SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 5, 2000
APPLIED POWER INC.
(Exact name of Registrant as specified in its charter)
Wisconsin 1-11288 39-0168610
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation Number) Identification No.)
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
Mailing address: P.O. Box 325, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (262) 523-7600
Item 5. Other Events.
As previously announced, Applied Power Inc. continues to
implement the steps required in connection with the spin-off of its Electronics
Business. On June 30, 2000 Applied Power Inc. commenced an offer to repurchase
its $200 million of senior subordinated debt and a concurrent consent
solicitation designed to remove restrictions on certain operations provisions
currently included in the indenture. The tender offer will expire on July 28,
2000, unless extended.
In response to inquiries as to the pro forma results of Applied
Power Inc. after the spin-off, Applied Power Inc. has prepared the following
unaudited pro forma financial information which give effect to (1) the spin-off
of the Electronics Business, (2) the previously announced divestitures of Air
Cargo Equipment Corporation and Barry Wright Corporation and (3) the internal
restructuring necessary to accomplish the spin-off.
2
Definitions (1) "Actuant," "we," "us" and "our" refer to
Actuant Corporation (Applied Power Inc.'s name after the Distribution (as
defined below) and approval of the name change by its shareholders) and its
subsidiaries, which upon the Distribution will own and conduct the Industrial
Business (as defined below) and will assume all obligations under the Notes;
(2) "APW" refers to APW Ltd. and its subsidiaries, which upon the Distribution
will own and conduct the Electronics Business (as defined below); (3) "Applied
Power" refers to Applied Power Inc. and its subsidiaries before the
Distribution; (4) "Industrial Business" refers to Applied Power's branded
electrical and industrial tools and supplies businesses and motion control
systems businesses; (5) "Electronics Business" refers to Applied Power's
integrated electronics enclosures business; (6) "Distribution" refers to the
spin-off by Applied Power of the Electronics Business and the related debt
realignment; (7) "Divestitures" refers to the recently completed sales by
Applied Power of its vibration isolation business, known as Barry Controls, and
its aerospace cargo products business, known as Air Cargo; (8) "Non-continuing
Businesses" refers to units that have been sold or will not be a part of Actuant
after the Distribution, consisting of Barry Controls, Air Cargo, Samuel Groves,
Moxness, GB Everest and Magnets; (9) "Transactions" refers to the Distribution,
the related corporate restructuring transactions and the Divestitures; and (10)
"pro forma" means after giving effect to the Transactions as if they had
occurred on the day immediately prior to the first day of the financial period
being referenced, in the case of the statement of earnings data, or as of the
referenced date, in the case of balance sheet data.
3
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical financial data have been derived from the
consolidated financial statements of Applied Power. The statement of
earnings data for each of the fiscal years ended August 31, 1998, and 1999 and
the balance sheet data as of August 31, 1998 and 1999 have been derived from
audited Consolidated Financial Statements. The statement of earnings data for
the fiscal year ended August 31, 1997 and the balance sheet data as of August
31, 1997 has been derived from unaudited consolidated financial statements of
Applied Power. The statement of earnings data for the six months ended February
28, 1999 and February 29, 2000 and the balance sheet data as of those dates have
been derived from unaudited consolidated financial statements of Applied Power.
Operating results for the six months ended February 29, 2000 are not necessarily
indicative of the results that may be expected for the entire fiscal year ending
August 31, 2000.
The financial data presented in the following table reflect all business
units other than the Electronics Business, which will be spun off to
shareholders in the Distribution. Financial data presented in the table include
the Non-continuing Businesses. As a result, the selected financial data in the
following table are not fully representative of the group of business units
that will comprise Actuant after the Distribution. We have included a separate
financial data table in "footnote 9 below" that includes only those units of
Applied Power that will comprise Actuant after the Distribution.
Year Ended August 31, Six Months Ended
-------------------------- -------------------------
February 28, February 29,
1997(2) 1998(2) 1999 1999 2000
------ ------ -------- ------------ ------------
(in millions, except per share data)
Statement of Earnings Data(1):
Net sales........................................ $522.4 $637.5 $ 695.7 $ 344.4 $ 357.1
Gross profit..................................... 180.5 200.9 252.7 124.1 127.8
Operating expenses(3)(4)(5)...................... 139.8 179.0 144.5 76.8 72.8
Operating earnings............................... 35.8 9.3 99.4 42.8 51.1
Earnings from continuing operations.............. 22.6 0.1 34.6 13.2 20.7
Diluted earnings per share from
continuing operations.......................... 0.57 0.00 0.86 0.33 0.52
Cash dividends per share(6)...................... 0.06 0.06 0.06 0.03 0.03
Balance Sheet Data (at end of period)(1):
Total assets(7).................................. $486.4 $711.5 $1,059.9 $1,092.3 $1,086.9
Total debt(8).................................... 54.8 225.2 521.2 589.0 510.3
- --------
(1) We completed various acquisitions and divestitures that impact the
comparability of the selected financial data presented in the table.
(2) Operating results for fiscal 1997 and 1998 include merger, restructuring
and other non-recurring charges that were recognized in cost of sales and
operating expenses. Such expenses totaled $6.2 million and $56.9 million on
a pre-tax basis in fiscal 1997 and 1998, respectively.
(3) Operating expenses in fiscal 1999 include a $7.8 million pre-tax charge due
to the cancellation of a contract. For the six months ended February 29,
2000, we recorded a $1.4 million pre-tax gain when we recovered costs in
excess of what we anticipated when the loss was initially recorded.
(4) Operating expenses for the six months ended February 29, 2000 include a
$3.5 million pre-tax charge for investment banking, legal, accounting and
other fees and expenses associated with the Distribution.
(5) Operating expenses include engineering, selling and administrative
expenses, contract termination costs (recovery), corporate reorganization
charges, merger related expenses, and all of Applied Power's general
corporate expenses (which include expenditures on resources and services
that supported the Electronics Business). Total general corporate expenses
were as follows:
Fiscal Period Amount
------------- -------------
(in millions)
1997...................................................... 15.2
1998 (excluding expenses in Note 2 above)................. 17.5
1999...................................................... 12.1
Six months ended February 28, 1999........................ 6.0
Six months ended February 29, 2000 (excluding expenses in
Note 4 above)............................................ 8.1
Such amounts include the general corporate expenses for Zero Corporation
("ZERO") for periods both prior to and after its merger with Applied Power
in fiscal 1998. The merger was accounted for using the pooling of interests
method of accounting, with all of Applied Power's historical results
restated to include the historical results of ZERO. The majority of ZERO's
general corporate expenses was eliminated shortly after its acquisition, as
its corporate support functions were provided by existing Applied Power
corporate personnel. We expect general corporate expenses to decrease
following the Distribution due to the need for fewer employees performing
such functions and a reduction in the size of the organization being
supported by such corporate personnel. We believe that the expenses required
to support such general corporate functions in fiscal 1999 and the six
months ended February 29, 2000, had the Distribution been completed prior to
the beginning of the period, would have been approximately $4.7 million and
$2.4 million, respectively.
(6) Applied Power split its stock two-for-one in fiscal 1998. All dividend and
per share data have been adjusted for this stock split. Actuant does not
intend to pay dividends following the Distribution.
(7) Includes net assets of discontinued operations as follows:
Balance Sheet Date Balance
------------------ -------------
(in millions)
August 31, 1997............................................. 86.2
August 31, 1998............................................. 249.7
August 31, 1999............................................. 598.5
February 28, 1999........................................... 624.5
February 29, 2000........................................... 627.9
(8) Historically, Applied Power incurred indebtedness at the parent company
level or at a limited number of subsidiaries, rather than at the operating
unit or segment level. Debt in the table reflects our debt balance after an
allocation was made to the Electronics Business, which is reported in
discontinued operations. The debt allocated to the Electronics Business was
based on the estimated debt expected to be assigned to APW in the debt
realignment related to the Distribution. Historical net financing costs
were allocated based on the debt allocation using the historical weighted-
average rate. Our debt and capitalization will change as a result of the
Distribution.
(9) The following consolidated financial data are derived from the audited
consolidated financial statements of Applied Power for each of the two years
ended August 31, 1999 and the unaudited consolidated financial statements of
Applied Power for the six months ended February 28, 1999 and February 29,
2000. The statement of earnings data for the fiscal year ended August 31,
1997 has been derived from unaudited consolidated financial statements of
Applied Power. The adjusted historical financial data in the following table
differs from the consolidated financial information in the Consolidated
Financial Statements because we excluded the financial data of the Non-
continuing Businesses. The unaudited pro forma consolidated statement of
earnings data give effect to the Transactions as if they had occurred on
August 31, 1998 and the unaudited pro forma consolidated balance sheet data
give effect to the Transactions as if they had occurred on February 29,
2000.
In the opinion of management, the following data include all necessary
adjustments for the fair presentation of the information set forth. Results for
interim periods are not necessarily indicative of the results for the full year.
Year Ended August Pro Forma
31, Six Months Ended Twelve Twelve
--------------------- ------------------------- Months Ended Months Ended
February 28, February 29, February 29, February 29,
1997 1998 1999 1999 2000 2000 2000(b)
------ ------ ------ ------------ ------------ ------------ ------------
(in millions, except ratios)
Statement of Earnings Data (a):
Net sales....................... $541.0(c)
Adjusted net sales.............. $381.8 $482.1 $527.5 $260.4 $268.6 $535.7
Adjusted gross profit(d)........ 132.3 151.0 189.5 92.4 95.6 192.6
Adjusted operating expenses
excluding general corporate
expenses(e).................... 93.3 126.0 99.7 55.0 45.2 89.9
General corporate expenses(f)... 15.2 17.5 12.1 6.0 8.1 14.2 5.0
Adjusted operating earnings(e).. 20.3 (3.5) 71.5 28.2 39.1 82.3
Cash interest expense .......... 49.6
Other Financial Data(a):
Adjusted depreciation.......... 8.9 10.8 10.4 5.5 5.8 10.7
Adjusted amortization of
intangible assets............. 3.4 11.1 6.2 3.2 3.2 6.2
Adjusted capital expenditures.. 10.2 15.4 13.7 11.6 5.0 7.1
Total debt..................... 452.7
- --------
(a) Adjusted items exclude results of the Non-continuing Businesses.
(b) Includes the reported operating results, until the date of its disposition,
of Samuel Groves, a business unit sold by Applied Power on November 23,
1999. For the twelve months ended February 29, 2000, Samuel Groves had net
sales of $5.4 million and EBITDA of $0.2 million. All adjusted operating
data exclude the results of Samuel Groves.
(c) Pro forma net sales of $541.0 million differs from the $535.7 million of
adjusted net sales for the twelve months ended February 29, 2000 by $5.4
million of net sales attributable to the divested Samuel Groves
business unit. Pro forma adjusted EBITDA of $110.4 million differs from (a)
the $110.6 million of pro forma EBITDA for the twelve months ended February
29, 2000 by $0.2 million of EBITDA attributable to Samuel Groves and (b) the
$101.2 million of adjusted EBITDA for the twelve months ended February 29,
2000 by $9.2 million of excess historical general corporate expenses of $5.0
million, the amount management believes would have been incurred by Actuant
had the Distribution occurred on the day immediately prior to the first day
of such period.
(d) Includes $3.3 million and $17.7 million in fiscal 1997 and 1998,
respectively, for non-recurring restructuring charges.
(e) Includes $2.9 million and $34.2 million of restructuring charges in fiscal
1997 and 1998, respectively; $7.8 million of contract termination costs in
fiscal 1999 and the six months ended February 28, 1999; $1.4 million of
contract termination recovery in the six months ended February 29, 2000;
and $3.5 million of corporate reorganization expenses in the six months
ended February 29, 2000.
(f) General corporate expenses include all general corporate expenses related
to Applied Power, including costs incurred to support both the Industrial
Business and the Electronics Business. In accordance with generally
accepted accounting principles, none of these expenses has been allocated
to discontinued operations. We expect general corporate expenses to
decrease following the Distribution due to the need for fewer corporate
employees and a reduction in the size of the organization being supported.
We believe that the expenses required to support general corporate
functions in the six months ended February 29, 2000, fiscal 1999 and the
twelve months ended February 29, 2000, had the Distribution been completed
prior to the beginning of the periods, would have been approximately $2.4
million, $4.7 million and $5.0 million, respectively.
(g) "EBITDA" is defined as operating earnings before depreciation, amortization
and certain restructuring and other non-recurring items. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and our calculation thereof may not be comparable to that
reported by other companies. We believe that EBITDA provides useful
information regarding our ability to service and/or incur indebtedness.
EBITDA does not take into account our working capital requirements, debt
service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
use. Pro forma twelve months ended February 29, 2000 EBITDA was $110.6.
"Adjusted EBITDA" is defined as EBITDA excluding results of the Non-
continuing Businesses. Adjusted EBITDA includes all general corporate
expenses of Applied Power, including costs incurred to support both the
Industrial Business and the Electronics Business. Accordingly, we believe
that, had we been a stand-alone entity during the periods presented, our
EBITDA would have been higher than the EBITDA presented in the table below.
The following is a reconciliation of operating earnings as reported in the
Consolidated Financial Statements to the adjusted EBITDA as displayed
in the table below.
Pro Forma
Year Ended August 31, Six Months Ended Twelve Twelve
--------------------- ------------------------- Months Ended Months Ended
February 28, February 29, February 29, February 29,
1997 1998 1999 1999 2000 2000 2000
--------------------- ------------ ------------ ------------ ------------
(in millions)
Operating earnings...... $ 35.8 $ 9.3 $ 99.4 $42.8 $51.1 $107.7 $ 95.0
Depreciation............ 14.8 17.0 17.3 9.1 8.4 16.7 10.9
Amortization of
intangible assets...... 5.0 12.6 8.7 4.4 4.0 8.3 6.1
Contract termination
costs (recovery)....... -- -- 7.8 7.8 (1.4) (1.4) (1.4)
Corporate reorganization
expenses............... -- -- -- -- 3.5 3.5 --
Restructuring charges... 6.2 38.0 -- -- -- -- --
Merger related
expenses............... -- 9.3 -- -- -- -- --
Provision for loss on
sale of subsidiary..... -- 4.5 -- -- -- -- --
------ ------ ------- ----- ----- ------ ------
EBITDA.................. $ 61.8 $90.7 $ 133.2 $64.1 $65.6 $134.8 $110.6
Less: operating earnings
from Non-continuing
Businesses............. 15.4 12.7 27.9 14.6 12.0 25.5
Less: depreciation and
amortization of
intangible assets of
Non-continuing
Businesses............. 7.4 7.7 9.5 4.8 3.4 8.1
------ ------ ------- ----- ----- ------
Adjusted EBITDA......... $38.9 $70.3 $95.8 $44.7 $50.2 $101.2
====== ====== ======= ===== ===== ======
5
CAPITALIZATION
The following table sets forth the unaudited historical capitalization of
Applied Power as of February 29, 2000, and the unaudited pro forma
capitalization of Actuant as of February 29, 2000 after giving effect to the
Transactions including the issuance of debt under the Actuant Credit Facility,
the issuance of the Notes and the estimated fees and expenses related thereto,
each as if they had occurred on that date.
February 29, 2000
-----------------------
Historical Pro Forma(1)
---------- ------------
(in millions)
Cash and cash equivalents............................... $ 8.8 $ 8.8
====== =======
Short-term borrowings(2)................................ $ 2.4 $ 2.7
Existing long-term debt(3).............................. 507.9 0.0
The Actuant Credit Facility(4).......................... 0.0 250.0
The Notes............................................... 0.0 200.0
------ -------
Total debt(5)......................................... 510.3 452.7
------ -------
Shareholders' equity(6)................................. 459.9 (134.9)
------ -------
Total capitalization.................................. $970.2 $ 317.8
====== =======
- --------
(1) Gives effect to the Transactions, including the issuance of debt under the
Actuant Credit Facility, the issuance of the Notes and the estimated fees
and expenses related thereto. See "The Transactions." The pro forma
capitalization assumes that 100% of the 1999 Notes are purchased in the
Tender Offer. If less than all of the 1999 Notes are tendered, the
borrowings under the Actuant Credit Facility will be lower.
(2) Represents net borrowings under international working capital facilities
shared with APW. The increase from $2.4 million to $2.7 million reflects
the adjustment to exclude the net overdraft position of the Non-continuing
Businesses. Following the Distribution, Actuant will have its own
international working capital facilities with a total availability of
approximately $14.0 million. Any amounts outstanding under such facilities
will reduce available borrowings under the revolving credit portion of the
Actuant Credit Facility.
(3) Historical long-term debt excludes $57.2 million of an off-balance sheet
accounts receivable financing facility which will be retired upon the
consummation of the Distribution. Immediately following the Distribution,
Actuant will not have an accounts receivable financing program. The
existing long-term debt balance excludes $287.4 million of debt allocated
to the Electronics Business, which is included in net assets of
discontinued operations on the consolidated balance sheet.
(4) The Actuant Credit Facility consists of $250.0 million in term loans which
will be borrowed upon the consummation of the Distribution and a $100.0
million revolving credit facility which will be undrawn upon consummation
of the Distribution.
(5) Prior to the Distribution, most of Applied Power's debt instruments were
held at the corporate level. Applied Power's historical debt has been
allocated between the Industrial Business and the Electronics Business
based on the amount of debt expected to be assumed by the Electronics
Business in the Distribution. The amount allocated to the Electronics
Business was based in part on an estimate of anticipated cash flow of
Applied Power from February 29, 2000 to the date of the Distribution. The
amount of debt allocated to the Industrial Business will approximate four
times EBITDA of Actuant pro forma for the Transactions for the four fiscal
quarters preceding the date of the Distribution and will be reflected in
an agreement to be finalized between APW and Actuant.
Footnotes continued on next page.
6
Footnotes continued from previous page.
(6) The reduction in shareholders' equity reflects the following items, net of
tax effect:
February 29,
2000
------------
(in
millions)
The Distribution............................................... $(627.9)
Estimated final allocation of debt to APW...................... (21.3)
Write-off of unamortized historical debt issuance costs........ (0.4)
Estimated transaction costs, including Tender Offer premium.... (16.7)
Estimated gain on the Divestitures............................. 71.6
-------
$(594.8)
=======
In accordance with generally accepted accounting principles, the
Distribution results in a net reduction in Applied Power's historical
shareholders' equity as the total assets being distributed to APW in the
Distribution exceed the total liabilities being distributed. The excess of
total assets over total liabilities requires a corresponding reduction in
shareholders' equity.
7
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated statements of earnings and
unaudited pro forma consolidated balance sheet present the consolidated results
of Applied Power and its financial position, adjusted to give effect to the
Transactions, including the issuance of the Notes, the issuance of debt under
the Actuant Credit Facility and the estimated fees and expenses related
thereto. The unaudited pro forma consolidated statements of earnings for the
six and twelve months ended February 29, 2000 and the fiscal year ended August
31, 1999 give effect to the Transactions as if they had occurred on the day
prior to the beginning of the period being referenced. The unaudited pro forma
consolidated balance sheet data give effect to the Transactions as if they had
occurred on February 29, 2000.
The unaudited pro forma consolidated financial statements have been derived
from the historical consolidated financial statements of Applied Power. The pro
forma adjustments, as described in the notes that follow, are based upon
available information and upon certain assumptions that management believes are
reasonable. You should read this information in conjunction with the
Consolidated Financial Statements included elsewhere in a recently published
offering circular. The unaudited pro forma consolidated financial statements are
included for comparative purposes only and do not purport to be indicative of
the results of Actuant in the future or what the financial position and results
of operations would have been had Actuant been a separate, stand-alone entity
during the periods shown.
8
Unaudited Pro Forma Consolidated Statement of Earnings
(in thousands, except per share data)
Six Months Ended February 29, 2000
------------------------------------------------
Excluded Other Pro
Historical Businesses(1) Adjustments Forma(2)
---------- ------------- ----------- --------
Net sales................... $357,128 $(87,204) $ -- $269,924
Cost of products sold....... 229,319 (55,243) -- 174,076
-------- -------- -------- --------
Gross profit................ 127,809 (31,961) -- 95,848
Engineering, selling and
administrative expenses.... 70,730 (19,094) (5,679)(3) 45,957
Amortization of intangible
assets..................... 3,956 (805) -- 3,151
Contract termination
recovery................... (1,446) -- -- (1,446)
Corporate reorganization
expenses................... 3,487 -- (3,487)(4) --
-------- -------- -------- --------
Operating earnings.......... 51,082 (12,062) 9,166 48,186
Other expense (income):
Net financing costs......... 18,142 -- 7,937 (5) 26,079
Other income--net........... (652) (4) -- (656)
-------- -------- -------- --------
Earnings from continuing
operations before income
tax expense................ 33,592 (12,058) 1,229 22,763
Income tax expense.......... 12,869 -- (3,536)(6) 9,333
-------- -------- -------- --------
Net earnings from continuing
operations................. 20,723 (12,058) 4,765 13,430
Earnings from discontinued
operations................. 23,501 -- (23,501)(7) --
-------- -------- -------- --------
Net earnings................ $ 44,224 $(12,058) $(18,736) $ 13,430
======== ======== ======== ========
Basic earnings per share:
Earnings from continuing
operations per share....... $ 0.53 $ 0.34
Discontinued operations per
share...................... 0.60 --
-------- --------
Net earnings per share...... $ 1.13 $ 0.34
======== ========
Weighted average common
shares outstanding......... 39,023 39,023
======== ========
Diluted earnings per share:
Earnings from continuing
operations per share....... $ 0.52 $ 0.33
Discontinued operations per
share...................... 0.58 --
-------- --------
Net earnings per share...... $ 1.10 $ 0.33
======== ========
Weighted average common and
equivalent shares
outstanding................ 40,343 40,343
======== ========
Other Data:
Depreciation and
amortization............... $ 12,381 $ (3,338) $ -- $ 9,043
Capital expenditures........ 5,744 (744) -- 5,000
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
9
Unaudited Pro Forma Consolidated Statement of Earnings
(in thousands, except per share data)
Year Ended August 31, 1999
------------------------------------------------
Excluded Other Pro
Historical Businesses(1) Adjustments Forma(2)
---------- ------------- ----------- --------
Net sales.................... $695,704 $(158,867) $ -- $536,837
Cost of products sold........ 443,020 (98,092) -- 344,928
-------- --------- -------- --------
Gross profit................. 252,684 (60,775) -- 191,909
Engineering, selling and
administrative expenses..... 136,671 (30,530) (7,399)(3) 98,742
Amortization of intangible
assets...................... 8,748 (2,589) -- 6,159
Contract termination costs... 7,824 -- -- 7,824
Corporate reorganization
expenses.................... -- -- -- --
-------- --------- -------- --------
Operating earnings........... 99,441 (27,656) 7,399 79,184
Other expense (income):
Net financing costs.......... 41,181 -- 10,204 (5) 51,385
Other expense (income)--net.. 850 (143) -- 707
-------- --------- -------- --------
Earnings from continuing
operations before income tax
expense..................... 57,410 (27,513) (2,805) 27,092
Income tax expense........... 22,830 -- (11,722)(6) 11,108
-------- --------- -------- --------
Net earnings from continuing
operations.................. 34,580 (27,513) 8,917 15,984
Earnings from discontinued
operations.................. 44,817 -- (44,817)(7) --
-------- --------- -------- --------
Net earnings................. $ 79,397 $ (27,513) $(35,900) $ 15,984
======== ========= ======== ========
Basic earnings per share:
Earnings from continuing
operations per share........ $ 0.89 $ 0.41
Discontinued operations per
share....................... 1.15 --
-------- --------
Net earnings per share....... $ 2.04 $ 0.41
======== ========
Weighted average common
shares outstanding.......... 38,825 38,825
======== ========
Diluted earnings per share:
Earnings from continuing
operations per share........ $ 0.86 $ 0.40
Discontinued operations per
share....................... 1.12 --
-------- --------
Net earnings per share....... $ 1.98 $ 0.40
======== ========
Weighted average common and
equivalent shares
outstanding................. 40,200 40,200
======== ========
Other Data:
Depreciation and
amortization................ $ 26,056 $ (9,197) $ -- $ 16,859
Capital expenditures......... 22,885 (9,062) -- 13,823
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
10
Unaudited Pro Forma Consolidated Statement of Earnings
(in thousands, except per share data)
Twelve Months Ended February 29, 2000
------------------------------------------------
Excluded Other Pro
Historical Businesses(1) Adjustments Forma(2)
---------- ------------- ----------- --------
Net sales................... $708,457 $(167,448) $ -- $541,009
Cost of products sold....... 452,024 (104,906) -- 347,118
-------- --------- -------- --------
Gross profit................ 256,433 (62,542) -- 193,891
Engineering, selling and
administrative expenses.... 138,415 (35,013) (9,155)(3) 94,247
Amortization of intangible
assets..................... 8,259 (2,156) -- 6,103
Contract termination
recovery................... (1,446) -- -- (1,446)
Corporate reorganization
expenses................... 3,487 -- (3,487)(4) --
-------- --------- -------- --------
Operating earnings.......... 107,718 (25,373) 12,642 94,987
Other expense (income):
Net financing costs......... 39,573 -- 11,812 (5) 51,385
Other income--net........... (111) (103) -- (214)
-------- --------- -------- --------
Earnings from continuing
operations before income
tax expense................ 68,256 (25,270) 830 43,816
Income tax expense.......... 26,125 -- (8,160)(6) 17,965
-------- --------- -------- --------
Net earnings from continuing
operations................. 42,131 (25,270) 8,990 25,851
Earnings from discontinued
operations................. 45,803 -- (45,803)(7) --
-------- --------- -------- --------
Net earnings................ $ 87,934 $ (25,270) $(36,813) $ 25,851
======== ========= ======== ========
Basic earnings per share:
Earnings from continuing
operations per share....... $ 1.08 $ 0.66
Discontinued operations per
share...................... 1.18 --
-------- --------
Net earnings per share...... $ 2.26 $ 0.66
======== ========
Weighted average common
shares outstanding......... 38,978 38,978
======== ========
Diluted earnings per share:
Earnings from continuing
operations per share....... $ 1.05 $ 0.64
Discontinued operations per
share...................... 1.14 --
-------- --------
Net earnings per share...... $ 2.18 $ 0.64
======== ========
Weighted average common and
equivalent shares
outstanding................ 40,249 40,249
======== ========
Other Data:
Depreciation and
amortization............... $ 24,920 $ (7,872) $ -- $ 17,048
Capital expenditures........ 11,921 (4,744) -- 7,177
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
11
Notes to Unaudited Pro Forma Consolidated Statements of Earnings
(1) Reflects the elimination of historical operating results for the Air Cargo
and Barry Controls businesses, which were sold in May 2000 and June 2000,
respectively, and the Magnets business, which will become part of APW in
connection with the Distribution.
(2) Includes the operating results, until the date of its disposition, of
Samuel Groves, a business unit sold by Applied Power on November 23, 1999.
Operating results of this divested business for the pro forma periods
presented were as follows:
Six Months Twelve
Ended Year Ended Months Ended
February 29, August 31, February 29,
2000 1999 2000
------------ ---------- ------------
(in thousands)
Net sales............................... $1,340 $9,385 $5,397
Gross profit............................ 348 2,466 1,310
Operating earnings...................... (58) 290 (70)
EBITDA.................................. 4 631 179
Capital expenditures.................... -- 75 59
(3) Engineering, selling and administrative expenses include all general
corporate expenses related to Applied Power, including costs incurred to
support both the Industrial Business and the Electronics Business. In
accordance with generally accepted accounting principles, none of these
expenses has been allocated to discontinued operations. The adjustment
reflects the elimination of the excess of historical general corporate
expenses over the amounts management believes would have been incurred by
Actuant had the Distribution taken place at the beginning of such periods.
The remainder represents salaries and benefits for positions in corporate
finance, treasury, tax, human resource and general management as well as
certain outside service fees expected to continue, including audit,
insurance and legal costs. For the six and twelve month periods ended
February 29, 2000 and fiscal 1999, pro forma general corporate expenses
were $2.4 million, $5.0 million and $4.7 million, respectively.
(4) Reflects the adjustment to exclude investment banking, legal, accounting
and other fees and expenses associated with the Distribution.
(5) Reflects the elimination of historical net financing costs and the
inclusion of estimated pro forma net financing costs based on the debt
realignment related to the Distribution as follows:
Six Months Year Twelve
Ended Ended Months Ended
February 29, August 31, February 29,
2000 1999 2000
------------ ---------- ------------
(in thousands)
The Actuant Credit Facility--Tranche A
Term Loan at 9.51%................... $ 5,286 $10,204 $10,204
The Actuant Credit Facility--Tranche B
Term Loan at 10.26%.................. 6,731 13,061 13,061
The Notes at 12.50%................... 12,500 25,000 25,000
Non-cash amortization of debt issuance
costs ............................... 876 1,752 1,752
Other financing costs................. 686 1,368 1,368
------- ------- -------
Estimated pro forma net financing
costs................................ 26,079 51,385 51,385
Less: historical net financing costs.. 18,142 41,181 39,573
------- ------- -------
Pro forma adjustment.................. $ 7,937 $10,204 $11,812
======= ======= =======
LIBOR assumed in the above calculations is 6.76%. A 0.25% change in LIBOR
for the Actuant Credit Facility would result in an approximate $0.6 million
change in annual pro forma net financing costs. A 0.25% change in the
coupon on the Notes would result in an approximate $0.5 million change in
annual pro forma net financing costs.
12
(6) Represents the adjustment required to arrive at an estimated income tax
expense after the Distribution. The increase in the effective pro forma tax
rate results from lower utilization of foreign tax credits.
(7) Reflects elimination of the net operating results of the Electronics
Business.
(8) "EBITDA" is defined as operating earnings before depreciation, amortization
and certain restructuring and other non-recurring items. Restructuring and
other non-recurring items included in the pro forma consolidated statement
of earnings are contract termination costs, contract termination recovery
and corporate reorganization expenses. As discussed in Note 2 above, pro
forma EBITDA includes $0.2 million of EBITDA from Samuel Groves, which we
divested on November 23, 1999. EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations as
determined by generally accepted accounting principles, and our calculation
thereof may not be comparable to that reported by other companies. We
believe that EBITDA provides useful information regarding our ability to
service and/or incur indebtedness. EBITDA does not take into account our
working capital requirements, debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary use.
Excluded Other Pro
EBITDA: Historical Businesses(1) Adjustments Forma(2)
------ ---------- ------------- ----------- --------
Six Months Ended February 29, 2000 $ 65,504 $(15,400) $5,607 $ 55,783
======== ======== ====== ========
Year Ended August 31, 1999 $133,321 $(36,853) $7,092 $103,867
======== ======== ====== ========
Twelve Months Ended February 29, 2000 $134,679 $(33,245) $9,155 $110,589
======== ======== ====== ========
13
Unaudited Pro Forma Consolidated Balance Sheet
(in thousands)
February 29, 2000
---------------------------------------------------
Excluded Other
Historical Businesses(1) Adjustments Pro Forma
---------- ------------- ----------- ---------
ASSETS
Current assets:
Cash and cash
equivalents............. $ 8,769 $ -- $ -- $ 8,769
Accounts receivable,
net..................... 73,304 (29,041) 57,243 (2) 101,506
Inventories, net......... 99,815 (29,676) -- 70,139
Prepaid expenses......... 7,415 (1,290) 40,000 (3) 46,125
Deferred income taxes.... 8,558 (2,705) -- 5,853
---------- --------- --------- ---------
Total current assets..... 197,861 (62,712) 97,243 232,392
Property, plant and
equipment............... 182,725 (51,380) -- 131,345
Less: accumulated
depreciation............ (110,081) 29,421 -- (80,660)
---------- --------- --------- ---------
Net property, plant and
equipment............... 72,644 (21,959) -- 50,685
Goodwill, net of
accumulated
amortization............ 155,539 (39,324) -- 116,215
Other intangibles, net of
accumulated
amortization............ 29,567 (4,926) -- 24,641
Net assets of
discontinued
operations.............. 627,930 -- (627,930)(4) --
Other assets............. 3,383 -- 14,320 (5) 17,703
---------- --------- --------- ---------
Total assets............. $1,086,924 $(128,921) $(516,367) $ 441,636
========== ========= ========= =========
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings.... $ 2,383 $ 340 $ -- $ 2,723
Trade accounts payable... 52,887 (13,744) -- 39,143
Accrued compensation and
benefits................ 20,152 (3,071) -- 17,081
Income taxes payable..... 1,031 (5,079) 28,448 (6) 24,400
Other current
liabilities............. 18,558 983 10,000 (7) 29,541
---------- --------- --------- ---------
Total current
liabilities............. 95,011 (20,571) 38,448 112,888
Long-term debt........... 507,914 (169,500) 111,586 (8) 450,000
Deferred income taxes.... 8,492 (9,166) -- (674)
Other deferred
liabilities............. 15,616 (1,252) -- 14,364
Shareholders' equity
Common stock............. 7,817 -- -- 7,817
Additional paid-in
capital................. 13,971 -- (618,063)(9) (604,092)
Retained earnings........ 455,916 71,568 (57,128)(10) 470,356
Accumulated other
comprehensive income.... (17,813) -- 8,790 (11) (9,023)
---------- --------- --------- ---------
Total shareholders'
equity.................. 459,891 71,568 (666,401) (134,942)
---------- --------- --------- ---------
Total liabilities and
shareholders' equity.... $1,086,924 $(128,921) $(516,367) $ 441,636
========== ========= ========= =========
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
14
Notes to Unaudited Pro Forma Consolidated Balance Sheet
(1) Reflects the historical financial position as of February 29, 2000 of the
Air Cargo and Barry Controls businesses which were sold in May 2000 and
June 2000 respectively, and the Magnets business, which will become part of
APW in connection with the Distribution.
(2) Historically, Applied Power, through a wholly-owned limited purpose
subsidiary, sold participating interests in a pool of its trade accounts
receivable to financial institutions. Immediately following the
Distribution, we will not have an accounts receivable financing program.
The adjustment represents the amount of accounts receivable relating to the
Industrial Business sold as of February 29, 2000.
(3) Reflects APW's agreement to reimburse Applied Power for the estimated tax
liability created by the corporate restructuring transactions related to
the Distribution, including the transactions that makes APW Ltd. a Bermuda
corporation. A corresponding liability is reflected in income taxes
payable.
(4) Reflects the transfer of the net assets of the Electronics Business in the
Distribution.
(5) Reflects estimated new debt issuance costs of approximately $15.0 million
that will be incurred as a result of the debt realignment related to the
Distribution, net of a write-off of $0.7 million of unamortized costs
related to former debt agreements.
(6) Represents the estimated tax liability increase (decrease) due to certain
other pro forma adjustments as follows:
February 29,
2000
--------------
(in thousands)
Estimated taxes on corporate restructuring transactions (see
Note 3 above)............................................... $40,000
Write-off of unamortized historical debt issuance costs (see
Note 5 above)............................................... (272)
Estimated costs associated with effecting the Transactions
including estimated Tender Offer premium (see Notes 7 and 8
below)...................................................... (11,280)
-------
Pro forma adjustment......................................... $28,448
=======
(7) Represents the accrual of the estimated investment banking, legal,
accounting and other fees and expenses associated with the Transactions.
(8) A reconciliation of the pro forma adjustments to long-term debt is as
follows:
February 29,
2000
--------------
(in thousands)
Accounts receivable financing facility (see Note 2 above)... $ 57,243
Estimated debt issuance costs (see Note 5 above)............ 15,000
Final allocation per debt realignment and other............. 39,343
--------
Pro forma adjustment........................................ $111,586
========
15
(9) Reflects changes to additional paid-in capital account impacted by pro
forma adjustments as follows:
February 29,
2000
--------------
(in thousands)
The Distribution (see Note 4 above)......................... $(627,930)
Estimated taxes on corporate restructuring transactions (see
Note 3 above).............................................. 40,000
Estimated final allocation of debt.......................... (21,343)
Cumulative translation adjustment (see Note 11 below)....... (8,790)
---------
Pro forma adjustment........................................ $(618,063)
=========
(10) Reflects changes to retained earnings generated by pro forma adjustments,
net of tax effect, as follows:
February 29,
2000
--------------
(in thousands)
Estimated taxes on corporate restructuring transactions
(see Note 3 above)........................................ $(40,000)
Write-off of unamortized historical debt issuance costs
(see Note 5 above)........................................ (408)
Estimated transaction costs and other...................... (16,720)
--------
Pro forma adjustment....................................... $(57,128)
========
(11) Reflects elimination of the portion of the cumulative translation account
attributable to the Electronics Business.
The statement of earnings data for the fiscal year ended August 31, 1997 has
been derived from unaudited consolidated financial statements of Applied Power.
16
Recent Developments
We recently announced our operating results for the three months ended May
31, 2000, but have not yet filed our Quarterly Report on Form 10-Q for the
quarterly period then ended. The following data summarize the results of
operations of Applied Power for this period, with the Electronics Business
reflected as discontinued operations:
Three Months
Ended May 31,
-------------
1999 2000
------ ------
(in millions)
Net sales........................................................ $180.0 $178.5
Gross profit..................................................... 66.2 66.0
Operating expenses(2)(3)......................................... 36.6 35.7
Amortization of intangible assets................................ 2.2 1.9
Depreciation..................................................... 4.6 3.6
Operating earnings............................................... 27.4 28.4
Footnotes:
(1) As adjusted to exclude the Non-continuing Businesses, the results were as
follows:
Three Months
Ended May 31,
-------------
1999 2000
------ ------
(in millions)
Adjusted net sales............................................... $137.9 $137.5
Adjusted gross profit............................................ 51.5 52.2
Adjusted operating expenses(2)(3)................................ 27.8 27.2
Adjusted amortization of intangible assets....................... 1.5 1.5
Adjusted depreciation............................................ 2.9 2.4
Adjusted operating earnings...................................... 22.2 23.4
Adjusted EBITDA(4)............................................... 26.6 28.4
- --------
(2) Operating expenses and adjusted operating expenses for the three months
ended May 31, 2000 include a $1.0 million pre-tax charge for investment
banking, legal, accounting and other fees and expenses associated with the
Distribution.
(3) Operating expenses and adjusted operating expenses include, among other
things, general corporate expenses, which include expenditures for
resources and services that supported the Electronics Business. In
accordance with generally accepted accounting principles, none of these
expenses has been allocated to discontinued operations. General corporate
expenses totaled $3.0 million and $4.2 million for the three months ended
May 31, 1999 and 2000, respectively.
(4) EBITDA is defined as operating earnings before depreciation, amortization
and certain restructuring and other non-recurring items. EBITDA and
adjusted EBITDA for the three months ended May 31, 2000 excludes $1.0
million in corporate reorganization expenses.
Three Months
Ended May 31,
-------------------
1999 2000
------ ------
EBITDA $34.2 $34.9
===== =====
Adjusted EBITDA $26.6 $28.4
===== =====
Our net sales, adjusted to exclude the operating results of the Non-
continuing Businesses, were $137.5 million for the three months ended May 31,
2000, compared to $137.9 million for the comparable period in fiscal 1999.
Excluding the effects of currency translation, our third quarter sales grew 2%
over last year, primarily reflecting increased shipments of heavy-duty truck
cab-tilt systems, RV leveling and slide-out systems and high force hydraulic
industrial tools. Adjusted EBITDA (not adjusted to exclude excess general
corporate expenses) increased by $1.8 million from $26.6 million for the
three months ended May 31, 1999 to $28.4 million for the three months ended
May 31, 2000, resulting from the incremental sales volume, improved gross
margins and reduction in operating expenses.
52
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
See Exhibit Index following the Signature page of this report,
which is incorporated herein by reference.
(i) Press release dated June 30, 2000.
SIGNATURE
Pursuant to the requirements 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.
APPLIED POWER INC.
(Registrant)
Date: July 7, 2000 By:__________________________________________
Joseph T. Lower
Leader-Finance and Business
Development
(Duly authorized to sign on behalf
of the Registrant)
APPLIED POWER INC.
(the "Registrant")
(Commission File No. 1-11288)
EXHIBIT INDEX
to
FORM 8-K CURRENT REPORT
Dated July 5, 2000
Exhibit Filed
Number Description Herewith
- ------ ----------- ---------
99.1 Applied Power Inc.
Press Release
dated June 30, 2000 X
20