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Proxy Statement Pursuant to Section 14(a) of the Securities
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APPLIED POWER INC.
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October, 1997
TO OUR FELLOW SHAREHOLDERS.....
1997 was another good year for Applied Power. Earnings per share increased
24% on sales growth of 18%. Cash flow provided by operating activities
increased 98% to $64.8 million. Looking back over the last five years, the
earnings per share of Applied Power have grown at a compound rate of 27%.
This is an excellent record of performance, and it is our ambition to maintain
it. In order to do that, it is important that we continue to invest heavily
in our best growth opportunities with the objective of making Applied Power a
sustainable growth company. This is a theme that we have focused on for the
last 12 years. During 1997, we did a number of things that are directed at
assuring that our future is one of growth. Allow me to highlight some of
these actions.
- - In 1997, we entered the technical enclosure market with the
acquisition of Everest Electronics and Eder Industries in North
America, and C Fab and Hormann in Ireland. By the fourth quarter of
1997, our annualized sales for this new product line were $112
million. We plan to make additional acquisitions in this area in
1998, and it is our ambition to build a large business that is focused
on the low to medium volume custom enclosure market, the OEM enclosure
market and includes integration capability. The Hormann and Eder
businesses bring us electronics capabilities that will help us both
with our enclosure integration strategy as well as with our Engineered
Solutions "active" products strategy.
- - In our Wright Line business, we increased the size of our worldwide
sales force by 60% during 1997. This expansion underpins our growth
objectives for 1998. During 1998, we plan to continue to expand our
worldwide sales force to assure that our growth objectives for 1999
are achievable.
- - Early in October of 1997, after the fiscal year closed, we acquired
Versa Technologies. The major impact of this business is on our
Engineered Solutions business. Versa Technologies' Power Gear
business has a strong and growing position in the recreational vehicle
market. We believe we can grow this opportunity long term and have
many initiatives directed at this end.
- - In 1997, we completed the development, introduced and received $8
million in orders for an active tuned mass absorber product which
dramatically reduced the noise in the passenger compartment of
airplanes that have rear mounted jet engines. We started shipping
this product in the summer of 1997 and expect to see additional orders
and sales growth during 1998. We believe that this technology has
applications to other airplanes and can be an important market segment
for out Engineered Solutions business.
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In addition to these and other programs directed at assuring future sales
growth, there is a broad initiative in the company that we call "World Class
Practices". This program has been underway for over a year and during 1997, we
broadened it out to all of our major locations. World Class Practices
encompasses many initiatives directed at improving quality, cutting costs,
improving customer service and realizing working capital efficiency
improvements. In certain parts of the company, we have already seen evidence of
the payoff that these initiatives can bring. The roots of World Class Practices
go back to Japan and to Toyota. We expect the adoption of these new practices to
have a significant impact on our company.
1997 marks the tenth year of Applied Power being a public company. As the chart
in the proxy statement shows, Applied Power has outperformed the S&P 500 over
this period by 129%. Applied Power's consistent goal, long term, has been
shareholder value, and we are very proud of our accomplishments over this ten-
year period.
The mainspring for everything we do is the quality of our people and their
ability to communicate and work together. In the last few years, we have made
significant progress in strengthening the "Applied Power Team". The Executive
Leadership Team of Applied Power spends significant amounts of time on this
important topic. Applied Power is a high change environment that suits out-going
team players who have good ideas and lots of energy. We are fortunate that we
have many such employees.
As we move towards 1998 and examine the opportunities that lie ahead in 1999 and
the year 2000, I believe that we are positioned to do well. You can be assured
that all of us at Applied Power plan to work very hard to make that belief a
reality. We thank you for your continued support.
Yours sincerely,
/s/ Richard G. Sim
Chairman and CEO
