<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended AUGUST 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
------ -------
Commission File No. 1 - 11288
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APPLIED POWER INC.
------------------
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-0168610
- - ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13000 WEST SILVER SPRING DRIVE
BUTLER, WISCONSIN 53007
MAILING ADDRESS: P.O. BOX 325, MILWAUKEE, WISCONSIN 53201
---------------------------------------------------------
(Address of principal executive offices)
(414) 781-6600
--------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
CLASS A COMMON STOCK, NEW YORK STOCK EXCHANGE
-------------------------------
$.20 PAR VALUE PER SHARE (Name of each exchange on
- - ---------------------------
(Title of each class) which registered)
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. /X/
As of October 31, 1996, the aggregate market value of Common Stock held by
non-affiliates was approximately $471.6 million, and there were 13,727,401
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 8, 1997 are incorporated by reference into
Part III hereof.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF THE COMPANY
Applied Power Inc. (the "Company"), a Wisconsin corporation incorporated in
1910, is a diversified global company engaged in the business of providing
tools, equipment, systems and consumable items to a variety of end-users and
original equipment manufacturers in the manufacturing, construction,
transportation, natural resource, aerospace, defense and other industries.
The Company's operations are divided into three business segments:
Distributed Products
Specialized tools and consumables sold primarily through
distribution.
Engineered Solutions
Hydraulic motion and vibration isolation customized products and
systems primarily sold to OEM customers.
Wright Line
Technical environment solutions for offices and laboratories.
During the fiscal year, the Company's Distributed Products segment made several
business acquisitions. Vision Plastics Manufacturing Company, acquired on
September 29, 1995, manufactures plastic cable ties which are sold through
electrical wholesale, retail and OEM channels and is based in San Diego,
California. On October 26, 1995, Designed Fluid-Air Systems, Inc. ("DFAS"),
located in Oswego, Illinois, was acquired. DFAS designs, fabricates and
assembles customized quick die change systems utilizing hydraulic, pneumatic
and electrical components. The remaining 10% minority interest in Applied Power
Korea was acquired on December 8, 1995. On May 15, 1996, CalTerm, Inc., a
supplier of electrical consumables and tools, was merged with a wholly-owned
subsidiary of the Company. CalTerm, Inc. is headquartered in San Diego,
California.
The Company's Wright Line segment acquired the European distribution rights for
its products on February 23, 1996.
On December 13, 1995, the Company's Distributed Products segment sold its HIT
spring steel product line for an amount approximating its book value. In
addition, the Company sold substantially all of the assets and liabilities of
its APITECH mobile equipment product line, which was part of the Engineered
Solutions segment, on January 24, 1996.
Following the end of the fiscal year, the Company, through its Wright Line
subsidiary, completed the acquisition of the net assets of Everest Electronic
Equipment, Inc. ("Everest"). Everest, based in Anaheim, California,
manufactures custom and standard electronic enclosures used primarily by the
computer, telecom, and datacom industries. Everest will be integrated with
Applied Power's Wright Line business segment.
For further information regarding the Company's acquisitions and dispositions,
see Note C - "Acquisitions" and Note D - "Sales of Product Lines" in Notes to
Consolidated Financial Statements.
Financial information by segment and geographic area, as well as information
related to export sales, is included in Note N - "Segment Information" in Notes
to Consolidated Financial Statements, which is included as part of Item 8 of
Part II of this report and is incorporated herein by reference.
All amounts are in thousands of US Dollars unless otherwise indicated.
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DESCRIPTION OF BUSINESS SEGMENTS
DISTRIBUTED PRODUCTS
Distributed Products is engaged in the design, manufacture and distribution of
tools and consumables to the construction, electrical wholesale, retail DIY,
datacom, retail automotive, industrial and production automation markets. These
products are sold through the Enerpac and GB Electrical businesses.
Distributed Products supplies approximately 13,000 SKU's. The vast majority of
products are manufactured, while select low volume products are sourced.
Enerpac is a specialist in hydraulic high force tools for the construction and
industrial markets, and also supplies quick mold change systems for the plastic
injection molding industry, quick die change systems for the metal stamping
industry and workholding products for the machining industry. GB Electrical is
a large volume manufacturer of wire connectors, conduit benders, plastic cable
ties and fish tapes for the electrical wiring industry.
Distributed Products has engineering, manufacturing and warehousing operations
in various areas of the United States, including Wisconsin, Illinois,
Minnesota, North Carolina, California, Nevada, and Connecticut. Globally, the
segment has operations throughout Europe, Asia and, to a lesser extent, South
America.
The high force tools and other production automation components are primarily
distributed through a worldwide network of over 2,500 independent distributors
as well as directly to certain OEM customers. Wholesale distributors, home
centers, hardware co-ops, mass merchandisers, and automotive parts and
accessory retailers combine to distribute the segment's electrical tools and
accessories product lines. This network includes approximately 4,000 electrical
wholesale accounts as well as retailers including Sears, Ace Hardware, Builders
Square, Payless Cashways, Wal-Mart, The Home Depot, Cotter & Co., Pep Boys,
Western Auto, and other major chains, which in total represent over 23,000
consumer outlets.
ENGINEERED SOLUTIONS
Engineered Solutions focuses on developing and marketing value-added,
customized solutions for OEMs in the automotive, truck, off-highway equipment,
medical, aerospace, semiconductor, defense and industrial markets. Engineered
Solutions is comprised of the Power-Packer, APITECH, and Barry Controls
businesses. Engineered Solutions' expertise is primarily in the areas of
hydraulic motion control and vibration isolation. The business is particularly
skilled in using electronics to create smart or active systems to control
motion.
Primary applications in the automotive industry include convertible top
actuation systems and electric hydraulic valves used to control hydraulic
systems on cars. In the truck industry, the business supplies cab-over-engine
hydraulic tilt systems, cab suspension systems, engine mount systems and other
vibration isolation components. Medical applications include self-contained
hydraulic actuators that are primarily used in conjunction with hospital beds
as well as vibration isolation products for medical instrumentation. In
aerospace, the segment is the leading supplier of engine vibration isolation
systems to aircraft manufacturers as well as directly to airlines to support
maintenance operations. In addition to these major markets, the segment's
products are used in a wide variety of applications in other industries.
The segment maintains engineering, manufacturing and sales organizations in
North America, Europe and Asia. The segment's products are primarily sold
through direct sales people, with sales representatives being used in certain
situations. The segment's success requires close cost control, high quality and
just-in-time delivery. Most of the segment's manufacturing operations are
ISO-9000 certified and the segment continues to make significant investments
directed at upgrading its manufacturing capability on an ongoing basis.
WRIGHT LINE
Wright Line designs, manufactures and sells furnishings and enclosures utilized
in technology intensive business environments. Applications for these products
include local area networks, multimedia production, electrical
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engineering and testing, telecommunication centers and R&D laboratories. In
addition, Wright Line provides modular workstations used in the computerized
office.
Wright Line sells customized systems primarily using direct sales personnel.
Wright Line employs over 200 direct sales people in the United States. Wright
Line's products are marketed in Asia and Europe through direct salespeople and
dealers, depending on the country. Its products are primarily sold to
commercial and governmental end-users. Sales to the Federal Government, which
now average approximately 25% of total Wright Line net sales, are made pursuant
to a contract between Wright Line and the US Government's General Services
Administration. Product is primarily manufactured in Worcester, Massachusetts.
COMPETITION
The Company competes on the basis of product design, quality, availability,
performance, customer service and price. The Company believes that its
technical skills, global presence, shared technology base, close working
relationships with customers as well as patent protection bolster its
competitive position.
The Company's businesses face competition to varying degrees in each of their
markets. In general, each product line competes with a small group of different
competitors. No one company competes directly with the Company across all of
its businesses. Some competitors are substantially larger than the Company and
have greater financial resources.
RESEARCH AND DEVELOPMENT
The Company maintains engineering staffs at several locations which design new
products and make improvements to existing product lines. Expenditures for
research and development were $9,852, $8,725 and $7,446 in fiscal years 1996,
1995 and 1994, respectively. Substantially all research, development and
product improvement expenditures are Company funded.
PATENTS AND TRADEMARKS
The Company has been issued a number of patents that provide protection of
valuable designs and processes in its Distributed Products and Engineered
Solutions businesses. Numerous other United States and foreign patents and
trademarks are owned by the Company, although no such individual patent or
trademark (or group thereof) is believed to be of sufficient importance that
its termination would have a materially adverse effect on the Company's
business.
MANUFACTURING, MATERIALS AND SUPPLIERS
The majority of the Company's manufacturing operations include the assembly of
parts and components which have been purchased by the Company from a number of
suppliers. In the absence of unusual circumstances, substantially all such
products are normally available from a number of local and national suppliers.
ORDER BACKLOGS AND SEASONALITY
At August 31, 1996, the Company had approximately $83,500 in backlog, compared
to approximately $88,200 at August 31, 1995. Substantially all orders are
expected to be completed prior to August 31, 1997. The Company's sales are
subject to minor seasonal fluctuations, with second quarter sales traditionally
being the lowest of the year.
EMPLOYEE RELATIONS
As of August 31, 1996, the Company employed 3,035 people on a full-time basis,
none of which are subject to a collective bargaining agreement. In general, the
Company enjoys good relationships with its employees.
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ENVIRONMENTAL COMPLIANCE
The Company has facilities in numerous geographic locations which are subject
to a range of environmental laws and regulations. Compliance with these laws
has and will require expenditures on a continuing basis. Environmental
expenditures are expensed or capitalized depending on their future economic
benefit. The Company has been identified by the United States Environmental
Protection Agency as a "Potentially Responsible Party" regarding seven
multi-party Superfund sites. Based on its investigations, the Company believes
it is a de minimis participant in each case, and that any liability which may
be incurred as a result of its involvement with such Superfund sites, taken
together with its expenditures for environmental compliance, will not have a
material adverse effect on its financial position. Liabilities are recorded
when environmental remediation is probable and the costs can be reasonably
estimated. Environmental remediation accruals of $611 and $573 were included in
the Consolidated Balance Sheet at August 31, 1996 and 1995, respectively. For
further information, refer to Note O - "Contingencies and Litigation" in Notes
to Consolidated Financial Statements.
ITEM 2. PROPERTIES
The following table summarizes the principal manufacturing, warehouse and
office facilities owned or leased by the Company:
Location and Business Size (sq. feet) Owned/Leased
- - -----------------------------------------------------------------------------
DISTRIBUTED PRODUCTS
Glendale, Wisconsin 280,000 Leased
Columbus, Wisconsin 130,000 Leased
Veenendaal, Netherlands 97,000 Owned
San Diego, California 69,000 Leased
Pachuca, Mexico 69,000 Leased
Troyes, France 67,000 Leased
Tecate, Mexico 54,000 Leased
Reno, Nevada 50,000 Owned
Tokyo, Japan 45,000 Leased
Matthews, North Carolina 33,000 Owned
Alexandria, Minnesota 25,000 Owned
Seoul, South Korea 22,000 Leased
Singapore, Singapore 15,000 Leased
Milford, Connecticut 11,000 Owned
ENGINEERED SOLUTIONS
Brighton, Massachusetts 227,000 Leased
Burbank, California 126,000 Leased
Oldenzaal, Netherlands 74,000 Owned
Westfield, Wisconsin 48,000 Owned
Hersham, England 39,000 Leased
Butler, Wisconsin 10,000 Leased
WRIGHT LINE
Worcester, Massachusetts 241,000 Owned
In addition to these properties, the Company utilizes a number of smaller
facilities in South Korea, Spain, Italy, Canada, Brazil, France, Germany,
Australia, Russia, Taiwan, India, the Peoples Republic of China, the United
Kingdom and the United States. The Company's headquarters are based in a 68,000
square foot leased office facility in Butler, Wisconsin, which is also utilized
by the Distributed Products and Engineered Solutions segments.
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The Company's strategy is to lease properties when available and economically
advantageous. Leases for the majority of the Company's facilities include
renewal options. For additional information, see Note I - "Leases" in Notes to
Consolidated Financial Statements. The Company believes its current properties
are well maintained and in general are adequately sized to house existing
operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal proceedings which have arisen in the
normal course of its business. These legal proceedings typically include
product liability, environmental and patent claims. (For further information
related to environmental claims, refer to "Environmental Compliance" on page
5). The Company has recorded reserves for loss contingencies based on the
specific circumstances of each case. Such reserves are recorded when the loss
is probable and can be reasonably estimated. In the opinion of management, the
resolution of these contingencies will not have a materially adverse effect on
the Company's financial condition or results of operations.
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
are listed below.
<TABLE>
<CAPTION>
Name Age Position
- - ---- --- --------
<S> <C> <C>
Richard G. Sim 52 Chairman, President and Chief Executive Officer; Director
William J. Albrecht 45 Senior Vice President, Engineered Solutions
Gustav H.P. Boel 52 Vice President, President of Enerpac
Philip T. Burkart 39 Vice President, President of Wright Line Inc.
Theodore M. Lecher 45 Vice President, President GB Electrical, Inc.
Robert C. Arzbaecher 36 Vice President, Chief Financial Officer
Dale A. Knutson 64 Vice President, Technology
Douglas R. Dorszynski 44 Vice President, Tax and Treasurer
Richard D. Carroll 33 Corporate Controller
Anthony W. Asmuth III 54 Secretary
</TABLE>
Richard G. Sim was elected President and Chief Operating Officer in 1985, Chief
Executive Officer in 1986 and Chairman of the Board in 1988. From 1982 through
1985, Mr. Sim was a General Manager in the General Electric Medical Systems
Business Group. He is also a director of IPSCO Inc. and Falcon Building
Products, Inc.
William J. Albrecht was named Senior Vice President of Engineered Solutions in
1994. Prior to that, he served as Vice President and President of Power-Packer
and APITECH since 1991. He joined the Company in 1989 as General Manager of the
APITECH Division in the United States. Prior to joining the Company, Mr.
Albrecht was Director of National Accounts and Industrial Power Systems at
Generac Corp. from 1987 to 1989 and Vice President-Sales at NP Marketing from
1985 to 1987.
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Gustav H.P. Boel was elected Vice President of the Company and named President
of the Company's Enerpac business in 1995. From 1991 until that time, he was
Managing Director of Power-Packer Europe. From 1990 to 1991, Mr. Boel was
Technical Director for Groeneveld, located in Holland. Prior to 1990, he spent
nineteen years with Enerpac in the Netherlands, where he last held the position
of Managing Director.
Philip T. Burkart was elected Vice President of the Company in 1995 and named
the President of Wright Line Inc. in 1994. From 1990 to 1994, Mr. Burkart held
various positions within Wright Line Inc. including: General Manager, Vice
President, Marketing and Operations and Director of Marketing. Prior to joining
the Company, Mr. Burkart was a Marketing Manager for GE Medical Systems.
Theodore M. Lecher has served as President of GB Electrical, Inc. (Gardner
Bender, Inc. prior to its acquisition by the Company in 1988) since 1986, and
as a Company Vice President since 1988. He was Vice President-General Manager
of Gardner Bender, Inc. from 1983 to 1986, and prior to that, Director of Sales
and Marketing since 1980. Mr. Lecher has been associated with GB Electrical,
Inc. since 1977.
Robert C. Arzbaecher was named Vice President and Chief Financial Officer in
1994. He had served as Vice President, Finance of Distributed Products from
1993 to 1994. He joined the Company in 1992 as Controller. From 1988 through
1991, Mr. Arzbaecher was employed by Grabill Aerospace Industries LTD, where he
last held the position of Chief Financial Officer. Prior to 1988, Mr.
Arzbaecher held various financial positions at Farley Industries Inc. and at
Grant Thornton and Company, a public accounting firm.
Dale A. Knutson has served as Vice President, Technology since 1987. From 1982
until 1987, he held the position of Vice President, Product Engineering. Mr.
Knutson has been associated with the Company since 1969.
Douglas R. Dorszynski was appointed Vice President, Tax and Treasurer in 1994.
Mr. Dorszynski joined the Company in 1983 as Corporate Tax Manager and was
subsequently appointed Director, Tax and Special Project Planning in 1985.
Prior to joining the Company, Mr. Dorszynski was employed by Arthur Young &
Co., a public accounting firm, from 1978 to 1983.
Richard D. Carroll joined the Company as Corporate Controller in 1996. Mr.
Carroll was previously employed with the Northwest Indiana Water Company as its
Vice President/Controller during 1995. Prior to that, he was Controller for
Nypro Chicago from 1993 to 1995. For 1990 through 1993, Mr. Carroll was
Controller at Roquette America, Inc. Prior to that, he was employed at Grabill
Aerospace Industries LTD and at Grant Thornton, a public accounting firm.
Anthony W. Asmuth III is a partner in the law firm of Quarles & Brady,
Milwaukee, Wisconsin, having joined that firm in 1989. Quarles & Brady performs
legal services for the Company and certain of its subsidiaries. Prior to
joining Quarles & Brady, he was a partner with the law firm of Whyte
Hirschboeck Dudek S.C. Mr. Asmuth had previously served as Secretary of the
Company from 1986 to 1993. He was re-elected Secretary in 1994.
Each officer is appointed by the Board of Directors and holds office until he
resigns, dies, is removed or a different person is appointed to the office. The
Board of Directors generally appoints officers at its meeting following the
Annual Meeting of Shareholders.
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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 APW. At October 31, 1996, the approximate number of record shareholders
of common stock was 493. The high and low sales prices of the common stock by
quarter for each of the past two years are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR PERIOD HIGH LOW
- - ----------- -------------------------- ---------- ---------
<S> <C> <C> <C>
1996 June 1 to August 31 $30 3/8 $27 1/8
March 1 to May 31 33 28 7/8
December 1 to February 29 32 3/8 26 3/4
September 1 to November 30 35 1/8 28 3/4
1995 June 1 to August 31 $33 3/8 $24 1/2
March 1 to May 31 27 23 1/4
December 1 to February 28 25 3/4 20 3/4
September 1 to November 30 25 1/8 21 5/8
</TABLE>
Quarterly dividends of $0.03 per share were declared and paid for each of the
quarters above.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In Millions, except per share amounts)
For the years ended August 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales $571.2 $527.1 $433.6 $398.7 $404.3
Gross Profit 219.9 201.4 163.5 151.0 154.9
Earnings(Loss)
Continuing Operations 33.7 25.0 16.9 7.1 (1) 8.5 (1)
Discontinued Operations - - (0.4) (3.8) (32.9)
Extraordinary Loss - (4.9) - - -
Cumulative Effect of
Accounting Change - - - (4.4) -
------ ------- ------- ------- -------
Net Earnings(Loss) $ 33.7 $ 20.1 $ 16.5 $ (1.1) $(24.4)
Earnings (Loss) Per Share
Continuing Operations $ 2.41 $ 1.82 $ 1.27 $ 0.54 (1) $ 0.65 (1)
Discontinued Operations - - (0.03) (0.29) (2.51)
Extraordinary Loss - (0.36) - - -
Cumulative Effect of
Accounting Change - - - (0.33) -
------ ------- ------- ------- -------
Net Earnings(Loss) Per Share $ 2.41 $ 1.46 $ 1.25 $(0.08) $(1.87)
Dividends Per Common Share $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.12
<CAPTION>
August 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Assets $381.2 $332.9 $317.4 $306.3 $301.5
Long-term Obligations $ 76.5 $ 74.3 $ 88.7 $ 97.5 $108.0
Shareholders' Equity $168.5 $131.7 $107.3 $ 88.0 $ 96.6
Actual Shares Outstanding 13.7 13.4 13.2 13.0 13.0
</TABLE>
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(1) Earnings from Continuing Operations for 1993 and 1992 reflect after-tax
restructuring charges of $5.0 ($0.38 per share) and $3.1 ($0.24 per share),
respectively. In addition, 1992 includes a liquidation of LIFO inventory which
had the effect of increasing earnings by $1.3 ($0.10 per share).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(Dollars in Millions, except per share amounts)
<TABLE>
<CAPTION>
RESULTS OF CONTINUING OPERATIONS
- - --------------------------------
Years Ended August 31, Percentage of Net Sales
---------------------------- ----------------------------
1996 1995 1994 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $571.2 $527.1 $433.6 100.0% 100.0% 100.0%
Gross Profit 219.9 201.4 163.5 38.5 38.2 37.7
Operating Expenses 158.5 149.2 121.3 27.7 28.3 28.0
Operating Earnings 61.4 52.2 42.2 10.8 9.9 9.7
Other Expenses 12.3 15.3 16.9 2.2 2.9 3.9
Earnings Before Income Taxes 49.1 36.9 25.3 8.6 7.0 5.8
Income Tax Expense 15.4 11.9 8.4 2.7 2.3 1.9
Earnings Before Accounting Change and
Extraordinary Loss 33.7 25.0 16.9 5.9 4.7 3.9
Extraordinary Loss - (4.9) - - (0.9) -
Net Earnings $ 33.7 $ 20.1 $ 16.9 5.9% 3.8% 3.9%
- - ------------ ------ ------ ------ ---- ----- -----
</TABLE>
The preceding table sets forth the results of continuing operations of the
Company for the years ended August 31, 1996, 1995 and 1994.
Net earnings have nearly doubled over the last two years as a result of higher
sales volume, improved operating margins and lower financing costs.
NET SALES
Net sales increased 8% in 1996 with two of the three segments posting solid
sales growth increases. Excluding the unfavorable impact on translated sales
from the stronger US Dollar, sales increased 9% over 1995.
<TABLE>
<CAPTION>
Sales Percentage Change from Prior Year
----------------------------- -------------------------------------
GEOGRAPHIC SALES 1996 1995 1994 1996 1995 1994
- - ---------------------- ------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
North America $360.8 $323.0 $279.6 12% 16% 8%
Europe 143.7 136.8 99.2 5 38 14
Japan and Asia Pacific 56.8 55.3 43.5 3 27 5
Latin America 9.9 12.0 11.3 (18) 6 11
- - ---------------------- ------ ------ ------ ----- ----- ----
Totals $571.2 $527.1 $433.6 8% 22% 9%
- - ---------------------- ------ ------ ------ ----- ----- ----
</TABLE>
Softening economic conditions experienced throughout the markets in which the
Company operates slowed the growth rates in these regions for fiscal 1996 and
combined to an overall 8% increase. Total sales in 1995 were 22% higher than in
1994, reflecting geographic expansion and an improvement in the economic
environment in North America and Europe. Ignoring the favorable impact on
translated sales from the weaker US Dollar in 1995, sales increased 18% over
1994.
Sales in Europe grew 5% in 1996 compared to 38% in 1995. The slowing economies
in Europe are the primary reasons for the slowing of the growth rate. Sales in
Japan and Asia Pacific increased 3% in 1996 compared to a 27% increase from
1994 to 1995. Excluding the affect of foreign currency fluctuations against the
US Dollar, sales in real terms increased 9% and 14% for fiscal 1996 and 1995,
respectively, in this geographic region. Latin American sales
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have been unfavorably impacted by the significant devaluation of the Mexican
Peso over the last few years. Excluding the effect of this devaluation, sales
growth was 1% in 1996 and 23% in 1995. The variation of the growth rates is the
result of the changing economies in Latin America.
<TABLE>
<CAPTION>
Sales Percentage Change from Prior Year
------------------------------ -------------------------------------
SEGMENT SALES 1996 1995 1994 1996 1995 1994
- - ------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Distributed Products $284.5 $264.9 $222.0 7% 19% 4%
Engineered Solutions 190.9 192.2 162.3 (1) 18 10
Wright Line 95.8 70.0 49.3 37 42 29
- - ------------------- ------- ------- ------- ------- ------- -------
Totals $571.2 $527.1 $433.6 8% 22% 9%
- - ------------------- ------- ------- ------- ------- ------- -------
</TABLE>
Total sales from Distributed Products increased 7% in 1996, with benefits
coming from the continued expansion into developing markets in Southeast Asia,
Latin America, and South America and approximately $16.7 million from
acquisitions net of product line dispositions. The impact of the stronger US
Dollar negatively impacted Distributed Products sales in 1996 relative to 1995
by approximately 1%, as sales generated by units outside the US translated into
lower US Dollars in 1996. In 1995, Distributed Products sales benefited from
improved economic conditions in North America and Europe, further expansion
into developing markets in Southeast Asia, Latin America, and South America and
approximately $4.0 million from minor acquisitions.
Engineered Solutions had a 1% decrease in sales in 1996 compared to an 18%
increase in 1995. The primary reason for the decrease was the disposition of
the Company's APITECH Mobile equipment product line in January 1996 and
softening markets in the defense, truck, and convertible top markets throughout
the US and Europe. The majority of the growth noted in fiscal 1995 was
attributable to strong demand from European OEM truck and automobile
manufacturers.
Wright Line continued to generate impressive sales growth posting increases of
37% and 42% for fiscal 1996 and 1995, respectively. The strong growth is
attributed to the continued demand for its existing products (most notably its
LAN Management Systems ("LMS") product line), acceptance of its new technical
environment solutions, its expanded direct sales force throughout 1996 and
1995, and geographic expansion into Europe and Asia.
Price changes have not had a significant impact on the comparability of net
sales during the last three years.
GROSS PROFIT
Gross profit increased to $219.9 million in 1996, compared to $201.4 million
and $163.5 million in 1995 and 1994, respectively. The improvement in gross
profit resulted primarily from the sales increases in 1996 and 1995.
<TABLE>
<CAPTION>
GROSS PROFIT PERCENTAGES BY SEGMENT 1996 1995 1994
- - ----------------------------------- ----- ----- -----
<S> <C> <C> <C>
Distributed Products 40.0% 42.1% 43.4%
Engineered Solutions 30.5 28.8 28.1
Wright Line 50.0 48.8 42.6
- - ----------------------------------- ----- ----- -----
Totals 38.5% 38.2% 37.7%
- - ------ ---- ---- ----
</TABLE>
Items influencing overall gross profit percentages include relative sales mix
between Distributed Products, Engineered Solutions and Wright Line, as well as
production levels. Engineered Solutions gross profit percentages are lower than
either Wright Line or Distributed Products because a much higher proportion of
its sales are made to OEM customers which generate lower margins than non-OEM
customers. As a result, the lower the proportion of its sales to total Company
sales, the higher the Company's overall gross profit percentage. Gross profit
percentages from Distributed Products were lower in 1996 and 1995, relative to
1994, as a result of inefficiencies during the implementation of automated
warehousing, competitive pricing pressures, higher discounts to distributors
and increased shipments to OEM customers. Engineered Solutions and Wright Line
gross profit percentages improved in 1996 due to the benefits of prior year
restructuring at Engineered Solutions, as well as higher production levels at
Wright Line. Both achieved
10
<PAGE> 11
improvement in 1995 over 1994 due to favorable product mix and the impact of
higher production levels on fixed manufacturing costs.
OPERATING EXPENSES
Operating expenses increased 6% and 23% in fiscal years 1996 and 1995,
respectively. During the corresponding periods, sales increased 8% and 22%,
respectively. The majority of the increase since 1994 relates to variable
selling expenses, primarily commissions. Wright Line has a direct sales force
whose compensation is commission-based. As a result of its 94% sales growth
over the last two years, its operating expenses have increased significantly.
As Wright Line becomes a larger part of the total Company, it will exert more
influence on the year-to-year growth in operating expenses.
In addition to variable selling expenses, total operating costs have increased
as a result of acquisitions, product development programs, and expenditures for
geographic expansion into emerging markets. Approximately $1.9 million of the
increase in fiscal 1996 was attributable to businesses acquired since the third
quarter of 1995. During the last few years, the Company has also opened sales
offices in Russia, India and China, and has increased its presence in Latin
America and Southeast Asia. Overall lower corporate expenses and the Company's
goal to continually identify ways to be more cost effective have allowed the
Company to keep operating expenses at a constant 28% of sales over the last
three fiscal years.
OTHER EXPENSE (INCOME)
<TABLE>
<CAPTION>
OTHER EXPENSE (INCOME) 1996 1995 1994
- - --------------------- ------ ------- -------
<S> <C> <C> <C>
Net financing costs $ 8.5 $10.3 $11.4
Amortization expense 4.1 3.3 5.1
Other - net (0.2) 1.7 0.4
- - ----------- ----- ------- -------
</TABLE>
The reduction in financing costs during the last three years reflects lower
market interest rates and reduced debt levels. The Company refinanced certain
debt in 1995, which also had the impact of lowering its financing costs. For
further information, see "Liquidity and Capital Resources" below.
Amortization expense increased in 1996 due to incremental amortization of
intangible assets added in 1995 and 1996 from acquisitions (see "Liquidity and
Capital Resources" below), but declined in 1995 as certain intangible assets
from the GB Electrical acquisition in 1988 became fully amortized.
"Other - net" includes foreign exchange (gains) losses and miscellaneous other
(income) expense. A net foreign exchange loss was realized in 1996, however it
was more than offset by miscellaneous income realized. In 1995, the Mexican
Peso devaluation caused a $1.3 million foreign exchange loss and represented
the majority of other expense.
INCOME TAX EXPENSE
The Company's effective income tax rate is largely impacted by the proportion
of earnings generated inside and outside the US, as well as the utilization of
foreign tax credits in the US. Higher US earnings and the utilization of
foreign tax credits had a favorable impact on the effective tax rate in 1996
and 1995.
EXTRAORDINARY LOSS
The Company recorded an extraordinary loss of $4.9 million, or $0.36 per share,
in 1995 in connection with the March 30, 1995 extinguishment of its $64.4
million 9.92% Senior Unsecured Notes. The pre-tax extraordinary loss of $7.3
million was comprised of an estimated make whole provision of $4.1 million,
costs associated with the cancellation of underlying interest rate swap
agreements of $3.0 million and the write-off of $0.2 million of deferred
financing costs. For further information, see Note H - "Long-term Debt" in
Notes to Consolidated Financial Statements.
11
<PAGE> 12
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," effective in fiscal 1995.
This adoption had no material effect on the Company's financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." As permitted by SFAS No. 123, the
Company expects to continue to apply Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and include the necessary pro
forma disclosures in its 1997 financial statements.
DISCONTINUED OPERATIONS
In the second quarter of 1994, the Company announced its decision to retain the
remaining Wright Line business, which had been reported as a discontinued
operation since 1992. The Company completed the sale of Wright Line's German
operation in 1993 and Wright Line's Datafile businesses in Canada, Australia,
the UK and the US in 1994. The net assets and results of operations for the
retained Wright Line business were reclassified from discontinued to continuing
operations for the periods it was held for sale. For further information, see
Note B - "Discontinued Operations" in Notes to Consolidated Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
Outstanding debt at August 31, 1996 totaled $92.6 million, an increase of $5.7
million since the beginning of the year. The increased level of business
acquisitions and capital expenditures, partially offset by the additional sale
of accounts receivable, are the primary reasons for the increase. End-of-year
debt to total capital was approximately 33% in 1996 compared to 37% in 1995.
Approximately $32.8 million of cash was generated from operating activities in
1996, while $33.9 million of cash was used to fund acquisitions and $22.7
million was used to fund capital expenditures. The balance of cash generated in
1996 originated from the additional sale of receivables. In 1995, $23.8 million
of cash was generated from operations of which $2.8 million was used to fund
acquisitions and $16.0 million was used to fund capital expenditures. The
balance of the cash generated in 1995 was used to reduce debt. Dividends of
$1.6 million were paid during both 1996 and 1995.
Increases in primary working capital (net receivables plus net inventory less
trade accounts payable) used approximately $17.7 million of cash during 1996 as
a result of higher sales volume (receivables) and geographic expansion
(inventory). The Company believes that primary working capital may grow further
in 1997 as a result of anticipated business expansion. During 1995, primary
working capital increased $22.4 million, also the result of increased sales and
geographic expansion.
The Company extinguished all $64.4 million of its 9.92% Senior Unsecured Notes
on March 30, 1995. The funds used to retire the debt and disburse the make
whole payments totaling $4.0 million were obtained from new borrowings,
including those under a temporary expansion of the Company's then existing
$40.0 million Multi-currency revolving credit agreement. The Company replaced
the original $40.0 million Multi-currency credit agreement and the temporary
$40.0 million expansion with the proceeds from a new $120.0 million
Multi-currency credit agreement in August 1995. To reduce interest rate risk
associated with the refinancing, the Company entered into interest rate caps on
a notional $60.0 million in borrowings that limits the maximum applicable base
rate (three month LIBOR) to 8.0%. The interest rate caps expire in March 1997.
In addition, the Company has entered into interest rate swap agreements during
fiscal 1996 which effectively convert $65.5 million of the Company's variable
rate debt to a weighted average fixed rate of 5.92%. The swap agreements expire
on varying dates through 2003. During 1996, the Company incurred interest at a
rate of .375 of 1% above IBOR.
In August 1996, the new Multi-currency credit agreement was amended to provide
unsecured credit availability of $170.0 million and extend the expiration date
to August 2001. For additional information, see Note H - "Long-term Debt" in
Notes to Consolidated Financial Statements.
12
<PAGE> 13
In 1995, the Company replaced its former $25.0 million accounts receivable
financing facility with a new facility that expires in August 1998 and provides
up to $50.0 million of multi-currency accounts receivable financing. During
1996, the agreement was amended to extend the terms through August 1999. An
incremental $13.3 million of receivables were financed in 1996, bringing the
total balance financed to $49.5 million at August 31, 1996. Proceeds were used
to reduce debt. For additional information, see Note E - "Accounts Receivable
Financing" in Notes to Consolidated Financial Statements.
The following table summarizes the Company's total capitalization over the last
three years.
<TABLE>
<CAPTION>
Dollars Percentage of Total Capitalization
------------------------------- ----------------------------------------
TOTAL CAPITALIZATION 1996 1995 1994 1996 1995 1994
- - -------------------- -------- -------- ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Debt $ 92.6 $ 87.0 $103.5 33% 37% 45%
Shareholders' Equity 168.5 131.7 107.3 61 56 48
Deferred Taxes 15.4 16.4 16.8 6 7 7
- - -------------------- ------ ------ ------ ------ ----- ----
Totals $276.5 $235.1 $227.6 100% 100% 100%
- - -------------------- ------ ------ ------ ------ ----- ----
</TABLE>
In order to minimize interest expense, the Company intentionally maintains low
cash balances and uses available cash to reduce short-term bank borrowings.
Funds available under unused non-committed lines and the $170.0 million
Multi-currency credit agreement totaled $47.4 million and $93.7 million,
respectively, as of August 31, 1996. The Company believes that such
availability plus funds generated from operations will be adequate to fund
operating activities, including capital expenditures and working capital, for
the foreseeable future.
INFLATION
No meaningful measures of inflation are available because the Company has a
significant number of small operations which operate in countries with diverse
rates of inflation and currency rate movements.
OUTLOOK
The Company expects its trend of increasing sales and earnings per share to
continue into 1997, assuming no significant downturn in the economy in North
America or Western Europe. Net sales are expected to be in the range of $650.0
to $690.0 million with earnings per share between $2.70 and $3.00. The strength
of its core business segments, integration of the acquisitions that took place
in 1996, and strategic acquisitions will be the driving forces of the growth.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain statements in the above section entitled "Outlook," as well as
statements which are not historical facts, are forward looking statements that
involve risks and uncertainties. There are several risk factors which are
beyond the Company's control which could cause the Company's actual results to
differ from those expressed in such forward looking statements. Those risk
factors include, without limitation, general economic conditions and market
conditions in the industrial production, trucking, construction, aerospace,
automotive, and defense industries in North America, Europe, and Asia, market
acceptance of existing and new products, successful integration of
acquisitions, competitive pricing, foreign currency risk, interest rate risk,
and other factors.
13
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Quarterly financial data for 1996 and 1995 is as follows:
(In Millions, except per share amounts)
<TABLE>
<CAPTION>
1996
---------------------------------------------------------
FIRST SECOND THIRD FOURTH
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 139.3 $ 137.1 $ 147.5 $ 147.3
Gross Profit 54.1 51.7 55.4 58.7
Net Earnings $ 7.7 $ 7.7 $ 9.1 $ 9.2
============ =========== ============= ==============
Net Earnings Per Share $ 0.55 $ 0.55 $ 0.65 $ 0.66
============ =========== ============= ==============
<CAPTION>
1995
---------------------------------------------------------
FIRST SECOND THIRD FOURTH
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 125.8 $ 124.5 $ 139.4 $ 137.4
Gross Profit 48.2 47.3 53.6 52.3
Earnings Before Extraordinary Loss 5.5 4.6 7.3 7.6
Extraordinary Loss - (4.9) - -
------------ ------------ ------------- --------------
Net Earnings (Loss) $ 5.5 $ (0.3) $ 7.3 $ 7.6
============ =========== ============= ==============
Earnings (Loss) Per Share
Before Extraordinary Loss $ 0.40 $ 0.34 $ 0.53 $ 0.55
Extraordinary Loss - (0.36) - -
------------ ----------- ------------- --------------
Net Earnings (Loss) Per Share $ 0.40 $ (0.02) $ 0.53 $ 0.55
============ =========== ============= ==============
</TABLE>
The Consolidated Financial Statements are included on pages 18 to 33 and are
incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference from the
"Election of Directors" and "Other Information -- Section 16(a) Beneficial
Ownership Reporting Compliance" sections of the Company's Proxy Statement for
its Annual Meeting of Shareholders to be held on January 8, 1997 (the "1997
Annual Meeting Proxy Statement"). See also "Executive Officers of the
Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
"Board Meetings, Committees and Director Compensation" section and the
"Executive Compensation" section (other than the subsections thereof entitled
"Report of the Compensation Committee of the Board of Directors on Executive
Compensation" and "Performance Graphs") of the 1997 Annual Meeting Proxy
Statement.
14
<PAGE> 15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
"Certain Beneficial Owners" and "Election of Directors" sections of the 1997
Annual Meeting Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Consolidated Financial Statements
See "Index to Consolidated Financial Statements and Financial
Statement Schedules" on page 16, the Independent Auditors' Report on
page 17 and the Consolidated Financial Statements on pages 18 to 33,
all of which are incorporated herein by reference.
2. Financial Statement Schedules
See "Index to Consolidated Financial Statements and Financial
Statement Schedules" on page 16 and the Financial Statement Schedule
on page 34, all of which are incorporated herein by reference.
3. Exhibits
See "Index to Exhibits" on pages 36 to 40, which is
incorporated herein by reference.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed in the fourth quarter.
15
<PAGE> 16
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page
- - ------------------------------------------ ----
Independent Auditors' Report 17
Consolidated Statement of Earnings
For the years ended August 31, 1996, 1995 and 1994 18
Consolidated Balance Sheet
As of August 31, 1996 and 1995 19
Consolidated Statement of Shareholders' Equity
For the years ended August 31, 1996, 1995 and 1994 20
Consolidated Statement of Cash Flows
For the years ended August 31, 1996, 1995 and 1994 21
Notes to Consolidated Financial Statements 22 - 33
INDEX TO FINANCIAL STATEMENT SCHEDULES
- - --------------------------------------
Schedule II - Valuation and Qualifying Accounts 34
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.
16
<PAGE> 17
Independent Auditors' Report
To the Shareholders and Directors of Applied Power Inc.:
We have audited the accompanying consolidated balance sheets of Applied Power
Inc. and subsidiaries as of August 31, 1996 and 1995, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended August 31, 1996. Our audits also
included the consolidated financial statement schedule listed in the Index at
Item 14. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Applied Power Inc. and
subsidiaries at August 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended August 31,
1996 in conformity with generally accepted accounting principles. Also, in our
opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
September 26, 1996
17
<PAGE> 18
APPLIED POWER INC.
CONSOLIDATED STATEMENT OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years ended August 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 571,215 $ 527,058 $ 433,644
Cost of products sold 351,283 325,621 270,120
----------- ----------- -----------
Gross Profit 219,932 201,437 163,524
Engineering, selling and administrative expenses 158,485 149,210 121,315
----------- ----------- -----------
Operating Earnings from Continuing Operations 61,447 52,227 42,209
Other Expense(Income)
Net financing costs 8,456 10,291 11,362
Amortization of intangible assets 4,054 3,369 5,092
Other - net (230) 1,694 457
----------- ----------- -----------
Earnings from Continuing Operations Before
Income Tax Expense 49,167 36,873 25,298
Income Tax Expense 15,438 11,868 8,402
----------- ----------- -----------
Earnings from Continuing Operations 33,729 25,005 16,896
Discontinued Operations, net of income taxes
(Income) from operations previously offset against
reserve for estimated loss on disposition - - (348)
----------- ----------- -----------
Loss from Discontinued Operations 0 0 (348)
----------- ----------- -----------
Earnings before Extraordinary Loss 33,729 25,005 16,548
Extraordinary Loss from Early Extinguishment of
Debt, net of $2,423 tax benefit - (4,920) -
----------- ----------- -----------
Net Earnings $ 33,729 $ 20,085 $ 16,548
=========== =========== ===========
Primary Earnings(Loss) Per Share:
Continuing Operations $ 2.41 $ 1.82 $ 1.27
Discontinued Operations - - (0.03)
Extraordinary Loss - (0.36) -
----------- ----------- -----------
Earnings Per Share $ 2.41 $ 1.46 $ 1.25
=========== =========== ===========
Weighted Average Common and Equivalent Shares (000's) 13,983 13,746 13,289
=========== =========== ===========
Fully Diluted Earnings(Loss) Per Share:
Continuing Operations $ 2.41 $ 1.79 $ 1.25
Discontinued Operations - - (0.03)
Extraordinary Loss - (0.35) -
----------- ----------- -----------
Earnings Per Share $ 2.41 $ 1.44 $ 1.23
=========== =========== ===========
Weighted Average Common and Equivalent Shares (000's) 13,983 13,958 13,477
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
18
<PAGE> 19
APPLIED POWER INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
August 31,
------------------------------
1996 1995
------------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,001 $ 911
Accounts receivable, less allowances of $4,179 and $3,593, respectively 68,747 71,000
Inventories 120,648 103,358
Prepaid income tax 10,734 10,297
Prepaid expenses 5,775 4,898
------------ -----------
Total Current Assets 206,905 190,464
Other Assets 6,370 6,274
Goodwill, net of accumulated amortization of $13,937 and $11,256, respectively 58,266 57,346
Other Intangibles, net of accumulated amortization of $11,917 and $18,798, respectively 33,464 10,427
Property, Plant and Equipment
Property 1,923 1,909
Plant 40,252 28,850
Machinery and equipment 125,950 122,615
------------ -----------
168,125 153,374
Less: Accumulated depreciation (91,889) (84,939)
------------ -----------
Net Property, Plant and Equipment 76,236 68,435
------------ -----------
Total Assets $ 381,241 $ 332,946
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 16,068 $ 12,620
Trade accounts payable 41,397 37,530
Accrued compensation and benefits 20,805 19,707
Income taxes payable 7,081 7,575
Current maturities of long-term debt - 187
Other current liabilities 22,378 19,828
------------ -----------
Total Current Liabilities 107,729 97,447
Long-term Debt, less current portion 76,548 74,156
Deferred Income Tax 15,395 16,386
Other Deferred Liabilities 13,114 13,271
Shareholders' Equity
Class A common stock, $0.20 par value per share, authorized 40,000,000 shares,
issued and outstanding 13,652,349 and 13,406,590 shares, respectively 2,730 2,681
Additional paid-in capital 34,383 28,328
Retained earnings 126,392 94,285
Cumulative translation adjustments 4,950 6,392
------------ -----------
Total Shareholders' Equity 168,455 131,686
------------ -----------
Total Liabilities and Shareholders' Equity $ 381,241 $ 332,946
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
19
<PAGE> 20
APPLIED POWER INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years Ended August 31, 1996, 1995 and 1994
----------------------------------------------------------
Class A Additional Cumulative
Common Paid-in Retained Translation
Stock Capital Earnings Adjustments
----------- ---------- ---------- ---------------------
<S> <C> <C> <C> <C>
Balances at September 1, 1993 $2,601 $21,654 $ 60,823 $ 2,932
Net earnings for the year - - 16,548 -
Cash dividends declared - $0.12 per share - - (1,569) -
Exercise of stock options 29 1,850 - -
Other - 144 - -
Currency translation adjustments - - - 2,299
------ ------- -------- --------
Balances at August 31, 1994 2,630 23,648 75,802 5,231
Net earnings for the year - - 20,085 -
Cash dividends declared - $0.12 per share - - (1,602) -
Exercise of stock options 51 4,168 - -
Other - 512 - -
Currency translation adjustments - - - 1,161
------ ------- -------- --------
Balances at August 31, 1995 2,681 28,328 94,285 6,392
Net earnings for the year - - 33,729 -
Cash dividends declared - $0.12 per share - - (1,622) -
Exercise of stock options 24 1,582 - -
Issuance of stock in acquisition 25 3,905 - -
Other - 568 - -
Currency translation adjustments - - - (1,442)
------ ------- -------- --------
Balances at August 31, 1996 $2,730 $34,383 $126,392 $ 4,950
====== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
20
<PAGE> 21
APPLIED POWER INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended August 31,
-----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net Earnings $ 33,729 $ 20,085 $ 16,548
Adjustments to reconcile earnings from continuing
operations to net cash provided by operating activities:
Depreciation and amortization 21,078 18,456 19,406
Other non-cash charge - extraordinary loss - 4,920 -
Other non-cash charge - discontinued operations - - 348
Provision for deferred taxes (1,588) (2,707) (789)
Changes in operating assets and liabilities, excluding
the effects of business acquisitions and disposals:
Accounts receivable (5,703) (15,413) (12,855)
Inventories (14,219) (8,170) (7,182)
Prepaid expenses and other assets (2,505) (2,077) 3,156
Trade accounts payable 2,262 1,231 8,509
Other liabilities (240) 7,499 (4,663)
-------- -------- --------
Net Cash Provided by Operating Activities 32,814 23,824 22,478
Investing Activities
Proceeds on the sale of property, plant and equipment 821 614 1,342
Additions to property, plant and equipment (22,734) (15,986) (12,707)
Business acquisitions (33,949) (2,758) (2,446)
Product line dispositions 5,181 - -
Other 65 162 142
-------- -------- --------
Net Cash Used in Investing Activities (50,616) (17,968) (13,669)
Financing Activities
Proceeds from issuance of long-term debt 42,433 116,055 13,959
Principal payments on long-term debt (37,877) (123,997) (33,755)
Refinancing expenditures - (4,370) -
Net borrowings(repayments) on short-term credit facilities 3,484 (2,092) (5,700)
Net commercial paper (repayments)borrowings (3,276) (6,671) 9,947
Additional receivables financed 13,275 11,200 -
Dividends paid on common stock (1,622) (1,602) (1,569)
Stock option exercises and other 1,551 4,219 1,879
-------- -------- --------
Net Cash Provided by(Used in) Financing Activities 17,968 (7,258) (15,239)
Effect of Exchange Rate Changes on Cash (76) 406 132
-------- -------- --------
Net Cash Provided by(Used in) Continuing Operations 90 (996) (6,298)
Discontinued Operations Activities
Proceeds from sale of Datafile - - 6,222
Other - - 663
-------- -------- --------
Net Cash Provided by Discontinued Operations 0 0 6,885
-------- -------- --------
Net Increase(Decrease) in Cash and Cash Equivalents 90 (996) 587
Cash and Cash Equivalents - Beginning of Year 911 1,907 1,320
-------- -------- --------
Cash and Cash Equivalents - End of Year $ 1,001 $ 911 $ 1,907
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
21
<PAGE> 22
APPLIED POWER INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of Applied Power Inc. and its majority-owned subsidiaries ("Applied
Power" or the "Company"). All significant intercompany balances, transactions
and profits have been eliminated.
Cash and Cash Equivalents: The Company considers all highly liquid investments
with original maturities of 90 days or less to be cash equivalents.
Inventories: Inventories are comprised of material, direct labor and
manufacturing overhead, and are stated at the lower of cost or market.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Plant and equipment are depreciated over the estimated useful lives of
the assets under the straight-line method for financial reporting purposes and
both straight-line and accelerated methods for tax purposes. Expenditures for
maintenance and repairs not expected to extend the useful life of an asset
beyond its normal useful life are expensed.
Intangible Assets: Goodwill is amortized on a straight-line basis over periods
of fifteen to forty years. Other intangible assets, consisting primarily of
purchased patents, trademarks and noncompete agreements, are amortized over
periods from two to forty years. The Company periodically evaluates the
carrying value of intangible assets in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
Revenue Recognition: Revenues and costs of products sold are recognized as the
related products are shipped.
Research and Development Costs: Research and development costs are expensed as
incurred. Such costs incurred in the development of new products or significant
improvements to existing products totaled approximately $9,852, $8,725 and
$7,446 in 1996, 1995 and 1994, respectively.
Financing Costs: Net financing costs represents interest expense on debt
obligations, investment income, and accounts receivable financing costs.
Income Taxes: The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." For further information, see Note M - "Income Taxes."
Earnings Per Share: Earnings per share is based on the weighted average number
of common and common equivalent shares outstanding during the year. The
dilutive effect of stock options, which are considered common stock
equivalents, is calculated using the treasury stock method.
Foreign Currency Translation: Foreign currency translation adjustments are
generally excluded from the Consolidated Statement of Earnings and are included
in Cumulative translation adjustments in the Consolidated Balance Sheet. Gains
and losses resulting from foreign currency transactions are included in Other -
net in the Consolidated Statement of Earnings.
Derivative Financial Instruments: Derivative financial instruments are utilized
by the Company to manage risks generally associated with interest rate market
volatility. The Company does not hold or issue derivative financial instruments
for trading purposes. The Company currently holds both interest rate swap and
cap agreements. The differential to be paid or received is accrued monthly as
interest rates change and is recognized over the life of the agreement as an
adjustment to interest expense. The Company also utilizes, in limited
circumstances, foreign
22
<PAGE> 23
currency forward contracts. Gains and losses resulting from these instruments
are recognized in the same period as the underlying transaction. For further
information, see Note H - "Long-term Debt."
Use of Estimates: The financial statements have been prepared in accordance
with generally accepted accounting principles and necessarily include amounts
based on estimates and assumptions by management. Actual results could differ
from those amounts.
New Accounting Standards: In October 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." As
permitted by SFAS No. 123, the Company expects to continue to apply Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and include the necessary pro forma disclosures in its 1997 financial
statements.
Reclassifications: Certain amounts shown for 1994 have been reclassified to
conform to the current presentation.
NOTE B - DISCONTINUED OPERATIONS
In the second quarter of 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. The retained business has refocused
its business strategy on technical furniture solutions for offices and
laboratories.
The Company had originally intended to sell all of Wright Line in a single
transaction in 1993. However, management subsequently determined that proceeds
could be maximized by selling the assets in a series of separate transactions.
The Company completed the sale of certain assets of Wright Line's German
operation to an existing distributor in exchange for the assumption of certain
liabilities. In early 1994, Wright Line's Datafile businesses in Canada,
Australia, the UK and the US were sold, generating proceeds of $6,222. A short
time later, Wright Line sold its Tapeseal product line to a third party for
future compensation.
The operating results from the retained Wright Line operations have been
reclassified from discontinued operations to continuing operations for all
periods presented. However, the results of the retained operations for the
period June 1992 through November 1993 have remained offset against the reserve
previously established for operating losses until disposition ($398 in fiscal
1994).
NOTE C - ACQUISITIONS
On May 15, 1996, CalTerm, Inc. ("CalTerm") was merged with a wholly-owned
subsidiary of the Company. Consideration included 122,810 shares of Applied
Power Inc. Class A common stock (valued at approximately $3,930) and
approximately $1,038 in cash. In addition, the Company assumed approximately
$6,000 of outstanding debt which was extinguished by the Company shortly after
the merger. In conjunction with the acquisition, a warehouse operated by
CalTerm in Reno, Nevada was purchased for approximately $2,300 and there were
payments of $1,000 for non-compete agreements. Three individuals received
employment agreements and related stock options. Cash payments required were
funded through borrowings under existing credit facilities. Goodwill of
approximately $2,000 was recorded as a result of this transaction.
Headquartered in San Diego, California, CalTerm is a supplier of electrical
consumables and tools primarily to the retail automotive aftermarket. The
results of operations of CalTerm subsequent to the acquisition date are
included in the Consolidated Statement of Earnings.
On February 23, 1996, the Company's Wright Line division acquired the European
distribution rights for its products for cash of $1,250 plus forgiveness of
accounts receivable outstanding of $723 from its European distributor. Goodwill
of approximately $1,900 was generated in conjunction with the transaction.
On December 8, 1995, the Company acquired the remaining 10% minority interest
in Applied Power Korea. Cash of $388 was used in the acquisition, which
generated goodwill of approximately $340. On March 21, 1994, the Company had
increased its ownership interest from approximately 50% to 90%. Cash of $912
was used in such
23
<PAGE> 24
acquisition which resulted in goodwill of $572. The results of operations of
this subsidiary have historically been included in the Consolidated Statement
of Earnings.
On October 26, 1995, the Company's Enerpac division acquired the assets of
Designed Fluid-Air Systems, Inc. ("DFAS"). Consideration included $298 in cash
plus future royalties over the next five years not to exceed $500 in the
aggregate. Approximately $100 of the purchase price was assigned to goodwill.
DFAS, located in Oswego, Illinois, designs, fabricates and assembles customized
quick die change systems utilizing hydraulic, pneumatic and electrical
components. The operating results of DFAS subsequent to the acquisition date
are included in the Consolidated Statement of Earnings.
On September 29, 1995, the Company completed the acquisition of substantially
all of the assets and certain liabilities of Vision Plastics Manufacturing
Company ("Vision") for $3,557 in cash. Included in the liabilities assumed was
$1,357 of outstanding mortgage debt, which was subsequently extinguished by the
Company during the first quarter. On January 10, 1996, in a separate
transaction, the Company acquired certain proprietary technology rights and
patents related to Vision. Total consideration for the two transactions of
approximately $21,500 was funded by proceeds from borrowings under existing
credit facilities. Intangible assets of $19,942 were recorded which included
approximately $950 of goodwill. Vision, based in San Diego, California,
manufactures plastic cable ties which are sold through electrical wholesale,
retail and OEM channels. The operating results of Vision subsequent to
September 29, 1995 are included in the Consolidated Statement of Earnings.
The Company acquired all of the outstanding stock of New England Controls, Inc.
("NECON") on June 28, 1995 for approximately $2,059 in cash. Approximately
$1,536 of the purchase price was assigned to goodwill. NECON, based in Milford,
Connecticut, manufactures electrical switches for the electrical wholesale,
retail and OEM markets. The operating results of NECON subsequent to June 28,
1995 are included in the Consolidated Statement of Earnings.
On September 1, 1994, the Company acquired the assets of Enerpac's master
distributor in Brazil for $699 in cash. Approximately $350 of the purchase
price was assigned to goodwill. The operating results of this business
subsequent to such date are included in the Consolidated Statement of Earnings.
The Company completed the acquisition of certain assets of Palmer Industries,
Inc. ("Palmer") on October 1, 1993 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 Consolidated Statement of
Earnings.
All acquisitions were accounted for using the purchase method. The transactions
were not material to the results of operations or the financial position of the
Company.
NOTE D - SALES OF PRODUCT LINES
On January 24, 1996, the Company sold substantially all of the assets and
liabilities of its APITECH mobile equipment product line. Total consideration
from the transaction, which included future collection of retained accounts
receivable, is approximately $5,200, which approximated the book value of the
product line.
On December 13, 1995, the Company's GB Electrical subsidiary sold its HIT
spring steel product line for approximately $2,400 in cash. Proceeds from the
sale approximated the book value of the product line.
NOTE E - ACCOUNTS RECEIVABLE FINANCING
As a part of its overall financing strategy, the Company sells to financial
institutions undivided participation interests in designated pools of accounts
receivable, with limited recourse. Participation interests in new receivables
may be sold as collections reduce previously sold participation interests. The
sold accounts receivable are reflected as a reduction of receivables in the
Consolidated Balance Sheet. The Company retains collection and administrative
24
<PAGE> 25
responsibilities on the participation interests sold as agent for the
purchaser. In August 1995, the Company entered into a new multi-currency
accounts receivable financing agreement that allows up to the equivalent of
$50,000 of sold receivables at any one time. Previously, the Company was a
party to an agreement that provided up to $30,000 of accounts receivable
financing for US Dollar denominated receivables. The new accounts receivable
financing agreement, as amended August 30, 1996, expires in August 1999.
At August 31, 1996 and 1995, accounts receivable were reduced by $49,475 and
$36,200, respectively, representing receivable interests sold under this
program.
Accounts receivable financing costs totaling $2,324, $1,892 and $1,076 for the
years ended August 31, 1996, 1995 and 1994, respectively, are included with
financing costs in the accompanying Consolidated Statement of Earnings.
NOTE F - NET INVENTORIES
Inventory cost is determined using the last-in, first-out ("LIFO") method for
substantially all US owned inventory (approximately 69% and 58% of total
inventories in 1996 and 1995, respectively). The first-in, first-out or average
cost methods are used for all other inventories. If the LIFO method was not
used, inventory balances would be higher than the amounts in the Consolidated
Balance Sheet by approximately $9,222 and $10,296 at August 31, 1996 and 1995,
respectively.
It is not practical to segregate the amounts of raw materials, work-in-process
or finished goods at the respective balance sheet dates, since the segregation
is possible only as the result of physical inventories which are taken at dates
different from the balance sheet dates. The systems at many of the Company's
operating units have not been designed to capture this segregation due to the
very short production cycle of their products and the minimal amount of
work-in-process.
NOTE G - SHORT-TERM BORROWINGS
The Company had borrowings under unsecured non-committed lines of credit with
banks aggregating approximately $16,068 and $12,620 at August 31, 1996 and
1995, respectively. Interest rates vary depending on the currency being
borrowed. The weighted average interest rate on the US and non-US short-term
borrowings was 9.37% at August 31, 1996. The amount of unused available
borrowings under such lines of credit was approximately $47,400 at August 31,
1996.
NOTE H - LONG-TERM DEBT
<TABLE>
<CAPTION>
August 31,
-----------------
1996 1995
------- -------
<S> <C> <C>
Borrowings under:
Multi-currency revolving credit agreement $76,298 $70,717
Commercial paper - 3,276
Other notes 250 350
------- -------
Total long-term debt 76,548 74,343
Less current maturities - (187)
------- -------
Long-term Debt, less current portion $76,548 $74,156
======= =======
</TABLE>
During the second quarter of 1995, the Company recorded an extraordinary loss
of $4,920 ($0.36 per share) in anticipation of the March 30, 1995
extinguishment of the outstanding $64,350, 9.92% Senior Unsecured Notes. The
pre-tax extraordinary loss of $7,343 was comprised of an estimated make whole
provision of $4,050, costs associated with the cancellation of underlying
interest rate swap agreements of $3,047, and the write-off of deferred
financing costs of $246.
25
<PAGE> 26
Funds used to retire the Senior Unsecured Notes and pay the make whole
obligation were obtained from new borrowings under an existing $40,000
Multi-currency revolving credit agreement and a temporary $40,000 expansion to
the existing Multi-currency revolving credit agreement. These borrowings were
extinguished on August 21, 1995, and all amounts outstanding were simultaneously
reborrowed under a new $120,000 Multi-currency revolving credit agreement (the
"new Multi-currency Credit Agreement").
The new agreement, as amended August 29, 1996, increases the credit line to
$170,000, extends the term to August 2001, and continues to bear interest at a
floating rate of IBOR plus .30 to .50 of 1% annually. Currently, the Company
incurs interest at .375 of 1% above IBOR. A commitment fee, currently computed
at a rate of .175 of 1% annually, is payable quarterly on the average unused
credit line. The unused credit line at August 31, 1996 was $93,702.
The new Multi-currency Credit Agreement contains customary restrictions
concerning investments, liens on assets, sales of assets, dividend payments,
maximum levels of debt and minimum levels of shareholders' equity. In addition,
the agreement requires the Company to maintain certain financial ratios. As of
August 31, 1996, the Company was in compliance with all debt covenants. Under
the most restrictive covenant, approximately $64,132 of retained earnings was
available for the payment of future dividends on common stock as of August 31,
1996.
Commercial paper outstanding at August 31, 1996 and 1995 totaled $0 and $3,276,
respectively, net of discount, and carried an average interest rate of 5.94% in
fiscal 1995. The Company had the ability and intent to maintain the commercial
paper obligations, classified as long-term, for more than one year. Amounts
outstanding as commercial paper reduce the amount available for borrowing under
the new Multi-currency Credit Agreement.
Interest Rate Financial Instruments: As part of its interest rate management
program, the Company periodically enters into interest rate swap and cap
agreements with respect to portions of its outstanding debt. The interest rate
swap agreements in place at August 31, 1996 effectively convert $65,500 of the
Company's variable rate debt to a weighted average fixed rate of 5.92%. The
swap agreements expire on varying dates through 2003. The accompanying
Consolidated Balance Sheet at August 31, 1996 does not reflect a value for
these swap agreements.
Interest rate caps limit the maximum interest rate that is paid. As of August
31, 1996, the Company had interest rate caps in place on a notional $60,000 in
borrowings that limit the maximum applicable base rate (three month LIBOR) to
8.0%. The interest rate caps expire in March 1997, and were recorded at a value
of $75 at August 31, 1996.
The counterparties to these financial instruments consist of major financial
institutions with investment grade or better credit ratings. The Company does
not expect any losses from nonperformance by these counterparties.
Fair Values: The fair value of the Company's short-term borrowings and
long-term debt approximated book value as of August 31, 1996. The fair value of
debt instruments is calculated by discounting the cash flow of such obligations
using the market interest rates for similar instruments at August 31, 1996. The
swap agreements currently in place had a fair value as determined by the
lenders of approximately $886 at August 31, 1996. Given the interest rate
market at August 31, 1996, the Company's interest rate cap agreement had
nominal value.
Aggregate Maturities: Aggregate maturities of long-term debt outstanding at
August 31, 1996, were: $0 in 1997; $250 in 1998; $0 in 1999; $0 in 2000 and
$76,298 in 2001.
The Company paid $8,084, $10,363 and $10,695 for financing costs in 1996, 1995
and 1994, respectively, excluding the make whole payments associated with
refinancing the 9.92% Senior Unsecured Debt.
NOTE I - LEASES
The Company leases certain facilities, computers, equipment and vehicles under
various lease agreements over periods of 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
which enable the Company to renew leases based upon the fair values on the date
of expiration of the initial lease.
26
<PAGE> 27
Future obligations on non-cancelable operating leases in effect at August 31,
1996 were: $9,839 in 1997; $6,667 in 1998; $4,415 in 1999; $4,077 in 2000;
$3,430 in 2001; and $20,127 thereafter.
Total rental expense under operating leases was $10,739, $11,076 and $11,379 in
1996, 1995 and 1994, respectively.
NOTE J - STOCK OPTION PLANS
At August 31, 1996, 2,004,886 shares of Class A common stock were reserved for
issuance under the Company's stock option plans.
Employee Plans: The Company has three nonqualified stock option plans for
employees - the 1985, 1987 and 1990 Plans. No further options may be granted
under the 1985 or 1987 Plans, although options previously issued and
outstanding under these plans remain exercisable pursuant to the provisions of
the plans. A total of 3,050,000 shares may be issued under all three stock
option plans (equal to 950,000 shares authorized under the 1985 Plan, 1,200,000
shares under the 1987 Plan and 900,000 shares under the 1990 Plan). Any
available unissued shares under the 1985 and 1987 Plans at the date of adoption
of the 1990 Plan became available for issuance under the 1990 Plan.
Options may be granted to officers and key employees. Options generally have a
maximum term of ten years and an exercise price equal to 100% of the fair
market value of a share of the Company's common stock at the date of grant.
Options generally vest 50% after 2 years and 100% after 5 years.
A summary of option activity under the three plans is as follows:
<TABLE>
<CAPTION>
Number of Price
Shares Range
---------- --------------------
<S> <C> <C>
Outstanding at September 1, 1993 1,716,610 $ 2.21 - $26.75
Granted 189,400 15.81 - 21.38
Exercised (146,288) 2.21 - 20.56
Canceled (174,187) 12.75 - 26.75
--------- --------------------
Outstanding at August 31, 1994 1,585,535 $ 2.21 - $24.13
Granted 227,740 24.13 - 29.25
Exercised (250,136) 2.21 - 24.13
Canceled (119,450) 15.44 - 29.25
--------- --------------------
Outstanding at August 31, 1995 1,443,689 $ 2.21 - $29.25
Granted 80,854 22.68 - 32.44
Exercised (121,949) 2.21 - 22.25
Canceled (154,699) 15.63 - 29.25
--------- --------------------
Outstanding at August 31, 1996 1,247,895 $ 3.50 - $32.44
--------- --------------------
Exercisable at August 31, 1996 797,263 $ 3.50 - $29.25
--------- --------------------
</TABLE>
Outside Director Plan: Annually, each outside director is automatically granted
stock options to purchase 1,000 shares of common stock at a price equal to the
market price of the underlying stock on the date of grant. A maximum of 60,000
shares may be issued under this plan. Options vest 100% after 11 months.
27
<PAGE> 28
A summary of option activity under this plan is as follows:
<TABLE>
<CAPTION>
Number of Price
Shares Range
--------- -----------------------
<S> <C> <C>
Outstanding at September 1, 1993 14,000 $12.75 - $ 24.13
Granted 6,000 16.69
Canceled (1,000) 16.69
-------- -----------------------
Outstanding at August 31, 1994 19,000 $12.75 - $ 24.13
Granted 5,000 25.00
Exercised (4,000) 12.75 - 24.13
-------- -----------------------
Outstanding at August 31, 1995 20,000 $12.75 - $ 25.00
Granted 6,000 27.63
Exercised (1,000) 17.00
-------- -----------------------
Outstanding at August 31, 1996 25,000 $12.75 - $ 27.63
-------- -----------------------
Exercisable at August 31, 1996 19,000 $12.75 - $ 25.00
-------- -----------------------
</TABLE>
NOTE K - EMPLOYEE STOCK OWNERSHIP AND RETIREMENT PLANS
US Employees: Primarily all of the Company's full-time US employees are
participants in the Applied Power Inc. Employee Stock Ownership Plan (the "ESOP
Plan"). Under the provisions of the ESOP Plan, the plan administrator acquires
shares of Class A common stock on the open market and allocates such shares to
accounts set aside for Company employees' retirements. Contributions equal 3%
of each employee's annual cash compensation except "initial participants," who
received no allocation of shares until 1995. During the years ended August 31,
1996, 1995 and 1994, pre-tax expense related to the ESOP Plan was $1,735,
$1,720 and $534, respectively.
The Company also offers an employee 401(k) Savings Plan (the "Savings Plan") to
encourage eligible employees to save on a regular basis for their retirements.
Primarily all full-time US employees are eligible to participate in the Savings
Plan, and generally may contribute up to 15% of their base compensation.
Effective January 1, 1996, the Company's annual match equals approximately 25%
of each participant's first 6% of earnings. Expense attributable to the Savings
Plan was $672, $643 and $293 for 1996, 1995 and 1994, respectively.
Non-US Employees: The Company contributes to a number of retirement programs
for employees outside the US. Pension expense amounted to $948, $821 and $631
in 1996, 1995 and 1994, respectively. These plans are not required to report to
US governmental agencies under ERISA and do not otherwise determine the
actuarial value of accumulated plan benefits or net assets available for
benefits.
NOTE L - POSTRETIREMENT BENEFITS
The Company does not offer postretirement health care and life insurance
benefits to employees. However, certain employees of businesses previously
acquired by the Company were entitled to such benefits upon retirement. The
individuals receiving health care benefits under these programs are required to
make monthly contributions to defray a portion of the cost. Retiree
contributions are adjusted annually. Retirees currently do not contribute
toward the cost of life insurance. The accounting for retiree health care
benefits assumes retirees will continue to contribute toward the cost of such
benefits.
Net periodic postretirement benefit expense for 1996, 1995 and 1994 included
the following components:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost of benefits earned $ 8 $ 9 $ 9
Interest cost on accumulated postretirement benefit obligation 400 482 553
Amortization of unrecognized gain (251) (180) (91)
----- ----- ----
Total Postretirement Benefit Expense $ 157 $ 311 $471
===== ===== ====
</TABLE>
28
<PAGE> 29
The Company's accumulated postretirement benefit obligation for such benefits
is as follows:
<TABLE>
<CAPTION>
August 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Retirees $4,174 $4,887
Vested former employees 1,029 1,419
Active employees 225 238
------- -------
Subtotal 5,428 6,544
Unrecognized gain 4,131 3,037
------- -------
Accumulated Postretirement Benefit Obligation $9,559 $9,581
======= =======
</TABLE>
The Company's postretirement benefit obligation is not funded. Benefits paid in
1996 were $22 higher than that expensed during the year. Payments in 1995 and
1994 were $24 and $202 lower than that expensed during those years,
respectively.
The health care cost trend rate used in the actuarial calculations was 10.6%,
trending downward to 6.5% by the year 2010, and remaining level thereafter. The
discount rate used in determining the accumulated postretirement benefit
obligation was 7.75% in each of the years 1996, 1995 and 1994. The effect of a
one percentage-point change in health care cost trend rates would change the
accumulated postretirement benefit obligation by approximately 9%.
NOTE M - INCOME TAXES
Income tax expense for continuing operations consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Currently Payable:
Federal $ 9,361 $ 7,007 $ 4,475
Foreign 6,059 6,313 3,621
State 1,606 1,255 1,095
------- ------- -------
Subtotals 17,026 14,575 9,191
------- ------- -------
Deferred:
Federal (711) (2,582) (2,166)
Foreign (780) 230 1,672
State (97) (355) (295)
------- ------- -------
Subtotals (1,588) (2,707) (789)
------- ------- -------
Totals $15,438 $11,868 $ 8,402
======= ======= =======
</TABLE>
Components of deferred income tax benefits include the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Compensation and other employee benefits $ 371 $ (443) $ (962)
Inventory items (694) 26 (519)
Depreciation and amortization (1,917) (956) (1,798)
Restructuring expenses 373 574 2,504
Deferred income 574 (1,225) (119)
Book reserves and other items (295) (683) 105
------- ------- ------
Totals $(1,588) $(2,707) $ (789)
======= ======= ======
</TABLE>
29
<PAGE> 30
Income tax expense differs from the amounts computed by applying the Federal
income tax rate to earnings before income tax expense. A reconciliation of
income taxes at the US statutory rate to the effective tax rate follows:
<TABLE>
<CAPTION>
Percent of Pre-tax Earnings
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of Federal effect 2.0 1.6 2.1
Non-deductible amortization 0.9 1.2 1.8
Net effects of foreign tax rates and credits (5.0) (5.6) (4.2)
Other items (1.5) - (1.5)
---- ---- ----
Effective Tax Rate 31.4% 32.2% 33.2%
==== ==== ====
</TABLE>
Temporary differences and carryforwards which gave rise to the deferred tax
assets and liabilities included the following items:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets:
Operating loss and foreign tax credit carryforwards $ 2,064 $ 4,167
Compensation and other employee benefits 5,327 5,698
Inventory items 5,821 4,446
Restructuring expenses 177 550
Deferred income 1,137 1,711
Book reserves and other items 3,092 2,501
------- -------
17,618 19,073
Valuation allowance (2,441) (4,700)
------- -------
15,177 14,373
------- -------
Deferred tax liabilities:
Depreciation and amortization 10,313 11,485
Inventory items 4,045 3,364
Other items 5,480 5,613
------- -------
19,838 20,462
------- -------
Net Deferred Tax Liability $(4,661) $(6,089)
======= =======
</TABLE>
The valuation allowance primarily represents foreign loss and foreign tax
credit carryforwards for which utilization is uncertain. The majority of the
foreign losses may be carried forward indefinitely; however, the foreign tax
credit carryforwards expire in 1997.
Income taxes paid during 1996, 1995 and 1994 were $17,039, $12,280 and $9,191,
respectively.
The Company's policy is to remit earnings from foreign subsidiaries only to the
extent any resultant foreign income taxes are creditable in the US.
Accordingly, the Company does not currently provide for the additional US and
foreign income taxes which would become payable upon remission of undistributed
earnings of foreign subsidiaries. Undistributed earnings on which additional
income taxes have not been provided amounted to approximately $40,000 at August
31, 1996. If all such undistributed earnings were remitted, an additional
provision for income taxes of approximately $2,700 would have been necessary as
of August 31, 1996.
Earnings from continuing operations before income taxes from non-US operations
were $10,639, $16,156 and $12,041 for 1996, 1995 and 1994, respectively.
30
<PAGE> 31
NOTE N - SEGMENT INFORMATION
The Company's operations are classified into three business segments:
Distributed Products, Engineered Solutions and Wright Line. Distributed
Products is involved in the design, manufacture and distribution of tools and
consumables to the construction, electrical wholesale, retail DIY, datacom,
retail automotive, industrial and production automation markets. Engineered
Solutions focuses on developing and marketing value-added, customized solutions
for OEMs in the automotive, truck, off-highway equipment, medical, aerospace,
semiconductor, defense and industrial markets. Wright Line designs,
manufactures and sells furnishings and enclosures utilized in technology
intensive business environments.
Summarized financial information by business segment is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ -----------
<S> <C> <C> <C>
NET SALES:
Distributed Products $284,490 $264,823 $222,076
Engineered Solutions 190,940 192,219 162,296
Wright Line 95,785 70,016 49,272
-------- -------- --------
Totals $571,215 $527,058 $433,644
======== ======== ========
OPERATIONS BEFORE INCOME TAXES:
Distributed Products $ 36,590 $ 37,379 $ 32,023
Engineered Solutions 16,801 15,200 12,314
Wright Line 14,362 8,587 4,242
General corporate and other (18,586) (24,293) (23,281)
-------- -------- --------
Totals $ 49,167 $ 36,873 $ 25,298
======== ======== ========
DEPRECIATION:
Distributed Products $ 6,242 $ 4,826 $ 4,165
Engineered Solutions 8,165 7,800 7,346
Wright Line 2,551 2,406 2,761
General corporate and other 66 55 42
-------- -------- --------
Totals $ 17,024 $ 15,087 $ 14,314
======== ======== ========
CAPITAL EXPENDITURES:
Distributed Products $ 9,515 $ 6,440 $ 5,917
Engineered Solutions 6,497 6,321 5,957
Wright Line 6,715 2,955 769
General corporate and other 7 270 64
-------- -------- --------
Totals $ 22,734 $ 15,986 $ 12,707
======== ======== ========
<CAPTION>
August 31,
-----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
ASSETS:
Distributed Products $210,939 $163,053 $148,737
Engineered Solutions 121,000 129,682 128,190
Wright Line 37,077 25,969 23,838
General corporate 12,225 14,242 16,637
-------- -------- --------
Totals $381,241 $332,946 $317,402
======== ======== ========
</TABLE>
31
<PAGE> 32
Summarized financial information by geographic region is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES:
North America $360,844 $323,015 $279,613
Europe 143,683 136,813 99,215
Japan and Asia Pacific 56,750 55,208 43,516
Latin America 9,938 12,022 11,300
-------- -------- --------
Totals $571,215 $527,058 $433,644
======== ======== ========
OPERATIONS BEFORE INCOME TAXES:
North America $ 48,538 $ 37,777 $ 32,672
Europe 16,483 15,208 8,352
Japan and Asia Pacific 3,796 7,227 7,043
Latin America (1,064) 954 512
General corporate and other (18,586) (24,293) (23,281)
-------- -------- --------
Totals $ 49,167 $ 36,873 $ 25,298
======== ======== ========
<CAPTION>
August 31,
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
ASSETS:
North America $240,420 $192,032 $192,103
Europe 78,445 77,505 64,919
Japan and Asia Pacific 38,834 37,200 32,690
Latin America 11,317 11,967 11,053
General corporate 12,225 14,242 16,637
-------- -------- --------
Totals $381,241 $332,946 $317,402
======== ======== ========
</TABLE>
Operations before income taxes for each business and geographic segment do not
include general corporate expenses, amortization expense, interest expense or
currency exchange adjustments. Sales between business segments and geographic
areas are insignificant and are accounted for at prices intended to yield a
reasonable return to the selling affiliate. No single customer accounted for
more than 10% of total sales in 1996, 1995 or 1994. Export sales from domestic
operations were less than 10% in each of the periods presented.
Corporate assets, which are not allocated, represent principally cash and
prepaid taxes.
NOTE O - CONTINGENCIES AND LITIGATION
The Company had outstanding letters of credit totaling $830 and $1,300 at
August 31, 1996 and 1995, respectively. The letters of credit generally serve
as collateral for liabilities included in the Consolidated Balance Sheet.
The Company is involved in various legal proceedings which have arisen in the
normal course of its business. These legal proceedings typically include
product liability and patent claims. The Company has recorded reserves for loss
contingencies based on the specific circumstances of each case. Such reserves
are recorded when the occurrence of loss is probable and can be reasonably
estimated. In the opinion of management, the resolution of these contingencies
will not have a materially adverse effect on the Company's financial condition
or results of operations.
The Company has facilities at numerous geographic locations, which are subject
to a range of environmental laws and regulations. Environmental costs are
expensed or capitalized depending on their future economic benefit.
Expenditures that have no future economic value are expensed. Liabilities are
recorded when environmental remediation is probable, and the costs can be
reasonably estimated. Although the level of future expenditures for
32
<PAGE> 33
environmental remediation is impossible to determine with any degree of
certainty, it is management's opinion that such costs will not have a material
effect on the Company's financial position. Environmental remediation accruals
of $611 and $573 were included in the Consolidated Balance Sheet at August 31,
1996 and 1995, respectively.
NOTE P - SUBSEQUENT EVENT
On September 26, 1996, the Company, through its Wright Line subsidiary,
completed the acquisition of the net assets of Everest Electronic Equipment,
Inc. ("Everest"). Consideration for the transaction was approximately $52,000,
and was funded by proceeds from borrowings under existing credit facilities.
Everest, based in Anaheim, California, manufactures custom and standard
electronic enclosures used primarily by the computer, telecom, and datacom
industries.
33
<PAGE> 34
APPLIED POWER INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- - -------------------------------------------------------------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions Deductions
-------------------------- ---------------------
Accounts
Balance at Charged to Written Off Balance
Beginning Costs and Net Less at End
Description of Period Expenses Acquired Recoveries Other of Period
- - --------------------------- ------------ ------------ ------------ ------------ ------- -----------
Deducted from assets to
which they apply:
- - -----------------
<S> <C> <C> <C> <C> <C> <C>
Allowance for losses -
trade accounts receivable
August 31, 1996 $3,593 $1,203 $100 $ 717 - $4,179
====== ====== ==== ====== ======= ======
August 31, 1995 $3,131 $1,255 - $ 793 - $3,593
====== ====== ==== ====== ======= ======
August 31, 1994 $3,053 $1,379 - $1,301 - $3,131
====== ====== ==== ====== ======= ======
Allowance for losses -
inventory
August 31, 1996 $8,371 $7,529 $ 30 $3,885 - 12,045
====== ====== ==== ====== ======= ======
August 31, 1995 $6,268 $5,413 - $3,310 - $8,371
====== ====== ==== ====== ======= ======
August 31, 1994 $4,854 $3,998 - $2,584 - $6,268
====== ====== ==== ====== ======= ======
</TABLE>
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
Dated: November 15, 1996 By:/s/ Robert C. Arzbaecher
---------------------------
Robert C. Arzbaecher
Vice President and
Chief Financial Officer
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard G. Sim and Robert C. Arzbaecher, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments to this report, and
to file the same, with all and any other regulatory authority, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.*
SIGNATURE TITLE
--------- -----
/s/ Richard G. Sim Chairman of the Board, President and Chief Executive
- - ------------------ Officer; Director
Richard G. Sim
/s/ Robert C. Arzbaecher Vice President and Chief Financial Officer
- - ------------------------ (Principal Financial Officer)
Robert C. Arzbaecher
/s/ Richard D. Carroll Controller
- - ---------------------- (Principal Accounting Officer)
Richard D. Carroll
/s/ H. Richard Crowther Director
- - -----------------------
H. Richard Crowther
/s/ Jack L. Heckel Director
- - -----------------------
Jack L. Heckel
/s/ Richard M. Jones Director
- - -----------------------
Richard M. Jones
/s/ Richard A. Kashnow Director
- - -----------------------
Richard A. Kashnow
/s/ L. Dennis Kozlowski Director
- - -----------------------
L. Dennis Kozlowski
/s/ Raymond S. Troubh Director
- - -----------------------
Raymond S. Troubh
/s/ John J. McDonough Director
- - -----------------------
John J. McDonough
- - -------------
* Each of the above signatures is affixed as of November 15, 1996.
35
<PAGE> 36
APPLIED POWER INC.
(COMMISSION FILE NO. 1-11288)
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED AUGUST 31, 1996
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
- - ----------- ------------------------------------- ----------------------------------- -----------
<S> <C> <C> <C>
3.1 (a) Amended and Restated Exhibit 19.1(a) to the Registrant's
Articles of Incorporation (as Form 10-Q for quarter ended
adopted January 8, 1987) February 28, 1990
("2/28/90 10-Q")
(b) Articles of Amendment to Exhibit 19.1(b) to 2/28/90 10-Q
Amended and Restated Articles
of Incorporation, amending
Sections 3.1 and 3.2 of Article
III and Article IV (as adopted
January 13, 1990)
3.2 Amended and Restated By-Laws X
(as last amended by amendment to
Section 3.01 increasing the
number of directors to eight, adopted
August 8, 1996)
4+
4.1 Articles III, IV and V of Amended See Exhibit 3.1 above
and Restated Articles of
Incorporation, as amended
4.2 Agreement for Purchase and Sale, Exhibit 19.2(a)-(g) to the
dated August 29, 1990, between Registrant's Form 10-Q for
Minnesota Mining and quarter ended May 31, 1991
Manufacturing Company and
Applied Power Inc., and seven related
Leases, each dated April 29, 1991,
between Bernard Garland and
Sheldon Garland, d/b/a Garland
Enterprises, as Landlord, and
Applied Power Inc., as Tenant
</TABLE>
+ Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant agrees
to furnish to the Securities and Exchange Commission upon request a copy of any
unfiled instruments, or any unfiled exhibits or schedules to filed instruments,
defining the rights of security holders.
36
<PAGE> 37
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
- - ------- -------------------------------------- -------------------------------- --------
<S> <C> <C> <C>
4.3 (a) Multi-currency Credit Agreement, Exhibit 4.3 to the Registrant's
dated as of August 22, 1995 Form 10-K for fiscal year ended
between Applied Power Inc. and August 31, 1995
Applied Power Finance S.A., as ("1995 10-K")
borrowers, various financial
institutions, as lenders, Bank of
America National Trust and Savings
Association, as agent, and BA
Securities, Inc., as arranger
(b) First Amendment Agreement X
dated as of August 29, 1996
4.4 (a) Amended and Restated Receivables Exhibit 4.4 to 1995 10-K
Purchase Agreement, dated as of
August 30, 1995, between Applied
Power Inc., Barry Wright
Corporation, Wright Line Inc., GB
Electrical, Inc., and certain other
subsidiaries from time to time
parties thereto, as sellers, and PNC
Bank, National Association, and
other financial institutions from time
to time parties thereto, as
purchasers
(b) First Amendment to Amended X
and Restated Receivables Purchase
Agreement dated as of August 30,
1996
10.1* Employment Agreement dated Exhibit 10.1 to the Registrant's
May 9, 1994 between Applied form 10-K for fiscal year ended
Power Inc. and Richard G. Sim August 31, 1994
(superseding Employment Agreement
dated July 5, 1985, as amended)
</TABLE>
*Management contracts and executive compensation plans and arrangements
required to be filed as exhibits pursuant to Item 14(c) of Form 10-K.
37
<PAGE> 38
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
- - ------- ------------------------------------ ----------------------------------- --------
<S> <C> <C> <C>
10.2* (a) Applied Power Inc. 1985 Stock Exhibit 10.2(a) to the Registrant's
Option Plan adopted by Board of Form 10-K for fiscal year ended
Directors on August 1, 1985 and August 31, 1989
approved by shareholders on ("1989 10-K")
January 6, 1986, as amended
("1985 Plan")
(b) Amendment to 1985 Plan adopted Exhibit 10.2(b) to 1989 10-K
by Board of Directors on November
8, 1989 and approved by shareholders
on January 13, 1990
(c) Amendment to 1985 Plan adopted Exhibit 10.2(c) to the Registrant's
by Board of Directors on August 9, Form 10-K for fiscal year ended
1990 August 31, 1990
("1990 10-K")
10.3* (a) Applied Power Inc. 1987 Exhibit 10.8 to the Registrant's
Nonqualified Stock Option Plan Form 10-K for fiscal year ended
adopted by Board of Directors on August 31,1987
November 3, 1987 and approved by
shareholders on January 7, 1988
("1987 Plan")
(b) Amendment to 1987 Plan adopted See Exhibit 10.2(b)
by Board of Directors on November
8, 1989 and approved by shareholders
on January 13, 1990
10.4* (a) Applied Power Inc. 1990 Stock Exhibit A to the Registrant's Proxy
Option Plan adopted by Board of Statement dated December 5, 1990
Directors on August 9, 1990 and for 1991 Annual Meeting of
approved by shareholders on Shareholders
January 7, 1991 ("1990 Plan")
(b) Amendment to 1990 Plan adopted Exhibit 10.5(b) to the Registrant's
by Board of Directors on August 10, Form 10-K for fiscal year ended
1992 and approved by shareholders August 31, 1992
on January 7, 1993
</TABLE>
* Management contracts and executive compensation plans and arrangements
required to be filed as exhibits pursuant to Item 14(c) of Form 10-K.
38
<PAGE> 39
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
- - ------- ---------------------------------- --------------------------------- --------
<S> <C> <C> <C>
10.5* Description of Fiscal 1996 Exhibit 10.6 to 1995 10-K
Management Bonus Arrangements
10.6* Description of Fiscal 1997 X
Management Bonus Arrangements
10.7* (a) Applied Power Inc. 1989 Exhibit 10.7 to 1989 10-K
Outside Directors' Stock Option
Plan adopted by Board of Directors
on November 8, 1989 and
approved by shareholders on
January 13, 1990 ("1989 Plan")
(b) Amendment to 1989 Plan Exhibit 10.7(b) to 1990 10-K
adopted by Board of Directors on
November 9, 1990 and approved
by shareholders on January 7, 1991
(c) Amendment to 1989 Plan X
adopted by Board of Directors on
October 31, 1996
10.8* Outside Directors' Deferred Exhibit 10.8 to 1995 10-K
Compensation Plan adopted by Board
of Directors on May 4, 1995
10.9 Asset Purchase Agreement Exhibit 2.1 to the Registrant's
between Applied Power Inc. and Form 8-K dated October 11, 1996
Wright Line Inc., on the one hand
and Everest Electronic Equipment,
Inc., Wallace H. Twedt, Terry D.
Wells and Robert L. Wells, on the
other hand dated August 27, 1996
10.10* 1996 Stock Plan adopted by Board Annex A to the Registrant's Proxy
of Directors on August 8, 1996 and Statement dated November 19, 1996
proposed for shareholder approval for 1997 Annual Meeting of
on January 8, 1997 Shareholders
</TABLE>
* Management contracts and executive compensation plans and arrangements
required to be filed as exhibits pursuant to Item 14(c) of Form 10-K.
39
<PAGE> 40
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
- - ------- -------------------------------- --------------------------------- --------
<S> <C> <C> <C>
10.11* Deferred Compensation Plan X
adopted by Board of Directors on
October 31, 1996 and proposed
for shareholder approval on
January 8, 1997
11 Statement regarding Computation X
of Earnings Per Share
21 Subsidiaries of the Registrant X
23 Consent of Deloitte & Touche LLP X
24 Power of Attorney See Signature Page of this report
27 Financial Data Schedule X
</TABLE>
* Management contracts and executive compensation plans and arrangements
required to be filed as exhibits pursuant to Item 14(c) of Form 10-K.
40
<PAGE> 1
AMENDED AND RESTATED BYLAWS
of
APPLIED POWER INC.
ADOPTED
NOVEMBER 7, 1991
and
AS LAST AMENDED ON AUGUST 8, 1996
<PAGE> 2
ARTICLE I. OFFICES; RECORDS; FISCAL YEAR
1.01. Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. Registered Office and Registered Agent. The registered office
of the corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical with the
principal office in the State of Wisconsin. The street address of the
registered office may be changed from time to time by any officer or by the
registered agent. The business office of the registered agent of the
corporation shall be identical to the street office of such registered office.
1.03. Corporate Records. The following documents and records shall
be kept at the corporation's principal office or at such other reasonable
location as may be specified by the corporation:
(a) Minutes of shareholders' and Board of Directors' meetings,
any written notices thereof and any written waivers of such notices.
(b) Records of actions taken by the shareholders or Board of
Directors without a meeting.
(c) Records of actions taken by committees of the Board of
Directors in place of the Board of Directors and on behalf of the Corporation.
(d) Accounting records.
(e) A record of its shareholders.
(f) Current Bylaws.
1.04. Fiscal Year. The fiscal year of the corporation shall commence
on the first day of September and end on the last day of August.
<PAGE> 3
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders shall
be held on the second Tuesday in January, or at such other time and date as may
be fixed by or under the authority of the Board of Directors, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting is a legal holiday
in the State of Wisconsin, such meeting shall be held on the next succeeding
business day. If the election of directors is not held on the day designated
herein, or fixed as herein provided, for any annual meeting of the shareholders,
or at any adjournment thereof, the Board of Directors shall cause the election
to be held at a meeting of the shareholders as soon thereafter as may be
convenient.
2.02. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the Chairperson of the Board, if there is one, the President or the Board of
Directors. If and as required by the Wisconsin Business Corporation Law, a
special meeting shall be called upon written demand describing one or more
purposes for which it is to be held by holders of shares with at least 10% of
the votes entitled to be cast on any issue proposed to be considered at the
meeting. The purpose or purposes of any special meeting shall be described in
the notice required by Section 2.04 of these Bylaws.
2.03. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Wisconsin, as the place of meeting
for any annual meeting or any special meeting. If no designation is made, the
place of meeting shall be the principal office of the corporation but any
meeting may be adjourned to reconvene at any place designated by vote of a
majority of the shares represented thereat.
2.04. Notices to Shareholders.
(a) Required Notice. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10) days
nor more than sixty (60) days before the date of the meeting (unless a different
time is provided by law or the Articles of Incorporation), by or at the
direction of the Chairperson of the Board, if there is one, the President or the
Secretary, to each shareholder entitled to vote at such meeting or, for the
fundamental transactions described in Sections 2.04(e)(1) to (4) below (for
which the Wisconsin Business Corporation Law requires that notice be given to
shareholders not entitled to vote), to all shareholders. If mailed, such notice
is effective when deposited in the United States mail, and shall be addressed
to
-2-
<PAGE> 4
the shareholder's address shown in the current record of shareholders of the
corporation, with postage thereon prepaid. At least twenty (20) days' notice
shall be provided if the purpose, or one of the purposes, of the meeting is to
consider a plan of merger or share exchange for which shareholder approval is
required by law, or the sale, lease, exchange or other disposition of all or
substantially all of the corporation's property, with or without good will,
otherwise than in the usual and regular course of business.
(b) Adjourned Meeting. If any shareholder meeting is adjourned
to a different date, time or place, notice need not be given of the new date,
time or place, if the new date, time or place is announced at the meeting before
adjournment; provided, however, that if a new record date for the adjourned
meeting is or must be fixed, then notice must be given pursuant to the
requirements of Section 2.04(a), to those persons who are shareholders as of the
new record date.
(c) Waiver of Notice. A shareholder may waive notice in
accordance with Article VI of these Bylaws.
(d) Contents of Notice. The notice of each special shareholder
meeting shall include a description of the purpose or purposes for which the
meeting is called. Except as otherwise provided in Section 2.04(e), in the
Articles of Incorporation, or in the Wisconsin Business Corporation Law, the
notice of an annual shareholder meeting need not include a description of the
purpose or purposes for which the meeting is called.
(e) Fundamental Transactions. If a purpose of any shareholder
meeting is to consider: (1) a proposed amendment to the Articles of
Incorporation (including any restated articles); (2) a plan of merger or share
exchange for which shareholder approval is required by law; (3) the sale, lease,
exchange or other disposition of all or substantially all of the corporation's
property, with or without good will, otherwise than in the usual and regular
course of business; (4) the dissolution of the corporation; or (5) the removal
of a director, the notice must so state and in cases (1), (2) and (3) above must
be accompanied by, respectively, a copy or summary of the: (1) proposed
articles of amendment or a copy of the restated articles that identifies any
amendment or other change; (2) proposed plan of merger or share exchange; or (3)
proposed transaction for disposition of all or substantially all of the
corporation's property. If the proposed corporate action creates dissenters'
rights, the notice must state that shareholders and beneficial shareholders are
or may be entitled to assert dissenters' rights, and must be accompanied by a
copy of Sections 180.1301 to 180.1331 of the Wisconsin Business Corporation Law.
-3-
<PAGE> 5
2.05. Fixing of Record Date. The Board of Directors may fix in
advance a date as the record date for one or more voting classes for any
determination of shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to vote, or to take any other action, such date in any
case to be not more than seventy (70) days prior to the meeting or action
requiring such determination of shareholders, and may fix the record date for
determining shareholders entitled to a share dividend or distribution. If no
record date is fixed for the determination of shareholders entitled to demand a
shareholder meeting, to notice of or to vote at a meeting of shareholders, or to
consent to action without a meeting, (a) the close of business on the day before
the corporation receives the first written demand for a shareholder meeting, (b)
the close of business on the day before the first notice of the meeting is
mailed or otherwise delivered to shareholders, or (c) the close of business on
the day before the first written consent to shareholder action without a meeting
is received by the corporation, as the case may be, shall be the record date for
the determination of shareholders. If no record date is fixed for the
determination of shareholders entitled to receive a share dividend or
distribution (other than a distribution involving a purchase, redemption or
other acquisition of the corporation's shares), the close of business on the day
on which the resolution of the Board of Directors is adopted declaring the
dividend or distribution shall be the record date. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall be applied to any adjournment
thereof unless the Board of Directors fixes a new record date and except as
otherwise required by law. A new record date must be set if a meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.
2.06. Shareholder List. The officer or agent having charge of the
stock transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to notice of
such meeting, arranged by class or series of shares and showing the address of
and the number of shares held by each shareholder. The shareholder list shall
be available at the meeting and may be inspected by any shareholder or his or
her agent or attorney at any time during the meeting or any adjournment. Any
shareholder or his or her agent or attorney may inspect the shareholder list
beginning two (2) business days after the notice of the meeting is given and
continuing to the date of the meeting, at the corporation's principal office or
at a place identified in the meeting notice in the city where the meeting will
be held and, subject to Section 180.1602(2)(b) 3 to 5 of the Wisconsin Business
Corporation Law, may copy the list, during regular business hours and at his or
her expense, during the period that it is available for inspection hereunder.
The original stock transfer books and nominee certificates on file with the
corporation (if any) shall be prima facie evidence as to who are the
shareholders entitled to inspect the shareholder list or to vote at any meeting
of share-
-4-
<PAGE> 6
holders. Refusal or failure to comply with the requirements of this section
shall not affect the validity of any action taken at such meeting.
2.07. Quorum and Voting Requirements. Except as otherwise provided
in the Articles of Incorporation or in the Wisconsin Business Corporation Law, a
majority of the votes entitled to be cast by shares entitled to vote as a
separate voting class on a matter, represented in person or by proxy, shall
constitute a quorum of that voting class for action on that matter at a meeting
of shareholders. If a quorum exists, action on a matter, other than the
election of directors, by a voting class is approved if the votes cast within
the voting class favoring the action exceed the votes cast opposing the action
unless a greater number of affirmative votes is required by the Wisconsin
Business Corporation Law or the Articles of Incorporation. If the Articles of
Incorporation or the Wisconsin Business Corporation Law provide for voting by
two (2) or more voting classes on a matter, action on that matter is taken only
when voted upon by each of those voting classes counted separately. Action may
be taken by one (1) voting class on a matter even though no action is taken by
another voting class entitled to vote on the matter. Although less than a
quorum exists at a meeting, a majority of the shares represented at the meeting
may adjourn the meeting from time to time and, unless a new record date is or
must be set for the meeting, the corporation is not required to give notice of
the new date, time or place of the meeting if the new date, time or place is
announced at the meeting before adjournment. Once a share is represented for
any purpose at a meeting, other than for the purpose of objecting to holding the
meeting or transacting business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or must be
set for that meeting. The term "voting class" as used in these Bylaws shall
have the same meaning as the term "voting group" under the Wisconsin Business
Corporation Law.
2.08. Conduct of Meetings. The Chairperson of the Board, or if there
is none, or in his or her absence, the President, and in the President's
absence, a Vice President in the order provided under Section 4.06 of these
Bylaws, and in their absence, any person chosen by the shareholders present
shall call the meeting of the shareholders to order and shall act as chairperson
of the meeting, and the Secretary shall act as secretary of all meetings of the
shareholders, but, in the absence of the Secretary, the presiding officer may
appoint any other person to act as secretary of the meeting.
2.09. Proxies. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his or her duly authorized attorney-in-fact. All proxy
appointment forms shall be filed with the Secretary or other officer or agent of
the cor-
-5-
<PAGE> 7
poration authorized to tabulate votes before or at the time of the meeting.
Unless the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest, a proxy appointment may be revoked at
any time. The presence of a shareholder who has filed a proxy appointment shall
not of itself constitute a revocation. No proxy appointment shall be valid
after eleven months from the date of its execution, unless otherwise expressly
provided in the appointment form. The Board of Directors shall have the power
and authority to make rules that are not inconsistent with the Wisconsin
Business Corporation Law as to the validity and sufficiency of proxy
appointments.
2.10. Voting of Shares. Each outstanding share shall be entitled to
one (1) vote on each matter submitted to a vote at a meeting of shareholders,
except to the extent that the voting rights of the shares are enlarged, limited
or denied by the Articles of Incorporation or the Wisconsin Business Corporation
Law. Shares owned directly or indirectly by another corporation are not
entitled to vote if this corporation owns, directly or indirectly, sufficient
shares to elect a majority of the directors of such other corporation. However,
the prior sentence shall not limit the power of the corporation to vote any
shares, including its own shares, held by it in a fiduciary capacity.
Redeemable shares are not entitled to vote after notice of redemption is mailed
to the holders and a sum sufficient to redeem the shares has been deposited with
a bank, trust company, or other financial institution under an irrevocable
obligation to pay the holders the redemption price on surrender of the shares.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. All corporate powers shall be
exercised by or under the authority of, and the business and affairs of the
corporation shall be managed under the direction of, its Board of Directors.
The number of directors of the corporation shall be eight (8). The number of
directors may be increased or decreased from time to time by amendment to this
Section adopted by the shareholders or the Board of Directors, but no decrease
shall have the effect of shortening the term of an incumbent director.
3.02. Election, Removal, Tenure and Qualifications. Unless action is
taken without a meeting under Section 7.01 of these Bylaws, directors shall be
elected by a plurality of the votes cast by the shares of the voting class
entitled to vote for such directors in the election at a shareholders meeting at
which a quorum is present; i.e., the individuals eligible for election by a
voting class with the largest number of votes in favor of their election are
elected as directors up to the maximum number of directors to be chosen in the
election by such voting class. Votes against a candidate are not given legal
effect and are not
-6-
<PAGE> 8
counted as votes cast in an election of directors. In the event two (2) or more
persons tie for the last vacancy to be filled, a run-off vote shall be taken
from among the candidates receiving the tie vote. Each director shall hold
office until the next annual meeting of shareholders and until the director's
successor shall have been elected or there is a decrease in the number of
directors, or until his or her prior death, resignation or removal. Any
director may be removed from office by the affirmative vote of a two-thirds
majority of the shares outstanding of the class or classes of stock which
elected such director at a special meeting of shareholders called for that
purpose. Although the foregoing bylaw establishes a greater shareholder voting
requirement than is generally provided by the Wisconsin Business Corporation
Law, it has not been amended or repealed, and it is therefore effective pursuant
to Section 180.1706(4) or successor statutes. The removal may be made with or
without cause unless the Articles of Incorporation or these Bylaws provide that
directors may be removed only for cause. If a director is elected by a voting
class of shareholders, only the shareholders of that voting class may
participate in the vote to remove that director. A director may resign at any
time by delivering a written resignation to the Board of Directors, to the
Chairperson of the Board (if there is one), or to the corporation through the
Secretary or otherwise. Directors need not be residents of the State of
Wisconsin or shareholders of the corporation. Any person who is seventy (70)
years of age or older on the date of a meeting of shareholders shall not be
eligible for election or re-election as a director at such meeting.
3.03. Regular Meetings. A regular meeting of the Board of Directors
shall be held, without other notice than this Bylaw, immediately after the
annual meeting of shareholders, and each adjourned session thereof. The place
of such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders or designated in a notice sent to the directors.
The Board of Directors and any committee may provide, by resolution, the time
and place, either within or without the State of Wisconsin, for the holding of
additional regular meetings without other notice than such resolution.
3.04. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of either the Chairperson of the Board, if
there is one, or the President. Special meetings of any committee may be called
by or at the request of the foregoing persons or the chairperson of the
committee. The persons calling any special meeting of the Board of Directors or
committee may fix any place, either within or without the State of Wisconsin, as
the place for holding any special meeting called by them, and if no other place
is fixed the place of meeting shall be the principal office of the corporation
in the State of Wisconsin.
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3.05 Meetings By Telephone or Other Communication Technology. (a)
Any or all directors may participate in a regular or special meeting or in a
committee meeting of the Board of Directors by, or conduct the meeting through
the use of, or any other means of communication by which either: (i) all
participating directors may simultaneously hear each other during the meeting or
(ii) all communication during the meeting is immediately transmitted to each
participating director, and each participating director is able to immediately
send messages to all other participating directors.
(b) If a meeting will be conducted through the use of any means
described in Section 3.05(a), all participating directors shall be informed that
a meeting is taking place at which official business may be transacted. A
director participating in a meeting by any means described in Section 3.05(a) is
deemed to be present in person at the meeting.
3.06. Notice of Meetings. Except as otherwise provided in the
Articles of Incorporation or the Wisconsin Business Corporation Law, notice of
the date, time and place of any special meeting of the Board of Directors and of
any special meeting of a committee of the Board shall be given orally or in
writing to each director or committee member at least 48 hours prior to the
meeting, except that notice by mail or private carrier shall be given at least
five (5) days prior to the meeting. The notice need not describe the purpose of
the meeting. Notice may be communicated in person, by telephone, telegraph or
facsimile, or by mail or private carrier. Oral notice is effective when
communicated. Written notice is effective as follows: If delivered in person,
when received; if given by mail, when deposited, postage prepaid, in the United
States mail addressed to the director at his or her business or home address (or
such other address as the director may have designated in writing filed with the
Secretary); if given by private carrier, when delivered to the private carrier,
with fees prepaid, addressed to the director at his or her business or home
address (or such other address as the director may have designated in writing
filed with the Secretary); if given by facsimile, at the time transmitted to a
facsimile number at any address designated above; and if given by telegraph,
when delivered to the telegraph company.
3.07. Quorum. Except as otherwise provided by the Wisconsin Business
Corporation Law, a majority of the number of directors as provided in Section
3.01 shall constitute a quorum of the Board of Directors. Except as otherwise
provided by the Wisconsin Business Corporation Law, a majority of the number of
directors appointed to serve on a committee shall constitute a quorum of the
committee. Although less than a quorum of the Board of Directors or a committee
is present at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice.
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3.08. Manner of Acting. Except as otherwise provided by the
Wisconsin Business Corporation Law or the Articles of Incorporation, the
affirmative vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors or any committee
thereof.
3.09. Conduct of Meetings. The Chairperson of the Board, or if there
is none, or in his or her absence, the President, and in the President's
absence, a Vice President in the order provided under Section 4.06 of these
Bylaws, and in their absence, any director chosen by the directors present,
shall call meetings of the Board of Directors to order and shall chair the
meeting. The Secretary of the corporation shall act as secretary of all
meetings of the Board of Directors, but in the absence of the Secretary, the
presiding officer may appoint any assistant secretary or any director or other
person present to act as secretary of the meeting.
3.10. Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled by the shareholders or the Board of Directors. If the directors
remaining in office constitute fewer than a quorum of the Board, the directors
may fill a vacancy by the affirmative vote of a majority of all directors
remaining in office. If the vacant office was held by a director elected by a
voting class of shareholders, only the holders of shares of that voting class
may vote to fill the vacancy if it is filled by the shareholders, and only the
remaining directors elected by that voting class may vote to fill the vacancy if
it is filled by the directors. A vacancy that will occur at a specific later
date (because of a resignation effective at a later date or otherwise) may be
filled before the vacancy occurs, but the new director may not take office until
the vacancy occurs.
3.11. Compensation. The Board of Directors, irrespective of any
personal interest of any of its members, may fix the compensation of directors,
or may delegate the authority to an appropriate committee.
3.12. Presumption of Assent. A director who is present and is
announced as present at a meeting of the Board of Directors or a committee
thereof at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (i) the director objects at the
beginning of the meeting or promptly upon his or her arrival to holding the
meeting or transacting business at the meeting, or (ii) the director's dissent
or abstention from the action taken is entered in the minutes of the meeting, or
(iii) the director delivers his or her written dissent or abstention to the
presiding officer of the meeting before the adjournment thereof or to the
corporation immediately after the adjournment of the meeting. Such right to
dissent or abstain shall not apply to a director who voted in favor of such
action.
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3.13. Committees. Unless the Articles of Incorporation otherwise
provide, the Board of Directors, by resolution adopted by the affirmative vote
of a majority of all the directors then in office, may create one (1) or more
committees. Each committee shall consist of three (3) or more directors as
members. An Executive Committee so appointed shall have and may exercise, when
the Board of Directors is not in session, the powers of the Board of Directors
in the management of the business and affairs of the corporation, subject to the
limitations set forth in this Section 3.13 and any additional limitations
provided by resolution adopted by the affirmative vote of the directors then in
office. Committees other than an Executive Committee, to the extent provided in
the resolution adopted by the Board of Directors creating such other committees,
and as thereafter supplemented or amended by further resolution adopted by a
like vote, may exercise the authority of the Board of Directors, except that
neither the Executive Committee nor any other committee may: (a) authorize
distributions; (b) approve or propose to shareholders action that the Wisconsin
Business Corporation Law requires be approved by shareholders; (c) fill
vacancies on the Board of Directors or any of its committees, except that the
Board of Directors may provide by resolution that any vacancies on a committee
shall be filled by the affirmative vote of a majority of the remaining committee
members; (d) amend the Articles of Incorporation; (e) adopt, amend or repeal
Bylaws; (f) approve a plan of merger not requiring shareholder approval; (g)
authorize or approve reacquisition of shares, except according to a formula or
method prescribed by the Board of Directors or (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the designation
and relative rights, preferences and limitations of a class or series of shares,
except within limits prescribed by the Board of Directors. The Board of
Directors may elect one or more of its members as alternate members of any such
committee who may take the place of any absent member or members at any meeting
of such committee, upon request by the Chairperson of the Board, if there is
one, the President or upon request by the chairperson of such meeting. Each such
committee shall fix its own rules (consistent with the Wisconsin Business
Corporation Law, the Articles of Incorporation and these Bylaws) governing the
conduct of its activities and shall make such reports to the Board of Directors
of its activities as the Board of Directors may request. Unless otherwise
provided by the Board of Directors in creating a committee, a committee may
employ counsel, accountants and other consultants to assist it in the exercise
of authority. The creation of a committee, delegation of authority to a
committee or action by a committee does not relieve the Board of Directors or
any of its members of any responsibility imposed on the Board of Directors or
its members by law.
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ARTICLE IV. OFFICERS
4.01. Appointment. The principal officers shall include a President,
one or more Vice Presidents (the number and designations to be determined by the
Board of Directors), a Secretary, a Treasurer and such other officers if any, as
may be deemed necessary by the Board of Directors, each of whom shall be
appointed by the Board of Directors. Any two or more offices may be held by the
same person.
4.02. Resignation and Removal. An officer shall hold office until he
or she resigns, dies, is removed hereunder, or a different person is appointed
to the office. An officer may resign at any time by delivering an appropriate
written notice to the corporation. The resignation is effective when the notice
is delivered, unless the notice specifies a later effective date and the
corporation accepts the later effective date. Any officer may be removed by the
Board of Directors with or without cause and notwithstanding the contract
rights, if any, of the person removed. Except as provided in the preceding
sentence, the resignation or removal is subject to any remedies provided by any
contract between the officer and the corporation or otherwise provided by law.
Appointment shall not of itself create contract rights.
4.03. Vacancies. A vacancy in any office because of death,
resignation, removal or otherwise, shall be filled by the Board of Directors.
If a resignation is effective at a later date, the Board of Directors may fill
the vacancy before the effective date if the Board of Directors provides that
the successor may not take office until the effective date.
4.04. Chairperson of the Board. The Board of Directors may at its
discretion appoint a Chairperson of the Board. The Chairperson of the Board, if
there is one, shall preside at all meetings of the shareholders and Board of
Directors, and shall carry out such other duties as directed by the Board of
Directors.
4.05. President. The President shall be the principal executive
officer and, subject to the control and direction of the Board of Directors,
shall in general supervise and control all of the business and affairs of the
corporation. He or she shall, in the absence of the Chairperson of the Board
(if one is appointed), preside at all meetings of the shareholders and of the
Board of Directors. The President shall have authority, subject to such rules
as may be prescribed by the Board of Directors, to appoint such agents and
employees of the corporation as he or she shall deem necessary, to prescribe
their powers, duties and compensation, and to delegate authority to them. Such
agents and employees shall hold office at the discretion of the President. The
President shall have authority to sign, execute and acknowledge, on behalf of
the corporation, all deeds, mortgages,
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bonds, stock certificates, contracts, leases, reports and all other documents or
instruments necessary or proper to be executed in the course of the
corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or directed by
the Board of Directors, the President may authorize any Vice President or other
officer or agent of the corporation to sign, execute and acknowledge such
documents or instruments in his or her place and stead. In general he or she
shall perform all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from time to time.
4.06. Vice Presidents. In the absence of the President, or in the
event of the President's death, inability or refusal to act, or in the event for
any reason it shall be impracticable for the President to act personally, a Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their appointment) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may
sign, with the Secretary or Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him or her by the President or the
Board of Directors. The execution of any instrument of the corporation by any
Vice President shall be conclusive evidence, as to third parties, of the Vice
President's authority to act in the stead of the President.
4.07. Secretary. The Secretary shall: (a) keep (or cause to be
kept) regular minutes of all meetings of the shareholders, the Board of
Directors and any committees of the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the corporation, if any, and see that
the seal of the corporation, if any, is affixed to all documents which are
authorized to be executed on behalf of the corporation under its seal; (d) keep
or arrange for the keeping of a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) keep or arrange for the keeping of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and exercise such
authority as from time to time may be delegated or assigned to him or her by the
President or by the Board of Directors.
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4.08. Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the corporation; (b)
receive and give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation in
such banks, trust companies or other depositaries as shall be selected by the
corporation; and (c) in general perform all of the duties incident to the office
of Treasurer and have such other duties and exercise such other authority as
from time to time may be delegated or assigned to him or her by the President or
by the Board of Directors.
4.09. Assistants and Acting Officers. The Board of Directors or the
President shall have the power to appoint any person to act as assistant to any
officer, or as agent for the corporation in the officer's stead, or to perform
the duties of such officer whenever for any reason it is impracticable for such
officer to act personally, and such assistant or acting officer or other agent
so appointed by the Board of Directors or President shall have the power to
perform all the duties of the office to which that person is so appointed to be
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors or the
President.
4.10. Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that such officer is also a director of the corporation.
ARTICLE V. CERTIFICATES FOR SHARES AND THEIR TRANSFER
5.01. Certificates for Shares. All shares of this corporation shall
be represented by certificates. Certificates representing shares of the
corporation shall be in such form, consistent with law, as shall be determined
by the Board of Directors. At a minimum, a share certificate shall state on its
face the name of the corporation and that it is organized under the laws of the
State of Wisconsin, the name of the person to whom issued, and the number and
class of shares and the designation of the series, if any, that the certificate
represents. If the corporation is authorized to issue different classes of
shares or different series within a class, the front or back of the certificate
must contain either (a) a summary of the designations, relative rights,
preferences and limitations applicable to each class, and the variations in the
rights, preferences and limitations determined for each series and the authority
of the Board of Directors to determine variations for future series, or (b) a
conspicuous statement that the corporation will furnish the shareholder the
information described in clause (a) on request, in writing and without charge.
Such certificates shall be
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signed, either manually or in facsimile, by the President or a Vice President
and by the Secretary or an Assistant Secretary. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and address
of the person to whom the shares represented thereby are issued, with the number
of shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer shall
be canceled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except as
provided in Section 5.05.
5.02. Signature by Former Officers. If an officer or assistant
officer, who has signed or whose facsimile signature has been placed upon any
certificate for shares, has ceased to be such officer or assistant officer
before such certificate is issued, the certificate may be issued by the
corporation with the same effect as if that person were still an officer or
assistant officer at the date of its issue.
5.03. Transfer of Shares. Prior to due presentment of a certificate
for shares for registration of transfer, and unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the shareholder, the corporation may
treat the registered owner of such shares as the person exclusively entitled to
vote, to receive notifications and otherwise to have and exercise all the rights
and power of an owner. The corporation may require reasonable assurance that
all transfer endorsements are genuine and effective and in compliance with all
regulations prescribed by or under the authority of the Board of Directors.
5.04. Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction upon the transfer of such shares imposed by the corporation or
imposed by any agreement of which the corporation has written notice.
5.05. Lost, Destroyed or Stolen Certificates. Where the owner claims
that his or her certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the corporation has notice that such shares have been acquired
by a bona fide purchaser, and (b) if required by the corporation, files with the
corporation a sufficient indemnity bond, and (c) satisfies such other reasonable
requirements as may be prescribed by or under the authority of the Board of
Directors.
5.06. Consideration for Shares. The shares of the corporation may be
issued for such consideration as shall be fixed from time to time and determined
to be adequate by the Board of Directors, provided that any shares having a par
value shall not be issued for a consideration less than the par value thereof.
The consideration may consist of any tangible or intan-
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gible property or benefit to the corporation, including cash, promissory notes,
services performed, contracts for services to be performed, or other securities
of the corporation. When the corporation receives the consideration for which
the Board of Directors authorized the issuance of shares, such shares shall be
deemed to be fully paid and nonassessable by the corporation.
5.07. Stock Regulations. The Board of Directors shall have the power
and authority to make all such rules and regulations not inconsistent with the
statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the
corporation, including the appointment or designation of one or more stock
transfer agents and one or more registrars.
ARTICLE VI. WAIVER OF NOTICE
6.01. Shareholder Written Waiver. A shareholder may waive any notice
required by the Wisconsin Business Corporation Law, the Articles of
Incorporation or these Bylaws before or after the date and time stated in the
notice. The waiver shall be in writing and signed by the shareholder entitled
to the notice, shall contain the same information that would have been required
in the notice under the Wisconsin Business Corporation Law except that the time
and place of meeting need not be stated, and shall be delivered to the
corporation for inclusion in the corporate records.
6.02. Shareholder Waiver by Attendance. A shareholder's attendance
at a meeting, in person or by proxy, waives objection to both of the following:
(a) Lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting or promptly upon arrival objects to
holding the meeting or transacting business at the meeting.
(b) Consideration of a particular matter at the meeting that is
not within the purpose described in the meeting notice, unless the shareholder
objects to considering the matter when it is presented.
6.03. Director Written Waiver. A director may waive any notice
required by the Wisconsin Business Corporation Law, the Articles of
Incorporation or the Bylaws before or after the date and time stated in the
notice. The waiver shall be in writing, signed by the director entitled to the
notice and retained by the corporation.
6.04. Director Waiver by Attendance. A director's attendance at or
participation in a meeting of the Board of Directors or any committee thereof
waives any required notice to him
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or her of the meeting unless the director at the beginning of the meeting or
promptly upon his or her arrival objects to holding the meeting or transacting
business at the meeting and does not thereafter vote for or assent to action
taken at the meeting.
ARTICLE VII. ACTION WITHOUT MEETINGS
7.01. Shareholder Action Without Meeting. Action required or
permitted by the Wisconsin Business Corporation Law to be taken at a
shareholders' meeting may be taken without a meeting by all shareholders
entitled to vote on the action. The action must be evidenced by one or more
written consents describing the action taken, signed by the shareholders
consenting thereto and delivered to the corporation for inclusion in its
corporate records. Action taken hereunder is effective when the consent is
delivered to the corporation, unless the consent specifies a different effective
date. A consent hereunder has the effect of a meeting vote and may be described
as such in any document.
7.02. Director Action Without Meeting. Unless the Articles of
Incorporation provide otherwise, action required or permitted by the Wisconsin
Business Corporation Law to be taken at a Board of Directors meeting or
committee meeting may be taken without a meeting if the action is taken by all
members of the Board or committee. The action shall be evidenced by one or more
written consents describing the action taken, signed by each director and
retained by the corporation. Action taken hereunder is effective when the last
director signs the consent, unless the consent specifies a different effective
date. A consent signed hereunder has the effect of a unanimous vote taken at a
meeting at which all directors or committee members were present, and may be
described as such in any document.
ARTICLE VIII. INDEMNIFICATION
8.01. Indemnification for Successful Defense. Within twenty (20) days
after receipt of a written request pursuant to Section 8.03, the corporation
shall indemnify a director or officer, to the extent he or she has been
successful on the merits or otherwise in the defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the director or officer was a
party because he or she is a director or officer of the corporation.
8.02. Other Indemnification.
(a) In cases not included under Section 8.01, the corporation
shall indemnify a director or officer against all
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liabilities and expenses incurred by the director or officer in a proceeding to
which the director or officer was a party because he or she is a director or
officer of the corporation, unless liability was incurred because the director
or officer breached or failed to perform a duty he or she owes to the
corporation and the breach or failure to perform constitutes any of the
following:
(1) A willful failure to deal fairly with the corporation or its
shareholders in connection with a matter in which the director or officer has a
material conflict of interest.
(2) A violation of criminal law, unless the director or officer had
reasonable cause to believe that his or her conduct was lawful or no reasonable
cause to believe that his or her conduct was unlawful.
(3) A transaction from which the director or officer derived an
improper personal profit.
(4) Willful misconduct.
(b) Determination of whether indemnification is required under
this Section shall be made pursuant to Section 8.05.
(c) The termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an equivalent plea,
does not, by itself, create a presumption that indemnification of the director
or officer is not required under this Section.
8.03. Written Request. A director or officer who seeks
indemnification under Sections 8.01 or 8.02 shall make a written request to the
corporation.
8.04. Nonduplication. The corporation shall not indemnify a director
or officer under Sections 8.01 or 8.02 if the director or officer has previously
received indemnification or allowance of expenses from any person, including the
corporation, in connection with the same proceeding. However, the director or
officer has no duty to look to any other person for indemnification.
8.05. Determination of Right to Indemnification.
(a) Unless otherwise provided by the Articles of Incorporation or
by written agreement between the director or officer and the corporation, the
director or officer seeking indemnification under Section 8.02 shall select one
of the following means for determining his or her right to indemnification:
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(1) By a majority vote of a quorum of the Board of Directors
consisting of directors not at the time parties to the same or related
proceedings. If a quorum of disinterested directors cannot be obtained, by
majority vote of a committee duly appointed by the Board of Directors and
consisting solely of two (2) or more directors who are not at the time parties
to the same or related proceedings. Directors who are parties to the same or
related proceedings may participate in the designation of members of the
committee.
(2) By independent legal counsel selected by a quorum of the Board of
Directors or its committee in the manner prescribed in sub. (1) or, if unable to
obtain such a quorum or committee, by a majority vote of the full Board of
Directors, including directors who are parties to the same or related
proceedings.
(3) By a panel of three (3) arbitrators consisting of one arbitrator
selected by those directors entitled under sub. (2) to select independent legal
counsel, one arbitrator selected by the director or officer seeking
indemnification and one arbitrator selected by the two (2) arbitrators
previously selected.
(4) By an affirmative vote of shares represented at a meeting of
shareholders at which a quorum of the voting group entitled to vote thereon is
present. Shares owned by, or voted under the control of, persons who are at the
time parties to the same or related proceedings, whether as plaintiffs or
defendants or in any other capacity, may not be voted in making the
determination.
(5) By a court under Section 8.08.
(6) By any other method provided for in any additional right to
indemnification permitted under Section 8.07.
(b) In any determination under (a), the burden of proof is on the
corporation to prove by clear and convincing evidence that indemnification under
Section 8.02 should not be allowed.
(c) A written determination as to a director's or officer's
indemnification under Section 8.02 shall be submitted to both the corporation
and the director or officer within 60 days of the selection made under (a).
(d) If it is determined that indemnification is required under
Section 8.02, the corporation shall pay all liabilities and expenses not
prohibited by Section 8.04 within ten (10) days after receipt of the written
determination under (c). The corporation shall also pay all expenses incurred
by the director or officer in the determination process under (a).
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8.06. Advance of Expenses. Within ten (10) days after receipt of a
written request by a director or officer who is a party to a proceeding, the
corporation shall pay or reimburse his or her reasonable expenses as incurred if
the director or officer provides the corporation with all of the following:
(a) A written affirmation of his or her good faith belief that he
or she has not breached or failed to perform his or her duties to the
corporation.
(b) A written undertaking, executed personally or on his or her
behalf, to repay the allowance to the extent that it is ultimately determined
under Section 8.05 that indemnification under Section 8.02 is not required and
that indemnification is not ordered by a court under Section 8.08(b)(2). The
undertaking under this Section 8.06(b) shall be an unlimited general obligation
of the director or officer and may be accepted without reference to his or her
ability to repay the allowance. The undertaking may be secured or unsecured.
8.07. Nonexclusivity.
(a) Except as provided in Section 8.07(b), Sections 8.01, 8.02
and 8.06 do not preclude any additional right to indemnification or allowance of
expenses that a director or officer may have under any of the following:
(1) The Articles of Incorporation.
(2) A written agreement between the director or officer and the
corporation.
(3) A resolution of the Board of Directors.
(4) A resolution, after notice, adopted by a majority vote of all of
the corporation's voting shares then issued and outstanding.
(b) Regardless of the existence of an additional right under
Section 8.07(a), the corporation shall not indemnify a director or officer, or
permit a director or officer to retain any allowance of expenses unless it is
determined by or on behalf of the corporation that the director or officer did
not breach or fail to perform a duty he or she owes to the corporation which
constitutes conduct under Section 8.02(a)(1), (2), (3) or (4). A director or
officer who is a party to the same or related proceeding for which
indemnification or an allowance of expenses is sought may not participate in a
determination under this Section 8.07(b).
(c) Sections 8.01 to 8.14 do not affect the corporation's power
to pay or reimburse expenses incurred by a director or officer in either of the
following circumstances:
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(1) As a witness in a proceeding to which he or she is not a party.
(2) As a plaintiff or petitioner in a proceeding because he or she is
or was an employee, agent, director or officer of the corporation.
8.08. Court-Ordered Indemnification.
(a) Except as provided otherwise by written agreement between the
director or officer and the corporation, a director or officer who is a party to
a proceeding may apply for indemnification to the court conducting the
proceeding or to another court of competent jurisdiction. Application shall be
made for an initial determination by the court under Section 8.05(a)(5) or for
review by the court of an adverse determination under Section 8.05(a)(1), (2),
(3), (4) or (6). After receipt of an application, the court shall give any
notice it considers necessary.
(b) The court shall order indemnification if it determines any of
the following:
(1) That the director or officer is entitled to indemnification under
Sections 8.01 or 8.02.
(2) That the director or officer is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, regardless of whether
indemnification is required under Section 8.02.
(c) If the court determines under Section 8.08(b) that the
director or officer is entitled to indemnification, the corporation shall pay
the director's or officer's expenses incurred to obtain the court-ordered
indemnification.
8.09. Indemnification and Allowance of Expenses of Employees and
Agents. The corporation shall indemnify an employee of the corporation who is
not a director or officer of the corporation, to the extent that he or she has
been successful on the merits or otherwise in defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the employee was a party
because he or she was an employee of the corporation. In addition, the
corporation may indemnify and allow reasonable expenses of an employee or agent
who is not a director or officer of the corporation to the extent provided by
the Articles of Incorporation or these Bylaws, by general or specific action of
the Board of Directors or by contract.
8.10. Insurance. The corporation may purchase and maintain insurance
on behalf of an individual who is an employee, agent, director or officer of the
corporation against liability asserted against or incurred by the individual in
his or her capacity as an employee, agent, director or officer, regardless
-20-
<PAGE> 22
of whether the corporation is required or authorized to indemnify or allow
expenses to the individual against the same liability under Sections 8.01, 8.02,
8.06, 8.07 and 8.09.
8.11. Securities Law Claims.
(a) Pursuant to the public policy of the State of Wisconsin, the
corporation shall provide indemnification and allowance of expenses and may
insure for any liability incurred in connection with a proceeding involving
securities regulation described under Section 8.11(b) to the extent required or
permitted under Sections 8.01 to 8.10.
(b) Sections 8.01 to 8.10 apply, to the extent applicable to any
other proceeding, to any proceeding involving a federal or state statute, rule
or regulation regulating the offer, sale or purchase of securities, securities
brokers or dealers, or investment companies or investment advisers.
8.12. Liberal Construction. In order for the corporation to obtain
and retain qualified directors, officers and employees, the foregoing provisions
shall be liberally administered in order to afford maximum indemnification of
directors, officers and, where Section 8.09 of these Bylaws applies, employees.
The indemnification above provided for shall be granted in all applicable cases
unless to do so would clearly contravene law, controlling precedent or public
policy.
8.13. Definitions Applicable to this Article. For purposes of this
Article:
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise that directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the corporation.
(b) "Corporation" means this corporation and any domestic or
foreign predecessor of this corporation where the predecessor corporation's
existence ceased upon the consummation of a merger or other transaction.
(c) "Director or officer" means any of the following:
(1) An individual who is or was a director or officer of this
corporation.
(2) An individual who, while a director or officer of this
corporation, is or was serving at the corporation's request as a director,
officer, partner, trustee, member of any governing or decision-making committee,
employee or agent of another corporation or foreign corporation, partnership,
joint venture, trust or other enterprise.
-21-
<PAGE> 23
(3) An individual who, while a director or officer of this
corporation, is or was serving an employee benefit plan because his or her
duties to the corporation also impose duties on, or otherwise involve services
by, the person to the plan or to participants in or beneficiaries of the plan.
(4) Unless the context requires otherwise, the estate or personal
representative of a director or officer.
For purposes of this Article, it shall be conclusively presumed that
any director or officer serving as a director, officer, partner, trustee, member
of any governing or decision-making committee, employee or agent of an affiliate
shall be so serving at the request of the corporation.
(d) "Expenses" include fees, costs, charges, disbursements,
attorney fees and other expenses incurred in connection with a proceeding.
(e) "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine, including an excise tax
assessed with respect to an employee benefit plan, and reasonable expenses.
(f) "Party" includes an individual who was or is, or who is
threatened to be made, a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or completed
civil, criminal, administrative or investigative action, suit, arbitration or
other proceeding, whether formal or informal, which involves foreign, federal,
state or local law and which is brought by or in the right of the corporation or
by any other person.
ARTICLE IX. SEAL
The Board of Directors may provide a corporate seal which may be
circular in form and have inscribed thereon the name of the corporation and the
state of incorporation and the words "Corporate Seal."
ARTICLE X. AMENDMENTS
10.01. By Shareholders. These Bylaws may be amended or repealed and
new Bylaws may be adopted by the shareholders by the vote provided in Section
2.07 of these Bylaws or as specifically provided in this Section 10.01. If
authorized by the Articles of Incorporation, the shareholders may adopt or amend
a
-22-
<PAGE> 24
Bylaw that fixes a greater or lower quorum requirement or a greater voting
requirement for shareholders or voting classes of shareholders than otherwise is
provided in the Wisconsin Business Corporation Law. The adoption or amendment
of a Bylaw that adds, changes or deletes a greater or lower quorum requirement
or a greater voting requirement for shareholders must meet the same quorum
requirement and be adopted by the same vote and voting classes required to take
action under the quorum and voting requirement then in effect.
10.02. By Directors. Except as the Articles of Incorporation may
otherwise provide, these Bylaws may also be amended or repealed and new Bylaws
may be adopted by the Board of Directors by the vote provided in Section 3.08,
but (a) no Bylaw adopted by the shareholders shall be amended, repealed or
readopted by the Board of Directors if the Bylaw so adopted so provides and (b)
a Bylaw adopted or amended by the shareholders that fixes a greater or lower
quorum requirement or a greater voting requirement for the Board of Directors
than otherwise is provided in the Wisconsin Business Corporation Law may not be
amended or repealed by the Board of Directors unless the Bylaw expressly
provides that it may be amended or repealed by a specified vote of the Board of
Directors. Action by the Board of Directors to adopt or amend a Bylaw that
changes the quorum or voting requirement for the Board of Directors must meet
the same quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then in effect, unless a
different voting requirement is specified as provided by the preceding sentence.
A Bylaw that fixes a greater or lower quorum requirement or a greater voting
requirement for shareholders or voting classes of shareholders than otherwise is
provided in the Wisconsin Business Corporation Law may not be adopted, amended
or repealed by the Board of Directors.
10.03. Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
Bylaws then in effect but is taken or authorized by a vote that would be
sufficient to amend the Bylaws so that the Bylaws would be consistent with such
action, shall be given the same effect as though the Bylaws had been temporarily
amended or suspended so far, but only so far, as is necessary to permit the
specific action so taken or authorized.
-23-
<PAGE> 1
FIRST AMENDMENT AGREEMENT
THIS FIRST AMENDMENT AGREEMENT (this "Amendment"), dated as of August 29,
1996, is among APPLIED POWER INC. (the "Company"), Applied Power Europe S.A.
(f/k/a Applied Power Finance S.A.) ("APSA"), the Banks listed on the signature
pages hereto, and Bank of America National Trust and Savings Association as
Agent for the Banks;
W I T N E S S E T H :
WHEREAS, the parties hereto are parties to that certain Multi-Currency
Credit Agreement dated as of August 22, 1995 (the "Credit Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement as
hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of the premises and
the mutual agreements herein contained, hereby agree as follows:
Section 1. Credit Agreement Definitions. Capitalized terms used herein
that are defined in the Credit Agreement shall have the same meaning when used
herein unless otherwise defined herein.
Section 2. Amendments to Credit Agreement. Effective on (and subject to
the occurrence of) the First Amendment Effective Date (as defined below), the
Credit Agreement shall be amended as follows:
2.1 Amendment to Section 1. The definition of "Termination Date" in
Section 1 of the Credit Agreement is amended by deleting the date "August 22,
2000" and inserting "August 22, 2001" therefor.
2.2 Schedule 1.1. Schedule 1.1 of the Credit Agreement is deleted in its
entirety and Schedule 1.1 to this Amendment is substituted therefore.
<PAGE> 2
2.3 Schedule 2.1. Schedule 2.1 to the Credit Agreement is deleted in its
entirety and Schedule 2.1 to this Amendment is substituted therefore.
Section 3. Representation and Warranties. In order to induce the Banks
and the Agent to execute and deliver this
Amendment, each Borrower hereby represents and warrants to each Bank and to the
Agent that:
(a) No Event of Default or Default has occurred and is continuing or
will result from the execution and delivery or effectiveness of this
Amendment; and
(b) the warranties of the Borrowers contained in Article V of the
Credit Agreement are true and correct as of the date hereof, with the same
effect as though made on such date; provided that with respect to clause
(a) of Section 5.4 the references to August 31, 1994 therein shall instead
be a reference to August 31, 1995 and the references to "May 31, 1995"
therein shall instead be a reference to May 31, 1996.
Section 4. Conditions to Effectiveness. The Amendment set forth in
Section 2 hereof shall become effective on the date (the "First Amendment
Effective Date") when the Agent shall have received all of the following, each
in form and substance satisfactory to the Agent:
(a) twelve counterparts of this Amendment executed by all of the
parties hereto;
(b) a Bid Note issued by the Company to each Bank substantially in
the form of Exhibit A attached hereto;
(c) certified copies of resolutions of the Board of Directors of
each Borrower authorizing the execution and delivery by such Borrower of
its obligations under the Credit Agreement as amended by this Amendment;
(d) a Certificate of the Secretary or Assistant Secretary of each
Borrower certifying the names of the officer or officers authorized to
sign this Amendment,
-2-
<PAGE> 3
together with a sample of the true signature of each such officer;
(e) an opinion of Quarles & Brady in substantially the form
delivered in connection with the initial closing of the Credit Agreement;
(f) an opinion of Salans Hertzfeld & Heilbronn in substantially the
form delivered in connection with the initial closing of the Credit
Agreement;
(g) a certificate of an authorized officer of the Borrowers as to
the satisfaction of the conditions set forth in Section 3 of this
Amendment; and
(h) such other documents as the Agent or any Bank may reasonably
request.
Section 5. Reaffirmation of Loan Documents. From and after the date
hereof, each reference that appears in any other Loan Document to the Credit
Agreement shall be deemed to be a reference to the Credit Agreement as amended
hereby. As amended hereby, the Credit Agreement, including, without
limitation, the obligations of each Borrower under Article IX thereof, is
hereby reaffirmed, approved and confirmed in every respect and shall remain in
full force and effect.
Section 6. Counterparts; Effectiveness. This Amendment may be executed
by the parties hereto in any number of counterparts and by the different
parties on separate counterparts and each such counterpart shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same agreement.
Section 7. Governing Law; Entire Agreement. This Amendment shall be
deemed a contract made under and governed by the laws of the State of Illinois,
without giving effect to conflicts of laws principles. This agreement
constitutes the entire understanding among the parties hereto with respect to
the subject matter hereof and supersedes any prior agreements with respect
thereto.
Section 8. Loan Document. This Amendment is a Loan Document.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
APPLIED POWER INC.
By: /s/ Douglas R. Dorszynski
----------------------------
Title: Vice President
---------------------------
APPLIED POWER EUROPE S.A.
By: /s/ Douglas R. Dorszynski
----------------------------
Title: Authorized Agent
---------------------------
-4-
<PAGE> 5
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/ M. H. Claggett
-----------------------------
Title: Vice President
--------------------------
BANK OF AMERICA ILLINOIS
By: /s/ M. H. Claggett
-----------------------------
Title: Vice President
--------------------------
-5-
<PAGE> 6
HARRIS TRUST AND SAVINGS BANK
By: /s/ Andrew K. Peterson
-------------------------------
Title: Vice President
----------------------------
-6-
<PAGE> 7
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Richard T. Jander
-----------------------------
Title: Assistant Vice President
--------------------------
-7-
<PAGE> 8
SOCIETE GENERALE
By: /s/ Susan Hummel
-----------------------------
Title: Assistant Vice President
--------------------------
By: /s/ Joseph A. Philbin
-----------------------------
Title: Vice President
--------------------------
-8-
<PAGE> 9
ABN AMRO BANK N.V.
By: /s/ Thomas M. Toerpe
--------------------------
Title: Vice President
----------------------
By: /s/ Christine E. Holmes
--------------------------
Title: Vice President
----------------------
-9-
<PAGE> 10
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Lisa L. Marshall
-------------------------------
Title: Managing Director
----------------------------
-10-
<PAGE> 11
BANK ONE, MILWAUKEE, N.A.
By: /s/ Ronald J. Carey
-----------------------------
Title: Vice President
--------------------------
-11-
<PAGE> 12
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By: /s/ Gordon R. Holtby
-------------------------------
Title: Vice President and Manager
----------------------------
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<PAGE> 1
FIRST AMENDMENT TO
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED RECEIVABLES PURCHASE
AGREEMENT, dated as of August 30, 1996 (this "Amendment"), is among APPLIED
POWER INC. ("API"), BARRY WRIGHT CORPORATION ("BWC"), WRIGHT LINE INC. ("WLI"),
GB ELECTRICAL, INC. ("GB"), CALTERM, INC. ("Calterm"); (API, BWC, WLI, GB AND
Cal Term are collectively referred to as "Sellers"); API, as representative of
Sellers in such capacity, the "Sellers' Representative", PNC BANK, NATIONAL
ASSOCIATION, ("PNC"), THE SANWA BANK, LIMITED ("Sanwa"), SOCIETE GENERALE
("SG"; PNC, Sanwa and SG are collectively referred to as "Purchasers" and PNC,
as agent for the Purchasers (in such capacity, the "Agent").
BACKGROUND
1. Sellers, Sellers' Representative, Purchasers and the Agent are parties
to that certain Amended and Restated Receivables Purchase Agreement, dated as
of August 30, 1995 (the "Receivables Purchase Agreement").
2. The parties hereto desire to extent the Commitment Termination Date (as
defined below) pursuant hereto.
NOW, THEREFORE, in consideration of the foregoing, and the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. Definitions. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings assigned thereto in the
Receivables Purchase Agreement.
SECTION 2. Commitment Termination Date. Section 1.02 of the Receivables
Purchase Agreement is hereby amended by deleting the date "August 30, 1998"
where it appears in clause (i) thereof and substituting therefor the date
"August 30, 1999".
SECTION 3. Representations and Warranties. Each Seller hereby represents
and warrants that (i) the representations and warranties set forth in Section
6.01 are correct on and as of the date hereof, after giving effect hereto, as
though made on and as
<PAGE> 2
of such date, and shall be deemed to have been made on such date and (ii) no
Termination Event or Unmatured Termination Event has occurred and is continuing,
or would result from this Amendment.
SECTION 4. Miscellaneous. The Receivables Purchase Agreement, as amended
hereby, remains in full force and effect. Any reference to the Receivables
Purchase Agreement from and
2
<PAGE> 3
after the date hereof shall be deemed to refer to the Receivables Purchase
Agreement as amended hereby. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same agreement. This Amendment
shall be governed by, and construed in accordance with, the internal laws of the
State of Illinois. Sellers, jointly and severally, agree to pay on demand all
costs and expenses, including the reasonable fees and expenses of counsel,
incurred in connection with the preparation, execution and delivery of this
Amendment.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
APPLIED POWER INC.,
as a Seller
By:/s/Douglas R. Dorszynski
-------------------------------
Name Printed:Douglas R. Dorszynski
---------------------
Title:Vice President
----------------------------
BARRY WRIGHT CORPORATION,
as a Seller
By:/s/Douglas R. Dorszynski
-------------------------------
Name Printed:Douglas R. Dorszynski
---------------------
Title:Vice President
----------------------------
GB ELECTRICAL, INC.,
as a Seller
By:/s/Douglas R. Dorszynski
-------------------------------
Name Printed:Douglas R. Dorszynski
---------------------
Title:Vice President
----------------------------
WRIGHT LINE INC.,
as a Seller
By:/s/Douglas R. Dorszynski
-------------------------------
Name Printed:Douglas R. Dorszynski
---------------------
Title:Vice President
----------------------------
CALTERM, INC.,
as a Seller
By:/s/Douglas R. Dorszynski
-------------------------------
Name Printed:Douglas R. Dorszynski
---------------------
Title:Vice President
----------------------------
S-1
<PAGE> 5
APPLIED POWER INC.
as Sellers' Representative
By:/s/Douglas R. Dorszynski
-------------------------------
Name Printed:Douglas R. Dorszynski
---------------------
Title:Vice President
----------------------------
S-2
<PAGE> 6
PNC BANK, NATIONAL ASSOCIATION,
as a Purchaser
By:/s/ Richard T. Jander
-----------------------------
Name Printed:Richard T. Jander
-------------------
Title:Assistant Vice President
--------------------------
THE SANWA BANK, LIMITED,
as a Purchaser
By:/s/ Seiji Daito
-----------------------------
Name Printed:Seiji Daito
-------------------
Title:Vice President and Manager
--------------------------
SOCIETE GENERALE,
as a Purchaser
By:/s/ Susan Hummel
-----------------------------
Name Printed:Susan Hummel
-------------------
Title:Assistant Vice President
--------------------------
By:/s/ Joseph A. Philbin
-----------------------------
Name Printed:Joseph A. Philbin
-------------------
Title:Vice President
--------------------------
HARRIS TRUST & SAVINGS BANK
By:/s/ Andrew K. Peterson
-----------------------------
Name Printed:Andrew K. Peterson
-------------------
Title:Vice President
--------------------------
PNC BANK, NATIONAL ASSOCIATION,
as Agent
By:/s/ Richard T. Jander
-----------------------------
Name Printed:Richard T. Jander
-------------------
Title:Assistant Vice President
--------------------------
S-3
<PAGE> 1
EXECUTIVE STAFF F'97 BONUS PLAN MEASUREMENTS AND CRITERIA EXHIBIT 10.6
(1996 10-K)
Executive Staff Measurements:
The fiscal 1997 bonus plan for executive staff will consist of the following:
a) 50% API Return on Net Assets (RONA)
b) 50% API Earnings Per Share (EPS)
Supporting Definitions:
Average Net Assets or Average Quarterly Net Assets = Total assets - current
liabilities (debt excluded from current liabilities).
Earnings Per Share = Net Income / Average Number of Common Shares Outstanding
during the period.
Return on Net Assets = After Tax Income (excluding interest) / Average Net
Assets. (RONA is a financial indicator of the ability of the Company to
generate profits utilizing available assets in an efficient manner).
Bonus Measurement:
<TABLE>
<CAPTION>
0% 100% 200%
(Target)
------------------------------------------
<S> <C> <C> <C>
50% API Return on Net Assets 13.50% 15.00% 17.00%
50% API Earnings Per Share $ 2.40 $ 2.80 $ 3.00
<CAPTION>
Name Functional Area Proposed Bonus Payout @ 100%
- - -------------- ----------------------------- ------------------------------
<S> <C> <C>
Sim CEO $310,000
Arzbaecher CFO $100,000
Dorszynski Tax & Treasury $ 35,000
Knutson Technology $ 29,000
</TABLE>
<PAGE> 2
ENGINEERED SOLUTIONS MULTI-BUSINESS UNITS F'97 BONUS PLAN MEASUREMENTS
Multi-Business Unit Leader Measurements:
The fiscal 1997 bonus plan for Engineered Solutions multi-business unit leader
will consist of the following:
a) 80% Engineered Solutions CMM (1) (2)
b) 20% API Financial Results (RONA and EPS)
<TABLE>
<CAPTION>
0% 100% 200%
(Target)
------- -------- --------
<S> <C> <C> <C>
CMM $8.1 MM $9.25MM $11.2 MM
API Results 0 100% 200%
------- -------- --------
Payout $0 $110,000 $220,000
</TABLE>
The business unit financial targets for fiscal 1997 have been established based
upon the business plans submitted by each business unit, current year Corporate
contribution requirements for profitability, and agreed upon long-term
investments.
(1) CMM = Operating Profit - (20% x Monthly Net Assets)
(2) Targeted bonus plan levels for CMM may be modified during the plan year
due to mergers and acquisitions.
<PAGE> 3
DISTRIBUTED PRODUCTS MULTI-BUSINESS UNIT LEADERS F'97 BONUS PLAN MEASUREMENTS
F'97 Bonus Measurements:
a) 50% Individual Unit CMM (1) (2)
b) 30% Distributed Products CMM (1) (2)
c) 20% Applied Power Financial Results (RONA and EPS)
Boel
<TABLE>
<CAPTION>
0% 100% 200%
(Target)
-------- -------- --------
<S> <C> <C> <C>
Unit CMM (3) $15.5 MM $18.0 MM $22.0 MM
DP CMM (3) $17.5 MM $22.5 MM $28.5 MM
API Results 0 100% 200%
-------- -------- --------
Payout $0 $100,000 $200,000
Lecher
<CAPTION>
0% 100% 200%
(Target)
-------- -------- --------
<S> <C> <C> <C>
Unit CMM $ 2.0 MM $ 4.5 MM $ 6.5 MM
DP CMM (3) $17.5 MM $22.5 MM $28.5 MM
API Results 0 100% 200%
-------- -------- --------
Payout $0 $95,000 $190,000
</TABLE>
(1) CMM = Internal Operating Profit - (20% x Monthly Net Assets)
(2) Excludes carrying charge related to Asia Pacific/Japan.
(3) Targeted bonus plan levels for CMM may be modified during the plan
year due to mergers and acquisitions.
<PAGE> 4
SINGLE BUSINESS UNIT LEADER F'97 BONUS PLAN MEASUREMENTS
Bonus Measurements for Wright Line:
100% Business Unit Operating Profit
1997 Target Objective - Wright Line $29.0 MM Operating Profit (1)
(92% improvement over F'96 includes
Everest acquisition)
Measures / Payout Scale
<TABLE>
<CAPTION>
0% 100% 200% 300%
(Target)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Profit $23.0 MM $29.0 MM $33.0 MM $36.0 MM
- - ---------------- -------- -------- -------- --------
Payout $0 $100,000 $200,000 $300,000
- - ---------------- -------- -------- -------- --------
</TABLE>
(1) Based on Wright Line's internal operating profit (excludes acquisition
write-up amortization).
<PAGE> 1
EXHIBIT 10.7(c)
(1996 10-K)
RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF
APPLIED POWER INC. ON OCTOBER 31, 1996 AMENDING THE
APPLIED POWER INC. 1989 OUTSIDE DIRECTORS' STOCK OPTION PLAN
WHEREAS, Applied Power Inc. has previously adopted the Applied Power Inc.
1989 Outside Directors' Stock Option Plan (the "Directors' Plan"); and
WHEREAS, Section 5(a) of the Directors' Plan states that each outside
director shall automatically be granted an option to purchase 1,000 shares of
Applied Power Inc. common stock at the Board of Directors meeting immediately
following the Company's annual shareholders meeting; and
WHEREAS, the Compensation Committee of the Board has recommended that the
number of shares covered by the annual grant be increased from 1,000 shares to
1,500 shares; and
WHEREAS, the Board agrees with the Compensation Committee's recommendation
to increase the number of shares covered by the annual grant from 1,000 shares
to 1,500 shares.
NOW, THEREFORE, BE IT RESOLVED that Section 5(a) of the Applied Power Inc.
1989 Outside Directors' Stock Option Plan is hereby amended to read as follows:
"Each year, upon the first meeting of the Company's Board of Directors
following the Company's annual meeting of shareholders, each person then
serving the Company as an outside director at that time shall automatically
be granted an option to purchase one thousand five hundred (1,500) shares,
subject to adjustment under paragraph 15 hereof."
FURTHER RESOLVED, that the appropriate officers of the Company are
authorized to take such actions as may be necessary or desirable to implement
this resolution.
<PAGE> 1
APPLIED POWER INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
<PAGE> 2
APPLIED POWER INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
APPLIED POWER INC., a Wisconsin corporation, hereby establishes the
Applied Power Inc. Executive Deferred Compensation Plan, to become effective as
of January 1, 1997, for the benefit of a select group of management and highly
compensated employees of the Company and its participating Affiliates. The Plan
is intended to provide such employees with certain deferred compensation
benefits. The Plan is an unfunded deferred compensation plan that is intended to
qualify for the exemptions provided in sections 201, 301, and 401 of ERISA.
SECTION 1
DEFINITIONS
The following words and phrases shall have the following meanings
unless a different meaning is plainly required by the context:
1.1 "Administrator" shall mean the Company, as provided in the Section
7.1.
1.2 "Affiliate" shall mean a corporation, trade or business which is,
together with any Employer, a member of a controlled group of corporations or
an affiliated service group or under common control (within the meaning of
section 414(b), (c) or (m) of the Code), but only for the period during which
such other entity is so affiliated with any Employer.
1.3 "Beneficiary" shall mean the person or persons entitled to receive
benefits under the Plan upon the death of a Participant, as provided in Section
5.7.
1.4 "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.
1.5 "Change of Control" means the first to occur of the following (a) the
Company sells, exchanges, or otherwise transfers all or substantially all of
its business or operating assets in a transaction or series of related
transactions, other than sales, exchanges, or transfers to an Affiliate or
Affiliates; (b) the Company merges, consolidates or otherwise combines with or
into any other corporation or corporations, and
-1-
<PAGE> 3
the Company is not the surviving entity, other than a merger, consolidation, or
other combination with an Affiliate or Affiliates; or (c) any person,
corporation, or other entity or group (the "acquiror") excluding Affiliates, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended), directly or indirectly, of
more than fifty percent (50%) of the outstanding shares of the class of stock of
the Company entitled to elect more than one-half of the members of the Board of
Directors of the Company; provided, however, that in no event shall a Change of
Control be deemed to have occurred if such acquiror is comprised of the Brumder
Family or the Sim Family, or any combination thereof. For this purpose the
Brumder Family includes Philip G. Brumder, Barbara B. Buzard, Dorothy B. Foote,
their respective spouses, issue, agent, or nominee, or a trust, custodianship,
or other relationship or entity created for the benefit of any such person or
persons; and the Sim Family shall include Richard G. Sim, his spouse, issue,
agent, or nominee, or a trust, custodianship, or other relationship or entity
created for the benefit of any of such person or persons.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of any
future legislation amending, supplementing or superseding such section.
1.7 "Committee" shall mean the Company's Compensation Committee, as it
may be constituted from time to time. The members of the Compensation
Committee are appointed by, and serve at the pleasure of, the Board of
Directors.
1.8 "Company" shall mean Applied Power Inc., a Wisconsin corporation.
1.9 "Compensation" shall mean the base salary of a Participant and any
bonuses paid to him or her under any of the Company's incentive or bonus plans.
1.10 "Compensation Deferrals" shall mean the amounts credited to
Participants' Accounts under the Plan pursuant to their deferral elections made
in accordance with Section 2.1.
1.11 "Disability" or "Disabled" shall mean the mental or physical
inability of a Participant to perform the regularly assigned duties of his or
her employment, provided that such inability (a) has continued or is expected
to continue for a period of at least 12 months and (b) is evidenced by the
certificate of a physician satisfactory to the Committee stating that such
inability exists and is likely to be permanent.
-2-
<PAGE> 4
1.12 "Eligible Employee" shall mean an employee who the Committee
determines is eligible to participate in the Plan. The Committee may make such
determination by individual or employment classification.
1.13 "Employers" shall mean the Company and each of its Affiliates. With
respect to an individual Participant, Employer shall mean the Company or its
Affiliate that directly employs such Participant.
1.14 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended. Reference to a specific section of ERISA shall include such
section, any valid regulation promulgated thereunder, and any comparable
provision of any future legislation amending, supplementing or superseding such
section.
1.15 "Participant" shall mean an Eligible Employee who (a) has become a
Participant in the Plan pursuant to Section 2.1 and (b) has not ceased to be a
Participant pursuant to Section 2.3.
1.16 "Participant's Account" or "Account" shall mean as to any Participant
the separate account maintained on the books of the Employers in order to
reflect his or her interest under the Plan.
1.17 "Plan" shall mean the Applied Power Inc. Executive Deferred
Compensation Plan, as set forth in this instrument and as hereafter amended
from time to time.
1.18 "Plan Year" shall mean the Company's fiscal year; provided that the
initial Plan Year shall be the short period January 1, 1997 through August 31,
1997.
SECTION 2
PARTICIPATION
2.1 Participation. Each Eligible Employee's decision to become a
Participant shall be entirely voluntary.
2.1.1 Election to Defer Compensation Bonuses. Each Eligible Employee who
makes an election under this Section 2.1 shall make a separate Compensation
Deferral election with respect to the salary portion and the bonus portion of
his or her Compensation.
2.1.2 Specific Timing and Method of Election. The Administrator, in its
sole discretion, shall determine the manner and deadlines for Participants to
make Compensation Deferral elections.
-3-
<PAGE> 5
2.1.3 Election Changes During Plan Year. In accordance with rules
established by the Administrator, a Participant may revoke a Compensation
Deferral election for the salary portion of his or her Compensation during the
Plan Year. However, any revocation shall not be effective with respect to any
prior deferrals. A Participant shall not be permitted to change or revoke his
or her election for the bonus portion of his or her Compensation during the
Plan Year, except as provided in Section 2.2.
2.2 Hardship Suspension of Participation. In the event that a
Participant incurs a "financial hardship" (as defined in this Section 2.2), the
Administrator, in its sole discretion, may suspend the Participant's
Compensation Deferrals for the bonus portion of his or her Compensation.
However, an election to make Compensation Deferrals under Section 2.1 shall be
irrevocable as to amounts deferred as of the effective date of any suspension
in accordance with this Section 2.2. A "financial hardship" for purposes of
the Plan shall mean a severe financial emergency which is caused by a sudden
and unexpected accident, illness or other event beyond the control of the
Participant which would, if no suspension of deferrals (or accelerated
distribution under Section 5.8) were made, result in severe financial burden to
the Participant or a member of his or her immediate family. Also, a financial
hardship does not exist to the extent that the hardship may be relieved by (a)
reimbursement or compensation by insurance, or (b) by liquidation of the
Participant's other assets (to the extent such liquidation would not itself
cause severe financial hardship).
2.3. Termination of Participation. An Eligible Employee who has become a
Participant shall remain a Participant until his or her entire vested Account
balance is distributed. However, an Eligible Employee who has become a
Participant may or may not be an active Participant making Compensation
Deferrals for a particular Plan Year, depending upon whether he or she has
elected to make Compensation Deferrals for such Plan Year.
SECTION 3
COMPENSATION DEFERRAL ELECTIONS
3.1 Compensation Deferrals. At the times and in the manner prescribed in
Section 2.1, each Eligible Employee may elect to defer portions of his or her
Compensation and to have the amounts of such deferrals credited to his or her
Account under the Plan on the books of the Employer in accordance with such
rules as the Committee may establish. The Administrator may establish rules
and regulations regarding compensation deferrals, including minimum deferral
requirements.
-4-
<PAGE> 6
3.2 Crediting of Compensation Deferrals. The amounts deferred pursuant
to Section 3.1 shall reduce the Participant's Compensation during the Plan Year
and shall be credited to the Participant's Account as of the last day of the
month in which the amounts (but for the deferral) would have been paid to the
Participant. For each Plan Year, the exact dollar amount to be deferred from
each Compensation payment shall be determined by the Administrator under such
formulae as it shall adopt from time to time.
3.3 Deemed Interest on Accounts. Each Participant's Account shall be
credited with deemed interest as of the end of each pay period. The rate for
crediting deemed interest as of the end of any pay period shall be based upon
the Participant's "Deferral Interest Rate" for that Plan Year. The
Participant's Deferral Interest Rate for a given Plan Year shall apply to all
amounts then credited to the Participant's Account, without regard to when the
amounts (whether attributable to Compensation Deferrals or deemed interest)
originally were credited to the Account. A Participant's Deferral Interest Rate
for a given Plan Year is the sum of (a) the simple average of the annual rate
paid by ten-year U.S. Treasury notes during each September preceding each Plan
Year during which the Participant defers income into under the Plan, plus (b)
1.50%. For example, a hypothetical Participant who had been in the Plan for
1996 would have had an interest rate credited to his account of 7.5% (T. note in
September, 1995 was 6%, plus 1.5%).
SECTION 4
ACCOUNTING
4.1 Participants' Accounts. For each Plan Year, at the direction of the
Administrator, there shall be established and maintained on the books of the
Employer, a separate Account for each Participant to which shall be credited
all Compensation Deferrals made by the Participant during such Plan Year, and
the deemed interest on such Compensation Deferrals.
4.2 Participants Remain Unsecured Creditors. All amounts credited to a
Participant's Account under the Plan shall continue for all purposes to be a
part of the general assets of the Employer. Each Participant's interest in the
Plan shall make him or her only a general, unsecured creditor of the Employer.
In the event that an Employer (other than the Company) becomes insolvent and
therefore unable to make a payment or payments owed by it under the Plan, the
Company shall make such payments; provided, however, that nothing in this
sentence shall make any Participant anything other than a general, unsecured
creditor of the Company.
-5-
<PAGE> 7
4.3 Accounting Methods. The accounting methods or formulae to be used
under the Plan for the purpose of maintaining the Participants' Accounts,
including the calculation and crediting of deemed interest, shall be determined
by the Administrator, in its sole discretion. The accounting methods or
formulae selected by the Administrator may be revised from time to time.
4.4 Reports. Each Participant shall be furnished with periodic
statements of his or her Account, reflecting the status of his or her interest
in the Plan, at least annually.
SECTION 5
DISTRIBUTIONS
5.1 Normal Time for Distribution. Except as otherwise provided in this
Section 5, a Participant's Account shall be distributed within ninety days of
the Participant's termination of employment with all Employers and Affiliates,
but only to the extent that the payments in any Plan Year are deductible under
section 162 of the Code. If, pursuant to the foregoing sentence, any amounts
are not paid when originally scheduled, such amounts shall be paid in the
immediately following taxable year or years to the extent that such payments
would be deductible under section 162 of the Code. (During any such delay in
payment, unpaid amounts shall continue to be credited with deemed interest
under Section 3.3.) Notwithstanding the foregoing, distribution of a
Participant's Account shall be made without regard to the deductibility of the
payments under section 162 of the Code if the time for distribution is
accelerated pursuant to Section 5.5 or Section 5.6.
5.2 Form of Payment. Each Participant shall indicate on his or her
deferral election (made pursuant to Section 3.1) the form of payment for the
Compensation Deferrals (and the deemed interest thereon) to be made for the
specific Plan Year covered by such deferral election. A Participant may elect
(a) a lump sum payment, (b) five annual installment payments, or (c) ten annual
installment payments; provided, however, that a Participant who elects to
receive annual installments for five or ten years shall receive payment in a
lump sum if: (1) the Participant's termination of employment occurs due to his
or her death or Disability, or (2) distribution to the Participant is
accelerated due to a Change of Control. A Participant's election as to the
form of payment shall be irrevocable and shall apply to all amounts credited to
the Participant's Account for the Plan
-6-
<PAGE> 8
Year with respect to which the election is made. If the Participant elected to
receive five or ten annual installment payments, his or her first installment
shall be equal to 1/5th or 1/10th (respectively) of the balance then credited
to his or her Account. Each subsequent annual installment shall be paid to the
Participant as near as administratively practicable to each anniversary of the
first installment payment. The amount of each subsequent installment shall be
equal to the balance then credited to the Participant's Account, divided by the
number of installments remaining to be made. While a Participant's Account is
in installment payout status, the unpaid balance credited to the Participant's
Account shall continue to be credited with deemed interest under Section 3.3.
5.3 Short-Term Payout. A Participant may elect, on his or her deferral
election for any Plan Year, to receive a short-term payout of the Participant's
Compensation Deferrals (and the deemed interest thereon) for that Plan Year.
The short-term payout shall be a lump sum payment in cash. Subject to the
other terms and conditions of this Plan, the short-term payout shall be paid
within 60 days of the earlier of (a) the date selected by the Participant
(which must be at least 3 years after the date of the Participant's
Compensation Deferral election), or (b) the date the Participant ceases to be
an Employee.
5.4 Deferral Elections for Short-Term Payouts. By filing a deferral
election with the Committee at least six (6) months prior to the date any
short-term payout becomes payable, a Participant may defer payment of all or
any portion of a short-term payout or an amount payable pursuant to a prior
deferral election for a one-year period (or such longer period as is approved
by the Committee); provided that any such deferral election shall be effective
only with the consent of the Committee. As it is in the Company's interest to
defer payments of compensation, the Committee shall be deemed to consent to a
deferral election unless the Committee notifies the Participant in writing,
within thirty business days after receipt of the deferral election, that
consent is not given.
5.5 Change of Control. If there is a Change of Control, the balance then
credited to a Participant's Account shall be distributed to him or her in a lump
sum as soon as administratively practicable after the date of the Change of
Control.
5.6 Special Rule for Death or Disability. If a Participant dies or
becomes Disabled, the balance then credited to his or her Account shall be
distributed to the Participant (or his or her Beneficiary) in a lump sum as
soon as administratively practicable after the date of death or Disability.
-7-
<PAGE> 9
5.7 Beneficiary Designations. Each Participant may, pursuant to such
procedures as the Administrator may specify, designate one or more
Beneficiaries. A Participant may designate different Beneficiaries (or may
revoke a prior Beneficiary designation) at any time by delivering a new
designation (or revocation of a prior designation) in like manner. Any
designation or revocation shall be effective only if it is received by the
Administrator. However, when so received, the designation or revocation shall
be effective as of the date the notice is executed (whether or not the
Participant still is living), but without prejudice to the Administrator on
account of any payment made before the change is recorded. The last effective
designation received by the Administrator shall supersede all prior
designations. If a Participant dies without having effectively designated a
Beneficiary, or if no Beneficiary survives the Participant, the Participant's
Account shall be payable to his or her surviving spouse, or, if the Participant
is not survived by his or her spouse, the Account shall be paid to his or her
estate.
5.8 Financial Hardship. In the event that a Participant incurs a
"financial hardship" (as defined in Section 2.2), the Administrator, in its
sole discretion and notwithstanding any contrary provision of the Plan, may
determine that all or part of the Participant's Account shall be paid to him or
her immediately; provided, however, that the amount paid to the Participant
pursuant to this Section 5.8 shall be limited to the amount reasonably
necessary to alleviate the Participant's hardship. Also, payment under this
Section 5.8 may not be made to the extent that the hardship may be relieved by
suspension of the Participant's Compensation Deferrals in accordance with
Section 2.2.
5.9 Payments to Incompetents. If any individual to whom a benefit is
payable under the Plan is a minor or legally incompetent, the Committee shall
determine whether payment shall be made directly to the individual, any person
acting as his or her custodian or legal guardian under the Uniform Transfers to
Minors Act, his or her legal representative or a near relative, or directly for
his or her support, maintenance or education.
5.10 Undistributable Accounts. Each Participant and (in the event of
death) his or her Beneficiary shall keep the Administrator advised of his or her
current address. If the Administrator is unable to locate a Participant to whom
a Participant's Account is payable under this Section 5, the Participant's
Account shall be held in suspense pending location of the Participant, but shall
continue to be credited with deemed interest in accordance with Section 3.3. If
the Administrator is unable to locate a Beneficiary to whom a Participant's
Account is payable under this Section 5 within six (6) months of the
Participant's death, the Participant's Account shall be paid to his or her
estate.
-8-
<PAGE> 10
5.11 Committee Discretion. Within the specific time periods described in
this Section 5, the Committee shall have sole discretion to determine the
specific timing of the payment of any Account balance under the Plan. In
addition and notwithstanding any contrary provision of the Plan, the Committee,
in its sole discretion, may cause the balance credited to a Participant's
Account to be paid to him or her in a lump sum at any time following the
Participant's termination of employment with all Employers and Affiliates.
SECTION 6
PARTICIPANT'S INTEREST IN ACCOUNT
6.1 Compensation Deferral Contributions. Subject to Sections 4.2
(relating to creditor status) and 8.2 (relating to amendment and/or termination
of the Plan), a Participant's interest in the balance credited to his or her
Account at all times shall be 100% vested and nonforfeitable.
SECTION 7
ADMINISTRATION OF THE PLAN
7.1 Plan Administrator. The Company is hereby designated as the
administrator of the Plan (within the meaning of section 3(16)(A) of ERISA).
7.2 Committee. The Committee shall have the authority to control and
manage the operation and administration of the Plan. Any member of the
Committee may resign at any time by notice in writing mailed or delivered to
the Secretary of the Company.
7.3 Actions by Committee. Each decision of a majority of the members of
the Committee then in office shall constitute the final and binding act of the
Committee. The Committee may act with or without a meeting being called or
held and shall keep minutes of all meetings held and a record of all actions
taken by written consent.
7.4 Powers of Committee. The Committee shall have all powers and
discretion necessary or appropriate to supervise the administration of the Plan
and to control its operation in accordance with its terms, including, but not by
way of limitation, the following powers:
(a) To interpret and determine the meaning and validity of the
provisions of the Plan and to determine any question arising under, or in
connection with, the administration, operation or validity of the Plan or any
amendment thereto;
-9-
<PAGE> 11
(b) To determine any and all considerations affecting the eligibility
of any employee to become a Participant or remain a Participant in the Plan;
(c) To cause one or more separate Accounts to be maintained for each
Participant;
(d) To cause Compensation Deferrals and deemed interest to be credited
to Participants' Accounts;
(e) To establish and revise an accounting method or formula for the
Plan, as provided in Section 4.3;
(f) To determine the manner and form in which any distribution is to
be made under the Plan;
(g) To determine the status and rights of Participants and their
spouses, Beneficiaries or estates;
(h) To employ such counsel, agents and advisers, and to obtain such
legal, clerical and other services, as it may deem necessary or appropriate in
carrying out the provisions of the Plan;
(i) To establish, from time to time, rules for the performance of its
powers and duties and for the administration of the Plan;
(j) To arrange for annual distribution to each Participant of a
statement of benefits accrued under the Plan;
(k) To publish a claims and appeal procedure satisfying the minimum
standards of section 503 of ERISA pursuant to which individuals or estates may
claim Plan benefits and appeal denials of such claims;
(l) To delegate to any one or more of its members or to any other
person, severally or jointly, the authority to perform for and on behalf of the
Committee one or more of the functions of the Committee under the Plan; and
(m) To decide all issues and questions regarding Account balances, and
the time, form, manner, and amount of distributions to Participants.
7.5 Decisions of Committee. All actions, interpretations, and decisions
of the Committee shall be conclusive and binding on all persons, and shall be
given the maximum possible deference allowed by law.
-10-
<PAGE> 12
7.6 Administrative Expenses. All expenses incurred in the administration
of the Plan by the Committee, or otherwise, including legal fees and expenses,
shall be paid and borne by the Employers.
7.7 Eligibility to Participate. No member of the Committee who is also
an employee of an Employer shall be excluded from participating in the Plan if
otherwise eligible, but he or she shall not be entitled, as a member of the
Committee, to act or pass upon any matters pertaining specifically to his or
her own Account under the Plan.
7.8 Indemnification. Each of the Employers shall, and hereby does,
indemnify and hold harmless the members of the Committee, from and against any
and all losses, claims, damages or liabilities (including attorneys' fees and
amounts paid, with the approval of the Board of Directors, in settlement of any
claim) arising out of or resulting from the implementation of a duty, act or
decision with respect to the Plan, so long as such duty, act or decision does
not involve gross negligence or willful misconduct on the part of any such
individual.
SECTION 8
MODIFICATION OR TERMINATION OF PLAN
8.1 Employers' Obligations Limited. The Employers intend to continue the
Plan indefinitely, and to maintain each Participant's Account until it is
scheduled to be paid to him or her in accordance with the provisions of the
Plan. However, the Plan is voluntary on the part of the Employers, and the
Employers do not guarantee to continue the Plan. The Company at any time may,
by amendment of the Plan, suspend Compensation Deferrals or may discontinue
Compensation Deferrals, with or without cause. Complete discontinuance of all
Compensation Deferrals shall be deemed a termination of the Plan.
8.2 Right to Amend or Terminate. The Board of Directors reserves the
right to alter, amend or terminate the Plan, or any part thereof, in such manner
as it may determine, at any time and for any reason. The Company, in its sole
discretion, may seek a private letter ruling from the Internal Revenue Service
regarding the tax consequences of the Plan. If such a ruling is sought, the
Committee shall have the right to adopt such amendments to the Plan, including
retroactive amendments, as the Internal Revenue Service may require as a
condition to the issuance of such ruling.
-11-
<PAGE> 13
8.3 Effect of Termination. If the Plan is terminated pursuant to this
Section 8, the balances credited to the Accounts of the affected Participants
shall be distributed to them at the time and in the manner set forth in Section
5; provided, however, that the Committee, in its sole discretion, may authorize
accelerated distribution of Participants' Accounts as of any earlier date.
SECTION 9
GENERAL PROVISIONS
9.1 Inalienability. In no event may either a Participant, a former
Participant or his or her Beneficiary, spouse or estate sell, transfer,
anticipate, assign, hypothecate, or otherwise dispose of any right or interest
under the Plan; and such rights and interests shall not at any time be subject
to the claims of creditors nor be liable to attachment, execution or other
legal process. Accordingly, for example, a Participant's interest in the Plan
is not transferable pursuant to a domestic relations order.
9.2 Rights and Duties. Neither the Employers nor the Committee shall be
subject to any liability or duty under the Plan except as expressly provided in
the Plan, or for any action taken, omitted or suffered in good faith.
9.3 No Enlargement of Employment Rights. Neither the establishment or
maintenance of the Plan, the making of any Compensation Deferrals nor any
action of any Employer or the Committee, shall be held or construed to confer
upon any individual any right to be continued as an employee of the Employer
nor, upon dismissal, any right or interest in any specific assets of the
Employers other than as provided in the Plan. Each Employer expressly reserves
the right to discharge any employee at any time.
9.4 Apportionment of Costs and Duties. All acts required of the Employers
under the Plan may be performed by the Company for itself and its Affiliates,
and the costs of the Plan may be equitably apportioned by the Committee among
the Company and the other Employers. Whenever an Employer is permitted or
required under the terms of the Plan to do or perform any act, matter or thing,
it shall be done and performed by any officer or employee of the Employer who is
thereunto duly authorized by the board of directors of the Employer.
9.5 Compensation Deferrals Not Counted Under Other Employee Benefit
Plans. Compensation Deferrals under the Plan will not be considered for
purposes of contributions or benefits under any other employee benefit plan
sponsored by the Employers.
-12-
<PAGE> 14
9.6 Applicable Law. The provisions of the Plan shall be construed,
administered and enforced in accordance with ERISA, and to the extent not
preempted by ERISA, with the laws of the State of Wisconsin.
9.7 Severability. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provisions of the Plan, and in lieu of each provision which is held invalid or
unenforceable, there shall be added as part of the Plan a provision that shall
be as similar in terms to such invalid or unenforceable provision as may be
possible and be valid, legal, and enforceable.
9.8 Captions. The captions contained in and the table of contents
prefixed to the Plan are inserted only as a matter of convenience and for
reference and in no way define, limit, enlarge or describe the scope or intent
of the Plan nor in any way shall affect the construction of any provision of
the Plan.
-13-
<PAGE> 1
APPLIED POWER INC. EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE (1996 10-K)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years ended August 31,
--------------------------------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 13,478 13,280 13,057
Net effect of dilutive options based
on the treasury stock method
using average market price 505 466 232
------- ------- -------
Total 13,983 13,746 13,289
======= ======= =======
Net Earnings(Loss):
Earnings from continuing operations $33,729 $25,005 $16,896
Discontinued operations - - (348)
Extraordinary loss - (4,920) -
Cumulative effect of accounting change - - -
------- ------- -------
Net Earnings(Loss) $33,729 $20,085 $16,548
======= ======= =======
Primary Earnings(Loss) per share:
Earnings from continuing operations $ 2.41 $ 1.82 $ 1.27
Discontinued operations - - (0.03)
Extraordinary loss - (0.36) -
Cumulative effect of accounting change - - -
------- ------- -------
Net Earnings(Loss) $ 2.41 $ 1.46 $ 1.25
======= ======= =======
FULLY DILUTED
Average shares outstanding 13,478 13,280 13,057
Net effect of dilutive options based
on the treasury stock method
using the greater of average
or year-end market price 505 678 420
------- ------- -------
Total 13,983 13,958 13,477
======= ======= =======
Net Earnings(Loss):
Earnings from continuing operations $33,729 $25,005 $16,896
Discontinued operations - - (348)
Extraordinary loss - (4,920) -
Cumulative effect of accounting change - - -
------- ------- -------
Net Earnings(Loss) $33,729 $20,085 $16,548
======= ======= =======
Primary Earnings(Loss) per share:
Earnings from continuing operations $ 2.41 $ 1.79 $ 1.25
Discontinued operations - - (0.03)
Extraordinary loss - (0.35) -
Cumulative effect of accounting change - - -
------- ------- -------
Net Earnings(Loss) $ 2.41 $ 1.44 $ 1.23
======= ======= =======
</TABLE>
<PAGE> 1
The following table sets forth the name and jurisdiction of EXHIBIT 21
incorporation of the Registrant's significant subsidiaries. (1996 10-K)
All subsidiaries are 100% owned except as noted.
Jurisdiction of
Name of Subsidiary Incorporation
- - ------------------ -----------------
UNITED STATES:
Applied Power Investments II Inc. Nevada
Barry Wright Corporation Massachusetts
CalTerm, Inc. Nevada
CalTerm Taiwan, Inc. Nevada
GB Electrical, Inc. Wisconsin
New England Controls, Inc. Connecticut
Wright Line Inc. Massachusetts
OUTSIDE THE UNITED STATES:
AIC (Hong Kong) Ltd. (49%) Hong Kong
AP International Corporation Barbados
APITECH Hydraulic GmbH Germany
Applied Power Asia Pte. Ltd. Singapore
Applied Power Australia Limited Australia
Applied Power Canada Ltd. Ontario, Canada
Applied Power do Brasil Equipamente Ltda. Brazil
Applied Power Europa B.V. Netherlands
Applied Power Europe S.A. France
Applied Power Export Corp. US Virgin Islands
Applied Power (Far East) Ltd. Japan
Applied Power Finance B.V. Netherlands
Applied Power GmbH Germany
Applied Power Holding GmbH Germany
Applied Power Hytec Sdn. Bhd. Malaysia
Applied Power International, S.A. France
Applied Power International, S.A. Switzerland
Applied Power Italiana S.p.A. Italy
Applied Power Japan, Ltd. Japan
Applied Power Korea Ltd. South Korea
Applied Power (Mexico) S.A. de C.V. Mexico
Applied Power Moscow CIS
Applied Power New Zealand Limited New Zealand
Barry Controls GmbH Germany
Barry Controls U.K. Ltd. United Kingdom
Enerpac Asia Pte. Ltd. Singapore
Enerpac B.V. Netherlands
Enerpac Hydraulic Technology (India) Pte. Ltd. India
Enerpac Ltd. United Kingdom
Enerpac S.A. France
Matairco/Hydro-Air, S.A. France
Norelem S.A. France
Power-Packer do Brasil Ltd. Brazil
Power-Packer Espana, S.A. Spain
Power-Packer Europa B.V. Netherlands
Shanghai Blackhawk Machinery Co. Ltd. China
All of the foregoing subsidiaries are included in the consolidated financial
statements filed herewith.
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT EXHIBIT 23
(1996 10-K)
We consent to the incorporation by reference in Registration Statements of
Applied Power Inc. on Forms S-8 No. 33-18140, No. 33-21250, No. 33-24197, No.
33-38719, No. 33-38720 and No. 33-62658 of our report dated September 26, 1996
appearing in this Annual Report on Form 10-K of Applied Power Inc. for the year
ended August 31, 1996
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 1,001
<SECURITIES> 0
<RECEIVABLES> 68,747
<ALLOWANCES> 4,179
<INVENTORY> 120,648
<CURRENT-ASSETS> 206,905
<PP&E> 168,125
<DEPRECIATION> 91,889
<TOTAL-ASSETS> 381,241
<CURRENT-LIABILITIES> 107,729
<BONDS> 76,548
0
0
<COMMON> 2,730
<OTHER-SE> 165,725
<TOTAL-LIABILITY-AND-EQUITY> 381,241
<SALES> 571,215
<TOTAL-REVENUES> 571,215
<CGS> 351,283
<TOTAL-COSTS> 351,283
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,456
<INCOME-PRETAX> 49,167
<INCOME-TAX> 15,438
<INCOME-CONTINUING> 33,729
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,729
<EPS-PRIMARY> 2.41
<EPS-DILUTED> 2.41
</TABLE>
