<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): OCTOBER 3, 1997
APPLIED POWER INC.
------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
WISCONSIN 1-11288 39-0168610
- ------------------------ --------------------- -------------------------
(State of incorporation) (Commission File No.) (I.R.S. Employer Id. No.)
</TABLE>
13000 WEST SILVER SPRING DRIVE
BUTLER, WISCONSIN 53007
MAILING ADDRESS: P.O. BOX 325, MILWAUKEE, WISCONSIN 53201
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(414) 781-6600
--------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 6, 1997, Applied Power Inc. ("Applied Power") announced that
its wholly owned subsidiary TVPA Corp., a Delaware corporation (the
"Purchaser"), had accepted for payment all shares of common stock, par value
$.01 per share (the "Common Stock"), including the associated rights to
purchase Series A Junior Participating Preferred Stock (together with the
Common Stock, the "Shares"), of Versa Technologies, Inc., a Delaware
corporation ("Versa/Tek"), which had been tendered pursuant to the Purchaser's
tender offer (the "Offer") to purchase all outstanding Shares at a price of
$24.625 per Share, net to the seller in cash, without interest thereon. The
Offer expired, as scheduled, on October 3, 1997. Pursuant to the Offer, the
Purchaser (and Applied Power through its ownership of the Purchaser) acquired
approximately 95% of the outstanding Shares. As a result of the merger (the
"Merger") of the Purchaser with and into Versa/Tek effective October 9, 1997
(the "Effective Date"), in which each outstanding Share not tendered pursuant
to the Offer was converted into the right to receive $24.625 per Share in cash
(without interest) and each outstanding share of common stock of the Purchaser
was converted into one share of Common Stock of Versa/Tek, Versa/Tek became a
wholly owned subsidiary of Applied Power.
The Offer and the Merger
The Offer was made and the Merger was effected pursuant to the Agreement
and Plan of Merger, dated as of September 2, 1997, among the Purchaser, Applied
Power and Versa/Tek (the "Merger Agreement"). Because the Purchaser owned more
than 90% of the outstanding Shares after consummation of the Offer, the Merger
was effected as a "short-form merger" under Section 253 of the Delaware General
Corporation Law (the "DGCL") by action of the Purchaser's Board of Directors
and sole stockholder, Applied Power, without a vote of the stockholders of
Versa/Tek, upon the filing of a Certificate of Ownership and Merger with the
Delaware Secretary of State on the Effective Date. The purpose of the Merger
was to complete the acquisition of the entire equity interest in, and control
of, Versa/Tek by Applied Power pursuant to the Merger Agreement.
The $24.625 per Share cash price in the Offer and the Merger, and the
other terms of the Merger Agreement, were the result of arms-length
negotiations between Applied Power and Versa/Tek prior to the execution of the
Merger Agreement and the consummation of the Offer. A total of 5,719,608
outstanding Shares were acquired as a result of the Offer and the Merger for a
total purchase price of approximately $140,845,000. Former holders of Shares
who do not wish to accept the $24.625 per Share cash payment pursuant to the
Merger have the right under the DGCL to dissent from the Merger and to seek an
appraisal of, and be paid the "fair value" for, their Shares as provided in the
DGCL.
As contemplated by the Merger Agreement, promptly following the purchase
by the Purchaser of Shares pursuant to the Offer, a majority of the members of
the Board of Directors of Versa/Tek resigned and the remaining Board members
filled the positions vacated with persons designated by Applied Power. Also,
certain officers of Versa/Tek resigned, and the Board of Directors of
Versa/Tek, as so reconstituted, elected designees of Applied Power as officers
of Versa/Tek.
Upon consummation of the Merger, when Versa/Tek became a wholly owned
subsidiary of Applied Power, the Shares were delisted from trading on The
Nasdaq Stock Market, Inc.'s National Market, and a filing was made with the
Securities and Exchange Commission (the "Commission") to suspend Versa/Tek's
reporting obligations and terminate the registration of the Shares under the
Securities Exchange Act of 1934, as amended.
Versa/Tek's Annual Report on Form 10-K for the fiscal year ended March 31,
1997 described Versa/Tek's business as follows:
The Company comprises three business segments serving diverse
markets. The Electronics Segment designs and manufactures custom
electronic and electrical systems for a broad range of
applications. The Engineered Materials Segment fabricates custom
components from elastomers for special applications requiring
<PAGE> 3
a high degree of engineering expertise and product quality. The
Fluid Power Segment manufactures custom engineered cylinders;
hydraulic devices that raise, lower, stabilize, or level
semitrailers, trucks, recreational vehicles and a variety of
off-highway vehicles and equipment; and electrically powered systems
that serve as drive mechanisms for slideout rooms on trailers and
recreational vehicles.
Applied Power is undertaking a thorough review of Versa/Tek's operations
and studying the manner in which the operations of the two companies can best
be optimized, and intends to take such actions as a result of this review as
may be deemed appropriate under the circumstances. Applied Power currently
intends to continue the primary business operations of Versa/Tek, and to
continue to use the Versa/Tek physical assets of such primary business
operations for that purpose, while integrating such operations with its own.
Financing of the Offer and the Merger
The total amount of funds required to consummate the Offer and the Merger
is currently estimated to be approximately $144 million, including related fees
and expenses. The Purchaser obtained all of the funds it expended from Applied
Power. To provide the necessary funds, Applied Power entered into a Credit
Agreement (the "Credit Agreement") with Bank of America National Trust and
Savings Association ("BoA"), as Agent, and the other financial institutions
from time to time party thereto (initially BoA and PNC Bank, National
Association), providing for a $140 million 364-day revolving credit facility
(the "Facility"). The Credit Agreement was arranged by BancAmerica Securities,
Inc. ("BASI").
Applied Power has executed a commitment letter dated September 24, 1997
(the "September Commitment Letter") issued by BoA, and by BASI as arranger,
providing for the refinancing of Applied Power's current $170 million revolving
credit facility with a new $350 million 5-year revolving credit facility (the
"New Facility"). Applied Power intends to repay its borrowings under the
Facility using funds received under the New Facility when this financing is
finalized. The New Facility is to be used to finance the remaining expenses of
the Offer and the Merger, to refinance existing indebtedness (including the
Facility), and for other general corporate purposes. Pending finalization of
the New Facility, funds required for the Offer and the Merger in excess of the
proceeds of the Facility have been or will be provided by Applied Power from
working capital and the existing $170 million revolving credit facility.
Additional Information
Further information concerning the Offer, the Merger and the financing
thereof is contained in the Tender Offer Statement on Schedule 14D-1 filed by
Applied Power and the Purchaser with the Commission on September 5, 1997, as
amended (the "Schedule 14D-1"), which includes the Offer to Purchase dated
September 5, 1997 (the "Offer to Purchase"), and in the
Solicitation/Recommendation Statement on Schedule 14D-9, dated September 5,
1997 (the "Schedule 14D-9"), filed by Versa/Tek in connection with the Offer.
The Merger Agreement, the Credit Agreement, the September Commitment Letter,
the Offer to Purchase and certain related documents are described in and filed
as exhibits to the Schedule 14D-1 and are incorporated herein by reference.
The descriptions thereof herein do not purport to be complete and are qualified
in their entirety by reference to the provisions of the respective documents.
-2-
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired:
The following financial statements of Versa/Tek (Commission File No.
0-5240) are incorporated herein by reference to pages 13 through 25 of
Versa/Tek's 1997 Annual Report to Shareholders (such financial statements
having been incorporated by reference in Versa/Tek's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997 from the 1997 Annual
Report to Shareholders):
Consolidated Statements of Earnings for the years ended March 31,
1997, 1996 and 1995
Consolidated Balance Sheets as of March 31, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the years ended
March 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended March 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Independent Auditors' Report
The following unaudited consolidated financial statements of
Versa/Tek are incorporated herein by reference to pages 3 through 7 of
its Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1997:
Consolidated Balance Sheet as of June 30, 1997
Consolidated Statements of Earnings for the three months ended June
30, 1997 and 1996
Consolidated Statements of Cash Flows for the three months ended
June 30, 1997 and 1996
Notes to Financial Statements
(b) Pro Forma Financial Information:
It is impracticable to provide the required pro forma financial
information at the time this report is being filed. Appropriate pro
forma financial information relating to Applied Power Inc. will be filed
as soon as practicable as an amendment to this report, and in any event
not later than December 17, 1997.
(c) Exhibits:
See the Exhibit Index following the Signature page of this report,
which is incorporated herein by reference.
-3-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APPLIED POWER INC.
Date: October 20, 1997 By: /s/Robert C. Arzbaecher
---------------------------
Robert C. Arzbaecher,
Vice President and
Chief Financial Officer
<PAGE> 6
APPLIED POWER INC.
(COMMISSION FILE NO. 1-11288)
EXHIBIT INDEX
TO
FORM 8-K CURRENT REPORT
Date of Report: October 3, 1997
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
- ------------ ----------------------------- ------------------------- --------
<S> <C> <C> <C>
Exhibit 2 Agreement and Exhibit (c)(1) to
Plan of Merger, Applied Power Inc.'s
dated as of Tender Offer Statement
September 2, 1997, on Schedule 14D-1 filed
among Applied Power on September 5, 1997 (the
Inc., TVPA Corp. and "Schedule 14D-1") (File
Versa Technologies, No. 5-13342)
Inc.
Exhibit 4.1 Credit Agreement, Exhibit (b)(2) filed with
dated as of October 3, Amendment No. 3 to the
1997, among Applied Schedule 14D-1 on
Power Inc., Bank of October 6, 1997
America National
Trust and Savings
Association, as Agent,
and the other financial
institutions party thereto
Exhibit 4.2 Commitment Letter Exhibit (b)(3) filed with
between Bank of Amendment No. 3 to the
America National Schedule 14D-1 on
Trust and Savings October 6, 1997
Association, BancAmerica
Securities, Inc. and
Applied Power Inc.
dated September 24, 1997
(including the Summary
of Terms and Conditions
attached thereto)
</TABLE>
EI-1
<PAGE> 7
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT DESCRIPTION BY REFERENCE TO HEREWITH
- ------------ ----------------------------- ------------------------- --------
<S> <C> <C> <C>
Exhibit 23 Consent of Deloitte & X
Touche LLP
Exhibit 99.1 Consolidated balance X
sheets of Versa Tech-
nologies, Inc. and
subsidiaries as of
March 31, 1997 and
1996 and related con-
solidated statements
of earnings, shareholders'
equity and cash flows for
each of the three years in
the period ended March 31,
1997, and the notes thereto
and auditors' report thereon,
incorporated by reference in
Item 7(a) of this report
Exhibit 99.2 Unaudited consolidated X
balance sheet of Versa
Technologies, Inc. and
subsidiaries as of June 30,
1997 and the related
consolidated statements
of earnings and cash flows
for the three months ended
June 30, 1997 and 1996, and
the notes thereto, incor-
porated by reference in
Item 7(a) of this report
Exhibit 99.3 Offer to Purchase, dated Exhibit (a)(1) to the
September 5, 1997 Schedule 14D-1
</TABLE>
EI-2
<PAGE> 1
EXHIBIT 23
(10/3/97 8-K)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the 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 May 9, 1997
incorporated by reference in the Annual Report on Form 10-K of Versa
Technologies, Inc. for the year ended March 31, 1997.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
October 20, 1997
<PAGE> 1
EXHIBIT 99.1
CONSOLIDATED STATEMENTS OF EARNINGS
Versa Technologies, Inc.
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Years Ended March 31 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $87,596 $70,699 $66,965
Cost of Sales 64,249 51,190 45,180
------------------------------------------------------
Gross Profit 23,347 19,509 21,785
Selling and Administrative Expenses 13,385 11,300 11,793
------------------------------------------------------
Operating Income 9,962 8,209 9,992
------------------------------------------------------
Other Income (Deductions):
Interest expense (160) (35) (9)
Interest income 356 848 753
Miscellaneous, net 163 117 35
Loss on sale of businesses (778)
------------------------------------------------------
(419) 930 779
------------------------------------------------------
Earnings Before Income Taxes 9,543 9,139 10,771
Income Taxes 3,840 3,240 3,965
------------------------------------------------------
Net Earnings $5,703 $5,899 $6,806
======================================================
Net earnings per weighted average common shares
outstanding $1.02 $0.99 $1.13
======================================================
Weighted average common shares outstanding 5,601 5,970 6,039
- --------------------------------------------------------------------======================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 2
CONSOLIDATED BALANCE SHEETS
Versa Technologies, Inc.
(Dollars in Thousands, except share and per share amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
March 31 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,127 $ 14,746
Receivables, less allowance of $231 in 1997, and
$207 in 1996 13,203 11,410
Inventories 11,501 7,743
Other current assets 1,467 1,183
---------------------------------
Total current assets 27,298 35,082
---------------------------------
Property, Plant, and Equipment - at cost:
Land 752 591
Buildings 10,159 9,196
Machinery and equipment 38,035 36,286
---------------------------------
48,946 46,073
Less accumulated depreciation 25,570 25,556
---------------------------------
23,376 20,517
Intangibles 11,127 1,530
Other Non-Current Assets 190 309
---------------------------------
$61,991 $57,438
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 2,981 $ -
Accounts payable 3,843 3,691
Accrued expenses 4,682 3,391
Income taxes 317 87
Employee stock purchase and payroll savings plan 47 -
---------------------------------
Total current liabilities 11,870 7,169
---------------------------------
Deferred Income Taxes 2,059 820
Deferred Pension, Deferred Compensation and
Postretirement Benefit Expense 2,936 2,465
Shareholders' Equity:
Preferred Shares -- authorized 1,000,000, $.01 par value;
none issued -- --
Common Shares -- authorized, 10,000,000, $.01 par value;
issued 6,063,200 in 1997 and 1996 61 61
Additional paid-in capital 18,648 18,681
Retained earnings 32,968 31,471
---------------------------------
51,677 50,213
Less treasury stock, at cost - 482,667 shares in 1997 and 234,036 in 1996 6,551 3,229
---------------------------------
Total shareholders' equity 45,126 46,984
---------------------------------
$61,991 $57,438
======================================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Versa Technologies, Inc.
(Dollars in Thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Years Ended March 31, 1997, 1996, and 1995 Common Stock Additional
---------------------------- paid in
Shares Amount capital
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at March 31, 1994 6,063 $ 61 $ 18,789
Exercise of stock options - 31,122 treasury shares were reissued -- -- (108)
Tax benefit from exercise of stock options -- -- 29
Purchase of treasury stock -- 42,500 shares -- -- --
Net earnings -- -- --
Cash dividends declared -- $.68 per share* -- -- --
-----------------------------------------------
Balance at March 31, 1995 6,063 61 18,710
Exercise of stock options - 34,542 treasury shares were reissued -- -- (52)
Tax benefit from exercise of stock options -- -- 23
Purchase of treasury stock -- 217,200 shares -- -- --
Net earnings -- -- --
Cash dividends declared -- $.74 per share** -- -- --
-----------------------------------------------
Balance at March 31, 1996 6,063 61 18,681
Exercise of stock options - 13,969 treasury shares were reissued -- -- (50)
Tax benefit from exercise of stock options -- -- 17
Purchase of treasury stock -- 262,600 shares -- -- --
Net earnings -- -- --
Cash dividends declared -- $.75 per share*** -- -- --
-----------------------------------------------
Balance at March 31, 1997 6,063 $ 61 $ 18,648
===============================================
<CAPTION>
Total
Years Ended March 31, 1997, 1996, and 1995 Retained Treasury Shareholders'
earnings stock Equity
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at March 31, 1994 $ 27,300 $ (590) $ 45,560
Exercise of stock options - 31,122 treasury shares were reissued -- 459 351
Tax benefit from exercise of stock options -- -- 29
Purchase of treasury stock -- 42,500 shares -- (569) (569)
Net earnings 6,806 -- 6,806
Cash dividends declared -- $.68 per share* (4,109) -- (4,109)
----------------------------------------------------
Balance at March 31, 1995 29,997 (700) 48,068
Exercise of stock options - 34,542 treasury shares were reissued -- 472 420
Tax benefit from exercise of stock options -- -- 23
Purchase of treasury stock -- 217,200 shares -- (3,001) (3,001)
Net earnings 5,899 -- 5,899
Cash dividends declared -- $.74 per share** (4,425) -- (4,425)
----------------------------------------------------
Balance at March 31, 1996 31,471 (3,229) 46,984
Exercise of stock options - 13,969 treasury shares were reissued -- 187 137
Tax benefit from exercise of stock options -- -- 17
Purchase of treasury stock -- 262,600 shares -- (3,509) (3,509)
Net earnings 5,703 -- 5,703
Cash dividends declared -- $.75 per share*** (4,206) -- (4,206)
----------------------------------------------------
Balance at March 31, 1997 $ 32,968 $ (6,551) $ 45,126
====================================================
</TABLE>
* Includes special cash dividend of $.33 per share.
** Includes special cash dividend of $.35 per share.
*** Includes special cash dividend of $.35 per share.
See notes to consolidated financial statements.
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASHFLOWS
Versa Technologies, Inc.
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Years Ended March 31 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 5,703 $5,899 $6,806
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 3,437 3,200 2,922
Amortization 223 34 34
Provision for losses on receivables (31) 45 52
Provision for deferred income taxes (92) 402 (119)
(Gain)loss on disposition of plant and equipment (14) (18) 15
Loss on sale of businesses 778
Changes in current assets and liabilities, net of effect
of business acquired:
Receivables (720) (2,051) (221)
Inventories (2,070) 65 (1,064)
Other current assets (68) 483 (427)
Accounts payable (700) 1,941 (483)
Accrued expenses 422 (10) 645
Income taxes payable (1) (408) 59
Employee stock purchase and payroll savings plan 47 (119) 83
Deferred pension, postretirement
benefits and compensation expense 592 3 369
---------------------------------------------------------
Net cash provided by operating activities 7,506 9,466 8,671
---------------------------------------------------------
Cash Flows from Investing Activities:
Proceeds from disposition of plant and equipment 39 80 37
Capital expenditures (6,254) (3,836) (6,070)
Proceeds from sale of businesses 4,483
Acquisition of business, net of cash acquired (14,747)
Other 37 52 16
---------------------------------------------------------
Net cash used in investing activities (16,442) (3,704) (6,017)
---------------------------------------------------------
Cash Flows from Financing Activities:
Net borrowings under line of credit agreement 2,877
Proceeds from exercise of common stock options 155 443 380
Purchase of treasury stock (3,509) (3,001) (569)
Dividends paid (4,206) (4,425) (4,109)
---------------------------------------------------------
Net cash used in financing activities (4,683) (6,983) (4,298)
---------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (13,619) (1,221) (1,644)
Cash and Cash Equivalents at Beginning of Year 14,746 15,967 17,611
---------------------------------------------------------
Cash and Cash Equivalents at End of Year $1,127 $14,746 $15,967
=========================================================
Supplemental Cash Flow Information - cash paid
during the year for:
Interest $ 93
Income taxes $ 3,914 $ 3,244 $ 3,997
============================================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Versa Technologies, Inc.
Years ended March 31, 1997, 1996 and 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany items and transactions have been eliminated in consolidation.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents -- The Company considers all temporary investments purchased
with maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments -- The Company believes the carrying amount
of its financial instruments (cash and cash equivalents, accounts receivable,
short-term debt and accounts payable) is a reasonable estimate of the fair
value of these instruments.
Inventories -- Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method for all inventories
excluding the Electronics Segment, which uses first-in-first-out (FIFO) method
to determine cost. At March 31, 1997 approximately 77% of total inventories
were valued under the LIFO method.
Property, Plant and Equipment -- Property, plant and equipment are carried at
cost.
Depreciation is provided over the useful lives of plant and equipment using the
straight-line method for financial reporting purposes. Buildings are being
depreciated over lives ranging from 20 to 30 years. Machinery and equipment
are being depreciated over lives ranging from 3 to 10 years. Accelerated
methods are used for income tax purposes. Provision is made for deferred
income tax applicable to the difference in depreciation charges.
Intangibles -- Intangibles include $797,000 relating to pre-1970 acquisitions
that are not being amortized. Included in intangible assets at March 31, 1997
was $10.3 million which is related to the acquisition of Eder Industries, Inc.
(See Note 2). Goodwill of $8.2 million represented the excess of the
acquisition cost over the fair value of net assets acquired and is amortized on
a straight-line basis over 40 years. Other acquired intangibles (principally
customer or employment related items) were $2.1 million and are being amortized
on a straight-line basis over periods ranging from 3 to 40 years. Amortization
expenses since the date of acquisition (October 30, 1996) to March 31, 1997
for the above items was approximately $206,000. Intangibles are stated net of
accumulated amortization of $234,000 at March 31, 1997 and $233,000 at March
31, 1996.
The Company periodically evaluates the carrying value of intangible assets in
accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of".
Pension Plans -- Pension expense recorded under the plans includes normal cost
and amortization of past service cost in accordance with Financial Accounting
Standards Statement No. 87 "Employers' Accounting for Pensions".
Revenue Recognition -- The Company recognizes revenue on the accrual basis of
accounting, upon the shipment of products.
Product Waranties -- The estimated cost for product warranties are accrued for
and charged to operations as the related products are shipped.
Accounting Pronouncements -- In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128 "Earnings per Share". The Company is
currently in the process of evaluating the accounting and disclosure effects of
the statement, which is required to be adopted during the third quarter of
fiscal 1998.
<PAGE> 6
2. ACQUISITION
On October 30, 1996, the Company acquired 100% of the capital stock of Eder
Industries, Inc. ("Eder") for $15,382,000. The funds used to acquire Eder were
borrowed ($4.8 million) under a revolving business note agreement, with the
balance ($10.6 million) coming from the sale of short term cash investments.
The acquisition was accounted for by the purchase method and, accordingly,
Eder's results of operations have been included with the Company's results
since the acquisition date. The fair value of assets acquired and liabilities
assumed totaled $7.6 million (of which $700,000 was cash) and $2.2 million,
respectively. The excess of the purchase price over the fair value of net
assets acquired ($8.2 million) is being amortized on a straight-line basis over
40 years.
The unaudited pro forma information below represents combined results of
operations as if the acquisition had occurred at the beginning of the
respective years presented. The unaudited pro forma information is not
necessarily indicative of the results of operations of the combined Company had
the acquisition occurred at the beginning of the years presented, nor is it
necessarily indicative of future results.
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
(In thousands, except per share data)
- -------------------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues $97,977 $87,826
Net Earnings (1) 5,870 5,873
Earnings per share (1) 1.05 .98
</TABLE>
(1) The 1997 period includes a $652,000, or $.115 per share, after-tax loss
on the disposition of Moxness Thermoplastics, Inc. and Lovdahl
Manufacturing.
3. SALE OF BUSINESSES
During fiscal 1997, the Company sold its two plastic molding operations. The
two units, Moxness Thermoplastics, Inc. ("Thermo") and Lovdahl Manufacturing
("Lovdahl") were part of the Engineered Materials Segment. Effective September
1, 1996, 100% of the stock of Thermo was acquired by General Plastics
Corporation for $3.4 million. Based on asset values on the effective date of
the sale, the sale resulted in an after-tax loss of $498,000 or $0.088 per
share, which was recorded in the second quarter. On March 31, 1997, all the
assets of Lovdahl were sold to Kurz-Kasch for $1.47 million. Based on asset
values on the effective date of the sale, the sale resulted in an after-tax
loss of $154,000 or $0.027 per share, which was recorded in the fourth quarter.
The decision to divest of both units is consistent with management's strategy
to concentrate on the Company's core businesses, moving away from commodity
products and focusing on more profitable niche markets.
Combined sales and operating losses for Thermo and Lovdahl for fiscal 1997 were
$3.9 million and $240,000 respectively. These results include a full year of
operations for Lovdahl and five months for Thermo. For fiscal 1996 the
combined sales and operating losses were $5.3 million and $498,000,
respectively.
4. INVENTORIES
Inventories at March 31 consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996
------- -------
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw Materials $ 7,692 $ 5,348
Work in Process 4,527 2,965
Finished Goods 1,201 1,399
------- -------
FIFO Inventories (approximates current cost) 13,420 9,712
LIFO Reserve (Electronics Segment excluded) (1,919) (1,969)
------- -------
LIFO Inventories $11,501 $ 7,743
======= =======
</TABLE>
<PAGE> 7
5. SHORT-TERM DEBT
At March 31, 1997, the Company's borrowings under a $15 million unsecured line
of credit agreement were $3.0 million. The line bears interest at a variable
rate based on the current thirty-day LIBOR rate plus 75 basis points. The rate
at March 31, 1997 was 6.18%. The line of credit renews annually on July 31.
6. CAPITAL STOCK
The Company's Board of Directors has the authority to determine the relative
rights and preferences of any series it may establish with respect to the
1,000,000 shares of $.01 par value authorized preferred shares. No preferred
stock is issued or outstanding.
On December 13, 1988, the Board of Directors adopted a common stock shareholder
rights plan ("Rights") which entitles each shareholder of record on December
21, 1988 to purchase Series A Junior Participating Preferred Stock
("Preferred") upon the occurrence of certain events. The Rights will be
exercisable the twentieth business day after a person or group acquires 20% of
the Company's common stock, or makes an offer to acquire 30% or more of the
Company's common stock. When exercisable, each right entitles the holder to
purchase for $60 one one-hundredth of a share of Preferred for each share of
common stock owned. Each share of Preferred will be entitled to a minimum
preferential quarterly dividend of $5.00 per share, but not less than an
aggregate dividend of 100 times the common stock dividend. Each share will
have 100 votes, voting together with the common stock. In the event of any
merger, each share of Preferred will be entitled to receive 100 times the
amount received per share of common stock. The Rights expire on December 21,
1998.
The Company has adopted a program to repurchase up to 900,000 shares or 15% of
its common stock.. The shares will be held for issuance under the Company's
various stock plans. As of March 31, 1997, 522,300 shares had been repurchased
at a cost of $7,080,000.
7. STOCK OPTIONS
Under the Company's 1982 Incentive Stock Option Plan no further options will be
granted. However, options previously granted under this Plan will remain
outstanding until they are exercised or canceled.
Under the 1992 Versa Technologies, Inc. Employee Incentive Stock Option Plan,
options granted have an exercise price equal to 100% of the fair market value
at the date of grant. Options granted become exercisable in 25% annual
increments beginning one year from the date of grant and have a maximum term of
ten years. At the Company's annual shareholders' meeting on July 23, 1996,
shareholders ratified an amendment to the plan increasing the number of shares
available for grant by 200,000 shares to a total of 500,000 shares.
The Company grants non-qualified stock options to the Company's non-employee
directors and secretary. Options granted have an exercise price equal to 100%
of the fair market value at the date of grant. Options become exercisable in
annual increments of 25% and expire the earlier of ten years from the date of
grant or termination as an officer or director of the Company.
<PAGE> 8
A combined summary of changes in options is as follows:
<TABLE>
<CAPTION>
Shares
---------------
Weighted-average
Incentive Non-Qualified exercise price
--------- ------------- ----------------
<S> <C> <C> <C>
Outstanding at March 31, 1994 217,294 25,500 $12.53
Granted 184,500 35,000 14.05
Exercised (14,550) (20,300) 11.73
Canceled (17,400) (100) 12.96
-------- --------
Outstanding at March 31, 1995 369,844 40,100 13.43
Granted 17,500 13.64
Exercised (23,450) 11.86
Canceled (48,000) (5,000) 13.97
-------- --------
Outstanding at March 31, 1996 315,894 35,100 13.46
Granted 62,500 13.01
Exercised (13,869) 9.87
Canceled (10,000) (5,100) 14.13
-------- --------
Outstanding at March 31, 1997 354,525 30,000 13.49
======== ========
Exercisable at March 31, 1997 187,703 15,000 13.36
======== ========
Shares available for future grants
at March 31, 1997 214,000
========
</TABLE>
The options outstanding at March 31, 1997 have exercise prices between $12.50 -
$16.00.
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-based Compensation" encourages, but does not require companies to record
compensation for stock-based employee compensation plans at fair value. The
Company accounts for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock. No compensation cost has been recognized with respect to the issuance
of stock options.
If the fair value method of accounting for stock options prescribed by SFAS No.
123 had been used, the expense relating to the stock options would have been
$40,000 for 1997 and none for 1996. The change to pro forma net earnings would
have been immaterial and there would not have been a change in pro forma
earnings per share. The pro forma effect on net earnings is not representative
of the pro forma effect on net earnings that will be disclosed in future years
because it does not take into consideration pro forma compensation expense
relating to grants made prior to 1996. The fair value of each option grant was
estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions: risk-free interest rate of 6.5%; expected
dividend yield of 3%; expected lives of 4.2 years and 6 years, respectively for
1997 and 1996; and expected volatility of 30%.
<PAGE> 9
8. EMPLOYEE STOCK PURCHASE AND PAYROLL SAVINGS PLAN
Under the 1993 Employee Stock Purchase and Payroll Savings Plan, 11,092 shares
of the Company's common stock at $12.83 per share were issued to employees in
the fiscal year ended March 31, 1996. The Plan terminated in January 1996.
At the Company's annual shareholders' meeting on July 23, 1996, shareholders
ratified the adoption of the Versa Technologies, Inc. 1996 Employee Stock
Purchase and Payroll Savings Plan.
Under the 1996 Stock Purchase and Payroll Savings Plan, options for 35,367
shares of the Company's common stock were subscribed to in December 1996 at a
price of $12.27 per share, which was 90% of the closing price of the common
stock on May 17, 1996. Payroll savings equal to the total option price will be
accumulated over a two-year period ending in December 1998. Interest at an
annual rate of 3%, compounded quarterly, is credited to each participant's
payroll savings account. Subject to certain restrictions, the Plan permits
participants to exercise their option to the extent of accumulated funds in
their payroll savings accounts during January 1998 and January 1999, or upon
termination of employment. Payroll savings and interest not applied to the
purchase of shares by a participant will be paid in cash. A participant may
withdraw from the Plan at any time.
As of March 31, 1997, options for 34,328 shares were outstanding to 235
participants in the Plan. (These options are not included in the table in Note
7.)
9. EMPLOYEE BENEFIT PLANS
The Company maintains two qualified defined contribution plans, which in total
cover virtually all employees. Both plans provide for discretionary matching
contributions. The expense under these plans for 1997 was $128,000. There was
no expense for 1996 of 1995.
The Company has four non-contributory, defined benefit pension plans covering
approximately 70% of all employees. (The Electronics Segment employees do not
participate.) Three of the plans cover hourly production employees and provide
benefits of stated amounts for specific periods of service. The other plan
covers all salaried, administrative and clerical employees and provides
benefits based on years of service and compensation.
The Company makes actuarially determined contributions to a trust fund for
these plans which represents the maximum allowable for deduction in
determination of Federal taxable income. Trust assets consist primarily of
participating units in common stock and bond funds.
Net pension costs for fiscals 1997, 1996, and 1995 for the defined benefit
plans consist of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service costs - benefits earned during the period $ 503 $ 414 $ 482
Interest on projected benefit obligation 793 710 660
Return on plan assets (939) (1,491) (451)
Amortization and deferral of unrecognized amounts 39 685 (279)
----- ------ -----
Net pension cost $ 396 $ 318 $ 412
===== ====== =====
</TABLE>
<PAGE> 10
The defined benefit plans' funded status at March 31, 1997 and March 31, 1996
was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 8,498 $ 7,312
======= =======
Accumulated benefit obligation $ 9,046 $ 8,450
======= =======
Projected benefit obligation $10,850 $10,279
Plan assets at fair value 11,185 10,592
------- -------
Plan assets in excess of projected benefits (335) (312)
Unrecognized obligations (75) (78)
Unrecognized prior service cost (36) (27)
Unrecognized net gain 1,840 1,459
------- -------
Accrued pension cost $ 1,394 $ 1,041
======= =======
</TABLE>
The projected benefit obligations assume a 7.75% actuarial discount rates and
(for the compensation based plan) 5% average annual salary increases. The
expected long term rate of return on plan assets was 8.5%.
In place of participation in any of the above defined benefit pension plans for
tool makers employed at one of the Company's manufacturing facilities, the
Company makes cash contributions to a labor management (union) multi-employer
pension fund based on hours worked, in accordance with a negotiated labor
contract.
The Company also has an unfunded supplemental pension agreement with a key
executive officer. Actuarially computed provisions for this agreement were
$50,000, $48,000 and $48,000 in fiscal 1997, 1996 and 1995, respectively.
The Company provides limited pre-Medicare-eligibility health insurance and
minimal life insurance benefits to a small group of retired employees who
attain specified age and years of service requirements. The periodic expense
for postretirement benefits was $33,000 and $27,000 for the years ended March
31, 1997 and 1996, respectively. The Company's policy is to fully accrue for
its postretirement benefits. This accrual was $531,000 and $499,000 at March
31, 1997 and 1996, respectively.
10. INCOME TAXES
Income tax expense consists of the following components:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $3,190 $2,234 $3,364
State 742 604 720
------ ------ ------
3,932 2,838 4,084
------ ------ ------
Deferred:
Federal (78) 322 (104)
State (14) 80 (15)
------ ------ ------
(92) 402 (119)
------ ------ ------
$3,840 $3,240 $3,965
====== ====== ======
</TABLE>
<PAGE> 11
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's net deferred tax liability as of March 31, 1997 and 1996 were
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Vacation pay reserve $ 301 $ 250
Pension accrual 740 610
Inventory related 355 217
Postretirement benefits 199 185
Health insurance reserve 222 161
Deferred compensation 340 191
Other 290 284
------ -----
2,447 1,898
------ -----
Deferred tax liabilities:
Property plant and equipement 2,463 1,848
Intangible assets 826 -0-
Other 40 50
------ -----
3,329 1,898
------ -----
Net deferred tax liability $ (882) $ -0-
====== =====
</TABLE>
Total income tax expense differs from the amounts computed by applying the
Federal income tax rate to earnings before income taxes for the following
reasons:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory Federal rate 34.0% 34.0% 34.0%
State income taxes, net of
Federal income tax benefit 5.2 4.9 4.3
Capital loss on sale of businesses 1.6 -- --
Foreign Sales Corporation
(FSC) earnings (0.4) (0.3) (0.3)
Federal tax-exempt bond interest (0.9) (2.2) (1.7)
Research & development credit -- (1.3) --
Other 0.7 0.4 0.5
----- ----- -----
40.2% 35.5% 36.8%
===== ===== =====
</TABLE>
<PAGE> 12
11. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Wages & commissions $1,522 $ 800
Vacations 992 818
Taxes, other than income taxes 326 277
Employee benefits 1,121 717
Other accruals 721 779
------ ------
Totals $4,682 $3,391
====== ======
</TABLE>
12. EARNINGS PER SHARE CALCULATION
Weighted average shares outstanding exclude common stock equivalents because
their dilutive effect is not significant.
13. SIGNIFICANT CUSTOMERS
One customer accounted for approximately 18%, 14% and 9.6% of consolidated
revenues during fiscal 1997, 1996 and 1995, respectively.
14. INDUSTRY SEGMENT INFORMATION
The Company comprised three business segments serving diverse markets. The
Electronics Segment designs and manufactures custom electronic and electrical
systems for a broad range of applications. The Engineered Materials Segment
fabricates custom components from elastomers for special applications requiring
a high degree of engineering expertise and product quality. The Fluid Power
Segment manufactures custom engineered cylinders; hydraulic devices that raise,
lower, stabilize, or level semitrailers, trucks, recreational vehicles and a
variety of off-highway vehicles and equipment; and electrically powered systems
that serve as drive mechanisms for slideout rooms on trailers and recreational
vehicles. Certain previously reported segment information has been
reclassified to conform with the current presentation.
<PAGE> 13
Selected segment information is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
(Dollars in Thousands) 1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES:
Fluid Power $48,038 $36,186 $29,055
Engineered Materials 32,195 35,463 39,064
Electronics 8,509(1) -- --
Intersegment* (1,146) (950) (1,154)
------- ------- -------
Sales to unaffiliated customers $87,596 $70,699 $66,965
======= ======= =======
OPERATING INCOME:
Fluid Power $ 9,946 $ 7,620 $ 5,874
Engineered Materials 271 1,361 4,975
Electronics 653(1) -- --
Unallocated Corp. expenses & consolidating adj. -- net (908) (772) (857)
------- ------- -------
Total operating income 9,962 8,209 9,992
OTHER INCOME (EXPENSE)--NET (419) 930 779
------- ------- -------
INCOME BEFORE INCOME TAXES $ 9,543 $ 9,139 $10,771
======= ======= =======
IDENTIFIABLE ASSETS:
Fluid Power $18,846 $14,790 $11,651
Engineered Materials 20,322 24,581 25,763
Electronics 18,944 -- --
Corporate 3,879 18,067 19,366
------- ------- -------
$61,991 $57,438 $56,780
======= ======= =======
DEPRECIATION & AMORTIZATION:
Fluid Power $ 702 $ 595 $ 550
Engineered Materials 2,466 2,496 2,270
Electronics 340(1) -- --
Corporate 152 143 136
------- ------- -------
$ 3,660 $ 3,234 $ 2,956
======= ======= =======
CAPITAL EXPENDITURES:
Fluid Power $ 2,069 $ 901 $ 1,113
Engineered Materials 3,743 2,766 4,591
Electronics 135(1) -- --
Corporate 307 169 366
------- ------- -------
$ 6,254 $ 3,836 $ 6,070
======= ======= =======
</TABLE>
(1) Amounts are for the 5 month period October 30, 1996 to March 31, 1997.
* Intersegment sales are priced on a negotiated basis not in excess of
competitive market value.
Corporate assets consist primarily of headquarters property and equipment at
March 31, 1997. Prior years included cash and cash equivalents.
The Company has no foreign operations and export sales were not significant.
<PAGE> 14
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Company is responsible for the objectivity of the accompanying consolidated
financial statements, which have been prepared in conformity with generally
accepted accounting principles. The financial statements of necessity include
the Company's estimates and judgments relating to matters not concluded by
year-end. Financial information contained elsewhere in the Annual Report is
consistent with that included in the financial statements.
The Company maintains a system of internal accounting controls that includes
careful selection and development of employees, division of duties and
established accounting and operating policies and procedures. Although there
are inherent limitations to the effectiveness of any system of accounting
controls, the Company believes that its system provides reasonable, but not
absolute, assurance that its assets are safeguarded from unauthorized use for
disposition and that its accounting records are sufficiently reliable to permit
the preparation of financial statements that conform in all material respects
with generally accepted accounting principles. Deloitte & Touche LLP,
independent auditors, are engaged to render an independent opinion regarding
the fair presentation in the financial statements of the Company's financial
condition and operating results. Their report appears below. Their
examination was made in accordance with generally accepted auditing standards
and included a review of the system of internal accounting controls to the
extent they considered necessary to determine the audit procedures required to
support their opinion.
The Audit Committee of the Board of Directors is composed solely of directors
who are not employees of the Company. The Committee meets periodically and
privately with the independent auditors, and with the chief financial officer
of the Company to review matters relating to the quality of the financial
reporting of the Company, the internal accounting controls and the scope and
results of audit examinations. The Committee also reviews compliance with the
Company's statement of policy as to the conduct of its business, including
proper accounting and dealing with auditors. In addition, it is responsible
for recommending the appointment of the Company's independent auditors, subject
to shareholder ratification.
<PAGE> 15
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS
VERSA TECHNOLOGIES, INC.
RACINE, WISCONSIN
We have audited the consolidated balance sheets of Versa Technologies, Inc. and
subsidiaries as of March 31, 1997 and 1996 and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of the
three years in the period ended March 31, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements 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 consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated 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 Versa Technologies, Inc. and
subsidiaries as of March 31, 1997 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
May 9, 1997
<PAGE> 1
EXHIBIT 99.2
VERSA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS*
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
-------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................................. $ 1,150 $ 1,127
Receivables, net of allowances......................................... 14,001 13,203
Inventories............................................................ 11,876 11,501
Prepaid expenses and taxes............................................. 1,262 1,467
-------- --------
Total current assets.............................................. 28,289 27,298
PROPERTY, PLANT, AND EQUIPMENT**......................................... 23,463 23,376
INTANGIBLES.............................................................. 11,005 11,127
OTHER ASSETS............................................................. 176 190
-------- --------
$ 62,933 $61,991
======= =======
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term debt........................................................ $ -- $ 2,981
Accounts payable....................................................... 5,176 3,843
Accrued expenses....................................................... 4,535 4,682
Income taxes........................................................... 1,301 317
Employee stock purchase and payroll savings plan....................... 87 47
-------- --------
Total current liabilities......................................... 11,099 11,870
DEFERRED INCOME TAXES.................................................... 2,020 2,059
DEFERRED PENSION, DEFERRED COMPENSATION AND POSTRETIREMENT BENEFITS
EXPENSE................................................................ 3,078 2,936
SHAREHOLDERS' EQUITY..................................................... 46,736 45,126
-------- --------
$ 62,933 $61,991
======= =======
</TABLE>
- -------------------------
* In thousands of dollars. March 31, 1997 figures condensed from audited
financial statements.
** Net of accumulated depreciation of $26,460,000 at June 30, 1997 and
$25,570,000 at March 31, 1997.
3
<PAGE> 2
VERSA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)*
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1997 1996
------- -------
<S> <C> <C>
NET SALES................................................................. $27,057 $19,365
Cost of Sales........................................................... 19,524 14,000
------- -------
GROSS PROFIT.............................................................. 7,533 5,365
Selling and administrative expenses....................................... 4,107 2,940
------- -------
OPERATING INCOME.......................................................... 3,426 2,425
------- -------
OTHER INCOME
Interest (expense) income............................................... (4) 160
Miscellaneous, net...................................................... 42 34
------- -------
38 194
------- -------
EARNINGS BEFORE INCOME TAXES.............................................. 3,464 2,619
INCOME TAXES.............................................................. 1,351 975
------- -------
NET EARNINGS.............................................................. $ 2,113 $ 1,644
======= =======
NET EARNINGS PER SHARE.................................................... $ .38 $ 0.29
======= =======
Average shares outstanding................................................ 5,581 5,729
======= =======
</TABLE>
- -------------------------
* Amounts are in thousands except earnings per share. Interim results are not
necessarily indicative of full year and are subject to audit.
4
<PAGE> 3
VERSA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)*
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net earnings............................................................ $ 2,113 $ 1,644
Depreciation............................................................ 922 848
Amortization............................................................ 126 9
Provision for losses on accounts receivable............................. 21 15
Increase in deferred liabilities........................................ 104 139
(Loss) gain on disposition of equipment................................. (8) 1
(Increase) decrease in current assets other than cash and cash
equivalents.......................................................... (987) 279
Increase (decrease) in current liabilities.............................. 2,210 (207)
------- -------
Net cash provided by operating activities.......................... 4,501 2,728
------- -------
Cash flows from investing activities:
Capital expenditures.................................................... (1,010) (1,704)
Other................................................................... 16 24
------- -------
Net cash used in investing activities.............................. (994) (1,680)
------- -------
Cash flows from financing activities:
Net payments under line of credit agreement............................. (2,981) --
Dividends paid.......................................................... (558) (580)
Purchase of treasury stock.............................................. -- (3,105)
Sale of stock under option plans........................................ 55 109
------- -------
Net cash used in financing activities.............................. (3,484) (3,576)
------- -------
Increase (decrease) in cash and cash equivalents.......................... 23 (2,528)
Cash and cash equivalents at beginning of period.......................... 1,127 14,746
------- -------
Cash and cash equivalents at end of period................................ $ 1,150 $12,218
======= =======
Supplemental Disclosures of Cash Flow Information
Cash paid during period for:
Interest................................................................ $ 4 --
Income taxes............................................................ $ 405 $ 356
</TABLE>
- -------------------------
* Amounts are in thousands.
5
<PAGE> 4
VERSA TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES --
The consolidated balance sheet as of June 30, 1997 and the consolidated
statements of earnings and cash flows for the three-month periods ended June 30,
1997 and 1996 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of such financial statements have been
included. Such adjustments consisted only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-Q,
and do not contain certain information included in the annual financial
statements and notes of Versa Technologies, Inc. and subsidiaries for the year
ended March 31, 1997.
2. INVENTORIES --
Interim inventories are based on perpetual records which are partially
verified by interim physical counts.
3. INTANGIBLES --
Intangibles include $797,000 relating to pre-1970 acquisitions that are not
being amortized. Included in intangible assets at June 30, 1997 was $10.2
million which is related to the acquisition of Eder Industries, Inc. (See Note
6). Goodwill of $8.1 million represented the excess of the acquisition cost over
the fair value of net assets acquired and is amortized on a straight-line basis
over 40 years. Other acquired intangibles (principally customer or employment
related items) were $2.1 million and are being amortized on a straight-line
basis over periods ranging from 3 to 40 years. Amortization expenses for the
quarter ended June 30, 1997 for the above items was approximately $126,000.
4. SHORT-TERM DEBT --
At June 30, 1997, the Company had no borrowings under a $15 million
unsecured line of credit agreement. The line bears interest at a variable rate
based on the current thirty-day LIBOR rate plus 75 basis points. The line of
credit renews annually on July 31.
5. SHAREHOLDERS' EQUITY --
Shareholders' equity is composed of the following elements (in thousands):
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
-------- ---------
<S> <C> <C>
Common stock, par value $.01 per share..................... $ 61 $ 61
Additional paid-in capital................................. 18,649 18,648
Retained earnings.......................................... 34,523 32,968
-------- ---------
53,233 51,677
Less treasury shares at cost............................... 6,497 6,551
-------- ---------
$ 46,736 $45,126
======= =======
</TABLE>
Total shares of common stock outstanding net of treasury shares was
5,584,458 at June 30, 1997 and 5,580,533 at March 31, 1997.
During the three months ended June 30, 1997, 3,905 shares of treasury stock
were re-issued under the provision of the Company's 1982 Incentive Stock Option
Plan (the 1982 Plan), the Company's 1992 Incentive Stock Option Plan (the 1992
Plan) and the Company's 1996 Employee Stock Purchase and Payroll Savings
6
<PAGE> 5
VERSA TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Plan (the 1996 Plan). Treasury stock cost basis in excess of the proceeds
received was charged to additional paid-in capital.
As of June 30, 1997, 76,650 shares of common stock were reserved for issue
under the Company's 1982 Plan; 486,125 shares were reserved for issue under the
Company's 1992 Plan; 30,643 shares were reserved for issue under the Company's
1996 Plan; and 30,000 shares were reserved for non-qualified stock options held
by outside directors and an outside officer of the Company.
During the three months ended June 30, 1997, retained earnings was credited
with net income of $2,113,000 and charged with $558,000 for dividends paid.
6. EARNINGS PER SHARE CALCULATION --
Earnings per share have been computed on the basis of weighted average
shares outstanding during the respective interim periods. Common share
equivalents were excluded because their dilutive effect is not significant.
7
