UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 
 T
              ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE
      REQUIRED)
 
 For
the fiscal year ended March 31, 2008
 
 Commission
file number 0-27618
 _________________
 
 COLUMBUS
McKINNON CORPORATION
 (Exact
name of Registrant as specified in its charter)
 
 New
      York
              16-0547600(State
      of Incorporation)
              (I.R.S.
      Employer Identification Number)
 
 140
John James Audubon Parkway
 Amherst, New York14228-1197
 (Address
of principal executive offices, including zip code)
 
 (716)
689-5400
 (Registrant’s
telephone number, including area code)
 _________________
 
 Securities
pursuant to section 12(b) of the Act:
 NONE
 
 Securities
registered pursuant to Section 12(g) of the Act:
 Common
Stock, $0.01 Par Value (and rights attached thereto)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.   Yes   £     No   T
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange
Act.   Yes   £     No   T
 
 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   T     No   £
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of Registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K     T.
 
 Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition
of “accelerated filer,” “large accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Act.
 
 Large
      accelerated filer £
              Accelerated
      filer TNon-accelerated
      filer £
              Smaller
      reporting company £
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
 Yes £   No
T
  
 
  The
aggregate market value of the voting stock held by non-affiliates of the
Registrant as of September 30, 2007 was approximately $452 million, based upon
the closing price of the Company’s common shares as quoted on the Nasdaq Stock
Market on such date. The number of shares of the Registrant’s common stock
outstanding as of April 30, 2008 was 18,989,413 shares.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 Portions
of the Registrant’s proxy statement for its 2008 Annual Meeting of Shareholders
to be filed with the Securities and Exchange Commission pursuant to Regulation
14A not later than 120 days after the end of the Registrant’s fiscal year ended
March 31, 2008 are incorporated by reference into Part III of this
report.
  
  COLUMBUS
McKINNON CORPORATION
 2008
Annual Report on Form 10-K
 
 This
annual report contains “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause our actual
results to differ materially from the results expressed or implied by such
statements, including general economic and business conditions, conditions
affecting the industries served by us and our subsidiaries, conditions affecting
our customers and suppliers, competitor responses to our products and services,
the overall market acceptance of such products and services, the integration of
acquisitions and other factors set forth herein under “Risk Factors.” We use
words like “will,”  “may,”  “should,”
“plan,”  “believe,”  “expect,” “anticipate,” “intend,”
“future” and other similar expressions to identify forward looking
statements.  These forward looking statements speak only as of their
respective dates and we do not undertake and specifically decline any obligation
to publicly release the results of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated changes. Our actual operating results could differ materially from
those predicted in these forward-looking statements, and any other events
anticipated in the forward-looking statements may not actually
occur.
 
 PART I
 
 Item
      1.
              Business
 
 General
 
 We are a
leading manufacturer and marketer of hoists, cranes, chain, conveyors, material
handling systems, lift tables and component parts serving a wide variety of
commercial and industrial end-user markets. Our products are used to efficiently
and ergonomically move, lift, position or secure objects and loads. We are the
U.S. market leader in hoists, our principal line of products, which we believe
provides us with a strategic advantage in selling our other products. We have
achieved this leadership position through strategic acquisitions, our extensive,
diverse and well-established distribution channels and our commitment to product
innovation and quality. We have one of the most comprehensive product offerings
in the industry and we believe we have more overhead hoists in use in North
America than all of our competitors combined. Our brand names, including CM,
Coffing, Duff-Norton, Shaw-Box and Yale, are among the most recognized and
well-respected in our marketplace.
 
 The
Building of Our Business
 
 Founded
in 1875, we have grown to our current size and leadership position through
organic growth and acquiring 14 businesses between 1994 and 1999. Those
acquisitions significantly broadened our product lines and services and expanded
our geographic reach, end-user markets and our customer base. Our senior
management has substantial experience in the acquisition and integration of
businesses, aggressive cost management, efficient manufacturing techniques and
global operations, all of which are critical to our long-term growth strategy.
We have a proven track record of acquiring complementary businesses and product
lines, integrating their activities into our organization, and aggressively
managing their cost structures to improve operating efficiencies. The history of
our acquisitions between 1994 and 1999 is outlined below (purchase price in
millions):
  1
  Date of
      Acquisition
              
              Acquired
      Company
              
              Purchase
                Price
              
              Products/ServicesApril
      1999
              
              Washington
      Equipment Company
              
              $   6.4
              
              Overhead
      cranesMarch
      1999
              
              GL
      International (2),(6)
              
              20.6
              
              Overhead
      cranesJanuary
      1999
              
              Camlok/Tigrip
              
              10.6
              
              Plate
      clamps, crane weighersDecember
      1998
              
              Gautier
              
              2.9
              
              Rotary
      unions, swivel jointsAugust
      1998
              
              Abell-Howe
      Crane (5)
              
              7.0
              
              Overhead
      cranesMarch
      1998
              
              ASI
      (3)
              
              155.0
              
              Design
      and manufacture of custom conveyor systemsJanuary
      1998
              
              Univeyor
              
              15.0
              
              Design
      and manufacture of powered roller conveyor systemsDecember
      1996
              
              Lister
      (4)
              
              7.0
              
              Cement
      kiln, anchor and buoy chainOctober
      1996
              
              Yale
      (1)
              
              270.0
              
              Hoists,
      scissor lift tables, actuators, jacks and rotary unionsNovember
      1995
              
              Lift-Tech
              
              63.0
              
              HoistsOctober
      1995
              
              Endor
              
              2.0
              
              HoistsJanuary
      1995
              
              Cady
      Lifters
              
              0.8
              
              Below-the-hook
      liftersDecember
      1994
              
              Conco
              
              0.8
              
              Operator
      controlled manipulatorsFebruary
      1994
              
              Durbin-Durco
              
              2.4
              
              Load
      securing equipment and attachments
 
 
 The
following is a summary of our divestitures and property sales relating to the
above acquisitions which occurred between 1998 and 2007 as we focus on our core
businesses and major business segments as well as reduce our operating
costs.
 
 (1)
              In
      August 1998, we sold the Mechanical Products division of
    Yale.
 (2)
              In
      January 2002, we sold Handling Systems & Conveyors, Inc., a subsidiary
      of GL International.
 (3)
              In
      May 2002, we sold substantially all of the assets of Automatic Systems,
      Inc. (“ASI”) and in March 2003, we sold LICO Steel, Inc., a subsidiary of
      Audubon West, formerly ASI.
 (4)
              In
      February 2004, we sold the assets of the Lister Chain & Forge
      division.
 (5)
              In
      January 2005, we sold a Chicago area
property.
 (6)
              In
      March 2007, we sold LARCO Inc., a subsidiary of Crane, Equipment, &
      Service, Inc.
 
 
 Our
Position in the Industry
 
 The
broad, global material handling industry includes the following
sectors:
 •
              overhead
      material handling and lifting
devices;
 •
              continuous
      materials movement;
 •
              wheeled
      handling devices;
 •
              pallets,
      containers and packaging;
 •
              storage
      equipment and shop furniture;
 •
              automation
      systems and robots; and
 •
              services
      and unbundled software.
 
 The
breadth of our products and services enables us to participate in each of these
sectors, except for pallets, containers and packaging and storage equipment and
shop furniture. This diversification, together with our extensive and varied
distribution channels, minimizes our dependence on any particular product,
market or customer. We believe that none of our competitors offers the variety
of products or services in the markets we serve.
 
 We
believe that the demand for our products and services has increased during the
last twelve months and we believe the demand will continue to increase in the
future as a result of several macro-economic growth drivers. These drivers
include:
 
 Favorable
Industry Trends.   The U.S. industrial economy improved
since 2003 and the Eurozone industrial economy has improved since
2005.  Industrial capacity utilization is currently around 80% in both
regions, generally indicative of capital expansion and favorable industrial
activity.  Additionally, we monitor other leading indicators so that
we can be responsive to economic conditions that could impact our
markets.  Our business performance is influenced by the state of the
U.S. and Eurozone industrial economies, as well as those in emerging
areas.
  2
  Productivity
Enhancement.   We believe employers respond to competitive
pressures by seeking to maximize productivity and efficiency, among other
actions. Our hoists and other lifting and positioning products allow loads to be
lifted and placed quickly, precisely, with little effort and fewer people,
thereby increasing productivity and reducing cycle time.
 
 Safety
Regulations and Concerns.    Driven by workplace
safety regulations such as the Occupational Safety and Health Act and the
Americans with Disabilities Act in the U.S., and by the general competitive need
to reduce costs such as health insurance premiums and workers’ compensation
expenses, employers seek safer ways to lift and position loads. Our lifting and
positioning products enable these tasks to be performed with reduced risk of
personal injury.
 
 Consolidation of
Suppliers.    In an effort to reduce costs and
increase productivity, our customers and end-users are increasingly
consolidating their suppliers. We believe that our competitive strengths will
enable us to benefit from this consolidation and enhance our market
share.
 
 Our
Competitive Strengths
 
 Leading Market
Positions.We are a leading manufacturer of hoists
and alloy and high strength carbon steel chain and attachments in North
America.  We have developed our leading market positions over our
133-year history by emphasizing technological innovation, manufacturing
excellence and superior after-sale service.  Approximately 69% of our
U.S. net sales for the year ended March 31, 2008 were from product categories in
which we believe we hold the number one market share. We believe that the
strength of our established products and brands and our leading market positions
provide us with significant competitive advantages, including preferred supplier
status with a majority of our largest customers.  Our large installed
base of products also provides us with a significant competitive advantage in
selling our products to existing customers as well as providing repair and
replacement parts.
 
 The
following table summarizes the product categories where we believe we are the
U.S. market leader:
 
 Product
      Category
              U.S. Market Share
              U.S. Market Position
              Percentage
      of
                U.S. Net SalesPowered
      Hoists (1)
              48%
              #1
              27%Manual
      Hoists & Trolleys (1)
              59%
              #1
              13%Forged
      Attachments (1)
              40%
              #1
              7%Lifting
      and Sling Chains (1)
              64%
              #1
              4%Hoist
      Parts (2)
              60%
              #1
              9%Mechanical
      Actuators (3)
              40%
              #1
              4%Tire
      Shredders (4)
              80%
              #1
              3%Jib
      Cranes (5)
              25%
              #1
              2%69%
 _____________
 (1)
              Market
      share and market position data are internal estimates derived from survey
      information collected and provided by our trade associations in
      2007.
 
 (2)
              Market
      share and market position data are internal estimates based on our market
      shares of Powered Hoists and Manual Hoists & Trolleys, which we
      believe are good proxies for our Hoist Parts market share because we
      believe most end-users purchase Hoist Parts from the original equipment
      supplier.
 
 (3)
              Market
      share and market position data are internal estimates derived by
      comparison of our net sales to net sales of one of our competitors and to
      estimates of total market sales from a trade association in
      2007.
 
 (4)
              Market
      share and market position data are internal estimates derived by comparing
      the number of our tire shredders in use and their capacity to estimates of
      the total number of tires shredded published by a trade association in
      2007.
 
 (5)
              Market
      share and market position are internal estimates derived from both the
      number of bids we win as a percentage of the total projects for which we
      submit bids and from estimates of our competitors’ net sales based on
      their relative position in distributor catalogues in
  2007.
 
 Comprehensive
Product Lines and Strong Brand Name
Recognition.    We believe we offer the most
comprehensive product lines in the markets we serve.  We are the only
major supplier of material handling equipment offering full lines of hoists,
chain and attachments.  Our capability as a full-line supplier has
allowed us to (i) provide our customers with “one-stop shopping” for material
handling equipment, which meets some customers’ desires to reduce the number of
their supply relationships in order to lower their costs, (ii) leverage our
engineering, product development and marketing costs over a larger sales base
and (iii) achieve purchasing efficiencies on common materials used across our
product lines.
  3
  In
addition, our brand names, including Budgit, Chester, CM, Coffing, Duff-Norton,
Little Mule, Shaw-Box and Yale, are among the most recognized and respected in
the industry.  The CM name has been synonymous with overhead hoists
since manual hoists were first developed and marketed under the name in the
early 1900s.  We believe that our strong brand name recognition has
created customer loyalty and helps us maintain existing business, as well as
capture additional business.  No single SKU comprises more than 1% of
our sales, a testament to our broad and diversified product
offering.
 
 Distribution
Channel Diversity and Strength.    Our products are
sold to over 20,000 general and specialty distributors and OEMs
globally.  We enjoy long-standing relationships with, and are a
preferred provider to, the majority of our largest distributors and industrial
buying groups.  There has been consolidation among distributors of
material handling equipment and we have benefited from this consolidation by
maintaining and enhancing our relationships with our leading distributors, as
well as forming new relationships.  We believe our extensive
distribution channels provide a significant competitive advantage and allow us
to effectively market new product line extensions and promote
cross-selling.
 
 Expanding
International Markets.    We have significantly grown
our international sales since becoming a public company in 1996.  Our
international sales have grown from $34.3 million (representing 16% of total
sales) in fiscal 1996 to $217.9 million (representing 35% of our total sales)
during the year ended March 31, 2008.  This growth has occurred
primarily in Europe, Latin America and Asia-Pacific where we have recently
expanded our sales presence.  Our international business has provided
us, and we believe will continue to provide us, with significant growth
opportunities and new markets for our products.
 
 Low-Cost
Manufacturing with Significant Operating
Leverage.We believe we are a low-cost
manufacturer and we have and will continue to generate significant operating
leverage due to the initiatives summarized below.  Our operating
leverage goal is for each incremental sales dollar to generate 20%-30% of
operating income.
 
 —
              Rationalization and
      Consolidation.    We have a successful history
      of consolidating manufacturing facilities and optimizing warehouse
      utilization and location resulting in lower annual operating costs and
      improving our fixed-variable cost relationship.  We continue to
      evaluate existing operations for further
  opportunities.
 
 —
              Lean
      Manufacturing.    We have initiated Lean
      Manufacturing techniques, facilitating inventory reductions, a significant
      decline in required manufacturing floor space, a decrease in product lead
      time and improved productivity and on-time deliveries.  We
      believe continued application of lean manufacturing tools will generate
      benefits for many years to come.
 
 —
              International
      Expansion.    Our continued expansion of our
      manufacturing facilities in China, Mexico and Hungary provides us with
      another cost efficient platform to manufacture and distribute certain of
      our products and components.  We now operate 25 manufacturing
      facilities in eight countries, with 32 stand alone sales and service
      offices in 16 countries, and 10 stand alone warehouse facilities in five
      countries.
 
 —
              Purchasing
      Council.    We continue to leverage our
      company-wide purchasing power through our Purchasing Council to reduce our
      costs and manage fluctuations in commodity pricing, including
      steel.
 
 —
              Selective Vertical
      Integration.    We manufacture many of the
      critical parts and components used in the manufacture of our hoists and
      cranes, resulting in reduced costs.
 
 Strong
After-Market Sales and Support.    We believe that we
retain customers and attract new customers due to our ongoing commitment to
customer service and satisfaction.  We have a large installed base of
hoists and chain that drives our after-market sales for components and repair
parts and is a stable source of higher margin business.  We maintain
strong relationships with our customers and provide prompt aftermarket service
to end-users of our products through our authorized network of 16 chain repair
stations and approximately 400 hoist service and repair stations.
 
 Long History of
Free Cash Flow Generation and Significant Debt
Reduction.    We have consistently generated positive
free cash flow (which we define as net cash provided by operating activities
less capital expenditures) by continually controlling our costs, improving our
working capital management, and reducing the capital intensity of our
manufacturing operations.  In the past five years, we have reduced
total debt by $168.4 million, from $316.3 million to $147.9 million and
continued to grow our cash balance.
 
 Experienced
Management Team with Equity Ownership.    Our senior
management team provides a depth and continuity of experience in the material
handling industry.  Our management has experience in aggressive cost
management, balance sheet management, efficient manufacturing techniques,
acquiring and integrating businesses and global operations, all of which are
critical to our long-term growth.  Our directors and executive
officers, as a group, own an aggregate of approximately 3% of our outstanding
common stock.
  4
  Our
Strategy
 
 Grow our Core
Business.    We intend to leverage our strong
competitive advantages to increase our market shares across all of our product
lines and geographies by:
 
 —
              Leveraging Our Strong
      Competitive Position.    Our large,
      diversified, global customer base, our extensive distribution channels and
      our close relationships with our distributors provide us with insights
      into customer preferences and product requirements that allow us to
      anticipate and address the future needs of
  end-users.
 
 —
              Introducing New and
      Cross-Branded Products.   We continue to expand our
      business by developing new material handling products and services and
      expanding the breadth of our product lines to address material handling
      needs.  We have a dedicated hoist product development team and
      recently formed a similar group for our rigging products (chain and forged
      attachments).  The majority of the powered hoist products under
      development are guided by the Federation of European Manufacturing, or
      FEM, standard.  We believe these FEM hoist products, as well as
      other international design products will facilitate our global sales
      expansion strategy as well as improve our cost competitiveness against
      internationally made products imported into the U.S.  New
      product sales (as defined by new items introduced within the last three
      years) amounted to $89.0 million, $79.5 million, and $81.5 million in
      fiscal 2008, 2007, and 2006,
respectively.
 
 —
              Leveraging Our Brand Portfolio
      to Maximize Market Coverage.    Most industrial
      distributors carry one or two lines of material handling products on a
      semi-exclusive basis.  Unlike many of our competitors, we have
      developed and acquired multiple well-recognized brands that are viewed by
      both distributors and end-users as discrete product lines.  As a
      result, we are able to sell our products to multiple distributors in the
      same geographic area.  This strategy maximizes our market
      coverage and provides the largest number of end-users with access to our
      products.
 
 Continue to Grow
in International Markets.    Our international sales
of $217.9 million comprised 35% of our net sales for the year ended March 31,
2008, as compared to $34.3 million, or 16% of our net sales, in fiscal 1996, the
year we became a public company.  We sell to distributors in over 50
countries and have our primary international manufacturing facilities in China,
Mexico, Germany, Denmark, the United Kingdom, France, and Hungary.  In
addition to new product introductions, we continue to expand our sales and
service presence in the major and developing market areas of Europe,
Asia-Pacific and Latin America including through our sales offices and warehouse
facilities in Canada, various countries in Western and Eastern Europe, China,
Thailand, Brazil, Uruguay, Panama and Mexico.  We intend to increase
our sales by manufacturing and exporting a broader array of high quality,
low-cost products and components from our facilities in Mexico, China and
Hungary for distribution in Europe, Latin America and
Asia-Pacific.  We have developed and are continuing to expand upon new
hoist and other products in compliance with FEM standards and international
designs to enhance our global distribution.
 
 Further Reduce
Our Operating Costs and Increase Manufacturing
Productivity.Our objective is to remain a
low-cost producer.  We continually seek ways to reduce our operating
costs and increase our manufacturing productivity including through our on-going
expansion of our manufacturing capacity in low-cost regions, including Mexico,
China and Hungary.  In furtherance of this objective, we have
undertaken the following:
 
 —
              Implementation of Lean
      Manufacturing.    We continuously identify
      potential efficiencies in our operations through Lean Manufacturing,
      initiated in fiscal 2002.  Additionally, we reinvigorated our
      Lean initiative during fiscal 2008 to take these activities to the next
      level globally.
 
 —
              Rationalization of Facilities.   We have a successful history of consolidating
      manufacturing facilities and optimizing warehouse utilization and location
      resulting in lower annual operating costs and improving our fixed-variable
      cost relationship.  We have sufficient capacity to meet current
      and future demand and we periodically investigate opportunities for
      further facility rationalization.
 
 —
              Leveraging of Our Purchasing
      Power.    Our Purchasing Council was formed in
      fiscal 1998 to centralize and leverage our overall purchasing power and
      has resulted in significant savings for our company as well as management
      of fluctuations in commodity pricing, including
  steel.
  5
  Drive EPS Growth
through De-leveraging.    We intend to continue our
focus on cash generation for debt reduction through the following
initiatives:
 
 —
              Increase Operating Cash
      Flow.  As a result of the execution of our
      strategies to control our operating costs, increase our U.S. organic
      growth and increase our penetration of international markets, we believe
      that  we will continue to realize favorable operating
      leverage.  Our operating leverage goal is for each incremental
      sales dollar to generate 20%-30% of operating income.  We
      believe that such operating leverage will result in increased operating
      cash flow available for debt reduction, as well as investment in new
      products and new markets, organically and via
  acquisitions.
 
 —
              Reduce Working
      Capital.    As described above, we believe that
      our Lean Manufacturing activities are facilitating inventory reduction,
      improving product lead times and increasing our
      productivity.  We have other initiatives underway to further
      improve other routine working capital components, including accounts
      payable, all initiatives driving toward our long-term goal of total
      working capital (excluding cash and debt) of 15% of latest 12 months’
      revenues.  We believe our improved working capital management
      and increased productivity will further result in increased free cash
      flow.
 
 Pursue Strategic
Acquisitions and Alliances.   We intend to pursue
synergistic acquisitions to complement our organic growth.  Priorities
for such acquisitions include:  1) increasing international geographic
penetration, particularly in the Asia-Pacific region, and 2) further broadening
our offering with complementary products frequently used in conjunction with
hoists. Additionally,
we continually challenge the long-term fit of underperforming businesses for
potential divestiture and redeployment of capital.
 
 Our
Segments
 
 We
currently report our operations in two business segments, Products and
Solutions.
 
 Our
Products segment designs, manufactures and distributes a broad range of material
handling products for various applications. Products in this segment include a
wide variety of electric, lever, hand and air-powered hoists; hoist trolleys;
industrial crane systems such as bridge, gantry and jib cranes; alloy, carbon
steel and kiln chain; closed-die forged attachments, such as hooks, shackles,
logging tools and loadbinders; industrial components, such as mechanical and
electromechanical actuators, mechanical jacks and rotary unions; and
below-the-hook special purpose lifters. These products are typically
manufactured for stock or assembled to order from standard components and are
sold primarily through a variety of commercial distributors. The diverse
end-users of our products are in manufacturing plants, power utility facilities
and warehouses, on construction sites, oil rigs, ships and tractor trailers.
Some of our products have farming, mining and logging applications, and we serve
a niche market for the entertainment industry.
 
 Our
Solutions segment is engaged primarily in the design, fabrication and
installation of integrated workstation and facility-wide material handling
systems and in the design and manufacture of tire shredders, lift tables and
light-rail systems.  These products and services have historically
been highly engineered, built to order and primarily sold directly to end-users
for specific applications in a variety of industries.  The material
handling systems business within this segment is currently undergoing the
process for divestiture.
 
 Note 19
to our consolidated financial statements included elsewhere herein provides
information related to our business segments in accordance with U.S. generally
accepted accounting principles.  Summary information concerning our
business segments for fiscal 2008, 2007 and 2006 is set forth
below.
  6
  Fiscal Years Ended
      March 31,2008
              
              
              2007
              
              
              2006Amount
              
              
              % of Total Sales
              
              
              Amount
              
              
              % of Total Sales
              
              
              Amount
              
              
              % of Total Sales(Dollars
      in millions)Net
      SalesProducts
              
              $
              570.0
              
              
              
              91.4
              
              
              $
              527.1
              
              
              
              89.4
              
              
              $
              493.9
              
              
              
              88.8Solutions
              
              
              53.3
              
              
              
              8.6
              
              
              
              62.7
              
              
              
              10.6
              
              
              
              62.1
              
              
              
              11.2Total
              
              $
              623.3
              
              
              
              100.0
              
              
              $
              589.8
              
              
              
              100.0
              
              
              $
              556.0
              
              
              
              100.0Amount
              
              
              % of Segment /Total Sales
              
              
              Amount
              
              
              % of Segment /Total Sales
              
              
              Amount
              
              
              % of Segment /Total SalesIncome
      (loss) from OperationsProducts
              
              $
              78.4
              
              
              
              13.8
              
              
              $
              71.5
              
              
              
              13.6
              
              
              $
              55.9
              
              
              
              11.3Solutions
              
              
              (7.3
              )
              
              
              (13.6
              )
              
              
              (3.0
              )
              
              
              (4.8
              )
              
              
              2.0
              
              
              
              3.2Total
              
              $
              71.1
              
              
              
              11.4
              
              
              $
              68.5
              
              
              
              11.6
              
              
              $
              57.9
              
              
              
              10.4
 
 
 Products
Segment
 
 Products
 
 Our
Products segment primarily designs, manufactures and distributes a broad range
of material handling, lifting and positioning products for various applications
and has total assets of approximately $560.1 million as of March 31, 2008. These
products are typically manufactured for stock or assembled to order from
standard components and are sold through a variety of distributors. In excess of
75% of our Products segment net sales is derived from the sale of products that
we sell at a unit price of less than $5,000. In fiscal 2008, net sales of the
Products segment were $570.0 million or approximately 91.4% of our net
sales.  Of these sales, $391.7 million, or 68.7% were U.S. and $178.3
million, or 31.3% were international. The following table sets forth certain
sales data for the products of our Products segment, expressed as a percentage
of net sales of this segment for fiscal 2008 and 2007:
 
 
 Fiscal Years Ended
      March 31,2008
              
              
              2007Hoists
              
              
              57
              %
              
              
              54
              %Chain
              
              
              14
              
              
              
              14Forged
      attachments
              
              
              11
              
              
              
              11Industrial
      cranes
              
              
              11
              
              
              
              13Industrial
      components
              
              
              7
              
              
              
              8100
              %
              
              
              100
              %
 
 
 Hoists.   We
manufacture a variety of electric chain hoists, electric wire rope hoists,
hand-operated hoists, lever tools and air-powered balancers and hoists. Load
capacities for our hoist product lines range from one-eighth of a ton to 100
tons. These products are sold under our Budgit, Chester, CM, Coffing, Little
Mule, Shaw-Box, Yale and other recognized trademarks. Our hoists are sold for
use in numerous general industrial applications, as well as for use in the
construction, energy, mining, food services, entertainment and other markets. We
also supply hoist trolleys, driven manually or by electric motors, for the
industrial, consumer and OEM markets.
 
 We also
currently offer several lines of custom-designed, below-the-hook tooling,
clamps, pallet trucks and textile strappings. Below-the-hook tooling and clamps
are specialized lifting apparatus used in a variety of lifting activities
performed in conjunction with hoist and chain applications.  Textile
strappings are below-the-hook attachments, frequently used in conjunction with
hoists.
  7
  Chain.   We
manufacture alloy and carbon steel chain for various industrial and consumer
applications. Federal regulations require the use of alloy chain, which we first
developed, for overhead lifting applications because of its strength and wear
characteristics. A line of our alloy chain is sold under the Herc-Alloy brand
name for use in overhead lifting, pulling and restraining applications. In
addition, we also sell specialized load chain for use in hoists, as well as
three grades and multiple sizes of carbon steel welded-link chain for various
load securing and other non-overhead lifting applications. We also manufacture
kiln chain sold primarily to the cement manufacturing market.
 
 Forged
Attachments.   We produce
a broad line of alloy and carbon steel closed-die forged attachments, including
hooks, shackles, hitch pins and master links. These forged attachments are used
in chain, wire rope and textile rigging applications in a variety of industries,
including transportation, mining, construction, marine, logging, petrochemical
and agriculture.
 
 In
addition, we manufacture carbon steel forged and stamped products, such as
loadbinders, logging tools and other securing devices, for sale to the
industrial, consumer and logging markets through industrial distributors,
hardware distributors, mass merchandiser outlets and OEMs.
 
 Industrial
Cranes.   We entered
the U.S. crane manufacturing market through our August 1998 acquisition of
Abell-Howe, a Chicago-based regional manufacturer of jib and overhead bridge
cranes. Our March 1999 acquisition of GL International, which included the
Gaffey and Larco brands, and our April 1999 acquisition of Washington Equipment
Company established us as a significant participant in the U.S. crane building
and servicing markets. Crane builders represent a specific distribution channel
for electric wire rope hoists, chain hoists and other crane components. We
divested of our Larco business in March 2007, which business provided cranes and
service primarily to the steel industry in southern Ontario,
Canada.
 
 Industrial
Components.   Through our Duff-Norton division, we design
and manufacture industrial components such as mechanical and electromechanical
actuators and rotary unions. Actuators are linear motion devices used in a
variety of industries, including the paper, steel and aerospace industries.
Rotary unions are devices that transfer a liquid or gas from a fixed pipe or
hose to a rotating drum, cylinder or other device. Rotary unions are used in a
variety of industries including pulp and paper, printing, textile and fabric
manufacturing, rubber and plastic.
 
 Sales
and Marketing
 
 Our sales
and marketing efforts in support of our Products segment consist of the
following programs:
 
 Factory-Direct
Field Sales and Customer Service.   We sell
our products through our sales force of more than 125 salespersons and through
independent sales agents worldwide. Our sales are further supported by
approximately 400 company-trained customer service correspondents and sales
application engineers. We compensate our sales force through a combination of
base salary and a commission plan based on top line sales and a pre-established
sales quota.
 
 Product
Advertising.   We promote our products by advertising in
leading trade journals as well as producing and distributing high quality
information catalogs. We run targeted advertisements for hoists, chain, forged
attachments, actuators, and cranes.
 
 Target
Marketing.   We provide
marketing literature to target specific end-user market sectors including
construction, energy, mining, food service, and others.  This
literature displays our broad product offering applicable to those sectors to
enhance awareness at the end-user level within those sectors.
 
 Trade Show
Participation.   Trade shows are central to the promotion
of our products, and we participate in more than 40 regional, national and
international trade shows each year. Shows in which we participate range from
global events held in Germany to local “markets” and “open houses” organized by
individual hardware and industrial distributors. We also attend specialty shows
for the entertainment, rental and safety markets, construction, as well as
general purpose industrial and hardware shows. In fiscal 2008, we participated
in trade shows in the U.S., Canada, Mexico, Germany, the United Kingdom, France,
China, Brazil, Australia, Korea, Chile, Argentina, and the United Arab
Emirates.
 
 Industry
AssociationMembership and
Participation.   As a recognized industry leader, we have
a long history of work and participation in a variety of industry associations.
Our management is directly involved at the officer and director levels of
numerous industry associations including the following: ISA (Industrial Supply
Association), AWRF (Associated Wire Rope Fabricators), PTDA (Power Transmission
and Distributors Association), SCRA (Specialty Carriers and Riggers
Association), WSTDA (Web Sling and Tie Down Association), MHI (Material Handling
Institute), HMI (Hoist Manufacturers Institute), CMAA (Crane Manufacturers
Association of America), ESTA (Entertainment Services and Technology
Association), NACM (National Association of Chain Manufacturers) and ARA
(American Rental Association).
  8
  Product Standards
and Safety Training Classes.   We conduct
on-site training programs worldwide for distributors and end-users to promote
and reinforce the attributes of our products and their safe use and operation in
various material handling applications.
 
 Web
Sites.   In addition
to our main corporate web site at www.cmworks.com, we currently sponsor an
additional 29brand
specific web sites and sell hand pallet trucks on one of these sites. Several of
our brand web sites include electronic catalogs of our various products and list
prices. Current and potential customers can browse through our diverse product
offering or search for specific products by name or classification code and
obtain technical product specifications. We continue to add additional product
catalogs, maintenance manuals, advertisements and customer service information
on our various web sites. Many of the web sites allow distributors to search for
personalized pricing information, order status and product serial number data
and to enter sales orders.
 
 Distribution
and Markets
 
 The
distribution channels for the Products segment include a variety of commercial
distributors. In addition, the Products segment sells overhead bridge, jib and
gantry cranes directly to end-users. We also sell to the consumer market through
wholesalers. The following describes our global distribution
channels:
 
 General
Distribution Channels.   Our global general distribution
channels consist of:
 
 —
              Industrial
      distributors that serve local or regional industrial markets and sell a
      variety of products for maintenance, repair, operating and production, or
      MROP, applications through their own direct sales
  force.
 
 —
              Rigging
      shops that are distributors with expertise in rigging, lifting,
      positioning and load securing. Most rigging shops assemble and distribute
      chain, wire rope and synthetic slings and distribute off-the-shelf hoists
      and attachments, chain slings and other off-the-shelf
      products.
 
 —
              Independent
      crane builders that design, build, install and service overhead crane and
      light-rail systems for general industry and also distribute a wide variety
      of hoists and lifting attachments. We sell electric wire rope hoists and
      chain hoists as well as crane components, such as end trucks, trolleys,
      drives and electrification systems to crane
  builders.
 
 Crane
End-Users.   We sell overhead bridge, jib and gantry
cranes, parts and service to end-users through our wholly owned crane builder,
Crane Equipment & Service, Inc. (“CES”) within the CraneMartTM network.
CES which includes Abell-Howe, Gaffey and Washington Equipment brands designs,
manufactures, installs and services a variety of cranes with capacities up to
100 tons.
 
 Specialty
Distribution Channels.   Our global
specialty distribution channels consist of:
 
 —
              National
      distributors that market a variety of MROP supplies, including material
      handling products, either exclusively through large, nationally
      distributed catalogs, or through a combination of catalog, internet and
      branch sales and a field sales force. The customer base served by national
      distributors such as W. W. Grainger, which traditionally included smaller
      industrial companies and consumers, has grown to include large industrial
      accounts and integrated suppliers.
 
 —
              Material
      handling specialists and integrators that design and assemble systems
      incorporating hoists, overhead rail systems, trolleys, scissor lift
      tables, manipulators, air balancers, jib arms and other material handling
      products to provide end-users with solutions to their material handling
      problems.
 
 —
              Entertainment
      equipment distributors that design, supply and install a variety of
      material handling and rigging equipment for concerts, theaters, ice shows,
      sports arenas, convention centers and night
  clubs.
 
 Service-After-Sale
Distribution Channel.   Service-after-sale
distributors include our authorized network of 16 chain repair service stations
and approximately 400 hoist service and repair stations. This service network is
designed for easy parts and service access for our large installed base of
hoists and related equipment in North America.
  9
  OEM/Government
Distribution Channels.   This
channel consists of:
 
 —
              OEMs
      that supply various component parts directly to other industrial
      manufacturers as well as private branding and packaging of our traditional
      products for material handling, lifting, positioning and special purpose
      applications.
 
 —
              Government
      agencies, including the U.S. and Canadian Navies and Coast Guards, that
      purchase primarily load securing chain and forged
    attachments.
 
 Customer
Service and Training
 
 We
maintain customer service departments staffed by trained personnel for all of
our Products segment sales divisions, and regularly schedule product and service
training schools for all customer service representatives and field sales
personnel. Training programs for distribution and service station personnel, as
well as for end-users, are scheduled on a regular basis at most of our
facilities and in the field. We have approximately 400 service and repair
stations worldwide that provide local and regional repair, warranty and general
service work for distributors and end-users. End-user trainees attending our
various programs include representatives of 3M, Cummins Engine, DuPont, GTE,
General Electric, General Motors and many other industrial and entertainment
organizations.
 
 We also
provide, in multiple languages, a variety of collateral material in video,
cassette, CD-ROM, slide and print format addressing relevant material handling
topics such as the care, use and inspection of chains and hoists, and overhead
lifting and positioning safety. In addition, we sponsor advisory boards made up
of representatives of our primary distributors and service-after-sale network
members who are invited to participate in discussions focused on improving
products and service. These boards enable us and our primary distributors to
exchange product and market information relevant to industry
trends.
 
 Backlog
 
 Our
Products segment backlog of orders at March 31, 2008 was approximately $55.8
million compared to approximately $53.2 million at March 31,
2007.  Our orders for standard products are generally shipped within
one week. Orders for products that are manufactured to customers’ specifications
are generally shipped within four to twelve weeks. Given the short product lead
times, we do not believe that the amount of our Products segment backlog of
orders is a reliable indication of our future sales.
 
 Competition
 
 The
material handling industry remains highly fragmented. We face competition from a
wide range of regional, national and international manufacturers in both U.S.
and international markets. In addition, we often compete with individual
operating units of larger, highly diversified companies.
 
 The
principal competitive factors affecting our Products segment include customer
service and support as well as product availability, performance, functionality,
brand reputation, reliability and price. Other important factors include
distributor relationships and territory coverage.
 
 Major
competitors with our Products segment for hoists are Konecranes, Demag Cranes
& Components and Kito-Harrington; for chain are Campbell Chain, Peerless
Chain Company and American Chain and Cable Company; for forged attachments are
The Crosby Group and Brewer Tichner Company; for cranes are Konecranes, Demag
Cranes & Components and a variety of independent crane builders; and for
industrial components are Deublin, Joyce-Dayton and Nook
Industries.
 
 Solutions
Segment
 
 The
Solutions segment is engaged primarily in the design, fabrication and
installation of integrated workstation and facility-wide material handling
systems and in the design and manufacture of tire shredders, lift tables and
light-rail systems and has total assets of approximately $30 million as of March
31, 2008. Net sales of the Solutions segment in fiscal 2008 were $53.3 million,
or 8.6% of our total net sales, of which $13.8 million, or 25.9% were U.S. and
$39.5 million, or 74.1% were international. The following table sets forth
certain sales data for the products and services of our Solutions segment,
expressed as a percentage of this segment’s net sales for fiscal 2008 and
2007:
  10
  Fiscal Years Ended
      March 31,2008
              
              
              2007Integrated
      material handling conveyor systems and service
              
              
              55
              %
              
              
              63
              %Tire
      shredders
              
              
              26
              
              
              
              20Lift
      tables
              
              
              14
              
              
              
              13Light-rail
      systems
              
              
              5
              
              
              
              4100
              %
              
              
              100
              %
 
 
 Products
and Services
 
 Integrated
Material Handling Conveyor Systems and Service.   Through our
Univeyor business, we have historically specialized in designing highly
customized, computer-controlled and automated powered roller conveyors for use
in warehouse operations and distribution systems.  In recent years, we
have focused on more standardized products and service to reduce its volatility
and improve its profitability and return on invested capital.  This
business is currently in the process of divestiture.
 
 Tire
Shredders.   We have
developed and patented a line of heavy equipment that shreds worn tires, with
the byproducts useful for fuel and recycled products including aggregate filler,
playgrounds, sports surfaces, landscaping and other such applications, as well
as scrap steel.
 
 Lift
Tables.   Our
American Lifts division manufactures powered lift tables. These products enhance
workplace ergonomics and are sold primarily to customers in the general
manufacturing, construction, and air cargo industries.
 
 Light-Rail
Systems.   Introduced
in fiscal 2001, light-rail systems are portable steel overhead beam
configurations used at workstations, from which hoists are frequently
suspended.
 
 Sales
and Marketing
 
 The
products and services of the Solutions segment are sold primarily to large
sophisticated corporate end-users, including Federal Express, John Deere,
Boeing, Lockheed Martin, Proctor & Gamble, Toyota, Honda and other
industrial companies, systems integrators and distributors. Sales are generated
by internal sales personnel and rely heavily on engineer-to-engineer
interactions with the customer or a large systems integrator. The process of
generating client contract awards for integrated conveyor systems generally
entails receiving a request-for-quotation from customers and undergoing a
competitive bidding process. The Solutions segment also sells tire shredders,
scissor lift tables and light-rail systems through its internal sales force and
through specialized independent distributors and manufacturers
representatives.
 
 Customer
Service and Training
 
 The
Solutions segment offers a wide range of value-added services to customers
including: an engineering review of the customer’s processes; an engineering
solution for identified material handling problems; project management; and
custom design, manufacturing and installation services. We also offer
after-sales services including operator training, maintenance and hot-line
support. The typical length of after-sales service varies depending on customer
requirements and supplemental training courses are offered as
needed.
 
 Backlog
 
 Revenues
from our Solutions segment are generally recognized within one to six months.
Our backlog of orders at March 31, 2008 was approximately $11.8 million compared
to approximately $9.6 million at March 31, 2007.
 
 Competition
 
 The
principal competitive factors affecting the market for the products and services
of our Solutions segment include application solutions, performance and price.
The process of generating client contract awards for these businesses generally
entails receiving a request-for-quotation from end-users and undergoing a
competitive bidding process. Our Solutions segment competes primarily with
Crisplant, Gorbel, Moving, Schaffer, Southworth and Swisslog.
  11
  Employees
 
 At March
31, 2008, we had 3,233 employees; 2,111 in the U.S./Canada, 213 in Latin
America, 572 in Europe and 337 in Asia. Approximately 724 of our employees are
represented under seven separate U.S. or Canadian collective bargaining
agreements which terminate at various times between September 2008 and March
2012.  The contract which expires in September 2008 currently covers
67 employees.  We believe that our relationship with our employees is
good.
 
 Raw
Materials and Components
 
 Our
principal raw materials and components are steel, consisting of structural
steel, processed steel bar, forging bar steel, steel rod and wire, steel pipe
and tubing and tool steel; electric motors; bearings; gear reducers; castings;
and electro-mechanical components.  These commodities are all
available from multiple sources.  We purchase most of these raw
materials and components from a limited number of strategic and preferred
suppliers under long-term agreements which are negotiated on a company-wide
basis through our Purchasing Council to take advantage of volume
discounts.  We generally seek to pass on materials price increases to
our distribution channel partners and end-user customers.  We will
continue to monitor our costs and reevaluate our pricing
policies.  Our ability to pass on these increases is determined by
market conditions.
 
 Manufacturing
 
 We
manufacture a significant percentage of the products we sell. We complement our
own manufacturing by outsourcing components and finished goods from an
established global network of suppliers. We regularly upgrade our global
manufacturing facilities and invest in tooling, equipment and technology. In
2001, we began implementing Lean Manufacturing in our plants which has resulted
in inventory reductions, reductions in required manufacturing floor area,
shorter product lead time and increased productivity.
 
 Our
manufacturing operations are highly integrated. Although raw materials and some
components such as motors, bearings, gear reducers, castings and
electro-mechanical components are purchased, our vertical integration enables us
to produce many of the components used in the manufacturing of our products. We
manufacture hoist lifting chain, steel forged gear blanks, lift wheels, trolley
wheels, and hooks and other attachments for incorporation into our hoist
products. These products are also sold as spare parts for hoist repair.
Additionally, our hoists are used as components in the manufacture of crane
systems by us as well as our crane-builder customers. We believe this vertical
integration results in lower production costs, greater manufacturing flexibility
and higher product quality, and reduces our reliance on outside
suppliers.
 
 Environmental
and Other Governmental Regulation
 
 Like most
manufacturing companies, we are subject to various federal, state and local laws
relating to the protection of the environment. To address the requirements of
such laws, we have adopted a corporate environmental protection policy which
provides that all of our owned or leased facilities shall, and all of our
employees have the duty to, comply with all applicable environmental regulatory
standards, and we have initiated an environmental auditing program for our
facilities to ensure compliance with such regulatory standards. We have also
established managerial responsibilities and internal communication channels for
dealing with environmental compliance issues that may arise in the course of our
business. We have made and could be required to continue to make significant
expenditures to comply with environmental requirements.  Because of
the complexity and changing nature of environmental regulatory standards, it is
possible that situations will arise from time to time requiring us to incur
additional expenditures in order to ensure environmental regulatory compliance.
However, we are not aware of any environmental condition or any operation at any
of our facilities, either individually or in the aggregate, which would cause
expenditures having a material adverse effect on our results of operations,
financial condition or cash flows and, accordingly, have not budgeted any
material capital expenditures for environmental compliance for fiscal
2008.
 
 We have
completed our investigation of past waste disposal activities at a facility in
Cleveland, Texas, operated by our subsidiary, Crane Equipment and Service,
Inc.  Remediation activities under the terms of the voluntary
agreement with the Texas Commission on Environmental Quality (“TCEQ”) have been
completed and we are awaiting final regulatory approval from the
TCEQ.
 
 In
addition, we have notified the North Carolina Department of Environment and
Natural Resources (the “DENR”) of the presence of certain contaminants in excess
of regulatory standards at our Coffing Hoist facility in Wadesboro, North
Carolina. We filed an application with the DENR to enter its voluntary cleanup
program and were accepted.  We are currently investigating under the
terms of the DENR Registered Environmental Consultant (“”the REC”) and, if
appropriate, will remediate site conditions at the facility. At this time,
investigative and remediation costs are expected to not exceed
$250,000.
  12
  We also
discovered the presence of certain contaminants in excess of regulatory
standards at our Damascus, Virginia hoist plant and have notified the Virginia
Department of Environmental Quality (the “DEQ”).  We filed an
application with the DEQ to participate in its voluntary remediation program and
have been accepted.    We are currently investigating under
the terms of the DEQ Voluntary Remediation Program and, if appropriate, will
remediate site conditions at the facility. At this time, investigative and
remediation costs are expected to not exceed $65,000.
 
 In June
of 2007, we were identified by the New York State Department of Environmental
Conservation (“the DEC”), along with other companies, as a potential responsible
party (“PRP”) at the Frontier Chemical Royal Avenue Site in Niagara Falls, New
York.  From 1974 to 1992, the Frontier Royal Avenue Site had been
operated as a commercial waste treatment and disposal facility.  We
sent waste pickle liquor generated at our facility in Tonawanda, New York to the
Frontier Royal Avenue Site during the period from approximately 1982 to
1984.  We have joined with other PRP members known as the Frontier
Chemical Site Joint Defense Alliance Group to conduct investigation and, if
appropriate, remediation activities at the site.  At this early stage,
we do not have an estimate of likely remediation costs, if any, but do not
believe that such costs would have a material adverse effect on our financial
condition or operating results.
 
 For all
of the currently known environmental matters, we have accrued a total of $0.9
million as of March 31, 2008, which, in our opinion, is sufficient to deal with
such matters. Further, our management believes that the environmental matters
known to, or anticipated by, us should not, individually or in the aggregate,
have a material adverse effect on our operating results or financial condition.
However, there can be no assurance that potential liabilities and expenditures
associated with unknown environmental matters, unanticipated events, or future
compliance with environmental laws and regulations will not have a material
adverse effect on us.
 
 Our
operations are also governed by many other laws and regulations, including those
relating to workplace safety and worker health, principally OSHA in the U.S. and
regulations thereunder. We believe that we are in material compliance with these
laws and regulations and do not believe that future compliance with such laws
and regulations will have a material adverse effect on our operating results or
financial condition.
 
 
 Available
Information
 
 Our
internet address is www.cmworks.com.  We
make available free of charge through our website our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments
to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, as soon as reasonably practicable
after such documents are electronically filed with, or furnished to, the
Securities and Exchange Commission.
 
 Item
      1A.
              Risk
      Factors
 
 Columbus
McKinnon is subject to a number of risk factors that could negatively affect our
results from business operations or cause actual results to differ materially
from those projected or indicated in any forward looking
statement.  Such factors include, but are not limited to, the
following:
 
 Our
business is cyclical and is affected by industrial economic
conditions.
 
 Many of
the end-users of our products are in highly cyclical industries, such as general
manufacturing and construction that are sensitive to changes in general economic
conditions. Their demand for our products, and thus our results of operations,
is directly related to the level of production in their facilities, which
changes as a result of changes in general economic conditions and other factors
beyond our control. Between fiscal 2000 and fiscal 2004 for example, we
experienced significantly reduced demand for our products, generally as a result
of the global economic slowdown, and more specifically as a result of the
dramatic decline in capital goods spending in the industries in which our
end-users operate. These lower levels of demand and the impact of divested
businesses resulted in a significant decline in net sales as well as income from
operations during that period.  If the current economic stability does
not continue or if there is deterioration in the general economy or in the
industries we serve, our business, results of operations and financial condition
could be materially adversely affected. In addition, the cyclical nature of our
business could at times also adversely affect our liquidity and ability to
borrow under our revolving credit facility.
  13
  We rely in large part on independent
distributors for sales of our products.
 
 We depend
on independent distributors to sell our products and provide service and
aftermarket support to our end-user customers.  Distributors play a
significant role in determining which of our products are stocked at the branch
locations, and hence are most readily accessible to aftermarket buyers, and the
price at which these products are sold.  Almost all of the
distributors with whom we transact business offer competitive products and
services to our end-user customers.  For the most part, we do not have
written agreements with our distributors located in the United
States.  The loss of a substantial number of these distributors or an
increase in the distributors’ sales of our competitors’ products to our ultimate
customers could materially reduce our sales and profits.
 
 We
are subject to currency fluctuations from our international sales.
 
 Our
products are sold in many countries around the world.  Thus, a portion
of our revenues (approximately $175 million in fiscal year 2008) is generated in
foreign currencies, including principally the euro, the Canadian dollar, and the
Danish Krone, and while much of the costs incurred to generate those revenues
are incurred in the same currency, a portion is incurred in other
currencies.  Since our financial statements are denominated in U.S.
dollars, changes in currency exchange rates between the U.S. dollar and other
currencies have had, and will continue to have, an impact on our
earnings.  We currently do not have exchange rate hedges in place to
reduce the risk of an adverse currency exchange movement.  Currency
fluctuations may impact our financial performance in the future.
 
 Our
international operations pose certain risks that may adversely impact sales and
earnings.
 
 We have
operations and assets located outside of the United States, primarily in China,
Mexico, Germany, Denmark, the United Kingdom, France, and Hungary. In addition,
we import a portion of our hoist product line from Asia, and sell our products
to distributors located in approximately 50 countries. In fiscal year 2008,
approximately 35% of our net sales were derived from non-U.S.
markets.  These international operations are subject to a number of
special risks, in addition to the risks of our U.S. business, including currency
exchange rate fluctuations, differing protections of intellectual property,
trade barriers, labor unrest, exchange controls, regional economic uncertainty,
differing (and possibly more stringent) labor regulation, risk of governmental
expropriation, U.S. and foreign customs and tariffs, current and changing
regulatory environments, difficulty in obtaining distribution support,
difficulty in staffing and managing widespread operations, differences in the
availability and terms of financing, political instability and risks of
increases in taxes. Also, in some foreign jurisdictions we may be subject to
laws limiting the right and ability of entities organized or operating therein
to pay dividends or remit earnings to affiliated companies unless specified
conditions are met. These factors may adversely affect our future
profits.
 
 Part of
our strategy is to expand our worldwide market share and reduce costs by
strengthening our international distribution capabilities and sourcing basic
components in foreign countries, in particular in Mexico, China and
Hungary.  Implementation of this strategy may increase the impact of
the risks described above, and we cannot assure you that such risks will not
have an adverse effect on our business, results of operations or financial
condition.
 
 Our
business is highly competitive and increased competition could reduce our sales,
earnings and profitability.
 
 The
principal markets that we serve within the material handling industry are
fragmented and highly competitive.  Competition is based primarily on
customer service and support as well as product availability, performance,
functionality, brand reputation, reliability and price. Our competition in the
markets in which we participate comes from companies of various sizes, some of
which have greater financial and other resources than we do. Increased
competition could force us to lower our prices or to offer additional services
at a higher cost to us, which could reduce our gross margins and net
income.
 
 The
greater financial resources or the lower amount of debt of certain of our
competitors may enable them to commit larger amounts of capital in response to
changing market conditions.  Certain competitors may also have the
ability to develop product or service innovations that could put us at a
disadvantage.  In addition, some of our competitors have achieved
substantially more market penetration in certain of the markets in which we
operate, including crane building. If we are unable to compete successfully
against other manufacturers of material handling equipment, we could lose
customers and our revenues may decline.  There can also be no
assurance that customers will continue to regard our products favorably, that we
will be able to develop new products that appeal to customers, that we will be
able to improve or maintain our profit margins on sales to our customers or that
we will be able to continue to compete successfully in our core
markets.
  14
  Our
products involve risks of personal injury and property damage, which exposes us
to potential liability.
 
 Our
business exposes us to possible claims for personal injury or death and property
damage resulting from the products that we sell.  We maintain
insurance through a combination of self-insurance retentions and excess
insurance coverage.  We monitor claims and potential claims of which
we become aware and establish accrued liability reserves for the self-insurance
amounts based on our liability estimates for such claims.  We cannot
give any assurance that existing or future claims will not exceed our estimates
for self-insurance or the amount of our excess insurance coverage.  In
addition, we cannot give any assurance that insurance will continue to be
available to us on economically reasonable terms or that our insurers would not
require us to increase our self-insurance amounts.Claims brought against
us that are not covered by insurance or that result in recoveries in excess of
insurance coverage could have a material adverse effect on our results and
financial condition.
 
 Our
future operating results may be affected by fluctuations in steel or other
material prices.  We may not be able to pass on increases in raw
material costs to our customers.
 
 The
principal raw material used in our chain, forging and crane building operations
is steel.  The steel industry as a whole is highly cyclical, and at
times pricing and availability can be volatile due to a number of factors beyond
our control, including general economic conditions, labor costs, competition,
import duties, tariffs and currency exchange rates.  This volatility
can significantly affect our raw material costs.  In an environment of
increasing raw material prices, competitive conditions will determine how much
of the steel price increases we can pass on to our customers. During historical
rising cost periods, we were successful in adding and maintaining a surcharge to
the prices of our high steel content products or incorporating them into price
increases, with a goal of margin neutrality.  In the future, to the
extent we are unable to pass on any steel price increases to our customers, our
profitability could be adversely affected.
 
 We
depend on our senior management team and the loss of any member could adversely
affect our operations.
 
 Our
success is dependent on the management and leadership skills of our senior
management team. The loss of any of these individuals or an inability to
attract, retain and maintain additional personnel could prevent us from
implementing our business strategy. We cannot assure you that we will be able to
retain our existing senior management personnel or to attract additional
qualified personnel when needed. We have not entered into employment agreements
with any of our senior management personnel with the exception of Wolfgang
Wegener, our Vice President and Managing Director of Columbus McKinnon
Europe.
 
 We
are subject to various environmental laws which may require us to expend
significant capital and incur substantial cost.
 
 Our
operations and facilities are subject to various federal, state, local and
foreign requirements relating to the protection of the environment, including
those governing the discharges of pollutants in the air and water, the
generation, management and disposal of hazardous substances and wastes and the
cleanup of contaminated sites.  We have made, and will continue to
make, expenditures to comply with such requirements.  Violations of,
or liabilities under, environmental laws and regulations, or changes in such
laws and regulations (such as the imposition of more stringent standards for
discharges into the environment), could result in substantial costs to us,
including operating costs and capital expenditures, fines and civil and criminal
sanctions, third party claims for property damage or personal injury, clean-up
costs or costs relating to the temporary or permanent discontinuance of
operations. Certain of our facilities have been in operation for many years, and
we have remediated contamination at some of our facilities.  Over
time, we and other predecessor operators of such facilities have generated,
used, handled and disposed of hazardous and other regulated wastes. Additional
environmental liabilities could exist, including clean-up obligations at these
locations or other sites at which materials from our operations were disposed,
which could result in substantial future expenditures that cannot be currently
quantified and which could reduce our profits or have an adverse effect on our
financial condition.
 
 We
make estimates in accounting for long-term contracts.
 
 We have
long-term contracts with some of our customers in our European material handling
systems business.  These contracts are accounted for using the
percentage of completion, cost-to-cost method of accounting in accordance with
the American Institute of Certified Public Accountants’ Statement of Position
81-1, “Accounting for Performance of Construction-Type and Certain
Production-Type Contacts”.  We recognize revenue on contracts using
the percentage of completion, cost-to-cost method of accounting as work
progresses toward completion as determined by the ratio of cumulative costs
incurred to date to estimated total contact costs at completion, multiplied by
the total estimated contract revenue, less cumulative revenue recognized in
prior periods.
  15
  Changes
in estimates affecting sales, costs, and profits are recognized in the period in
which the change becomes known using the cumulative catch-up method of
accounting, resulting in cumulative effect changes reflected in the
period.  A significant change in an estimate on one or more contracts
could have a material effect on our results of operations.  For
contracts with anticipated losses at completion, we establish a provision for
the entire amount of the estimated remaining loss and charge it against income
in the period in which the loss becomes known.  Amounts representing
penalties, contract claims, or change orders are considered in estimating
revenues, costs, and profits when they can be reliably estimated and realization
is considered probable.
 
 We
rely on subcontractors or suppliers to perform their contractual
obligations.
 
 Some of
our contracts involve subcontracts with other companies upon which we rely to
perform a portion of the services we must provide to our
customers.  There is a risk that we may have disputes with our
subcontractors, including disputes regarding the quality and timeliness of work
performed by our subcontractor or customer concerns about the
subcontractor.  Failure by our subcontractors to satisfactorily
provide on a timely basis the agreed-upon supplies or perform the agreed upon
services may materially and adversely impact our ability to perform our
obligations as the prime contractor.  A delay in our ability to obtain
components and equipment parts from our suppliers may affect our ability to meet
our customers’ needs and may have an adverse effect upon our
profitability.
 
 We
enter into fixed-price contracts.
 
 We have
fixed price contracts with some of our customers, particularly in our European
material handling systems business.  On fixed-price contracts, we
agree to perform the scope of work specified in the contract for a predetermined
price.  Depending on the fixed price negotiated, these contracts may
provide us with an opportunity to achieve higher profits based on the
relationship between our total contract cost and the contract’s fixed
price.  However, we bear the risk that increased or unexpected costs
may reduce our profit or cause us to incur a loss on the contract which would
reduce our net sales and net earnings.
 
 
 Item
      1B.
              Unresolved Staff
      Comments
 
 None.
  16
  Item
      2.
              Properties
 
 We
maintain our corporate headquarters in Amherst, New York and, as of March 31,
2008, conducted our principal manufacturing at the following
facilities:
 
 
 Location
              
              Products/Operations
              
              Square
                Footage
              
              Owned or
                Leased
              
              Business
                SegmentUnited
      States:Muskegon,
      MI
              
              Hoists
              
              441,000
              
              Owned
              
              ProductsWadesboro,
      NC
              
              Hoists
              
              186,000
              
              Owned
              
              ProductsLexington,
      TN
              
              Chain
              
              165,000
              
              Owned
              
              ProductsCharlotte,
      NC
              
              Industrial
      components
              
              146,000
              
              Leased
              
              ProductsCedar
      Rapids, IA
              
              Forged
      attachments
              
              100,000
              
              Owned
              
              ProductsEureka,
      IL
              
              Cranes
              
              91,000
              
              Owned
              
              ProductsDamascus,
      VA
              
              Hoists
              
              90,000
              
              Owned
              
              ProductsChattanooga,
      TN
              
              Forged
      attachments
              
              81,000
              
              Owned
              
              ProductsGreensburg,
      IN
              
              Scissor
      lifts
              
              70,000
              
              Owned
              
              SolutionsChattanooga,
      TN
              
              Forged
      attachments
              
              59,000
              
              Owned
              
              ProductsLisbon,
      OH
              
              Hoists
      and below-the-hook tooling
              
              37,000
              
              Owned
              
              ProductsCleveland,
      TX
              
              Cranes
              
              35,000
              
              Owned
              
              ProductsTonawanda,
      NY
              
              Light-rail
      crane systems
              
              35,000
              
              Owned
              
              SolutionsSarasota,
      FL
              
              Tire
      shredders
              
              25,000
              
              Owned
              
              Solutions
 
 International:Velbert,
      Germany
              
              Hoists
              
              108,000
              
              Leased
              
              ProductsSantiago,
      Tianguistenco, Mexico
              
              Hoists
      and chain
              
              91,000
              
              Owned
              
              ProductsHangzhou,
      China
              
              Hoists
      and hand pallet trucks
              
              78,000
              
              Leased
              
              ProductsArden,
      Denmark
              
              Project
      design, conveyors, Layer Picker, EmptiCon
              
              72,000
              
              Owned
              
              SolutionsHangzhou,
      China
              
              Textile
      strappings
              
              58,000
              
              Leased
              
              ProductsHangzhou,
      China
              
              Metal
      fabrication, textiles and textile strappings
              
              51,000
              
              Leased
              
              ProductsChester,
      United Kingdom
              
              Plate
      clamps
              
              48,000
              
              Leased
              
              ProductsChester,
      United Kingdom
              
              Plate
      clamps
              
              28,000
              
              Owned
              
              ProductsRomeny-sur-Marne,
      France
              
              Rotary
      unions
              
              22,000
              
              Owned
              
              ProductsArden,
      Denmark
              
              Project
      construction
              
              20,000
              
              Leased
              
              SolutionsSzekesfeher,
      Hungary
              
              Textiles
      and textile strappings
              
              18,000
              
              Leased
              
              Products
   In
addition, we have a total of 42 sales offices, distribution centers and
warehouses.  We believe that our properties have been adequately
maintained, are in generally good condition and are suitable for our business as
presently conducted. We also believe our existing facilities provide sufficient
production capacity for our present needs and for our anticipated needs in the
foreseeable future. Upon the expiration of our current leases, we believe that
either we will be able to secure renewal terms or enter into leases for
alternative locations at market terms.
 
 Item
      3.
              Legal
      Proceedings
 
 From time
to time, we are named a defendant in legal actions arising out of the normal
course of business. We are not a party to any pending legal proceeding other
than ordinary, routine litigation incidental to our business. We do not believe
that any of our pending litigation will have a material impact on our business.
We maintain comprehensive general liability insurance against risks arising out
of the normal course of business through our wholly-owned insurance subsidiary
of which we are the sole policy holder. The limits of this coverage are
currently $3.0 million per occurrence ($2.0 million through March 31, 2003) and
$6.0 million aggregate ($5.0 million through March 31, 2003) per year. We obtain
additional insurance coverage from independent insurers to cover potential
losses in excess of these limits.
 
 Item
      4.
              Submission of Matters
      to a Vote of Security
Holders
 
 None.
  17
  PART II
 
 Item
      5.
              Market for the
      Company’s Common Stock and Related Security Holder
      Matters
 
 Our
common stock is traded on the Nasdaq Stock Market under the symbol ‘‘CMCO.” As
of April 30, 2008, there were 450 holders of record of our common
stock.
 
 We do not
currently pay cash dividends. Our current credit agreement allows, but limits
our ability to pay dividends.  We may reconsider or revise this policy
from time to time based upon conditions then existing, including, without
limitation, our earnings, financial condition, capital requirements,
restrictions under credit agreements or other conditions our Board of Directors
may deem relevant.
 
 We did
not repurchase any shares of our company stock during the fourth quarter of
fiscal 2008.
 
 The
following table sets forth, for the fiscal periods indicated, the high and low
sale prices per share for our common stock as reported on the Nasdaq Stock
Market.
 
 
 Price
      Range of
                Common StockHigh
              
              
              LowYear
      Ended March 31, 2007First
      Quarter
              
              $
              30.56
              
              
              $
              20.15Second
      Quarter
              
              
              22.70
              
              
              
              16.50Third
      Quarter
              
              
              25.00
              
              
              
              17.11Fourth
      Quarter
              
              
              25.71
              
              
              
              20.65Year
      Ended March 31, 2008First
      Quarter
              
              $
              33.68
              
              
              $
              21.84Second
      Quarter
              
              
              34.30
              
              
              
              22.55Third
      Quarter
              
              
              33.85
              
              
              
              24.46Fourth
      Quarter
              
              
              33.34
              
              
              
              22.00
 
 
 On April
30, 2008, the closing price of our common stock on the Nasdaq Stock Market was
$28.31 per share.
  18
  PERFORMANCE
GRAPH
 
 The
Performance Graph shown below compares the cumulative total shareholder return
on our common stock based on its market price, with the total return of the
S&P MidCap 400 Index and the Dow Jones US Diversified
Industrials.  The comparison of total return assumes that a fixed
investment of $100 was invested on March 31, 2003 in our common stock and in
each of the foregoing indices and further assumes the reinvestment of
dividends.  The stock price performance shown on the graph is not
necessarily indicative of future price performance.
  Chart 1
  *$100
invested on 3/31/2003 in stock or index-including reinvestment of dividends.
Fiscal year ending March 31.
 
 Copyright
© 2008, Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. All
right reserved. www.researchdatagroup/S&P.htm
  19
  Item
      6.
              Selected Financial
      Data
 
 The
consolidated balance sheets as of March 31, 2008 and 2007 and the related
statements of income, cash flows and shareholders’ equity for the three years
ended March 31, 2008 and notes thereto appear elsewhere in this annual report.
The selected consolidated financial data presented below should be read in
conjunction with, and are qualified in their entirety by “Management’s
Discussion and Analysis of Results of Operations and Financial Condition,” our
consolidated financial statements and the notes thereto and other financial
information included elsewhere in this annual report.
 
 
 Fiscal Years Ended
      March 31,2008
              
              
              2007
              
              
              2006
              
              
              2005
              
              
              2004(Amounts in millions, except per share
      data)Statements
      of Income Data:Net
      sales
              
              $
              623.3
              
              
              $
              589.8
              
              
              $
              556.0
              
              
              $
              514.8
              
              
              $
              444.6Cost
      of products sold
              
              
              438.8
              
              
              
              425.2
              
              
              
              408.4
              
              
              
              388.9
              
              
              
              339.8Gross
      profit
              
              
              184.5
              
              
              
              164.6
              
              
              
              147.6
              
              
              
              125.9
              
              
              
              104.8Selling
      expenses
              
              
              72.0
              
              
              
              61.7
              
              
              
              54.3
              
              
              
              52.3
              
              
              
              48.3General
      and administrative expenses
              
              
              37.6
              
              
              
              34.1
              
              
              
              33.6
              
              
              
              31.7
              
              
              
              25.0Restructuring
      charges (1)
              
              
              1.2
              
              
              
              0.1
              
              
              
              1.6
              
              
              
              0.9
              
              
              
              1.2Impairment
      loss (2)
              
              
              2.5
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Write-off/amortization
      of intangibles
              
              
              0.1
              
              
              
              0.2
              
              
              
              0.2
              
              
              
              0.3
              
              
              
              0.4Income
      from operations
              
              
              71.1
              
              
              
              68.5
              
              
              
              57.9
              
              
              
              40.7
              
              
              
              29.9Interest
      and debt expense
              
              
              14.6
              
              
              
              16.5
              
              
              
              24.7
              
              
              
              27.6
              
              
              
              28.9Other
      (income) and expense, net
              
              
              (3.0
              )
              
              
              (1.9
              )
              
              
              5.0
              
              
              
              (5.2
              )
              
              
              (4.2
              )Income
      before income taxes
              
              
              59.5
              
              
              
              53.9
              
              
              
              28.2
              
              
              
              18.3
              
              
              
              5.2Income
      tax expense (benefit)
              
              
              22.7
              
              
              
              20.5
              
              
              
              (30.9
              )
              
              
              2.2
              
              
              
              4.0Income
      from continuing operations
              
              
              36.8
              
              
              
              33.4
              
              
              
              59.1
              
              
              
              16.1
              
              
              
              1.2Income
      from discontinued operations (3)
              
              
              0.5
              
              
              
              0.7
              
              
              
              0.7
              
              
              
              0.6
              
              
              
              —Net
      income
              
              $
              37.3
              
              
              $
              34.1
              
              
              $
              59.8
              
              
              $
              16.7
              
              
              $
              1.2Diluted
      earnings per share from continuing operations
              
              $
              1.92
              
              
              $
              1.76
              
              
              $
              3.56
              
              
              $
              1.09
              
              
              $
              0.08Basic
      earnings per share from continuing operations
              
              $
              1.96
              
              
              $
              1.80
              
              
              $
              3.69
              
              
              $
              1.10
              
              
              $
              0.08Weighted
      average shares outstanding – assuming dilution
              
              
              19.2
              
              
              
              19.0
              
              
              
              16.6
              
              
              
              14.8
              
              
              
              14.6Weighted
      average shares outstanding – basic
              
              
              18.7
              
              
              
              18.5
              
              
              
              16.1
              
              
              
              14.6
              
              
              
              14.6Balance
      Sheet Data (at end of period):Total
      assets
              
              $
              590.0
              
              
              $
              565.6
              
              
              $
              566.0
              
              
              $
              480.9
              
              
              $
              473.4Total
      debt (4)
              
              
              147.9
              
              
              
              172.1
              
              
              
              209.8
              
              
              
              270.9
              
              
              
              293.4Total
      shareholders’ equity
              
              
              295.5
              
              
              
              241.3
              
              
              
              204.4
              
              
              
              81.8
              
              
              
              63.0Other
      Financial Data:Net
      cash provided by operating activities
              
              
              59.6
              
              
              
              45.5
              
              
              
              46.4
              
              
              
              17.2
              
              
              
              26.4Net
      cash (used) provided by investing activities
              
              
              (8.6
              )
              
              
              (3.4
              )
              
              
              (6.4
              )
              
              
              3.1
              
              
              
              4.3Net
      cash used in financing activities
              
              
              (28.6
              )
              
              
              (39.9
              )
              
              
              (4.2
              )
              
              
              (21.9
              )
              
              
              (21.5
              )Capital
      expenditures
              
              
              13.1
              
              
              
              10.7
              
              
              
              8.4
              
              
              
              5.9
              
              
              
              3.6Cash
      dividends per common share
              
              
              0.00
              
              
              
              0.00
              
              
              
              0.00
              
              
              
              0.00
              
              
              
              0.00
  20
  _____________
 
 (1)
              Refer
      to “Results of Operations” in “Item 7.  Management’s Discussion
      and Analysis of Results of Operations and Financial Condition” for a
      discussion of the restructuring charges related to fiscal 2008, 2007, and
      2006.  The fiscal 2005 restructuring charges consist of $0.5
      million of costs related to facility rationalizations being expensed on an
      as incurred basis as a result of the project timing being subsequent to
      the adoption of SFAS No. 144.  Fiscal 2005 also included $0.3
      million of write-down on the net realizable value of a facility based on
      changes in market conditions and a reassessment of its net realizable
      value.  During fiscal 2004, restructuring charges of $1.2
      million were recorded related to various employee termination benefits and
      facility costs as a result of our continued closure, merging and
      reorganization and completion of two open projects from fiscal
      2003.
 
 (2)
              As
      a result of the recurring losses and decreasing cash flows associated with
      our Univeyor business, the Company recorded a $2.5 million impairment
      charge in accordance with SFAS 144 during fiscal 2008. Refer to Note 2 to
      our consolidated financial statements for additional information on
      Impairment of Long-Lived Assets.
 
 (3)
              In
      May 2002, the Company sold substantially all of the assets of
      ASI.  The Company received $20,600,000 in cash and an 8%
      subordinated note in the principal amount of $6,800,000 which is payable
      over 10 years beginning in August 2004.  The full amount of this
      note has been reserved due to the uncertainty of collection. Principal
      payments received on the note are recorded as income from discontinued
      operations at the time of receipt.  All interest and principal
      payments required under the note have been made to date.  Refer
      to Note 3 to our consolidated financial statements for additional
      information on Discontinued
Operations.
 
 (4)
                  Total
      debt includes long-term debt, including the current portion, notes payable
      and subordinated debt.
 
 
 Item
      7.
              Management’s
      Discussion And Analysis Of Results Of Operations And Financial
      Condition
 
 This
section should be read in conjunction with our consolidated financial statements
included elsewhere in this annual report. Comments on the results of operations
and financial condition below refer to our continuing operations, except in the
section entitled “Discontinued Operations.”
 
 EXECUTIVE
OVERVIEW
 
 We are a
leading manufacturer and marketer of hoists, cranes, chain, conveyors, material
handling systems, lift tables and industrial component parts serving a wide
variety of commercial and industrial end-user markets. Our products are used to
efficiently and ergonomically move, lift, position or secure objects and loads.
Our Products segment sells a wide variety of powered and manually operated wire
rope and chain hoists, industrial crane systems, chain, hooks and attachments,
actuators and rotary unions. Our Solutions segment designs, manufactures, and
installs application-specific or standard material handling systems and
solutions for end-users to improve workstation and facility-wide work
flow.
 
 Founded
in 1875, we have grown to our current size and leadership position through
organic growth and the acquisition of 14 businesses between February 1994 and
April 1999. We have developed our leading market position over our 132-year
history by emphasizing technological innovation, manufacturing excellence and
superior after-sale service. In addition, the acquisitions significantly
broadened our product lines and services and expanded our geographic reach,
end-user markets and customer base.  Ongoing operations include
improving our productivity and increased penetration of the European, Latin
American, and Asian marketplaces. We are executing those initiatives through our
Lean Manufacturing efforts, new product development and expanded sales and
marketing activities. Shareholder value will be enhanced through continued
emphasis on the improvement of the fundamentals including manufacturing
efficiency, cost containment, efficient capital investment, market expansion and
excellent customer satisfaction.
 
 We
maintain a strong North American market share with significant leading market
positions in hoists, lifting and sling chain, and forged
attachments.  To broaden our product offering in markets where we have
a strong competitive position as well as to facilitate penetration into new
geographic markets, we continue expand our new product development
activities.  During fiscal 2008, this included the completion of our
product line offering of wire rope hoist lines in accordance with international
standards which began in fiscal 2006, to complement our current offering of
hoist products designed in accordance with U.S. standards.  Our
efforts to expand our global sales will be accomplished through the introduction
of certain of our products that historically have been distributed only in North
America and also by introducing new products through our existing European
distribution network.  Furthermore, we continue to expand our
on-the-ground sales forces as well as the distribution relationships in China to
capture the anticipated growing demand for material handling products as that
economy continues to industrialize.  Our internal organization
supports these strategic initiatives through division of responsibility for
North America, Europe, Latin America and Asia Pacific.  The
investments in international markets and new products are part of our focus on
our greatest opportunities for growth.  We are also looking for
opportunities for growth via acquisitions or joint ventures.  The
focus of our acquisition strategy centers on opportunities for international
revenue growth and product line expansion in alignment with our existing core
offering.
  21
  Management
believes that the growth rate of total sales may moderate in future periods due
to more difficult comparisons with our fiscal 2008 periods and a slower rate of
U.S. economic growth.  We monitor such indicators as U.S. Industrial
Capacity Utilization, which increased since July 2003, as an indicator of
anticipated demand for our product in the U.S.  In addition, we
continue to monitor leading indicators of the potential impact of global and
U.S. trends, including energy costs, steel price fluctuations, rising interest
rates, currency impact and activity in a variety of end-user markets around the
globe.
 
 We
constantly explore ways in which to enhance our operating margins and leverage
as well as further improve our productivity and competitiveness.  We
have specific initiatives related to improved customer satisfaction, reduction
of defects, shortened lead times, improved inventory turns and on-time
deliveries, reduction of warranty costs, and improved working capital
utilization.  The initiatives are being driven by the continued
implementation of our Lean Manufacturing efforts which are fundamentally
changing our manufacturing processes to be more responsive to customer demand
and improving on-time delivery and productivity. In addition to Lean
manufacturing, we are working to achieve these strategic initiatives through
product simplification, the creation of centers of excellence, and improved
supply chain management.
 
 We
continue to operate in a highly competitive and global business
environment.  Accordingly, we face a variety of challenges and
opportunities in those markets and geographies, including trends towards
increased utilization of the global labor force and the expansion of market
opportunities in Asia and other emerging markets.
 
 RESULTS
OF OPERATIONS
 
 Net sales
of our Products and Solutions segments, in millions of dollars and with
percentage changes for each segment, were as follows:
 
 Fiscal Years Ended March 31,
              
              
              Change
                2008 vs. 2007
              
              
              Change
                2007 vs. 20062008
              
              
              2007
              
              
              2006
              
              
              Amount
              
              
              %
              
              
              Amount
              
              
              %Products
      segment
              
              $
              570.0
              
              
              $
              527.1
              
              
              $
              493.9
              
              
              $
              42.9
              
              
              
              8.1
              
              
              $
              33.2
              
              
              
              6.7Solutions
      segment
              
              
              53.3
              
              
              
              62.7
              
              
              
              62.1
              
              
              
              (9.4
              )
              
              
              (15.0
              )
              
              
              0.6
              
              
              
              1.0Total
      net sales
              
              $
              623.3
              
              
              $
              589.8
              
              
              $
              556.0
              
              
              $
              33.5
              
              
              
              5.7
              
              
              $
              33.8
              
              
              
              6.1
 
 
 During
fiscal 2008, the Company saw continued strength in the North American economy as
well as increased demand in Europe, Latin America and Asia.  This
growth was a continuation of improvement in the industrial sector that began in
fiscal 2005 through the current period.  In addition, sales growth
continues to be fostered by the expansion of international selling
efforts.  Net sales for fiscal 2008 of $623.3 increased by $33.5
million or 5.7% from fiscal 2007, and net sales for fiscal 2007 of $589.8
million increased by $33.8 million, or 6.1%, from fiscal 2006.  The
Products segment for fiscal 2008 experienced a net sales increase of 8.1% over
the prior year.  The increase was due to a combination of increased
volume on the continued growth of the global industrial economy and
international market share gains as well as price increases ($9.8 million).
Fiscal 2008 was impacted by the continued weakness of the U.S. dollar relative
to other currencies, particularly the euro, and reported Products segment sales
were favorably affected by $11.3 million.  The Products segment for
fiscal 2007 experienced a net sales increase of 6.7% over the prior
year.  The increase was due to a combination of increased volume on
the continued growth of the global industrial economy and increasing penetration
in our European markets as well as price increases ($7.9 million). Fiscal 2007
was impacted by the continued weakness of the U.S. dollar relative to other
currencies, particularly the euro, and reported Products segment sales were
favorably affected by $4.2 million.  Our fiscal 2008 Solutions segment
net sales were down $9.4 million, or 15%.  The intentional downsizing
of our European material handling systems business resulting from our decision
to be more selective in the projects we choose to accept due to a challenging
market and pricing environment resulted in a 25% reduction in the sales of this
business while the remaining solutions businesses were up
1.6%.  Fiscal 2008 foreign currency fluctuations of the U.S. dollar
relative to the Danish Krone resulted in a favorable impact of $2.9
million.  Our fiscal 2007 Solutions segment net sales were flat as
increased volume in our U.S. operations was offset by a downsizing of our
European material handling systems business resulting from our decision to be
more selective in the projects we choose to accept due to a challenging market
and pricing environment.  Fiscal 2007 foreign currency fluctuations of
the U.S. dollar relative to the Danish Krone resulted in a favorable impact of
$2.0 million.
  22
  Gross
profit of the Products and Solutions segments, in millions of dollars and as a
percentage of total segment net sales, was as follows:
 
 
 Fiscal Years Ended March
31,2008
              
              
              2007
              
              
              2006Amount
              
              
              %
              
              
              Amount
              
              
              %
              
              
              Amount
              
              
              %Products
      segment
              
              $
              178.4
              
              
              
              31.3
              
              
              $
              159.2
              
              
              
              30.2
              
              
              $
              138.1
              
              
              
              28.0Solutions
      segment
              
              
              6.1
              
              
              
              11.4
              
              
              
              5.4
              
              
              
              8.6
              
              
              
              9.5
              
              
              
              15.3Total
      gross profit
              
              $
              184.5
              
              
              
              29.6
              
              
              $
              164.6
              
              
              
              27.9
              
              
              $
              147.6
              
              
              
              26.5
 
 Our gross
profit margins were approximately 29.6%, 27.9% and 26.5% in fiscal 2008, 2007
and 2006, respectively.  The Products segment for fiscal 2008 and
fiscal 2007 continues to see improved gross margins as a result of operational
leverage at increased volumes from the prior years across all businesses, the
proportion of that increase in our most profitable products sales (hoists), and
the impact of previous facility rationalization projects and ongoing lean
manufacturing activities.  The Solutions segment’s gross profit
margins increased in Fiscal 2008 as a result of timing of one large order on an
international tire shredder system sale, offsetting losses at our European
material handling systems business.  The European systems business
losses were the result of performance issues and cost overruns on certain
projects, declining sales volumes and an unfavorable mix of projects with
regards to resale versus proprietary product
componentry.    The Solutions segment’s gross profit margins
decreased in fiscal 2007 as favorable leverage on volume increases at our U.S.
operations was offset by losses at our European material handling systems
business.  The European systems business losses were the result of
performance issues and cost overruns on certain projects, a challenging pricing
environment and an unfavorable sales mix of projects.
 
 Selling
expenses were $72.0 million, $61.7 million and $54.3 million in fiscal 2008,
2007 and 2006, respectively. As a percentage of net sales, selling expenses were
11.5%, 10.5% and 9.8% in fiscal 2008, 2007 and 2006, respectively.  In
furtherance of our continuing strategic growth initiatives, the fiscal 2008
increase includes additional salaries ($1.9 million), increased advertising,
marketing, and travel ($2.4 million), investments in new markets ($2.3 million),
translation of foreign currencies ($2.3 million), and a one-time commission
expense associated with a particularly large sale in our Solutions business
($1.5 million).  The fiscal 2007 increase, driven by our strategic
growth initiatives, includes additional salaries ($2.5 million), increased
advertising, marketing, warehousing and travel ($1.4 million), investments in
new markets ($1.6 million), translation of foreign currencies ($1.1 million),
and commission expense on higher revenue ($0.5 million).
 
 General
and administrative expenses were $37.6 million, $34.1 million and $33.6 million
in fiscal 2008, 2007 and 2006, respectively. As a percentage of net sales,
general and administrative expenses were 6.0%, 5.8% and 6.1% in fiscal 2008,
2007 and 2006, respectively. Fiscal 2008 includes increases in personnel costs
for new market investment and organizational capacity expansion ($1.6 million),
increased research and development costs ($0.5 million), and translation of
foreign currencies ($1.2 million).  Fiscal 2007 includes increases in
personnel costs for new market investment ($1.3 million), increased research and
development costs ($1.0 million), and increased healthcare costs ($0.8 million),
offset by lower variable compensation costs ($2.5 million).
 
 Restructuring
charges of $1.2 million, $0.1 million and $1.6 million, or 0.2%, 0.0% and 0.3%
of net sales in fiscal 2008, 2007 and 2006, respectively, were primarily
attributable to the ongoing organizational rationalizations occurring at the
company. The fiscal 2008 charges consist of demolition costs of the unused
portion of a facility ($0.8 million) being expensed on an as-incurred basis and
severance costs related to the continued reorganization of our European systems
business ($0.4 million).  The fiscal 2007 charges represent severance
costs related to the reorganization of our European systems business ($0.3
million) and demolition costs of the unused portion of the facility referenced
above ($0.2 million) being expensed on an as-incurred basis, offset by a
recovery of a portion of previous write-downs ($0.4 million) on a vacant
facility that was sold during fiscal 2007.  The fiscal 2006 charges
consist of the cost of removal of certain environmentally hazardous materials
($0.6 million), inventory disposal costs related to the rationalization of
certain product families within our mechanical jack lines ($0.4 million), the
ongoing maintenance costs of a non-operating facility accrued based on
anticipated sale date ($0.3 million) and other facility rationalization projects
($0.3 million).
 
 Fiscal
2008 includes an impairment charge of $2.5 million related to our European
material handling systems business.  Refer to Note 2 to our
consolidated financial statements for additional information on Impairment of
Long-Lived Assets.
 
 Amortization
of intangibles was $0.1 million, $0.2 million and $0.2 million in fiscal 2008,
2007 and 2006, respectively.
  23
  Interest
and debt expense was $14.6 million, $16.4 million and $24.7 million in fiscal
2008, 2007 and 2006, respectively. As a percentage of net sales, interest and
debt expense was 2.3%, 2.8% and 4.4% in fiscal 2008, 2007 and 2006,
respectively. The fiscal 2008 and 2007 decreases primarily resulted from lower
debt levels as we continue to execute our strategy of debt reduction and
increased financial flexibility.
 
 The
Company incurred $1.8 million, $5.2 million, and $9.2 million in fiscal 2008,
2007, and 2006, respectively related to redemption costs associated with the
repurchase of outstanding long-term debt.
 
 The
Company recorded $1.2 million, $5.3 million, and $2.0 million of investment
income related to assets held in the Company’s wholly owned captive insurance
subsidiary in fiscal 2008, 2007, and 2006, respectively.
 
 Other
income and expense, net was $3.6 million, $1.8 million and $2.1 million in
fiscal 2008, 2007 and 2006, respectively. Fiscal 2008 includes $2.2 million of
investment and interest income, $0.6 million from product line/real estate
sales, and $0.6 million of exchange gains offset.  Fiscal 2007
includes $1.2 million of interest income and $0.5 million of gain from a
business divestiture.  Fiscal 2006 includes $1.1 million of interest
income and $0.8 million of gains from sales of real estate.
 
 Income
taxes as a percentage of income from continuing operations before income taxes
for fiscal 2008 and fiscal 2007 were 38.2% and 38.1%,
respectively.  Income taxes as a percentage of income before income
taxes were not reflective of U.S statutory rates in fiscal 2006.  A
valuation allowance of $50.5 million existed at March 31, 2005 due to the
uncertainty of whether our U.S. federal net operating loss carryforwards
(“NOLs”), deferred tax assets and capital loss carryforwards might ultimately be
realized.  We utilized $14.9 million of the U.S. federal NOLs in
fiscal 2006 reducing the valuation allowance by $5.2 million.  As a
result of our improved operating performance during fiscal 2006, we re-evaluated
the certainty as to whether our remaining U.S. federal NOLs and other deferred
tax assets may ultimately be realized.  As a result of the
determination that it is more likely than not that nearly all of the remaining
deferred tax assets would be realized, $38.6 million of the remaining valuation
allowance was reversed as of March 31, 2006.  The U.S. NOLs were fully
utilized in fiscal 2008.
 
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 Cash and
cash equivalents totaled $76.0 million at March 31, 2008, an increase of $27.3
million from the March 31, 2007 balance of $48.7 million.
 
 Net cash
provided by operating activities was $59.6 million, $45.5 million and $46.4
million in fiscal 2008, 2007 and 2006, respectively. The $14.1 million increase
in fiscal 2008 relative to fiscal 2007 was primarily due to stronger operating
performance in fiscal 2008 ($10.4 million) and improved working capital
components ($3.7 million).  Changes in net working capital include
favorable changes of $11.2 in accounts receivable and unbilled revenues
(downsizing of our European material handling  systems business)
and  $8.6 in accounts payable (resulting from timing of disbursements
and increased volume of business) offset by an unfavorable change of $7.4
million in inventory (resulting from support for increase in new product
launches and new market penetration) and an unfavorable change of $9.3 million
in accrued and non-current liabilities (funding of pension
liabilities).  The $0.9 million decrease in fiscal 2007 relative to
fiscal 2006 was primarily due to stronger operating performance in fiscal 2007
($16.2 million) offset by increased working capital components ($17.1
million).  Changes in net working capital include an unfavorable
change of $4.8 million on inventory (resulting from support for upcoming new
product launches, a surge in demand for larger capacity equipment, and timing of
offshore purchases) and an unfavorable change of $20.4 million in accounts
payable and accrued and non-current liabilities (resulting from timing of
disbursements, changing product liability reserves, and decreased variable
compensation accruals).  These were offset by a favorable change of
$7.5 million on accounts receivables and unbilled revenues as a result of
improved collections.
 
 Net cash
used by investing activities was $8.6 million, $3.4 million and $6.4 million in
fiscal 2008, 2007 and 2006, respectively. The fiscal 2008 change in cash used by
investing activities is the result of increased capital expenditures and net
purchases of marketable securities offset by proceeds from the sale of
properties and assets.  The fiscal 2007 change in cash used by
investing activities is the result of increased capital expenditures, offset by
increased net proceeds from the sale of marketable securities and greater
proceeds from asset sales.  The fiscal 2008, 2007 and 2006 amounts
included $5.5 million, $5.4 million and $2.1 million, respectively, from
business, property and asset divestitures.
  24
  Net cash
used in financing activities was $28.6 million, $39.9 million and $4.2 million
in fiscal 2008, 2007 and 2006, respectively.  Fiscal 2008 and 2007
include $1.4 million and $2.6 million, respectively, of proceeds from the
exercise of employee stock options.  Fiscal 2006 includes $56.6
million of proceeds from the November 2005 stock offering, $7.1 million from the
exercise of employee stock options, and $2.2 million of tax benefit from the
exercise of stock options.  The fiscal 2008, 2007 and 2006 amounts
included $31.1 million, $42.9 million and $67.8 million of debt repayment,
respectively. We also paid $2.8 million of financing costs in fiscal 2006 to
effect the capital transaction previously described.
 
 We
believe that our cash on hand, cash flows, and borrowing capacity under our
Revolving Credit Facility will be sufficient to fund our ongoing operations and
budgeted capital expenditures for at least the next twelve months. This belief
is dependent upon a steady economy and successful execution of our current
business plan which includes cash generation for debt repayment.  The
business plan focuses on continued implementation of lean manufacturing,
improving working capital utilization, including inventory management, and new
market and new product development.
 
 In March
2006, we entered into a Revolving credit facility, which provides availability
up to $75 million. Provided there is no default, the Company may request an
increase in the availability of the Revolving Credit Facility by an amount not
exceeding $50 million, subject to lender approval.  The Revolving
Credit Facility matures February 2011.
 
 At March
31, 2008, the Revolving Credit Facility was not drawn and the available amount,
net of outstanding letters of credit of $11.2 million, totaled $63.8 million.
Interest is payable at a Eurodollar rate or a prime rate plus an applicable
margin determined by our leverage ratio. At our current leverage ratio, we
qualify for the lowest applicable margin level, which amounts to 87.5 basis
points for Eurodollar borrowings and zero basis points for prime rate based
borrowings. The Revolving Credit Facility is secured by all U.S. inventory,
receivables, equipment, real property, subsidiary stock (limited to 65% for
foreign subsidiaries) and intellectual property. The corresponding credit
agreement associated with the Revolving Credit Facility places certain debt
covenant restrictions on us, including certain financial requirements and a
limitation on dividend payments, with which we were in compliance as of
March 31, 2008.
 
 The
Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005
amounted to $129.9 million at March 31, 2008 and are due November 1,
2013.  Provisions of the 8 7/8% Notes include, without limitation,
restrictions on indebtedness, asset sales, and dividends and other restricted
payments.  Until November 1, 2008, we may redeem up to 35% of the
outstanding notes at a redemption price of 108.875% with the proceeds of equity
offerings, subject to certain restrictions. On or after November 1, 2009, the 8
7/8% Notes are redeemable at the option of the Company, in whole or in part, at
prices declining annually from 104.438% to 100% on and after November 1,
2011.  In the event of a Change of Control (as defined in the
indenture for such notes), each holder of the 8 7/8% Notes may require us to
repurchase all or a portion of such holder’s 8 7/8% Notes at a purchase price
equal to 101% of the principal amount thereof. The 8 7/8% Notes are guaranteed
by certain existing and future U.S. subsidiaries and are not subject to any
sinking fund requirements.
 
 In
November 2005, we registered an additional 3,350,000 shares of our common stock
which were sold at $20.00 per share.  The number of shares offered by
us was 3,000,000 and 350,000 were offered by a selling
shareholder.  We did not receive any proceeds from the sale of shares
by the selling shareholder.  This secondary stock offering increased
our weighted average common stock outstanding by 1.8 million shares for the year
ended March 31, 2006.
 
 Unsecured
and uncommitted lines of credit are available to meet short-term working capital
needs for certain of our subsidiaries operating outside of the U.S. The lines of
credit are available on an offering basis, meaning that transactions under the
line of credit will be on such terms and conditions, including interest rate,
maturity, representations, covenants and events of default, as mutually agreed
between our subsidiaries and the local bank at the time of each specific
transaction. As of March 31, 2008, significant credit lines totaled
approximately $12.7 million, of which $11.3 million was drawn.
 
 In
addition to the above facilities, our foreign subsidiaries have certain fixed
term bank loans. As of March 31, 2008, significant secured term loans totaled
$3.3 million.  There were no significant unsecured loans outstanding
at March 31, 2008.
  25
  CONTRACTUAL
OBLIGATIONS
 
 The
following table reflects a summary of our contractual obligations in millions of
dollars as of March 31, 2008, by period of estimated payments due:
 
 
 Fiscal
              
              
              Fiscal
      2010-
              
              
              Fiscal
      2012-
              
              
              More
      ThanTotal
              
              
              2009
              
              
              Fiscal 2011
              
              
              Fiscal 2013
              
              
              Five YearsLong-term
      debt obligations (a)
              
              $
              136.6
              
              
              $
              0.5
              
              
              $
              0.9
              
              
              $
              0.9
              
              
              $
              134.3Operating
      lease obligations (b)
              
              
              19.0
              
              
              
              5.1
              
              
              
              7.4
              
              
              
              3.6
              
              
              
              2.9Purchase
      obligations (c)
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              --Interest
      obligations (d)
              
              
              67.7
              
              
              
              12.1
              
              
              
              24.3
              
              
              
              23.5
              
              
              
              7.8Letter
      of credit obligations
              
              
              11.2
              
              
              
              11.2
              
              
              
              --
              
              
              
              --
              
              
              
              --Uncertain
      tax positions
              
              
              2.4
              
              
              
              0.2
              
              
              
              0.2
              
              
              
              2.0
              
              
              
              0.0Other
      long-term liabilities reflected on the Company’s balance sheet under GAAP
      (e)
              
              
              48.8
              
              
              
              0.0
              
              
              
              27.4
              
              
              
              14.8
              
              
              
              6.6Total
              
              $
              285.7
              
              
              $
              29.1
              
              
              $
              60.2
              
              
              $
              44.8
              
              
              $
              151.6
 
 (a)
              As
      described in note 10 to our consolidated financial
    statements.
 (b)
              As
      described in note 17 to our consolidated financial
    statements.
 (c)
              We
      have no purchase obligations specifying fixed or minimum quantities to be
      purchased. We estimate that, at any given point in time, our open purchase
      orders to be executed in the normal course of business approximate $40
      million.
 (d)
              Estimated
      for our Senior Subordinated Notes due
11/1/13.
 (e)
              As
      described in note 9 to our consolidated financial
    statements.
 
 We have
no additional off-balance sheet obligations that are not reflected
above.
 
 CAPITAL
EXPENDITURES
 
 In
addition to keeping our current equipment and plants properly maintained, we are
committed to replacing, enhancing and upgrading our property, plant and
equipment to support new product development, improve productivity and customer
responsiveness, reduce production costs, increase flexibility to respond
effectively to market fluctuations and changes, meet environmental requirements,
enhance safety and promote ergonomically correct work stations. Our capital
expenditures for fiscal 2008, 2007 and 2006 were $13.1 million, $10.7 million
and $8.4 million, respectively. Higher capital expenditures in fiscal 2008 and
2007 were the result of new product development and productivity enhancing
equipment along with normal maintenance items. We expect capital expenditure
spending in fiscal 2009 to be in the range of $14-$15 million.
 
 INFLATION
AND OTHER MARKET CONDITIONS
 
 Our costs
are affected by inflation in the U.S. economy and, to a lesser extent, in
foreign economies including those of Europe, Canada, Mexico, South America and
Asia-Pacific. We do not believe that general inflation has had a material effect
on our results of operations over the periods presented primarily due to overall
low inflation levels over such periods and our ability to generally pass on
rising costs through annual price increases and surcharges. However, employee
benefits costs such as health insurance, workers compensation insurance,
pensions as well as energy and business insurance have exceeded general
inflation levels. In the future, we may be further affected by inflation that we
may not be able to pass on as price increases.  With changes in
worldwide demand for steel and fluctuating scrap steel prices over the past
several years, we experienced fluctuations in our costs that we have reflected
as price increases and surcharges to our customers.  We believe we
have been successful in instituting surcharges and price increases to pass on
these material cost increases.  We will continue to monitor our costs
and reevaluate our pricing policies.
 
 SEASONALITY
AND QUARTERLY RESULTS
 
 Our
quarterly results may be materially affected by the timing of large customer
orders, periods of high vacation and holiday concentrations, restructuring
charges and other costs attributable to our facility rationalization program,
divestitures, acquisitions and the magnitude of rationalization integration
costs. Therefore, our operating results for any particular fiscal quarter are
not necessarily indicative of results for any subsequent fiscal quarter or for
the full fiscal year.
 
 DISCONTINUED
OPERATIONS
 
 In May
2002, we completed the divestiture of substantially all of the assets of ASI
which comprised the principal business unit in our former Solutions - Automotive
segment. Proceeds from this sale included an 8% subordinated note in the
principal amount of $6.8 million payable over 10 years.  Due to the
uncertainty of its collection, the note has been recorded at its estimated net
realizable value of $0.  Principal payments received on the note are
recorded as income from discontinued operations at the time of receipt.
Accordingly, $0.6 million of income from discontinued operations was recorded in
fiscal 2008, net of tax.  All interest and principal payments required
under the note have been made to date.
  26
  CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires us to make estimates and assumptions that affect
the amounts reported in our consolidated financial statements and accompanying
notes. We continually evaluate the estimates and their underlying assumptions,
which form the basis for making judgments about the carrying value of our assets
and liabilities. Actual results inevitably will differ from those estimates. We
have identified below the accounting policies involving estimates that are
critical to our financial statements. Other accounting policies are more fully
described in note 2 of notes to our consolidated financial
statements.
 
 Pension and Other Postretirement
Benefits.The determination of the obligations and expense for pension
and postretirement benefits is dependent on our selection of certain assumptions
that are used by actuaries in calculating such amounts. Those assumptions are
disclosed in Note 11 to our fiscal 2008 consolidated financial statements and
include the discount rates, expected long-term rate of return on plan assets and
rates of future increases in compensation and healthcare costs.
 
 The
pension discount rate assumptions of 61⁄2%, 6%, and 53⁄4% as of March 31, 2008, 2007
and 2006, respectively, are based on long-term bond rates. The increase in the
discount rates for fiscal 2008 and 2007 resulted in an $8.4 and $4.3 decrease in
the projected benefit obligation as of March 31, 2008 and 2007,
respectively.  The decrease in discount rate for fiscal 2006 resulted
in a $3.9 million increase in the projected benefit obligation as of March 31,
2006.  The rate of return on plan assets assumptions of 71⁄2% for each
of the years ended March 31, 2008, 2007 and 2006 is based on the composition of
the asset portfolios (approximately 60% equities and 40% fixed income at March
31, 2008) and their long-term historical returns. The actual assets realized
gains of $6.9 and $11.0 million in fiscal 2008 and 2007. Our under-funded status
as of March 31, 2008 and 2007 was $15.3 million and $28.8 million, or 10.9% and
20.6% of the projected benefit obligation, respectively. Our pension
contributions during fiscal 2008 and 2007 were approximately $14.5 and $6.0
million, respectively. The under-funded status may result in future pension
expense increases.  Pension expense for the March 31, 2009 fiscal year
is expected to approximate $5.3 million, which is down from the fiscal 2008
amount of $6.6 million due to an increase in the return on the higher asset
value and lower amortization of unrecognized losses.  The factors
outlined above may result in increases in funding requirements over time, unless
there is continued market appreciation in the asset values.  Pension
funding contributions for the March 31, 2009 fiscal year are expected to
decrease by approximately $7.7 million compared to fiscal 2008 which included
approximately $7.0 million in discretionary contributions above the minimum
amounts required by ERISA.  The discretionary funding decision
reflects an acceleration to comply with the Pension Protection Act of
2006.  The compensation increase assumption of 3% as of March 31, 2008
and 2007 and 4% as of March 31, 2006 is based on historical trends.
 
 The
healthcare inflation assumptions of 81⁄4%, 9% and 93⁄4% for fiscal 2008, 2007 and
2006, respectively are based on anticipated trends.  Healthcare costs
in the United States have increased substantially over the last several
years.  If this trend continues, the cost of postretirement healthcare
will increase in future years.
 
 Insurance
Reserves.Our accrued general and product liability reserves
as described in Note 14 to our consolidated financial statements involve
actuarial techniques including the methods selected to estimate ultimate claims,
and assumptions including emergence patterns, payment patterns, initial expected
losses and increased limit factors. Other insurance reserves such as workers
compensation and group health insurance are based on actual historical and
current claim data provided by third party administrators or internally
maintained.
 
 Inventory and Accounts Receivable
Reserves.Slow-moving and obsolete inventory reserves are
judgmentally determined based on formulas applied to historical and expected
future usage within a reasonable timeframe. We reassess trends and usage on a
regular basis and if we identify changes, we revise our estimated
allowances.  Allowances for doubtful accounts and credit memo reserves
are also judgmentally determined based on formulas applied to historical bad
debt write-offs and credit memos issued, assessing potentially uncollectible
customer accounts and analyzing the accounts receivable agings.
 
 Long-Lived
Assets.  Property, plant and equipment and certain intangibles
are depreciated or amortized over their assigned lives. These assets as well as
goodwill are also periodically measured for impairment.  The assigned
lives and the projected cash flows used to test impairment are
subjective.  If actual lives are shorter than anticipated or if future
cash flows are less than anticipated, we could incur a future impairment charge
or a loss on disposal relating to these assets.
 
 Marketable
Securities.On a quarterly basis, we review our marketable
securities for declines in market value that may be considered other than
temporary.  We consider market value declines to be other than
temporary if they are declines for a period longer than six months and in excess
of 20% of original cost.
  27
  Deferred Tax Asset Valuation
Allowance.  As of March 31, 2008, we had $31.9 million of gross
deferred tax assets before valuation allowances.  As described in Note
16 to the consolidated financial statements, the deferred tax assets relate
principally to liabilities including employee benefit plans, insurance reserves,
accrued vacation and incentive costs and also to asset valuation reserves such
as inventory obsolescence reserves and bad debt reserves.  The
deferred tax assets include $5.1 million related to various state and foreign
net operating loss carryforwards for which a $4.1 million deferred tax asset
valuation allowance is recorded.
 
 We record
a valuation allowance to reduce deferred tax assets to the amount of future tax
benefit we believe is more likely than not to be realized.  We
consider recent earnings projections, allowable tax carryforward periods, tax
planning strategies and historical earnings performance to determine the amount
of the valuation allowance.  Changes in these factors could cause us
to adjust our valuation allowance, which would impact our income tax expense
when we determine that these factors have changed.
 
 Revenue
Recognition.Sales are recorded when title passes to the
customer, which is generally at the time of shipment to the customer, except for
long-term construction-type contracts. For long-term construction-type
contracts, we recognize contract revenues under the percentage of completion
method, measured by comparing direct costs incurred to total estimated direct
costs. Changes in job performance, job conditions and estimated profitability,
including those arising from final contract settlements, may result in revisions
to costs and income and are recognized in the period in which the revisions are
determined. In the event that a loss is anticipated on an uncompleted contract,
a provision for the estimated loss is made at the time it is determined.
Billings on contracts may precede or lag revenues earned, and such differences
are reported in the balance sheet as current liabilities (accrued liabilities)
and current assets (unbilled revenues), respectively. Customers do not routinely
return product. However, sales returns are permitted in specific situations and
typically include a restocking charge or the purchase of additional product. We
have established an allowance for returns based upon historical
trends.
 
 
 EFFECTS
OF NEW ACCOUNTING PRONOUNCEMENTS
 
 In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, “Fair Value Measurements,” (“SFAS 157”) to define fair value,
establish a framework for measuring fair value in accordance with generally
accepted accounting principles, and expand disclosures about fair value
measurements. SFAS 157 will be effective for fiscal years beginning after
November 15, 2007. In February 2008, the FASB issued FSP FAS 157-2, “Effective
Date of FASB Statement No. 157.” This FSP (1) partially defers the effective
date of SFAS No. 157 for one year for certain nonfinancial assets and
nonfinancial liabilities and (2) removes certain leasing transactions from the
scope of SFAS 157. The Company believes that the adoption of SFAS No. 157 will
not have a material effect on its consolidated financial
statements.
 
 In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)” (“SFAS 158”). Among other items, SFAS 158 requires
recognition of the overfunded or underfunded status of an entity’s defined
benefit postretirement plan as an asset or liability in the financial statements
and requires recognition of the funded status of defined benefit postretirement
plans in other comprehensive income. We adopted all of the currently required
provisions of SFAS 158 in fiscal 2007. This statement also requires an entity to
measure a defined benefit postretirement plan’s assets and obligations that
determine its funded status as of the end of the employers’ fiscal year. This
requirement is effective for fiscal years ending after December 15, 2008. The
Company does not expect the adoption of this requirement to have a material
impact on the Company’s consolidated financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities — Including an Amendment of FASB
Statement No. 115” (“SFAS 159”). SFAS 159 allows the irrevocable election of
fair value as the initial and subsequent measurement attribute for certain
financial assets and liabilities and other items on an instrument-by-instrument
basis. Changes in fair value would be reflected in earnings as they occur. The
objective of SFAS 159 is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS 159 is effective as of the beginning
of the first fiscal year beginning after November 15, 2007. The Company believes
that the adoption of SFAS No. 159 will not have a material effect on its
consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business
Combinations” (“SFAS 141(R)”). SFAS 141(R) requires the acquiring entity in a
business combination to recognize all the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; and
requires the acquirer to disclose all of the information required to evaluate
and understand the nature and financial effect of the business combination. This
statement is effective for acquisition dates on or after the beginning of the
first annual reporting period beginning after December 15, 2008. The Company is
currently evaluating the impact the adoption of SFAS 141(R) will have on the
Company’s consolidated financial statements.
  28
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51” (“SFAS 160”).
This Statement amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 is effective as of the beginning of the first fiscal year
beginning after December 15, 2008. The Company believes that the adoption of
SFAS No. 160 will not have a material effect on its consolidated financial
statements.
 
 
 Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995
 
 This
report may include “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995.  Such statements
involve known and unknown risks, uncertainties and other factors that could
cause our actual results to differ materially from the results expressed or
implied by such statements, including general economic and business conditions,
conditions affecting the industries served by us and our subsidiaries,
conditions affecting our customers and suppliers, competitor responses to our
products and services, the overall market acceptance of such products and
services, the integration of acquisitions and other factors disclosed in our
periodic reports filed with the Commission.  Consequently such
forward-looking statements should be regarded as our current plans, estimates
and beliefs.  We do not undertake and specifically decline any
obligation to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
 
 
 Item
      7A.
              Quantitative and
      Qualitative Disclosures About Market
Risk
 
 Market
risk is the potential loss arising from adverse changes in market rates and
prices, such as interest rates. We are exposed to various market risks,
including commodity prices for raw materials, foreign currency exchange rates
and changes in interest rates. We may enter into financial instrument
transactions, which attempt to manage and reduce the impact of such changes. We
do not enter into derivatives or other financial instruments for trading or
speculative purposes.
 
 Our
primary commodity risk is related to changes in the price of
steel.  We control this risk through negotiating purchase contracts on
a consolidated basis and by attempting to build changes in raw material costs
into the selling prices of or surcharges on our products.  We have not
entered into financial instrument transactions related to raw material
costs.
 
 In fiscal
2008, 28% of our net sales were from manufacturing plants and sales offices in
foreign jurisdictions. We manufacture our products in the United States, Mexico,
China, Denmark, the United Kingdom, France, Hungary and Germany and sell our
products and solutions in over 50 countries. Our results of operations could be
affected by factors such as changes in foreign currency rates or weak economic
conditions in foreign markets. Our operating results are exposed to fluctuations
between the U.S. dollar and the Canadian dollar, European currencies, the
Mexican peso and the Chinese yuan. For example, when the U.S. dollar weakens
against the Euro, the value of our net sales and net income denominated in Euros
increases when translated into U.S. dollars for inclusion in our consolidated
results. We are also exposed to foreign currency fluctuations in relation to
purchases denominated in foreign currencies. Our foreign currency risk is
mitigated since the majority of our foreign operations’ net sales and the
related expense transactions are denominated in the same currency so therefore a
significant change in foreign exchange rates would likely have a very minor
impact on net income.  For example, a 10% decline in the rate of
exchange between the euro and the U.S. dollar impacts net income by
approximately $1.1 million.  In addition, the majority of our export
sale transactions are denominated in U.S. dollars. Accordingly, we currently
have not invested in derivative instruments, such as foreign exchange contracts,
to hedge foreign currency transactions.
 
 We
control risk related to changes in interest rates by structuring our debt
instruments with a combination of fixed and variable interest rates and by
periodically entering into financial instrument transactions as appropriate. At
March 31, 2008, we do not have any material swap agreements or similar financial
instruments in place. At March 31, 2008 and 2007, approximately 88% and 92% of
our outstanding debt had fixed interest rates, respectively. At those dates, we
had approximately $18.0 million and $13.9 million, respectively, of outstanding
variable rate debt. A 1% fluctuation in interest rates in fiscal 2008 and 2007
would have changed interest expense on that outstanding variable rate debt by
approximately $0.2 and $0.1 million, respectively.
 
 Like many
industrial manufacturers, we are involved in asbestos-related
litigation.  In continually evaluating costs relating to our estimated
asbestos-related liability, we review, among other things, the incidence of past
and recent claims, the historical case dismissal rate, the mix of the claimed
illnesses and occupations of the plaintiffs, our recent and historical
resolution of the cases, the number of cases pending against us, the status and
results of broad-based settlement discussions, and the number of years such
activity might continue.  Based on this review, we have estimated our
share of liability to defend and resolve probable asbestos-related personal
injury claims.  This estimate is highly uncertain due to the
limitations of the available data and the difficulty of forecasting with any
certainty the numerous variables that can affect the range of the
liability.  We will continue to study the variables in light of
additional information in order to identify trends that may become evident and
to assess their impact on the range of liability that is probable and
estimable.
  29
  Based on
actuarial information, we have estimated our asbestos-related aggregate
liability through March 31, 2026 and March 31, 2038 to range between $5.0
million and $15.0 million using actuarial parameters of continued claims for a
period of 18 to 30 years. Our estimation of our asbestos-related aggregate
liability that is probable and estimable, in accordance with U.S. generally
accepted accounting principles approximates $8.4 million which has been
reflected as a liability in the consolidated financial statements as of March
31, 2008.  The recorded liability does not consider the impact of any
potential favorable federal legislation. This liability may fluctuate based on
the uncertainty in the number of future claims that will be filed and the cost
to resolve those claims, which may be influenced by a number of factors,
including the outcome of the ongoing broad-based settlement negotiations,
defensive strategies, and the cost to resolve claims outside the broad-based
settlement program.  Of this amount, management expects to incur
asbestos liability payments of approximately $0.4 million over the next 12
months.  Because payment of the liability is likely to extend over
many years, management believes that the potential additional costs for claims
will not have a material after-tax effect on our financial condition or our
liquidity, although the net after-tax effect of any future liabilities recorded
could be material to earnings in a future period.   30
 Item
      8.
              Financial Statements
      and Supplementary Data.
 
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Columbus
McKinnon Corporation
 
 Audited
      Consolidated Financial Statements as of March 31, 2008:Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Balance Sheets
              F-3Consolidated
      Statements of Income
              F-4Consolidated
      Statements of Shareholders’ Equity
              F-5Consolidated
      Statements of Cash Flows
              F-6Notes
      to Consolidated Financial Statements1.
              Description
      of Business
              F-72.
              Accounting
      Principles and Practices
              F-73.
              Discontinued
      Operations
              F-114.
              Unbilled
      Revenues and Excess Billings
              F-125.
              Inventories
              F-126.
              Marketable
      Securities
              F-127.
              Property,
      Plant, and Equipment
              F-138.
              Goodwill
      and Intangible Assets
              F-149.
              Accrued
      Liabilities and Other Non-current Liabilities
              F-1410.
              Debt
              F-1511.
              Pensions
      and Other Benefit Plans
              F-1612.
              Employee
      Stock Ownership Plan (ESOP)
              F-2013.
              Earnings
      per Share and Stock Plans
              F-2114.
              Loss
      Contingencies
              F-2515.
              Restructuring
      Charges
              F-2616.
              Income
      Taxes
              F-2717.
              Rental
      Expense and Lease Commitments
              F-2918.
              Summary
      Financial Information
              F-3019.
              Business
      Segment Information
              F-3420.
              Selected
      Quarterly Financial Data (unaudited)
              F-3621.
              Accumulated
      Other Comprehensive Loss
              F-3722.
              Effects
      of New Accounting Pronouncements
              F-38Schedule
      II – Valuation and Qualifying Accounts.
              F-39
  F-1
  Report
of Independent Registered Public Accounting Firm
 
 
 The Board
of Directors and Shareholders of Columbus McKinnon Corporation
 
 We have
audited the accompanying consolidated balance sheets of Columbus McKinnon
Corporation as of March 31, 2008 and 2007, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended March 31, 2008. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Columbus McKinnon
Corporation at March 31, 2008 and 2007 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 2008, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth
therein.
 
 As
discussed in Note 2 to the consolidated financial statements, on April 1, 2006
the Company changed its method of accounting for stock-based
compensation.  As discussed in Note 11 to the consolidated financial
statements, on March 31, 2007 the Company changed its method of accounting for
employee retirement plans and other postretirement benefits. As discussed in
Note 16 to the consolidated financial statements, on April 1, 2007 the Company
changed its method of accounting for uncertainty in income taxes.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Columbus McKinnon Corporation’s internal
control over financial reporting as of March 31, 2008, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated May 29,
2008 expressed an unqualified opinion thereon.
 
 
 /s/ Ernst
& Young LLP
 
 Buffalo,
New York
 May 29,
2008
  F-2
  COLUMBUS
McKINNON CORPORATION
 
 CONSOLIDATED
BALANCE SHEETS
 
 March 31,2008
                
                
                2007(In
      thousands, except share data)ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                75,994
                
                
                $
                48,655Trade
      accounts receivable, less allowance for doubtful accounts ($4,259 and
      $3,628, respectively)
                
                
                97,335
                
                
                
                97,269Unbilled
      revenues
                
                
                9,574
                
                
                
                15,050Inventories
                
                
                88,332
                
                
                
                77,179Prepaid
      expenses
                
                
                17,532
                
                
                
                18,029Total
      current assets
                
                
                288,767
                
                
                
                256,182Net
      property, plant, and equipment
                
                
                58,414
                
                
                
                55,231Goodwill,
      net
                
                
                187,055
                
                
                
                185,634Other
      intangibles, net
                
                
                321
                
                
                
                269Marketable
      securities
                
                
                29,807
                
                
                
                28,920Deferred
      taxes on income
                
                
                17,570
                
                
                
                34,460Other
      assets
                
                
                8,101
                
                
                
                4,942Total
      assets
                
                $
                590,035
                
                
                $
                565,638LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Notes
      payable to banks
                
                $
                11,330
                
                
                $
                9,598Trade
      accounts payable
                
                
                41,895
                
                
                
                35,896Accrued
      liabilities
                
                
                55,855
                
                
                
                52,344Restructuring
      reserve
                
                
                58
                
                
                
                599Current
      portion of long-term debt
                
                
                521
                
                
                
                297Total
      current liabilities
                
                
                109,659
                
                
                
                98,734Senior
      debt, less current portion
                
                
                6,196
                
                
                
                26,168Subordinated
      debt
                
                
                129,855
                
                
                
                136,000Other
      non-current liabilities
                
                
                48,844
                
                
                
                63,411Total
      liabilities
                
                
                294,554
                
                
                
                324,313Shareholders’
      equity:Voting
      common stock; 50,000,000 shares authorized; 18,982,538 and 18,825,312
      shares issued
                
                
                189
                
                
                
                188Additional
      paid-in capital
                
                
                178,457
                
                
                
                174,654Retained
      earnings
                
                
                122,400
                
                
                
                85,237ESOP
      debt guarantee; 176,646 and 213,667 shares
                
                
                (2,824
                )
                
                
                (3,417
                )Accumulated
      other comprehensive loss
                
                
                (2,741
                )
                
                
                (15,337
                )Total
      shareholders’ equity
                
                
                295,481
                
                
                
                241,325Total
      liabilities and shareholders’ equity
                
                $
                590,035
                
                
                $
                565,638
 
 
 See
accompanying notes.
  F-3
  COLUMBUS McKINNON
CORPORATION
 
 CONSOLIDATED
STATEMENTS OF INCOME
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006(In
      thousands, except per share data)Net
      sales
              
              $
              623,334
              
              
              $
              589,848
              
              
              $
              556,007Cost
      of products sold
              
              
              438,781
              
              
              
              425,248
              
              
              
              408,385Gross
      profit
              
              
              184,553
              
              
              
              164,600
              
              
              
              147,622Selling
      expenses
              
              
              71,955
              
              
              
              61,731
              
              
              
              54,255General
      and administrative expenses
              
              
              37,647
              
              
              
              34,097
              
              
              
              33,640Restructuring
      charges
              
              
              1,179
              
              
              
              133
              
              
              
              1,609Impairment
      loss
              
              
              2,509
              
              
              
              -
              
              
              
              -Amortization
      of intangibles
              
              
              115
              
              
              
              183
              
              
              
              249Income
      from operations
              
              
              71,148
              
              
              
              68,456
              
              
              
              57,869Interest
      and debt expense
              
              
              14,629
              
              
              
              16,430
              
              
              
              24,667Cost
      of bond redemptions
              
              
              1,794
              
              
              
              5,188
              
              
              
              9,201Investment
      income
              
              
              (1,165
              )
              
              
              (5,257
              )
              
              
              (2,017
              )Other
      (income) and expense, net
              
              
              (3,641
              )
              
              
              (1,825
              )
              
              
              (2,136
              )Income
      from continuing operations before income taxexpense
      (benefit)
              
              
              59,531
              
              
              
              53,920
              
              
              
              28,154Income
      tax expense (benefit)
              
              
              22,739
              
              
              
              20,539
              
              
              
              (30,946
              )Income
      from continuing operations
              
              
              36,792
              
              
              
              33,381
              
              
              
              59,100Income
      from discontinued operations (net of tax)
              
              
              557
              
              
              
              704
              
              
              
              696Net
      income
              
              $
              37,349
              
              
              $
              34,085
              
              
              $
              59,796Average
      basic shares outstanding
              
              
              18,723
              
              
              
              18,517
              
              
              
              16,052Average
      diluted shares outstanding
              
              
              19,158
              
              
              
              18,951
              
              
              
              16,628Basic
      income per share:Income
      from continuing operations
              
              $
              1.96
              
              
              $
              1.80
              
              
              $
              3.69Income
      from discontinued operations
              
              
              0.03
              
              
              
              0.04
              
              
              
              0.04Basic
      income per share
              
              $
              1.99
              
              
              $
              1.84
              
              
              $
              3.73Diluted
      income per share:Income
      from continuing operations
              
              $
              1.92
              
              
              $
              1.76
              
              
              $
              3.56Income
      from discontinued operations
              
              
              0.03
              
              
              
              0.04
              
              
              
              0.04Diluted
      income per share
              
              $
              1.95
              
              
              $
              1.80
              
              
              $
              3.60
 
 
 See
accompanying notes.
  F-4
  COLUMBUS
McKINNON CORPORATION
 
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
 (In
thousands, except share and per share data)
 
 Common Stock ($.01 par
    value)
              
              
              Addi- tional Paid-in
Capital
              
              
              Retained Earnings (Accumulated
      Deficit)
              
              
              ESOP Debt Guarantee
              
              
              UnearnedRestrictedStock
              
              
              Accumulated Other Comprehensive
      Loss
              
              
              Total Shareholders’ EquityBalance
      at March 31, 2005
              
              $
              149
              
              
              $
              104,078
              
              
              $
              (8,644
              )
              
              $
              (4,554
              )
              
              $
              (6
              )
              
              $
              (9,256
              )
              
              $
              81,767Comprehensive
      income:Net
      income 2006
              
              
              —
              
              
              
              —
              
              
              
              59,796
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              59,796Change
      in foreign currency translation adjustment
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (1,846
              )
              
              
              (1,846
              )Change
      in net unrealized gain oninvestments, net of tax of $354
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              658
              
              
              
              658Change
      in minimum pension liability adjustment, net of tax benefit of
      $1,681
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (2,535
              )
              
              
              (2,535
              )Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              56,073Common
      stock issued, 3,000,000 shares
              
              
              30
              
              
              
              56,589
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              56,619Stock
      options exercised, 626,282 shares
              
              
              6
              
              
              
              7,143
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              7,149Tax
      benefit from exercise of stock  options
              
              
              —
              
              
              
              2,154
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2,154Earned
      34,874 ESOP shares
              
              
              —
              
              
              
              95
              
              
              
              —
              
              
              
              558
              
              
              
              —
              
              
              
              —
              
              
              
              653Restricted
      common stock granted, 1,000 shares
              
              
              —
              
              
              
              22
              
              
              
              —
              
              
              
              —
              
              
              
              (22
              )
              
              
              —
              
              
              
              —Earned
      portion of restricted shares
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              6
              
              
              
              —
              
              
              
              6Balance
      at March 31, 2006
              
              $
              185
              
              
              $
              170,081
              
              
              $
              51,152
              
              
              $
              (3,996
              )
              
              $
              (22
              )
              
              $
              (12,979
              )
              
              $
              204,421Comprehensive
      income:Net
      income 2007
              
              
              —
              
              
              
              —
              
              
              
              34,085
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              34,085Change
      in foreign currency translation adjustment
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              4,093
              
              
              
              4,093Change
      in net unrealized gain oninvestments, net of tax benefit of
      $1,006
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (1,869
              )
              
              
              (1,869
              )Change
      in pension liability, priorto adoption of SFAS 158, net of tax of
      $3,830
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              5,758
              
              
              
              5,758Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              42,067Adjustment
      to initially apply SFAS 158 net of tax benefit of $6,906
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (10,340
              )
              
              
              (10,340
              )Stock
      compensation - directors
              
              
              —
              
              
              
              180
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              180Stock
      options exercised, 240,468 shares
              
              
              3
              
              
              
              2,598
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2,601Stock
      compensation expense
              
              
              —
              
              
              
              1,255
              
              
              
              —
              
              
              
              —
              
              
              
              22
              
              
              
              —
              
              
              
              1,277Tax
      benefit from exercise of stock  options
              
              
              —
              
              
              
              311
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              311Earned
      36,154 ESOP shares
              
              
              —
              
              
              
              229
              
              
              
              —
              
              
              
              579
              
              
              
              —
              
              
              
              —
              
              
              
              808Balance
      at March 31, 2007
              
              $
              188
              
              
              $
              174,654
              
              
              $
              85,237
              
              
              $
              (3,417
              )
              
              $
              —
              
              
              $
              (15,337
              )
              
              $
              241,325Comprehensive
      income:Net
      income 2008
              
              
              —
              
              
              
              —
              
              
              
              37,349
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              37,349Change
      in foreign currency translation adjustment
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              9,431
              
              
              
              9,431Change
      in net unrealized gain oninvestments, net of tax benefit of
      $410
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (762
              )
              
              
              (762
              )Change
      in pension liability and postretirement obligations, net of tax of
      $2,695
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              3,927
              
              
              
              3,927Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              49,945Adjustment
      to initially apply FIN 48
              
              
              —
              
              
              
              —
              
              
              
              (186
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (186
              )Stock
      compensation - directors
              
              
              —
              
              
              
              196
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              196Stock
      options exercised, 144,425 shares
              
              
              1
              
              
              
              1,415
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              1,416Stock
      compensation expense
              
              
              —
              
              
              
              1,266
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              1,266Tax
      benefit from exercise of stock  options
              
              
              —
              
              
              
              482
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              482Earned
      37,021 ESOP shares
              
              
              —
              
              
              
              444
              
              
              
              —
              
              
              
              593
              
              
              
              —
              
              
              
              —
              
              
              
              1,037Balance
      at March 31, 2008
              
              $
              189
              
              
              $
              178,457
              
              
              $
              122,400
              
              
              $
              (2,824
              )
              
              $
              —
              
              
              $
              (2,741
              )
              
              $
              295,481
 
 
 See
accompanying notes.
  F-5
  COLUMBUS
McKINNON CORPORATION
  CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 Year ended March 31,2008
              
              
              2007
              
              
              2006(In
      thousands)Operating
      activities:Income
      from continuing operations
              
              $
              36,792
              
              
              $
              33,381
              
              
              $
              59,100Adjustments
      to reconcile income from continuing operations to net cash provided by
      operating activities:Depreciation
      and amortization
              
              
              8,816
              
              
              
              8,289
              
              
              
              8,824Deferred
      income taxes
              
              
              14,625
              
              
              
              12,438
              
              
              
              (36,968
              )(Gain)
      loss on divestitures
              
              
              (70
              )
              
              
              (504
              )
              
              
              87Gain
      on sale of real estate/investments
              
              
              (526
              )
              
              
              (5,373
              )
              
              
              (2,100
              )Loss
      on early retirement of bonds
              
              
              1,378
              
              
              
              4,263
              
              
              
              7,083Amortization/write-off
      of deferred financing costs
              
              
              982
              
              
              
              1,603
              
              
              
              3,297Stock-based
      compensation
              
              
              1,462
              
              
              
              1,457
              
              
              
              —Impairment
      loss
              
              
              2,509
              
              
              
              —
              
              
              
              —Changes
      in operating assets and liabilities net of effects of business
      divestitures:Trade
      accounts receivable and  unbilled revenues
              
              
              7,652
              
              
              
              (3,521
              )
              
              
              (11,025
              )Inventories
              
              
              (9,667
              )
              
              
              (2,260
              )
              
              
              2,518Prepaid
      expenses
              
              
              654
              
              
              
              (2,132
              )
              
              
              (2,026
              )Other
      assets
              
              
              (1,183
              )
              
              
              921
              
              
              
              207Trade
      accounts payable
              
              
              4,707
              
              
              
              (3,849
              )
              
              
              6,099Accrued
      and non-current liabilities
              
              
              (8,541
              )
              
              
              782
              
              
              
              11,267Net
      cash provided by operating activities
              
              
              59,590
              
              
              
              45,495
              
              
              
              46,363Investing
      activities:Proceeds
      from sale of marketable securities
              
              
              13,076
              
              
              
              36,853
              
              
              
              15,913Purchases
      of marketable securities
              
              
              (14,638
              )
              
              
              (35,686
              )
              
              
              (16,801
              )Capital
      expenditures
              
              
              (13,066
              )
              
              
              (10,653
              )
              
              
              (8,430
              )Proceeds
      from sale of assets
              
              
              5,504
              
              
              
              2,813
              
              
              
              2,091Proceeds
      from sale of businesses
              
              
              —
              
              
              
              2,574
              
              
              
              —Proceeds
      from discontinued operations, net of tax
              
              
              557
              
              
              
              704
              
              
              
              857Net
      cash used by investing activities
              
              
              (8,567
              )
              
              
              (3,395
              )
              
              
              (6,370
              )Financing
      activities:Proceeds
      from issuance of common stock
              
              
              —
              
              
              
              —
              
              
              
              56,619Proceeds
      from exercise of stock options
              
              
              1,416
              
              
              
              2,601
              
              
              
              7,149Payments
      under revolving line-of-credit agreements
              
              
              —
              
              
              
              (62,930
              )
              
              
              (47,669
              )Borrowings
      under revolving line-of-credit agreements
              
              
              18
              
              
              
              65,975
              
              
              
              49,030Repayment
      of debt
              
              
              (31,069
              )
              
              
              (45,964
              )
              
              
              (205,167
              )Proceeds
      from issuance of long-term debt
              
              
              —
              
              
              
              —
              
              
              
              136,000Payment
      of deferred financing costs
              
              
              (2
              )
              
              
              (449
              )
              
              
              (2,877
              )Tax
      benefit from exercise of stock options
              
              
              482
              
              
              
              311
              
              
              
              2,154Change
      in ESOP debt guarantee
              
              
              593
              
              
              
              579
              
              
              
              558Net
      cash used by financing activities
              
              
              (28,562
              )
              
              
              (39,877
              )
              
              
              (4,203
              )Effect
      of exchange rate changes on cash
              
              
              4,878
              
              
              
              834
              
              
              
              329Net
      change in cash and cash equivalents
              
              
              27,339
              
              
              
              3,057
              
              
              
              36,119Cash
      and cash equivalents at beginning of year
              
              
              48,655
              
              
              
              45,598
              
              
              
              9,479Cash
      and cash equivalents at end of year
              
              $
              75,994
              
              
              $
              48,655
              
              
              $
              45,598Supplementary
      cash flows data:Interest
      paid
              
              $
              14,079
              
              
              $
              17,221
              
              
              $
              26,565Income
      taxes paid, net
              
              $
              9,568
              
              
              $
              5,712
              
              
              $
              5,035
 
 
 See
accompanying notes.
  F-6
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 (tabular
amounts in thousands, except share data)
 
 
 1.
              Description
      of Business
 
 Columbus
McKinnon Corporation (the Company) is a leading U.S. designer and manufacturer
of material handling products, systems and services which efficiently and
ergonomically move, lift, position and secure material. Key products include
hoists, cranes, chain and forged attachments.  The Company’s material
handling products are sold, domestically and internationally, principally to
third party distributors through diverse distribution channels, and to a lesser
extent directly to end-users.  The Company’s integrated material
handling solutions businesses deal primarily with end users and sales are
concentrated, domestically and internationally (primarily Europe), in the
consumer products, manufacturing, warehousing and, to a lesser extent, the
steel, construction, automotive and other industrial markets.  During
fiscal 2008, approximately 65% of sales were to customers in the United
States.
 
 
 2.
              Accounting
      Principles and Practices
 
 Advertising
 
 Costs
associated with advertising are expensed in the year incurred and are included
in selling expense in the statement of income.  Advertising expenses
were $5,531,000, $3,779,000, and $3,343,000 in fiscal 2008, 2007, and 2006,
respectively.
 
 Cash
and Cash Equivalents
 
 The
Company considers as cash equivalents all highly liquid investments with an
original maturity of three months or less.
 
 Concentrations
of Labor
 
 Approximately
22% of the Company’s employees are represented by seven separate domestic and
Canadian collective bargaining agreements which terminate at various times
between September 2008 and March 2012. Approximately 2% of the labor force
is covered by collective bargaining agreements that will expire within one
year.
 
 Consolidation
 
 These
consolidated financial statements include the accounts of the Company and its
domestic and foreign subsidiaries; all significant intercompany accounts and
transactions have been eliminated. Our international subsidiaries in Asia and
Spain close one month and our Mexican subsidiary closes three months earlier to
facilitate consolidated reporting.
 
 Financial
Instruments
 
 The
carrying value of the Company’s current assets and current liabilities
approximate their fair values based upon the relatively short maturity of those
instruments.  For the fair value of the Company’s marketable
securities and debt instruments, see Notes 6 and 10, respectively.
 
 Foreign
Currency Translations
 
 The
Company translates foreign currency financial statements as described in
Financial Accounting Standards Board (FASB) Statement of Financial Accounting
Standards (SFAS) No. 52, “Foreign Currency Translation.” Under this method, all
items of income and expense are translated to U.S. dollars at average exchange
rates for the year. All assets and liabilities are translated to U.S. dollars at
the year-end exchange rate. Gains or losses on translations are recorded in
accumulated other comprehensive loss in the shareholders’ equity section of the
balance sheet.  The functional currency is the foreign currency in
which the foreign subsidiaries conduct their business.  Gains and
losses from foreign currency transactions are reported in other income and
expense, net.  There were gains of approximately $600,000 in fiscal
2008 and losses of approximately $225,000 and a $100,000 on foreign currency
transactions in fiscal 2007 and 2006, respectively.
  F-7
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Goodwill
 
 Goodwill
is not amortized but is periodically tested for impairment, in accordance with
the provisions of SFAS No. 142, “Goodwill and Other Intangible
Assets.”  Goodwill impairment is deemed to exist if the net book value
of a reporting unit exceeds its estimated fair value.  The fair value
of a reporting unit is determined using a discounted cash flow
methodology.  The Company’s reporting units are determined based upon
whether discrete financial information is available and regularly reviewed,
whether those units constitute a business, and the extent of economic
similarities between those reporting units for purposes of
aggregation.  As a result of this analysis, the reporting units
identified under SFAS No. 142 were at the component level, or one level below
the reporting segment level as defined under SFAS No. 131, “Disclosures about
Segments of an Enterprise and Related Information.”  The Products
segment was subdivided into three reporting units and the Solutions segment was
subdivided into two reporting units.  Identifiable intangible assets
acquired in a business combination are amortized over their useful lives unless
their useful lives are indefinite, in which case those intangible assets are
tested for impairment annually and not amortized until their lives are
determined to be finite.  See Note 8 for further discussion of
goodwill and intangible assets.
 
 Impairment
of Long-Lived Assets
 
 The
Company assesses impairment of its long-lived assets in accordance with the
provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets.” SFAS No. 144 requires long-lived assets, such as property
and equipment and purchased intangibles subject to amortization to be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset group may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset group to estimated undiscounted future cash flows expected to be
generated by the asset group. If the carrying amount of an asset group exceeds
its estimated future cash flows, an impairment charge is recognized equal to the
amount by which the carrying amount of the asset group exceeds the fair value of
the asset group.
 
 In
assessing long-lived assets for an impairment loss, assets are grouped with
other assets and liabilities at the lowest level for which identifiable cash
flows are largely independent of the cash flows of other assets and liabilities.
Asset grouping requires a significant amount of judgment. Accordingly, facts and
circumstances will influence how asset groups are determined for impairment
testing. In assessing long-lived assets for impairment, management considered
the company’s product line portfolio, customers and related commercial
agreements, labor agreements and other factors in grouping assets and
liabilities at the lowest level for which identifiable cash flows are
independent. The Company considers projected future undiscounted cash flows,
trends and other factors in its assessment of whether impairment conditions
exist. While the Company believes that its estimates of future cash flows are
reasonable, different assumptions regarding such factors as future production
volumes, customer pricing, economics and productivity and cost initiatives,
could significantly affect its estimates. In determining fair value of
long-lived assets, management uses appraisals, management estimates or
discounted cash flow calculations.
 
 During
fiscal 2008, the Company recorded an impairment charge of $2,509,000 to reduce
the net book value of certain long-lived assets related to our Univeyor business
within the Company’s Solutions segment to their estimated fair value. This
impairment was recorded pursuant to impairment indicators including recurring
operating losses and declining cash flow.
 
 There
were no impairment charges in fiscal 2007 or 2006.
 
 Inventories
 
 Inventories
are valued at the lower of cost or market. Cost of approximately 56% of
inventories at March 31, 2008 (60% in 2007) has been determined using the LIFO
(last-in, first-out) method. Costs of other inventories have been determined
using the FIFO (first-in, first-out) or average cost method. FIFO cost
approximates replacement cost. Costs in inventory include components for direct
labor and overhead costs.
  F-8
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Marketable
Securities
 
 All of
the Company’s marketable securities, which consist of equity securities, have
been classified as available-for-sale securities and are therefore recorded at
their fair values with the unrealized gains and losses, net of tax, reported in
accumulated other comprehensive loss within shareholders’ equity unless
unrealized losses are deemed to be other than temporary. In such instance, the
unrealized losses are reported in the statement of income within investment
income. Estimated fair value is based on published trading values at the balance
sheet dates. The cost of securities sold is based on the specific identification
method. Interest and dividend income are included in investment income in the
consolidated statements of income.
 
 The
marketable securities are carried as long-term assets since they are held for
the settlement of the Company’s general and products liability insurance claims
filed through CM Insurance Company, Inc., a wholly owned captive insurance
subsidiary.
 
 Property,
Plant, and Equipment
 
 Property,
plant, and equipment are stated at cost and depreciated principally using the
straight-line method over their respective estimated useful lives (buildings and
building equipment—15 to 40 years; machinery and equipment—3 to 18 years). When
depreciable assets are retired, or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is reflected in operating results.
 
 Research
and Development
 
 Research
and development costs as defined in SFAS No. 2, “Accounting for Research and
Development Costs” for the years ended March 31, 2008, 2007 and 2006 were
$4,495,000, $2,887,000 and $1,614,000, respectively and are classified as
general and administrative expense in the consolidated statements of
income.
 
 Revenue
Recognition and Concentration of Credit Risk
 
 Sales are
recorded when title passes to the customer which is generally at time of
shipment to the customer, except for long-term construction contracts as
described below. The Company performs ongoing credit evaluations of its
customers’ financial condition, but generally does not require collateral to
support customer receivables. The credit risk is controlled through credit
approvals, limits and monitoring procedures. Accounts receivable are reported at
net realizable value and do not accrue interest.  The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other
factors.   Accounts receivable are charged against the allowance
for doubtful accounts once all collection efforts have been
exhausted.  The Company does not routinely permit customers to return
product.  However, sales returns are permitted in specific situations
and typically include a restocking charge or the purchase of additional
product.  The Company has established an allowance for returns based
upon historical trends.
 
 The
Company recognizes contract revenues under the percentage of completion method,
measured by comparing direct costs incurred to total estimated direct costs.
Changes in job performance, job conditions and estimated profitability,
including those arising from final contract settlements, may result in revisions
to costs and income and are recognized in the period in which the revisions are
determined. In the event that a loss is anticipated on an uncompleted contract,
a provision for the estimated loss is made at the time it is
determined.   Billings on contracts may precede or lag revenues
earned, and such differences are reported in the balance sheet as current
liabilities (accrued liabilities) and current assets (unbilled revenues),
respectively.
 
 Sale-Leaseback
Transactions
 
 On June
22, 2007, the Company sold its facility in Charlotte, NC and entered into a
leaseback for a portion of the facility under a 10-year lease agreement. Net
proceeds to the Company for the sale of the property were approximately
$4,800,000. The $800,000 gain on the transaction was deferred and will be
recognized as income over the 10-year leaseback period. The lease agreement has
been recorded as a capital lease, refer to note 7.
  F-9
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 On
January 28, 2005, the Company sold its corporate headquarters property and
entered into a leaseback for a portion of the facility under a 10-year lease
agreement. Net proceeds to the Company for the sale of the property were
approximately $2,700,000 and the gain on the transaction was $2,200,000. Of the
total gain, $1,000,000 was recognized in 2005 under the caption other income,
and $1,200,000 was deferred and will be recognized as income over the 10-year
leaseback period. Additionally, $500,000 of non-cash value (rent abatement) will
be recognized on a straight-line basis as lower operating expenses over the
10-year leaseback period.
 
 Shipping
and Handling Costs
 
 Shipping
and handling costs are a component of cost of products sold.
 
 Stock-Based
Compensation
 
 Effective
April 1, 2006, the Company adopted SFAS 123(R), "Share-Based Payment," applying
the modified prospective method. This Statement requires all equity-based
payments to employees, including grants of employee stock options, to be
recognized in the statement of earnings based on the grant date fair value of
the award. Under the modified prospective method, the Company is required to
record equity-based compensation expense for all awards granted after the date
of adoption and for the unvested portion of previously granted awards
outstanding as of the date of adoption. The adoption of SFAS 123(R) resulted in
$1,230,000 ($0.06 per share) of non-deductible incentive stock option
expense in the year ended March 31, 2007.  Stock compensation expense
is included in cost of goods sold, selling, and general and administrative
expense.  The Company uses a straight-line method of attributing the
value of stock-based compensation expense, subject to minimum levels of expense,
based on vesting.
 
 Prior to
April 1, 2006, the Company accounted for the stock option plans under the
recognition and measurement principles of Accounting Principles Board Opinion
No. 25, “Accounting for Stock Issued to Employees” (APB 25) and related
Interpretations.  No stock-based employee compensation cost was
reflected in net income, as all options granted under these plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant and the number of options granted was fixed.
 
 The
Company's net income and earnings per share as if the fair value based method
had been applied to all outstandingand unvested
awards for fiscal year 2006 is as follows:
 
 Year Ended
    March 31,2006Net
      income, as reported
              
              $
              59,796Deduct:
      Total stock-based employee compensation expense determined under fair
      value based method for all awards, net of related tax
    effects
              
              
              (577
              )Net
      income, pro forma
              
              $
              59,219Basic
      income per share:As
      reported
              
              $
              3.73Pro
      forma
              
              $
              3.69Diluted
      income per share:As
      reported
              
              $
              3.60Pro
      forma
              
              $
              3.56
  F-10
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 In
November 2005, the Financial Accounting Standards Board (FASB) issued Staff
Position ("FSP") FAS 123(R)-3, “Transition Election Related to Accounting for
the Tax Effects of Share-Based Payment Awards.” FSP FAS 123(R)-3 provides
an alternative transition method for establishing the beginning balance of
the pool of excess tax benefits available to absorb tax deficiencies
recognized subsequent to the adoption of SFAS No. 123(R) (the "APIC Pool").
Effective in the fourth quarter of fiscal 2007, the Company elected to
adopt the alternative transition method provided in FSP FAS 123(R)-3 for
establishing the beginning balance of the APIC Pool. This method consists of
a computational component that establishes a beginning balance of the
APIC Pool related to employee compensation and a simplified method
("short-cut method") to determine the subsequent impact on the APIC Pool of
employee awards that are fully vested and outstanding upon the adoption of
SFAS No. 123(R).
 
 See Note
13 for further discussion of stock-based compensation.
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
 
 Warranties
 
 The
Company offers warranties for certain products it sells.  The specific
terms and conditions of those warranties vary depending upon the product sold
and the country in which the Company sold the product.  The Company
generally provides a basic limited warranty, including parts and labor for any
product deemed to be defective for a period of one year.  The Company
estimates the costs that may be incurred under its basic limited warranty, based
largely upon actual warranty repair costs history, and records a liability in
the amount of such costs in the month that the product revenue is
recognized.  The resulting accrual balance is reviewed during the
year.  Factors that affect the Company’s warranty liability include
the number of units sold, historical and anticipated rate of warranty claims,
and cost per claim.
 
 Changes
in the Company’s product warranty accrual are as follows:
 
 March 31,2008
              
              
              2007Balance
      at beginning of year
              
              $
              1,263
              
              
              $
              2,132Accrual
      for warranties issued
              
              
              3,300
              
              
              
              3,770Warranties
      settled
              
              
              (3,160
              )
              
              
              (4,639
              )Balance
      at end of year
              
              $
              1,403
              
              
              $
              1,263
 
 3.
              Discontinued
      Operations
 
 In May
2002, the Company sold substantially all of the assets of Automatic Systems,
Inc. (ASI). The ASI business was the principal business unit in the Company’s
former Solutions – Automotive segment.  The Company received
$20,600,000 in cash and an 8% subordinated note in the principal amount of
$6,800,000 which is payable at a rate of $214,000 per quarter over eight years
beginning August 2004. Due to the uncertainty surrounding the financial
viability of the debtor, the note has been recorded at the estimated net
realizable value of $0.  Principal payments received on the note are
recorded as income from discontinued operations at the time of
receipt.  All interest and principal payments required under the note
have been made to date.  The gross value of the note as of March 31,
2008 is approximately $3,600,000.
  F-11
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 4.
              Unbilled
      Revenues and Excess Billings
 
 March 31,2008
              
              
              2007Costs
      incurred on uncompleted contracts
              
              $
              38,039
              
              
              $
              50,014Estimated
      earnings
              
              
              12,334
              
              
              
              12,119Revenues
      earned to date
              
              
              50,373
              
              
              
              62,133Less
      billings to date
              
              
              41,179
              
              
              
              48,042$
              9,194
              
              
              $
              14,091
 
 The net
amounts above are included in the consolidated balance sheets under the
following captions:
 
 March 31,2008
              
              
              2007Unbilled
      revenues
              
              $
              9,574
              
              
              $
              15,050Accrued
      liabilities
              
              
              (380
              )
              
              
              (959
              )$
              9,194
              
              
              $
              14,091
 
 5.
              Inventories
 
 Inventories
consisted of the following:
 
 March 31,2008
              
              
              2007At
      cost—FIFO basis:Raw
      materials
              
              $
              48,640
              
              
              $
              45,006Work-in-process
              
              
              10,454
              
              
              
              9,050Finished
      goods
              
              
              44,102
              
              
              
              36,606103,196
              
              
              
              90,662LIFO
      cost less than FIFO cost
              
              
              (14,864
              )
              
              
              (13,483
              )Net
      inventories
              
              $
              88,332
              
              
              $
              77,179
 
 
 6.
              Marketable
      Securities
 
 Marketable
securities are held for the settlement of the Company’s general and products
liability insurance claims filed through the Company’s wholly-owned captive
insurance subsidiary, CM Insurance Company, Inc. (see Notes 2 and 14). In
accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities,” the Company reviews its marketable securities for
declines in market value that may be considered other than
temporary.  The Company considers market value declines to be other
than temporary if they are declines for a period longer than six months and in
excess of 20% of original cost.  Based on the Company’s review no
unrealized losses represented an other than temporary impairment for the years
ended March 31, 2008 and 2007.  As of March 31, 2006, in accordance
with SFAS No. 115, the Company reduced the cost bases of certain equity
securities since it was determined that the unrealized losses on those
securities were other than temporary in nature. This determination resulted in
the recognition of a pre-tax charge to earnings of $78,000 for the year ended
March 31, 2006, classified within other (income) and expense, net.
 
 The
following is a summary of available-for-sale securities at March 31,
2008:
 
 Cost
              
              
              Gross Unrealized Gains
              
              
              Gross Unrealized Losses
              
              
              Estimated Fair ValueEquity
      securities
              
              $
              30,945
              
              
              $
              4
              
              
              $
              1,142
              
              
              $
              29,807
  F-12
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 The
aggregate fair value of investments and unrealized losses on available-for-sale
securities in an unrealized loss position at March 31, 2008 are as
follows:
 
 Aggregate
              
              
              UnrealizedFair Value
              
              
              LossesSecurities
      in a continuous loss position for less than 12 months
              
              $
              17,636
              
              
              $
              580Securities
      in a continuous loss position for more than 12 months
              
              
              10,938
              
              
              
              562$
              28,574
              
              
              $
              1,142
 
 The net
gains related to sales of marketable securities totaled $88,000, $4,360,000 and
$1,436,000 in fiscal 2008, 2007 and 2006, respectively.
 
 The
following is a summary of available-for-sale securities at March 31,
2007:
 
 Cost
              
              
              Gross Unrealized Gains
              
              
              Gross Unrealized Losses
              
              
              Estimated Fair ValueEquity
      securities
              
              $
              28,886
              
              
              $
              68
              
              
              $
              34
              
              
              $
              28,920
 
 
 Net
unrealized losses included in the balance sheet at March 31, 2008 amounted to
$1,138,000 and the related income tax benefit was $398,000. Net unrealized gains
included in the balance sheet at March 31, 2007 amounted to $34,000 and the
related income taxes were $12,000. Unrealized gains and losses, net of related
income taxes, are reflected as a component of accumulated other comprehensive
loss within shareholders’ equity.
 
 
 7.
              Property,
      Plant, and Equipment
 
 Consolidated
property, plant, and equipment of the Company consisted of the
following:
 
 March 31,2008
              
              
              2007Land
      and land improvements
              
              $
              4,503
              
              
              $
              5,036Buildings
              
              
              32,656
              
              
              
              29,657Machinery,
      equipment, and leasehold improvements
              
              
              110,192
              
              
              
              104,479Construction
      in progress
              
              
              2,747
              
              
              
              2,277150,098
              
              
              
              141,449Less
      accumulated depreciation
              
              
              91,684
              
              
              
              86,218Net
      property, plant, and equipment
              
              $
              58,414
              
              
              $
              55,231
 
 Buildings
include assets recorded under capital leases amounting to $3,147,000 and $0 for
the years ended March 31, 2008 and 2007, respectively.  Accumulated
depreciation includes accumulated amortization of the assets recorded under
capital leases amounting to $236,000 at March 31, 2008.
 
 Depreciation
expense, including amortization of assets recorded under capital leases, was
$8,701,000, $8,106,000, and $8,575,000 for the years ended March 31, 2008, 2007
and 2006, respectively.
  F-13
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 8.
              Goodwill
      and Intangible Assets
 
 As
discussed in Note 2, goodwill is not amortized but is periodically tested for
impairment, in accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible
Assets.”  Goodwill impairment is deemed to exist if the net book value
of a reporting unit exceeds its estimated fair value.  The fair value
of a reporting unit is determined using a discounted cash flow
methodology.  The Company’s reporting units are determined based upon
whether discrete financial information is available and regularly reviewed,
whether those units constitute a business, and the extent of economic
similarities between those reporting units for purposes of
aggregation.  As a result of this analysis, the reporting units
identified under SFAS No. 142 were at the component level, or one level below
the reporting segment level as defined under SFAS No. 131, “Disclosures about
Segments of an Enterprise and Related Information.”  The Products
segment was subdivided into three reporting units and the Solutions segment was
subdivided into two reporting units.
 
 Identifiable
intangible assets acquired in a business combination are amortized over their
useful lives unless their useful lives are indefinite, in which case those
intangible assets are tested for impairment annually and not amortized until
their lives are determined to be finite.
 
 No
impairment charges related to goodwill or intangible assets were recorded during
fiscal 2008, 2007 or 2006.
 
 All
goodwill reported in fiscal 2008 and 2007 was related to the products
segment.  A summary of changes in goodwill during the years ended
March 31, 2008 and 2007 is as follows:
 
 Balance
      at March 31, 2006
              
              $
              184,917Currency
      translation
              
              
              717Balance
      at March 31, 2007
              
              $
              185,634Currency
      translation
              
              
              1,421Balance
      at March 31, 2008
              
              $
              187,055
 
 Patents
and other intangibles, net amounted to $321,000 and $269,000 for the years ended
March 31, 2008 and 2007, respectively. Based on the current amount of patents
and other, net, the estimated amortization expense for each of the succeeding
five years is expected to be $107,000, $85,000, $67,000, $45,000, and 17,000,
respectively.
 
 
 9.
              Accrued
      Liabilities and Other Non-current
Liabilities
 
 Consolidated accrued liabilities of the
Company consisted of the following:
 
 March 31,2008
              
              
              2007Accrued
      payroll
              
              $
              18,466
              
              
              $
              17,302Accrued
      pension cost
              
              
              338
              
              
              
              245Interest
      payable
              
              
              4,976
              
              
              
              5,408Accrued
      workers compensation
              
              
              3,520
              
              
              
              3,000Accrued
      income taxes payable
              
              
              7,311
              
              
              
              7,723Accrued
      postretirement benefit obligation
              
              
              1,332
              
              
              
              1,456Accrued
      health insurance
              
              
              4,026
              
              
              
              3,466Accrued
      general and product liability costs
              
              
              4,010
              
              
              
              4,000Other
      accrued liabilities
              
              
              11,876
              
              
              
              9,744$
              55,855
              
              
              $
              52,344
  F-14
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Consolidated other non-current
liabilities of the Company consisted of the following:
 
 March 31,2008
              
              
              2007Accumulated
      postretirement benefit obligation
              
              $
              9,362
              
              
              $
              9,015Accrued
      general and product liability costs
              
              
              16,761
              
              
              
              17,078Accrued
      pension cost
              
              
              16,603
              
              
              
              28,531Accrued
      workers compensation
              
              
              2,253
              
              
              
              6,104Other
      non-current liabilities
              
              
              3,865
              
              
              
              2,683$
              48,844
              
              
              $
              63,411
 
 
 10.
              Debt
 
 Consolidated
long-term debt of the Company consisted of the following:
 
 March 31,2008
              
              
              2007Revolving
      Credit Facility due February 22, 2011
              
              $
              -
              
              
              $
              -10%
      Senior Secured Notes
              
              
              -
              
              
              
              22,125Capital
      lease obligations
              
              
              3,006
              
              
              
              -Other
      senior debt
              
              
              3,711
              
              
              
              4,340Total
      senior debt
              
              
              6,717
              
              
              
              26,4658
      7/8% Senior Subordinated Notes due November 1, 2013 with interest payable
      in semi-annual installments
              
              
              129,855
              
              
              
              136,000Total
              
              
              136,572
              
              
              
              162,465Less
      current portion
              
              
              521
              
              
              
              297$
              136,051
              
              
              $
              162,168
 
 In March,
2006, the Company amended and expanded its revolving credit facility. The
Revolving Credit Facility provides availability up to a maximum of
$75,000,000.  Provided there is no default, the Company may request an
increase in the availability of the Revolving Credit Facility by an amount not
exceeding $50,000,000, subject to lender approval.  The unused
Revolving Credit Facility totaled $63,800,000, net of outstanding borrowings of
$0 and outstanding letters of credit of $11,200,000. Interest on the revolver is
payable at varying Eurodollar rates based on LIBOR or prime plus a spread
determined by our leverage ratio amounting to 87.5 or 0 basis points,
respectively, at March 31, 2008.  The Revolving Credit Facility is
secured by all domestic inventory, receivables, equipment, real property,
subsidiary stock (limited to 65% for foreign subsidiaries) and intellectual
property.
 
 The
corresponding credit agreement associated with the Revolving Credit Facility
places certain debt covenant restrictions on the Company, including certain
financial requirements and a restriction on dividend payments, with which the
Company was in compliance as of March 31, 2008.
 
 The
Senior Subordinated 8 7/8% Notes (8 7/8% Notes) issued on September 2, 2005
amounted to $129,855,000 at March 31, 2008 and are due November 1, 2013.
Provisions of the 8 7/8% Notes include, without limitation, restrictions on
indebtedness, asset sales, and dividends and other restricted
payments.  Until November 1, 2008, the Company may redeem up to 35% of
the outstanding notes at a redemption price of 108.875% with the proceeds of
equity offerings, subject to certain restrictions.  The 8 7/8% Notes
are redeemable at the option of the Company, in whole or in part, at prices
declining annually from the Make-Whole Price (as defined in the 8 7/8% Notes
agreement) to 100% on and after November 1, 2011.  In the event of a
Change of Control (as defined in the indenture for such notes), each holder of
the 8 7/8% Notes may require us to repurchase all or a portion of such holder’s
8 7/8% Notes at a purchase price equal to 101% of the principal amount
thereof.  The 8 7/8% Notes are guaranteed by certain existing and
future domestic subsidiaries and are not subject to any sinking fund
requirements. During fiscal 2008, the Company used cash on hand to
repurchase $6,145,000 of the outstanding 8 7/8% Notes.
  F-15
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 On August
1, 2007 the Company used cash on hand to redeem all of the remaining $22,125,000
of its outstanding 10% Senior Secured Notes.
 
 Cost of
bond redemptions, including premiums and the write-off of deferred financing
fees, was $1,794,000, $5,188,000 and $9,201,000 in fiscal 2008, 2007 and 2006
respectively.
 
 The
carrying amount of the Company’s revolving credit facility approximates the fair
value based on current market rates. The Company’s Senior Subordinated Notes
have an approximate fair market value of $132,452,000 based on quoted market
prices, the total of which is more than their carrying amount of
$129,855,000.
 
 On June
22, 2007, the Company recorded a capital lease resulting from the sale and
partial leaseback of its facility in Charlotte, NC under a 10 year lease
agreement. The outstanding balance on the capital lease of $3,006,000 as of
March 31, 2008 is included in senior debt in the consolidated balance
sheets.
 
 The
principal payments scheduled to be made as of March 31, 2008 on the above debt
are as follows (in thousands):
 
 2009
              
              $
              5212010
              
              
              5052011
              
              
              4332012
              
              
              4252013
              
              
              447Thereafter
              
              
              134,241
 
 International
Lines of Credit and Loans
 
 Unsecured
and uncommitted lines of credit are available to meet short-term working capital
needs for our subsidiaries operating outside of the United States. The lines of
credit are available on an offering basis, meaning that transactions under the
line of credit will be on such terms and conditions, including interest rate,
maturity, representations, covenants and events of default, as mutually agreed
between our subsidiaries and the local bank at the time of each specific
transaction.  Effective August 1, 2007, the Company issued a guarantee
to a third party lender which secures any borrowing by Univeyor, one of the
Company’s wholly-owned foreign subsidiaries, under Univeyor’s credit
facility.  The credit facility provides availability up to a maximum
of approximately $12,705,000. The outstanding borrowings on this credit facility
were approximately $11,294,000 at March 31, 2008.
 
 In
addition to the above facilities, our foreign subsidiaries have certain fixed
term bank loans. As of March 31, 2008, significant secured loans totaled
$3,325,000.  There were no significant unsecured loans outstanding at
March 31, 2008.
 
 11.
              Pensions
      and Other Benefit Plans
 
 The
Company provides retirement and pension plans, including defined benefit and
defined contribution plans, and postretirement benefit plans to certain
employees.  Effective March 31, 2007, the Company adopted SFAS
No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R),” which required the recognition in pension and other postretirement
benefits obligations and accumulated other comprehensive income of actuarial
gains or losses, prior service costs or credits and transition assets or
obligations that had previously been deferred under the reporting requirements
of SFAS No. 87, SFAS No. 106 and SFAS No. 132(R). This
statement also requires an entity to measure a defined benefit postretirement
plan’s assets and obligations that determine its funded status as of the end of
the employers’ fiscal year.  This requirement is effective for fiscal
years ending after December 15, 2008.
  F-16
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Pension
Plans
 
 The
Company provides defined benefit pension plans to certain
employees.  The Company uses March 31 as the measurement date for its
Yale Industrial Products GmbH pension plan and December 31 as the measurement
date for all of its other pension plans.  The following provides a
reconciliation of benefit obligation, plan assets, and funded status of the
plans:
 
 March 31,2008
              
              
              2007Change
      in benefit obligation:Benefit
      obligation at beginning of year
              
              $
              139,621
              
              
              $
              134,148Service
      cost
              
              
              4,386
              
              
              
              4,147Interest
      cost
              
              
              8,277
              
              
              
              7,608Actuarial
      (gain) loss
              
              
              (4,827
              )
              
              
              22Benefits
      paid
              
              
              (6,973
              )
              
              
              (6,346
              )Foreign
      exchange rate changes
              
              
              389
              
              
              
              42Benefit
      obligation at end of year
              
              $
              140,873
              
              
              $
              139,621
 
 Change
      in plan assets:Fair
      value of plan assets at beginning of year
              
              $
              110,845
              
              
              $
              100,206Actual
      gain on plan assets
              
              
              6,859
              
              
              
              10,989Employer
      contribution
              
              
              14,466
              
              
              
              5,960Benefits
      paid
              
              
              (6,973
              )
              
              
              (6,346
              )Foreign
      exchange rate changes
              
              
              343
              
              
              
              36Fair
      value of plan assets at end of year
              
              $
              125,540
              
              
              $
              110,845
 
 Funded
      status
              
              $
              (15,333
              )
              
              $
              (28,776
              )Unrecognized
      actuarial loss
              
              
              21,289
              
              
              
              27,918Unrecognized
      prior service cost
              
              
              1,943
              
              
              
              2,213Net
      amount recognized
              
              $
              7,899
              
              
              $
              1,355
 
 Amounts
recognized in the consolidated balance sheets are as follows:
 
 March 31,2008
              
              
              2007Other
      assets – non current
              
              $
              1,608
              
              
              $
              -Accrued
      liabilities
              
              
              (338
              )
              
              
              (245
              )Other
      non-current liabilities
              
              
              (16,603
              )
              
              
              (28,531
              )Deferred
      tax effect of accumulated other comprehensive loss
              
              
              9,252
              
              
              
              12,059Accumulated
      other comprehensive loss
              
              
              13,980
              
              
              
              18,072Net
      amount recognized
              
              $
              7,899
              
              
              $
              1,355
 
 In fiscal
2009, an estimated net loss of $875,000 and prior service cost of $340,000 for
the defined benefit pension plans will be amortized from accumulated other
comprehensive income to net periodic benefit cost.
 
 Net
periodic pension cost included the following components:
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Service
      costs—benefits earned during the period
              
              $
              4,386
              
              
              $
              4,147
              
              
              $
              4,004Interest
      cost on projected benefit obligation
              
              
              8,277
              
              
              
              7,608
              
              
              
              7,213Expected
      return on plan assets
              
              
              (8,198
              )
              
              
              (7,244
              )
              
              
              (6,753
              )Net
      amortization
              
              
              2,014
              
              
              
              2,773
              
              
              
              2,518Curtailment/settlement
      loss
              
              
              80
              
              
              
              156
              
              
              
              -Net
      periodic pension cost
              
              $
              6,559
              
              
              $
              7,440
              
              
              $
              6,982
  F-17
  COLUMBUS McKINNON
CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Information
for pension plans with a projected benefit obligation in excess of plan assets
is as follows:
 
 March 31,2008
              
              
              2007Projected
      benefit obligation
              
              $
              107,912
              
              
              $
              139,621Fair
      value of plan assets
              
              
              91,030
              
              
              
              110,845
 
 Information
for pension plans with an accumulated benefit obligation in excess of plan
assets is as follows:
 
 March 31,2008
              
              
              2007Accumulated
      benefit obligation
              
              $
              18,912
              
              
              $
              124,508Fair
      value of plan assets
              
              
              9,733
              
              
              
              105,345
 
 Unrecognized
gains and losses are amortized on a straight-line basis over the average
remaining service period of active participants.
 
 The weighted-average assumptions in the
following table represent the rates used to develop the actuarial present value
of the projected benefit obligation for the year listed and also net periodic
pension cost for the following year:
 
 March 31,2008
              
              
              2007
              
              
              2006
              
              
              2005Discount
      rate
              
              
              6.50
              %
              
              
              6.00
              %
              
              
              5.75
              %
              
              
              6.00
              %Expected
      long-term rate of return on plan assets
              
              
              7.50
              
              
              
              7.50
              
              
              
              7.50
              
              
              
              8.25Rate
      of compensation increase
              
              
              3.00
              
              
              
              3.00
              
              
              
              4.00
              
              
              
              4.00
 
 The
expected rate of return on plan asset assumptions are determined considering
historical averages and real returns on each asset class.
 
 The
Company’s retirement plan target and actual asset allocations are as
follows:
 
 March 31,Target
              
              
              Actual2009
              
              
              2008
              
              
              2007Equity
      securities
              
              
              70
              %
              
              
              60
              %
              
              
              62
              %Fixed
      income
              
              
              30
              
              
              
              40
              
              
              
              38Total
      plan assets
              
              
              100
              %
              
              
              100
              %
              
              
              100
              %
 
 The
Company has an investment objective for domestic pension plans to adequately
provide for both the growth and liquidity needed to support all current and
future benefit payment obligations.  The investment strategy is to
invest in a diversified portfolio of assets which are expected to satisfy the
aforementioned objective and produce both absolute and risk adjusted returns
competitive with a benchmark that is a blend of major US and international
equity indexes and an aggregate bond fund.  The shift to the targeted
allocation is the result of management’s re-evaluation of its investment
allocation.  The targeted allocation will be accomplished as some plan
assets governed by collective bargaining contracts will be transferred from
fixed income into equity securities, as well as reallocation of remaining assets
to achieve the desired balance during fiscal 2009.
 
 The
Company’s funding policy with respect to the defined benefit pension plans is to
contribute annually at least the minimum amount required by the Employee
Retirement Income Security Act of 1974 (ERISA).   Additional
contributions may be made to minimize PBGC premiums. The Company expects to
contribute $6,777,000 to its pension plans in fiscal 2009.
  F-18
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Information
about the expected benefit payments for the Company’s defined benefit plans is
as follows:
 
 2009
              
              $
              6,1642010
              
              
              6,6432011
              
              
              7,2512012
              
              
              8,1642013
              
              
              8,9682014-2018
              
              
              54,489
 
 Postretirement
Benefit Plans
 
 The
Company sponsors defined benefit postretirement health care plans that provide
medical and life insurance coverage to certain domestic retirees and their
dependents of one of its subsidiaries. Prior to the acquisition of this
subsidiary, the Company did not sponsor any postretirement benefit plans. The
Company pays the majority of the medical costs for certain retirees and their
spouses who are under age 65. For retirees and dependents of retirees who
retired prior to January 1, 1989, and are age 65 or over, the Company
contributes 100% toward the American Association of Retired Persons (“AARP”)
premium frozen at the 1992 level. For retirees and dependents of retirees who
retired after January 1, 1989, the Company contributes $35 per month toward the
AARP premium. The life insurance plan is noncontributory.
 
 The
Company’s postretirement health benefit plans are not funded.  The
following sets forth a reconciliation of benefit obligation and the funded
status of the plan:
 
 March 31,2008
              
              
              2007Change
      in benefit obligation:Benefit
      obligation at beginning of year
              
              $
              10,471
              
              
              $
              12,221Service
      cost
              
              
              3
              
              
              
              3Interest
      cost
              
              
              613
              
              
              
              658Actuarial
      loss (gain)
              
              
              693
              
              
              
              (193
              )Benefits
      paid
              
              
              (1,086
              )
              
              
              (2,218
              )Benefit
      obligation at end of year
              
              $
              10,694
              
              
              $
              10,471
 
 Funded
      status
              
              $
              (10,694
              )
              
              $
              (10,471
              )Unrecognized
      actuarial loss
              
              
              5,413
              
              
              
              5,138Net
      amount recognized
              
              $
              (5,281
              )
              
              $
              (5,333
              )
 
 Amounts
recognized in the consolidated balance sheets are as follows:
 
 March 31,2008
              
              
              2007Accrued
      liabilities
              
              $
              (1,332
              )
              
              $
              (1,456
              )Other
      non-current liabilities
              
              
              (9,362
              )
              
              
              (9,015
              )Deferred
      tax effect of accumulated other comprehensive loss
              
              
              2,165
              
              
              
              2,055Accumulated
      other comprehensive loss
              
              
              3,248
              
              
              
              3,083Net
      amount recognized
              
              $
              (5,281
              )
              
              $
              (5,333
              )
 
 In fiscal
2009, an estimated net loss of $408,000 for the defined benefit postretirement
health care plans will be amortized from accumulated other comprehensive income
to net periodic benefit cost.
  F-19
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Net
periodic postretirement benefit cost included the following:
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Service
      cost—benefits attributed to service during the period
              
              $
              3
              
              
              $
              3
              
              
              $
              6Interest
      cost
              
              
              613
              
              
              
              658
              
              
              
              751Amortization
      of plan net losses
              
              
              418
              
              
              
              414
              
              
              
              411Net
      periodic postretirement benefit cost
              
              $
              1,034
              
              
              $
              1,075
              
              
              $
              1,168
 
 For
measurement purposes, healthcare costs were assumed to increase 8.25% in fiscal
2008. Healthcare costs were assumed to increase 9.5% in fiscal 2009 grading down
over time to 5% in six years. The discount rate used in determining the
accumulated postretirement benefit obligation was 6.5% and 6.0% as of March 31,
2008 and 2007, respectively.
 
 Information
about the expected benefit payments for the Company’s postretirement health
benefit plans is as follows:
  2009
              
              $
              1,3322010
              
              
              1,2422011
              
              
              1,2432012
              
              
              1,1982013
              
              
              1,1482014-2018
              
              
              4,422
 
 Assumed
medical claims cost trend rates have an effect on the amounts reported for the
health care plans. A one-percentage point change in assumed health care cost
trend rates would have the following effects:
 
 One
      Percentage
              
              
              One
      PercentagePoint Increase
              
              
              Point DecreaseEffect
      on total of service and interest cost components
              
              $
              33
              
              
              $
              (30
              )Effect
      on postretirement obligation
              
              
              599
              
              
              
              (541
              )
 
 Other
Benefit Plans
 
 The
Company also sponsors defined contribution plans covering substantially all
domestic employees. Participants may elect to contribute basic contributions.
These plans provide for employer contributions based primarily on employee
participation. The Company recorded a charge for such contributions of
approximately $1,780,000, $1,650,000 and $1,476,000 for the years ended March
31, 2008, 2007 and 2006, respectively.
 
 12.
              Employee
      Stock Ownership Plan (ESOP)
 
 The AICPA
Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership
Plans” requires that compensation expense for ESOP shares be measured based on
the fair value of those shares when committed to be released to employees,
rather than based on their original cost. Also, dividends on those ESOP shares
that have not been allocated or committed to be released to ESOP participants
are not reflected as a reduction of retained earnings. Rather, since those
dividends are used for debt service, a charge to compensation expense is
recorded. Furthermore, ESOP shares that have not been allocated or committed to
be released are not considered outstanding for purposes of calculating earnings
per share.
 
 The
obligation of the ESOP to repay borrowings incurred to purchase shares of the
Company’s common stock is guaranteed by the Company; the unpaid balance of such
borrowings, if any, would be reflected in the consolidated balance sheet as a
liability. An amount equivalent to the cost of the collateralized common stock
and representing deferred employee benefits has been recorded as a deduction
from shareholders’ equity.
  F-20
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Substantially
all of the Company’s domestic non-union employees are participants in the ESOP.
Contributions to the plan result from the release of collateralized shares as
debt service payments are made. Compensation expense amounting to $965,000,
$808,000 and $653,000 in fiscal 2008, 2007 and 2006, respectively, is recorded
based on the guaranteed release of the ESOP shares at their fair market value.
Dividends on allocated ESOP shares, if any,   are recorded as a
reduction of retained earnings and are applied toward debt service.
 
 At March
31, 2008 and 2007, 667,177 and 694,751 of ESOP shares, respectively, were
allocated or available to be allocated to participants’ accounts. At March 31,
2008 and 2007, 176,646 and 213,667 of ESOP shares were pledged as collateral to
guarantee the ESOP term loans.
 
 The fair
market value of unearned ESOP shares at March 31, 2008 amounted to
$5,472,000.
 
 
 13.
              Earnings
      per Share and Stock Plans
 
 Earnings
per Share
 
 The
Company calculates earnings per share in accordance with Statement of Financial
Accounting Standards No. 128, “Earnings per Share” (SFAS No. 128). Basic
earnings per share excludes any dilutive effects of options, warrants, and
convertible securities. Diluted earnings per share includes any dilutive effects
of stock options.
 
 The
following table sets forth the computation of basic and diluted earnings per
share:
 
 Year
      Ended March 31,2008
              
              
              2007
              
              
              2006Numerator
      for basic and diluted earnings per share:Income
      from continuing operations
              
              $
              36,792
              
              
              $
              33,381
              
              
              $
              59,100Income
      from discontinued operations (net of tax)
              
              
              557
              
              
              
              704
              
              
              
              696Net
      income
              
              $
              37,349
              
              
              $
              34,085
              
              
              $
              59,796Denominators:Weighted-average
      common stock outstanding— denominator for basic EPS
              
              
              18,723
              
              
              
              18,517
              
              
              
              16,052Effect
      of dilutive employee stock options
              
              
              435
              
              
              
              434
              
              
              
              576Adjusted
      weighted-average common stock outstanding and assumed conversions—
      denominator for diluted EPS
              
              
              19,158
              
              
              
              18,951
              
              
              
              16,628
 
 The
weighted-average common stock outstanding shown above is net of unallocated ESOP
shares (see Note 12).
 
 
 Stock
Plans
 
 Effective
April 1, 2006, the Company adopted SFAS 123(R), "Share-Based Payment," applying
the modified prospective method. This Statement requires all equity-based
payments to employees, including grants of employee stock options, to be
recognized in the statement of earnings based on the grant date fair value of
the award. Under the modified prospective method, the Company is required to
record equity-based compensation expense for all awards granted after the date
of adoption and for the unvested portion of previously granted awards
outstanding as of the date of adoption. Stock based compensation expense
amounted to $1,128,000 and $1,230,000 in fiscal 2008 and 2007,
respectively.  Stock compensation expense is included in cost of goods
sold, selling, and general and administrative expense.  The Company
uses a straight-line method of attributing the value of stock-based compensation
expense, subject to minimum levels of expense, based on
vesting.
  F-21
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 Long
Term Incentive Plan
 
 Effective
July 31, 2006, the shareholders of the Company approved the adoption of our Long
Term Incentive Plan (LTIP).  The total number of shares of common
stock with respect to which awards may be granted under the plan is
850,000.  The LTIP was designed as an omnibus plan and awards may
consist of non-qualified stock options, incentive stock options, stock
appreciation rights, restricted stock, restricted stock units, or stock bonuses.
A maximum of 600,000 shares may be awarded as restricted stock, restricted stock
units, or stock bonuses.
 
 On May
17, 2007, the Company’s Board of Directors approved the terms of the fiscal 2008
awards to be granted under the 2006 Long Term Incentive plan.  Under
the plan, the granting of awards to employees may take the form of options,
restricted shares, and performance shares.  The Compensation Committee
of our Board of Directors determines the number of shares, the term, the
frequency and date, the type, the exercise periods, any performance criteria
pursuant to which awards may be granted and the restriction and other terms and
conditions of each grant in accordance with terms of our Plan.
 
 Options
granted were subject to a performance measure and have a maximum term of 10
years and vest ratably over a four year period from date of
grant.  Option awards provide for accelerated vesting as a result of
reaching retirement age and a specified number of years of
service.  Restricted shares vest ratably based on service one-third
after each of years three, four, and five.  Performance shares granted
are based upon the Company’s performance over a three year period depending on
the Company’s total shareholder return relative to a group of peer
companies.
 
 The
Company recognized compensation expense for stock option awards and unvested
restricted share awards that vest based on time or market parameters
straight-line over the requisite service period for vesting of the
award.  Performance based nonvested shares are recognized as
compensation expense based on fair value on date of grant, the number of shares
ultimately expected to vest and the vesting period.  For accounting
purposes, the performance shares are considered to have a market
condition.  The effect of the market condition is reflected in the
grant date fair value of the award and, thus compensation expense is recognized
on this type of award provided that the requisite service is rendered
(regardless of whether the market condition is achieved).  The fair
value of a performance share award is estimated using a Monte Carlo analysis to
estimate the total return ranking of CMCO among the peer companies on the date
of grant over the performance period.
 
 For the
year ended March 31, 2008, the Company granted 34,457 performance based awards
at a weighted average fair value of $19.40.  All 34,457 awards were
outstanding and unvested as of March 31, 2008.  There were no
performance based awards granted in fiscal 2007 or fiscal 2006.  Total
unrecognized compensation costs related to the unvested performance share awards
as of March 31, 2008 was $469,000 and is expected be recognized over a weighted
average period of two years.
 
 During
fiscal 2008 and 2007, a total of 7,601 and 9,390 shares of stock,
respectively, were granted under the LTIP to the Company’s non-executive
directors as part of their annual compensation.  The weighted average
fair value grant price of those shares was $25.80 and $19.17 for fiscal 2008 and
fiscal 2007, respectively.  The expense related to the shares for
fiscal 2008 and 2007 was $196,000 and $180,000, respectively.
 
 During
fiscal 2008 and fiscal 2007, restricted stock units were granted under the LTIP
to the Company’s non-executive directors as part of their annual
compensation.  A summary of the restricted stock unit awards granted
to the Company’s non-executive Directors as of March 31, 2008 is as
follows:
 
 Shares
              
              
              Weighted-average Grant Date Fair
      ValueUnvested
      at March 31, 2006
              
              
              -
              
              
              $
              -Granted
              
              
              7,200
              
              
              
              19.17Unvested
      at March 31, 2007
              
              
              7,200
              
              
              $
              19.17Granted
              
              
              7,842
              
              
              
              25.80Vested
              
              
              (4,521
              )
              
              
              19.54Unvested at
      March 31, 2008
              
              
              10,521
              
              
              $
              23.96
  F-22
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 The
expense related to the restricted stock units for fiscal 2008 and 2007 was
$130,000 and $40,000, respectively. Total unrecognized compensation cost related
to unvested restricted stock units as of March 31, 2008 is $200,000 and is
expected to be recognized over a weighted average period of one
year.  The fair value of restricted stock units that vested during the
year ended March 31, 2008 was $117,000.
 
 As of
March 31, 2008, there were 783,510 shares available for future grants under the
Long Term Incentive Plan.
 
 Stock
Option Plans
 
 Existing
prior to the adoption of the LTIP,the Company
maintained two stock option plans, a Non-Qualified Stock Option Plan
(Non-Qualified Plan) and an Incentive Stock Option Plan (Incentive Plan). Under
the Non-Qualified Plan, options may be granted to officers and other key
employees of the Company as well as to non-employee directors and
advisors.  As of March 31, 2008, no options have been granted to
non-employees. Options granted under the Non-Qualified and Incentive Plans
become exercisable over a four-year period at the rate of 25% per year
commencing one year from the date of grant at an exercise price of not less than
100% of the fair market value of the common stock on the date of grant. Any
option granted under the Non-Qualified plan may be exercised not earlier than
one year from the date such option is granted. Any option granted under the
Incentive Plan may be exercised not earlier than one year and not later than 10
years from the date such option is granted.
 
 A summary of option transactions during
each of the three fiscal years in the period endedMarch 31, 2008is as follows:
 
 Shares
              
              
              Weighted-average Exercise
    Price
              
              Weighted-average Remaining Contractual Life (in
      years)
              
              Aggregate Intrinsic
ValueOutstanding
      at March 31, 2005
              
              
              1,802,800
              
              
              $
              10.89Granted
              
              
              45,000
              
              
              
              21.61Exercised
              
              
              (626,282
              )
              
              
              11.41Cancelled
              
              
              (89,400
              )
              
              
              7.76Outstanding
      at March 31, 2006
              
              
              1,132,118
              
              
              $
              11.28Granted
              
              
              70,000
              
              
              
              22.41Exercised
              
              
              (240,468
              )
              
              
              10.82Cancelled
              
              
              (30,500
              )
              
              
              9.85Outstanding
      at March 31, 2007
              
              
              931,150
              
              
              $
              12.28Granted
              
              
              5,000
              
              
              
              32.85Exercised
              
              
              (144,425
              )
              
              
              9.81Cancelled
              
              
              (4,875
              )
              
              
              5.46Outstanding
      at March 31, 2008
              
              
              786,850
              
              
              $
              12.91
              
              4.8
              
              $     14,227Exercisable
      at March 31, 2008
              
              
              581,475
              
              
              $
              12.89
              
              4.0
              
              $     10,521
 
 We
calculated intrinsic value for those options that had an exercise price lower
than the market price of our common shares as of March 31, 2008. The aggregate
intrinsic value of outstanding options as of March 31, 2008 is calculated
as the difference between the exercise price of the underlying options and the
market price of our common shares for the 781,850 options that were in-the-money
at that date. The aggregate intrinsic value of exercisable options as of March
31, 2008 is calculated as the difference between the exercise price of the
underlying options and the market price of our common shares for the 581,475
exercisable options that were in-the-money at that date. The Company's closing
stock price was $30.98 as of March 31, 2008. The total intrinsic value of stock
options exercised was $2,842,000, $3,434,000 and $6,487,000 during fiscal 2008,
2007 and 2006, respectively.  As of March 31, 2008, there are 132,475
options available for future grants under the two stock option
plans.
 
 The fair
value of shares that vested was $5.14, $3.87 and $4.01 during fiscal 2008, 2007
and 2006, respectively.
  F-23
  COLUMBUS McKINNON
CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 Cash
received from option exercises under all share-based payment arrangements during
fiscal 2008 was $1,416,000. Proceeds from the exercise of stock options under
stock option plans are credited to common stock at par value and the excess is
credited to additional paid-in capital.
 
 As of
March 31, 2008, $891,000 of unrecognized compensation cost related to non-vested
stock options is expected to be recognized over a weighted-average period of
approximately 3 years.
 
 Exercise
prices for options outstanding as of March 31, 2008, ranged from $5.46 to
$32.85. The following table provides certain information with respect to stock
options outstanding at March 31, 2008:
 
 Range of Exercise
      Prices
              
              
              Stock
      Options
                Outstanding
              
              
              Weighted-average
                Exercise Price
              
              
              Weighted-average
      Remaining
                Contractual LifeUp
      to $10.00
              
              
              
              440,100
              
              
              $
              7.15
              
              
              
              5.2$10.01
      to $20.00.
              
              
              
              80,000
              
              
              
              14.67
              
              
              
              6.8$20.01
      to $30.00
              
              
              
              261,750
              
              
              
              21.67
              
              
              
              3.5$30.01
      to $40.00
              
              
              
              5,000
              
              
              
              32.85
              
              
              
              9.3786,850
              
              
              $
              12.91
              
              
              
              4.8
 
 The
following table provides certain information with respect to stock options
exercisable at March 31, 2008:
 
 Range of Exercise
      Prices
              
              
              Stock
      Options
                Outstanding
              
              
              Weighted-average
                Exercise PriceUp
      to $10.00
              
              
              
              330,975
              
              
              $
              7.66$10.01
      to $20.00.
              
              
              
              48,750
              
              
              
              13.64$20.01
      to $30.00
              
              
              
              201,750
              
              
              
              21.28581,475
              
              
              $
              12.89
 
 The fair
value of stock options granted was estimated on the date of grant using a
Black-Scholes option pricing model.  The Black-Scholes option
valuation model was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the Company’s
employee stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management’s opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options. The weighted-average fair value of the options was
$18.48, $12.93 and $12.13 for options granted during fiscal 2008, 2007 and 2006,
respectively.  The following table provides the weighted-average
assumptions used to value stock options granted during fiscal 2008, 2007 and
2006:
 
 
 Year
      Ended
              
              
              Year
      Ended
              
              
              Year
      EndedMarch 31, 2008
              
              
              March 31, 2007
              
              
              March 31, 2006Assumptions:Risk-free
      interest rate
              
              
              4.9
              %
              
              
              4.9
              %
              
              
              4.5
              %Dividend
      yield—Incentive Plan
              
              
              0.0
              %
              
              
              0.0
              %
              
              
              0.0
              %Volatility
      factor
              
              
              0.571
              
              
              
              0.593
              
              
              
              0.615Expected
      life—Incentive Plan
              
              5.5
      years
              
              
              5.5
      years
              
              
              5
      years
 
 To
determine expected volatility, the Company uses historical volatility based on
daily closing prices of its Common Stock over periods that correlate with the
expected terms of the options granted. The risk-free rate is based on the United
States Treasury yield curve at the time of grant for the appropriate term of the
options granted. Expected dividends are based on the Company's history and
expectation of dividend payouts. The expected term of stock options is based on
vesting schedules, expected exercise patterns and contractual
terms.
  F-24
  COLUMBUS McKINNON
CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 Restricted
Stock
 
 Also
existing prior to the adoption of the LTIP, the Company maintains a Restricted
Stock Plan. The Company charges compensation expense and shareholders’ equity
for the market value of shares ratably over the restricted period. Grantees that
remain continuously employed with the Company become vested in their shares five
years after the date of the grant.  As of March 31, 2008, there were
47,000 shares available for future grants under the Restricted Stock
Plan.
 
 During
the Fiscal 2008, 1,000 shares of restricted stock were granted at a weighted
average fair value grant price of $31.69.  As of March 31, 2008, there
are 3,000 shares of restricted stock outstanding with a weighted average fair
value grant price of $21.39.  The expense related to restricted stock
was $8,000, $7,000 and $6,000 for fiscal 2008, 2007 and 2006,
respectively.
 
 14.
              Loss
      Contingencies
 
 From time
to time, the Company is named a defendant in legal actions arising out of the
normal course of business.  The Company is not a party to any pending
legal proceeding other than ordinary, routine litigation incidental to our
business.  The Company does not believe that any of our pending
litigation will have a material impact on its business.
 
 General and Product Liability—Accrued general and product liability costs are the actuarially estimated
reserves based on amounts determined from loss reports, individual cases filed
with the Company, and an amount for losses incurred but not
reported.  Reserves for certain asbestos related claims are discounted
using a risk free interest rate which ranged from 1.55% to 4.30% as of March 31,
2008.  The aggregate amount of undiscounted reserves and discount
amount was $4,430,000 and $1,425,000, respectively, as of March 31,
2008.  Payments over each of the next five years is expected to be
$200,000 and $3,430,000 thereafter.  The liability for accrued general
and product liability costs is funded by investments in marketable securities
(see Notes 2 and 6).
 
 During
fiscal 2006, the Company reevaluated the predictability of future cash flows
associated with its self-insured product liability and asbestos reserves and
concluded that future cash payments related to reserves for nonasbestos claims
could no longer be discounted due to their underlying uncertainty.  This
change in estimate resulted in a reduction in the discount recorded by the
company of approximately $1,578,000 ($0.09 diluted EPS) impact for fiscal
2006.
 
 The
following table provides a reconciliation of the beginning and ending balances
for accrued general and product liability:
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Accrued
      general and product liability, beginning of year
              
              $
              21,078
              
              
              $
              20,969
              
              
              $
              16,094Add
      impact of change in discount estimate
              
              
              -
              
              
              
              -
              
              
              
              1,578Add
      provision for claims
              
              
              2,201
              
              
              
              4,343
              
              
              
              6,342Deduct
      payments for claims
              
              
              (2,508
              )
              
              
              (4,234
              )
              
              
              (3,045
              )Accrued
      general and product liability, end of year
              
              $
              20,771
              
              
              $
              21,078
              
              
              $
              20,969
 
 
 The per
occurrence limits on our self-insurance for general and product liability
coverage to Columbus McKinnon were $2,000,000 from inception through fiscal 2003
and $3,000,000 for fiscal 2004 and thereafter.  In addition to the per
occurrence limits, the Company’s coverage is also subject to an annual aggregate
limit, applicable to losses only.  These limits range from $2,000,000
to $6,000,000 for each policy year from inception through fiscal
2008.
  F-25
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 Along
with other manufacturing companies, the Company is subject to various federal,
state and local laws relating to the protection of the environment. To address
the requirements of such laws, the Company has adopted a corporate environmental
protection policy which provides that all of its owned or leased facilities
shall, and all of its employees have the duty to, comply with all applicable
environmental regulatory standards, and the Company has initiated an
environmental auditing program for our facilities to ensure compliance with such
regulatory standards.  The Company has also established managerial
responsibilities and internal communication channels for dealing with
environmental compliance issues that may arise in the course of our business.
Because of the complexity and changing nature of environmental regulatory
standards, it is possible that situations will arise from time to time requiring
the Company to incur expenditures in order to ensure environmental regulatory
compliance. However, the Company is not aware of any environmental condition or
any operation at any of its facilities, either individually or in the aggregate,
which would cause expenditures having a material adverse effect on its results
of operations, financial condition or cash flows and, accordingly, has not
budgeted any material capital expenditures for environmental compliance for
fiscal 2008.
 
 Like many industrial manufacturers,
the Company is involved in asbestos-related litigation.  In
continually evaluating costs relating to its estimated asbestos-related
liability, the Company reviews, among other things, the incidence of past and
recent claims, the historical case dismissal rate, the mix of the claimed
illnesses and occupations of the plaintiffs, its recent and historical
resolution of the cases, the number of cases pending against it, the status and
results of broad-based settlement discussions, and the number of years such
activity might continue.  Based on this review, the Company has
estimated its share of liability to defend and resolve probable asbestos-related
personal injury claims.  This estimate is highly uncertain due to the
limitations of the available data and the difficulty of forecasting with any
certainty the numerous variables that can affect the range of the
liability.  The Company will continue to study the variables in light
of additional information in order to identify trends that may become evident
and to assess their impact on the range of liability that is probable and
estimable.
 
 Based on
actuarial information, the Company has estimated its asbestos-related aggregate
liability through March 31, 2026 and March 31, 2038 to range between $5,000,000
and $15,000,000 using actuarial parameters of continued claims for a period of
18 to 30 years.  The Company's estimation of its asbestos-related
aggregate liability that is probable and estimable, in accordance with U.S.
generally accepted accounting principles approximates $8,400,000 which has been
reflected as a liability in the consolidated financial statements as of March
31, 2008. The recorded liability does not consider the impact of any potential
favorable federal legislation.  This liability may fluctuate based on
the uncertainty in the number of future claims that will be filed and the cost
to resolve those claims, which may be influenced by a number of factors,
including the outcome of the ongoing broad-based settlement negotiations,
defensive strategies, and the cost to resolve claims outside the broad-based
settlement program.  Of this amount, management expects to incur
asbestos liability payments of approximately $400,000 over the next 12
months.  Because payment of the liability is likely to extend over
many years, management believes that the potential additional costs for claims
will not have a material after-tax effect on the financial condition of the
Company or its liquidity, although the net after-tax effect of any future
liabilities recorded could be material to earnings in a future
period.
 
 
 15.
              Restructuring
      Charges
 
 The
Company analyzes its global capacity requirements in accordance with its ongoing
cost savings and consolidation efforts.  As a result, facilities are
closed or significantly reorganized and production operations are transferred to
other facilities within the same reporting segment, to better utilize their
available capacity. During fiscal 2008, the Company recorded restructuring costs
of $1,179,000 for facility demolition costs and severance. $1,132,000 and
$47,000 of these costs are related to the Solutions and Products segments,
respectively. The Solutions segment costs are related to two separate businesses
within the segment. The liability as of March 31, 2008 consists primarily of
environmental remediation costs which were accrued in accordance with SFAS No.
143.
  F-26
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 During
fiscal 2007, the Company recorded restructuring costs of $543,000 for severance
and the maintenance of non-operating facilities being held for sale which are
expensed on an as incurred basis in accordance with SFAS No. 146 “Accounting for
Costs Associated with Exit or Disposal Activities.”  $519,000 and
$24,000 of these costs are related to the Solutions and Products segments,
respectively. The completion of the sale of a previously closed facility
resulted in the reversal of $410,000 of restructuring charges within the
Products segment, including $216,000 of gain on the sale of a non-operating
property that had been written down in previous years.  The liability
as of March 31, 2007 consisted primarily of environmental remediation costs
which were accrued in accordance with SFAS No. 143.
 
 During
fiscal 2006, the Company recorded restructuring costs of $1,609,000 related to
environmental remediation charges, inventory disposal costs, and facility costs
as a result of the continued closure, merging and reorganization of the
Company.  $1,000,000 and $609,000 of these costs are related to the
Products and Solutions segments, respectively.  The charges primarily
relate to the cost of removal of certain environmentally hazardous materials in
accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations” and
FIN 47 ($600,000) and inventory disposal related to the rationalization of
certain product families within our mechanical jacks line
($400,000).  In addition, we have accrued additional costs of
maintenance of a non-operating facility based on anticipated sale date
($300,000).  The costs associated with the disposal of this facility
were originally accrued as a result of the restructuring occurring prior to the
adoption of SFAS No. 146, “Accounting for the Costs Associated with Exit or
Disposal Activities.”   As of March 31, 2006, the liability
primarily consisted of costs associated with the preparation and maintenance of
a non-operating facility and environmental remediation costs which were accrued
in accordance with SFAS No. 143.  The Company had one facility that
was completely closed and prepared for disposal.
 
 The
following provides a reconciliation of the activity related to restructuring
reserves:
 
 Employee
              
              
              Facility
              
              
              TotalReserve
      at March 31, 2005
              
              $
              16
              
              
              $
              128
              
              
              $
              144Fiscal
      2006 restructuring charges
              
              
              358
              
              
              
              1,251
              
              
              
              1,609Cash
      payments
              
              
              (315
              )
              
              
              (645
              )
              
              
              (960
              )Reserve
      at March 31, 2006
              
              $
              59
              
              
              $
              734
              
              
              $
              793Fiscal
      2007 restructuring charges
              
              
              289
              
              
              
              254
              
              
              
              543Cash
      payments
              
              
              (348
              )
              
              
              (195
              )
              
              
              (543
              )Restructuring
      charge reversal
              
              
              -
              
              
              
              (410
              )
              
              
              (410
              )Gain
      on sale of a non-operating facility
              
              
              -
              
              
              
              216
              
              
              
              216Reserve
      at March 31, 2007
              
              $
              -
              
              
              $
              599
              
              
              $
              599Fiscal
      2008 restructuring charges
              
              
              448
              
              
              
              731
              
              
              
              1,179Cash
      payments
              
              
              (448
              )
              
              
              (1,272
              )
              
              
              (1,720
              )Reserve
      at March 31, 2008
              
              $
              -
              
              
              $
              58
              
              
              $
              58
 
 
 16.
              Income
      Taxes
 
 The provision for income taxes differs
from the amount computed by applying the statutory federal income tax rate to
income from continuing operations before income tax expense.  The
sources and tax effects of the difference were as follows:
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Expected
      tax at 35%
              
              $
              20,836
              
              
              $
              18,872
              
              
              $
              9,854State
      income taxes net of federal benefit
              
              
              1,238
              
              
              
              910
              
              
              
              705Foreign
      taxes (less) greater than statutory provision
              
              
              (633
              )
              
              
              961
              
              
              
              41Permanent
      items
              
              
              315
              
              
              
              171
              
              
              
              370Valuation
      allowance
              
              
              2,029
              
              
              
              -
              
              
              
              (44,237
              )Other
              
              
              (1,046
              )
              
              
              (375
              )
              
              
              2,321Actual
      tax provision (benefit)
              
              $
              22,739
              
              
              $
              20,539
              
              
              $
              (30,946
              )
  F-27
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 The
provision for income tax expense (benefit) consisted of the
following:
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Current
      income tax expense:United
      States Federal
              
              $
              853
              
              
              $
              1,228
              
              
              $
              856State
      taxes
              
              
              1,904
              
              
              
              1,401
              
              
              
              1,084Foreign
              
              
              5,357
              
              
              
              5,472
              
              
              
              4,082Deferred
      income tax expense (benefit):United
      States
              
              
              14,304
              
              
              
              13,831
              
              
              
              (37,099
              )Foreign
              
              
              321
              
              
              
              (1,393
              )
              
              
              131$
              22,739
              
              
              $
              20,539
              
              
              $
              (30,946
              )
 
 The
Company applies the liability method of accounting for income taxes as required
by SFAS Statement No. 109, “Accounting for Income Taxes.” The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities are as follows:
 
 March 31,2008
              
              
              2007Deferred
      tax assets:Federal
      net operating loss carryforwards
              
              $
              -
              
              
              $
              13,484State
      and foreign net operating loss carryforwards
              
              
              5,093
              
              
              
              2,064Employee
      benefit plans
              
              
              6,729
              
              
              
              12,343Asset
      reserves
              
              
              1,324
              
              
              
              1,711Insurance
      reserves
              
              
              8,219
              
              
              
              7,372Accrued
      vacation and incentive costs
              
              
              3,420
              
              
              
              2,131Other
              
              
              7,112
              
              
              
              9,237Valuation
      allowance
              
              
              (4,093
              )
              
              
              (2,064
              )Gross
      deferred tax assets
              
              
              27,804
              
              
              
              46,278Deferred
      tax liabilities:Inventory
      reserves
              
              
              (2,289
              )
              
              
              (2,068
              )Property,
      plant, and equipment
              
              
              (1,658
              )
              
              
              (2,407
              )Gross
      deferred tax liabilities
              
              
              (3,947
              )
              
              
              (4,475
              )Net
      deferred tax assets
              
              $
              23,857
              
              
              $
              41,803
 
 The
valuation allowance includes $3,029,000 and $0 related to net operating losses
at our Univeyor business and $1,064,000 and $2,064,000 related to state net
operating losses in the United States at March 31, 2008 and 2007,
respectively.  The valuation allowance was established due to
uncertainty of the Company's ability to utilize all of the net operating loss
carry forwards before they expire.  The Univeyor valuation allowance is for
net operating losses in Denmark which have an indefinite life.  The state
net operating losses have expiration dates ranging from 2009 through
2023.
 
 Deferred
income taxes are classified within the consolidated balance sheets based on the
following breakdown:
 
 March 31,2008
              
              
              2007Net
      current deferred tax asset
              
              $
              7,958
              
              
              $
              8,669Net
      non-current deferred tax asset
              
              
              17,570
              
              
              
              34,460Net
      non-current deferred tax liability
              
              
              (1,671
              )
              
              
              (1,326
              )Net
      deferred tax asset
              
              $
              23,857
              
              
              $
              41,803
 
 The net
current deferred tax asset and net non-current deferred tax liability are
included in prepaid expenses and other non-current liabilities,
respectively.
  F-28
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 Income
from continuing operations before income tax expense (benefit) includes foreign
subsidiary income of $11,512,000, $10,067,000 and $13,034,000 for the years
ended March 31, 2008, 2007, and 2006, respectively. Income from discontinued
operations reported in the statement of income is net of tax of $300,000,
$373,000 and $375,000 for the years ended March 31, 2008, 2007, and 2006,
respectively. As of March 31, 2008, the Company had unrecognized deferred tax
liabilities related to approximately $24,000,000 of cumulative undistributed
earnings of foreign subsidiaries.  These earnings are considered to be
permanently invested in operations outside the United
States.  Determination of the amount of unrecognized deferred U.S.
income tax liability with respect to such earnings is not
practicable.
 
 There
were 70,725 and 136,511 shares of common stock were issued through the exercise
of non-qualified stock options or through the disqualifying disposition of
incentive stock options in the years ended March 31, 2008, and 2007,
respectively. The tax benefit to the Company from these transactions, which is
credited to additional paid-in capital rather than recognized as a reduction of
income tax expense, was $482,000 and $311,000 in 2008 and 2007,
respectively.  This tax benefit has also been recognized in the
consolidated balance sheet as an increase in deferred tax assets.
 
 On April
1, 2007, the Company adopted the provisions of Financial Standards Accounting
Board ("FASB") Interpretation ("FIN") No. 48 “Accounting for Uncertainty in
Income Taxes,” (“FIN 48”) an interpretation of FASB Statement of Financial
Accounting Standards ("SFAS") No. 109. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized under SFAS 109. FIN 48 prescribes a
recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return and also provides guidance on various related matters such as
derecognition, interest and penalties, and disclosure.
 
 Upon
adoption of FIN 48, the Company recorded a reduction in retained earnings for
the cumulative effect adjustment of $186,000 to its $2,600,000 of unrecognized
tax benefits, all of which would favorably impact the effective tax rate if
recognized. During fiscal 2008, the balance of unrecognized tax benefits
decreased $153,000 as a result of foreign currency translation, partially offset
by an increase related to certain intercompany transactions that have not been
audited by the various tax jurisdictions and a matter that arose during a state
income tax audit.
 
 The
Company had $133,000 accrued for the payment of interest and penalties at March
31, 2008. The Company recognizes interest expense or penalties related to
uncertain tax positions as a part of income tax expense in its consolidated
statement of income. The Company is currently open to audit by the Internal
Revenue Service for the years ending March 31, 2005 through 2008.
 
 Below is
a summary of fiscal 2008 changes to the unrecognized tax benefit (excluding
interest and penalties):
 
 Balance
      at April 1, 2007
              
              $
              2,600Additions
      based on upon tax positions related to prior years
              
              
              76Foreign
      currency translation
              
              
              (229
              )Balance
      at March 31, 2008
              
              $
              2,447
 
 The
Company does not anticipate that total unrecognized tax benefits will change
significantly due to the settlement of audits or the expiration of statutes of
limitations prior to March 31, 2009.
 
 17.
              Rental
      Expense and Lease Commitments
 
 Rental
expense for the years ended March 31, 2008, 2007 and 2006 was $5,746,000,
$4,483,000, and $3,914,000, respectively. The following amounts represent future
minimum payment commitments as of March 31, 2008 under non-cancelable operating
leases extending beyond one year:
 
 Year Ended March
      31,
              
              Real Property
              
              
              Vehicles and Equipment
              
              
              Total2009
              
              $
              1,988
              
              
              $
              3,130
              
              
              $
              5,1182010
              
              
              1,531
              
              
              
              2,592
              
              
              
              4,1232011
              
              
              1,215
              
              
              
              2,049
              
              
              
              3,2642012
              
              
              556
              
              
              
              1,524
              
              
              
              2,0802013
              
              
              484
              
              
              
              1,048
              
              
              
              1,532
  F-29
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 18.
              Summary
      Financial Information
 
 The
following information sets forth the condensed consolidating summary financial
information of the parent and guarantors, which guarantee the 8 7/8% Senior
Subordinated Notes, and the nonguarantors. The guarantors are wholly owned and
the guarantees are full, unconditional, joint and several.
 
 
 As of and
for the year ended March 31, 2008:
 
 Parent
              
              
              Guarantors
              
              
              Non Guarantors
              
              
              Eliminations
              
              
              ConsolidatedAs
      of March 31, 2008:Current
      assets:Cash
              
              $
              31,800
              
              
              $
              (341
              )
              
              $
              44,535
              
              
              $
              —
              
              
              $
              75,994Trade
      accounts receivable and unbilled revenues
              
              
              62,992
              
              
              
              —
              
              
              
              43,917
              
              
              
              —
              
              
              
              106,909Inventories
              
              
              35,375
              
              
              
              18,797
              
              
              
              36,525
              
              
              
              (2,365
              )
              
              
              88,332Prepaid
      expenses
              
              
              8,264
              
              
              
              1,025
              
              
              
              8,243
              
              
              
              —
              
              
              
              17,532Total
      current assets
              
              
              138,431
              
              
              
              19,481
              
              
              
              133,220
              
              
              
              (2,365
              )
              
              
              288,767Net
      property, plant, and equipment
              
              
              26,834
              
              
              
              11,916
              
              
              
              19,664
              
              
              
              —
              
              
              
              58,414Goodwill
      and other intangibles, net
              
              
              89,008
              
              
              
              57,034
              
              
              
              41,334
              
              
              
              —
              
              
              
              187,376Intercompany
      balances
              
              
              50,555
              
              
              
              (59,869
              )
              
              
              (64,821
              )
              
              
              74,135
              
              
              
              —Other
      non-current assets
              
              
              79,909
              
              
              
              194,783
              
              
              
              30,643
              
              
              
              (249,857
              )
              
              
              55,478Total
      assets
              
              $
              384,737
              
              
              $
              223,345
              
              
              $
              160,040
              
              
              $
              (178,087
              )
              
              $
              590,035Current
      liabilities
              
              $
              42,714
              
              
              $
              15,951
              
              
              $
              52,113
              
              
              $
              (1,119
              )
              
              $
              109,659Long-term
      debt, less current portion
              
              
              129,855
              
              
              
              2,815
              
              
              
              3,381
              
              
              
              —
              
              
              
              136,051Other
      non-current liabilities
              
              
              12,312
              
              
              
              10,757
              
              
              
              25,775
              
              
              
              —
              
              
              
              48,844Total
      liabilities
              
              
              184,881
              
              
              
              29,523
              
              
              
              81,269
              
              
              
              (1,119
              )
              
              
              294,554Shareholders’
      equity
              
              
              199,856
              
              
              
              193,822
              
              
              
              78,771
              
              
              
              (176,968
              )
              
              
              295,481Total
      liabilities and shareholders’ equity
              
              $
              384,737
              
              
              $
              223,345
              
              
              $
              160,040
              
              
              $
              (178,087
              )
              
              $
              590,035
 
 For
      the Year Ended March 31, 2008:Net
      sales
              
              $
              302,676
              
              
              $
              176,901
              
              
              $
              185,157
              
              
              $
              (41,400
              )
              
              $
              623,334Cost
      of products sold
              
              
              219,366
              
              
              
              129,575
              
              
              
              131,035
              
              
              
              (41,195
              )
              
              
              438,781Gross
      profit (loss)
              
              
              83,310
              
              
              
              47,326
              
              
              
              54,122
              
              
              
              (205
              )
              
              
              184,553Selling,
      general and administrative expenses
              
              
              49,834
              
              
              
              18,043
              
              
              
              41,725
              
              
              
              —
              
              
              
              109,602Restructuring
      charges
              
              
              836
              
              
              
              —
              
              
              
              343
              
              
              
              —
              
              
              
              1,179Impairment
      loss
              
              
              —
              
              
              
              —
              
              
              
              2,509
              
              
              
              —
              
              
              
              2,509Amortization
      of intangibles
              
              
              112
              
              
              
              3
              
              
              
              —
              
              
              
              —
              
              
              
              115Income
      (loss) from operations
              
              
              32,528
              
              
              
              29,280
              
              
              
              9,545
              
              
              
              (205
              )
              
              
              71,148Interest
      and debt expense
              
              
              9,918
              
              
              
              3,554
              
              
              
              1,157
              
              
              
              —
              
              
              
              14,629Other
      (income) and expense, net
              
              
              641
              
              
              
              (643
              )
              
              
              (3,010
              )
              
              
              —
              
              
              
              (3,012
              )Income
      from continuing operations  before income tax expense
      (benefit)
              
              
              21,969
              
              
              
              26,369
              
              
              
              11,398
              
              
              
              (205
              )
              
              
              59,531Income
      tax expense (benefit)
              
              
              6,068
              
              
              
              11,080
              
              
              
              5,679
              
              
              
              (88
              )
              
              
              22,739Income
      (loss) from continuous operations
              
              
              15,901
              
              
              
              15,289
              
              
              
              5,719
              
              
              
              (117
              )
              
              
              36,792Income
      from discontinued operations
              
              
              557
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              557Net
      income (loss)
              
              $
              16,458
              
              
              $
              15,289
              
              
              $
              5,719
              
              
              $
              (117
              )
              
              $
              37,349
  F-30
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 Parent
              
              
              Guarantors
              
              
              Non Guarantors
              
              
              Eliminations
              
              
              ConsolidatedFor
      the Year Ended March 31, 2008:Operating
      activities:Cash
      provided (used) by operating activities
              
              $
              47,514
              
              
              $
              (1,483
              )
              
              $
              13,558
              
              
              $
              1
              
              
              $
              59,590Investing
      activities:Sales
      of marketable securities, net
              
              
              —
              
              
              
              —
              
              
              
              (1,562
              )
              
              
              —
              
              
              
              (1,562
              )Capital
      expenditures
              
              
              (7,228
              )
              
              
              (2,745
              )
              
              
              (3,093
              )
              
              
              —
              
              
              
              (13,066
              )Proceeds
      from sale of businesses and surplus real estate
              
              
              —
              
              
              
              5,504
              
              
              
              —
              
              
              
              —
              
              
              
              5,504Proceeds
      from discontinued operations (net of tax)
              
              
              557
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              557Net
      cash (used) provided by investing activities
              
              
              (6,671
              )
              
              
              2,759
              
              
              
              (4,655
              )
              
              
              —
              
              
              
              (8,567
              )Financing
      activities:Proceeds
      from exercise of stock options
              
              
              1,416
              
              
              
              —
              
              
              
              1
              
              
              
              (1
              )
              
              
              1,416Net
      borrowings under revolving line-of-credit
agreements .
              
              
              —
              
              
              
              —
              
              
              
              18
              
              
              
              —
              
              
              
              18Repayment
      of debt
              
              
              (29,898
              )
              
              
              (142
              )
              
              
              (1,029
              )
              
              
              —
              
              
              
              (31,069
              )Deferred
      financing costs incurred
              
              
              (2
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (2
              )Other
              
              
              1,075
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              1,075Net
      cash used by financing activities
              
              
              (27,409
              )
              
              
              (142
              )
              
              
              (1,010
              )
              
              
              (1
              )
              
              
              (28,562
              )Effect
      of exchange rate changes on cash
              
              
              —
              
              
              
              (313
              )
              
              
              5,191
              
              
              
              —
              
              
              
              4,878Net
      change in cash and cash equivalents
              
              
              13,434
              
              
              
              821
              
              
              
              13,084
              
              
              
              —
              
              
              
              27,339Cash
      and cash equivalents at beginning of year .
              
              
              18,366
              
              
              
              (1,162
              )
              
              
              31,451
              
              
              
              —
              
              
              
              48,655Cash
      and cash equivalents at end of year
              
              $
              31,800
              
              
              $
              (341
              )
              
              $
              44,535
              
              
              $
              —
              
              
              $
              75,994
 
 
 
 As of and
for the year ended March 31, 2007:
 
 As
      of March 31, 2007:Current
      assets:Cash
              
              $
              18,366
              
              
              $
              (1,162
              )
              
              $
              31,451
              
              
              $
              —
              
              
              $
              48,655Trade
      accounts receivable and unbilled revenues
              
              
              64,849
              
              
              
              45
              
              
              
              47,425
              
              
              
              —
              
              
              
              112,319Inventories
              
              
              34,548
              
              
              
              17,175
              
              
              
              27,616
              
              
              
              (2,160
              )
              
              
              77,179Prepaid
      expenses
              
              
              6,237
              
              
              
              2,707
              
              
              
              9,085
              
              
              
              —
              
              
              
              18,029Total
      current assets
              
              
              124,000
              
              
              
              18,765
              
              
              
              115,577
              
              
              
              (2,160
              )
              
              
              256,182Net
      property, plant, and equipment
              
              
              24,662
              
              
              
              11,508
              
              
              
              19,061
              
              
              
              —
              
              
              
              55,231Goodwill
      and other intangibles, net
              
              
              88,703
              
              
              
              57,037
              
              
              
              40,163
              
              
              
              —
              
              
              
              185,903Intercompany
      balances
              
              
              66,971
              
              
              
              (77,385
              )
              
              
              (63,602
              )
              
              
              74,016
              
              
              
              —Other
      non-current assets
              
              
              93,609
              
              
              
              194,922
              
              
              
              29,647
              
              
              
              (249,856
              )
              
              
              68,322Total
      assets
              
              $
              397,945
              
              
              $
              204,847
              
              
              $
              140,846
              
              
              $
              (178,000
              )
              
              $
              565,638Current
      liabilities
              
              $
              36,388
              
              
              $
              15,376
              
              
              $
              48,120
              
              
              $
              (1,150
              )
              
              $
              98,734Long-term
      debt, less current portion
              
              
              158,125
              
              
              
              —
              
              
              
              4,043
              
              
              
              —
              
              
              
              162,168Other
      non-current liabilities
              
              
              27,646
              
              
              
              11,143
              
              
              
              24,622
              
              
              
              —
              
              
              
              63,411Total
      liabilities
              
              
              222,159
              
              
              
              26,519
              
              
              
              76,785
              
              
              
              (1,150
              )
              
              
              324,313Shareholders’
      equity
              
              
              175,786
              
              
              
              178,328
              
              
              
              64,061
              
              
              
              (176,850
              )
              
              
              241,325Total
      liabilities and shareholders’ equity.
              
              $
              397,945
              
              
              $
              204,847
              
              
              $
              140,846
              
              
              $
              (178,000
              )
              
              $
              565,638
  F-31
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 Parent
              
              
              Guarantors
              
              
              Non
      Guarantors
              
              
              Eliminations
              
              
              ConsolidatedFor
      the Year Ended March 31, 2007:Net
      sales
              
              $
              287,223
              
              
              $
              170,633
              
              
              $
              179,235
              
              
              $
              (47,243
              )
              
              $
              589,848Cost
      of products sold
              
              
              210,020
              
              
              
              127,691
              
              
              
              134,985
              
              
              
              (47,448
              )
              
              
              425,248Gross
      profit
              
              
              77,203
              
              
              
              42,942
              
              
              
              44,250
              
              
              
              205
              
              
              
              164,600Selling,
      general and administrative expenses
              
              
              42,503
              
              
              
              17,490
              
              
              
              35,835
              
              
              
              —
              
              
              
              95,828Restructuring
      charges
              
              
              (137
              )
              
              
              —
              
              
              
              270
              
              
              
              —
              
              
              
              133Amortization
      of intangibles
              
              
              109
              
              
              
              3
              
              
              
              71
              
              
              
              —
              
              
              
              183Income
      from operations
              
              
              34,728
              
              
              
              25,449
              
              
              
              8,074
              
              
              
              205
              
              
              
              68,456Interest
      and debt expense
              
              
              12,154
              
              
              
              3,948
              
              
              
              328
              
              
              
              —
              
              
              
              16,430Other
      (income) and expense, net
              
              
              4,860
              
              
              
              (913
              )
              
              
              (5,841
              )
              
              
              —
              
              
              
              (1,894
              )Income
      from continuing operations  before  income tax expense
      (benefit)
              
              
              17,714
              
              
              
              22,414
              
              
              
              13,587
              
              
              
              205
              
              
              
              53,920Income
      tax expense (benefit)
              
              
              7,506
              
              
              
              8,916
              
              
              
              4,197
              
              
              
              (80
              )
              
              
              20,539Income
      from continuous operations
              
              
              10,208
              
              
              
              13,498
              
              
              
              9,390
              
              
              
              285
              
              
              
              33,381Income
      from discontinued operations
              
              
              704
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              704Net
      income
              
              $
              10,912
              
              
              $
              13,498
              
              
              $
              9,390
              
              
              $
              285
              
              
              $
              34,085
 
 
 
 For
      the Year Ended March 31, 2007:Operating
      activities:Cash
      provided (used) by operating activities
              
              $
              41,024
              
              
              $
              925
              
              
              $
              (1,667
              )
              
              $
              5,213
              
              
              $
              45,495Investing
      activities:Sales
      of marketable securities, net
              
              
              —
              
              
              
              —
              
              
              
              1,167
              
              
              
              —
              
              
              
              1,167Capital
      expenditures
              
              
              (6,319
              )
              
              
              (1,099
              )
              
              
              (3,235
              )
              
              
              —
              
              
              
              (10,653
              )Proceeds
      from sale of businesses and surplus real estate
              
              
              1,906
              
              
              
              2,970
              
              
              
              511
              
              
              
              —
              
              
              
              5,387Proceeds
      from discontinued operations (net of tax)
              
              
              704
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              704Net
      cash (used) provided by investing activities
              
              
              (3,709
              )
              
              
              1,871
              
              
              
              (1,557
              )
              
              
              —
              
              
              
              (3,395
              )Financing
      activities:Proceeds
      from exercise of stock options
              
              
              2,601
              
              
              
              (15
              )
              
              
              13,489
              
              
              
              (13,474
              )
              
              
              2,601Net
      borrowings under revolving line-of-credit
agreements .
              
              
              —
              
              
              
              —
              
              
              
              3,045
              
              
              
              —
              
              
              
              3,045(Repayment)
      borrowing of debt
              
              
              (49,522
              )
              
              
              —
              
              
              
              3,558
              
              
              
              —
              
              
              
              (45,964
              )Deferred
      financing costs incurred
              
              
              (449
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (449
              )Dividends
      paid
              
              
              —
              
              
              
              (2,324
              )
              
              
              (5,937
              )
              
              
              8,261
              
              
              
              —Other
              
              
              890
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              890Net
      cash (used) provided by financing activities
              
              
              (46,480
              )
              
              
              (2,339
              )
              
              
              14,155
              
              
              
              (5,213
              )
              
              
              (39,877
              )Effect
      of exchange rate changes on cash
              
              
              —
              
              
              
              (158
              )
              
              
              992
              
              
              
              —
              
              
              
              834Net
      change in cash and cash equivalents
              
              
              (9,165
              )
              
              
              299
              
              
              
              11,923
              
              
              
              —
              
              
              
              3,057Cash
      and cash equivalents at beginning of year.
              
              
              27,531
              
              
              
              (1,461
              )
              
              
              19,528
              
              
              
              —
              
              
              
              45,598Cash
      and cash equivalents at end of year
              
              $
              18,366
              
              
              $
              (1,162
              )
              
              $
              31,451
              
              
              $
              —
              
              
              $
              48,655
  F-32
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 For the
year ended March 31, 2006:
 
 Parent
              
              
              Guarantors
              
              
              Non Guarantors
              
              
              Eliminations
              
              
              ConsolidatedFor
      the Year Ended March 31, 2006:Net
      sales
              
              $
              268,570
              
              
              $
              152,181
              
              
              $
              163,787
              
              
              $
              (28,531
              )
              
              $
              556,007Cost
      of products sold
              
              
              200,639
              
              
              
              114,042
              
              
              
              120,842
              
              
              
              (27,138
              )
              
              
              408,385Gross
      profit
              
              
              67,931
              
              
              
              38,139
              
              
              
              42,945
              
              
              
              (1,393
              )
              
              
              147,622Selling,
      general and administrative expenses
              
              
              40,811
              
              
              
              16,003
              
              
              
              31,081
              
              
              
              —
              
              
              
              87,895Restructuring
      charges
              
              
              1,635
              
              
              
              —
              
              
              
              (26
              )
              
              
              —
              
              
              
              1,609Amortization
      of intangibles
              
              
              179
              
              
              
              3
              
              
              
              67
              
              
              
              —
              
              
              
              249Income
      from operations
              
              
              25,306
              
              
              
              22,133
              
              
              
              11,823
              
              
              
              (1,393
              )
              
              
              57,869Interest
      and debt expense
              
              
              19,558
              
              
              
              4,876
              
              
              
              233
              
              
              
              —
              
              
              
              24,667Other
      (income) and expense, net
              
              
              8,055
              
              
              
              20
              
              
              
              (3,027
              )
              
              
              —
              
              
              
              5,048(Loss)
      income from continuing operations  before income tax
      (benefit) expense
              
              
              (2,307
              )
              
              
              17,237
              
              
              
              14,617
              
              
              
              (1,393
              )
              
              
              28,154Income
      tax (benefit) expense
              
              
              (37,950
              )
              
              
              2,912
              
              
              
              4,263
              
              
              
              (171
              )
              
              
              (30,946
              )Income
      from continuous operations
              
              
              35,643
              
              
              
              14,325
              
              
              
              10,354
              
              
              
              (1,222
              )
              
              
              59,100Income
      from discontinued operations
              
              
              696
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              696Net
      income
              
              $
              36,339
              
              
              $
              14,325
              
              
              $
              10,354
              
              
              $
              (1,222
              )
              
              $
              59,796
 
 
 
 For
      the Year Ended March 31, 2006:Operating
      activities:Cash
      provided by operating activities
              
              $
              26,358
              
              
              $
              8,418
              
              
              $
              11,587
              
              
              $
              —
              
              
              $
              46,363Investing
      activities:Purchases
      of marketable securities, net
              
              
              —
              
              
              
              —
              
              
              
              (888
              )
              
              
              —
              
              
              
              (888
              )Capital
      expenditures
              
              
              (4,759
              )
              
              
              (800
              )
              
              
              (2,871
              )
              
              
              —
              
              
              
              (8,430
              )Proceeds
      from sale of businesses and surplus real estate
              
              
              —
              
              
              
              468
              
              
              
              1,623
              
              
              
              —
              
              
              
              2,091Proceeds
      from discontinued operations note receivable
              
              
              857
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              857Net
      cash used by investing activities
              
              
              (3,902
              )
              
              
              (332
              )
              
              
              (2,136
              )
              
              
              —
              
              
              
              (6,370
              )Financing
      activities:Proceeds
      from issuance of common stock
              
              
              56,619
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              56,619Proceeds
      from exercise of stock options
              
              
              7,149
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              7,149Net
      borrowings under revolving line-of-credit
agreements .
              
              
              240
              
              
              
              —
              
              
              
              1,121
              
              
              
              —
              
              
              
              1,361Repayment
      of debt
              
              
              (204,832
              )
              
              
              —
              
              
              
              (335
              )
              
              
              —
              
              
              
              (205,167
              )Proceeds
      from issuance of long-term debt
              
              
              136,000
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              136,000Deferred
      financing costs incurred
              
              
              (2,877
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (2,877
              )Dividends
      paid
              
              
              9,067
              
              
              
              (8,854
              )
              
              
              (213
              )
              
              
              —
              
              
              
              —Other
              
              
              2,712
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              2,712Net
      cash provided (used) by financing activities
              
              
              4,078
              
              
              
              (8,854
              )
              
              
              573
              
              
              
              —
              
              
              
              (4,203
              )Effect
      of exchange rate changes on cash
              
              
              -
              
              
              
              4
              
              
              
              325
              
              
              
              —
              
              
              
              329Net
      change in cash and cash equivalents
              
              
              26,534
              
              
              
              (764
              )
              
              
              10,349
              
              
              
              —
              
              
              
              36,119Cash
      and cash equivalents at beginning of year.
              
              
              997
              
              
              
              (697
              )
              
              
              9,179
              
              
              
              —
              
              
              
              9,479Cash
      and cash equivalents at end of year
              
              $
              27,531
              
              
              $
              (1,461
              )
              
              $
              19,528
              
              
              $
              —
              
              
              $
              45,598
  F-33
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 19.
              Business
      Segment Information
 
 As a
result of the way the Company manages the business, its reportable segments are
strategic business units that offer products with different characteristics. The
most defining characteristic is the extent of customized engineering required on
a per-order basis. In addition, the segments serve different customer bases
through differing methods of distribution. The Company has two reportable
segments: Products and Solutions. The Company’s Products segment sells hoists,
industrial cranes, chain, attachments, and other material handling products
principally to third party distributors through diverse distribution channels,
and to a lesser extent directly to end-users. The Solutions segment sells
engineered material handling systems such as conveyors and lift tables primarily
to end-users in the consumer products, manufacturing, warehousing, and, to a
lesser extent, the steel, construction, automotive, and other industrial
markets. The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. Intersegment sales are not
significant. The Company evaluates performance based on the operating earnings
of the respective business units.
 
 Segment
information as of and for the years ended March 31, 2008, 2007 and 2006 is as
follows:
 
 Year Ended March 31,
    2008Products
              
              
              Solutions
              
              
              TotalSales
      to external customers
              
              $
              570,013
              
              
              $
              53,321
              
              
              $
              623,334Income
      (loss) from operations
              
              
              78,387
              
              
              
              (7,239
              )
              
              
              71,148Depreciation
      and amortization
              
              
              7,958
              
              
              
              858
              
              
              
              8,816Total
      assets
              
              
              560,085
              
              
              
              29,950
              
              
              
              590,035Capital
      expenditures
              
              
              12,095
              
              
              
              971
              
              
              
              13,066
 
 Year Ended March 31,
    2007Products
              
              
              Solutions
              
              
              TotalSales
      to external customers
              
              $
              527,089
              
              
              $
              62,759
              
              
              $
              589,848Income
      (loss) from operations
              
              
              71,478
              
              
              
              (3,022
              )
              
              
              68,456Depreciation
      and amortization
              
              
              7,431
              
              
              
              858
              
              
              
              8,289Total
      assets
              
              
              526,660
              
              
              
              38,978
              
              
              
              565,638Capital
      expenditures
              
              
              10,399
              
              
              
              254
              
              
              
              10,653
 
 Year Ended March31, 2006Products
              
              
              Solutions
              
              
              TotalSales
      to external customers
              
              $
              493,896
              
              
              $
              62,111
              
              
              $
              556,007Income
      from operations
              
              
              55,849
              
              
              
              2,020
              
              
              
              57,869Depreciation
      and amortization
              
              
              7,805
              
              
              
              1,019
              
              
              
              8,824Total
      assets
              
              
              530,600
              
              
              
              35,444
              
              
              
              566,044Capital
      expenditures
              
              
              7,931
              
              
              
              499
              
              
              
              8,430
  F-34
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 Financial
information relating to the Company’s operations by geographic area is as
follows:
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Net
      sales:United
      States
              
              $
              447,977
              
              
              $
              424,696
              
              
              $
              394,657Europe
              
              
              136,051
              
              
              
              121,908
              
              
              
              112,868Canada
              
              
              18,672
              
              
              
              26,757
              
              
              
              30,492Other
      Other
              
              
              20,634
              
              
              
              16,487
              
              
              
              17,990Total
              
              $
              623,334
              
              
              $
              589,848
              
              
              $
              556,007
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Total
      assets:United
      States
              
              $
              399,462
              
              
              $
              394,923
              
              
              $
              411,199Europe
              
              
              161,695
              
              
              
              143,712
              
              
              
              123,694Canada
              
              
              15,464
              
              
              
              15,222
              
              
              
              20,444Other
              
              
              13,414
              
              
              
              11,781
              
              
              
              10,707Total
              
              $
              590,035
              
              
              $
              565,638
              
              
              $
              566,044
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Long-lived
      assets:United
      States
              
              $
              184,792
              
              
              $
              182,160
              
              
              $
              184,448Europe
              
              
              57,558
              
              
              
              55,444
              
              
              
              53,357Canada
              
              
              -
              
              
              
              -
              
              
              
              1,869Other
              
              
              3,440
              
              
              
              3,530
              
              
              
              2,785Total
              
              $
              245,790
              
              
              $
              241,134
              
              
              $
              242,459
 
 
 Sales by
major product group are as follows:
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Hoists
              
              $
              321,778
              
              
              $
              284,494
              
              
              $
              258,082Chain
      and forged attachments
              
              
              142,966
              
              
              
              134,850
              
              
              
              134,301Industrial
      cranes
              
              
              63,327
              
              
              
              67,003
              
              
              
              61,967Other
              
              
              95,263
              
              
              
              103,501
              
              
              
              101,657Total
              
              $
              623,334
              
              
              $
              589,848
              
              
              $
              556,007
  F-35
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 20.
              Selected
      Quarterly Financial Data
(Unaudited)
 
 The
Company’s quarterly reporting periods, with the exception of the fourth quarter,
end on the Sunday closest to the end of the calendar quarter. The interim fiscal
periods presented below are consistently determined from year to
year.
 
 Below is
selected quarterly financial data for fiscal 2008 and 2007:
 
 
 Three Months EndedJuly 1,
                2007
              
              
              September 30,
                2007
              
              
              December 30,
                2007
              
              
              March 31,
                2008Net
      sales
              
              $
              148,110
              
              
              $
              151,410
              
              
              $
              155,196
              
              
              $
              168,618Gross
      profit
              
              
              43,888
              
              
              
              46,038
              
              
              
              46,674
              
              
              
              47,953Income
      from operations
              
              
              18,267
              
              
              
              19,148
              
              
              
              19,162
              
              
              
              14,571Net
      income
              
              $
              9,520
              
              
              $
              9,453
              
              
              $
              9,994
              
              
              $
              8,382Net
      income per share – basic
              
              $
              0.51
              
              
              $
              0.51
              
              
              $
              0.53
              
              
              $
              0.45Net
      income per share – diluted
              
              $
              0.50
              
              
              $
              0.49
              
              
              $
              0.52
              
              
              $
              0.44
 
 Results
include a pre-tax fixed asset impairment charge of $2,509,000 in the quarter
ended March 31, 2008 and pre-tax losses on early extinguishment of debt of
$1,443,000, $177,000 and $174,000 for the quarters ended September 30, 2007,
December 30, 2007 and March 31, 2008 respectively.
 
 Three Months EndedJuly 2,
                2006
              
              
              October 1,
                2006
              
              
              December 31,
                2006
              
              
              March 31,
                2007Net
      sales
              
              $
              146,694
              
              
              $
              144,225
              
              
              $
              142,044
              
              
              $
              156,885Gross
      profit
              
              
              42,283
              
              
              
              39,017
              
              
              
              38,623
              
              
              
              44,677Income
      from operations
              
              
              17,780
              
              
              
              16,104
              
              
              
              14,896
              
              
              
              19,676Net
      income
              
              $
              5,572
              
              
              $
              8,314
              
              
              $
              9,126
              
              
              $
              11,073Net
      income per share – basic
              
              $
              0.30
              
              
              $
              0.45
              
              
              $
              0.49
              
              
              $
              0.60Net
      income per share – diluted
              
              $
              0.29
              
              
              $
              0.44
              
              
              $
              0.48
              
              
              $
              0.58
 
 
 Results
include pre-tax losses on early extinguishment of debt of $4,583,000, $359,000
and $246,000 for the quarters ended July 2, 2006, December 31, 2006 and March
31, 2007 respectively.
  F-36
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 
 21.
              Accumulated
      Other Comprehensive Loss
 
 The components of accumulated other
comprehensive loss are as follows:
 
 March 31,2008
              
              
              2007Net
      unrealized investment (loss) gain – net of tax
              
              $
              (740
              )
              
              $
              22Adjustment
      to pension liability– net of tax
              
              
              (14,514
              )
              
              
              (18,606
              )Adjustment
      to other postretirement obligations – net of tax
              
              
              (3,248
              )
              
              
              (3,083
              )Foreign
      currency translation adjustment
              
              
              15,761
              
              
              
              6,330Accumulated
      other comprehensive loss
              
              $
              (2,741
              )
              
              $
              (15,337
              )
 
 The
deferred taxes associated with the items included in accumulated other
comprehensive loss were $11,817,000 and $14,102,000 for 2008 and 2007,
respectively.  As a result of the recording of a deferred tax asset
valuation allowance in fiscal 2005, the Company recorded as an offsetting entry
a $534,000 charge in the minimum pension liability component of other
comprehensive income.  With the reversal of that valuation allowance
in fiscal 2006 the Company recorded the reversal of the valuation allowance as a
reduction of income taxes in the statement of income.  This is in
accordance with FASB Statement No. 109, “Accounting for Income Taxes,” even
though the valuation allowance was initially established by a charge against
comprehensive income.  This amount will remain indefinitely as a
component of minimum pension liability adjustment.
 
 The activity by year related to
investments, including reclassification adjustments for activity included in
earnings is as follows (all items shown net of tax):
 
 Year Ended March 31,2008
              
              
              2007
              
              
              2006Net
      unrealized investment gain at beginning of year
              
              $
              22
              
              
              $
              1,891
              
              
              $
              1,233Unrealized
      holdings (loss) gain arising during the period
              
              
              (674
              )
              
              
              2,491
              
              
              
              1,591Reclassification
      adjustments for (gain) included in earnings
              
              
              (88
              )
              
              
              (4,360
              )
              
              
              (933
              )Net
      change in unrealized (loss) gain on investments
              
              
              (762
              )
              
              
              (1,869
              )
              
              
              658Net
      unrealized investment (loss) gain at end of year
              
              $
              (740
              )
              
              $
              22
              
              
              $
              1,891
  F-37
  COLUMBUS
McKINNON CORPORATION
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
 
 22.
              Effects
      of New Accounting Pronouncements
 
 In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, “Fair Value Measurements,” (“SFAS 157”) to define fair value,
establish a framework for measuring fair value in accordance with generally
accepted accounting principles, and expand disclosures about fair value
measurements. SFAS 157 will be effective for fiscal years beginning after
November 15, 2007. In February 2008, the FASB issued FSP FAS 157-2, “Effective
Date of FASB Statement No. 157.” This FSP (1) partially defers the effective
date of SFAS No. 157 for one year for certain nonfinancial assets and
nonfinancial liabilities and (2) removes certain leasing transactions from the
scope of SFAS 157. The Company believes that the adoption of SFAS No. 157 will
not have a material effect on its consolidated financial
statements.
 
 In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)” (“SFAS 158”). Among other items, SFAS 158 requires
recognition of the overfunded or underfunded status of an entity’s defined
benefit postretirement plan as an asset or liability in the financial statements
and requires recognition of the funded status of defined benefit postretirement
plans in other comprehensive income. We adopted all of the currently required
provisions of SFAS 158 in fiscal 2007. This statement also requires an entity to
measure a defined benefit postretirement plan’s assets and obligations that
determine its funded status as of the end of the employers’ fiscal year. This
requirement is effective for fiscal years ending after December 15, 2008. The
Company does not expect the adoption of this requirement to have a material
impact on the Company’s consolidated financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities — Including an Amendment of FASB
Statement No. 115” (“SFAS 159”). SFAS 159 allows the irrevocable election of
fair value as the initial and subsequent measurement attribute for certain
financial assets and liabilities and other items on an instrument-by-instrument
basis. Changes in fair value would be reflected in earnings as they occur. The
objective of SFAS 159 is to improve financial reporting by providing entities
with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions. SFAS 159 is effective as of the beginning
of the first fiscal year beginning after November 15, 2007. The Company believes
that the adoption of SFAS No. 159 will not have a material effect on its
consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007) “Business
Combinations” (“SFAS 141(R)”). SFAS 141(R) requires the acquiring entity in a
business combination to recognize all the assets acquired and liabilities
assumed in the transaction; establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; and
requires the acquirer to disclose all of the information required to evaluate
and understand the nature and financial effect of the business combination. This
statement is effective for acquisition dates on or after the beginning of the
first annual reporting period beginning after December 15, 2008. The Company is
currently evaluating the impact the adoption of SFAS 141(R) will have on the
Company’s consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51” (“SFAS 160”).
This Statement amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 is effective as of the beginning of the first fiscal year
beginning after December 15, 2008. The Company believes that the adoption of
SFAS No. 160 will not have a material effect on its consolidated financial
statements.
  F-38
  COLUMBUS
McKINNON CORPORATION
 
 SCHEDULE
II—Valuation and qualifying accounts
 March
31, 2008, 2007 and 2006
 Dollars
in thousands
 
 AdditionsDescription
              
              Balance at Beginning of
    Period
              
              
              Charged to Costs and
    Expenses
              
              
              Charged to Other Accounts
              
              
              Deductions
              
              
              Balance at End of PeriodYear
      ended March 31, 2008:Deducted
      from asset accounts:Allowance
      for doubtful accounts
              
              $
              3,628
              
              
              $
              1,484
              
              
              $
              —
              
              
              $
              853
              (1)
              
              $
              4,259Slow-moving
      and obsolete inventory
              
              
              8,843
              
              
              
              1,746
              
              
              
              —
              
              
              
              1,657
              (2)
              
              
              8,932Deferred
      tax asset valuation allowance
              
              
              2,064
              
              
              
              3,029
              
              
              
              —
              
              
              
              1,000
              
              
              
              4,093Total
              
              $
              14,535
              
              
              $
              6,259
              
              
              $
              —
              
              
              $
              3,510
              
              
              $
              17,284Reserves
      on balance sheet:Accrued
      general and product liability costs
              
              $
              21,078
              
              
              $
              2,201
              
              
              $
              —
              
              
              $
              2,508
              (3)
              
              $
              20,771Year
      ended March 31, 2007:Deducted
      from asset accounts:Allowance
      for doubtful accounts
              
              $
              3,417
              
              
              $
              1,359
              
              
              $
              —
              
              
              $
              1,148
              (1)
              
              $
              3,628Slow-moving
      and obsolete inventory
              
              
              7,635
              
              
              
              2,754
              
              
              
              (240
              )
      (4)
              
              
              1,306
              (2)
              
              
              8,843Deferred
      tax asset valuation allowance
              
              
              6,301
              
              
              
              —
              
              
              
              —
              
              
              
              4,237
              
              
              
              2,064Total
              
              $
              17,353
              
              
              $
              4,113
              
              
              $
              (240
              )
              
              $
              6,691
              
              
              $
              14,535Reserves
      on balance sheet:Accrued
      general and product liability costs
              
              $
              20,969
              
              
              $
              4,343
              
              
              $
              —
              
              
              $
              4,234
              (3)
              
              $
              21,078Year
      ended March 31, 2006:Deducted
      from asset accounts:Allowance
      for doubtful accounts
              
              $
              3,015
              
              
              $
              1,628
              
              
              $
              —
              
              
              $
              1,226
              (1)
              
              $
              3,417Slow-moving
      and obsolete inventory
              
              
              6,413
              
              
              
              2,617
              
              
              
              —
              
              
              
              1,395
              (2)
              
              
              7,635Deferred
      tax asset valuation allowance
              
              
              50,538
              
              
              
              (38,571
              )
              
              
              —
              
              
              
              5,666
              
              
              
              6,301Total
              
              $
              59,966
              
              
              $
              (34,326
              )
              
              $
              —
              
              
              $
              8,287
              
              
              $
              17,353Reserves
      on balance sheet:Accrued
      general and product liability costs
              
              $
              16,094
              
              
              $
              7,920
              
              
              $
              —
              
              
              $
              3,045
              (3)
              
              $
              20,969
 ________
 (1)
              Uncollectible
      accounts written off, net of
recoveries
 (2)
              Obsolete
      inventory disposals
 (3)
              Insurance
      claims and expenses paid
 (4)
              Reserves
      at date of disposal of
subsidiary
  F-39
  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, 2008, an evaluation was performed under the supervision and with the
participation of our management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on that evaluation, our management,
including the Chief Executive Officer and Chief Financial Officer, concluded
that our disclosure controls and procedures were effective as of March 31,
2008.  There were no changes in our internal controls or in other
factors during our fourth quarter ended March 31, 2008.
 
 Management’s
Report on Internal Control Over Financial Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f) and 15d-15(f). Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we conducted an evaluation of the effectiveness of our internal control over
financial reporting as of March 31, 2008 based on the framework in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that evaluation, our
management concluded that our internal control over financial reporting was
effective as of March 31, 2008.
 
 The
effectiveness of the Company’s internal control over financial reporting as of
March 31, 2008 has been audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report which is included
herein.
 
 Our
management, including the CEO and CFO, does not expect that our disclosure
controls or our internal control over financial reporting will prevent or detect
all error and all fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives will be met. The design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Further, because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty and that breakdowns can occur because of simple error or mistake.
Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The
design of any system of controls is based in part on certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of controls effectiveness to future
periods are subject to risks. Over time, controls may become inadequate because
of changes in conditions or deterioration in the degree of compliance with
policies or procedures.
 
 
 
 Report
of Independent Registered Public Accounting Firm
 
 The Board
of Directors and Shareholders of Columbus McKinnon Corporation
 
 We have
audited Columbus McKinnon Corporation’s internal control over financial
reporting as of March 31, 2008, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the COSO criteria). Columbus McKinnon Corporation’s
management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s
Report On Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the company’s internal control over financial reporting
based on our audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating 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.
  31
  A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 In our
opinion, Columbus McKinnon Corporation maintained, in all material respects,
effective internal control over financial reporting as of March 31, 2008, based
on the COSO criteria.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Columbus
McKinnon Corporation as of March 31, 2008 and 2007, and the related consolidated
statements of income, shareholders’ equity, and cash flows for each of the three
years in the period ended March 31, 2008 of Columbus McKinnon Corporation and
our report dated May 29, 2008 expressed an unqualified opinion
thereon.
 
 
 
 /s/ Ernst
& Young LLP
 
 
 Buffalo,
New York
 May 29,
2008
 
 
 
 Item
      9B.
              Other
      Information
 
 None.
 
 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 29,
2008 and upon the filing of such Proxy Statement, is incorporated by reference
herein.
 
 The
charters of our Audit Committee, Compensation and Succession Committee, and
Governance and Nominating Committee are available on our website at www.cmworks.com and
are available to any shareholder upon request to the Corporate Secretary. The
information on the Company's website is not incorporated by reference into this
Annual Report on Form 10-K.
 
 We have
adopted a code of ethics that applies to all of our employees, including our
principal executive officer, principal financial officer and principal
accounting officer, as well as our directors.  Our code of ethics, the
Columbus McKinnon Corporation Legal Compliance & Business Ethics Manual, is
available on our website at www.cmworks.com.  We
intend to disclose any amendment to, or waiver from, the code of ethics that
applies to our principal executive officer, principal financial officer or
principal accounting officer otherwise required to be disclosed under Item 10 of
Form 8-K by posting such amendment or waiver, as applicable, on our
website.
  32
  Item
      11.
              Executive
      Compensation
 
 The
information regarding Executive Compensation will be included in a Proxy
Statement to be filed with the Commission prior to July 29, 2008 and upon the
filing of such Proxy Statement, is incorporated by reference
herein.
 
 Item
      12.
              Security Ownership of
      Certain Beneficial Owners and
Management
 
 The
information regarding Security Ownership of Certain Beneficial Owners and
Management and regarding equity compensation plan incorporation will be included
in a Proxy Statement to be filed with the Commission prior to July 29, 2008 and
upon the filing of such Proxy Statement, is incorporated by reference
herein.
 
 Item
      13.
              Certain Relationships
      and Related Transactions
 
 The
information regarding Certain Relationships and Related Transactions will be
included in a Proxy Statement to be filed with the Commission prior to July 29,
2008 and upon the filing of such Proxy Statement, is incorporated by reference
herein.
 
 Item
      14.
              Principal Accountant
      Fees and Services
 
 The
information regarding Principal Accountant Fees and Services will be included in
a Proxy Statement to be filed with the Commission prior to July 29, 2008 and
upon the filing of such Proxy Statement, is incorporated by reference
herein.
 
 
 PART IV
 
 Item
      15.
              Exhibits and Financial
      Statement Schedules
  (1)
                Financial
      Statements:The
      following consolidated financial statements of Columbus McKinnon
      Corporation are included in Item 8:Reference
                Page
      No.Report
      of Independent Registered Public Accounting Firm
                F-2Consolidated
      balance sheets - March 31, 2008 and 2007
                F-3Consolidated
      statements of income – Years ended March 31, 2008, 2007 and
      2006
                F-4Consolidated
      statements of shareholders’ equity - Years ended March 31, 2008, 2007 and
      2006
                F-5Consolidated
      statements of cash flows – Years ended March 31, 2008, 2007 and
      2006
                F-6Notes
      to consolidated financial statements
                F-7
      to F-38(2)
                Financial Statement
      Schedule:
                Page
      No.Schedule
      II - Valuation and qualifying accounts
                F-39All
      other schedules for which provision is made in the applicable accounting
      regulation of the Securities and Exchange Commission are not required
      under the related instructions or are inapplicable and therefore have been
      omitted.
  33
 (3)
              Exhibits:
 
 ExhibitNumber
              
              Exhibit3.1
              
              Restated
      Certificate of Incorporation of the Registrant (incorporated by reference
      to Exhibit 3.1 to the Company’s Registration Statement No. 33-80687 on
      Form S-1 dated December 21, 1995).3.2
              
              Amended
      By-Laws of the Registrant (incorporated by reference to Exhibit 3 to the
      Company’s Current Report on Form 8-K dated May 17,
  1999).4.1
              
              Specimen
      common share certificate (incorporated by reference to Exhibit 4.1 to the
      Company’s Registration Statement No. 33-80687 on Form S-1 dated December
      21, 1995.)4.2
              
              First
      Amendment and Restatement of Rights Agreement, dated as of October 1,
      1998, between Columbus McKinnon Corporation and American Stock Transfer
      & Trust Company, as Rights Agent (incorporated by reference to Exhibit
      4.2  to the Company’s Quarterly Report on Form 10-Q for the
      quarterly period ended June 29, 2003).4.3
              
              Indenture,
      dated as of March 31, 1998,  among Columbus McKinnon
      Corporation, the guarantors named on the signature pages thereto and State
      Street Bank and Trust Company, N.A., as trustee (incorporated by reference
      to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated April 9,
      1998).4.4
              
              Supplemental
      Indenture among LICO, Inc., Automatic Systems, Inc., LICO Steel, Inc.,
      Columbus McKinnon Corporation, Yale Industrial Products, Inc., Mechanical
      Products, Inc., Minitec Corporation and State Street Bank and Trust
      Company, N.A., as trustee, dated March 31, 1998 (incorporated by reference
      to Exhibit 4.3 to the Company’s Current Report on form 8-K dated April 9,
      1998).4.5
              
              Second
      Supplemental Indenture among Abell-Howe Crane, Inc., LICO, Inc., Automatic
      Systems, Inc. LICO Steel, Inc., Columbus McKinnon Corporation, Yale
      Industrial Products Inc. and State Street Bank and Trust Company, N.A., as
      trustee, dated as of February 12, 1999 (incorporated by reference to
      Exhibit 4.6 to the Company’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 1999).4.6
              
              Third
      Supplemental Indenture among G.L. International, Inc., Gaffey, Inc.,
      Handling Systems and Conveyors, Inc., Larco Material Handling Inc.,
      Abell-Howe Crane, Inc., LICO, Inc., Automatic Systems, Inc., LICO Steel,
      Inc., Columbus McKinnon Corporation, Yale Industrial Products, Inc. and
      State Street Bank and Trust Company, N.A., as trustee, dated as of March
      1, 1999 (incorporated by reference to Exhibit 4.7 to the Company’s Annual
      Report on Form 10-K for the fiscal year ended March 31,
    1999).4.7
              
              Fourth
      Supplemental Indenture among Washington Equipment Company, G.L.
      International, Inc., Gaffey, Inc., Handling Systems and Conveyors, Inc.,
      Larco Material Handling Inc., Abell-Howe Crane, Inc., Automatic Systems,
      Inc., LICO Steel, Inc., Columbus McKinnon Corporation, Yale Industrial
      Products, Inc. and State Street Bank and Trust Company, N.A., as trustee,
      dated as of November 1, 1999 (incorporated by reference to Exhibit 10.2 to
      the Company’s quarterly report on form 10-Q for the quarterly period ended
      October 3, 1999).4.8
              
              Fifth
      Supplemental Indenture among Columbus McKinnon Corporation, Crane
      Equipment & Service, Inc., Automatic Systems, Inc., LICO Steel, Inc.,
      Yale Industrial Products, Inc. and State Street Bank and Trust Company,
      N.A., as trustee, dated as of April 4, 2002 (incorporated by reference to
      Exhibit 4.8 to the Company’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 2002).4.9
              
              Sixth
      Supplemental Indenture among Columbus McKinnon Corporation, Audubon West,
      Inc., Crane Equipment & Service, Inc., LICO Steel, Inc., Yale
      Industrial Products, Inc., Audubon Europe S.a.r.l. and State Street Bank
      and Trust Company, N.A., as trustee, dated as of August 5, 2002
      (incorporated by reference to Exhibit 4.9 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31, 2002).4.10
              
              Seventh
      Supplemental Indenture among Columbus McKinnon Corporation, Crane
      Equipment & Service, Inc., Yale Industrial Products, Inc., Audubon
      Europe S.a.r.l. and U.S. Bank National Trust Association, as trustee,
      dated as of August 30, 2005 (incorporated by reference to Exhibit 4.1 to
      the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
      October 2, 2005).
  34
  4.11
              
              Indenture,
      dated as of July 22, 2003, among Columbus McKinnon Corporation, the
      guarantors named on the signature pages thereto and U.S. Bank Trust
      National Association, as trustee (incorporated by reference to Exhibit 4.2
      to the Company’s Quarterly Report on Form 10-Q for the quarterly period
      ended June 29, 2003).4.12
              
              First
      Supplemental Indenture, dated as of September 19, 2003, among Columbus
      McKinnon Corporation, the guarantors named on the signature pages thereto
      and U.S. Bank Trust National Association, as trustee (incorporated by
      reference to Exhibit 4.13 to Amendment No. 1 to the Company’s Registration
      Statement No. 333-109730 on Form S-4/A dated November 7,
      2003).4.13
              
              Indenture
      among Columbus McKinnon Corporation, Audubon Europe S.a.r.l., Crane
      Equipment & Service, Inc., Yale Industrial Products, Inc.. and U.S.
      Bank National Association., as trustee, dated as of September 2, 2005
      (incorporated by reference to Exhibit 4.5 to the Company’s Registration
      Statement No. 33-129142 on Form S-3 dated October 19,
    2005).4.14
              
              Registration
      Rights Agreement among Columbus McKinnon Corporation, Audubon Europe
      S.a.r.l., Crane Equipment & Service, Inc., Yale Industrial Products,
      Inc., and Credit Suisse First Boston LLC, acting on behalf of itself and
      as Representative of the Initial Purchasers, dated as of September 2, 2005
      (incorporated by reference to Exhibit 4.6 to the Company’s Registration
      Statement No. 33-129142 on Form S-3 dated October 19,
    2005).10.1
              
              Agreement
      by and among Columbus McKinnon Corporation Employee Stock Ownership Trust,
      Columbus McKinnon Corporation and Marine Midland Bank, dated November 2,
      1995 (incorporated by reference to Exhibit 10.6 to the Company’s
      Registration Statement No. 33-80687 on Form S-1 dated December 21,
      1995).#10.2
              
              Columbus
      McKinnon Corporation Employee Stock Ownership Plan Restatement Effective
      April 1, 1989 (incorporated by reference to Exhibit 10.23 to the Company’s
      Registration Statement No. 33-80687 on Form S-1 dated December 21,
      1995).#10.3
              
              Amendment
      No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated March 2, 1995
      (incorporated by reference to Exhibit 10.24 to the Company’s Registration
      Statement No. 33-80687 on Form S-1 dated December 21,
    1995).#10.4
              
              Amendment
      No. 2 to the Columbus McKinnon Corporation Employee Stock Ownership Plan,
      dated October 17, 1995 (incorporated by reference to Exhibit 10.38 to the
      Company’s Annual Report on Form 10-K for the fiscal year ended March 31,
      1997).#10.5
              
              Amendment
      No. 3 to the Columbus McKinnon Corporation Employee Stock Ownership Plan,
      dated March 27, 1996 (incorporated by reference to Exhibit 10.39 to the
      Company’s Annual Report on Form 10-K for the fiscal year ended March 31,
      1997).#10.6
              
              Amendment
      No. 4 of the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated September 30, 1996
      (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended September 30,
      1996).#10.7
              
              Amendment
      No. 5 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated August 28, 1997
      (incorporated by reference to Exhibit 10.37 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31, 1998).#10.8
              
              Amendment
      No. 6 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated June 24, 1998
      (incorporated by reference to Exhibit 10.38 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31, 1998).#10.9
              
              Amendment
      No. 7 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated April 30, 2000
      (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31, 2000).#10.10
              
              Amendment
      No. 8 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated March 26, 2002
      (incorporated by reference to Exhibit 10.30 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31,
  2002).
  35
  #10.11
              
              Amendment
      No. 9 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated March 27, 2003
      (incorporated by reference to Exhibit 10.32 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31, 2003).#10.12
              
              Amendment
      No. 10 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated February 28, 2004
      (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31, 2004).#10.13
              
              Amendment
      No. 11 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated December 19, 2003
      (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended December 28,
      2003).#10.14
              
              Amendment
      No. 12 to the Columbus McKinnon Corporation Employee Stock Ownership Plan
      as Amended and Restated as of April 1, 1989, dated March 17, 2005
      (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31, 2005).#10.15
              
              Columbus
      McKinnon Corporation Personal Retirement Account Plan Trust Agreement,
      dated April 1, 1987 (incorporated by reference to Exhibit 10.25 to the
      Company’s Registration Statement No. 33-80687 on Form S-1 dated December
      21, 1995).#10.16
              
              Amendment
      No. 1 to the Columbus McKinnon Corporation Employee Stock Ownership Trust
      Agreement (formerly known as the Columbus McKinnon Corporation Personal
      Retirement Account Plan Trust Agreement) effective November 1, 1988
      (incorporated by reference to Exhibit 10.26 to the Company’s Registration
      Statement No. 33-80687 on Form S-1 dated December 21,
    1995).#10.17
              
              Amendment
      and Restatement of Columbus McKinnon Corporation 1995 Incentive Stock
      Option Plan (incorporated by reference to Exhibit 10.25 to the Company’s
      Annual Report on Form 10-K for the fiscal year ended March 31,
      1999).#10.18
              
              Second
      Amendment to the Columbus McKinnon Corporation 1995 Incentive Stock Option
      Plan, as amended and restated (incorporated by reference to Exhibit 10.2
      to the Company’s Quarterly Report on Form 10-Q for the quarterly period
      ended September 29, 2002).#10.19
              
              Columbus
      McKinnon Corporation Restricted Stock Plan, as amended and restated
      (incorporated by reference to Exhibit 10.28 to the Company’s Registration
      Statement No. 33-80687 on Form S-1 dated December 21,
    1995).#10.20
              
              Second
      Amendment to the Columbus McKinnon Corporation Restricted Stock Plan
      (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended September 29,
      2002).#10.21
              
              Amendment
      and Restatement of Columbus McKinnon Corporation Non-Qualified Stock
      Option Plan (incorporated by reference to Exhibit 10.27 to the Company’s
      Annual Report on Form 10-K for the fiscal year ended March 31,
      1999).#10.22
              
              Columbus
      McKinnon Corporation Thrift [401(k)] Plan 1989 Restatement Effective
      January 1, 1998 (incorporated by reference to Exhibit 10.2 to the
      Company’s Quarterly Report on Form 10-Q for the quarterly period ended
      December 27, 1998).#10.23
              
              Amendment
      No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated December 10, 1998 (incorporated by reference
      to Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the
      fiscal year ended March 31, 1999).#10.24
              
              Amendment
      No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401 (k)] Plan, dated June 1, 2000 (incorporated by reference to
      Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 2000).
  36
  #10.25
              
              Amendment
      No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401 (k)] Plan, dated  March 26, 2002 (incorporated by
      reference to Exhibit 10.39 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended March 31, 2002).#10.26
              
              Amendment
      No. 4 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated May 10, 2002 (incorporated by reference to
      Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
      quarterly period ended September 29, 2002).#10.27
              
              Amendment
      No. 5 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated December 20, 2002 (incorporated by reference
      to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
      quarterly period ended December 29, 2002).#10.28
              
              Amendment
      No. 6 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated May 22, 2003 (incorporated by reference to
      Exhibit 10.46 to the Company’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 2003).#10.29
              
              Amendment
      No. 7 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated April 14, 2004 (incorporated by reference to
      Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 2004).#10.30
              
              Amendment
      No. 8 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated December 19, 2003 (incorporated by reference
      to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
      quarterly period ended December 28, 2003).#10.31
              
              Amendment
      No. 9 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated March 16, 2004 (incorporated by reference to
      Exhibit 10.30 to the Company’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 2004).#10.32
              
              Amendment
      No. 10 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated July 12, 2004 (incorporated by reference to
      Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
      quarterly period ended July 4, 2004).#10.33
              
              Amendment
      No. 11 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated March 31, 2005 (incorporated by reference to
      Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the fiscal
      year ended March 31, 2005).#10.34
              
              Amendment
      No. 12 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated December 27, 2005 (incorporated by reference
      to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the
      fiscal year ended March 31, 2006).#10.35
              
              Amendment
      No. 13 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated December 21, 2006 (incorporated by reference
      to Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the
      fiscal year ended March, 31, 2007).*#10.36
              
              Amendment
      No. 14 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Thrift [401(k)] Plan, dated December 21, 2007.#10.37
              
              Columbus
      McKinnon Corporation Thrift 401(k) Plan Trust Agreement Restatement
      Effective August 9, 1994 (incorporated by reference to Exhibit 10.32 to
      the Company’s Registration Statement No. 33-80687 on Form S-1 dated
      December 21, 1995).#10.38
              
              Columbus
      McKinnon Corporation Monthly Retirement Benefit Plan Restatement Effective
      April 1, 1998 (incorporated by reference to Exhibit 10.1 to the Company’s
      Quarterly Report on Form 10-Q for the quarterly period ended December 27,
      1998).#10.39
              
              Amendment
      No. 1 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated December 10, 1998 (incorporated by
      reference to Exhibit 10.32 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended March 31,
1999).
  37
  #10.40
              
              Amendment
      No. 2 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated May 26, 1999 (incorporated by
      reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended March 31, 1999).#10.41
              
              Amendment
      No. 3 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated March 26, 2002 (incorporated by
      reference to Exhibit 10.44 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended March 31, 2002).#10.42
              
              Amendment
      No. 4 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated December 20, 2002 (incorporated by
      reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
      for the quarterly period ended December 29, 2002).#10.43
              
              Amendment
      No. 5 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated February 28, 2004 (incorporated by
      reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended March 31, 2004).#10.44
              
              Amendment
      No. 6 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated March 17, 2005 (incorporated by
      reference to Exhibit 10.41 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended March 31, 2005).#10.45
              10.43
              Amendment
      No. 7 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated December 28, 2005 (incorporated by
      reference to Exhibit 10.43 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended March 31, 2006).#10.46
              
              Amendment
      No. 8 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated December 28, 2005 (incorporated by
      reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
      for the quarterly period ended December 31, 2006).*#10.47
              
              Amendment
      No. 9 to the 1998 Plan Restatement of the Columbus McKinnon Corporation
      Monthly Retirement Benefit Plan, dated April 21, 2008.#10.48
              
              Columbus
      McKinnon Corporation Monthly Retirement Benefit Plan Trust Agreement
      Effective as of April 1, 1987 (incorporated by reference to Exhibit 10.34
      to the Company’s Registration Statement No. 33-80687 on Form S-1 dated
      December 21, 1995).#10.49
              
              Form
      of Change in Control Agreement as entered into between Columbus McKinnon
      Corporation and each of Timothy T. Tevens, Derwin R. Gilbreath, Karen L.
      Howard, Joseph J. Owen, Richard A. Steinberg, and Timothy R. Harvey,
      (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March, 31,
1998).#10.50
              
              Employment
      agreement with Wolfgang Wegener dated December 31, 1996 (incorporated by
      reference to Exhibit 10.48 to the Company’s Annual Report on Form 10-K for
      the fiscal year ended March, 31, 2007).10.51
              
              Intercreditor
      Agreement dated as of July 22, 2003 among Columbus McKinnon Corporation,
      the subsidiary guarantors as listed thereon, Fleet Capital Corporation, as
      Credit Agent, and U.S. Bank Trust National Association, as Trustee
      (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended June 29,
      2003).10.52
              
              Second
      Amended and Restated Credit and Security Agreement, dated as of November
      21, 2002 and amended and restated as of January 2, 2004, among Columbus
      McKinnon Corporation, as Borrower, Larco Industrial Services Ltd.,
      Columbus McKinnon Limited, the Guarantors Named Herein, the Lenders Party
      Hereto From Time to Time, Fleet Capital Corporation, as Administrative
      Agent, Fleet National Bank, as Issuing Lender, Congress Financial
      Corporation (Central), Syndication Agent, Merrill Lynch Capital, a
      Division of Merrill Lynch Business Financial Services Inc., as
      Documentation Agent, and Fleet Securities, Inc., as Arranger (incorporated
      by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form
      10-Q for the quarterly period ended December 28, 2003).#10.53
              
              Columbus
      McKinnon Corporation Corporate Management Variable Compensation Plan
      (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly
      Report on Form 10-Q for the quarterly period ended October 3,
      2004).
  38
  #10.54
              
              Columbus
      McKinnon Corporation 2006 Long Term Incentive Plan (incorporated by
      reference to Appendix A to the definitive Proxy Statement for the Annual
      Meeting of Stockholders of Columbus McKinnon Corporation held on July 31,
      2006).#10.55
              
              Columbus
      McKinnon Corporation Executive Management Variable Compensation Plan
      (incorporated by reference to Appendix B to the definitive Proxy Statement
      for the Annual Meeting of Stockholders of Columbus McKinnon Corporation
      held on July 31, 2006).10.56
              
              First
      Amendment to that certain Second Amended and Restated Credit and Security
      Agreement, dated as of November 21, 2002 and amended and restated as of
      January 2, 2004, among Columbus McKinnon Corporation, as Borrower, Larco
      Industrial Services Ltd., Columbus McKinnon Limited, the Guarantors From
      Time to Time Party Thereto, the Lenders From Time to Time Party Thereto,
      Bank of America, N.A. as Administrative Agent for such Lenders and as
      Issuing Lender dated April 29, 2005 (incorporated by reference to Exhibit
      10.1 to the Company’s Current Report on Form 8-K dated April 29,
      2005).10.57
              
              Second
      amendment, dated as of August 5, 2005, to that certain Second Amended and
      Restated Credit and Security Agreement, dated as of November 21, 2002 and
      amended and restated as of January 2, 2004 (as amended by that certain
      First Amendment to that certain Second Amended and Restated Credit and
      Security Agreement, dated as of April 29, 2005, and as further modified
      and supplemented and in effect from time to time, the “Credit Agreement”),
      among Columbus McKinnon Corporation, a corporation organized under the
      laws of New York (the “Borrower”), Larco Industrial Services Ltd., a
      business corporation organized under the laws of the Province of Ontario,
      Columbus McKinnon Limited, a business corporation organized under the laws
      of Canada, the Guarantors from time to time party thereto, the Lenders
      from time to time party thereto (collectively, the “Lenders”), Bank of
      America, N.A., as Administrative Agent for such Lenders (the “Agent”) and
      as Issuing Lender (incorporated by reference to Exhibit 10.1 to the
      Company’s Quarterly Report on Form 10-Q dated October 2,
      2005).10.58
              
              Third
      amendment, dated as of August 22, 2005, to that certain Second Amended and
      Restated Credit and Security Agreement, dated as of November 21, 2002 and
      amended and restated as of January 2, 2004 (as amended by that certain
      First Amendment to that certain Second Amended and Restated Credit and
      Security Agreement, dated as of April 29, 2005, by that certain Second
      Amendment to that certain Second Amended and Restated Credit and Security
      Agreement, dated as of August 5, 2005, and as further modified and
      supplemented and in effect from time to time, the “Credit Agreement”),
      among Columbus McKinnon Corporation, a corporation organized under the
      laws of New York (the “Borrower”), Larco Industrial Services Ltd., a
      business corporation organized under the laws of the Province of Ontario,
      Columbus McKinnon Limited, a business corporation organized under the laws
      of Canada, the Guarantors from time to time party thereto, the Lenders
      from time to time party thereto (collectively, the “Lenders”), Bank of
      America, N.A., as Administrative Agent for such Lenders (the “Agent”) and
      as Issuing Lender (incorporated by reference to Exhibit 10.2 to the
      Company’s Quarterly Report on Form 10-Q dated October 2,
      2005).10.59
              
              Fourth
      amendment, dated as of October 17, 2005, to that certain Second Amended
      and Restated Credit and Security Agreement, dated as of November 21, 2002
      and amended and restated as of January 2, 2004, and amended by that
      certain First Amendment to the Credit Agreement, dated as of April 29,
      2005, and by that certain Second Amendment to the Credit Agreement, dated
      as of August 5, 2005, and by that certain Third Amendment to the Credit
      Agreement, dated as of August 22, 2005 (as further amended, supplemented
      or otherwise modified from time to time, the "Credit Agreement"), among
      Columbus McKinnon Corporation (the "Borrower"), Larco Industrial Services
      Ltd., Columbus McKinnon Limited, the Guarantors named therein, the lending
      institutions party thereto, and Bank of America, N.A., as Administrative
      Agent and Issuing Lender.  Capitalized terms used herein and not
      defined herein shall have the meanings ascribed thereto in the Credit
      Agreement (incorporated by reference to Exhibit 10.3 to the Company’s
      Quarterly Report on Form 10-Q dated October 2, 2005).10.60
              
              Third
      Amended and Restated Credit and Security Agreement, dated as of March 16,
      2006 among Columbus McKinnon Corporation, as the Borrower, Bank of
      America, N.A., as Administrative Agent and Issuing Lender, and Other
      Lenders Party Hereto, and Bank of America Securities LLC, as Arranger
      (incorporated by reference to Exhibit 10.53 to the Company’s Annual Report
      on Form 10-K for the fiscal year ended March 31,
  2006).
  39
  10.61
              
              First
      amendment, dated as of January 8, 2007 to that certain Third Amended and
      Restated Credit and Security Agreement, dated as of March 16, 2006 among
      Columbus McKinnon Corporation, as the Borrower, Bank of America, N.A., as
      Administrative Agent and Issuing Lender, and Other Lenders Party Hereto,
      and Bank of America Securities LLC, as Arranger (incorporated by reference
      to Exhibit 10.59 to the Company’s Annual Report on Form 10-K for the
      fiscal year ended March, 31, 2007).*21.1
              
              Subsidiaries
      of the Registrant.*23.1
              
              Consent
      of Independent Registered Public Accounting Firm.*31.1
              
              Certification
      of the principal executive officer pursuant to Rule 13a-14(a) of the
      Securities Exchange Act of 1934, as amended.*31.2
              
              Certification
      of the principal financial officer pursuant to Rule 13a-14(a) of the
      Securities Exchange Act of 1934, as amended.*32.1
              
              Certification
      of the principal executive officer and the principal financial officer
      pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as
      amended and 18 U.S.C. Section 1350, as adopted by pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002.  The information contained in
      this exhibit shall not be deemed filed with the Securities and Exchange
      Commission nor incorporated by reference in any registration statement
      foiled by the Registrant under the Securities Act of 1933, as
      amended.
 
 _________________
 *
              Filed
      herewith
 #
              Indicates
      a Management contract or compensation plan or
  arrangement
  40
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 
 Date:  May
30, 2008
 
 COLUMBUS
      McKINNON CORPORATIONBy:
              /s/
              Timothy T.
      TevensTimothy
      T. TevensPresident
      and Chief Executive Officer
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
 Signature
              
              Title
              
              Date/s/
      Timothy
      T. Tevens
              
              President,
      Chief Executive Officer and DirectorTimothy
      T. Tevens
              
              (Principal
      Executive Officer)May
      30, 2008/s/KAREN L. HOWARD
              
              Vice
      President – Finance and Chief Financial OfficerKaren
      L. Howard
              
              (Principal
      Financial Officer and Principal Accounting Officer)May
      30, 2008/s/
      Ernest
      R. Verebelyi
              
              Chairman
      of the Board of DirectorsErnest
      R. Verebelyi
              
              
              
              May
      30, 2008/s/
      Richard H. Fleming
              
              DirectorRichard
      H. Fleming
              
              
              
              May
      30, 2008/s/
      Nicholas T. Pinchuk
              
              DirectorNicholas
      T. Pinchuk
              
              
              
              May
      30, 2008/s/
      Wallace W. Creek
              
              DirectorWallace
      W. Creek
              
              
              
              May
      30, 2008/s/
      Linda A. Goodspeed
              
              DirectorLinda
      A. Goodspeed
              
              
              
              May
      30, 2008/s/
      Stephen Rabinowitz
              
              DirectorStephen
      Rabinowitz
              
              
              
              May
      30, 2008
   41