<PAGE> 1
UNITED STATES
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, 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: 13,243,230 as of December
31, 1994.
The Index to Exhibits appears on Page 11.
1
<PAGE> 2
APPLIED POWER INC.
INDEX
<TABLE>
<CAPTION>
Page No.
---------
<S> <C>
PART I - FINANCIAL INFORMATION
- - - - ------------------------------
Item 1 - Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Statement of Earnings -
Three Months Ended November 30, 1994 and 1993 3
Condensed Consolidated Balance Sheet -
November 30, 1994 and August 31, 1994 4
Condensed Consolidated Statement of Cash Flows -
Three Months Ended November 30, 1994 and 1993 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II - OTHER INFORMATION
- - - - ---------------------------
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURE 10
- - - - ---------
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
APPLIED POWER INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended November 30,
-------------------------------
1994 1993
--------- ---------
<S> <C> <C>
Net Sales $ 125,799 $ 103,604
Cost of Products Sold 77,627 65,012
--------- ---------
Gross Profit 48,172 38,592
Engineering, Selling and Administrative Expenses 35,693 30,109
--------- ---------
Operating Earnings from Continuing Operations 12,479 8,483
Other Expense (Income)
Interest 2,738 2,838
Amortization of intangible assets 1,161 1,255
Other - net 201 61
--------- ---------
Earnings from Continuing Operations Before
Income Tax Expense 8,379 4,329
Income Tax Expense 2,938 1,401
--------- ---------
Earnings from Continuing Operations 5,441 2,928
Discontinued Operations, net of income taxes
Earnings from operations previously
credited to reserve for estimated loss
on disposition - (348)
--------- ---------
Net Earnings $ 5,441 $ 2,580
========= =========
Earnings (Loss) Per Share
Continuing Operations $ 0.40 $ 0.22
Discontinued Operations - (0.03)
--------- ---------
Net Earnings Per Share $ 0.40 $ 0.20
========= =========
Weighted Average Shares Outstanding (In thousands) 13,622 13,141
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE> 4
APPLIED POWER INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
November 30, August 31,
1994 1994
------------ ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,201 $ 1,907
Net accounts receivable 64,283 64,259
Net inventories 95,619 94,949
Prepaid expenses 12,741 13,694
--------- ---------
Total Current Assets 174,844 174,809
Other Assets 6,484 6,390
Goodwill 56,327 56,708
Other Intangibles 11,343 11,750
Net Property, Plant and Equipment 66,665 67,745
--------- ---------
Total Assets $ 315,663 $ 317,402
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 17,306 $ 14,707
Trade accounts payable 32,901 35,219
Accrued compensation and benefits 14,064 16,335
Income taxes payable 7,811 8,190
Current maturities of long-term debt 10,650 10,792
Other current liabilities 20,242 16,722
--------- ---------
Total Current Liabilities 102,974 101,965
Long-Term Debt, less current maturities 68,942 77,956
Deferred Income Taxes 16,205 16,768
Other Deferred Liabilities 13,575 13,402
Shareholders' Equity
Common stock, $.20 par value, authorized 40,000,000 shares, issued and
outstanding 13,226,842 and 13,152,454 shares, respectively 2,674 2,630
Additional paid-in capital 24,764 23,648
Retained earnings 80,847 75,802
Cumulative translation adjustments 5,682 5,231
--------- ---------
Total Shareholders' Equity 113,967 107,311
--------- ---------
Total Liabilities and Shareholders' Equity $ 315,663 $ 317,402
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE> 5
APPLIED POWER INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended November 30,
-------------------------------
1994 1993
--------- ---------
<S> <C> <C>
Earnings from Continuing Operations $ 5,441 $ 2,928
Adjustments to reconcile earnings from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 4,651 4,892
Changes in operating assets and liabilities, excluding
the effects of business acquisitions and disposals:
Accounts receivable (4,767) (3,984)
Inventories 8 (543)
Prepaid expenses and other assets 704 567
Trade accounts payable (2,422) 1,777
Other liabilities 1,738 (226)
Income taxes payable (955) (2,531)
--------- ---------
Net Cash Provided by Operating Activities 4,398 2,880
Investing Activites
Proceeds from the sale of property, plant and equipment 29 836
Capital expenditures (2,637) (2,905)
Cash used to purchase subsidiaries (699) (1,534)
Other 152 (28)
--------- ---------
Net Cash Used in Investing Activities (3,155) (3,631)
Financing Activities
Net repayments of long-term debt (644) (8,564)
Net borrowings on short-term credit facilities 2,583 3,369
Net commercial paper repayments (8,662) -
Cash received on sale of accounts receivable 5,000 -
Dividends paid on common stock (396) (391)
Exercise of stock options 1,160 60
--------- ---------
Net Cash Used in Financing Activities (959) (5,526)
Effect of Exchange Rate Changes on Cash 10 (11)
--------- ---------
Net Cash Provided By (Used in) Continuing Operations 294 (6,288)
Discontinued Operations Activities
Proceeds from sale of Datafile - 6,640
Other - (104)
--------- ---------
Net Cash Provided by Discontinued Operations - 6,536
--------- ---------
Net Increase in Cash and Cash Equivalents 294 248
Cash and Cash Equivalents - Beginning of Period 1,907 1,320
--------- ---------
Cash and Cash Equivalents - End of Period $ 2,201 $ 1,568
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE> 6
APPLIED POWER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Applied Power Inc. (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 1994 Annual Report on Form 10-K.
The condensed consolidated financial statements for the three months ended
November 30, 1993, have 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 month period ended November
30, 1994 are not necessarily indicative of the results that may be expected for
the fiscal year ending August 31, 1995.
NOTE B - DISCONTINUED OPERATIONS
The Company completed the sale of certain assets of Wright Line's Datafile
business in October, 1993. A short time later, Wright Line sold its Tapeseal
product line to a third party for future compensation. In the second quarter
of fiscal 1994, the Company announced its decision to retain the remaining
Wright Line business, which had been included in discontinued operations since
the third quarter of 1992. Accordingly, the operating results of the retained
Wright Line operations have been reclassified from discontinued operations to
continuing operations for the three months ended November 30, 1993. For
further information, refer to Note B - "Discontinued Operations" in Notes to
Consolidated Financial Statements in the Company's 1994 Annual Report on Form
10-K.
NOTE C - ACQUISITIONS
On September 2, 1994, the Company acquired its master distributor in Brazil for
$699 in cash. Approximately $300 of the purchase price was assigned to
goodwill. The operating results of the new entity, subsequent to its
acquisition, are included in the Condensed Consolidated Statement of Earnings.
On March 21, 1994, the Company increased its ownership interest in Applied
Power Korea to 90%. Cash of $912 was used in the acquisition which generated
goodwill of $572. The results of operations of this subsidiary have
historically been included in the Condensed Consolidated Statement of Earnings.
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.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
RESULTS OF OPERATIONS
The Company reported record sales and net earnings for the quarter ended
November 30, 1994. Net earnings from continuing operations for the first
quarter of 1995 were $5,441, or $.40 per share, an 86% improvement over
comparable prior year earnings of $2,928, or $.22 per share. Increased sales
volume and gross profit margins were the key factors in the improved results.
<TABLE>
<CAPTION>
- - - - ----------------------------------------------------------------------------------
Three Months Ended November 30,
- - - - ----------------------------------------------------------------------------------
SALES BY SEGMENT 1994 1993 Change
- - - - ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Distributed Products Group $ 62,740 $ 53,589 17%
Engineered Solutions Group 45,707 37,508 22%
Wright Line 17,352 12,507 39%
- - - - ----------------------------------------------------------------------------------
Total $ 125,799 $ 103,604 21%
==================================================================================
</TABLE>
Sales from the Distributed Products Group, which consists of Enerpac and GB
Electrical, increased 17% over the comparable prior year period, of which 4%
was the result of foreign exchange rate changes (the weaker U.S. dollar). The
improvement reflects increased volume as a result of further strengthening of
European and North American economies, as well as continued geographic
expansion into the developing Latin American and Asia Pacific regions.
The Engineered Solutions Group, consisting of Barry Controls, Power-Packer and
APITECH, reported a first quarter sales gain of 22% over the comparable prior
year period, of which 3% was attributable to changes in foreign exchange rates.
Strong European cab-tilt and convertible top system sales by Power-Packer, as
well as overall improvement in the North American and European transportation
and industrial markets were the key contributors.
Wright Line's 39% year-to-year sales growth was primarily due to the strength
of its product offering and distribution effectiveness into the fast growing
local area computer network market.
<TABLE>
<CAPTION>
- - - - ----------------------------------------------------------------------------------
Three Months Ended November 30,
- - - - ----------------------------------------------------------------------------------
GROSS PROFIT BY SEGMENT 1994 1993 Change
- - - - ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Distributed Products Group $ 26,439 $ 23,660 12%
Engineered Solutions Group 13,200 10,189 30%
Wright Line 8,533 4,743 80%
- - - - ----------------------------------------------------------------------------------
Total $ 48,172 $ 38,592 25%
==================================================================================
</TABLE>
Total gross profit increased 25% from the first quarter of fiscal 1994,
primarily attributable to increased sales volume. Favorable manufacturing
efficiencies and volume at Wright Line and within the Engineered Solutions
Group resulted in an increase in the overall gross profit percentage from 37.2%
to 38.3%.
<TABLE>
<CAPTION>
- - - - ----------------------------------------------------------------------------------
Three Months Ended November 30,
- - - - ----------------------------------------------------------------------------------
OPERATING EXPENSES 1994 1993 Change
- - - - ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Engineering $ 3,722 $ 3,085 21%
Selling 21,319 18,146 17%
Administration 10,652 8,878 20%
- - - - ----------------------------------------------------------------------------------
Total $ 35,693 $ 30,109 19%
==================================================================================
</TABLE>
First quarter operating expenses were 19% higher than that reported in the
first quarter of 1994, 3% of which was attributable to foreign exchange rate
changes. Engineering expenses increased 21%, reflecting higher new product
development expenditures at a number of locations. The increase in selling and
marketing expense was primarily sales volume driven, consisting of higher
commissions and advertising. Administration expense increased due to
additional employee benefit, legal, information technology and geographic
expansion expenditures. As a percentage of sales, operating expenses declined
from 29.1% in the first quarter of 1994 to 28.4% in the most recent quarter.
7
<PAGE> 8
Interest expense for the three months ended November 30, 1994 declined from the
comparable prior year period due primarily to reductions in outstanding
indebtedness.
Included under the caption "Discontinued Operations, net of income taxes" in
the Condensed Consolidated Statement of Earnings for the three months ended
November 30, 1993 are the earnings of the retained Wright Line operations,
which had previously been credited to the discontinued operations reserve. For
further information, see Note B - "Discontinued Operations" in Notes to
Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAl RESOURCES
Cash and cash equivalents totaled $2,201 at November 30, 1994 and $1,907 at
August 31, 1994. In order to minimize interest expense, the Company
intentionally maintains low cash balances by using available cash to reduce
short-term bank borrowings. Funds available under unused credit lines totaled
approximately $68,822 as of November 30, 1994.
Cash generated from operations, after considering non-cash items and changes in
operating assets and liabilities, totaled $4,398 for the three months ended
November 30, 1994, compared to $2,880 for the comparable prior year period.
Increased sales volume resulted in higher earnings from continuing operations
and higher primary working capital levels.
Cash used in investing activities totaled $3,155 for the first quarter of 1995,
of which $2,637 was used for capital expenditures, and $699 for the acquisition
of the Company's master distributor in Brazil.
<TABLE>
<CAPTION>
- - - - ----------------------------------------------------------------------------------------------
November 30, August 31,
- - - - ----------------------------------------------------------------------------------------------
CAPITALIZATION 1994 1994
- - - - ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholders' Equity $ 113,967 50% $ 107,311 47%
Total Debt 96,898 43% 103,455 45%
Deferred Taxes 16,205 7% 16,768 8%
- - - - ----------------------------------------------------------------------------------------------
Total $ 227,070 100% $ 227,534 100%
==============================================================================================
</TABLE>
During the three months ended November 30, 1994, outstanding debt declined by
$6,557. Debt as a percentage of total capitalization was 43% at November 30,
1994, compared to 45% at August 31, 1994. The Company increased amounts sold
under its accounts receivable financing program from $25,000 to $30,000 during
the quarter, generating proceeds of $5,000 which were used to reduce debt.
Dividends of $396 were paid, while the exercise of stock options generated
$1,160 of cash.
The Company s second installment payment on its Senior Unsecured Notes is due
August 15, 1995. The Company anticipates meeting this $10,650 requirement with
cash generated from operations and funds available under unused credit lines.
In the fourth quarter of fiscal 1993, the Company recorded a $7,589 ($.38 per
share) pre-tax restructuring charge. Approximately $6,165 of such costs had
been incurred as of November 30, 1994. The majority of the remaining $1,424
will be incurred during the balance of fiscal 1995 on severance and
consolidation costs.
The Company anticipates that funds generated from operations and available
under credit facilities will be adequate to meet anticipated operating,
restructuring, debt service and capital expenditure requirements for the
foreseeable future.
8
<PAGE> 9
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) See Index to Exhibits on page 11, which is incorporated herein by
reference.
(b) There were no reports on Form 8-K filed during the three months ended
November 30, 1994 or thereafter through the date of this report.
9
<PAGE> 10
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 9, 1995 By: /s/Robert C. Arzbaecher
---------------------------
Robert C. Arzbaecher
Vice President and
Chief Financial Officer
(Principal Financial Officer
and duly authorized to sign
on behalf of the registrant)
10
<PAGE> 11
APPLIED POWER INC.
INDEX TO EXHIBITS
FISCAL 1995 FIRST QUARTER 10-Q
<TABLE>
<CAPTION>
Exhibit
Number Description Page No.
- - - - ------- --------------------------------- --------------
<S> <C> <C>
11 Computation of Earnings Per Share 12
27 Financial Data Schedule 13
</TABLE>
11
<PAGE> 1
Exhibit 11
APPLIED POWER INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended November 30,
-------------------------------
1994 1993
------------ -----------
<S> <C> <C>
PRIMARY:
Average shares outstanding 13,190 13,010
Net effect of dilutive options based
on the treasury stock method
using average market price 432 131
------- -------
Total 13,622 13,141
Net earnings (loss):
Continuing operations $5,441 $2,928
Discontinued operations - (348)
------- -------
Net Earnings $5,441 $2,580
Primary earnings (loss) per share:
Continuing operations $0.40 $0.22
Discontinued operations - (0.03)
------- -------
Net Earnings $0.40 $0.20
======= =======
FULLY DILUTED: (A)
Average shares outstanding 13,190 13,010
Net effect of dilutive options based
on the treasury stock method
using the greater of average
or period-end market price 432 131
------- -------
Total 13,622 13,141
Net earnings (loss):
Continuing operations $5,441 $2,928
Discontinued operations - (348)
------- -------
Net Earnings $5,441 $2,580
Fully diluted earnings (loss) per share:
Continuing operations $0.40 $0.22
Discontinued operations - (0.03)
------- -------
Net Earnings $0.40 $0.20
======= =======
</TABLE>
(A) Dilution of less than 3%; therefore not presented in Condensed Consolidated
Statement of Earnings.
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Applied
Power Inc.'s Form 10-Q for the quarter ended November 30, 1994 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> NOV-30-1994
<EXCHANGE-RATE> 1
<CASH> 2,201
<SECURITIES> 0
<RECEIVABLES> 62,203
<ALLOWANCES> 3,350
<INVENTORY> 95,619
<CURRENT-ASSETS> 174,844
<PP&E> 141,437
<DEPRECIATION> 74,772
<TOTAL-ASSETS> 315,663
<CURRENT-LIABILITIES> 102,974
<BONDS> 68,942
<COMMON> 2,674
0
0
<OTHER-SE> 111,293
<TOTAL-LIABILITY-AND-EQUITY> 315,663
<SALES> 125,799
<TOTAL-REVENUES> 125,799
<CGS> 77,627
<TOTAL-COSTS> 77,627
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,738
<INCOME-PRETAX> 8,379
<INCOME-TAX> 2,938
<INCOME-CONTINUING> 5,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,441
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
