SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED NOVEMBER 30, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-11288
APPLIED POWER INC.
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-0168610
(State of incorporation) (I.R.S. Employer Id. No.)
13000 WEST SILVER SPRING DRIVE
BUTLER, WISCONSIN 53007
MAILING ADDRESS: P. O. BOX 325, MILWAUKEE, WISCONSIN 53201
(Address of principal executive offices) (Zip Code)
(414) 781-6600
(Registrant's telephone number)
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 (or such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Number of outstanding shares of Class A Common Stock: 13,013,116 as of
November 30, 1993.
The Exhibit Index appears on Page 11.
INDEX
APPLIED POWER INC. AND SUBSIDIARIES
Page No.
PART I - FINANCIAL INFORMATION
Item 1 - Unaudited Consolidated Financial Statements
Condensed Consolidated Statement of Earnings -
Three Month Periods Ended November 30, 1993 and 1992 3
Condensed Consolidated Balance Sheet -
November 30, 1993 and August 31, 1993 4
Condensed Consolidated Statement of Cash Flows -
Three Month Periods Ended November 30, 1993 and 1992 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Results
of Operations and Financial Condition 7
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURE 10
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APPLIED POWER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<CAPTION>
Three Months Ended November 30,
1993 1992
<S> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . $91,097 $91,721
Cost of products sold. . . . . . . . . . . . . . . 57,248 57,032
------------ ------------
Gross profit. . . . . . . . . . . . . . . . . 33,849 34,689
Operating expenses:
Engineering. . . . . . . . . . . . . . . . . . . 3,085 2,598
Selling and administrative . . . . . . . . . . . 22,871 23,289
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . 25,956 25,887
------------ ------------
Operating profit . . . . . . . . . . . . . . . . . 7,893 8,802
Other expense (income):
Interest expense . . . . . . . . . . . . . . . . 2,701 3,263
Amortization of intangible assets. . . . . . . . 1,094 1,060
Other - net. . . . . . . . . . . . . . . . . . . 41 (906)
------------ ------------
Earnings before income tax expense . . . . . . . . 4,057 5,385
Income tax expense . . . . . . . . . . . . . . . . 1,477 2,078
------------ ------------
Earnings before accounting change. . . . . . . . . 2,580 3,307
Cumulative effect of accounting change-
postretirement benefits. . . . . . . . . . . . . . - (4,355)
------------ ------------
Net earnings (loss). . . . . . . . . . . . . . . . $ 2,580 $ (1,048)
============ ============
Net earnings (loss) per share:
Earnings before accounting change. . . . . . . . $ 0.20 $ 0.25
Cumulative effect of accounting change . . . . . - (0.33)
------------ ------------
Net earnings (loss) per share . . . . . . . $ 0.20 $ (0.08)
============ ============
Weighted average shares outstanding. . . . . . . . 13,141 13,069
============ ============
Cash dividends paid per share. . . . . . . . . . . $ 0.03 $ 0.03
============ ============
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
<TABLE>
APPLIED POWER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
November 30, August 31,
1993 1993
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents. . . . . . . . . . . . $ 1,546 $ 939
Net accounts receivable. . . . . . . . . . . . . 49,630 48,944
Net inventories. . . . . . . . . . . . . . . . . 85,280 84,145
Prepaid expenses . . . . . . . . . . . . . . . . 12,768 12,143
Net assets held for sale . . . . . . . . . . . . 8,477 15,414
------------ ------------
Total Current Assets . . . . . . . . . . . . . 157,701 161,585
Other assets . . . . . . . . . . . . . . . . . . . 6,597 7,876
Net property, plant and equipment. . . . . . . . . 53,984 53,589
Intangible assets. . . . . . . . . . . . . . . . . 67,307 67,628
------------ ------------
Total Assets . . . . . . . . . . . . . . . . . . $285,589 $290,678
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings. . . . . . . . . . . . . . $ 23,635 $ 20,401
Trade accounts payable . . . . . . . . . . . . . 24,713 23,400
Accrued compensation and benefits. . . . . . . . 11,045 11,434
Income taxes payable . . . . . . . . . . . . . . 2,864 6,698
Other current liabilities. . . . . . . . . . . . 21,979 20,044
Current maturities of long-term debt . . . . . . 24,087 10,745
------------ ------------
Total Current Liabilities. . . . . . . . . . . 108,323 92,722
Long-term debt, less current maturities. . . . . . 64,700 86,785
Deferred liabilities . . . . . . . . . . . . . . . 22,639 23,161
Shareholders' Equity
Class A common stock, $0.20 par value,
authorized 40,000 shares, issued and
outstanding 13,013 and 13,005 shares, 2,602 2,601
respectively . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . 21,713 21,654
Retained earnings. . . . . . . . . . . . . . . . 63,012 60,823
Cumulative translation adjustments . . . . . . . 2,600 2,932
------------ ------------
Total Shareholders' Equity . . . . . . . . . . 89,927 88,010
------------ ------------
Total Liabilities and Shareholders' Equity . . . . $285,589 $290,678
============ ============
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
<TABLE>
APPLIED POWER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Three Months Ended November 30,
1993 1992
<S> <C> <C>
Operating Activities
Net earnings (loss). . . . . . . . . . . . . . . . . . . $ 2,580 $ (1,048)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . 4,014 3,605
Non-cash charge - adoption of SFAS 106 . . . . . . . - 4,355
Changes in operating assets and liabilities, excluding
effect of business acquisition
Net receivables . . . . . . . . . . . . . . . . . . (1,214) 944
Net inventories . . . . . . . . . . . . . . . . . . (1,031) (2,504)
Prepaid expenses. . . . . . . . . . . . . . . . . . (627) (1,637)
Other assets. . . . . . . . . . . . . . . . . . . . 1,230 (2,559)
Trade accounts payable. . . . . . . . . . . . . . . 1,466 230
Income taxes payable. . . . . . . . . . . . . . . . (3,809) (1,564)
Other liabilities . . . . . . . . . . . . . . . . . 370 135
-------- --------
Net Cash Provided by (Used in) Operating Activities. . . . 2,979 (43)
Investing Activities
Proceeds from sale of property, plant and equipment. . . 567 834
Capital expenditures . . . . . . . . . . . . . . . . . . (2,776) (2,026)
Acquisition of Palmer Industries . . . . . . . . . . . . (1,534) -
Other. . . . . . . . . . . . . . . . . . . . . . . . . . (28) 607
------------ ------------
Net Cash Used in Investing Activities. . . . . . . . . . . (3,771) (585)
Financing Activities
Net short-term borrowings . . . . . . . . . . . . . . . 3,389 640
Borrowings (repayments) of long-term debt. . . . . . . . (8,564) 856
Capital stock transactions . . . . . . . . . . . . . . . 60 12
Dividends paid on common stock . . . . . . . . . . . . . (391) (389)
------------ ------------
Net Cash Provided by (Used in) Financing Activities. . . . (5,526) 1,119
Effect of Exchange Rate Changes on Cash. . . . . . . . . . (11) (229)
------------ ------------
Net Cash Provided by (Used in) Continuing Operations . . . (6,329) 262
Discontinued Operation Activities
Proceeds from sale of Datafile . . . . . . . . . . . . . 6,640 -
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 296 (222)
------------ ------------
Net Cash Provided by (Used in) Discontinued Operations . . 6,936 (222)
------------ ------------
Net Increase in Cash and Cash Equivalents. . . . . . . . . 607 40
Cash and Cash Equivalents at Beginning of Period . . . . . 939 3,047
------------ ------------
Cash and Cash Equivalents at End of Period . . . . . . . . $ 1,546 $ 3,087
============ ============
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
APPLIED POWER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Applied Power Inc. and Subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim
financial reporting and with the instructions of Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For additional information, refer to the consolidated
financial statements and footnotes thereto in the Company's 1993 Annual
Report.
Operating results for the three month period ended November 30, 1992 have
been restated to reflect the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions", and SFAS No. 109, "Accounting for Income
Taxes", effective September 1, 1992.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist of only those of a
recurring nature. Operating results for the three month period ended
November 30, 1993 are not necessarily indicative of the results that may be
expected for the fiscal year ending August 31, 1994.
NOTE B - INVENTORY
It is not practical to segregate the amounts of raw materials, work-in-
process and finished goods inventories at the respective balance sheet dates,
because accounting systems at many of the Company's operating units have not
been designed to capture this information due to the very short production
cycle of their products and the minimal amount of work-in-process.
NOTE C - DISCONTINUED OPERATIONS
During the third quarter of fiscal 1992, a formal plan was authorized to
offer for sale the Company's Wright Line business ("Wright Line"). The net
assets of Wright Line are included in the accompanying Condensed Consolidated
Balance Sheet under the caption "Net assets held for sale".
On October 8, 1993, the Company completed the sale of Wright Line's Datafile
business ("Datafile") for approximately $6,640 cash, plus future
compensation. Proceeds from this transaction were used to reduce debt.
Also during the quarter, an agreement was reached to sell the real estate at
Wright Line's headquarters and manufacturing operations in Worcester,
Massachusetts for $7,500. This transaction is currently scheduled to close
in the second quarter of fiscal 1994. Proceeds from this transaction will be
used to reduce debt.
Excluding Datafile, Wright Line's net sales were $12,507 during the three
months ended November 30, 1993, compared to $10,592 recorded in the
comparable period last year.
Interest expense allocated to discontinued operations for the three month
periods ended November 30, 1993 and 1992 totalled $292 and $477,
respectively. Interest expense is allocated to discontinued operations
based on an estimate of the ultimate reduction in the Company's debt upon the
sale of such operations. Income tax expense allocated to discontinued
operations for the three month periods ended November 30, 1993 and 1992 was
$1,172 and $261, respectively.
NOTE D - ACQUISITIONS
Effective October 1, 1993, the Company completed the acquisition of certain
assets of Palmer Industries, Inc. ("Palmer") for approximately $1,534 in cash
and a $350 note. Approximately $490 of the purchase price was assigned to
Goodwill. Palmer, based in Alexandria, Minnesota, is a leading manufacturer
of plastic and metal staples, fasteners and straps. The operating results of
Palmer subsequent to October 1, 1993 are included in the Condensed
Consolidated Statement of Earnings.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF CONTINUING OPERATIONS
Net earnings for the first quarter were $2,580, or $.20 per share, compared
to a loss of $1,048, or $.08 per share in the prior year, which included a
$4,355 charge for the cumulative effect of adopting a new accounting
pronouncement for postretirement benefits. Earnings before accounting
changes for the first quarter of fiscal 1994 were $2,580, or $.20 per share,
compared to $3,307, or $.25 per share, for the same period last year.
Sales for the first quarter of fiscal 1994 were $91,097, down slightly from
$91,721 reported in the same quarter last year. Due to poor economic
conditions, results at the Company's operations in Europe and Japan were
weak, with sales declines from last year of 11% and 2%, respectively. Sales
in North America increased 4% over last year.
Sales increases were recorded at GB Electrical, Power-Packer, and APITECH of
15%, 8% and 100%, respectively. Due to poor economic conditions in Europe
and Japan, Enerpac sales declined 7% from last year. First quarter sales at
Barry Controls were lower than the comparable period last year due to reduced
demand from aircraft manufacturers, as well as the sale of the helicopter
product line in the second quarter of fiscal 1993.
The Company's overall gross profit margin declined from 37.8% in the first
quarter of fiscal 1993 to 37.2% in the most recent quarter, reflecting an
unfavorable shift in product mix.
Operating expenses for the first quarter of fiscal 1994 were approximately
equal with those in the comparable period last year. Increased engineering
costs related to product development and prototypes at Barry Controls and
Power-Packer were offset by operating efficiencies realized as a result of
fiscal 1993 restructuring of Barry Controls.
Interest expense declined from the first quarter of fiscal 1993 due to
reductions in outstanding indebtedness and lower market interest rates.
Other-net operating expenses in fiscal 1993 included certain non-recurring
gains.
A $4,355 net charge was recorded in the quarter ended November 30, 1992 to
reflect the Company's adoption of SFAS No. 106 - "Employers' Accounting for
Postretirement Benefits Other Than Pensions".
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $1,546 at November 30, 1993 and $939 at
August 31, 1993. In order to minimize interest expense, the Company
intentionally maintains low cash balances and uses available cash to reduce
short-term bank borrowings.
After considering non-cash items and changes in operating assets and
liabilities, the Company generated $2,979 of cash in operating activities in
the first three months of fiscal 1994, compared with $(43) in the comparable
prior year period. Earnings of $2,580, coupled with non-cash items of
$4,014, generated $6,594 of cash in the most recent quarter. However, income
tax payments partially offset this cash generation.
The Company used $3,771 of cash in investing activities in the first quarter
of fiscal 1994, the majority of which was utilized for capital expenditures
and the acquisition of Palmer Industries.
Debt was reduced from $117,931 at August 31, 1993 to $112,422 at November 30,
1993, primarily reflecting the application of the Datafile sale proceeds
against outstanding indebtedness.
The Company's revolving credit agreements expire within the next twelve
months. Accordingly, all outstanding indebtedness under such agreements has
been included in "Current maturities of long-term debt" in the Condensed
Consolidated Balance Sheet. The Company anticipates either extending these
agreements or entering into new facilities prior to their expiration.
The Company anticipates that funds generated from operations and available
under short and long-term credit facilities will be adequate to meet
anticipated requirements for the foreseeable future.
ACCOUNTING PRONOUNCEMENTS
In December 1992, the Financial Accounting Standards Board issued Statement
No. 112, "Employers' Accounting for Postemployment Benefits", which requires
accrual of postemployment benefits during the years an employee provides
services. Although management is in the process of evaluating this new
pronouncement, the adoption of it is not expected to have a significant
impact on the Company's financial position or results of operations. The
Company intends to adopt this new pronouncement on or prior to September 1,
1994.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index to Exhibits on page 11.
(b) There were no reports on Form 8-K filed during the three months ended
November 30, 1993 or thereafter through the date of this report.
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: January 13, 1994 By: /s/ David L. Harbert
David L. Harbert
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
INDEX TO EXHIBITS
Exhibit
Number Description Page No.
11 Computation of Earnings Per Share 12
<TABLE>
Exhibit 11
APPLIED POWER INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Three Months Ended November 30,
1993 1992
<S> <C> <C>
PRIMARY:
Average shares outstanding . . 13,010 12,963
Net effect of dilutive options
based on the treasury stock
method using average market
price. . . . . . . . . . . . . 131 106
---------- ----------
Total . . . . . . . . . 13,141 13,069
========== ==========
Net earnings (loss):
Earnings before accounting
change. . . . . . . . . . $ 2,580 $ 3,307
Cumulative effect of
accounting change . . . . - (4,355)
---------- ----------
Total. . . . . . . . . . $ 2,580 $ (1,048)
========== ==========
Primary earnings (loss) per
share:
Earnings before accounting
change. . . . . . . . . . $ 0.20 $ 0.25
Cumulative effect of
accounting change . . . . - (0.33)
---------- ----------
Total. . . . . . . . . . $ 0.20 $ (0.08)
========== ==========
FULLY DILUTED:
Average shares outstanding . 13,010 12,963
Net effect of dilutive options
based on the treasury stock
method using period-end
market price when it is
greater than average market
price. . . . . . . . . . . . 131 107
---------- ----------
Total. . . . . . . . . . . 13,141 13,070
========== ==========
Net earnings (loss):
Earnings before accounting
change. . . . . . . . . . . $ 2,580 $ 3,307
Cumulative effect of
accounting change . . . . . - (4,355)
--------- --------
Total. . . . . . . . . . . $ 2,580 $(1,048)
========== ==========
Fully diluted earnings (loss)
per share:
Earnings before accounting
change. . . . . . . . . . . $ 0.20 $ 0.25
Cumulative effect of
accounting change . . . . . - (0.33)
---------- ----------
Total. . . . . . . . . . . $ 0.20 $ (0.08)
========== ==========
<FN>
NOTE: Fully diluted earnings per share are not presented in the Condensed
Consolidated Statement of Earnings as the dilution is less than 3%.
</TABLE>
