Annual Report
2010
Positioned for Global Growth
Lift
Position
Secure
Table of Contents
Letter to Shareholders
Growth Strategy
Performance Highlights
Long-Term Goals
Company Profi le
Financial Summary
Shareholder Information
Form 10-K
1
2
3
4
6
7
8
10
During Super Bowl XXXVIII at Reliant Stadium in
Houston, TX, USA, CM entertainment Lodestar
hoists were utilized to position the special
lighting used during the various performances.
1
Dear Fellow Shareholders:
Faced with very uncertain global markets that were dramatically slowing at the beginning
of fi scal 2010, our priorities were to generate operating cash fl ow by managing liquidity and
costs, while strategically investing in high-potential markets, new products, and leadership
talent. Your Company succeeded in executing these priorities very well during fi scal 2010
and we have entered fi scal 2011 strong, well capitalized, and positioned for global growth,
as we maintain our leadership in providing products and application knowledge to help
customers lift, position, and secure materials easily and safely.
Generating Operating Cash Flow
We generated approximately $30 million of cash fl ow from operations during fi scal 2010,
in spite of a 22% reduction in revenue by managing our working capital. We also reduced
net debt to its lowest level since Columbus McKinnon’s 1996 initial public offering,
amounting to 27% of net capitalization at March 31, 2010, and well within our long-term
goal of 30%, allowing fl exibility to 50% to accommodate acquisitions.
We continued to position ourselves to generate favorable operating leverage, which will
come with incremental improvement in demand, by consolidating certain North American
production facilities. We have reduced about 500,000 square feet of operating space and
eliminated approximately $13 to $15 million in annualized fi xed costs, with the third and
fi nal project of the initiative being completed in early fi scal 2011.
At the same time, your Company continues to embrace Lean systems globally to improve
productivity, quality, and effi ciency. As we reconfi gured our production facilities for
consolidation, we took the opportunity to ensure that our facilities took full advantage of
applying Lean techniques. These restructuring activities have made us more productive
as we will be able to meet historic peak demand levels with 25% less operating space
and $13 to $15 million lower fi xed costs. During the prior recession of 2001 to 2004, we
also undertook aggressive productivity enhancing steps, generating operating leverage
in a range from 20% to in excess of 30% as we emerged from that trough. We once again
anticipate comparable operating leverage with our new cost structure as we emerge from
this historic global recession.
We are a much different company than we were during the industrial downturn of the early
2000s. Today, we have signifi cantly lower debt and a balanced capital structure, improved
working capital utilization, better operating cash fl ow, higher productivity, and greater
product and geographic market diversity.
Investing In Our Future
What has not changed over the years is the strength and market leadership of Columbus
McKinnon’s brands. In the United States alone, most of our sales are from products where
we’ve earned the number one market share position in their respective product categories.
In North America, we are proud to have the largest installed base of hoists compared with
any of our competitors. And outside of North America, we’ve been investing to capitalize
on market leadership positions we have achieved and expand them further.
In the face of fi scal 2010’s challenging operating environment, we positioned Columbus
McKinnon to quickly and fully capitalize on a recovery by investing in product development,
while continuing to expand our geographic reach in global markets.
We recently introduced a more technically advanced and global standards-compliant
Lodestar, the number-one selling electric chain hoist in North America, that now has wider
global application opportunities. We also expanded our rigging tool product offering,
including high capacity shackles for global applications. Other newly released hoists are
gaining traction in the global marketplace for their adaptability and ease of use, as we strive
toward our goal of having new products introduced in the last three years represent 20% or
more of our total sales in a given year.
We continued to invest in our global sales reach during fi scal 2010, as we work toward
our revenue diversifi cation goal of having 50% of our sales in markets outside of the U.S.
Supporting our international distribution network, we have more than 40 stand-alone sales
and service offi ces in 19 countries, including China, Brazil, Hungary, Russia, and South Africa,
as well as the developed North American and Western European regions.
Specifi cally in the Asia Pacifi c region (APAC), we are expanding our sales force and investing
in improving the productivity of our Chinese manufacturing operations, all under the
leadership of Eric Woon, who was appointed managing director for CMCO-Asia Pacifi c in
fi scal 2010. Eric is a member of our executive committee and responsible for leading our
profi table growth strategy for the region, with a strong focus on China. Most recently, Eric
was president of Volvo Construction Equipment China, and has been a senior corporate
executive based in Asia for more than 15 years.
Eric replaces Bob Clare, who retired after leading our Asian business in an interim role and
transitioning those responsibilities to Eric. We appreciate Bob’s 15 years of leadership in a
variety of key roles in our international operations and wish him well in his retirement.
We also continue to invest in our EMEA region, under the leadership of Dr. Ivo Celi, our
newly-appointed managing director for our Europe, Middle East, and Africa business.
Ivo joined us in the fourth quarter of fi scal 2010 from Hilti AG, one of the world’s leading
manufacturers of power tools for the professional construction and building maintenance
markets, where he was a senior vice president. Over his 13 years at Hilti, Ivo was responsible
for signifi cantly growing businesses, both organically and through acquisitions. His
experience includes roles in strategy development, sales and marketing, product portfolio
management, customer-oriented product development, procurement, production, and
logistics. He is based in Germany and also serves on our executive committee.
Upon joining Columbus McKinnon, Ivo worked closely with Wolfgang Wegener, who will
retire in fi scal 2011 after successfully leading our European operations for more than 30 years,
including the successful integration of our Pfaff-silberblau business which was acquired in
fi scal 2009. We cannot thank Wolfgang enough for his leadership and the valuable role he has
played in Columbus McKinnon’s growth in Europe and around the world.
In North America, we initiated a new go-to-market approach during the fi scal year, in
which all of our hoist and rigging brands are now sold through one sales force, supported
by very experienced product and vertical markets specialists. Key vertical markets for us
include: power generation and distribution, construction, mining, oil and gas exploration,
entertainment, and manufacturing.
Growth Strategy
n Grow revenue by investing in
existing and new markets around
the world and developing innovative
and complementary material
handling products
n Acquire synergistic, bolt-on acquisitions
to complement our organic growth
n Continue increasing productivity by
creating a Lean culture throughout the
organization and continue investing in
the development of our people
n Manage operating margins and
return on invested capital; maintain
a solid capital structure to support
growth initiatives
This manufacturing facility in Ohio, USA, uses a
CM Loderail freestanding, enclosed track crane
system, with a Lodestar electric chain hoist, to
move fi xtures and tooling in and out of their
CNC machine.
2
Performance Highlights –
Fiscal Year 2010
n Operations generate cash fl ow of
approximately $30 million
n Strong liquidity position with $64 million
in cash on hand, $85 million line of credit
and net debt to total capitalization of
26.9% at March 31, 2010
n International sales growth to 44%
n Facility consolidation cost reduction
to generate $13-$15 million in annualized
savings
We continue to invest in top corporate executive talent. Joe Maliekel joined our fi nancial
leadership team during fi scal 2010 as Corporate Controller and Chief Accounting Offi cer.
Joe, a CPA, brings tremendous fi nancial depth developed during his more than 20 years of
experience with Monsanto, Deloitte, and BDO Siedman.
Global Growth
Both U.S. and Eurozone capacity utilization are leading market indicators for your Company.
During this fi scal year, Eurozone and U.S. capacity utilization fell to historic lows. Eurozone
capacity utilization reached a 24-year low of 69.6%, according to the European Commission’s
report for June 2009. U.S. capacity utilization plummeted to an all-time low of 65.2%, also in
June 2009, according to the Federal Reserve Board.
Fortunately, as we progressed through fi scal 2010, we witnessed industrial capacity
utilization begin what we hope will lead to a sustained economic rebound. Eurozone
capacity utilization has been trending upward from its summer 2009 low to 75.5% in March
2010, according to the European Commission. Additionally, U.S. capacity utilization has been
increasing steadily since its June 2009 low to 71.3% in April 2010, according to the Federal
Reserve Board. While these statistics refl ect favorable trends, they are considerably below
the long-term average of approximately 80%.
Notably, what is most important to our ability to achieve economic revenue growth is the
trend line in capacity utilization, not an absolute number. In other words, any increase in
capacity utilization will positively affect our revenue, generally one to two quarters later.
Ultimately, what drives demand for our products is the need for end users to continually
enhance productivity and workplace safety. These drivers provide customers with
opportunities to innovate, gain competitive advantages within their own industries, and
comply with ever-expanding workplace regulatory requirements around the world.
Fiscal 2010 Results
For the fi scal year ending March 31, 2010, Columbus McKinnon’s net sales were $476.2
million, a 21.5% decline from $606.7 million the year prior. Refl ecting the severity of the
economic recession by adjusting for the impact of the mid-year fi scal 2009 Pfaff acquisition,
comparable sales declined 28.2% in fi scal 2010. Fiscal 2010 gross profi t margin was
24.3%, compared with 28.6% for fi scal 2009. Excluding special charges related to facility
consolidations, fi scal 2010 gross profi t margin was 25.3%.
While continuing to invest in our international market penetration and new product
development initiatives, we reduced selling, general, and administrative expenses by
8.1% to $101.4 million in fi scal 2010. This is the result of aggressive cost reduction
measures combined with lower commissions on reduced volume.
The Metro Vienna, in Austria, uses a Pfaff-silberblau
under-fl oor lifting system with electrically-driven
turntables to maintain and repair its trains.
Excluding restructuring and other special costs, including a non-recurring goodwill
impairment charge in fi scal 2009, operating margin was 4.3% in fi scal 2010 and 10.5% in
fi scal 2009 on a non-GAAP basis.
3
Excluding special charges or gains, as well as normalizing the fi scal 2010 effective tax
rate to 36%, non-GAAP net income was $6.1 million, or $0.32 per share, in fi scal 2010,
compared with $35.8 million, or $1.90 per share, for fi scal 2009. Special charges or gains
are summarized on the following table:
(in millions, except per diluted share data)
GAAP net loss
COGS restr costs*
Large prod liab claim*
Pfaff purchase accounting*
Restructuring charges*
Goodwill/asset* impairment charge
Gain on property/litigation*
Gain on bond redemptions*
Mark-to-market adj*
Fx transaction losses*
Normalize effective tax rate to 36%
Discontinued operations*
Twelve Months Ended
March 31, 2010
March 31, 2009
$ (7.0)
$ (0.36) per share
$ (78.4)
$ (4.16) per share
2.8
1.9
–
10.2
0.4
(1.1)
–
–
–
(0.6)
(0.5)
0.15
0.10
–
0.54
0.02
(0.06)
–
–
–
(0.04)
(0.02)
–
–
0.7
1.2
107.0
(2.2)
(0.2)
2.6
2.0
0.8
2.3
–
–
0.04
0.07
5.67
(0.11)
(0.01)
0.14
0.10
0.04
0.12
Non-GAAP net income
$ 6.1
$ 0.32 per share
$ 35.8
$ 1.90 per share
* net of 38% tax
During fi scal 2010, in spite of the negative economic climate, we generated $29.9 million
in cash from operating activities. On March 31, 2010, we had $64.0 million in cash and
equivalents, compared with $39.2 million at the end of fi scal 2009 – a strong position in an
environment where liquidity remains a real asset.
Working capital (excluding cash and debt) at the end of fi scal 2010 was 16.2% of revenue,
with inventory turnover of 4.6 times. Our long-term working capital goal is 15% of revenue,
with six to seven annual inventory turns. We believe we will make further progress toward
our working capital goal with improvement in sales volumes.
Net debt-to-capitalization was 26.9% at March 31, 2010, well within Columbus McKinnon’s
long-term goal of 30%, fl exing to 50% to accommodate acquisitions. It is worth reiterating
that Columbus McKinnon’s debt is at its lowest level since our IPO 14 years ago, with net
debt of $68.8 million and total debt of $132.8 million at March 31, 2010.
Successful Diversifi cation
Our goal to derive 50% of total revenue from markets outside the United States continues
to be important as we pursue our long-term objective of reaching $1 billion in revenue.
While the economy impacts the timing and rate of Columbus McKinnon’s growth, we
believe our target remains reasonable and achievable.
Long-Term Goals
n 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
n Generate operating margins of
12% to 14%
n Sustain debt to total capitalization
of 30%, fl exing to 50% to accommodate
acquisitions
n Manage working capital to 15%
of revenues
n Have global resources in place to
execute the strategic plan
A seven-metric ton capacity, explosion-proof,
corrosion-resistant, electric, low headroom
chain hoist is used to service a gas compressor
on an oil production platform off the coast of
Angola, Africa.
4
This New York City theater replaced a manual
system with a CM Lodestar XL to allow workers
to delicately lower the 2.5 ton chandelier during
cleaning and maintenance operations.
Sales to markets outside the United States totaled $211 million, or 44% of revenue, in fiscal
2010. When compared with 38% of revenue in fiscal 2009, what is striking is the progress
we’ve made on geographic diversification since international growth became a key element
of our corporate strategy in 2001. Then, non-U.S. sales represented only 20% of total
revenue. Over the last nine years, we’ve more than doubled our percentage of non-U.S.
sales, while maintaining our U.S. market-leadership position. This geographic diversity is
important to provide greater profitable growth opportunities and additional potential
reliability to our revenue stream.
Acquisitions, particularly strategic “bolt-on” ones which broaden our geographic reach or
our product offering, will continue to be important for Columbus McKinnon, as we expect
$100 million to $200 million of our revenue goal to come from acquired businesses. During
fiscal 2010, we successfully integrated our Pfaff-silberblau business, acquired in fiscal
2009. While we did not close any transactions last year, we have continued with an active
program for evaluating potential targets.
Our Strategy
To achieve our long term goals, we remain focused on our growth strategy. As evidenced
by our performance and activities in fiscal 2010, Columbus McKinnon continues to:
n invest in global markets and new products
n improve productivity by implementing a Lean culture and investing in our people
n seek geographic and/or product expansion acquisition opportunities
n improve operating margins and return on invested capital, and maintain a solid
capital structure
We will continue to make prudent investments in new products, markets, and people
as we execute our growth strategy, while managing your Company with a balanced
approach toward maintaining liquidity, preserving cash, and aggressively containing costs.
A sincere thanks to all of our associates around the world who work to better our Company
every day. We also thank you, our shareholders, for your confidence and investment in
Columbus McKinnon.
This wind farm installation in Hawaii, USA,
uses an extensive rigging system of CM spreader
beams, synthetic slings, and shackles to lift
the blades, tower sections, hubs, and nacelles
into position.
5
Timothy T. Tevens
President and Chief Executive Officer
Ernest R. Verebelyi
Chairman of the Board of Directors
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
Europe,
Middle East
& Africa
10%
Latin
America
2%
Asia
Pacific
1%
Canada
7%
United States
80%
Asia
Pacific
2%
Canada
5%
United States
56%
Europe,
Middle East
& Africa
32%
Latin America
5%
2001
2010
6
Strong Cash Flow From Operations
Cash Flow from Operations
($ in millions)
$60
30
0
59.6
60.2
46.4
45.5
29.9
06
07
08
09
10
Cash Flow from Operations
per Share
$4
2
0
3.11
3.19
2.79
2.40
1.58
06
07
08
09
10
Operating Margin (%)*
13.6
13.6
11.1
10.5
Growing Globally
($ in millions)
Net Sales
$700
550.5
513.3
593.8 606.7
476.2
20
10
0
350
0
Financial Summary
(In thousands, except per share, percent change, margin and ratio data)
Data as of or for the years ended March 31, 2010 and March 31, 2009
Income Statement Data
2010
2009
Change
Net sales
Gross profit
Gross margin
$476,183
$606,708
-21.5%
115,939
173,701
-33.3%
24.3%
28.6%
(Loss) from operations
(3,812)
(46,559)
91.8%
Operating Margin
(0.8)%
(7.7)%
Non-GAAP income from operations*
20,707
63,462
-67.4%
Non-GAAP operating margin*
4.3%
10.5%
Net (loss)
Net (loss) per diluted share
(7,013)
($0.37)
(78,384)
($4.16)
91.1%
91.1%
Non-GAAP net income per diluted share*
$0.32
$1.90
-83.2%
Total assets
Total liabilities
Total debt
Total debt, net of cash
Total shareholders’ equity
Total debt/capitalization
294,219
132,817
68,849
187,278
41.5%
26.9%
309,810
137,886
-2.1%
-5.0%
-3.7%
98,650
-30.2%
181,854
3.0%
43.1%
35.2%
4.3
Balance Sheet Data
06
07
08
09
10
$481,497
$491,664
06
07
08
09
10
Total debt, net of cash/capitalization
International Sales**
$250
125
0
224.5
210.7
188.3
155.6
159.2
Other Data
06
07
08
09
10
Operating cash flow per share
1.58
3.19
-50.5%
Operating cash flow
$29,867
$60,231
-50.4%
Strong Liquidity Position
($ in millions)
Total Debt, Net of Cash
$300
164.2
150
123.4
98.7
71.9
68.8
0
06
07
08
09
10
7
Depreciation, amortization and impairment
12,490
117,590
Capital expenditures
(7,245)
(12,245)
-40.8%
Working capital (excl. cash and debt)/revenue
16.2%
18.8%
Days sales outstanding
Inventory turns
51.4
4.6
53.7
4.0
** Excludes restructuring-related costs of $21.0 million in fiscal 2010 and $1.9 million in fiscal 2009,
other special charges of $3.5 million in fiscal 2010 and $1.1 million in fiscal 2009, and a $107.0 million
goodwill impairment charge in fiscal 2009
** International sales refers to those to customers outside the United States
Shareholder and Corporate Information
Common Stock
Columbus McKinnon’s common stock is traded on NASDAQ
under the symbol CMCO. As of April 30, 2010, there were 589
shareholders of record of the Company’s common stock.
According to March 31, 2010 SEC filings, about 118 institutional
investors own approximately 93% of Columbus McKinnon’s
outstanding common shares.
Annual Meeting of Shareholders
July 26, 2010
10:00 a.m. Eastern Time
The Martha Washington Inn
150 West Main Street
Abington, Virginia 24210
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, New York 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, 15th floor
Buffalo, New York 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.
8
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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, 2010
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 30,
2009 (the second fiscal quarter in which this Form 10-K relates) was approximately $287 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, 2010 was 19,122,266 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s proxy statement for its 2010 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, 2010 are incorporated by reference into Part III of this report.
COLUMBUS McKINNON CORPORATION
2010 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 global designer, manufacturer and marketer of hoists, cranes, actuators, chain, forged attachments, lift 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, as well as certain chain and forged attachment 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. Additionally, we believe are the market leader of manual hoist products in Europe, which
provides us further opportunity to sell our other products through our existing distribution channels in that region. Further,
complimented by our October 2008 Pfaff acquisition, we believe we are the global leader for mechanical actuator products and
services. 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.
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, reached 70.5% in March 2010, the
first time it has been above 70% since November 2008. This is compared to 65.2% reached in June 2009; the lowest reported
US industrial capacity utilization as published by the U.S. Federal Reserve Board. Similarly, the Eurozone capacity utilization
reached 75.5% in March 2010, following a 69.6% trough in June 2009.
In response to the negative economic climate we experienced in Fiscal 2010 and consistent with our manufacturing strategy,
we initiated a plan to rationalize our North American hoist and rigging operations to improve efficiency, control costs and
facilitate future growth. During fiscal 2010, we closed one of our forge facilities in the U.S. and significantly stopped welded
chain production in our Mexico facility. Continuing into early fiscal 2011, one of our hoist facilities will be closed, with this
entire facility consolidation initiative resulting in a reduction of 500,000 square feet of manufacturing space and generating
annual savings estimated at approximately $13-$15 million. After completion, we will have sufficient capacity to produce peak
demands. The cost of the restructuring is expected to be approximately $25-$27 million with 80% of the total charges having
been incurred 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.
1
Our Position in the Industry
The broad, global material handling industry includes the following sectors:
•
•
•
•
•
•
•
overhead material handling and lifting devices;
continuous materials movement;
wheeled handling devices;
pallets, containers and packaging;
storage equipment and shop furniture;
automation systems and robots; and
services and unbundled software.
The breadth of our products and services enables us to participate in 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 channel partners and end-user
customers 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 and marketer of hoists and alloy and high
strength carbon steel chain and attachments in North America. We have developed our leading market positions over our 135-
year history by emphasizing technological innovation, manufacturing excellence and superior service. Approximately 61% of
our U.S. net sales for the year ended March 31, 2010 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 channel partners and
end user 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
45%
55%
35%
49%
50%
43%
80%
25%
U.S. Market Position
#1
#1
#1
#1
#1
#1
#1
#1
Percentage of
U.S. Net Sales
22%
13%
7%
4%
10%
5%
2%
1%
64%
(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.
2
(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 2009.
(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. Most of our products work in conjunction with each other to create a lifting system. We
offer engineering and design services to help channel partners and end users solve material handling problems. We are the only
major supplier of material handling equipment offering full lines of hoists, rigging and lifting tools as well as actuators. 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 powered
hoists and manual hoists and were first developed and marketed under these brand names 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 $210.7 million
(representing 44% of our total sales) during the year ended March 31, 2010. This growth has occurred primarily in Europe, Latin
America and Asia-Pacific. The Pfaff acquisition in October 2008 has enhanced our international revenue growth, particularly in
Europe. Additionally, we have recently opened two sales offices in Shanghai and Guangzhou, China to sell into this growing
industrial market, with more planned in the coming year. Our international business has provided us, and we believe will
continue to provide us, with significant growth opportunities and new markets for our products.
“International sales,” as expressed throughout Items 1 and 7 of this Form 10-K, are defined as sales to customers located
outside of the United States.
Low-Cost Manufacturing with Significant Operating Leverage - We have the ability to produce products in low cost
countries of the world. We have a manufacturing base in Hangzhou, China which allows us to produce certain products in this
low cost environment. We do believe we will continue to generate significant operating leverage due to the restructuring
activities recently initiated as summarized below. Once the economic climate improves, our operating leverage goal is for each
incremental sales dollar to generate 20%-30% of additional operating income, in addition to the fixed cost savings realized from
our facility consolidation activities.
—
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 underwent consolidation of our North American hoist
and rigging operations in accordance with our strategy. We completed the closure of one of our
manufacturing facilities and significantly downsized a second facility in the third quarter of fiscal 2010. We
expect to complete the closure of a third facility at the end of our FY 2011 first quarter. We expect that these
projects will result in an aggregate reduction of approximately 500,000 square feet of manufacturing space
and generate annual savings estimated at approximately $13-$15 million.
—
Lean Culture - We have been applying Lean techniques since 2001, facilitating inventory reductions, and a
significant decline in required manufacturing floor space, a decrease in product lead time and improved
3
productivity and on-time deliveries. We believe continued application of Lean will generate benefits for
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.
—
International Expansion - Our continued expansion of our manufacturing facilities in China, Mexico and
Hungary provides us with a cost efficient platform to manufacture and distribute certain of our products and
components. We now operate 22 manufacturing facilities in eight countries, with 41 stand alone sales and
service offices in 19 countries.
—
Consolidated Purchasing Activities - We continue to leverage our company-wide purchasing power through
our Purchasing Council to reduce our costs and manage fluctuations in commodity pricing, including steel.
—
Selective Integration and outsourcing - We manufacture many of the critical parts and components used in the
manufacture of our hoists and lifting systems, resulting in reduced costs. We also evaluate outsourcing
opportunities for non-critical operations and components.
Strong -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 replacement units and components and repair parts. We maintain strong relationships with our
distribution channel partners and provide prompt service to end-users of our products through our authorized network of 16 chain
repair stations and approximately 340 hoist service and repair stations. We also work closely with end users to design the
appropriate lifting systems using our products to help them solve their material handling problems.
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 $89.9 million, from $158.7 million to $68.8 million and continue to improve
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. Management of the Company
promotes the ownership of its stock by the executive officers and directors.
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:
—
—
Leverage Our Strong Competitive Position - Our large, diversified, global customer base, our extensive
distribution channels and our close relationships with end users and channel partners provide us with insights
into customer preferences and product requirements that allow us to anticipate and address the future needs of
the marketplace. We are also investing in key vertical markets that will help us grow our revenues in these key
markets.
Introducing New Product - 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 of
our customers. We design our powered hoist lines to many international standards included the FEM
(European) and ANSI (U.S.) and other standard setting bodies. We employ 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 $74.3 million, $74.8 million and $89.0 million in fiscal
2010, 2009 and 2008, 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
4
geographic area. This strategy maximizes our market coverage and provides the largest number of end-users
with access to our products.
Continue to Grow in International Markets - Our international sales of $210.7 million comprised 44% of our net sales for
the year ended March 31, 2010, as compared with $228.8 million, or 38% in fiscal 2009 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 North America, Europe, Latin America and Asia-Pacific. We have developed and are
continuing to expand upon new hoist and other products in compliance with global standards and international designs to
enhance our global distribution.
Further Reduce Our Operating Costs and Increase Manufacturing Productivity - Our objective is to provide the highest
quality product and service at a price consistent with the value created for our customers. We continually evaluate our costs and
challenge the global supply and manufacturing chain to reduce costs. Our view is that a market focused sales and marketing
effort along with a low cost of operating will prove to be successful for our customers and Columbus McKinnon. We continually
seek ways to reduce our operating costs and increase our manufacturing productivity. In furtherance of this objective, we have
undertaken the following:
—
Lean - We continuously identify value streams throughout our businesses and work intensively to remove
waste in all forms. We started Lean in 2001 and continue to recognize benefits from this effort.
—
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 began consolidation of our North American hoist and rigging
operations in accordance with our strategy. This involves the closing of two manufacturing facilities and
significantly downsizing a third facility during 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 $13-$15 million.
—
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.
Pursue Strategic Acquisitions and Alliances; Evaluate Existing Business Portfolio - 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
our businesses for potential divestiture and redeployment of capital.
Our Business
ASC Topic 280 “Segment Reporting” establishes the standards for reporting information about operating segments in
financial statements. 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 determined that we have only one reporting segments for internal and
external reporting purposes. 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 load binders; industrial components, such as mechanical and electromechanical actuators and rotary
unions; below-the-hook special purpose lifters; tire shredders; 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;
5
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, transportation and heavy duty trucking, 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
2010 sales, $265.5 million, or 56% were U.S. and $210.7 million, or 44% were international. The following table sets forth
certain sales data for our products, expressed as a percentage of net sales for fiscal 2010 and 2009:
Hoists .......................................................................................
Chain........................................................................................
Forged attachments..................................................................
Industrial cranes.......................................................................
Actuators and rotary unions.....................................................
Other ........................................................................................
Fiscal Years Ended March 31,
2010
53%
11
10
9
14
3
100%
2009
55%
12
10
10
10
3
100%
Hoists - We manufacture a wide variety of electric chain hoists, electric wire rope hoists, hand-operated hoists, winches,
lever tools and air-powered 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.
We also offer several lines of standard and custom-designed, below-the-hook tooling, clamps, and textile strappings.
Below-the-hook tooling, textile and chain slings and associated forgings, and clamps are specialized lifting apparatus used in a
variety of lifting activities performed in conjunction with hoisting or lifting applications.
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 load binders, 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 transportation, 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.
6
Other - This category includes tire shredders, light-rail systems and lift tables. 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. Light-rail systems are portable steel overhead beam configurations used at workstations, from which hoists are an
integral component. We also evaluate outsourcing opportunities for non-core competencies.
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 140 sales
people and through independent sales agents worldwide. Our sales are further supported by over 350 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 - With increased emphasis beginning in fiscal 2010, 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. We also
employ vertical market specialists to support our field sales force to assist our customers with solving their material handling
application needs.
Trade Show Participation - Trade shows are central to the promotion of our products, and we participate in more than 40
regional, national and international trade shows each year. Shows in which we participate range from global events held in
Germany to local “markets” and “open houses” organized by individual hardware and industrial distributors. We also attend
specialty shows for the entertainment, rental and safety markets, construction, as well as general purpose industrial and hardware
shows. In fiscal 2010, we participated in trade shows in the U.S., Canada, Mexico, Germany, the United Kingdom, France,
China, Brazil, Russia, 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.
7
Web Sites - Our main corporate web site www.cmworks.com supports the Company’s broad product offering providing
product data, maintenance manuals and related information for 11 brands within our product portfolio. The site also provides
detailed search and simultaneous product comparisons, the ability to submit Requests for Quotations and allow users to be able
chat live with a member of our customer service department. In addition to our main site we maintain an additional 20 sites
supporting various product lines, industry segments and geographies. Within these sites we currently sell Towing products,
Training, and standard hoists products manufactured by Pfaff. Distributors also have access to a secure, extranet portal website
allowing them to enter sales orders, search pricing information, check order status, and product serial number information.
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:
—
—
—
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.
Specialty Distribution Channels - Our global specialty distribution channels consist of:
—
National distributors that market a variety of MROP supplies, including material handling products, either
exclusively through large, nationally distributed catalogs, or through a combination of catalog, internet and
branch sales and a field sales force. The customer base served by national distributors such as W. W.
Grainger, which traditionally included smaller industrial companies and consumers, has grown to include
large industrial accounts and integrated suppliers.
— Material handling specialists and integrators that design and assemble systems incorporating hoists,
overhead rail systems, trolleys, scissor lift tables, manipulators, air balancers, jib arms and other material
handling products to provide end-users with solutions to their material handling problems.
—
Entertainment equipment distributors that design, supply and install a variety of material handling and
rigging equipment for concerts, theaters, ice shows, sporting events, convention centers and night clubs.
Pfaff International Direct - Our German-based Pfaff business markets and sells most of its actuators and certain of its
hoist products direct to end-users, providing an additional method to market for us in the European region.
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.
Service-After-Sale Distribution Channel - Service-after-sale distributors include our authorized network of 16 chain
repair service stations and approximately 340 hoist service and repair stations throughout North America. This service network is
designed for easy parts and service access for our large installed base of hoists and related equipment in that region.
8
OEM/Government Distribution Channels - This channel consists of:
—
—
OEMs that supply various component parts directly to other industrial manufacturers as well as private
branding and packaging of our traditional products for material handling, lifting, positioning and special
purpose applications.
Government agencies, including the U.S. and Canadian Navies and Coast Guards, that purchase primarily
load securing chain and forged attachments. 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 340 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, 2010 was approximately $67.8 million compared to approximately $70.1 million at
March 31, 2009. 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; and for light-rail systems is Gorbel.
Employees
At March 31, 2010, we had 2,542 employees; 1,501 in the U.S./Canada, 70 in Latin America, 659 in Europe and 312 in
Asia. Approximately 13% of our employees are represented under five separate U.S. or Canadian collective bargaining
agreements which terminate at various times between July 2010 and March 2012. We believe that our relationship with our
employees is good.
9
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.
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 investigated
under the supervision of a DENR Registered Environmental Consultant (“the REC”) and have commenced voluntary clean-up at
the facility. At this time, additional remediation costs are not expected to exceed the accrued balance of $0.2 million.
In March of 2007, we also discovered the presence of certain contaminants in excess of regulatory standards at our
Damascus, Virginia hoist plant and have notified the Virginia Department of Environmental Quality (the “DEQ”). We filed an
application with the DEQ to participate in its voluntary remediation program and have been accepted. We are currently
investigating under the terms of the DEQ Voluntary Remediation Program and, if appropriate, will remediate site conditions at
the facility. At this time, investigative and remediation costs are not expected to be significant.
10
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 sulfuric acid pickling solution 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 $0.2 million as of March 31, 2010, 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 fiscal year 2010, 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. U.S. industrial capacity
utilization has improved to 70.5% in March 2010 from historical low of 65.2% in June of 2009. Similarly, Eurozone industrial
capacity utilization has improved to 75.5% in March 2010 compared with its June 2009 trough of 69.6%. However if the current
economic trends fail to continue in FY 2011 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.
11
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, global economy and credit conditions over the past 18 months 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 economy and
the reduced availability of credit may have decreased the financial stability of our major customers and suppliers. As a result, it
may be 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, 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 $210 million in
fiscal year 2010) 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, a currency translation 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 2010, approximately 44% 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 on transactions, 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.
12
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.
We are subject to debt covenant restrictions.
Our credit facility contains several financial and other restrictive covenants. A significant decline in our operating income or
cash generating ability could cause us to violate our leverage or fixed charge coverage ratios 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.
13
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 Dr. Ivo Celi, our Managing Director, EMEA and Wolfgang Wegener, our Vice President and
former Managing Director of Columbus McKinnon Europe.
We are subject to various environmental laws which may require us to expend significant capital and incur substantial cost.
Our operations and facilities are subject to various federal, state, local and foreign requirements relating to the protection of
the environment, including those governing the discharges of pollutants in the air and water, the generation, management and
disposal of hazardous substances and wastes and the cleanup of contaminated sites. We have made, and will continue to make,
expenditures to comply with such requirements. Violations of, or liabilities under, environmental laws and regulations, or
changes in such laws and regulations (such as the imposition of more stringent standards for discharges into the environment),
could result in substantial costs to us, including operating costs and capital expenditures, fines and civil and criminal sanctions,
third party claims for property damage or personal injury, clean-up costs or costs relating to the temporary or permanent
discontinuance of operations. Certain of our facilities have been in operation for many years, and we have remediated
contamination at some of our facilities. Over time, we and other predecessor operators of such facilities have generated, used,
handled and disposed of hazardous and other regulated wastes. Additional environmental liabilities could exist, including clean-
up obligations at these locations or other sites at which materials from our operations were disposed, which could result in
substantial future expenditures that cannot be currently quantified and which could reduce our profits or have an adverse effect
on our financial condition.
We 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, 2010, conducted our principal
manufacturing at the following facilities:
Location
United States:
Muskegon, MI
Wadesboro, NC
Lexington, TN
Charlotte, NC
Eureka, IL
Damascus, VA
Chattanooga, TN
Chattanooga, TN
Cleveland, TX
Lisbon, OH
Tonawanda, NY
Sarasota, FL
Products/Operations
Hoists (scheduled for closure in June 2010)
Hoists
Chain
Actuators and Rotary Unions
Cranes
Hoists
Forged attachments
Forged attachments
Cranes and below-the-hook tooling
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
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
91,000 Owned
90,000 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
24,000 Leased
In addition, we have a total of 51 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 ($5.0 million through March 31, 2003) per year.
We obtain additional insurance coverage from independent insurers to cover potential losses in excess of these limits.
Item 4.
Reserved
15
PART II
Item 5.
Market for the Company’s Common Stock and Related Security Holder Matters
Our common stock is traded on the Nasdaq Stock Market under the symbol ‘‘CMCO.” As of April 30, 2010, there were 488
holders of record of our common stock.
We do not currently pay cash dividends. Our current credit agreement allows, but limits our ability to pay dividends. We may
reconsider or revise this policy from time to time based upon conditions then existing, including, without limitation, our earnings,
financial condition, capital requirements, restrictions under credit agreements or other conditions our Board of Directors may deem
relevant.
The following table sets forth, for the fiscal periods indicated, the high and low sale prices per share for our common stock as
reported on the Nasdaq Stock Market.
Price Range of
Common Stock
Low
High
Year Ended March 31, 2009
First Quarter ..........................................................$ 32.87
Second Quarter......................................................
30.14
Third Quarter.........................................................
23.69
Fourth Quarter....................................................... 16.25
$ 24.05
21.29
8.84
6.90
Year Ended March 31, 2010
First Quarter ..........................................................$ 15.32
Second Quarter...................................................... 16.28
17.79
17.33
Third Quarter.........................................................
Fourth Quarter.......................................................
$
8.43
11.36
13.61
12.63
On May 21, 2010, the closing price of our common stock on the Nasdaq Stock Market was $16.56 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, 2005 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
$250
$200
$150
$100
$50
$0
3/05
3/06
3/07
3/08
3/09
3/10
Columbus McKinnon Corporation
S&P Midcap 400
Dow Jones US Diversified Industrials
*$100 invested on 3/31/05 in stock or index, including reinvestment of dividends.
Fiscal year ending March 31.
Copyright© 2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
Copyright© 2010 Dow Jones & Co. All rights reserved.
17
Item 6.
Selected Financial Data
The consolidated balance sheets as of March 31, 2010 and 2009 and the related statements of operations, cash flows and
shareholders’ equity for the three years ended March 31, 2010 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.
Year ended March 31st
2010
2009
2008
2007
2006
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 (benefit) expense
(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 debt, net of cash and cash equivalents
Total shareholders’ equity
Other Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Capital expenditures
Cash dividends per common share
$
$
$
$
$
18
476.1
360.2
115.9
64.4
36.9
16.5
—
1.9
(3.8)
13.2
(4.2)
(12.8)
(5.3)
(7.5)
0.5
(7.0)
606.7
433.0
173.7
72.6
37.7
1.9
107.0
1.0
(46.5)
13.2
(1.6)
(58.1)
18.0
(76.1)
(2.3)
$
(78.4)
593.8 $ 550.5 $
$
513.3
408.2 385.7 372.1
185.6 164.8 141.2
59.4
69.9
51.9
30.6
34.1
30.4
(0.1)
0.8
1.6
—
—
—
0.2
0.1
0.3
74.7
80.7
57.0
15.9
13.6
24.4
(1.9)
(2.6)
5.3
60.7
69.7
27.3
22.1 (31.4)
22.8
38.6
46.9
58.7
(9.6)
(4.5)
1.1
37.3 $ 34.1 $
59.8
(0.40)
(4.16)
$ 2.45 $ 2.04 $
(0.40)
(4.16)
$ 2.50 $ 2.09 $
19.0
19.0
18.9
18.9
19.2
18.7
19.0
18.5
3.53
3.66
16.6
16.1
481.5
132.8
68.8
187.3
491.7
137.9
98.7
181.9
590.0 $ 565.6 $
$
566.0
133.3 159.4 204.3
57.3 110.7 158.7
295.5 241.3 204.4
29.9
(1.4)
(5.4)
7.2
0.00
45.5
59.6
60.2
(3.4)
(8.6)
(65.5)
(22.5) (28.6) (39.9)
10.5
12.2
0.00
0.00
12.5
0.00
46.4
(6.4)
(4.2)
8.2
0.00
(1) Refer to “Results of Operations” in “Item 7. Management’s Discussion and Analysis of Results of Operations and
Financial Condition” for a discussion of the restructuring charges related to fiscal 2010, 2009, and 2008. 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).
(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 ASC Topic 350-20 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 4 to our consolidated financial statements for additional information on Discontinued
Operations.
(4) Total debt includes all 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 global designer, marketer and manufacturer of a wide variety of powered and manually operated wire rope
and chain hoists, industrial crane systems, chain, hooks and other attachments, actuators, rotary unions, 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.
Founded in 1875, we have grown to our current size and leadership position through organic growth and acquisitions. We
developed our leading market position over our 135-year history by emphasizing technological innovation, manufacturing
excellence and superior after-sale service. In addition, acquisitions significantly broadened our product lines and services and
expanded our geographic reach, end-user markets and customer base. Ongoing initiatives include improving our productivity and
increasing penetration of the European, Latin American, and Asian marketplaces. In accordance with our strategy, we have been
investing in our Lean efforts across the Company, new product development and directed sales and marketing activities.
Shareholder value will be enhanced through continued emphasis on improvement of the fundamentals including new product
development, market expansion, manufacturing efficiency, cost containment, efficient capital investment and a high degree of
customer satisfaction.
19
Over the course of its history, the Company has resiliently withstood many business cycles and its strong cash flow profile
has helped it to grow and expand globally. Reflecting on the recent global economic recession and credit crisis, we stand with a
strong capital structure which includes excess cash reserves, significant revolver availability with an expiration of May 2013,
fixed-rate long-term debt which expires in 2013 and a strong free cash flow business profile. We believe our liquidity strength
and operational cost management actions have enabled us to withstand this downturn. During the first quarter of fiscal 2010, we
consolidated our North American sales force and offered certain employees an incentive to voluntarily retire early. The early
retirement program consisted of two benefits: a paid leave of absence and an enhanced pension benefit. In furtherance of our
strategic reorganization, we completed the sale of one of our less strategic businesses, American Lifts, generating $2.4 million of
proceeds during the third quarter of fiscal 2010. Further, we are managing our business through this cycle with a lower fixed cost
footprint than prior cycles and are aggressively reducing our fixed cost base further as we strategically reorganize our North
American hoist and rigging operations. The process includes the closure of two manufacturing facilities and the significant
downsizing of a third facility, of which two of the three projects were completed in the third quarter of fiscal 2010 and the third
schedule for completion during the first quarter of fiscal 2011. The closures will result in a reduction of approximately 500,000
square feet of manufacturing space and generation of annual savings estimated at approximately $13 - $15 million with
approximately 77% of the total $18 - $19 million of restructuring charges related to manufacturing facility consolidation
expected in fiscal 2010. These costs were being recognized beginning in the second quarter of fiscal 2010 and will continue into
early fiscal 2011. We recorded total restructuring charges, including costs related to the early retirement program and paid leave
of absence, of approximately $16.5 million in fiscal 2010 and incurred an additional $4.5 million of facility consolidation-related
costs categorized as costs of products sold in fiscal 2010.
Additionally, our revenue base now is more geographically diverse than in our Company’s history, with approximately 44%
derived outside the U.S. in fiscal 2010, which we believe will help to balance the impact of changes that will occur in different
global economies at different times. As in the past, we monitor U.S. and Eurozone Industrial Capacity Utilization as an indicator
of anticipated demand for our product. These statistics weakened significantly between September 2008 and June 2009, but have
since consistently improved through March 31, 2010. In addition, we continue to monitor the potential impact of other global
and U.S. trends, including industrial production, energy costs, steel price fluctuations, interest rates, currency exchange and
activity in a variety of end-user markets around the globe.
Regardless of the economic climate, we constantly explore ways to manage our operating margins as well as further
improve our productivity and competitiveness, regardless of the point in the economic cycle. 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 and culturally changing our manufacturing and 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 continuously monitor market prices of steel. We utilize approximately $25.0 million to $35.0 million of steel annually
in a variety of forms including rod, wire, bar, structural and others. Generally, as we experience fluctuations in our costs, we
reflect them as price increases or surcharges to our customers with the goal of being margin neutral. Our steel costs have been
relatively stable during this quarter despite an increase in structural steel pricing experienced as the result of higher scrap
surcharges and the outsourcing of cut-to-length processes in conjunction with our plant rationalization.
From a strategic perspective, we are investing in international markets and new products as we 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 continuing and
focusing our sales and marketing activities directed toward select North American and global sectors including entertainment,
energy, construction, mining and food processing. Our fiscal 2009 acquisition of Pfaff is enhancing our European market
penetration as well as strengthening our global actuator offering. Further, we continue to invest in emerging market penetration,
including the geographic regions of Asia, Eastern Europe, and Latin America. We complement these activities with continued
investments in new product development, particularly products with global reach.
20
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.
We continue to operate in a highly competitive and global business environment, effectively managing through a global
economic cycle. We face a variety of opportunities in those markets and geographies, including trends toward increased
utilization of the global labor force and the expansion of market opportunities in Asia and other emerging markets. While we
continue to execute our long-term growth strategy, we have weathered this cycle with our strong capital structure, including a
solid cash position and flexible cost base, aggressively addressing costs and restructuring to future margin opportunities.
RESULTS OF OPERATIONS
Fiscal 2010 sales were $476.2 million, down 21.5%, or $130.5 million compared with fiscal 2009. Our Pfaff acquisition
contributed $71.5 million to our sales for fiscal 2010 with the remaining business being down 28.1%, or $158.0 million,
excluding Pfaff. The decline in sales was primarily due to volume decline resulting from the global economic slow down. The
divestiture of our American Lift business as well as fewer shipping days also contributed to lower sales in FY 2010 by
approximately $5 million but was partially offset by favorable foreign currency impact of approximately $3.5 million. In fiscal
2009, net sales increased by $12.9 million to $606.7 million or 2.2% from 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 in fiscal 2009 with the
remaining business down approximately $30.6 million. Fiscal 2009 was also impacted by the recovery of the U.S. dollar relative
to other currencies, particularly the Euro, and reported sales were unfavorably affected by $3.6 million.
Our gross profit margins were approximately 24.3%, 28.6% and 31.3% in fiscal 2010, 2009 and 2008, respectively. The
fiscal 2010 decline in gross profit margin of $57.8 million or 33.3% compared with fiscal 2009 was mostly due to under
absorption of costs due to lower volume in all markets. Restructuring charges related to factory consolidation of approximately
$4.5 million as well as reserve related to an atypical product liability claim of $2.9 million also contributed to lower margin in
fiscal 2010. Despite higher revenue, the fiscal 2009 margin compared with fiscal 2008 was 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, as well as under absorption of costs in the fiscal 2009 fourth quarter due to the rapid and
significant decline in sales.
Selling expenses were $64.4 million, $72.6 million and $69.9 million in fiscal 2010, 2009 and 2008, respectively. As a
percentage of net sales, selling expenses were 13.5%, 12.0% and 11.8% in fiscal 2010, 2009 and 2008, respectively. Decreases in
fiscal 2010 selling expense of $8.2 million or 11.3% reflect aggressive efforts to reduce or eliminate costs as well as lower
salaries, benefits and commissions by $3.3 million on lower volume offset by $0.5 million in increased variable compensation
expense. The fiscal 2009 increase was a result of the addition of the Pfaff business contributing $6.7 million and continued
investments in our strategic growth initiatives offset by lower commissions/incentives of $2.0 million, marketing and travel
expense of $1.0 million as a result of and in response to the economic slowdown, and translation of foreign currencies of $0.8
million.
General and administrative expenses were $36.9 million, $37.7 million and $34.0 million in fiscal 2010, 2009 and 2008,
respectively. As a percentage of net sales, general and administrative expenses were 7.7%, 6.2% and 5.7% in fiscal 2010, 2009
and 2008, respectively. Fiscal 2010 general and administrative expenses decreased by $0.8 million or 2.2% primarily due to
lower pension/group health benefit costs of $1.2 million and lower bad debt expense of $1.1 million offset by increased variable
compensation expense of $2.4 million, and other miscellaneous items. The fiscal 2009 increase was a result of the addition of the
Pfaff business contributing $4.3 million, increased credit and collection reserves of $1.3 million, increased fees for professional
services of $0.6 million and increased research and development costs of $0.4 million, offset by lower employee benefit costs
including variable compensation of $2.5 million and foreign currency translation of $0.3 million.
Restructuring charges of $16.5 million, $1.9 million and $0.8 million, or 3.5%, 0.3% and 0.1% of net sales were recorded in
fiscal 2010, 2009 and 2008, respectively. Fiscal 2010 charges resulted from the consolidation of our North American sales force,
early retirement benefits offered and costs associated with the closure and downsizing of manufacturing facilities (see further
discussion above in Executive Overview). The 2009 charges are primarily severance costs related to a company-wide staff
reduction effort in response to the sudden decline in economic conditions during the third and fourth quarters.
21
In the fourth quarter of 2009, we recorded an impairment charge of $107.0 million ($5.67 per diluted share) 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 Note 9 to our consolidated financial statements for additional information
on Goodwill and Intangible Assets. There were no goodwill impairments in fiscal 2010 or fiscal 2008.
Amortization of intangibles was $1.9 million, $1.0 million and $0.1 million in fiscal 2010, 2009 and 2008, respectively.
The fiscal 2010 increase is attributable to a full year of amortization of intangible assets from the Pfaff acquisition.
Interest and debt expense was $13.2 million, $13.2 million and $13.6 million in fiscal 2010, 2009 and 2008, respectively.
As a percentage of net sales, interest and debt expense was 2.8%, 2.2% and 2.3% in fiscal 2010, 2009 and 2008, respectively.
The fiscal 2009 decrease primarily resulted from slightly lower debt levels as we continue to execute our strategy of debt
reduction and increased financial flexibility.
We incurred ($0.2 million) and $1.8 million in fiscal 2009 and 2008, respectively, related to redemption (gain) costs
associated with the repurchase of outstanding debt. In fiscal 2009, we recorded a $3.3 million gain from a litigation settlement.
Investment (income) loss of ($1.5 million), $2.9 million, and ($1.2 million) in fiscal 2010, 2009 and 2008, respectively,
related to marketable securities held in the Company’s wholly owned captive insurance subsidiary. The fiscal 2009 loss includes
$4.0 million related to unrealized losses on securities that were determined to be other than temporary in nature. See Note 7 to
our consolidated financial statements for additional information on Marketable Securities and were included in other income
(expense).
Foreign currency exchange (gain) loss was ($0.3) million, $3.0 million and $0.4 million in fiscal 2010, 2009 and 2008,
respectively, as a result of foreign currency volatility related to purchases and intercompany debt.
Other income, net was $2.3 million, $3.9 million, and $3.6 million in fiscal 2010, 2009 and 2008, respectively. Other income
in fiscal 2010 includes a gain from the sale of the American Lifts business and a gain from the sale of an equity investment in
Europe.
Income tax (benefit) expense as a percentage of (loss) income from continuing operations before income tax (benefit) expense
was (41.5) %, 31.0% and 32.7% in fiscal 2010, 2009 and 2008, respectively. After excluding the impact of the $107 million
impairment charge, none of which is deductible for tax purposes, the effective tax rate for fiscal 2009 was 36.8%. The effective
rate for fiscal 2010 was positively impacted by foreign tax benefits and from U.S. state net operating loss benefits. Fiscal 2009
income from continuing operations was adjusted for the $107 million goodwill impairment charge, none of which is deductible
for tax purposes the percentages vary from the U.S. statutory rate due to varying effective tax rates at our foreign subsidiaries,
and the jurisdictional mix of taxable income
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $63.9 million, $39.2 million, and $76.0 million at March 31, 2010, 2009 and 2008,
respectively. $52.8 million of cash on hand was used for the Pfaff acquisition in October of 2008.
Net cash provided by operating activities was $29.9 million, $60.2 million and $59.6 million in fiscal 2010, 2009 and 2008,
respectively. The $30.3 million decrease in fiscal 2010 relative to fiscal 2009 was primarily due to lower operating performance
on lower sales as a result of the continued weakness in the global economy as well as cash payments related to restructuring
activities, partially offset by improved working capital management. Favorable changes in the net working capital affects on cash
flows from operating activities included $19.8 million in inventory, $7.5 million in trade accounts payable, and $1.8 million in
accrued and other non-current liabilities, partially offset by unfavorable changes in accounts receivable of $13.9 million and
prepaid expenses and other assets of $2.7 million. Net cash provided by operating activities was $60.2 million in fiscal 2009, an
increase of $0.6 million compared to fiscal 2008. The increase in cash provided by operating activities in fiscal 2009 relative to
fiscal 2008 was primarily due to weaker operating performance in fiscal 2009 ($29.5 million) and an increase in cash used by
discontinued operations ($1.6 million) offset by higher cash from working capital components of $30.9 million. Changes in net
working capital included favorable changes of $27.7 million in accounts receivable, $10.8 million in inventory, and unfavorable
changes in accounts payable of $15.0 million as a result of the declining volume of business.
22
Net cash used by investing activities was $1.4 million, $65.5 million and $8.6 million in fiscal 2010, 2009 and 2008,
respectively. The fiscal 2010 decrease in cash used of $64.1 million compared to fiscal 2009 was primarily the result of $52.8
million of cash used in fiscal 2009 for the Pfaff acquisition as well as lower capital expenditures in fiscal 2010. The fiscal 2010,
2009 and 2008 amounts included $7.2 million, $12.2 million and $12.5 million for capital expenditures. The fiscal 2010, 2009
and 2008 amounts benefited from $3.5 million, $1.6 million, and $5.5 million, respectively, of proceeds from business, property
and asset divestitures.
Net cash used by financing activities was $5.4 million, $22.5 million and $28.6.million in fiscal 2010, 2009 and 2008,
respectively. The decrease in cash used by financing activities for fiscal 2010 compared to fiscal 2009 was due to less debt
repayment from continuing operations of $2.1 million. The decrease in cash used by financing activities for fiscal 2009 compared
to fiscal 2008 was due to less debt repayments 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. Fiscal 2010, 2009 and 2008 include $0.3
million, $0.4 million and $1.4 million, respectively, of proceeds from the exercise of employee stock options.
We entered into an amended, restated and expanded revolving credit facility dated December 31, 2009, providing
availability up to a maximum of $85.0 million. We believe that our cash on hand, cash flows, and borrowing capacity under this
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 significant further
deterioration in the economy and successful execution of our current business plan which focuses on continued implementation
of lean manufacturing, and improving working capital utilization, specifically inventory management.
The restated Revolving Credit Agreement has an initial term ending May 1, 2013, which can be extended to December 31,
2013 as long as our existing Senior Subordinated Notes are paid in full on or prior to May 1, 2013 from proceeds of permitted
indebtedness with a maturity of no earlier than January 5, 2014.
Provided there is no default, we may, on a one-time basis, request an increase in the availability of the Revolving Credit
Facility by an amount not exceeding $65 million, subject to lender approval. The unused portion of the Revolving Credit Facility
totaled $77.1 million, net of outstanding borrowings of $0 and outstanding letters of credit of $7.9 million, as of March 31, 2010.
Interest on the revolver is payable at varying Eurodollar rates based on LIBOR or prime plus a spread determined by our total
leverage ratio amounting to 300 or 200 basis points, respectively, based on our leverage ratio at March 31, 2010. The Revolving
Credit Facility is secured by all domestic inventory, receivables, equipment, real property, subsidiary stock (limited to 65% of
foreign subsidiaries) and intellectual property.
The restated Revolving Credit Facility Agreement places certain debt covenant restrictions on us, including certain financial
requirements and restrictions on dividend payments, with which we were in compliance as of March 31, 2010. Key financial
covenants include a minimum fixed charge coverage ratio of 1.25x, a maximum total leverage ratio, net of cash, of 3.75x through
June 30, 2010 and 3.5x thereafter, and maximum annual capital expenditures of $15 million in fiscal 2010 and $18 million
thereafter excluding capital expenditures associated with a global ERP system.
The Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005 amounted to $124.9 million at March
31, 2010 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.
Our capital lease obligations related to property and equipment leases amounted to $7.0 million at March 31, 2010. Capital
lease obligations are included in senior debt in the consolidated balance sheets.
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,
2010, significant unsecured credit lines totaled approximately $7.1 million, of which $.8 million was drawn.
23
In addition to the above facilities, our foreign subsidiaries have certain secured credit lines. As of March 31, 2010,
significant secured credit lines totaled $2.0, of which $0 million was drawn.
CONTRACTUAL OBLIGATIONS
The following table reflects a summary of our contractual obligations in millions of dollars as of March 31, 2010, 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............
Projected pension and other
postretirement obligation benefit
payouts
Other
reflected on
balance sheet under GAAP (e)
Total ...................................
liabilities
the Company’s
long-term
Total
$ 131.9
6.8
--
43.5
16.6
3.6
Fiscal
2011
$ 1.1
3.4
--
11.7
16.6
0.2
Fiscal 2012-
Fiscal 2013
$ 2.3
2.6
--
22.6
--
2.1
Fiscal 2014- More Than
Five Years
Fiscal 2015
$ 1.3
$ 127.2
--
.8
--
0.1
--
0.0
--
9.1
--
1.3
118.6
10.1
21.9
22.4
64.2
72.4
$ 393.4
0.0
$43.1
25.3
$ 76.8
26.1
$ 186.9
21.0
$ 86.6
(a) As described in Note 11 to consolidated financial statements.
(b) As described in Note 18 to consolidated financial statements.
(c) We have no purchase obligations specifying fixed or minimum quantities to be purchased. We estimate that, at any
given point in time, our open purchase orders to be executed in the normal course of business approximate $40 million.
(d) Estimated for our Senior Subordinated Notes due 11/1/13.
(e) As described in Note 10 to our consolidated financial statements. Additionally, we intend to contribute approximately
$10.0 million to our pension plans for fiscal 2011.
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
2010, 2009 and 2008 were $7.2 million, $12.2 million and $12.5 million, respectively. Capital expenditures for fiscal 2010 were
limited to investments required to accommodate facility consolidation and new product development activities. We expect capital
expenditure spending in fiscal 2011 to be in the range of $10-$12 million.
INFLATION AND OTHER MARKET CONDITIONS
Our costs are affected by inflation in the U.S. economy and, to a lesser extent, in foreign economies including those of
Europe, Canada, Mexico, South America and Asia-Pacific. We do not believe that general inflation has had a material effect on
our results of operations over the periods presented primarily due to overall low inflation levels over such periods and our ability
to generally pass on rising costs through annual price increases and surcharges. However, employee benefits costs such as health
insurance, workers compensation insurance, pensions as well as energy and business insurance have exceeded general inflation
levels. In the future, we may be further affected by inflation that we may not be able to pass on as price increases. With changes
in worldwide demand for steel and fluctuating scrap steel prices over the past several years, we experienced fluctuations in our
costs that we have reflected as price increases and surcharges to our customers. We believe we have been successful in
instituting surcharges and price increases to pass on these material cost increases. We will continue to monitor our costs and
reevaluate our pricing policies.
24
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 the continuing evaluation of our businesses, we determined that our 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, we completed the sale of Univeyor A/S, which business represented the majority of our former Solutions segment. In
accordance with the provisions of ASC Topic 205-20 “Discontinued Operations” the results of operations of the Univeyor
business have been classified as such in the condensed, 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, we 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 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 at the time of the divestiture. 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 2010, 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
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 2010 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 6%, 7¼%, and 6½% as of March 31, 2010, 2009, and 2008, respectively, are primarily
based on long-term AA rated corporate bond rates. The decrease in the discount rate for fiscal 2010 resulted in a $33.9 million increase
in projected benefit obligation. The increase in the discount rates for fiscal 2009, and 2008 resulted in an $11.2 million, and $8.4
million, respectively, decrease in the projected benefit obligation as of March 31, 2009, and 2008, respectively. The rate of return on
plan assets assumptions of 7½% for each of the years ended March 31, 2010, 2009 and 2008 is based on the composition of the asset
portfolios (approximately 70% equities and 30% fixed income at March 31, 2010) and their long-term historical returns. The assets
realized actual gain of $30.5 million in fiscal 2010 and actual losses of $34.9 million in fiscal 2009 as a result of the significant
volatility in US capital markets in fiscal 2010 and fiscal 2009. The assets realized gains of $6.9 million in fiscal 2008. Our under-
funded status as of March 31, 2010 and 2009 was $36.8 million and $48.9 million, or 21.8% and 34.9% of the projected benefit
obligation, respectively. Our pension contributions during fiscal 2010 and 2009 were approximately $18.0 million and $9.3 million,
respectively. The under-funded status may result in future pension expense increases. Pension expense for the March 31, 2011 fiscal
year is expected to approximate $7.2 million, which is down from the fiscal 2010 amount of $12.6 million due to a decrease in
amortization of unrecognized losses, improved expected returns on the somewhat recovered asset values and curtailment expenses of
$2.4 million not expected to re-occur. Pension funding contributions for the March 31, 2011 fiscal year is expected to decrease by
approximately $9.0 million compared to fiscal 2010. The compensation increase assumption of 2% as of March 31, 2010 and 2% as of
March 31, 2009 and 3% as of March 31, 2008 is based on expected wage trends and historical patterns.
25
The healthcare costs inflation assumptions of 8.0%, 8.75% and 9.5% for fiscal 2011, 2010, and 2009, 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 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 aging.
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 exceed their fair market value. The
following summarizes the value of long-lived assets subject to impairment testing when events or circumstances indicate
potential impairment (amounts in millions):
Property, plant and equipment, net
Acquired intangibles with estimable useful lives
Other assets
Balance as of
March 31, 2010
$ 57.1
19.0
4.0
Impairment may exist 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, if any, would be measured as the amount by which the carrying amount of
a long-lived asset exceeds its fair market value as determined by appropriate valuation techniques.
Goodwill impairment testing. Our goodwill balance, $105.1 million as of March 31, 2010, 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.
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 have four reporting units, only
two of which have goodwill. Our Duff Norton reporting unit and Rest of Products reporting unit have goodwill totaling $9.8
million and $95.3 million at March 31, 2010, respectively.
During fiscal 2010, we tested goodwill for impairment as of September 30, 2009 for the Duff-Norton reporting units
because key performance indicators for this reporting unit were below budget and prior year levels. Accordingly, we performed
Step I impairment testing as of the end of the second quarter. Step I testing was not considered necessary for our other reporting
unit with goodwill because, based on testing performed in the prior year, the fair value of the reporting unit sufficiently exceeded
book value and no new risks of impairment existed at September 30, 2009. Based on our assessment as of September 30, 2009,
the fair value of the Duff-Norton reporting unit exceeded its net book value by 6%; as such, no impairment charges related to
goodwill or intangible assets were recorded during the six month period ended September 30, 2009. As of December 31, 2009,
we concluded that no indicators of goodwill impairment existed, so an interim test was not performed.
26
As a result of our annual impairment test as of February 28, 2010, the fair market value of our reporting units will goodwill
exceeds their net book values and no goodwill impairment charges were recorded. Fair market value of the Duff Norton and Rest
of the Products reporting units exceeded net book value by approximately 13% and 15%, respectively. 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.
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 was approximately 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 on a global basis. 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 28, 2010
test date ranged between 13.0% and 16.5%. 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 50 basis points would decrease
fair market value by $0.3 million and $9.8 million for the Duff Norton reporting unit and Rest of the Products reporting unit,
respectively, or an increase in the weighted-average cost of capital by 100 basis points would result in a decrease in fair market
value by $0.8 million and $26.5 million for the Duff Norton reporting unit and Rest of the Products reporting units, respectively.
Even with such changes fair value of the reporting units would be greater than the net book value necessitating no Step 2
calculations.
While we currently do not believe that any of our reporting units with goodwill are at risk of failing Step 1 of the goodwill
impairment test. But if the projected long-term revenue growth rates, profit margins, or terminal rates are significantly lower,
and/or the estimated weighted-average cost of capital is considerably higher, future testing may indicate impairment of one or
more of the Company’s reporting units and, as a result, the related goodwill may 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, 2010, we had $47.9 million of gross deferred tax assets before
valuation allowances. As described in Note 17 to consolidated financial statements, the deferred tax assets relate principally to net
operating loss carryforwards (primarily due to a tax loss from sale of a foreign subsidiary in 2009 and restructuring costs in 2010)
and liabilities related to employee benefit plans and insurance reserves. The deferred tax assets include $3.7 million related to various
states and foreign net operating loss carryforwards for which a $1.6 million deferred tax asset valuation allowance is recorded.
27
Accounting rules require a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on the
available evidence, it is more likely than not that such assets will not be realized. Management assesses the need to establish
valuation allowances for deferred tax assets periodically. In assessing the requirement for, and amount of, a valuation allowance
in accordance with the more-likely-than-not standard, we give appropriate consideration to all positive and negative evidence
related to the realization of the deferred tax assets. Under the accounting rules, this assessment considers, among other matters,
the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory
carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused and tax planning
alternatives. Forecast of future profitability were a significant consideration in assessing the realizability of our deferred tax
assets at March 31, 2010. Based on our assessment, we have concluded that it is more likely than not that we will have sufficient
U.S. profitability during the remaining NOL and tax credit carryforward periods (20 years) to realize substantially all of the
economic value of the federal NOLs and some of the state NOLs before they expire. If the actual recovery amount of the
deferred tax asset is less than anticipated or if actual future profitability is considerably less than what we are currently
anticipating, or if taxable income is not generated in fiscal 2011, a valuation allowance may need to be recorded for some or all
of the net deferred tax assets, resulting in a reduction of net income and shareowners’ equity. In order to recover all of the
deferred tax assets attributable to the net operating losses, taxable income approximating $35.0 million will need to be generated
during the carryover period.
The Internal Revenue Code imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership
change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in
the stock of a corporation by more than 50 percentage points over a three-year period. If we were to experience an ownership
change, utilization of our NOLs would be subject to an annual limitation determined by multiplying the market value of our
outstanding shares of stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual
limitation may be carried over to later years within the allowed NOL carryforward period. The amount of the limitation may,
under certain circumstances, be increased or decreased by built-in gains or losses held by us at the time of the change that are
recognized in the five-year period after the change.
Effects of New Accounting Pronouncements
Effective July 1, 2009, we adopted ASC Topic 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-
10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial
statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws
are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level
of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered,
non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in
the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to
update the Codification, provide background information about the guidance and provide the bases for conclusions on the
change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the
Codification.
On June 30, 2009 we adopted the provisions of ASC Topic 855 “Subsequent Events” which establishes principles and
requirements for subsequent events. These provisions set forth the period after the balance sheet date during which management
shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements,
circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date, as well as the
disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. The adoption of these
provisions did not have a material impact on our consolidated financial position or results of operations. We made no significant
changes to our condensed consolidated financial statements as a result of our subsequent events evaluation.
On April 1, 2009, we adopted the additional guidance issued under ASC Topic 820 through the issuance of FSP Statement
of Financial Accounting Standards (“SFAS”) No. 157-4, “Determining Fair Value When the Volume and Level of Activity for
the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP SFAS 157-4”).
FSP SFAS 157-4 amends ASC Topic 820 to provide additional guidance on estimating fair value when the volume and level of
activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability. The
FSP also provides additional guidance on circumstances that may indicate that a transaction is not orderly, and requires additional
disclosures about fair value measurements in annual and interim reporting periods. FSP SFAS No. 157-4 also supersedes FSP
SFAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.” Disclosures
required by this codification update are included in Notes 5 and 11.
28
On April 1, 2009, we adopted the additional guidance issued under ASC Topic 320 and ASC Topic 325 through the
issuance of FSP SFAS No. 115-2 and SFAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”
(“FSP SFAS 115-2 / 124-2”). This FSP extends existing disclosure requirements about debt and equity securities to interim
reporting periods as well as provides new disclosure requirements. FSP SFAS 115-2 / 124-2 also provides new guidance on the
recognition and presentation of an other-than-temporary impairment for debt securities classified as available for sale or held to
maturity. Equity securities are excluded from the scope the FSP’s recognition and measurement provisions. Refer to Note 7 to
consolidated financial statements for disclosures required as a result of the adoption of this codification update.
On April 1, 2009, we adopted additional guidance issued under ASC Topic 825 “Financial Instruments” through the
issuance of FSP SFAS No. 107-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP SFAS 107-1”) which
requires disclosures about fair value of financial instruments in financial statements for interim reporting periods and in annual
financial statements of publicly-traded companies. These provisions also require entities to disclose the method(s) and significant
assumptions used to estimate the fair value of financial instruments in financial statements on an interim and annual basis and to
highlight any changes from prior periods. The adoption of these provisions did not have a material impact on our consolidated
financial position, results of operations or cash flows. Disclosures required by this codification update are included in Notes 5
and 11 to consolidated financial statements.
On April 1, 2009, we adopted the additional guidance issued under ASC Topic 815 “Derivatives and Hedging” through the
issuance of SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB
Statement No. 133” which requires additional disclosures about the objectives of derivative instruments and hedging activities,
the method of accounting for such instruments and a tabular disclosure of the effects of such instruments and related hedged
items on our financial position, financial performance, and cash flows. The adoption of these provisions did not have a material
impact on our consolidated financial position, results of operations or cash flows.
On April 1, 2008, the Company adopted the measurement provisions related to Split Dollar Life Insurance Arrangements
contained in ASC Topic 715 and covered in paragraphs 715-60-35-177 to 35-185 (formerly under the pre-codification standards
of EITF 06-10). In accordance with ASC Topic 715-60-35-177, an employer should recognize a liability for the postretirement
benefit related to a collateral assignment split-dollar life insurance arrangement. These provisions were applied as a change in
accounting principle through a cumulative-effect adjustment to retained earnings. The adoption of this guidance resulted in a
$1.2 million reduction to the fiscal 2009 opening balance of retained earnings, recorded on April 1, 2008, the date of adoption.
The adoption of ASC Topic 715 did not have a significant impact on our financial position, results of operations or cash flows,
or basic or diluted per share amounts.
On April 1, 2009, we adopted the provisions of ASC Topic 805 “Business Combinations” which 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.
We adopted these provisions effective April 1, 2009 for future acquisitions and for deferred tax adjustments related to
acquisitions completed before its effective date.
In December 2008, the FASB issued additional guidance under ASC Topic 715 to require additional disclosures about assets
held in an employer’s defined benefit pension or other postretirement plan. This 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 requires disclosure of the level within the fair value hierarchy in which each major
category of plan assets falls, using the guidance in ASC Topic 820. This requirement is applicable for fiscal years ending after
December 15, 2009. We will comply with these disclosure provisions after its effective date. We do not expect the adoption of
this requirement to have a material impact on our consolidated financial position, results of operations or cash flows.
29
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, facility consolidations and
other restructurings, our asbestos-related liability, 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 2010, 39% 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 $0.4 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 $18.3 million and all contracts mature by September 30, 2013. As of March 31, 2010, the fair value of
these derivatives was a $0.8 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, 2010, we
do not have any material swap agreements or similar financial instruments in place. At March 31, 2010 and 2009, approximately
94% and 91% of our outstanding debt had fixed interest rates, respectively. At those dates, we had approximately $8.0 million
and $11.9 million, respectively, of outstanding variable rate debt. A 1% fluctuation in interest rates would have changed interest
expense on that outstanding variable rate debt by approximately $0.1 million in fiscal 2010 and 2009.
Like many industrial manufacturers, we are involved in asbestos-related litigation. In continually evaluating costs relating to
our estimated asbestos-related liability, we review, among other things, the incidence of past and recent claims, the historical case
dismissal rate, the mix of the claimed illnesses and occupations of the plaintiffs, our recent and historical resolution of the cases, the
number of cases pending against us, the status and results of broad-based settlement discussions, and the number of years such
activity might continue. Based on this review, we have estimated our share of liability to defend and resolve probable asbestos-
related personal injury claims. This estimate is highly uncertain due to the limitations of the available data and the difficulty of
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.
30
Based on actuarial information, we have estimated our asbestos-related aggregate liability through March 31, 2028 and March
31, 2040 to range between $7.4 million and $17.8 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 $11 million which has been reflected as a liability in the consolidated financial
statements as of March 31, 2010. 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 $0.5 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.
31
Item 8.
Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 2010:
Report of Ernst & Young LLP, 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. Divestitures ...........................................................................................................................................
Fair Value Measurements .....................................................................................................................
5.
6.
Inventories ............................................................................................................................................
7. Marketable Securities............................................................................................................................
8.
Property, Plant, and Equipment ............................................................................................................
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 .......................................................................................
F-2
F-3
F-4
F-5
F-6
F-7
F-7
F-12
F-13
F-13
F-16
F-16
F-18
F-18
F-21
F-21
F-23
F-28
F-29
F-34
F-36
F-37
F-39
F-40
F-44
F-45
F-45
F-46
Schedule II – Valuation and Qualifying Accounts. ........................................................................................
F-49
F-1
Report of Ernst & Young LLP, 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, 2010 and 2009, and the related consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended March 31, 2010. Our audits also included the financial statement
schedule listed in the Index at Item 15(2). 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, 2010 and 2009 and the consolidated results of
its operations and its cash flows for each of the three years in the period ended March 31, 2010, 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 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 guidance
originally issued in FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) (codified in FASB ASC
Topic 715, Compensation – Retirement Plans ), and on March 31, 2009 the Company adopted the measurement date
provisions of FASB ASC Topic 715. As discussed in Note 17 to 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, 2010, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated May 28, 2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
May 28, 2010
F-2
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
2009
2010
(In thousands, except
share data)
Current assets:
ASSETS
Cash and cash equivalents ............................................................................................. $
63,968
$
39,236
Trade accounts receivable, less allowance for doubtful accounts
($4,240 and $5,338, respectively)...............................................................................
70,218
Inventories .....................................................................................................................
79,822
Prepaid expenses and other............................................................................................
16,014
Total current assets ................................................................................................................
230,022
Net property, plant, and equipment .......................................................................................
57,106
Goodwill, net .........................................................................................................................
105,134
Other intangibles, net ............................................................................................................
19,031
Marketable securities.............................................................................................................
29,399
Deferred taxes on income ......................................................................................................
36,768
Other assets ...........................................................................................................................
4,037
Total assets ............................................................................................................................ $ 481,497
80,168
100,621
18,115
238,140
62,102
104,744
20,336
28,828
32,521
4,993
$ 491,664
Current liabilities:
LIABILITIES AND SHAREHOLDERS’ EQUITY
Notes payable to banks .................................................................................................. $
Trade accounts payable .................................................................................................
Accrued liabilities..........................................................................................................
Restructuring reserve.....................................................................................................
Current portion of long-term debt..................................................................................
Total current liabilities ..........................................................................................................
Senior debt, less current portion ............................................................................................
Subordinated debt..................................................................................................................
Other non-current liabilities ..................................................................................................
Total liabilities.......................................................................................................................
Shareholders’ equity:
841
33,480
52,754
2,755
1,155
90,985
5,966
124,855
72,413
294,219
$
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;
19,122,266 and 19,046,930 shares issued and outstanding .......................................
191
Additional paid-in capital ..............................................................................................
182,385
Retained earnings ..........................................................................................................
34,878
ESOP debt guarantee; 115,766 and 144,458 shares ......................................................
(1,850)
Accumulated other comprehensive loss ........................................................................
(28,326)
Total shareholders’ equity .....................................................................................................
187,278
Total liabilities and shareholders’ equity............................................................................... $ 481,497
190
180,327
41,891
(2,309)
(38,245)
181,854
$ 491,664
See accompanying notes.
F-3
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
2010
Year Ended March 31,
2009
(In thousands, except per share data)
2008
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 (income) loss......................................................................
Foreign currency exchange (gain) loss .................................................
Gain from litigation settlement.............................................................
Other income, net .................................................................................
(Loss) income from continuing operations before income tax
(benefit) expense ..........................................................................
Income tax (benefit) expense................................................................
(Loss) income from continuing operations...........................................
Income (loss) from discontinued operations (net of tax) ......................
Net (loss) income.................................................................................. $
476,183
360,244
115,939
64,464
36,892
16,519
-
1,876
(3,812)
13,225
-
(1,544)
(344)
-
(2,260)
(12,889)
(5,345)
(7,544)
531
(7,013)
$
$
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)
Average basic shares outstanding.........................................................
Average diluted shares outstanding......................................................
18,963
18,963
18,861
18,861
Basic (loss) income per share:
(Loss) income from continuing operations................................... $
Income (loss) from discontinued operations.................................
Basic (loss) income per share ....................................................... $
(0.40)
0.03
(0.37)
$
$
(4.04)
(0.12)
(4.16)
Diluted (loss) income per share:
(Loss) income from continuing operations................................... $
Income (loss) from discontinued operations.................................
Diluted (loss) income per share .................................................... $
(0.40)
0.03
(0.37)
$
$
(4.04)
(0.12)
(4.16)
$
$
$
$
$
$
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
18,723
19,158
2.50
(0.51)
1.99
2.45
(0.50)
1.95
See accompanying notes.
F-4
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data)
Common
Stock
($.01
par value)
188
$
Additional
Paid-in
Capital
$ 174,654
ESOP
Debt
Guarantee
(3,417)
$
Accumulated
Other
Comprehensive
Loss
(15,337)
$
Total
Shareholders’
Equity
$ 241,325
Balance at April 1, 2007.................................
Comprehensive income:
Net income 2008 ............................................
Change in foreign currency
translation adjustment ................................
Change in net unrealized gain on
investments, net of tax benefit of $410......
Change in pension liability and
postretirement obligations, net of
tax of $2,695...............................................
Total comprehensive income .........................
Adjustment to initially apply FIN 48 .............
Stock compensation - directors ......................
Stock options exercised, 144,425 shares........
Stock compensation expense .........................
Tax benefit from exercise of stock options...
Earned 37,021 ESOP shares...........................
Balance at March 31, 2008 ............................
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...............................
ASC 715 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 ............................
Comprehensive income:
Net loss 2010 ..................................................
Change in foreign currency
translation adjustment ................................
Change in net unrealized gain on
investments, net of tax of $1,090 ...............
Change in derivatives qualifying as hedges...
Change in pension liability and
postretirement obligations, net of
tax of $3,773...................................................
Total comprehensive income .........................
Stock compensation - directors ......................
Stock options exercised, 45,500 shares..........
Stock compensation expense .........................
Tax effect of exercise of stock options .........
Earned 28,693 ESOP shares...........................
Balance at March 31, 2010 ............................
—
—
—
—
—
—
1
—
—
—
189
—
—
—
—
—
—
—
1
—
—
—
190
—
—
—
—
—
1
—
—
—
191
$
$
$
Retained
Earnings
$ 85,237
37,349
—
—
—
—
—
—
—
—
—
—
—
—
196
1,415
1,266
482
444
$ 178,457
(186)
—
—
—
—
—
$ 122,400
$
—
—
—
—
—
593
(2,824)
$
—
—
—
—
(78,384)
—
—
—
—
—
260
420
799
274
117
$ 180,327
—
—
—
—
(877)
(1,248)
—
—
—
—
—
$ 41,891
(7,013)
$
—
—
—
—
—
—
—
—
—
—
—
—
—
515
(2,309)
—
—
—
—
$
280
291
1,544
(5)
(52)
$ 182,385
—
—
—
—
—
$ 34,878
—
—
—
—
459
(1,850)
$
$
—
9,431
(762)
3,927
—
—
—
—
—
—
(2,741)
37,349
9,431
(762)
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)
—
—
—
—
—
—
—
(38,245)
(19,453)
(113,888)
(877)
(1,248)
260
421
799
274
632
$ 181,854
—
(7,013)
4,789
2,025
(58)
3,163
—
—
—
—
—
(28,326)
4,789
2,025
(58)
3,163
2,906
280
292
1,544
(5)
407
$ 187,278
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
2010
Year ended March 31,
2009
(In thousands)
2008
(7,013) $
(78,384) $ 37,349
activities:
(Income) loss from discontinued operations................................................
Depreciation and amortization.....................................................................
Deferred income taxes .................................................................................
(Gain) loss on sale of real estate/investments and other ..............................
(Gain) loss on early retirement of bonds .....................................................
Amortization/write-off of deferred financing costs .....................................
Stock-based compensation ..........................................................................
Impairment loss ...........................................................................................
Non-cash restructuring charges ...................................................................
Changes in operating assets and liabilities net of effects
of business divestitures:
(531)
12,490
(8,675)
(2,515)
—
640
1,824
—
1,835
2,282
10,590
(1,700)
2,594
(300)
575
1,059
107,000
—
9,566
8,325
14,737
(596)
1,378
982
1,462
—
—
(3,292)
(9,144)
612
(1,176)
7,801
(7,231)
60,773
(1,183)
59,590
24,396
1,658
2,955
1,960
(7,207)
(4,451)
63,027
(2,796)
60,231
10,508
21,477
941
1,228
288
(2,630)
29,867
—
29,867
Trade accounts receivable ...................................................................
Inventories ...........................................................................................
Prepaid expenses and other..................................................................
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.......................................................................................
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 .............................................................
1,416
Payments under revolving line-of-credit agreements ..........................................
(831)
Borrowings under revolving line-of-credit agreements.......................................
18
Repayment of debt...............................................................................................
(29,855)
Payment of deferred financing costs ...................................................................
(2)
Tax benefit from exercise of stock options..........................................................
482
Change in ESOP debt guarantee..........................................................................
593
Net cash used by financing activities from continuing operations ......................
(28,179)
Net cash used by financing activities from discontinued operations ...................
(383)
Net cash used by financing activities ..................................................................
(28,562)
4,878
Effect of exchange rate changes on cash..........................................................
Net change in cash and cash equivalents.............................................................
27,339
Cash and cash equivalents at beginning of year ..................................................
48,655
Cash and cash equivalents at end of year ............................................................ $ 63,968 $ 39,236 $ 75,994
Supplementary cash flows data:
291
(8,502)
4,556
(964)
(1,258)
—
459
(5,418)
—
(5,418)
1,633
24,732
39,236
421
(10,623)
8,485
(6,987)
—
274
515
(7,915)
(14,612)
(22,527)
(8,957)
(36,758)
75,994
363
(2,968)
(12,245)
1,593
(52,779)
(66,036)
531
(65,505)
6,340
(4,518)
(7,245)
3,542
—
(1,881)
531
(1,350)
13,076
(14,638)
(12,479)
5,504
—
(8,537)
(30)
(8,567)
Interest paid ................................................................................................. $ 12,451 $ 12,815 $ 14,079
Income taxes paid, net of refunds ................................................................ $
9,568
3,954 $
9,673 $
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 designer, marketer and manufacturer of material
handling products and services which efficiently and safely moves, 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 2010, approximately 56% 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 $3,020,000, $4,883,000, and $5,406,000 in fiscal
2010, 2009, and 2008, 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 13% of the Company’s employees are represented by five separate domestic and Canadian
collective bargaining agreements which terminate at various times between July 2010 and March 2012.
Approximately 5% 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 as accumulated other comprehensive loss, or AOCL, 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 foreign currency exchange (gain) loss in the Company’s consolidated statement
of operations. For derivatives not classified as cash flow hedges, all changes in market value are recorded as a
foreign currency exchange (gain) loss in the Company’s consolidated statements of operations.
The Company has foreign currency forward agreements and a cross-currency swap in place to offset 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 $18,289,000, and all contracts mature by September 30, 2013. These
contracts are not designated as hedges.
F-7
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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 liabilities of the foreign subsidiary at March 31, 2010 relating to this guarantee was $717,000.
The Company has foreign currency forward agreements in place to hedge changes in the value of booked foreign
currency liabilities due to changes in foreign exchange rates at the settlement date. The notional amount of those
derivatives is $1,817,000 and all contracts mature within twelve months. These contracts are not designated as
hedges.
The Company has foreign currency forward agreements that are designated as cash flow hedges to hedge a
portion of forecasted inventory purchases denominated in a foreign currency. The notional amount of those derivates
is $2,872,000 and all contracts mature within thirteen months of March 31, 2010.
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. The Company anticipates that these
counterparties will be able to fully satisfy their obligations under the contracts.
The following is the pretax effect of derivative instruments on the condensed consolidated statement of
operations for the year ended March 31, 2010:
Derivatives
Designated as Cash
Flow Hedges
Foreign exchange
contracts
Amount of Loss
Recognized in Other
Comprehensive Income
on Derivatives
(Effective Portion)
Location of Loss
Recognized in Income on
Derivatives
Amount of Loss
Reclassified from
AOCL into Income
(Effective Portion)
$
94
Cost of products sold
-
Derivatives Not Designated as
Hedging Instruments
Foreign exchange contracts
Location of (Gain) or Loss Recognized
in Income on Derivatives
Foreign currency exchange (gain) loss
Amount of (Gain) or
Loss Recognized in
Income on Derivatives
$
(174)
The following is information relative to the Company’s derivative instruments in the condensed consolidated
balance sheet as of March 31, 2010:
Derivatives Designated as Hedging Instruments
Foreign exchange contracts
Derivatives Not Designated as Hedging Instruments
Foreign exchange contracts
Financial Instruments
Balance Sheet
Location
Accrued Liabilities
Balance Sheet
Location
Accrued Liabilities
Fair Value of
Liability
$
114
Fair Value of
Liability
$
834
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.
F-8
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Foreign Currency Translations
The Company translates foreign currency financial statements as described in Financial Accounting Standards
Board (FASB) Accounting Standards Codification (ASC) Topic 830, “Foreign Currency Matters.” 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 (gain) loss. There were gains,
including changes in the fair value of derivatives, of approximately $344,000 on foreign currency transactions in
fiscal 2010. There were losses, including changes in the fair value of derivatives, of approximately $3,018,000 and
$403,000 on foreign currency transactions in fiscal 2009 and 2008, respectively.
Gain from Litigation
During the fourth quarter of fiscal 2009, the Company settled a dispute with a previous service provider. The
Company recorded a gain of $3,330,000 related to the settlement in the form of cash proceeds and a note receivable
which was collected in fiscal 2010.
Goodwill
Goodwill is not amortized but is tested for impairment at least annually, in accordance with the provisions of
ASC Topic 350-20-35-1. 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
reviewed regularly, 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 ASC Topic 350-20-35-
33 are at the component level, or one level below the reporting segment level as defined under ASC Topic 280-10-
50-10 “Segment Reporting – Disclosure.” 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 ASC Topic 360
“Property, Plant, and Equipment.” 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.
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 management estimates, discounted cash flow calculations, and appraisals where
necessary.
F-9
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Intangible Assets
At acquisition, the Company estimates and records 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,
2010 (52% at March 31, 2009) 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 (income) loss. Estimated fair value is based on published
trading values at the balance sheet dates. The cost of securities sold is based on the specific identification method.
Interest and dividend income are included in investment (income) loss 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.
Research and Development
Research and development costs as defined in ASC Topic 730, “Research and Development,” were
$2,592,000, $4,451,000, and $3,280,000 for the years ended March 31, 2010, 2009 and 2008, respectively and are
classified as general and administrative expense in the consolidated statements of operations.
F-10
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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
trend rates.
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 ASC Topic 718, “Compensation – Stock
Compensation.” 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.
Reclassifications
Certain prior year numbers have been reclassified to conform to current year reporting presentations.
F-11
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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,
2010
1,282
1,946
(2,302)
926
$
$
2009
$
$
1,403
3,761
(3,882)
1,282
3. Acquisitions
On October 1, 2008, the Company 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 $90,000,000 in calendar 2007. This strategic acquisition continues the
execution of the Company’s strategic plan to grow its revenue in complementary product lines and also broaden that
revenue in international markets. Pfaff-silberblau complements the Company’s existing material handling business
in Europe and the U.S. and creates a global actuator business when combined with the Company’s U.S. based Duff-
Norton actuator business. The Company is creating value from this acquisition through integrating the Pfaff business
with the Columbus McKinnon European and U.S. based material handling businesses and Duff-Norton. Value is
being 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. 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, plant 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-12
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
4. Divestitures
As part of the continuing strategic 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 the Company’s former “Solutions” segment. In accordance with the provisions
of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-20-45-
1, “Presentation of Financial Statements – Discontinued Operations”, the results of operations of Univeyor A/S have
been classified as discontinued operations in the condensed 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 $15,191,000 in amounts outstanding on Univeyor’s lines of credit and fixed term bank debt.
Income from discontinued operations presented herein includes payments received on a note receivable related
to the fiscal 2002 disposal of Automatic Systems, Inc. Due to the uncertainty surrounding the financial viability of
the debtor, the note was recorded at the estimated net realizable value of $0 at the time of the divestiture.
Summarized statements of operations for discontinued operations are as follows:
Net revenue.................................................................................. $
Gain (loss) before income taxes ..................................................
Income tax expense .....................................................................
Gain (loss) from operations of discontinued businesses..............
Loss on sale of discontinued operation........................................
Tax benefit from sale of discontinued operation .........................
Gain (loss) from discontinued operations.................................... $
2010
Year Ended March 31,
2009
(In thousands)
$
2008
-
857
326
531
-
-
531
$
8,982 $
(798)
326
(1,124)
(15,926)
14,768
(2,282) $
29,548
(9,346)
220
(9,566)
-
-
(9,566)
During fiscal 2010, as part of the continuing strategic evaluation of its businesses, the Company determined
that its American Lifts business no longer provided a strategic fit with its long-term growth and operational
objectives. The American Lifts business manufactured powered lift tables which enhance workplace ergonomics and
were sold primarily to customers in the general manufacturing, construction, and air cargo industries. On October
30, 2009, the Company sold this business to a strategic buyer for $2,400,000 in cash. A $1,055,000 pre-tax gain on
the sale is included in other income, net in the Company’s consolidated statements of operations for the year ended
March 31, 2010. American Lifts has not been treated as a discontinued operation as its results from operations were
immaterial to the overall consolidated financial results of the Company.
5. Fair Value Measurements
ASC Topic 820 “Fair Value Measurements and Disclosures” establishes the standards for reporting 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 these standards, 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 Company applied the provisions of ASC Topic 820 in determining the fair value of its financial assets and
financial liabilities effective April 1, 2008. The Company applied the provisions of ASC Topic 820 in determining
the fair value of its nonfinancial assets and nonfinancial liabilities on a non-recurring basis effective April 1, 2009.
F-13
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
ASC Topic 820-10-35-37 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:
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:
Fair value measurements at reporting date using
Significant other
Quoted prices in
active markets for
identical assets
(Level 1)
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$ 29,399
$ -
$ -
Description
Assets/(Liabilities):
Marketable securities
severance
Accrued
costs
Property, plant, and
equipment
Derivative liabilities
At March 31, 2010
$ 29,399
(2,755)
775
(948)
-
-
-
-
-
(948)
(2,755)
775
-
As of March 31, 2010, the Company did not have any nonfinancial assets and liabilities that are recognized or
disclosed at fair value on a recurring basis.
F-14
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Interest and dividend income on marketable securities are recorded in investment (income) loss. Changes in
the fair value of derivatives are recorded in foreign currency exchange (gain) loss and other comprehensive loss.
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
(income) loss. During fiscal 2010, the Company sold a portion of these previously written down investments, which
resulted in the recognition of a gain of approximately $606,000.
Assets that are measured on a non-recurring basis include the Company’s reporting units that are used to test
goodwill for impairment on an annual or interim basis under the provisions of ASC Topic 350-20-35-1 “Intangibles,
Goodwill and Other – Goodwill Subsequent Measurement”, as well as property, plant and equipment in
circumstances when the Company determines that those assets are impaired under the provisions of ASC Topic 360-
10-35-17 “Property Plant and Equipment – Subsequent Measurement” and the measurement of termination benefits
in connection with the Company’s restructuring plan under the provisions of ASC Topic 420 “Exit or Disposal Cost
Obligations”.
The Company applied the provisions of ASC Topic 350-20-35-1 during the annual goodwill impairment test
performed as of February 28, 2010. Step I of the goodwill impairment test consisted of determining a fair value for
each of the Company’s reporting units. The fair values for the Company’s reporting units cannot be determined
using readily available quoted Level 1 inputs or Level 2 inputs that are observable in active markets. Therefore, the
Company used a discounted cash flow valuation model to estimate the fair value of its reporting units, using Level 3
inputs. To estimate the fair values of reporting units, the Company uses significant estimates and judgmental factors.
The key estimates and factors used in the discounted cash flow valuation model include revenue growth rates and
profit margins based on internal forecasts, terminal growth rates, and the weighted-average cost of capital used to
discount future cash flows. See Note 9 for the results of the Company’s February 28, 2010 annual goodwill
impairment test.
The write-down of fixed assets to their estimated fair market values, as discussed above, related to the closure
of two manufacturing facilities and the significant downsizing of a third facility in connection with the Company’s
restructuring plan. The fair value was determined based on management’s best estimate of the realizability of the
assets, using Level 3 inputs given the lack of observable market data for the assets. The net book value of the assets
was $2,650,000, and their estimated fair market value was $775,000.
During the year ended March 31, 2010, the Company offered termination benefits to certain employees in
connection with its restructuring plan and the liabilities measured and recorded during the period have been
determined based upon their ultimate payment amounts, which approximate fair value as determined using Level 3
inputs.
F-15
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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,
2010
2009
42,340
10,774
44,585
97,699
(17,877)
79,822
$
$
49,697
12,497
59,896
122,090
(21,469)
100,621
The excess of FIFO over LIFO cost decreased primarily due to LIFO liquidation resulting in a $2,797,000
positive impact on fiscal 2010 income.
7. 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 instances, the unrealized losses are reported in the
consolidated statements of operations and retained earnings within investment (income) loss. Estimated fair value is
based on published trading values at the balance sheet dates. The cost of securities sold is based on the specific
identification method. Interest and dividend income are included in investment (income) loss in the consolidated
statements of operations.
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.
In accordance with ASC Topic 320-10-35-30 “Investments – Debt & Equity Securities – Subsequent
Measurement,” 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 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 (income) loss. There were no other than temporary impairments for the years ended
March 31, 2010 and 2008. During fiscal 2010, the Company sold a portion of these previously written down
investments, which resulted in the recognition of a gain of approximately $606,000.
F-16
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
The following is a summary of available-for-sale securities at March 31, 2010:
Equity securities ...................... $
26,771
$
2,667
$
39
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Estimated Fair
Value
$
29,399
The aggregate fair value of investments and unrealized losses on available-for-sale securities in an unrealized
loss position at March 31, 2010 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
2,295
$
454
2,749
$
Unrealized
Losses
30
9
39
$
$
The Company considered the nature of the investments, causes of previous impairments, the severity and
duration of unrealized losses and other factors and determined that the unrealized losses at March 31, 2010 were
temporary in nature.
Net realized (losses) gains related to sales of marketable securities (excluding other-than-temporary
impairments) were $(238,000), $7,000, and $88,000 in fiscal 2010, 2009 and 2008, respectively.
The following is a summary of available-for-sale securities at March 31, 2009:
Equity securities ...................... $
29,315
$
394
$
881
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
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
$
$
Net unrealized gains (losses) included in the balance sheet amounted to $2,628,000 at March 31, 2010 and
$(487,000) at March 31, 2009. The amounts, net of related income tax expense (benefit) of $920,000 and $(170,000)
at March 31, 2010 and 2009, respectively, are reflected as a component of accumulated other comprehensive loss
within shareholders’ equity.
F-17
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
8. Property, Plant, and Equipment
Consolidated property, plant, and equipment of the Company consisted of the following:
March 31,
Land and land improvements ....................................................................................... $
Buildings ......................................................................................................................
4,804
28,621
Machinery, equipment, and leasehold improvements................................................... 121,447
2,335
157,207
Less accumulated depreciation..................................................................................... 100,101
Net property, plant, and equipment .............................................................................. $ 57,106
Construction in progress...............................................................................................
2010
2009
$
4,172
25,169
120,293
4,825
154,459
92,357
$ 62,102
Buildings include assets recorded under capital leases amounting to $3,147,000 for each of the years ended
March 31, 2010 and 2009. Machinery, equipment, and leasehold improvements include assets recorded under
capital leases amounting to $5,613,000 and $5,505,000 for the years ended March 31, 2010 and 2009, respectively.
Accumulated depreciation includes accumulated amortization of the assets recorded under capital leases amounting
to $1,910,000 and $959,000 at March 31, 2010 and 2009, respectively.
Depreciation expense, including amortization of assets recorded under capital leases, was $10,613,000,
$9,592,000, and $8,210,000 for the years ended March 31, 2010, 2009 and 2008, respectively.
9. Goodwill and Intangible Assets
As discussed in Note 2, Goodwill is not amortized but is tested for impairment at least annually, in
accordance with the provisions of ASC Topic 350-20-35-1. 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 reviewed regularly, 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 ASC Topic 350-20-35-33 are at the component level, or one level below the reporting segment level
as defined under ASC Topic 280-10-50-10 “Segment Reporting – Disclosure.” The Company has four reporting
units. Only two of the four reporting units carry goodwill at March 31, 2010 and March 31, 2009. The Duff-Norton
reporting unit (which designs, manufactures and sources mechanical and electromechanical actuators and rotary
unions) had goodwill of $9,838,000 and $9,919,000 at March 31, 2010 and 2009, respectively, and the Rest of
Products reporting unit (representing the core hoist, chain, and forgings design, manufacturing, and distribution
businesses) had goodwill of $95,296,000 and $96,500,000 at March 31, 2010 and 2009, respectively.
In accordance with ASC Topic 350-20-35-3, the measurement of impairment of goodwill consists of two
steps. In the first step, the Company compares the fair value of each reporting unit to its carrying value. As part of
the impairment analysis, the Company determines the fair value of each of its 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 the Company’s historical experience, current market trends and
future expectations.
F-18
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
During fiscal 2009, the generally weak economic conditions resulted in a rapid decline in business, a
reduction in forecasted cash flows, and an increase in capital costs as a result of tightening credit markets. Based on
this evaluation, the Company determined that the fair value of its Rest of Products reporting unit was less than its
carrying value in the fourth quarter of fiscal 2009. Following this assessment, ASC Topic 350-20-35-8 required the
Company 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. As a result of this assessment, the Company recorded a goodwill
impairment charge of $107,000,000 in the fourth quarter of fiscal 2009. None of the charge related to goodwill was
deductible for tax purposes.
During fiscal 2010, the Company tested goodwill for impairment as of September 30, 2009 for the Duff-
Norton reporting unit because key performance indicators for this reporting unit were below budget and prior year
levels. Accordingly, the Company performed Step I impairment testing as of the end of the second quarter. Step I
testing was not considered necessary for the other reporting unit because, based on testing performed for prior year
end, fair value of the reporting unit sufficiently exceeded book value and no new risk of impairment existed at
September 30, 2009. Based on the Company’s assessment as of September 30, 2009, fair value of the Duff-Norton
reporting unit exceeded its book value by 6%; as such, no impairment charges related to goodwill or intangible
assets were recorded during the six month period ended September 30, 2009. As of December 31, 2009, the
Company concluded that no indicators of goodwill impairment existed, so an interim test was not performed.
As a result of the assessments for the years ended March 31, 2010 and 2008, the Company concluded that
the balances of goodwill and intangible assets were not impaired, and therefore did not record impairment charges
during the fiscal years ended March 31, 2010 and 2008.
Future impairment indicators, such as declines in forecasted cash flows, may cause additional significant
impairment charges. Impairment charges could be based on such factors as the Company’s stock price, forecasted
cash flows, assumptions used, control premiums or other variables.
F-19
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Identifiable intangible assets acquired in a business combination are amortized over their estimated useful
lives.
A summary of changes in goodwill during the years ended March 31, 2010 and 2009 is as follows:
Balance at March 31, 2008 ...................................................................................................
Acquisitions..........................................................................................................................
Impairment ...........................................................................................................................
Currency translation .............................................................................................................
Balance at March 31, 2009 ...................................................................................................
Currency translation .............................................................................................................
Balance at March 31, 2010 ...................................................................................................
$
$
$
187,055
27,769
(107,000)
(3,080)
104,744
390
105,134
Intangible assets at March 31, 2010 are as follows:
Trademark ..................................................................
Customer relationships ...............................................
Other...........................................................................
Balance at March 31, 2010 .........................................
Intangible assets at March 31, 2009 were as follows:
Gross Carrying
Amount
$ 5,856
14,487
1,358
$ 21,701
Accumulated
Amortization
$ 481
1,996
193
$ 2,670
Net
$ 5,375
12,491
1,165
$ 19,031
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
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 $1,876,000, $998,000, and $115,000 for fiscal 2010, 2009, and 2008, respectively.
Based on the current amount of intangible assets, the estimated amortization expense for each of the succeeding five
years is expected to be $1,890,000, $1,860,000, $1,830,000, $1,810,000, and $1,780,000, respectively.
F-20
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
10. Accrued Liabilities and Other Non-current Liabilities
Consolidated accrued liabilities of the Company consisted of the following:
March 31,
2010
Accrued payroll ................................................................................................ $ 17,534
4,902
Interest payable.................................................................................................
2,301
Accrued workers compensation........................................................................
2,401
Accrued income taxes payable .........................................................................
1,169
Accrued postretirement benefit obligation .......................................................
3,665
Accrued health insurance..................................................................................
4,081
Accrued general and product liability costs......................................................
16,701
Other accrued liabilities....................................................................................
$ 52,754
2009
$ 14,568
4,790
2,525
4,048
1,159
3,177
4,010
16,166
$ 50,443
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..............................................................................
7,909
18,973
36,179
1,764
5,644
1,944
$ 72,413
$
7,360
19,232
49,052
2,272
6,504
2,461
$ 86,881
March 31,
2010
2009
11. Debt
Consolidated long-term debt of the Company consisted of the following:
Revolving Credit Facility due May 1, 2013 ..................................................... $
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,
2010
2009
$
-
6,974
147
7,121
-
8,020
224
8,244
124,855
131,976
1,155
$ 130,821
124,855
133,099
1,171
$ 131,928
The Company entered into an amended, restated and expanded revolving credit facility dated December 31,
2009. The new Revolving Credit Facility provides availability up to a maximum of $85,000,000 and has an initial
term ending May 1, 2013, which can be extended to December 31, 2013 as long as the Company’s existing Senior
Subordinated Notes are paid in full on or prior to May 1, 2013 from proceeds of permitted indebtedness with a
maturity of no earlier than January 5, 2014.
F-21
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Provided there is no default, the Company may, on a one-time basis, request an increase in the availability of
the Revolving Credit Facility by an amount not exceeding $65,000,000, subject to lender approval. The unused
portion of the Revolving Credit Facility totaled $77,097,000, net of outstanding borrowings of $0 and outstanding
letters of credit of $7,903,000, as of March 31, 2010. Interest on the revolver is payable at varying Eurodollar rates
based on LIBOR or prime plus a spread determined by the Company’s total leverage ratio amounting to 300 or 200
basis points, respectively, based on the Company’s leverage ratio at March 31, 2010. The Revolving Credit Facility
is secured by all domestic inventory, receivables, equipment, real property, subsidiary stock (limited to 65% of
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 restrictions on dividend payments, with
which the Company was in compliance as of March 31, 2010. Key financial covenants include a minimum fixed
charge coverage ratio of 1.25x, a maximum total leverage ratio, net of cash, of 3.75x through June 30, 2010 and 3.5x
thereafter, and maximum annual capital expenditures of $15,000,000 in fiscal 2010 and $18,000,000 thereafter,
excluding capital expenditures for a global ERP system.
The Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005 amounted to
$124,855,000 at March 31, 2010 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. The 8 7/8% Notes
are redeemable at the option of the Company, in whole or in part, at a price of 104.44% through October 31, 2010,
102.22% from November 1, 2010 through October 31, 2011, and 100.00% from November 1, 2011 and thereafter.
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.
The carrying amount of the Company’s revolving credit facility, notes payable to banks and other senior debt
approximate their fair values based on current market rates. The Company’s Senior Subordinated Notes, which have
a carrying value of $124,855,000 at March 31, 2010, have an approximate fair value of $126,104,000, based on
market data. The Company recorded approximately $1,069,000 of deferred financing charges related to the
December 31, 2009 amendment and restatement of its credit agreement, which are being amortized over the life of
the agreement.
(Gain) loss on bond redemptions, including discounts, premiums and the write-off of deferred financing fees,
was $0, $(244,000), and $1,794,000 in fiscal 2010, 2009 and 2008, respectively.
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 $6,974,000 and $8,020,000
as of March 31, 2010 and 2009, respectively, is included in senior debt in the consolidated balance sheets.
The principal payments scheduled to be made as of March 31, 2010 on the above debt are as follows (in $
thousands):
2011
2012
2013
2014
2015
Thereafter
1,155
1,176
1,088
125,868
1,333
1,356
F-22
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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. As of March 31, 2010, significant unsecured credit lines totaled
approximately $7,100,000, of which $800,000 was drawn.
In addition to the above facilities, our foreign subsidiaries have certain secured credit lines. As of March 31,
2010, significant secured credit lines totaled $2,000,000, of which none was drawn.
12. Pensions and Other Benefit Plans
The Company provides retirement plans, including defined benefit and defined contribution plans, and
postretirement benefit plans to certain employees. Effective March 31, 2007, the Company adopted ASC Topic 715
“Compensation – Retirement Benefits,” 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. 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 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-23
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Pension Plans
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,
2010
2009
Change in benefit obligation:
Benefit obligation at beginning of year ................................................................. $ 140,085
ASC Topic 715 measurement date adjustment......................................................
-
Acquisitions...........................................................................................................
-
Service cost............................................................................................................
3,687
Interest cost............................................................................................................
9,950
Actuarial loss (gain)...............................................................................................
22,688
Benefits paid..........................................................................................................
(8,168)
Foreign exchange rate changes..............................................................................
676
Benefit obligation at end of year ........................................................................... $ 168,918
$ 140,873
(520)
4,685
4,381
8,969
(11,139)
(6,245)
(919)
$ 140,085
Change in plan assets:
Fair value of plan assets at beginning of year........................................................ $ 91,144
ASC Topic 715 measurement date adjustment......................................................
-
Actual gain (loss) on plan assets............................................................................
30,549
Employer contribution...........................................................................................
18,026
Benefits paid..........................................................................................................
(8,168)
Settlements ............................................................................................................
-
Foreign exchange rate changes..............................................................................
585
Fair value of plan assets at end of year.................................................................. $ 132,136
$ 125,540
(1,705)
(34,933)
9,311
(6,245)
(244)
(580)
$ 91,144
Funded status ........................................................................................................ $
(36,782)
Unrecognized actuarial loss...................................................................................
47,739
Unrecognized prior service cost ............................................................................
1,251
Net amount recognized.......................................................................................... $ 12,208
$
$
(48,941)
54,334
1,956
7,349
Amounts recognized in the consolidated balance sheets are as follows:
Other assets – non current ..................................................................................... $
-
Accrued liabilities..................................................................................................
(603)
Other non-current liabilities...................................................................................
(36,179)
Deferred tax effect of accumulated other comprehensive loss ..............................
18,546
Accumulated other comprehensive loss ................................................................
30,444
Net amount recognized.......................................................................................... $ 12,208
$
$
2010
2009
707
(596)
(49,052)
22,488
33,802
7,349
March 31,
F-24
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
In fiscal 2011, an estimated net loss of $3,410,000 and prior service cost of $240,000 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:
3,687
Service costs—benefits earned during the period.................................... $
9,950
Interest cost on projected benefit obligation............................................
(7,479)
Expected return on plan assets.................................................................
4,210
Net amortization ......................................................................................
Curtailment/settlement loss .....................................................................
2,417
Net periodic pension cost ........................................................................ $ 12,785
$
$
4,381
8,969
(9,234)
1,319
457
5,892
$
$
4,386
8,277
(8,198)
2,014
80
6,559
Year Ended March 31,
2009
2010
2008
In fiscal 2010, the Company recorded a curtailment loss on the statement of operations within restructuring
charges. Refer to Note 16 for further discussion.
Information for pension plans with a projected benefit obligation in excess of plan assets is as follows:
March 31,
Projected benefit obligation................................................................................... $ 168,918
Fair value of plan assets.........................................................................................
132,136
2010
2009
$ 135,021
85,374
Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
March 31,
Accumulated benefit obligation............................................................................. $ 162,212
Fair value of plan assets.........................................................................................
132,136
2010
2009
$ 127,890
85,374
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,
2010
6.00%
7.50
2.00
2009
7.25%
7.50
2.00
2008
6.50%
7.50
3.00
The expected rates 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 .........................................................
F-25
Target
2011
70%
30
100%
March 31,
Actual
2010
60%
40
100%
2009
56%
44
100%
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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 2011.
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 approximately
$10,000,000 to its pension plans in fiscal 2011.
Information about the expected benefit payments for the Company’s defined benefit plans is as follows (in $
thousands):
2011
2012
2013
2014
2015
2016-2020
$
8,940
9,070
9,600
10,040
10,520
60,650
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,
2010
2009
Change in benefit obligation:
Benefit obligation at beginning of year .......................................................... $
ASC Topic 715 measurement date adjustment...............................................
Service cost.....................................................................................................
Interest cost.....................................................................................................
Actuarial (gain) loss .......................................................................................
Benefits paid...................................................................................................
Benefit obligation at end of year .................................................................... $
8,520
-
-
586
738
(766)
9,078
$ 10,694
238
1
587
(1,661)
(1,339)
8,520
$
Funded status ................................................................................................. $
Unrecognized actuarial loss............................................................................
Net amount recognized................................................................................... $
(9,078)
4,161
(4,917)
$
$
(8,520)
3,736
(4,784)
F-26
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Amounts recognized in the consolidated balance sheets are as follows:
Accrued liabilities........................................................................................... $
Other non-current liabilities............................................................................
Deferred tax effect of accumulated other comprehensive loss .......................
Accumulated other comprehensive loss .........................................................
Net amount recognized................................................................................... $
(1,169)
(7,909)
1,664
2,497
(4,917)
$
$
(1,159)
(7,360)
1,494
2,241
(4,784)
March 31,
2010
2009
In fiscal 2011, an estimated net loss of $344,000 for the defined benefit postretirement health care plans will be
amortized from accumulated other comprehensive loss to net periodic benefit cost. In fiscal 2010, 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................................................
Year Ended March 31,
2009
$
1
587
351
$ 939
2010
$
-
586
313
$ 899
2008
$
3
613
418
$1,034
For measurement purposes, healthcare costs are assumed to increase 8.0% in fiscal 2011, grading down over
time to 5.0% in five years. The discount rate used in determining the accumulated postretirement benefit obligation
was 6.0% and 7.25% as of March 31, 2010 and 2009, respectively.
Information about the expected benefit payments for the Company’s postretirement health benefit plans is as
follows:
2011
2012
2013
2014
2015
2016-2020
$
1,170
1,110
1,090
1,000
920
3,600
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 .................................................
$
31
515
$
(28)
(464)
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 measurement provisions related to Split Dollar Life Insurance
Arrangements contained in ASC Topic 715 and covered in paragraphs 715-60-35-177 to 35-185 (formerly under the
pre-codification standards of EITF 06-10). In accordance with ASC Topic 715-60-35-177, an employer should
recognize a liability for the postretirement benefit related to a collateral assignment split-dollar life insurance
arrangement. These provisions were applied as a change in accounting principle through a cumulative-effect
adjustment to retained earnings. The adoption of this guidance resulted in a $1,248,000 reduction to the fiscal 2009
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. The net periodic pension cost
for fiscal 2010 was $77,000 and the accrued liability at March 31, 2009 is $44,000.
F-27
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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
$340,000, $1,684,000, and $1,780,000 for the years ended March 31, 2010, 2009 and 2008, respectively. Due to the
significant economic downturn, the Company significantly reduced its contribution to the defined contribution plans
in FY 2010.
Fair Values of Plan Assets
The fair values of the Company’s defined benefit plans’ consolidated assets by asset category as of March 31
were as follows:
Asset categories:
March 31,
2010
2009
Equity securities ............................................................................................... $ 80,430
50,875
Fixed income securities ....................................................................................
831
Cash equivalents...............................................................................................
Total.................................................................................................................. $ 132,136
$ 49,645
40,515
984
$ 91,144
The fair values of our defined benefit plans’ consolidated assets were determined using the fair value
hierarchy of inputs described in Note 5. The fair values by category of inputs as of March 31, 2010 were as follows:
Quoted Prices
in Active
Markets for
Identical
Assets (Level 1)
Significant
Unobservable
Inputs
(Level 3)
Total
Asset categories:
Equity securities ......................................................................... $ 80,430
Fixed income securities ..............................................................
35,212
Cash equivalents.........................................................................
831
Total............................................................................................ $ 116,473
$
-
15,663
-
$ 15,663
$ 80,430
50,875
831
$ 132,136
Level 1 fixed income securities consist of fixed income mutual funds with quoted market prices.
Fair value of Level 3 fixed income securities at the beginning of the year was $15,603,000. During fiscal 2010
fixed income securities earned investment return of $785,000 and had disbursements, settlements, and transfers, net
of $725,000 resulting in an ending balance of $15,663,000.
13. Employee Stock Ownership Plan (ESOP)
The guidance in ASC Topic 718 "Compensation - Stock Compensation" and covered in sub-topic 718-40
"Employee Stock Ownership Plans" requires that compensation expense for ESOP shares be measured based on the
fair value of those shares when committed to be released to employees, rather than based on their original cost. Also,
dividends on those ESOP shares that have not been allocated or committed to be released to ESOP participants are
not reflected as a reduction of retained earnings. Rather, since those dividends are used for debt service, a charge to
compensation expense is recorded. Furthermore, ESOP shares that have not been allocated or committed to be
released are not considered outstanding for purposes of calculating earnings per share.
The obligation of the ESOP to repay borrowings incurred to purchase shares of the Company’s common stock
is guaranteed by the Company; the unpaid balance of such borrowings, if any, would be reflected in the consolidated
balance sheet as a liability. An amount equivalent to the cost of the collateralized common stock and representing
deferred employee benefits has been recorded as a deduction from shareholders’ equity.
F-28
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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 $408,000, $632,000, and $1,037,000 in fiscal 2010, 2009 and 2008, 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, 2010 and 2009, 623,137 and 646,329 of ESOP shares, respectively, were allocated or available
to be allocated to participants’ accounts. At March 31, 2010 and 2009, 115,778 and 144,458 of ESOP shares were
pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares at March 31, 2010 amounted to $2,300,000.
14. Earnings per Share and Stock Plans
Earnings per Share
The Company calculates earnings per share in accordance with ASC Topic 260, “Earnings per Share.” Basic
earnings per share exclude 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 178,000
common shares and 15,000 common shares, respectively, were not included in the computation of diluted loss per
share for fiscal 2010 because they were antidilutive as a result of the Company’s net loss. 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................................. $
Income (loss) from discontinued operations (net of tax) ............
Net (loss) income ....................................................................... $
(7,544) $
531
(7,013) $
(76,102) $
(2,282)
(78,384) $
46,915
(9,566)
37,349
Year Ended March 31,
2010
2009
2008
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 ..................................................
18,963
-
18,861
-
18,723
435
18,963
18,861
19,158
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note
13).
F-29
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Stock Plans
The Company records stock-based compensation in accordance with ASC Topic 718, “Compensation –
Retirement Benefits,” 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 401,821 shares remain for future grants as of March 31, 2010. 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 $1,544,000, $799,000, and $1,266,000 for fiscal 2010, 2009 and 2008,
respectively. Stock compensation expense is included in cost of goods sold, selling, and general and administrative
expense. The Company recognizes 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. ASC Topic 718 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 2010. 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, 2010, no options have been granted to non-employees. Options granted under the Non-Qualified and
Incentive Plans generally 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-30
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
A summary of option transactions during each of the three fiscal years in the period ended March 31, 2010 is
as follows:
Shares
Outstanding at April 1, 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
160,700
Granted ..........................................
Exercised .......................................
Cancelled .......................................
(45,500)
(194,596)
Outstanding at March 31, 2010 .......... 646,259
Exercisable at March 31, 2010 ........... 444,663
$
$
Weighted-average
Exercise Price
12.28
32.85
9.81
5.46
12.91
27.42
9.07
22.69
13.51
13.73
6.40
21.11
12.02
10.27
$
$
$
Weighted-average
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic
Value
5.3
3.6
$ 3,341
$ 3,004
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, 2010. The aggregate intrinsic value of outstanding options as of March
31, 2010 is calculated as the difference between the exercise price of the underlying options and the market price of
our common shares for the 521,018 options that were in-the-money at that date. The aggregate intrinsic value of
exercisable options as of March 31, 2010 is calculated as the difference between the exercise price of the underlying
options and the market price of our common shares for the 363,350 exercisable options that were in-the-money at
that date. The Company's closing stock price was $15.87 as of March 31, 2010. The total intrinsic value of stock
options exercised was $324,000, $773,000, and $2,842,000 during fiscal 2010, 2009 and 2008, respectively. As of
March 31, 2010, there are 96,615 options available for future grants under the two stock option plans.
The fair value of shares that vested was $12.32, $4.20, and $5.14 during fiscal 2010, 2009 and 2008,
respectively.
Cash received from option exercises under all share-based payment arrangements during fiscal 2010 was
approximately $292,000. 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, 2010, $718,000 of unrecognized compensation cost related to non-vested stock options is
expected to be recognized over a weighted-average period of approximately 3 years.
Exercise prices for options outstanding as of March 31, 2010, ranged from $5.46 to $28.45. The following
table provides certain information with respect to stock options outstanding at March 31, 2010:
Range of Exercise Prices
Up to $10.00 .......................................
$10.01 to $20.00. .................................
$20.01 to $30.00 ..................................
Stock Options
Outstanding
351,850
189,168
105,241
646,259
Weighted-average
Exercise Price
7.46
$
14.07
23.60
12.02
$
Weighted-average
Remaining
Contractual Life
2.9
8.8
7.0
5.3
F-31
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
The following table provides certain information with respect to stock options exercisable at March 31, 2010:
Range of Exercise Prices
Up to $10.00 .........................................................................
$10.01 to $20.00. ...................................................................
$20.01 to $30.00 ....................................................................
Stock Options
Outstanding
351,850
19,000
73,813
444,663
$
Weighted-average
Exercise Price
7.46
14.79
22.49
10.27
$
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 $8.18, $14.77, and $18.48 for options granted during
fiscal 2010, 2009 and 2008, respectively. The following table provides the weighted-average assumptions used to
value stock options granted during fiscal 2010, 2009 and 2008:
Year Ended
Year Ended
March 31, 2010 March 31, 2009 March 31, 2008
Year Ended
Assumptions:
Risk-free interest rate ...................................
Dividend yield—Incentive Plan ...................
Volatility factor ............................................
Expected life—Incentive Plan......................
1.97%
0.0%
0.591
5.5 years
2.58%
0.0%
0.567
6.0 years
4.92%
0.0%
0.571
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.
F-32
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Restricted Stock Units
The Company granted restricted stock units under the LTIP during fiscal 2010, 2009 and 2008 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, 2010 is
as follows:
Unvested at April 1, 2007 .....................................................................
Granted.............................................................................................
Vested ..............................................................................................
Unvested at March 31, 2008 .................................................................
Granted.............................................................................................
Vested ..............................................................................................
Forfeited...........................................................................................
Unvested at March 31, 2009 .................................................................
Granted.............................................................................................
Vested ..............................................................................................
Forfeited...........................................................................................
Unvested at March 31, 2010 .................................................................
Weighted-average
Grant Date
Fair Value
Shares
7,200
7,842
(4,521)
10,521
54,916
(5,260)
(25,199)
34,978
78,647
(8,600)
(5,434)
99,591
$
$
$
$
19.17
25.80
19.54
23.96
26.02
23.96
28.45
23.95
13.30
22.40
14.55
16.21
Total unrecognized compensation cost related to unvested restricted stock units as of March 31, 2010 is
$1,215,000 and is expected to be recognized over a weighted average period of 3 years. The fair value of restricted
stock units that vested during the year ended March 31, 2010 and 2009 was $122,000 and $129,000, respectively.
Performance Shares
The Company granted performance shares under the LTIP during fiscal 2010, 2009, and 2008. 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). The Company 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, 2010 March 31, 2009 March 31, 2008
Year Ended
Assumptions:
Risk-free interest rate ....................................................
Dividend yield...............................................................
Volatility factor .............................................................
Expected life..................................................................
1.21%
0.0%
0.641
2.87 years
2.50%
0.0%
0.479
2.87 years
4.75 %
0.0 %
0.481
2.86 years
F-33
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
A summary of the performance shares transactions during each of the three fiscal years in the period ended
March 31, 2010 is as follows:
Unvested at April 1, 2007
Granted
Unvested at March 31, 2008...........................................................
Granted ......................................................................................
Forfeited ....................................................................................
Unvested at March 31, 2009...........................................................
Granted ......................................................................................
Forfeited ....................................................................................
Vested ........................................................................................
Unvested at March 31, 2010...........................................................
Shares
-
34,457
34,457
20,669
(10,047)
45,079
64,614
(20,059)
(8,062)
81,572
Weighted-average
Grant Date Fair Value
-
$ 19.40
19.40
28.07
22.60
22.66
17.12
19.40
19.40
19.40
$
Total unrecognized compensation costs related to the unvested performance share awards as of March 31, 2010
was $995,000 and is expected be recognized over a weighted average period of 1.5 years. The fair value of
performance shares that vested during the year ended March 31, 2010 and 2009 was $127,000 and $0, respectively.
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, 2010, 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 2010. As of March 31, 2010, there are 2,000 shares
of restricted stock outstanding with a weighted average fair value grant price of $27.10.
Directors Stock
During fiscal 2010, 2009 and 2008, a total of 21,536, 12,436, and 7,601 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 $13.00, $20.96, and $25.80 for fiscal 2010, 2009 and
2008, respectively. The expense related to the shares for fiscal 2010, 2009 and 2008 was $280,000, $260,000, and
$196,000, 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 0.41% to 4.72% as of March 31, 2010. The aggregate amount of
undiscounted reserves and discount amount was $24,535,000 and $1,481,000, respectively, as of March 31, 2010.
Payments over each of the next five years for the portion of asbestos reserves that the Company discounts are
expected to be $200,000 per year and $3,400,000 thereafter. The liability for accrued general and product liability
costs are funded by investments in marketable securities (see Notes 2 and 7).
F-34
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
The following table provides a reconciliation of the beginning and ending balances for accrued general and
product liability:
2010
$ 23,242
Accrued general and product liability, beginning of year........
5,061
Add provision for claims .........................................................
Deduct payments for claims ....................................................
(5,249)
Accrued general and product liability, end of year.................. $ 23,054
2009
$ 20,771
4,052
(1,581)
$ 23,242
2008
$ 21,078
2,201
(2,508)
$ 20,771
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
2010.
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
2011.
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, 2028 and March 31, 2040 to range between $7,400,000 and $17,800,000 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 $11,000,000
which has been reflected as a liability in the consolidated financial statements as of March 31, 2010. 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 $525,000 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.
F-35
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
16. Restructuring Charges
During fiscal 2010, the Company continued its business reorganization plan. As part of that plan, the Company
consolidated its North American sales force and offered certain of its employees an incentive to voluntarily retire
early. Charges related to the early retirement program were approximately $5,732,000 and consist of two benefits: a
paid leave of absence and an enhanced pension benefit. The payments for the paid leave of absence are being made
to the employees in installments on their regular pay dates. Charges for the enhanced pension benefit of $2,012,000
are recorded in long-term pension liabilities. Long-term pension liabilities are included in other non-current
liabilities on the condensed consolidated balance sheets.
Furthermore, during fiscal 2010, as part of the business reorganization plan, the Company initiated strategic
consolidation of its North American hoist and rigging operations. The process includes the closure of two
manufacturing facilities and the significant downsizing of a third facility. The closures will result in a reduction of
approximately 500,000 square feet of manufacturing space and generation of annual savings estimated at
approximately $13,000,000 to $15,000,000. The Company expects to record approximately $3,500,000 in additional
restructuring charges in fiscal 2011. Rationalization of North American hoist and rigging operations and the
significant downsizing of the third facility resulted in $1,835,000 of non-cash fixed asset impairment charges,
$3,209,000 of other facility related costs, $5,325,000 in expense for severance costs related to salaried and union
workforce reductions, and $418,000 of pension plan curtailment charges recognized in fiscal 2010.
Restructuring reserves were $2,755,000 as of March 31, 2010, consisting primarily of accrued severance costs.
The majority of the severance costs will be paid during fiscal 2011.
During fiscal 2009, the Company incurred 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. During fiscal 2008, the Company recorded restructuring costs of $836,000 for
facility demolition costs and severance.
The following provides a reconciliation of the activity related to restructuring reserves:
$
$
-
105
(105)
-
1,823
(521)
Employee Facility
599
$
731
(1,272)
58
98
(156)
-
5,044
(3,209)
$ 1,302
11,475
$
$
(7,592)
(2,430)
-
(1,835)
-
$ 2,755
$
-
Total
$
$
599
836
(1,377)
58
1,921
(677)
$ 1,302
16,519
(10,801)
(2,430)
(1,835)
$ 2,755
Reserve at April 1, 2007 .................................................................................
Fiscal 2008 restructuring charges ...................................................................
Cash payments................................................................................................
Reserve at March 31, 2008 .............................................................................
Fiscal 2009 restructuring charges ...................................................................
Cash payments................................................................................................
Reserve at March 31, 2009 .............................................................................
Fiscal 2010 restructuring charges ...................................................................
Cash payments................................................................................................
Reclassification of long-term pension liability...............................................
Fixed asset impairment...................................................................................
Reserve at March 31, 2010 .............................................................................
F-36
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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% .................................................................................. $
State income taxes net of federal benefit ...................................................
Foreign taxes less than statutory provision................................................
Permanent items ........................................................................................
Goodwill impairment.................................................................................
Valuation allowance ..................................................................................
Other..........................................................................................................
Actual tax (benefit) provision.................................................................... $
The provision for income tax (benefit) expense consisted of the following:
$
Year Ended March 31,
2009
(20,335)
309
(1,136)
137
37,450
-
1,576
$ 18,001
2008
$ 24,407
1,238
(1,095)
315
-
(1,000)
(1,046)
$ 22,819
2010
(4,511)
(238)
(1,081)
229
-
-
256
(5,345)
Year Ended March 31,
2009
2010
2008
Current income tax (benefit) expense:
United States Federal......................................................................... $
State taxes..........................................................................................
Foreign...............................................................................................
-
913
2,417
$ 13,963
291
5,447
$
853
1,904
5,437
Deferred income tax (benefit) expense:
United States......................................................................................
Foreign...............................................................................................
$
(7,745)
(930)
(5,345)
(1,076)
(624)
$ 18,001
14,304
321
$ 22,819
The Company applies the liability method of accounting for income taxes as required by ASC Topic 740,
“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,
2010
2009
12,184
3,703
12,163
1,674
9,035
1,916
7,250
(1,609)
46,316
(2,355)
(1,521)
(5,167)
(9,043)
37,273
$
$
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
F-37
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
The valuation allowance includes $545,000 and $530,000 related to pre-acquisition foreign net operating
losses and $1,064,000 related to state net operating losses in the United States at both March 31, 2010 and 2009. The
increase in the foreign valuation allowance is due to exchange rate fluctuations. 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 2014 through 2030.
The United States Federal net operating losses have expiration dates ranging from 2029 to 2030.
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,
2010
$ 6,149
36,768
(5,644)
$ 37,273
2009
$ 7,346
32,521
(6,504)
$ 33,363
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 income (loss) of
$8,769,000, $(16,119,000), and $21,715,000 for the years ended March 31, 2010, 2009, and 2008, respectively. Income
(loss) from discontinued operations reported in the statements of operations is net of tax expense (benefit) of $326,000,
$(14,442,000), and $220,000 for the years ended March 31, 2010, 2009, and 2008, respectively. As of March 31, 2010,
the Company had unrecognized deferred tax liabilities related to approximately $31,000,000 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 2,500 and 24,375 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, 2010 and 2009,
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 $5,600 and $274,000 in 2010 and 2009, respectively.
This tax benefit has also been recognized in the consolidated balance sheet as an increase in deferred tax assets.
On April 1, 2007, the Company adopted the provisions of ASC Topic 740, “Income Taxes, relating to accounting
for uncertainty in income taxes,” formerly referred to as Financial Accounting Standards 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, which clarifies the accounting for uncertainty in income taxes
recognized. ASC Topic 740 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 ............................................................................................................ $
2010
2009
3,546
20
260
(33)
(90)
(126)
3,577
$
$
2,447
12
1,327
(116)
-
(124)
3,546
F-38
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
The Company had $130,000 and $123,000 accrued for the payment of interest and penalties at March 31, 2010 and
2009, 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, 2010 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 has completed an examination of the Company’s U.S. income tax returns for
2007 and 2008, resulting in a reduction of AMT credit carry forwards of $256,000. Current examinations include an IRS
audit for one of the Company’s subsidiaries for its 2009 return, a German audit of 2005 through 2007, and various state
audits.
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, 2011.
18. Rental Expense and Lease Commitments
Rental expense for the years ended March 31, 2010, 2009, and 2008 was $5,463,000, $5,695,000, and $5,560,000,
respectively. The following amounts represent future minimum payment commitments as of March 31, 2010 under non-
cancelable operating leases extending beyond one year:
Year Ended March 31,
2011.......................................................................
2012.......................................................................
2013.......................................................................
2014.......................................................................
2015 and thereafter ................................................
Real Property
1,639
$
501
333
316
16
$ 2,805
Vehicles/Equipment
Total
$
1,779
1,240
529
317
194
$ 4,059
$
3,418
1,741
862
633
210
$ 6,864
Total
F-39
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
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, 2010:
As of March 31, 2010:
Current assets:
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
Cash........................................................... $ 33,081
38,316
Trade accounts receivable .........................
26,023
Inventories .................................................
3,432
Prepaid expenses .......................................
100,852
Total current assets ................................
27,330
Net property, plant, and equipment ...................
41,013
Goodwill and other intangibles, net...................
(79,763)
Intercompany balances ......................................
37,319
Other non-current assets ....................................
248,915
Investment in subsidiaries
Total assets ............................................ $ 375,666
24
64
16,057
874
17,019
11,998
31,028
153,190
1,255
—
$ 214,490
$
$ 30,863
31,838
39,742
11,056
113,499
17,778
52,124
(76,594)
31,630
—
$ 138,437
—
—
(2,000)
652
(1,348)
—
—
3,167
—
$ 63,968
70,218
79,822
16,014
230,022
57,106
124,165
—
70,204
—
$ (247,096) $ 481,497
(248,915)
Current liabilities............................................... $ 38,157
124,855
Long-term debt, less current portion .................
25,376
Other non-current liabilities ..............................
188,388
Total liabilities.......................................
187,278
Shareholders’ equity..........................................
$ 375,666
liabilities and shareholders’
.......................................................
Total
equity
$ 13,176
2,475
9,083
24,734
189,756
$ 214,490
$ 37,833
3,491
37,954
79,278
59,159
$ 138,437
$
1,819
—
—
1,819
$ 90,985
130,821
72,413
294,219
187,278
$ (247,096) $ 481,497
(248,915)
For the Year Ended March 31, 2010:
Net sales ............................................................ $ 193,784
158,571
Cost of products sold.........................................
35,213
Gross profit........................................................
41,397
Selling, general and administrative expenses ....
15,316
Restructuring charges ........................................
119
Amortization of intangibles...............................
(21,619)
(Loss) income from operations..........................
11,865
Interest and debt expense...................................
Other (income) and expense, net .......................
(1,893)
(Loss) income from continuing operations
before income
(31,591)
tax (benefit) expense......................................
Income tax (benefit) expense.............................
Equity in income from continuing operations
of subsidiaries……………................................
(Loss) income from continuous operations .......
Income from discontinued operations ...............
Net (loss) income............................................... $
$
$ 117,854
94,906
22,948
13,651
—
3
9,294
493
(1,033)
$ 192,326
135,245
57,081
46,308
1,203
1,754
7,816
867
(1,222)
(27,781) $ 476,183
360,244
(28,478)
115,939
697
101,356
—
16,519
—
1,876
—
(3,812)
697
13,225
—
(4,148)
—
9,834
8,171
1,687
697
192
(12,889)
(5,345)
(9,963)
2,739
14,084
—
7,095
—
7,095
—
6,484
—
6,484
$
(7,544)
531
(7,013) $
(14,084)
(13,579)
—
—
(13,579) $
$
(7,544)
531
(7,013)
F-40
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
28,418
28,418
$
$
(665)
(665)
16,198
16,198
$
(14,084)
(14,084)
$
29,867
29,867
For the Year Ended March 31, 2010:
Operating activities:
Net cash provided by operating activities from
continuing operations .....................................................
Cash provided by operating activities...................................
Investing activities:
Purchases of marketable securities, net ................................
Capital expenditures..............................................................
Investment in subsidiaries.....................................................
Purchases of businesses, net of cash
Net cash used by investing activities from continuing
(414)
(4,933)
(14,084)
—
—
(1,674)
—
2,407
operations........................................................................
(19,431)
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 ................................................................
Deferred financing costs incurred.........................................
Other......................................................................................
Net cash used by financing activities from continuing
531
(18,900)
291
—
—
(1,258)
390
operations........................................................................
(577)
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 .............................
$
—
(577)
—
8,941
24,140
33,081
$
733
—
733
—
—
(130)
—
69
(61)
—
(61)
(13)
(6)
30
24
$
As of and for the year ended March 31, 2009:
2,236
(638)
—
1,135
2,733
—
2,733
—
(3,946)
(834)
—
—
(4,780)
—
(4,780)
1,646
15,797
15,066
30,863
$
—
—
14,084
—
14,084
—
14,084
—
—
—
—
—
—
—
—
—
—
—
—
$
1,822
(7,245)
—
3,542
(1,881)
531
(1,350)
291
(3,946)
(964)
(1,258)
459
(5,418)
—
(5,418)
1,633
24,732
39,236
63,968
As of March 31, 2009
Current assets:
Cash and cash equivalents
Trade accounts receivable
Inventories
Other current assets
Total current assets
Property, plant, and equipment, net
Goodwill and other intangibles, net
Intercompany
Other assets
Investment in subsidiaries
Total assets
Current liabilities
Long-term debt, less current portion
Other non-current liabilities
Total liabilities
Shareholders' equity
Total liabilities and shareholders' equity
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
$
$
$
$
24,115
46,358
33,268
8,480
112,221
29,001
41,016
(58,739)
36,099
222,102
381,700
33,767
124,855
41,224
199,846
181,854
381,700
$
$
$
$
30
37
21,113
1,060
22,240
11,995
31,031
140,495
4,659
—
210,420
17,162
2,597
13,895
33,654
176,766
210,420
$
$
$
$
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
$
$
$
$
—
—
(2,697)
844
(1,853)
—
—
1,992
—
(222,102)
(221,963)
139
—
—
139
(222,102)
(221,963)
$
$
$
$
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
F-41
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
Parent
Guarantors
Non
Guarantors
Eliminations
Consolidated
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) ................................................
Equity in (loss) income from continuing operations of
subsidiaries………................................................................
(Loss) income from continuous operations ..........................
Loss from discontinued operations.......................................
Equity in (loss) income from discontinued operations of
subsidiaries (net of tax)……….............................................
Net (loss) income .................................................................. $
$
288,928
217,628
71,300
46,242
1,367
48,000
117
(24,426)
10,793
(4,833)
(30,386)
6,730
$
$
162,935
124,573
38,362
18,612
554
26,000
3
(6,807)
1,497
(1,230)
(7,074)
7,979
197,200
132,829
64,371
45,487
—
33,000
878
(14,994)
858
4,457
(20,309)
3,418
(38,986)
—
—
(76,102)
(627)
(15,053)
—
(23,727)
(1,655)
(42,355)
(42,023)
(332)
—
—
—
—
(332)
—
—
(332)
(126)
38,986
38,780
—
$
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)
(1,655)
(78,384)
—
$
(15,053)
—
$
(25,382)
$
1,655
40,435
—
$
(78,384)
For the Year Ended March 31, 2009:
Operating activities:
Net cash provided by operating activities from
continuing operations .....................................................
$
(20,482)
$
628
$
43,895
$
38,986
$
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……………………
Investment in subsidiaries.....................................................
Net cash used by investing activities from continuing
(2,233)
(22,715)
—
(7,461)
—
—
40,641
operations........................................................................
33,180
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
33,711
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
$
$
—
628
—
(1,910)
1,593
—
—
(317)
—
(317)
—
—
(191)
—
(191)
—
(191)
251
371
(341)
30
$
(2,218)
41,677
(2,605)
(2,874)
—
(52,779)
—
1,655
40,641
—
—
—
—
(40,641)
(2,796)
60,231
(2,605)
(12,245)
1,593
(52,779)
—
(58,258)
(40,641)
(66,036)
—
(58,258)
—
(2,138)
(2,096)
—
(4,234)
579
(3,655)
(9,208)
(29,444)
44,535
15,091
$
—
(40,641)
—
—
—
—
—
—
—
—
—
—
—
$
531
(65,505)
421
(2,138)
(6,987)
789
(7,915)
(14,612)
(22,527)
(8,957)
(36,758)
75,994
39,236
F-42
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
For the year ended March 31, 2008:
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) ................................................
from continuing operations of
Equity
subsidiaries………................................................................
Income (loss) from continuous operations ...........................
Income (loss) from discontinued operations ........................
Net income (loss) .................................................................. $
income
in
$
302,676
219,366
83,310
49,834
836
112
32,528
9,918
641
21,969
6,068
$
176,901
129,575
47,326
18,043
—
3
29,280
3,554
(643)
26,369
11,080
$
155,609
100,465
55,144
36,007
—
—
19,137
90
(2,554)
21,601
5,759
20,891
—
—
36,792
557
37,349
$
15,289
—
15,289
$
15,842
(10,123)
5,719
$
(41,400)
(41,195)
(205)
—
—
—
(205)
—
—
(205)
(88)
(20,891)
(21,008)
—
(21,008)
$
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 .....................................................
$
78,528
$
(1,483)
$
14,741
$
(31,013)
$
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 .....
Investment in subsidiaries.....................................................
Net cash (used) provided by investing activities from
(10,123)
68,405
—
(7,228)
—
(20,891)
continuing operations .....................................................
(28,119)
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
(27,562)
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
10,123
(20,890)
—
—
—
20,891
20,891
—
20,891
(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
18,366
31,800
$
$
(1,162)
(341)
$
31,451
44,535
$
F-43
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
20. Business Segment Information
ASC Topic 280, “Segment Reporting,” 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. Fiscal 2008
financial information reflects the financial position and results of operations as one segment. As part of the
organizational restructuring announced in response to adverse market conditions, the Company has reevaluated its
reportable segments and continues to believe that it has only one reportable operating segment.
Financial information relating to the Company’s operations by geographic area is as follows:
Year Ended March 31,
2009
2008
2010
Net sales:
United States................................................................................................. $ 291,564 $ 420,498 $ 447,977
Europe ..........................................................................................................
106,503
18,672
Canada
Other.............................................................................................................
20,634
Total ............................................................................................................. $ 476,183 $ 606,708 $ 593,786
141,595
15,052
29,563
149,872
12,081
22,666
Year Ended March 31,
2009
2008
2010
Total assets:
United States................................................................................................. $ 302,210 $ 321,656 $ 399,462
Europe ..........................................................................................................
139,360
Canada..........................................................................................................
15,464
Other.............................................................................................................
13,414
Assets of continuing operations....................................................................
567,700
Assets of discontinued operations ................................................................
22,335
Total ............................................................................................................. $ 481,497 $ 491,664 $ 590,035
134,027
8,422
27,559
491,664
-
139,064
13,943
26,280
481,497
-
Year Ended March 31,
2009
2008
2010
Long-lived assets:
United States................................................................................................. $ 111,369 $ 113,043 $ 184,792
Europe ..........................................................................................................
52,564
Other.............................................................................................................
3,440
Total ............................................................................................................. $ 181,271 $ 187,182 $ 240,796
Note: Long-lived assets include goodwill, other intangibles and other assets
66,760
7,379
64,458
5,444
Sales by major product group are as follows:
2008
Hoists............................................................................................................ $ 252,824
$ 321,778
Chain and forged attachments ......................................................................
142,966
Industrial cranes ...........................................................................................
63,327
Other.............................................................................................................
65,715
Total ............................................................................................................. $ 476,183 $ 606,708 $ 593,786
132,492
59,868
82,526
95,862
41,170
86,327
2010
Year Ended March 31,
2009
$ 331,822
F-44
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
21. Selected Quarterly Financial Data (Unaudited)
Below is selected quarterly financial data for fiscal 2010 and 2009:
Three Months Ended
Net sales ...................................................
Gross profit...............................................
(Loss) income from operations.................
Net (loss) income......................................
June 30,
2009
$ 119,008
29,430
(1,786)
(2,398) $
$
$
September 30,
2009
115,234
28,051
543
(2,731) $
$
December 31,
2009
118,971
March 31,
2010
$ 122,970
31,633
(26)
460
26,825
(2,543)
(2,344) $
Net (loss) income per share – basic ..........
$
(0.13)
$
(0.14)
$
(0.12)
$
0.02
Net (loss) income per share – diluted .......
$
(0.13)
$
(0.14)
$
(0.12)
$
0.02
For fiscal 2009, the Company’s quarterly reporting periods, with the exception of the fourth quarter, ended on
the Sunday closest to the end of the calendar quarter.
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)
Note: The per-share net income (loss) for the four quarters may not equal the per share net loss for the year due to
rounding).
Fiscal 2009 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 were deductible for tax
purposes.
22. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss is as follows:
Net unrealized investment gain (loss) – 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 – net of tax ..................
Foreign currency translation adjustment – net of tax.........................................
Derivatives qualifying as hedges – net of tax ....................................................
Accumulated other comprehensive loss ............................................................
$
$
F-45
March 31,
2010
1,708
(31,112)
(2,497)
(443)
4,076
(58)
(28,326)
2009
$
(317)
(34,336)
(2,241)
(638)
(713)
-
$ (38,245)
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
The deferred taxes associated with the items included in accumulated other comprehensive loss were
$19,291,000 and $24,154,000, for 2010 and 2009, 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 ASC Topic 740, “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 are as follows (all items shown net of tax):
Year Ended March 31,
2009
2008
2010
Net unrealized investment (loss) gain at beginning of year.................. $
Unrealized holdings gain (loss) arising during the period ................
Reclassification adjustments for (gain) loss included in earnings ....
Net change in unrealized gain (loss) on investments............................
Net unrealized investment gain (loss) at end of year............................ $
(317) $
2,393
(368)
2,025
1,708 $
(740) $
(3,584)
4,007
423
(317) $
22
(674)
(88)
(762)
(740)
23. Effects of New Accounting Pronouncements
Effective July 1, 2009, the Company adopted ASC Topic 105-10, “Generally Accepted Accounting Principles
– Overall” (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the
“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S.
GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The
Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-
SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new
standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will
issue Accounting Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in their own
right. ASUs will serve only to update the Codification, provide background information about the guidance and
provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance
throughout this document have been updated for the Codification.
On June 30, 2009 the Company adopted the provisions of ASC Topic 855 “Subsequent Events” which
establishes principles and requirements for subsequent events. These provisions set forth the period after the balance
sheet date during which management shall evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, circumstances under which an entity shall recognize events or transactions
occurring after the balance sheet date, as well as the disclosures that an entity shall make about events or
transactions that occurred after the balance sheet date. The adoption of these provisions did not have a material
impact on the Company’s consolidated financial position or results of operations. The Company made no significant
changes to its condensed consolidated financial statements as a result of its subsequent events evaluation.
F-46
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
On April 1, 2009, the Company adopted the additional guidance issued under ASC Topic 820 through the
issuance of FSP Statement of Financial Accounting Standards (“SFAS”) No. 157-4, “Determining Fair Value When
the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly” (“FSP SFAS 157-4”). FSP SFAS 157-4 amends ASC Topic 820 to provide
additional guidance on estimating fair value when the volume and level of activity for an asset or liability have
significantly decreased in relation to normal market activity for the asset or liability. The FSP also provides
additional guidance on circumstances that may indicate that a transaction is not orderly, and requires additional
disclosures about fair value measurements in annual and interim reporting periods. FSP SFAS No. 157-4 also
supersedes FSP SFAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is
Not Active.” Disclosures required by this codification update are included in Notes 5 and 11.
On April 1, 2009, the Company adopted the additional guidance issued under ASC Topic 320 and ASC Topic
325 through the issuance of FSP SFAS No. 115-2 and SFAS No. 124-2, “Recognition and Presentation of Other-
Than-Temporary Impairments” (“FSP SFAS 115-2 / 124-2”). This FSP extends existing disclosure requirements
about debt and equity securities to interim reporting periods as well as provides new disclosure requirements. FSP
SFAS 115-2 / 124-2 also provides new guidance on the recognition and presentation of an other-than-temporary
impairment for debt securities classified as available for sale or held to maturity. Equity securities are excluded from
the scope the FSP’s recognition and measurement provisions. Refer to Note 6 for disclosures required as a result of
the adoption of this codification update.
On April 1, 2009, the Company adopted additional guidance issued under ASC Topic 825 “Financial
Instruments” through the issuance of FSP SFAS No. 107-1, “Interim Disclosures about Fair Value of Financial
Instruments” (“FSP SFAS 107-1”) which requires disclosures about fair value of financial instruments in financial
statements for interim reporting periods and in annual financial statements of publicly-traded companies. These
provisions also require entities to disclose the method(s) and significant assumptions used to estimate the fair value
of financial instruments in financial statements on an interim and annual basis and to highlight any changes from
prior periods. The adoption of these provisions did not have a material impact on the Company’s consolidated
financial position, results of operations or cash flows. Disclosures required by this codification update are included
in Notes 5 and 11.
On April 1, 2009, the Company adopted the additional guidance issued under ASC Topic 815 “Derivatives and
Hedging” through the issuance of SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities
– an amendment of FASB Statement No. 133” which requires additional disclosures about the objectives of
derivative instruments and hedging activities, the method of accounting for such instruments and a tabular disclosure
of the effects of such instruments and related hedged items on the Company’s financial position, financial
performance, and cash flows. The adoption of these provisions did not have a material impact on the Company’s
consolidated financial position, results of operations or cash flows.
On April 1, 2008, the Company adopted the additional guidance issued under ASC Topic 715 “Compensation –
Retirement Benefits” through the issuance 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 this codification update, an employer should recognize a liability for the postretirement benefit related to a
collateral assignment split-dollar life insurance arrangement. 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 adoption of EITF 06-10 did not have a significant impact on the Company’s financial position,
results of operations or cash flows, basic or diluted per share amounts.
F-47
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(tabular amounts in thousands, except share data)
On April 1, 2009, the Company adopted the provisions of ASC Topic 805 “Business Combinations” which
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. The Company adopted these provisions effective April
1, 2009 for future acquisitions and for deferred tax adjustments related to acquisitions completed before its effective
date.
In December 2008, the FASB issued additional guidance under ASC Topic 715 to require additional
disclosures about assets held in an employer’s defined benefit pension or other postretirement plan. This 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 requires disclosure of
the level within the fair value hierarchy in which each major category of plan assets falls, using the guidance in ASC
Topic 820. This requirement is applicable for fiscal years ending after December 15, 2009. The Company will
comply with these disclosure provisions after its effective date. The Company does not expect the adoption of this
requirement to have a material impact on its consolidated financial position, results of operations or cash flows.
F-48
COLUMBUS McKINNON CORPORATION
SCHEDULE II—Valuation and qualifying accounts
March 31, 2010, 2009 and 2008
Dollars in thousands
Description
Year ended March 31, 2010:
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
$ 5,338
8,624
1,594
$ 15,556
$
553
1,548
—
$ 2,101
$ —
—
15
$ 15
$ 1,651
1,799
—
$ 3,450
(1) $ 4,240
8,373
(2)
1,609
$ 14,222
Accrued general and product liability costs $ 23,242
$
5,061
$ —
$ 5,249
(3) $ 23,054
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:
$ 3,583
8,735
1,064
$ 13,382
$
2,447
535
—
$ 2,982
$ 370 (4) $ 1,062
1,290
—
$ 2,352
644 (4)
530 (4)
$ 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
________
(1) Uncollectible accounts written off, net of recoveries
(2) Obsolete inventory disposals
(3) Insurance claims and expenses paid
(4) Reserves at date of acquisition of subsidiary
F-49
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, 2010, 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, 2010. There were no
changes in our internal controls or in other factors during our fourth quarter ended March 31, 2010.
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, 2010 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, 2010.
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2010 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.
32
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Columbus McKinnon Corporation
We have audited Columbus McKinnon Corporation’s internal control over financial reporting as of March 31, 2010, 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.
In our opinion, Columbus McKinnon Corporation maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2010, 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, 2010 and 2009, and the related consolidated
statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2010 of
Columbus McKinnon Corporation and our report dated May 28, 2010 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
May 28, 2010
Item 9B.
Other Information
None.
33
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, 2010 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, 2010 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, 2010
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, 2010 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, 2010 and upon the filing of such Proxy Statement, is incorporated by reference herein.
34
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 Ernst & Young LLP, Independent Registered Public Accounting Firm
Consolidated balance sheets - March 31, 2010 and 2009
Consolidated statements of operations – Years ended March 31, 2010, 2009, and 2008
Page No.
F-2
F-3
F-4
Consolidated statements of shareholders’ equity – Years ended March 31, 2010, 2009, and
2008
F-5
Consolidated statements of cash flows – Years ended March 31, 2010, 2009 , and 2008
F-6
Notes to consolidated financial statements
F-7 to F-48
(2)
Financial Statement Schedule:
Page No.
Schedule II - Valuation and qualifying accounts
F-49
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).
35
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).
#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
36
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
(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).
37
#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).
#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).
38
#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).
#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
39
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
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).
40
*#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 Ernst & Young LLP, Independent Registered Public Accounting Firm.
*31.1 Certification of the principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended.
*31.2 Certification of the principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of
1934, as amended.
*32.1 Certification of the principal executive officer and the principal financial officer pursuant to Rule 13a-14(b)
of the Securities Exchange Act of 1934, as amended and 18 U.S.C. Section 1350, as adopted by pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. The information contained in this exhibit shall not be
deemed filed with the Securities and Exchange Commission nor incorporated by reference in any
registration statement foiled by the Registrant under the Securities Act of 1933, as amended.
_________________
* Filed herewith
# Indicates a Management contract or compensation plan or arrangement
41
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
SIGNATURES
its behalf by the undersigned, thereunto duly authorized.
Date: May 28, 2010
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)
Date
May 28, 2010
/S/ KAREN L. HOWARD
____________________________________
Karen L. Howard
/S/ JOSEPH J. MALIEKEL
____________________________________
Joseph J. Maliekel
/S/ ERNEST R. VEREBELYI
____________________________________
Ernest R. Verebelyi
/S/ RICHARD H. FLEMING
____________________________________
Richard H. Fleming
Vice President – Finance and Chief Financial Officer
May 28, 2010
(Principal Financial Officer)
Corporate Controller and Chief Accounting Officer
May 28, 2010
Chairman of the Board of Directors
May 28, 2010
Director
May 28, 2010
/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
42
May 28, 2010
May 28, 2010
May 28, 2010
May 28, 2010
May 28, 2010
May 28, 2010
Exhibit 21.1
COLUMBUS McKINNON CORPORATION
SUBSIDIARIES
(as of March 31, 2010)
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)
43
Exhibit 23.1
Consent of Ernst & Young LLP, 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 May 28, 2010 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, 2010.
/s/ Ernst & Young LLP
Buffalo, New York
May 28, 2010
44
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: May 28, 2010
/S/ TIMOTHY T. TEVENS
Timothy T. Tevens
Chief Executive Officer
45
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: May 28, 2010
/S/ KAREN L. HOWARD
Karen L. Howard
Chief Financial Officer
46
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, 2010, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934 and that information contained in the such Annual Report on Form 10-K fairly presents, in all material respects, the
financial condition and result of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be
retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: May 28, 2010
/S/ TIMOTHY T. TEVENS
Timothy T. Tevens
Chief Executive Officer
/S/ KAREN L. HOWARD
Karen L. Howard
Chief Financial Officer
47
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Executive Committee
Board of Directors
Timothy T. Tevens
President and Chief Executive Officer
Mr. Tevens was elected President, Chief Executive Officer and a Director of
the Company in May 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.
Ivo Celi
Managing Director – Columbus McKinnon EMEA (Europe, Middle East & Africa)
Dr. Celi joined the Company in January 2010. Prior to joining the Company,
Dr. Celi served 13 years as Senior Vice President – Business Unit Diamond
Systems with Hilti AG, one of the world’s leading manufacturers of power tools
for the professional construction and building maintenance markets.
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 and Services, 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.
Eric Woon
Managing Director – Asia Pacific
Named Managing Director – Asia Pacific and Vice President of Columbus
McKinnon Asia Pacific, Ltd. in November 2009, Mr. Woon is responsible for
leading the long term profitable growth for the entire region, with a strong
focus on China. During his last 15 years in Asia, Mr. Woon served as President
of Volvo Construction Equipment China and President and CEO of Tesa Tape
Asia Pacific.
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, Vice President, 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.
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 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. He also serves as a director of CF Industries
Holdings, Inc. (NYSE: CF).
Board Committees: Corporate Governance and
Nomination, 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 (Chairwoman), 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.
Mr. Rabinowitz is also Chairman of the Board 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 Snap-on
Incorporated (NYSE: SNA).
Board Committees: Compensation and Succession,
Corporate Governance, and Nomination
Liam McCarthy was appointed a Director of the
Company in November 2008. Mr. McCarthy is President
and Chief Operating Officer of Molex Incorporated
(NASDAQ:MOLX), where he previously served in various
executive and management capacities.
Board Committees: Compensation and Succession,
Corporate Governance, and Nomination
Christian B. Ragot became a Director of the Company
in November 2008. Since December 2009, Mr. Ragot
has been engaged as a consultant, advising several
companies in various industries. From 2007 until
December 2009, Mr. Ragot was President, Chief Executive
Officer, and a Director of Freightcar America, Inc. Prior
thereto, he served in various executive capacities with
Terex Corporation and Ingersoll-Rand Company.
Board Committees: Compensation and Succession,
Corporate Governance, and Nomination
Product and Market Diversity
Due to the precise capabilities of the CM Lodestar with Variable Frequency Drive
(VFD), a single worker at this Pennsylvania-based manufacturer of stabilizing
equipment for ocean vessels can now accurately position a gyro unit for testing.
CM’s under running, patent track Gaffey cranes are used to interlock 37 bridges,
allowing 70 Yale Cable King wire rope hoists to move from one bay to another,
providing flexible and flawless handling of the jet engines at this engine repair
facility in Texas, USA.
These CM Cyclone manual chain hoists are used to pull concrete formwork
on a chimney construction project at a power station in South Carolina.
(photo courtesy of Commonwealth Dynamics, Inc., Chimneys, Stacks, Silos,
Cooling towers, www.comdynam.com)
The Pfaff-silberblau 150-ton under-floor lifting system with turntables
installation, used by the Taipei Rapid Transit Corporation in Taiwan to lift its
trains for maintenance, is earthquake resistant.
For the Walt Disney Musical TARZAN, the Neue Flora, Europe’s largest musical
theatre located in Hamburg, Germany, installed Delta electrical wire rope
winches in their newly-arranged FlyGrid, including a complete, computerized,
control system made by Pfaff-silberblau.
More than 200 units of CM’s Lodestar and Showpro electric chain hoists were
used in the 2008 Beijing Olympic venues, including the Beijing National Stadium,
shown here.
140 John James Audubon Parkway | Amherst, New York 14228-1197
716-689-5400 | cmworks.com