140 John James Audubon Parkway
cmworks.com
NASDAQ: CMCO
Amherst, NY 14228-1197
General 716-689-5400
Investor Relations 716-689-5479
Our Vision
Become the Material Handling Champion of the World
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Innovation, quality, and craftsmanship in all aspects of performance
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L I F T I N G . P O S I T I O N I N G . S E C U R I N G .
OUR GLOBAL REACH
OUR GLOBAL REACH
2012 Annual Report
Company Profi le
Columbus McKinnon Corporation
(NASDAQ: CMCO) is a leading worldwide
designer, manufacturer and marketer
of material handling products, systems
and services, which effi ciently and
ergonomically move, lift, position and
secure materials.
Headquartered in Amherst, New York,
Columbus McKinnon’s key products
include hoists, cranes, actuators, and
rigging tools. The Company is focused on
commercial and industrial applications
that require the safety and quality
provided by its superior design and
engineering know-how.
Fiscal 2012 Net Sales
7% 2%
$591.9
million
(Fiscal 2012
Net Sales)
59%
18%
Broad Product Offering
Hoists
Rigging & Lifting Tools
Actuators/Rotary Unions
Cranes
Other
59%
18%
14%
7%
2%
Our Competitive Advantage:
Strong Brands Built on Quality and Reliability
Shareholder and Corporate Information
1898
1881
1927
1937
1942
1904
1920
1929
1938
1972
5% 2%
8%
Sales in
over 50
countries
55%
30%
Global Sales – FY 2012
US
Europe, Middle East & Africa
Canada
Latin America
Asia Pacifi c
55%
30%
8%
5%
2%
Common Stock
Corporate Headquarters
Columbus McKinnon’s common stock is traded on NASDAQ under the symbol
Columbus McKinnon Corporation
CMCO. As of April 30, 2012, there were 552 shareholders of record and
140 John James Audubon Parkway
19,400,526 total outstanding common stock. According to March 31, 2012
Amherst, New York 14228-1197
SEC fi lings, 109 institutional and mutual fund investors owned approximately
716-689-5400
Please direct questions about lost certifi cates, change of address and
consolidation of accounts to the Company’s transfer agent and registrar:
American Stock Transfer & Trust Company
91% of Columbus McKinnon’s outstanding common shares.
Annual Meeting of Shareholders
108 East Superior Street @ North Michigan Avenue
July 23, 2012
10:00 a.m. Central Time
The Peninsula Chicago
Chicago, Illinois 60611
312-337-2888
Transfer Agent
59 Maiden Lane, Plaza Level
New York, New York 10038
800-937-5449
718-921-8200
www.amstock.com
Investor Relations
Gregory P. Rustowicz
Vice President – Finance and Chief Financial Offi cer
Columbus McKinnon Corporation
716-689-5442
E-mail: greg.rustowicz@cmworks.com
Deborah K. Pawlowski
Kei Advisors LLC
716-843-3908
E-mail: dpawlowski@keiadvisors.com
Investor information is available on the Company’s website:
www.cmworks.com
The following analysts published research about
Columbus McKinnon Corporation during the last year:
Independent Auditors
Ernst & Young LLP
50 Fountain Plaza, 15th fl oor
Buffalo, New York 14202-2297
Analyst Coverage
BB&T Capital Markets
Schon Williams / 804-782-8769
cwilliams@bbandt.com
CJS Securities
Jason Ursaner / 914-287-7600
jursaner@cjs-securities.com
C.L. King & Associates
Gary Farber / 212-364-1812
gaf@clking.com
Sidoti & Company
Joseph Mondillo / 212-894-3339
jmondillo@sidoti.com
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 fi led with the Securities and Exchange Commission.
The Company assumes no obligation to update the forward-looking information
contained in this report.
2012 Annual Report
Financial Summary
(In thousands, except per share, percent change, margin and ratio data)
Fiscal Year Ended March 31,
2012
2011
2010
2009
2008*
Income Statement Data
Net sales
Gross profi t
Gross margin
Income (Loss) from operations
Operating Margin
Non-GAAP income from operations **
Non-GAAP operating margin **
Net income (loss)
$ 591,945
$ 524,065
$ 476,183
$ 606,708
$ 593,786
157,718
126,052
115,939
173,701
185,575
26.6 %
45,144
7.6 %
43,994
7.4 %
26,967
24.1 %
18,572
3.5 %
27,704
5.3 %
(35,950)
($1.89)
24.3 %
28.6 %
(3,812)
(46,559)
(0.8) %
20,707
4.3 %
(7,013)
($0.37)
(7.7) %
62,362
10.3 %
(78,384)
($4.16)
$
0.51
$
0.32
$
1.90
31.3 %
80,740
13.6 %
80,740
13.6 %
37,349
$
$
1.95
2.35
Net income (loss) per diluted share
Non-GAAP net income per diluted share **
$
$
1.38
1.32
Balance Sheet Data
Total assets
Total liabilities
Total debt
Total debt, net of cash
Total shareholders’ equity
Total debt/capitalization
Total debt, net of cash/net total capitalization
Other Data
Operating cash fl ow
Depreciation and amortization
Capital expenditures
Working capital (excl. cash and debt)/revenue
Days sales outstanding
Inventory turns
$ 515,407
$ 478,872
$ 481,497
$ 491,664
$ 590,035
354,941
316,726
294,219
309,810
294,554
153,094
154,405
132,817
137,886
133,283
63,621
74,266
68,849
98,650
57,289
160,466
162,146
187,278
181,854
295,481
48.8 %
28.4 %
48.8 %
31.4 %
41.5 %
26.9 %
43.1 %
35.2 %
31.1 %
16.2 %
$ 23,587
$
3,280
$
29,867
$ 60,231
$
59,590
11,862
(13,765)
17.6 %
50.6
4.3
11,050
(12,543)
16.9 %
49.1
4.7
12,490
(7,245)
16.2 %
51.4
4.6
117,590
(12,245)
18.8 %
53.7
4.0
8,325
(12,479)
18.2 %
53.0
5.2
* Restated for Univeyor discontinued operations, divested July 2008
** The Company believes that the Non-GAAP information presented are meaningful measures of operating performance in comparing period-to-period results.
This information should be considered in addition to, but not as a substitute for, other measures of fi nancial performance reported in accordance with GAAP.
2009 Non-GAAP margin dollars and percentages exclude $107.0 million goodwill
impairment charge and $1.9 million in restructuring and other special charges.
2011 Non-GAAP margin dollars and percentages exclude $6.2 million
restructuring-related costs and $2.9 million of unusual product liability claims.
2010 Non-GAAP margin dollars and percentages exclude $21.0 million
restructuring-related costs and $3.5 million of other special charges.
2012 Non-GAAP margin dollars and percentages exclude $1.1 million
pension curtailment charge, $1.5 million gain on the sale of a closed facility,
and $0.9 million gain on re-measurement of investment.
2012 Annual Report
1
Letter to the Shareholders
Dear Fellow Shareholders:
Fiscal Year 2012 was a year of solid progress toward achieving our vision of
being the material-handling champion of the world. We continued to provide
products and solutions that lift, position and secure, in an easy and safe way, for
our global customers. In fi scal 2012, we achieved 13% sales growth for total
revenue of $591.9 million. We believe the strength of our brands and continued
execution of our growth strategy to expand our geographic reach and product
offering drove greater demand for our products as industrial activity and the
global economy improved. Our strategic goal is $1 billion in revenue through
organic growth and acquisitions. While we expect that the fastest growth will be
in international markets, we continue to also increase our already strong market
share in the United States.
Of signifi cance, net income grew to $27.0 million, or $1.38 per diluted share,
from a prior year loss of $36.0 million, as the benefi ts of our restructuring efforts
during the recession take hold and the improved leverage inherent in our business
is demonstrated through margin expansion.
Product, Vertical Market and Geographic Expansion
We gained traction in the U.S. during the year, and believe we can continue to
capture new opportunities given our leading market share. Our vertical market
approach has helped us address the needs of key end users in specifi c industries
including: oil and gas exploration and processing, power generation and distribution,
mining, construction, manufacturing and entertainment. This vertical market
focus has generated end-user demand and pull-through within our channels,
creating a win-win scenario for Columbus McKinnon and our channel partners.
Likewise through the year, we grew in our Europe, Middle East and Africa
(EMEA) region. In Europe specifi cally, despite the economic turmoil, our rate of
growth exceeded the general economy, which we believe is an indicator that we
are capturing market share in that region. We are having measurable success in
the Eastern European countries and opened a new sales offi ce in Turkey during the
year. Our market entry approach has worked well for us. We begin by importing
Net Sales
(Dollars in millions)
593.8 606.7
591.9
524.1
476.2
‘08
‘09
‘10
‘11
‘12
$800
600
400
200
0
15
12
9
6
3
0
Operating Margin
13.6%
7.6%
3.5%
‘09
‘10
‘08
‘11
‘12
-0.8%
-7.7%
2
Columbus McKinnon Corporation
into a geographic region until we get a level of sales that supports adding a direct
sales offi ce, inventory and technical support. In time, we generally add more value
and begin to assemble product in the local market as well. This measured approach
ensures that we invest in an appropriate and disciplined manner. This past year, we
also opened sales offi ces in Casablanca, Morocco, and Dubai, United Arab Emirates.
The signifi cant levels of infrastructure growth in these economies drive demand for
our products, and we believe our product quality, responsiveness and experience, all
provide for a competitive edge.
We continue to increase revenue and our market presence in China and are
developing excellent channel partner relationships. We now have approximately 30
sales personnel in 9 offi ces in China and continue to invest in engineering, sales and
support personnel.
Continued Innovation
During fi scal 2012, our expanded product offering included the introduction of
a new Lodestar line. This new product line, which spans the range of a 1/8 ton
through 3 ton electric chain hoist, provides us the fl exibility to address extremely
varied international standards. We have also localized two key product lines into our
Chinese facilities, our JLC and Vego electric chain hoist lines. This has enabled us to
have the right product – at the right cost structure – to market and sell to this large
and growing industrial market.
We believe new products are an important component of our growth and expect
them to comprise 20% of sales. We achieved that goal in fi scal 2012.
Columbus McKinnon Lean Business System
Over the long term, with our “Lean” business approach, we believe we can produce
operating margins in the 12% to 14% range while managing working capital
Cash Flow from Operations
(Dollars in millions)
59.6
60.2
$100
80
Total Debt, Net of Cash
(Dollars in millions)
98.7
74.3
68.8
63.6
60
57.3
29.9
23.6
3.3
‘08
‘09
‘10
‘11
‘12
40
20
0
‘08
‘09
‘10
‘11
‘12
$70
60
50
40
30
20
10
0
requirements at 15% of sales. We would need to return to our peak revenue level
of approximately $650 million (inclusive of a full year of Pfaff, which was acquired
in October 2008) to achieve these goals. Nonetheless, we continually improve our
productivity and drive to expand our leverage in order to be in a signifi cantly stronger
position for the next industrial down cycle. We have removed approximately
500,000 square feet of manufacturing fl oor space in the past few years while
preserving suffi cient capacity for growth. We have focused on seven key operating
goals which include: customer satisfaction, lead time, customer on-time delivery,
warranty costs, internal defect rate, safety rate and inventory turns. All, except
inventory turns, improved over the prior year. Inventory optimization is a primary
area of focus for us as we move through fi scal 2013.
The year was not without its challenges. We worked diligently to improve the
operating issues in our forging business, which occurred as a result of the consolidation
of our two forging facilities. Unfortunately, although this business is relatively small,
representing just 8% of sales, it did consume signifi cant management resources to
improve our performance. We turned the corner in the third quarter of the year and
are working aggressively to win back orders.
It is important to note, however, that the majority of our restructuring activities were
quite successful – in fact, exceeding our expectations. The savings from our chain and
hoist consolidations more than offset the losses from the challenges with forgings.
The total net improvement from our restructuring activities was approximately
$6 million. Obviously, we want to realize our targeted $13 to $15 million in annual
savings and expect we will achieve this run rate in the latter half of fi scal 2013.
Financial Flexibility
We have a very strong balance sheet that provides us the fl exibility to pursue
investments in our business as well as execute our acquisition strategy. We had a
net debt to net total capitalization ratio of 28.4%, a cash balance of $89.5 million
and an $85 million revolver of which approximately $70 million was available at
fi scal year end. In addition, our operating cash requirements are relatively low
at approximately $25 to $30 million per year, giving us suffi cient available capital
to make meaningful acquisitions. This past year, we acquired a small business in
South Africa, Yale Lifting Solutions, a hoist supplier and service organization that
serves the mines in South Africa with material handling equipment. We believe
that our current level of net debt to net total capitalization is comfortable, but we
are willing to fl ex up to approximately 50% for the right opportunity.
We are systematically identifying and targeting acquisition opportunities,
methodically building the relationships needed, typically with private owners,
all the while diligently reviewing their operations, fi nancials, market position
and customer relationships. Of course, we also consider expected return on
investment and most importantly building shareholder value. Our focus is on
emerging economies, specifi cally China and Brazil, where we believe we have
the greatest market penetration potential as well as the benefi t of a rapidly
growing industrial base.
Strong, Steady Outlook
We are focused on the long term, meeting our goals and objectives, and generating
value for our shareholders. We operate in an ever-changing socio-economic
global environment and believe our success is dependent upon our people.
It takes the right people in the right positions executing the right activities to
profi tably grow, and we believe we are building a very capable team. We will
continue to execute our strategy, focus on the basics for profi table growth and
maintain a vision and culture that drives improvement.
We appreciate the hard-working men and women in our Company that have
produced the results of fi scal 2012. They are the backbone of our organization
and dedicated to our future success.
As always, we appreciate your investment in Columbus McKinnon.
Sincerely,
Timothy T. Tevens
President and Chief Executive Offi cer
Ernest R. Verebelyi
Chairman of the Board of Directors
2012 Annual Report
3
Executive Committee
Timothy T. Tevens
President and Chief Executive Offi cer
Charles R. Giesige
Vice President - Corporate Development
Timothy T. Tevens is President, Chief Executive Offi cer and a director of Columbus
McKinnon Corporation, a leading manufacturer and marketer of material handling
products, systems and services. He joined the Company in 1991 as Vice President-
Information Services and was elected Chief Operating Offi cer in 1996. In 1998,
Mr. Tevens was appointed President and Director and later that year was appointed
to his current position. Prior to joining Columbus McKinnon, he was with Ernst &
Young LLP in various management consulting capacities for more than 10 years.
Gregory P. Rustowicz
Vice President - Finance and Chief Financial Offi cer
Gregory P. Rustowicz joined the Columbus McKinnon executive team in August
2011. He spent 20 years with PPG Industries, Inc., where he progressed through
a series of promotions in fi nance and accounting, including Group Chief Financial
Offi cer of PPG’s Glass, Fiber Glass and Chemicals businesses. After leaving PPG,
he joined Momentive Performance Materials as Corporate Treasurer. Most recently,
Mr. Rustowicz was the Vice President - Finance for Momentive Performance
Materials. He began his career with KPMG Peat Marwick. He is a graduate of
Canisius College with a B.S. in Accounting and he earned a M.S., Industrial
Administration from Carnegie Mellon University.
Gene P. Buer
Vice President - Americas
As of July 1, 2010, Mr. Buer was named Vice President - Americas. Before the transition
from Executive Director to Vice President of Hoist Products - the Americas in 2009,
he 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 Ingersoll-Rand, Zimmerman International
Corp., and Champion Blower and Forge.
Ivo Celi
Vice President - CMCO EMEA (Europe, Middle East and Africa)
Dr. Celi joined Columbus McKinnon in early 2010 as the Managing Director -
EMEA successor and assumed that position effective April 1, 2010. Prior to joining
the Company, he progressed through roles of increasing responsibility with Hilti
AG, most recently as Senior Vice President - Business Unit Diamond Systems.
Mr. Giesige was named Vice President - Corporate Development as of July 1, 2010.
He previously served as Vice President of Rigging Products, the Americas (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 fi nance positions within Johnson Controls, Inc.
Alan S. Korman
Vice President - General Counsel and Corporate Secretary
Alan S. Korman joined our Company in January 2011 as General Counsel and
Assistant Secretary. In July 2011 he was elected Vice President, General Counsel
and Secretary. From 1994 until January 2011, he served in various senior executive
positions of responsibility at Ivoclar Vivadent, Inc., including Vice President,
General Counsel and Secretary, and President of Pentron Ceramics, Inc., a
wholly-owned subsidiary. Prior to joining Ivoclar Vivadent, Mr. Korman was
engaged in private practice at the law fi rm of Nixon Peabody LLC.
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
Resources 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.
Eric Woon
Vice President - CMCO APAC (Asia Pacifi c)
Mr. Woon joined Columbus McKinnon in 2009 as the Managing Director - APAC to
transform the business from being primarily a low-cost manufacturing operation
for export sales to a designer and manufacturer of hoists and other equipment
for the APAC market. Previously, he was President - China for Volvo Construction
Equipment, where he was involved in major acquisitions and organic growth. His
exensive leadership experience in Asia also includes his role as President - Asia
Pacifi c with Tesa Tape Asia PTE Ltd. and Deputy General Manager with Shanghai
Fleetguard Filter Company, a wholly owned subsidiary of Cummins Inc.
Board of Directors
Ernest R. Verebelyi
Chairman
Timothy T. Tevens
President and Chief Executive Offi cer
Richard H. Fleming
Chairman, Audit Committee
Member, Compensation and Succession Committee
4
Columbus McKinnon Corporation
See Proxy Statement for additional information.
Linda A. Goodspeed
Chairwoman, Corporate Governance and
Nomination Committee
Member, Audit Committee
Nicholas T. Pinchuk
Member, Compensation and Succession Committee
and Corporate Governance and Nomination
Committee
Stephanie K. Kushner
Member, Audit Committee and
Corporate Governance and Nomination Committee
Steven Rabinowitz
Chairman, Compensation and Succession Committee
Member, Audit Committee
Liam G. McCarthy
Member, Audit Committee and
Compensation and Succession Committee
Christian B. Ragot
Member, Compensation and Succession Committee
and Corporate Governance and Nomination
Committee
[THIS PAGE INTENTIONALLY LEFT BLANK]
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:95) 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, 2012
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 (cid:134) No (cid:95)
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 (cid:134) No (cid:95)
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 (cid:95) No (cid:134)
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 (cid:95) No (cid:134)
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 (cid:95).
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 (cid:134)
Non-accelerated filer (cid:134)
Accelerated filer (cid:95)
Smaller reporting company (cid:134)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:134) No (cid:95)
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30, 2011 (the second fiscal quarter in
which this Form 10-K relates) was approximately $212 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 May 22, 2012 was 19,400,526 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s proxy statement for its 2012 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, 2012 are incorporated by
reference into Part III of this report.
COLUMBUS McKINNON CORPORATION
2012 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.
3
TABLE OF CONTENTS
Part I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
Part II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplemental Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Part III.
Item 10.
Directors and Executive Officers of Registrant
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Part IV
Item 15
Exhibits and Financial Statement Schedules
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Item 1.
Business
General
PART I
We are a leading global designer, manufacturer and marketer of hoists, rigging tools, cranes, actuators, 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 and
secure objects and loads. We are the U.S. market leader in hoists, our principal line of products, as well as certain chain, forged attachment, and
actuator 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 we are the market leader of manual hoist and actuator products in Europe, which
provides us further opportunity to sell our other products through our existing distribution channels in that region. 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 manufacturing industry
capacity utilization, industrial production and the general economic activity indicators, like GDP. Both U.S. and Eurozone capacity utilization are
leading market indicators for the Company. US industrial capacity utilization increased to 78.4% in April 2012, trending up from 74.8% in April
2011. Eurozone capacity utilization has also been trending higher for the last seven quarters, reaching 79.8% in March 2012 compared with the trough
of 69.6% in June 2009.
Our Position in the Industry
The broad, global material handling industry includes the following sectors:
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overhead material handling and lifting devices;
continuous materials movement;
wheeled handling devices;
pallets, containers and packaging;
storage equipment and shop furniture;
automation systems and robots; and
services and unbundled software.
The breadth of our products and services enables us to participate in most of these sectors. This diversification, together with our extensive
and varied distribution channels, minimizes our dependence on any particular product, market or customer. We believe that none of our competitors
offers the variety of products or services in the markets we serve.
We believe that the demand for our products and services will be aided by several macro-economic growth drivers. These drivers include:
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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. Further, emphasis on “Lean” techniques by many companies increases demand
for our lifting and positioning products for use in single-piece flow workstation applications.
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, alloy and high strength carbon steel
chain and attachments, and actuators in North America. We have developed our leading market positions over our 137-year history by emphasizing
technological innovation, manufacturing excellence and superior service. Approximately 62% of our U.S. net sales for the year ended March 31, 2012
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
U.S. Market Position
Percentage of
U.S. Net Sales
45%
51%
28%
49%
48%
43%
80%
25%
#1
#1
#1
#1
#1
#1
#1
#1
18%
14%
9%
5%
10%
4%
1%
1%
62%
(1) Market share and market position data are internal estimates derived from survey information collected and provided by our trade associations
in 2011.
(2) Market share and market position data are internal estimates based on our market shares of Powered Hoists and Manual Hoists & Trolleys,
which we believe are good proxies for our Hoist Parts market share because we believe most end-users purchase Hoist Parts from the original
equipment supplier.
(3) Market share and market position data are internal estimates derived by comparison of our net sales to net sales of one of our competitors and
to estimates of total market sales from a trade association in 2011.
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(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 2011.
(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 2011.
Comprehensive Product Lines and Strong Brand Name Recognition - We believe we offer the most comprehensive product lines in the
markets we serve. We offer engineering and design services to help channel partners and end users solve material handling problems. Most of our
products are maintenance, repair and operating tools which work in conjunction with each other to create a complete lifting system. We complement
our product offerings with engineering and design services to assist our channel partners and end-users in finding the optimal solution for their
material handling needs. 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. No single SKU comprises more than 1% of our sales, a testament to our broad and diversified product offering.
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. We are at the forefront of innovation in our industry and continually
introduce new products to meet our changing customer needs. Products introduced during the three fiscal years ended March 31, 2012 account for
approximately 20.4% of our net sales; achieving our goal from last year to increase this from 17.2% to 20%.
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. Our
largest distributor represents approximately 3.3% of our total net sales and our top 10 customers represent approximately 16% of our total net sales.
Expanding Non-U.S. Markets - We have significantly grown our non-U.S. sales since becoming a public company in 1996. Our non-U.S.
sales have grown from $34,300,000 (representing 16% of total sales) in fiscal 1996 to $268,654,000 (representing 45% of our total sales) during the year
ended March 31, 2012. This growth has occurred primarily in Europe, Latin America and Asia-Pacific. We have nine offices in China to sell into this
growing industrial market. Our non-U.S. business has provided us, and we believe will continue to provide us, with significant growth opportunities
and new markets for our products.
"Non-U.S. 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.
Efficient Operations with Low-Cost Structure - We are extremely focused on optimizing our cost structure and have taken a number of
steps towards reducing our costs, including: consolidating facilities, promoting a “Lean” culture, manufacturing in low cost jurisdictions, coordinating
purchasing activities across the organization and selectively outsourcing non-critical functions. The actions we have taken to date have eliminated
fixed costs from our operations and provided us with significant operating leverage as the economic conditions in our markets continue to improve. Our
operating leverage goal is for each incremental sales dollar to generate 30%-40% of additional operating income, in addition to the fixed cost savings
realized from our facility consolidation activities.
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Rationalization and Consolidation - We have a history of consolidating manufacturing facilities and optimizing warehouse utilization,
resulting in lower annual operating costs and improving our fixed-variable cost relationship. During our fiscal year ended March 31, 2010, we
initiated further consolidation of our North American hoist and rigging operations in accordance with our strategy. We completed the closure
of one of our manufacturing facilities in Cedar Rapids, Iowa and significantly downsized manufacturing at a second facility in Mexico in the
third quarter of the fiscal year ended March 31, 2010. Additionally, we completed the closure of a third facility in Muskegon, Michigan in the
first quarter of the fiscal year ended March 31, 2011.
Lean Culture - We have been applying “Lean” techniques since 2001 and our efforts have resulted in increased inventory turns, reduced
manufacturing floor space, and an improvement in productivity. We have witnessed the benefits of “Lean” principles in our manufacturing
operations and are now working to develop a “Lean” culture throughout our organization—improving our processes and reducing waste in all
forms in all of our business activities.
Expansion Outside the U.S. - Our continued expansion of our manufacturing facilities in China and Hungary provides us with a cost efficient
platform to manufacture and distribute certain of our products and components. We now operate 12 major manufacturing facilities in six
countries, with 39 stand-alone sales and service offices in 17 countries and 10 warehouse facilities in five 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 After-Market Sales and Support - We believe that we retain customers and attract new customers due to our ongoing commitment to
customer service and ultimate satisfaction. We have a large installed base of hoists and rigging tools that drives our after-market sales for 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 14 chain repair stations and approximately 260 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.
We also provide a wide variety of training and certification programs to the users of our products. These training and certification programs
include crane inspection and operation training and certification, hoist inspection and repair training and certification, various rigging training courses,
load securement training, and CM entertainment technology equipment training and certification classes.
Consistent 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) through periods of economic uncertainty by continually controlling
our costs, improving our working capital management and reducing the capital intensity of our manufacturing operations. In the past five years, despite
the economic downturn, we have reduced total net debt (defined as total debt less cash and cash equivalents) by $47,100,000, from $110,700,000 to
$63,600,000 at March 31, 2012. We manage our capital structure conservatively while maintaining flexibility to pursue attractive strategic growth
opportunities.
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Experienced Management Team with Equity Ownership - Our senior management team provides significant depth and continuity of
experience in the material handling industry, supplemented by expertise in growing businesses, aggressive cost management, balance sheet
management, efficient manufacturing techniques and acquiring and integrating businesses and global operations. This diverse experience has been
critical to our success to date and will be instrumental to our long-term growth. Our management promotes the ownership of company stock by the
executive officers and directors to align the interests of our leadership team with those of our stakeholders.
Our Strategy
Invest in New Products and Targeted Markets. We intend to leverage our competitive advantages to increase our market shares across all of
our product lines and geographies by:
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Introducing New Products—We continue to expand our business by developing new material handling products and services
and expanding the breadth of our product lines to address the material handling needs of our customers. We design our
powered hoist lines to many international standards including the FEM (European and Asian), ANSI (U.S.) and other standard
setting bodies to ensure maximum utility for these products across geographies. 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 $121,000,000 in the fiscal year ended March 31, 2012, or 20.4% of total sales achieving our
goal of having new products amounting to at least 20% of total sales. New product sales amounted to $90,000,000 in the fiscal
year ended March 31, 2011 (17.2% of total sales) and $74,500,000 in the fiscal year ended March 31, 2010 (15.6% of total sales).
Leveraging Our Distribution Channel Relationships and Vertical Market Knowledge—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 increase our revenues.
Broadening Our Product Offering—Developing and offering a broad range of products to our channel partners is an important
element of our strategy. Industrial channel partners offer a broad array of industrial components that are used by many end-
user markets. We continue to review and add new material handling components to broaden our product offering, but also
remove some products that we find duplicative or not marketable.
Continue to Grow in Non-U.S. Markets - Our non-U.S. sales of $268,654,000 comprised 45% of our net sales for the year ended March 31,
2012, as compared with $241,970,000, or 46% in fiscal 2011 and $34,300,000, or 16% of our net sales, in fiscal 1996, the year we became a public
company. Although we have made significant progress, our goal is to continue to increase our presence outside the U.S to capitalize on the higher
growth opportunities and continue to diversify our business profile. We presently sell to distributors in over 50 countries and have our primary non-
U.S. manufacturing facilities in China, Germany, United Kingdom, Hungary, Mexico and France. In addition to new product introductions, we continue
to expand our sales and service presence in the major and developing market areas of Asia-Pacific, Europe, and Latin America and have 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 in Asia-Pacific by manufacturing a broader array of high quality, low-cost products and components in China. 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.
Focus on Operational Excellence - Our objective is to provide the highest quality products and services at prices 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 low operating costs will prove to be successful for both our customers and for the
Company. We continually seek ways to reduce our operating costs and increase our manufacturing productivity, while maintaining quality. Ongoing
programs include our efforts to further develop our “Lean” culture throughout the organization, the completion of our facility rationalization programs
in the U.S., the consolidation of our facilities within China, our continued search for new ways to leverage our purchasing power through our
Purchasing Council and the continued focus on enhancing the efficiency of our global supply chain. Our operating leverage goal is for each
incremental sales dollar to generate 30% to 40% of additional operating income, in addition to the fixed cost savings realized from our facility
consolidation activities.
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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. We provide our products and services through one operating and reportable 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 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
Nearly 80% 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 fiscal 2012 sales,
$323,291,000 or 55% were U.S. and $268,654,000, or 45% were international. The following table sets forth certain sales data for our products, expressed
as a percentage of net sales for fiscal 2012 and 2011:
Hoists
Rigging tools
Industrial cranes
Actuators and rotary unions
Other
Fiscal Years Ended March 31,
2012
2011
59%
18
7
14
2
100%
55%
20
8
15
2
100%
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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.
Rigging Tools - 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.
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.
Other - This category includes tire shredders and light-rail systems. We have developed and patented a line of heavy equipment that shreds
whole tires, for use in recycling the various components of a tire including: rubber and steel. These recycled products also can be used as aggregate,
playgrounds, sports surfaces, landscaping and other such applications, as well as scrap steel. Light-rail systems are portable steel overhead beam
configurations used at workstations, from which hoists are an integral component.
Sales and Marketing
Our sales and marketing efforts consist of the following programs:
Factory-Direct Field Sales and Customer Service - We sell our products through our sales force of more than 125 sales people and through
independent sales agents worldwide. 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.
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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 an effective way to promote our products to distributors and end users. Shows can range in
size from distributor “open houses” to large, global shows such as CeMAT held in Hanover, Germany. Through partnerships with our distributors, we
have expanded our reach to the end user while strengthening our distribution network. In fiscal 2012, we focused primarily on shows related to
targeted industries. Examples include LDI (USA) and PALM Expo (China) for the entertainment industry, OTC (USA), Brasil Offshore (Brazil), and Expo
Petrolera (Mexico) for the oil and gas industry, and the Railway and Harbours Conference (S. Africa) for the transportation industry.
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 and certification 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. These
training and certification programs include crane inspection and operation training and certification, hoist inspection and repair training and
certification, various rigging training courses, load securement training, and entertainment technology equipment training and certification classes.
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 hoist 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.
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— 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 14 chain repair service stations
and approximately 260 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.
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.
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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 260 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, 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, 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, 2012 was approximately $114,180,000 compared to approximately $89,393,000 at March 31, 2011. 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. Fluctuations in backlog reflect the project oriented nature of certain aspects of our business.
Competition
The material handling industry remains highly fragmented. We face competition from a wide range of regional, national and international
manufacturers globally. 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 (and its U.S. subsidiary 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, 2012, we had 2,549 employees; 1,520 in the U.S./Canada, 66 in Latin America, 736 in Europe and 227 in Asia. Approximately 13%
of our employees are represented under four separate U.S. or Canadian collective bargaining agreements which terminate at various times between
August 2013 and April 2015. We also have various labor agreements with our non-U.S. employees which we negotiate from time to time. We believe
that our relationship with our employees is good and that the risk of a disruption in production related to these negotiations is remote.
14
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.
Hedging Activities
We use derivative instruments to manage selected foreign currency exposures. The Company does not use derivative instruments for
speculative trading purposes.
We use foreign currency forward agreements and cross-currency swaps to offset changes in the value of intercompany loans to certain
foreign subsidiaries due to changes in foreign exchange rates. In addition, we use foreign currency forward agreements to i) hedge changes in the
value of booked foreign currency liabilities due to changes in foreign exchange rates at the settlement date and ii) to hedge a portion of forecasted
inventory purchases and sales denominated in a foreign currency.
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 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 2013.
15
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 $200,000.
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.
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. We do not believe that such costs will have a material adverse effect on our financial condition, operating results or cash flows.
For all of the currently known environmental matters, we have accrued a total of $356,000 as of March 31, 2012 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 substantial 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, financial condition, or
liquidity.
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.
16
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:
Adverse changes in global economic conditions may negatively affect our industry, business and results of operations.
Financial markets in the United States, Europe and Asia have experienced substantial disruption including, among other things, extreme volatility in
security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others.
Governments have taken unprecedented actions intended to address these market conditions and the extent to which such government actions may
prove effective remains unclear. The future economic environment may worsen.
Our industry is affected by changes in economic conditions outside our control, which can result in a general decrease in product demand from our
customers. Such economic developments may affect our business in a number of ways. Reduced demand may drive us and our competitors to offer
products at promotional prices, which would have a negative impact on our profitability. In addition, the tightening of credit in financial markets may
adversely affect the ability of our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease
in, or cancellation of, orders for our products. If demand for our products slows down or decreases, we will not be able to improve our revenues and we
may run the risk of failing to satisfy the financial and other restrictive covenants to which we are subject under our existing indebtedness. Reduced
revenues as a result of decreased demand may also reduce our planned growth and otherwise hinder our ability to improve our performance in
connection with our long term strategy.
Our business is cyclical and is affected by industrial economic conditions, and, during the global recession in fiscal 2009 and fiscal 2010 we
experienced substantially reduced demand for our products.
Many of the end-users of our products are in highly cyclical industries 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, their construction and capital expenditure
budgets, changes in their vertical market sectors and other factors beyond our control. In the fiscal years ended March 31, 2009 and 2010, for example,
we experienced significantly reduced demand for our products, generally as a result of the global economic slowdown. These lower levels of demand
resulted in a 20% decline in net sales from our 2008 fiscal year to our 2010 fiscal year, from $593,800,000 to $476,100,000, despite our acquisition of Pfaff
in the middle of our 2009 fiscal year. This decline in net sales resulted in a 105% decrease in our income from operations during the same period. We
have seen improvement in demand for our products in the fiscal year ended March 31, 2012. Our net sales for the year ended March 31, 2012 were
$591,945,000, up $67,880,000 or 13.0% from the year ending March 31, 2011. However, there is no certainty that this improvement will continue in the
future.
Our business is highly competitive and subject to consolidation of competitors. 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.
17
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, through consolidation, 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.
Our operations outside the U.S. 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 our
fiscal year ended March 31, 2012, approximately 45% of our net sales were derived from non-U.S. markets. These non-U.S. operations are subject to a
number of special risks, in addition to the risks of our U.S. business, differing protections of intellectual property, trade barriers, labor unrest, exchange
controls, regional economic uncertainty, differing (and possibly more stringent) labor regulation, risk of governmental expropriation, U.S. and foreign
customs and tariffs, current and changing regulatory environments, difficulty in obtaining distribution support, difficulty in staffing and managing
widespread operations, differences in the availability and terms of financing, political instability and risks of increases in taxes. Also, in some foreign
jurisdictions we may be subject to laws limiting the right and ability of entities organized or operating therein to pay dividends or remit earnings to
affiliated companies unless specified conditions are met. These factors may adversely affect our future profits.
Part of our strategy is to expand our worldwide market share and reduce costs by strengthening our international distribution capabilities and sourcing
basic components in lower cost countries, in particular in China and Hungary. Implementation of this strategy may increase the impact of the risks
described above, and we cannot assure you that such risks will not have an adverse effect on our business, results of operations or financial condition.
Our 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 are in excess of insurance
coverage could have a material adverse effect on our results, financial condition, or liquidity.
18
In addition, like many industrial manufacturers, we are also 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 estimate 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 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. We believe that the potential additional costs for claims will not have a material after-tax effect on our financial condition
or liquidity, although the net after-tax effect of any future liabilities recorded could be material to earnings in a future period. See Note 16 to our March
31, 2012 consolidated financial statements included in Item 8 of this form 10K.
As indicated above, our self-insurance coverage is effected through our captive insurance subsidiary. The reserves of our captive insurance subsidiary
are subject to periodic adjustments based upon actuarial evaluations, which adjustments impact our overall results of operations. These periodic
adjustments can be favorable or unfavorable.
We are subject to currency fluctuations from our sales outside the U.S.
Our products are sold in many countries around the world. Thus, a portion of our revenues (approximately $268,654,000 in our fiscal year ended March
31, 2012) are 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 future operating results may be affected by fluctuations in steel or other material prices. We may not be able to pass on increases in raw
material costs to our customers.
The principal raw material used in our chain, forging and crane building operations is steel. The steel industry as a whole is highly cyclical, and at times
pricing and availability can be volatile due to a number of factors beyond our control, including general economic conditions, labor costs, competition,
import duties, tariffs and currency exchange rates. This volatility can significantly affect our raw material costs. In an environment of increasing raw
material prices, competitive conditions will determine how much of the steel price increases we can pass on to our customers. During historical rising
cost periods, we were generally successful in adding and maintaining a surcharge to the prices of our high steel content products or incorporating them
into price increases, with a goal of margin neutrality. In the future, to the extent we are unable to pass on any steel price increases to our customers, our
profitability could be adversely affected.
We 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. 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 various environmental laws which may require us to expend significant capital and incur substantial cost.
19
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, operations, or liquidity.
We rely on subcontractors or suppliers to perform their contractual obligations.
Some of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services we must provide to our
customers. There is a risk that we may have disputes with our subcontractors, including disputes regarding the quality and timeliness of work
performed by our subcontractor or customer concerns about the subcontractor. Failure by our subcontractors to satisfactorily provide on a timely
basis the agreed-upon supplies or perform the agreed upon services may materially and adversely impact our ability to perform our obligations as the
prime contractor. A delay in our ability to obtain components and equipment parts from our suppliers may affect our ability to meet our customers'
needs and may have an adverse effect upon our profitability.
We are subject to debt covenant restrictions.
Our revolving credit facility and the indenture governing the notes contain 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.
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 continually evaluate and assess our personnel and may make additional changes to the members or assignments of our senior management team in
the future.
We have not entered into employment agreements with any of our senior management personnel with the exception of Dr. Ivo Celi, our Vice President,
EMEA.
20
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
We maintain our corporate headquarters in Amherst, New York and, as of March 31, 2012, conducted our principal manufacturing at the
following facilities:
Location
Products/Operations
Square
Footage
Owned or
Leased
1. Wadesboro, NC
2. Lexington, TN
3. Charlotte, NC
4. Damascus, VA
5.
Forging operation:
Chattanooga, TN
Chattanooga, TN
6. Ohio hoist operation:
Salem, OH
Lisbon, OH
7. Velbert, Germany
8. Kissing, Germany
9.
10. Asia operation:
Santiago Tianguistenco, Mexico
Hangzhou, China
Hangzhou, China
11. Chester, England
12. Szekesfehervar, Hungary
13. Eureka, IL
14. Cleveland, TX
15. Sarasota, FL
16. Heilbronn, Germany
17. Romeny-sur-Marne, France
Hoists
Chain
Actuators and Rotary Unions
Hoists
Forged attachments
Forged attachments
Hoists
Hoists and below-the-hook tooling
Hoists
Hoists, winches, and actuators
Hoists
Hoists and actuators
Textile strappings
Plate clamps
Textiles and textile strappings
Cranes
Cranes
Tire shredders
Actuators
Rotary unions
186,000 Owned
165,000 Owned
146,000 Leased
90,000 Owned
81,000 Owned
59,000 Owned
49,000 Leased
37,000 Owned
108,000 Owned
107,000 Leased
91,000 Owned
54,000 Leased
53,000 Leased
48,000 Leased
24,000 Leased
91,000 Owned
39,000 Owned
25,000 Owned
23,000 Leased
22,000 Owned
In addition, we have a total of 52 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 $3,000,000 per occurrence ($2,000,000 through March 31, 2003) and $6,000,000 aggregate ($5,000,000 through March 31, 2003) per
year. We obtain additional insurance coverage from independent insurers to cover potential losses in excess of these limits.
21
Like many industrial manufacturers, we are also 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 do not
believe that any of our pending asbestos-related claims will have a material impact on our business. See Note 16 to our March 31, 2012 consolidated
financial statements for more information on our asbestos claims.
Item 4.
Mine Safety Disclosures.
Not Applicable.
22
PART II
Item 5.
Market for the Company’s Common Stock and Related Security Holder Matters
Our common stock is traded on the Nasdaq Global Select Market under the symbol ‘‘CMCO.” As of April 30, 2012, there were 552 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 Global Select Market.
Year Ended March 31, 2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year Ended March 31, 2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
Price Range of
Common Stock
High
Low
19.26 $
16.70
21.06
22.25
20.45 $
18.32
14.99
17.85
13.92
12.35
15.86
15.67
16.84
10.08
10.37
12.71
On May 22, 2012, the closing price of our common stock on the Nasdaq Global Select Market was $13.47 per share.
23
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, 2007 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.
PERFORMANCE GRAPH
24
Item 6.
Selected Financial Data
The consolidated balance sheets as of March 31, 2012 and 2011, and the related statements of operations, cash flows and shareholders’
equity for each of the three years ended March 31, 2012 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
( In millions, except for per share data)
2009
2010
2011
2008
2012
$
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
Income (loss) from operations
Interest and debt expense
Cost of bond redemptions
Other (income) and expense, net
Income (loss) before income taxes
Income tax expense (benefit) (3)
Income (loss) from continuing operations
Income (loss) from discontinued operations (4)
Net income (loss)
$
Diluted earnings (loss) per share from continuing operations $
$
Basic earnings (loss) 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 (5)
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 provided by (used in) financing activities
Capital expenditures
$
$
$
$
$
$
524.1
398.0
126.1
62.9
40.6
2.2
-
1.8
18.6
13.5
3.9
(3.9)
5.1
41.4
(36.3)
0.4
(35.9)
(1.91)
(1.91)
19.0
19.0
478.9
154.4
74.3
162.1
3.3
(4.3)
15.8
12.5
$
$
$
$
$
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)
(0.40)
(0.40)
19.0
19.0
481.5
132.8
68.8
187.3
29.9
(1.4)
(5.4)
7.2
$
$
$
$
$
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)
(4.04)
(4.04)
18.9
18.9
491.7
137.9
98.7
181.9
60.2
(65.5)
(22.5)
12.2
593.8
408.2
185.6
69.9
34.1
0.8
-
0.1
80.7
13.6
1.8
(4.4)
69.7
22.8
46.9
(9.6)
37.3
2.45
2.50
19.2
18.7
590.0
133.3
57.3
295.5
59.6
(8.6)
(28.6)
12.5
$
$
$
$
$
591.9
434.2
157.7
64.9
46.7
(1.0)
-
2.0
45.1
14.2
-
(1.9)
32.8
6.9
25.9
1.1
27.0
1.33
1.35
19.5
19.3
515.4
153.1
63.6
160.5
23.6
(13.5)
0.5
13.8
25
(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 2012, 2011, and 2010.
(2) The Company’s impairment testing is performed on an annual basis in the fourth quarter of each year. The Company recorded a $107,000,000
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) During 2011, the Company recorded non-cash charge of $42,983,000 included within its provision for income taxes. The majority of this charge
relates to the Company’s determination that a full valuation allowance against its deferred tax assets generated in the U.S is
necessary. Accounting rules require a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on the
available and objectively verifiable evidence, it is more likely than not that such assets will not be realized. The existence of cumulative losses
for a certain threshold period is a significant form of negative evidence used in the assessment. If a cumulative loss threshold is met, the
accounting rules indicate that forecasts of future profitability are generally not sufficient positive evidence to overcome the presumption that
a valuation allowance is necessary.
(4)
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 $6,800,000 which is payable over 10 years
ending in May 2012. 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.
(5) Total debt includes all debt, including the current portion, notes payable and subordinated debt.
26
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 worldwide designer, manufacturer and marketer of material handling products, systems and services which efficiently and
safely move, lift, position and secure material. Key products include hoists, actuators, cranes and rigging tools. The Company is focused on serving
commercial and industrial applications that require the safety and quality provided by the Company’s superior design and engineering know-how.
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 137-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 Asian, Latin American and European marketplaces. In
accordance with our strategy, we have been investing in our directed sales and marketing activities, new product development and “Lean” efforts
across the Company. Shareholder value will be enhanced through continued emphasis on improvement of the fundamentals including market
expansion, a high degree of customer satisfaction, new product development, manufacturing efficiency, cost containment, and efficient capital
investment.
Over the course of our history, we have managed through many business cycles and our solid cash flow profile has helped us grow and
expand globally. We stand with a capital structure which includes sufficient cash reserves, significant revolver availability with an expiration of
December 2013, fixed-rate long-term debt which expires in 2019 and a solid cash flow business profile. During fiscal 2010 we initiated projects to
strategically reorganize our North American hoist and rigging operations, which were essentially completed during the first quarter of fiscal 2011. The
projects included the closure of two manufacturing facilities and the significant downsizing of a third facility. The closures and downsizing resulted in a
reduction of approximately 500,000 square feet of manufacturing space (or approximately 25% of total manufacturing space).
Additionally our revenue base is now more geographically diverse than at any time in our Company’s history, with approximately 45% derived
from customers outside the U.S. for the fiscal year ending March 31, 2012. We believe this will help balance the impact of changes that will occur in
local economies as well as benefit the Company from growth in emerging markets. As in the past, we monitor both U.S. and Eurozone Industrial
Capacity Utilization statistics as indicators of anticipated demand for our product. Since their June 2009 trough, these statistics have improved through
April 2012. 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 of end-user markets around the globe.
From a strategic perspective, we are investing in global 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 focusing our sales and marketing activities toward select North American and global
market sectors including energy, construction, entertainment, mining and food processing.
Regardless of the economic climate and point in the economic cycle, we constantly explore ways to manage our operating margins as well as
further improve our productivity and competitiveness. We have specific initiatives related to improved customer satisfaction, reduction of defects,
shortened lead times, improved inventory turns and on-time deliveries, reduction of warranty costs, and improved working capital utilization. The
initiatives are being driven by the continued implementation of our “Lean” efforts which are fundamentally 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 purchase approximately $30,000,000 to $40,000,000 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. Some of our steel costs have increased during this year as a result of higher scrap and alloy
surcharges.
27
We are also looking for opportunities for growth via strategic acquisitions or joint ventures. The focus of our acquisition strategy centers on
opportunities for non-U.S. market penetration and product line expansion in alignment with our existing core product offering.
We operate in a highly competitive and global business environment. 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 are supported by our solid capital structure, including our cash position and flexible
cost base. We are also aggressively addressing costs and restructuring opportunities to enhance future margin opportunities.
RESULTS OF OPERATIONS
Fiscal 2012 sales were $591,945,000, up 13.0%, or $67,880,000 compared with fiscal 2011. The increase in sales was primarily due to an increase
of $43,735,000 in volume resulting from the economic recovery and market share gains. Price increases resulted in a $13,585,000 increase in
sales. Favorable foreign currency translation impacted sales by $10,560,000. Fiscal 2011 sales were $524,065,000, up 10.1%, or $47,882,000 compared
with fiscal 2010. The increase in sales was primarily due to an increase of $52,785,000 in volume resulting from the economic recovery and market share
gains. Further, price increases resulted in a $4,651,000 increase in sales. These increases were offset by a reduction of sales of $2,695,000 from the
October 2009 divestiture of our American Lifts business as well as a negative foreign currency impact of $6,828,000.
Our gross profit was $157,718,000, $126,052,000, and $115,939,000 in fiscal 2012, 2011 and 2010, respectively. The fiscal 2012 increase in gross
profit of $31,666,000 or 25.1% is the result of $20,941,000 in increased volume, favorable manufacturing variances of $3,655,000, $3,006,000 in less
restructuring related expenses included within cost of goods sold, and $2,570,000 from lower product liability expenses partially offset by a pension
plan curtailment charge of $1,122,000. Foreign currency translation had a favorable impact on gross profit of $2,616,000. The fiscal 2011 increase in
gross profit of $10,113,000 is the result of a $12,800,000 increase in volume, a $6,700,000 increase in restructuring benefits, $1,500,000 increase in savings
on U.S. health and pension expenses, offset by a decrease of $6,800,000 from inefficiencies in our forgings operation, a decrease of $1,800,000 for
increases in our product liability and asbestos related reserves, a decrease of $1,800,000 for increases in costs of materials and freight and a decrease of
$487,000 for currency translation and other.
Selling expenses were $64,860,000, $62,910,000, and $64,464,000 in fiscal 2012, 2011 and 2010, respectively. As a percentage of net sales, selling
expenses were 11.0%, 12.0% and 13.5% in fiscal 2012, 2011 and 2010, respectively. The increase in fiscal 2012 selling expense is primarily the result of
increasing revenues year over year. Decreases in fiscal 2011 selling expense of $1,554,000 or 2.4% are due to reorganization efforts specifically in the
Company’s North American sales operations, partially offset by investments in non-U.S markets and commissions on higher sales.
General and administrative expenses were $46,677,000, $40,592,000 and $36,892,000 in fiscal 2012, 2011 and 2010, respectively. As a percentage
of net sales, general and administrative expenses were 7.9%, 7.7% and 7.7% in fiscal 2012, 2011 and 2010, respectively. Fiscal 2012 general and
administrative expenses increased by $6,085,000 or 15.0% primarily due to the new global ERP system implementation project, increased variable
compensation costs, as well as higher employee related costs. Fiscal 2011 general and administrative expenses increased by $3,700,000 or 10.0%
primarily due to the Company’s investments in its management team in Asia and new product development.
Restructuring (gains) charges of ($1,037,000), $2,200,000 and $16,519,000, or (0.2%), 0.4% and 3.5% of net sales were recorded in fiscal 2012,
2011 and 2010, respectively. Fiscal 2012 restructuring gains were the result of a gain recognized on the sale of a previously closed manufacturing facility
of ($1,462,000) offset by an employee workforce reduction effort initiated and completed at one of our European facilities. Fiscal 2011 restructuring
charges of $2,700,000 were offset by a gain from the sale of a previously closed manufacturing facility totaling ($500,000).
28
Amortization of intangibles was $2,074,000, $1,778,000 and $1,876,000 in fiscal 2012, 2011 and 2010, respectively and primarily relate to
amortization of intangible assets acquired in connection with our fiscal 2009 acquisition of Pfaff.
Interest and debt expense was $14,214,000, $13,532,000 and $13,225,000 in fiscal 2012, 2011 and 2010, respectively. As a percentage of net
sales, interest and debt expense was 2.4%, 2.6% and 2.8% in fiscal 2012, 2011 and 2010, respectively.
We incurred costs of $3,939,000 in fiscal 2011 related to the repurchase of outstanding debt. Further discussion on this topic is included below
in the Liquidity and Capital Resources section and Note 12 of our consolidated financial statements. No such costs were incurred in Fiscal 2012.
Investment income of $1,018,000, $3,041,000 and $1,544,000, in fiscal 2012, 2011 and 2010, respectively, related to marketable securities held in
the Company’s wholly owned captive insurance subsidiary. The fiscal 2011 $3,041,000 gain primarily is the result of the market recovery and sale of
securities previously impaired in fiscal 2009.
Foreign currency exchange loss (gain) was $316,000, $452,000, and ($344,000) in fiscal 2012, 2011 and 2010, respectively, as a result of foreign
currency volatility related to purchases and intercompany debt.
Other income, net was $1,179,000, $1,375,000, and $2,260,000 in fiscal 2012, 2011 and 2010, respectively. Other income in fiscal 2012 includes a
gain of $850,000 calculated on the acquisition of the remaining ownership interest of an investment which the Company previously had a 20%
ownership interest.
Income tax expense (benefit) as a percentage of income (loss) from continuing operations before income tax (benefit) expense was 21.0%,
817.6% and (41.5)% in fiscal 2012, 2011 and 2010, respectively. The unusual percentage experienced during the year ended March 31, 2011 is related to
the recording of a deferred tax asset valuation allowance in the amount of $42,983,000.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totalled $89,473,000, $80,139,000, and $63,968,000 at March 31, 2012, 2011 and 2010, respectively.
Net cash provided by operating activities was $23,587,000, $3,280,000 and $29,867,000 in fiscal 2012, 2011 and 2010, respectively. The net cash
provided by operating activities in fiscal 2012 consisted of $26,967,000 in net income which was largely due to increased sales volume, a decrease in
prepaid expenses and other assets of $3,776,000 and increases in trade accounts payable and accrued and non-current liabilities of $3,862,000 and
$5,906,000, respectively, offset by increases in trade accounts receivables and inventories of $9,823,000 and $17,489,000 respectively. The increase in
inventory during fiscal 2012 was primarily to meet increasing sales volume and expected future customer demand.
The net cash provided by operating activities in fiscal 2011 consisted of $7,033,000 in net income before a $42,983,000 non-cash charge related
to the recording of valuation allowances against deferred tax assets, and increases in trade accounts payable and accrued and non-current liabilities of
$4,027,000 and $1,668,000 respectively, offset by increases in trade accounts receivables, inventory, and prepaid expenses and other assets of
$6,683,000, $9,848,000 and $5,178,000, respectively. The increase in inventories during the prior year was to meet expected future customer demand as
well as avoid disruption of supply during major facility consolidation projects. The increase in prepaid expenses in the prior year was due to the timing
of certain prepaid expenditures.
Net cash used by investing activities was $13,541,000, $4,344,000 and $1,350,000 in fiscal 2012, 2011 and 2010, respectively. The net cash used
by investing activities in fiscal 2012 consisted of $13,765,000 in capital expenditures (of which $5,248,000 relates to implementation of our global ERP
system) and $3,356,000 for the purchase of the remaining 80% interest in Yale Lifting Solutions (Pty) Ltd based in South Africa, partially offset by
$1,971,000 net proceeds from the sale of our vacant property in Cedar Rapids, Iowa in the period. The net cash used by investing activities in fiscal 2011
consisted of $12,543,000 in capital expenditures (of which $3,642,000 related to the initial investment in our global ERP system) offset by $6,621,000 in
cash generated from the net sales of marketable securities (related to the settlement of certain product liability insurance claims) and net proceeds of
$1,182,000 primarily from the sale of our vacant property in Muskegon, Michigan.
29
Net cash generated by financing activities was $474,000 and $15,794,000 in fiscal 2012 and 2011 respectively compared with net cash used by
financing activities of $5,418,000 in fiscal 2010. The net cash generated by financing activities in fiscal 2012 consisted of $1,436,000 of proceeds from
exercises of stock options offset by $361,000 of net payments under international lines of credit and $1,036,000 in repayment of debt. The Net cash
generated in fiscal 2011 was due to the refinancing of the $124,855,000 outstanding 8 7/8% Notes with a new issuance of $150,000,000 7 7/8%
Notes. Offsetting the proceeds from the offering was $3,154,000 paid for tender and call redemption premiums on the 8 7/8% Notes and $3,185,000 paid
for direct financing costs which have been deferred.
We believe that our cash on hand, cash flows, and borrowing capacity under our Revolving Credit Facility will be sufficient to fund our
ongoing operations and budgeted capital expenditures for at least the next twelve months. This belief is dependent upon successful execution of our
current business plan and effective working capital utilization. No material restrictions exist in accessing cash held by our non-U.S.
subsidiaries. Additionally we expect to meet our U.S. funding needs without repatriating non-U.S. cash and incurring the incremental U.S. taxes. As of
March 31, 2012, $33,242,000 of cash and cash equivalents were held by foreign subsidiaries.
We have an amended, restated and expanded revolving credit facility dated December 31, 2009. The Revolving Credit Facility provides
availability up to a maximum of $85,000,000 and expires December 31, 2013.
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 $65,000,000, subject to lender approval. The unused portion of the Revolving Credit Facility totalled $70,286,000, net of outstanding
borrowings of $0 and outstanding letters of credit of $14,714,000, as of March 31, 2012. The outstanding letters of credit at March 31, 2012 consisted of
$5,425,000 in commercial letters of credit (including a significant letter of credit related to a large customer order, amounting to $2,590,000 which will
mature in May 2012) and $9,289,000 of standby letters of credit.
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 150 or 50 basis points, respectively, at March 31, 2012. The Revolving Credit Facility is secured by all domestic inventory, receivables,
equipment, real property, subsidiary stock (limited to 65% of non-U.S. subsidiaries) and intellectual property.
The corresponding credit agreement associated with the Revolving Credit Facility places certain debt covenant restrictions on us, including
certain financial requirements and restrictions on dividend payments, with which we were in compliance as of March 31, 2012. Key financial covenants
include a minimum fixed charge coverage ratio of 1.25x, a maximum total leverage ratio, net of cash, of 3.50x, and maximum annual capital expenditures of
$18,000,000 excluding capital expenditures for a global ERP system. Our actual fixed charges coverage ratio and total leverage ratio, as calculated per
the terms of our Revolving Credit Facility, were 3.42x and 1.45x, respectively, at March 31, 2012.
During the fourth quarter of fiscal year 2011, the Company refinanced its 8 7/8% Notes through the issuance of $150,000,000 principal amount
of 7 7/8% Senior Subordinated Notes due 2019 in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended
(“Unregistered 7 7/8% Notes”). The proceeds from the sale of the Unregistered 7 7/8% Notes were used to repurchase or redeem all of the outstanding
8 7/8% Notes amounting to $124,855,000 and to fund working capital and other corporate activities. The offering price of the Unregistered 7 7/8%
Notes was 98.545% after adjustment for the original issue discount. Provisions of the Unregistered 7 7/8% Notes include, without limitation,
restrictions on indebtedness, asset sales, and dividends and other restrictive payments. Until February 1, 2014, the Company may redeem up to 35% of
the outstanding Unregistered 7 7/8% Notes at a redemption price of 107.875% with the proceeds of equity offerings, subject to certain restrictions. On
or after February 1, 2015, the Unregistered 7 7/8% Notes are redeemable at the option of the Company, in whole or in part, at a redemption price of
103.938%, reducing to 100% on February 1, 2017. In the event of a Change of Control (as defined in the indenture for such notes), each holder of the
Unregistered 7 7/8% Notes may require us to repurchase all or a portion of such holder’s Unregistered 7 7/8% Notes at a purchase price equal to 101%
of the principal amount thereof. The Unregistered 7 7/8% Notes are guaranteed by certain existing and future U.S. subsidiaries and are not subject to
any sinking fund requirements.
30
During the first quarter of fiscal year 2012, the Company exchanged its $150,000,000 outstanding Unregistered 7 7/8% Notes for a like principal
amount of 7 7/8% Senior Subordinated Notes due 2019 registered under the Securities Act of 1933, as amended (“7 7/8% Notes”). All of the
Unregistered 7 7/8% Notes were exchanged in the transaction. The 7 7/8% Notes contain identical terms and provisions as the Unregistered 7 7/8%
Notes.
Our capital lease obligations related to property and equipment leases amounted to $4,842,000 at March 31, 2012. 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, 2012, significant unsecured credit lines totalled approximately $10,361,000, of which
$112,000 was drawn.
CONTRACTUAL OBLIGATIONS
The following table reflects a summary of our contractual obligations in millions of dollars as of March 31, 2012, by period of estimated
payments due:
Total
Fiscal
2013
Fiscal 2014- Fiscal 2016- More Than
Fiscal 2015 Fiscal 2017
Five Years
Long-term debt obligations (a)
Operating lease obligations (b)
Purchase obligations (c)
Interest obligations (d)
Letter of credit obligations
Bank guarantees
Uncertain tax positions
Other long-term liabilities reflected on the Company’s
balance sheet under GAAP (e)
Total
$
$
$
154.8
13.5
-
81.7
14.7
7.4
2.4
96.7
371.2
$
1.1
4.6
-
12.2
14.7
7.4
-
-
40.0
$
$
$
2.4
5.8
-
24.0
-
2.4
$
0.8
3.1
-
23.8
-
-
33.8
68.4
$
34.9
62.6
$
150.5
-
-
21.7
-
-
28.0
200.2
(a) As described in Note 12 to consolidated financial statements.
(b) As described in Note 19 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 2/1/19 and other senior debt.
(e) As described in Note 11 to our consolidated financial statements. Excludes uncertain tax positions of $2.4 million shown separately above.
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 2012, 2011 and 2010 were $13,765,000, $12,543,000 and $7,245,000, respectively.
We expect capital expenditure spending in fiscal 2013 to be in the range of $14,000,000 to $17,000,000, excluding acquisitions and strategic partnerships.
31
INFLATION AND OTHER MARKET CONDITIONS
Our costs are affected by inflation in the U.S. economy and, to a lesser extent, in non-U.S. 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, U.S. employee benefits costs such as health insurance, workers compensation insurance, pensions as well as energy and
business insurance have exceeded general inflation levels. In the future, we may be further affected by inflation that we may not be able to pass on as
price increases. With changes in worldwide demand for steel and fluctuating scrap steel prices over the past several years, we experienced fluctuations
in our costs that we have reflected as price increases and surcharges to our customers. We believe we have been successful in instituting surcharges
and price increases to pass on these material cost increases. We will continue to monitor our costs and reevaluate our pricing policies.
SEASONALITY AND QUARTERLY RESULTS
Our quarterly results may be materially affected by the timing of large customer orders, periods of high vacation and holiday concentrations,
restructuring charges and other costs attributable to our facility rationalization program, divestitures, acquisitions and the magnitude of rationalization
integration costs. Therefore, our operating results for any particular fiscal quarter are not necessarily indicative of results for any subsequent fiscal
quarter or for the full fiscal year.
DISCONTINUED OPERATIONS
In May 2002, we completed the divestiture of substantially all of the assets of ASI which comprised the principal business unit in our former
Solutions - Automotive segment. Proceeds from this sale included an 8% subordinated note in the principal amount of $6,800,000 payable over 10
years. Due to the uncertainty of its collection, the note was 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, $1,052,000, and $396,000 of
income from discontinued operations was recorded in fiscal 2012, and 2011 respectively, net of tax. All interest and principal payments required under
the note have been made to date. The Company expects that the loan will be fully collected by the end of fiscal 2013.
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.
Revenue Recognition. Sales are recorded when title passes to the customer which is generally at the 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.
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 13
to our fiscal 2012 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.
32
The pension discount rate assumptions of 4.70%, 5.75%, and 6.0%, as of March 31, 2012, 2011, and 2010, respectively, are based on long-term
AA rated corporate and municipal bond rates. The decrease in the discount rate for fiscal 2012 resulted in a $11,500,000 increase in the projected benefit
obligation. The decrease in the discount rates for fiscal 2011 resulted in an $4,700,000 increase in the projected benefit obligation as of March 31,
2011. The rate of return on plan assets assumptions of 7.5% for each of the years ended March 31, 2012, 2011 and 2010 is based on the targeted plan
asset allocation (approximately 70% equities and 30% fixed income) and their long-term historical returns. Our under-funded status for all pension plans
as of March 31, 2012 and 2011 was $65,123,000 and $32,366,000, or 30.3% and 18.2% of the projected benefit obligation, respectively. Our pension
contributions during fiscal 2012 and 2011 were approximately $5,974,000 and $7,796,000, respectively. The under-funded status may result in future
pension expense increases. Pension expense for the March 31, 2013 fiscal year is expected to approximate $7,137,000, slightly less than the fiscal 2012
amount of $7,547,000, which includes a curtailment charge of $1,120,000. Pension funding contributions for the March 31, 2013 fiscal year is expected to
increase by approximately $4,412,000 compared to fiscal 2012. The compensation increase assumption of 2% as of March 31, 2012, 2011, and 2010 is
based on expected wage trends and historical patterns.
The healthcare costs inflation assumptions of 8.0% 8.5%, and 8.0% for fiscal 2012, 2011, and 2010, 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 16 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.
Accounts Receivable Reserves. 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. Accounts receivable are charged against the allowance for doubtful accounts once all collection efforts have been
exhausted. At March 31, 2012 the allowance for doubtful accounts totaled $2,700,000.
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, 2012
61.7
$
15.8
6.6
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, $106,435,000 as of March 31, 2012 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.
33
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
$9,821,000 and $96,614,000, respectively, at March 31, 2012.
When we evaluate the potential for goodwill impairment, we assess a range of qualitative factors including, but not limited to, macroeconomic
conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political
developments, entity specific factors such as strategy and changes in key personnel and overall financial performance. If, after completing this
assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we proceed to a two-step
impairment test.
In order to perform the two-step impairment test, we use the discounted cash flow method to estimate the fair value of each of our reporting
units. The discounted cash flow method incorporates various assumptions, the most significant being projected revenue growth rates, operating profit
margins and cash flows, the terminal growth rate and the discount rate. Management projects revenue growth rates, operating margins and cash flows
based on each reporting unit’s current business, expected developments and operational strategies over a five-year period. In estimating the terminal
growth rate, we consider our historical and projected results, as well as the economic environment in which our reporting units operate. The discount
rates utilized for each reporting unit reflect management’s assumptions of marketplace participants’ cost of capital and risk assumptions, both specific
to the reporting unit and overall in the economy.
We performed our qualitative assessment during the fourth quarter and determined that it was not more likely than not that the fair value of
each of our reporting units was less than that its applicable carrying value. Accordingly, we did not perform the two-step goodwill impairment test for
any of our reporting units.
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. During the fiscal year ended March 31, 2011, the Company recorded a non-cash charge of
$42,983,000 included within its provision for income taxes. The balance of the valuation allowance at March 31, 2012 is $53,325,000. This charge relates
to the Company’s determination that a full valuation allowance against its deferred tax assets generated in the U.S. was necessary. The deferred tax
assets relate principally to liabilities related to employee benefit plans, insurance reserves, U.S. tax credits, and U.S. net operating loss carryforwards.
The U.S. net operating loss carryforwards have been generated primarily as a result of restructuring costs in fiscal years 2010 and 2011. Accounting
rules require a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on the available and objectively verifiable
evidence, it is more likely than not that such assets will not be realized. The existence of cumulative losses for a certain threshold period is a significant
form of negative evidence used in the assessment. During the third quarter ended December 31, 2010, the Company determined that it would be in a
three-year cumulative pretax loss position in the U.S. at March 31, 2011 primarily due to restructuring-related charges incurred in the U.S. to-date in
fiscal 2011, despite our expectations of future profitability. If a cumulative loss threshold is met, the accounting rules indicate that forecasts of future
profitability are generally not sufficient positive evidence to overcome the presumption that a valuation allowance is necessary.
The recording of this non-cash charge does not impact the Company’s ability to realize the economic benefit of its deferred tax assets
(including those related to net operating loss carryforwards) amounting to $58,226,000 on a gross basis at March 31, 2012 on future tax returns. In
future periods, the allowance could be reduced or reversed based on sufficient objectively verifiable evidence indicating that it is more likely than not
that a portion or all of the Company’s deferred tax assets will be realized.
34
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
In December 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-12, Comprehensive Income (Topic 220): Deferral of the
Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting
Standards Update No. 2011-05. Among the new provisions in ASU 2011-05 was a requirement for entities to present reclassification adjustments out of
accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other
comprehensive income is presented (for both interim and annual financial statements); however this reclassification requirement is indefinitely deferred
by ASU 2011-12 and will be further deliberated by the FASB at a future date.
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities (ASU
2011-11). The update requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative
instruments. The ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods therein. We are currently evaluating the
impact this update will have on our consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment. The
amendment permits entities to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination
that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing relevant events or circumstances,
an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-
step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to follow the existing provisions of the two-step
impairment test. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15,
2011. Early adoption is permitted. We adopted the new guidance for our annual goodwill impairment test, which we tested as of our measurement date
of February 29, 2012. The adoption of this standard did not have a material impact on our consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”), effective for fiscal years, and
interim periods within those years, beginning after December 15, 2011. The issuance of ASU 2011-5 is intended to improve the comparability,
consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The guidance in
ASU 2011-5 supersedes the presentation options in ASC Topic 220 and facilitates convergence of U.S. generally accepted accounting principles and
International Financial Reporting Standards by eliminating the option to present components of other comprehensive income as part of the statement
of changes in stockholders’ equity and requiring that all nonowner changes in stockholders’ equity be presented either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. The Company does not expect that the adoption of ASU 2011-05
will have a significant impact on the Company’s consolidated financial statements.
In May 2011 the FASB issued ASU No. 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in US GAAP and International Financial Reporting Standards (“IFRS”) (“ASU 2011-04”). ASU 2011-04
represents the converged guidance of the FASB and the International Accounting Standards Board (the “Boards”) on fair value measurements. The
collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for
disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common
requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with
GAAP and IFRS. The amendments in this ASU are required to be applied prospectively, and are effective for interim and annual periods beginning
after December 15, 2011. The Company does not expect that the adoption of ASU 2011-04 will have a significant impact on the Company’s
consolidated financial statements.
35
In March 2011, the SEC issued Staff Accounting Bulletin (SAB) 114. This SAB revises or rescinds portions of the interpretive guidance
included in the codification of the Staff Accounting Bulletin Series. This update is intended to make the relevant interpretive guidance consistent with
current authoritative accounting guidance issued as a part of the FASB’s Codification. The principal changes involve revision or removal of
accounting guidance references and other conforming changes to ensure consistency of referencing through the SAB Series. The effective date for
SAB 114 was March 28, 2011. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This report may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the results
expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by us and
our subsidiaries, conditions affecting our customers and suppliers, competitor responses to our products and services, the overall market acceptance
of such products and services, 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 2012, 45% of our net sales were from manufacturing plants and sales offices in foreign jurisdictions. We manufacture our products in
the United States, China, Germany, United Kingdom, Hungary, Mexico and France and sell our products in approximately 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% change in the value of the U.S. dollar in relation to our most significant foreign currency exposures would have had an impact of
approximately $1,200,000 on our net income. In addition, the majority of our export sale transactions are denominated in U.S. dollars.
The Company has foreign currency forward agreements and cross-currency swaps 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 $11,120,000 and all contracts
mature by September 30, 2013. These contracts are not designated as hedges.
The Company has foreign currency forward agreements in place to hedge changes in the value of recorded foreign currency liabilities due to
changes in foreign exchange rates at the settlement date. The notional amount of those derivatives is $2,597,000 and all contracts mature within twelve
months. These contracts are marked to market each balance sheet date and are not designated as hedges.
36
The Company has foreign currency forward agreements that are designated as cash flow hedges to hedge a portion of forecasted inventory
purchases and sales, including multi-year contracts related to capital project sales, denominated in a foreign currency. The notional amount of those
derivatives is $10,098,000 and all contracts mature within twenty-seven months of March 31, 2012.
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, 2012, we do not have any material swap agreements or
similar financial instruments in place. At March 31, 2012 and 2011, approximately 99% and 99% of our outstanding debt had fixed interest rates,
respectively. At those dates, we had approximately $112,000 and $473,000, respectively, of outstanding variable rate debt. A 1% fluctuation in interest
rates would have changed interest expense on that outstanding variable rate debt by less than $100,000 in fiscal 2012 and 2011.
37
Item 8.
Financial Statements and Supplemental Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 2012:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Inventories
1. Description of Business
2. Accounting Principles and Practices
3. Acquisitions
4. Divestitures
5. Fair Value Measurements
6.
7. Marketable Securities
8.
Property, Plant, and Equipment
9. Goodwill and Intangible Assets
10. Derivative Instruments
11. Accrued Liabilities and Other Non-current Liabilities
12. Debt
13. Pensions and Other Benefit Plans
14. Employee Stock Ownership Plan (ESOP)
15. Earnings per Share and Stock Plans
16. Loss Contingencies
17. Restructuring Charges
18.
19. Rental Expense and Lease Commitments
20. Summary Financial Information
21. Business Segment Information
22. Selected Quarterly Financial Data (unaudited)
23. Accumulated Other Comprehensive Loss
24. Effects of New Accounting Pronouncements
Income Taxes
Schedule II – Valuation and Qualifying Accounts.
38
39
40
41
42
43
44
44
48
48
49
51
51
53
53
55
57
58
60
66
67
73
74
76
79
79
85
86
87
87
89
The Board of Directors and Shareholders of Columbus McKinnon Corporation
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Columbus McKinnon Corporation as of March 31, 2012 and 2011, and the related
consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2012. 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, 2012 and 2011 and the consolidated results of its operations and its cash flows for each of the three years in the
period ended March 31, 2012, 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.
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, 2012, 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 30, 2012 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
May 30, 2012
39
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
Current assets:
ASSETS
Cash and cash equivalents
Trade accounts receivable, less allowance for doubtful accounts ($2,745 and $3,166, respectively)
Inventories
Prepaid expenses and other
Total current assets
Net property, plant, and equipment
Goodwill
Other intangibles, net
Marketable securities
Deferred taxes on income
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable to banks
Trade accounts payable
Accrued liabilities
Restructuring reserve
Current portion of long-term debt
Total current liabilities
Senior debt, less current portion
Subordinated debt
Other non-current liabilities
Total liabilities
Shareholders’ equity:
Voting common stock: 50,000,000 shares authorized; 19,400,526 and 19,171,428 shares issued and outstanding
Additional paid-in capital
Retained earnings (accumulated deficit)
ESOP debt guarantee: 60,460 and 88,097 shares
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes.
40
March 31,
2012
2011
(In thousands, except share
data)
$
$
$
$
89,473
88,642
108,055
10,449
296,619
61,709
106,435
15,791
25,393
2,824
6,636
515,407
112
40,991
61,713
-
1,093
103,909
3,749
148,140
99,143
354,941
193
189,260
25,895
(975)
(53,907)
160,466
515,407
$
$
$
$
80,139
77,744
90,031
14,294
262,208
59,360
106,055
18,089
24,592
1,217
7,351
478,872
473
37,174
56,455
47
1,116
95,265
4,949
147,867
68,645
316,726
191
184,884
(1,072)
(1,407)
(20,450)
162,146
478,872
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31,
Net sales
Cost of products sold
Gross profit
Selling expenses
General and administrative expenses
Restructuring (gain) charges, net
Amortization of intangibles
Income (loss) from operations
Interest and debt expense
Cost of bond redemptions
Investment income
Foreign currency exchange loss (gain)
Other income, net
Income (loss) from continuing operations before income tax expense (benefit)
Income tax expense (benefit)
Income (loss) from continuing operations
Income from discontinued operations (net of tax)
Net income (loss)
Average basic shares outstanding
Average diluted shares outstanding
Income (loss) from continuing operations
Income from discontinued operations
Basic income (loss) per share
Diluted (loss) per share:
Income (loss) from continuing operations
Income from discontinued operations
Diluted income (loss) per share
$
$
$
$
$
$
See accompanying notes.
41
2012
2010
$
$
2011
(In thousands, except per share data)
591,945
434,227
157,718
64,860
46,677
(1,037)
2,074
45,144
14,214
―
(1,018)
316
(1,179)
32,811
6,896
25,915
524,065
398,013
126,052
62,910
40,592
2,200
1,778
18,572
13,532
3,939
(3,041)
452
(1,375)
5,065
41,411
(36,346)
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)
1,052
26,967
$
396
(35,950)
$
19,272
19,512
1.35
0.05
1.40
1.33
0.05
1.38
$
$
$
$
19,047
19,047
(1.91)
0.02
(1.89)
(1.91)
0.02
(1.89)
$
$
$
$
531
(7,013)
18,963
18,963
(0.40)
0.03
(0.37)
(0.40)
0.03
(0.37)
Balance at April 1, 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
Comprehensive income (loss):
Net loss 2011
Change in foreign currency translation
adjustment
Change in net unrealized gain
on investments, net of tax of $0
Change in derivatives qualifying as
hedges, net of tax of $0
Change in pension liability and
postretirement obligations, net of tax
of $952
Total comprehensive loss
Stock compensation - directors
Stock options exercised, 6,625 shares
Stock compensation expense
Tax effect of exercise of stock options
Earned 27,669 ESOP shares
Balance at March 31, 2011
Comprehensive income (loss):
Net income 2012
Change in foreign currency translation
adjustment
Change in net unrealized gain
on investments, net of tax of $0
Change in derivatives qualifying as
hedges, net of tax of $12
Change in pension liability and
$
$
postretirement obligations, net of tax
of $438
Total comprehensive loss
Stock compensation - directors
Stock options exercised, 171,970 shares
Stock compensation expense
Earned 26,872 ESOP shares
Balance at March 31, 2012
$
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data)
Common
Stock ($.01
par value)
Additional
Paid-in
Capital
Retained
Earnings
ESOP
Debt
Guarantee
Accumulated
Other
Comprehensive
Loss
Total
Shareholders
Equity
$
190
$
180,327
$
41,891
$
(2,309)
$
(38,245)
$
181,854
-
-
-
-
-
-
-
-
-
-
-
1
-
-
-
191
$
280
291
1,544
(5)
(52)
182,385
$
-
-
-
-
-
-
-
-
-
-
-
-
-
191
$
450
56
2,034
(68)
27
184,884
$
-
-
-
-
-
-
-
-
-
-
(7,013)
-
-
-
-
-
-
-
-
-
34,878
(35,950)
$
-
-
-
-
-
-
-
-
(1,072)
26,967
$
-
-
-
-
-
-
-
-
-
-
-
-
-
459
(1,850)
$
-
-
-
-
-
-
-
-
443
(1,407)
$
-
-
-
-
-
-
2
-
-
193
$
420
1,436
2,493
27
189,260
$
-
-
-
-
25,895
$
-
-
-
432
(975)
$
See accompanying notes.
42
-
(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
-
(35,950)
4,933
(329)
239
3,033
-
-
-
-
-
(20,450)
-
(4,621)
1,201
(246)
(29,791)
-
-
-
-
(53,907)
$
$
4,933
(329)
239
3,033
(28,074)
450
56
2,034
(68)
470
162,146
26,967
(4,621)
1,201
(246)
(29,791)
(6,490)
420
1,438
2,493
459
160,466
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
2012
Operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Income from discontinued operations
Depreciation and amortization
Deferred income taxes
Gain on sale of real estate/investments and other
Loss on early retirement of bonds
Amortization/write-off of deferred financing costs
Stock-based compensation
Gain on re-measurement of investment
Non-cash restructuring charges
Changes in operating assets and liabilities, net of effects of business acquisitions and
divestitures:
Trade accounts receivable
Inventories
Prepaid expenses and other
Other assets
Trade accounts payable
Accrued and non-current liabilities
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
Purchase of business
Net cash used for investing activities from continuing operations
Net cash provided by investing activities from discontinued operations
Net cash used for investing activities
Financing activities:
Proceeds from exercise of stock options
Payment of bond redemption tender fees
Payments under line-of-credit agreements
Borrowings under line-of-credit agreements
Repayment of debt
Proceeds from issuance of long-term debt
Payment of deferred financing costs
Change in ESOP debt guarantee
Net cash provided by (used for) financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplementary cash flows data:
Interest paid
Income taxes paid, net of refunds
$
$
$
$
See accompanying notes.
43
Year ended March 31,
2011
(In thousands)
(35,950)
$
$
26,967
(1,052)
11,862
(910)
(1,958)
-
383
2,913
(850)
-
(9,823)
(17,489)
3,232
544
3,862
5,906
23,587
5,747
(5,190)
(13,765)
1,971
(3,356)
(14,593)
1,052
(13,541)
1,436
-
(361)
-
(1,036)
-
-
435
474
(1,186)
9,334
80,139
89,473
14,206
5,394
$
$
$
(396)
11,050
40,773
(2,884)
3,939
278
2,484
-
-
(6,683)
(9,848)
(3,983)
(1,195)
4,027
1,668
3,280
23,048
(16,427)
(12,543)
1,182
-
(4,740)
396
(4,344)
-
(3,154)
(511)
174
(125,817)
147,844
(3,185)
443
15,794
1,441
16,171
63,968
80,139
15,556
946
$
$
$
2010
(7,013)
(531)
12,490
(8,675)
(2,515)
-
640
1,824
-
1,835
10,508
21,477
941
1,228
288
(2,630)
29,867
6,340
(4,518)
(7,245)
3,542
-
(1,881)
531
(1,350)
291
-
(8,502)
4,556
(964)
-
(1,258)
459
(5,418)
1,633
24,732
39,236
63,968
12,451
3,954
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 move, lift, position and secure material. Key products include hoists, rigging tools, cranes, and actuators. The Company’s
material handling products are sold globally principally to third party distributors through diverse distribution channels, and to a lesser extent directly
to end-users. During fiscal 2012, approximately 55% 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 $3,500,000, $3,700,000, and $3,020,000 in fiscal 2012, 2011, and 2010, 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 four separate U.S. and Canadian collective bargaining agreements which
terminate at various times between August 2013 and April 2015.
Consolidation
These consolidated financial statements include the accounts of the Company and its global subsidiaries; all significant intercompany
accounts and transactions have been eliminated. Our Mexican subsidiary closes one month early to facilitate consolidated reporting.
Financial Instruments
The carrying value of the Company’s current assets and current liabilities approximate their fair values based upon the relatively short
maturity of those instruments.
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 losses, including changes in the fair value of derivatives, of approximately $316,000 on foreign
currency transactions in fiscal 2012. Including changes in the fair value of derivatives, there were losses of $452,000 and gains of $344,000 on foreign
currency transactions in fiscal 2011 and 2010, respectively.
44
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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.
When the Company evaluates the potential for goodwill impairment, it assesses a range of qualitative factors including, but not limited to,
macroeconomic conditions, industry conditions, the competitive environment, changes in the market for its products and services, regulatory and
political developments, entity specific factors such as strategy and changes in key personnel and overall financial performance. If, after completing this
assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company proceeds to
a two-step impairment test.
The Company performed its qualitative assessment during the fourth quarter and determined that it was not more likely than not that the fair
value of each of its reporting units was less than that its applicable carrying value. Accordingly, the Company did not perform the two-step goodwill
impairment test for any of its 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.
45
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 method is
not considered significant. The estimated useful lives for our intangible assets range from 3 to 18 years.
Inventories
Inventories are valued at the lower of cost or market. Cost of approximately 44% of inventories at March 31, 2012 (46% at March 31, 2011) 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. Estimated fair value is based on published trading values at
the balance sheet dates. The cost of securities sold is based on the specific identification method. Interest and dividend income are included in
investment income in the consolidated statements of 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 $4,497,000, $2,947,000, and $2,592,000 for
the years ended March 31, 2012, 2011 and 2010, respectively, and are classified as general and administrative expense in the consolidated statements of
operations.
Revenue Recognition, Accounts Receivable and Concentration of Credit Risk
46
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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.
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 15 for further discussion of stock-based compensation.
Reclassifications
Certain prior year numbers have been reclassified to conform with current year reporting presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those
estimates.
Warranties
The Company offers warranties for certain products it sells. The specific terms and conditions of those warranties vary depending upon the
product sold and the country in which the Company sold the product. The Company generally provides a basic limited warranty, including parts and
labor for any product deemed to be defective for a period of one year. The Company estimates the costs that may be incurred under its basic limited
warranty, based largely upon actual warranty repair costs history, and records a liability in the amount of such costs in the month that the product
revenue is recognized. The resulting accrual balance is reviewed during the year. Factors that affect the Company’s warranty liability include the
number of units sold, historical and anticipated rate of warranty claims, and cost per claim. Changes in the Company’s product warranty accrual are as
follows:
Balance at beginning of year
Accrual for warranties issued
Warranties settled
Balance at end of year
47
2012
2011
$
$
563
2,849
(2,342)
1,070
$
$
926
1,474
(1,837)
563
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
3.
Acquisitions
On December 13, 2011, the Company acquired 80% of the outstanding common shares of Yale Lifting Solutions (Pty) LTD (“YLS PTY”)
located in Magaliesburg, South Africa, a privately owned company with annual sales of less than $10,000,000. The Company now owns 100% of YLS
PTY. YLS PTY has been representing the Company’s Yale brand of products as a distributor to the South African mining industry for over 14 years.
The Company had previously owned 20% of the outstanding common shares of YLS PTY which the Company accounted for as a cost method
investment as it did not exercise significant influence over YLS PTY’s operating or financial policies. The carrying amount of the cost method
investment prior to the acquisition of the remaining 80% interest was under $1,000. The results of YLS PTY are included in the Company’s
consolidated financial statements from the date of acquisition. The acquisition of YLS PTY is not considered significant to the Company’s consolidated
financial position and results of operations.
This transaction was accounted for as a step acquisition in accordance with Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 805 “Business Combinations.” The aggregate purchase consideration for the remaining 80% ownership of Yale
Lifting Solutions (Pty) LTD was $3,356,000. The acquisition date fair value of the Company’s 20% interest in YLS PTY was $850,000 and resulted in an
$850,000 gain, which is recorded within other income, net in the consolidated financial statements. The acquisition was funded with existing cash. The
purchase price and fair value of the previously held 20% ownership interest has been assigned to the assets acquired and liabilities assumed based
upon their fair values. The identifiable intangible assets consist of customer contracts with a value of $397,000 (3 year estimated useful life). The excess
consideration over fair value was recorded as goodwill and approximates $1,470,000, none of which is deductible for tax purposes. The allocation of
purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):
Working capital
Property, plant and equipment
Identifiable intangible assets
Goodwill
Total
$
$
2,062
277
397
1,470
4,206
4.
Divestitures
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. The note has a remaining balance of $214,000 at March 31, 2012 which is expected to be fully collected by the
end of fiscal 2013.
Summarized statements of operations for discontinued operations are as follows:
Net revenue
Gain before income taxes
Income tax expense
Gain from discontinued operations
$
$
48
2012
Year Ended March 31,
2011
(In thousands)
-
$
639
243
396
$
$
$
-
1,052
-
1,052
2010
-
857
326
531
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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.
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 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.
49
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The following table provides information regarding financial assets and liabilities measured at fair value on a recurring basis:
Description
Assets/(Liabilities):
Marketable securities
Other Equity Investments
Net Derivative liabilities
Fair value measurements at reporting date using
At March
31, 2012
Quoted prices in active
markets for identical
assets (Level 1)
Significant other
observable inputs
(Level 2)
Significant
unobservable
inputs (Level 3)
$
25,393 $
1,248
(809)
25,393 $
1,248
-
- $
-
(809)
-
-
-
As of March 31, 2012, the Company did not have any nonfinancial assets and liabilities that are recognized or disclosed at fair value on a
recurring basis.
Interest and dividend income on marketable securities are recorded in investment (income) loss. Changes in the fair value of derivatives are
recorded in foreign currency exchange (gain) loss or other comprehensive loss, to the extent that the derivative qualifies as a hedge under the
provisions of ASC Topic 815. 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 2011 and 2010, the Company sold a portion of these previously written down
investments, which resulted in the recognition of a gain of approximately $1,852,000 and $606,000, respectively.
Assets that were measured on a non-recurring basis during fiscal 2011 and 2010 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.” Liabilities that are measured on a non-
recurring basis during fiscal 2010 include 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.”
Assets and liabilities that are measured on a non-recurring basis during fiscal 2012 include assets and liabilities acquired in connection with
the acquisition of YLS PTY described in Note 3. The estimated fair values allocated to the assets acquired and liabilities assumed relied upon fair value
measurements based primarily on Level 3 inputs. The valuation techniques used to allocate fair values to working capital items; property, plant, and
equipment; and identifiable intangible assets included the cost approach, market approach, and other income approaches. The valuation techniques
relied on a number of inputs which included the cost and condition of property, plant, and equipment and forecasted net sales and income.
50
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,
2012
2011
$
$
59,252
18,952
49,315
127,519
(19,464)
108,055
$
$
50,590
15,175
41,508
107,273
(17,242)
90,031
There were LIFO liquidations resulting in $2,173,000 and $500,000 positive impacts on fiscal 2012 and 2011 income, respectively. There were no LIFO
liquidations in fiscal 2010.
During fiscal 2011 the Company wrote off $411,000 in inventory related to restructuring activities, which is classified in cost of products sold.
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. Estimated fair value is based on
published trading values at the balance sheet dates. The cost of securities sold is based on the specific identification method. Interest and dividend
income are included in investment income in the consolidated statements of 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, 2012, 2011, and 2010.
During fiscal 2011 and 2010, the Company sold nearly all of these previously written down investments, which resulted in the recognition of gains of
approximately $1,852,000 and $606,000, respectively.
51
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, 2012:
Marketable securities
$
23,183 $
2,249 $
39 $
25,393
The aggregate fair value of investments and unrealized losses on available-for-sale securities in an unrealized loss position at March 31, 2012
are as follows:
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cost
Securities in a continuous loss position for less than 12 months
Securities in a continuous loss position for more than 12 months
Aggregate
Fair Value
Unrealized
Losses
$
$
1,667
-
1,667
$
$
39
-
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, 2012 were temporary in nature.
Net realized gains (losses) related to sales of marketable securities (excluding other-than-temporary impairments) were $152,000, $2,358,000,
and $(238,000) in fiscal 2012, 2011 and 2010, respectively.
The following is a summary of available-for-sale securities at March 31, 2011:
Marketable securities
$
23,708 $
1,064 $
180 $
24,592
The aggregate fair value of investments and unrealized losses on available-for-sale securities in an unrealized loss position at March 31, 2011
are as follows:
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Cost
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
14,788
1,035
15,823
$
$
$
$
Unrealized
Losses
159
21
180
Net unrealized gains included in the balance sheet amounted to $2,210,000 at March 31, 2012 and $884,000 at March 31, 2011. The amounts, net
of related deferred tax liabilities of $309,000 and $309,000 at March 31, 2012 and 2011, respectively, are reflected as a component of accumulated other
comprehensive loss within shareholders’ equity.
In addition to the above, the Company has included unrealized gains of $679,000 and $804,000 as of the period ending March 31, 2012 and
2011, respectively, net of deferred tax liabilities, within accumulated other comprehensive loss related to an investment recorded in prepaid expenses
and other current assets.
52
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:
Land and land improvements
Buildings
Machinery, equipment, and leasehold improvements
Construction in progress
Less accumulated depreciation
Net property, plant, and equipment
March 31,
2012
2011
$
$
4,009
25,449
127,656
8,369
165,483
103,774
61,709
$
$
3,814
25,175
122,785
7,198
158,972
99,612
59,360
Buildings include assets recorded under capital leases amounting to $9,697,000 and $9,595,000 for the years ended March 31, 2012 and
2011. Machinery, equipment, and leasehold improvements include assets recorded under capital leases amounting to $2,303,000 and $3,357,000 for the
years ended March 31, 2012 and 2011, respectively. Accumulated depreciation includes accumulated amortization of the assets recorded under capital
leases amounting to $5,799,000 and $5,254,000 at March 31, 2012 and 2011, respectively.
Depreciation expense, including amortization of assets recorded under capital leases, was $9,788,000, $9,286,000, and $10,613,000 for the years
ended March 31, 2012, 2011 and 2010, respectively.
Machinery, equipment, and leasehold improvements include gross capitalized software costs of $9,759,000. Accumulated depreciation
includes accumulated amortization on capitalized software costs of $274,000. Depreciation expense on capitalized software costs was $179,000 during
the year ended March 31, 2012.
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, 2012 and March 31, 2011. The Duff-Norton reporting unit (which
designs, manufactures and sources mechanical and electromechanical actuators and rotary unions) had goodwill of $9,821,000 and $9,902,000 at March
31, 2012 and 2011, respectively, and the Rest of Products reporting unit (representing the hoist, chain, and forgings design, manufacturing, and
distribution businesses) had goodwill of $96,614,000 and $96,153,000 at March 31, 2012 and 2011, respectively.
When we evaluate the potential for goodwill impairment, we assess a range of qualitative factors including, but not limited to, macroeconomic
conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political
developments, entity specific factors such as strategy and changes in key personnel and overall financial performance. If, after completing this
assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we proceed to a two-step
impairment test.
53
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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.
We performed our qualitative assessment during the fourth quarter and determined that it was not more likely than not that the fair value of
each of our reporting units was less than that its applicable carrying value. Accordingly, we did not perform the two-step goodwill impairment test for
any of our reporting units.
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.
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, 2012 and 2011 is as follows:
Balance at April 1, 2010
Currency translation
Balance at March 31, 2011
Acquisition of YLS PTY (See Note 3)
Currency translation
Balance at March 31, 2012
$
$
105,134
921
106,055
1,470
(1,090)
106,435
Goodwill is recognized net of accumulated impairment losses of $107,000,000 as of March 31, 2012 and 2011, respectively. There were no goodwill
impairment losses recorded in fiscal 2012, 2011, or 2010.
Intangible assets at March 31, 2012 are as follows:
Trademarks
Customer relationships
Other
Balance at March 31, 2012
Gross
Carrying
Amount
Accumulated
Amortization
Net
$
$
5,783
14,808
1,267
21,858
$
$
(1,109)
(4,693)
(265)
(6,067)
$
$
4,674
10,115
1,002
15,791
54
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Intangible assets at March 31, 2011 were as follows:
Trademarks
Customer relationships
Other
Balance at March 31, 2011
Gross
Carrying
Amount
Accumulated
Amortization
Net
$
$
6,136
15,179
1,339
22,654
$
$
(841)
(3,485)
(239)
(4,565)
$
$
5,295
11,694
1,100
18,089
All of the Company’s intangibles assets are considered to have finite 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 $2,074,000, $1,778,000, and
$1,876,000 for fiscal 2012, 2011, and 2010, respectively. Based on the current amount of intangible assets, the estimated amortization expense for each of
the succeeding five years is expected to be $1,930,000, $1,900,000, $1,880,000, $1,850,000, and $1,840,000, respectively.
10.
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 (“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 cross-currency swaps 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 $11,120,000 and all contracts
mature by September 30, 2013. These contracts are not designated as hedges.
The Company has foreign currency forward agreements in place to hedge changes in the value of recorded foreign currency liabilities due to
changes in foreign exchange rates at the settlement date. The notional amount of those derivatives is $2,597,000 and all contracts mature within twelve
months. These contracts are marked to market each balance sheet date and 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 and sales, including multi-year contracts related to capital project sales, denominated in a foreign currency. The notional amount of those
derivatives is $10,098,000 and all contracts mature within twenty-seven months of March 31, 2012.
The Company is exposed to credit losses in the event of non-performance 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 Company has derivative contracts with four different counterparties as of March 31, 2012.
55
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The following is the effect of derivative instruments on the consolidated statement of operations for the years ended March 31, 2012, 2011,
and 2010 (in thousands):
Derivatives Designated as Cash Flow
Hedges (Foreign Exchange Contracts)
March 31,
2012
2011
2010
Derivatives Not Designated as
Hedging Instruments (Foreign
Exchange Contracts)
March 31,
2012
2011
2010
Amount of Gain or
(Loss) Recognized in
Other
Comprehensive
Income on
Derivatives
(Effective Portion)
Location of Gain or
(Loss) Recognized
in Income on
Derivatives
Amount of
Gain or (Loss)
Reclassified
from AOCL
into Income
(Effective
Portion)
$
24 Cost of products sold $
217 Cost of products sold
94 Cost of products sold
183
38
-
Location of (Gain) or Loss Recognized in
Income on Derivatives
Amount of
(Gain) or Loss
Recognized in
Income on
Derivatives
Foreign currency exchange (gain) loss
Foreign currency exchange (gain) loss
Foreign currency exchange (gain) loss
$
(556)
(209)
(174)
As of March 31, 2012 and 2011, the Company had no derivatives designated as net investments or fair value hedges in accordance with ASC
Topic 815, “Derivatives and Hedging.”
The following is information relative to the Company’s derivative instruments in the consolidated balance sheet as of March 31, 2012 and 2011
(in thousands):
Derivatives Designated as
Hedging Instruments
Foreign exchange contracts
Foreign exchange contracts
Derivatives Not Designated as
Hedging Instruments
Foreign exchange contracts
Foreign exchange contracts
Fair Value of Asset (Liability)
March 31,
2012
2011
$
$
1
(324)
85
(439)
Fair Value of Asset (Liability)
March 31,
2012
2011
$
$
16
(502)
3
(1,046)
Balance Sheet Location
Other Assets
Accrued Liabilities
Balance Sheet Location
Other Assets
Accrued Liabilities
56
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
11.
Accrued Liabilities and Other Non-current Liabilities
Consolidated accrued liabilities of the Company consisted of the following:
Accrued payroll
Interest payable
Accrued workers compensation
Accrued income taxes payable
Accrued postretirement benefit obligation
Accrued health insurance
Accrued general and product liability costs
Customer advances and deposits
Other accrued liabilities
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
57
March 31,
2012
2011
19,072
2,228
1,220
4,715
855
3,179
4,039
15,033
11,372
61,713
$
$
17,966
2,600
1,719
2,622
1,021
3,912
4,065
11,122
11,428
56,455
March 31,
2012
2011
6,221
16,497
64,279
1,202
4,522
6,422
99,143
$
$
7,812
16,511
31,467
1,717
4,702
6,436
68,645
$
$
$
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
12.
Debt
Consolidated long-term debt of the Company consisted of the following:
Capital lease obligations
Other senior debt
Total senior debt
7 7/8% Senior Subordinated Notes due February 1, 2019 with interest payable in
semi-annual installments (net of the unamortized discount of $1,860 and $2,133,
respectively)
Total
Less current portion
March 31,
2012
2011
$
$
$
4,842
-
4,842
148,140
152,982
1,093
151,889
$
$
$
6,037
28
6,065
147,867
153,932
1,116
152,816
The Revolving Credit Facility provides availability up to a maximum of $85,000,000 and has an initial term ending December 31, 2013.
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 $70,286,000, net of
outstanding borrowings of $0 and outstanding letters of credit, issued under the credit facility, of $14,714,000, as of March 31, 2012. The outstanding
letters of credit at March 31, 2012 consisted of $5,425,000 in commercial letters of credit (including a significant letter of credit related to a large customer
order, amounting to $2,590,000, which matures in May 2012) and $9,289,000 of standby letters of credit. 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 150 or 50 basis points,
respectively, based on the Company’s leverage ratio at March 31, 2012. The Revolving Credit Facility is secured by all U.S. inventory, receivables,
equipment, real property, subsidiary stock (limited to 65% of non-U.S. 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, 2012. Key
financial covenants include a minimum fixed charge coverage ratio of 1.25x, a maximum total leverage ratio, net of cash, of 3.50x, and maximum annual
capital expenditures of $18,000,000, excluding capital expenditures for a global ERP system.
The Company entered into a third amendment to its Revolving Credit Facility on July 15, 2011 to: (i) make reductions in the ‘Applicable Rate’
grid, in recognition of improved market conditions, resulting in lower unused, Libor and Base Rate borrowing and letters of credit fees at various levels
in the grid, based on the Total Leverage Ratio; (ii) amend the definition of Total Funded Indebtedness to exclude commercial letters of credit (Total
funded indebtedness is used in the calculation of the Total Leverage Ratio covenant); (iii) allow for letters of credit to be issued for any period up to 5
days prior to the expiry date of the Revolving Credit Facility and a “basket” of $20,000,000 for letters of credit which may expire up to 1 year past the
expiry date; (iv) permit a general lien “basket” of $2,500,000; (v) extend the expected date for consummation of a pre-approved specific acquisition and
divestiture, and (vi) increase the general Investments “basket” by $5,000,000 to $30,000,000.
The Company entered into a fourth amendment to its Revolving Credit Facility on February 13, 2012 in relation to a proposed change in its
global legal entity structure. The amendment: (i) permits the Company to pledge 65% of the stock of a newly created Dutch holding company as
consideration for release of the pledge of 65% of the stock of an existing non-U.S. subsidiary; (ii) increases the “basket” for investments in the
Company’s subsidiaries, that are not loan parties, by $20,000,000 to $30,000,000 and; (iii) permits the newly created Dutch holding company to operate
as a treasury center.
58
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
On January 25, 2011, the Company issued $150,000,000 principal amount of 7 7/8% Senior Subordinated Notes due 2019 in a private placement
pursuant to Rule 144A under the Securities Act of 1933, as amended (Unregistered 7 7/8% Notes). The offering price of the notes was 98.545% of par
after adjustment for original issue discount.
Provisions of the Unregistered 7 7/8% Notes include, without limitation, restrictions on indebtedness, asset sales, and dividends and other
restricted payments. Until February 1, 2014, the Company may redeem up to 35% of the outstanding Unregistered 7 7/8% Notes at a redemption price of
107.875% with the proceeds of equity offerings, subject to certain restrictions. On or after February 1, 2015, the Unregistered 7 7/8% Notes are
redeemable at the option of the Company, in whole or in part, at a redemption price of 103.938%, reducing to 101.969% and 100% on February 1, 2016
and February 1, 2017, respectively and are due February 1, 2019. In the event of a Change of Control (as defined in the indenture for such notes), each
holder of the Unregistered 7 7/8% Notes may require the Company to repurchase all or a portion of such holder’s Unregistered 7 7/8% Notes at a
purchase price equal to 101% of the principal amount thereof. The Unregistered 7 7/8% Notes are guaranteed by certain existing and future U.S.
subsidiaries and are not subject to any sinking fund requirements.
On June 2, 2011 the Company exchanged $150,000,000 of its outstanding Unregistered 7 7/8% Notes due 2019 for a like principal amount of its
7 7/8% Notes due 2019, registered under the Securities Act of 1933, as amended (7 7/8% Notes). All of the Unregistered 7 7/8% Senior Subordinated
Notes due 2019 were exchanged in the transaction. The 7 7/8% Notes contain identical terms and provisions as the Unregistered 7 7/8% Notes.
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 7 7/8% Notes, which have a par value of $150,000,000 at March 31, 2012, have an approximate fair value
of $156,000,000 based on quoted market prices.
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
lease obligations of $4,842,000 and $6,037,000 as of March 31, 2012 and 2011, respectively, are included in senior debt in the consolidated balance
sheets.
The principal payments scheduled to be made as of March 31, 2012 on the above debt are as follows (in $ thousands):
2013
2014
2015
2016
2017
Thereafter
$
$
1,093
1,059
1,372
412
449
150,457
154,842
The Company’s Notes payable to banks consist primarily of draws against unsecured non-U.S. lines of credit. The Company’s other senior
debt consists primarily of capital lease obligations as described above.
59
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Non-U.S. 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, 2012, significant unsecured credit lines totaled approximately $10,361,000, of which
$112,000 was drawn.
13.
Pensions and Other Benefit Plans
The Company provides retirement plans, including defined benefit and defined contribution plans, and postretirement benefit plans to certain
employees. The Company applies 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.
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:
Change in benefit obligation:
Benefit obligation at beginning of year
Curtailment
Amendment
Service cost
Interest cost
Actuarial loss
Benefits paid
Foreign exchange rate changes
Benefit obligation at end of year
60
March 31,
2012
2011
$
$
177,760
(3,256)
648
3,530
10,010
36,723
(9,165)
(1,037)
215,213
$
$
168,918
-
-
3,368
9,738
4,583
(9,655)
808
177,760
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Change in plan assets:
Fair value of plan assets at beginning of year
Actual gain on plan assets
Employer contribution
Benefits paid
Foreign exchange rate changes
Fair value of plan assets at end of year
Funded status
Unrecognized actuarial loss
Unrecognized prior service cost
Net amount recognized
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
61
$
$
$
$
145,394
8,032
5,974
(9,165)
(145)
150,090
(65,123)
76,600
415
11,892
$
$
$
$
132,136
15,010
7,796
(9,655)
107
145,394
(32,366)
43,620
1,018
12,272
March 31,
2012
2011
(844) $
(64,279)
18,511
58,504
11,892
$
(899)
(31,467)
17,751
26,887
12,272
$
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
In fiscal 2013, an estimated net loss of $6,096,000 and prior service cost of $162,000 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:
2012
2011
2010
Service costs—benefits earned during the period
Interest cost on projected benefit obligation
Expected return on plan assets
Net amortization
Curtailment/settlement loss
Net periodic pension cost
$
$
3,530
10,010
(10,704)
3,591
1,120
7,547
$
$
$
3,368
9,738
(9,865)
3,572
23
6,836
$
3,687
9,950
(7,479)
4,210
2,417
12,785
In fiscal 2010, the Company recorded a curtailment loss on the statement of operations within restructuring charges. Refer to Note 17 for
further discussion.
In fiscal 2012, the Company completed negotiations with one of its labor unions which resulted in an amendment to one of its pension
plans. The Company also amended one of its pension plans with its non-union employees. Within cost of products sold for fiscal 2012, the Company
recorded a curtailment charge of $1,120,000 resulting from the amendments.
Information for pension plans with a projected benefit obligation in excess of plan assets is as follows:
Projected benefit obligation
Fair value of plan assets
March 31,
2012
2011
$
215,213
150,090
$
177,760
145,394
Information for pension plans with an accumulated benefit obligation in excess of plan assets is as follows:
Accumulated benefit obligation
Fair value of plan assets
March 31,
2012
2011
$
206,985
150,090
$
172,830
145,394
Unrecognized gains and losses are amortized through March 31, 2012 on a straight-line basis over the average remaining service period of
active participants.
62
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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
2012
2011
2010
4.70%
7.50
2.00
5.75%
7.50
2.00
6.00%
7.50
2.00
The expected rates of return on plan asset assumptions are determined considering long-term historical averages and real returns on each
asset class.
The Company’s retirement plan target and actual asset allocations are as follows:
Equity securities
Fixed income
Total plan assets
Target
2013
Actual
2012
2011
70%
30%
100%
63%
37%
100%
61%
39%
100%
The Company has an investment objective for domestic pension plans to adequately provide for both the growth and liquidity needed to
support all current and future benefit payment obligations. The investment strategy is to invest in a diversified portfolio of assets which are expected to
satisfy the aforementioned objective and produce both absolute and risk adjusted returns competitive with a benchmark that is a blend of major US and
international equity indexes and an aggregate bond fund. The shift to the targeted allocation is the result of management’s re-evaluation of its
investment allocation. The targeted allocation will be accomplished as some plan assets governed by collective bargaining contracts will be transferred
from fixed income into equity securities, as well as reallocation of remaining assets to achieve the desired balance during fiscal 2013.
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 $10,400,000 to its pension plans in fiscal 2013.
Information about the expected benefit payments for the Company’s defined benefit plans is as follows (in $ thousands):
2013
2014
2015
2016
2017
2018-2022
Postretirement Benefit Plans
$
9,537
9,737
10,375
10,878
11,389
66,325
The Company sponsors a defined benefit postretirement health care plan that provide medical and life insurance coverage to certain U.S.
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.
63
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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:
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Actuarial gain
Benefits paid
Benefit obligation at end of year
Funded status
Unrecognized actuarial loss
Net amount recognized
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
$
$
$
$
$
March 31,
2012
2011
8,833
388
(1,669)
(476)
7,076
(7,076)
1,940
(5,136)
$
$
$
$
9,078
476
(93)
(628)
8,833
(8,833)
3,768
(5,065)
March 31,
2012
2011
$
(855)
(6,221)
1,507
433
(5,136)
(1,021)
(7,812)
1,507
2,261
(5,065)
In fiscal 2013, an estimated net loss of $143,000 for the defined benefit postretirement health care plans will be amortized from accumulated
other comprehensive loss to net periodic benefit cost. In fiscal 2012, 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,
2012
-
388
158
546
$
$
2011
-
476
301
777
$
$
2010
-
586
313
899
For measurement purposes, healthcare costs are assumed to increase 8.0% in fiscal 2013, grading down over time to 5.0% in six years. The
discount rate used in determining the accumulated postretirement benefit obligation was 4.70% and 5.75% as of March 31, 2012 and 2011, respectively.
64
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Information about the expected benefit payments for the Company’s postretirement health benefit plans is as follows:
2013
2014
2015
2016
2017
2018-2022
$
855
832
779
735
697
2,705
Assumed medical claims cost trend rates have an effect on the amounts reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects
Effect on total of service and interest cost components
Effect on postretirement obligation
One Percentage One Percentage
Point Increase Point Decrease
(19)
21 $
$
(379)
423
The Company has collateralized split-dollar life insurance arrangements with two of its former officers. Under these arrangements, the
Company pays certain premium costs on life insurance policies for the former officers. Upon the later of the death of the former officer or their spouse,
the Company will receive all of the premiums paid to-date. The net periodic pension cost for fiscal 2012 was $254,000 and the liability at March 31, 2012
is $3,715,000 with 3,575,000 included in other non-current liabilities and $140,000 included in accrued liabilities in the consolidated balance sheet. The
cash surrender value of the policies is $2,109,000 at March 31, 2012 and is included in other assets in the consolidated balance sheet.
Other Benefit Plans
The Company also sponsors defined contribution plans covering substantially all domestic employees. Participants may elect to contribute
basic contributions. These plans provide for employer contributions based primarily on employee participation. The Company recorded a charge for
such contributions of approximately $1,344,000, $389,000, and $340,000 for the years ended March 31, 2012, 2011 and 2010, respectively. Due to the
significant global economic downturn, the Company significantly reduced its contribution to the defined contribution plans in fiscal 2010 and 2011.
Fair Values of Plan Assets
The Company classified its investments within the categories of equity securities, fixed income securities, and cash equivalents, as the
Company’s management bases its investment objectives and decisions from these three categories. The Company’s investment policy as it relates to
its pension assets is to invest in broad-based mutual funds, with an investment objective of being diversified. Further the Company’s investment
objective of its equity securities is long-term growth, its objective of the fixed income securities is long-term growth, consistency of income and
preservation of capital, and its objective of cash equivalents is preservation of capital. It is the Company’s position that its investment policy and
investment objectives as defined above reduce the risk of concentrations within its investments.
65
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The fair values of the Company’s defined benefit plans’ consolidated assets by asset category as of March 31 were as follows:
Asset categories:
Equity securities
Fixed income securities
Cash equivalents
Total
March 31,
2012
2011
$
$
94,587
55,373
130
150,090
$
$
88,556
55,690
1,148
145,394
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, 2012 were as follows:
Asset categories:
Equity securities
Fixed income securities
Cash equivalents
Total
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant other
observable
inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
46,939
$
38,892
130
85,961
$
47,648
$
47,648
$
-
16,481
-
16,481
$
$
94,587
55,373
130
150,090
Level 1 fixed income securities consist of fixed income mutual funds with quoted market prices.
Level 2 equity securities consist of short term investments stated at net asset value which approximates fair value.
Fair value of Level 3 fixed income securities at the beginning of the year was $15,872,000. During fiscal 2012 fixed income securities earned
investment return of $1,037,000 and had disbursements of $428,000 resulting in an ending balance of $16,481,000. These fixed income securities consist
primarily of insurance contracts which are carried at their liquidation value based on actuarial calculations and the terms of the contracts.
14.
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.
66
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Effective January 1, 2012 the ESOP was closed to new hires. Prior to this date, substantially all of the Company’s U.S. non-union employees
were 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 $416,000, $466,000, and $408,000 in fiscal 2012, 2011 and 2010, 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, 2012 and 2011, 440,000 and 513,000 of ESOP shares, respectively, were allocated or available to be allocated to participants’
accounts. At March 31, 2012 and 2011, 61,000 and 88,000 of ESOP shares were pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares at amounted to $991,000 and $1,626,000 at March 31, 2012 and March 31, 2011, respectively.
15.
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, unvested
restricted stock units, unvested performance shares, and unvested restricted stock. Stock options and performance shares with respect to
184,000, 249,000 and 193,000 common shares were not included in the computation of diluted loss per share for fiscal 2012, 2011 and 2010,
respectively, because they were antidilutive.
The following table sets forth the computation of basic and diluted earnings per share:
Numerator for basic and diluted earnings per share:
Income (loss) from continuing operations
Income from discontinued operations (net of tax)
Net income (loss)
Denominators:
Weighted-average common stock outstanding— denominator for basic EPS
Effect of dilutive employee stock options, RSU's and performance shares
Adjusted weighted-average common stock outstanding and assumed conversions—
denominator for diluted EPS
19,272
240
19,512
19,047
-
19,047
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note 14).
67
Year Ended March 31,
2011
2010
2012
$
$
25,915
1,052
26,967
$
$
(36,346)
396
(35,950)
$
$
(7,544)
531
(7,013)
18,963
-
18,963
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 – Stock Compensation,” 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.
Prior to the adoptions of the 2010 Long Term Incentive Plan, the Company maintained several different stock plans, specifically: 1995 Incentive
Stock Option Plan, Non-Qualified Stock Option Plan, Restricted Stock Plan and 2006 Long Term Incentive Plan, collectively referred to as the “Prior
Stock Plans”. The specifics of each of these plans are discussed below.
Stock based compensation expense was $2,913,000, $2,484,000, and $1,824,000 for fiscal 2012, 2011 and 2010, 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.
Long Term Incentive Plan
On July 26, 2010, the shareholders of the Company approved the 2010 Long Term Incentive Plan (“LTIP”). The Company grants share based
compensation to eligible participants under the LTIP. The total number of shares of common stock with respect to which awards may be granted under
the plan is 1,250,000 including shares not previously authorized for issuance under any of the Prior Stock Plans and any shares not issued or subject to
outstanding awards under the Prior Stock Plans. As of March 31, 2012, 1,099,000 shares remain for future grants. 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.
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 Option Plans
Existing prior to the adoption of the LTIP, the Company maintained two stock option plans, a Non-Qualified Stock Option Plan (Non-Qualified
Plan) and an Incentive Stock Option Plan (Incentive Plan). Effective with adoption of the LTIP no new grants can be made from the Non-Qualified Plan
or the Incentive Stock Plan. Options outstanding under the Non-Qualified Plan or the Incentive Stock Plan generally become exercisable over a four-
year period at a rate of 25% per year commencing one year from the date of grant and exercise price of not less than 100% of the fair market value of the
common stock on the date of grant. Options granted under the Non-Qualified Plan or the Incentive Stock Plan are exercisable not earlier than one year
and not later than ten years from the date such option was granted.
68
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, 2012 is as follows:
Outstanding at April 1, 2009
Granted
Exercised
Cancelled
Outstanding at March 31, 2010
Granted
Exercised
Cancelled
Outstanding at March 31, 2011
Granted
Exercised
Cancelled
Outstanding at March 31, 2012
Exercisable at March 31, 2012
Shares
725,655
160,700
(45,500)
(194,596)
646,259
102,772
(6,625)
(22,323)
720,083
106,674
(171,970)
(12,780)
642,007
366,781
$
$
$
$
Weighted-
average
Exercise Price
$
Weighted-
average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic
Value
5.7
3.9
$
$
2,406
2,163
13.51
13.73
6.40
21.11
12.02
18.28
8.52
16.51
12.81
16.00
8.36
16.29
14.46
12.31
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, 2012. The aggregate intrinsic value of outstanding options as of March 31, 2012 is calculated as the difference between the exercise price of
the underlying options and the market price of our common shares for the 458,000 options that were in-the-money at that date. The aggregate intrinsic
value of exercisable options as of March 31, 2012 is calculated as the difference between the exercise price of the underlying options and the market
price of our common shares for the 337,000 exercisable options that were in-the-money at that date. The Company's closing stock price was $16.29 as of
March 31, 2012. The total intrinsic value of stock options exercised was $1,466,000, $40,000, and $324,000 during fiscal 2012, 2011 and 2010, respectively.
As of March 31, 2012, there are 0 options available for future grants under the two stock option plans.
The fair value of shares that vested was $8.96, $9.33, and $12.32 during fiscal 2012, 2011 and 2010, respectively.
Cash received from option exercises under all share-based payment arrangements during fiscal 2012 was approximately $1,438,000. 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, 2012, $1,464,000 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, 2012, ranged from $5.46 to $28.45. The following table provides certain information
with respect to stock options outstanding at March 31, 2012:
69
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Stock Options
Outstanding
Weighted-average
Exercise Price
Weighted-average
Remaining
Contractual Life
Range of Exercise Prices
Up to $10.00
$ 10.01 to $20.00
$ 20.01 to $30.00
184,725
346,004
111,278
642,007
$
$
5.47
16.50
23.01
14.46
The following table provides certain information with respect to stock options exercisable at March 31, 2012:
Range of Exercise Prices
Up to $10.00
$ 10.01 to $20.00
$ 20.01 to $30.00
Stock Options
Outstanding
Weighted-
average
Exercise Price
184,725
89,423
92,633
366,781
$
$
2.1
8.0
4.5
5.7
5.47
15.24
23.13
12.31
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 $9.81, $9.29, and $8.18 for
options granted during fiscal 2012, 2011 and 2010, respectively. The following table provides the weighted-average assumptions used to value stock
options granted during fiscal 2012, 2011 and 2010:
Assumptions:
Risk-free interest rate
Dividend yield—Incentive Plan
Volatility factor
Expected life—Incentive Plan
Year Ended
March 31,
2012
Year Ended
March 31,
2011
Year Ended
March 31,
2010
0.81%
0.0%
1.33%
0.0%
0.598
5.5 years
0.587
5.5 years
1.97%
0.0%
0.591
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.
70
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 2012, 2011 and 2010 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, 2012 is as follows:
Unvested at April 1, 2009
Granted
Vested
Forfeited
Unvested at March 31, 2010
Granted
Vested
Forfeited
Unvested at March 31, 2011
Granted
Vested
Forfeited
Unvested at March 31, 2012
Weighted-
average
Grant Date
Fair Value
23.95
13.30
22.40
14.55
16.21
17.87
15.01
18.30
17.25
18.22
17.21
17.76
17.60
$
$
Shares
34,978
78,647
(8,600)
(5,434)
99,591
95,947
(25,318)
(12,671)
157,549
68,537
(49,254)
(6,232)
170,600
Total unrecognized compensation cost related to unvested restricted stock units as of March 31, 2012 is $1,933,000 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, 2012 and
2011 was $1,265,000 and $380,000, respectively.
Performance Shares
The Company granted performance shares under the LTIP during fiscal 2012, 2011, and 2010. 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. The following table provides the weighted-average assumptions used to value performance shares granted during fiscal 2012, 2011, and 2010.
71
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Assumptions:
Risk-free interest rate
Dividend yield
Volatility factor
Expected life
Year Ended
March 31,
2012
Year Ended
March 31,
2011
Year Ended
March 31,
2010
0.86%
0.0%
1.29%
0.0%
1.21%
0.0%
0.610
2.86 years
0.635
2.87 years
0.641
2.87 years
A summary of the performance shares transactions during each of the three fiscal years in the period ended March 31, 2012 is as follows:
Unvested at April 1, 2009
Granted
Forfeited
Vested
Unvested at March 31, 2010
Granted
Forfeited
Unvested at March 31, 2011
Granted
Forfeited
Unvested at March 31, 2012
Weighted-
average
Grant Date
Fair Value
22.66
17.12
19.40
19.40
19.40
21.93
25.93
19.20
24.65
17.31
23.36
$
$
Shares
45,079
64,614
(20,059)
(8,062)
81,572
46,057
(21,014)
106,615
48,123
(59,620)
95,118
Total unrecognized compensation costs related to the unvested performance share awards as of March 31, 2012 was $1,180,000 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,
2012 and 2011 was $0 for all three years.
Restricted Stock
The Company also 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, 2012, there were no shares available for future grants under the Restricted Stock Plan.
No restricted stock was granted in fiscal 2012 or fiscal 2011. As of March 31, 2012, there are 1,000 shares of restricted stock outstanding with
a weighted average fair value grant price of $30.72.
Directors Stock
During fiscal 2012, 2011 and 2010, a total of 21,248, 17,664, and 21,536 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 $16.99,
$15.85, and $13.00 for fiscal 2012, 2011 and 2010, respectively. The expense related to the shares for fiscal 2012, 2011 and 2010 was $420,000, $450,000,
and $280,000, respectively.
72
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Shareholder Rights Plan
On May 19, 2009 the Company announced that its Board of Directors had adopted a Shareholder Rights Plan, pursuant to which a dividend
distribution was declared of one preferred share purchase right to each outstanding common share of the Company. Subject to limited exceptions, the
rights will be exercisable if a person or group acquires 20% or more of the Company’s common shares or announces a tender offer for 20% or more of
the common shares. Under certain circumstances, each right will entitle shareholders to buy one one-thousandth of a share of the newly created series
A junior participating preferred shares of the Company at an exercise price of $80.00 per share.
16.
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.
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. The aggregate amounts of reserves were $20,536,000 and $20,576,000
as of March 31, 2012 and 2011, respectively. The liability for accrued general and product liability costs are funded by investments in marketable
securities (see Notes 2 and 7).
The following table provides a reconciliation of the beginning and ending balances for accrued general and product liability:
Accrued general and product liability, beginning of year
Add provision for claims
Deduct payments for claims
Accrued general and product liability, end of year
Year Ended March 31,
2011
2010
2012
$
$
20,576
4,151
(4,191)
20,536
$
$
23,054
6,447
(8,925)
20,576
$
$
23,242
5,061
(5,249)
23,054
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 2012.
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 2013.
73
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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 including related legal costs to range
between $7,000,000 and $18,000,000 using actuarial parameters of continued claims for a period of 18 to 30 years from March 31, 2012. 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 $12,000,000, which has been reflected as a liability in the consolidated financial statements as of March 31, 2012. The recorded liability
does not consider the impact of any potential favorable federal legislation. This liability will 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 $1,500,000 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 effect on the financial condition
of the Company or its liquidity, although the effect of any future liabilities recorded could be material to earnings in a future period.
The Company is also involved in other unresolved legal actions that arise in the normal course of business. The most prevalent of these
unresolved actions involve disputes related to product design, manufacture and performance liability. The Company's estimation of its product-related
aggregate liability that is probable and estimable, in accordance with U.S. generally accepted accounting principles approximates $8,500,000, which has
been reflected as a liability in the consolidated financial statements as of March 31, 2012. In some cases, we cannot reasonably estimate a range of loss
because there is insufficient information regarding the matter. Management believes that the potential additional costs for claims will not have a
material effect on the financial condition of the Company or its liquidity, although the effect of any future liabilities recorded could be material to
earnings in a future period.
17.
Restructuring Charges
Beginning in fiscal 2010, as part of the business reorganization plan, the Company initiated strategic consolidation of its North American hoist
and rigging operations. The process included the closure of two manufacturing facilities and the significant downsizing of a third facility. The closures
and downsizing resulted in a reduction of approximately 500,000 square feet of manufacturing space. Restructuring charges recorded in the year ended
March 31, 2011 relate to the continuation of the consolidation of the North American hoist and rigging operations. Charges recorded in the year ended
March 31, 2011 included a write off of production supplies in the amount of $411,000 and other facility related costs of $2,208,000, offset by a gain in the
sale of a closed facility in the amount of $419,000.
74
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Also, in fiscal 2010, 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 consolidated balance sheets.
During the year ended March 31, 2012, the Company initiated and completed employee workforce reductions at one of its European
facilities. These reductions resulted in approximately $413,000 in one-time termination benefits recorded as restructuring costs during the year ended
March 31, 2012. These restructuring charges were fully paid by March 31, 2012.
During year ended March 31, 2012, the Company recognized a gain of $1,462,000 on the sale of a previously closed manufacturing facility. The
gain was recorded as a credit to restructuring expenses.
The following provides a reconciliation of the activity related to restructuring reserves (in thousands):
Employee
Facility
Total
Balance at March 31, 2009
Fiscal 2010 restructuring charges
Cash payments
Reclassification of long-term pension liability
Fixed asset impairment
Balance at March 31, 2010
Fiscal 2011 restructuring charges
Cash payments
Write-off of production supplies
Balance at March 31, 2011
Fiscal 2012 restructuring charges
Cash payments
Balance at March 31, 2012
$
$
$
$
75
$
$
1,302
11,475
(7,592)
(2,430)
-
2,755
-
(2,708)
-
47
413
(460)
-
$
$
-
5,044
(3,209)
-
(1,835)
-
2,200
(1,789)
(411)
-
-
-
-
$
$
$
$
1,302
16,519
(10,801)
(2,430)
(1,835)
2,755
2,200
(4,497)
(411)
47
413
(460)
-
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
18.
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 expense (benefit)
Foreign taxes less than statutory provision
Permanent items
Valuation allowance
Research & development credits
Other
Actual tax provision (benefit)
Current income tax expense (benefit):
United States Federal
State taxes
Foreign
Deferred income tax expense (benefit):
United States
Foreign
Year Ended March 31,
2011
2010
2012
11,485
253
(1,012)
(211)
(4,315)
-
696
6,896
$
$
1,773
(936)
(683)
(119)
42,983
(812)
(795)
41,411
$
$
(4,511)
(238)
(1,081)
229
-
-
256
(5,345)
Year Ended March 31,
2011
2012
2010
487
269
7,050
130
(1,040)
6,896
$
$
$
(4,229)
49
4,818
40,621
152
41,411
$
-
913
2,417
(7,745)
(930)
(5,345)
$
$
$
$
76
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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
Insurance reserves
Accrued vacation and incentive costs
Federal tax credit carryforwards
Equity compensation
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 liabilities
March 31,
2012
2011
$
$
$
5,107
4,217
23,262
8,722
3,389
7,568
1,797
4,164
(53,325)
4,901
(2,283)
(4,272)
(6,555)
(1,654)
$
10,709
5,189
10,795
9,048
3,408
6,584
1,680
2,012
(45,836)
3,589
(1,822)
(4,916)
(6,738)
(3,149)
During 2011, the Company recorded a non-cash charge of $42,983,000 (or $2.26 per diluted share) included within its provision for income
taxes. This charge relates to the Company’s determination that a full valuation allowance against its deferred tax assets generated in the U.S and three
of the Company’s subsidiaries is necessary. Accounting rules require a reduction of the carrying amounts of deferred tax assets by a valuation
allowance if, based on the available and objectively verifiable evidence, it is more likely than not that such assets will not be realized. The existence of
cumulative losses for a certain threshold period is a significant form of negative evidence used in the assessment. If a cumulative loss threshold is met,
the accounting rules indicate that forecasts of future profitability are generally not sufficient positive evidence to overcome the presumption that a
valuation allowance is necessary.
The valuation allowance includes $1,358,000 and $1,240,000 related to foreign net operating losses at March 31, 2012 and 2011, respectively.
The increase in foreign valuation allowance is primarily due to net operating losses in two of the Company’s subsidiaries. The Company’s valuation
allowance related to foreign subsidiaries’ net operating losses have lives that range from five years to indefinite.
The federal net operating losses have expiration dates ranging from 2030 to 2031. The state net operating losses have expiration dates ranging
from 2015 through 2030. The federal tax credits have expiration dates starting in 2013.
77
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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 liability
March 31,
2012
2011
$
$
44
2,824
(4,522)
(1,654)
$
$
336
1,217
(4,702)
(3,149)
The net current deferred tax assets are included in prepaid expenses. Net non-current deferred tax liabilities are included in other non-current
liabilities.
Income from continuing operations before income tax expense includes foreign subsidiary income of $18,590,000, $12,403,000, and $8,769,000 f
the years ended March 31, 2012, 2011, and 2010, respectively. Income from discontinued operations reported in the statements of operations is net of t
expense of $0, $243,000, and $326,000 for the years ended March 31, 2012, 2011, and 2010, respectively. As of March 31, 2012, the Company h
unrecognized deferred tax liabilities related to approximately $94,000,000 of cumulative undistributed earnings of foreign subsidiaries. These earnings a
considered to be permanently invested in operations outside the United States. Determination of the amount of unrecognized deferred U.S. income t
liability with respect to such earnings is not practicable.
There were shares of common stock issued through restricted stock units, the exercise of non-qualified stock options, or through the disqualifyi
disposition of incentive stock options in the years ended March 31, 2012 and 2011. The tax benefits to the Company from these transactions, recorded
additional paid-in capital rather than recognized as a reduction of income tax expense, were $0 and $68,000 in 2012 and 2011, respectively. This tax shortf
has also been recognized in the consolidated balance sheet as an increase in deferred tax assets.
78
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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
Settlements
Foreign currency translation
Lapses in statute limitations
Ending balance
2012
2011
2010
$
$
2,647
-
30
(45)
(112)
(44)
(48)
2,428
$
$
$
3,577
27
93
(928)
-
32
(154)
$
2,647
3,546
20
260
(33)
-
(90)
(126)
3,577
The Company had $176,000 and $96,000 accrued for the payment of interest and penalties at March 31, 2012 and 2011, respectively. The Compa
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, 2012 would impact the effective tax rate if recognized.
The Company and its subsidiaries file income tax returns in the U.S., various state, local, and foreign jurisdictions. The Internal Revenue Servi
has completed an examination of the Company’s U.S. income tax returns for 2009 and 2010 resulting in no adjustments. Current examinations include vario
state audits.
The Company’s major jurisdictions are the United States and Germany. With few exceptions, the Company is no longer subject to tax
examinations by tax authorities in the United States for tax years prior to March 31, 2011 and in Germany for tax years prior to December 31, 2006.
The Company does not anticipate that total unrecognized tax benefits will change significantly due to the settlement of audits or the expiration
statutes of limitations prior to March 31, 2013.
19.
Rental Expense and Lease Commitments
Rental expense for the years ended March 31, 2012, 2011, and 2010 was $6,832,000, $7,195,000, and $5,463,000, respectively. The following amoun
represent future minimum payment commitments as of March 31, 2012 under non-cancelable operating leases extending beyond one year:
Year Ended March 31,
2013
2014
2015
2016
2017
Thereafter
Total
20.
Summary Financial Information
Real
Property
Vehicles/Equipment
Total
$
$
3,060 $
2,237
1,725
1,359
357
850
9,588 $
1,504 $
1,188
693
425
79
-
3,889 $
4,564
3,425
2,418
1,784
436
850
13,477
The following information sets forth the condensed consolidating summary financial information of the parent and guarantors, which
guarantee the 7 7/8% Senior Subordinated Notes, and the nonguarantors. The guarantors are wholly owned and the guarantees are full, unconditional,
joint and several.
79
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The Company has reclassified certain balances in its March 31, 2011 summary financial information to reflect the liquidation of a subsidiary
effective as of that date. The reclassifications have no impact on the Company’s consolidated financial statements.
As of and for the year ended March 31, 2012:
As of March 31, 2012:
Current assets:
Cash
Trade accounts receivable
Inventories
Prepaid expenses
Total current assets
Net property, plant, and equipment
Goodwill and other intangibles, net
Intercompany balances
Other non-current assets
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
For the Year Ended March 31, 2012:
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expenses
Restructuring (gain) charges, net
Amortization of intangibles
Income from operations
Interest and debt expense
Cost of bond redemptions
Other (income) and expense, net
Income from continuing operations before income tax
expense
$
$
$
$
$
Income tax expense
Equity in income from continuing operations of subsidiaries
Income from continuing operations
Income from discontinued operations
Net income
$
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
$
$
$
$
5,717
5,579
20,087
502
31,885
13,050
31,025
96,759
784
-
173,503
18,772
1,961
6,842
27,575
145,928
173,503
163,207
140,690
22,517
17,554
-
-
4,963
1,394
-
42
3,527
94
-
3,433
-
3,433
$
33,510
38,688
61,347
4,004
137,549
15,980
50,295
(61,149)
27,620
-
170,295
49,472
1,788
36,825
88,085
82,210
170,295
258,288
182,408
75,880
54,486
413
1,963
19,018
388
-
(1,102)
19,732
5,964
-
13,768
-
13,768
$
$
$
$
$
$
-
-
(2,540)
545
(1,995)
-
-
180
-
(228,138)
(229,953)
(1,815)
-
-
(1,815)
(228,138)
(229,953)
(54,809)
(54,809)
-
-
-
-
-
-
-
-
-
-
(17,201)
(17,201)
-
(17,201)
$
$
$
$
$
$
89,473
88,642
108,055
10,449
296,619
61,709
122,226
-
34,853
-
515,407
103,909
151,889
99,143
354,941
160,466
515,407
591,945
434,227
157,718
111,537
(1,037)
2,074
45,144
14,214
-
(1,881)
32,811
6,896
-
25,915
1,052
26,967
$
$
$
$
$
$
50,246
44,375
29,161
5,398
129,180
32,679
40,906
(35,790)
6,449
228,138
401,562
37,480
148,140
55,476
241,096
160,466
401,562
225,259
165,938
59,321
39,497
(1,450)
111
21,163
12,432
-
(821)
9,552
838
17,201
25,915
1,052
26,967
80
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Parent
Guarantors Guarantors Eliminations Consolidated
Non
For the Year Ended March 31, 2012:
Operating activities:
Cash provided by operating activities
Investing activities:
Sales of marketable securities, net
Capital expenditures
Proceeds from sale of assets
Purchase of business
Net cash used for investing activities from continuing
operations
Net cash provided by investing activities from discontinued
operations
Net cash used for investing activities
Financing activities:
Proceeds from exercise of stock options
Net repayments under revolving line-of-credit agreements
Repayment of long-term debt
Dividends paid
Other
Net cash provided by (used for) 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
$
$
7,042
$
8,820
$
7,725
$
-
(2,869)
-
-
(2,869)
-
(2,869)
-
-
(240)
-
-
(240)
-
5,711
7
5,718
$
557
(3,256)
-
(3,356)
(6,055)
-
(6,055)
-
(361)
(796)
-
-
(1,157)
(1,186)
(673)
34,178
33,505
$
-
(7,640)
1,971
-
(5,669)
1,052
(4,617)
1,436
-
-
-
435
1,871
-
4,296
45,954
50,250
81
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
23,587
557
(13,765)
1,971
(3,356)
(14,593)
1,052
(13,541)
1,436
(361)
(1,036)
-
435
474
(1,186)
9,334
80,139
89,473
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
$
$
$
$
As of March 31, 2011:
Current assets:
Cash
Trade accounts receivable
Inventories
Prepaid expenses
Total current assets
Net property, plant, and equipment
Goodwill and other intangibles, net
Intercompany balances
Other non-current assets
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
For the Year Ended March 31, 2011:
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expenses
Restructuring charges
Amortization of intangibles
Income from operations
Interest and debt expense
Cost of bond redemptions
Other (income) and expense, net
(Loss) income from continuing operations before
income tax expense
Income tax expense
Equity in income from continuing operations of subsidiaries
(Loss) income from continuing operations
Income from discontinued operations
Net (loss) income
$
$
$
$
$
$
7
32
18,497
698
19,234
11,866
31,025
91,245
4,152
-
157,522
15,774
2,235
8,506
26,515
131,007
157,522
148,905
121,852
27,053
21,763
-
3
5,287
1,436
-
21
3,830
3,125
-
705
-
705
$
34,178
36,317
47,597
16,404
134,496
17,043
52,166
(72,773)
26,492
-
157,424
44,523
2,714
37,678
84,915
72,509
157,424
217,724
152,901
64,823
50,286
111
1,657
12,769
357
-
(2,760)
15,172
5,273
-
9,899
-
9,899
$
$
$
$
$
$
-
-
(2,000)
1,599
(401)
-
-
586
(1,762)
(203,516)
(205,093)
(824)
-
(753)
(1,577)
(203,516)
(205,093)
(39,955)
(39,955)
-
-
-
-
-
-
-
-
-
62
(10,542)
(10,604)
-
(10,604)
$
$
$
$
$
$
80,139
77,744
90,031
14,294
262,208
59,360
124,144
-
33,160
-
478,872
95,265
152,816
68,645
316,726
162,146
478,872
524,065
398,013
126,052
103,502
2,200
1,778
18,572
13,532
3,939
(3,964)
5,065
41,411
-
(36,346)
396
(35,950)
$
$
$
$
$
$
45,954
41,395
25,937
(4,407)
108,879
30,451
40,953
(19,058)
4,278
203,516
369,019
35,792
147,867
23,214
206,873
162,146
369,019
197,391
163,215
34,176
31,453
2,089
118
516
11,739
3,939
(1,225)
(13,937)
32,951
10,542
(36,346)
396
(35,950)
82
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
For the Year Ended March 31, 2011:
Operating activities:
Cash provided by (used for) operating activities
Investing activities:
Proceeds from sales of marketable securities, net
Capital expenditures
Proceeds from sale of assets
Net cash (used for) provided by investing activities from
continuing operations
Net cash provided by investing activities from discontinued
operations
Net cash (used for) provided by investing activities
Financing activities:
Proceeds from exercise of stock options
Payment of tender fees
Net repayments under revolving line-of-credit agreements
Repayment of long-term debt
Proceeds from the issuance of long-term debt
Deferred financing costs incurred
Dividends paid
Other
Net cash provided by (used for) 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
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
2,052
$
2,489
$
(638)
$
(623)
$
3,280
712
(8,562)
1,182
(6,668)
396
(6,272)
(3,154)
-
(124,855)
147,844
(3,185)
-
443
17,093
-
12,873
33,081
45,954
83
$
$
-
(1,673)
-
(1,673)
-
(1,673)
-
-
(210)
-
-
-
(774)
(984)
151
(17)
24
7
$
5,909
(2,308)
-
3,601
-
3,601
-
(337)
(752)
-
-
-
-
(1,089)
1,441
3,315
30,863
34,178
$
-
-
-
-
-
-
-
-
-
-
-
-
774
774
(151)
-
-
-
$
6,621
(12,543)
1,182
(4,740)
396
(4,344)
(3,154)
(337)
(125,817)
147,844
(3,185)
-
443
15,794
1,441
16,171
63,968
80,139
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
For the Year Ended March 31, 2010:
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expenses
Restructuring charges
Amortization of intangibles
(Loss) income from operations
Interest and debt expense
Other (income) and expense, net
(Loss) income from continuing operations before
income 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
$
For the Year Ended March 31, 2010:
Operating activities:
Cash provided by (used for) operating activities
Investing activities:
Purchases of marketable securities, net
Capital expenditures
Investment in subsidiaries
Proceeds from sale of assets
Net cash (used for) provided by investing activities from
continuing operations
Net cash provided by investing activities from discontinued
operations
Net cash (used for) provided 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 for 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
$
$
117,854
94,906
22,948
13,651
-
3
9,294
493
(1,033)
9,834
2,739
-
7,095
-
7,095
$
(665)
-
(1,674)
-
2,407
733
-
733
-
-
(130)
-
69
(61)
(13)
(6)
30
24
$
$
192,326
135,245
57,081
46,308
1,203
1,754
7,816
867
(1,222)
8,171
1,687
-
6,484
-
6,484
$
(27,781)
(28,478)
697
-
-
-
697
-
-
697
192
(14,084)
(13,579)
-
(13,579)
$
$
476,183
360,244
115,939
101,356
16,519
1,876
(3,812)
13,225
(4,148)
(12,889)
(5,345)
-
(7,544)
531
(7,013)
16,198
(14,084)
29,867
2,236
(638)
-
1,135
2,733
-
2,733
-
(3,946)
(834)
-
-
(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)
1,633
24,732
39,236
63,968
193,784
158,571
35,213
41,397
15,316
119
(21,619)
11,865
(1,893)
(31,591)
(9,963)
14,084
(7,544)
531
(7,013)
$
$
28,418
(414)
(4,933)
(14,084)
-
(19,431)
531
(18,900)
291
-
-
(1,258)
390
(577)
-
8,941
24,140
33,081
84
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
21.
Business Segment Information
ASC Topic 280, “Segment Reporting,” establishes the standards for reporting information about operating segments in financial statements.
The Company has one operating and reportable segment for both internal and external reporting purposes.
Financial information relating to the Company’s operations by geographic area is as follows:
Net sales:
United States
Europe
Canada
Other
Total
Total assets:
United States
Europe
Canada
Other
Total
Long-lived assets:
United States
Europe
Other
Total
Year Ended March 31,
2011
2010
2012
345,451
177,976
23,495
45,023
591,945
$
$
315,219
159,363
16,847
32,636
524,065
$
$
291,564
149,872
12,081
22,666
476,183
Year Ended March 31,
2011
2012
2010
309,624
153,021
18,304
34,458
515,407
$
$
282,925
152,020
17,722
26,205
478,872
$
$
302,210
139,064
13,943
26,280
481,497
Year Ended March 31,
2011
2012
2010
117,660
61,144
5,131
183,935
$
$
$
114,295
64,015
5,194
183,504
$
$
$
111,369
64,458
5,444
181,271
$
$
$
$
$
$
$
Note: Long-lived assets include net property, plant, and equipment and goodwill and other intangibles, net.
Sales by major product group are as follows:
Hoists
Chain and forged attachments
Industrial cranes
Other
Total
Year Ended March 31,
2011
2012
2010
$
$
351,725
104,143
41,816
94,261
591,945
$
$
287,905
108,590
39,715
87,855
524,065
$
$
252,824
95,862
41,170
86,327
476,183
85
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
22.
Selected Quarterly Financial Data (Unaudited)
Below is selected quarterly financial data for fiscal 2012 and 2011:
Net sales
Gross profit
Income from operations
Net income
Net income per share – basic
Net income per share – diluted
Net sales
Gross profit
Income from operations
Net (loss) income (1)
Net (loss) income per share – basic
Net (loss) income per share – diluted
Three Months Ended
June 30,
2011
September 30, December 31,
March 31,
2011
2011
2012
139,760
35,642
7,213
2,779
$
$
149,863
39,231
12,314
6,676
$
$
142,750
38,603
12,000
8,515
$
$
159,572
44,242
13,617
8,997
0.14
$
0.35
$
0.44
$
0.14
$
0.34
$
0.44
$
0.47
0.46
Three Months Ended
June 30,
2010
September 30,
2010
December 31,
2010
March 31,
2011
119,087
28,015
1,136
(722)
$
$
132,312
31,241
5,185
1,868
$
$
128,696
29,351
2,950
(39,639)
$
$
143,970
37,445
9,301
2,543
(0.04)
$
0.10
$
(2.08)
$
(0.04)
$
0.10
$
(2.08)
$
0.13
0.13
$
$
$
$
$
$
$
$
(1) During the quarter ended December 31, 2010, the Company recorded a non-cash charge of $39,700,000 included within its provision for income
taxes. This charge relates to the Company’s determination that a full valuation allowance against its deferred tax assets generated in the U.S. was
necessary.
Note: The per-share net income (loss) for the four quarters combined may not equal the per share net loss for the year due to rounding.
86
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
23.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss is as follows:
Net unrealized investment gain – net of tax
Adjustment to pension liability– net of tax
Adjustment to other postretirement obligations – net of tax
Adjustment to split-dollar life insurance arrangements – net of tax
Foreign currency translation adjustment – net of tax
Derivatives qualifying as hedges – net of tax
Accumulated other comprehensive loss
March 31,
2012
2011
$
$
2,580
(58,504)
(325)
(1,981)
4,388
(65)
(53,907)
$
$
1,379
(26,887)
(2,103)
(2,029)
9,009
181
(20,450)
The deferred taxes associated with the items included in accumulated other comprehensive loss, net of deferred tax asset valuation
allowances, were $438,000 and $952,000 for 2012 and 2011 respectively. Refer to Note 18 for discussion of the deferred tax asset valuation allowance. In
the period subsequent to our initial recording of the valuation allowance in fiscal 2011, increases and decreases to both the deferred tax assets
associated with items in accumulated other comprehensive loss, and the valuation allowance, have been recorded as offsets to comprehensive income.
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 statement 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):
Net unrealized investment gain (loss) at beginning of year
Unrealized holdings gain arising during the period
Reclassification adjustments for gain included in earnings
Net change in unrealized gain (loss) on investments
Net unrealized investment gain at end of year
24.
Effects of New Accounting Pronouncements
2012
Year Ended March 31,
2011
2010
$
$
1,379
1,201
-
1,201
2,580
$
$
1,708
1,484
(1,813)
(329)
1,379
$
$
(317)
2,393
(368)
2,025
1,708
In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the
Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. Among the
new provisions in ASU 2011-05 was a requirement for entities to present reclassification adjustments out of accumulated other comprehensive income
by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both
interim and annual financial statements); however this reclassification requirement is indefinitely deferred by ASU 2011-12 and will be further
deliberated by the FASB at a future date.
87
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities (ASU
2011-11). The update requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative
instruments. The ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods therein. We are currently evaluating the
impact this update will have on our consolidated financial statements.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment. The
amendment permits entities to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination
that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing relevant events or circumstances,
an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-
step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to follow the existing provisions of the two-step
impairment test. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15,
2011. Early adoption is permitted. We adopted the new guidance for our annual goodwill impairment test, which we tested as of our measurement date
of February 29, 2012. The adoption of this standard did not have a material impact on our consolidated financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”), effective for fiscal years, and
interim periods within those years, beginning after December 15, 2011. The issuance of ASU 2011-5 is intended to improve the comparability,
consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The guidance in
ASU 2011-5 supersedes the presentation options in ASC Topic 220 and facilitates convergence of U.S. generally accepted accounting principles and
International Financial Reporting Standards by eliminating the option to present components of other comprehensive income as part of the statement
of changes in stockholders’ equity and requiring that all nonowner changes in stockholders’ equity be presented either in a single continuous
statement of comprehensive income or in two separate but consecutive statements. The Company does not expect that the adoption of ASU 2011-05
will have a significant impact on the Company’s consolidated financial statements.
In May 2011 the FASB issued ASU No. 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value
Measurement and Disclosure Requirements in US GAAP and International Financial Reporting Standards (“IFRS”) (“ASU 2011-04”). ASU 2011-04
represents the converged guidance of the FASB and the International Accounting Standards Board (the “Boards”) on fair value measurements. The
collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for
disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common
requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with
GAAP and IFRS. The amendments in this ASU are required to be applied prospectively, and are effective for interim and annual periods beginning
after December 15, 2011. The Company does not expect that the adoption of ASU 2011-04 will have a significant impact on the Company’s
consolidated financial statements.
In March 2011, the SEC issued Staff Accounting Bulletin (SAB) 114. This SAB revises or rescinds portions of the interpretive guidance
included in the codification of the Staff Accounting Bulletin Series. This update is intended to make the relevant interpretive guidance consistent with
current authoritative accounting guidance issued as a part of the FASB’s Codification. The principal changes involve revision or removal of
accounting guidance references and other conforming changes to ensure consistency of referencing through the SAB Series. The effective date for
SAB 114 was March 28, 2011. The adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.
88
COLUMBUS McKINNON CORPORATION
SCHEDULE II—Valuation and qualifying accounts
March 31, 2012, 2011 and 2010
Dollars in thousands
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged
to Other
Accounts
Deductions
Balance
at End of
Period
$
$
$
$
$
$
$
$
$
3,166
45,836
49,002
$
$
844
(4,315)
(3,471)
$
$
-
11,804 (3)
11,804
20,576
$
4,151
$
-
4,240
1,609
5,849
$
$
627
42,983
43,610
$
$
-
1,244
1,244
23,054
$
6,447
$
-
5,338
1,594
6,932
$
$
553
-
553
$
$
-
15
15
23,242
$
5,061
$
-
$
$
$
$
$
$
$
$
$
1,265 (1)
-
1,265
$
$
2,745
53,325
56,070
4,191 (2)
$
20,536
1,701 (1)
-
1,701
$
$
3,166
45,836
49,002
8,925 (2)
$
20,576
1,651 (1)
-
1,651
$
$
4,240
1,609
5,849
5,249 (2)
$
23,054
Description
Year ended March 31, 2012:
Deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
Accrued general and product liability costs
Year ended March 31, 2011:
Deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
Accrued general and product liability costs
Year ended March 31, 2010:
Deducted from asset accounts:
Allowance for doubtful accounts
Deferred tax asset valuation allowance
Total
Reserves on balance sheet:
Accrued general and product liability costs
(1) Uncollectible accounts written off, net of recoveries
(2) Insurance claims and expenses paid
(3) Charged against accumulated other comprehensive loss
89
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, 2012, 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, 2012. There were no changes in our internal controls or in other factors during our fourth quarter ended March 31, 2012.
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, 2012 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, 2012.
The effectiveness of the Company’s internal control over financial reporting as of March 31, 20121 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.
90
The Board of Directors and Shareholders of Columbus McKinnon Corporation
Report of Independent Registered Public Accounting Firm
We have audited Columbus McKinnon Corporation’s internal control over financial reporting as of March 31, 2012, 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,
2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance
sheets of Columbus McKinnon Corporation as of March 31, 2012 and 2011, and the related consolidated statements of operations, shareholders’
equity, and cash flows for each of the three years in the period ended March 31, 2012, and our report dated May 30, 2012 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
May 30, 2012
91
Item 9B.
Other Information
None.
PART III
Item 10.
Directors and Executive Officers of the Registrant
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 31, 2012 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 31, 2012
and upon the filing of such Proxy Statement, is incorporated by reference herein.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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 31, 2012 and upon the filing of such Proxy Statement, is
incorporated by reference herein.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information regarding Certain Relationships and Related Transactions will be included in a Proxy Statement to be filed with the
Commission prior to July 31, 2012 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 31, 2012 and upon the filing of such Proxy Statement, is incorporated by reference herein.
92
Item 15.
Exhibits and Financial Statement Schedules
(1) Financial Statements:
PART IV
The following consolidated financial statements of Columbus McKinnon Corporation are included in Item 8:
Reference
Report of Independent Registered Public Accounting Firm
Consolidated balance sheets - March 31, 2012 and 2011
Consolidated statements of operations – Years ended March 31, 2012, 2011, and 2010
Consolidated statements of shareholders’ equity – Years ended March 31, 2012, 2011, and 2010
Consolidated statements of cash flows – Years ended March 31, 2012, 2011 , and 2010
Notes to consolidated financial statements
(2)
Financial Statement Schedule:
Schedule II - Valuation and qualifying accounts
Page No.
39
40
41
42
43
44 to 88
Page No.
89
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.
93
(3)
Exhibits:
Exhibit
Number
Exhibit
3.1 Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement
No. 33-80687 on Form S-1 dated December 21, 1995).
3.2 Amended By-Laws of the Registrant (incorporated by reference to Exhibit 3. to the Company’s Current Report on Form 8-K dated May
17, 1999).
3.3 Certificate of Amendment to the Certificate of Incorporation of Columbus McKinnon Corporation, dated as of May 18, 2009
(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated May 18, 2009).
4.1 Specimen common share certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement No. 33-80687 on
Form S-1 dated December 21, 1995.)
4.2 Indenture among Columbus McKinnon Corporation, Audubon Europe S.a.r.l., Crane Equipment & Service, Inc., Yale Industrial Products,
Inc. and U.S. Bank National Association., as trustee, dated as of September 2, 2005 (incorporated by reference to Exhibit 4.5 to the
Company’s Registration Statement No. 33-129142 on Form S-3 dated October 19, 2005).
4.3 Rights Agreement, dated as of May 18, 2009, between Columbus McKinnon Corporation and American Stock Transfer & Trust
Company, LLC, which includes the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Stock as
Exhibit C (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated May 18, 2009).
#10.1 Agreement by and among Columbus McKinnon Corporation Employee Stock Ownership Trust, Columbus McKinnon Corporation and
Marine Midland Bank, dated November 2, 1995 (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement No.
33-80687 on Form S-1 dated December 21, 1995).
#10.2 Columbus McKinnon Corporation Employee Stock Ownership Plan Restatement Effective April 1, 1989 (incorporated by reference to
Exhibit 10.23 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.3 Amendment No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated March 2, 1995 (incorporated by reference to Exhibit 10.24 to the Company’s Registration Statement No. 33-80687 on Form S-1
dated December 21, 1995).
#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).
94
#10.8 Amendment No. 6 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated June 24, 1998 (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 1998).
#10.9 Amendment No. 7 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated April 30, 2000 (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2000).
#10.10 Amendment No. 8 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated March 26, 2002 (incorporated by reference to Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2002).
#10.11 Amendment No. 9 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated March 27, 2003 (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2003).
#10.12 Amendment No. 10 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated February 28, 2004 (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the fiscal
year ended March 31, 2004).
#10.13 Amendment No. 11 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated December 19, 2003 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended December 28, 2003).
#10.14 Amendment No. 12 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated March 17, 2005 (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year
ended March 31, 2005).
#10.15 Amendment No. 13 to the Columbus McKinnon Corporation Employee Stock Ownership Plan as Amended and Restated as of April 1,
1989, dated December 19, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended December 28, 2008).
#10.16 Columbus McKinnon Corporation Personal Retirement Account Plan Trust Agreement, dated April 1, 1987 (incorporated by reference to
Exhibit 10.25 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.17 Amendment and Restatement of Columbus McKinnon Corporation 1995 Incentive Stock Option Plan (incorporated by reference to
Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1999).
#10.18 Second Amendment to the Columbus McKinnon Corporation 1995 Incentive Stock Option Plan, as amended and restated (incorporated
by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2002).
#10.19 Columbus McKinnon Corporation Restricted Stock Plan, as amended and restated (incorporated by reference to Exhibit 10.28 to the
Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.20 Second Amendment to the Columbus McKinnon Corporation Restricted Stock Plan (incorporated by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2002).
#10.21 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).
95
#10.22 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).
#10.23 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).
#10.24 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).
#10.25 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).
#10.26 Amendment No. 5 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Thrift [401(k)] Plan, dated December 20, 2002
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 29,
2002).
#10.27 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).
#10.28 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).
#10.29 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).
#10.30 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).
#10.31 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).
#10.32 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).
#10.33 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).
#10.34 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).
#10.35 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).
#10.36 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).
96
#10.37 Columbus McKinnon Corporation Thrift 401(k) Plan Trust Agreement Restatement Effective August 9, 1994 (incorporated by reference
to Exhibit 10.32 to the Company’s Registration Statement No. 33-80687 on Form S-1 dated December 21, 1995).
#10.38 Columbus McKinnon Corporation Monthly Retirement Benefit Plan Restatement Effective April 1, 1998 (incorporated by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 27, 1998).
#10.39 Amendment No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated
December 10, 1998 (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 1999).
#10.40 Amendment No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated May
26, 1999 (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31,
1999).
#10.41 Amendment No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated March
26, 2002 (incorporated by reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31,
2002).
#10.42 Amendment No. 4 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated
December 20, 2002 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period
ended December 29, 2002).
#10.43 Amendment No. 5 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated
February 28, 2004 (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2004).
#10.44 Amendment No. 6 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated March
17, 2005 (incorporated by reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31,
2005).
#10.45 Amendment No. 7 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated
December 28, 2005 (incorporated by reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2006).
#10.46 Amendment No. 8 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated
December 28, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 2006).
#10.47 Amendment No. 9 to the 1998 Plan Restatement of the Columbus McKinnon Corporation Monthly Retirement Benefit Plan, dated April
21, 2008 (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).
#10.48 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).
#10.49 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).
#10.50 Employment agreement with Wolfgang Wegener dated December 31, 1996 (incorporated by reference to Exhibit 10.48 to the Company’s
Annual Report on Form 10-K for the fiscal year ended March, 31, 2007).
97
#10.51 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).
#10.52 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).
#10.53 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.
#10.54 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.
# 10.55 Fourth amended and restated credit agreement dated as of December 31, 2009 (incorporated by reference to exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on January 14, 2010)
#10.56 2010 Long Term Incentive Plan effective July 26, 2010 (incorporated by reference to Exhibit 4.1 of the Company’s S-8 filed on August 12,
2010.
#10.57 First Amendment to the Company’s Fourth Amended and Restated Credit Agreement dated December 31, 2009. (incorporated by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 26, 2010)
#10.58 Second Amendment to the Company’s Fourth Amended and Restated Credit Agreement dated December 31, 2009. (incorporated by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on December 22, 2010)
#10.59 Indenture related to the Company’s 7.875% Senior Subordinated Notes due 2019 (incorporated by reference to exhibit 4.1 to the
Company’s Current Report on Form 8-K filed on January 28, 2011)
#10.60 Supplemental Indenture related to the Company’s subsidiary guarantors as defined in the Indenture agreement related to the Company’s
7.875% Senior Subordinated Notes due 2019 (incorporated by reference to exhibit 4.3 to the Company’s Current Report on Form 8-K filed
on January 28, 2011)
#10.61 Third Amendment to the Company’s Fourth Amended and Restated Credit Agreement dated December 31, 2009. (incorporated by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on July 20, 2011)
#10.62 Fourth Amendment to the Company’s Fourth Amended and Restated Credit Agreement dated December 31, 2009. (incorporated by
reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on February 15, 2012)
*21.1 Subsidiaries of the Registrant.
*23.1 Consent of Independent Registered Public Accounting Firm.
*31.1 Certification of the principal executive officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
*31.2 Certification of the principal financial officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
*32.1 Certification of the principal executive officer and the principal financial officer pursuant to Rule 13a-14(b) of the Securities Exchange
Act of 1934, as amended and 18 U.S.C. Section 1350, as adopted by pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. The
information contained in this exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by
reference in any registration statement foiled by the Registrant under the Securities Act of 1933, as amended.
98
*101.INS XBRL Instance Document
*101.SCH XBRL Taxonomy Extension Schema Document
*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB XBRL Taxonomy Extension Label Linkbase Document
*101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
* Filed herewith
# Indicates a Management contract or compensation plan or arrangement
99
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 30, 2012
SIGNATURES
COLUMBUS McKINNON CORPORATION
By: /S/ TIMOTHY T. TEVENS
Timothy T. Tevens
President and Chief Executive Officer
(Principal 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
Date
/S/ TIMOTHY T. TEVENS
TIMOTHY T. TEVENS
/S/ GREGORY P. RUSTOWICZ
GREGORY P. RUSTOWICZ
President, Chief Executive Officer and Director
(Principal Executive Officer)
May 30, 2012
Vice President and Chief Financial Officer
(Principal Financial Officer)
May 30, 2012
/S/ ERNEST R. VEREBELYI
Chairman of the Board of Directors
May 30, 2012
ERNEST R. VEREBELYI
/S/ RICHARD H. FLEMING
Director
May 30, 2012
RICHARD H. FLEMING
/S/ NICHOLAS T. PINCHUK
Director
NICHOLAS T. PINCHUK
/S/ STEPHANIE K. KUSHNER
Director
STEPHANIE K. KUSNHER
/S/ LINDA A. GOODSPEED
Director
LINDA A. GOODSPEED
/S/ STEPHEN RABINOWITZ
Director
STEPHEN RABINOWITZ
/S/ CHRISTIAN B. RAGOT
Director
CHRISTIAN B. RAGOT
/S/ LIAM MCCARTHY
Director
LIAM MCCARTHY
100
May 30, 2012
May 30, 2012
May 30, 2012
May 30, 2012
May 30, 2012
May 30, 2012
Exhibit 21.1
COLUMBUS McKINNON CORPORATION
SUBSIDIARIES
(as of March 31, 2012)
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)
Columbus McKinnon Limited (Canada)
Yale Industrial Products Ltd. (England)
Columbus McKinnon Industrial Products GmbH (Germany)
Columbus McKinnon Asia Pacific Ltd. (Hong Kong)
Hangzhou LILA Lifting and Lashing Co. Ltd. (China)
Columbus McKinnon (Hangzhou) Industrial Products Co. Ltd. (China)
Columbus McKinnon Corporation Ltd. (England)
Columbus McKinnon France S.a.r.l. (France)
Columbus McKinnon Maghreb S.a.r.l AAU (Morocco)
Columbus McKinnon Italia S.r.l. (Italy)
Columbus McKinnon Ibérica S.L.U. (Spain)
Yale Industrial Products Asia Co. Ltd. (Thailand)
Columbus McKinnon Benelux, B.V. (The Netherlands)
Columbus McKinnon PTY, LTD (South Africa)
Yale Lifting & Mining Products (Pty.) Ltd. (South Africa)
Yale Engineering Products (Pty.) Ltd. (South Africa)
Yale Lifting Solutions (Pty.) Ltd. (South Africa)
Pfaff Hoist & Rigging (Pty.) Ltd. (South Africa)
Columbus McKinnon Austria GmbH (Austria)
Columbus McKinnon Hungary Kft. (Hungary)
Columbus McKinnon Russia LLC (Russia)
Columbus McKinnon Kaldirma ESVT, Ltd. (Turkey)
Columbus McKinnon Industrial Products ME FZE (Dubai)
Pfaff Beteiligungs GmbH (Germany)
Columbus McKinnon Engineered Products GmbH (Germany)
Alltec Antriebstechnik GmbH (Germany)
Pfaff Silberblau Utilaje de Ridicat si Transportat S.R.L. (Romania)
Pfaff Silberblau Winden & Hebezuege GesmbH (Austria)
Columbus McKinnon Polska Sp.z.o.o (Poland)
Columbus McKinnon Switzerland AG (Switzerland)
Pfaff Silberblau LTD, UK (England)
Verkehrstechnik Beteiligungs Gmbh (Germany)
Verkehrstechnik Gmbh & Co. KG (Germany)
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
Consent of Independent Registered Public Accounting Firm
(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,
(3) Registration Statement (Form S-8 No. 333-137212) pertaining to the Columbus McKinnon Corporation 2006 Long Term Incentive Plan, and
(4) Registration Statement (Form S-8 No. 333-168777) pertaining to the Columbus McKinnon Corporation 2010 Long Term Incentive Plan;
of our reports dated May 30, 2012, 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 this Annual Report (Form 10-K) for the year
ended March 31, 2012.
/s/ Ernst & Young LLP
Buffalo, New York
May 30, 2012
Exhibit 31.1
I, Timothy T. Tevens, certify that:
CERTIFICATION
1.
2.
3.
4.
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;
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.
b.
c.
d.
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;
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;
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
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, the registrant’s fourth fiscal quarter in the case of an annual report, 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.
b.
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
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: May 30, 2012
/S/ TIMOTHY T. TEVENS
Timothy T. Tevens
Chief Executive Officer
(Principal Executive Officer)
Exhibit 31.2
I, Gregory P. Rustowicz, certify that:
1. I have reviewed this report on Form 10-K of Columbus McKinnon Corporation;
CERTIFICATION
2.
3.
4.
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;
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.
b.
c.
d.
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;
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;
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
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, the registrant’s fourth fiscal quarter in the case of an annual report, 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.
b.
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
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: May 30, 2012
/S/ GREGORY P. RUSTOWICZ
Gregory P. Rustowicz
Chief Financial Officer
(Principal Financial Officer)
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, 2011, fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the such Annual Report on
Form 10-K fairly presents, in all material respects, the financial condition and result of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: May 30, 2012
/S/ TIMOTHY T. TEVENS
Timothy T. Tevens
Chief Executive Officer
(Principal Executive Officer)
/S/ GREGORY P. RUSTOWICZ
Gregory P. Rustowicz
Chief Financial Officer
(Principal Financial Officer)
[THIS PAGE INTENTIONALLY LEFT BLANK]
Company Profi le
Columbus McKinnon Corporation
(NASDAQ: CMCO) is a leading worldwide
designer, manufacturer and marketer
of material handling products, systems
and services, which effi ciently and
ergonomically move, lift, position and
secure materials.
Headquartered in Amherst, New York,
Columbus McKinnon’s key products
include hoists, cranes, actuators, and
rigging tools. The Company is focused on
commercial and industrial applications
that require the safety and quality
provided by its superior design and
engineering know-how.
Fiscal 2012 Net Sales
7% 2%
$591.9
million
(Fiscal 2012
Net Sales)
59%
18%
Broad Product Offering
Rigging & Lifting Tools
Actuators/Rotary Unions
Hoists
Cranes
Other
59%
18%
14%
7%
2%
1898
1881
1927
1937
1942
1904
1920
1929
1938
1972
5% 2%
8%
Sales in
over 50
countries
55%
30%
Global Sales – FY 2012
US
Europe, Middle East & Africa
Canada
Latin America
Asia Pacifi c
55%
30%
8%
5%
2%
Our Competitive Advantage:
Strong Brands Built on Quality and Reliability
Shareholder and Corporate Information
Common Stock
Columbus McKinnon’s common stock is traded on NASDAQ under the symbol
CMCO. As of April 30, 2012, there were 552 shareholders of record and
19,400,526 total outstanding common stock. According to March 31, 2012
SEC fi lings, 109 institutional and mutual fund investors owned approximately
91% of Columbus McKinnon’s outstanding common shares.
Annual Meeting of Shareholders
July 23, 2012
10:00 a.m. Central Time
The Peninsula Chicago
108 East Superior Street @ North Michigan Avenue
Chicago, Illinois 60611
312-337-2888
Transfer Agent
Please direct questions about lost certifi cates, 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
Gregory P. Rustowicz
Vice President – Finance and Chief Financial Offi cer
Columbus McKinnon Corporation
716-689-5442
E-mail: greg.rustowicz@cmworks.com
Deborah K. Pawlowski
Kei Advisors LLC
716-843-3908
E-mail: dpawlowski@keiadvisors.com
Investor information is available on the Company’s website:
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 fl oor
Buffalo, New York 14202-2297
Analyst Coverage
The following analysts published research about
Columbus McKinnon Corporation during the last year:
BB&T Capital Markets
Schon Williams / 804-782-8769
cwilliams@bbandt.com
CJS Securities
Jason Ursaner / 914-287-7600
jursaner@cjs-securities.com
C.L. King & Associates
Gary Farber / 212-364-1812
gaf@clking.com
Sidoti & Company
Joseph Mondillo / 212-894-3339
jmondillo@sidoti.com
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 fi led with the Securities and Exchange Commission.
The Company assumes no obligation to update the forward-looking information
contained in this report.
2012 Annual Report
140 John James Audubon Parkway
Amherst, NY 14228-1197
General 716-689-5400
cmworks.com
NASDAQ: CMCO
Our Vision
Become the Material Handling Champion of the World
Superior
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2012 Annual Report