Lean. Strong. Global.
Annual Report 2009
Dear Fellow Shareholders:
During fiscal 2009, in the midst of what may prove to be the deepest recession in
generations and one of the toughest environments for global manufacturers, we have
continued to systematically improve your Company’s operating efficiency and expand
our international reach and market penetration. Columbus McKinnon was made even
more diversified and flexible than ever before in its history. Lean, strong and global.
That’s what Columbus McKinnon is today; dramatically more so than just five or six
years ago.
In our letter to shareholders last year, we wrote that “we have deliberately fortified
Columbus McKinnon to weather more challenging economic conditions, should they
materialize,” reflecting the recognition that ours is a cyclical industry and the fact
that Columbus McKinnon is in a far superior capital position today than when it
entered the last downturn in fiscal 2001.
By design, Columbus McKinnon’s revenue, markets and customers have much greater
geographic diversity than ever before in our history. In addition, the tough decisions
we made during the last recession are paying off today. For example, we previously
eliminated 10 manufacturing facilities and one million square feet of manufacturing
space, removing approximately $15 million in costs and shifting much of our cost
structure from fixed to variable. The continuation of our Lean culture presents us
with significant opportunities to further eliminate structural costs. In accordance with
our strategy, we recently announced plans to reduce annualized costs by another
$8 million to $10 million by closing two plants and downsizing a third, consolidating
production into five of our other existing North American facilities. Decisions that
result in plant closings and workforce reductions are never easy, but these changes
are essential to maintain the healthy and thriving enterprise we have today. Given
the challenging economic climate, we have also been very focused on tactical cost
management. This includes focusing our purchasing and materials management
resources on cost saving opportunities globally. In the North American marketplace,
we are investing in targeted end-user sectors such as energy, construction and mining
to further enhance our leadership position and strengthen our growth opportunities
when the economy recovers.
Since the last downturn faced by Columbus McKinnon and other industrial
manufacturers in the early 2000s, we have also dramatically de-levered the balance
sheet, improved working capital utilization, embraced Lean quality systems as our
way to continually improve our business, and heightened our focus on promoting
safety throughout our Company.
This management team has weathered significant storms before, and we believe
Columbus McKinnon is very well prepared for the current business turbulence. In
our view, Columbus McKinnon’s performance in fiscal 2009 reflects the reality of the
economic downturn while highlighting the fundamental strength of the Company.
Table of Contents
Letter to Shareholders 1
Company Profile 6
Executive Committee
7
Board of Directors 8
Financial Summary 9
Form 10-K
10
1
FY2009 Results
As announced last year, upon evaluating its strategic fit within the context of our
vision for Columbus McKinnon, we decided to divest of our Denmark-based Univeyor
conveyor systems business. That transaction was completed in July 2008 and was
accounted for as a discontinued operation.
Net sales from continuing operations for fiscal 2009 were $606.7 million, up 2.2%, or
$12.9 million compared with fiscal 2008, including significant contributions from
the German lifting, material handling and actuator products supplier we acquired
during fiscal 2009, Pfaff-silberblau. Columbus McKinnon’s international sales grew
to $224.5 million, increasing $36.2 million or 19% for the year, continuing our positive
international growth trend.
The Company’s fiscal 2009 net loss was $78.4 million, or $4.16 per diluted share,
compared with net income of $37.3 million, or $1.95 per diluted share, for the same
period last year. GAAP results included a non-cash goodwill impairment charge
and other items totaling $114.2 million, or $6.06 per diluted share, during fiscal 2009
compared with only $7.8 million of such items, or $0.40 per diluted share, in fiscal 2008.
The goodwill impairment charge, recorded in accordance with Statement of Financial
Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” reflected the
Company’s share price in the fourth quarter compared with the Company’s net book
value and had no impact on the Company’s cash flow, liquidity or debt covenants.
Columbus McKinnon posted fiscal 2009 net income from continuing operations of
$35.8 million, or $1.90 per diluted share, on a non-GAAP basis excluding unusual items,
compared with $45.1 million, or $2.35 per diluted share, in fiscal 2008.
Operating margin excluding the goodwill impairment charge for fiscal 2009 was 10.0%
compared with 13.6% for fiscal 2008. Despite higher revenue, fiscal 2009 margins were
negatively impacted by higher material, freight and utility costs in the second and third
quarters, one-time accounting charges associated with the Pfaff acquisition in the third
quarter, lower margins currently in the Pfaff business, as well as under-absorption of
costs in the fiscal fourth quarter due to the rapid and significant decline in sales.
Columbus McKinnon has maintained its strong liquidity position with $39.2 million of
cash on hand at March 31, 2009, as well as $64.5 million of availability on its $75 million
line of credit, with $10.5 million used for outstanding letters of credit.
The United States was the first market to reveal a sharp downturn in demand in fiscal
2009, with Europe following shortly thereafter. We continue to see growth in Latin
America, Asia and parts of Europe but at a less rapid pace. U.S. industrial capacity
utilization is an important indicator of demand for Columbus McKinnon products in
North America. In April 2009 it was 66%, significantly down from its 77% level at April
2008. This is the lowest level ever reported by the U.S. Federal Reserve Board.
Built for Tough
Economic Conditions
Reduced net debt by more than 60%
over five years
Increased product, market-channel
and geographic diversity
Shifted many fixed costs to variable
Focused manufacturing in low-cost
operations
Improved productivity through a
Lean culture
Challenging base costs while continuing
investments in strategic initiatives
The Company’s hoists and rigging products
were used in supporting the traveling camera
rail system at the National Aquatics Center
of the 2008 Beijing Olympics.
2
Importantly, the volatility of the economy, the credit and stock markets and our end
markets do not divert us from our growth strategy and long-term goals, which are
designed to drive us through the ups and downs of our historically cyclical industry.
Our goal through business cycles is to produce higher highs and higher lows in terms
of revenue and operating margins, and we are well positioned to do just that.
Strategic Execution
We continue to successfully execute our growth strategy of:
• investing in global markets and new products
• improving productivity by implementing a Lean culture and investing in our people
• seeking bolt-on acquisition opportunities
• managing operating margins and return on invested capital, and maintaining a stable
capital structure
An outstanding example of this strategy in action is the aforementioned fiscal 2009
acquisition of Pfaff, a leading European supplier of lifting, material handling and
actuator products. While Pfaff only began contributing to Columbus McKinnon’s results
in the second half of fiscal 2009, it added more than $43 million in international revenue
to Columbus McKinnon’s top line for the year. We expect the Pfaff acquisition to be
accretive to first year earnings. Its integration with our European lifting business, as well
as our Duff-Norton North American actuator business, continues to progress smoothly
and ahead of schedule. In addition to the Pfaff investment, we are continuing our
expansion activities in emerging market regions of Eastern Europe, Asia and Latin
America, which present significant long-term growth opportunities.
Pfaff’s strong brands and top-line contributions bring us another step closer to
achieving one of our long-term goals, which is reaching $1 billion in revenue, with $100
million to $200 million from acquisitions, at least 20% from new products and 50%
from markets outside the United States. While the challenging economy is certainly
tempering the pace of growth, Columbus McKinnon nonetheless increased revenue
to $606.7 million in fiscal 2009, and with the addition of Pfaff on an annualized basis,
approximately 40% of sales are now international. While the economy impacts the
timing and rate of Columbus McKinnon’s growth, we believe our target remains
reasonable and achievable.
Sustained debt-to-total-capitalization of 30%, flexing to 50% to accommodate
acquisitions, is another one of the Company’s long term goals. Columbus McKinnon’s
net debt-to-total-capitalization stood at 35.2% at year end 2009 and is enhanced by
the Company’s strong cash flow profile. In fiscal 2009, we generated $63 million of net
cash from operating activities of continuing operations, 4% higher than fiscal 2008
despite the difficult economy that prevailed in the latter half of fiscal 2009. Given the
accumulation of cash, we used $53 million for the Pfaff acquisition and still ended
the year with $39 million on our balance sheet.
Growth Strategy
Grow revenue by investing in existing
and new markets around the world
and developing innovative and
complementary material handling
products
Continue increasing productivity by
creating a Lean culture throughout the
organization and continue investing in
the development of our people
Acquire synergistic, bolt-on acquisitions
to complement our organic growth
Manage operating margins and return on
invested capital; maintain a stable capital
structure to support growth initiatives
A boiler making firm in northeast France,
which specializes in the installations of metallic
structures and piping, relies on this system of
29 of the Company’s CM Electric Chain Hoists.
3
We continue to focus on our long-term goals, including reducing working capital to
15% of revenue, from 18.8% at the end of fiscal 2009. To achieve this target, we believe
we need six to seven annual inventory turns, compared with 4.0 turns for fiscal 2009.
Inventory turns were particularly challenged toward the end of fiscal 2009 with the
sudden and significant reduction in demand for industrial products like ours and the
resulting timelag to adjust inventories to that lower level.
Finally, another long-term goal is to have the global resources in place to execute
our growth strategy. An essential element of this is having the right leadership and
organizational structure in place to make our sales and manufacturing operations
in developing and high-growth countries as strong as they’ve historically been in
Western Europe and North America. To that end, we made key appointments to
Columbus McKinnon’s executive committee and continue to invest in leadership
development globally.
Organizational Development
Columbus McKinnon veteran Bob Clare was promoted to a newly created managing
director position responsible for sales and manufacturing across Asia Pacific, based in
Hong Kong. For the Americas we promoted Gene Buer and Chuck Giesige to be vice
presidents responsible for hoist and rigging products, respectively. Wolfgang Wegener,
who has served on our executive committee since 2006 as managing director of our
European business, now also leads Columbus McKinnon’s global actuator operations,
including Pfaff and Duff-Norton.
Today, our organizational structure and management executive committee reports
up to the chief executive officer on two tracks. First, we have the above-named
executives who have geographic responsibility for sales and operations. Second,
we have corporate support functions where we established a new executive level
function, global supply chain, Lean and quality management, which is being led by
longtime executive committee member Joe Owen. The leadership of Columbus
McKinnon’s other global support functions – our chief financial officer, Karen Howard,
general counsel, Tim Harvey, and head of human resources, Rick Steinberg – remains
unchanged and these individuals continue to serve on the management executive
committee of the Company.
Also during fiscal 2009, Columbus McKinnon’s Board of Directors added strong
industrial and international business experience to its talented ranks with the
appointments of Christian Ragot and Liam McCarthy. Chris is President and Chief
Executive Officer of Freightcar America, Inc., and has also served as an executive officer
with global companies such as Terex Corporation and Ingersoll-Rand Company in
the United States and France. Liam is President and Chief Operating Officer of Molex
Incorporated, a company he has served for more than 30 years in senior leadership
positions throughout Europe, Asia Pacific and the United States. Their additions bring
our board to nine directors, eight of whom are independent.
Long-Term Goals
Grow revenue to $1 billion with
• Acquisitions representing $100 to
$200 million of the revenue growth
• International markets contributing
approximately 50% of revenue
• New products developed in the
last three years representing 20%
of revenue
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 revenues
Have global resources in place to
execute the strategic plan
Shown here in Las Vegas, Nevada, the CM
Compensator is a 15 ton CM PowerStar Electric
Chain Hoist attached to the hook of a tower
crane. The system has been engineered
specifically to enable the pioneering “flying
deck” high-rise construction technique.
4
Performance Highlights
International sales grew to a run rate
of 40% at end of fiscal 2009
Reorganized global leadership team
geographically to support international
business
Strategic, bolt-on acquisition of
Pfaff completed
Strong liquidity position with $39.2
million in cash on hand, $64.5 million
revolver availability and net debt to total
capitalization of 35.2% at March 31, 2009
New facility consolidation cost savings
to generate $8 million to $10 million in
annualized savings
Positioned for Global Growth
In addition to experienced leadership, a strong financial position, and a sound growth
strategy, Columbus McKinnon boasts superior products, market leadership in key
regions including the United States and Europe, outstanding relationships with more
than 15,000 leading distributors and customers around the world, and more than 2,700
highly trained and motivated associates in 19 countries.
These are Columbus McKinnon’s defining characteristics, and we believe these make
the Company very well positioned for continued global growth. As always, we wish
to thank all of our stakeholders, including our associates around the world, for their
support and commitment to our shared success and vision. We have great confidence
in how well Columbus McKinnon will weather today’s economic challenges, and we look
forward to updating you on our progress.
Timothy T. Tevens
President and Chief Executive Officer
Ernest R. Verebelyi
Chairman of the Board of Directors
Three 10-ton capacity hoists with spark
and corrosion-resistant wire rope are used
for lifting pump motors on oil production
platforms off the coast of Angola, Africa.
5
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, actuators, 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.
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
Growing International Presence
Canada – 5%
Europe –22%
United States – 63%
Latin America – 5%
Rest of world – 5%
6
Executive Committee
Timothy T. Tevens President and Chief Executive Officer
Mr. Tevens was elected President, Chief Executive Officer and a Director of the Company in 1998. Mr. Tevens joined the Company in May
1991 as Vice President – Information Services and was elected Chief Operating Officer of the Company 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).
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, and Controller, as well as other
financial and accounting capacities since joining the Company in 1995. Previously, she was a certified public accountant with Ernst &
Young LLP.
Wolfgang Wegener Vice President and Managing Director – Columbus McKinnon Europe
Named Vice President and Managing Director – CMCO Europe in 2006, Mr. Wegener was assigned leadership of the recently acquired
Pfaff-silberblau business as well as the Duff-Norton business. Previously, Mr. Wegener served as Managing Director of the CMCO
Europe operations.
Gene P. Buer Vice President – Hoist Products, the Americas
Before the transition from Executive Director to Vice President of Hoist Products – the Americas in 2009, Mr. Buer was the President
of Columbus McKinnon’s Crane Equipment and Services, Inc. subsidiary and served in other executive capacities. Prior to joining the
Company in 2005, Mr. Buer held Senior Executive and sales management positions with several industrial companies including Creative
Ergonomic Systems, Inc., Zimmerman International Corp., Thermal Devices Corp. and Champion Blower and Forge.
Charles R. Giesige Vice President – Rigging Products, the Americas
Mr. Giesige was named Vice President of Rigging Products – the Americas in 2009 after serving as Executive Director of the sector since
2008. Prior to that, Mr. Giesige was the Executive Director of special projects and a General Manager within Columbus McKinnon. Before
joining the Company in 2006, he held a variety of Senior Operations and Finance positions within Johnson Controls, Inc.
Robert S. Clare Managing Director – Asia Pacific
Mr. Clare was named to the newly created position of Managing Director – Asia Pacific in February 2009. Previously, he was the
European Business Development Managing Director and oversaw the integration of Columbus McKinnon products and brands into
the European and Middle East markets. Prior to that, he served as Columbus McKinnon’s Managing Director for the United Kingdom,
based in Chester, England.
Joseph J. Owen Vice President – Supply Chain Management
In 2008, Mr. Owen was named to the newly created executive position to oversee global supply chain management as well as Lean,
quality and restructuring initiatives. Since joining the Company in 1997, he has served as Hoist Group Leader, VP – Strategic Integration
and Director – Materials Management. Previously, Mr. Owen 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.
Timothy R. Harvey General Counsel
Prior to joining Columbus McKinnon in 1996, Mr. Harvey was engaged in the private practice of law in Buffalo, New York. In addition to his
current position, Mr. Harvey has served as Corporate Secretary and Manager – Legal Affairs for the Company.
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 at 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 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 has served as senior financial executive with Collins &
Aikman and 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 for 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).
Board Committees: Compensation and Succession (Chairman), Audit
Nicholas T. Pinchuk became a Director of the Company in January 2007. Mr. Pinchuk is currently the President, Chief Executive Officer
and Chairman of the Board at Snap-on Incorporated (NYSE: SNA).
Board Committees: Compensation and Succession, Corporate Governance and Nomination
Liam G. McCarthy was appointed a Director of the Company in November 2008. Mr. McCarthy is also President and Chief Operating
Officer of Molex Incorporated (NASDAQ:MOLX), where he previously served in various executive and management capacities at Molex.
Board Committees: Compensation and Succession, Corporate Governance and Nomination
Christian B. Ragot became a Director of the Company in November 2008. In 2007, Mr. Ragot was appointed President, Chief Executive
Officer and Director of Freightcar America, Inc. (NASDAQ:RAIL). Prior thereto, he served in various executive capacities with Terex
Corporation (NYSE: TEX) and Ingersoll-Rand Company (NYSE: IR).
Board Committees: Compensation and Succession, Corporate Governance and Nomination
Corporate Secretary
Robert J. Olivieri is a Partner and member of the Corporate & Securities Practice Group at Hodgson Russ LLP.
8
Financial Summary
(In thousands, except per share, percent change, margin and ratio data)
Data as of or for the years ended March 31, 2009 and March 31, 2008
Income Statement Data
2009
2008
Change
Net sales
Gross profit
Gross margin
$606,708
$593,786
173,701
185,575
2.2%
-6.4%
28.6%
31.3%
(Loss) income from operations
(46,559)
80,740
Operating margin
(7.7)%
13.6%
Non-GAAP income from operations*
62,362
81,576
-23.6%
Non-GAAP operating margin*
10.3%
13.7%
Net (loss) income
(78,384)
37,349
Net (loss) income per diluted share
Non-GAAP net income per diluted share*
($4.16)
$1.90
$1.95
$2.35
-19.1%
Balance Sheet Data
Total assets
Total liabilities
$491,664
$590,035
-16.7%
309,810
294,554
5.2%
3.5%
Total funded debt
137,886
133,283
Funded debt, net of cash
98,650
57,289
72.2%
Total shareholders’ equity
181,854
295,481
-38.5%
Funded debt/capitalization
Funded debt, net of cash/capitalization
43.1%
35.2%
31.1%
16.2%
Strong Cash Flow From
Operations
Cash Flow from
Operations
($ in millions)
$60
30
0
59.6
60.2
46.4
45.5
17.2
05
06
07
08
09
Cash Flow from
Operations per Share
$4
2
0
3.11
3.19
2.80
2.39
1.16
05
06
07
08
09
Reduced Debt Levels
($ in millions)
Debt, Net of Cash
$300
261.5
150
0
164.2
123.4
98.7
71.9
05
06
07
08
09
Our Growing Global Presence
($ in millions)
Net Sales
$700
550.5
513.3
472.1
593.8 606.7
350
0
$250
125
0
05
06
07
08
09
Other Data
International Sales
224.5
188.3
148.3
155.6
159.2
Operating cash flow
$60,231
$59,590
Operating cash flow per share
3.19
Depreciation, amortization and impairment
117,590
3.11
8,325
1.1%
2.6%
05
06
07
08
09
Capital expenditures
(12,245)
(12,479)
-1.9%
Working capital/ revenue
18.8%
18.2%
Days sales outstanding
Inventory turns
53.7
4.0
53.0
5.2
*Excludes unusual items including $107.0 million goodwill impairment charge and $1.9 million
restructuring charge; a reconciliation of the unusual items affecting net income in both years is
provided in the Company’s fiscal 2009 fourth quarter and full year earnings release which is available
on the corporate website at www.cmworks.com
Growing Profitability
Operating Margin (%)
20
10
0
13.6%
13.6%
11.1%
8.4%
10.3%*
05
06
07
08
09
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, 2009
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 whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes [ ] 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 28,
2008 was approximately $429 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, 2009 was 19,047,430 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s proxy statement for its 2009 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, 2009 are incorporated by reference into Part III of this report.
COLUMBUS McKINNON CORPORATION
2009 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.
PART I
Item 1.
Business
General
We are a leading manufacturer and marketer of hoists, cranes, actuators, chain, forged attachments, lift tables and other
material handling products 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 products are
sold globally and our brand names, including CM, Coffing, Chester, Duff-Norton, Pfaff, Shaw-Box and Yale, are among the
most recognized and well-respected in the marketplace.
As part of our continuing evaluation of its businesses, the Company determined that its integrated material handling
conveyor systems business (Univeyor A/S) no longer provided a strategic fit with its long-term growth and operational
objectives. On July 25, 2008, the Company completed the sale of Univeyor A/S, and its results of operations for all periods
presented have been classified as discontinued operations in the consolidated balance sheets, statements of operations and
statements of cash flows presented herein.
On October 1, 2008, we acquired Pfaff Beteiligungs GmbH (“Pfaff-silberblau” or “Pfaff”), a Kissing, Germany based
company with leading European position in lifting, material handling and actuator products. Pfaff had revenue of approximately
$90 million USD, in calendar 2007. This strategic acquisition continues the execution of our strategic plan to grow our revenue
in complimentary product lines and also broaden that revenue in international markets. We believe Pfaff-silberblau complements
our existing material handling business in Europe and the U.S. and creates a more global actuator business when combined with
our U.S. based Duff Norton actuator company. We expect to create value from this acquisition through integrating the Pfaff
business with our Columbus McKinnon European and U.S. based material handling businesses and Duff Norton. Value will be
created by cross selling products among these groups as well reducing costs through business integration and procurement
activities.
Our business is cyclical in nature and sensitive to changes in general economic conditions, including changes in the
industrial capacity utilization, industrial production and the general economic activity indicators like GDP. The U.S. industrial
capacity utilization, which we use as a leading market indicator for our U.S. based businesses, was 65.8% in both March 2009
and April 2009. This is the lowest reported US industrial capacity utilization as published by the U.S. Federal Reserve Board.
In light of the current economic climate and in accordance with our manufacturing strategy, subsequent to March 31, 2009,
we have commenced with a plan to rationalize our North American hoist and rigging operations to improve efficiency, control
costs and facilitate future growth. The execution of the plan is contingent upon successful bargaining unit negotiations with the
labor unions at each facility. The process currently involves closing two manufacturing facilities and significantly downsizing a
third facility beginning in the second quarter of fiscal 2010 and continuing through fiscal 2011 resulting in a reduction of
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500,000 square feet of manufacturing space and generating annual savings estimated at approximately $8-$10 million. The cost
of the restructuring is expected to be approximately $8-$10 million with 80% of the total charges occurring in fiscal year 2010.
This strategy, together with steps to integrate our sales force will provide increased operating leverage when the global economy
returns to more normalized levels.
Our Position in the Industry
The broad, global material handling industry includes the following sectors:
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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 most of these sectors. 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 will be aided by several macro-economic growth drivers. These
drivers include:
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. Driven by workplace safety regulations such as the Occupational Safety and Health Act and the
Americans with Disabilities Act in the U.S. and other safety regulations around the world, 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 broad product offering combined with our well established brand
names will enable us to benefit from this consolidation and enhance our market share.
Our Competitive Strengths
Leading North American 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 134-year history by
emphasizing technological innovation, manufacturing excellence and superior after-sale service. Approximately 68% of our U.S.
net sales for the year ended March 31, 2009 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
46%
58%
38%
71%
60%
44%
80%
25%
2
U.S. Market Position
#1
#1
#1
#1
#1
#1
#1
#1
Percentage of
U.S. Net Sales
25%
14%
7%
4%
8%
5%
3%
2%
68%
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(1) Market share and market position data are internal estimates derived from survey information collected and provided by our trade associations in 2009.
(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 2009.
(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 2008.
(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 2009.
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 lifting tools. 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.
In addition, our brand names, including Budgit, Chester, CM, Coffing, Duff-Norton, Little Mule, Pfaff, Shaw-Box and
Yale, are among the most recognized and respected in the industry. The CM and Yale names have 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 15,000 general and specialty distributors, end
users 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 $224.5 million
(representing 37% of our total sales) during the year ended March 31, 2009. This growth has occurred primarily in Europe, Latin
America and Asia-Pacific. The Pfaff acquisition in October 2008 will further enhance our international revenue growth.
Additionally, we have recently opened a sales office in Beijing, China to sell into this growing industrial market. 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. Once the economic climate
resumes growth, our operating leverage goal is for each incremental sales dollar to generate 20%-30% of additional operating
income.
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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. During fiscal 2010, we are undergoing consolidation of our North American
hoist and rigging operations in accordance with our strategy subject to bargaining unit negotiations. In the
event of successful union negotiations, we expect this will involve the closing of two manufacturing facilities
and significantly downsizing a third facility beginning in the second quarter of fiscal 2010 and continuing
through fiscal 2011 resulting in a reduction of approximately 500,000 square feet of manufacturing space and
generating annual savings estimated at approximately of $8-$10 million.
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Lean Culture. We have been applying Lean techniques since 2001, 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 tools will generate benefits for
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many years to come. We are developing our people and focusing on now becoming a Lean culture where we
improve our processes and reduce waste in all forms in all our business activities.
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International Expansion. Our continued expansion of our manufacturing facilities in China and Hungary
provides us with another cost efficient platform to manufacture and distribute certain of our products and
components. We now operate 24 manufacturing facilities in seven countries, with 39 stand alone sales and
service offices in 19 countries, and nine stand alone warehouse facilities in four countries.
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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.
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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 ultimate satisfaction. We have a large installed base of hoists and rigging tools 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 distribution channel partners and provide prompt aftermarket service to end-users of our products
through our authorized network of 16 chain repair stations and approximately 225 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 net debt by $174.8 million, from $273.5 million to $98.7 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 the material handling industry as well as
growing businesses, 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 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:
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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.
We are also investing in key vertical markets that will help us grow our revenues in these key markets.
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. 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. Over the past year, we have
adopted the StageGate process to enhance discipline and focus in our new product development program.
New product sales (as defined by new items introduced within the last three years) amounted to $74.8 million,
$89.0 million and $79.5 million in fiscal 2009, 2008 and 2007, 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.
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Continue to Grow in International Markets. Our international sales of $224.5 million comprised 37% of our net sales for
the year ended March 31, 2009, 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, France, Germany, Hungary, Mexico and the United Kingdom. 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 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 China and Hungary. In furtherance
of this objective, we have undertaken the following:
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Lean. We continuously identify value streams throughout our businesses and intensely remove waste in all
forms. We started Lean in 2001 and continue to recognize benefits from this effort.
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Rationalization of Facilities. We have a successful history of consolidating manufacturing 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. During fiscal 2010, we are undergoing consolidation of our North American hoist and rigging
operations in accordance with our strategy subject to bargaining unit negotiations. In the event of successful
union negotiations, we expect this will involve the closing of two manufacturing facilities and significantly
downsizing a third facility beginning in the second quarter of fiscal 2010 and continuing through fiscal 2011
resulting in a reduction of approximately 500,000 square feet of manufacturing space and generating annual
savings estimated at approximately $8-$10 million.
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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.
Drive EPS Growth through De-leveraging. We intend to continue our focus on cash generation for debt reduction
through the following initiatives:
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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 once the economic climate resumes growth. Our
operating leverage goal is for each incremental sales dollar to generate 20%-30% of operating income in a
healthy economic environment. 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 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 and accounts
receivable, 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.
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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 other emerging markets, 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 Business
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes the standards for
reporting information about operating segments in financial statements. Historically we had two operating and reportable
segments, Products and Solutions. The Solutions segment engaged primarily in the design, fabrication and installation of
integrated material handling conveyor systems and service and in the design and manufacture of tire shredders, lift tables and
light-rail systems. In the first quarter of fiscal 2009, we re-evaluated our operating and reportable segments in connection with
the divestiture of our integrated material handling conveyor systems and service business. With this divestiture, and in
consideration of the quantitative contribution of the remaining portions of the Solutions segment to the Company as a whole and
our products-orientated strategic growth initiatives, we determined that we now have only one operating and reportable segment
for both internal and external reporting purposes. Prior period financial information included herein has been restated to reflect
the financial position and results of operations as one segment. As part of the organizational restructuring announced in our
December 22, 2008 press release and form 8-K filing, we reevaluated our reportable segments and we continue to believe that we
have only one reportable operating segment.
We design, manufacture and distribute a broad range of material handling products for various applications. Products
include a wide variety of electric, lever, hand and air-powered hoists, hoist trolleys, winches industrial crane systems such as
bridge, gantry and jib cranes; alloy and carbon steel chain; closed-die forged attachments, such as hooks, shackles, textile slings,
clamps logging tools and loadbinders; industrial components, such as mechanical and electromechanical actuators and rotary
unions; below-the-hook special purpose lifters; tire shredders; lift tables and light-rail systems. These products are typically
manufactured for stock or assembled to order from standard components and are sold primarily through a variety of commercial
distributors; and to a lesser extent directly to end-users. The diverse end-users of our products are in a variety of industries
including: manufacturing, power generation and distribution, utilities, wind power, ,warehouses, commercial construction, oil
exploration and refining, petrochemical , marine, ship building, and heavy duty trucks, agriculture, logging and mining. ,We also
serve a niche market for the entertainment industry including permanent and traveling concerts, live theater and sporting venues.
Products
In excess of 75% of our net sales are derived from the sale of products that we sell at a unit price of less than $5,000. Of
our 2009 sales, $382.2 million, or 63% were U.S. and $224.5 million, or 37% were international. The following table sets forth
certain sales data for our products, expressed as a percentage of net sales for fiscal 2009 and 2008:
Hoists .......................................................................................
Chain........................................................................................
Forged attachments..................................................................
Industrial cranes.......................................................................
Actuators and rotary unions.....................................................
Other ........................................................................................
Fiscal Years Ended March 31,
2009
55%
12
10
10
10
3
100%
2008
54%
13
11
11
7
4
100%
Hoists. We manufacture a wide variety of electric chain hoists, electric wire rope hoists, hand-operated hoists, winches,
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, Pfaff, Shaw-Box, Yale and other
recognized brands. 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.
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We also offer several lines of standard and 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.
Chain. We manufacture alloy and carbon steel chain for various industrial and consumer applications. U.S. 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 participate in the U.S. crane manufacturing and servicing markets through our offering of overhead
bridge, jib and gantry cranes. Our products are sold under the CES, Abell-Howe, Gaffey and Washington Equipment brands.
Crane builders represent a specific distribution channel for electric wire rope hoists, chain hoists and other crane components.
Actuators and Rotary Unions. Through our Duff-Norton and Pfaff divisions, 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, energy, aerospace and many other commercial 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.
Other. This category includes tire shredders, lift tables and light-rail systems. We have developed and patented a line of
heavy equipment that shreds whole tires, for use in recycling the various components of a tire including: rubber and steel. These
recycled products also can be used as aggregate, playgrounds, sports surfaces, landscaping and other such applications, as well as
scrap steel. 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 are
portable steel overhead beam configurations used at workstations, from which hoists are an integral component .
Sales and Marketing
Our sales and marketing efforts consist of the following programs:
Factory-Direct Field Sales and Customer Service. We sell our products through our sales force of more than 150 sales
people and through independent sales agents worldwide. Our sales are further supported by over 425 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 entertainment,
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
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shows. In fiscal 2009, we participated in trade shows in the U.S., Canada, Mexico, Germany, the United Kingdom, France,
China, Brazil, Russia, 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 in 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).
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 27 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 enter sales orders, search pricing information, order status and product serial number data.
Distribution and Markets
Our distribution channels include a variety of commercial distributors. In addition, we sell overhead bridge, jib and gantry
cranes as well as certain Pfaff products directly to end-users. The following describes our global distribution channels:
General Distribution Channels. Our global general distribution channels consist of:
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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 manual hoists and
attachments, chain slings and other 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 crane components. 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 market and sell overhead bridge, jib and gantry cranes, parts and service to end-users through our
wholly owned crane builder, Crane Equipment & Service, Inc. (“CES”). 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:
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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.
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Entertainment equipment distributors that design, supply and install a variety of material handling and
rigging equipment for concerts, theaters, ice shows, sporting events, 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 225 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.
OEM/Government Distribution Channels. This channel consists of:
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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. We also provide our products to the U.S government for a
variety of military applications..
Customer Service and Training
We maintain customer service departments staffed by trained personnel for all of our 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 225 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, John Deere, Praxair 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 backlog of orders at March 31, 2009 was approximately $70.1 million compared to approximately $57.7 million at
March 31, 2008 with our Pfaff acquisition contributing to the significant increase from the prior year. 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
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 business 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 for hoists are Konecranes, Demag Cranes 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 and a variety of independent crane builders; for actuators and rotary unions
are Deublin, Joyce-Dayton and Nook Industries; for tire shredders is Granutech; for lift tables is Southworth; and for light-rail
systems is Gorbel.
9
Employees
At March 31, 2009, we had 2,886 employees; 1,709 in the U.S./Canada, 139 in Latin America, 690 in Europe and 348 in
Asia. Approximately 18% of our employees are represented under seven separate U.S. or Canadian collective bargaining
agreements which terminate at various times between April 2010 and March 2012. 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 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 improvement techniques in our business 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..
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 2010.
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 received final regulatory approval from the TCEQ.
In addition, we notified the North Carolina Department of Environment and Natural Resources (the “DENR”) in April 2006
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 supervision of a DENR Registered Environmental Consultant (“”the REC”) and, if appropriate, will
remediate site conditions at the facility. At this time, investigative and remediation costs are expected to not exceed $350,000.
In March of 2007, we also discovered in 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
10
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 $100,000.
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 $0.7 million as of March 31, 2009, which,
in our opinion, is sufficient to deal with such matters. Further, we believe 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. During the fourth quarter of fiscal 2009, we experienced significantly reduced demand for
our products, generally as a result of the rapid and severe contraction in industrial markets worldwide. These lower levels of
demand resulted in a significant decline in net sales as well as a decline in income from operations during that period. If the
current economic conditions deteriorate further with respect to 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.
We are subject to the risk of loss resulting from financial institutions or customers defaulting on their obligations.
Due to the general weakening of the U.S. economy, certain of the lenders in our senior credit facility may have a weakened
financial condition related to their lending and other financial relationships. As a result, they may tighten their lending standards,
which could make it more difficult for us to borrow under our credit facility or to obtain other financing on favorable terms or at
all. Also, any cash balances with our banks are insured only up to $250,000 per bank by the FDIC, and any deposits in excess of
this limit are also subject to risk. In addition, the weakening of the national economy and the recent reduced availability of credit
may have decreased the financial stability of our major customers and suppliers. As a result, it may become more difficult for us
to collect our accounts receivable and outsource products and services to our suppliers. If any of these conditions were to occur,
11
our financial condition and results of operations could be adversely affected.
We rely in large part on independent distributors for sales of our products.
For the most part, 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 $186 million in
fiscal year 2009) is generated in foreign currencies, including principally the euro and the Canadian dollar, 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. 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, 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 2009, approximately 37% 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 lower cost countries, in particular in 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. 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.
12
We are subject to debt covenant restrictions.
Our credit facility contains several financial and other restrictive covenants. A significant decline in our operating income
could cause us to violate our fixed charge coverage ratio in our bank credit facility. This could result in our being unable to
borrow under our bank credit facility or being obliged to refinance and renegotiate the terms of our bank indebtedness.
Our strategy depends on successful integration of acquisitions.
Acquisitions are a key part of our growth strategy. Our historical growth has depended, and our future growth is likely to
depend on our ability to successfully implement our acquisition strategy, and the successful integration of acquired businesses
into our existing operations. We intend to continue to seek additional acquisition opportunities in accordance with our
acquisition strategy, both to expand into new markets and to enhance our position in existing markets throughout the world. If
we are unable to successfully integrate acquired businesses into our existing operations or expand into new markets, our sales and
earnings growth could be reduced.
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
generally 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,
13
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 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.
Item 1B.
Unresolved Staff Comments
None.
14
Item 2.
Properties
We maintain our corporate headquarters in Amherst, New York and, as of March 31, 2009, conducted our principal
manufacturing at the following facilities:
Location
United States:
Muskegon, MI
Wadesboro, NC
Lexington, TN
Charlotte, NC
Cedar Rapids, IA
Eureka, IL
Damascus, VA
Greensburg, IN
Chattanooga, TN
Chattanooga, TN
Cleveland, TX
Lisbon, OH
Tonawanda, NY
Sarasota, FL
Products/Operations
Hoists
Hoists
Chain
Industrial components
Forged attachments
Cranes
Hoists
Scissor lifts
Forged attachments
Forged attachments
Cranes
Hoists and below-the-hook tooling
Light-rail crane systems
Tire shredders
Hoists
Hoists, winches, and actuators
International:
Velbert, Germany
Kissing, Germany
Santiago, Tianguistenco, Mexico Hoists and chain
Hangzhou, China
Hangzhou, China
Hangzhou, China
Chester, United Kingdom
Heilbronn, Germany
Romeny-sur-Marne, France
Szekesfeher, Hungary
Hoists and hand pallet trucks
Textile strappings
Metal fabrication, textiles and textile strappings
Plate clamps
Actuators
Rotary unions
Textiles and textile strappings
Square
Footage
Owned or
Leased
441,000 Owned
186,000 Owned
165,000 Owned
146,000 Leased
100,000 Owned
91,000 Owned
90,000 Owned
86,000 Owned
81,000 Owned
59,000 Owned
39,000 Owned
37,000 Owned
35,000 Owned
25,000 Owned
108,000 Leased
107,000 Leased
91,000 Owned
78,000 Leased
58,000 Leased
51,000 Leased
48,000 Leased
23,000 Leased
22,000 Owned
18,000 Leased
In addition, we have a total of 48 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 product liability
insurance against risks arising out of the use of our products sold to customers through our wholly-owned New York state
captive 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 ($5.0 million through March 31, 2003) per year.
We obtain additional insurance coverage from independent insurers to cover potential losses in excess of these limits.
Item 4.
Submission of Matters to a Vote of Security Holders
None.
15
PART II
Item 5.
Market for the Company’s Common Stock and Related Security Holder Matters
Our common stock is traded on the Nasdaq Stock Market under the symbol ‘‘CMCO.” As of April 30, 2009, there were 464
holders of record of our common stock.
We do not currently pay cash dividends. Our current credit agreement allows, but limits our ability to pay dividends. We may
reconsider or revise this policy from time to time based upon conditions then existing, including, without limitation, our earnings,
financial condition, capital requirements, restrictions under credit agreements or other conditions our Board of Directors may deem
relevant.
We did not repurchase any shares of our company stock during the fourth quarter of fiscal 2009.
The following table sets forth, for the fiscal periods indicated, the high and low sale prices per share for our common stock as
reported on the Nasdaq Stock Market.
Price Range of
Common Stock
Low
High
Year Ended March 31, 2008
First Quarter ..........................................................$ 33.68
34.30
Second Quarter......................................................
33.85
Third Quarter.........................................................
Fourth Quarter....................................................... 33.34
$ 21.84
22.55
24.46
22.00
Year Ended March 31, 2009
First Quarter ..........................................................$ 32.36
Second Quarter...................................................... 29.88
23.34
15.51
Third Quarter.........................................................
Fourth Quarter.......................................................
$ 24.05
22.04
10.11
7.37
On April 30, 2009, the closing price of our common stock on the Nasdaq Stock Market was $12.96 per share.
16
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, 2004 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
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
3/04
3/05
3/06
3/07
3/08
3/09
Columbus McKinnon Corporation
S&P Midcap 400
Dow Jones US Diversified Industrials
*$100 invested on 3/31/04 in stock or index, including reinvestment of dividends.
Fiscal year ending March 31.
Copyright© 2009 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
Copyright© 2009 Dow Jones & Co. All rights reserved.
17
Item 6.
Selected Financial Data
The consolidated balance sheets as of March 31, 2009 and 2008 and the related statements of operations, cash flows and
shareholders’ equity for the three years ended March 31, 2009 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.
Statements of Operations Data:
Net sales
Cost of products sold
Gross profit
Selling expenses
General and administrative expenses
Restructuring charges (1)
Impairment loss (2)
Amortization of intangibles
(Loss) income from operations
Interest and debt expense
Other (income) and expense, net
(Loss) income before income taxes
Income tax expense (benefit)
(Loss) income from continuing operations
(Loss) income from discontinued operations (3)
Net (loss) income
Diluted (loss) earnings per share from continuing
operations
Basic (loss) 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 Data:
$
$
$
$
$
2009
Fiscal Years Ended March 31,
2006
2007
(Amounts in millions, except per share data)
2008
606.7 $
433.0
173.7
72.6
37.7
1.9
593.8 $ 550.5 $ 513.3
408.2 385.7 372.1
185.6 164.8 141.2
69.9
59.4
51.9
34.1
30.6
30.4
0.8
(0.1)
1.6
107.0 —
—
—
0.1
0.2
0.3
80.7
74.7
57.0
13.6
15.9
24.4
(2.6)
(1.9)
5.3
69.7
60.7
27.3
22.8
22.1
(31.4)
46.9
38.6
58.7
(9.6)
(4.5)
1.1
34.1 $ 59.8
37.3 $
1.0
(46.5)
13.2
(1.6)
(58.1)
18.0
(76.1)
(2.3)
(78.4) $
$
$
2005
472.1
352.6
119.5
50.0
28.5
0.9
—
0.3
39.8
27.4
(5.1)
17.5
1.8
15.7
1.0
16.7
(4.16)
$ 2.45 $
2.04 $
3.53 $
1.06
(4.16)
$ 2.50 $
2.09 $
3.66 $
1.07
18.9
18.9
19.2
18.7
19.0
18.5
16.6
16.1
14.8
14.6
491.7 $
137.9
181.9
590.0 $ 565.6 $ 566.0
133.3 159.4 204.3
295.5 241.3 204.4
$
480.9
265.9
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
45.5
59.6
60.2
(3.4)
(8.6)
(65.5)
(22.5) (28.6) (39.9)
10.5
12.5
12.2
0.00
0.00
0.00
46.4
(6.4)
(4.2)
8.2
0.00
17.2
3.1
(21.9)
5.0
0.00
18
_____________
(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 2009, 2008, and 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). 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.
(2) The Company’s impairment testing is performed on an annual basis in the fourth quarter of each year. The company
recorded a $107.0 million goodwill impairment charge in accordance with SFAS 142 during the fourth quarter of fiscal
2009. Refer to “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” and
Note 9 to our consolidated financial statements for additional information on Goodwill and Intangible Assets.
(3) In July 2008, the Company sold its integrated material handling conveyor systems business, Univeyor A/S and its results
of operations have been reflected as discontinued operations for all periods presented. In May 2002, the Company sold
substantially all of the assets of ASI. As part of the sale of ASI, the Company received an 8% subordinated note in the
principal amount of $6.8 million 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, actuators, chain, attachments, lift tables and tire shredders
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 sell a wide variety of powered and manually operated wire rope and chain hoists,
industrial crane systems, chain, hooks and attachments, actuators and rotary unions.
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 as well as another in October 2008. We have developed our leading market
position over our 134-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 have been investing in our Lean efforts across the company, new
product development and expanded sales and marketing activities. Shareholder value will be enhanced through continued
emphasis on the improvement of the fundamentals including new product development, market expansion, manufacturing
efficiency, cost containment, efficient capital investment and a high degree of customer satisfaction.
We are investing in international markets and new products in execution of our strategy and focus on our greatest
opportunities for growth. We maintain a strong North American market share with significant leading market positions in hoists,
lifting and sling chain, forged attachments and actuators. We seek to maintain and enhance our market share by expanding our
sales and marketing activities directed toward selected North American and global sectors including entertainment, energy,
construction, mining and food processing. Our fiscal 2009 acquisition of Pfaff is enhancing our European hoist market
penetration as well as strengthening our global actuator offering. Further, we continue to invest in emerging market penetration,
including the regions of eastern Europe, Latin America and Asia. We complement these activities with continued investments in
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new product development, particularly products with global reach.
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.
While we are cognizant of our need to strategically invest in our future, we are also currently focused on liquidity
preservation and cost management given the broad impact of the worldwide credit market turmoil and economic downturn. We
monitor such indicators as U.S. Industrial Capacity Utilization as an indicator of anticipated demand for our product in the U.S.
That statistic currently stands at its lowest point reported by the Federal Reserve Board. In addition, we continue to monitor
leading indicators of the potential impact of global trends, including energy costs, steel price fluctuations, changing interest rates,
currency impact and activity in a variety of end-user markets around the globe.
In light of the current economic climate and in accordance with our manufacturing strategy, subsequent to March 31, 2009,
we have commenced with a plan to rationalize our North American hoist and rigging operations to improve efficiency, control
costs and facilitate future growth. The execution of the plan is contingent upon successful bargaining unit negotiations with the
labor unions at each facility. The process currently involves closing two manufacturing facilities and significantly downsizing a
third facility beginning in the second quarter of fiscal 2010 and continuing through fiscal 2011 resulting in a reduction of
500,000 square feet of manufacturing space and generating annual savings estimated at approximately $8-$10 million. The cost
of the restructuring is expected to approximate $8-$10 million with 80% of the total charges occurring in fiscal year 2010.
Additionally, 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 efforts which are fundamentally changing our
business processes to be more responsive to customer demand and improving on-time delivery and productivity. In addition to
Lean, 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
Fiscal 2009 sales were $606.7 million, up 2.2%, or $12.9 million compared with fiscal 2008. Fiscal 2009 was marked by
growth in the first half of the year followed by a significant decline in sales and orders received as a result of the rapid and severe
contraction in industrial markets worldwide. Our Pfaff acquisition contributed $43.5 million to our sales growth for fiscal 2009
with the remaining business being down 5.1%, or $30.6 million. Fiscal 2009 was impacted by the recovery of the U.S. dollar
relative to other currencies in the latter half of the year, particularly the euro, and reported sales were unfavorably affected by
$3.6 million. Net sales for fiscal 2008 of $593.8 million increased by $43.3 million or 7.9% from fiscal 2007. 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
first half of fiscal 2009. Sales growth also continued to be fostered by the expansion of international selling efforts. The 2008
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 ($10.1 million). Fiscal 2008 was impacted by the continued weakness
of the U.S. dollar relative to other currencies, particularly the euro, and reported sales were favorably affected by $11.3 million.
Our gross profit margins were 28.6%, 31.3% and 29.9% in fiscal 2009, 2008 and 2007, respectively. Despite higher
revenue, the fiscal 2009 margins were impacted by higher material, freight, and utility costs in the second and third quarters, one
time accounting charges associated with the Pfaff acquisition primarily related to the fair value write-up of inventory in the third
quarter, as well as underabsorption of costs in the fiscal 2009 fourth quarter due to the rapid and significant decline in sales.
Fiscal 2008 and fiscal 2007 saw continued improvement in 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 activities.
Selling expenses were $72.6 million, $69.8 million and $59.4 million in fiscal 2009, 2008 and 2007, respectively. As a
percentage of net sales, selling expenses were 12.0%, 11.8% and 10.8% in fiscal 2009, 2008 and 2007, respectively. The fiscal
2009 increase was a result of the addition of the Pfaff business ($6.7 million) and continued investments in our strategic growth
initiatives offset by lower commissions/incentives ($2.0 million), marketing and travel expense ($1.0 million) as a result of and in
20
response to the economic slowdown, and translation of foreign currencies ($0.8 million). 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 tire shredder business ($1.5 million).
General and administrative expenses were $37.7 million, $34.0 million and $30.7 million in fiscal 2009, 2008 and 2007,
respectively. As a percentage of net sales, general and administrative expenses were 6.2%, 5.7% and 5.6% in fiscal 2009, 2008
and 2007, respectively. The fiscal 2009 increase was a result of the addition of the Pfaff business ($4.3 million), increased credit
and collection reserves ($1.3 million), increased fees for professional services ($0.6 million) and increased research and
development costs ($0.4 million), offset by lower benefit costs including annual incentive plans ($2.5 million) and foreign
currency translation ($0.3 million). 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).
Restructuring charges of $1.9 million, $0.8 million and ($0.1) million, or 0.3%, 0.1% and 0.0% of net sales were recorded
in fiscal 2009, 2008 and 2007, respectively. The 2009 charges are primarily severance related to company-wide staff reduction
efforts in response to the decline in economic conditions during the third and fourth quarters. 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. The fiscal 2007
charges represent 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.
In the fourth quarter of 2009, we recorded an impairment charge of $107.0 million associated with goodwill. Based on
impairment testing performed as of February 22, 2009, we determined that impairment existed for goodwill related to our rest of
products reporting unit. Refer to Critical Accounting Policies and Note 9 to our consolidated financial statements for additional
information on Impairment of Long-Lived Assets.
Amortization of intangibles was $1.0 million, $0.1 million and $0.2 million in fiscal 2009, 2008 and 2007, respectively.
The 2009 increase is attributable to amortization of definite-lived intangible assets recorded in connection with the Pfaff
acquisition.
Interest and debt expense was $13.1 million, $13.6 million and $15.9 million in fiscal 2009, 2008 and 2007, respectively.
As a percentage of net sales, interest and debt expense was 2.2%, 2.3% and 2.9% in fiscal 2009, 2008 and 2007, respectively.
The fiscal 2008 decrease primarily resulted from lower debt levels as we continued to execute our strategy of debt reduction and
increased financial flexibility.
We incurred ($0.2) million, $1.8 million, and $5.2 million in fiscal 2009, 2008, and 2007, respectively, related to
redemption (gain) costs associated with the repurchase of outstanding long-term debt.
We recorded ($2.9) million, $1.2 million, and $5.3 million of investment (loss) income related to marketable securities held
in the Company’s wholly owned captive insurance subsidiary in fiscal 2009, 2008, and 2007, respectively. The 2009 loss
includes $4.0 million related to unrealized losses on securities that were determined to be other than temporary in nature. Refer
to Note 7 to our consolidated financial statements for additional information on Marketable Securities.
Other income and expense, net was $4.3 million, $3.2 million and $1.8 million in fiscal 2009, 2008 and 2007, respectively.
Fiscal 2009 includes $3.0 million of foreign currency exchange loss, a $3.3 million gain from a litigation settlement, $1.4 million
in gains from property sales, and $2.3 million of interest income. Fiscal 2008 includes $2.2 million of investment and interest
income and $0.6 million from product line/real estate sales. Fiscal 2007 includes $1.2 million of interest income and $0.5 million
of gain from a business divestiture.
After adjusting income from continuing operations for the $107.0 million impairment charge, none of which is deductible
for tax purposes, income taxes as a percentage of income from continuing operations before income taxes for fiscal 2009, 2008
and 2007 were 36.8%, 32.7% and 36.4%, respectively. The effective rate in fiscal 2008 was favorably impacted by a reduction
in the valuation allowance related to state net operating losses and changes in deferred state tax rates.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $39.2 million at March 31, 2009, a decrease of $36.8 million from the March 31, 2008
21
balance of $76.0 million. In October of 2008, approximately $52.8 million of cash on hand was used for the acquisition of Pfaff.
Net cash provided by operating activities was $60.2 million, $59.6 million and $45.5 million in fiscal 2009, 2008 and 2007,
respectively. The $0.6 million increase in fiscal 2009 relative to fiscal 2008 was primarily due to weaker operating performance
in fiscal 2009 ($29.5 million) and an increase cash used by discontinued operations ($1.6) offset by higher cash from working
capital components ($31.7 million). Changes in net working capital include favorable changes of $27.7 in accounts receivable,
$10.8 in inventory, and an unfavorable change in accounts payable of $15.0 million all as a result of the declining volume of
business. In addition, there were favorable changes of $2.3 million in prepayments (foreign tax payments) and $2.8 in accrued
and non-current liabilities (lower funding of pension liabilities). The $14.1 million increase in fiscal 2008 relative to fiscal 2007
was primarily due to stronger operating performance in fiscal 2008 ($11.4 million) and improved cash flows from discontinued
operations ($5.8) offset by unfavorable working capital components ($3.1 million). Changes in net working capital include
favorable changes of $2.7 in prepayments and $9.6 in accounts payable (resulting from timing of disbursements and increased
volume of business) offset by an unfavorable change of $7.3 million in inventory (resulting from support for an increase in new
product launches and new market penetration) and an unfavorable change of $7.4 million in accrued and non-current liabilities
(as a result of increased funding of pension liabilities).
Net cash used by investing activities was $65.5 million, $8.6 million and $3.4 million in fiscal 2009, 2008 and 2007,
respectively. The fiscal 2009 increase in cash used of $56.9 million included $52.8 million for the acquisition of Pfaff and less
proceeds from property sales. 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 increased proceeds from the sale of properties and assets. The
fiscal 2009, 2008 and 2007 amounts included $1.6 million, $5.5 million and $4.9 million, respectively, from business, property
and asset divestitures.
Net cash used by financing activities was $22.5 million, $28.6 million and $39.9 million in fiscal 2009, 2008 and 2007,
respectively. The decrease in cash used by financing activities for 2009 compared to 2008 was due to less debt repayment from
continuing operations of $21.5 million offset by an additional $14.2 million of payments by the Company on outstanding debt of
its divested business, Univeyor. The decrease in cash used by financing activities for 2008 compared to 2007 was due to less
debt repayment from continuing operations of $18.5 million offset by $6.6 of less cash used by the financing activities of the
Company’s divested business, Univeyor. Fiscal 2009, 2008 and 2007 include $0.4, $1.4 million and $2.6 million, respectively,
of proceeds from the exercise of employee stock options.
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.
We believe that our cash on hand, cash flows, and borrowing capacity under our recently amended Revolving Credit
Facility will be sufficient to fund our ongoing operations, restructuring activities and budgeted capital expenditures for at least
the next twelve months. This belief is dependent upon no further deterioration in the economy and successful execution of our
current business plan which focuses on opportunities to consolidate our manufacturing footprint in North America, continued
implementation of Lean, and improving working capital utilization, specifically inventory management. On May 19, 2009, the
credit facility was amended to increase the amount of restructuring charges to be excluded from the fixed charge coverage ratio.
As part of the amendment, certain senior subordinated note repurchases were also excluded from the fixed charge coverage ratio
covenant calculation.
At March 31, 2009, the Revolving Credit Facility was not drawn and the available amount, net of outstanding letters of
credit of $10.5 million, totaled $64.5 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, 2009.
The Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005 amounted to $124.9 million at March
31, 2009 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. 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
22
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.
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,
2009, significant unsecured credit lines totaled approximately $7.0 million, of which $4.3 million was drawn.
In addition to the above facilities, our foreign subsidiaries have certain secured credit lines. As of March 31, 2009,
significant secured credit lines totaled $2.9, of which $0.4 million was drawn.
CONTRACTUAL OBLIGATIONS
The following table reflects a summary of our contractual obligations in millions of dollars as of March 31, 2009, by period
of estimated payments due:
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
$ 133.1
9.6
--
56.0
10.5
3.5
Fiscal
2010
$ 1.2
4.0
--
12.0
10.5
0.2
Fiscal 2011-
Fiscal 2012
$ 2.3
4.5
--
24.0
--
3.3
Fiscal 2013- More Than
Five Years
Fiscal 2014
$ 2.7
$ 126.9
0.2
0.9
--
--
1.2
18.8
--
--
--
--
86.9
$ 299.6
--
$ 27.9
30.1
$ 64.2
31.1
$ 177.7
25.7
$ 29.8
(a) As described in Note 11 to our consolidated financial statements.
(b) As described in Note 18 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 and our capital lease obligations.
(e) As described in Note 10 to our consolidated financial statements. Additionally, we intend to contribute approximately
$18.3 million to our pension plans in fiscal 2010.
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
2009, 2008 and 2007 were $12.2 million, $12.5 million and $10.5 million, respectively. Higher capital expenditures in fiscal
2009 and 2008 were the result of new product development and productivity enhancing equipment along with normal
maintenance items. We expect capital expenditure spending in fiscal 2010 to be in the range of $10-$11 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
23
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
As part of our continuing evaluation of its businesses, the Company determined that its integrated material handling
conveyor systems business (Univeyor A/S) no longer provided a strategic fit with its long-term growth and operational
objectives. On July 25, 2008, the Company completed the sale of Univeyor A/S, which business represented the majority of our
former Solutions segment. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Statement of
Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” the
results of operations of the Univeyor business have been classified as discontinued operations in the consolidated balance sheets,
statements of operations and statements of cash flows presented herein.
In connection with the sale of Univeyor A/S on July 25, 2008, the Company used cash on hand to repay $15.2 million in
amounts outstanding on Univeyor’s lines of credit and fixed term bank debt.
In May 2002, we completed the divestiture of substantially all of the assets of ASI which comprised at the time 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 time of receipt.
Accordingly, $0.5 million of income from discontinued operations was recorded in fiscal
2009, 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 12 to our fiscal 2009 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 7¼, 6½%, and 6% as of March 31, 2009, 2008 and 2007, respectively, are primarily
based on long-term bond rates. The increase in the discount rates for fiscal 2009, 2008 and 2007 resulted in an $11.2, $8.4 and $4.3,
respectively, decrease in the projected benefit obligation as of March 31, 2009, 2008 and 2007, respectively. The rate of return on plan
assets assumptions of 7½% for each of the years ended March 31, 2009, 2008 and 2007 is based on the composition of the asset
portfolios (approximately 60% equities and 40% fixed income at March 31, 2009) and their long-term historical returns. The assets
realized actual losses of $34.9 million in fiscal 2009 as a result of the significant volatility in US capital markets during the last half of
fiscal 2009 and gains of $6.9 million in fiscal 2008. Our under-funded status as of March 31, 2009 and 2008 was $48.9 million and
$15.3 million, or 34.9% and 10.9% of the projected benefit obligation, respectively. Our pension contributions during fiscal 2009 and
2008 were approximately $9.3 million and $14.5 million, respectively. The under-funded status may result in future pension expense
increases. Pension expense for the March 31, 2010 fiscal year is expected to approximate $10.9 million, which is up significantly from
the fiscal 2009 amount of $5.9 million due to an increase in amortization of unrecognized losses and lower expected returns on the
depressed asset values. The factors outlined above may result in increases in funding requirements over time, unless there is
24
considerable market appreciation in the plans’ asset values. Pension funding contributions for the March 31, 2010 fiscal year are
expected to increase by approximately $9.0 million compared to fiscal 2009. The compensation increase assumption of 2% as of
March 31, 2009 and 3% as of March 31, 2008 and 2007 is based on expected wage trends and historical patterns.
The healthcare inflation assumptions of 9½%, 8¼%, and 9% for fiscal 2009, 2008 and 2007, 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 15 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. These actuarial estimates are subject to a high
degree of uncertainty due to a variety of factors, including extended lag time in the reporting and resolution of claims, trends or changes
in claim settlement patterns, insurance industry practices, and legal interpretations. As a result, actual costs could differ significantly
from the estimated amounts. Adjustments to estimated reserves are recorded in the period in which the change in estimate occurs.
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.
Impairment of depreciable and amortizable long-lived assets. Property, plant and equipment and certain intangibles are
depreciated or amortized over their assigned lives. We test long-lived assets for impairment when events or changes in
circumstances indicate that the carrying amount of those assets may not be recoverable and exceeds their fair market value. The
following summarizes the value of long-lived assets subject to impairment testing when events or circumstances indicate
potential impairment as of March 31, 2009 (in millions):
Property, plant and equipment, net
Acquired intangibles with estimable useful lives
Other assets
Balance as of
March 31, 2009
$ 62.1
20.3
5.0
Impairment exists if the carrying amount of the asset in question exceeds the sum of the undiscounted cash flows expected to
result from the use of the asset. The impairment loss would be measured as the amount by which the carrying amount of a long-
lived asset exceeds its fair market value as determined by the discounted cash flow method or in the case of negative cash flow,
an independent market appraisal of the asset.
Goodwill impairment testing. Our goodwill balance, $104.7 million as of March 31, 2009, is subject to impairment testing.
We test goodwill for impairment at least annually, as of the end of February, and more frequently whenever events occur or
circumstances change that indicate there may be impairment. These events or circumstances could include a significant long-
term adverse change in the business climate, poor indicators of operating performance, or a sale or disposition of a significant
portion of a reporting unit. During fiscal 2009, we tested goodwill for impairment as of February 22, 2009.
We test goodwill at the reporting unit level, which is one level below our operating segment. We identify our reporting
units by assessing whether the components of our operating segment constitute businesses for which discrete financial
information is available and segment management regularly reviews the operating results of those components. We also
aggregate components that have similar economic characteristics into single reporting units (for example, similar products and /
or services, similar long-term financial results, product processes, classes of customers, etc.). We currently have four reporting
units as compared to five reporting units for the fiscal 2008 goodwill impairment test. The sale of Univeyor A/S resulted in the
divestiture of a reporting unit. We aggregated the fiscal 2009 acquisition of Pfaff Beteiligungs GmbH into another reporting unit
with similar economic characteristics.
The goodwill impairment test consists of comparing the fair value of a reporting unit, determined using discounted cash
flows, with its carrying amount including goodwill. If the carrying amount of the reporting unit exceeds the reporting unit’s fair
value, the implied fair value of goodwill is compared to the carrying amount of goodwill. An impairment loss would be
recognized for the amount by which the carrying amount of goodwill exceeds the implied fair value of goodwill.
25
Only two of our four reporting units carry goodwill. One reporting unit had a carrying amount exceeding the reporting unit’s
fair value at February 22, 2009 due to an expected decrease in projected revenues and cash flows to be generated by the reporting
unit, combined with a higher weighted-average cost of capital due to market conditions. Therefore, the Company initiated step
two of the goodwill impairment test which involves calculating the implied fair value of goodwill by allocating the fair value of
the reporting unit to its assets and liabilities other than goodwill and comparing it to the carrying amount of goodwill. The
Company estimated that the implied fair value of goodwill for the one reporting unit was less than its carrying value by
approximately $107.0 million which has been recorded as an impairment charge during the fourth quarter ended March 31, 2009.
Prior to the impairment charge, this reporting unit had goodwill of $200.3 million. The impairment charge is based on the
allocation of fair value in the second step of the goodwill impairment test. Future impairment indicators, such as declines in
forecasted cash flows, may cause additional significant impairment charges. Impairment charges could be based on factors such
as the Company’s stock price, forecasted cash flows, assumptions used, control premiums or other variables.
Testing goodwill for impairment requires us to estimate fair values of reporting units using significant estimates and
judgmental factors. The key estimates and factors used in our discounted cash flow valuation include revenue growth rates and
profit margins based on internal forecasts, terminal value, and the weighted-average cost of capital used to discount future cash
flows. The compound annual growth rate for revenue during the first five years of our projections ranged between 2.1% and
2.8%. The terminal value was calculated assuming projected growth rates of 2.0% after five years which reflects our estimate of
long-term gross domestic product growth. Operating profit margins were projected to return to historical norms by between
fiscal 2012 and fiscal 2013 in the individual reporting units. The estimated weighted-average cost of capital for the consolidated
Company was determined to be 13.5% based upon an analysis of similar companies and their debt to equity mix, their related
volatility and the size of their market capitalization. We also consider any additional risk of each individual reporting unit
achieving its forecasts, and adjust the weighted-average cost of capital applied when determining each reporting unit’s estimated
fair value. The weighted-average cost of capital determined for each reporting unit as of the February 22, 2009 test date ranged
between 13.0% and 17.0%. Future changes in these estimates and assumptions could materially affect the results of our goodwill
impairment tests. For example, a decline in the terminal growth rate greater than 110 basis points or an increase in the weighted-
average cost of capital greater than 75 basis points would have indicated impairment in one reporting unit as of February 22,
2009 whose goodwill was $9.8 million.
If the projected long-term revenue growth rates, profit margins, or terminal rates are considerably lower, and/or the
estimated weighted-average cost of capital is considerably higher, future testing may indicate further impairment of one or more
of the Company’s reporting units and, as a result, the related goodwill would likely be impaired.
Marketable Securities. On a quarterly basis, we review our marketable securities for declines in market value that may be
considered other than temporary. We generally consider market value declines to be other than temporary if there are declines for a
period longer than six months and in excess of 20% of original cost. We also consider the nature of the underlying investments and
other market conditions.
Deferred Tax Asset Valuation Allowance. As of March 31, 2009, we had $44.1 million of gross deferred tax assets before
valuation allowances. As described in Note 17 to the consolidated financial statements, the deferred tax assets relate principally to
liabilities including employee benefit plans and insurance reserves. The deferred tax assets include $2.8 million related to various state
and foreign net operating loss carryforwards for which a $1.6 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.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued 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. In October 2008, the FASB issued FSP FAS 157-3, “Determining the Fair
Value of a Financial Asset When the Market for That Asset Is Not Active.” The adoption of SFAS 157 did not have a material
effect on the Company’s consolidated financial statements.
26
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. The Company adopted all of the aforementioned 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 adoption of the measurement date requirement resulted in an $887,000 reduction to retained earnings in fiscal 2009.
On April 1, 2008, the Company adopted the provisions of FASB Emerging Issues Task Force (“EITF”) Issue No. 06-10,
“Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements” (“EITF 06-10”). In accordance with EITF 06-
10, an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life
insurance arrangement in accordance with either SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than
Pensions,” or APB Opinion 12, “Omnibus Opinion—1967.” The provisions of EITF 06-10 were applied as a change in
accounting principle through a cumulative-effect adjustment to retained earnings. The adoption of EITF 06-10 resulted in a
$1,248,000 reduction to retained earnings in fiscal 2009.
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. We did not elect to implement the fair value option
allowed under this standard.
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 believes that the adoption of SFAS 141(R) will not have a
material effect on its 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 160 will not have a
material effect on its consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”
(“SFAS 161”), which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”).
SFAS 161 requires a company with derivative instruments to disclose information that should enable financial statement users to
understand how and why the company uses derivative instruments, how derivative instruments and related hedged items are
accounted for under SFAS 133, and how derivative instruments and related hedged items affect the company’s financial position,
financial performance, and cash flows. The required disclosures include the fair value of derivative instruments and their gains or
losses in tabular format, information about credit risk related contingent features in derivative agreements, counterparty credit
risk, and a company’s strategies and objectives for using derivative instruments. The Statement expands the current disclosure
framework in SFAS 133. SFAS 161 is effective prospectively for periods beginning on or after November 15, 2008. We will
comply with the disclosure provisions of this statement after its effective date.
In December 2008, the FASB issued FASB Staff Position, or FSP, No. 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets” (“SFAS 161”). This FSP amends SFAS 132(R), “Employer’s Disclosures about Pensions
and Other Postretirement Benefits” (“SFAS 132(R)”), to require additional disclosures about assets held in an employer’s defined
benefit pension or other postretirement plan. This FSP replaces the requirement to disclose the percentage of the fair value of
total plan assets for each major category of plan assets, such as equity securities, debt securities, real estate and all other assets,
with the fair value of each major asset category as of each annual reporting date for which a financial statement is presented. It
also amends SFAS 132(R) to require disclosure of the level within the fair value hierarchy in which each major category of plan
27
assets falls, using the guidance in SFAS No. 157, “Fair Value Measurements.” This FSP is applicable to employers that are
subject to the disclosure requirements of SFAS 132(R) and is generally effective for fiscal years ending after December 15, 2009.
We will comply with the disclosure provisions of this FSP after its effective date.
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 2009, 31% of our net sales were from manufacturing plants and sales offices in foreign jurisdictions. We
manufacture our products in the United States, Mexico, China, the United Kingdom, France, Hungary and Germany and sell our
products 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 $0.8 million. In addition, the majority of our export sale transactions are
denominated in U.S. dollars.
During 2009, the Company entered into cross-currency swaps and foreign exchange forward agreements to hedge changes
in the value of intercompany loans to certain foreign subsidiaries due to changes in foreign exchange rates. The notional amount
of these derivatives is $27.3 million and all contracts mature by September 30, 2013. As of March 31, 2009, the fair value of
these derivatives was a $1.0 million loss that was recorded to earnings and is included in foreign currency exchange loss.
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, 2009, we
do not have any material swap agreements or similar financial instruments in place. At March 31, 2009 and 2008, approximately
91% and 98% of our outstanding debt had fixed interest rates, respectively. At those dates, we had approximately $11.9 million
and $3.1 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 $0.1 million and $0 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-
28
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. 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, 2027 and March
31, 2039 to range between $5.5 million and $15.5 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 $8.8 million which has been reflected as a liability in the consolidated financial
statements as of March 31, 2009. 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.
29
Item 8.
Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 2009:
Report of Independent Registered Public Accounting Firm...............................................................................
Consolidated Balance Sheets..............................................................................................................................
Consolidated Statements of Operations..............................................................................................................
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. Acquisitions ..........................................................................................................................................
4. Discontinued Operations.......................................................................................................................
Fair Value Measurements .....................................................................................................................
5.
6.
Inventories ............................................................................................................................................
7. Marketable Securities............................................................................................................................
Property, Plant, and Equipment ............................................................................................................
8.
9. Goodwill and Intangible Assets ............................................................................................................
10. Accrued Liabilities and Other Non-current Liabilities .........................................................................
11. Debt.......................................................................................................................................................
12. Pensions and Other Benefit Plans .........................................................................................................
13. Employee Stock Ownership Plan (ESOP) ............................................................................................
14. Earnings per Share and Stock Plans......................................................................................................
15. Loss Contingencies ...............................................................................................................................
16. Restructuring Charges...........................................................................................................................
17.
Income Taxes ........................................................................................................................................
18. Rental Expense and Lease Commitments .............................................................................................
19. Summary Financial Information ...........................................................................................................
20. Business Segment Information .............................................................................................................
21. Selected Quarterly Financial Data (unaudited) .....................................................................................
22. Accumulated Other Comprehensive Loss.............................................................................................
23. Effects of New Accounting Pronouncements .......................................................................................
24. Subsequent Event..................................................................................................................................
F-2
F-3
F-4
F-5
F-6
F-7
F-7
F-11
F-12
F-12
F-14
F-14
F-15
F-15
F-16
F-17
F-18
F-22
F-23
F-28
F-29
F-30
F-32
F-33
F-37
F-38
F-39
F-39
F-41
Schedule II – Valuation and Qualifying Accounts.........................................................................................
F-42
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, 2009 and 2008, and the related consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 2009. 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, 2009 and 2008 and the consolidated results of
its operations and its cash flows for each of the three years in the period ended March 31, 2009, 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 12 to the consolidated financial statements, on March 31, 2007 the Company changed its
method of accounting for employee retirement plans and other postretirement benefits in accordance with SFAS No.
158, and on March 31, 2009 the Company adopted the measurement date provisions of SFS No. 158. As discussed
in Note 17 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, 2009,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated June 5, 2009 expressed an unqualified opinion
thereon.
/s/ Ernst & Young LLP
Buffalo, New York
June 5, 2009
F-2
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
2009
2008
(In thousands, except
share data)
Current assets:
ASSETS
Cash and cash equivalents............................................................................................. $
39,236
$
75,994
Trade accounts receivable, less allowance for doubtful accounts
($5,338 and $3,583, respectively) ..............................................................................
80,168
100,621
Inventories.....................................................................................................................
18,115
Prepaid expenses ...........................................................................................................
-
Current assets of discontinued operations .....................................................................
238,140
Total current assets................................................................................................................
62,102
Net property, plant, and equipment .......................................................................................
104,744
Goodwill, net.........................................................................................................................
20,336
Other intangibles, net ............................................................................................................
28,828
Marketable securities.............................................................................................................
32,521
Deferred taxes on income......................................................................................................
4,993
Other assets ...........................................................................................................................
Assets of discontinued operations .........................................................................................
-
Total assets ............................................................................................................................ $ 491,664
93,833
84,286
17,320
17,334
288,767
53,420
187,055
321
29,807
17,570
8,094
5,001
$ 590,035
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable to banks.................................................................................................. $
Trade accounts payable .................................................................................................
Accrued liabilities..........................................................................................................
Restructuring reserve.....................................................................................................
Current portion of long-term debt .................................................................................
Current liabilities of discontinued operations................................................................
Total current liabilities ..........................................................................................................
Senior debt, less current portion............................................................................................
Subordinated debt..................................................................................................................
Other non-current liabilities ..................................................................................................
Total liabilities.......................................................................................................................
Shareholders’ equity:
4,787
33,298
50,443
1,302
1,171
-
91,001
7,073
124,855
86,881
309,810
Voting common stock; 50,000,000 shares authorized;
$
36
35,149
52,265
58
326
24,955
112,789
3,066
129,855
48,844
294,554
190
19,046,930 and 18,982,538 shares issued .................................................................
180,327
Additional paid-in capital ..............................................................................................
41,891
Retained earnings ..........................................................................................................
(2,309)
ESOP debt guarantee; 144,458 and 176,646 shares ......................................................
(38,245)
Accumulated other comprehensive loss ........................................................................
Total shareholders’ equity .....................................................................................................
181,854
Total liabilities and shareholders’ equity .............................................................................. $ 491,664
189
178,457
122,400
(2,824)
(2,741)
295,481
$ 590,035
See accompanying notes.
F-3
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
2009
Year Ended March 31,
2008
(In thousands, except per share data)
2007
Net sales ............................................................................................... $
Cost of products sold............................................................................
Gross profit...........................................................................................
Selling expenses ...................................................................................
General and administrative expenses ...................................................
Restructuring charges ...........................................................................
Impairment loss ....................................................................................
Amortization of intangibles..................................................................
(Loss) income from operations.............................................................
Interest and debt expense .....................................................................
(Gain) loss on bond redemptions..........................................................
Investment loss (income)......................................................................
Foreign currency exchange loss ...........................................................
Gain from litigation settlement.............................................................
Other (income) and expense, net..........................................................
(Loss) income from continuing operations before income tax
expense .........................................................................................
Income tax expense ..............................................................................
(Loss) income from continuing operations...........................................
Loss from discontinued operations (net of tax)....................................
Net (loss) income.................................................................................. $
606,708
433,007
173,701
72,620
37,721
1,921
107,000
998
(46,559)
13,148
(244)
2,889
3,018
(3,330)
(3,939)
(58,101)
18,001
(76,102)
(2,282)
(78,384)
$
$
593,786
408,211
185,575
69,836
34,048
836
-
115
80,740
13,562
1,794
(1,165)
403
-
(3,588)
69,734
22,819
46,915
(9,566)
37,349
$
$
550,490
385,654
164,836
59,374
30,657
(137)
-
183
74,759
15,881
5,188
(5,257)
226
-
(2,020)
60,741
22,097
38,644
(4,559)
34,085
Average basic shares outstanding.........................................................
Average diluted shares outstanding......................................................
18,861
18,861
18,723
19,158
18,517
18,951
Basic (loss) income per share:
(Loss) income from continuing operations................................... $
Loss from discontinued operations...............................................
Basic (loss) income per share ....................................................... $
(4.04)
(0.12)
(4.16)
Diluted (loss) income per share:
(Loss) income from continuing operations................................... $
Loss from discontinued operations...............................................
Diluted (loss) income per share.................................................... $
(4.04)
(0.12)
(4.16)
$
$
$
$
2.50
(0.51)
1.99
2.45
(0.50)
1.95
$
$
$
$
2.09
(0.25)
1.84
2.04
(0.24)
1.80
See accompanying notes.
F-4
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data)
Common
Stock
($.01
par value)
Addi-
tional
Paid-in
Capital
Retained
Earnings
185 $ 170,081 $ 51,152
ESOP
Debt
Guarantee
Unearned
Restricted
Stock
Accumulated
Other
Comprehensive
Loss
$
(3,996) $
(22)
$
(12,979)
Total
Shareholders’
Equity
$ 204,421
investments, net of tax benefit of $1,006...
—
investments, net of tax benefit of $410......
—
Balance at March 31, 2006............................. $
Comprehensive income:
Net income 2007 ............................................
Change in foreign currency
translation adjustment ................................
Change in net unrealized gain on
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
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............................. $
Comprehensive loss:
Net loss 2009 ..................................................
Change in foreign currency
translation adjustment ................................
Change in net unrealized gain on
investments, net of tax of $228 ..................
Change in pension liability and
postretirement obligations, net of
tax benefit of $12,565 ................................
Total comprehensive loss ...............................
SFAS 158 measurement date adjustment,
net of tax benefit of $545...........................
Adjustment to initially apply EITF 06-10
Stock compensation - directors ......................
Stock options exercised, 46,375 shares..........
Stock compensation expense..........................
Tax benefit from exercise of stock options...
Earned 32,188 ESOP shares...........................
Balance at March 31, 2009............................. $
—
34,085
4,093
4,093
(1,869)
(1,869)
5,758
5,758
42,067
(10,340)
—
—
—
—
—
(15,337)
(10,340)
180
2,601
1,277
311
808
$ 241,325
—
37,349
9,431
9,431
(762)
(762)
3,927
—
—
—
—
—
—
(2,741)
3,927
49,945
(186)
196
1,416
1,266
482
1,037
$ 295,481
—
(78,384)
(16,474)
(16,474)
423
423
(19,453)
(19,453)
(113,888)
—
—
—
—
—
—
—
(38,245)
(877)
(1,248)
260
421
799
274
632
$ 181,854
—
—
—
—
—
—
—
—
—
—
34,085
—
—
—
—
—
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
180
—
2,598
—
1,255
—
311
—
229
188 $ 174,654 $ 85,237
$
—
—
—
—
—
579
—
—
—
22
—
—
(3,417) $ —
$
—
—
—
—
37,349
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
(186)
—
—
196
—
1,415
—
1,266
—
482
—
444
189 $ 178,457 $ 122,400
$
—
—
—
—
—
593
—
—
—
—
—
—
(2,824) $ —
$
—
—
—
—
—
—
—
—
(78,384)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
—
(877)
—
(1,248)
—
—
260
—
420
—
799
—
274
—
117
190 $ 180,327 $ 41,891
$
—
—
—
—
—
—
515
—
—
—
—
—
—
—
(2,309) $ —
$
See accompanying notes.
F-5
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Operating activities:
Net (loss) income.............................................................................................................. $
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Loss from discontinued operations ..........................................................................
Depreciation and amortization.................................................................................
Deferred income taxes .............................................................................................
Gain on divestitures .................................................................................................
Loss (gain) on sale of real estate/investments..........................................................
(Gain) 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:
Trade accounts receivable...............................................................................
Inventories ......................................................................................................
Prepaid expenses.............................................................................................
Other assets .....................................................................................................
Trade accounts payable...................................................................................
Accrued and non-current liabilities.................................................................
Net cash provided by operating activities from continuing operations.............................
Net cash used by operating activities from discontinued operations ................................
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 .............................................................................................
Purchases of businesses ....................................................................................................
Proceeds from sale of businesses......................................................................................
Net cash used by investing activities from continuing operations....................................
Net cash provided (used) by investing activities from discontinued operations ...............
Net cash used by investing activities ................................................................................
Financing activities:
Proceeds from exercise of stock options...........................................................................
Payments under revolving line-of-credit agreements .......................................................
Borrowings under revolving line-of-credit agreements ....................................................
Repayment of debt............................................................................................................
Payment of deferred financing costs.................................................................................
Tax benefit from exercise of stock options.......................................................................
Change in ESOP debt guarantee.......................................................................................
Net cash used by financing activities from continuing operations ...................................
Net cash (used) provided by financing activities from discontinued operations ..............
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:
2009
Year ended March 31,
2008
(In thousands)
2007
(78,384) $
37,349 $
34,085
2,282
10,590
(1,700)
-
2,594
(300)
575
1,059
107,000
24,396
1,658
2,955
1,960
(7,207)
(4,451)
63,027
(2,796)
60,231
363
(2,968)
(12,245)
1,593
(52,779)
9,566
8,325
14,737
(70)
(526)
1,378
982
1,462
—
4,559
7,793
13,879
(504)
(5,373)
4,263
1,603
1,457
—
(3,292)
(9,144)
612
(1,176)
7,801
(7,231)
60,773
(1,183)
59,590
13,076
(14,638)
(12,479)
5,504
—
—
(8,537)
(30)
(8,567)
(4,640)
(1,887)
(2,082)
921
(1,750)
141
52,465
(6,970)
45,495
36,853
(35,686)
(10,540)
2,302
—
2,574
(4,497)
1,102
(3,395)
—
(66,036)
531
(65,505)
421
(10,623)
8,485
(6,987)
—
274
515
(7,915)
(14,612)
(22,527)
(8,957)
(36,758)
75,994
39,236 $
1,416
(831)
18
(29,855)
(2)
482
593
(28,179)
(383)
(28,562)
4,878
27,339
48,655
75,994 $
2,601
(62,930)
63,009
(49,251)
(449)
311
579
(46,130)
6,253
(39,877)
834
3,057
45,598
48,655
Interest paid ............................................................................................................. $
Income taxes paid, net ............................................................................................. $
12,815 $
9,673 $
14,079 $
9,568 $
17,221
5,712
See accompanying notes.
F-6
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, marketer and manufacturer of
material handling products and services which efficiently and ergonomically move, lift, position and secure
material. Key products include hoists, cranes, rigging tools including chain and forged attachments and actuators.
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. During fiscal 2009,
approximately 63% 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
consolidated statements of operations. Advertising expenses were $4,883,000, $5,406,000, and $3,654,000 in fiscal
2009, 2008, and 2007, 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 18% of the Company’s employees are represented by seven separate domestic and Canadian
collective bargaining agreements which terminate at various times between April 2010 and March 2012.
Approximately 4% 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.
Derivative Instruments
The Company uses derivative instruments to manage selected foreign currency exposures. The Company does
not use derivative instruments for speculative trading purposes. All derivative instruments must be recorded on the
balance sheet at fair value. For derivatives designated as cash flow hedges, the effective portion of changes in the
fair value of the derivative is recorded to accumulated other comprehensive loss in the shareholders’ equity section
of the balance sheet and is reclassified to earnings when the underlying transaction has an impact on earnings. The
ineffective portion of changes in the fair value of the derivative is reported in cost of products sold. For derivatives
not classified as cash flow hedges, all changes in market value are recorded to earnings.
During fiscal 2009, the Company entered into cross-currency swaps and foreign exchange forward agreements
with a third party to hedge changes in the value of intercompany loans to certain foreign subsidiaries due to changes
in foreign exchange rates. The notional amount of these derivatives is $27,298,000, and all contracts mature by
September 30, 2013. As of March 31, 2009, the fair value of these derivatives was a $1,007,000 pretax loss that was
recorded to earnings and is included in foreign currency exchange loss. These derivatives are not treated as hedges
for accounting purposes because the loans are intercompany.
F-7
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
In relation to certain of the derivative transactions discussed above, the Company issued a guarantee to a third
party lender which secures any obligations of one of the Company’s wholly-owned foreign subsidiaries under the
subsidiary’s agreement with the third party lender, regarding those derivative transactions. The fair value of the
derivative liability of the foreign subsidiary at March 31, 2009 relating to this guarantee was $974,000.
The Company is exposed to credit losses in the event of nonperformance by the counterparties on its financial
instruments. All counterparties have investment grade credit ratings; accordingly, the Company anticipates that
these counterparties will be able to fully satisfy their obligations under the contracts.
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 7 and 11, 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 foreign currency exchange loss. There were
losses of approximately $3,020,000 (including changes in the fair value of derivatives), $400,000 and $225,000 on
foreign currency transactions in fiscal 2009, 2008 and 2007, respectively.
Gain from Litigation
During the fourth quarter of fiscal 2009, the Company settled a dispute with its previous healthcare provider.
The Company recorded a gain of $3,330,000 related to the settlement in the form of cash proceeds and a note
receivable.
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” (“SFAS 142”). 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. The Company’s
reporting units identified under SFAS 142 are 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
Company’s one segment is subdivided into four reporting units. See Note 9 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.” This statement 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.
F-8
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, and discounted cash flow calculations.
Intangible Assets
At acquisition, we estimate and record the fair value of purchased intangible assets which primarily consist of
trade names, customer relationships and technology. The fair values are estimated based on management’s
assessment as well as independent third party appraisals. Such valuations may include a discounted cash flow of
anticipated revenues resulting from the acquired intangible asset.
Amortization of intangible assets with finite lives is recognized over their estimated useful lives using an
amortization method that reflects the pattern in which the economic benefits of the intangible assets are consumed
or otherwise realized. The straight line method is used for customer relationships. As a result of the negligible
attrition rate in our customer base, the difference between the straight line method and attrition methods is not
considered significant. The estimated useful lives for our intangible assets range from 11 to 18 years.
Inventories
Inventories are valued at the lower of cost or market. Cost of approximately 52% of inventories at March 31,
2009 (58% in 2008) 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.
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 in the shareholders’ equity section of the balance sheet
unless unrealized losses are deemed to be other than temporary. In such instance, the unrealized losses are reported
in the consolidated statements of operations within investment loss (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 loss (income) in the consolidated statements of
operations.
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. The marketable securities are not available for general working capital
purposes.
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.
F-9
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Reclassification/Revisions
Certain prior year amounts have been reclassified to conform to the current year presentation to reflect
Univeyor A/S as a discontinued operation for all prior periods presented.
Research and Development
Research and development costs as defined in SFAS No. 2, “Accounting for Research and Development
Costs” were $4,451,000, $3,280,000 and $1,995,000 for the years ended March 31, 2009, 2008 and 2007,
respectively and are classified as general and administrative expense in the consolidated statements of operations.
Revenue Recognition, Accounts Receivable and Concentration of Credit Risk
Sales are recorded when title passes to the customer which is generally at time of shipment to the customer.
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.
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 is being recognized as income
over the 10-year leaseback period. The lease agreement has been recorded as a capital lease, refer to note 8.
Shipping and Handling Costs
Shipping and handling costs are a component of cost of products sold.
Stock-Based Compensation
The Company records stock-based compensation in accordance with SFAS 123(R), "Share-Based Payment."
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. 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.
See Note 14 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.
F-10
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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:
Balance at beginning of year ......................................................................
Accrual for warranties issued .....................................................................
Warranties settled .......................................................................................
Balance at end of year ................................................................................
March 31,
2009
1,403
3,761
(3,882)
1,282
$
$
2008
1,263
3,300
(3,160)
1,403
$
$
3. Acquisitions
On October 1, 2008, we acquired Pfaff Beteiligungs GmbH (“Pfaff-silberblau” or “Pfaff”), a Kissing,
Germany based company with a leading European position in lifting, material handling and actuator products. Pfaff
had revenue of approximately $90 million USD, in calendar 2007. This strategic acquisition continues the execution
of our strategic plan to grow our revenue in complimentary product lines and also broaden that revenue in
international markets. We believe Pfaff-silberblau complements our existing material handling business in Europe
and the U.S. and creates a more global actuator business when combined with our U.S. based Duff Norton actuator
company. We expect to create value from this acquisition through integrating the Pfaff business with our Columbus
McKinnon European and U.S. based material handling businesses and Duff Norton. Value will be created by cross
selling products among these groups as well as reducing costs through business integration and procurement
activities. The results of Pfaff-silberblau are included in the Company’s consolidated financial statements from the
date of acquisition.
This transaction was accounted for under the purchase method of accounting in accordance with SFAS No.
141 “Business Combinations.” The aggregate purchase consideration for the acquisition of Pfaff-silberblau was
$52,779,000 in cash and acquisition costs. The acquisition was funded with existing cash. The purchase price was
allocated to the assets acquired and liabilities assumed based upon a valuation of respective fair values. The
identifiable intangible assets consisted of trademarks with a value of $6,101,000 (18 year estimated useful life),
customer relationships with a value of $15,092,000 (11 year estimated useful life), and technology with a value of
$806,000 (14 year estimated useful life). The excess consideration over fair value was recorded as goodwill and
approximated $27,769,000, none of which is deductible for tax purposes. The allocation of purchase consideration
to the assets acquired and liabilities assumed is as follows:
Working capital.....................................................................................................
Property, plan and equipment ...............................................................................
Other long term liabilities, net...............................................................................
Identifiable intangible assets .................................................................................
Goodwill ...............................................................................................................
Total ......................................................................................................................
$ 13,340
8,321
(18,650)
21,999
27,769
$ 52,779
F-11
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4. Discontinued Operations
As part of its continuing evaluation of its businesses, the Company determined that its integrated material
handling conveyor systems business (Univeyor A/S) no longer provided a strategic fit with its long-term growth and
operational objectives. During fiscal 2009, the Company completed the sale of Univeyor A/S, which business
represented the majority of the former Solutions segment. In accordance with the provisions of SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” the results of operations of the Univeyor A/S
business have been classified as discontinued operations in the consolidated balance sheets, statements of operations
and statements of cash flows presented herein.
In connection with the sale of Univeyor A/S, the Company used cash on hand to repay $15,191,000 in
amounts outstanding on the Univeyor A/S lines of credit and fixed term bank debt.
In fiscal 2002, the Company sold substantially all of the assets of Automatic Systems, Inc. (ASI). The ASI
business was the principal business unit at the time 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, 2009 is approximately $2,800,000.
Summarized statements of operations for discontinued operations:
2009
Year Ended March 31,
2008
(In thousands)
2007
Net revenue ................................................................................. $
Loss before income taxes ............................................................
Income tax expense (benefit).......................................................
Loss from operations of discontinued businesses........................
Loss on sale of discontinued operation .......................................
Tax benefit from sale of discontinued operation .........................
Loss from discontinued operations.............................................. $
$
8,982
(798)
326
(1,124)
(15,926)
14,768
(2,282) $
$
29,548
(9,346)
220
(9,566)
-
-
(9,566) $
39,358
(5,744)
(1,185)
(4,559)
-
-
(4,559)
The Company recognized a tax benefit of $14,768,000 as a result of the worthless stock deduction created by
the sale of Univeyor A/S on July 25, 2008. The Company’s tax basis in the Univeyor A/S stock was approximately
$39,380,000.
5. Fair Value Measurements
Effective April 1, 2008, the Company adopted the provisions of SFAS No. 157, “Fair Value Measurements,”
(“SFAS 157”) for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or
disclosed at fair value on a recurring basis (at least annually). Under this standard, fair value is defined as the price
that would be received to sell an asset or paid to transfer a liability (i.e. the "exit price") in an orderly transaction
between market participants at the measurement date. The adoption of SFAS 157 did not have a material impact on
our consolidated financial position or results of operations.
SFAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable
inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when
available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed
based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that
reflect the Company's assumptions about the valuation techniques that market participants would use in pricing the
asset or liability developed based on the best information available in the circumstances. The hierarchy is separated
into three levels based on the reliability of inputs as follows:
F-12
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that the
Company has the ability to access. Since valuations are based on quoted prices that are readily and
regularly available in an active market, valuation of these products does not entail a significant degree of
judgment.
Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs
are observable, either directly or indirectly, involving some degree of judgment.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value
measurement. The degree of judgment exercised in determining fair value is greatest for instruments
categorized in Level 3.
The availability of observable inputs can vary from asset/liability to asset/liability and is affected by a wide
variety of factors, including, the type of asset/liability, whether the asset/liability is established in the marketplace,
and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that
are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain
cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases,
for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in its entirety
falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Fair value is a market-based measure considered from the perspective of a market participant rather than an
entity-specific measure. Therefore, even when market assumptions are not readily available, assumptions are
required to reflect those that market participants would use in pricing the asset or liability at the measurement date.
When valuing our derivative portfolio, the Company uses readily observable market data in conjunction with
commonly used valuation models. Consequently, the Company designates our derivatives as Level 2.
The following table provides information regarding financial assets and liabilities measured at fair value on a
recurring basis:
Description
Assets/(Liabilities):
Marketable securities
Derivative liabilities
At March 31, 2009
$ 28,828
(1,007)
$ 28,828
-
Quoted prices in
active markets for
identical assets
(Level 1)
Fair value measurements at reporting date using
Significant other
observable
inputs
(Level 2)
$ -
(1,007)
Significant
unobservable
inputs
(Level 3)
$ -
-
As of March 31, 2009, the Company did not have any nonfinancial assets and liabilities that are recognized or
disclosed at fair value on a recurring basis.
Interest and dividend income on marketable securities, and changes in the fair value of derivatives, are
recorded in investment loss (income) and foreign currency exchange loss, respectively. Interest and dividend
income on marketable securities are measured based upon amounts earned on their respective declaration dates.
During fiscal 2009, the Company reduced the cost bases of certain marketable 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 $4,014,000, classified within investment loss (income).
In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial assets and financial
liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are
reported in earnings. SFAS 159 was effective for fiscal 2009. The Company did not elect to implement the fair
value options allowed under this standard.
F-13
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. 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,
2009
2008
49,697
12,497
59,896
122,090
(21,469)
100,621
$
$
44,594
10,454
44,102
99,150
(14,864)
84,286
7. 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 15). 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 generally 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, or when other evidence indicates an
impairment. During the year ended March 31, 2009, because of uncertain market conditions and the duration at
which certain securities had been trading below cost, 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 $4,014,000 for the year ended
March 31, 2009, classified within investment loss (income). There were no other than temporary impairments for the
years ended March 31, 2008 and 2007.
The following is a summary of available-for-sale securities at March 31, 2009:
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Equity securities ...................... $
29,315
$
394
$
881
Estimated Fair
Value
$
28,828
The aggregate fair value of investments and unrealized losses on available-for-sale securities in an unrealized
loss position at March 31, 2009 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
2,318
$
15,982
$ 18,300
Unrealized
Losses
107
774
881
$
$
The Company considered the nature of the investments, causes of previous impairments, the severity and
duration of unrealized losses and other factors when determining whether or not the unrealized losses at March 31,
2009 were temporary in nature. Based upon published trading values subsequent to March 31, 2009, the securities
in unrealized loss positions at March 31, 2009 are now in unrealized gain positions. Because of this and other
factors, the Company believes that the unrealized losses at March 31, 2009 are temporary.
Net realized gains related to sales of marketable securities (excluding other-than-temporary impairments) were
$7,000, $88,000 and $4,360,000 in fiscal 2009, 2008 and 2007, respectively.
The following is a summary of available-for-sale securities at March 31, 2008:
Equity securities ...................... $
30,945
$
4
$
1,142
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated Fair
Value
$
29,807
F-14
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net unrealized losses included in the balance sheet amounted to $487,000 at March 31, 2009 and $1,138,000
at March 31, 2008. The amounts, net of related income tax benefits of $170,000 and $398,000 at March 31, 2009
and 2008, respectively, are reflected as a component of accumulated other comprehensive loss within shareholders’
equity.
8. Property, Plant, and Equipment
Consolidated property, plant, and equipment of the Company consisted of the following:
March 31,
Land and land improvements ....................................................................................... $
Buildings ......................................................................................................................
4,172
25,169
Machinery, equipment, and leasehold improvements .................................................. 120,293
4,825
154,459
Less accumulated depreciation.....................................................................................
92,357
Net property, plant, and equipment .............................................................................. $ 62,102
Construction in progress...............................................................................................
2009
2008
$
4,503
24,783
108,974
2,747
141,007
87,587
$ 53,420
Buildings include assets recorded under capital leases amounting to $3,147,000 for the years ended March
31, 2009 and 2008. Machinery, equipment, and leasehold improvements include assets recorded under capital
leases amounting to $5,505,000 and $0 for the years ended March 31, 2009 and 2008, respectively. Accumulated
depreciation includes accumulated amortization of the assets recorded under capital leases amounting to $959,000
and $236,000 at March 31, 2009 and 2008, respectively.
Depreciation expense, including amortization of assets recorded under capital leases, was $9,592,000,
$8,210,000, and $7,610,000 for the years ended March 31, 2009, 2008 and 2007, respectively.
9. 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 SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). 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. The Company’s reporting units identified under SFAS 142 are 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 Company has four reporting units. Only two of the four reporting units carry
goodwill at March 31, 2009 and 2008.
Under SFAS 142, the measurement of impairment of goodwill consists of two steps. In the first step, we
compare the fair value of each reporting unit to its carrying value. As part of our impairment analysis, we
determined the fair value of each of our reporting units with goodwill using the income approach. The income
approach uses a discounted cash flow methodology to determine fair value. This methodology recognizes value
based on the expected receipt of future economic benefits. Key assumptions in the income approach include a free
cash flow projection, an estimated discount rate, a long-term growth rate and a terminal value. These assumptions
are based upon our historical experience, current market trends and future expectations. During fiscal 2009, the
generally weak economic conditions resulted in a rapid decline in business, a reduction in forecast cash flows, and
an increase in capital costs as a result of tightening credit markets. Based on this evaluation, we determined that the
fair value of our rest of products reporting unit was less than its carrying value. Following this assessment, SFAS
142 required us to perform a second step in order to determine the implied fair value of goodwill in this reporting
unit and to compare it to its carrying value. The activities in the second step included hypothetically valuing all of
the tangible and intangible assets of the impaired reporting unit using market participant assumptions, as if the
reporting unit had been acquired in a business combination.
F-15
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As a result of this assessment, the company recorded noncash charges of $107,000,000 to goodwill impairment
in the fiscal 2009 consolidated statement of operations. None of the charges related to goodwill was deductible for
tax purposes. No impairment charges related to goodwill or intangible assets were recorded during fiscal 2008 or
2007.
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.
A summary of changes in goodwill during the years ended March 31, 2009 and 2008 is as follows:
Balance at March 31, 2007...................................................................................................
Currency translation .............................................................................................................
Balance at March 31, 2008...................................................................................................
Acquisitions..........................................................................................................................
Impairment ...........................................................................................................................
Currency translation .............................................................................................................
Balance at March 31, 2009...................................................................................................
$
$
$
185,634
1,421
187,055
27,769
(107,000)
(3,080)
104,744
Intangible assets at March 31, 2009 are as follows:
Trademark ..................................................................
Customer relationships ...............................................
Other...........................................................................
Balance at March 31, 2009.........................................
Gross Carrying
Amount
$ 5,743
14,208
1,342
$ 21,293
Accumulated
Amortization
$ 157
652
148
$ 957
Net
$ 5,586
13,556
1,194
$ 20,336
Intangible assets at March 31, 2008 were $321, consisting of patents and other intangibles, net.
All of the Company’s intangibles assets are considered to have definite lives and are amortized. The
weighted-average amortization periods are 18 years for trademarks, 11 years for customer relationships and 14 years
for other. Total amortization expense was $998,000, $115,000, and $183,000 for fiscal 2009, 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 $1,780,000, $1,762,000, $1,740,000, $1,712,000, and 1,682,000,
respectively.
10. Accrued Liabilities and Other Non-current Liabilities
Consolidated accrued liabilities of the Company consisted of the following:
March 31,
2009
Accrued payroll ................................................................................................ $ 14,568
4,790
Interest payable.................................................................................................
2,525
Accrued workers compensation .......................................................................
4,048
Accrued income taxes payable .........................................................................
1,159
Accrued postretirement benefit obligation .......................................................
3,177
Accrued health insurance .................................................................................
4,010
Accrued general and product liability costs .....................................................
16,166
Other accrued liabilities....................................................................................
$ 50,443
2008
$ 16,003
4,976
3,520
7,311
1,332
4,026
4,010
11,087
$ 52,265
F-16
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 .......................................................................
Deferred income tax .........................................................................................
Other non-current liabilities .............................................................................
7,360
19,232
49,052
2,272
6,504
2,461
$ 86,881
$
9,362
16,761
16,603
2,253
1,671
2,194
$ 48,844
March 31,
2009
2008
11. Debt
Consolidated long-term debt of the Company consisted of the following:
Revolving Credit Facility due February 22, 2011 ............................................ $
Capital lease obligations...................................................................................
Other senior debt ..............................................................................................
Total senior debt...............................................................................................
8 7/8% Senior Subordinated Notes due November 1, 2013 with interest
payable in semi-annual installments.............................................................
Total .................................................................................................................
Less current portion..........................................................................................
March 31,
2009
2008
$
-
8,020
224
8,244
-
3,006
386
3,392
124,855
133,099
1,171
$ 131,928
129,855
133,247
326
$ 132,921
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 $64,518,000, net
of outstanding borrowings of $0 and outstanding letters of credit of $10,482,000. 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, 2009. 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, 2009. The Company amended its Revolving Credit Facility
on May 19, 2009. The credit facility was amended to increase the amount of restructuring charges to be excluded
from the fixed charge coverage ratio. Certain senior subordinated note repurchases were also excluded from the
fixed charge coverage ratio covenant calculation as a result of the amendment.
The Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005 amounted to
$124,855,000 at March 31, 2009 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. 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. The Company used cash on hand to repurchase $5,000,000 and $6,145,000 of the outstanding 8
7/8% Notes in fiscal 2009 and 2008, respectively.
F-17
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Gain (loss) on bond redemptions, including discounts, premiums and the write-off of deferred financing fees,
was $244,000, ($1,794,000) and ($5,188,000) in fiscal 2009, 2008 and 2007, 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 $107,000,000
based on quoted market prices, compared to their carrying amount of $124,855,000 at March 31, 2009.
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 Company also has capital leases on certain
production machinery and equipment. The outstanding balance on the capital leases of $8,020,000 and $3,006,000
as of March 31, 2009 and 2008, respectively, is included in senior debt in the consolidated balance sheets.
The principal payments scheduled to be made as of March 31, 2009 on the above debt are as follows (in
thousands):
2010
2011
2012
2013
2014
Thereafter
1,171
1,180
1,143
1,062
125,855
2,658
International Lines of Credit and Loans
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. In addition, our foreign subsidiaries have certain secured credit lines. As of
March 31, 2009, principal amounts outstanding under significant secured and unsecured international lines of credit
were $3,869,000. These amounts are included in notes payable to banks in the March 31, 2009 consolidated
balance sheet.
12. 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. The measurement date requirement was adopted in fiscal 2009 and was applied as a
change in accounting principle, resulting in an $877,000, net of tax, cumulative-effect reduction to the opening
balance of retained earnings.
F-18
COLUMBUS McKINNON CORPORATION
Pension Plans
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The Company provides defined benefit pension plans to certain employees. The Company uses March 31 as
the measurement date. The following provides a reconciliation of benefit obligation, plan assets, and funded status
of the plans:
March 31,
2009
2008
Change in benefit obligation:
Benefit obligation at beginning of year ................................................................. $ 140,873
(520)
SFAS No. 158 measurement date adjustment .......................................................
4,685
Acquisitions...........................................................................................................
4,381
Service cost............................................................................................................
8,969
Interest cost............................................................................................................
(11,139)
Actuarial gain ........................................................................................................
(6,245)
Benefits paid..........................................................................................................
Foreign exchange rate changes..............................................................................
(919)
Benefit obligation at end of year ........................................................................... $ 140,085
$ 139,621
-
-
4,386
8,277
(4,827)
(6,973)
389
$ 140,873
Change in plan assets:
Fair value of plan assets at beginning of year ....................................................... $ 125,540
(1,705)
SFAS No. 158 measurement date adjustment .......................................................
(34,933)
Actual (loss) gain on plan assets ...........................................................................
9,311
Employer contribution...........................................................................................
(6,245)
Benefits paid..........................................................................................................
(244)
Settlements ............................................................................................................
(580)
Foreign exchange rate changes..............................................................................
Fair value of plan assets at end of year.................................................................. $ 91,144
$ 110,845
-
6,859
14,466
(6,973)
-
343
$ 125,540
Funded status ........................................................................................................ $ (48,941)
54,334
Unrecognized actuarial loss...................................................................................
1,956
Unrecognized prior service cost ............................................................................
7,349
Net amount recognized.......................................................................................... $
$ (15,333)
21,289
1,943
7,899
$
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.......................................................................................... $
March 31,
2009
707
(596)
(49,052)
22,488
33,802
7,349
2008
1,608
(338)
(16,603)
9,252
13,980
7,899
$
$
In fiscal 2010, an estimated net loss of $4,363,000 and prior service cost of $317,000 for the defined benefit
pension plans will be amortized from accumulated other comprehensive loss to net periodic benefit cost.
Net periodic pension cost included the following components:
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 ........................................................................ $
4,381
8,969
(9,234)
1,319
457
5,892
$
$
4,386
8,277
(8,198)
2,014
80
6,559
$
$
4,147
7,608
(7,244)
2,773
156
7,440
Year Ended March 31,
2008
2009
2007
F-19
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................................................................................... $ 135,021
85,374
Fair value of plan assets ........................................................................................
2009
2008
$ 107,912
91,030
Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
March 31,
Accumulated benefit obligation............................................................................. $ 127,890
85,374
Fair value of plan assets ........................................................................................
2009
2008
$ 18,912
9,733
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,
2009
7.25%
7.50
2.00
2008
6.50%
7.50
3.00
2007
6.00%
7.50
3.00
2006
5.75%
7.50
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
2010
70%
30
100%
March 31,
Actual
2009
56%
44
100%
2008
60%
40
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 2010.
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 $18,255,000 to its
pension plans in fiscal 2010.
F-20
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:
2010
2011
2012
2013
2014
2015-2019
$
7,110
7,625
8,419
9,169
9,806
57,981
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,
2009
2008
Change in benefit obligation:
Benefit obligation at beginning of year .......................................................... $ 10,694
238
SFAS No. 158 measurement date adjustment ................................................
1
Service cost.....................................................................................................
Interest cost.....................................................................................................
587
(1,661)
Actuarial (gain) loss .......................................................................................
(1,339)
Benefits paid...................................................................................................
8,520
Benefit obligation at end of year .................................................................... $
$ 10,471
-
3
613
693
(1,086)
$ 10,694
Funded status ................................................................................................. $
Unrecognized actuarial loss............................................................................
Net amount recognized................................................................................... $
(8,520)
4,784
(3,736)
$ (10,694)
5,413
(5,281)
$
Amounts recognized in the consolidated balance sheets are as follows:
March 31,
2009
2008
Accrued liabilities........................................................................................... $
Other non-current liabilities ...........................................................................
Deferred tax effect of accumulated other comprehensive loss .......................
Accumulated other comprehensive loss .........................................................
Net amount recognized................................................................................... $
(1,159)
(7,360)
1,494
2,241
(3,736)
$
$
(1,332)
(9,362)
2,165
3,248
(5,281)
In fiscal 2010, an estimated net loss of $290,000 for the defined benefit postretirement health care plans will
be amortized from accumulated other comprehensive loss to net periodic benefit cost. Net periodic postretirement
benefit cost included the following:
Service cost—benefits attributed to service during the period......................
Interest cost....................................................................................................
Net amortization ............................................................................................
Net periodic postretirement benefit cost................................................
F-21
Year Ended March 31,
2008
$
3
613
418
$1,034
2009
$
1
587
351
$ 939
2007
$
3
658
414
$1,075
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For measurement purposes, healthcare costs were assumed to increase 9.5% in fiscal 2009. Healthcare costs
were assumed to increase 8.75% in fiscal 2010 grading down over time to 5% in five years. The discount rate used
in determining the accumulated postretirement benefit obligation was 7.25% and 6.5% as of March 31, 2009 and
2008, respectively.
Information about the expected benefit payments for the Company’s postretirement health benefit plans is as
follows:
2010
2011
2012
2013
2014
2015-2019
$
1,159
1,166
1,126
1,079
1,007
3,904
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:
One Percentage
Point Increase
One Percentage
Point Decrease
Effect on total of service and interest cost components ..................
Effect on postretirement obligation .................................................
$
40
489
$
(36)
(444)
The Company has split dollar life insurance arrangements with two of its former employees. Under these
arrangements, the Company pays certain premium costs on life insurance polices for the employees. Upon the later
of the death of the former employee or their spouse, the company will receive all of the premiums paid to date.
On April 1, 2008, the Company adopted the provisions of FASB Emerging Issues Task Force (“EITF”) Issue
No. 06-10, “Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements” (“EITF 06-10”). In
accordance with EITF 06-10, an employer should recognize a liability for the postretirement benefit related to a
collateral assignment split-dollar life insurance arrangement in accordance with either SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions,” or APB Opinion 12, “Omnibus Opinion—
1967”. The provisions of EITF 06-10 were applied as a change in accounting principle through a cumulative-effect
adjustment to retained earnings. The adoption of EITF 06-10 resulted in a $1,248,000 reduction to the opening
balance of retained earnings, recorded on April 1, 2008, the date of adoption. The net periodic pension cost for
fiscal 2009 was $71,000 and the accrued liability at March 31, 2009 is $301,000.
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
$1,684,000, $1,780,000 and $1,650,000 for the years ended March 31, 2009, 2008 and 2007, respectively.
13. 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.
F-22
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
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 $632,000, $1,037,000 and $808,000 in fiscal 2009, 2008 and 2007, 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, 2009 and 2008, 646,329 and 667,177 of ESOP shares, respectively, were allocated or available
to be allocated to participants’ accounts. At March 31, 2009 and 2008, 144,458 and 176,646 of ESOP shares were
pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares at March 31, 2009 amounted to $1,260,000.
14. 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 include any dilutive effects of stock options. Stock
options and performance shares with respect to 236,000 common shares and 28,000 common shares, respectively,
were not included in the computation of diluted loss per share for fiscal 2009 because they were antidilutive as a
result of the Company’s net loss.
The following table sets forth the computation of basic and diluted earnings per share:
Numerator for basic and diluted earnings per share:
(Loss) income from continuing operations................................. $
(Loss) income from discontinued operations (net of tax)...........
Net (loss) income ....................................................................... $
(76,102) $
(2,282)
(78,384) $
36,792
557
37,349
$
$
33,381
704
34,085
Year Ended March 31,
2009
2008
2007
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 ..................................................
18,861
-
18,723
435
18,517
434
18,861
19,158
18,951
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note
13).
F-23
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Stock Plans
The Company records stock-based compensation in accordance with 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.
Long Term Incentive Plan
The Company grants share based compensation to eligible participants under our Long Term Incentive Plan,
or LTIP. The LTIP was approved by our Board of Directors and the shareholders of the Company in fiscal 2007.
The total number of shares of common stock with respect to which awards may be granted under the plan is
850,000, of which 649,330 shares remain for future grants as of March 31, 2009. 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.
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.
Stock based compensation expense was $799,000, $1,266,000 and $1,277,000 for fiscal 2009, 2008 and 2007,
respectively. Stock compensation expense is included in cost of goods sold, selling, and general and administrative
expense. We recognize expense for all share–based awards over the service period, which is the shorter of the
period until the employees’ retirement eligibility dates or the service period for the award for awards expected to
vest. Accordingly, expense is generally reduced for estimated forfeitures. SFAS No. 123(R) requires forfeitures to
be estimated at the time of grant and revised if necessary, in subsequent periods if actual forfeitures differ from
those estimates.
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.
Stock Option Plans
The Company granted stock options under the LTIP in 2009. Options granted have a maximum term of 10
years and vest ratably over a five or six 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. 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, 2009, 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.
F-24
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
A summary of option transactions during each of the three fiscal years in the period ended March 31, 2009 is
as follows:
Shares
Outstanding at March 31, 2006 .......... 1,132,118
70,000
(240,468)
(30,500)
Granted ..........................................
Exercised .......................................
Cancelled .......................................
Outstanding at March 31, 2007 .......... 931,150
5,000
Granted ..........................................
Exercised .......................................
Cancelled .......................................
(144,425)
(4,875)
Outstanding at March 31, 2008 .......... 786,850
89,150
(46,375)
(103,970)
Granted ..........................................
Exercised .......................................
Cancelled .......................................
Outstanding at March 31, 2009 .......... 725,655
Exercisable at March 31, 2009 ........... 623,000
$
$
Weighted-average
Exercise Price
11.28
22.41
10.82
9.85
12.28
32.85
9.81
5.46
12.91
27.42
9.07
22.69
13.51
11.79
$
$
$
Weighted-average
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic
Value
4.0
3.3
$
$
763
763
The Company calculated intrinsic value for those options that had an exercise price lower than the market
price of our common shares as of March 31, 2009. The aggregate intrinsic value of outstanding options as of March
31, 2009 is calculated as the difference between the exercise price of the underlying options and the market price of
our common shares for the 236,850 options that were in-the-money at that date. The aggregate intrinsic value of
exercisable options as of March 31, 2009 is calculated as the difference between the exercise price of the underlying
options and the market price of our common shares for the 236,850 exercisable options that were in-the-money at
that date. The Company's closing stock price was $8.72 as of March 31, 2009. The total intrinsic value of stock
options exercised was $773,000, $2,842,000 and $3,434,000 during fiscal 2009, 2008 and 2007, respectively. As of
March 31, 2009, there are 59,670 options available for future grants under the two stock option plans.
The fair value of shares that vested was $4.20, $5.14 and $3.87 during fiscal 2009, 2008 and 2007,
respectively.
Cash received from option exercises under all share-based payment arrangements during fiscal 2009 was
$421,000. 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, 2009, $865,000 of unrecognized compensation cost related to non-vested stock options is
expected to be recognized over a weighted-average period of approximately 2 years.
Exercise prices for options outstanding as of March 31, 2009, ranged from $5.46 to $32.85. The following
table provides certain information with respect to stock options outstanding at March 31, 2009:
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
391,350
61,250
268,055
5,000
725,655
Weighted-average
Exercise Price
7.28
$
14.62
22.00
32.85
13.51
$
Weighted-average
Remaining
Contractual Life
4.1
6.1
3.3
8.3
4.0
F-25
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table provides certain information with respect to stock options exercisable at March 31, 2009:
Range of Exercise Prices
Up to $10.00.........................................................................
$10.01 to $20.00....................................................................
$20.01 to $30.00....................................................................
Stock Options
Outstanding
391,350
41,250
190,400
623,000
$
Weighted-average
Exercise Price
7.28
13.00
20.79
11.79
$
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 $14.77, $18.48 and $12.93 for options granted
during fiscal 2009, 2008 and 2007, respectively. The following table provides the weighted-average assumptions
used to value stock options granted during fiscal 2009, 2008 and 2007:
Year Ended
Year Ended
Year Ended
March 31, 2009 March 31, 2008 March 31, 2007
Assumptions:
Risk-free interest rate ...................................
Dividend yield—Incentive Plan ...................
Volatility factor ............................................
Expected life—Incentive Plan......................
2.58 %
0.0 %
0.567
6.0 years
4.92%
0.0 %
0.571
5.5 years
4.93 %
0.0 %
0.593
5.5 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.
Restricted Stock Units
The Company granted restricted stock units under the LTIP during 2009, 2008 and 2007 to employees as well
as to the Company’s non-executive directors as part of their annual compensation. Restricted shares for employees
vest ratably based on service one-third after each of years three, four, and five.
A summary of the restricted stock unit awards granted under the Company’s LTIP plan as of March 31, 2009
is as follows:
Unvested at March 31, 2006 .................................................................
Granted.............................................................................................
Unvested at March 31, 2007 .................................................................
Granted.............................................................................................
Vested ..............................................................................................
Unvested at March 31, 2008 .................................................................
Granted.............................................................................................
Vested ..............................................................................................
Forfeited...........................................................................................
Unvested at March 31, 2009 .................................................................
F-26
Shares
$
$
Weighted-average
Grant Date
Fair Value
-
19.17
19.17
25.80
19.54
23.96
26.02
23.96
28.45
23.95
$
$
-
7,200
7,200
7,842
(4,521)
10,521
54,916
(5,260)
(25,199)
34,978
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Total unrecognized compensation cost related to unvested restricted stock units as of March 31, 2009 is
$629,000 and is expected to be recognized over a weighted average period of 3.3 years. The fair value of restricted
stock units that vested during the year ended March 31, 2009 and 2008 was $129,000 and $117,000, respectively.
Performance Shares
The Company granted performance shares under the LTIP during 2009 and 2008. There were no performance
based awards granted in fiscal 2007. 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.
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). We estimated the fair value of
each performance share granted under the LTIP on the date of grant using a Monte Carlo simulation that uses the
assumptions noted in the following table. Expected volatility is based upon the daily historical volatilities of
Columbus McKinnon’s stock and our peer group. The risk free rate was based on zero coupon government bonds
at the time of grant. The expected term represents the period from the grant date to the end of the three year
performance period.
Year Ended
Year Ended
March 31, 2009 March 31, 2008
Assumptions:
Risk-free interest rate.....................................................
Dividend yield ...............................................................
Volatility factor..............................................................
Expected life..................................................................
2.50 %
0.0 %
0.479
2.87 years
4.75 %
0.0 %
0.481
2.86 years
A summary of the performance shares transactions during each of the two fiscal years in the period ended
March 31, 2009 is as follows:
Unvested at March 31, 2007 ...........................................
Granted.......................................................................
Unvested at March 31, 2008 ...........................................
Granted.......................................................................
Forfeited .....................................................................
Unvested at March 31, 2009 ...........................................
$
Weighted-average
Grant Date
Fair Value
-
19.40
19.40
28.07
22.60
22.66
$
$
Shares
-
34,457
34,457
20,669
(10,047)
45,079
Total unrecognized compensation costs related to the unvested performance share awards as of March 31,
2009 was $547,000 and is expected be recognized over a weighted average period of 1.5 years.
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, 2009, there were 47,000 shares available for future grants under the
Restricted Stock Plan.
During fiscal 2008, 1,000 shares of restricted stock were granted at a weighted average fair value grant price
of $31.69. No restricted stock was granted in fiscal 2009 or fiscal 2007. As of March 31, 2009, there are 2,000
shares of restricted stock outstanding with a weighted average fair value grant price of $27.10.
F-27
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Directors Stock
During fiscal 2009, 2008 and 2007, a total of 12,436, 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 $20.96, $25.80 and $19.17 for fiscal 2009, 2008 and
2007, respectively. The expense related to the shares for fiscal 2009, 2008 and 2007 was $260,000 $196,000 and
$180,000, respectively.
15. 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. Future cash payments related to reserves for nonasbestos claims are not
discounted due to their underlying uncertainty. Reserves for certain asbestos related claims are discounted using a
risk free interest rate which ranged from 0.57% to 3.61% as of March 31, 2009. The aggregate amount of
undiscounted reserves and discount amount was $4,400,000 and $1,197,000, respectively, as of March 31, 2009.
Payments over each of the next five years for the portion of asbestos reserves that we discount are expected to be
$200,000 and $3,400,000 thereafter. The liability for accrued general and product liability costs is funded by
investments in marketable securities (see Notes 2 and 7).
The following table provides a reconciliation of the beginning and ending balances for accrued general and
product liability:
2009
$ 20,771
Accrued general and product liability, beginning of year .......
4,052
Add provision for claims .........................................................
Deduct payments for claims ....................................................
(1,581)
Accrued general and product liability, end of year ................. $ 23,242
2008
$ 21,078
2,201
(2,508)
$ 20,771
2007
$ 20,969
4,343
(4,234)
$ 21,078
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 2009.
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
2010.
F-28
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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, 2027 and March 31, 2039 to range between $5,500,000 and $15,500,000 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 $8,800,000
which has been reflected as a liability in the consolidated financial statements as of March 31, 2009. 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.
16. 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, to better utilize their available capacity.
In response to adverse market conditions in 2009, the Company implemented restructuring activities that
resulted in restructuring costs of $1,921,000 for facility rationalization costs and severance. The total charge for
severance was $1,823,000 all of which related to salaried workforce reductions and $98,000 for costs associated
with the closure of a production facility. The number of salaried employees terminated was approximately 70. All
of the remaining payments are expected to be made in fiscal 2010.
During fiscal 2008, the Company recorded restructuring costs of $836,000 for facility demolition costs and
severance. The liability as of March 31, 2008 consists primarily of environmental remediation costs which were
accrued in accordance with SFAS No 143, “Accounting for Asset Retirement Obligations,” (“SFAS 143”).
During fiscal 2007, the Company recorded restructuring costs of $273,000 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.” The completion of the sale of a
previously closed facility resulted in the reversal of $410,000 of restructuring charges, 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 143.
F-29
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following provides a reconciliation of the activity related to restructuring reserves:
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.............................................................................
Fiscal 2009 restructuring charges...................................................................
Cash payments................................................................................................
Reserve at March 31, 2009.............................................................................
Total
$
59
19
(78)
Employee Facility
734
$
254
(195)
(410)
216
599
731
(1,272)
58
98
(156)
-
-
-
-
$
105
(105)
-
1,823
(521)
$ 1,302
$
$
$
$
$
$
793
273
(273)
(410)
216
599
836
(1,377)
58
1,921
(677)
$ 1,302
$
17. 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% .................................................................................. $ (20,335)
309
State income taxes net of federal benefit...................................................
(1,136)
Foreign taxes (less) greater than statutory provision.................................
37,587
Permanent items ........................................................................................
-
Valuation allowance ..................................................................................
Other..........................................................................................................
1,576
Actual tax provision .................................................................................. $ 18,001
2009
Year Ended March 31,
2008
$ 24,407
1,238
(1,095)
315
(1,000)
(1,046)
$ 22,819
2007
$ 21,259
910
132
171
-
(375)
$ 22,097
The provision for income tax expense consisted of the following:
Year Ended March 31,
2008
2009
2007
Current income tax expense:
United States Federal......................................................................... $ 13,963
291
State taxes..........................................................................................
5,447
Foreign ..............................................................................................
$
$
853
1,904
5,437
1,228
1,401
5,472
Deferred income tax expense (benefit):
United States......................................................................................
Foreign ..............................................................................................
(1,076)
(624)
$ 18,001
14,304
321
$ 22,819
13,831
165
$ 22,097
F-30
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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:
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:
Inventory reserves .................................................................................................................
Property, plant, and equipment..............................................................................................
Intangible assets ....................................................................................................................
Gross deferred tax liabilities .............................................................................................
Net deferred tax assets .................................................................................................. $
March 31,
2009
2008
1,556
2,829
18,050
1,471
9,245
2,259
8,681
(1,594)
42,497
(1,298)
(2,303)
(5,533)
(9,134)
33,363
$
$
-
2,064
6,729
1,324
8,219
3,420
7,112
(1,064)
27,804
(2,289)
(1,658)
-
(3,947)
23,857
The valuation allowance includes $530,000 and $0 related to pre-acquisition net operating losses and
$1,064,000 and $1,064,000 related to state net operating losses in the United States at March 31, 2009 and 2008,
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 Company’s valuation allowance related to Pfaff is for
net operating losses which have an indefinite life. The state net operating losses have expiration dates ranging from
2013 through 2029.
Deferred income taxes are classified within the consolidated balance sheets based on the following breakdown:
Net current deferred tax asset ....................................................................................................
Net non-current deferred tax asset .............................................................................................
Net non-current deferred tax liability ........................................................................................
Net deferred tax asset........................................................................................................
March 31,
$
2009
7,346
32,521
(6,504)
$ 33,363
2008
$
7,958
17,570
(1,671)
$ 23,857
The net current deferred tax asset and net non-current deferred tax liability are included in prepaid expenses
and other non-current liabilities, respectively.
Income (loss) from continuing operations before income tax expense includes foreign subsidiary (loss) income of
($16,119,000), $21,715,000 and $16,888,000 for the years ended March 31, 2009, 2008, and 2007, respectively. Loss
from discontinued operations reported in the statements of operations is net of tax (benefit) expense of ($14,442,000),
$220,000 and ($1,185,000) for the years ended March 31, 2009, 2008, and 2007, respectively. As of March 31, 2009,
the Company had unrecognized deferred tax liabilities related to approximately $25,000,000 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 24,375 and 70,725 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, 2009, and 2008,
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 $274,000 and $482,000 in 2009 and 2008,
respectively. This tax benefit has also been recognized in the consolidated balance sheet as an increase in deferred tax
assets.
F-31
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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.
Changes in the Company’s uncertain income tax positions, excluding the related accrual for interest and penalties,
are as follows:
Beginning balance ....................................................................................................... $
Additions for prior year tax positions..........................................................................
Additions for current year tax positions ......................................................................
Reductions for prior year tax positions .......................................................................
Foreign currency translation........................................................................................
Lapses in statute limitations ........................................................................................
Ending balance ............................................................................................................ $
2009
2008
2,447
12
1,327
(116)
-
(124)
3,546
$
$
2,600
76
-
-
(229)
-
2,447
The additions for current year tax positions for fiscal 2009 in the above table were primarily attributable to
uncertainties associated with the utilization of certain foreign tax deductions. The Company had $123,000 and $133,000
accrued for the payment of interest and penalties at March 31, 2009 and 2008, respectively. The Company recognizes
interest expense or penalties related to uncertain tax positions as a part of income tax expense in its consolidated
statements of operations.
Substantially all of the unrecognized tax benefits as of March 31, 2009 would impact the effective tax rate if
recognized.
The Company and its subsidiaries file income tax returns in the U.S and various state and local and foreign
jurisdictions. The Internal Revenue Service is currently conducting an examination of the Company’s U.S. income tax
returns for 2007 and 2008.
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, 2010.
18. Rental Expense and Lease Commitments
Rental expense for the years ended March 31, 2009, 2008 and 2007 was $5,695,000, $5,560,000, and $4,224,000,
respectively. The following amounts represent future minimum payment commitments as of March 31, 2009 under non-
cancelable operating leases extending beyond one year:
Year Ended March 31,
2010.......................................................................
2011.......................................................................
2012.......................................................................
2013.......................................................................
2014.......................................................................
Real Property
1,851
$
1,510
654
447
300
Vehicles/Equipment
Total
$
2,192
1,548
805
153
24
$
4,043
3,058
1,459
600
324
F-32
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
19. 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, 2009:
As of March 31, 2009:
Current assets:
Cash............................................................................. $
Trade accounts receivable...........................................
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 .............................................................
Total liabilities and shareholders’ equity............... $
For the Year Ended March 31, 2009:
Net sales ................................................................................ $
Cost of products sold ............................................................
Gross profit (loss)..................................................................
Selling, general and administrative expenses .......................
Restructuring charges............................................................
Impairment loss .....................................................................
Amortization of intangibles ..................................................
Loss from operations.............................................................
Interest and debt expense ......................................................
Other (income) and expense, net ..........................................
Loss from continuing operations before income
tax expense (benefit) ........................................................
Income tax expense (benefit) ................................................
Loss from continuous operations..........................................
Loss from discontinued operations .......................................
Net loss ................................................................................ $
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
24,115
46,358
33,268
8,480
112,221
29,001
41,016
59,508
79,791
321,537
33,767
124,855
41,224
199,846
121,691
321,537
$
$
$
$
$
288,928
217,628
71,300
46,242
1,367
48,000
117
(24,426)
10,793
(4,833)
(30,386)
6,730
(37,116)
(627)
(37,743) $
30
37
21,113
1,060
22,240
11,995
31,031
(50,435)
195,589
210,420
17,162
2,597
13,895
33,654
176,766
210,420
162,935
124,573
38,362
18,612
554
26,000
3
(6,807)
1,497
(1,230)
(7,074)
7,979
(15,053)
—
(15,053)
$
$
$
$
$
$
15,091
33,773
48,937
7,731
105,532
21,106
53,033
(83,748)
25,584
121,507
39,933
4,476
31,762
76,171
45,336
121,507
197,200
132,829
64,371
45,487
—
33,000
878
(14,994)
858
4,457
(20,309)
3,418
(23,727)
(1,655)
(25,382)
$
$
$
$
$
$
$
$
$
$
—
—
(2,697)
844
(1,853)
—
—
74,675
(234,622)
(161,800)
139
—
—
139
(161,939)
(161,800)
(42,355)
(42,023)
(332)
—
—
—
—
(332)
—
—
(332)
(126)
(206)
—
(206)
$
$
39,236
80,168
100,621
18,115
238,140
62,102
125,080
—
66,342
491,664
91,001
131,928
86,881
309,810
181,854
491,664
606,708
433,007
173,701
110,341
1,921
107,000
998
(46,559)
13,148
(1,606)
(58,101)
18,001
(76,102)
(2,282)
(78,384)
F-33
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
For the Year Ended March 31, 2009:
Operating activities:
Net cash provided by operating activities from
continuing operations .....................................................
$
18,504
$
628
$
43,895
$
—
$
63,027
Net cash used by operating activities from discontinued
operations .......................................................................
Cash provided by operating activities...................................
Investing activities:
Purchases of marketable securities, net ................................
Capital expenditures..............................................................
Proceeds from sale of PP&E.................................................
Purchases of businesses, net of cash
Net cash used by investing activities from continuing
(578)
17,926
—
(7,461)
—
—
operations .......................................................................
(7,461)
Net cash provided by investing activities from
discontinued operations..................................................
Net cash used by investing activities ....................................
Financing activities:
Proceeds from exercise of stock options ..............................
Net repayments under revolving line-of-credit
agreements........................................................................
Repayment of debt ................................................................
Other......................................................................................
Net cash used by financing activities from continuing
531
(6,930)
421
—
(4,700)
789
operations .......................................................................
(3,490)
Net cash (used) provided by financing activities from
discontinued operations..................................................
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 .............................
(15,191)
(18,681)
—
(7,685)
31,800
24,115
$
As of and for the year ended March 31, 2008:
As of March 31, 2008:
Current assets:
Cash............................................................................. $
Trade accounts receivable...........................................
Inventories...................................................................
Prepaid expenses.........................................................
Current assets of discontinued operations ..................
Total current assets ................................................
Net property, plant, and equipment.......................................
Goodwill and other intangibles, net......................................
Intercompany balances..........................................................
Other non-current assets .......................................................
Assets of discontinued operations ........................................
Total assets............................................................. $
Current liabilities of continuing operations .......................... $
Current liabilities of discontinued operations.......................
Current liabilities...................................................................
Long-term debt, less current portion.....................................
Other non-current liabilities..................................................
Total liabilities .......................................................
Shareholders’ equity .............................................................
Total liabilities and shareholders’ equity............... $
31,800
62,992
35,375
8,264
—
138,431
26,834
89,008
50,555
79,909
—
384,737
42,714
—
42,714
129,855
12,312
184,881
199,856
384,737
—
628
—
(1,910)
1,593
—
(317)
—
(317)
—
—
(191)
—
(191)
—
(191)
251
371
(341)
30
(341)
—
18,797
1,025
—
19,481
11,916
57,034
(59,869)
194,783
—
223,345
15,951
—
15,951
2,815
10,757
29,523
193,822
223,345
$
$
$
$
$
(2,218)
41,677
(2,605)
(2,874)
—
(52,779)
(58,258)
—
(58,258)
—
(2,138)
(2,096)
—
(4,234)
579
(3,655)
(9,208)
(29,444)
44,535
15,091
44,535
30,841
32,479
8,031
17,334
133,220
14,670
41,334
(64,821)
30,636
5,001
160,040
30,288
24,955
55,243
251
25,775
81,269
78,771
160,040
$
$
$
$
$
$
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
(2,796)
60,231
(2,605)
(12,245)
1,593
(52,779)
(66,036)
531
(65,505)
421
(2,138)
(6,987)
789
(7,915)
(14,612)
(22,527)
(8,957)
(36,758)
75,994
39,236
—
—
(2,365)
—
—
(2,365)
—
—
74,135
(249,857)
—
(178,087)
(1,119)
—
(1,119)
—
—
(1,119)
(176,968)
(178,087)
$
$
$
$
75,994
93,833
84,286
17,320
17,334
288,767
53,420
187,376
—
55,471
5,001
590,035
87,834
24,955
112,789
132,921
48,844
294,554
295,481
590,035
F-34
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
For the Year Ended March 31, 2008:
Net sales ................................................................................ $
Cost of products sold ............................................................
Gross profit (loss)..................................................................
Selling, general and administrative expenses .......................
Restructuring charges...........................................................…
Amortization of intangibles .................................................…
Income (loss) from operations ..............................................
Interest and debt expense ......................................................
Other (income) and expense, net ..........................................
Income (loss) from continuing operations before
income tax expense (benefit) ...........................................
Income tax expense (benefit) ................................................
Income (loss) from continuous operations............................
Income (loss) from discontinued operations.........................
Net income (loss) .................................................................. $
302,676
219,366
83,310
49,834
836
112
32,528
9,918
641
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
$
$
155,609
100,465
55,144
36,007
—
—
19,137
90
(2,554)
21,601
5,759
15,842
(10,123)
5,719
$
$
(41,400)
(41,195)
(205)
—
—
—
(205)
—
—
(205)
(88)
(117)
—
(117)
$
$
593,786
408,211
185,575
103,884
836
115
80,740
13,562
(2,556)
69,734
22,819
46,915
(9,566)
37,349
For the Year Ended March 31, 2008:
Operating activities:
Net cash provided (used) by operating activities from
continuing operations .....................................................
$
47,514
$
(1,483)
$
14,741
$
1
$
60,773
Net cash used by operating activities from discontinued
operations .......................................................................
Net cash provided (used) by operating activities..................
Investing activities:
Purchases of marketable securities, net ................................
Capital expenditures..............................................................
Proceeds from sale of businesses and surplus real estate .....
Net cash (used) provided by investing activities from
—
47,514
—
(7,228)
—
continuing operations .....................................................
(7,228)
Net cash provided (used) by investing activities from
discontinued operations..................................................
Net cash (used) provided by investing activities ..................
Financing activities:
Proceeds from exercise of stock options ..............................
Net repayment under revolving line-of-credit
agreements........................................................................
(Repayment) borrowing of debt............................................
Deferred financing costs incurred.........................................
Other......................................................................................
Net cash used by financing activities from continuing
557
(6,671)
1,416
—
(29,898)
(2)
1,075
operations .......................................................................
(27,409)
Net cash used by financing activities from discontinued
operations .......................................................................
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 .............................
—
(27,409)
—
13,434
—
(1,483)
—
(2,745)
5,504
2,759
—
2,759
—
—
(142)
—
—
(142)
—
(142)
(313)
821
(1,183)
13,558
(1,562)
(2,506)
—
(4,068)
(587)
(4,655)
1
(813)
185
—
—
(627)
(383)
(1,010)
5,191
13,084
18,366
31,800
$
$
(1,162)
(341)
$
31,451
44,535
$
F-35
—
1
—
—
—
—
—
—
(1)
—
—
—
—
(1)
—
(1)
—
—
—
—
$
(1,183)
59,590
(1,562)
(12,479)
5,504
(8,537)
(30)
(8,567)
1,416
(813)
(29,855)
(2)
1,075
(28,179)
(383)
(28,562)
4,878
27,339
48,655
75,994
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
For the year ended March 31, 2007:
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
income tax expense (benefit) ...........................................
Income tax expense (benefit) ................................................
Income from continuous operations .....................................
Income (loss) from discontinued operations.........................
Net income ............................................................................ $
287,223
210,020
77,203
42,503
(137)
109
34,728
12,154
4,860
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
$
$
139,877
95,391
44,486
30,038
—
71
14,377
(221)
(5,810)
20,408
5,755
14,653
(5,263)
9,390
$
$
$
(47,243)
(47,448)
205
—
—
—
205
—
—
205
(80)
285
—
285
$
550,490
385,654
164,836
90,031
(137)
183
74,759
15,881
(1,863)
60,741
22,097
38,644
(4,559)
34,085
For the Year Ended March 31, 2007:
Operating activities:
Net cash provided by operating activities from continuing
operations .......................................................................
$
41,024
$
925
$
5,303
$
5,213
$
52,465
Net cash used by operating activities from discontinued
operations .......................................................................
Net cash provided (used) by operating activities..................
Investing activities:
Sales of marketable securities, net ........................................
Capital expenditures..............................................................
Proceeds from sale of businesses and surplus real estate .....
Net cash (used) provided by investing activities from
—
41,024
—
(6,319)
1,906
continuing operations .....................................................
(4,413)
Net cash provided by investing activities from
discontinued operations..................................................
Net cash (used) provided by investing activities ..................
Financing activities:
Proceeds from exercise of stock options ..............................
Net borrowings under revolving line-of-credit
agreements........................................................................
(Repayment) borrowing of debt............................................
Deferred financing costs incurred.........................................
Dividends paid ......................................................................
Other......................................................................................
Net cash (used) provided by financing activities from
704
(3,709)
2,601
—
(49,522)
(449)
—
890
Net cash provided by financing activities from
discontinued operations..................................................
Net cash (used) provided 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 .............................
—
925
—
(1,099)
2,970
1,871
—
1,871
(6,970)
(1,667)
1,167
(3,122)
—
(1,955)
398
(1,557)
—
5,213
—
—
—
—
—
—
(15)
13,489
(13,474)
—
—
—
(2,324)
—
79
271
—
(5,937)
—
—
—
—
8,261
—
(5,213)
—
(5,213)
—
—
(6,970)
45,495
1,167
(10,540)
4,876
(4,497)
1,102
(3,395)
2,601
79
(49,251)
(449)
—
890
(46,130)
6,253
(39,877)
834
3,057
—
(46,480)
-
(9,165)
—
(2,339)
(158)
299
6,253
14,155
992
11,923
27,531
18,366
$
$
(1,461)
(1,162)
$
19,528
31,451
$
—
—
$
45,598
48,655
F-36
continuing operations .....................................................
(46,480)
(2,339)
7,902
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
20. Business Segment Information
SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes the
standards for reporting information about operating segments in financial statements. Historically the Company had
two operating and reportable segments, Products and Solutions. The Solutions segment engaged primarily in the
design, fabrication and installation of integrated material handling conveyor systems and service and in the design
and manufacture of tire shredders, lift tables and light-rail systems. In fiscal 2009, the Company re-evaluated its
operating and reportable segments in connection with the discontinuation of its integrated material handling
conveyor systems and service business. With this divestiture, and in consideration of the quantitative contribution of
the remaining portions of the Solutions segment to the Company as a whole and our products-orientated strategic
growth initiatives, the Company determined that it now has only one operating and reportable segment for both
internal and external reporting purposes. Prior period financial information included herein has been restated to
reflect the financial position and results of operations as one segment. As part of the organizational restructuring
announced in response to adverse market conditions, we have reevaluated our reportable segments and we continue
to believe that we have only one reportable operating segment.
Financial information relating to the Company’s operations by geographic area is as follows:
Year Ended March 31,
2008
2007
2009
Net sales:
United States ................................................................................................ $ 420,498 $ 447,977 $ 424,696
82,550
Europe ..........................................................................................................
26,757
Canada..........................................................................................................
Other.............................................................................................................
16,487
Total ............................................................................................................. $ 606,708 $ 593,786 $ 550,490
106,503
18,672
20,634
141,595
15,052
29,563
Year Ended March 31,
2008
2009
2007
Total assets:
United States ................................................................................................ $ 321,656 $ 399,462 $ 394,923
112,487
Europe ..........................................................................................................
15,222
Canada..........................................................................................................
11,781
Other.............................................................................................................
534,413
Assets of continuing operations ...................................................................
Assets of discontinued operations ................................................................
31,225
Total ............................................................................................................. $ 491,664 $ 590,035 $ 565,638
134,027
8,422
27,559
491,664
-
139,360
15,464
13,414
567,700
22,335
Year Ended March 31,
2008
2009
2007
Long-lived assets:
United States ................................................................................................ $ 113,043 $ 184,792 $ 182,160
49,089
Europe ..........................................................................................................
Other.............................................................................................................
3,530
Total ............................................................................................................. $ 187,182 $ 240,796 $ 234,779
52,564
3,440
66,760
7,379
Sales by major product group are as follows:
Year Ended March 31,
2008
2009
2007
$ 321,778 $ 284,494
Hoists............................................................................................................ $ 331,822
134,850
Chain and forged attachments ......................................................................
67,003
Industrial cranes ...........................................................................................
Other.............................................................................................................
64,143
Total ............................................................................................................. $ 606,708 $ 593,786 $ 550,490
142,966
63,327
65,715
132,492
59,868
82,526
F-37
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
21. 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 2009 and 2008:
Three Months Ended
Net sales ...................................................
Gross profit...............................................
Income (loss) from operations..................
Net income (loss)......................................
June 29,
2008
$ 151,164
48,525
20,395
9,670
$
$
September 28,
2008
154,680
45,572
18,778
10,637
$
$
March 31,
2009
December 28,
2008
165,076 $ 135,788
44,791
34,813
14,889 (100,621)
$ (102,504)
3,813
$
Net income (loss) per share – basic..........
$
0.51
$
0.56
$
0.20
$
(5.43)
Net income (loss) per share – diluted .......
$
0.50
$
0.55
$
0.20
$
(5.43)
Results include a $2,096,000 loss from discontinued operations, net of tax, in the quarter ended June 29, 2008,
a pre-tax $3,628,000 other-than-temporary impairment of marketable securities in the quarter ended December 28,
2008, and a goodwill impairment charge of $107,000,000 and a pre-tax gain of $3,330,000 from litigation in the
quarter ended March 31, 2009. None of the charges related to goodwill was deductible for tax purposes.
Three Months Ended
Net sales ...................................................
Gross profit...............................................
Income from operations............................
Net income ...............................................
July 1,
2007
$ 141,450
43,332
19,475
9,520
$
$
September 30,
2007
144,977
45,296
19,684
9,453
$
$
March 31,
2008
December 30,
2007
146,176 $ 161,183
51,469
22,184
8,382
45,478
19,397
$
9,994
$
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 loss on early extinguishment of debt of $1,443,000 for the quarter ended September
30, 2007 and an $8,062,000 loss from discontinued operations, net of tax, in the quarter ended March 31, 2008.
F-38
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
22. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
Net unrealized investment (loss) gain – net of tax ............................................
Adjustment to pension liability– net of tax .......................................................
Adjustment to other postretirement obligations – net of tax .............................
Adjustment to split-dollar life insurance arrangements.....................................
Foreign currency translation adjustment ...........................................................
Accumulated other comprehensive loss ............................................................
$
(317)
(34,336)
(2,241)
(638)
(713)
$ (38,245)
$
$
2009
2008
(740)
(14,514)
(3,248)
-
15,761
(2,741)
March 31,
The deferred taxes associated with the items included in accumulated other comprehensive loss were
$24,154,000 and $11,817,000 for 2009 and 2008, 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
consolidated statements of operations. 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,
2008
2007
2009
Net unrealized investment (loss) gain at beginning of year ................. $
Unrealized holdings (loss) gain arising during the period................
Reclassification adjustments for loss (gain) included in earnings....
Net change in unrealized gain (loss) on investments ...........................
Net unrealized investment (loss) gain at end of year............................ $
(740) $
(3,584)
4,007
423
(317) $
22 $
(674)
(88)
(762)
(740) $
1,891
2,491
(4,360)
(1,869)
22
23. Effects of New Accounting Pronouncements
In September 2006, the FASB issued 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. In October
2008, the FASB issued FSP FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for
That Asset Is Not Active.” The adoption of SFAS 157 did not have a material effect on the Company’s
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. The Company adopted all of the
aforementioned 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 adoption of the
measurement date requirement resulted in an $887,000 reduction to retained earnings in fiscal 2009.
F-39
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
On April 1, 2008, the Company adopted the provisions of FASB Emerging Issues Task Force (“EITF”) Issue No. 06-10,
“Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements” (“EITF 06-10”). In accordance with EITF 06-
10, an employer should recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life
insurance arrangement in accordance with either SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other
Than Pensions,” or APB Opinion 12, “Omnibus Opinion—1967.” The provisions of EITF 06-10 were applied as a change in
accounting principle through a cumulative-effect adjustment to retained earnings. The adoption of EITF 06-10 resulted in a
$1,248,000 reduction to retained earnings in fiscal 2009.
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. We did not elect to implement the fair value option
allowed under this standard.
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 believes that the adoption of SFAS 141(R) will not have a
material effect on its 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 160 will not have a
material effect on its consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”
(“SFAS 161”), which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”).
SFAS 161 requires a company with derivative instruments to disclose information that should enable financial statement users to
understand how and why the company uses derivative instruments, how derivative instruments and related hedged items are
accounted for under SFAS 133, and how derivative instruments and related hedged items affect the company’s financial position,
financial performance, and cash flows. The required disclosures include the fair value of derivative instruments and their gains or
losses in tabular format, information about credit risk related contingent features in derivative agreements, counterparty credit
risk, and a company’s strategies and objectives for using derivative instruments. The Statement expands the current disclosure
framework in SFAS 133. SFAS 161 is effective prospectively for periods beginning on or after November 15, 2008. We will
comply with the disclosure provisions of this statement after its effective date.
In December 2008, the FASB issued FASB Staff Position, or FSP, No. 132(R)-1, “Employers’ Disclosures about
Postretirement Benefit Plan Assets” (“SFAS 161”). This FSP amends SFAS 132(R), “Employer’s Disclosures about Pensions
and Other Postretirement Benefits” (“SFAS 132(R)”), to require additional disclosures about assets held in an employer’s
defined benefit pension or other postretirement plan. This FSP replaces the requirement to disclose the percentage of the fair
value of total plan assets for each major category of plan assets, such as equity securities, debt securities, real estate and all other
assets, with the fair value of each major asset category as of each annual reporting date for which a financial statement is
presented. It also amends SFAS 132(R) to require disclosure of the level within the fair value hierarchy in which each major
category of plan assets falls, using the guidance in SFAS No. 157, “Fair Value Measurements.” This FSP is applicable to
employers that are subject to the disclosure requirements of SFAS 132(R) and is generally effective for fiscal years ending after
December 15, 2009. We will comply with the disclosure provisions of this FSP after its effective date.
F-40
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
24. Subsequent Event
On May 19, 2009 the Company announced that its Board of Directors had adopted a Shareholder Rights Plan,
pursuant to which a dividend distribution was declared of one preferred share purchase right on each outstanding
common share of the Company. Subject to limited exceptions, the rights will be exercisable if a person or group
acquires 20% or more of the Company’s common shares or announces a tender offer for 20% or more of the
common shares. Under certain circumstances, each right will entitle shareholders to buy one one-thousandth of a
share of the newly created series A junior participating preferred shares of the Company at an exercise price of
$80.00. Additional details regarding the Shareholder Rights Plan may be found in the Current Report on Form 8-K
filed previously by Columbus McKinnon with the Securities and Exchange Commission.
F-41
COLUMBUS McKINNON CORPORATION
SCHEDULE II—Valuation and qualifying accounts
March 31, 2009, 2008 and 2007
Dollars in thousands
Description
Year ended March 31, 2009:
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
Balance at
End of
Period
Deductions
$ 3,583
8,735
1,064
$ 13,382
$
2,447
535
—
$ 2,982
$ 370 (5) $ 1,062
1,290
—
$ 2,352
644 (5)
530 (5)
$ 1,544
(1) $ 5,338
8,624
(2)
1,594
$ 15,556
Accrued general and product liability costs $ 20,771
$
4,052
$ —
$ 1,581
(3) $ 23,242
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:
$ 3,515
8,843
2,064
$ 14,422
$
921
1,549
—
$ 2,470
$ —
—
—
$ —
$ 853
1,657
1,000
$ 3,510
(1) $ 3,583
8,735
(2)
1,064
$ 13,382
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
2,064
$ 13,116
$
1,246
2,754
—
$ 4,000
$ —
(240) (4)
—
$ (240)
$ 1,148
1,306
—
$ 2,454
(1) $ 3,515
8,843
(2)
2,064
$ 14,422
Accrued general and product liability costs $ 20,969
$
4,343
$ —
$ 4,234
(3) $ 21,078
________
(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
(5) Reserves at date of acquisition of subsidiary
F-42
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None.
Item 9A.
Controls and Procedures
Management’s Evaluation of Disclosure Controls and Procedures
As of March 31, 2009, 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, 2009. There were no
changes in our internal controls or in other factors during our fourth quarter ended March 31, 2009.
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, 2009 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, 2009.
The Company completed an acquisition during fiscal 2009 that was excluded from the Company’s Management’s Annual
Report on Internal Control Over Financial Reporting as of March 31, 2009. On October 1, 2008, the Company acquired the
Kissing, Germany based Pfaff Beteiligungs GmbH and subsidiaries (“Pfaff-silberblau” or “Pfaff”), whose results are included in
the Company’s consolidated financial statements and constituted $63.2 million and $35.8 million of total and net assets,
respectively, as of March 31, 2009 and $43.5 million and $13.9 million of net sales and net loss, respectively, for the year then
ended.
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2009 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.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting during the most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting
30
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, 2009, 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
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.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls
of Pfaff Beteiligungs GmbH and subsidiaries, which is included in the March 31, 2009 consolidated financial statements of
Columbus McKinnon Corporation and constituted $63,199,000 and $35,819,000 of total and net assets, respectively, as of March
31, 2009 and $43,489,000 and $(13,942,000) of net sales and net loss, respectively, for the year then ended. Our audit of internal
control over financial reporting of Columbus McKinnon Corporation also did not include an evaluation of the internal control
over financial reporting of Pfaff Beteiligungs GmbH and subsidiaries.
In our opinion, Columbus McKinnon Corporation maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2009, based on the COSO criteria.
We have also 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, 2009 and 2008, and the related consolidated
statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2009 of
Columbus McKinnon Corporation and our report dated June 5, 2009 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
June 5, 2009
Item 9B.
Other Information
None.
31
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, 2009 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 Nomination
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.
Item 11.
Executive Compensation
The information regarding Executive Compensation will be included in a Proxy Statement to be filed with the Commission prior
to July 29, 2009 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, 2009
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, 2009 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, 2009 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, 2009 and 2008
Page No.
F-2
F-3
Consolidated statements of operations – Years ended March 31, 2009, 2008 and 2007
F-4
32
Consolidated statements of shareholders’ equity – Years ended March 31, 2009, 2008 and 2007
F-5
Consolidated statements of cash flows – Years ended March 31, 2009, 2008 and 2007
F-6
Notes to consolidated financial statements
F-7 to F-41
(2)
Financial Statement Schedule:
Page No.
Schedule II - Valuation and qualifying accounts
F-42
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.
(3)
Exhibits:
Exhibit
Number
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).
3.3 Certificate of Amendment to the Certificate of Incorporation of Columbus McKinnon Corporation, dated as
of May 18, 2009 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
dated May 18, 2009).
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 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).
4.3 Rights Agreement, dated as of May 18, 2009, between Columbus McKinnon Corporation and American
Stock Transfer & Trust Company, LLC, which includes the form of Right Certificate as Exhibit B and the
Summary of Rights to Purchase Preferred Stock as Exhibit C (incorporated by reference to Exhibit 4.1 to the
Company’s Current Report on Form 8-K dated May 18, 2009).
#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).
33
#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
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 Amendment No. 13 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended
and Restated as of April 1, 1989, dated December 19, 2008 (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2008).
#10.16 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).
#10.17 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).
#10.18 Amendment and Restatement of Columbus McKinnon Corporation 1995 Incentive Stock Option Plan
34
(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).
#10.19 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).
#10.20 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).
#10.21 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).
#10.22 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).
#10.23 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).
#10.24 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).
#10.25 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).
#10.26 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).
#10.27 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).
#10.28 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).
#10.29 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).
#10.30 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).
#10.31 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).
#10.32 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).
35
#10.33 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).
#10.34 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).
#10.35 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).
#10.36 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).
#10.37 Amendment No. 14 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated December 21, 2007 (incorporated by reference to Exhibit 10.36 to the Company’s Annual Report
on Form 10-K for the fiscal year ended March 31, 2008).
#10.38 Amendment No. 15 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)]
Plan, dated January 29, 2009 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report
on Form 10-Q for the quarterly period ended December 28, 2008).
#10.39 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).
#10.40 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).
#10.41 Amendment No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated December 10, 1998 (incorporated by reference to Exhibit 10.32 to the
Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
#10.42 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).
#10.43 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).
#10.44 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).
#10.45 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).
#10.46 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).
#10.47 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).
36
#10.48 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).
#10.49 Amendment No. 9 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated April 21, 2008 (incorporated by reference to Exhibit 10.47 to the Company’s
Annual Report on Form 10-K for the fiscal year ended March 31, 2008).
#10.50 Amendment No. 10 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly
Retirement Benefit Plan, dated December 19, 2008 (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 28, 2008).
#10.51 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).
#10.52 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).
10.53 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).
10.54 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).
#10.55 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).
#10.56 Amendment No. 1 to the Columbus McKinnon Corporation 2006 Long Term Incentive Plan, dated December
30, 2008 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended December 28, 2008).
#10.57 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).
10.58 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).
10.59 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
37
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).
10.60 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).
10.61 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).
10.62 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, 2007).
10.63 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).
*#10.64 Form of Change in Control Agreement as entered into between Columbus McKinnon Corporation and each
of Timothy T. Tevens, Karen L. Howard, Joseph J. Owen, Richard A. Steinberg, Timothy R. Harvey, Gene
Buer, and Chuck Giesige.
*#10.65 Form of Omnibus Code Section 409A Compliance Policy as entered into between Columbus McKinnon
Corporation and each of Timothy T. Tevens, Karen L. Howard, Joseph J. Owen, Richard A. Steinberg,
Timothy R. Harvey, Gene Buer, and Chuck Giesige.
*10.66 Second amendment, dated as of May 19, 2009 to that certain Third Amended and Restated Credit Agreement,
dated as of March 16, 2006 among Columbus McKinnon Corporation, the Guarantors named therein, the
lending institutions party thereto, and Bank of America, N.A., as Administrative Agent, Swing Line Lender
and L/C Issuer.
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Independent Registered Public Accounting Firm.
38
*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
39
SIGNATURES
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.
Date: June 5, 2009
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
June 5, 2009
June 5, 2009
/S/ ERNEST R. VEREBELYI
____________________________________
Ernest R. Verebelyi
Chairman of the Board of Directors
June 5, 2009
/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
/S/ CHRISTIAN B. RAGOT
____________________________________
Christian B. Ragot
/S/ LIAM MCCARTHY
____________________________________
Liam McCarthy
Director
Director
Director
Director
Director
40
June 5, 2009
June 5, 2009
June 5, 2009
June 5, 2009
June 5, 2009
June 5, 2009
June 5, 2009
Exhibit 21.1
COLUMBUS McKINNON CORPORATION
SUBSIDIARIES
(as of March 31, 2009)
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)
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)
Columbus McKinnon Asia Pacific Ltd. (Hong Kong)
Hangzhou LILA Lifting and Lashing Co. Ltd. (China)
Columbus McKinnon Hangzhou Industrial Co. Ltd. (China)
Columbus McKinnon Corporation Ltd. (England)
Columbus McKinnon France S.a.r.l. (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)
Columbus McKinnon PTY, LTD (South Africa)
Yale Lifting & Mining Products (Pty.) Ltd. (25% Financial Interest) (South Africa)
Yale Engineering Products Pty. Ltd. (South Africa)
Yale Industrial Products GmbH (Austria)
Columbus McKinnon Hungary Kft. (Hungary)
Pfaff Beteiligungs GmbH (Germany)
Pfaff Silberblau Hebezeugfabrik GmbH (Germany)
Alltec Antriebstechnik GmbH (Germany)
Dreier Transportgerate Lager-u. Betriebseinr GmbH (Germany)
Pfaff Silberblau Winden & Hebezuege GesmbH (Austria)
Pfaff Silberblau Benelux B.V (Netherlands)
Pfaff Silberblau Polska SP.z.o.o (Poland)
Pfaff Silberblau LTD, UK (England)
Pfaff Silberblau Hungaria Csorlok es Emeloszkozok KFT (Hungary)
Pfaff Silberblau Hebezeuge und Antriebstechnik AG (Switzerland)
Verkehrstechnik Beteiligungs Gmbh (Germany)
Verkehrstechnik Gmbh & Co. KG (Germany)
41
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
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 June 5, 2009 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, 2009.
/s/ Ernst & Young LLP
Buffalo, New York
June 5, 2009
42
CERTIFICATION
Exhibit 31.1
I, Timothy T. Tevens, Chief Executive Officer, certify that:
1.
2.
3.
I have reviewed this report on Form 10-K of Columbus McKinnon Corporation;
Based on my knowledge, this 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 report;
Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4. 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)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, 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;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably 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):
a. 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
b. 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: June 5, 2009
/S/ TIMOTHY T. TEVENS
Timothy T. Tevens
Chief Executive Officer
43
CERTIFICATION
Exhibit 31.2
I, Karen L. Howard, Chief Financial Officer, certify that:
1.
I have reviewed this report on Form 10-K of Columbus McKinnon Corporation;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;
4. 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)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, 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;
c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably 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):
a. 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
b. 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: June 5, 2009
/S/ KAREN L. HOWARD
Karen L. Howard
Chief Financial Officer
44
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, 2009, 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: June 5, 2009
/S/ TIMOTHY T. TEVENS
Timothy T. Tevens
Chief Executive Officer
/S/ KAREN L. HOWARD
Karen L. Howard
Chief Financial Officer
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Shareholder and Corporate Information
Shareholder and Corporate Information
Common Stock
Columbus McKinnon’s common stock is traded on NASDAQ
under the symbol CMCO. As of April 30, 2009, there were
463 shareholders of record of the Company’s common
stock. According to March 31, 2009 SEC filings, about 158
institutional investors own approximately 90% of Columbus
McKinnon’s outstanding common shares.
Annual Meeting of Shareholders
July 27, 2009; 10:00 a.m. Eastern Time
Buffalo Marriott Niagara Hotel
1340 Millersport Highway
Amherst, New York 14221
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
Investor Relations
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
Corporate Headquarters
Columbus McKinnon Corporation
140 John James Audubon Parkway
Amherst, New York 14228-1197
716-689-5400
Independent Auditors
Ernst & Young LLP
50 Fountain Plaza, 14th floor
Buffalo, NY 14202-2297
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.
Product and Market Diversity
Two of the company’s 16-ton precision bearing
trolleys are used as part of a system to position a
blowout preventer (BOP), a device placed on top
of well casings on an oil well, preventing dangerous
pressure related “blowouts” of fluids and/or gas.
The Company’s newly acquired Pfaff business is
very well positioned in the transportation industry.
Here, Pfaff’s 144-ton Underfloor Lifting System is
used for maintenance on a four-car metro train in
Hamburg, Germany.
Mounted to a system of six high-performance
worm gear screw jacks from the Company’s recently
acquired Pfaff business, this highly sensitive radio
telescope in Hawaii is precisely positioned to
measure cosmic microwaves.
CM Electric Chain Hoists suspend the truss system
at the Beijing National Stadium, site of the 2008
Summer Olympics track and field events.
A 74-ton Underfloor Lifting System, from the
Company’s Pfaff unit, is used near Garmisch-
Partenkirchen, Germany for replacement of bogies,
general inspection and repair work on a two-car train.
Some customers are unable to send their chain
hoists away for testing, so Columbus McKinnon’s
Yale Lifting Solutions offers a mobile, on-site testing
service. This Electric Chain Hoist is being evaluated
at a South African gold mine to determine whether
it is in good working order, requires repairs or
should be taken out of service.
The indoor Sports Arena Leipzig in Germany
relies on up to 70 worm gear screw jacks applying
actuator technology from Pfaff to ensure optimal
conditions in the turns of its oval running track.
The Company’s motorized trolley unit and Coffing
Electric Chain Hoists are used for lifting and moving
wall sections in a pre-fabricated framing process for
residential housing.
The Company’s 7-ton capacity Chester low-
headroom, explosion-proof Electric Chain Hoist
is used to service a gas compressor for an
offshore platform.
140 John James Audubon Parkway
Amherst, New York 14228-1197
716-689-5400 | cmworks.com