2013 Annual Report
Our Strongest Link
I
C
O
L
U
M
B
U
S
M
c
K
N
N
O
N
C
O
R
P
O
R
A
T
O
N
I
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
O
u
r
S
t
r
o
n
g
e
s
t
L
i
n
k
140 John James Audubon Parkway
cmworks.com
NASDAQ: CMCO
Amherst, NY 14228-1197
General 716-689-5400
Investor Relations 716-689-5442
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
Buff alo, New York 14202-2297
Forward-Looking Information
The Columbus McKinnon annual report contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are
not limited to, statements concerning future revenue and earnings, involve known and unknown
risks, uncertainties and other factors that could cause the actual results of the Company to diff er
materially from the results expressed or implied by such statements, including general economic
and business conditions, conditions aff ecting the industries served by the Company and its
subsidiaries, conditions aff ecting 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.
Shareholder and Corporate Information
Common Stock
Columbus McKinnon’s common stock is traded on NASDAQ under the symbol
CMCO. As of April 30, 2013, there were 588 shareholders of record and
19,507,939 total outstanding common stock. According to March 31, 2013
SEC fi lings, 118 institutional and mutual fund investors owned approximately
91% of Columbus McKinnon’s outstanding common shares. 96% of Float is held
by Institutional & Mutual Fund Owners.
Annual Meeting of Shareholders
July 22, 2013
10:00 a.m. Central Time
The Ritz-Carlton Chicago
160 E. Pearson Street At Water Tower Place
Chicago, Illinois
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
718-921-8124
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
Company Profi le
A motorized Yalelift at work servicing an Airbus A380 turbine.
Columbus McKinnon Corporation (NASDAQ: CMCO) is a lead-
ing 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 2013 Net Sales
7% 2%
Broad Product Off ering
13%
15%
$597.3 million
(Fiscal 2013 Net Sales)
63%
Hoists
Chain and forged attachments
Chain and forged attachments
Actuators and rotary unions
Actuators and rotary unions
Industrial cranes
Industrial cranes
Other
Other
4%
10%
Sales in over
50 countries
28%
Global Sales – FY 2013
US
US
Europe
Europe
58 %
Latin America and Asia Pacifi c
Latin America and Asia Pacifi c
Canada
Canada
Financial Summary
(In thousands, except per share, percent change, margin and ratio data)
Fiscal Year Ended March 31,
2013
2012
2011
2010
2009 Income Statement Data
Income Statement Data
Net sales
Gross profit
Gross margin
$ 597,263
$ 591,945
$ 524,065
$ 476,183
$ 606,708
174,231
157,718
126,052
115,939
173,701
29.2 %
26.6 %
24.1 %
24.3 %
28.6 %
Income (Loss) from operations
54,371
45,144
18,572
(3,812)
(46,559)
Operating margin
9.1 %
7.6 %
3.5 %
(0.8) %
(7.7) %
Non-GAAP income from operations*
54,371
43,994
27,704
20,707
62,362
Non-GAAP operating margin*
9.1 %
7.4 %
5.3 %
4.3 %
10.3 %
Net income (loss)
78,296
26,967
(35,950)
Net income (loss) per diluted share
Non-GAAP net income per diluted share *
$
$
3.98
1.34
$
$
1.38
1.04
($1.89)
$
0.51
$
0.32
$
1.90
(7,013)
($0.37)
(78,384)
($4.16)
Balance Sheet Data
Total assets
Total liabilities
Total debt
$ 566,867
$ 515,407
$ 478,872
$ 481,497
$ 491,664
326,880
354,941
316,726
294,219
309,810
152,077
153,094
154,405
132,817
137,886
Total debt, net of cash
30,417
63,621
74,266
68,849
98,650
Total shareholders’ equity
239,987
160,466
162,146
187,278
181,854
Total debt/capitalization
Total debt, net of cash/net total capitalization
38.8 %
11.2 %
48.8 %
28.4 %
48.8 %
31.4 %
41.5 %
26.9 %
43.1 %
35.2 %
Other Data
Operating cash flow
$ 42,378
$ 23,587
$
3,280
$ 29,867
$ 60,231
Depreciation and amortization
12,115
11,862
11,050
12,490
117,590
Capital expenditures
(14,879)
(13,765)
(12,543)
(7,245)
(12,245)
Working capital (excl. cash and debt)/revenue
18.3 %
Days sales outstanding
Inventory turns
50.5
4.3
17.6 %
50.6
4.3
16.9 %
49.1
4.7
16.2 %
51.4
4.6
18.8 %
53.7
4.0
* 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 financial 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.
2010 Non-GAAP margin
dollars and percentages
exclude $21.0 million
restructuring-related costs
and $3.5 million
of 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.
2012 Non-GAAP margin
dollars and percentages
exclude $1.1 million pension
curtailment charges,
$1.5 million gain on the
sale of a closed facility,
and $0.9 million gain on
re-measurement of
investment.
Reconciliation
Adjusted EPS
to GAAP EPS
Adjusted EPS
Discontinued operations
Normalized 38% tax rate
GAAP EPS
Year Ended
March 31, March 31,
2013
$1.34
-
$2.64
$3.98
2012
$1.04
$0.05
$0.29
$1.38
2013 ANNuAL RePORT 1
Dear Fellow Shareholders:
Fiscal Year 2013 finished strong despite rather lackluster, or in some instances, recessionary economies in the developed regions we serve. Revenue was
relatively unchanged from the prior year at $597 million, yet gross margin increased to 29.2% from 26.6%. In addition, even as we made significant
investments in our organization, products and facilities to help us grow, operating income increased 20% and operating margin expanded 150 basis
points. We believe this was a clear demonstration of the capability of our business model and the operating leverage it generates. We earned $3.98 per
diluted share in Fiscal 2013; nearly triple the earnings of Fiscal 2012. Removing the effects of the tax valuation allowance reversal and adjusting for a
38% tax rate, adjusted earnings were $1.34 per diluted share, up nearly 30% over Fiscal 2012 earnings. Nonetheless, we know that we came off of a low
base in Fiscal 2012 and we have room for improving our earnings power, even at these sales levels.
As is normally the case for our Company, we continued to generate positive cash flow. In Fiscal 2013, we generated $42 million in cash from
operations and ended the year with over $121 million in cash. Additionally, our shareholders’ equity expanded to $240 million, which included the
impact of a tax valuation allowance reversal.
Our exceptionally strong balance sheet provides us a great deal of flexibility to execute our growth strategy. We are focused on achieving our
strategic goal of reaching $1 billion in revenue with operating margins in the 12% to 14% range. We expect to accomplish our growth goals through
organic growth initiatives and acquisitions.
Expanding in Emerging Economies
We have been executing our strategic plan to gain market share in emerging economies. Our approach to
entering a new market and gaining market share over the years has proven successful. Initially, we will
export product to the market to gain brand awareness, then establish sales offices as our products
gain traction and finally, add inventory and sometimes final assembly operations. We have found
that the key to our success is the quality of our people located in the local markets and their
dedication to our products and customers. Penetrating emerging markets requires more
“feet on the street.” This is in stark contrast to developed economies where the distributor
networks are much more established and efficient. Additionally, our strategy to enhance
existing product lines and develop products designed to address specific regional
needs augments our growth in these emerging markets.
Although Western Europe has been struggling and in fact has been in a
recession for the last several months, we continue to have success with our
sales efforts in the emerging economies of Eastern Europe, including Turkey,
Poland and Hungary. As these countries industrialize, they require
our products.
Our growth in Northern and South Africa as well as Latin America,
continues apace. Development of a very aged infrastructure in North
Africa is spurring demand for our products, while the acquisition we made
in Fiscal 2012 has proven advantageous for us as we further penetrate
the mining industry in South Africa. In China, our market presence and
share continues to expand. China’s middle class is estimated to grow from 100
million to 300 million over the next several years and we expect this tremendous
growth will drive the demand for more energy, transportation and infrastruc-
ture, all of which require our products.
2 2013 ANNuAL RePORT
Driving Key Vertical Markets
We have targeted key vertical markets to create end-market pull through and capitalize on the
extensive distribution channel we have in more developed economies. The oil and gas industry
uses material handling products like ours in all aspects of their exploration, refining and
distribution processes. We have developed specific products that are explosion proof to meet a
direct requirement of this industry. We also spend a great deal of time studying how this and
other vertical market industries function, adjust our products accordingly and then train and
educate users in these key vertical markets.
We have vertical market managers focused on our large Original Equipment
Manufacturer (OEM) customers. We are helping our OEM customers recognize the positive
impact the total cost of ownership associated with our hoists can have on their performance.
Although the initial cost of our products may be slightly higher, over their life, they better stand
the test of time and use. This results in lower maintenance, repair and replacement costs that
Net Sales
(Dollars in millions)
Operating Margin
$800
606.7
600
591.9
597.3
524.1
476.2
400
200
0
‘09
‘10
‘11
‘12
‘13
10
8
6
4
2
0
-2
-4
-6
-8
9.1%
7.6%
3.5%
-0.8%
-7.7%
`09
`10
`11
`12
`13
can be as little as one-third the “life of product” cost of competitors’ equipment. Ultimately,
attention toward achieving that goal. Collectively, these programs help to develop a strong
our customers recognize that our products operate safely and reliably, which is a critical
management group, expand our bench strength, and strengthen employee skills, morale and
component of their purchase decision as well. In the end, our value proposition is compelling
motivation. We also are very interested in our associates’ perspective and periodically survey
and garners the attention of those manufacturers that realize the overall favorable cost,
them for their input with our commitment to appropriate follow-up action for improvement.
reliability and safe operations they can achieve with Columbus McKinnon products.
Driving Toward Our Strategic Goal
Investing in Our People
We expect that acquisitions and strategic alliances will supplement our organic growth.
Our Company is very focused on the most important asset we have, our people. We believe
We have invested significant time and energy in finding the right acquisitions that will deepen
our people are the lifeblood of innovation, planning and execution. Every day, they deliver
our geographic reach, augment our product offerings and further our vertical market strategy.
outstanding results to the best of their ability and are continually finding ways to do things
It’s been a little disappointing to not deploy more cash in such a pursuit, but we remain
even better. It is our responsibility to give them the resources to do their jobs well and to
disciplined and focused on making the right decision for the long-term success of the organization.
provide them the training to improve themselves and their company.
We also continue with our lean initiatives to strengthen our operations and earnings power.
We accomplished this by hiring some of the industry’s top talent, providing our upcoming,
Additionally, we are yet in the beginning stages of implementing an organization-wide
middle managers with in-house formal training, through our Global Leadership Development
enterprise resource planning (ERP) system that we expect will help to drive efficiencies as well.
Program and further developing our supervisors and managers with a Global Supervisor &
As always, our future success will be linked to the hard-working men and women in the
Manager Training Program. To the benefit of our workforce, we are intensely focused on safety
Company who delivered a very strong fiscal 2013 performance. We have a great deal of pride,
and, although not perfect, we have dramatically improved our own safety record. Our team
respect and appreciation for our dedicated global work force.
is committed to our goal of zero accidents and we spend a considerable amount of time and
Thank you for your interest and investment in Columbus McKinnon. We hope you share in
our excitement as we continue to grow around the world.
Cash Flow from Operations
(Dollars in millions)
Total Debt, Net of Cash
(Dollars in millions)
Sincerely,
$70
60
50
40
30
20
10
0
60.2
42.4
29.9
23.6
3.3
‘09
‘10
‘11
‘12
‘13
$100
98.7
80
60
40
20
0
74.3
68.8
63.6
Timothy T. Tevens
President and Chief Executive Officer
30.4
Ernest R. Verebelyi
Chairman of the Board of Directors
‘09
‘10
‘11
‘12
‘13
2013 ANNuAL RePORT 3
Executive Committee
Timothy T. Tevens
President and Chief Executive Officer
Charles R. Giesige
Vice President - Corporate Development
Gregory P. Rustowicz
Vice President - Finance and Chief Financial Officer
Alan S. Korman
Vice President - General Counsel and Corporate Secretary
Gene Buer
Vice President - N. America , Global Vertical Markets
Richard A. Steinberg
Vice President - Human Resources
Ivo Celi
Vice President - Europe, Middle East and Africa
Lawrence Gavin
Executive Director and Chief Procurement Officer
Eric Woon
Vice President - Asia Pacific
Kurt F. Wozniak
Vice President - Latin America
Sight & Sound Theatre, Lancaster County, PA. The largest faith-based theatre in America uses chain hoists provided by Columbus McKinnon
Board of Directors
Ernest R. Verebelyi
Chairman
Timothy T. Tevens
Columbus McKinnon Corporation
Richard H. Fleming 1*,2
USG Corporation (NYSE: USG) (retired)
4 2013 ANNuAL RePORT
Linda A. Goodspeed 1,3*
The ServiceMaster Company
Stephanie K. Kushner 1,3
Broadwind Energy Corporation
(NASDAQ: BWEN)
Liam G. McCarthy 1,2
Molex Inc. (NASDAQ: MOLX)
Nicholas T. Pinchuk 2,3
Snap-on Inc. (NYSE: SNA)
Steven Rabinowitz 1,2*
General Cable Corporation (retired)
1 Audit
2 Compensation and Succession
3 Corporate Governance and Nomination
* Chairperson
Form 10-k
[THIS PAGE INTENTIONALLY LEFT BLANK]
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
⌧
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, 2013
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 o No ⌧
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 o No ⌧
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 ⌧ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ⌧ No o
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 ⌧.
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 o
Non-accelerated filer o
Accelerated filer ⌧
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ⌧
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30, 2012 (the second fiscal quarter in
which this Form 10-K relates) was approximately $285 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, 2013 was 19,509,042 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, 2013 are incorporated by
reference into Part III of this report.
COLUMBUS McKINNON CORPORATION
2013 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
4
5
18
22
22
22
23
24
26
28
39
40
99
99
101
101
101
101
101
101
102
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 the U.S. and Eurozone capacity utilization are primary
leading market indicators for the Company. U.S. industrial capacity utilization increased to 77.1% in March 2013, trending up from 76.9% in March 2012
and slightly improved from 77.0% in December 2012. Eurozone capacity utilization was 77.2% in the quarter ended March 31, 2013, down from 79.9%
during the quarter ended March 31, 2012, but improved from 76.9% at the end of December 2012. The European indicator reflects the modest recession
being experienced in the Eurozone, while the U.S. indicator demonstrates moderate economic growth. In addition we follow the Emerging Markets
Purchasing Managers’ Index (PMI) for countries significant to our operations including China, Brazil, Mexico, and Russia.
Our Position in the Industry
The broad, global material handling industry includes the following sectors:
•
•
overhead material handling and lifting devices;
continuous materials movement;
• wheeled handling devices;
•
•
•
•
pallets, containers and packaging;
storage equipment and shop furniture;
automation systems and robots; and
services and unbundled software.
The breadth of our products and services enables us to participate in most of these sectors. This diversification, together with our extensive and varied
distribution channels, minimizes our dependence on any particular product, market or customer. We believe that none of our competitors offers the
variety of products or services in the markets we serve.
5
We believe that the demand for our products and services will be aided by several macro-economic growth drivers. These drivers include:
Productivity Enhancement - We believe employers respond to competitive pressures by seeking to maximize productivity and efficiency, among other
actions. Our hoists and other lifting and positioning products allow loads to be lifted and placed quickly, precisely, with little effort and fewer people,
thereby increasing productivity and reducing cycle time. 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 138-year history by emphasizing
technological innovation, manufacturing excellence and superior service. Approximately 84% of our U.S. net sales for the year ended March 31, 2013
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 Chain Attachments (1)
Load Chain (1)
Hoist Parts (2)
Mechanical Actuators (3)
Tire Shredders (4)
Jib Cranes (5)
_____________
U.S. Market Share
Percentage of
U.S. Net Sales
U.S. Market Position
#1
#1
#1
#1
#1
#1
#1
#1
47%
50%
24%
50%
48%
37%
55%
25%
34%
15%
10%
3%
11%
7%
2%
2%
84%
(1) Market share and market position data are internal estimates derived from survey information collected and provided by our trade associations
in 2012.
(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.
6
(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 2012.
(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 2012.
(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 2012.
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 or engineered for our customers during the three fiscal years
ended March 31, 2013 account for approximately 23.7% of our net sales; exceeding our goal to have these products contributing 20% to revenue.
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 4.0% of our total net sales and our top 10 customers represent approximately 19% 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 $253,252,000 (representing 42% of our total sales) during the year ended
March 31, 2013. 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.
7
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.
— 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 and on-time deliveries. 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 Europe provides us with a cost
efficient platform to manufacture and distribute certain of our products and components. We now operate 16 principal manufacturing
facilities in 7 countries, with 32 stand-alone sales and service offices in 20 countries and 10 warehouse facilities in 4 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 179 certified 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.
8
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 $68,300,000, from $98,700,000 to
$30,400,000 at March 31, 2013. We manage our capital structure conservatively while maintaining flexibility to pursue attractive strategic growth
opportunities.
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:
—
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 (defined as new products introduced within the last three years and products
engineered for our customers) amounted to $142,000,000 in the fiscal year ended March 31, 2013, or 23.7% of total sales exceeding our
goal of having new products amounting to at least 20% of total sales. New product sales amounted to $121,000,000 in the fiscal year
ended March 31, 2012 (20.4% of total sales) and $90,000,000 in the fiscal year ended March 31, 2011 (17.2% 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 $253,252,000 comprised 42% of our net sales for the year ended March 31, 2013, as
compared with $260,960,000, or 44% in fiscal 2012 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.
9
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 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.
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.
10
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 2013 sales, $344,011,000 or
58% were U.S. and $253,252,000, or 42% were international. The following table sets forth certain sales data for our products, expressed as a percentage
of net sales for fiscal 2013 and 2012:
Hoists
Chain and rigging tools
Industrial cranes
Actuators and rotary unions
Other
Fiscal Years Ended March 31,
2013
2012
63%
15
7
13
2
100%
62%
15
7
14
2
100%
Hoists - We manufacture a wide variety of electric chain hoists, electric wire rope hoists, hand-operated hoists, winches, lever tools and air-powered
hoists. Load capacities for our hoist product lines range from one-eighth of a ton to 60 tons with up to 140 ton capacity being introduced in fiscal 2014.
These products are sold under our Budgit, Chester, CM, Coffing, Little Mule, Pfaff, Shaw-Box, Yale and other recognized brands. Our hoists are sold for
use in numerous general industrial applications, as well as for use in the construction, energy, mining, food services, entertainment and other markets.
We also supply hoist trolleys, driven manually or by electric motors, for the industrial, consumer and OEM markets.
We also offer several lines of standard and custom-designed, below-the-hook tooling, clamps, and textile strappings. Below-the-hook tooling, textile
and chain slings and associated forgings, and clamps are specialized lifting apparatus used in a variety of lifting activities performed in conjunction
with hoisting or lifting applications.
Chain and 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 produce a broad line of alloy and carbon steel closed-die forged chain attachments, including hooks, shackles, Hammerloks, 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 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, and Washington Equipment brands. Crane builders represent a specific distribution channel
for electric wire rope hoists, chain hoists and other crane components.
11
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 primarily includes tire shredders. 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.
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.
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 2013, we focused primarily on shows related to targeted
industries. Examples include: OTC (US) for oil & gas, MODEX (US) for material handling, MINExpo (US) for mining industry, LDO (US) for the
entertainment industry, PALM Expo (China) for the entertainment industry, CEMAT ASIA for material handling, automation, transport/logistics
industries, Prolight & Sound (Germany) for industrial equipment, Plasa (UK) for entertainment, Mecânica (Brazil) for automation and process controls,
Rio for oil & gas (Brazil) and Expo Manejo de Materiales y Logística (Mexico) for handling of materials and logistics.
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), AMSE (American Society of Mechanical Engineers) 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.
12
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.
— 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.
13
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 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 179 certified 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.
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 179 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, 2013 was approximately $99,034,000 compared to approximately $114,180,000 at March 31, 2012. Fiscal 2012 backlog
was elevated due to an unusually large amount of project-related business at the end of the year. Our orders for standard products are generally
shipped within one week. Orders for products that are manufactured to customers’ specifications are generally shipped within four to twelve weeks.
Given the short product lead times, we do not believe that the amount of our backlog of orders is a reliable indication of our future sales. Fluctuations
in backlog reflect the project oriented nature of certain aspects of our business.
14
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, 2013, we had 2,578 employees; 1,524 in the U.S./Canada, 107 in Latin America, 746 in Europe and 201 in Asia. Approximately 14% 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.
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.
15
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.
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 2014.
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
$245,000.
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. The estimated cost for the voluntary clean-up is not expected to exceed the accrued balance of $25,000.
In June of 2007, we were identified by the New York State Department of Environmental Conservation (“the DEC”), along with other companies, as a
potential responsible party (“PRP”) at the Frontier Chemical Royal Avenue Site in Niagara Falls, New York. 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 settled this matter in June 2012 for approximately $71,000.
CMCO has been a part of the Pendleton Site PRP Group since about 1993. CMCO sent its pickle liquor wastes from Tonawanda to the Pendleton Site
for treatment and disposal. The Pendleton Site PRP Group signed an Order on Consent with the NYS DEC in 1996 and the cleanup was concluded in
the early 2000s. The Order on Consent required a post-construction operation and maintenance period of 30 years and CMCO is required to pay its
share of the costs associated with the operation and maintenance period. These annual costs are approximately $50,000 of which CMCO pays 13.4% or
$6,700. Reserves on the books are sufficient to cover these costs for the remainder of the operations and maintenance period.
16
For all of the currently known environmental matters, we have accrued a total of $356,000 as of March 31, 2013 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.
17
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.
During the last five years, 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. In addition we recorded a
goodwill impairment charge and incurred restructuring costs in these periods. 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. We
have seen improvement in demand for our products in the fiscal year ended March 31, 2013. Our net sales for the year ended March 31, 2013 were
$597,263,000 up $5,318,000 or 1.0% from the year ending March 31, 2012. 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.
18
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, 2013, approximately 42% 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.
19
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, 2013 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 $253,252,000 in our fiscal year ended March
31, 2013) 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.
20
We are subject to various environmental laws which may require us to expend significant capital and incur substantial cost.
Our operations and facilities are subject to various federal, state, local and foreign requirements relating to the protection of the environment, including
those governing the discharges of pollutants in the air and water, the generation, management and disposal of hazardous substances and wastes and
the cleanup of contaminated sites. We have made, and will continue to make, expenditures to comply with such requirements. Violations of, or liabilities
under, environmental laws and regulations, or changes in such laws and regulations (such as the imposition of more stringent standards for discharges
into the environment), could result in substantial costs to us, including operating costs and capital expenditures, fines and civil and criminal sanctions,
third party claims for property damage or personal injury, clean-up costs or costs relating to the temporary or permanent discontinuance of operations.
Certain of our facilities have been in operation for many years, and we have remediated contamination at some of our facilities. Over time, we and other
predecessor operators of such facilities have generated, used, handled and disposed of hazardous and other regulated wastes. Additional
environmental liabilities could exist, including clean-up obligations at these locations or other sites at which materials from our operations were
disposed, which could result in substantial future expenditures that cannot be currently quantified and which could reduce our profits or have an
adverse effect on our financial condition, 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.
21
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
We maintain our corporate headquarters in Amherst, New York and, as of March 31, 2013, 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. Santiago Tianguistenco, Mexico
10. Asia operation:
Hangzhou, China
Hangzhou, China
11. Chester, England
12. Szekesfehervar, Hungary
13. Eureka, IL
14. Sarasota, FL
15. Heilbronn, Germany
16. 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
Hoists
Plate clamps
Textiles and textile strappings
Cranes
Tire shredders
Actuators
Rotary unions
186,000
165,000
146,000
90,000
81,000
59,000
49,000
37,000
108,000
107,000
91,000
54,000
53,000
48,000
24,000
91,000
25,000
23,000
22,000
Owned
Owned
Leased
Owned
Owned
Owned
Leased
Owned
Leased
Leased
Owned
Owned
Owned
Owned
Leased
Owned
Owned
Leased
Owned
In addition, we have a total of 42 sales offices, distribution centers and warehouses. We believe that our properties have been adequately maintained,
are in generally good condition and are suitable for our business as presently conducted. We also believe our existing facilities provide sufficient
production capacity for our present needs and for our anticipated needs in the foreseeable future. Upon the expiration of our current leases, we believe
that either we will be able to secure renewal terms or enter into leases for alternative locations at market terms.
Item 3.
Legal Proceedings
From time to time, we are named a defendant in legal actions arising out of the normal course of business. We are not a party to any pending legal
proceeding other than ordinary, routine litigation incidental to our business. We do not believe that any of our pending litigation will have a material
impact on our business. We maintain comprehensive general 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 per occurrence limits
on the self-insurance for general and product liability coverage 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, our 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 2013. We obtain additional insurance coverage from independent
insurers to cover potential losses in excess of these limits.
22
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, 2013 consolidated financial
statements for more information on our asbestos claims.
Item 4.
Mine Safety Disclosures.
Not Applicable.
23
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, 2013, there were 588 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, 2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year Ended March 31, 2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
Price Range of
Common Stock
High
Low
$
$
20.45
18.32
14.99
17.85
16.25
16.22
16.52
20.84
16.84
10.08
10.37
12.71
13.13
13.77
14.27
15.87
On May 22, 2013, the closing price of our common stock on the Nasdaq Global Select Market was $19.01 per share.
24
PERFORMANCE GRAPH
The Performance Graph shown below compares the cumulative total shareholder return on our common stock based on its market price, with the total
return of the S&P SmallCap 600 Index, the S&P MidCap 400 Index, and the Dow Jones U.S. Diversified Industrials. The comparison of total return
assumes that a fixed investment of $100 was invested on March 31, 2008 in our common stock and in each of the foregoing indices and further assumes
the reinvestment of dividends. Going forward, we will replace the S&P MidCap 400 Index with the S&P SmallCap 600 Index as it is a more appropriate
comparison for the Company. The stock price performance shown on the graph is not necessarily indicative of future price performance.
25
Item 6.
Selected Financial Data
The consolidated balance sheets as of March 31, 2013 and 2012, and the related statements of operations, cash flows and shareholders’ equity for each
of the three years ended March 31, 2013 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)
2010
2011
2012
2009
2013
$
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) (4)
Income (loss) from continuing operations
Income (loss) from discontinued operations (5)
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 (6)
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
$
$
$
$
$
$
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
$
$
$
$
$
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
$
$
$
$
$
597.3
423.1
174.2
65.6
52.2
-
-
2.0
54.4
13.8
-
(2.0)
42.6
(35.7)
78.3
-
78.3
3.98
4.03
19.7
19.4
566.9
152.1
30.4
240.0
42.4
(10.1)
(1.1)
14.9
26
(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 2013, 2012, and 2011.
(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) The Company had a valuation allowance of $53,325,000 recorded as of March 31, 2012 due to the uncertainty of whether the Company's net
operating loss carryforwards and deferred tax assets might ultimately be realized. The Company was able to utilize $14,567,000 of U.S.
federal net operating loss carryforwards in fiscal 2013 which reduced the valuation allowance by $5,107,000. As a result of the increased
operating performance of the Company over the past several years, the Company reevaluated the certainty as to whether the Company's
remaining net operating loss carryforwards and other deferred tax assets may ultimately be realized. As a result of the determination that it
is more likely than not that all of the remaining deferred tax assets will be realized with the exception of certain U.S. federal tax credit
carryforwards, a significant portion of the remaining valuation allowance totaling $49,161,000 was reversed in fiscal 2013.
(4) During 2011, the Company recorded non-cash charge of $42,983,000 included within its provision for income taxes. As noted in footnote
number (3) above, this valuation allowance was reversed in fiscal 2013. 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.
(5) 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 was payable over 10 years ending in May 2012. The full amount of this note had been
reserved due to the uncertainty of collection. Principal payments received on the note had been recorded as income from discontinued
operations at the time of receipt. As of March 31, 2013, the note was paid in full. Refer to Note 4 to our consolidated financial statements for
additional information on Discontinued Operations.
(6) Total debt includes all debt, including the current portion, notes payable and subordinated debt.
27
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 138-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 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 October 31,
2017, fixed-rate long-term debt which expires in 2019 and a solid cash flow business profile.
Additionally, our revenue base is geographically diverse with approximately 42% derived from customers outside the U.S. for the year ended March 31,
2013. 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
products. Since their June 2009 trough, these statistics have improved over the last several years, though we have recently seen a small decline in the
Eurozone. 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, foreign currency exchange rates 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, general industrial, entertainment, and mining.
Regardless of the economic climate and point in the economic cycle, we constantly explore ways to increase our operating margins as well as further
improve our productivity and competitiveness. We have specific initiatives related to improved customer satisfaction, reduced defects, shortened lead
times, improved inventory turns and on-time deliveries, reduced 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.
28
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 pursuing cost reduction opportunities to enhance future margins.
RESULTS OF OPERATIONS
Fiscal 2013 Compared to 2012
Fiscal 2013 sales were $597,263,000, up 0.9%, or $5,318,000 compared with fiscal 2012 sales of $591,945,000. Sales for the year were positively impacted
by $20,755,000 in volume and mix of products sold and $16,057,000 in price increases. Sales for the year were negatively impacted $9,644,000 due to net
acquisition and divestiture activity and $4,784,000 by two fewer shipping days. Unfavorable foreign currency translation impacted sales by
$17,066,000.
Our gross profit was $174,231,000 and $157,718,000 in fiscal 2013 and 2012 respectively. The fiscal 2013 increase in gross profit of $16,513,000 or 10.5%
is the result of $16,057,000 in price increases, $5,355,000 in increased productivity, $3,812,000 in increased volume, $1,666,000 from lower product liability
expenses, and $1,971,000 from net acquisition and divestiture activity partially offset by $6,821,000 in material inflation. Foreign currency translation
had an unfavorable impact on gross profit of $5,527,000.
Selling expenses were $65,608,000 and $64,860,000 or 11.0% of net sales in in both fiscal years 2013 and 2012. The increase in fiscal 2013 selling expense
was consistent with the overall increase in sales volume. Additionally, foreign currency translation had a $2,760,000 favorable impact on selling
expenses.
General and administrative expenses were $52,271,000 and $46,677,000 or 8.8% and 7.9% of net sales in fiscal 2013 and 2012, respectively. The increase
in fiscal 2013 general and administrative expenses was primarily the result of investments in emerging markets and new product development costs,
higher variable compensation costs, higher employee benefit costs, including pension and group medical costs, the implementation of the Company’s
new enterprise management system, as well as general inflationary increases.
Restructuring charges of $0 and ($1,037,000), or 0% and (0.2%) of net sales were recorded in fiscal 2013 and 2012, 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.
Amortization of intangibles was $1,981,000 and $2,074,000 fiscal 2013 and 2012, respectively and primarily relate to amortization of intangible assets
acquired in connection with our fiscal 2009 acquisition of Pfaff.
Interest and debt expense was $13,757,000 and $14,214,000 or 2.3% and 2.4% of net sales in fiscal 2013 and 2012, respectively.
Investment income of $1,546,000 and $1,018,000, in fiscal 2013 and 2012, respectively, related to marketable securities held in the Company’s wholly
owned captive insurance subsidiary.
Foreign currency exchange (gain) loss was ($45,000) and $316,000 in fiscal 2013 and 2012, respectively, as a result of foreign currency volatility related
to foreign currency denominated purchases and intercompany debt.
Other income, net was $417,000 and $1,179,000 in fiscal 2013 and 2012, 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.
29
Income tax (benefit) expense as a percentage of income (loss) from continuing operations before income tax expense was (83.7%) and 21.0% in fiscal
2013 and 2012, respectively. The unusual percentage experienced during the year ended March 31, 2013 is related to the reversal of a deferred tax asset
valuation allowance of $49,161,000.
Fiscal 2012 Compared to 2011
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.
Our gross profit was $157,718,000 and $126,052,000 in fiscal 2012 and 2011, 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.
Selling expenses were $64,860,000 and $62,910,000 or 11.0% and 12.0% of net sales in fiscal 2012 and 2011, respectively. The increase in fiscal 2012
selling expense is primarily the result of increasing revenues year over year.
General and administrative expenses were $46,677,000 and $40,592,000 in fiscal 2012 and 2011, respectively. As a percentage of net sales, general and
administrative expenses were 7.9% and 7.7% in fiscal 2012 and 2011, respectively. 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.
Restructuring charges of $(1,037,000) and $2,200,000, or (0.2)% and 0.4% of net sales were recorded in fiscal 2012 and 2011, 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.
Amortization of intangibles was $2,074,000 and $1,778,000 in fiscal 2012 and 2011, 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 and $13,532,000 or 2.4% and 2.6% of net sales in fiscal 2012 and 2011, respectively.
Investment income of $1,018,000 and $3,041,000, in fiscal 2012 and 2011, respectively, related to marketable securities held in the Company’s wholly
owned captive insurance subsidiary.
Foreign currency exchange loss was $316,000, and $452,000 in fiscal 2012 and 2011, respectively, as a result of foreign currency volatility related to
purchases and intercompany debt.
Other income, net was $1,179,000 and $1,375,000 in 2012 and 2011, respectively. Other income in fiscal 2013 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% and 817.6% in
fiscal 2012 and 2011, 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.
30
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totalled $121,660,000, $89,473,000, and $80,139,000 at March 31, 2013, 2012 and 2011, respectively.
Cash flow provided by operating activities
Net cash provided by operating activities was $42,378,000, $23,587,000 and $3,280,000 in fiscal 2013, 2012 and 2011, respectively. The net cash provided
by operating activities in fiscal 2013 consisted of $29,135,000 in net income, before a $49,161,000 reversal of a non-cash charge (originally booked in
fiscal 2011) related to the recording of valuation allowances against deferred tax assets. The improvement in net income was largely due to higher gross
profit. In addition, net cash provided by operating activities in fiscal 2013 increased as a result of a decrease in inventories and trade accounts
receivable of $10,106,000 and $6,712,000 respectively, offset by an increase in prepaid expenses of $1,283,000 and a decrease in trade accounts payable
and accrued and non-current liabilities of $5,465,000 and $18,801,000 respectively. The reduction in accrued and non-current liabilities was due to a net
decrease in customer deposits due to large projects in process at the end of the prior fiscal year and sales rebates earned in fiscal year 2012 and paid in
fiscal 2013, a decrease in accrued product liability costs and a decrease in accrued pension costs.
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.
Cash flow used by investing activities
Net cash used by investing activities was $10,087,000, $13,541,000 and $4,344,000 in fiscal 2013, 2012 and 2011, respectively. The net cash used by
investing activities in fiscal 2013 consisted of $14,879,000 in capital expenditures (of which $3,953,000 relates to implementation of our global ERP
system) partially offset by $2,357,000 in proceeds from the sale of assets and $2,435,000 in net proceeds from the sale of marketable securities.
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.
Cash flow (used) provided by financing activities
Net cash (used) provided by financing activities was ($1,086,000), $474,000 and $15,794,000 in fiscal 2013, 2012 and 2011, respectively. The net cash
used by financing activities in fiscal 2013 primarily consisted of $1,066,000 repayment of debt and $684,000 payment in deferred financing costs related
to the renewal of the Revolving Credit Facility.
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.
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, 2013, $41,981,000
of cash and cash equivalents were held by foreign subsidiaries.
We entered into a fifth amended, restated and expanded revolving credit facility dated October 19, 2012 (New Revolving Credit Facility). The New
Revolving Credit Facility provides availability up to a maximum of $100,000,000 and has an initial term ending October 31, 2017.
31
Provided there is no default, we may request an increase in the availability of the New Revolving Credit Facility by an amount not exceeding
$75,000,000, subject to lender approval. The unused portion of the New Revolving Credit Facility totalled $89,881,000 net of outstanding borrowings of
$0 and outstanding letters of credit of $10,119,000 as of March 31, 2013. The outstanding letters of credit at March 31, 2013 consisted of $2,189,000 in
commercial letters of credit and $7,930,000 of standby letters of credit. The unused portion of the New Revolving Credit Facility combined with our
cash balance yields total liquidity of $211,541,000 at March 31, 2013. Interest on the revolver is payable at varying Eurodollar rates based on LIBOR
plus an applicable margin of 100 basis points or at a Base Rate (equivalent to a fluctuating rate per annum equal to the higher of (a) the Federal Funds
Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate.”)
plus 0 basis points. The applicable margin is determined based on the pricing grid in the New Revolving Credit Facility which varies based on the
Company’s total leverage ratio at March 31, 2013. The New 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 New 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, 2013. 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 $30,000,000. Our actual fixed charges coverage ratio and total leverage ratio, as calculated per the terms of our New Revolving
Credit Facility, were 4.03x and 0.68x, respectively, at March 31, 2013.
In connection with the execution of the New Revolving Credit Facility, it was determined that the borrowing capacity of each lender participating in this
new agreement exceeded their borrowing capacities prior to the amendment. As a result, unamortized deferred financing costs associated with the
agreement prior to its amendment remain deferred and are being amortized over the term of the New Revolving Credit Facility. Fees and other costs paid
to execute the New Revolving Credit Facility totaling $684,000 were recorded as additional deferred financing costs and are being amortized over the
term of the New Revolving Credit Facility.
At March 31, 2012, the Company had entered into an amended, restated and expanded revolving credit facility dated December 31, 2009. The Revolving
Credit Facility provided availability up to a maximum of $85,000,000 and had an initial term ending December 31, 2013. The Revolving Credit Facility was
replaced by the New Revolving Credit Facility on October 19, 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.
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.
32
The gross balances of deferred financing costs were $4,133,000 and $4,640,000 as of March 31, 2013 and 2012, respectively. The accumulated
amortization balances were $934,109 and $1,513,000 as of March 31, 2013 and 2012, respectively.
Our capital lease obligations related to property and equipment leases amounted to $3,665,000 at March 31, 2013. 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, 2013, significant unsecured credit lines totalled approximately $6,408,000, of which $0 was drawn.
In addition to the above facilities, one of our foreign subsidiaries has a credit line secured by a parent company guarantee. This credit line provides
availability of up to $966,000, of which $0 was drawn as of March 31, 2013.
CONTRACTUAL OBLIGATIONS
The following table reflects a summary of our contractual obligations in millions of dollars as of March 31, 2013, by period of estimated payments due:
Total
Fiscal
2014
Fiscal
2015-
Fiscal
2017-
Fiscal 2016
Fiscal 2018
More
Than
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
$
$
$
153.7
31.1
-
69.5
10.1
6.2
2.0
89.6
362.2
$
$
1.0
5.8
-
12.1
10.1
6.2
-
-
35.2
$
$
1.8
8.0
-
23.9
-
2.0
$
0.9
5.3
-
23.7
-
-
31.3
67.0
$
32.3
62.2
$
150.0
12.0
-
9.8
-
-
26.0
197.8
(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 $2.0 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 2013, 2012 and 2011 were $14,879,000, $13,765,000 and $12,543,000, respectively. We expect
capital expenditure spending in fiscal 2014 to be in the range of $20,000,000 to $25,000,000, excluding acquisitions and strategic alliances.
33
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, $0, and $1,052,000 of income from
discontinued operations was recorded in fiscal 2013, and 2012 respectively, net of tax. The note was paid during the year ended March 31, 2013.
During the year ended March 31, 2013 the Company sold certain assets of the Gaffey division of Crane Equipment and Service, Inc. The sale of the
Gaffey assets did not have a material effect on the Company’s financial statements and therefore was not reclassified as a discontinued operation.
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. If interpreted differently under different conditions or circumstances, changes in our estimates could result in
material changes to our reported results. 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 2013 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. Changes in these assumptions can result in the calculation of different plan expense and liability
amounts. Further, actual experience can differ from the assumptions.
34
The pension discount rate assumptions of 4.35%, 4.70%, and 5.75%, as of March 31, 2013, 2012, and 2011, respectively, are based on long-term AA
rated corporate and municipal bond rates. The decrease in the discount rate for fiscal 2013 resulted in a $9,300,000 increase in the projected benefit
obligation. The decrease in the discount rates for fiscal 2012 resulted in an $11,500,000 increase in the projected benefit obligation. The rate of return on
plan assets assumptions of 7.5% for each of the years ended March 31, 2013, 2012 and 2011 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,
2013 and 2012 was $62,163,000 and $65,123,000, or 27.1% and 30.3% of the projected benefit obligation, respectively. Our pension contributions during
fiscal 2013 and 2012 were approximately $10,328,000 and $5,974,000, respectively. The under-funded status may result in future pension expense
increases. Pension expense for the March 31, 2014 fiscal year is expected to approximate $6,390,000, less than the fiscal 2013 amount of
$7,464,000. Pension funding contributions for the March 31, 2014 fiscal year is expected to increase by approximately $700,000 compared to fiscal 2013.
The compensation increase assumption of 2% as of March 31, 2013, 2012, and 2011 is based on expected wage trends and historical patterns.
The healthcare costs inflation assumptions of 7.5% 8.0%, and 8.5% for fiscal 2013, 2012, and 2011, 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. Changes to these estimates could result in material changes to the amount of expense and liabilities recorded in our financial
statements. Further, 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.
Goodwill impairment testing. Our goodwill balance, $105,354,000 as of March 31, 2013 is subject to impairment testing. We test goodwill for
impairment at least annually, as of the end of February, and more frequently whenever events occur or circumstances change that indicate there may be
impairment. These events or circumstances could include a significant long-term adverse change in the business climate, poor indicators of operating
performance, or a sale or disposition of a significant portion of a reporting unit.
We test goodwill at the reporting unit level, which is one level below our operating segment. We identify our reporting units by assessing whether the
components of our operating segment constitute businesses for which discrete financial information is available and segment management regularly
reviews the operating results of those components. We also aggregate components that have similar economic characteristics into single reporting
units (for example, similar products and / or services, similar long-term financial results, product processes, classes of customers, etc.). We have four
reporting units, only two of which have goodwill. Our Duff-Norton reporting unit and Rest of Products reporting unit have goodwill totaling $9,770,000
and $95,584,000, respectively, at March 31, 2013.
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.
35
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.
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, 2013 the allowance for doubtful accounts totaled $2,256,000.
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,
2013
$
65.7
13.4
7.3
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.
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. In fiscal years 2013, 2012 and 2011 income taxes as a percentage of income before income taxes were not
reflective of U.S. statutory rates. The Company had a valuation allowance of $53,325,000 at March 31, 2012 due to the uncertainty of whether U.S.
federal and certain foreign net operating loss carryforwards ("NOLs") and deferred tax assets might ultimately be realized. In fiscal year 2013, we
utilized the remaining U.S. federal NOLs thereby, reducing the valuation allowance by $5,107,000. As a result of our increased operating performance
over the past several years, we reevaluated the certainty as to whether our remaining NOLs and other deferred tax assets may ultimately be
realized. Management concluded that it is more likely than not that almost all of the remaining deferred tax assets will be realized; therefore,
$49,161,000 of the remaining valuation allowance was reversed as of March 31, 2013.
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 was $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. NOLs. The U.S. NOLs 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., despite our expectations of future profitability. If the 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.
36
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 March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation
Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This ASU
addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no
longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. This ASU
is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company is evaluating the
potential impact of this adoption on its consolidated financial statements.
In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, “Liabilities (Topic 405): Obligations Resulting from
Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date.” This ASU addresses the
recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other
contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within
those years, beginning after December 15, 2013. The Company is evaluating the potential impact of this adoption on its consolidated financial
statements.
In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income.” The ASU requires entities to provide information about significant amounts reclassified out of accumulated other
comprehensive income by component and their corresponding effect on net income. The ASU is effective for public entities for fiscal years beginning
after December 15, 2012. Management does not expect the adoption of this standard has a significant effect on the Company's financial statement
disclosures.
In January 2013, the FASB issued ASU No. 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and
Liabilities". The ASU clarifies that ordinary trade receivables and certain other receivables are not in the scope of ASU No. 2011-11, “Balance Sheet
(Topic 210): Disclosures about Offsetting Assets and Liabilities.” Specifically, Update 2011-11 applies only to derivatives, repurchase agreements and
reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria
contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. The amendments in this ASU
are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. Management does not expect the adoption of
this standard has a significant effect on the Company's consolidated financial position.
37
In October 2012, the FASB issued ASU No. 2012-04, “Technical Corrections and Improvements” which amends a wide variety of Topics in the FASB
Accounting Standards Codification ("Codification”). The amendments in ASU No. 2012-04 represent changes to clarify the Codification, correct
unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current
accounting practice. The adoption of ASU 2012-04 in fiscal 2013 did not have a significant impact on the Company’s condensed consolidated financial
statements.
In August 2012, the FASB issued ASU No. 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs
Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to
FASB Accounting Standards Update 2010-22 (SEC Update)”. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114.
The adoption of ASU 2012-03 did not have a significant impact on the Company’s condensed consolidated financial statements.
In July 2012, the FASB issued ASU No. 2012-02, which updated the guidance in ASC Topic 350, “Intangibles – Goodwill and Other.” The amendments
in Update will allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. Under
these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based
on qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired. The amendments include a number of
events and circumstances for an entity to consider in conducting the qualitative assessment. The amendments are effective for annual and interim
impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The amendments are not expected to have
an impact on our financial condition or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): 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 non-owner changes in stockholders’ equity be
presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The adoption of ASU 2011-
05 in fiscal 2013 did not have a significant impact on the Company’s condensed 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 U.S. GAAP and IFRSs” (“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 adoption of ASU 2011-04 in fiscal
2013 did not have a significant impact on the Company’s condensed 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.
38
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 2013, 42% 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 $2,100,000 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 $3,295,000 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 $2,529,000 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
$8,071,000 and all contracts mature within fifteen months of March 31, 2013.
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, 2013, we do not have any material swap agreements or similar
financial instruments in place. At March 31, 2013 and 2012, approximately 100% and 99% of our outstanding debt had fixed interest rates, respectively.
At those dates, we had approximately $0 and $112,000, respectively, of outstanding variable rate debt. A 1% fluctuation in interest rates would have
changed interest expense on that outstanding variable rate debt by $0 in fiscal 2013 and less than $10,000 in fiscal 2012.
39
Item 8.
Financial Statements and Supplemental Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Columbus McKinnon Corporation
Audited Consolidated Financial Statements as of March 31, 2013:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements Of Comprehensive Income (Loss)
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Fair Value Measurements
Inventories
Property, Plant, and Equipment
Goodwill and Intangible Assets
1. Description of Business
2. Accounting Principles and Practices
3. Acquisitions
4. Divestitures
5.
6.
7. Marketable Securities
8.
9.
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.
23. Accumulated Other Comprehensive Loss
24. Effects of New Accounting Pronouncements
Selected Quarterly Financial Data (unaudited)
Income Taxes
Schedule II – Valuation and Qualifying Accounts.
40
41
42
43
44
45
46
47
47
50
51
52
54
55
56
57
59
61
61
63
69
70
76
78
79
81
82
93
94
95
96
98
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, 2013 and 2012, and the related
consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the three years in the period
ended March 31, 2013. 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, 2013 and 2012 and the consolidated results of its operations and its cash flows for each of the three years in the
period ended March 31, 2013, 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, 2013, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 29, 2013 expressed an unqualified
opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
May 29, 2013
41
COLUMBUS McKINNON CORPORATION
CONSOLIDATED BALANCE SHEETS
Current assets:
ASSETS
Cash and cash equivalents
Trade accounts receivable, less allowance for doubtful accounts ($2,256 and $2,745, 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
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; 19,507,939 and 19,400,526 shares issued and outstanding
Additional paid-in capital
Retained earnings
ESOP debt guarantee: 33,980 and 60,460 shares
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes.
42
March 31,
2013
2012
(In thousands, except share data)
$
$
$
$
121,660
80,224
94,189
17,905
313,978
65,698
105,354
13,395
23,951
37,205
7,286
566,867
-
34,329
48,884
1,024
84,237
2,641
148,412
91,590
326,880
195
192,308
104,191
(552)
(56,155)
239,98
566,867
$
$
$
$
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
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 from operations
Interest and debt expense
Cost of bond redemptions
Investment income
Foreign currency exchange (gain) loss
Other income, net
Income from continuing operations before income tax (benefit) expense
Income tax (benefit) expense
Income (loss) from continuing operations
Income from discontinued operations (net of tax)
Net income (loss)
Average basic shares outstanding
Average diluted shares outstanding
Basic income (loss) per share:
Income (loss) from continuing operations
Income from discontinued operations
Basic income (loss) per share
Diluted income (loss) per share:
Income (loss) from continuing operations
Income from discontinued operations
Diluted income (loss) per share
$
$
$
$
$
$
See accompanying notes.
43
2013
2011
$
$
2012
(In thousands, except per share data)
597,263
423,032
174,231
65,608
52,271
-
1,981
54,371
13,757
-
(1,546)
(45)
(417)
42,622
(35,674)
78,296
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)
-
78,296
$
1,052
26,967
$
19,425
19,687
19,272
19,512
4.03
-
4.03
3.98
-
3.98
$
$
$
$
1.35
0.05
1.40
1.33
0.05
1.38
$
$
$
$
396
(35,950)
19,047
19,047
(1.91)
0.02
(1.89)
(1.91)
0.02
(1.89)
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net income (loss)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
Pension liability adjustments, net of taxes of $52, $438, and $952
Other post retirement obligations adjustments, net of taxes of $(242), $0, and $0
Split-dollar life insurance arrangement adjustments, net of taxes of $(47), $0, and $0
Change in derivatives qualifying as hedges, net of taxes of $159, $12, and $0
Adjustments:
Unrealized holding gain arising during the period, net of taxes of $(406), $0, and $0 *
Reclassification adjustment for (loss) gain included in net income, net of taxes of $268, $0, and
$0 *
Net change in unrealized gain (loss) on investments
Total other comprehensive (loss) income
Comprehensive income (loss)
2013
March 31,
2012
(In thousands)
2011
$
78,296
$
26,967
$
(35,950)
(2,183)
(362)
381
76
(388)
725
(4,621)
(31,617)
1,778
48
(246)
1,358
(497)
228
(2,248)
76,048
$
(157)
1,201
(33,457)
(6,490)
$
$
4,933
4,225
394
(1,586)
239
1,814
(2,143)
(329)
7,876
(28,074)
* The zero net deferred tax benefit related to the change in derivatives for our domestic subsidiaries qualifying as hedges, unrealized holding gains and
losses, and reclassification adjustments during the years ended 2012 and 2011 is due to the related deferred tax asset valuation allowance.
See accompanying notes.
44
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands, except share data)
Balance at April 1, 2010
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
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
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
Stock compensation - directors
Stock options exercised, 171,970 shares
Stock compensation expense
Earned 26,872 ESOP shares
Balance at March 31, 2012
Net income 2013
Change in foreign currency
translation adjustment
Change in net unrealized gain on
investments, net of tax of $(138)
Change in derivatives qualifying as hedges, net of
tax of $159
Change in pension liability and postretirement
obligations, net of tax of $(237)
Stock compensation - directors
Stock options exercised, 39,878 shares
Stock compensation expense
Tax effect of exercise of stock options
Earned 26,480 ESOP shares
Balance at March 31, 2013
Common
Stock ($.01
par value)
191
-
$
Additional
Paid-in
Capital
Retained
Earnings
$
182,385
-
$
34,878
$
(35,950)
ESOP
Debt
Guarantee
(1,850)
-
-
-
-
-
-
-
-
-
191
-
-
-
-
-
-
2
-
-
193
-
-
-
-
-
-
-
2
-
-
-
195
$
$
$
-
-
-
-
-
280
56
2,204
(68)
27
184,884
-
$
-
-
-
-
-
-
(1,072) $
26,967
-
-
-
-
-
-
-
360
1,436
2,553
27
189,260
-
$
-
-
-
-
-
25,895
78,296
$
-
-
-
-
-
-
-
-
-
361
293
2,973
(576)
(3)
$
192,308
-
-
-
-
-
-
104,191
$
See accompanying notes.
45
-
-
-
-
-
-
-
443
(1,407)
-
-
-
-
-
-
-
-
432
(975)
-
-
-
-
-
-
-
-
-
-
423
(552)
$
$
$
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
$
(28,326) $
-
4,933
(329)
239
3,033
-
-
-
-
-
$
(20,450) $
-
187,278
(35,950)
4,933
(329)
239
3,033
280
56
2,204
(68)
470
162,146
26,967
(4,621)
(4,621)
1,201
(246)
(29,791)
-
-
-
-
$
(53,907) $
-
(2,183)
-
228
1,201
(246
(29,791)
360
1,438
2,553
459
160,466
78,296
(2,183)
-
228
(388)
(388)
95
-
-
-
-
-
$
(56,155) $
95
361
295
2,973
(576)
420
239,987
COLUMBUS McKINNON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
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 and discount on subordinated debt
Stock-based compensation
Gain on re-measurement of investment
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 (used for) provided by financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplementary cash flows data:
Interest paid
Income taxes paid, net of refunds
See accompanying notes.
46
2013
Year ended March 31,
2012
(In thousands)
2011
$
78,296
$
26,967
$
(35,950)
-
12,115
(42,047)
(827)
-
592
3,334
-
6,712
10,106
(1,283)
(354)
(5,465)
(18,801)
42,378
6,573
(4,138)
(14,879)
2,357
-
(10,087)
-
(10,087)
295
-
(54)
-
(1,066)
-
(684)
423
(1,086)
982
32,187
89,473
121,660
$
(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
$
(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
13,115
9,419
$
$
14,206
5,394
$
$
15,556
946
$
$
$
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 2013, approximately 58% of sales were to customers in the United States.
2.
Accounting Principles and Practices
Advertising
Costs associated with advertising are expensed as incurred and are included in selling expense in the consolidated statements of operations.
Advertising expenses were $2,900,000, $3,500,000, and $3,700,000 in fiscal 2013, 2012, and 2011, 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 14% 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 with approximately 7% represented by collective bargaining agreements which expire within 12
months.
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 (gains)/losses, including changes in the fair value of derivatives, on foreign currency transactions of approximately
$(45,000), $316,000, and $452,000 in fiscal 2013, 2012, and 2011, respectively.
47
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, or more frequently if indicators of impairment exist, 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 as of February 28, 2013 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.
48
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 48% and 44% of inventories at March 31, 2013 and March 31, 2012,
respectively, have 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 $5,172,000, $4,497,000, and $2,947,000 for the years
ended March 31, 2013, 2012 and 2011, respectively, and are classified as general and administrative expense in the consolidated statements of
operations.
Revenue Recognition, Accounts Receivable and Concentration of Credit Risk
Sales are recorded when title passes to the customer which is generally at time of shipment to the customer. The Company performs ongoing credit
evaluations of its customers’ financial condition, but generally does not require collateral to support customer receivables. The credit risk is controlled
through credit approvals, limits and monitoring procedures. Accounts receivable are reported at net realizable value and do not accrue interest. The
Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and
other factors. Accounts receivable are charged against the allowance for doubtful accounts once all collection efforts have been exhausted. The
Company does not routinely permit customers to return product. However, sales returns are permitted in specific situations and typically include a
restocking charge or the purchase of additional product.
49
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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
3.
Acquisitions
March 31,
2013
2012
$
$
1,070
2,267
(2,546)
791
$
$
563
2,849
(2,342)
1,070
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.
50
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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 had a remaining balance of $214,000 at March 31, 2012, which the Company collected during fiscal year 2013.
Summarized statements of operations for discontinued operations are as follows:
Net revenue
Gain before income taxes
Income tax expense
Income from operations of discontinued businesses
Year Ended March 31,
2012
2013
2011
$
$
-
-
-
-
$
$
-
1,052
-
1,052
$
$
-
639
243
396
During the year ended March 31, 2013, the Company sold certain assets of the Gaffey division of Crane Equipment and Service, Inc. The sale of the
Gaffey assets did not have a material effect on the Company’s financial statements for year ended March 31, 2013 and therefore was not reclassified as
a discontinued operation.
51
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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.
52
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)
Measured at fair value:
Marketable securities
Derivative liabilities
Other equity investments
Disclosed at fair value:
Subordinated debt
Senior debt
Description
Assets/(Liabilities)
Measured at fair value:
Marketable securities
Derivative liabilities
Other equity investments
Disclosed at fair value:
Subordinated debt
Senior debt
Fair value measurements at reporting date using
Quoted prices in
active markets for
identical assets
Significant
other observable
inputs
Significant
unobservable
inputs
At March
31, 2013
$
$
23,951 $
(512)
1,508
(160,500) $
(3,665)
(Level 1)
(Level 2)
(Level 3)
$
23,951
-
1,508
$
-
(512)
-
$
-
-
(160,500)
(3,665)
$
-
-
-
-
-
Fair value measurements at reporting date using
Quoted prices in
active markets for
identical assets
At March 31, 2012
(Level 1)
Significant
other observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
25,393 $
(809)
1,248
(156,000) $
(4,842)
$
25,393
-
1,248
$
-
(809)
-
$
-
-
(156,000)
(4,842)
$
-
-
-
-
-
As of March 31, 2013, the Company did not have any nonfinancial assets and liabilities that are recognized at fair value on a recurring basis.
The carrying amount of these financial assets and liabilities are the same as their fair value with the exception of the subordinated debt whose carrying
value is a liability of $148,412,000 and $148,140,000 at March 31, 2013 and 2012, respectively.
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 2013, 2011, and 2010, the Company sold a portion of these previously written down
investments, which resulted in the recognition of gains of approximately $242,000, $1,852,000, and $606,000, respectively.
53
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Assets and liabilities that were 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.
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,
2013
2012
$
$
52,900
10,813
50,722
114,435
(20,246)
94,189
$
$
59,252
18,952
49,315
127,519
(19,464)
108,055
There were LIFO liquidations resulting in $1,482,000, $2,173,000 and $500,000 of additional income in fiscal 2013, 2012 and 2011 income, respectively.
During fiscal 2011 the Company wrote off $411,000 in inventory related to restructuring activities, which is classified in cost of products sold.
54
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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 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. We also consider the nature of the underlying investments and other market conditions in making this assessment.
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 basis 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, 2013, 2012, and 2011. During
fiscal 2013, 2011, and 2010, the Company sold nearly all of these previously written down investments, which resulted in the recognition of gains of
approximately $242,000, $1,852,000 and $606,000, respectively.
The following is a summary of available-for-sale securities at March 31, 2013:
Gross
Unrealized
Gains
Cost
Gross
Unrealized Losses
Estimated
Fair Value
Marketable securities
$
21,635
$
2,335
$
19
$
23,951
The aggregate fair value of investments and unrealized losses on available-for-sale securities in an unrealized loss position at March 31, 2013 are as
follows:
Securities in a continuous loss position for less than 12 months
Securities in a continuous loss position for more than 12 months
55
Aggregate
Fair Value
Unrealized
Losses
$
$
3,040
-
3,040
$
$
19
-
19
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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, 2013 were temporary in nature.
Net realized gains related to sales of marketable securities were $764,000, $152,000, and $2,358,000, in fiscal 2013, 2012 and 2011, respectively.
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
Net unrealized gains included in the balance sheet amounted to $2,316,000 and March 31, 2013 and $2,210,000 at March 31, 2012. The amounts, net of
related deferred tax liabilities of $253,000 and $309,000 at March 31, 2013 and 2012, 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 $745,000 and $679,000 as of the period ending March 31, 2013 and 2012,
respectively, net of deferred tax liabilities, within accumulated other comprehensive loss related to an investment recorded in prepaid expenses and
other current assets.
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
56
March 31,
2013
2012
$
$
3,574
25,377
129,117
16,302
174,370
108,672
65,698
$
$
4,009
25,449
127,656
8,369
165,483
103,774
61,709
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Buildings include assets recorded under capital leases amounting to $9,557,000 and $9,697,000 for the years ended March 31, 2013 and
2012. Machinery, equipment, and leasehold improvements include assets recorded under capital leases amounting to $1,498,000 and $2,303,000 for the
years ended March 31, 2013 and 2012, respectively. Accumulated depreciation includes accumulated amortization of the assets recorded under capital
leases amounting to $6,300,000 and $5,799,000 at March 31, 2013 and 2012, respectively.
Depreciation expense, including amortization of assets recorded under capital leases, was $10,134,000, $9,788,000, and $9,286,000, for the years ended
March 31, 2013, 2012 and 2011, respectively.
Gross property, plant, and equipment includes capitalized software costs of $14,929,000 and $9,759,000 at March 31, 2013 and 2012,
respectively. Accumulated depreciation includes accumulated amortization on capitalized software costs of $1,945,000 and $1,436,000 at March 31, 2013
and 2012 respectively. Depreciation expense on capitalized software costs was $499,000, $179,000, and $138,000 during the years ended March 31, 2013,
2012, and 2011, respectively.
9.
Goodwill and Intangible Assets
As discussed in Note 2, goodwill is not amortized but is tested for impairment at least annually, in accordance with the provisions of ASC Topic 350-20-
35-1. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. The fair value of a reporting unit
is determined using a discounted cash flow methodology. The Company’s reporting units are determined based upon whether discrete financial
information is available and reviewed regularly, whether those units constitute a business, and the extent of economic similarities between those
reporting units for purposes of aggregation. The Company’s reporting units identified under ASC Topic 350-20-35-33 are at the component level, or
one level below the reporting segment level as defined under ASC Topic 280-10-50-10 “Segment Reporting – Disclosure.” The Company has four
reporting units. Only two of the four reporting units carry goodwill at March 31, 2013 and March 31, 2012. The Duff-Norton reporting unit (which
designs, manufactures and sources mechanical and electromechanical actuators and rotary unions) had goodwill of $9,770,000 and $9,821,000 at March
31, 2013 and 2012, respectively, and the Rest of Products reporting unit (representing the hoist, chain, and forgings design, manufacturing, and
distribution businesses) had goodwill of $95,584,000 and $96,614,000 at March 31, 2013 and 2012, 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.
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.
57
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Identifiable intangible assets acquired in a business combination are amortized over their estimated useful lives.
A summary of changes in goodwill during the years ended March 31, 2013 and 2012 is as follows:
Balance at April 1, 2011
Acquisition of YLS PTY (See Note 3)
Currency translation
Balance at March 31, 2012
Currency translation
Balance at March 31, 2013
$
$
106,055
1,470
(1,090)
106,435
(1,081)
105,354
Goodwill is recognized net of accumulated impairment losses of $107,000,000 as of March 31, 2013 and 2012, respectively. There were no goodwill
impairment losses recorded in fiscal 2013, 2012, or 2011.
Intangible assets at March 31, 2013 are as follows:
Trademark
Customer relationships
Other
Balance at March 31, 2013
Intangible assets at March 31, 2012 were as follows:
Trademark
Customer relationships
Other
Balance at March 31, 2012
$
$
$
$
Gross
Carrying
Amount
Accumulated
Amortization
Net
5,556
14,166
1,235
20,957
$
$
(1,370)
(5,894)
(298)
(7,562)
$
$
4,186
8,272
937
13,395
Gross
Carrying
Amount
5,783
14,808
1,267
21,858
$
Accumulated
Amortization
$
Net
4,674
10,115
1,002
15,791
$
$
(1,109)
(4,693)
(265)
(6,067)
All of the Company’s intangible 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, 14 years for other, and 13 years in total. Total amortization expense was $1,981,000, $2,074,000, and
$1,778,000 for fiscal 2013, 2012, and 2011, respectively. Based on the current amount of intangible assets, the estimated amortization expense for each of
the succeeding five years is expected to be approximately $1,700,000.
58
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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 $3,295,000 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 $2,529,000 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
$8,071,000 and all contracts mature within fifteen months of March 31, 2013.
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 three different counterparties as of March 31, 2013.
From its March 31, 2013 balance of accumulated other comprehensive loss, the Company expects to reclassify approximately $374,000 out of
accumulated other comprehensive loss during the next 12 months.
59
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, 2013, 2012, and 2011 (in
thousands):
Derivatives Designated as Cash Flow
Hedges (Foreign Exchange Contracts)
March 31,
2013
2012
2011
(Loss)/Gain
Recognized (1)
$
(256)
24
217
Location of Gain or
(Loss) Recognized
in Income on
Derivatives
Cost of products sold
Cost of products sold
Cost of products sold
Derivatives Not Designated as
Hedging Instruments (Foreign
Exchange Contracts)
March 31,
2013
2012
2011
Location of (Gain) or Loss Recognized in
Income on Derivatives
Foreign currency exchange (gain) loss
Foreign currency exchange (gain) loss
Foreign currency exchange (gain) loss
(Loss)/Gain
Recognized
(2)
$
132
183
38
Amount of
(Gain) or Loss
Recognized in
Income on
Derivatives
$
(478)
(556)
(209)
(1) Recognized in Other Comprehensive Loss (OCL) on Derivatives (Effective Portion)
(2) Reclassified from Accumulated Other Comprehensive Loss (AOCL) into Income (Effective Portion)
As of March 31, 2013 and 2012, 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, 2013 and 2012 (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,
2013
2012
$
$
8
(511)
1
(324)
Fair Value of Asset (Liability)
March 31,
2013
2012
$
$
95
(104)
16
(502)
Balance Sheet Location
Other Assets
Accrued Liabilities
Balance Sheet Location
Other Assets
Accrued Liabilities
60
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 health insurance
Accrued general and product liability costs
Customer advances, deposits, and rebates
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
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 $1,588 and $1,860,
respectively)
Total
Less current portion
61
March 31,
2013
2012
19,955
2,123
1,127
2,996
2,564
3,500
7,346
9,273
48,884
$
$
19,072
2,228
1,220
4,715
3,179
4,039
18,108
9,152
61,713
March 31,
2013
2012
5,340
13,619
61,330
1,108
3,099
7,094
91,590
$
$
6,221
16,497
64,279
1,202
4,522
6,422
99,143
March 31,
2013
2012
$
3,665
-
3,665
148,412
152,077
1,024
151,053
$
4,842
-
4,842
148,140
152,982
1,093
151,889
$
$
$
$
$
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The Company entered into a fifth amended, restated and expanded revolving credit facility dated October 19, 2012 (New Revolving Credit Facility). The
New Revolving Credit Facility provides availability up to a maximum of $100,000,000 and has an initial term ending October 31, 2017.
Provided there is no default, the Company may request an increase in the availability of the New Revolving Credit Facility by an amount not exceeding
$75,000,000, subject to lender approval. The unused portion of the New Revolving Credit Facility totalled $89,881,000 net of outstanding borrowings of
$0 and outstanding letters of credit of $10,119,000 as of March 31, 2013. The outstanding letters of credit at March 31, 2013 consisted of $2,189,000 in
commercial letters of credit and $7,930,000 of standby letters of credit. Interest on the revolver is payable at varying Eurodollar rates based on LIBOR
plus an applicable margin of 100 basis points or at a Base Rate (equivalent to a fluctuating rate per annum equal to the higher of (a) the Federal Funds
Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate.”)
plus 0 basis points. The applicable margin is determined based on the pricing grid in the New Revolving Credit Facility which varies based on the
Company’s total leverage ratio at March 31, 2013. The New 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 New 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, 2013. 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 $30,000,000.
In connection with the execution of the New Revolving Credit Facility, it was determined that the borrowing capacity of each lender participating in this
new agreement exceeded their borrowing capacities prior to the amendment. As a result, unamortized deferred financing costs associated with the
agreement prior to its amendment remain deferred and are being amortized over the term of the New Revolving Credit Facility. Fees and other costs paid
to execute the New Revolving Credit Facility totaling $684,000 were recorded as additional deferred financing costs and are being amortized over the
term of the New Revolving Credit Facility.
At March 31, 2012, the Company had entered into an amended, restated and expanded revolving credit facility dated December 31, 2009. The Revolving
Credit Facility provided availability up to a maximum of $85,000,000 and had an initial term ending December 31, 2013. The Revolving Credit Facility was
replaced by the New Revolving Credit Facility on October 19, 2012.
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.
62
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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, 2013, have an approximate fair value of
$160,500,000 based on quoted market prices.
The gross balances of deferred financing costs were $4,133,000 and $4,640,000 as of March 31, 2013 and 2012, respectively. The accumulated
amortization balances were $934,000 and $1,513,000 as of March 31, 2013 and 2012, respectively.
On June 22, 2007, the Company recorded a capital lease resulting from the sale and partial leaseback of its facility in Charlotte, NC under a 10 year lease
agreement. The Company also has capital leases on certain production machinery and equipment. The outstanding balance on the capital lease
obligations of $3,665,000 and $4,842,000 as of March 31, 2013 and 2012, respectively, are included in senior debt in the consolidated balance sheets.
The principal payments scheduled to be made as of March 31, 2013 on the above debt are as follows:
2014
2015
2016
2017
2018
Thereafter
$
$
1,024
1,272
467
446
456
150,000
153,665
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.
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, 2013, significant unsecured credit lines totaled approximately $6,408,000, of which $0 was drawn.
In addition to the above facilities, one of our foreign subsidiaries has a credit line secured by a parent company guarantee. This credit line provides
availability of up to $966,000, of which $0 was drawn as of March 31, 2013.
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.
63
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Pension Plans
The Company provides defined benefit pension plans to certain employees. The Company uses March 31 as the measurement date. The following
provides a reconciliation of benefit obligation, plan assets, and funded status of the plans:
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
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
64
March 31,
2013
2012
215,213
-
-
2,517
9,837
11,952
(9,668)
(671)
229,180
150,090
16,328
10,328
(9,668)
(61)
167,017
(62,163)
77,079
298
15,214
$
$
$
$
$
$
177,760
(3,256)
648
3,530
10,010
36,723
(9,165)
(1,037)
215,213
145,394
8,032
5,974
(9,165)
(145)
150,090
(65,123)
76,600
415
11,892
March 31,
2013
2012
(832)
(61,330)
18,510
58,866
15,214
$
$
(844)
(64,279)
18,511
58,504
11,892
$
$
$
$
$
$
$
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
In fiscal 2014, an estimated net loss of $6,310,000 and prior service cost of $117,000 for the defined benefit pension plans will be amortized from
accumulated other comprehensive loss to net periodic benefit cost.
Net periodic pension cost included the following components:
Service costs—benefits earned during the period
Interest cost on projected benefit obligation
Expected return on plan assets
Net amortization
Curtailment/settlement loss
Net periodic pension cost
2013
2012
2011
$
$
2,517
9,837
(11,195)
6,305
-
7,464
$
$
3,530
10,010
(10,704)
3,591
1,120
7,547
$
$
3,368
9,738
(9,865)
3,572
23
6,836
In fiscal 2012, the Company completed negotiations with one of its labor unions which resulted in an amendment to one of its pension plans. Within
cost of products sold for fiscal 2012, the Company recorded a curtailment charge of $1,120,000 resulting from the amendments. The Company also
amended one of its pension plans with its non-union employees that limited participation and froze benefits. These changes have reduced ongoing
service costs.
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
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,
2013
2012
229,180
167,017
$
215,213
150,090
March 31,
2013
2012
221,347
167,017
$
206,985
150,090
$
$
Unrecognized gains and losses are amortized through March 31, 2013 on a straight-line basis over the average remaining service period of active
participants.
The weighted-average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit
obligation for the year listed and also net periodic pension cost for the following year:
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase
2013
2012
2011
4.35 %
7.50
2.00
4.70 %
7.50
2.00
5.75 %
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.
65
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The Company’s retirement plan target and actual asset allocations are as follows:
Equity securities
Fixed income
Total plan assets
Target
2014
70%
30%
100%
Actual
2013
66%
34%
100%
2012
63%
37%
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 U.S. 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 2014.
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 $11,000,000 to its pension plans in fiscal 2014.
Information about the expected benefit payments for the Company’s defined benefit plans is as follows:
2014
2015
2016
2017
2018
2019-2023
Postretirement Benefit Plans
$
9,951
10,349
10,811
11,350
11,940
68,679
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.
66
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,
2013
2012
7,076
285
(543)
(716)
6,102
(6,102)
1,316
(4,786)
$
$
$
$
8,833
388
(1,669)
(476)
7,076
(7,076)
1,940
(5,136)
March 31,
2013
2012
(762)
(5,340)
1,372
(56)
(4,786)
$
$
(855)
(6,221)
1,507
433
(5,136)
$
$
$
$
$
$
In fiscal 2014, an estimated net loss of $85,000 for the defined benefit postretirement health care plans will be amortized from accumulated other
comprehensive loss to net periodic benefit cost. In fiscal 2013, net periodic postretirement benefit cost included the following:
Interest cost
Net amortization
Net periodic postretirement benefit cost
Year Ended March 31,
2012
2013
2011
$
$
285
81
366
$
$
388
158
546
$
$
476
301
777
For measurement purposes, healthcare costs are assumed to increase 7.50% in fiscal 2014, grading down over time to 5.0% in six years. The discount
rate used in determining the accumulated postretirement benefit obligation was 4.35% and 4.70% as of March 31, 2013 and 2012, respectively.
67
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:
2014
2015
2016
2017
2018
2019-2023
$
762
718
675
646
585
2,266
Assumed medical claims cost trend rates have an effect on the amounts reported for the health care plans. A one-percentage point change in assumed
health care cost trend rates would have the following effects
Effect on total of service and interest cost components
Effect on postretirement obligation
$
One Percentage
Point Increase
One Percentage
Point Decrease
(14)
(316)
15 $
353
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 2013 was $247,000 and the liability at March 31, 2013 is $3,842,000
with $140,000 included in other non-current liabilities and $3,702,000 included in accrued liabilities in the consolidated balance sheet. The cash
surrender value of the policies is $2,249,000 and $2,109,000 at March 31, 2013 and 2012, respectively. The balance 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 $2,484,000, $1,344,000, and $389,000 for the years ended March 31, 2013, 2012 and 2011, respectively. The Company
expects its contributions for the defined contribution plans in future years to remain comparable to its fiscal 2013 contributions.
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.
68
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,
2013
2012
$
$
108,710
57,378
929
167,017
$
$
94,587
55,373
130
150,090
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, 2013 and March 31, 2012 were as follows:
As of March 31, 2013:
Asset categories:
Equity securities
Fixed income securities
Cash equivalents
Total
As of March 31, 2012:
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
$
$
54,767
40,571
929
96,267
$
$
53,943
-
-
53,943
$
$
-
16,807
-
16,807
$
$
108,710
57,378
929
167,017
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.
The Level 2 securities are investments in common collective trust funds. The fair values of these securities are determined based on the net asset value
of these funds. Each of these investment funds has a stated performance objective to approximate as closely as practicable, before expenses, the
performance of the stated benchmark to which the funds are indexed, over the long term. Redemptions of the units held in these funds may be made on
the last business day of each month and on at least one other business day during the month, based on the net asset value per unit of the funds. We
are not aware of any significant restrictions on the issuances or redemptions of units of participation in these funds.
Fair value of Level 3 fixed income securities at the beginning of the year was $16,481,000. During fiscal 2013 fixed income securities earned investment
return of $742,000 and had disbursements of $416,000 resulting in an ending balance of $16,807,000. 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. Significant inputs in
determining the fair value for these contracts include company contributions, contract disbursements and stated interest rates. Gains and losses on
these contracts are recognized as part of net periodic pension cost and recorded as part of cost of sales, selling, or general and administrative expense.
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.
69
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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.
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
$422,000, $416,000, and $466,000 in fiscal 2013, 2012 and 2011, 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, 2013 and 2012, 481,000 and 494,000 of ESOP shares, respectively, were allocated or available to be allocated to participants’ accounts. At
March 31, 2013 and 2012, 35,000 and 61,000 of ESOP shares were pledged as collateral to guarantee the ESOP term loans.
The fair market value of unearned ESOP shares amounted to $669,000 and $991,000 at March 31, 2013 and March 31, 2012, respectively as determined
based on the quoted market value of the Company’s stock.
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 189,000, 184,000, and
249,000 common shares were not included in the computation of diluted loss per share for fiscal 2013, 2012 and 2011, respectively, because they were
antidilutive.
70
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The following table sets forth the computation of basic and diluted earnings per share (share data presented in thousands):
Numerator for basic and diluted earnings per share:
Income (loss) from continuing operations
Income from discontinued operations (net of tax)
Net income (loss)
Denominators:
2013
Year Ended March 31,
2012
2011
$
$
78,296
-
78,296
$
$
25,915
1,052
26,967
$
$
(36,346)
396
(35,950)
19,047
-
Weighted-average common stock outstanding— denominator for basic EPS
Effect of dilutive employee stock options, RSU's and performance shares
19,425
262
19,272
240
Adjusted weighted-average common stock outstanding and assumed conversions—
denominator for diluted EPS
19,687
19,512
19,047
The weighted-average common stock outstanding shown above is net of unallocated ESOP shares (see Note 14).
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 $3,334,000, $2,913,000, and $2,484,000 for fiscal 2013, 2012 and 2011, respectively. Stock compensation expense
is included in cost of goods sold, selling, and general and administrative expenses. 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.
71
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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, 2013, 853,000 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 the 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.
A summary of option transactions during each of the three fiscal years in the period ended March 31, 2013 is as follows:
Outstanding at April 1, 2010
Granted
Exercised
Cancelled
Outstanding at March 31, 2011
Granted
Exercised
Cancelled
Outstanding at March 31, 2012
Granted
Exercised
Cancelled
Outstanding at March 31, 2013
Exercisable at March 31, 2013
Weighted-
average
Exercise Price
Shares
Weighted-
average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic
Value
102,772
(6,625)
(22,323)
720,083
106,674
(171,970)
(12,780)
642,007
159,212
(39,858)
(25,060)
736,301
404,186
$
$
18.28
8.52
16.51
12.81
16.00
8.36
16.29
14.46
13.43
7.39
19.22
14.46
13.66
72
5.7 $
3.7 $
3,938
2,644
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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,
2013. The aggregate intrinsic value of outstanding options as of March 31, 2013 is calculated as the difference between the exercise price of the
underlying options and the market price of our common shares for the 557,000 options that were in-the-money at that date. The aggregate intrinsic
value of exercisable options as of March 31, 2013 is calculated as the difference between the exercise price of the underlying options and the market
price of our common shares for the 288,000 exercisable options that were in-the-money at that date. The Company's closing stock price was $19.25 as of
March 31, 2013. The total intrinsic value of stock options exercised was $332,000, $1,466,000, and $40,000 during fiscal 2013, 2012 and 2011, respectively.
As of March 31, 2013, there are no options available for future grants under the two stock option plans.
The fair value of shares that vested was $9.21, $8.96, and $9.33 during fiscal 2013, 2012 and 2011, respectively.
Cash received from option exercises under all share-based payment arrangements during fiscal 2013 and 2012 was approximately $295,000 and
$1,436,000, respectively. 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, 2013, $1,777,000 of unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted-
average period of approximately 2.5 years.
Exercise prices for options outstanding as of March 31, 2013, ranged from $5.46 to $28.45. The following table provides certain information with respect
to stock options outstanding at March 31, 2013:
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
154,725
483,886
97,690
736,301
$
$
The following table provides certain information with respect to stock options exercisable at March 31, 2013:
Range of Exercise Prices
Stock Options
Outstanding
Weighted-average
Exercise Price
Up to $10.00
$10.01 to $20.00
$20.01 to $30.00
154,725
153,437
96,024
404,186
$
$
5.47
15.56
23.23
14.46
5.47
15.94
23.23
13.66
1.1
7.7
3.4
5.7
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 $6.70, $9.81, and $9.29 for options granted
during fiscal 2013, 2012 and 2011, respectively. The following table provides the weighted-average assumptions used to value stock options granted
during fiscal 2013, 2012 and 2011:
73
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Assumptions:
Risk-free interest rate
Dividend yield—Incentive Plan
Volatility factor
Expected life—Incentive Plan
Year Ended
March 31,
2013
Year Ended
March 31,
2012
Year Ended
March 31,
2011
0.42%
0.0%
0.81%
0.0%
0.566
5.5 years
0.598
5.5 years
1.33%
0.0%
0.587
5.5 years
To determine expected volatility, the Company uses historical volatility based on daily closing prices of its Common Stock over periods that correlate
with the expected terms of the options granted. The risk-free rate is based on the United States Treasury yield curve at the time of grant for the
appropriate term of the options granted. Expected dividends are based on the Company's history and expectation of dividend payouts. The expected
term of stock options is based on vesting schedules, expected exercise patterns and contractual terms.
Restricted Stock Units
The Company granted restricted stock units under the LTIP during fiscal 2013, 2012 and 2011 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, 2013 is as follows:
Unvested at April 1, 2010
Granted
Vested
Forfeited
Unvested at March 31, 2011
Granted
Vested
Forfeited
Unvested at March 31, 2012
Granted
Vested
Forfeited
Unvested at March 31, 2013
Weighted-
average
Grant Date
Fair Value
Shares
99,591
95,947
(25,318)
(12,671)
157,549
68,537
(49,254)
(6,232)
170,600
99,795
(58,539)
(8,212)
203,644
$
$
16.21
17.87
15.01
18.30
17.25
18.22
17.21
17.76
17.60
14.18
17.51
18.30
15.95
Total unrecognized compensation cost related to unvested restricted stock units as of March 31, 2013 is $1,834,000 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, 2013 and 2012 was
$1,025,000 and $1,265,000, respectively.
74
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
Performance Shares
The Company granted performance shares under the LTIP during fiscal 2013, 2012, and 2011. Fiscal year 2013 Performance shares granted are based
upon the Company’s adjusted earnings before interest and taxes (EBIT) for the one year period ended March 31, 2013. Fiscal year 2013 performance
based nonvested shares are recognized as compensation expense based upon the award earned and the fair market value as of March 31, 2013. This
expense is recognized ratably over the three year period that these shares are restricted. Fiscal Year 2012 and 2011 performance shares granted were
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. Fiscal year 2012 and 2011 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 2012 and 2011 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 2012 and 2011 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 and 2011.
Assumptions:
Risk-free interest rate
Dividend yield
Volatility factor
Expected life
Year Ended
March 31,
2012
Year Ended
March 31,
2011
0.86%
0.0%
1.29%
0.0%
0.610
2.86 years
0.635
2.87 years
A summary of the performance shares transactions during each of the three fiscal years in the period ended March 31, 2013 is as follows:
Unvested at April 1, 2010
Granted
Forfeited
Unvested at March 31, 2011
Granted
Forfeited
Unvested at March 31, 2012
Granted
Forfeited
Unvested at March 31, 2013
75
Weighted-average
Grant Date
Fair Value
Shares
81,572 $
46,057
(21,014)
106,615
48,123
(59,620)
95,118
61,106
(52,360)
103,864 $
19.40
21.93
25.93
19.20
24.65
17.31
23.36
19.25
21.90
21.47
Total unrecognized compensation costs related to the unvested performance share awards as of March 31, 2013 was $962,000 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, 2013 and
2012 was $0 for all three years.
Restricted Stock
The Company maintained 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, 2013, there were no shares available for future grants under the Restricted Stock Plan and no further outstanding
grants.
No restricted stock was granted in fiscal 2013, 2012, or 2011. During fiscal year 2013, 1,000 shares of restricted stock with a grant date fair value of
$30.72 vested.
Directors Stock
During fiscal 2013, 2012 and 2011, a total of 25,552, 21,248, and 17,664 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 $14.09, $16.94, and $15.85 for
fiscal 2013, 2012 and 2011, respectively. The expense related to the shares for fiscal 2013, 2012 and 2011 was $361,000, $360,000, and $280,000,
respectively.
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 $17,119,000 and $20,536,000 as of
March 31, 2013 and 2012, respectively. The liability for accrued general and product liability costs are funded by investments in marketable securities
(see Notes 2 and 7).
76
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The following table provides a reconciliation of the beginning and ending balances for accrued general and product liability:
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,
2012
2013
2011
$
$
20,536 $
2,185
(5,602)
17,119 $
20,576 $
4,151
(4,191)
20,536 $
23,054
6,447
(8,925)
20,576
The per occurrence limits on the 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
2013.
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 its 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 its 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 2014.
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
$8,000,000 and $13,000,000 using actuarial parameters of continued claims for a period of 18 to 30 years from March 31, 2013. 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
$10,967,000, which has been reflected as a liability in the consolidated financial statements as of March 31, 2013. 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 $2,300,000 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.
77
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
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 $6,152,000, which has been
reflected as a liability in the consolidated financial statements as of March 31, 2013. 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.
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):
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
Fiscal 2013 restructuring charges
Cash payments
Balance at March 31, 2013
78
$
$
$
$
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 differences 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 and development credits
Other
Actual tax provision (benefit) expense
The provision for income tax (benefit) expense consisted of the following:
Current income tax expense (benefit):
United States Federal
State taxes
Foreign
Deferred income tax expense (benefit):
United States
Foreign
Year Ended March 31,
2012
2013
2011
14,919
284
(1,909)
153
(48,985)
(166)
30
(35,674)
$
$
11,485
253
(1,012)
(211)
(4,315)
-
696
6,896
$
$
1,773
(936)
(683)
(119)
42,983
(812)
(795)
41,411
Year Ended March 31,
2012
2013
2011
$
525
346
5,502
(40,868)
(1,179)
(35,674)
$
$
487
269
7,050
130
(1,040)
6,896
$
(4,229)
49
4,818
40,621
152
41,411
$
$
$
$
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
Deferred tax assets after valuation allowance
Deferred tax liabilities:
Property, plant, and equipment
Intangible assets
Gross deferred tax liabilities
Net deferred tax assets (liabilities)
79
March 31,
2013
2012
-
4,535
22,126
7,510
3,779
7,532
2,076
3,789
(3,924)
47,423
(2,777)
(3,657)
(6,434)
40,989
$
$
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)
$
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
The gross amount of the Company’s deferred tax assets were $51,347,000 and $58,226,000 at March 31, 2013 and 2012, respectively.
The Company had a valuation allowance of $53,325,000 recorded as of March 31, 2012 due to the uncertainty of whether the Company's net operating
loss carryforwards and deferred tax assets might ultimately be realized. The Company was able to utilize $14,567,000 of U.S. federal net operating loss
carryforwards in fiscal 2013 which reduced the valuation allowance by $5,107,000. As a result of the improved operating performance of the
Company over
the Company's remaining net
operating loss carryforwards and other deferred tax assets may ultimately be realized. As a result of the determination that it is more likely than not
that all of the remaining deferred tax assets will be realized with the exception of certain U.S. federal tax credits carryforwards, a significant portion of the
remaining valuation allowance totaling $49,161,000 was reversed in fiscal 2013.
the Company reevaluated the certainty
several years,
to whether
the past
as
During 2011, the Company recorded a non-cash charge of $42,983,000 included within its provision for income taxes. As described above, this charge
was nearly fully reversed during the year ended March 31, 2013. This charge related 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 was 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 $1,660,000, $1,358,000 and $1,240,000 related to foreign net operating losses at March 31, 2013, 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 state net operating losses have expiration dates ranging from 2021 through 2031. The federal tax credits have expiration dates starting in 2013.
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 assets (liabilities)
March 31,
2013
2012
$
$
6,883
37,205
(3,099)
40,989
$
$
44
2,824
(4,522)
(1,654)
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 $18,322,000, $18,590,000, and $12,403,000 for the
years ended March 31, 2013, 2012, and 2011, respectively. Income from discontinued operations reported in the statements of operations is net of tax
expense of $0, $0 and $243,000 for the years ended March 31, 2013, 2012, and 2011, respectively. As of March 31, 2013, the Company had unrecognized
deferred tax liabilities related to approximately $112,000,000 of cumulative undistributed earnings of foreign subsidiaries. These earnings are considered
to be permanently invested in operations outside the United States. Determination of the amount of unrecognized deferred U.S. income tax liability with
respect to such earnings is not practicable.
80
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
There were shares of common stock issued through restricted stock units, the exercise of non-qualified stock options, or through the disqualifying
disposition of incentive stock options in the years ended March 31, 2013 and 2012. The tax effects to the Company from these transactions, recorded in
additional paid-in capital rather than recognized as a reduction of income tax expense, were $(576,000) and $0 in 2013 and 2012, respectively. This tax
shortfall has also been recognized in the consolidated balance sheet as a decrease in deferred tax assets.
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 statutes of limitation
Ending balance
2013
2012
2011
2,428
-
334
(702)
(30)
(44)
-
1,986
$
$
2,647
-
30
(45)
(112)
(44)
(48)
2,428
$
$
3,577
27
93
(928)
-
32
(154)
2,647
$
$
The Company had $142,000 and $176,000 accrued for the payment of interest and penalties at March 31, 2013 and 2012, respectively. The Company
recognizes interest expense or penalties related to uncertain tax positions as a part of income tax expense in its consolidated statements of operations.
Substantially all of the unrecognized tax benefits as of March 31, 2013 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 Service has
completed an examination of the Company’s U.S. income tax returns for 2009 and 2010 resulting in no adjustments. Current examinations include
various state audits.
The Company’s major tax 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, 2007.
The Company does not anticipate that total unrecognized tax benefits will change significantly due to the settlement of audits or the expiration of
statutes of limitation prior to March 31, 2014.
19.
Rental Expense and Lease Commitments
Rental expense for the years ended March 31, 2013, 2012, and 2011 was $5,811,000, $6,832,000, and $7,195,000, respectively. The following amounts
represent future minimum payment commitments as of March 31, 2013 under non-cancelable operating leases extending beyond one year:
Year Ended March 31,
2014
2015
2016
2017
2018
Thereafter
Total
Real Property Vehicles/Equipment
$
3,824 $
3,263
2,584
2,530
2,339
12,000
26,540 $
2,020 $
1,504
623
240
203
-
4,590 $
Total
5,844
4,767
3,207
2,770
2,542
12,000
31,130
$
81
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
20.
Summary Financial Information
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 100% owned and the guarantees are full, unconditional, joint and several.
As of and for the year ended March 31, 2013:
As of March 31, 2013:
ASSETS
Current assets:
Cash and cash equivalents
Trade accounts receivable, less allowance for doubtful
accounts
Inventories
Prepaid expenses and other
Total current assets
Net property, plant, and equipment
Goodwill
Other intangibles, net
Intercompany
Marketable securities
Deferred taxes on income
Investment in subsidiaries
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable
Accrued liabilities
Current portion of long-term debt
Total current liabilities
Senior debt, less current portion
Subordinated debt
Other non-current liabilities
Total liabilities
Total shareholders’ equity
Total liabilities and shareholders’ equity
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
79,412
$
-
$
42,248
$
-
$
121,660
37,967
28,117
10,850
156,346
39,552
40,696
253
5,805
-
27,215
203,753
6,690
480,310
17,433
21,710
-
39,143
-
148,412
52,768
240,323
239,987
480,310
82
$
$
$
$
$
$
4,068
14,230
1,371
19,669
11,612
31,025
-
63,368
-
2,389
-
525
128,588
7,018
3,952
311
11,281
1,650
-
5,875
18,806
109,782
128,588
$
$
$
38,189
51,842
5,684
137,963
14,534
33,633
13,142
(69,173)
23,951
7,601
-
71
161,722
9,878
23,222
713
33,813
991
-
32,947
67,751
93,971
161,722
$
$
$
-
-
-
-
-
-
-
-
-
-
(203,753)
-
(203,753)
-
-
-
-
-
-
-
-
(203,753)
(203,753)
$
$
$
80,224
94,189
17,905
313,978
65,698
105,354
13,395
-
23,951
37,205
-
7,286
566,867
34,329
48,884
1,024
84,237
2,641
148,412
91,590
326,880
239,987
566,867
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
$
For the Year Ended March 31, 2013:
Net sales
Cost of products sold
Gross profit
Selling expenses
General and administrative expenses
Amortization of intangibles
Income from operations
Interest and debt expense
Investment income
Foreign currency exchange gain
Other (income) and expense, net
Income from continuing operations before income tax
(benefit) expense
Income tax (benefit) expense
Equity in income from continuing operations of subsidiaries
Income from continuing operations
Income from discontinued operations (net of tax)
Net income
$
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
151,569
125,701
25,868
5,903
14,262
-
5,703
200
-
-
(933)
6,436
(3,020)
-
9,456
-
9,456
$
254,738
177,677
77,061
36,165
20,708
1,877
18,311
356
(1,546)
(45)
2,071
17,475
5,975
-
11,500
-
11,500
$
$
(52,633)
(52,633)
-
-
-
-
-
-
-
-
-
-
-
(20,956)
(20,956)
-
(20,956)
$
$
597,263
423,032
174,231
65,608
52,271
1,981
54,371
13,757
(1,546)
(45)
(417)
42,622
(35,674)
-
78,296
-
78,296
$
$
243,589
172,287
71,302
23,540
17,301
104
30,357
13,201
-
-
(1,555)
18,711
(38,629)
20,956
78,296
-
78,296
83
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
For the Year Ended March 31, 2013
Net income
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Change in derivatives qualifying as hedges, net of tax of
$159
Change in pension liability and postretirement obligations,
net of tax of $(237)
Adjustments:
Unrealized holding loss arising during the period, net of tax
of $(406)
Reclassification adjustment for gain included in net income,
net of tax of $268
Total adjustments
Total other comprehensive income (loss)
Comprehensive income (loss)
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
78,296
$
9,456
$
11,500
$
(20,956)
$
78,296
-
(205)
815
-
-
-
610
78,906
84
$
$
-
-
382
-
-
-
382
9,838
$
(2,183)
(183)
(1,102)
725
(497)
228
(3,240)
8,260
-
-
-
-
-
-
-
(20,956)
$
$
(2,183)
(388)
95
725
(497)
228
(2,248)
76,048
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
For the Year Ended March 31, 2013:
Operating activities:
Net cash provided by (used for) operating activities
Investing activities:
Proceeds from sale of marketable securities
Purchases of marketable securities
Capital expenditures
Proceeds from sale of assets
Net cash (used for) provided by investing activities
Financing activities:
Proceeds from exercise of stock options
Payments under line-of-credit agreements
Repayment of 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
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
34,544
$
(1,418)
$
9,252
$
-
-
(11,124)
-
(11,124)
295
-
-
(684)
423
34
-
23,454
55,958
79,412
85
$
$
-
-
(670)
2,357
1,687
-
-
(274)
-
-
(274)
-
(5)
5
-
$
6,573
(4,138)
(3,085)
-
(650)
-
(54)
(792)
-
-
(846)
982
8,738
33,510
42,248
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
42,378
6,573
(4,138)
(14,879)
2,357
(10,087)
295
(54)
(1,066)
(684)
423
(1,086)
982
32,187
89,473
121,660
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
As of March 31, 2012:
ASSETS
Current assets:
Cash and cash equivalents
Trade accounts receivable, less allowance for doubtful
accounts
Inventories
Prepaid expenses and other
Total current assets
Net property, plant, and equipment
Goodwill
Other intangibles, net
Intercompany
Marketable securities
Deferred taxes on income
Investment in subsidiaries
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable to banks
Trade accounts payable
Accrued liabilities
Current portion of long-term debt
Total current liabilities
Senior debt, less current portion
Subordinated debt
Other non-current liabilities
Total liabilities
Total shareholders’ equity
Total liabilities and shareholders’ equity
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
55,958
$
5
$
33,510
$
-
$
89,473
44,375
26,621
5,943
132,897
32,679
40,696
210
(39,507)
-
443
228,138
6,006
401,562
-
13,259
24,221
-
37,480
-
148,140
55,476
241,096
160,466
401,562
86
$
$
$
$
$
$
5,579
20,087
502
26,173
13,050
31,025
-
102,471
-
258
-
526
173,503
-
12,496
6,002
274
18,772
1,961
-
6,842
27,575
145,928
173,503
$
$
$
38,688
61,347
4,004
137,549
15,980
34,714
15,581
(62,964)
25,393
2,123
-
104
162,480
112
15,236
31,490
819
47,657
1,788
-
36,825
86,270
82,210
168,480
$
$
$
-
-
-
-
-
-
-
-
-
-
(228,138)
-
(228,138)
-
-
-
-
-
-
-
-
-
(228,138)
(228,138)
$
$
$
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
160,466
515,407
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
$
For the Year Ended March 31, 2012:
Net sales
Cost of products sold
Gross profit
Selling expenses
General and administrative expenses
Restructuring (gain) charges, net
Amortization of intangibles
Income from operations
Interest and debt expense
Investment income
Foreign currency exchange loss
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 of tax)
Net income
$
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
163,207
140,690
22,517
5,855
11,699
-
-
4,963
1,394
-
-
42
3,527
94
-
3,433
-
3,433
$
258,288
182,408
75,880
34,685
19,801
413
1,963
19,018
388
(1,018)
316
(400)
19,732
5,964
-
13,768
-
13,768
$
$
(54,809)
(54,809)
-
-
-
-
-
-
-
-
-
-
-
-
(17,201)
(17,201)
-
(17,201)
$
$
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
1,052
26,967
$
$
225,259
165,938
59,321
24,320
15,177
(1,450)
111
21,163
12,432
-
-
(821)
9,552
838
17,201
25,915
1,052
26,967
87
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
For the Year Ended March 31, 2012
Net income
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
Change in derivatives qualifying as hedges, net of tax of $12
Change in pension liability and postretirement obligations,
$
net of tax of $438
Adjustments:
Unrealized holding loss arising during the period, net of tax
of $0
Reclassification adjustment for gain included in net income,
net of tax of $0
Total adjustments
Total other comprehensive (loss) income
Comprehensive (loss) income
$
Parent
Guarantors Guarantors Eliminations Consolidated
Non
26,967
$
3,433
$
13,768
$
(17,201)
$
26,967
-
(237)
-
-
(30,806)
1,778
-
-
-
1,778
5,211
$
-
-
-
(31,043)
(4,076)
$
88
(4,621)
(9)
(763)
1,358
(157)
1,201
(4,192)
9,576
-
-
-
-
-
-
-
(17,201)
$
$
(4,621)
(246)
(29,791)
1,358
(157)
1,201
(33,457)
(6,490)
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:
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
Payments under line-of-credit agreements
Repayment of debt
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
$
12,750
$
3,107
$
7,730
$
-
-
(7,640)
1,971
-
(5,669)
1,052
(4,617)
1,436
-
-
435
1,871
-
10,004
45,954
55,958
89
$
$
-
-
(2,869)
-
-
(2,869)
-
(2,869)
-
-
(240)
-
(240)
-
(2)
7
5
$
5,747
(5,190)
(3,256)
-
(3,356)
(6,055)
-
(6,055)
-
(361)
(796)
-
(1,157)
(1,186)
(668)
34,178
33,510
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
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
$
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
$
For the Year Ended March 31, 2011:
Net sales
Cost of products sold
Gross profit
Selling expenses
General and administrative expenses
Restructuring charges
Amortization of intangibles
Income (loss) from operations
Interest and debt expense
Cost of bond redemptions
Investment income
Foreign currency exchange loss
Other income, net
(Loss) income from continuing operations before income tax
expense (benefit)
Income tax expense
Equity in income from continuing operations of subsidiaries
(Loss) income from continuing operations
Income from discontinued operations (net of tax)
Net (loss) income
$
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
148,905
121,852
27,053
5,959
15,804
-
3
5,287
1,436
-
-
-
21
3,830
3,125
-
705
-
705
$
217,724
152,901
64,823
31,623
18,663
111
1,657
12,769
357
-
(3,041)
452
(171)
15,172
5,273
-
9,899
-
9,899
$
$
(39,955)
(39,955)
-
-
-
-
-
-
-
-
-
-
-
-
62
(10,542)
(10,604)
-
(10,604)
$
$
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)
396
(35,950)
$
$
197,391
163,215
34,176
25,328
6,125
2,089
118
516
11,739
3,939
-
-
(1,225)
(13,937)
32,951
10,542
(36,346)
396
(35,950)
90
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
For the Year Ended March 31, 2011
Net (loss) income
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
Change in derivatives qualifying as hedges, net of tax of $0
Change in pension liability and postretirement obligations,
net of tax of $952
Adjustments:
Unrealized holding loss arising during the period, net of tax
of $0
Reclassification adjustment for gain included in net income,
net of tax of $0
Total adjustments
Total other comprehensive income
Comprehensive (loss) income
Parent
Guarantors Guarantors Eliminations Consolidated
Non
$
(35,950)
$
705
$
9,899
$
(10,604)
$
(35,950)
-
239
3,051
-
-
-
3,290
(32,660)
$
91
$
-
-
421
-
-
-
421
1,126
$
4,933
-
(439)
1,814
(2,143)
(329)
4,165
14,064
-
-
-
-
-
-
-
(10,604)
$
$
4,933
239
3,033
1,814
(2,143)
(329)
7,876
(28,074)
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:
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
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:
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
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
-
-
(7,850)
1,182
(6,668)
396
(6,272)
(3,154)
-
-
(124,855)
147,844
(3,185)
443
17,093
-
12,873
33,081
45,954
92
$
$
-
-
(1,673)
-
(1,673)
-
(1,673)
-
-
-
(210)
-
-
(774)
(984)
151
(17)
24
7
$
23,048
(16,427)
(3,020)
-
3,601
-
3,601
-
(511)
174
(752)
-
-
-
(1,089)
1,441
3,315
30,863
34,178
$
-
-
-
-
-
-
-
-
-
-
-
-
-
774
774
(151)
-
-
-
$
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
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
2013
Year Ended March 31,
2012
2011
353,565
173,851
21,637
48,210
597,263
$
$
345,451
177,976
23,495
45,023
591,945
$
$
315,219
159,363
16,847
32,636
524,065
Year Ended March 31,
2012
2013
2011
365,497
136,493
26,952
37,925
566,867
$
$
309,624
153,021
18,304
34,458
515,407
$
$
282,925
152,020
17,722
26,205
478,872
Year Ended March 31,
2012
2013
2011
123,138
56,633
4,676
184,447
$
$
117,660
61,144
5,131
183,935
$
$
114,295
64,015
5,194
183,504
$
$
$
$
$
$
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 rigging tools
Industrial cranes
Actuators and rotary unions
Other
Total
2013
Year Ended March 31,
2012
2011
$
$
375,208
90,428
41,259
80,028
10,340
597,263
$
$
368,431
87,437
41,816
83,391
10,870
591,945
$
$
299,012
97,483
39,715
76,454
11,401
524,065
93
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 2013 and 2012:
Net sales
Gross profit
Income from operations
Net income (1)
Net income per share – basic
Net income per share – diluted
Net sales
Gross profit
Income from operations
Net income
Net income per share – basic
Net income per share – diluted
Three Months Ended
June 30,
2012
September 30, December 31, March 31,
2012
2012
2013
153,013
43,824
12,782
8,436
$
$
146,472
42,402
12,920
8,252
$
$
153,225
43,797
14,189
9,579
$
$
144,553
44,208
14,480
52,029
0.44
$
0.42
$
0.49
$
0.43
$
0.42
$
0.49
$
2.68
2.64
Three Months Ended
June 30,
2011
September 30,
2011
December 31,
2011
March 31,
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
$
$
$
$
$
$
$
$
(1) During the quarter ended March 31, 2013, the Company reversed its deferred tax asset valuation allowance in the United States of $49,161,000, which
is included in its provision for income taxes.
Note: The per-share net income for the four quarters combined may not equal the per share net income for the year due to rounding.
94
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
Pension liability– net of tax
Postretirement obligations – net of tax
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,
2013
2012
2,808
(58,866)
56
(1,905)
2,205
(453)
(56,155)
$
$
2,580
(58,504)
(325)
(1,981)
4,388
(65)
(53,907)
$
$
The deferred taxes associated with the items included in accumulated other comprehensive loss, net of deferred tax asset valuation allowances, were
$(216,000), $438,000, and $952,000 for 2013, 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 2011, the Company recorded as an offsetting entry a $10,006,000 charge
in the minimum pension liability component, $(935,000) charge in the other post retirement obligations component, and $747,000 charge in the split
dollar life insurance arrangement component of other comprehensive income. With the reversal of that valuation allowance in fiscal 2013, 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. These
amounts will remain indefinitely as a component of minimum pension liability adjustment.
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
95
2013
Year Ended March 31,
2012
2011
$
$
2,580
725
(497)
228
2,808
$
$
1,379
1,358
(157)
1,201
2,580
$
$
1,708
1,814
(2,143)
(329)
1,379
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
24.
Effects of New Accounting Pronouncements
In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation
Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This ASU
addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no
longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. This ASU
is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company is evaluating the
potential impact of this adoption on its consolidated financial statements.
In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, “Liabilities (Topic 405): Obligations Resulting from
Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date.” This ASU addresses the
recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other
contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within
those years, beginning after December 15, 2013. The Company is evaluating the potential impact of this adoption on its consolidated financial
statements.
In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income.” The ASU requires entities to provide information about significant amounts reclassified out of accumulated other
comprehensive income by component and their corresponding effect on net income. The ASU is effective for public entities for fiscal years beginning
after December 15, 2012. Management does not expect the adoption of this standard has a significant effect on the Company's financial statement
disclosures.
In January 2013, the FASB issued ASU No. 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and
Liabilities". The ASU clarifies that ordinary trade receivables and certain other receivables are not in the scope of ASU No. 2011-11, “Balance Sheet
(Topic 210): Disclosures about Offsetting Assets and Liabilities.” Specifically, Update 2011-11 applies only to derivatives, repurchase agreements and
reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria
contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. The amendments in this ASU
are effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. Management does not expect the adoption of
this standard has a significant effect on the Company's consolidated financial position.
In October 2012, the FASB issued ASU No. 2012-04, “Technical Corrections and Improvements” which amends a wide variety of Topics in the FASB
Accounting Standards Codification ("Codification”). The amendments in ASU No. 2012-04 represent changes to clarify the Codification, correct
unintended application of guidance, or make minor improvements to the Codification that are not expected to have a significant effect on current
accounting practice. The adoption of ASU 2012-04 in fiscal 2013 did not have a significant impact on the Company’s condensed consolidated financial
statements.
In August 2012, the FASB issued ASU No. 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs
Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to
FASB Accounting Standards Update 2010-22 (SEC Update)”. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114.
The adoption of ASU 2012-03 did not have a significant impact on the Company’s condensed consolidated financial statements.
96
COLUMBUS McKINNON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(tabular amounts in thousands, except share data)
In July 2012, the FASB issued ASU No. 2012-02, which updated the guidance in ASC Topic 350, “Intangibles – Goodwill and Other.” The amendments
in this Update allow an entity to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. Under
these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines, based
on qualitative assessment, that it is not more likely than not, the indefinite-lived intangible asset is impaired. The amendments include a number of
events and circumstances for an entity to consider in conducting the qualitative assessment. The amendments are effective for annual and interim
impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The amendments are not expected to have
an impact on our financial condition or results of operations.
In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): 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 non-owner changes in stockholders’ equity be
presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The adoption of ASU 2011-
05 in fiscal 2013 did not have a significant impact on the Company’s condensed 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 U.S. GAAP and IFRSs” (“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 adoption of ASU 2011-04 in fiscal
2013 did not have a significant impact on the Company’s condensed consolidated financial statements.
97
COLUMBUS McKINNON CORPORATION
SCHEDULE II—Valuation and qualifying accounts
March 31, 2013, 2012 and 2011
Dollars in thousands
Description
Year ended March 31, 2013:
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, 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
$
$
$
$
$
$
$
$
$
Additions
Balance at
Beginning
of Period
Charged
to Costs
and
Expenses
Charged
to Other
Accounts
Deductions
Balance
at End of
Period
2,745
53,325
56,070
$
$
258
(48,985)
(48,727)
$
$
-
$
(416) (3)
$
(416)
747 (1) $
-
747
$
2,256
3,924
6,180
20,536
$
2,185
$
-
$
5,602 (2) $
17,119
3,166
45,836
49,002
$
$
844
(4,315)
(3,471)
$
$
-
11,804
11,804
$
$
1,265 (1) $
-
1,265
$
2,745
53,325
56,070
20,576
$
4,151
$
-
$
4,191 (2) $
20,536
4,240
1,609
5,849
$
$
627
42,983
43,610
$
$
-
1,244
1,244
$
$
1,701 (1) $
-
1,701
$
3,166
45,836
49,002
23,054
$
6,447
$
-
$
8,925 (2) $
20,576
(1) Uncollectible accounts written off, net of recoveries
(2)
(3)
Insurance claims and expenses paid
Charged against accumulated other comprehensive loss
98
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, 2013, 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, 2013. There were no changes in our internal controls or in other factors during our fourth quarter ended March 31, 2013.
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, 2013 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, 2013.
The effectiveness of the Company’s internal control over financial reporting as of March 31, 2013 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.
99
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, 2013, 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,
2013, 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, 2013 and 2012, and the related consolidated statements of operations, comprehensive
income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2013 of Columbus McKinnon
Corporation, and our report dated May 29, 2013 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Buffalo, New York
May 29, 2013
100
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, 2013 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, 2013 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, 2013 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, 2013 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, 2013 and upon the filing of such Proxy Statement, is incorporated by reference herein.
101
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, 2013 and 2012
Consolidated statements of operations – Years ended March 31, 2013, 2012, and 2011
Consolidated Statements of Comprehensive Income (Loss)
Consolidated statements of shareholders’ equity – Years ended March 31, 2013, 2012, and 2011
Consolidated statements of cash flows – Years ended March 31, 2013, 2012 , and 2011
Notes to consolidated financial statements
(2)
Financial Statement Schedule:
Schedule II - Valuation and qualifying accounts
Page No.
41
42
43
44
45
46
47 to 97
Page No.
98
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.
102
(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 3.1 to the Company’s Current Report on Form 8-K dated March 28,
2013).
3.3 Certificate of Amendment to the Restated 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 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).
4.3 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)
4.4 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)
#10.1 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).
103
#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).
104
#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).
105
#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).
#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).
106
#10.50 Employment agreement with Wolfgang Wegener dated December 31, 1996 (incorporated by reference to Exhibit 10.48 to the Company’s
Annual Report on Form 10-K for the fiscal year ended March, 31, 2007).
#10.51 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).
#10.53 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).
#10.54 Form of Change in Control Agreement as entered into between Columbus McKinnon Corporation and certain of its executive officers.
(incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998).
#10.55 Form of Omnibus Code Section 409A Compliance Policy as entered into between Columbus McKinnon Corporation and certain of its
executive officers. (incorporated by reference to Appendix to the definitive Proxy Statement for the Annual Meeting of Stockholders of
Columbus McKinnon Corporation held on July 31, 2006).
# 10.56 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)
#10.57 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.
#10.58 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)
#10.59 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)
#10.60 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)
#10.61 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)
#10.62 Amendment to the Company’s non-qualified deferred compensation plan, effective January 1, 2013. (incorporated by reference to Exhibit
5.02 of the Company’s Current Report on Form 8-K filed on July 19, 2012)
#10.63 Fifth 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 October 24, 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.
107
*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.
*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
108
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 29, 2013
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
President, Chief Executive Officer and Director
May 29, 2013
(Principal Executive Officer)
TIMOTHY T. TEVENS
/S/ GREGORY P. RUSTOWICZ
Vice President and Chief Financial Officer
May 29, 2013
(Principal Financial Officer)
GREGORY P. RUSTOWICZ
/S/ ERNEST R. VEREBELYI
Chairman of the Board of Directors
May 29, 2013
ERNEST R. VEREBELYI
/S/ RICHARD H. FLEMING
Director
May 29, 2013
RICHARD H. FLEMING
/S/ NICHOLAS T. PINCHUK
Director
May 29, 2013
NICHOLAS T. PINCHUK
/S/ STEPHANIE K. KUSHNER
Director
May 29, 2013
STEPHANIE K. KUSHNER
/S/ LINDA A. GOODSPEED
Director
May 29, 2013
LINDA A. GOODSPEED
/S/ STEPHEN RABINOWITZ
Director
May 29, 2013
STEPHEN RABINOWITZ
CHRISTIAN B. RAGOT
(Resigned Effective May 19, 2013)
Director
/S/ LIAM MCCARTHY
Director
May 29, 2013
LIAM MCCARTHY
109
COLUMBUS McKINNON CORPORATION
SUBSIDIARIES
(as of March 31, 2013)
Exhibit 21.1
CM Insurance Company, Inc. (US-NY)
Columbus McKinnon de Mexico, S.A. de C.V. (Mexico)
Columbus McKinnon de Uruguay, S.A. (Uruguay)
Columbus McKinnon do Brazil Ltda. (Brazil)
Columbus McKinnon de Panama S.A. (Panama)
Crane Equipment & Service, Inc. (US-OK)
Société d’Exploitation des Raccords Gautier (France)
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 Dutch Holdings 1 B.V. (The Netherlands)
Columbus McKinnon Dutch Holdings 2 B.V. (The Netherlands)
Columbus McKinnon Dutch Holdings 3 B.V. (The Netherlands)
Columbus McKinnon Asia Pacific Pte. Ltd. (Singapore)
Columbus McKinnon Asia Pacific Ltd. (Hong Kong)
Hangzhou LILA Lifting and Lashing Co. Ltd. (China)
Columbus McKinnon (Hangzhou) Industrial Products Co. Ltd. (China)
Yale Industrial Products Asia Co. Ltd. (Thailand)
Columbus McKinnon Singapore Pte. Ltd. (Singapore)
Columbus McKinnon EMEA GmbH (Germany)
Columbus McKinnon Industrial Products GmbH (Germany)
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)
Columbus McKinnon Benelux, B.V. (The Netherlands)
CMCO Material Handling (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 (UAE)
Pfaff Beteiligungs GmbH (Germany)
Columbus McKinnon Engineered Products GmbH (Germany)
Pfaff Silberblau Utilaje de Ridicat si Transportat S.R.L. (Romania)
Columbus McKinnon Polska Sp.z.o.o (Poland)
Columbus McKinnon Switzerland AG (Switzerland)
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. 333-137212) pertaining to the Columbus McKinnon Corporation 2006 Long Term Incentive Plan, and
(3) Registration Statement (Form S-8 No. 333-168777) pertaining to the Columbus McKinnon Corporation 2010 Long Term Incentive Plan;
of our reports dated May 29, 2013, 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, 2013.
/s/ Ernst & Young LLP
Buffalo, New York
May 29, 2013
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. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter, 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.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: May 29, 2013
/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. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter, 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.
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: May 29, 2013
/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, 2013, 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 29, 2013
/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)
Shareholder and Corporate Information
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
Buff alo, New York 14202-2297
Forward-Looking Information
The Columbus McKinnon annual report contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are
not limited to, statements concerning future revenue and earnings, involve known and unknown
risks, uncertainties and other factors that could cause the actual results of the Company to diff er
materially from the results expressed or implied by such statements, including general economic
and business conditions, conditions aff ecting the industries served by the Company and its
subsidiaries, conditions aff ecting 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.
Common Stock
Columbus McKinnon’s common stock is traded on NASDAQ under the symbol
CMCO. As of April 30, 2013, there were 588 shareholders of record and
19,507,939 total outstanding common stock. According to March 31, 2013
SEC fi lings, 118 institutional and mutual fund investors owned approximately
91% of Columbus McKinnon’s outstanding common shares. 96% of Float is held
by Institutional & Mutual Fund Owners.
Annual Meeting of Shareholders
July 22, 2013
10:00 a.m. Central Time
The Ritz-Carlton Chicago
160 E. Pearson Street At Water Tower Place
Chicago, Illinois
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
718-921-8124
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
Company Profi le
A motorized Yalelift at work servicing an Airbus A380 turbine.
Columbus McKinnon Corporation (NASDAQ: CMCO) is a lead-
Headquartered in Amherst, New York, Columbus McKinnon’s key products
ing worldwide designer, manufacturer and marketer of material handling
include hoists, cranes, actuators, and rigging tools. The Company is focused on
products, systems and services, which effi ciently and ergonomically move,
commercial and industrial applications that require the safety and quality
lift, position and secure materials.
provided by its superior design and engineering know-how.
Fiscal 2013 Net Sales
7% 2%
Broad Product Off ering
13%
15%
$597.3 million
(Fiscal 2013 Net Sales)
63%
Hoists
Chain and forged attachments
Actuators and rotary unions
Industrial cranes
Other
4%
10%
Global Sales – FY 2013
Sales in over
50 countries
28%
58 %
Latin America and Asia Pacifi c
US
Europe
Canada
2013 Annual Report
2013 Annual Report
2013 Annual Report
Our Strongest Link
I
C
O
L
U
M
B
U
S
M
c
K
N
N
O
N
C
O
R
P
O
R
A
T
O
N
I
2
0
1
3
A
n
n
u
a
l
R
e
p
o
r
t
O
u
r
S
t
r
o
n
g
e
s
t
L
i
n
k
140 John James Audubon Parkway
Amherst, NY 14228-1197
General 716-689-5400
Investor Relations 716-689-5442
cmworks.com
NASDAQ: CMCO