pass on these material cost increases. We will continue to monitor our costs and
reevaluate our pricing policies.
SEASONALITY AND QUARTERLY RESULTS
Our quarterly results may be materially affected by the timing of large customer orders, periods of high vacation and
holiday concentrations, restructuring charges and other costs attributable to our facility rationalization program, divestitures,
acquisitions and the magnitude of rationalization integration costs. Therefore, our operating results for any particular fiscal
quarter are not necessarily indicative of results for any subsequent fiscal quarter or for the full fiscal year.
DISCONTINUED OPERATIONS
In May 2002, we completed the divestiture of substantially all of the assets of ASI which comprised the principal business
unit in our former Solutions - Automotive segment. Proceeds from this sale included an 8% subordinated note in the principal
amount of $6.8 million payable over 10 years. Due to the uncertainty of its collection, the note has been recorded at its estimated
net realizable value of $0. Principal payments received on the note are recorded as income from discontinued operations at the
26
time of receipt. Accordingly, $0.6 million of income from discontinued operations was recorded in fiscal 2008, net of tax. All
interest and principal payments required under the note have been made to date.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make
estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We
continually evaluate the estimates and their underlying assumptions, which form the basis for making judgments about the carrying
value of our assets and liabilities. Actual results inevitably will differ from those estimates. We have identified below the accounting
policies involving estimates that are critical to our financial statements. Other accounting policies are more fully described in note 2 of
notes to our consolidated financial statements.
Pension and Other Postretirement Benefits. The determination of the obligations and expense for pension and postretirement
benefits is dependent on our selection of certain assumptions that are used by actuaries in calculating such amounts. Those assumptions
are disclosed in Note 11 to our fiscal 2008 consolidated financial statements and include the discount rates, expected long-term rate of
return on plan assets and rates of future increases in compensation and healthcare costs.
The pension discount rate assumptions of 6½%, 6%, and 5¾% as of March 31, 2008, 2007 and 2006, respectively, are based on
long-term bond rates. The increase in the discount rates for fiscal 2008 and 2007 resulted in an $8.4 and $4.3 decrease in the projected
benefit obligation as of March 31, 2008 and 2007, respectively. The decrease in discount rate for fiscal 2006 resulted in a $3.9 million
increase in the projected benefit obligation as of March 31, 2006. The rate of return on plan assets assumptions of 7½% for each of the
years ended March 31, 2008, 2007 and 2006 is based on the composition of the asset portfolios (approximately 60% equities and 40%
fixed income at March 31, 2008) and their long-term historical returns. The actual assets realized gains of $6.9 and $11.0 million in
fiscal 2008 and 2007. Our under-funded status as of March 31, 2008 and 2007 was $15.3 million and $28.8 million, or 10.9% and
20.6% of the projected benefit obligation, respectively. Our pension contributions during fiscal 2008 and 2007 were approximately
$14.5 and $6.0 million, respectively. The under-funded status may result in future pension expense increases. Pension expense for the
March 31, 2009 fiscal year is expected to approximate $5.3 million, which is down from the fiscal 2008 amount of $6.6 million due to
an increase in the return on the higher asset value and lower amortization of unrecognized losses. The factors outlined above may
result in increases in funding requirements over time, unless there is continued market appreciation in the asset values. Pension funding
contributions for the March 31, 2009 fiscal year are expected to decrease by approximately $7.7 million compared to fiscal 2008 which
included approximately $7.0 million in discretionary contributions above the minimum amounts required by ERISA. The discretionary
funding decision reflects an acceleration to comply with the Pension Protection Act of 2006. The compensation increase assumption of
3% as of March 31, 2008 and 2007 and 4% as of March 31, 2006 is based on historical trends.
The healthcare inflation assumptions of 8¼%, 9% and 9¾% for fiscal 2008, 2007 and 2006, respectively are based on anticipated
trends. Healthcare costs in the United States have increased substantially over the last several years. If this trend continues, the cost of
postretirement healthcare will increase in future years.
Insurance Reserves. Our accrued general and product liability reserves as described in Note 14 to our consolidated financial
statements involve actuarial techniques including the methods selected to estimate ultimate claims, and assumptions including
emergence patterns, payment patterns, initial expected losses and increased limit factors. Other insurance reserves such as workers
compensation and group health insurance are based on actual historical and current claim data provided by third party administrators or
internally maintained.
Inventory and Accounts Receivable Reserves. Slow-moving and obsolete inventory reserves are judgmentally determined based
on formulas applied to historical and expected future usage within a reasonable timeframe. We reassess trends and usage on a regular
basis and if we identify changes, we revise our estimated allowances. Allowances for doubtful accounts and credit memo reserves are
also judgmentally determined based on formulas applied to historical bad debt write-offs and credit memos issued, assessing potentially
uncollectible customer accounts and analyzing the accounts receivable agings.
Long-Lived Assets. Property, plant and equipment and certain intangibles are depreciated or amortized over their assigned lives.
These assets as well as goodwill are also periodically measured for impairment. The assigned lives and the projected cash flows used
to test impairment are subjective. If actual lives are shorter than anticipated or if future cash flows are less than anticipated, we could
incur a future impairment charge or a loss on disposal relating to these assets.
Marketable Securities. On a quarterly basis, we review our marketable securities for declines in market value that may be
considered other than temporary. We consider market value declines to be other than temporary if they are declines for a period longer
than six months and in excess of 20% of original cost.
27
Deferred Tax Asset Valuation Allowance. As of March 31, 2008, we had $31.9 million of gross deferred tax assets before
valuation allowances. As described in Note 16 to the consolidated financial statements, the deferred tax assets relate principally to
liabilities including employee benefit plans, insurance reserves, accrued vacation and incentive costs and also to asset valuation
reserves such as inventory obsolescence reserves and bad debt reserves. The deferred tax assets include $5.1 million related to various
state and foreign net operating loss carryforwards for which a $4.1 million deferred tax asset valuation allowance is recorded.
We record a valuation allowance to reduce deferred tax assets to the amount of future tax benefit we believe is more likely than
not to be realized. We consider recent earnings projections, allowable tax carryforward periods, tax planning strategies and historical
earnings performance to determine the amount of the valuation allowance. Changes in these factors could cause us to adjust our
valuation allowance, which would impact our income tax expense when we determine that these factors have changed.
Revenue Recognition. Sales are recorded when title passes to the customer, which is generally at the time of shipment to the
customer, except for long-term construction-type contracts. For long-term construction-type contracts, we recognize contract revenues
under the percentage of completion method, measured by comparing direct costs incurred to total estimated direct costs. Changes in job
performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions
to costs and income and are recognized in the period in which the revisions are determined. In the event that a loss is anticipated on an
uncompleted contract, a provision for the estimated loss is made at the time it is determined. Billings on contracts may precede or lag
revenues earned, and such differences are reported in the balance sheet as current liabilities (accrued liabilities) and current assets
(unbilled revenues), respectively. Customers do not routinely return product. However, sales returns are permitted in specific situations
and typically include a restocking charge or the purchase of additional product. We have established an allowance for returns based
upon historical trends.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value
Measurements,” (“SFAS 157”) 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 157 will be effective for fiscal
years beginning after November 15, 2007. In February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB
Statement No. 157.” This FSP (1) partially defers the effective date of SFAS No. 157 for one year for certain nonfinancial assets
and nonfinancial liabilities and (2) removes certain leasing transactions from the scope of SFAS 157. The Company believes that
the adoption of SFAS No. 157 will not have a material effect on its consolidated financial statements.
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 SFAS 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.
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 believes that the adoption of SFAS
No. 159 will not have a material effect on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business Combinations” (“SFAS 141(R)”).
SFAS 141(R) requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed
in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities
assumed; and requires the acquirer to disclose all of the information required to evaluate and understand the nature and financial
effect of the business combination. This statement is effective for acquisition dates on or after the beginning of the first annual
reporting period beginning after December 15, 2008. The Company is currently evaluating the impact the adoption of SFAS
141(R) will have on the Company’s consolidated financial statements.
28
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements--an
amendment of ARB No. 51” (“SFAS 160”). This Statement amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective as of the beginning
of the first fiscal year beginning after December 15, 2008. The Company believes that the adoption of SFAS No. 160 will not
have a material effect on its consolidated financial statements.
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.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates. We are
exposed to various market risks, including commodity prices for raw materials, foreign currency exchange rates and changes in
interest rates. We may enter into financial instrument transactions, which attempt to manage and reduce the impact of such
changes. We do not enter into derivatives or other financial instruments for trading or speculative purposes.
Our primary commodity risk is related to changes in the price of steel. We control this risk through negotiating purchase
contracts on a consolidated basis and by attempting to build changes in raw material costs into the selling prices of or surcharges
on our products. We have not entered into financial instrument transactions related to raw material costs.
In fiscal 2008, 28% of our net sales were from manufacturing plants and sales offices in foreign jurisdictions. We
manufacture our products in the United States, Mexico, China, Denmark, the United Kingdom, France, Hungary and Germany
and sell our products and solutions in over 50 countries. Our results of operations could be affected by factors such as changes in
foreign currency rates or weak economic conditions in foreign markets. Our operating results are exposed to fluctuations between
the U.S. dollar and the Canadian dollar, European currencies, the Mexican peso and the Chinese yuan. For example, when the
U.S. dollar weakens against the Euro, the value of our net sales and net income denominated in Euros increases when translated
into U.S. dollars for inclusion in our consolidated results. We are also exposed to foreign currency fluctuations in relation to
purchases denominated in foreign currencies. Our foreign currency risk is mitigated since the majority of our foreign operations’
net sales and the related expense transactions are denominated in the same currency so therefore a significant change in foreign
exchange rates would likely have a very minor impact on net income. For example, a 10% decline in the rate of exchange
between the euro and the U.S. dollar impacts net income by approximately $1.1 million. In addition, the majority of our export
sale transactions are denominated in U.S. dollars. Accordingly, we currently have not invested in derivative instruments, such as
foreign exchange contracts, to hedge foreign currency transactions.
We control risk related to changes in interest rates by structuring our debt instruments with a combination of fixed and
variable interest rates and by periodically entering into financial instrument transactions as appropriate. At March 31, 2008, we
do not have any material swap agreements or similar financial instruments in place. At March 31, 2008 and 2007, approximately
88% and 92% of our outstanding debt had fixed interest rates, respectively. At those dates, we had approximately $18.0 million
and $13.9 million, respectively, of outstanding variable rate debt. A 1% fluctuation in interest rates in fiscal 2008 and 2007
would have changed interest expense on that outstanding variable rate debt by approximately $0.2 and $0.1 million, respectively.
Like many industrial manufacturers, we are involved in asbestos-related litigation. In continually evaluating costs relating to
our estimated asbestos-related liability, we review, 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, our recent and historical resolution of the cases, the
number of cases pending against us, the status and results of broad-based settlement discussions, and the number of years such
activity might continue. Based on this review, we have estimated our 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
29
forecasting with any certainty the numerous variables that can affect the range of the liability. We 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, we have estimated our asbestos-related aggregate liability through March 31, 2026 and March
31, 2038 to range between $5.0 million and $15.0 million using actuarial parameters of continued claims for a period of 18 to 30
years. Our estimation of our asbestos-related aggregate liability that is probable and estimable, in accordance with U.S. generally
accepted accounting principles approximates $8.4 million which has been reflected as a liability in the consolidated financial
statements as of March 31, 2008. 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 $0.4 million 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 our financial condition or our liquidity, although the net after-tax effect of any future liabilities recorded could be material to
earnings in a future period.
30
Item 8.
Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 2008:
Report of Independent Registered Public Accounting Firm..............................................................................
Consolidated Balance Sheets .............................................................................................................................
Consolidated Statements of Income...................................................................................................................
Consolidated Statements of Shareholders’ Equity.............................................................................................
Consolidated Statements of Cash Flows............................................................................................................
Notes to Consolidated Financial Statements
1. Description of Business........................................................................................................................
2. Accounting Principles and Practices ....................................................................................................
3. Discontinued Operations ......................................................................................................................
4. Unbilled Revenues and Excess Billings ...............................................................................................
5.
Inventories............................................................................................................................................
6. Marketable Securities ...........................................................................................................................
7.
Property, Plant, and Equipment............................................................................................................
8. Goodwill and Intangible Assets ...........................................................................................................
9. Accrued Liabilities and Other Non-current Liabilities.........................................................................
10. Debt ......................................................................................................................................................
11. Pensions and Other Benefit Plans ........................................................................................................
12. Employee Stock Ownership Plan (ESOP)............................................................................................
13. Earnings per Share and Stock Plans .....................................................................................................
14. Loss Contingencies ..............................................................................................................................
15. Restructuring Charges ..........................................................................................................................
Income Taxes .......................................................................................................................................
16.
17. Rental Expense and Lease Commitments ............................................................................................
18. Summary Financial Information...........................................................................................................
19. Business Segment Information.............................................................................................................
20. Selected Quarterly Financial Data (unaudited) ....................................................................................
21. Accumulated Other Comprehensive Loss ............................................................................................
22. Effects of New Accounting Pronouncements ......................................................................................
F-2
F-3
F-4
F-5
F-6
F-7
F-7
F-11
F-12
F-12
F-12
F-13
F-14
F-14
F-15
F-16
F-20
F-21
F-25
F-26
F-27
F-29
F-30
F-34
F-36
F-37
F-38
Schedule II – Valuation and Qualifying Accounts. .......................................................................................
F-39
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Columbus McKinnon Corporation
We have audited the accompanying consolidated balance sheets of Columbus McKinnon Corporation as of March
31, 2008 and 2007, and the related consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended March 31, 2008. Our audits also included the financial statement schedule
listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Columbus McKinnon Corporation at March 31, 2008 and 2007 and the consolidated results of
its operations and its cash flows for each of the three years in the period ended March 31, 2008, in conformity with
U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 2 to the consolidated financial statements, on April 1, 2006 the Company changed its method
of accounting for stock-based compensation. As discussed in Note 11 to the consolidated financial statements, on
March 31, 2007 the Company changed its method of accounting for employee retirement plans and other
postretirement benefits. As discussed in Note 16 to the consolidated financial statements, on April 1, 2007 the
Company changed its method of accounting for uncertainty in income taxes.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Columbus McKinnon Corporation’s internal control over financial reporting as of March 31, 2008,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated May 29, 2008 expressed an unqualified opinion
thereon.
/s/ Ernst & Young LLP
Buffalo, New York
May 29, 2008
F-2
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
2008
2007
(In thousands, except
share data)
Current assets:
ASSETS
$
Cash and cash equivalents ................................................................................................
75,994
$
48,655
Trade accounts receivable, less allowance for doubtful accounts
($4,259 and $3,628, respectively)..................................................................................
Unbilled revenues .............................................................................................................
Inventories ........................................................................................................................
Prepaid expenses...............................................................................................................
Total current assets ...................................................................................................................
Net property, plant, and equipment ..........................................................................................
Goodwill, net ............................................................................................................................
Other intangibles, net................................................................................................................
Marketable securities ................................................................................................................
Deferred taxes on income .........................................................................................................
Other assets...............................................................................................................................
Total assets................................................................................................................................
97,335
9,574
88,332
17,532
288,767
58,414
187,055
321
29,807
17,570
8,101
$ 590,035
97,269
15,050
77,179
18,029
256,182
55,231
185,634
269
28,920
34,460
4,942
$ 565,638
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
$
Notes payable to banks .....................................................................................................
Trade accounts payable.....................................................................................................
Accrued liabilities .............................................................................................................
Restructuring reserve ........................................................................................................
Current portion of long-term debt.....................................................................................
Total current liabilities..............................................................................................................
Senior debt, less current portion ...............................................................................................
Subordinated debt .....................................................................................................................
Other non-current liabilities......................................................................................................
Total liabilities ..........................................................................................................................
Shareholders’ equity:
Voting common stock; 50,000,000 shares authorized;
18,982,538 and 18,825,312 shares issued ....................................................................
Additional paid-in capital ................................................................................................
Retained earnings..............................................................................................................
ESOP debt guarantee; 176,646 and 213,667 shares .........................................................
Accumulated other comprehensive loss............................................................................
Total shareholders’ equity ........................................................................................................
Total liabilities and shareholders’ equity..................................................................................
178,457
122,400
(2,824)
(2,741)
295,481
$ 590,035
11,330
41,895
55,855
58
521
109,659
6,196
129,855
48,844
294,554
189
$
9,598
35,896
52,344
599
297
98,734
26,168
136,000
63,411
324,313
188
174,654
85,237
(3,417)
(15,337)
241,325
$ 565,638
See accompanying notes.
F-3
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
2008
Year Ended March 31,
2007
(In thousands,
except per share data)
2006
Net sales................................................................................................ $
Cost of products sold ............................................................................
Gross profit ...........................................................................................
Selling expenses....................................................................................
General and administrative expenses....................................................
Restructuring charges ...........................................................................
Impairment loss ....................................................................................
Amortization of intangibles ..................................................................
Income from operations ........................................................................
Interest and debt expense......................................................................
Cost of bond redemptions.....................................................................
Investment income................................................................................
Other (income) and expense, net ..........................................................
Income from continuing operations before income tax
expense (benefit)...........................................................................
Income tax expense (benefit)................................................................
Income from continuing operations......................................................
Income from discontinued operations (net of tax)................................
Net income............................................................................................ $
623,334
438,781
184,553
71,955
37,647
1,179
2,509
115
71,148
14,629
1,794
(1,165)
(3,641)
59,531
22,739
36,792
557
37,349
Average basic shares outstanding .........................................................
Average diluted shares outstanding ......................................................
18,723
19,158
Basic income per share:
Income from continuing operations .............................................. $
Income from discontinued operations...........................................
Basic income per share ................................................................. $
Diluted income per share:
Income from continuing operations .............................................. $
Income from discontinued operations...........................................
Diluted income per share .............................................................. $
1.96
0.03
1.99
1.92
0.03
1.95
$
$
$
$
$
$
589,848
425,248
164,600
61,731
34,097
133
-
183
68,456
16,430
5,188
(5,257)
(1,825)
53,920
20,539
33,381
704
34,085
18,517
18,951
1.80
0.04
1.84
1.76
0.04
1.80
$
$
$
$
$
$
556,007
408,385
147,622
54,255
33,640
1,609
-
249
57,869
24,667
9,201
(2,017)
(2,136)
28,154
(30,946)
59,100
696
59,796
16,052
16,628
3.69
0.04
3.73
3.56
0.04
3.60
See accompanying notes.
F-4
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share and per share data)
Common
Stock
($.01
par value)
Addi-
tional
Paid-in
Capital
149 $ 104,078 $
Retained
Earnings
(Accumulated
Deficit)
ESOP
Debt
Guarantee
Unearned
Restricted
Stock
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
(8,644) $
(4,554) $
(6)
$
(9,256)
$
81,767
Balance at March 31, 2005............................. $
Comprehensive income:
Net income 2006 ............................................
Change in foreign currency
translation adjustment ................................
Change in net unrealized gain on
investments, net of tax of $354 ..................
Change in minimum pension
liability adjustment, net of
tax benefit of $1,681 ..................................
Total comprehensive income..........................
Common stock issued, 3,000,000 shares .......
Stock options exercised, 626,282 shares........
Tax benefit from exercise of stock options...
Earned 34,874 ESOP shares...........................
Restricted common stock granted,
1,000 shares .................................................
Earned portion of restricted shares.................
Balance at March 31, 2006............................. $
Comprehensive income:
Net income 2007 ............................................
Change in foreign currency
translation adjustment ................................
Change in net unrealized gain on
investments, net of tax benefit of $1,006...
Change in pension liability, prior
to adoption of SFAS 158, net of
tax of $3,830...............................................
Total comprehensive income..........................
Adjustment to initially apply SFAS 158,
net of tax benefit of $6,906 ........................
Stock compensation - directors ......................
Stock options exercised, 240,468 shares........
Stock compensation expense..........................
Tax benefit from exercise of stock options...
Earned 36,154 ESOP shares...........................
Balance at March 31, 2007............................. $
Comprehensive income:
Net income 2008 ............................................
Change in foreign currency
translation adjustment ................................
Change in net unrealized gain on
investments, net of tax benefit of $410 ......
Change in pension liability and
postretirement obligations, net of
tax of $2,695...............................................
Total comprehensive income..........................
Adjustment to initially apply FIN 48 .............
Stock compensation - directors ......................
Stock options exercised, 144,425 shares........
Stock compensation expense..........................
Tax benefit from exercise of stock options...
Earned 37,021 ESOP shares...........................
Balance at March 31, 2008............................. $
—
—
—
—
30
6
—
—
—
—
—
—
56,589
7,143
2,154
95
59,796
—
—
—
—
—
—
—
—
—
—
—
—
—
—
558
—
—
—
—
—
—
—
—
—
59,796
(1,846)
(1,846)
658
658
(2,535)
—
—
—
—
(2,535)
56,073
56,619
7,149
2,154
653
—
—
—
22
—
—
185 $ 170,081 $ 51,152
$
—
—
(3,996) $
(22)
6
(22)
$
—
—
(12,979)
—
6
$ 204,421
—
—
—
—
—
—
34,085
—
—
—
—
—
—
—
—
—
34,085
4,093
4,093
(1,869)
(1,869)
—
—
—
—
—
5,758
5,758
42,067
—
—
3
—
—
—
—
—
—
180
—
2,598
—
1,255
—
311
—
229
188 $ 174,654 $ 85,237
$
—
—
—
—
—
579
—
—
—
22
—
—
(3,417) $ —
$
(10,340)
—
—
—
—
—
(15,337)
(10,340)
180
2,601
1,277
311
808
$ 241,325
—
—
—
—
—
—
37,349
—
—
—
—
—
—
—
—
—
37,349
9,431
9,431
(762)
(762)
—
—
—
—
—
3,927
—
—
1
—
—
—
(186)
—
—
196
—
1,415
—
1,266
—
482
—
444
189 $ 178,457 $ 122,400
$
—
—
—
—
—
593
—
—
—
—
—
—
(2,824) $ —
$
—
—
—
—
—
—
(2,741)
3,927
49,945
(186)
196
1,416
1,266
482
1,037
$ 295,481
See accompanying notes.
F-5
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities:
Income from continuing operations................................................................
Adjustments to reconcile income from continuing
operations to net cash provided by operating activities:
2008
Year ended March 31,
2007
(In thousands)
2006
$
36,792
$
33,381
$
59,100
Depreciation and amortization................................................................
Deferred income taxes ............................................................................................
(Gain) loss on divestitures ......................................................................................
Gain on sale of real estate/investments ................................................................
Loss on early retirement of bonds................................................................
Amortization/write-off of deferred financing costs ................................
Stock-based compensation......................................................................................
Impairment loss................................................................................................
Changes in operating assets and liabilities
net of effects of business divestitures:
8,816
14,625
(70)
(526)
1,378
982
1,462
2,509
8,289
12,438
(504)
(5,373)
4,263
1,603
1,457
—
Trade accounts receivable and unbilled revenues................................
Inventories ................................................................................................
Prepaid expenses.............................................................................................
Other assets ................................................................................................
Trade accounts payable...................................................................................
Accrued and non-current liabilities................................................................
7,652
(9,667)
654
(1,183)
4,707
(8,541)
59,590
Net cash provided by operating activities................................................................
Investing activities:
Proceeds from sale of marketable securities ................................................................
Purchases of marketable securities ................................................................
Capital expenditures ................................................................................................
Proceeds from sale of assets ...........................................................................................
Proceeds from sale of businesses....................................................................................
Proceeds from discontinued operations, net of tax .........................................................
Net cash used by investing activities ................................................................
Financing activities:
Proceeds from issuance of common stock ................................................................
Proceeds from exercise of stock options................................................................
Payments under revolving line-of-credit agreements .....................................................
Borrowings under revolving line-of-credit agreements..................................................
Repayment of debt ................................................................................................
Proceeds from issuance of long-term debt................................................................
Payment of deferred financing costs................................................................
Tax benefit from exercise of stock options................................................................
Change in ESOP debt guarantee.....................................................................................
Net cash used by financing activities................................................................
Effect of exchange rate changes on cash................................................................
Net change in cash and cash equivalents ................................................................
Cash and cash equivalents at beginning of year .............................................................
Cash and cash equivalents at end of year ................................................................
Supplementary cash flows data:
$
13,076
(14,638)
(13,066)
5,504
—
557
(8,567)
—
1,416
—
18
(31,069)
—
(2)
482
593
(28,562)
4,878
27,339
48,655
75,994
(3,521)
(2,260)
(2,132)
921
(3,849)
782
45,495
36,853
(35,686)
(10,653)
2,813
2,574
704
(3,395)
—
2,601
(62,930)
65,975
(45,964)
—
(449)
311
579
(39,877)
834
3,057
45,598
48,655
$
Interest paid ................................................................................................
$
$
Income taxes paid, net ............................................................................................
14,079
9,568
$
$
17,221
5,712
See accompanying notes.
F-6
8,824
(36,968)
87
(2,100)
7,083
3,297
—
—
(11,025)
2,518
(2,026)
207
6,099
11,267
46,363
15,913
(16,801)
(8,430)
2,091
—
857
(6,370)
56,619
7,149
(47,669)
49,030
(205,167)
136,000
(2,877)
2,154
558
(4,203)
329
36,119
9,479
45,598
26,565
5,035
$
$
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands, except share data)
1. Description of Business
Columbus McKinnon Corporation (the Company) is a leading U.S. designer and manufacturer of material
handling products, systems and services which efficiently and ergonomically move, lift, position and secure
material. 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 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. During fiscal 2008, approximately 65% of sales were to
customers in the United States.
2. Accounting Principles and Practices
Advertising
Costs associated with advertising are expensed in the year incurred and are included in selling expense in the
statement of income. Advertising expenses were $5,531,000, $3,779,000, and $3,343,000 in fiscal 2008, 2007, and
2006, respectively.
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments with an original maturity of three
months or less.
Concentrations of Labor
Approximately 22% of the Company’s employees are represented by seven separate domestic and Canadian
collective bargaining agreements which terminate at various times between September 2008 and March 2012.
Approximately 2% of the labor force is covered by collective bargaining agreements that will expire within one
year.
Consolidation
These consolidated financial statements include the accounts of the Company and its domestic and foreign
subsidiaries; all significant intercompany accounts and transactions have been eliminated. Our international
subsidiaries in Asia and Spain close one month and our Mexican subsidiary closes three months earlier to facilitate
consolidated reporting.
Financial Instruments
The carrying value of the Company’s current assets and current liabilities approximate their fair values based
upon the relatively short maturity of those instruments. For the fair value of the Company’s marketable securities
and debt instruments, see Notes 6 and 10, respectively.
Foreign Currency Translations
The Company translates foreign currency financial statements as described in Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 52, “Foreign Currency Translation.”
Under this method, all items of income and expense are translated to U.S. dollars at average exchange rates for the
year. All assets and liabilities are translated to U.S. dollars at the year-end exchange rate. Gains or losses on
translations are recorded in accumulated other comprehensive loss in the shareholders’ equity section of the balance
sheet. The functional currency is the foreign currency in which the foreign subsidiaries conduct their business.
Gains and losses from foreign currency transactions are reported in other income and expense, net. There were
gains of approximately $600,000 in fiscal 2008 and losses of approximately $225,000 and a $100,000 on foreign
currency transactions in fiscal 2007 and 2006, respectively.
F-7
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Goodwill
Goodwill is not amortized but is periodically tested for impairment, in accordance with the provisions of
SFAS No. 142, “Goodwill and Other Intangible Assets.” Goodwill impairment is deemed to exist if the net book
value of a reporting unit exceeds its estimated fair value. The fair value of a reporting unit is determined using a
discounted cash flow methodology. The Company’s reporting units are determined based upon whether discrete
financial information is available and regularly reviewed, whether those units constitute a business, and the extent of
economic similarities between those reporting units for purposes of aggregation. As a result of this analysis, the
reporting units identified under SFAS No. 142 were at the component level, or one level below the reporting
segment level as defined under SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
Information.” The Products segment was subdivided into three reporting units and the Solutions segment was
subdivided into two reporting units. Identifiable intangible assets acquired in a business combination are amortized
over their useful lives unless their useful lives are indefinite, in which case those intangible assets are tested for
impairment annually and not amortized until their lives are determined to be finite. See Note 8 for further
discussion of goodwill and intangible assets.
Impairment of Long-Lived Assets
The Company assesses impairment of its long-lived assets in accordance with the provisions of SFAS
No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires long-lived
assets, such as property and equipment and purchased intangibles subject to amortization to be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount
of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the
carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized equal
to the amount by which the carrying amount of the asset group exceeds the fair value of the asset group.
In assessing long-lived assets for an impairment loss, assets are grouped with other assets and liabilities at the
lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and
liabilities. Asset grouping requires a significant amount of judgment. Accordingly, facts and circumstances will
influence how asset groups are determined for impairment testing. In assessing long-lived assets for impairment,
management considered the company’s product line portfolio, customers and related commercial agreements, labor
agreements and other factors in grouping assets and liabilities at the lowest level for which identifiable cash flows
are independent. The Company considers projected future undiscounted cash flows, trends and other factors in its
assessment of whether impairment conditions exist. While the Company believes that its estimates of future cash
flows are reasonable, different assumptions regarding such factors as future production volumes, customer pricing,
economics and productivity and cost initiatives, could significantly affect its estimates. In determining fair value of
long-lived assets, management uses appraisals, management estimates or discounted cash flow calculations.
During fiscal 2008, the Company recorded an impairment charge of $2,509,000 to reduce the net book value
of certain long-lived assets related to our Univeyor business within the Company’s Solutions segment to their
estimated fair value. This impairment was recorded pursuant to impairment indicators including recurring operating
losses and declining cash flow.
There were no impairment charges in fiscal 2007 or 2006.
Inventories
Inventories are valued at the lower of cost or market. Cost of approximately 56% of inventories at March 31,
2008 (60% in 2007) has been determined using the LIFO (last-in, first-out) method. Costs of other inventories have
been determined using the FIFO (first-in, first-out) or average cost method. FIFO cost approximates replacement
cost. Costs in inventory include components for direct labor and overhead costs.
F-8
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Marketable Securities
All of the Company’s marketable securities, which consist of equity securities, have been classified as
available-for-sale securities and are therefore recorded at their fair values with the unrealized gains and losses, net
of tax, reported in accumulated other comprehensive loss within shareholders’ equity unless unrealized losses are
deemed to be other than temporary. In such instance, the unrealized losses are reported in the statement of income
within investment income. Estimated fair value is based on published trading values at the balance sheet dates. The
cost of securities sold is based on the specific identification method. Interest and dividend income are included in
investment income in the consolidated statements of income.
The marketable securities are carried as long-term assets since they are held for the settlement of the
Company’s general and products liability insurance claims filed through CM Insurance Company, Inc., a wholly
owned captive insurance subsidiary.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and depreciated principally using the straight-line method
over their respective estimated useful lives (buildings and building equipment—15 to 40 years; machinery and
equipment—3 to 18 years). When depreciable assets are retired, or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operating
results.
Research and Development
Research and development costs as defined in SFAS No. 2, “Accounting for Research and Development
Costs” for the years ended March 31, 2008, 2007 and 2006 were $4,495,000, $2,887,000 and $1,614,000,
respectively and are classified as general and administrative expense in the consolidated statements of income.
Revenue Recognition and Concentration of Credit Risk
Sales are recorded when title passes to the customer which is generally at time of shipment to the customer,
except for long-term construction contracts as described below. The Company performs ongoing credit evaluations
of its customers’ financial condition, but generally does not require collateral to support customer receivables. The
credit risk is controlled through credit approvals, limits and monitoring procedures. Accounts receivable are
reported at net realizable value and do not accrue interest. The Company establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of specific customers, historical trends and other factors.
Accounts receivable are charged against the allowance for doubtful accounts once all collection efforts have been
exhausted. The Company does not routinely permit customers to return product. However, sales returns are
permitted in specific situations and typically include a restocking charge or the purchase of additional product. The
Company has established an allowance for returns based upon historical trends.
The Company recognizes contract revenues under the percentage of completion method, measured by
comparing direct costs incurred to total estimated direct costs. Changes in job performance, job conditions and
estimated profitability, including those arising from final contract settlements, may result in revisions to costs and
income and are recognized in the period in which the revisions are determined. In the event that a loss is anticipated
on an uncompleted contract, a provision for the estimated loss is made at the time it is determined. Billings on
contracts may precede or lag revenues earned, and such differences are reported in the balance sheet as current
liabilities (accrued liabilities) and current assets (unbilled revenues), respectively.
Sale-Leaseback Transactions
On June 22, 2007, the Company sold its facility in Charlotte, NC and entered into a leaseback for a portion of
the facility under a 10-year lease agreement. Net proceeds to the Company for the sale of the property were
approximately $4,800,000. The $800,000 gain on the transaction was deferred and will be recognized as income
over the 10-year leaseback period. The lease agreement has been recorded as a capital lease, refer to note 7.
F-9
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On January 28, 2005, the Company sold its corporate headquarters property and entered into a leaseback for a
portion of the facility under a 10-year lease agreement. Net proceeds to the Company for the sale of the property
were approximately $2,700,000 and the gain on the transaction was $2,200,000. Of the total gain, $1,000,000 was
recognized in 2005 under the caption other income, and $1,200,000 was deferred and will be recognized as income
over the 10-year leaseback period. Additionally, $500,000 of non-cash value (rent abatement) will be recognized on
a straight-line basis as lower operating expenses over the 10-year leaseback period.
Shipping and Handling Costs
Shipping and handling costs are a component of cost of products sold.
Stock-Based Compensation
Effective April 1, 2006, the Company adopted SFAS 123(R), "Share-Based Payment," applying the modified
prospective method. This Statement requires all equity-based payments to employees, including grants of employee
stock options, to be recognized in the statement of earnings based on the grant date fair value of the award. Under
the modified prospective method, the Company is required to record equity-based compensation expense for all
awards granted after the date of adoption and for the unvested portion of previously granted awards outstanding as
of the date of adoption. The adoption of SFAS 123(R) resulted in $1,230,000 ($0.06 per share) of non-deductible
incentive stock option expense in the year ended March 31, 2007. Stock compensation expense is included in cost
of goods sold, selling, and general and administrative expense. The Company uses a straight-line method of
attributing the value of stock-based compensation expense, subject to minimum levels of expense, based on vesting.
Prior to April 1, 2006, the Company accounted for the stock option plans under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees” (APB 25) and related Interpretations. No stock-based employee compensation cost was reflected in net
income, as all options granted under these plans had an exercise price equal to the market value of the underlying
common stock on the date of grant and the number of options granted was fixed.
The Company's net income and earnings per share as if the fair value based method had been applied to all
outstanding and unvested awards for fiscal year 2006 is as follows:
Year Ended
March 31,2006
Net income, as reported ..........................................................
$
Deduct: Total stock-based employee
59,796
compensation expense determined under
fair value based method for all awards,
net of related tax effects................................................................
Net income, pro forma ................................................................
$
(577)
59,219
Basic income per share:
As reported................................................................................................
3.73
3.69
Pro forma ................................................................................................
$
$
Diluted income per share:
As reported................................................................................................
3.60
3.56
Pro forma ................................................................................................
$
$
F-10
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In November 2005, the Financial Accounting Standards Board (FASB) issued Staff Position ("FSP") FAS
123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.” FSP
FAS 123(R)-3 provides an alternative transition method for establishing the beginning balance of the pool of excess
tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123(R) (the
"APIC Pool"). Effective in the fourth quarter of fiscal 2007, the Company elected to adopt the alternative transition
method provided in FSP FAS 123(R)-3 for establishing the beginning balance of the APIC Pool. This method
consists of a computational component that establishes a beginning balance of the APIC Pool related to employee
compensation and a simplified method ("short-cut method") to determine the subsequent impact on the APIC Pool
of employee awards that are fully vested and outstanding upon the adoption of SFAS No. 123(R).
See Note 13 for further discussion of stock-based compensation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Warranties
The Company offers warranties for certain products it sells. The specific terms and conditions of those
warranties vary depending upon the product sold and the country in which the Company sold the product. The
Company generally provides a basic limited warranty, including parts and labor for any product deemed to be
defective for a period of one year. The Company estimates the costs that may be incurred under its basic limited
warranty, based largely upon actual warranty repair costs history, and records a liability in the amount of such costs
in the month that the product revenue is recognized. The resulting accrual balance is reviewed during the year.
Factors that affect the Company’s warranty liability include the number of units sold, historical and anticipated rate
of warranty claims, and cost per claim.
Changes in the Company’s product warranty accrual are as follows:
March 31,
Balance at beginning of year...................................................................................
Accrual for warranties issued .................................................................................
Warranties settled ................................................................................................
$
Balance at end of year.............................................................................................
1,263
3,300
(3,160)
1,403
$
2008
2007
$
$
2,132
3,770
(4,639)
1,263
3. Discontinued Operations
In May 2002, the Company sold substantially all of the assets of Automatic Systems, Inc. (ASI). The ASI
business was the principal business unit in the Company’s former Solutions – Automotive segment. The Company
received $20,600,000 in cash and an 8% subordinated note in the principal amount of $6,800,000 which is payable
at a rate of $214,000 per quarter over eight years beginning August 2004. Due to the uncertainty surrounding the
financial viability of the debtor, the note has been recorded at the estimated net realizable value of $0. Principal
payments received on the note are recorded as income from discontinued operations at the time of receipt. All
interest and principal payments required under the note have been made to date. The gross value of the note as of
March 31, 2008 is approximately $3,600,000.
F-11
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4. Unbilled Revenues and Excess Billings
Costs incurred on uncompleted contracts ...............................................................
Estimated earnings ..................................................................................................
Revenues earned to date .........................................................................................
Less billings to date ................................................................................................
$
$
March 31,
2008
2007
38,039
12,334
50,373
41,179
9,194
$
$
50,014
12,119
62,133
48,042
14,091
The net amounts above are included in the consolidated balance sheets under the following captions:
Unbilled revenues ...........................................................................................................
Accrued liabilities ...........................................................................................................
$
$
5. Inventories
Inventories consisted of the following:
At cost—FIFO basis:
Raw materials .........................................................................................................
Work-in-process .....................................................................................................
Finished goods ........................................................................................................
$
LIFO cost less than FIFO cost ........................................................................................
Net inventories................................................................................................................
$
March 31,
2008
2007
9,574
(380)
9,194
$
$
15,050
(959)
14,091
March 31,
2008
2007
48,640
10,454
44,102
103,196
(14,864)
88,332
$
$
45,006
9,050
36,606
90,662
(13,483)
77,179
6. Marketable Securities
Marketable securities are held for the settlement of the Company’s general and products liability insurance
claims filed through the Company’s wholly-owned captive insurance subsidiary, CM Insurance Company, Inc. (see
Notes 2 and 14). In accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity
Securities,” the Company reviews its marketable securities for declines in market value that may be considered other
than temporary. The Company considers market value declines to be other than temporary if they are declines for a
period longer than six months and in excess of 20% of original cost. Based on the Company’s review no unrealized
losses represented an other than temporary impairment for the years ended March 31, 2008 and 2007. As of March 31,
2006, in accordance with SFAS No. 115, the Company reduced the cost bases of certain equity securities since it
was determined that the unrealized losses on those securities were other than temporary in nature. This
determination resulted in the recognition of a pre-tax charge to earnings of $78,000 for the year ended March 31,
2006, classified within other (income) and expense, net.
The following is a summary of available-for-sale securities at March 31, 2008:
Equity securities..........................................................
Gross
Unrealized
Gains
$
4
Cost
$ 30,945
F-12
Gross
Unrealized
Losses
$
Estimated
Fair
Value
1,142 $ 29,807
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The aggregate fair value of investments and unrealized losses on available-for-sale securities in an unrealized
loss position at March 31, 2008 are as follows:
Securities in a continuous loss position for less than 12 months
Securities in a continuous loss position for more than 12 months
Aggregate
Fair Value
Unrealized
Losses
$ 17,636
10,938
$ 28,574
$
$
580
562
1,142
The net gains related to sales of marketable securities totaled $88,000, $4,360,000 and $1,436,000 in fiscal
2008, 2007 and 2006, respectively.
The following is a summary of available-for-sale securities at March 31, 2007:
Equity securities..........................................................
Gross
Unrealized
Gains
$
68
Cost
$ 28,886
Gross
Unrealized
Losses
$
Estimated
Fair
Value
34 $ 28,920
Net unrealized losses included in the balance sheet at March 31, 2008 amounted to $1,138,000 and the related
income tax benefit was $398,000. Net unrealized gains included in the balance sheet at March 31, 2007 amounted to
$34,000 and the related income taxes were $12,000. Unrealized gains and losses, net of related income taxes, are
reflected as a component of accumulated other comprehensive loss within shareholders’ equity.
7. Property, Plant, and Equipment
Consolidated property, plant, and equipment of the Company consisted of the following:
Land and land improvements........................................................................................ $
Buildings.......................................................................................................................
Machinery, equipment, and leasehold improvements...................................................
Construction in progress ...............................................................................................
4,503
32,656
110,192
2,747
150,098
Less accumulated depreciation .....................................................................................
91,684
Net property, plant, and equipment............................................................................... $ 58,414
2008
2007
$
5,036
29,657
104,479
2,277
141,449
86,218
$ 55,231
March 31,
Buildings include assets recorded under capital leases amounting to $3,147,000 and $0 for the years ended
March 31, 2008 and 2007, respectively. Accumulated depreciation includes accumulated amortization of the assets
recorded under capital leases amounting to $236,000 at March 31, 2008.
Depreciation expense, including amortization of assets recorded under capital leases, was $8,701,000,
$8,106,000, and $8,575,000 for the years ended March 31, 2008, 2007 and 2006, respectively.
F-13
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
8. Goodwill and Intangible Assets
As discussed in Note 2, goodwill is not amortized but is periodically tested for impairment, in accordance with
the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible
Assets.” Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair
value. The fair value of a reporting unit is determined using a discounted cash flow methodology. The Company’s
reporting units are determined based upon whether discrete financial information is available and regularly
reviewed, whether those units constitute a business, and the extent of economic similarities between those reporting
units for purposes of aggregation. As a result of this analysis, the reporting units identified under SFAS No. 142
were at the component level, or one level below the reporting segment level as defined under SFAS No. 131,
“Disclosures about Segments of an Enterprise and Related Information.” The Products segment was subdivided
into three reporting units and the Solutions segment was subdivided into two reporting units.
Identifiable intangible assets acquired in a business combination are amortized over their useful lives unless
their useful lives are indefinite, in which case those intangible assets are tested for impairment annually and not
amortized until their lives are determined to be finite.
No impairment charges related to goodwill or intangible assets were recorded during fiscal 2008, 2007 or
2006.
All goodwill reported in fiscal 2008 and 2007 was related to the products segment. A summary of changes in
goodwill during the years ended March 31, 2008 and 2007 is as follows:
Balance at March 31, 2006 ....................................................................................
Currency translation...............................................................................................
Balance at March 31, 2007 ....................................................................................
Currency translation...............................................................................................
Balance at March 31, 2008 ....................................................................................
$ 184,917
717
$ 185,634
1,421
$ 187,055
Patents and other intangibles, net amounted to $321,000 and $269,000 for the years ended March 31, 2008
and 2007, respectively. Based on the current amount of patents and other, net, the estimated amortization expense
for each of the succeeding five years is expected to be $107,000, $85,000, $67,000, $45,000, and 17,000,
respectively.
9. Accrued Liabilities and Other Non-current Liabilities
Consolidated accrued liabilities of the Company consisted of the following:
March 31,
Accrued payroll ........................................................................................................................
Accrued pension cost ................................................................................................................
Interest payable.........................................................................................................................
Accrued workers compensation................................................................................................
Accrued income taxes payable................................................................................................
Accrued postretirement benefit obligation................................................................................
Accrued health insurance..........................................................................................................
Accrued general and product liability costs..............................................................................
Other accrued liabilities ............................................................................................................
2008
$ 18,466
338
4,976
3,520
7,311
1,332
4,026
4,010
11,876
$ 55,855
2007
$ 17,302
245
5,408
3,000
7,723
1,456
3,466
4,000
9,744
$ 52,344
F-14
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Consolidated other non-current liabilities of the Company consisted of the following:
Accumulated postretirement benefit obligation ................................................................
$
Accrued general and product liability costs..............................................................................
Accrued pension cost ................................................................................................................
Accrued workers compensation................................................................................................
Other non-current liabilities................................................................................................
9,362
16,761
16,603
2,253
3,865
$ 48,844
2008
2007
$
9,015
17,078
28,531
6,104
2,683
$ 63,411
March 31,
10. Debt
Consolidated long-term debt of the Company consisted of the following:
March 31,
Revolving Credit Facility due February 22, 2011 ................................................................
10% Senior Secured Notes ................................................................................................
Capital lease obligations ................................................................................................
Other senior debt................................................................................................
Total senior debt ................................................................................................
8 7/8% Senior Subordinated Notes due November 1, 2013 with interest
-
-
3,006
3,711
6,717
$
2008
payable in semi-annual installments ................................................................
Total................................................................................................................................
Less current portion ................................................................................................
129,855
136,572
521
$ 136,051
$
2007
-
22,125
-
4,340
26,465
136,000
162,465
297
$ 162,168
In March, 2006, the Company amended and expanded its revolving credit facility. The Revolving Credit
Facility provides availability up to a maximum of $75,000,000. Provided there is no default, the Company may
request an increase in the availability of the Revolving Credit Facility by an amount not exceeding $50,000,000,
subject to lender approval. The unused Revolving Credit Facility totaled $63,800,000, net of outstanding
borrowings of $0 and outstanding letters of credit of $11,200,000. Interest on the revolver is payable at varying
Eurodollar rates based on LIBOR or prime plus a spread determined by our leverage ratio amounting to 87.5 or 0
basis points, respectively, at March 31, 2008. 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 the Company, including certain financial requirements and a restriction on dividend payments, with
which the Company was in compliance as of March 31, 2008.
The Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005 amounted to
$129,855,000 at March 31, 2008 and are due November 1, 2013. Provisions of the 8 7/8% Notes include, without
limitation, restrictions on indebtedness, asset sales, and dividends and other restricted payments. Until November 1,
2008, the Company 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. The 8 7/8% Notes are redeemable at the option of the
Company, in whole or in part, at prices declining annually from the Make-Whole Price (as defined in the 8 7/8%
Notes agreement) 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. During fiscal 2008, the Company used cash on hand to repurchase $6,145,000 of the outstanding 8
7/8% Notes.
F-15
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On August 1, 2007 the Company used cash on hand to redeem all of the remaining $22,125,000 of its
outstanding 10% Senior Secured Notes.
Cost of bond redemptions, including premiums and the write-off of deferred financing fees, was $1,794,000,
$5,188,000 and $9,201,000 in fiscal 2008, 2007 and 2006 respectively.
The carrying amount of the Company’s revolving credit facility approximates the fair value based on current
market rates. The Company’s Senior Subordinated Notes have an approximate fair market value of $132,452,000
based on quoted market prices, the total of which is more than their carrying amount of $129,855,000.
On June 22, 2007, the Company recorded a capital lease resulting from the sale and partial leaseback of its
facility in Charlotte, NC under a 10 year lease agreement. The outstanding balance on the capital lease of
$3,006,000 as of March 31, 2008 is included in senior debt in the consolidated balance sheets.
The principal payments scheduled to be made as of March 31, 2008 on the above debt are as follows (in
thousands):
2009
2010
2011
2012
2013
Thereafter
$
521
505
433
425
447
134,241
International Lines of Credit and Loans
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 default, as mutually agreed between our subsidiaries and the local bank at
the time of each specific transaction. Effective August 1, 2007, the Company issued a guarantee to a third party
lender which secures any borrowing by Univeyor, one of the Company’s wholly-owned foreign subsidiaries, under
Univeyor’s credit facility. The credit facility provides availability up to a maximum of approximately $12,705,000.
The outstanding borrowings on this credit facility were approximately $11,294,000 at March 31, 2008.
In addition to the above facilities, our foreign subsidiaries have certain fixed term bank loans. As of March 31,
2008, significant secured loans totaled $3,325,000. There were no significant unsecured loans outstanding at March
31, 2008.
11. Pensions and Other Benefit Plans
The Company provides retirement and pension plans, including defined benefit and defined contribution
plans, and postretirement benefit plans to certain employees. Effective March 31, 2007, the Company adopted
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),” which required the recognition in pension and other
postretirement benefits obligations and accumulated other comprehensive income of actuarial gains or losses, prior
service costs or credits and transition assets or obligations that had previously been deferred under the reporting
requirements of SFAS No. 87, SFAS No. 106 and SFAS No. 132(R). 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.
F-16
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Pension Plans
The Company provides defined benefit pension plans to certain employees. The Company uses March 31 as
the measurement date for its Yale Industrial Products GmbH pension plan and December 31 as the measurement
date for all of its other pension plans. The following provides a reconciliation of benefit obligation, plan assets, and
funded status of the plans:
March 31,
2008
2007
Change in benefit obligation:
Benefit obligation at beginning of year ........................................................................
Service cost ...................................................................................................................
Interest cost ...................................................................................................................
Actuarial (gain) loss................................................................................................
Benefits paid .................................................................................................................
Foreign exchange rate changes .....................................................................................
Benefit obligation at end of year...................................................................................
$ 139,621
4,386
8,277
(4,827)
(6,973)
389
$ 140,873
$ 134,148
4,147
7,608
22
(6,346)
42
$ 139,621
Change in plan assets:
Fair value of plan assets at beginning of year...............................................................
Actual gain on plan assets.............................................................................................
Employer contribution ................................................................................................
Benefits paid .................................................................................................................
Foreign exchange rate changes .....................................................................................
Fair value of plan assets at end of year .........................................................................
$ 110,845
6,859
14,466
(6,973)
343
$ 125,540
$ 100,206
10,989
5,960
(6,346)
36
$ 110,845
Funded status ...............................................................................................................
Unrecognized actuarial loss ..........................................................................................
Unrecognized prior service cost ...................................................................................
$
Net amount recognized ................................................................................................
$ (15,333)
21,289
1,943
7,899
$ (28,776)
27,918
2,213
1,355
$
Amounts recognized in the consolidated balance sheets are as follows:
Other assets – non current.............................................................................................
$
Accrued liabilities .........................................................................................................
Other non-current liabilities..........................................................................................
Deferred tax effect of accumulated other comprehensive loss ................................
Accumulated other comprehensive loss........................................................................
$
Net amount recognized ................................................................................................
1,608
(338)
(16,603)
9,252
13,980
7,899
2008
2007
-
(245)
(28,531)
12,059
18,072
1,355
$
$
March 31,
In fiscal 2009, an estimated net loss of $875,000 and prior service cost of $340,000 for the defined benefit
pension plans will be amortized from accumulated other comprehensive income to net periodic benefit cost.
Net periodic pension cost included the following components:
Year Ended March 31,
2007
2006
2008
Service costs—benefits earned during the period.............................................
Interest cost on projected benefit obligation.....................................................
Expected return on plan assets..........................................................................
Net amortization ...............................................................................................
Curtailment/settlement loss...............................................................................
Net periodic pension cost..................................................................................
$
$
4,386
8,277
(8,198)
2,014
80
6,559
$
$
4,147
7,608
(7,244)
2,773
156
7,440
$
$
4,004
7,213
(6,753)
2,518
-
6,982
F-17
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Information for pension plans with a projected benefit obligation in excess of plan assets is as follows:
March 31,
Projected benefit obligation ..........................................................................................
Fair value of plan assets................................................................................................
2008
$ 107,912
91,030
2007
$ 139,621
110,845
Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
March 31,
Accumulated benefit obligation ....................................................................................
Fair value of plan assets................................................................................................
2008
$ 18,912
9,733
2007
$ 124,508
105,345
Unrecognized gains and losses are amortized on a straight-line basis over the average remaining service
period of active participants.
The weighted-average assumptions in the following table represent the rates used to develop the actuarial
present value of the projected benefit obligation for the year listed and also net periodic pension cost for the
following year:
Discount rate...............................................................
Expected long-term rate of return on plan assets........
Rate of compensation increase....................................
March 31,
2008
6.50%
7.50
3.00
2007
6.00%
7.50
3.00
2006
5.75%
7.50
4.00
2005
6.00%
8.25
4.00
The expected rate of return on plan asset assumptions are determined considering historical averages and real
returns on each asset class.
The Company’s retirement plan target and actual asset allocations are as follows:
Equity securities..........................................................
Fixed income ..............................................................
Total plan assets..........................................................
Target
2009
70%
30
100%
March 31,
Actual
2008
60%
40
100%
2007
62%
38
100%
The Company has an investment objective for domestic pension plans to adequately provide for both the
growth and liquidity needed to support all current and future benefit payment obligations. The investment strategy
is to invest in a diversified portfolio of assets which are expected to satisfy the aforementioned objective and
produce both absolute and risk adjusted returns competitive with a benchmark that is a blend of major US and
international equity indexes and an aggregate bond fund. The shift to the targeted allocation is the result of
management’s re-evaluation of its investment allocation. The targeted allocation will be accomplished as some plan
assets governed by collective bargaining contracts will be transferred from fixed income into equity securities, as
well as reallocation of remaining assets to achieve the desired balance during fiscal 2009.
The Company’s funding policy with respect to the defined benefit pension plans is to contribute annually at
least the minimum amount required by the Employee Retirement Income Security Act of 1974 (ERISA).
Additional contributions may be made to minimize PBGC premiums. The Company expects to contribute
$6,777,000 to its pension plans in fiscal 2009.
F-18
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Information about the expected benefit payments for the Company’s defined benefit plans is as follows:
2009
2010
2011
2012
2013
2014-2018
$
6,164
6,643
7,251
8,164
8,968
54,489
Postretirement Benefit Plans
The Company sponsors defined benefit postretirement health care plans that provide medical and life
insurance coverage to certain domestic retirees and their dependents of one of its subsidiaries. Prior to the
acquisition of this subsidiary, the Company did not sponsor any postretirement benefit plans. The Company pays the
majority of the medical costs for certain retirees and their spouses who are under age 65. For retirees and
dependents of retirees who retired prior to January 1, 1989, and are age 65 or over, the Company contributes 100%
toward the American Association of Retired Persons (“AARP”) premium frozen at the 1992 level. For retirees and
dependents of retirees who retired after January 1, 1989, the Company contributes $35 per month toward the AARP
premium. The life insurance plan is noncontributory.
The Company’s postretirement health benefit plans are not funded. The following sets forth a reconciliation of
benefit obligation and the funded status of the plan:
March 31,
2008
2007
Change in benefit obligation:
Benefit obligation at beginning of year ................................................................
Service cost ...................................................................................................................
Interest cost ...................................................................................................................
Actuarial loss (gain)................................................................................................
Benefits paid .................................................................................................................
Benefit obligation at end of year...................................................................................
$ 10,471
3
613
693
(1,086)
$ 10,694
Funded status ................................................................................................
Unrecognized actuarial loss ..........................................................................................
Net amount recognized ................................................................................................
$ (10,694)
5,413
(5,281)
$
$ 12,221
3
658
(193)
(2,218)
$ 10,471
$ (10,471)
5,138
(5,333)
$
Amounts recognized in the consolidated balance sheets are as follows:
Accrued liabilities ................................................................................................
$
Other non-current liabilities..........................................................................................
Deferred tax effect of accumulated other comprehensive loss ................................
Accumulated other comprehensive loss................................................................
$
Net amount recognized ................................................................................................
(1,332)
(9,362)
2,165
3,248
(5,281)
$
$
(1,456)
(9,015)
2,055
3,083
(5,333)
In fiscal 2009, an estimated net loss of $408,000 for the defined benefit postretirement health care plans will
be amortized from accumulated other comprehensive income to net periodic benefit cost.
March 31,
2008
2007
F-19
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net periodic postretirement benefit cost included the following:
Year Ended March 31,
2007
Service cost—benefits attributed to service during the period ................................
$
3
Interest cost................................................................................................................................
613
Amortization of plan net losses................................................................................................
418
$1,034
Net periodic postretirement benefit cost ................................................................
3
658
414
$1,075
2008
$
2006
$
6
751
411
$1,168
For measurement purposes, healthcare costs were assumed to increase 8.25% in fiscal 2008. Healthcare costs
were assumed to increase 9.5% in fiscal 2009 grading down over time to 5% in six years. The discount rate used in
determining the accumulated postretirement benefit obligation was 6.5% and 6.0% as of March 31, 2008 and 2007,
respectively.
Information about the expected benefit payments for the Company’s postretirement health benefit plans is as
follows:
2009
2010
2011
2012
2013
2014-2018
$
1,332
1,242
1,243
1,198
1,148
4,422
Assumed medical claims cost trend rates have an effect on the amounts reported for the health care plans. A
one-percentage point change in assumed health care cost trend rates would have the following effects:
Effect on total of service and interest cost components................................
Effect on postretirement obligation ................................................................
One Percentage
Point Increase
33
599
$
One Percentage
Point Decrease
$
(30)
(541)
Other Benefit Plans
The Company also sponsors defined contribution plans covering substantially all domestic employees.
Participants may elect to contribute basic contributions. These plans provide for employer contributions based
primarily on employee participation. The Company recorded a charge for such contributions of approximately
$1,780,000, $1,650,000 and $1,476,000 for the years ended March 31, 2008, 2007 and 2006, respectively.
12. Employee Stock Ownership Plan (ESOP)
The AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans”
requires that compensation expense for ESOP shares be measured based on the fair value of those shares when
committed to be released to employees, rather than based on their original cost. Also, dividends on those ESOP
shares that have not been allocated or committed to be released to ESOP participants are not reflected as a reduction
of retained earnings. Rather, since those dividends are used for debt service, a charge to compensation expense is
recorded. Furthermore, ESOP shares that have not been allocated or committed to be released are not considered
outstanding for purposes of calculating earnings per share.
The obligation of the ESOP to repay borrowings incurred to purchase shares of the Company’s common stock
is guaranteed by the Company; the unpaid balance of such borrowings, if any, would be reflected in the
consolidated balance sheet as a liability. An amount equivalent to the cost of the collateralized common stock and
representing deferred employee benefits has been recorded as a deduction from shareholders’ equity.
F-20
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Substantially all of the Company’s domestic non-union employees are participants in the ESOP. Contributions
to the plan result from the release of collateralized shares as debt service payments are made. Compensation
expense amounting to $965,000, $808,000 and $653,000 in fiscal 2008, 2007 and 2006, respectively, is recorded
based on the guaranteed release of the ESOP shares at their fair market value. Dividends on allocated ESOP shares,
if any, are recorded as a reduction of retained earnings and are applied toward debt service.
At March 31, 2008 and 2007, 667,177 and 694,751 of ESOP shares, respectively, were allocated or available
to be allocated to participants’ accounts. At March 31, 2008 and 2007, 176,646 and 213,667 of ESOP shares were
pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares at March 31, 2008 amounted to $5,472,000.
13. Earnings per Share and Stock Plans
Earnings per Share
The Company calculates earnings per share in accordance with Statement of Financial Accounting Standards
No. 128, “Earnings per Share” (SFAS No. 128). Basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share includes any dilutive effects of stock options.
The following table sets forth the computation of basic and diluted earnings per share:
Numerator for basic and diluted earnings per share:
Year Ended March 31,
2008
2007
2006
Income from continuing operations ..........................................................
Income from discontinued operations (net of tax) ................................
$
Net income ...............................................................................................
$
36,792
$
557
37,349 $
Denominators:
Weighted-average common stock outstanding—
denominator for basic EPS ................................................................
Effect of dilutive employee stock options.................................................
Adjusted weighted-average common stock
outstanding and assumed conversions—
denominator for diluted EPS................................................................
18,723
435
19,158
$
33,381
704
34,085 $
59,100
696
59,796
18,517
434
16,052
576
18,951
16,628
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note
12).
Stock Plans
Effective April 1, 2006, the Company adopted SFAS 123(R), "Share-Based Payment," applying the modified
prospective method. This Statement requires all equity-based payments to employees, including grants of employee
stock options, to be recognized in the statement of earnings based on the grant date fair value of the award. Under
the modified prospective method, the Company is required to record equity-based compensation expense for all
awards granted after the date of adoption and for the unvested portion of previously granted awards outstanding as
of the date of adoption. Stock based compensation expense amounted to $1,128,000 and $1,230,000 in fiscal 2008
and 2007, respectively. Stock compensation expense is included in cost of goods sold, selling, and general and
administrative expense. The Company uses a straight-line method of attributing the value of stock-based
compensation expense, subject to minimum levels of expense, based on vesting.
F-21
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Long Term Incentive Plan
Effective July 31, 2006, the shareholders of the Company approved the adoption of our Long Term Incentive
Plan (LTIP). The total number of shares of common stock with respect to which awards may be granted under the
plan is 850,000. The LTIP was designed as an omnibus plan and awards may consist of non-qualified stock
options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, or stock bonuses.
A maximum of 600,000 shares may be awarded as restricted stock, restricted stock units, or stock bonuses.
On May 17, 2007, the Company’s Board of Directors approved the terms of the fiscal 2008 awards to be
granted under the 2006 Long Term Incentive plan. Under the plan, the granting of awards to employees may take
the form of options, restricted shares, and performance shares. The Compensation Committee of our Board of
Directors determines the number of shares, the term, the frequency and date, the type, the exercise periods, any
performance criteria pursuant to which awards may be granted and the restriction and other terms and conditions of
each grant in accordance with terms of our Plan.
Options granted were subject to a performance measure and have a maximum term of 10 years and vest ratably
over a four year period from date of grant. Option awards provide for accelerated vesting as a result of reaching
retirement age and a specified number of years of service. Restricted shares vest ratably based on service one-third
after each of years three, four, and five. Performance shares granted are based upon the Company’s performance
over a three year period depending on the Company’s total shareholder return relative to a group of peer companies.
The Company recognized compensation expense for stock option awards and unvested restricted share awards
that vest based on time or market parameters straight-line over the requisite service period for vesting of the award.
Performance based nonvested shares are recognized as compensation expense based on fair value on date of grant,
the number of shares ultimately expected to vest and the vesting period. For accounting purposes, the performance
shares are considered to have a market condition. The effect of the market condition is reflected in the grant date
fair value of the award and, thus compensation expense is recognized on this type of award provided that the
requisite service is rendered (regardless of whether the market condition is achieved). The fair value of a
performance share award is estimated using a Monte Carlo analysis to estimate the total return ranking of CMCO
among the peer companies on the date of grant over the performance period.
For the year ended March 31, 2008, the Company granted 34,457 performance based awards at a weighted
average fair value of $19.40. All 34,457 awards were outstanding and unvested as of March 31, 2008. There were
no performance based awards granted in fiscal 2007 or fiscal 2006. Total unrecognized compensation costs related
to the unvested performance share awards as of March 31, 2008 was $469,000 and is expected be recognized over a
weighted average period of two years.
During fiscal 2008 and 2007, a total of 7,601 and 9,390 shares of stock, respectively, were granted under the
LTIP to the Company’s non-executive directors as part of their annual compensation. The weighted average fair
value grant price of those shares was $25.80 and $19.17 for fiscal 2008 and fiscal 2007, respectively. The expense
related to the shares for fiscal 2008 and 2007 was $196,000 and $180,000, respectively.
During fiscal 2008 and fiscal 2007, restricted stock units were granted under the LTIP to the Company’s non-
executive directors as part of their annual compensation. A summary of the restricted stock unit awards granted to
the Company’s non-executive Directors as of March 31, 2008 is as follows:
Shares
Unvested at March 31, 2006................................
Granted ................................................................
Unvested at March 31, 2007................................
Granted ................................................................
Vested ................................................................
Unvested at March 31, 2008................................
-
7,200
7,200
7,842
(4,521)
10,521
$
Weighted-average
Grant Date
Fair Value
-
19.17
19.17
25.80
19.54
23.96
$
$
F-22
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The expense related to the restricted stock units for fiscal 2008 and 2007 was $130,000 and $40,000,
respectively. Total unrecognized compensation cost related to unvested restricted stock units as of March 31, 2008
is $200,000 and is expected to be recognized over a weighted average period of one year. The fair value of
restricted stock units that vested during the year ended March 31, 2008 was $117,000.
As of March 31, 2008, there were 783,510 shares available for future grants under the Long Term Incentive
Plan.
Stock Option Plans
Existing prior to the adoption of the LTIP, the Company maintained two stock option plans, a Non-Qualified
Stock Option Plan (Non-Qualified Plan) and an Incentive Stock Option Plan (Incentive Plan). Under the Non-
Qualified Plan, options may be granted to officers and other key employees of the Company as well as to non-
employee directors and advisors. As of March 31, 2008, no options have been granted to non-employees. Options
granted under the Non-Qualified and Incentive Plans become exercisable over a four-year period at the rate of 25%
per year commencing one year from the date of grant at an exercise price of not less than 100% of the fair market
value of the common stock on the date of grant. Any option granted under the Non-Qualified plan may be exercised
not earlier than one year from the date such option is granted. Any option granted under the Incentive Plan may be
exercised not earlier than one year and not later than 10 years from the date such option is granted.
A summary of option transactions during each of the three fiscal years in the period ended March 31, 2008 is
as follows:
Shares
1,802,800
Outstanding at March 31, 2005 ................................
45,000
Granted ................................................................
(626,282)
(89,400)
Exercised ................................................................
Cancelled ................................................................
Outstanding at March 31, 2006 ................................
Granted ................................................................
Exercised ................................................................
Cancelled ................................................................
Outstanding at March 31, 2007 ................................
Granted ................................................................
Exercised ................................................................
Cancelled ................................................................
1,132,118
70,000
(240,468)
(30,500)
931,150
5,000
(144,425)
(4,875)
Outstanding at March 31, 2008 ................................
Exercisable at March 31, 2008 ................................
786,850
581,475
Weighted-average
Exercise Price
Weighted-average
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic
Value
$
$
$
$
$
10.89
21.61
11.41
7.76
11.28
22.41
10.82
9.85
12.28
32.85
9.81
5.46
12.91
12.89
4.8
4.0
$ 14,227
$ 10,521
We calculated intrinsic value for those options that had an exercise price lower than the market price of our
common shares as of March 31, 2008. The aggregate intrinsic value of outstanding options as of March 31, 2008 is
calculated as the difference between the exercise price of the underlying options and the market price of our
common shares for the 781,850 options that were in-the-money at that date. The aggregate intrinsic value of
exercisable options as of March 31, 2008 is calculated as the difference between the exercise price of the underlying
options and the market price of our common shares for the 581,475 exercisable options that were in-the-money at
that date. The Company's closing stock price was $30.98 as of March 31, 2008. The total intrinsic value of stock
options exercised was $2,842,000, $3,434,000 and $6,487,000 during fiscal 2008, 2007 and 2006, respectively. As
of March 31, 2008, there are 132,475 options available for future grants under the two stock option plans.
The fair value of shares that vested was $5.14, $3.87 and $4.01 during fiscal 2008, 2007 and 2006,
respectively.
F-23
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cash received from option exercises under all share-based payment arrangements during fiscal 2008 was
$1,416,000. Proceeds from the exercise of stock options under stock option plans are credited to common stock at
par value and the excess is credited to additional paid-in capital.
As of March 31, 2008, $891,000 of unrecognized compensation cost related to non-vested stock options is
expected to be recognized over a weighted-average period of approximately 3 years.
Exercise prices for options outstanding as of March 31, 2008, ranged from $5.46 to $32.85. The following
table provides certain information with respect to stock options outstanding at March 31, 2008:
Range of Exercise Prices
Up to $10.00 ......................................
$10.01 to $20.00. ................................
$20.01 to $30.00 .................................
$30.01 to $40.00 .................................
Stock Options
Outstanding
440,100
80,000
261,750
5,000
786,850
Weighted-average
Exercise Price
7.15
$
14.67
21.67
32.85
$ 12.91
Weighted-average
Remaining
Contractual Life
5.2
6.8
3.5
9.3
4.8
The following table provides certain information with respect to stock options exercisable at March 31, 2008:
Range of Exercise Prices
Up to $10.00 ............................................................................
$10.01 to $20.00. ......................................................................
$20.01 to $30.00 .......................................................................
Stock Options
Outstanding
330,975
48,750
201,750
581,475
$
Weighted-average
Exercise Price
7.66
13.64
21.28
12.89
$
The fair value of stock options granted was estimated on the date of grant using a Black-Scholes option
pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of
traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected stock price volatility. Because the
Company’s employee stock options have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s
opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee
stock options. The weighted-average fair value of the options was $18.48, $12.93 and $12.13 for options granted
during fiscal 2008, 2007 and 2006, respectively. The following table provides the weighted-average assumptions
used to value stock options granted during fiscal 2008, 2007 and 2006:
Year Ended
March 31, 2008
Year Ended
March 31, 2007
Year Ended
March 31, 2006
Assumptions:
Risk-free interest rate....................................
Dividend yield—Incentive Plan ...................
Volatility factor ............................................
Expected life—Incentive Plan ......................
4.9 %
0.0 %
0.571
5.5 years
4.9 %
0.0 %
0.593
5.5 years
4.5 %
0.0 %
0.615
5 years
To determine expected volatility, the Company uses historical volatility based on daily closing prices of its
Common Stock over periods that correlate with the expected terms of the options granted. The risk-free rate is based
on the United States Treasury yield curve at the time of grant for the appropriate term of the options granted.
Expected dividends are based on the Company's history and expectation of dividend payouts. The expected term of
stock options is based on vesting schedules, expected exercise patterns and contractual terms.
F-24
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Restricted Stock
Also existing prior to the adoption of the LTIP, the Company maintains a Restricted Stock Plan. The Company
charges compensation expense and shareholders’ equity for the market value of shares ratably over the restricted
period. Grantees that remain continuously employed with the Company become vested in their shares five years
after the date of the grant. As of March 31, 2008, there were 47,000 shares available for future grants under the
Restricted Stock Plan.
During the Fiscal 2008, 1,000 shares of restricted stock were granted at a weighted average fair value grant
price of $31.69. As of March 31, 2008, there are 3,000 shares of restricted stock outstanding with a weighted
average fair value grant price of $21.39. The expense related to restricted stock was $8,000, $7,000 and $6,000 for
fiscal 2008, 2007 and 2006, respectively.
14. Loss Contingencies
From time to time, the Company is named a defendant in legal actions arising out of the normal course of
business. The Company is not a party to any pending legal proceeding other than ordinary, routine litigation
incidental to our business. The Company does not believe that any of our pending litigation will have a material
impact on its business.
General and Product Liability— Accrued general and product liability costs are the actuarially estimated
reserves based on amounts determined from loss reports, individual cases filed with the Company, and an amount
for losses incurred but not reported. Reserves for certain asbestos related claims are discounted using a risk free
interest rate which ranged from 1.55% to 4.30% as of March 31, 2008. The aggregate amount of undiscounted
reserves and discount amount was $4,430,000 and $1,425,000, respectively, as of March 31, 2008. Payments over
each of the next five years is expected to be $200,000 and $3,430,000 thereafter. The liability for accrued general
and product liability costs is funded by investments in marketable securities (see Notes 2 and 6).
During fiscal 2006, the Company reevaluated the predictability of future cash flows associated with its self-
insured product liability and asbestos reserves and concluded that future cash payments related to reserves for
nonasbestos claims could no longer be discounted due to their underlying uncertainty. This change in estimate
resulted in a reduction in the discount recorded by the company of approximately $1,578,000 ($0.09 diluted EPS)
impact for fiscal 2006.
The following table provides a reconciliation of the beginning and ending balances for accrued general and
product liability:
2008
Accrued general and product liability, beginning of year..............................
$ 21,078
-
Add impact of change in discount estimate ................................
2,201
Add provision for claims ................................................................
Deduct payments for claims................................................................
(2,508)
Accrued general and product liability, end of year................................
$ 20,771
2007
$ 20,969
-
4,343
(4,234)
2006
$ 16,094
1,578
6,342
(3,045)
$ 21,078
$ 20,969
Year Ended March 31,
The per occurrence limits on our self-insurance for general and product liability coverage to Columbus
McKinnon were $2,000,000 from inception through fiscal 2003 and $3,000,000 for fiscal 2004 and thereafter. In
addition to the per occurrence limits, the Company’s coverage is also subject to an annual aggregate limit,
applicable to losses only. These limits range from $2,000,000 to $6,000,000 for each policy year from inception
through fiscal 2008.
F-25
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Along with other manufacturing companies, the Company is subject to various federal, state and local laws
relating to the protection of the environment. To address the requirements of such laws, the Company has adopted a
corporate environmental protection policy which provides that all of its owned or leased facilities shall, and all of its
employees have the duty to, comply with all applicable environmental regulatory standards, and the Company has
initiated an environmental auditing program for our facilities to ensure compliance with such regulatory standards. The
Company has also established managerial responsibilities and internal communication channels for dealing with
environmental compliance issues that may arise in the course of our business. Because of the complexity and changing
nature of environmental regulatory standards, it is possible that situations will arise from time to time requiring the
Company to incur expenditures in order to ensure environmental regulatory compliance. However, the Company is not
aware of any environmental condition or any operation at any of its facilities, either individually or in the aggregate,
which would cause expenditures having a material adverse effect on its results of operations, financial condition or cash
flows and, accordingly, has not budgeted any material capital expenditures for environmental compliance for fiscal
2008.
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, 2026 and March 31, 2038 to range between $5,000,000 and $15,000,000 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 $8,400,000
which has been reflected as a liability in the consolidated financial statements as of March 31, 2008. 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 $400,000 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.
15. Restructuring Charges
The Company analyzes its global capacity requirements in accordance with its ongoing cost savings and
consolidation efforts. As a result, facilities are closed or significantly reorganized and production operations are
transferred to other facilities within the same reporting segment, to better utilize their available capacity. During
fiscal 2008, the Company recorded restructuring costs of $1,179,000 for facility demolition costs and severance.
$1,132,000 and $47,000 of these costs are related to the Solutions and Products segments, respectively. The
Solutions segment costs are related to two separate businesses within the segment. The liability as of March 31,
2008 consists primarily of environmental remediation costs which were accrued in accordance with SFAS No. 143.
F-26
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
During fiscal 2007, the Company recorded restructuring costs of $543,000 for severance and the maintenance
of non-operating facilities being held for sale which are expensed on an as incurred basis in accordance with SFAS
No. 146 “Accounting for Costs Associated with Exit or Disposal Activities.” $519,000 and $24,000 of these costs
are related to the Solutions and Products segments, respectively. The completion of the sale of a previously closed
facility resulted in the reversal of $410,000 of restructuring charges within the Products segment, including
$216,000 of gain on the sale of a non-operating property that had been written down in previous years. The liability
as of March 31, 2007 consisted primarily of environmental remediation costs which were accrued in accordance
with SFAS No. 143.
During fiscal 2006, the Company recorded restructuring costs of $1,609,000 related to environmental
remediation charges, inventory disposal costs, and facility costs as a result of the continued closure, merging and
reorganization of the Company. $1,000,000 and $609,000 of these costs are related to the Products and Solutions
segments, respectively. The charges primarily relate to the cost of removal of certain environmentally hazardous
materials in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations” and FIN 47 ($600,000)
and inventory disposal related to the rationalization of certain product families within our mechanical jacks line
($400,000). In addition, we have accrued additional costs of maintenance of a non-operating facility based on
anticipated sale date ($300,000). The costs associated with the disposal of this facility were originally accrued as a
result of the restructuring occurring prior to the adoption of SFAS No. 146, “Accounting for the Costs Associated
with Exit or Disposal Activities.” As of March 31, 2006, the liability primarily consisted of costs associated with
the preparation and maintenance of a non-operating facility and environmental remediation costs which were
accrued in accordance with SFAS No. 143. The Company had one facility that was completely closed and prepared
for disposal.
The following provides a reconciliation of the activity related to restructuring reserves:
Reserve at March 31, 2005 ............................................................................
Fiscal 2006 restructuring charges ..................................................................
Cash payments ...............................................................................................
Reserve at March 31, 2006 ............................................................................
Fiscal 2007 restructuring charges ..................................................................
Cash payments ...............................................................................................
Restructuring charge reversal ........................................................................
Gain on sale of a non-operating facility.........................................................
Reserve at March 31, 2007 ............................................................................
Fiscal 2008 restructuring charges ..................................................................
Cash payments ...............................................................................................
Reserve at March 31, 2008 ............................................................................
$
$
Employee
16
358
(315)
59
289
(348)
-
-
-
448
(448)
-
$
$
Facility
$
Total
$
128
1,251
(645)
734
254
(195)
(410)
216
599
731
(1,272)
$
$
144
1,609
(960)
793
543
(543)
(410)
216
599
1,179
(1,720)
$
$
$
58
$
58
16. Income Taxes
The provision for income taxes differs from the amount computed by applying the statutory federal income
tax rate to income from continuing operations before income tax expense. The sources and tax effects of the
difference were as follows:
Expected tax at 35% ......................................................................................
State income taxes net of federal benefit .......................................................
Foreign taxes (less) greater than statutory provision .....................................
Permanent items.............................................................................................
Valuation allowance ......................................................................................
Other ..............................................................................................................
Actual tax provision (benefit) ........................................................................
Year Ended March 31,
2007
$ 18,872
910
961
171
-
(375)
2008
$ 20,836
1,238
(633)
315
2,029
(1,046)
$
$ 22,739
$ 20,539
2006
9,854
705
41
370
(44,237)
2,321
$ (30,946)
F-27
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The provision for income tax expense (benefit) consisted of the following:
Year Ended March 31,
2007
2006
2008
Current income tax expense:
United States Federal .............................................................................
$
State taxes ..............................................................................................
Foreign................................................................................................
$
853
1,904
5,357
$
1,228
1,401
5,472
856
1,084
4,082
Deferred income tax expense (benefit):
United States ..........................................................................................
Foreign................................................................................................
14,304
321
$ 22,739
13,831
(1,393)
$ 20,539
(37,099)
131
$ (30,946)
The Company applies the liability method of accounting for income taxes as required by SFAS Statement No.
109, “Accounting for Income Taxes.” The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
March 31,
2008
2007
Deferred tax assets:
Federal net operating loss carryforwards..........................................................................
State and foreign net operating loss carryforwards...........................................................
Employee benefit plans................................................................................................
Asset reserves ...................................................................................................................
Insurance reserves.............................................................................................................
Accrued vacation and incentive costs ...............................................................................
Other ................................................................................................................................
Valuation allowance ................................................................................................
$
Gross deferred tax assets
Deferred tax liabilities:
$
-
5,093
6,729
1,324
8,219
3,420
7,112
(4,093)
27,804
Inventory reserves.............................................................................................................
Property, plant, and equipment .........................................................................................
Gross deferred tax liabilities .........................................................................................
Net deferred tax assets ..............................................................................................
$
(2,289)
(1,658)
(3,947)
23,857
$
13,484
2,064
12,343
1,711
7,372
2,131
9,237
(2,064)
46,278
(2,068)
(2,407)
(4,475)
41,803
The valuation allowance includes $3,029,000 and $0 related to net operating losses at our Univeyor business
and $1,064,000 and $2,064,000 related to state net operating losses in the United States at March 31, 2008 and
2007, respectively. The valuation allowance was established due to uncertainty of the Company's ability to utilize
all of the net operating loss carry forwards before they expire. The Univeyor valuation allowance is for net
operating losses in Denmark which have an indefinite life. The state net operating losses have expiration dates
ranging from 2009 through 2023.
Deferred income taxes are classified within the consolidated balance sheets based on the following breakdown:
March 31,
Net current deferred tax asset ...............................................................................................
Net non-current deferred tax asset ........................................................................................
Net non-current deferred tax liability ...................................................................................
Net deferred tax asset................................................................................................
2008
$ 7,958
17,570
(1,671)
$ 23,857
2007
$ 8,669
34,460
(1,326)
$ 41,803
The net current deferred tax asset and net non-current deferred tax liability are included in prepaid expenses
and other non-current liabilities, respectively.
F-28
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Income from continuing operations before income tax expense (benefit) includes foreign subsidiary income of
$11,512,000, $10,067,000 and $13,034,000 for the years ended March 31, 2008, 2007, and 2006, respectively. Income
from discontinued operations reported in the statement of income is net of tax of $300,000, $373,000 and $375,000 for
the years ended March 31, 2008, 2007, and 2006, respectively. As of March 31, 2008, the Company had unrecognized
deferred tax liabilities related to approximately $24,000,000 of cumulative undistributed earnings of foreign subsidiaries.
These earnings are considered to be permanently invested in operations outside the United States. Determination of the
amount of unrecognized deferred U.S. income tax liability with respect to such earnings is not practicable.
There were 70,725 and 136,511 shares of common stock issued through the exercise of non-qualified stock options
or through the disqualifying disposition of incentive stock options in the years ended March 31, 2008, and 2007,
respectively. The tax benefit to the Company from these transactions, which is credited to additional paid-in capital
rather than recognized as a reduction of income tax expense, was $482,000 and $311,000 in 2008 and 2007,
respectively. This tax benefit has also been recognized in the consolidated balance sheet as an increase in deferred tax
assets.
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,” (“FIN 48”) an interpretation of FASB
Statement of Financial Accounting Standards ("SFAS") No. 109. FIN 48 clarifies the accounting for uncertainty in
income taxes recognized under SFAS 109. FIN 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 48, the Company recorded a reduction in retained earnings for the cumulative effect
adjustment of $186,000 to its $2,600,000 of unrecognized tax benefits, all of which would favorably impact the effective
tax rate if recognized. During fiscal 2008, the balance of unrecognized tax benefits decreased $153,000 as a result of
foreign currency translation, partially offset by an increase related to certain intercompany transactions that have not
been audited by the various tax jurisdictions and a matter that arose during a state income tax audit.
The Company had $133,000 accrued for the payment of interest and penalties at March 31, 2008. The Company
recognizes interest expense or penalties related to uncertain tax positions as a part of income tax expense in its
consolidated statement of income. The Company is currently open to audit by the Internal Revenue Service for the years
ending March 31, 2005 through 2008.
Below is a summary of fiscal 2008 changes to the unrecognized tax benefit (excluding interest and penalties):
Balance at April 1, 2007.......................................................................................................................
Additions based on upon tax positions related to prior years ...............................................................
Foreign currency translation.................................................................................................................
Balance at March 31, 2008...................................................................................................................
$ 2,600
76
(229)
$ 2,447
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 March 31, 2009.
17. Rental Expense and Lease Commitments
Rental expense for the years ended March 31, 2008, 2007 and 2006 was $5,746,000, $4,483,000, and $3,914,000,
respectively. The following amounts represent future minimum payment commitments as of March 31, 2008 under non-
cancelable operating leases extending beyond one year:
Year Ended March 31,
Real Property
1,988
2009................................................................................................
$
1,531
2010................................................................................................
1,215
2011................................................................................................
556
2012................................................................................................
484
2013................................................................................................
$
Vehicles/Equipment
3,130
2,592
2,049
1,524
1,048
Total
$ 5,118
4,123
3,264
2,080
1,532
F-29
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
18. 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.
As of and for the year ended March 31, 2008:
As of March 31, 2008:
Current assets:
Cash ...................................................................................
$
Trade accounts receivable and unbilled
revenues........................................................................
Inventories .........................................................................
Prepaid expenses ...............................................................
Total current assets.......................................................
Net property, plant, and equipment .............................................
Goodwill and other intangibles, net ............................................
Intercompany balances ................................................................
Other non-current assets ..............................................................
$
Total assets ................................................................
Current liabilities .........................................................................
$
Long-term debt, less current portion ...........................................
Other non-current liabilities ........................................................
Total liabilities..............................................................
Shareholders’ equity................................................................
42,714
129,855
12,312
184,881
199,856
Total liabilities and shareholders’
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
31,800
$
(341)
$
44,535
$
—
$
75,994
62,992
35,375
8,264
138,431
26,834
89,008
50,555
79,909
384,737
—
18,797
1,025
19,481
11,916
57,034
(59,869)
194,783
223,345
15,951
2,815
10,757
29,523
193,822
43,917
36,525
8,243
133,220
19,664
41,334
(64,821)
30,643
160,040
52,113
3,381
25,775
81,269
78,771
$
$
$
$
$
$
—
(2,365)
—
(2,365)
—
—
74,135
(249,857)
(178,087)
(1,119)
—
—
(1,119)
(176,968)
$
$
106,909
88,332
17,532
288,767
58,414
187,376
—
55,478
590,035
109,659
136,051
48,844
294,554
295,481
equity ................................................................
$
384,737
$
223,345
$
160,040
$
(178,087)
$
590,035
For the Year Ended March 31, 2008:
Net sales.......................................................................................
$
Cost of products sold................................................................
Gross profit (loss) ........................................................................
Selling, general and administrative expenses..............................
Restructuring charges .......................................................... ……………….
Impairment loss ................................................................... ……………….
Amortization of intangibles................................................. …………………….
Income (loss) from operations.....................................................
Interest and debt expense ............................................................
Other (income) and expense, net .................................................
Income from continuing operations before
302,676
219,366
83,310
49,834
836
—
112
32,528
9,918
641
income tax expense (benefit)..................................................
Income tax expense (benefit).......................................................
Income (loss) from continuous operations ................................
Income from discontinued operations .........................................
$
Net income (loss).........................................................................
21,969
6,068
15,901
557
16,458
$
$
176,901
129,575
47,326
18,043
—
—
3
29,280
3,554
(643)
26,369
11,080
15,289
—
15,289
$
$
185,157
131,035
54,122
41,725
343
2,509
—
9,545
1,157
(3,010)
11,398
5,679
5,719
—
5,719
$
$
$
(41,400)
(41,195)
(205)
—
—
—
—
(205)
—
—
(205)
(88)
(117)
—
(117)
$
623,334
438,781
184,553
109,602
1,179
2,509
115
71,148
14,629
(3,012)
59,531
22,739
36,792
557
37,349
F-30
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
For the Year Ended March 31, 2008:
Operating activities:
$
Cash provided (used) by operating activities ................................
Investing activities:
Sales of marketable securities, net ..............................................................
Capital expenditures ................................................................
Proceeds from sale of businesses and surplus real estate............................
Proceeds from discontinued operations (net of tax)................................
Net cash (used) provided by investing activities ................................
Financing activities:
Proceeds from exercise of stock options ................................
Net borrowings under revolving line-of-credit
—
(7,228)
—
557
(6,671)
47,514
1,416
agreements .............................................................................................
Repayment of debt.......................................................................................
Deferred financing costs incurred ...............................................................
Other ................................................................................................
Net cash used by financing activities ..........................................................
Effect of exchange rate changes on cash ................................
Net change in cash and cash equivalents ................................
Cash and cash equivalents at
beginning of year................................................................
Cash and cash equivalents at end of year................................
—
(29,898)
(2)
1,075
(27,409)
—
13,434
18,366
31,800
$
$
(1,483)
$
13,558
$
1
$
59,590
—
(2,745)
5,504
—
2,759
—
—
(142)
—
—
(142)
(313)
821
(1,562)
(3,093)
—
—
(4,655)
1
18
(1,029)
—
—
(1,010)
5,191
13,084
(1,162)
(341)
$
31,451
44,535
$
$
—
—
—
—
—
(1)
—
—
—
—
(1)
—
—
—
—
$
(1,562)
(13,066)
5,504
557
(8,567)
1,416
18
(31,069)
(2)
1,075
(28,562)
4,878
27,339
48,655
75,994
As of and for the year ended March 31, 2007:
As of March 31, 2007:
Current assets:
Cash ...................................................................................
$
Trade accounts receivable and unbilled
revenues........................................................................
Inventories .........................................................................
Prepaid expenses ...............................................................
Total current assets.......................................................
Net property, plant, and equipment .............................................
Goodwill and other intangibles, net ............................................
Intercompany balances ................................................................
Other non-current assets ..............................................................
$
Total assets ................................................................
Current liabilities .........................................................................
$
Long-term debt, less current portion ...........................................
Other non-current liabilities ........................................................
Total liabilities..............................................................
Shareholders’ equity................................................................
36,388
158,125
27,646
222,159
175,786
Total liabilities and shareholders’
18,366
$
(1,162)
$
31,451
$
—
$
48,655
64,849
34,548
6,237
124,000
24,662
88,703
66,971
93,609
397,945
45
17,175
2,707
18,765
11,508
57,037
(77,385)
194,922
204,847
15,376
—
11,143
26,519
178,328
47,425
27,616
9,085
115,577
19,061
40,163
(63,602)
29,647
140,846
48,120
4,043
24,622
76,785
64,061
$
$
$
$
$
$
—
(2,160)
—
(2,160)
—
—
74,016
(249,856)
(178,000)
(1,150)
—
—
(1,150)
(176,850)
$
$
112,319
77,179
18,029
256,182
55,231
185,903
—
68,322
565,638
98,734
162,168
63,411
324,313
241,325
equity ................................................................
$
397,945
$
204,847
$
140,846
$
(178,000)
$
565,638
F-31
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
For the Year Ended March 31, 2007:
Net sales.......................................................................................
$
Cost of products sold................................................................
Gross profit ..................................................................................
Selling, general and administrative expenses..............................
Restructuring charges .......................................................... ……………….
Amortization of intangibles................................................. …………………….
Income from operations...............................................................
Interest and debt expense ............................................................
Other (income) and expense, net .................................................
Income from continuing operations before
287,223
210,020
77,203
42,503
(137)
109
34,728
12,154
4,860
income tax expense (benefit)..................................................
Income tax expense (benefit).......................................................
Income from continuous operations ............................................
Income from discontinued operations .........................................
$
Net income...................................................................................
17,714
7,506
10,208
704
10,912
$
$
170,633
127,691
42,942
17,490
—
3
25,449
3,948
(913)
22,414
8,916
13,498
—
13,498
$
$
179,235
134,985
44,250
35,835
270
71
8,074
328
(5,841)
13,587
4,197
9,390
—
9,390
$
$
$
(47,243)
(47,448)
205
—
—
—
205
—
—
205
(80)
285
—
285
$
589,848
425,248
164,600
95,828
133
183
68,456
16,430
(1,894)
53,920
20,539
33,381
704
34,085
For the Year Ended March 31, 2007:
Operating activities:
$
Cash provided (used) by operating activities ................................
Investing activities:
Sales of marketable securities, net ..............................................................
Capital expenditures ................................................................
Proceeds from sale of businesses and surplus real estate............................
Proceeds from discontinued operations (net of tax)................................
Net cash (used) provided by investing activities ................................
Financing activities:
Proceeds from exercise of stock options ................................
Net borrowings under revolving line-of-credit
—
(6,319)
1,906
704
(3,709)
41,024
2,601
agreements .............................................................................................
(Repayment) borrowing of debt ................................................................
Deferred financing costs incurred ...............................................................
Dividends paid.............................................................................................
Other ................................................................................................
Net cash (used) provided by financing
—
(49,522)
(449)
—
890
activities................................................................................................
Effect of exchange rate changes on cash ................................
Net change in cash and cash equivalents ................................
Cash and cash equivalents at
beginning of year................................................................
Cash and cash equivalents at end of year................................
$
(46,480)
—
(9,165)
$
925
$
(1,667)
$
5,213
$
45,495
—
(1,099)
2,970
—
1,871
1,167
(3,235)
511
—
(1,557)
—
—
—
—
—
1,167
(10,653)
5,387
704
(3,395)
(15)
13,489
(13,474)
2,601
—
—
—
(2,324)
—
(2,339)
(158)
299
3,045
3,558
—
(5,937)
—
14,155
992
11,923
—
—
—
8,261
—
(5,213)
—
—
—
—
$
3,045
(45,964)
(449)
—
890
(39,877)
834
3,057
45,598
48,655
27,531
18,366
$
(1,461)
(1,162)
$
19,528
31,451
$
F-32
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the year ended March 31, 2006:
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
For the Year Ended March 31, 2006:
Net sales.......................................................................................
$
Cost of products sold................................................................
Gross profit ..................................................................................
Selling, general and administrative expenses..............................
Restructuring charges .......................................................... ……………….
Amortization of intangibles................................................. …………………….
Income from operations...............................................................
Interest and debt expense ............................................................
Other (income) and expense, net .................................................
(Loss) income from continuing operations before
268,570
200,639
67,931
40,811
1,635
179
25,306
19,558
8,055
income tax (benefit) expense..................................................
Income tax (benefit) expense.......................................................
Income from continuous operations ............................................
Income from discontinued operations .........................................
$
Net income...................................................................................
(2,307)
(37,950)
35,643
696
36,339
$
$
$
152,181
114,042
38,139
16,003
—
3
22,133
4,876
20
17,237
2,912
14,325
—
14,325
$
163,787
120,842
42,945
31,081
(26)
67
11,823
233
(3,027)
14,617
4,263
10,354
—
10,354
$
$
$
(28,531)
(27,138)
(1,393)
—
—
—
(1,393)
—
—
(1,393)
(171)
(1,222)
—
(1,222)
$
556,007
408,385
147,622
87,895
1,609
249
57,869
24,667
5,048
28,154
(30,946)
59,100
696
59,796
26,358
$
8,418
$
11,587
$
—
$
46,363
$
For the Year Ended March 31, 2006:
Operating activities:
Cash provided by operating activities .........................................................
Investing activities:
Purchases of marketable securities, net.......................................................
Capital expenditures ................................................................
Proceeds from sale of businesses and surplus real estate............................
Proceeds from discontinued operations note receivable .............................
Net cash used by investing activities...........................................................
Financing activities:
Proceeds from issuance of common stock ................................
Proceeds from exercise of stock options ................................
Net borrowings under revolving line-of-credit
—
(4,759)
—
857
(3,902)
56,619
7,149
agreements .............................................................................................
Repayment of debt.......................................................................................
Proceeds from issuance of long-term debt ................................
Deferred financing costs incurred ...............................................................
Dividends paid.............................................................................................
Other ................................................................................................
Net cash provided (used) by financing
240
(204,832)
136,000
(2,877)
9,067
2,712
activities................................................................................................
4,078
Effect of exchange rate changes on cash ................................
Net change in cash and cash equivalents ................................
Cash and cash equivalents at
beginning of year................................................................
Cash and cash equivalents at end of year................................
$
-
26,534
—
(800)
468
—
(332)
—
—
—
—
—
—
(8,854)
—
(8,854)
4
(764)
(888)
(2,871)
1,623
—
(2,136)
—
—
1,121
(335)
—
—
(213)
—
573
325
10,349
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
(888)
(8,430)
2,091
857
(6,370)
56,619
7,149
1,361
(205,167)
136,000
(2,877)
—
2,712
(4,203)
329
36,119
9,479
45,598
997
(697)
27,531
$
(1,461)
$
9,179
19,528
$
F-33
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
19. 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. 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 the operating earnings of the respective business units.
Segment information as of and for the years ended March 31, 2008, 2007 and 2006 is as follows:
Year Ended March 31, 2008
Solutions
$ 53,321
(7,239)
858
29,950
971
Products
$ 570,013
78,387
7,958
560,085
12,095
Total
$ 623,334
71,148
8,816
590,035
13,066
Year Ended March 31, 2007
Solutions
$ 62,759
(3,022)
858
38,978
254
Products
$ 527,089
71,478
7,431
526,660
10,399
Total
$ 589,848
68,456
8,289
565,638
10,653
Year Ended March 31, 2006
Solutions
$ 62,111
2,020
1,019
35,444
499
Products
$ 493,896
55,849
7,805
530,600
7,931
Total
$ 556,007
57,869
8,824
566,044
8,430
Sales to external customers......................................................................
Income (loss) from operations .................................................................
Depreciation and amortization.................................................................
Total assets...............................................................................................
Capital expenditures ................................................................................
Sales to external customers......................................................................
Income (loss) from operations .................................................................
Depreciation and amortization.................................................................
Total assets...............................................................................................
Capital expenditures ................................................................................
Sales to external customers......................................................................
Income from operations ...........................................................................
Depreciation and amortization.................................................................
Total assets...............................................................................................
Capital expenditures ................................................................................
F-34
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Financial information relating to the Company’s operations by geographic area is as follows:
Net sales:
United States.............................................................................................................
Europe ......................................................................................................................
Canada ......................................................................................................................
Other ................................................................................................................
Total..........................................................................................................................
$ 447,977
136,051
18,672
20,634
$ 623,334
$ 424,696
121,908
26,757
16,487
$ 589,848
$ 394,657
112,868
30,492
17,990
$ 556,007
Year Ended March 31,
2007
2006
2008
Total assets:
United States.............................................................................................................
Europe.......................................................................................................................
Canada ......................................................................................................................
Other .........................................................................................................................
Total..........................................................................................................................
$ 399,462
161,695
15,464
13,414
$ 590,035
$ 394,923
143,712
15,222
11,781
$ 565,638
$ 411,199
123,694
20,444
10,707
$ 566,044
Year Ended March 31,
2007
2006
2008
Long-lived assets:
United States.............................................................................................................
Europe.......................................................................................................................
Canada ......................................................................................................................
Other .........................................................................................................................
Total..........................................................................................................................
$ 184,792
57,558
-
3,440
$ 245,790
$ 182,160
55,444
-
3,530
$ 241,134
$ 184,448
53,357
1,869
2,785
$ 242,459
Year Ended March 31,
2007
2006
2008
2006
$ 258,082
134,301
61,967
101,657
$ 556,007
Sales by major product group are as follows:
2008
Year Ended March 31,
2007
Hoists ........................................................................................................................
Chain and forged attachments...................................................................................
Industrial cranes................................................................................................
Other .........................................................................................................................
Total..........................................................................................................................
$ 321,778
142,966
63,327
95,263
$ 623,334
$ 284,494
134,850
67,003
103,501
$ 589,848
F-35
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
20. Selected Quarterly Financial Data (Unaudited)
The Company’s quarterly reporting periods, with the exception of the fourth quarter, end on the Sunday
closest to the end of the calendar quarter. The interim fiscal periods presented below are consistently determined
from year to year.
Below is selected quarterly financial data for fiscal 2008 and 2007:
Three Months Ended
Net sales................................................... $ 148,110 $
Gross profit ..............................................
Income from operations ...........................
Net income............................................... $
43,888
18,267
9,520 $
July 1,
2007
September 30,
2007
151,410 $
46,038
19,148
March 31,
2008
December 30,
2007
155,196 $ 168,618
47,953
14,571
46,674
19,162
9,453 $
9,994 $
8,382
Net income per share – basic ................... $
0.51 $
0.51 $
0.53 $
0.45
Net income per share – diluted ................ $
0.50 $
0.49 $
0.52 $
0.44
Results include a pre-tax fixed asset impairment charge of $2,509,000 in the quarter ended March 31, 2008
and pre-tax losses on early extinguishment of debt of $1,443,000, $177,000 and $174,000 for the quarters ended
September 30, 2007, December 30, 2007 and March 31, 2008 respectively.
Three Months Ended
Net sales................................................... $ 146,694 $
Gross profit ..............................................
Income from operations ...........................
Net income............................................... $
42,283
17,780
5,572 $
July 2,
2006
October 1,
2006
144,225 $
39,017
16,104
March 31,
2007
December 31,
2006
142,044 $ 156,885
44,677
19,676
38,623
14,896
8,314 $
9,126 $ 11,073
Net income per share – basic ................... $
0.30 $
0.45 $
0.49 $
0.60
Net income per share – diluted ................ $
0.29 $
0.44 $
0.48 $
0.58
Results include pre-tax losses on early extinguishment of debt of $4,583,000, $359,000 and $246,000 for the
quarters ended July 2, 2006, December 31, 2006 and March 31, 2007 respectively.
F-36
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
21. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
March 31,
2008
2007
Net unrealized investment (loss) gain – net of tax............................................. $
Adjustment to pension liability– net of tax........................................................
Adjustment to other postretirement obligations – net of tax..............................
Foreign currency translation adjustment............................................................
Accumulated other comprehensive loss............................................................. $
(740) $
22
(18,606)
(14,514)
(3,083)
(3,248)
15,761
6,330
(2,741) $ (15,337)
The deferred taxes associated with the items included in accumulated other comprehensive loss were
$11,817,000 and $14,102,000 for 2008 and 2007, respectively. As a result of the recording of a deferred tax asset
valuation allowance in fiscal 2005, the Company recorded as an offsetting entry a $534,000 charge in the minimum
pension liability component of other comprehensive income. With the reversal of that valuation allowance in fiscal
2006 the Company recorded the reversal of the valuation allowance as a reduction of income taxes in the statement
of income. This is in accordance with FASB Statement No. 109, “Accounting for Income Taxes,” even though the
valuation allowance was initially established by a charge against comprehensive income. This amount will remain
indefinitely as a component of minimum pension liability adjustment.
The activity by year related to investments, including reclassification adjustments for activity included in
earnings is as follows (all items shown net of tax):
Year Ended March 31,
2007
2006
2008
$
Net unrealized investment gain at beginning of year................................
22 $
Unrealized holdings (loss) gain arising during the period .............................
Reclassification adjustments for (gain) included in earnings ........................
Net change in unrealized (loss) gain on investments................................
$
Net unrealized investment (loss) gain at end of year ................................
(674)
(88)
(762)
(740)
$
1,891 $
2,491
(4,360)
(1,869)
22 $
1,233
1,591
(933)
658
1,891
F-37
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
22. Effects of New Accounting Pronouncements
In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair
Value Measurements,” (“SFAS 157”) 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 157 will be effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued
FSP FAS 157-2, “Effective Date of FASB Statement No. 157.” This FSP (1) partially defers the effective date of
SFAS No. 157 for one year for certain nonfinancial assets and nonfinancial liabilities and (2) removes certain
leasing transactions from the scope of SFAS 157. The Company believes that the adoption of SFAS No. 157 will
not have a material effect on its consolidated financial statements.
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 SFAS 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.
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 believes that the adoption of SFAS No. 159 will not
have a material effect on its consolidated financial statements.
the FASB
In December 2007,
issued SFAS No. 141
(revised 2007) “Business Combinations”
(“SFAS 141(R)”). SFAS 141(R) requires the acquiring entity in a business combination to recognize all the assets
acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose all of the information
required to evaluate and understand the nature and financial effect of the business combination. This statement is
effective for acquisition dates on or after the beginning of the first annual reporting period beginning after
December 15, 2008. The Company is currently evaluating the impact the adoption of SFAS 141(R) will have on the
Company’s consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements--an amendment of ARB No. 51” (“SFAS 160”). This Statement amends ARB 51 to establish accounting
and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.
SFAS 160 is effective as of the beginning of the first fiscal year beginning after December 15, 2008. The Company
believes that the adoption of SFAS No. 160 will not have a material effect on its consolidated financial statements.
F-38
COLUMBUS McKINNON CORPORATION
SCHEDULE II—Valuation and qualifying accounts
March 31, 2008, 2007 and 2006
Dollars in thousands
Description
Year ended March 31, 2008:
Deducted from asset accounts:
Allowance for doubtful accounts
Slow-moving and obsolete inventory
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged
to Other
Accounts
Deductions
Balance at
End of
Period
$ 3,628
8,843
2,064
$ 14,535
$
1,484
1,746
3,029
$ 6,259
$ —
—
—
$ —
$ 853
1,657
1,000
$ 3,510
(1)
(2)
$ 4,259
8,932
4,093
$ 17,284
Accrued general and product liability costs
$ 21,078
$
2,201
$ —
$ 2,508
(3)
$ 20,771
Year ended March 31, 2007:
Deducted from asset accounts:
Allowance for doubtful accounts
Slow-moving and obsolete inventory
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
$ 3,417
7,635
6,301
$ 17,353
$
1,359
2,754
—
$ 4,113
$ —
(240) (4)
—
$ (240)
$ 1,148
1,306
4,237
$ 6,691
(1)
(2)
$ 3,628
8,843
2,064
$ 14,535
Accrued general and product liability costs
$ 20,969
$
4,343
$ —
$ 4,234
(3)
$ 21,078
Year ended March 31, 2006:
Deducted from asset accounts:
Allowance for doubtful accounts
Slow-moving and obsolete inventory
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
$ 3,015
6,413
50,538
$ 59,966
$
1,628
2,617
(38,571)
$ (34,326)
$ —
—
—
$ —
(1)
(2)
$ 1,226
1,395
5,666
$ 8,287
$ 3,417
7,635
6,301
$ 17,353
Accrued general and product liability costs
$ 16,094
$
7,920
$ —
$ 3,045
(3)
$ 20,969
________
(1) Uncollectible accounts written off, net of recoveries
(2) Obsolete inventory disposals
(3) Insurance claims and expenses paid
(4) Reserves at date of disposal of subsidiary
F-39
None.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A.
Controls and Procedures
Management’s Evaluation of Disclosure Controls and Procedures
As of March 31, 2008, an evaluation was performed under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on that evaluation, our management, including the Chief Executive Officer and Chief
Financial Officer, concluded that our disclosure controls and procedures were effective as of March 31, 2008. There were no
changes in our internal controls or in other factors during our fourth quarter ended March 31, 2008.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness
of our internal control over financial reporting as of March 31, 2008 based on the framework in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that
evaluation, our management concluded that our internal control over financial reporting was effective as of March 31, 2008.
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2008 has been audited by
Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over
financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system
must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the controls. The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are
subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of
compliance with policies or procedures.
The Board of Directors and Shareholders of Columbus McKinnon Corporation
Report of Independent Registered Public Accounting Firm
We have audited Columbus McKinnon Corporation’s internal control over financial reporting as of March 31, 2008, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). Columbus McKinnon Corporation’s management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting included in the accompanying Management’s Report On Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
31
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Columbus McKinnon Corporation maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2008, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Columbus McKinnon Corporation as of March 31, 2008 and 2007, and the related consolidated
statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2008 of
Columbus McKinnon Corporation and our report dated May 29, 2008 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
May 29, 2008
Item 9B.
Other Information
None.
Item 10.
Directors and Executive Officers of the Registrant
PART III
The information regarding Directors and Executive Officers of the Registrant will be included in a Proxy Statement to be filed
with the Commission prior to July 29, 2008 and upon the filing of such Proxy Statement, is incorporated by reference herein.
The charters of our Audit Committee, Compensation and Succession Committee, and Governance and Nominating
Committee are available on our website at www.cmworks.com and are available to any shareholder upon request to the Corporate
Secretary. The information on the Company's website is not incorporated by reference into this Annual Report on Form 10-K.
We have adopted a code of ethics that applies to all of our employees, including our principal executive officer, principal
financial officer and principal accounting officer, as well as our directors. Our code of ethics, the Columbus McKinnon
Corporation Legal Compliance & Business Ethics Manual, is available on our website at www.cmworks.com. We intend to
disclose any amendment to, or waiver from, the code of ethics that applies to our principal executive officer, principal financial
officer or principal accounting officer otherwise required to be disclosed under Item 10 of Form 8-K by posting such amendment
or waiver, as applicable, on our website.
32
The information regarding Executive Compensation will be included in a Proxy Statement to be filed with the Commission prior
Executive Compensation
Item 11.
to July 29, 2008 and upon the filing of such Proxy Statement, is incorporated by reference herein.
Item 12.
Security Ownership of Certain Beneficial Owners and Management
The information regarding Security Ownership of Certain Beneficial Owners and Management and regarding equity
compensation plan incorporation will be included in a Proxy Statement to be filed with the Commission prior to July 29, 2008
and upon the filing of such Proxy Statement, is incorporated by reference herein.
Item 13.
Certain Relationships and Related Transactions
The information regarding Certain Relationships and Related Transactions will be included in a Proxy Statement to be filed
with the Commission prior to July 29, 2008 and upon the filing of such Proxy Statement, is incorporated by reference herein.
Item 14.
Principal Accountant Fees and Services
The information regarding Principal Accountant Fees and Services will be included in a Proxy Statement to be filed with the
Commission prior to July 29, 2008 and upon the filing of such Proxy Statement, is incorporated by reference herein.
PART IV
Item 15.
Exhibits and Financial Statement Schedules
(1) Financial Statements:
The following consolidated financial statements of Columbus McKinnon Corporation are included in Item 8:
Reference
Report of Independent Registered Public Accounting Firm
Consolidated balance sheets - March 31, 2008 and 2007
Consolidated statements of income – Years ended March 31, 2008, 2007 and 2006
Page No.
F-2
F-3
F-4
Consolidated statements of shareholders’ equity - Years ended March 31, 2008, 2007 and 2006
F-5
Consolidated statements of cash flows – Years ended March 31, 2008, 2007 and 2006
F-6
Notes to consolidated financial statements
F-7 to F-38
(2)
Financial Statement Schedule:
Schedule II - Valuation and qualifying accounts
Page No.
F-39
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
33
Exhibit Number
(3)
Exhibits:
Exhibit
3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the
Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
3.2 Amended By-Laws of the Registrant (incorporated by reference to Exhibit 3 to the Company’s Current
Report on Form 8-K dated May 17, 1999).
4.1 Specimen common share certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration
Statement No. 33-80687 on Form S-1 dated December 21, 1995.)
4.2 First Amendment and Restatement of Rights Agreement, dated as of October 1, 1998, between Columbus
McKinnon Corporation and American Stock Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
June 29, 2003).
4.3 Indenture, dated as of March 31, 1998, among Columbus McKinnon Corporation, the guarantors named on
the signature pages thereto and State Street Bank and Trust Company, N.A., as trustee (incorporated by
reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 9, 1998).
4.4 Supplemental Indenture among LICO, Inc., Automatic Systems, Inc., LICO Steel, Inc., Columbus McKinnon
Corporation, Yale Industrial Products, Inc., Mechanical Products, Inc., Minitec Corporation and State Street
Bank and Trust Company, N.A., as trustee, dated March 31, 1998 (incorporated by reference to Exhibit 4.3 to
the Company’s Current Report on form 8-K dated April 9, 1998).
4.5 Second Supplemental Indenture among Abell-Howe Crane, Inc., LICO, Inc., Automatic Systems, Inc. LICO
Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products Inc. and State Street Bank and Trust
Company, N.A., as trustee, dated as of February 12, 1999 (incorporated by reference to Exhibit 4.6 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
4.6 Third Supplemental Indenture among G.L. International, Inc., Gaffey, Inc., Handling Systems and Conveyors,
Inc., Larco Material Handling Inc., Abell-Howe Crane, Inc., LICO, Inc., Automatic Systems, Inc., LICO Steel,
Inc., Columbus McKinnon Corporation, Yale Industrial Products, Inc. and State Street Bank and Trust
Company, N.A., as trustee, dated as of March 1, 1999 (incorporated by reference to Exhibit 4.7 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
4.7 Fourth Supplemental Indenture among Washington Equipment Company, G.L. International, Inc., Gaffey, Inc.,
Handling Systems and Conveyors, Inc., Larco Material Handling Inc., Abell-Howe Crane, Inc., Automatic
Systems, Inc., LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial Products, Inc. and State
Street Bank and Trust Company, N.A., as trustee, dated as of November 1, 1999 (incorporated by reference to
Exhibit 10.2 to the Company’s quarterly report on form 10-Q for the quarterly period ended October 3, 1999).
4.8 Fifth Supplemental Indenture among Columbus McKinnon Corporation, Crane Equipment & Service, Inc.,
Automatic Systems, Inc., LICO Steel, Inc., Yale Industrial Products, Inc. and State Street Bank and Trust
Company, N.A., as trustee, dated as of April 4, 2002 (incorporated by reference to Exhibit 4.8 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2002).
4.9 Sixth Supplemental Indenture among Columbus McKinnon Corporation, Audubon West, Inc., Crane
Equipment & Service, Inc., LICO Steel, Inc., Yale Industrial Products, Inc., Audubon Europe S.a.r.l. and
State Street Bank and Trust Company, N.A., as trustee, dated as of August 5, 2002 (incorporated by reference
to Exhibit 4.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2002).
4.10 Seventh Supplemental Indenture among Columbus McKinnon Corporation, Crane Equipment & Service,
Inc., Yale Industrial Products, Inc., Audubon Europe S.a.r.l. and U.S. Bank National Trust Association, as
trustee, dated as of August 30, 2005 (incorporated by reference to Exhibit 4.1 to the Company’s Quarterly
Report on Form 10-Q for the quarterly period ended October 2, 2005).
34
4.11 Indenture, dated as of July 22, 2003, among Columbus McKinnon Corporation, the guarantors named on the
signature pages thereto and U.S. Bank Trust National Association, as trustee (incorporated by reference to
Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 29, 2003).
4.12 First Supplemental Indenture, dated as of September 19, 2003, among Columbus McKinnon Corporation, the
guarantors named on the signature pages thereto and U.S. Bank Trust National Association, as trustee
(incorporated by reference to Exhibit 4.13 to Amendment No. 1 to the Company’s Registration Statement
No. 333-109730 on Form S-4/A dated November 7, 2003).
4.13 Indenture among Columbus McKinnon Corporation, Audubon Europe S.a.r.l., Crane Equipment & Service,
Inc., Yale Industrial Products, Inc.. and U.S. Bank National Association., as trustee, dated as of September 2,
2005 (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement No. 33-129142 on
Form S-3 dated October 19, 2005).
4.14 Registration Rights Agreement among Columbus McKinnon Corporation, Audubon Europe S.a.r.l., Crane
Equipment & Service, Inc., Yale Industrial Products, Inc., and Credit Suisse First Boston LLC, acting on
behalf of itself and as Representative of the Initial Purchasers, dated as of September 2, 2005 (incorporated
by reference to Exhibit 4.6 to the Company’s Registration Statement No. 33-129142 on Form S-3 dated
October 19, 2005).
10.1 Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus
McKinnon Corporation and Marine Midland Bank, dated November 2, 1995 (incorporated by reference to
Exhibit 10.6 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.2 Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989
(incorporated by reference to Exhibit 10.23 to the Company’s Registration Statement No. 33-80687 on Form
S-1 dated December 21, 1995).
#10.3 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated March 2, 1995 (incorporated by reference to Exhibit 10.24 to the
Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.4 Amendment No. 2 to the Columbus McKinnon Corporation Employee Stock Ownership Plan, dated
October 17, 1995 (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-
K for the fiscal year ended March 31, 1997).
#10.5 Amendment No. 3 to the Columbus McKinnon Corporation Employee Stock Ownership Plan, dated March
27, 1996 (incorporated by reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K for the
fiscal year ended March 31, 1997).
#10.6 Amendment No. 4 of the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated September 30, 1996 (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1996).
#10.7 Amendment No. 5 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated August 28, 1997 (incorporated by reference to Exhibit 10.37 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1998).
#10.8 Amendment No. 6 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated June 24, 1998 (incorporated by reference to Exhibit 10.38 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1998).
#10.9 Amendment No. 7 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated April 30, 2000 (incorporated by reference to Exhibit 10.24 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2000).
#10.10 Amendment No. 8 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated March 26, 2002 (incorporated by reference to Exhibit 10.30 to the
35
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2002).
#10.11 Amendment No. 9 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated March 27, 2003 (incorporated by reference to Exhibit 10.32 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2003).
#10.12
Amendment No. 10 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated February 28, 2004 (incorporated by reference to Exhibit 10.12 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004).
#10.13 Amendment No. 11 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated December 19, 2003 (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2003).
#10.14 Amendment No. 12 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated March 17, 2005 (incorporated by reference to Exhibit 10.14 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005).
#10.15 Columbus McKinnon Corporation Personal Retirement Account Plan Trust Agreement, dated April 1, 1987
(incorporated by reference to Exhibit 10.25 to the Company’s Registration Statement No. 33-80687 on Form
S-1 dated December 21, 1995).
#10.16 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Trust Agreement
(formerly known as the Columbus McKinnon Corporation Personal Retirement Account Plan Trust
Agreement) effective November 1, 1988 (incorporated by reference to Exhibit 10.26 to the Company’s
Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.17 Amendment and Restatement of Columbus McKinnon Corporation 1995 Incentive Stock Option Plan
(incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal
year ended March 31, 1999).
#10.18 Second Amendment to the Columbus McKinnon Corporation 1995 Incentive Stock Option Plan, as amended
and restated (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for
the quarterly period ended September 29, 2002).
#10.19 Columbus McKinnon Corporation Restricted Stock Plan, as amended and restated (incorporated by reference
to Exhibit 10.28 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21,
1995).
#10.20 Second Amendment to the Columbus McKinnon Corporation Restricted Stock Plan (incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
September 29, 2002).
#10.21 Amendment and Restatement of Columbus McKinnon Corporation Non-Qualified Stock Option Plan
(incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the fiscal
year ended March 31, 1999).
#10.22 Columbus McKinnon Corporation Thrift [401(k)] Plan 1989 Restatement Effective January 1, 1998
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended December 27, 1998).
#10.23 Amendment No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated December 10, 1998 (incorporated by reference to Exhibit 10.29 to the Company’s Annual Report
on Form 10-K for the fiscal year ended March 31, 1999).
#10.24 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401 (k)]
Plan, dated June 1, 2000 (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2000).
36
#10.25 Amendment No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401 (k)]
Plan, dated March 26, 2002 (incorporated by reference to Exhibit 10.39 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2002).
#10.26 Amendment No. 4 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated May 10, 2002 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 29, 2002).
#10.27 Amendment No. 5 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated December 20, 2002 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q for the quarterly period ended December 29, 2002).
#10.28 Amendment No. 6 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated May 22, 2003 (incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2003).
#10.29 Amendment No. 7 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated April 14, 2004 (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2004).
#10.30 Amendment No. 8 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated December 19, 2003 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly
Report on Form 10-Q for the quarterly period ended December 28, 2003).
#10.31 Amendment No. 9 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated March 16, 2004 (incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2004).
#10.32 Amendment No. 10 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated July 12, 2004 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended July 4, 2004).
#10.33 Amendment No. 11 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated March 31, 2005 (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on
Form 10-K for the fiscal year ended March 31, 2005).
#10.34 Amendment No. 12 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated December 27, 2005 (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report
on Form 10-K for the fiscal year ended March 31, 2006).
#10.35 Amendment No. 13 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated December 21, 2006 (incorporated by reference to Exhibit 10.35 to the Company’s Annual Report
on Form 10-K for the fiscal year ended March, 31, 2007).
*#10.36 Amendment No. 14 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated December 21, 2007.
#10.37 Columbus McKinnon Corporation Thrift 401(k) Plan Trust Agreement Restatement Effective August 9, 1994
(incorporated by reference to Exhibit 10.32 to the Company’s Registration Statement No. 33-80687 on Form
S-1 dated December 21, 1995).
#10.38 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Restatement Effective April 1, 1998
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended December 27, 1998).
#10.39 Amendment No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated December 10, 1998 (incorporated by reference to Exhibit 10.32 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
37
#10.40 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated May 26, 1999 (incorporated by reference to Exhibit 10.33 to the Company’s
Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
#10.41 Amendment No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated March 26, 2002 (incorporated by reference to Exhibit 10.44 to the Company’s
Annual Report on Form 10-K for the fiscal year ended March 31, 2002).
#10.42 Amendment No. 4 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated December 20, 2002 (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 29, 2002).
#10.43 Amendment No. 5 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated February 28, 2004 (incorporated by reference to Exhibit 10.37 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004).
#10.44 Amendment No. 6 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated March 17, 2005 (incorporated by reference to Exhibit 10.41 to the Company’s
Annual Report on Form 10-K for the fiscal year ended March 31, 2005).
#10.45 Amendment No. 7 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated December 28, 2005 (incorporated by reference to Exhibit 10.43 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006).
#10.46 Amendment No. 8 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated December 28, 2005 (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2006).
*#10.47 Amendment No. 9 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated April 21, 2008.
#10.48 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Trust Agreement Effective as of April 1,
1987 (incorporated by reference to Exhibit 10.34 to the Company’s Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995).
#10.49 Form of Change in Control Agreement as entered into between Columbus McKinnon Corporation and each
of Timothy T. Tevens, Derwin R. Gilbreath, Karen L. Howard, Joseph J. Owen, Richard A. Steinberg, and
Timothy R. Harvey, (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form
10-K for the fiscal year ended March, 31, 1998).
#10.50 Employment agreement with Wolfgang Wegener dated December 31, 1996 (incorporated by reference to
Exhibit 10.48 to the Company’s Annual Report on Form 10-K for the fiscal year ended March, 31, 2007).
10.51 Intercreditor Agreement dated as of July 22, 2003 among Columbus McKinnon Corporation, the subsidiary
guarantors as listed thereon, Fleet Capital Corporation, as Credit Agent, and U.S. Bank Trust National
Association, as Trustee (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended June 29, 2003).
10.52 Second Amended and Restated Credit and Security Agreement, dated as of November 21, 2002 and
amended and restated as of January 2, 2004, among Columbus McKinnon Corporation, as Borrower, Larco
Industrial Services Ltd., Columbus McKinnon Limited, the Guarantors Named Herein, the Lenders Party
Hereto From Time to Time, Fleet Capital Corporation, as Administrative Agent, Fleet National Bank, as
Issuing Lender, Congress Financial Corporation (Central), Syndication Agent, Merrill Lynch Capital, a
Division of Merrill Lynch Business Financial Services Inc., as Documentation Agent, and Fleet Securities,
Inc., as Arranger (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-
Q for the quarterly period ended December 28, 2003).
#10.53 Columbus McKinnon Corporation Corporate Management Variable Compensation Plan (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
38
October 3, 2004).
#10.54 Columbus McKinnon Corporation 2006 Long Term Incentive Plan (incorporated by reference to Appendix A
to the definitive Proxy Statement for the Annual Meeting of Stockholders of Columbus McKinnon
Corporation held on July 31, 2006).
#10.55 Columbus McKinnon Corporation Executive Management Variable Compensation Plan (incorporated by
reference to Appendix B to the definitive Proxy Statement for the Annual Meeting of Stockholders of
Columbus McKinnon Corporation held on July 31, 2006).
10.56 First Amendment to that certain Second Amended and Restated Credit and Security Agreement, dated as of
November 21, 2002 and amended and restated as of January 2, 2004, among Columbus McKinnon
Corporation, as Borrower, Larco Industrial Services Ltd., Columbus McKinnon Limited, the Guarantors
From Time to Time Party Thereto, the Lenders From Time to Time Party Thereto, Bank of America, N.A.
as Administrative Agent for such Lenders and as Issuing Lender dated April 29, 2005 (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 29, 2005).
10.57 Second amendment, dated as of August 5, 2005, to that certain Second Amended and Restated Credit and
Security Agreement, dated as of November 21, 2002 and amended and restated as of January 2, 2004 (as
amended by that certain First Amendment to that certain Second Amended and Restated Credit and Security
Agreement, dated as of April 29, 2005, and as further modified and supplemented and in effect from time to
time, the “Credit Agreement”), among Columbus McKinnon Corporation, a corporation organized under the
laws of New York (the “Borrower”), Larco Industrial Services Ltd., a business corporation organized under
the laws of the Province of Ontario, Columbus McKinnon Limited, a business corporation organized under
the laws of Canada, the Guarantors from time to time party thereto, the Lenders from time to time party
thereto (collectively, the “Lenders”), Bank of America, N.A., as Administrative Agent for such Lenders (the
“Agent”) and as Issuing Lender (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q dated October 2, 2005).
10.58 Third amendment, dated as of August 22, 2005, to that certain Second Amended and Restated Credit and
Security Agreement, dated as of November 21, 2002 and amended and restated as of January 2, 2004 (as
amended by that certain First Amendment to that certain Second Amended and Restated Credit and Security
Agreement, dated as of April 29, 2005, by that certain Second Amendment to that certain Second Amended
and Restated Credit and Security Agreement, dated as of August 5, 2005, and as further modified and
supplemented and in effect from time to time, the “Credit Agreement”), among Columbus McKinnon
Corporation, a corporation organized under the laws of New York (the “Borrower”), Larco Industrial
Services Ltd., a business corporation organized under the laws of the Province of Ontario, Columbus
McKinnon Limited, a business corporation organized under the laws of Canada, the Guarantors from time to
time party thereto, the Lenders from time to time party thereto (collectively, the “Lenders”), Bank of
America, N.A., as Administrative Agent for such Lenders (the “Agent”) and as Issuing Lender (incorporated
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q dated October 2, 2005).
10.59 Fourth amendment, dated as of October 17, 2005, to that certain Second Amended and Restated Credit and
Security Agreement, dated as of November 21, 2002 and amended and restated as of January 2, 2004, and
amended by that certain First Amendment to the Credit Agreement, dated as of April 29, 2005, and by that
certain Second Amendment to the Credit Agreement, dated as of August 5, 2005, and by that certain Third
Amendment to the Credit Agreement, dated as of August 22, 2005 (as further amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among Columbus McKinnon Corporation
(the "Borrower"), Larco Industrial Services Ltd., Columbus McKinnon Limited, the Guarantors named
therein, the lending institutions party thereto, and Bank of America, N.A., as Administrative Agent and
Issuing Lender. Capitalized terms used herein and not defined herein shall have the meanings ascribed
thereto in the Credit Agreement (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly
Report on Form 10-Q dated October 2, 2005).
10.60 Third Amended and Restated Credit and Security Agreement, dated as of March 16, 2006 among Columbus
McKinnon Corporation, as the Borrower, Bank of America, N.A., as Administrative Agent and Issuing
Lender, and Other Lenders Party Hereto, and Bank of America Securities LLC, as Arranger (incorporated by
reference to Exhibit 10.53 to the Company’s Annual Report on Form 10-K for the fiscal year ended March
31, 2006).
39
10.61 First amendment, dated as of January 8, 2007 to that certain Third Amended and Restated Credit and Security
Agreement, dated as of March 16, 2006 among Columbus McKinnon Corporation, as the Borrower, Bank of
America, N.A., as Administrative Agent and Issuing Lender, and Other Lenders Party Hereto, and Bank of
America Securities LLC, as Arranger (incorporated by reference to Exhibit 10.59 to the Company’s Annual
Report on Form 10-K for the fiscal year ended March, 31, 2007).
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Independent Registered Public Accounting Firm.
*31.1 Certification of the principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended.
*31.2 Certification of the principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended.
*32.1 Certification of the principal executive officer and the principal financial officer pursuant to Rule 13a-14(b)
of the Securities Exchange Act of 1934, as amended and 18 U.S.C. Section 1350, as adopted by pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. The information contained in this exhibit shall not be
deemed filed with the Securities and Exchange Commission nor incorporated by reference in any
registration statement foiled by the Registrant under the Securities Act of 1933, as amended.
_________________
* Filed herewith
# Indicates a Management contract or compensation plan or arrangement
40
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: May 30, 2008
COLUMBUS McKINNON CORPORATION
By: /S/ TIMOTHY T. TEVENS
Timothy T. Tevens
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
/S/ TIMOTHY T. TEVENS
____________________________________
Timothy T. Tevens
President, Chief Executive Officer and Director
(Principal Executive Officer)
/S/ KAREN L. HOWARD
____________________________________
Karen L. Howard
Vice President – Finance and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
Date
May 30, 2008
May 30, 2008
/S/ ERNEST R. VEREBELYI
____________________________________
Ernest R. Verebelyi
Chairman of the Board of Directors
May 30, 2008
/S/ RICHARD H. FLEMING
____________________________________
Richard H. Fleming
Director
/S/ NICHOLAS T. PINCHUK
____________________________________
Director
Nicholas T. Pinchuk
/S/ WALLACE W. CREEK
____________________________________
Wallace W. Creek
/S/ LINDA A. GOODSPEED
____________________________________
Linda A. Goodspeed
/S/ STEPHEN RABINOWITZ
____________________________________
Stephen Rabinowitz
Director
Director
Director
May 30, 2008
May 30, 2008
May 30, 2008
May 30, 2008
May 30, 2008
41
COLUMBUS McKINNON CORPORATION
SUBSIDIARIES
(as of March 31, 2008)
Exhibit 21.1
CM Insurance Company, Inc. (US-NY)
Columbus McKinnon de Mexico, S.A. de C.V. (Mexico)
Columbus McKinnon de Uruguay, S.A. (Uruguay)
Columbus McKinnon do Brazil Ltda. (Brazil)
Columbus McKinnon de Panama S.A. (Panama)
Crane Equipment & Service, Inc. (US-OK)
Société d’Exploitation des Raccords Gautier (France)
Univeyor A/S (Denmark)
Univeyor Conveying Systems Ltd. (England)
Yale Industrial Products, Inc. (US-DE)
Egyptian-American Crane Co. (40% Joint Venture) (Egypt)
Audubon Europe S.a.r.l. (Luxembourg)
Columbus McKinnon Limited (Canada)
Yale Industrial Products Ltd. (England)
Yale Industrial Products GmbH (Germany)
Asia Hoist Co., Ltd. (Hong Kong)
Hangzhou LILA Lifting and Lashing Co. Ltd. (China)
Yale Hangzhou Industrial Products Co. Ltd. (China)
Columbus McKinnon Corporation Ltd. (England)
Yale Levage (France)
Columbus McKinnon Italia S.r.l. (Italy)
Yale Elevación Ibérica S.L. (Spain)
Yale Industrial Products Asia (Thailand) Co. Ltd.
Yale Industrial Products B.V. (The Netherlands)
Yale Industrial Products GmbH (Austria)
Yale Industrial Products Pty. Ltd. (South Africa)
Yale Lifting & Mining Products (Pty.) Ltd. (25% Financial Interest) (South Africa)
Yale Industrial Products Kft. (Hungary)
42
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-3212) pertaining to the Columbus McKinnon Corporation 1995 Incentive
Stock Option Plan, the Columbus McKinnon Corporation Non-Qualified Stock Option Plan, the Columbus McKinnon
Corporation Restricted Stock Plan and the Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement
Effective April 1, 1989 of Columbus McKinnon Corporation,
(2) Registration Statement (Form S-8 No. 333-81719) pertaining to the Options assumed by Columbus McKinnon
Corporation originally granted under the GL International, Inc. 1997 Stock Option Plan and the Larco Industrial Services
Ltd. 1997 Stock Option Plan, and
(3) Registration Statement (Form S-8 No. 333-137212) pertaining to the Columbus McKinnon Corporation 2006 Long Term
Incentive Plan
of our reports dated May 29, 2008, with respect to the consolidated financial statements and schedule of Columbus McKinnon
Corporation, and the effectiveness of internal control over financial reporting of Columbus McKinnon Corporation, included in
the Annual Report (Form 10-K) for the year ended March 31, 2008.
Buffalo, New York
May 29, 2008
43
CERTIFICATION
Exhibit 31.1
I, Timothy T. Tevens, Chief Executive Officer, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Columbus McKinnon Corporation;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this annual report.
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this annual report is being prepared;
b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this annual report based on such evaluation; and
c. disclosed in this annual report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over
financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
d. all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
e. any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: May 30, 2008
/S/ TIMOTHY T. TEVENS
Timothy T. Tevens
Chief Executive Officer
44
CERTIFICATION
Exhibit 31.2
I, Karen L. Howard, Chief Financial Officer, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Columbus McKinnon Corporation;
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this annual report.
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this annual report is being prepared;
b. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this annual report based on such evaluation; and
c. disclosed in this annual report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is likely to materially affect, the registrant’s internal control over
financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
d. all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
e. any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: May 30, 2008
/S/ KAREN L. HOWARD
Karen L. Howard
Chief Financial Officer
45
CERTIFICATION
Exhibit 32.1
Each of the undersigned hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that the Annual Report of Columbus McKinnon Corporation (the "Company") on Form 10-K for
the year ended March 31, 2008, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that information contained in the such Annual Report on Form 10-K fairly presents, in all material respects, the
financial condition and result of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: May 30, 2008
/S/ TIMOTHY T. TEVENS
Timothy T. Tevens
Chief Executive Officer
/S/ KAREN L. HOWARD
Karen L. Howard
Chief Financial Officer
46
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Company Profile
Columbus McKinnon Corporation (NASDAQ: CMCO) is a leading designer, manufacturer and marketer of material
handling products, systems and services which lift, secure, position and move material ergonomically, safely,
precisely and efficiently. Headquartered in Amherst, New York, Columbus McKinnon’s major products include hoists,
cranes, chain and forged attachments. The Company’s products serve a wide variety of commercial and industrial
applications that require the safety and quality provided by Columbus McKinnon’s superior product design and
engineering know-how.
Forward-looking information
The Columbus McKinnon annual report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements include, but are not limited to, statements concerning future revenue and earnings, involve known and unknown risks,
uncertainties and other factors that could cause the actual results of the Company to differ materially from the results expressed or implied
by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its
subsidiaries, conditions affecting the Company’s customers and suppliers, competitor responses to the Company’s products and services, the
overall market acceptance of such products and services and other factors disclosed in the Company’s periodic reports filed with the Securities
and Exchange Commission. The Company assumes no obligation to update the forward-looking information contained in this report.
42˚ 58’ 42˝ N 78˚ 48’ 00˝ W
AmHeRst, new YoRk
Columbus McKinnon Corporation World Headquarters
140 John James Audubon Parkway
Amherst, New York 14228-1197
716-689-5400
cmworks.com