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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2003

OR

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from to                              to                             

Commission File No. 1-11288

ACTUANT CORPORATION

(Exact name of Registrant as specified in its charter)

6100 NORTH BAKER ROAD

MILWAUKEE, WISCONSIN 53209

Mailing address: P.O. Box 3241, Milwaukee, Wisconsin 53201

(Address of principal executive offices)

(414) 352-4160

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark 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, and (2) has been subject to such filing requirements for the past 90 days.        Yes    X          No       

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).        Yes    X          No       

As of October 15, 2003, the aggregate market value of Common Stock held by non-affiliates was approximately $725.1 million and there were 23,561,504 shares of the Registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on January 9, 2004 are incorporated by reference into Part III hereof.

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Actuant Corporation provides free-of-charge access to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, through our website, www.actuant.com, as soon as reasonably practical after such reports are electronically filed with the Securities and Exchange Commission.

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FORWARD LOOKING STATEMENTS AND CAUTIONARY FACTORS

This annual report on Form 10-K contains certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The terms “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “plan,” “project” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to inherent risks and uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection with such statements, factors that may cause actual results or events to differ materially from those contemplated by such forward-looking statements include, without limitation, general economic conditions and market conditions in the recreational vehicle, truck, automotive, industrial production, and construction industries in North America, Europe and, to a lesser extent, Asia, market acceptance of existing and new products, successful integration of acquisitions, operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material or labor cost increases, foreign currency risk, interest rate risk, the economy’s reaction to terrorist attacks and the impact of war, the length of economic downturns in the Company’s markets, the resolution of contingent liabilities related to APW Ltd. and other litigation matters, the Company’s ability to access capital markets, the Company’s debt level, and other factors that may be referred to or noted in the Company’s reports filed with the Securities and Exchange Commission from time to time.

When used herein, the terms “Actuant,” “Applied Power,” “we,” “us,” “our,” and the “Company” refer to Actuant Corporation and its subsidiaries.

PART I

Item 1.    Business

General

Headquartered in Milwaukee, Wisconsin, Actuant Corporation is a Wisconsin corporation incorporated in 1910. Actuant is a global manufacturer and marketer of a broad range of industrial products and systems, organized into two business segments, Tools & Supplies and Engineered Solutions. Tools & Supplies sells branded specialized electrical and industrial tools and supplies to hydraulic and electrical wholesale distributors, to catalog houses and through various retail distribution channels. Engineered Solutions’ primary expertise is in designing, manufacturing and marketing customized motion control systems primarily for OEMs in diversified niche markets. We believe that our strong market positions are the result of a combination of our brand recognition, proprietary engineering and design competencies, dedicated service philosophy and global manufacturing and distribution capabilities.

During fiscal 2003, the Company acquired Heinrich Kopp AG (“Kopp” or the “Kopp Acquisition”) and Shanghai Sanxin Hydraulic Co., Ltd., both included in the Tools & Supplies segment. During fiscal 2001, Actuant acquired the assets of Dewald Manufacturing, Inc. and divested the Mox-Med business, both of which are included in the Engineered Solutions segment. Actuant also divested the Quick Mold Change product line in the Tools & Supplies segment. These actions impact the comparability of operating results. For further information, see Note 2, “Acquisitions and Divestitures” in the Notes to Consolidated Financial Statements.

Prior to July 31, 2000, the Company was known as Applied Power and consisted of two segments, Electronics and Industrial. The Electronics segment (the “Electronics Business” or “APW”) focused on electronic enclosures, while the Industrial segment (the “Industrial Business”) concentrated on the current Tools & Supplies and Engineered Solutions businesses, as well as other businesses that have been divested. On January 25, 2000, Applied Power’s board of directors authorized various actions to enable Applied Power to distribute its Electronics Business to its shareholders in the form of a special dividend (the “spin-off” or “Distribution”). The Distribution took place on July 31, 2000.

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Description of Business Segments

Tools & Supplies.    The Tools & Supplies segment includes our Enerpac, Gardner Bender, and Kopp businesses. These businesses share core competencies in product branding, distribution channel management, global sourcing, and managing the logistics of SKU-intensive product lines. The Tools & Supplies segment sells a wide array of branded, specialized electrical and industrial tools and supplies to hydraulic and electrical wholesale tool distributors, to catalog houses and through various retail distribution channels. The segment’s products include high-force hydraulic tools, electrical tools and consumables, which are sold directly to end-user markets including general industrial, residential, construction, and production automation, or to end-user markets through retail home centers, retail marine or retail automotive aftermarket distribution channels. Tools & Supplies provides over 20,000 SKUs, most of which are designed and manufactured by us in the United States or Germany. In addition, the segment manages a global sourcing operation that supplements its manufactured product offerings. Major customers include Lowe’s, The Home Depot, Menards, Ace Hardware, Praktiker (Metro Group), Hagebau/Zeus, Rewe, Snap-on, TruServe and W.W. Grainger. This group also sells to over 10,000 small accounts globally and over 3,000 wholesale electrical, marine and automotive aftermarket distributors.

We believe Enerpac is a leading global supplier of specialized high-force hydraulic systems and components for general industrial, construction and production automation markets. The following is a summary of each of Enerpac’s three major product lines:

Industrial Tools.    We believe Enerpac is a leading global supplier of high-force hydraulic industrial tools operating at very high pressures of between 5,000 pounds per square inch and 15,000 pounds per square inch. The industrial tool line consists of a broad range of products that are generally sold by industrial and specialty fluid power distributors to customers in the construction, mining, steel mill, cement, railway, oil and gas, and general maintenance industries. Enerpac also works closely with major global construction firms to supply products that are used in major infrastructure projects. Enerpac’s products allow users to apply controlled force and motion to increase productivity, reduce labor costs and make work safer and easier to perform. Enerpac maintains strong customer relationships with such leading distributors as Grainger, Applied Industrial Technologies, and MSC.

Workholding.    We also believe Enerpac is a leading supplier of hydraulic workholding components and systems. Workholding products hold parts in position in metal cutting machine tools during the machining process. The products are marketed through distributors to the automotive, machine tool and fixture design markets.

Customized Solutions.    Enerpac’s customized solutions consist of customized hydraulic products that are sold directly to OEM customers including Caterpillar, Parker-Hannifin and Snap-on. Enerpac’s product development staff works closely with OEM customers to develop hydraulic solutions for specific applications.

We believe Gardner Bender is a leading supplier of electrical tools and components to the North American retail home center, retail marine and retail automotive aftermarket and wholesale electrical markets, supplying over 10,000 SKUs through a variety of distribution channels. Gardner Bender maintains strong customer relationships with leading retailers such as Lowe’s, The Home Depot, Menards, TruServ, Ace Hardware, WalMart, Sears, Advance Auto Parts and West Marine. Gardner Bender’s main product lines include the following:

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We believe Kopp is a leading supplier of electrical consumables and components to the German and Austrian retail home center and wholesale electrical markets, with a growing presence in other European countries. Supplying over 5,000 SKUs, Kopp maintains strong customer relationships with leading retailers such as Praktiker (Metro Group), Hagebau/Zeus, Rewe, Hornbach, Baumax, and OBI. Kopp’s main product lines include the following:

Engineered Solutions.    We believe that the Engineered Solutions segment is a leading global designer and manufacturer of customized motion control systems for OEMs in a variety of niche industrial markets. The segment works with its customers to provide customized solutions in the recreational vehicle (“RV”), heavy duty truck, automotive, and medical markets. Products include RV slide-out and leveling systems, hydraulic cab-tilt systems for heavy-duty trucks, and electro-hydraulic automotive convertible top actuation systems. We believe that the segment’s principal brands, Power-Packer, Power Gear, Milwaukee Cylinder and Nielsen Sessions, are recognized for their engineering quality, integrated custom design and geographic reach. Engineered Solutions’ customers include leading corporations such as Wilhelm Karmann GmbH, Fleetwood, Monaco, Volvo, Bertone, Jayco, and CTS Dachsysteme. Engineered Solutions’ main brands or businesses are summarized below:

Power-Packer.    Under this brand, Engineered Solutions manufactures hydraulic and electro-hydraulic motion control systems for OEM applications in the truck, automotive, and medical markets. Products manufactured include hydraulic cab-tilt systems for heavy-duty cab-over-engine trucks, cab suspension systems, electro-hydraulic automotive convertible top actuation systems and self-contained hydraulic actuators for patient lifting and positioning applications within the medical market. The majority of sales of cab-tilt systems and convertible top actuation systems are generated in the European market, but North American convertible top actuation sales are expected to grow significantly in the near future. These systems are comprised of sensors, electronic controls, hydraulic cylinders, electronic motors and a hydraulic pump. Our convertible top actuation systems are utilized on both retractable soft and hard top vehicles. Over the past three years we have been named as the supplier of the convertible top actuation system on a number of replacement and new automotive platforms. For example, Engineered Solutions was awarded the actuation system on European models such as the Renault Megane, Volkswagen Beetle, Audi A-4, and Mercedes CLK and US models such as the Corvette, Chrysler PT Cruiser, Cadillac XLR, and Chevrolet SSR. Engineered Solutions also markets and produces a smaller, low-cost hydraulic cab-tilt system called the “Hy-Cab.” This system replaces existing component supply or torsion bars that have historically been used for cab-tilt applications on medium sized trucks. The segment’s patient positioning systems are incorporated into hospital beds, stretchers, examination chairs, surgery tables and transfer lifts. Power-Packer also designs, manufactures, and markets trailer landing gear, which generally consists of two adjustable legs used to support the front end of a semi-trailer in a level position when disconnected from the towing vehicle. Our hydraulic stabilizers quickly position and level off-highway equipment at remote sites.

Power Gear.    Engineered Solutions designs, manufactures and markets both electric and hydraulic powered slide-out systems, hydraulic leveling systems and landing gears for the RV market under the Power Gear brand. Slide-out systems, which are typically comprised of sensors, electronic controls, and either hydraulic pumps and cylinders or electric motors, allow an RV owner to increase a room’s size by

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telescoping a section of the room’s wall outward. Leveling systems typically consist of four hydraulic cylinders, a 12-volt DC hydraulic motor pump and an electronic control system and are capable of leveling motor homes to within three degrees of fully horizontal. Power Gear augmented its slide-out and leveling system business with the acquisition of Dewald in March 2001. Substantially all of our sales to RV OEM’s are generated in North America, although we have recently won our first supply contract for the European RV market.

Other Products.    Engineered Solutions also supplies other niche markets with positioning products and industrial case hardware. Under the Milwaukee Cylinder brand, it produces a broad range of tie-rod hydraulic and pneumatic cylinders for a wide variety of applications including automated production lines, machine tools, machinery, boat drives and material handling. It also designs and manufactures highly specialized cylinders such as servo-actuators used in vibration and fatigue testing. Engineered Solutions offers a comprehensive line of case, container and industrial hardware marketed under the Nielsen Sessions brand. Products include a variety of hinges, latches, handles, caster plates and accessories.

International Business

Actuant is a global business. For fiscal 2003, we derived approximately 49% of our net sales from the United States, 43% from Europe, 5% from Asia, 2% from Canada, and 1% from South and Latin America. Our European sales significantly increased in fiscal 2003 due to the acquisition of Kopp. International sales are influenced by fluctuations in exchange rates of foreign currencies, foreign economic conditions and other factors associated with foreign trade. We serve a global customer base and have implemented a global infrastructure for the manufacturing, sourcing, distribution and sales of our products. Our global scale and infrastructure enable us to meet the needs of our customers with global operations, which supports our strong relationships with many leading global OEMs.

Distribution and Marketing

Enerpac sells its products through a combination of distributors, direct sales personnel and manufacturers representatives. Enerpac’s distributor network is one of its key competitive strengths and generates the majority of its net sales. Enerpac employs territory managers that make joint sales calls to large end-users with distributor sales personnel, train end-user and distributor personnel on products and provide product application expertise.

Gardner Bender markets its electrical tools and supplies through an extensive distribution network, and has established strong positions in each of its major sales channels, including retail, distribution and direct sales. Gardner Bender products may be found under the Gardner Bender, Cal Term, Ancor, and Del City brand names.

Retail.    Gardner Bender utilizes a combination of internal account managers and independent manufacturers representatives to serve its retail customers, including home centers, specialty marine and automotive retailers, mass merchandisers and hardware cooperatives. Gardner Bender’s sales and marketing personnel provide significant marketing support, including promotional planning, sales programs, retail point-of-purchase materials and displays, effective product packaging, strong merchandising, and advertising programs.

Distribution.    Gardner Bender also sells its products to thousands of distributors through internal sales managers dedicated to the distributor channel and independent sales representatives. Due to the distributor channel’s high level of fragmentation, Gardner Bender relies extensively on independent manufacturers representatives to provide ongoing customer sales and service support.

Direct.    Gardner Bender currently focuses the majority of its direct marketing efforts on small OEM companies. Sales to this channel require no internal field sales personnel or independent sales representatives, and are made through a combination of catalogs, telemarketers and the internet.

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Kopp markets it electrical products similar to Gardner Bender. Kopp’s internal account managers serve all retail customers and sales and marketing employees provide significant marketing support, including promotional planning, sales programs, retail point-of-purchase materials and displays, effective product packaging, strong merchandising, and advertising programs. Similarly, internal employees sell to the distribution channel.

Engineered Solutions’ products are marketed directly to OEMs through a direct technical sales organization. Most product lines also have dedicated market managers as well as a technical support organization. Engineered Solutions has an experienced sales force, organized by end-market, that typically resides in the manufacturing facilities and reports to market sales leaders that are based in the primary engineering facilities for their respective market areas. Engineered Solutions’ engineering capabilities, technical service and established customer relationships are key competitive advantages in winning new contracts.

Product Development and Engineering

We have earned a reputation for design and engineering expertise and for the creation of highly engineered innovative products. We maintain engineering staff at several locations that design new products and make improvements to existing product lines. Research and development costs are expensed as incurred. Expenditures for research and development were $4.3 million, $3.1 million, and $3.4 million in fiscal 2003, 2002 and 2001, respectively. We have developed several proprietary technologies and hold over 500 patents, including applications, across the world.

Competition

We have numerous competitors in each of our markets, but we believe that we are well positioned to compete successfully. Although we face larger competitors in some markets, the majority of our competition in our niche markets is primarily composed of small, regional competitors who often lack the infrastructure and financial resources to support global OEMs. We believe that our global scale and infrastructure help to build and maintain strong relationships with major OEMs.

Patents and Trademarks

We own numerous United States and foreign patents and trademarks. No individual patent or trademark is believed to be of such sufficient importance that its termination would have a material adverse effect on our businesses.

Manufacturing and Operations

Our manufacturing operations primarily consist of light assembly operations. We also have plastic injection molding capabilities and automated welding and painting lines. We have implemented single piece flow methodology in our manufacturing plants, which reduces inventory levels, lowers “re-work” costs and shortens lead time to customers. We manufacture the majority of the products we sell, but strategically outsource components and finished goods from an established global network of qualified suppliers. Components are purchased from a variety of suppliers. We have built strong relationships with our key suppliers over many years, and while we single source many of our components, we believe that in most cases there are several qualified alternative sources.

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Order Backlogs and Seasonality

We had an order backlog of approximately $60.7 million and $49.8 million at August 31, 2003 and 2002, respectively. Substantially all orders are expected to be completed prior to the end of fiscal 2004. As illustrated in the following table, our consolidated sales are not subject to significant seasonal fluctuations:

Sales Percentages by Fiscal Quarter

Employees

As of August 31, 2003, we employed approximately 3,300 people. Our employees are not subject to any collective bargaining agreements with the exception of approximately 63 Milwaukee Cylinder production employees and employees covered by government-mandated collective labor agreements in some international locations. We believe we enjoy good working relationships with our employees.

Environmental Matters

Our operations, like those of similar businesses, are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those regulating discharges of hazardous materials into the air and water, the storage and disposal of such materials, and the clean-up of soil and groundwater contamination. Pursuant to certain environmental laws, a current or prior owner or operator of a site may be liable for the cost of an investigation and any remediation of contamination, and persons who arrange for disposal or treatment of hazardous materials may be liable for such costs at a disposal or treatment site, whether or not the person owned or operated it. These laws impose strict, and under certain circumstances, joint and several liability.

We believe that we are in material compliance with applicable environmental laws. Compliance with these laws has and will require expenditures on an ongoing basis. Regulators have identified us as a potentially responsible party regarding remediation of several multi-party waste sites. Based on our investigations, we believe that we are a de minimis participant in those sites. In addition, soil and groundwater contamination has been identified at a few facilities that we operate or formerly owned or operated. We are also a party to several state and local environmental matters, and we have provided environmental indemnifications for several divested business units, and as such retain responsibility for certain potential environmental liabilities.

Environmental expenditures over the last three years have not been material, and we believe that the costs for known environmental matters are not likely to have a material adverse effect on our financial position, results of operations or cash flows. Nevertheless, more stringent environmental laws, unanticipated, burdensome remedy requirements, or discovery of previously unknown conditions could have a material adverse effect upon our financial condition and results of operations. Environmental remediation accruals of $1.8 million and $1.1 million were included in the Consolidated Balance Sheets at August 31, 2003 and 2002, respectively. For further information, see Note 16, “Contingencies and Litigation” in the Notes to Consolidated Financial Statements.

Other

For additional information regarding revenues, profits and losses, and total assets of each business segment, geographical financial information and information on customers, see Note 15, “Business Segment, Geographic and Customer Information” in the Notes to Consolidated Financial Statements.

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Item 2.    Properties

We generally lease rather than own our operating facilities. The majority of our leases are short-term and renewable at our option.

Tools & Supplies

Tools & Supplies maintains 14 manufacturing facilities in the United States, Mexico, Europe and Asia and 18 distribution facilities and sales offices worldwide.

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Engineered Solutions

Engineered Solutions maintains 10 manufacturing facilities throughout North America, Europe and Asia and 4 distribution and sales facilities.

Item 3.    Legal Proceedings

The Company is a party to various legal proceedings that have arisen in the normal course of business. These legal proceedings typically include product liability, environmental, labor and patent claims.

We self-insure a portion of our product liability by maintaining a per claim retention provision under our insurance program. We have recorded reserves for estimated losses based on the specific circumstances of each case. Such reserves are recorded when it is probable that a loss has been incurred as of the balance sheet date and the amount of the loss can be reasonably estimated. In our opinion, the resolution of these contingencies is not likely to have a material adverse effect on our financial condition, results of operation or cash flows. For further information refer to Note 16, “Contingencies and Litigation” in the Notes to Consolidated Financial Statements.

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Item 4.    Submission of Matters to a Vote of Security Holders

None.

Executive Officers of the Registrant

The names, ages and positions of all of the executive officers of the Company as of the record date of November 18, 2003 are listed below.

Robert C. Arzbaecher, President and Chief Executive Officer and Chairman of the Board of Directors. Mr. Arzbaecher was named President and Chief Executive Officer of the Company on August 9, 2000. He served as Vice President and Chief Financial Officer of Applied Power starting in 1994 and Senior Vice President in 1998. He served as Vice President, Finance of Tools & Supplies from 1993 to 1994. He joined Applied Power Inc. in 1992 as Corporate Controller. From 1988 through 1991, Mr. Arzbaecher was employed by Grabill Aerospace Industries LTD, where he last held the position of Chief Financial Officer.

William S. Blackmore, Vice President—Engineered Solutions-Americas. Mr. Blackmore was appointed leader of the Engineered Solutions-Americas business in fiscal year 2002. Prior to joining Actuant, he served as President of Integrated Systems—Americas at APW Ltd. from 2000 to 2001 and as President, Rexnord Gear and Coupling Products (“Rexnord”) from 1997 to 2000. Prior to 1997 Mr. Blackmore held various general management positions at Rexnord and Pillar Industries.

Gustav H.P. Boel, Vice President—Kopp and member of the Board of Directors. Mr. Boel has been associated with the Company for over 25 years. Following the spin-off, he left the Company as an employee but served as a member of the Board of Directors. During this time he was employed by APW Ltd., where he last held the position of Senior Vice President. In September 2002, he rejoined the Company as an employee and was named business leader of Kopp in addition to his Board responsibilities. Prior to the spin-off, he held various positions with Applied Power Inc., including President of the Industrial business segment, President of Engineered Solutions Europe and President of Enerpac.

George T. Bowman, Vice President—Enerpac. Mr. Bowman joined the Company as leader of the Enerpac business in fiscal year 2003. From 2002 to 2003, he served as President of The Torrington Company—Automotive Division, a subsidiary of Ingersoll-Rand. Prior to this, he spent eleven years with General Electric in a series of increasingly responsible roles, including General Manager of Switchgear.

Mark E. Goldstein, Vice President—Tools & Supplies. Mr. Goldstein was appointed leader of the Tools and Supplies business segment in fiscal year 2003. He joined the Company in fiscal year 2001 as the leader of the Gardner Bender business. Prior to joining Actuant he held senior sales, marketing and operations management positions at The Stanley Works, most recently as President, Stanley Door Systems. Mr. Goldstein was employed by The Stanley Works for 22 years.

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Ralph L. Keller, Vice President—Operations. Mr. Keller joined the Company in 1999 in his present position. Prior to joining Actuant, he held senior operating positions in multinational organizations, most recently with Whitecap, Inc., a subsidiary of Schmalbach Lubeca AG.

Arthur Kerk, Vice President—Engineered Solutions—Europe and Asia. Mr. Kerk joined Applied Power in 1995 as Commercial Director of Power-Packer Europe. A resident of The Netherlands, he was promoted to Managing Director of Power-Packer Europe in 1996, and subsequently was appointed as Leader of Engineered Solutions—Europe in 1997. Prior to joining Applied Power, he worked in sales management at Conex Union and as Managing Director of McKechnie in The Netherlands.

Brian K. Kobylinski, Vice President—Business Development. Mr. Kobylinski was appointed to his present position in fiscal year 2002. Prior to being promoted, he served as leader of the distribution and OEM channels of Gardner Bender, leader of Gardner Bender’s Del City operation, Gardner Bender’s Vice President of Marketing and Director of OEM sales. Prior to joining Applied Power Inc. in 1992, Mr. Kobylinski held various sales positions in the insurance industry.

Andrew G. Lampereur, Vice President and Chief Financial Officer. Mr. Lampereur joined Applied Power Inc. in 1993 as Corporate Controller, a position he held until 1996 when he was appointed Vice President of Finance for Gardner Bender. In 1998, Mr. Lampereur was appointed Vice President, General Manager for Gardner Bender. He was appointed to his present position on August 9, 2000. Prior to joining Applied Power Inc., Mr. Lampereur was the Corporate Controller of Fruehauf Trailer Corporation and held a number of financial management positions at Terex Corporation.

Edmund W. Staple, Vice President—Gardner Bender. Mr. Staple was appointed leader of the Gardner Bender business in fiscal year 2003. He joined Actuant in fiscal year 2002 as the Sales and Marketing Leader for Gardner Bender. Prior to joining Actuant, he spent ten years at Textron most recently as the Executive Vice President of Sales and Marketing for Textron Fastening Systems. Previous to Textron, he held various positions with Danaher Corporation, GE Plastics, and Goodyear Tire & Rubber Corporation.

Ronald P. Wieczorek, Vice President—Human Resources. Mr. Wieczorek was appointed leader of human resources in fiscal 2002. Prior to being promoted, he served as human resources leader of Engineered Solutions—Americas. Prior to joining Applied Power Inc. in 1998, Mr. Wieczorek held various senior human resources positions, most recently with Watlow Gordon, Inc. where he served as a member of the general management leadership team.

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PART II

Item 5.    Market for Registrant’s Common Equity and Related Stockholder Matters

The Company’s common stock is traded on the New York Stock Exchange under the symbol ATU. At September 30, 2003, the approximate number of record shareholders of common stock was 1,765.

On January 25, 2001 the Company completed a one-for-five reverse stock split and in October 2003, the Company executed a two-for-one stock split. In February 2002, the Company sold, pursuant to an underwritten public offering, 6,900,000 shares of its Class A common stock. The high and low sales prices of the common stock, which reflect the impact of these transactions, were as follows for the previous two years:

No dividends have been declared or paid during fiscal 2003 and 2002. The Company’s current credit agreements restrict its ability to pay dividends. We do not plan on declaring or paying dividends in the foreseeable future, but will instead retain cash flow for working capital needs, to fund acquisitions and to reduce outstanding debt.

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Item 6.    Selected Financial Data

The following selected historical financial data have been derived from the Consolidated Financial Statements of Actuant. The data should be read in conjunction with these financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The information presented reflects all business units other than the Electronics Business, which was distributed to shareholders in a spin-off transaction on July 31, 2000 as discussed in Item 1, “Business” and is reported in discontinued operations in the accompanying Consolidated Financial Statements. The results of all businesses acquired or divested during the time periods presented are included in the table from their acquisition date or up to their divestiture date. As a result, the selected financial data in the following table are not fully representative of the group of business units that comprise Actuant as of August 31, 2003.

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Background

Actuant Corporation is a manufacturer and marketer of a broad range of industrial products and systems, organized as two business segments, Tools & Supplies and Engineered Solutions. On July 31, 2000 the Company completed a spin-off (the “Distribution”) of its Electronics business (“APW”) to shareholders. As you read the following review of the Company’s financial condition and results of operations, you should also read our financial statements and related notes, which follow the discussion.

Results of Operations

Historical Financial Data

Net Sales

The following table summarizes our net sales for the past three fiscal years:

Fiscal 2003 compared to Fiscal 2002

Total net sales increased by $122.4 million, or 26%, from $463.0 million in fiscal 2002 to $585.4 million in fiscal 2003. Sales from Kopp, which was acquired on September 3, 2002, comprised 81% of the increase. Currency translation rates also positively impacted sales in fiscal 2003 by $21.2 million. Excluding the impact of Kopp and foreign currency rate changes on translated results, sales in fiscal 2003 were essentially unchanged as compared to fiscal 2002.

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Net sales for the Tools & Supplies segment increased by $107.0 million or 41%, from $259.5 million in fiscal 2002 to $366.5 million in fiscal 2003. Kopp comprised 93% of the increase. Excluding the impact of Kopp and foreign currency rate changes on translated results, which had a positive impact of $8.7 million, sales were essentially unchanged with the prior year. The flat sales reflect lower sales in North America due to weak economic conditions, especially in the commercial construction markets, partially offset by growth in the emerging Chinese market and large infrastructure projects in Europe.

Engineered Solutions net sales increased $15.4 million, or 8%, from $203.5 million in fiscal 2002 to $218.9 million in fiscal 2003. Excluding the impact of foreign currency rate changes on translated results, which had a positive impact of $12.5 million, sales increased $3.0 million, or 1%, as compared to fiscal 2002. This increase was caused by growth in demand in both the truck and convertible top actuation markets offset by decreased recreational vehicle (“RV”) market sales due to excess inventory levels held at dealers and the loss of two customers in late fiscal 2002.

Fiscal 2002 compared to Fiscal 2001

Total net sales decreased $18.9 million, or 4%, from $481.9 million in fiscal 2001 to $463.0 million in fiscal 2002. This decline is due to the impact of the Mox-Med and QMC divestitures in fiscal 2001 and reduced sales in most of the Tools & Supplies distribution channels, offset by approximately $2.7 million of favorable currency impact on translated results, increased sales to the RV market due to higher demand, and the March 1, 2001 acquisition of Dewald. Poor economic conditions in fiscal 2001 were exacerbated by the terrorist actions in the United States on September 11, 2001.

Tools & Supplies net sales decreased from $281.2 million in fiscal 2001 to $259.5 million in fiscal 2002, a $21.7 million or 8% decrease. Approximately $17.6 million of the decrease was driven by weaker economic conditions in North America and the negative impact of the September 11, 2001 terrorist actions. Sales in our more capital intensive distribution channels, to the electrical distribution market and to OEMs declined more than other markets in fiscal 2002. The divestiture of QMC in fiscal 2001 contributed $3.3 million to the decline.

Engineered Solutions net sales increased $2.8 million, or 1%, from $200.7 million in fiscal 2001 to $203.5 million in fiscal 2002. This increase is attributable to a 40% increase, or $23.7 million, in sales to the RV market due to higher demand and the incremental impact of a full year of Dewald sales (acquired in the middle of fiscal 2001). These increases were partially offset by the loss of sales due to the August 2001 divestiture of Mox-Med.

Gross Profit

The following table summarizes gross profit and gross profit margins for the past three fiscal years:

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Fiscal 2003 Compared to Fiscal 2002

Consolidated gross profit in fiscal 2003 was $190.0 million, a $31.0 million increase over the $159.0 million reported in fiscal 2002. The increase is the result of the Kopp Acquisition, the impact of currency exchange rates on translated results, and the continued focus on improving manufacturing efficiencies and achieving material cost reductions, offset by continued automotive start-up and new model launch activities. Total gross profit margin decreased from 34.3% in fiscal 2002 to 32.5% in fiscal 2003 primarily due to the lower gross profit margins at Kopp as compared to the other Actuant businesses. In addition, during fiscal 2003, the Company incurred a total of $2.2 million in downsizing costs, $1.1 million of which impacted gross profit with the remaining $1.1 million affecting selling, administrative, and engineering expense. Excluding Kopp, gross profit increased 4% in fiscal 2003 as compared to fiscal 2002.

In fiscal 2003, Tools & Supplies gross profit increased $30.2 million, or 28%, to $138.8 million from $108.6 million in fiscal 2002. This increase is due to the Kopp Acquisition, the impact of currency exchange rates on translated results, and the material cost down initiatives discussed earlier. Gross profit margins in Tools & Supplies decreased in fiscal 2003 as compared to fiscal 2002 due to the lower gross profit margins realized by Kopp as compared to the rest of the Tools & Supplies segment. Excluding the impact of the Kopp acquisition, gross profit margins were essentially unchanged. The Company expects Kopp’s gross profit margins to improve in fiscal 2004 as Kopp continues to implement lean manufacturing techniques to reduce costs, simplify the business, shorten cycle time and reduce inventory.

Engineered Solutions gross profit increased $0.8 million, or 2%, to $51.2 million in fiscal 2003 as compared to $50.4 million in fiscal 2002. This increase is due to the significant progress that was made on material cost down initiatives and improvements in manufacturing efficiencies in the RV business, offset by initial production costs and inefficiencies with new automotive platforms which began production in fiscal 2003, a start-up joint venture in Germany, and the opening of a United States automotive plant to support new business. Gross profit margin decreased from 24.7% in fiscal 2002 to 23.4% in fiscal 2003 as a result.

Fiscal 2002 Compared to Fiscal 2001

Consolidated gross profit decreased $9.9 million, or 6%, from $168.9 in fiscal 2001 to $159.0 in fiscal 2002, primarily due to reduced sales volumes resulting from the divestitures of Mox-Med and QMC, which contributed $9.6 million of gross profit in fiscal 2001. Gross profit margins declined slightly due to the unfavorable mix resulting from the growth in our Engineered Solutions business and contraction in our Tools & Supplies business. Engineered Solutions margins were reduced due to the RV plant consolidation activities, the impact of a full year of Dewald’s lower margins, and increased engineering development and prototype costs for new convertible top business. Gross margin increases in the Tools & Supplies business were driven by a focused effort to reduce costs.

Gross profit decreased $4.1 million, or 3.6%, in the Tools & Supplies business, from $112.7 million in fiscal 2001 to $108.6 million in fiscal 2002. The divestiture of QMC comprised $1.2 million of the decrease, with the remainder attributable to reduced Tools & Supplies sales. Gross profit margins, however, improved to 42.0% in fiscal 2002, from 40.1% in fiscal 2001. Significant cost reduction efforts were made in the hydraulic and electrical tools businesses, resulting in material cost reductions, personnel reductions, and facility downsizing. These cost reductions come in large part from a formal cost reduction program implemented in the Tools & Supplies business in mid-fiscal 2001, which was subsequently implemented across all Actuant businesses.

Engineered Solutions fiscal 2002 gross profit decreased $5.8 million, or 10.3% from fiscal 2001. This decrease is comprised of the impact of the divestiture of Mox-Med, offset by gross profit increases resulting from the increased sales to the RV market. Gross profit margins decreased from 28.0% in fiscal 2001 to 24.7% in fiscal 2002 due to the divestiture of Mox-Med, which had higher margins than the Engineered Solutions business as a whole, inefficiencies related to the consolidation of our RV manufacturing facilities, lower fixed cost absorption at our more vertically integrated Milwaukee Cylinder and Nielsen Sessions operations due to lower sales and production levels as compared to the prior year, and higher prototype costs in the automotive operations to support new platform development. In addition, fiscal 2002 includes a full year of sales from Dewald, which historically had lower margins than our Power Gear business.

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Operating Expenses

The following table summarizes operating expenses for the past three fiscal years:

Selling, Administrative and Engineering (“SAE”) Expenses

The following table summarizes our SAE expenses for the past three fiscal years:

All of the general corporate expenses incurred by Actuant Corporation are included in SAE expenses. None of these expenses have been allocated to the two business units.

Fiscal 2003 Compared to Fiscal 2002

Consolidated SAE expenses increased $29.5 million, or 35%, from $85.4 million in fiscal 2002 to $114.9 million in fiscal 2003. This increase is due to the Kopp Acquisition, spending on preproduction engineering and plant start-up costs due to the significant number of new automotive convertible top actuation and latching contracts the Company has won, the impact of currency rate changes on translated results, and $1.1 million in downsizing costs in SAE in fiscal 2003.

Tools & Supplies SAE expenses increased $25.5 million, or 43%, from $59.6 million in fiscal 2002 to $85.1 million in fiscal 2003. Approximately $20.5 million of this increase was a result of the Kopp Acquisition. Additionally, downsizing provisions, and higher SAE costs in the Enerpac business to support construction and infrastructure market initiatives, as well as currency translation, increased SAE expenses.

Engineered Solutions SAE expenses increased $2.0 million, or 10%, from $20.8 million in fiscal 2002 to $22.8 million in fiscal 2003. This increase was primarily the result of preproduction engineering and start-up costs incurred for the new German automotive joint venture and the new United States automotive plant, and the impact of currency on translated results.

General Corporate SAE expenses increased $2.0 million, or 40%, from $5.0 million in fiscal 2002 to $7.0 million in fiscal 2003. This increase was primarily due to increased corporate personnel to support the Company’s initiatives in addition to increased legal and professional fees over the comparable prior year periods.

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Fiscal 2002 Compared to Fiscal 2001

Consolidated SAE expenses decreased $3.6 million, or 4.0%, from $89.0 million in fiscal 2001 to $85.4 million in fiscal 2002. This decrease primarily results from the divestiture of Mox-Med and QMC in fiscal 2001 and lower corporate expenses, comprising $5.0 million of the decrease. Partially offsetting the divestitures were incremental SAE costs due to the inclusion of a full year’s SAE costs for Dewald, non-accruable costs associated with the RV plant consolidation activities, and higher automotive engineering development costs.

SAE expenses in the Tools & Supplies business decreased $3.4 million to $59.6 million in fiscal 2002. The divestiture of QMC resulted in $1.5 million of the decline, with the remainder resulting from reduced variable SAE due to the reduced sales levels and the cost reduction efforts implemented during fiscal 2001 and 2002.

SAE expenses in the Engineered Solutions business increased $1.0 million, or 5% from $19.8 million in fiscal 2001 to $20.8 million in fiscal 2002. This increase was caused by the net impact of the divestiture of Mox-Med, which resulted in a decline in SAE costs of $2.3 million, offset by SAE cost increases due to the inclusion of a full year of SAE costs for Dewald which was acquired on March 1, 2001, non-accruable costs associated with the consolidation of the RV production facilities, and a high level of engineering development costs related to convertible top actuation for new automotive program wins.

Amortization of Intangible Assets

The decrease in amortization expense from fiscal 2001 to fiscal 2002 is primarily due to ceasing goodwill amortization in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142. See Note 5, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements for more information regarding this change in accounting principle.

Restructuring Charges

The Company adopted plans to restructure portions of its operations during the third quarter of fiscal 2001. These plans were designed to reduce administrative and operational costs and resulted in a pre-tax charge of $1.7 million. Of the charge, $0.3 million related to the consolidation of the RV slide-out production facilities, $0.6 million related to downsizing the cable tie production facility, and $0.8 million related to other personnel reductions. The Company wrote down the fixed assets at the locations to be closed or downsized to their fair value, less costs to sell. In addition, the Company eliminated approximately 36 positions. In fiscal 2002, the Company received net cash proceeds of approximately $0.5 million from the sale of a former RV slide-out manufacturing facility. As of August 31, 2002, all restructuring initiatives contemplated by these plans had been completed.

Other Expense (Income)

Net Financing Costs

Fiscal 2003 net financing costs decreased 35% to $21.4 million from $32.7 million in fiscal 2002. Fiscal 2002 net financing costs decreased 33% from $49.2 million in fiscal 2001. These reductions are primarily due to reduced debt levels, especially the senior subordinated notes (the “13% Notes”), and lower interest rates due to the Company’s deleveraging and the lower interest rate environment. See “Liquidity and Capital Resources” below for further information regarding the composition of our debt and deleveraging.

Charge for Early Extinguishment of Debt

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 145, which the Company adopted on September 1, 2002, early extinguishment of debt charges are recorded in earnings from continuing operations for all periods presented, and not as an extraordinary item, as was required under the previous accounting rules.

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During the first quarter of fiscal 2003, the Company retired $9.4 million (gross principal amount) of its 13% Notes by acquiring them through open market purchases. The Company recorded a pre-tax charge of $2.0 million related to the redemption of the 13% Notes. The pre-tax charge consisted of the $1.7 million bond redemption premium payment and a $0.3 million non-cash write-off of the associated debt discount and debt issuance costs.

During the fourth quarter of fiscal 2002, the Company retired $10.4 million of its 13% Notes by acquiring them through open market purchases. The Company recorded a pre-tax charge of $2.1 million, or $1.3 million after-tax, for the $1.7 million bond redemption premium payment and the $0.4 million write-off of the associated debt discount and debt issuance costs.

In March 2002, the Company used the proceeds from its common stock offering to redeem $70 million of the 13% Notes and optionally prepay $16.5 million of debt under the senior secured credit agreement. The Company recorded a pre-tax charge of $12.0 million related to the redemption of the 13% Notes. The pre-tax charge consisted of the $9.1 million bond redemption premium payment and a $2.9 million non-cash write-off of the associated debt discount and debt issuance costs.

Also in the third quarter of fiscal 2002, the Company recorded a pre-tax charge of $2.3 million related to refinancing a portion of the senior secured credit agreement. The non-cash, pre-tax charge represents the write-off of a portion of the capitalized debt issuance costs from the original financing.

Litigation Charge Associated with Divested Businesses

In fiscal 2003, the Company recorded a pre-tax charge of $6.5 million to recognize the impact of adverse developments in two separate litigation matters associated with businesses divested prior to the spin-off of APW in July 2000, for which the Company retained indemnification risk. Both matters were settled and funded prior to August 31, 2003.

Gain on Sale of Subsidiary

During fiscal 2001 the Company sold its Mox-Med business. Cash proceeds from the sale were approximately $40.5 million, which resulted in a net gain of $18.5 million, $11.1 million after tax, or $0.67 per diluted share.

Other (Income) Expense, net

Other (income) expense, net is comprised of the following:

The net foreign currency translation gain in fiscal 2003 includes a net gain of $1.0 million related to the liquidation of two foreign subsidiaries. During the second quarter of fiscal 2003, the Company reached a settlement in a patent infringement matter in which the counterparty received a non-exclusive license, subject to the payment of royalties, to use certain patents of the Company until expiration. In connection with the settlement, the Company recorded a gain of $0.5 million, net of litigation and other related costs.

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See Note 14, “Other Items”, in the Notes to Consolidated Financial Statements for information regarding the gains recorded for insurance recoveries in fiscal 2001 and 2002, as well as the net present value of the idled lease recorded in fiscal 2001.

Income Tax Expense

The Company’s income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are higher or lower than the federal statutory rate, state tax rates in the jurisdictions where we do business, and our ability to utilize various tax credits. The Company’s effective income tax rate on earnings from continuing operations in fiscal 2003 was 35.3%, compared to 36.2% in fiscal 2002. This decrease is the result of a lower effective state income tax rate and utilization of foreign tax credits. The Company’s effective income tax rate on earnings from continuing operations for fiscal 2002 was 36.2%, compared to 40.3% for fiscal 2001. The decrease is primarily due to ceasing the amortization of goodwill in fiscal 2002, most of which was not deductible for income tax purposes, and lower overall effective tax rates in foreign jurisdictions. For more information regarding the variations in effective tax rates for the periods presented, see Note 9, “Income Taxes,” in the Notes to Consolidated Financial Statements.

Discontinued Operations

See Note 10, “Distribution and Discontinued Operations” and Note 16, “Contingencies and Litigation” in the Notes to Consolidated Financial Statements for information regarding the results of our discontinued operations.

Cumulative Effect of Change in Accounting Principle

The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” on September 1, 2001. Under the transitional provisions of SFAS No. 142, the Company recorded a goodwill impairment loss associated with its Milwaukee Cylinder reporting unit of $7.2 million in fiscal 2002. The impairment loss has been recorded as a cumulative effect of change in accounting principle in the accompanying Consolidated Statements of Earnings. See Note 5, “Goodwill and Other Intangible Assets,” in the Notes to Consolidated Financial Statements for more information regarding this change in accounting principle.

Restructuring Reserves

The Company committed to integration plans to restructure portions of Kopp’s operations during the first quarter of fiscal 2003. These plans are designed to reduce administrative and operational costs and resulted in the recording of a $11.7 million restructuring reserve in the purchase accounting process. Of the reserve, $2.6 million relates to the closure of Kopp’s manufacturing facility in Ingolstadt, Germany, with the balance primarily representing other employee severance costs to be incurred in connection with the transfer of certain production to lower cost locations and general reductions in the workforce. As a result of these plans, the Company expects to terminate a sizeable number of employees in the first 24 months of Kopp ownership. As of August 31, 2003 the Ingolstadt facility was closed, approximately 100 employees were terminated and agreements were in place for additional reductions in fiscal 2004.

A rollforward of the restructuring reserve follows (in thousands):

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Critical Accounting Policies

The Company’s significant accounting policies are disclosed in the Notes to Consolidated Financial Statements. The more critical of these policies include consolidation and presentation of financial statements, revenue recognition, inventory valuation, goodwill and other intangible asset accounting, and the use of estimates, which are summarized below.

Consolidation and Presentation:    The Consolidated Financial Statements include the accounts of Actuant Corporation and its consolidated subsidiaries. The Company consolidates companies in which it owns or controls more than fifty percent of the voting shares. The minority interest amount included on the Consolidated Balance Sheet as of August 31, 2003 represents the amount of equity attributable to minority shareholders of consolidated subsidiaries. The results of companies acquired or disposed are included in the Consolidated Financial Statements from the date of acquisition or until the date of disposal. All significant intercompany balances, transactions, and profits have been eliminated in consolidation.

Revenue Recognition:    Revenue is recognized when title to the products being sold transfers to the customer, which is upon shipment.

Inventories:    Inventories are comprised of material, direct labor and manufacturing overhead, and are stated at the lower of cost or market. Inventory cost is determined using the last-in, first-out (“LIFO”) method for a portion of U.S. owned inventory (approximately 43% and 56% of total inventories at August 31, 2003 and 2002, respectively). The first-in, first-out or average cost method is used for all other inventories. If the LIFO method were not used, the inventory balance would be higher than the amount in the Consolidated Balance Sheet by approximately $5.6 million and $6.7 million at August 31, 2003 and 2002, respectively.

Goodwill and Other Intangible Assets:    Other intangible assets with definite lives, consisting primarily of purchased patents, trademarks and noncompete agreements, are amortized over periods from three to twenty-five years. Other intangible assets with indefinite lives are not subject to amortization, but are subject to annual impairment testing. Goodwill is not amortized, but is subjected to annual impairment testing in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” The Company performed impairment tests of its goodwill at August 31, 2003 and 2002 and at September 1, 2001.

Use of Estimates:    As required under generally accepted accounting principles, the Consolidated Financial Statements include estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses for the periods presented. They also affect the disclosure of contingencies. See Note 10, “Distribution and Discontinued Operations,” Note 9, “Income Taxes”, and Note 16, “Contingencies and Litigation” in the Notes to Consolidated Financial Statements for further information. Actual results could differ from those estimates and assumptions.

Liquidity and Capital Resources

Cash and cash equivalents totaled $4.6 million and $3.0 million at August 31, 2003 and 2002, respectively. Our goal is to maintain low cash balances, utilizing any excess cash to pay down debt in an effort to minimize financing costs.

The Company generated cash from operating activities of continuing operations of $49.4 million, $18.9 million and $95.1 million in fiscal 2003, 2002 and 2001, respectively. Fiscal 2003 operating cash flows exceeded fiscal 2002 because (1) fiscal 2002 includes an incremental $9.1 million of redemption premiums paid on the 13% Notes, (2) fiscal 2002 cash interest payments were $14.5 million greater due to higher debt levels, and (3) income tax and transaction costs of approximately $7.0 million were paid in fiscal 2002 related to the August 2001 sale of Mox-Med. Fiscal 2002 operating cash flows were lower than fiscal 2001 because (1) fiscal 2001

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operating cash flows include the proceeds from the accounts receivable securitization program of $25.3 million (see Note 3 “Accounts Receivable Financing”), (2) fiscal 2001 includes the receipt of $28.7 million of tax refunds, (3) interest payments on the 13% Senior Subordinated Notes (the “13% Notes”) were $5.6 million higher than in fiscal 2001 since only nine months of interest was paid in fiscal 2001 versus twelve months in fiscal 2002 and interest was due on the 13% Notes that were repurchased in the fourth quarter, (4) income tax and transaction costs of approximately $7.0 million were paid in fiscal 2002 related to the August 2001 sale of Mox-Med, and (5) $10.8 million of redemption premiums on the 13% Notes were paid in fiscal 2002.

Cash provided by (used in) investing activities of continuing operations was $(20.7) million, $(4.8) million, and $28.1 million in fiscal 2003, 2002 and 2001, respectively. Fiscal 2003 cash flows consisted of $12.7 million of capital expenditures and $9.2 of cash paid for acquisitions, offset by $1.1 million of proceeds from the sale of fixed assets. Fiscal 2002 cash flows consisted of $10.0 million of capital expenditures and the payment of the deferred purchase price related to the Dewald acquisition, partially offset by $3.2 million of proceeds from the sale of fixed assets and $2.9 million of recoveries under an insurance settlement. Fiscal 2001 cash flows consisted of $6.7 million of capital expenditures and $11.3 million of cash paid for acquisitions, offset by $1.9 million of proceeds from the sale of fixed assets, $2.4 million of insurance proceeds and $41.7 million of cash proceeds from business unit divestitures.

Cash used in financing activities was $27.3 million, $37.7 million and $106.3 million in fiscal 2003, 2002 and 2001, respectively, the majority of which represented debt repayments. Fiscal 2003 cash flows from financing activities primarily consisted of $9.4 million used to redeem a portion of the 13% Notes, $21.1 million used for net repayments on all other debt, offset by $1.5 million of proceeds from the early termination of an interest rate swap. In fiscal 2002 cash flows from financing activities primarily reflect the proceeds of the equity offering, offset by debt repayments on both the 13% Notes and the senior secured credit agreement. Fiscal 2001 cash flows primarily reflect net debt repayments.

Debt

Debt outstanding at August 31, 2003 totaled $169.8, a $22.8 million reduction from the $192.6 million at August 31, 2002. Since the Distribution on July 31, 2000, the Company has reduced its indebtedness from approximately $451 million to approximately $170 million as of August 31, 2003. This approximate $281 million reduction was accomplished as follows (in millions):

The Company has made considerable effort to reduce its debt and financing costs since the Distribution. A major part of this was the reduction in outstanding borrowings in the form of its 13% Notes. The Company redeemed $70 million of the 13% Notes with the proceeds from our February 2002 equity offering, and retired an additional $19.8 million of 13% Notes since then via open-market repurchases. Total 13% Notes outstanding at August 31, 2003 were approximately $110 million. The approximate $90 million principle reduction in 13% Notes has resulted in an $11.7 million reduction in financing costs. Subsequent to the end of fiscal 2003, the Company acquired an additional $15 million of the 13% Notes on the open market, resulting in approximately $95 million of outstanding 13% Notes at September 30, 2003. We may repurchase additional 13% Notes on the open market, from time to time, as cash flow and borrowing availability permit and if the offering price is attractive to the Company.

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In connection with the Kopp Acquisition, the Company assumed three Euro denominated term loans totaling $5.5 million. Two of the loans bear interest at floating rates ranging from EURIBOR plus 0.76% to EURIBOR plus 1.25% and are payable semiannually through June 2007. The third loan bears interest at a fixed rate of 4.5% and is payable semiannually through September 2008. See Note 2, “Acquisitions and Divestitures,” for more information on the Kopp Acquisition.

See the “Timing of Commitments” table below for the maturities schedule of long-term debt outstanding at August 31, 2003.

At August 31, 2003 the Company was party to one interest rate swap to convert variable rate debt to a fixed rate (which expired September 5, 2003) with a total notional value of $25 million and one interest rate swap to convert fixed rate debt to a variable rate with a notional amount of $25 million. See Note 1, “Summary of Significant Accounting Policies,” and Note 6, “Debt” in the Notes to Consolidated Financial Statements for more information.

Equity Offering

The Company issued 6,900,000 shares of previously unissued shares of Class A Common Stock in February 2002 for $15.25 per share (the “Equity Offering”). Cash proceeds from the Equity Offering, net of underwriting discounts, were approximately $99.7 million. See Note 6, “Debt” and Note 11, “Capital Stock” in the Notes to Consolidated Financial Statements for further information regarding the Equity Offering.

In March 2002, the Company used the proceeds from the Equity Offering to redeem $70 million of the 13% Notes and pay down $16.5 million of debt under the senior secured credit agreement. In the third quarter of fiscal 2002, the Company refinanced a portion of the senior secured credit agreement to achieve $1.3 million in annual interest savings. In conjunction with the refinancing, all outstanding Tranche B institutional term loans were extinguished and $85.0 million of New Tranche A term loans were funded by existing bank lenders. At August 31, 2002, the remaining $66.2 million New Tranche A term loans, with a final maturity in June 2006, were priced at LIBOR plus 2.25%, which was reduced to LIBOR plus 2.00% in early October 2002 due to the improvement in our leverage ratio. The term loans are subject to a pricing grid, which allows for further increases or decreases depending on the leverage ratio.

Commitments and Contingencies

The Company leases certain facilities, computers, equipment and vehicles under various operating lease agreements, generally over periods from one to twenty years. Under most arrangements, the Company pays the property taxes, insurance, maintenance and expenses related to the leased property. Many of the leases include provisions that enable the Company to renew the lease based upon fair value rental rates on the date of expiration of the initial lease. See Note 7, “Leases,” in the Notes to Consolidated Financial Statements and the “Timing of Commitments” table below for further information.

As discussed in Note 10, “Distribution and Discontinued Operations” in the Notes to Consolidated Financial Statements, the Company is contingently liable for certain lease agreements held by APW or its successors. If APW or its successors do not fulfill their obligations under the leases, the Company could be liable for such leases. The discounted present value of future minimum lease payments for such leases totals approximately $18.3 million at August 31, 2003. The future undiscounted minimum lease payments for these leases are as follows: $4.3 million in calendar 2004; $3.1 million in calendar 2005; $2.4 million in calendar 2006; $2.4 million in calendar 2007; $2.5 million in calendar 2008; and $9.1 million thereafter. A future breach of the lease agreements by APW or its successors could potentially have a material adverse effect on the Company’s results of operations and financial position.

As more fully discussed in Note 3, “Accounts Receivable Financing” in the Notes to Consolidated Financial Statements, the Company is party to an accounts receivable securitization arrangement. Trade receivables sold and being serviced by the Company were $23.9 million and $24.9 million at August 31, 2003 and 2002, respectively. If the Company were to discontinue this securitization program, at August 31, 2003 it would have

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been required to borrow approximately $23.9 million to finance the working capital increase. Total capacity under the program is approximately $35 million.

Pursuant to an agreement with the Company’s former subsidiary, APW, the Company will be required to pay an estimated $18 to $19 million to APW or other third parties as Distribution related contingencies are resolved. This amount is accrued in “Other long-term liabilities” in the Consolidated Balance Sheets. The Company estimates that these payments will occur in fiscal 2005, and will be funded by availability under the revolving credit facilities and funds generated from operations. In addition, cash outflows will be required in fiscal 2004 to fund the remaining Kopp purchase price of $1.6 million, the $3.2 million acquisition of the Kopp minority interest, and the Kopp restructuring cash flow requirements. See Note 2, “Acquisitions and Divestitures,” in the accompanying Consolidated Financial Statements for further information about Kopp.

The Company’s Federal income tax return for fiscal year 2000 is presently under audit by the Internal Revenue Service (“IRS”). Company management believes that adequate reserves are maintained as of August 31, 2003 to cover a reasonable estimate of its potential exposure with respect to the income tax liabilities that may result from such audit. Nonetheless, there can be no assurance that such reserves will be sufficient upon completion of the IRS audit, and if not, there could be a material adverse impact on the Company’s financial position and results of operations.

At August 31, 2003 the Company had outstanding letters of credit totaling $6.4 million for contractual and contingent payments due to the former owners of Kopp and for contingent payments related to indemnifications provided to purchasers of sold subsidiaries.

Timing of Commitments

The timing of payments due under the Company’s commitments is as follows:

Dividends have not been declared or made during fiscal 2003, nor does the Company expect to pay dividends in the foreseeable future. Cash flow will instead be retained for working capital needs, acquisitions, and to reduce outstanding debt. At August 31, 2003, the Company had approximately $93.2 million of availability under its revolver. In September 2003, approximately $20 million was used to fund the repurchase of a portion of the 13% Notes and $30 million was utilized to acquire Kwikee Products Company, Inc. (see Note 17 “Subsequent Events” for further information). As a result, the Company had approximately $43 million available under its revolver at September 30, 2003. The Company believes that, if needed, additional borrowing capacity could be attained. The Company’s senior secured credit facility contains customary limits and restrictions

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concerning investments, sales of assets, liens on assets, interest and fixed cost coverage ratios, maximum leverage, capital expenditures, acquisitions, excess cash flow, dividends, and other restricted payments. At August 31, 2003 the Company was in compliance with all debt covenants. The Company believes that availability under its credit facilities, plus funds generated from operations, will be adequate to meet operating, debt service and capital expenditure requirements.

Seasonality and Working Capital

Since the Distribution, we have met our working capital needs and capital expenditure requirements through a combination of operating cash flow and availability under revolving credit facilities. Although there are modest seasonal factors within certain of our businesses, on a consolidated basis, we do not experience material changes in seasonal working capital or capital resource requirements.

Our receivables are derived from a diverse customer base in a number of industries. The largest single customer generated approximately 5.8% of fiscal 2003 net sales.

Capital Expenditures

The majority of our manufacturing operations consist of the assembly of components that are sourced from a variety of vendors. We believe that our capital expenditure requirements are not as extensive as many other industrial companies given the assembly nature of our operations. Capital expenditures for the fiscal years ended August 31, 2003, 2002, and 2001 were $12.7 million, $10.0 million, and $6.7 million, respectively.

Capital expenditures have historically been funded by operating cash flows and borrowings under revolving credit facilities. For the past three fiscal years, capital expenditures were invested primarily in machinery and equipment and computer systems. Fiscal 2003 capital expenditures were higher than the previous two fiscal years due to the continued ramp up in the automotive convertible top business to support the new automotive business won by the Company. Fiscal 2002 capital expenditures were higher than 2001 due to capital spending resulting from the February 2001 fire at our plant in Oldenzaal, The Netherlands and higher spending relating to new automotive production lines to support new convertible top business. There are no significant capital programs planned in the near future that would require expenditures in excess of fiscal 2003 levels.

Raw Material Costs and Inflation

No meaningful measures of inflation are available because we have significant operations in countries with diverse rates of inflation and currency rate movements. However, we believe that the rate of inflation in recent years has been relatively low and has not had a significant effect on our results of operations. We source a wide variety of materials and components from a network of global suppliers. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations.

New Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145, “Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” related to accounting for debt extinguishments, leases, and intangible assets of motor carriers. The provisions of SFAS No. 145 are effective for fiscal years beginning after May 15, 2002. The Company adopted SFAS No. 145 effective September 1, 2002. As a result of the adoption of this statement, costs incurred by the Company in connection with the early retirement of debt will no longer be classified as extraordinary items. As required by SFAS No. 145, prior year financial statements have been reclassified.

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” which clarifies

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disclosure and recognition/measurement requirements related to certain guarantees. The disclosure requirements are effective for financial statements issued after December 15, 2002 and the recognition/measurement requirements are effective on a prospective basis for guarantees issued or modified after December 31, 2002. The Company adopted the provisions of the statement effective January 1, 2003. The adoption did not have any impact on the Consolidated Financial Statements beyond disclosure.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure,” which amends SFAS No. 123, “Accounting for Stock-Based Compensation.” The provisions of SFAS No. 148 provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The provisions also amend the disclosure requirements of SFAS No. 123 for both annual and interim financial statements regarding the method of accounting for stock-based employee compensation and the effect of the method used on reporting results. The transitional provisions of SFAS No. 148 are effective for financial statements for fiscal years ending after December 15, 2002 and the disclosure provisions are effective for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002, with early adoption encouraged. The Company adopted the disclosure requirements of SFAS No. 148 in the second quarter of fiscal 2003.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates and, to a much lesser extent, commodities. To reduce such risks, the Company selectively uses financial instruments and other proactive management techniques. All hedging transactions are authorized and executed pursuant to clearly defined policies and procedures, which strictly prohibit the use of financial instruments for trading or speculative purposes.

A discussion of the Company’s accounting policies for derivative financial instruments is included within Note 1 “Summary of Significant Accounting Policies” in Notes to Consolidated Financial Statements.

Currency Risk:    The Company has exposure to foreign currency exchange fluctuations. Approximately 51% and 33% of our revenues for the year ended August 31, 2003 and 2002, respectively, were denominated in currencies other than the U.S. dollar. Of those non-U.S. dollar denominated amounts, approximately 78% and 68%, respectively, were denominated in euro, with the majority of the remainder denominated in various Asian and other European currencies. The Company does not expect to hedge the translation exposure represented by the net assets of its foreign subsidiaries. Foreign currency translation adjustments are recorded as a component of shareholders’ equity.

The Company’s identifiable foreign currency exchange exposure results primarily from the anticipated purchase of product from affiliates and third party suppliers and from the repayment of intercompany loans between subsidiaries denominated in foreign currencies. The Company periodically identifies areas where it does not have naturally occurring offsetting positions and then may purchase hedging instruments to protect against anticipated exposures. There are no such hedging instruments in place as of October 24, 2003. The Company’s financial position is not materially sensitive to fluctuations in exchange rates as any gains or losses on foreign currency exposures are generally offset by gains and losses on underlying payables and receivables.

Interest Rate Risk:    The Company has earnings exposure related to interest rate changes on its outstanding floating rate debt instruments that are indexed to the LIBOR and EURIBOR interest rates. The Company has periodically utilized interest rate swap agreements to manage overall financing costs and interest rate risk. At August 31, 2003, the Company was a party to two interest rate swap agreements. One of these swap contracts converts $25 million of the Company’s floating rate debt, issued pursuant to the senior secured credit agreement, to fixed rate debt. The second swap contract converts $25 million of fixed rate senior subordinated debt to a variable rate. At August 31, 2003, the aggregate fair value of these contracts was approximately $(1.8) million. A 10 percent increase or decrease in the applicable interest rates on unhedged variable rate debt would result in a change in pre-tax interest expense of approximately $0.1 million on an annual basis.

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The Company’s senior secured credit agreement stipulates that no more than 50% of total debt shall be effectively subject to a floating interest rate at the time an interest rate swap agreement is entered into. The Company is in compliance with this requirement.

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Item 8.    Financial Statements and Supplementary Data

All other schedules are omitted because they are not applicable, not required or because the required information is included in the Consolidated Financial Statements or notes thereto.

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REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of Actuant Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Actuant Corporation and its subsidiaries at August 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 145, “Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” relating to the classification of gains and losses from extinguishment of debt effective September 1, 2002.

As discussed in Note 5 to the consolidated financial statements, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” effective September 1, 2001.

PRICEWATERHOUSECOOPERS LLP

Milwaukee, Wisconsin

September 26, 2003, except as to the stock split discussed in Note 17,

for which the date is October 21, 2003

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ACTUANT CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share amounts)

The accompanying notes are an integral part of these financial statements.

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ACTUANT CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)