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 FEBRUARY 28, 1994
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: 13,030,566 as of
February 28, 1994.
The Exhibit Index appears on Page 12.
INDEX
APPLIED POWER INC. AND SUBSIDIARIES
Page No.
PART I - FINANCIAL INFORMATION
Item 1- Unaudited Consolidated Financial Statements
Condensed Consolidated Statement of Earnings -
Three and Six Months Ended
February 28, 1994 and 1993. . . . . . . . . . . . . . . . . . .3
Condensed Consolidated Balance Sheet -
February 28, 1994 and August 31, 1993 . . . . . . . . . . . . .4
Condensed Consolidated Statement of Cash Flows -
Sixth Months Ended
February 28, 1994 and 1993 . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements. . . . . . . 6
Item 2 - Management's Discussion and Analysis of Results
of Operations and Financial Condition . . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders . . .10
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . 10
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
<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 Six Months Ended
February 28, February 28,
1994 1993 1994 1993
----------------------- ------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . $101,869 $94,873 $205,473 $197,187
Cost of products sold . . . . . . . . . . . . 64,196 59,784 129,208 123,108
--------- -------- --------- --------
Gross profit. . . . . . . . . . . . . . . 37,673 35,089 76,265 74,079
Operating expenses:
Engineering . . . . . . . . . . . . . . . . 3,181 2,860 6,266 5,458
Selling and administrative. . . . . . . . . 25,511 25,680 52,535 53,230
-------- -------- -------- ---------
Total. . . . . . . . . . . . . . . . . . 28,692 28,540 58,801 58,688
Operating profit. . . . . . . . . . . . . . . 8,981 6,549 17,464 15,391
Other expense (income):
Interest expense. . . . . . . . . . . . . . 2,681 3,165 5,519 6,643
Amortization of intangible assets . . . . . 1,280 1,213 2,535 2,434
Other, net. . . . . . . . . . . . . . . . . 90 (25) 151 (934)
------- ------- -------- ---------
Earnings before income taxes. . . . . . . . . 4,930 2,196 9,259 7,248
Income tax expense. . . . . . . . . . . . . . 1,633 433 3,034 2,198
Net earnings from continuing operations before
cumulative effect of accounting change. . . . 3,297 1,763 6,225 5,050
Cumulative effect of accounting change -
postretirement benefits . . . . . . . . . . - - - (4,355)
------- ------- ------- --------
Earnings from continuing operations . . . . . 3,297 1,763 6,225 695
Discontinued operations, net of taxes:
(Earnings) loss from operations previously
offset against reserve for estimated
loss on disposition. . . . . . . . . . . . - 783 (348) 803
-------- --------- ------- -------
Net earnings . . . . . . . . . . . . . . . . $ 3,297 $ 2,546 $ 5,877 $ 1,498
========= ========= ========= =========
Net earnings (loss) per share:
Continuing operations . . . . . . . . . . $ 0.25 $ 0.13 $ 0.47 $ 0.39
Cumulative effect of accounting change. . - - - (0.33)
Discontinued operations . . . . . . . . . - 0.06 (0.02) 0.06
--------- --------- --------- ----------
Net earnings . . . . . . . . . . . . . $ 0.25 $ 0.19 $ 0.45 $ 0.11
========= ========= ========= ==========
Weighted average shares outstanding. . . . . 13,169 13,092 13,154 13,080
========= ========= ========= ==========
Cash dividends paid per share $ 0.03 $ 0.03 $ 0.06 $ 0.06
========= ========= ========= ==========
<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)
(UNAUDITED)
<CAPTION>
February 28, August 31,
1994 1993
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 680 $ 1,320
Net accounts receivable 56,414 49,463
Net inventories 89,940 85,730
Prepaid expenses 15,631 14,743
Net assets held for sale 5,150 12,035
------------ ----------
Total Current Assets 167,815 163,291
Other assets 6,504 8,181
Net property, plant and equipment 60,937 61,988
Intangible assets 70,711 72,457
----------- ----------
Total Assets $305,967 $305,917
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 21,823 $ 20,401
Trade accounts payable 28,958 26,176
Accrued compensation and benefits 11,335 12,551
Income taxes payable 4,994 6,500
Other current liabilities 23,562 25,454
Current maturities of long-term debt 29,306 10,745
---------- ----------
Total Current Liabilities 119,978 101,827
Long-term debt, less current maturities 64,700 86,785
Deferred income taxes 16,318 17,649
Other deferred liabilities 11,738 11,646
Shareholders' Equity
Class A common stock, $0.20 par value, authorized
40,000 shares, issued and outstanding 13,031
and 13,005 shares, respectively 2,606 2,601
Additional paid-in capital 21,965 21,654
Retained earnings 65,918 60,823
Cumulative translation adjustments 2,744 2,932
----------- ---------
Total Shareholders' Equity 93,233 88,010
----------- ---------
Total Liabilities and Shareholders' Equity $305,967 $305,917
=========== =========
<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>
Six Months Ended February 28,
1994 1993
-----------------------------------------
<S> <C> <C>
Operating Activities
Net earnings from continuing operations $6,225 $ 695
Adjustments to reconcile net earnings from continuing
operations to net cash provided by (used in) operating
activities:
Depreciation and amortization 9,825 9,424
Non-cash charge - adoption SFAS 106 - 4,355
Changes in operating assets and liabilities, excluding
effect of business acquisition:
Net receivables (7,015) (4,045)
Net inventories (3,892) (5,069)
Prepaid expenses (910) (1,030)
Other assets 1,603 (1,896)
Trade accounts payable 2,729 1,082
Income taxes payable (1,555) (429)
Other liabilities (5,452) (7,186)
---------- ---------
Net Cash Provided by (Used in) Operating Activities 1,558 (4,099)
Investing Activities
Proceeds on sale of property, plant and equipment 892 1,873
Capital expenditures (6,071) (6,465)
Acquisition of Palmer Industries (1,534) -
Other 3 777
---------- ----------
Net Cash Used in Investing Activities (6,710) (3,815)
Financing Activities
Net short-term borrowings 1,572 5,305
Borrowings (repayments) of long-term debt (3,485) 948
Capital stock transactions 316 107
Dividends paid on common stock (782) (778)
--------- -----------
Net Cash Provided by (Used in) Financing Activities (2,379) 5,582
Effect of Exchange Rate Changes on Cash 6 (450)
--------- -----------
Net Cash Used in Continuing Operations (7,525) (2,782)
Discontinued Operation Activities
Proceeds from sale of Datafile 6,222 -
Other 663 308
-------- ----------
Net Cash Provided by Discontinued Operations 6,885 308
-------- ----------
Net Decrease in Cash and Cash Equivalents (640) (2,474)
Cash and Cash Equivalents at Beginning of Period 1,320 3,447
---------- ---------
Cash and Cash Equivalents at End of Period $ 680 $ 973
========== =========
<FN>
See accompanying Notes to Condensed Consolidated Financial Statements
</TABLE>
APPLIED POWER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
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 and six months ended February 28, 1993 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", both effective September 1, 1992. The condensed consolidated
financial statements have also been adjusted to reflect the retention of
certain Wright Line operations, as described in Note B - Discontinued
Operations.
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 and six months ended
February 28, 1994 are not necessarily indicative of the results that may be
expected for the fiscal year ending August 31, 1994.
NOTE B - 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").
On October 8, 1993, the Company completed the sale of Wright Line's Datafile
business for approximately $6,222 of cash, plus future compensation.
Proceeds from this transaction were used to reduce debt. Also during the
first quarter of fiscal 1994, an agreement was reached to sell the real
estate at Wright Line's headquarters and manufacturing operations in
Worcester, Massachusetts. Estimated gross proceeds are $7,500, and would be
used to reduce debt. This transaction is expected to close in fiscal 1994.
During the second quarter of fiscal 1994, the Company announced its decision
to return the remainder of the Wright Line business to continuing operations.
The retained business, whose sales are primarily in North America, has
refocused its business strategy on technical furniture solutions for the
information technology environment. The introduction of the new Local Area
Network Management System in early 1993, and the benefits of restructuring in
1993 have contributed to Wright Line's improved operating performance. The
retained Wright Line business' net assets and results of operations for all
periods have been reclassified from discontinued operations to continuing
operations in the accompanying financial statements.
The following represents the impact of the retained Wright Line operations on
reported results:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28, February 28,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales
Sales from continuing operations excluding
Wright Line . . . . . . . . . . . . . . . . $90,466 $86,407 $181,563 $178,128
Sales from retained Wright Line operations . 11,403 8,466 23,910 19,059
---------- --------- ----------- ----------
Adjusted sales from continuing operations. . $101,869 $94,873 $205,473 $197,187
========== ========= =========== ==========
Earnings
Net income from continuing operations before
cumulative effect of accounting change,
excluding Wright Line. . . . . . . . . . . . $2,872 $2,546 $5,452 $5,853
Net income (loss) from retained Wright Line
operations. . . . . . . . . . . . . . . . . . 425 (783) 773 (803)
----------- ----------- ------------ -----------
Adjusted net income from continuing
operations before cumulative effect of
accounting change . . . . . . . . . . . . . $ 3,297 $1,763 $6,225 $5,050
=========== ============ =========== ===========
Earnings Per Share
Earnings per share from continuing operations
before cumulative effect of accounting
change, excluding Wright Line. . . . . . . . $ 0.22 $ 0.19 $ 0.42 $ 0.44
Earnings per share from retained Wright Line
operations. . . . . . . . . . . . . . . . . . 0.03 (0.06) 0.06 (0.06)
Adjusted earnings per share from continuing
operations before cumulative effect of
accounting change . . . . . . . . . . . . . . $ 0.25 $ 0.13 $ 0.47 $ 0.39
========== ========== ======== ========
</TABLE>
NOTE C - ACQUISITION
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
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS
Net earnings from continuing operations for the second quarter of 1994 were
$3,297, or $.25 per share, compared to $1,763, or $.13 per share for the
comparable prior year period. For the first six months of 1994, net earnings
from continuing operations before cumulative effect of accounting change were
$6,225, or $.47 per share, compared to $5,050, or $.39 per share for the
comparable period last year. Improved current year results at Wright Line,
Barry Controls and Power-Packer were key factors in increased current year
earnings.
Sales for the second quarter of 1994 were $101,869, up 7.4% from $94,873 in
the prior year. Sales for the first six months of 1994 were $205,473, an
increase of 4.2% over the comparable prior year period. Power-Packer,
APITECH, Wright Line and GB Electrical all reported sales gains in the
current year. Improvement in the industrial sector at Barry Controls was
offset by a decline in the aerospace market. Enerpac sales in the second
quarter and first half of fiscal 1994 were 2% and 5% lower, respectively,
than the prior year due to poor economic conditions in Japan and Europe.
The Company's gross profit percentage for the second quarter was unchanged
from the prior year second quarter, at 37.0%. Year-to-date margins in fiscal
1994 are slightly lower than last year due to a shift in product mix.
Operating expenses for the first six months of fiscal 1994 were approximately
equal to those in the comparable prior year period. The Company has
increased its investment in engineering projects and prototypes in the
current year, which has resulted in an approximate 15% increase in
engineering expense over the comparable period last year. However, selling
and administrative expenses declined during the same period as a result of
cost containment programs and the benefits of restructuring steps implemented
in 1993 at Barry Controls, Enerpac and Power-Packer.
Interest expense for the three and six months ended February 28, 1994,
declined from comparable prior year periods due to reductions in outstanding
indebtedness and lower market interest rates.
Other-net operating expenses incurred during the first six months of 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".
In the second quarter of fiscal 1994, the Company announced its decision to
retain the non-divested portion of the Wright Line business. Included under
the caption "Discontinued Operations, net of tax" is (income)/loss generated
by the retained Wright Line operations which had previously been offset
against the discontinued operations reserve.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totalled $680 at February 28, 1994 and $1,320 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.
Cash generated from (used in) operations, after considering non-cash items
and changes in operating assets and liabilities, totalled $1,558 for the
first six months of fiscal 1994, as opposed to $(4,099) for the comparable
prior year period. Earnings from continuing operations of $6,225, coupled
with non-cash items of $9,825, generated $16,050 of cash in the first half of
the current fiscal year. Partially offsetting this were increases in
inventory and receivables of $7,015 and $3,892, respectively, necessitated by
higher sales volume and seasonal demands. Income tax payments in excess of
income tax expense during the first six months also used cash during the
current periods.
Cash used in investing activities totalled $6,710 for the first half of
fiscal 1994, the majority of which was used for capital expenditures and the
acquisition of Palmer Industries.
The Company reduced debt from $117,931 at August 31, 1993 to $115,829 at
February 28, 1994.
The Company's two revolving credit agreements expire within the next twelve
months. Accordingly, all outstanding indebtedness under such agreements,
totalling approximately $18,560, 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's first installment payment on its Senior Unsecured Notes is due
August 15, 1994. This $10,650 cash requirement will be funded by cash
generated from operations and funds available under short-term borrowings.
The Company generated $6,885 of cash from discontinued operations in the
current year, of which $6,222 was received in conjunction with the sale of
Datafile.
In the fourth quarter of fiscal 1993, the Company recorded a $6,700 ($.33 per
share) pre-tax charge primarily related to consolidating certain
manufacturing, distribution and administrative functions at its European
operations and idle facility costs at Barry Controls. Approximately $2,291
of such costs had been incurred as of February 28, 1994. The majority of the
remainder, $4,409, will be incurred during the balance of fiscal 1994 on
severance and consolidation expenditures.
The Company anticipates that funds generated from operations and available
under short and long-term credit facilities will be adequate to meet
anticipated operating, restructuring, debt service and capital expenditure
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 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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on January 10, 1994. The only
matter voted on by shareholders at the meeting was the election of directors.
Each director nominee was elected. The number of shares and votes for each
nominee is set forth below:
Votes For Votes Withheld
H. Richard Crowther 10,793,952 shares 54,793 shares
Jack L. Heckel 10,793,912 shares 54,833 shares
Richard M. Jones 10,792,630 shares 56,115 shares
Richard A. Kashnow 10,793,852 shares 54,893 shares
Richard T. Savage 10,793,952 shares 54,793 shares
Richard G. Sim 10,788,035 shares 60,710 shares
Raymond S. Troubh 10,792,890 shares 55,855 shares
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index to Exhibits on page 12.
(b) There were no reports on Form 8-K filed during the three months ended
February 28, 1994 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.
<PAGE>
APPLIED POWER INC.
(Registrant)
Date: April 14, 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 13
<TABLE>
EXHIBIT 11
APPLIED POWER INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
Three Months Ended Six Months Ended
February 28, February 28,
1994 1993 1994 1993
<S> <C> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding . . . . . . . . 13,016 12,971 13,013 12,967
Net effect of dilutive options based
on the treasury stock method
using average market price . . . . . . . 153 121 141 113
Total . . . . . . . . . . . . . . . 13,169 13,092 13,154 13,080
======== ======== ======== ========
Net earnings (loss):
Earnings from continuing operations
before cumulative effect of
accounting change . . . . . . . . . . . $ 3,297 $ 1,763 $ 6,225 $ 5,050
Cumulative effect of accounting change . - - - (4,355)
Discontinued operations . . . . . . . . . - 783 (348) 803
Net earnings . . . . . . . . . . . $ 3,297 $ 2,546 $ 5,877 $ 1,498
========== ========== ========== ==========
Primary earnings (loss) per share:
Earnings from continuing operations
before cumulative effect of
accounting change . . . . . . . . . . . $ 0.25 $ 0.13 $ 0.47 $ 0.39
Cumulative effect of accounting change . - - - (0.33)
Discontinued operations . . . . . . . . - 0.06 (.02) .06
Total . . . . . . . . . . . . . . . $ 0.25 $ 0.19 $ 0.45 $ 0.11
========= ========= ========= =========
FULLY DILUTED: (A)
Average shares outstanding . . . . . . . . 13,016 12,971 13,013 12,967
Net effect of dilutive options based
on the treasury stock method
using average market price . . . . . . . 235 124 238 115
Total . . . . . . . . . . . . . . . 13,251 13,095 13,251 13,082
======== ======== ======== =========
Net earnings (loss):
Earnings from continuing operations
before cumulative effect of
accounting change . . . . . . . . . . . $ 3,297 $ 1,763 $ 6,225 $ 5,050
Cumulative effect of accounting change . - - - (4,355)
Discontinued operations . . . . . . . . - 783 (348) 803
Net earnings . . . . . . . . . . . $ 3,297 $ 2,546 $ 5,877 $ 1,498
========== ========== =========== ==========
Fully diluted earnings (loss) per share:
Earnings from continuing operations
before cumulative effect of
accounting change . . . . . . . . . . . $ 0.25 $ 0.13 $ 0.47 $ 0.39
Cumulative effect of accounting change . - - - (0.33)
Discontinued operations . . . . . . . . - 0.06 (0.03) 0.06
Total . . . . . . . . . . . . . . . $ 0.25 $ 0.19 $ 0.44 $ 0.11
========= ========= ========= =========
<CAPTION>
(A) Dilution of less than 3%; therefore not presented in Condensed Consolidated Statement of Earnings.
</TABLE>
