<PAGE>
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): July 31, 1998
APPLIED POWER INC.
-----------------
(Exact name of Registrant as specified in its charter)
Wisconsin 1-11288 39-0168610
--------- ------- ----------
(State of incorporation) (Commission File No.) (I.R.S. Employer Id. No.)
13000 West Silver Spring Drive
Butler, Wisconsin 53007
Mailing address: P. O. Box 325, Milwaukee, Wisconsin 53201
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(414) 781-6600
--------------
(Registrant's telephone number, including area code)
1
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Item 2. Acquisition or Disposition of Assets
Merger with ZERO Corporation
On July 31, 1998, ZERO Corporation, a Delaware corporation ("ZERO"), became
a wholly owned subsidiary of Applied Power Inc. ("API") through the merger of
STB Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of API ("Acquisition"), with and into ZERO (the "Merger") pursuant to
an Agreement and Plan of Merger by and among API, ZERO and Acquisition dated as
of April 6, 1998 (the "Merger Agreement"). Subject to the terms and conditions
of the Merger Agreement, each share of Common Stock, par value $.01 per share,
of ZERO ("ZERO Common Stock") outstanding immediately prior to the effective
time of the Merger was converted into 0.85 (the "Exchange Ratio") shares of API
Class A Common Stock, par value $.20 per share ("API Common Stock"), with
resulting fractional share interest to be paid in cash. Each outstanding option
to purchase shares of ZERO Common Stock (a "ZERO Option") under ZERO's 1994
Stock Option Plan and 1988 Stock Option Plan, each as amended (collectively, the
"Plans"), was assumed by API and converted into an option to purchase shares of
API Common Stock on the same terms and conditions as were applicable under such
ZERO Option, as adjusted to reflect the Exchange Ratio. Immediately prior to the
effective time of the Merger, there were 12,523,060 shares of ZERO Common Stock
outstanding and there were ZERO Options outstanding under the Plans to purchase
an aggregate of 623,337 shares of ZERO Common Stock. Accordingly, a total of
approximately 11,174,000 shares of API Common Stock were issued in the Merger or
are issuable upon the exercise of ZERO Options assumed pursuant to the Merger
Agreement (less fractional interests paid in cash). The Merger will be treated
as a tax-free reorganization for federal income tax purposes and will be
accounted for as a pooling of interests.
The shareholders of API approved the issuance of shares of API Common Stock
pursuant to the Merger Agreement to effect the transactions contemplated by the
Merger Agreement by the requisite vote at the special meeting of shareholders of
API held on July 31, 1998. The stockholders of ZERO approved and adopted the
Merger Agreement by the requisite vote at the special meeting of stockholders of
ZERO held on July 31, 1998.
The Exchange Ratio and the other terms of the Merger Agreement were
determined by arms-length negotiations between the parties.
ZERO Common Stock ceased to trade on the New York Stock Exchange and the
Pacific Exchange on July 31, 1998 and will be delisted and deregistered. API
Common Stock, including the additional shares issued pursuant to the Merger
Agreement or issuable upon the exercise of ZERO Options assumed pursuant to the
Merger Agreement, is listed on the New York Stock Exchange or authorized for
listing upon official notice of issuance.
As contemplated by the Merger Agreement, the officers of API who were the
directors and officers of Acquisition immediately prior to the Merger became the
directors and officers of ZERO, as the surviving corporation, at the effective
time of the Merger, replacing the persons who were the directors and officers of
ZERO immediately prior to the Merger.
ZERO's operations have two business segments: "Enclosures and Accessories"
for the electronics industry and "Other." ZERO's primary business is "Enclosures
and Accessories" for the system packaging, thermal management and engineered
case requirements of the telecommunications, instrumentation and data processing
markets of the electronics industry. ZERO's "Other" segment serves the air cargo
and consumer/other markets. Air Cargo Equipment Corporation, a subsidiary of
ZERO, designs, manufactures and markets a broad range of specialized and
general-purpose cargo containers as well as a patented telescoping baggage/cargo
system. In addition, ZERO produces and markets the well-known line of ZERO
Halliburton(R) luggage, carrying cases and attaches
2
<PAGE>
for consumers worldwide, food service containers and other specialized
enclosures.
API is undertaking a thorough review of ZERO's operations and studying the
manner in which its operations can best be optimized within API, and intends to
take such actions as a result of this review as may be deemed appropriate under
the circumstances. API currently intends to continue the primary business
operations of ZERO, and to continue to use the physical assets of ZERO's primary
business operations for that purpose, while integrating such operations with its
own.
Further information concerning the Merger, the Merger Agreement and the
transactions contemplated by the Merger Agreement is contained in API's
Registration Statement on Form S-4 (No. 333-58267), which was filed with the
Securities and Exchange Commission under the Securities Act of 1933 and became
effective on July 1, 1998, and the Joint Proxy Statement of API and ZERO, which
also constitutes the Prospectus of API, included therein.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired:
The following financial statements of ZERO (Commission File No. 1-5260) are
incorporated herein by reference to pages 21 through 37 of ZERO's Annual Report
on Form 10-K for the fiscal year ended March 31, 1998 and filed herewith as
Exhibit 99.1:
<TABLE>
<CAPTION>
ZERO 10-K
Page No.
---------
<S> <C>
Consolidated Financial Statements
---------------------------------
Independent Auditors' Report 21
Statements of Consolidated Income - Years Ended March 31,
1998, 1997 and 1996 22
Consolidated Balance Sheets - March 31, 1998 and 1997 23 - 24
Statements of Consolidated Stockholders' Equity - Years Ended
March 31, 1998, 1997 and 1996 25
Statements of Consolidated Cash Flows - Years Ended March 31,
1998, 1997 and 1996 26
Notes to Consolidated Financial Statements 27 - 36
Financial Statement Schedule
----------------------------
Schedule II - Valuation and Qualifying Accounts - Years Ended
March 31, 1998, 1997 and 1996 37
</TABLE>
3
<PAGE>
(b) Pro Forma Financial Information:
The following unaudited pro forma combined consolidated financial
statements of API and subsidiaries, reflecting the acquisition of ZERO, are
filed herewith:
Introduction to Unaudited Pro Forma Combined Financial Statements of
Applied Power Inc. and ZERO Corporation.
Unaudited Pro Forma Combined Statement of Earnings for
the nine months ended May 31, 1998 and 1997.
Unaudited Pro Forma Combined Statements of Earnings for the fiscal
years ended August 31, 1997, 1996 and 1995.
Unaudited Pro Forma Combined Balance Sheet as of May 31, 1998.
Notes to Unaudited Pro Forma Combined Financial Statements.
(c) Exhibits:
See the Exhibit Index following the Signature page of this Report, which is
incorporated herein by reference.
4
<PAGE>
APPLIED POWER INC. AND ZERO CORPORATION
Introduction to Unaudited Pro Forma Combined Financial Statements
As described under Item 2 of this report, Applied Power Inc. (the "Company" or
"API") and ZERO Corporation ("ZERO") were combined through a merger of a newly
created, wholly owned subsidiary of API into ZERO. Under the Merger Agreement,
which was approved by the shareholders of both companies on July 31, 1998, each
share of ZERO Common Stock, par value $.01 per share ("ZERO Common Stock"),
issued and outstanding at July 31, 1998 was converted into 0.85 (the "Exchange
Ratio") shares of API Class A Common Stock, par value $.20 per share ("API
Common Stock").
The following Unaudited Pro Forma Combined Balance Sheet and Statements of
Earnings (the "pro forma statements") give effect to the Merger as a pooling of
interests and are based on the estimates and assumptions set forth in the notes
to such pro forma statements. The pro forma statements have been prepared by the
Company utilizing the historical consolidated financial statements of API and
ZERO. The Unaudited Pro Forma Combined Balance Sheet has been prepared as if the
Merger occurred on May 31, 1998. The Unaudited Pro Forma Combined Statements of
Earnings have been prepared as if the Merger occurred on September 1, 1994.
These pro forma statements have been prepared and included herein as required by
the rules and regulations of the Securities and Exchange Commission and are
provided for comparative purposes only. The unaudited pro forma adjustments
described in the accompanying notes are based upon preliminary estimates and
certain assumptions that management believes are reasonable. The pro forma
statements are not necessarily indicative of the future consolidated financial
position and results of operations or those which would have occurred had the
Merger been consummated as of the dates reflected in the pro forma
statements. The following pro forma financial statements do not reflect any
adjustments for the various synergies or cost reductions the Company expects to
achieve as a result of the Merger, and should be read in conjunction with the
audited historical consolidated financial statements, including the notes
thereto, of API and ZERO.
5
<PAGE>
APPLIED POWER INC. AND ZERO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
API VERSA/TEK VERO ZERO
NINE MONTHS SEPTEMBER 1, NINE MONTHS NINE MONTHS
ENDED TO ENDED SUB-TOTAL ENDED TOTAL
MAY 31, OCTOBER 6, MARCH 31, PRO FORMA MARCH 31, PRO FORMA
1998(1) 1997(1) 1998(1) ADJUSTMENTS COMBINED 1998(1) ADJUSTMENTS COMBINED
------------ ------------ ------------ ----------- --------- ------------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales.............. $667,487 $9,330 $126,159 $802,976 $194,193 $997,169
Cost of products sold.. 433,764 6,637 80,142 24 (4) 520,567 128,412 648,979
-------- ------ -------- ------- -------- -------- --------
Gross profit...... 233,723 2,693 46,017 (24) 282,409 65,781 348,190
Engineering, selling
and administrative
expenses.............. 149,579 1,302 35,397 186,278 38,098 (1,108)(3) 223,268
Amortization of
intangible assets..... 8,746 -- 354 237 (4) 11,875 -- 1,108 (3) 12,983
2,538 (5)
-------- ------ ------- ------- -------- -------- ------- --------
Operating earnings 75,398 1,391 10,266 (2,799) 84,256 27,683 111,939
Other Expenses
(Income):
Net financing costs. 15,390 (11) 437 763 (4) 26,319 2,804 29,123
9,740 (5)
Other--net........ (346) 100 -- (246) (8,016)(10) (8,262)
-------- ------ ------- ------- -------- -------- ------- --------
Net Earnings from
Continuing Operations
Before Income Tax
Expense............... 60,354 1,302 9,829 (13,302) 58,183 32,895 91,078
Income Tax Expense(11). 21,299 -- 3,441 (201)(4) 21,261 13,318 34,579
(3,278)(5)
-------- ------ ------- ------- -------- -------- ------- --------
Net Earnings from
Continuing Operations. $ 39,055 $1,302 $ 6,388 $(9,823) $ 36,922 $ 19,577 (10) $ -- $ 56,499
======== ====== ======= ======= ======== ======== ======= ========
Net earnings from
continuing operations
per common and
equivalent share:
Basic............. $ 1.41 $ 1.33 $ 1.58 (10) $ 1.48
Diluted........... $ 1.33 $ 1.25 $ 1.55 (10) $ 1.41
Common and equivalent
shares used in
computing per share
amounts:
Basic............. 27,790 27,790 12,365 (1,855)(2) 38,300
Diluted........... 29,426 29,426 12,651 (1,898)(2) 40,179
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
6
<PAGE>
APPLIED POWER INC. AND ZERO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
API ZERO
NINE MONTHS NINE MONTHS
ENDED ENDED
MAY 31, MARCH 31, PRO FORMA
1997 (1) 1997 (1) ADJUSTMENTS COMBINED
------------ ------------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net Sales................... $484,105 $170,778 $654,883
Cost of products sold....... 298,443 115,221 413,664
-------- -------- --------
Gross profit........... 185,662 55,557 241,219
Engineering, selling and
administrative expenses.... 127,525 33,550 (901)(3) 160,174
Amortization of intangible
assets..................... 5,046 -- 901 (3) 5,947
-------- -------- ------- --------
Operating earnings..... 53,091 22,007 75,098
Other Expenses (Income):
Net financing costs.... 8,963 3,105 12,068
Other--net............. (1,146) (1,149) (2,295)
-------- -------- ------- --------
Earnings from Continuing
Operations Before Income
Tax Expense................ 45,274 20,051 65,325
Income Tax Expense (11)..... 15,167 7,963 23,130
-------- -------- ------- --------
Earnings from Continuing
Operations................. $ 30,107 $ 12,088 $ -- $ 42,195
======== ======== ======= ========
Earnings from continuing
operations per common and
equivalent share:
Basic.................. $ 1.09 $ 0.99 $ 1.11
Diluted................ $ 1.05 $ 0.97 $ 1.08
Common and equivalent shares
used in computing per share
amounts:
Basic.................. 27,506 12,197 (1,830)(2) 37,873
Diluted................ 28,626 12,422 (1,863)(2) 39,185
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
7
<PAGE>
APPLIED POWER INC. AND ZERO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
EVEREST VERSA/TEK VERO ZERO
API SEPTEMBER 1, YEAR YEAR YEAR
YEAR ENDED TO ENDED ENDED SUB-TOTAL ENDED TOTAL
AUGUST 31, SEPTEMBER 26, JUNE 30, JUNE 30, ADJUST- PRO FORMA JUNE 30, ADJUST- PRO FORMA
1997 (1) 1996 (1) 1997 (1) 1997 (1) MENTS COMBINED 1997 (1) MENTS COMBINED
---------- ------------- --------- -------- -------- --------- -------- ------- ----------
(In Thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............. $672,316 $3,496 $95,288 $163,270 $ 5,701 (7) $940,071 $235,330 $1,175,401
Cost of products sold. 419,420 2,663 69,773 106,492 4,597 (7) 602,965 158,195 761,160
20 (6)
-------- ------ ------- -------- -------- -------- -------- ----------
Gross profit......... 252,896 833 25,515 56,778 1,084 337,106 77,135 414,241
Engineering, selling
and administrative
expenses............. 173,200 304 14,552 37,233 755 (7) 226,044 46,377 (1,194)(3) 271,227
Amortization of
intangible assets.... 6,813 125 -- 473 145 (6) 13,952 -- 1,194 (3) 15,146
3,012 (7)
3,384 (8)
-------- ------ ------- -------- -------- -------- -------- ------- ----------
Operating earnings... 72,883 404 10,963 19,072 (6,212) 97,110 30,758 127,868
Other Expenses
(Income):
Net financing
costs............... 12,003 (23) (32) 653 282 (6) 35,376 4,095 39,471
9,507 (7)
12,986 (8)
Other--net........... (1,863) (47) 607 -- (3)(7) (1,306) (1,393) (2,699)
-------- ------ ------- -------- -------- -------- -------- ------- ----------
Net Earnings from
Continuing
Operations Before
Income Tax Expense... 62,743 474 10,388 18,419 (28,984) 63,040 28,056 91,096
Income Tax
Expense (11)......... 20,705 -- 4,216 6,649 62 (6) 23,433 11,165 34,598
(3,735)(7)
(4,464)(8)
-------- ------ ------- -------- -------- -------- -------- ------- ----------
Net Earnings from
Continuing
Operations........... $ 42,038 $ 474 $ 6,172 $ 11,770 $(20,847) $ 39,607 $ 16,891 $ -- $ 56,498
======== ====== ======= ======== ======== ======== ======== ======= ==========
Net earnings from
continuing
operations per
common and
equivalent share:
Basic................ $ 1.53 $ 1.44 $ 1.38 $ 1.49
Diluted.............. $ 1.46 $ 1.38 $ 1.36 $ 1.44
Common and
equivalent shares
used in computing
per share amounts:
Basic................ 27,530 27,530 12,213 (1,832)(2) 37,911
Diluted.............. 28,754 28,754 12,450 (1,868)(2) 39,336
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
8
<PAGE>
APPLIED POWER INC. AND ZERO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
API Year ZERO Year
ended Ended Pro
August 31, March 31, Forma
1996 (1) 1996 (1) Adjustments Combined
---------- --------- ----------- --------
(In Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Sales....................... $571,215 $206,247 $777,462
Cost of products sold........... 351,283 135,708 486,991
-------- -------- --------
Gross profit.................. 219,932 70,539 290,471
Engineering, selling and
administrative expenses........ 158,485 43,933 (1,086)(3) 201,332
Amortization of intangible
assets......................... 4,054 -- 1,086 (3) 5,140
-------- -------- ------- --------
Operating earnings............ 57,393 26,606 83,999
Other Expenses (Income):
Net financing costs........... 8,456 (564) 7,892
Other--net.................... (230) (1,077) (1,307)
-------- -------- ------- --------
Net Earnings from Continuing
Operations Before Income Tax
Expense........................ 49,167 28,247 77,414
Income Tax Expense (11)......... 15,438 11,297 26,735
-------- -------- ------- --------
Net Earnings from Continuing
Operations..................... $ 33,729 $ 16,950 $ -- $ 50,679
======== ======== ======= ========
Net earnings from continuing
operations per common and
equivalent share:
Basic......................... $ 1.25 $ 1.08 $ 1.26
Diluted....................... $ 1.21 $ 1.07 $ 1.22
Common and equivalent shares
used in computing per share
amounts:
Basic......................... 26,957 15,719 (2,358)(2) 40,318
Diluted....................... 27,967 15,866 (2,380)(2) 41,453
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
9
<PAGE>
APPLIED POWER INC. AND ZERO CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
API Year ZERO Year
ended Ended Pro
August 31, March 31, Forma
1995 (1) 1995 (1) Adjustments Combined
---------- --------- ----------- --------
(In Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net Sales........................ $527,058 $179,694 $706,752
Cost of products sold............ 325,621 118,084 443,705
-------- -------- --------
Gross profit................... 201,437 61,610 263,047
Engineering, selling and
administrative expenses......... 149,210 39,769 (1,025)(3) 187,954
Amortization of intangible
assets.......................... 3,369 -- 1,025 (3) 4,394
-------- -------- ------- --------
Operating earnings............. 48,858 21,841 70,699
Other Expenses (Income):
Net financing costs............ 10,291 (1,041) 9,250
Other--net..................... 1,694 (1,344) 350
-------- -------- ------- --------
Net Earnings from Continuing
Operations Before Income Tax
Expense......................... 36,873 24,226 61,099
Income Tax Expense (11).......... 11,868 9,401 21,269
-------- -------- ------- --------
Net Earnings from Continuing
Operations...................... $ 25,005 $ 14,825 $ -- $ 39,830
======== ======== ======= ========
Net earnings from continuing
operations per common and
equivalent share:
Basic.......................... $ 0.94 $ 0.93 $ 0.99
Diluted........................ $ 0.91 $ 0.93 $ 0.97
Common and equivalent shares used
in computing per share amounts:
Basic.......................... 26,559 15,936 (2,390)(2) 40,105
Diluted........................ 27,491 16,020 (2,403)(2) 41,108
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
10
<PAGE>
APPLIED POWER INC. AND ZERO CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
API VERO Sub-Total ZERO Total
May 31, March 31, Pro Forma March 31, Pro Forma
ASSETS 1998 (1) 1998 (1) Adjustments Combined 1998 (1) Adjustments Combined
------ ------------ ------------ ----------- --------- ------------ ----------- ----------
(In Thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Current Assets
Cash and cash
equivalents........... $ 4,262 $ 6,595 $ 10,857 $ 30,979 $ 41,836
Short-term
investments........... -- -- -- 9,990 9,990
Accounts receivable,
net................... 83,471 29,305 112,776 35,002 147,778
Inventories............ 129,950 24,295 154,245 31,409 185,654
Prepaid income tax..... 12,420 -- 12,420 2,608 15,028
Prepaid expenses....... 9,721 2,126 11,847 5,757 17,604
--------- -------- --------- -------- ----------
Total Current Assets. 239,824 62,321 302,145 115,745 417,890
Investment in VERO
Group, plc............. -- -- 192,384 (9a) -- -- --
(192,384)(9b)
Other Assets............ 30,423 1,401 31,824 15,743 (1,964)(3) 45,603
Goodwill................ 283,794 16,892 134,170 (9b) 434,856 36,505 471,361
Other Intangibles....... 47,704 -- 47,704 -- 1,964 (3) 49,668
Property, Plant and
Equipment.............. 258,453 40,712 299,165 99,892 399,057
Less: Accumulated
depreciation.......... (129,020) (10,498) (139,518) (50,887) (190,405)
--------- -------- --------- -------- ----------
Net Property, Plant and
Equipment.............. 129,433 30,214 159,647 49,005 208,652
--------- -------- --------- --------- -------- ------- ----------
Total Assets......... $ 731,178 $110,828 $ 134,170 $ 976,176 $216,998 $ -- $1,193,174
========= ======== ========= ========= ======== ======= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Short-term borrowings.. $ 37,475 $ 1,100 $ 38,575 $ 2 $ 38,577
Trade accounts
payable............... 66,501 14,387 80,888 8,174 89,062
Accrued compensation
and benefits.......... 29,326 -- 29,326 7,964 37,290
Income taxes payable... 3,521 5,235 8,756 4,371 13,127
Other current
liabilities........... 22,660 16,054 38,714 7,683 46,397
--------- -------- --------- -------- ----------
Total Current
Liabilities......... 159,483 36,776 196,259 28,194 224,453
Long-term Debt.......... 284,213 14,859 192,384 (9a) 491,456 50,555 542,011
Deferred Income Tax..... 17,030 979 18,009 -- 18,009
Other Deferred
Liabilities............ 25,786 -- 25,786 12,184 37,970
Shareholders' Equity
Common stock (API:
27,836,656 shares;
ZERO 12,391,197
shares; and
38,369,173 shares on
a pro forma combined
basis)................ 5,587 5,026 (5,026) 5,587 166 5,753
Additional paid-in
capital............... 40,030 30,471 (30,471) 40,030 40,236 80,266
Retained earnings...... 204,579 23,673 (22,717) 205,535 159,366 364,901
Cumulative translation
adjustments........... (5,530) (956) (6,486) 113 (6,373)
Treasury stock......... -- -- -- (73,816) (73,816)
--------- -------- --------- --------- -------- ----------
Total Shareholders'
Equity.............. 244,666 58,214 (58,214)(9b) 244,666 126,065 370,731
--------- -------- --------- --------- -------- ------- ----------
Total Liabilities and
Shareholders'
Equity.............. $ 731,178 $110,828 $ 134,170 $ 976,176 $216,998 $ -- $1,193,174
========= ======== ========= ========= ======== ======= ==========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements
11
<PAGE>
APPLIED POWER INC. AND ZERO CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1--PERIODS COMBINED
The API consolidated statements of earnings for the nine months ended May
31, 1998 and 1997 (both unaudited) and for the fiscal years ended August 31,
1997, 1996 and 1995 have been combined with the ZERO consolidated statements of
income for the nine months ended March 31, 1998 and 1997, for the twelve months
ended June 30, 1997 (all unaudited) and for the fiscal years ended March 31,
1996 and 1995, respectively. This presentation has the effect of excluding
ZERO's results of operations for the three-month period ended June 30, 1996 in
the unaudited pro forma combined statements of operations. Unaudited net sales
and net income for ZERO were $54,664,000 and $3,800,000, respectively, for the
three-month period ended June 30, 1996. ZERO's results of operations for this
period are reflected in shareholders' equity in the pro forma combined balance
sheet at May 31, 1998. API's May 31, 1998 unaudited consolidated balance sheet
has been combined with ZERO's March 31, 1998 audited consolidated balance sheet
and VERO's March 31, 1998 unaudited consolidated balance sheet.
On April 23, 1998, API announced that it had reached an agreement with the
Board of Directors of VERO Group plc ("VERO") on the terms of a recommended cash
offer (with a guaranteed loan note alternative) to be made by Applied Power
Limited, a United Kingdom subsidiary of API, to acquire the entire issued share
capital of VERO at a price of 157 pence per VERO share. On May 5, 1998, Pentair,
Inc. announced the terms of a competing cash offer (with a guaranteed loan note
alternative), to be made through a wholly-owned subsidiary, to acquire the
entire issued share capital of VERO at a price of 170 pence per VERO share. On
May 12, 1998, in response to the offer by Pentair, Inc., API increased its cash
offer to 192 pence per VERO share. Pentair, Inc. subsequently withdrew its
offer. On May 15, 1998, the Applied Power Limited offering documents were sent
to the VERO shareholders. On June 5, 1998, the initial tender offer period
expired, and API announced that Applied Power Limited had accepted for payment
the VERO stock tendered, which totaled over 72% of the outstanding VERO shares.
Applied Power Limited had previously acquired approximately 10% of VERO's
shares, so that after accepting the shares tendered, Applied Power Limited owned
or had accepted over 82% of VERO's shares. The shares accepted were paid for on
June 19, 1998. The tender offer remained open. On June 19, 1998, Applied Power
Limited announced that the additional shares tendered brought the total of the
shares it owned or had accepted for payment to over 90% of all VERO's shares,
sufficient to invoke procedures under the U.K. Companies Act of 1985 which, when
completed, will result in Applied Power Limited owning all of the outstanding
shares of VERO. The unaudited pro forma combined financial data for the nine
months ended May 31, 1998 includes the operating results of Versa Technologies,
Inc. ("Versa/Tek"), which was acquired by API on October 6, 1997, for the period
from September 1 to October 6, 1997 and the operating results of VERO for the
nine months ended March 31, 1998. The unaudited pro forma combined financial
data for the year ended August 31, 1997 includes the operating results of
Everest Electronics Equipment, Inc. ("Everest"), which was acquired by API on
September 26, 1996, for the period from September 1 to September 26, 1996, and
the operating results of Versa/Tek and VERO for their respective twelve months
ended June 30, 1997. The operating results of Versa/Tek and Everest subsequent
to their acquisition dates, are included in API's historic results (presented in
the first column of the accompanying combined financial statements) for the nine
months ended May 31, 1998 and the year ended August 31, 1997.
VERO's reporting currency is the pound sterling and its financial
information in the accompanying pro forma combined financial statements has been
translated to the U.S. dollar in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation." VERO's historic
financial statements are prepared in accordance with generally accepted
accounting principles in the United Kingdom ("UK GAAP"), however, VERO's
financial information in the accompanying pro forma combined financial
statements has been adjusted to conform with generally accepted accounting
principles in the United States ("US GAAP"). The only material adjustment
required to conform with US GAAP related to goodwill. Under UK GAAP purchased
goodwill may be written off on acquisition directly against reserves. Under US
GAAP goodwill is capitalized and amortized by charges against income over the
period during which it is estimated it will be of
12
<PAGE>
benefit subject to a maximum of 40 years. Accordingly, goodwill, net of
amortization, was recorded in the pro forma combined balance sheet at May 31,
1998 and the related amortization expense included in the pro forma combined
statements of earnings for the nine months ended May 31, 1998 and the twelve
months ended August 31, 1997.
NOTE 2--PRO FORMA NET EARNINGS PER SHARE
The unaudited pro forma combined net earnings per common share and per
common and equivalent share is based upon the weighted average number of
common and equivalent shares of API and ZERO outstanding for each period at
the Exchange Ratio of 0.85 shares of API Common Stock for each share of ZERO
Common Stock.
NOTE 3--RECLASSIFICATIONS (ZERO)
Certain reclassifications, none of which affect income from continuing
operations, have been made to the ZERO statements of income in the pro forma
combined statements of earnings to conform classifications of "Amortization of
intangible assets" and to ZERO's balance sheet in the pro forma combined
balance sheet to conform classifications of "Other intangibles."
NOTE 4--PRO FORMA ADJUSTMENTS (VERSA/TEK)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the nine months ended May 31,
1998 as a result of the Versa/Tek acquisition.
<TABLE>
<S> <C>
1. Incremental interest expense on acquisition debt at a rate
of 6.5%...................................................... $(763)
2. Increase in depreciation expense resulting from adjustment
to carrying amount of plant and equipment being
depreciated over a 7 year life............................... (24)
3. Reflect amortization of increase in goodwill and
intangible assets arising from this transaction, over
periods of 10 to 40 years.................................... (237)
4. Decrease in income taxes (net benefit) applying a 39%
effective US and Wisconsin state income tax rate to the
earnings of Versa/Tek, less the effect of pro forma
adjustments in 1, 2 and 3 above (with the exception of non-
deductible amortization)..................................... 201
-----
$(823)
=====
</TABLE>
NOTE 5--PRO FORMA ADJUSTMENTS (VERO)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the nine months ended May 31,
1998 as a result of the VERO acquisition.
<TABLE>
<S> <C>
1. Incremental interest expense on acquisition debt at a rate of
6.75%........................................................ $(9,740)
2. Reflect amortization of goodwill arising from this
transaction, over a 40 year life............................. (2,538)
3. Decrease in income taxes (net benefit) applying a 37%
effective income tax rate to the earnings of VERO, less the
effect of pro forma adjustments in 1 and 2 above (with the
exception of non-deductible amortization).................... 3,278
-------
$(9,000)
=======
</TABLE>
NOTE 6--PRO FORMA ADJUSTMENTS (EVEREST)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the year ended August 31,
1997 as a result of the Everest acquisition.
<TABLE>
<S> <C>
1. Incremental interest expense on acquisition debt at a rate of
6.5%......................................................... $(282)
2. Increase in depreciation expense resulting from adjustment to
carrying amount of plant and equipment being depreciated over
a 7 year life................................................ (20)
3. Reflect amortization of goodwill arising from this
transaction, over a 25 year life............................. (145)
4. Increase in income taxes applying a 41% effective U.S. and
California state income tax rate to the earnings of Everest,
less the effect of pro forma adjustments in 1, 2 and 3 above. (62)
-----
$(509)
=====
</TABLE>
13
<PAGE>
NOTE 7--PRO FORMA ADJUSTMENTS (VERSA/TEK)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the year ended August 31,
1997 to reflect a full year of Eder Industries in Versa/Tek (Eder was acquired
by Versa/Tek on October 31, 1996).
<TABLE>
<S> <C>
1. Add historical operating results of Eder for the four-month
period July 1, 1996 to 10/31/96 (date of Versa/Tek's
acquisition)
Net Sales................................................... $ 6,338
Cost of Products Sold....................................... (4,924)
Engineering, Selling and Administrative Expenses............ (755)
Financing Costs............................................. (19)
Other Income................................................ 3
2. Eliminate intercompany sales and purchases between Eder and
Versa/Tek................................................... 637
(637)
3. Incremental interest expense/elimination of interest income
relating to the cash borrowed/used in the acquisition at a
rate of 6.5%................................................ (333)
4. Increase in depreciation expense resulting from adjustment
to carrying amount of plant and equipment being depreciated
over periods of 10 to 30 years.............................. (24)
5. Reflect additional amortization of goodwill and other
intangibles arising from the Eder transaction over periods
of 3 to 40 years............................................ (163)
-------
$ 123
=======
</TABLE>
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the year ended August 31,
1997 as a result of the Versa Tek acquisition.
<TABLE>
<S> <C>
6. Incremental interest expense on acquisition debt at a
rate of 6.5%................................................ $(9,155)
7. Increase in depreciation expense resulting from
adjustment to carrying amount of plant and equipment
being depreciated over a 7 year life........................ (286)
8. Reflect amortization of increase in goodwill and
intangible assets arising from this transaction over
periods of 10 to 40 years................................... (2,849)
9. Decrease in income taxes (net benefit) applying a 39%
effective US and Wisconsin state income tax rate to the
earnings of Versa/Tek, less the effect of pro forma
adjustments in 1 through 8 above (with the exception of
non-deductible amortization)................................ 3,735
-------
$(8,555)
=======
</TABLE>
NOTE 8--PRO FORMA ADJUSTMENTS (VERO)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for API's year ended August 31,
1997 as a result of the pending VERO acquisition.
<TABLE>
<S> <C>
1. Incremental interest expense on acquisition debt at a rate
of 6.75%.................................................... $(12,986)
2. Reflect amortization of goodwill arising from this
transaction, over a 40 year life............................ (3,384)
3. Decrease in income taxes (net benefit) applying a 37%
effective income tax rate to the earnings of VERO, less
the effect of pro forma adjustments 1 and 2 above (with
the exception of non-deductible amortization)............... 4,464
--------
$(11,906)
========
</TABLE>
14
<PAGE>
NOTE 9--PRO FORMA ADJUSTMENTS (VERO)
(a) The following pro forma adjustments are incorporated in the pro forma
combined balance sheet at May 31, 1998 as a result of the VERO acquisition.
<TABLE>
<S> <C>
Purchase price of outstanding shares.......................... $192,384
</TABLE>
(b) The following pro forma adjustments are made to reflect estimated fair
value adjustments and to eliminate the investment in VERO:
<TABLE>
<S> <C>
VERO net assets--as reported.................................. $ 58,214
Fair value adjustments:
Record goodwill acquired.................................... 134,170
--------
Investment in VERO........................................ $192,384
========
</TABLE>
Because of the proximity of the transaction, API has not had adequate time
to complete its evaluation of the fair value of the net assets acquired in the
VERO transaction. As a result, no fair value adjustments have been reflected
in these pro forma statements.
NOTE 10--SPECIAL ITEM (ZERO)
Other Income--net for the nine months ended March 31, 1998 includes
approximately $3,900,000 ($7,024,000 pre-tax) of special items (gain from life
insurance and sale of property net of provision for estimated loss on sale of
subsidiary) recognized by ZERO during 1998.
NOTE 11--INCOME TAX EXPENSE
Effective tax rates are higher than the statutory federal income tax rates
primarily due to state income taxes, net of federal benefit.
15
<PAGE>
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: August 12, 1998 By: /s/Robert C. Arzbaecher
-----------------------
Robert C. Arzbaecher,
Vice President and
Chief Financial Officer
16
<PAGE>
APPLIED POWER INC.
EXHIBIT INDEX
to
FORM 8-K CURRENT REPORT
Date of Report: July 31, 1998
<TABLE>
<CAPTION>
Exhibit Incorporated Herein Filed
Number Description by Reference to Herewith
- ------ ----------- ------------------- --------
<S> <C> <C> <C>
2.1 Agreement and Plan of Merger, Appendix A to the Joint
dated as of April 6, 1998, by Proxy Statement/Prospectus
and among Applied Power Inc., contained in API's
ZERO Corporation and STB Registration Statement on
Acquisition Corporation Form S-4 (File No. 333-58267)
2.2 Certified copy of Certificate X
of Merger of STB Acquisition
Corporation with and into
ZERO Corporation, dated
July 31, 1998
23 Consent of Deloitte & Touche LLP, X
ZERO's independent accountants
99.1 Consolidated balance sheets of ZERO X
Corporation and subsidiaries as of
March 31, 1998 and 1997, and the
related statements of consolidated
income, stockholders' equity and
cash flows for each of the three
years in the period ended March 31,
1998, and the notes thereto and
independent auditors' report thereon
incorporated by reference in Item
7(a) of this Report.
99.2 Press Release dated July 31, 1998 X
</TABLE>
17
<PAGE>
Exhibit 2.2
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER,
WHICH MERGES:
"STB ACQUISITION CORPORATION", A DELAWARE CORPORATION,
WITH AND INTO "ZERO CORPORATION" UNDER THE NAME OF "ZERO CORPORATION", A
CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS
RECEIVED AND FILED IN THIS OFFICE THE THIRTY-FIRST DAY OF JULY, A.D. 1998, AT
2:30 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
18
<PAGE>
CERTIFICATE OF MERGER
OF
STB ACQUISITION CORPORATION,
a Delaware corporation,
WITH AND INTO
ZERO CORPORATION,
a Delaware corporation
The undersigned corporation, pursuant to Section 251 of the Delaware
General Corporation Law, for the purpose of merging STB Acquisition Corporation
("Acquisition"), a Delaware corporation, with and into ZERO Corporation
("ZERO"), a Delaware corporation, which is the surviving corporation in such
merger (the "Surviving Corporation") (Acquisition and ZERO are together referred
to herein as the "Constituent Corporations") hereby certifies the following:
1. An Agreement and Plan of Merger (the "Merger Agreement") by and among
Applied Power Inc., ZERO and Acquisition has been approved, adopted, certified,
executed and acknowledged by each of the Constituent Corporations in accordance
with Section 251 of the Delaware General Corporation Law.
2. The name of the surviving corporation is ZERO Corporation, and it
shall be governed by the laws of the State of Delaware. The Restated Certificate
of Incorporation of ZERO, as in effect immediately prior to the effective time
of the merger, shall be the Certificate of Incorporation of the Surviving
Corporation, until amended in accordance with law.
3. The executed Merger Agreement is on file at the principal place of
business of the Surviving Corporation, 444 South Flower Street, Los Angeles,
California 90071-2922.
4. A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of either of the
Constituent Corporations.
5. The effective time of the merger shall be the date and time on which
this Certificate of Merger is filed with the Office of the Delaware Secretary of
State.
IN WITNESS WHEREOF, the Surviving Corporation has caused this Certificate
of Merger to be executed as of the 31st day of July, 1998.
ZERO CORPORATION
By: /s/ Wilford D. Godbold, Jr.
----------------------------
Wilford D. Godbold, Jr.
President and Chief Executive Officer
19
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements of
Applied Power Inc. on Form S-3 No. 333-47493 and on Forms S-8 No. 33-18140, No.
33-21250, No. 33-24197, No. 33-38719, No. 33-38720, No. 33-62658, No. 333-42353
and No. 333-46469 of our report dated May 11, 1998, appearing in the Annual
Report on Form 10-K of ZERO Corporation for the year ended March 31, 1998.
DELOITTE & TOUCHE LLP
Los Angeles, California
August 12, 1998
20
<PAGE>
Exhibit 99.1
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Stockholders of ZERO Corporation:
We have audited the accompanying consolidated balance sheets of ZERO Corporation
and its subsidiaries as of March 31, 1998 and 1997, and the related statements
of consolidated income, stockholders' equity, and cash flows for each of the
three years in the period ended March 31, 1998. Our audits also included the
financial statement schedule of the Company listed in Item 14(a)(2). These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
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 ZERO Corporation and its
subsidiaries at March 31, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 1998
in conformity with generally accepted accounting principles. Also in our
opinion, such 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.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Los Angeles, California
May 11, 1998
21
<PAGE>
<TABLE>
<CAPTION>
Statements of Consolidated Income
Years Ended March 31, 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $258,745,000 $225,442,000 $206,247,000
Cost of Sales 171,386,000 151,131,000 135,708,000
- ----------------------------------------------------------------------------------------------------------------
Gross Profit 87,359,000 74,311,000 70,539,000
Selling and Administrative Expenses 50,925,000 45,522,000 43,933,000
Special Items 7,024,000 - -
Other Income 1,236,000 1,847,000 1,077,000
Interest Income 953,000 515,000 1,727,000
Interest Expense 4,747,000 4,670,000 1,163,000
- ----------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 40,900,000 26,481,000 28,247,000
Income Taxes 16,520,000 10,593,000 11,297,000
- ----------------------------------------------------------------------------------------------------------------
Net Income $ 24,380,000 $ 15,888,000 $ 16,950,000
- ----------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share $ 1.98 $ 1.30 $ 1.08
Diluted Earnings Per Share $ 1.93 $ 1.28 $ 1.07
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
22
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
March 31, 1998 1997
- ---------------------------------------------------------------------------------------------------
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 30,979,000 $ 16,201,000
Short-term investments 9,990,000 -
Receivables (less allowances for doubtful accounts of
$818,000 in 1998 and $607,000 in 1997) 35,002,000 35,966,000
Inventories
Raw materials and supplies 18,967,000 21,504,000
Work in process 7,673,000 7,821,000
Finished goods 4,769,000 5,685,000
Other (including deferred tax assets of $2,608,000 in 1998
and $1,864,000 in 1997) 8,365,000 4,172,000
- ---------------------------------------------------------------------------------------------------
Total Current Assets 115,745,000 91,349,000
- ---------------------------------------------------------------------------------------------------
Property, Plant and Equipment, Net 49,005,000 44,375,000
Goodwill (less accumulated amortization of $13,245,000 in 1998
and $11,844,000 in 1997) 36,505,000 30,602,000
Other Assets 15,743,000 19,630,000
- ---------------------------------------------------------------------------------------------------
Total Assets $216,998,000 $185,956,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
23
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
March 31, 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities
Current Liabilities
Current portion of long-term debt $ 2,000 $ 35,000
Accounts payable 8,174,000 8,901,000
Income taxes payable 4,371,000 -
Accrued liabilities
Wages and commissions 7,964,000 6,579,000
Workers' compensation 1,666,000 1,128,000
Other 6,017,000 4,365,000
- -------------------------------------------------------------------------------------------------------------
Total Current Liabilities 28,194,000 21,008,000
- -------------------------------------------------------------------------------------------------------------
Non-Current Liabilities (including deferred compensation of
$10,787,000 in 1998 and $9,443,000 in 1997) 12,184,000 12,192,000
Long-term Debt 50,555,000 51,503,000
Commitments and Contingencies
Stockholders' Equity
Preferred stock - authorized 1,000,000 shares of $.01 par
value; none issued
Common stock -- authorized 30,000,000 shares of $.01 par
value; issued shares, 16,611,749 in 1998 and 16,445,332
in 1997; outstanding shares, 12,416,827 in 1998 and
12,250,427 in 1997 166,000 164,000
Additional paid-in capital 40,236,000 37,021,000
Retained earnings 159,366,000 137,750,000
Foreign currency translation adjustment 113,000 132,000
Treasury stock (4,194,922 shares in 1998 and 4,194,905
shares in 1997), at cost (73,816,000) (73,814,000)
- -------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 126,065,000 101,253,000
- -------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $216,998,000 $185,956,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
24
<PAGE>
Statements of Consolidated Stockholders' Equity
<TABLE>
<CAPTION>
Foreign
Additional Currency
Issued Common Paid-in Retained Translation Treasury
Shares* Stock Capital Earnings Adjustments Stock
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995 16,124,144 $161,000 $31,079,000 $115,754,000 $ 261,000 $(1,661,000)
Net Income for the year - - - 16,950,000 - -
Cash Dividends declared - $.44
per share - - - (7,059,000) - -
Exercise of stock options and
issuance of treasury stock 161,199 2,000 3,169,000 (1,461,000) - 11,000
Stock repurchase - - - - - (71,871,000)
Foreign currency translation
adjustments and other - - - - (504,000) -
- -------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1996 16,285,343 163,000 34,248,000 124,184,000 (243,000) (73,521,000)
Net Income for the year - - - 15,888,000 - -
Cash Dividends declared - $.12 (1,460,000)
per share - - - - -
Exercise of stock options and
issuance of treasury stock 159,989 1,000 2,773,000 (862,000) - -
Stock repurchase - - - - - (293,000)
Foreign currency translation
adjustments and other - - - - 375,000 -
- -------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1997 16,445,332 164,000 37,021,000 137,750,000 132,000 (73,814,000)
Net Income for the year - - - 24,380,000 - -
Cash Dividends declared - $.12
per share - - - (1,480,000) - -
Exercise of stock options and
issuance of treasury stock 166,417 2,000 3,215,000 (1,316,000) - -
Stock repurchase - - - - - (2,000)
Foreign currency translation
adjustments and other - - - 32,000 (19,000) -
- -------------------------------------------------------------------------------------------------------------------------------
Balance at March 31, 1998 16,611,749 $166,000 $40,236,000 $159,366,000 $ 113,000 $(73,816,000)
===============================================================================================================================
</TABLE>
* Outstanding shares at March 31, 1998, 1997 and 1996 were 12,416,827,
12,250,427 and 12,105,840, respectively.
The Notes to Consolidated Financial Statements are an integral part of these
statements.
25
<PAGE>
Statements of Consolidated Cash Flows
<TABLE>
<CAPTION>
Years Ended March 31, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flow From Operating Activities
Net income $ 24,380,000 $ 15,888,000 $ 16,950,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 7,024,000 6,249,000 5,069,000
Amortization of goodwill 1,401,000 1,200,000 1,086,000
Gain from sale of assets (9,899,000) (511,000) (46,000)
Provision for loss from sale of subsidiary 4,500,000 - -
Changes in operating assets and liabilities, net
of effect of business acquisitions
Receivables 277,000 (2,046,000) (4,833,000)
Inventories 1,599,000 (2,711,000) (1,852,000)
Other non-current assets 2,685,000 (2,239,000) (215,000)
Accounts payable 372,000 603,000 (8,000)
Accrued liabilities 7,737,000 49,000 118,000
Other non-current liabilities 948,000 1,417,000 2,639,000
Other (4,308,000) 1,305,000 (1,582,000)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 36,716,000 19,204,000 17,326,000
- --------------------------------------------------------------------------------------------------------------------
Cash Flow From Investing Activities
(Purchases) sales of short-term investments, net (9,990,000) 965,000 18,937,000
Purchase of non-cash assets of acquired (9,022,000) (1,936,000) (11,748,000)
businesses
Expenditures for property, plant and equipment (14,585,000) (10,822,000) (8,657,000)
Payment of note from sale of property 2,450,000 - -
Proceeds from sale of assets 8,740,000 1,651,000 1,670,000
Other 75,000 (142,000) 324,000
- --------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (22,332,000) (10,284,000) 526,000
- --------------------------------------------------------------------------------------------------------------------
Cash Flow From Financing Activities
Stock repurchases (2,000) (293,000) (71,871,000)
Cash dividends paid (1,480,000) (1,460,000) (7,059,000)
Proceeds from issuance of long-term debt - - 50,000,000
Payments of long-term debt (35,000) (273,000) (253,000)
Exercise of stock options 1,901,000 1,912,000 1,710,000
Other (including effect of exchange rate 10,000 377,000 (493,000)
changes)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 394,000 263,000 (27,966,000)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 14,778,000 9,183,000 (10,114,000)
Cash and cash equivalents at beginning of period 16,201,000 7,018,000 17,132,000
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 30,979,000 $ 16,201,000 $ 7,018,000
=====================================================================================================================
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
Cash Equivalents
Cash equivalents include mutual funds, treasury bills and other highly liquid
investments with maturities of three months or less. As of March 31, 1998 and
1997, the carrying values of cash equivalents approximated market values.
Short-term Investments
Short-term investments at March 31, 1998 consist primarily of government agency
notes and bonds with maturities greater than three months that are classified as
securities available-for-sale. Market prices, which approximated cost at the
balance sheet date, are reasonable estimates of the portfolio's fair value.
Inventories
Inventories are stated at the lower of cost (first-in, first-out or average) or
market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets. Capital leases and leasehold improvements are amortized over the
life of the related assets or the life of the lease, whichever is shorter.
Intangible Assets
Costs in excess of the fair value of net assets acquired in purchase
transactions are recorded as goodwill and amortized over periods of up to 40
years. The Company reviews the recoverability of intangible assets to determine
if there has been any impairment. Such review includes estimating future cash
flows based on operating performance and future prospects of the business.
Earnings Per Share
During the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This
statement requires the disclosure of basic and diluted earnings per share. All
prior period earnings per share data in these financial statements have been
restated in accordance with SFAS No. 128.
27
<PAGE>
In accordance with SFAS No. 128, earnings per share were computed as follows:
<TABLE>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net income $24,380,000 $15,888,000 $16,950,000
Denominator:
Weighted average common shares outstanding for 12,340,000 12,177,000 15,719,000
basic earnings per share
Net effect of dilutive options based on the treasury
stock method using average market price 282,000 238,000 147,000
- -------------------------------------------------------------------------------------------------------
Weighted average common and equivalent shares
outstanding for diluted earnings per share 12,622,000 12,415,000 15,866,000
=======================================================================================================
Basic Earnings Per Share $ 1.98 $ 1.30 $ 1.08
Diluted Earnings Per Share $ 1.93 $ 1.28 $ 1.07
=======================================================================================================
</TABLE>
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars
at the year-end exchange rate and gains and losses are being accumulated in
stockholders' equity. The related income statement is translated at the average
exchange rate for the year.
Supplemental Cash Flow Information
For the years ended March 31, 1998, 1997 and 1996, cash paid for income taxes,
net of refunds, was $12,157,000, $11,696,000 and $12,065,000, respectively, and
cash paid for interest on long-term debt was $3,555,000, $3,801,000 and
$118,000, respectively.
In connection with acquisitions during fiscal years 1998, 1997 and 1996, the
following liabilities were assumed:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Estimated fair value of tangible assets acquired $ 1,216,000 $ 2,488,000 $ 9,696,000
Goodwill and identifiable intangible assets 7,806,000 1,331,000 3,899,000
Net cash paid (9,022,000) (1,936,000) (11,748,000)
- -----------------------------------------------------------------------------------------------------------------
Liabilities assumed $ - $ 1,883,000 $ 1,847,000
=================================================================================================================
</TABLE>
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of cash equivalents, short-term investments and
receivables. The Company places its cash equivalents and short-term investments
with high credit quality institutions and limits the amount of credit exposure
with any one institution. Credit risk on trade receivables is minimized as a
result of the diverse nature of the Company's customer base. The Company
performs ongoing credit evaluations of its customers and maintains an allowance
for potential credit losses.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions affect the reported amounts of assets and
liabilities, and the 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.
New Accounting Standards
During the third quarter of fiscal 1998, the Company adopted SFAS No. 128,
"Earnings Per Share." This statement requires the disclosure of basic and
diluted earnings per share and supersedes the Company's previous standards for
computing earnings per share under Accounting Principles Board No. 15. All prior
period earnings per share data have been restated in accordance with the new
standard.
28
<PAGE>
In June 1997, Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosure About Segments of
an Enterprise and Related Information." Both statements are effective for fiscal
years beginning after December 15, 1997. The Company is assessing the required
disclosures and will adopt these statements in fiscal 1999.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, short-term investments, receivables, accounts payable and debt
instruments. The carrying values of all financial instruments, other than debt
instruments, are representative of their fair values due to their short
maturities. The estimated fair value of the notes payable has been determined
using quoted prices of debt instruments with similar terms and maturities and
approximates carrying value.
Impairment of Long-lived Assets
During 1996, the Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Under the
provisions of this statement, the Company evaluates long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying value of an asset may not be fully recoverable. If the estimated future
cash flows (undiscounted and without interest charges) from the use of an asset
are less than the carrying value, a write down would be recorded to reduce the
related asset to its estimated fair value.
Report Presentation
Certain amounts reported in prior years have been reclassified to conform to the
1998 presentation.
NOTE 2
Property, Plant and Equipment
Property, plant and equipment and accumulated depreciation and amortization at
March 31, 1998 and 1997 consisted of:
<TABLE>
<CAPTION>
Estimated
Useful Lives 1998/1/ 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 3,248,000 $ 2,866,000
Buildings/land improvements 10-40 years 20,593,000 20,835,000
Machinery/equipment 3-15 years 71,526,000 68,894,000
Leasehold improvements 5-9 years 4,525,000 4,646,000
- -------------------------------------------------------------------------------------------------
Total 99,892,000 97,241,000
Less accumulated depreciation and
amortization 50,887,000 52,866,000
- -------------------------------------------------------------------------------------------------
Property, plant and equipment, net $49,005,000 $44,375,000
=================================================================================================
</TABLE>
/1/Excludes amounts included in net assets held for sale (Note 12)
NOTE 3
Employee Benefits
The Company has a defined contribution pension plan and, as of January 1, 1995,
a 401(k) plan which cover all employees who have completed at least one year of
service and are employed by U.S. divisions that have elected to participate.
The pension plan cost, which is fully funded on a current basis, is based upon
percentages of eligible employees' compensation. The Company's contributions to
the pension plan aggregated $1,758,000, $1,607,000 and $1,539,000 in 1998, 1997
and 1996, respectively, and to the 401(k) plan aggregated $513,000, $489,000 and
$427,000 in 1998, 1997 and 1996, respectively.
The Company has a nonqualified deferred compensation plan for key employees who
can elect to have a portion of their compensation deferred. The amounts set
aside earn interest at rates generally higher than the average prime interest
rate. Interest expense accrued on the participants' accounts totaled $1,015,000,
$862,000 and $714,000 in 1998, 1997 and 1996, respectively. Generally, payment
of a participant's account balance will be deferred until death, disability,
retirement or termination.
29
<PAGE>
NOTE 4
Long-term Debt
At March 31, 1998 and 1997, long-term debt consisted of:
<TABLE>
<CAPTION>
1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Senior promissory notes, due March 8, 2011 $50,000,000 $50,000,000
Other notes payable, due July 3, 2002 and March 31, 2005 1,525,000 1,538,000
- -----------------------------------------------------------------------------------------------
Total 51,525,000 51,538,000
Less:
Amount included in net assets held for sale (Note 12) 968,000 -
Current portion 2,000 35,000
- -----------------------------------------------------------------------------------------------
Total long-term debt $50,555,000 $51,503,000
===============================================================================================
</TABLE>
The senior promissory notes bear interest at 7.13%, and are payable in 11 annual
payments of $4,545,000 beginning March 8, 2001. The proceeds from the notes were
used solely for the repurchase of the Company's common stock in a Dutch Auction
Tender Offer (refer to Note 7) and for payment of related expenses. Other notes
payable have imputed interest rates ranging from 8.5% to 10%.
In March 1998, the Company negotiated a $50,000,000 shelf facility for future
acquisitions. The interest rate for the shelf facility would be based on U.S.
Treasury rates at the time of borrowing.
Aggregate maturities of long-term debt over the next five fiscal years are as
follows: $57,000 in 1999, $239,000 in 2000, $4,826,000 in 2001, $4,870,000 in
2002, $4,915,000 in 2003 and $36,618,000 thereafter.
NOTE 5
Acquisitions and Divestiture
The Company acquired one company during fiscal 1998 and two companies in fiscal
1997, all of which complement existing operations. These acquisitions were
accounted for using the purchase method of accounting. The operating results of
the entities acquired, which were not material, were included in the
consolidated financial statements from their respective acquisition dates. The
purchase prices of these acquisitions were allocated to the net assets acquired,
including intangible assets, based upon their estimated fair values at the dates
of acquisition. Intangible assets, principally the excess of cost over the fair
value of identifiable net assets of these purchased businesses, are being
amortized using the straight-line method over a period of 15 to 20 years.
During fiscal 1997, the Company completed the sale of Anvil Cases, Inc., a
subsidiary of the Company, which manufactures riveted cases primarily for the
music, packaging specialists and audio/video markets. The gain on the sale of
Anvil Cases, Inc. was not material.
The pro forma effect of these transactions on 1998 and 1997 was not material.
30
<PAGE>
NOTE 6
Common Stock
The Company has a stock option plan that provides for the granting of options to
purchase shares of the Company's stock to directors, officers and other key
employees at a price not less than the fair market value on the date of grant.
Options are granted for terms of five to eight years and are exercisable in
annual installments (generally one-third of the total grant) commencing one year
from date of grant, on a cumulative basis.
The Company's stock option plan provides for the granting of qualified and
nonqualified options as well as stock appreciation rights ("SARs") in tandem
with options. The SARs entitle a holder to receive an amount equal to the excess
of the fair market value of the Company's common stock on the date of exercise
over the option price. The exercise of SARs automatically cancels the option on
the related shares. Compensation expense recognized in connection with SARs
during the years ended March 31, 1998, 1997 and 1996 was not material.
Changes in the number of shares subject to options during the three years ended
March 31, 1998, are summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Avg. Exercise Avg. Exercise Avg. Exercise
Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 810,228 $15.22 826,741 $13.60 866,048 $12.82
Granted 161,732 $26.98 216,900 $19.47 253,500 $15.39
Exercised (211,435) $13.18 (204,378) $13.17 (250,871) $12.74
Cancelled or expired (18,621) $18.96 (29,035) $15.13 (41,936) $13.45
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 741,904 $18.23 810,228 $15.22 826,741 $13.60
- ----------------------------------------------------------------------------------------------------------------------------------
Options exercisable at year-end 377,589 392,262 370,447
Weighted average fair value of
options granted during the year $8.53 $6.10 $4.62
Options available for future grant 413,657 56,768 255,868
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In July 1997, the stockholders of the Company approved the increase in the
number of shares available for grant of options by 500,000.
The Company has recognized no compensation cost for its stock option plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under this plan consistent with the
method of SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's
pro forma net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net income $23,777,000 $15,552,000 $16,853,000
Pro forma basic earnings per share $ 1.93 $ 1.28 $ 1.07
Pro forma diluted earnings per share $ 1.88 $ 1.25 $ 1.06
</TABLE>
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for fiscal years 1998, 1997 and 1996, respectively: risk-free
interest rate of 6.1%, 6.3% and 5.8%; expected volatility of 22.9%, 22.6% and
23.3%; dividend yield of .4%, .6% and .8%; and an expected life of five years.
No adjustments have been made for non-transferability or risk of forfeiture.
31
<PAGE>
The following table summarizes information about stock options outstanding at
March 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------- ---------------------------------------------
Weighted Avg. Weighted
Number Remaining Avg.
Range of Outstanding at Contractual Exercise Number Exercisable at Weighted Avg.
Exercise Prices March 31, 1998 Life Price March 31, 1998 Exercise Price
- ----------------------------------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 11.31 - $ 13.75 216,103 2.6 $13.14 216,103 $13.14
$ 15.38 - $ 15.63 176,416 4.6 $15.39 105,050 $15.39
$ 19.38 - $ 21.38 190,303 5.6 $19.48 56,436 $19.49
$ 25.75 - $ 27.69 159,082 6.6 $26.98
</TABLE>
NOTE 7
Common Stock Repurchase
In February 1996, the Company repurchased approximately 4,019,000 shares of its
common stock at a cost of approximately $71,871,000 in a Dutch Auction Tender
Offer. The source of the funds to repurchase the shares was provided by the
issuance of promissory notes totaling $50,000,000 by the Company (refer to Note
4), together with available cash and cash derived from the sale of short-term
investments.
In November 1996, the Board of Directors authorized the repurchase of up to an
additional 400,000 shares, as well as shares of "odd lot" stockholders. During
fiscal 1998 and 1997, total shares repurchased were insignificant.
NOTE 8
Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
This approach requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the
financial reporting basis and tax basis of assets and liabilities.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------
Current
<S> <C> <C> <C> <C>
Federal $15,246,000 $ 8,470,000 $10,031,000
State 3,085,000 1,432,000 2,145,000
Deferred
Federal (1,502,000) 708,000 (740,000)
State (309,000) (17,000) (139,000)
- ------------------------------------------------------------------------------------------------
Total $16,520,000 $10,593,000 $11,297,000
- ------------------------------------------------------------------------------------------------
</TABLE>
Deferred tax assets and liabilities comprised the following as of:
<TABLE>
<CAPTION>
March 31, 1998 1997
- --------------------------------------------------------------------------------------------------------------
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation/amortization $ - $3,093,000 $ - $2,814,000
Provision for estimated expenses 2,689,000 444,000
Employee benefit plans 6,292,000 5,353,000
State and foreign taxes 135,000 235,000
Other 1,803,000 884,000
- --------------------------------------------------------------------------------------------------------------
Total $8,981,000 $5,031,000 $5,797,000 $3,933,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
A reconciliation between the income taxes computed at the federal statutory rate
and the provision for income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes computed at the Federal statutory rate $14,315,000 $ 9,268,000 $ 9,886,000
State income taxes, net of Federal income tax benefit 1,803,000 909,000 1,304,000
Tax-exempt income (168,000) (97,000) (90,000)
Other 570,000 513,000 197,000
- ----------------------------------------------------------------------------------------------------------------
Total provision $16,520,000 $10,593,000 $11,297,000
- ----------------------------------------------------------------------------------------------------------------
Effective income tax rate 40.4% 40.0% 40.0%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9
Commitments
Future minimum lease payments under operating leases at March 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
Year Ending March 31,
<S> <C>
1999 $2,306,000
2000 1,809,000
2001 1,460,000
2002 1,382,000
2003 922,000
Thereafter 1,979,000
- -----------------------------------
Total $9,858,000
- -----------------------------------
</TABLE>
Rental expense under operating leases was $2,346,000, $2,090,000, and $2,059,000
for 1998, 1997 and 1996, respectively. Obligations under capital leases at March
31, 1998 were not material.
NOTE 10
Contingent Liabilities
Environmental Matters
In November 1996, the Company, along with 39 other potentially responsible
parties ("PRPs"), received an Administrative Order for Remedial Action from the
U.S. Environmental Protection Agency (the "EPA") with regard to implementation
of the interim remedy for the Glendale North and Glendale South Operable Units
of the San Fernando Valley Superfund Site near Los Angeles, California ("the
Site"). An administrative order on consent relating to the design work for the
interim remedies was entered into in March 1994 between the EPA and 24 PRPs,
including the Company. The design work is complete. In addition, the Company,
through the PRP Group, is responding to a unilateral order received on October
1, 1997 from the EPA for the construction, operation and maintenance of the
interim remedy.
An arbitrated award has resulted in the allocation of a 58.8% share of the total
costs associated with the Site to certain Burbank Operable Unit PRPs. The
remaining 41.2% share was allocated to the Glendale PRPs, including the Company.
The Company has provided reserves of approximately $1,400,000 for its estimated
share of the total costs of construction, operation and maintenance of the EPA
selected remedy, as well as certain response and oversight costs of the EPA and
the State of California in connection with the Site. The Company's liabilities
for these costs are based on management's best estimate of undiscounted future
costs, excluding possible insurance recoveries. The Company's ultimate liability
related to environmental matters at the Site is dependent upon a variety of
factors, including changes in the cost of the construction, operation and
maintenance of the interim remedy and the final remedy, as well as any changes
to the allocation of those costs among the PRPs including any additional
participants. The Company has received favorable rulings from the U.S. District
Court in response to its claim for reimbursement of defense costs related to the
Site from its insurance carriers. These rulings are currently being appealed by
the insurance carriers.
The Company is also engaged in remediation and/or environmental monitoring at
three other locations, and has been named by the State of California and/or the
EPA as a de minimus potentially responsible party at two locations. The Company
has provided reserves, which are not deemed to be material, for the cleanup
costs associated with these sites to the extent they could be reasonably
estimated at this time.
33
<PAGE>
Other Matters
The Company is subject to legal proceedings that arise in the ordinary course of
its business activities. In the opinion of management, any liability that may
result from the resolution of these matters will not have a material adverse
effect on its financial statements.
NOTE 11
Segment Information
Business segment information as of and for the years ended March 31, 1998, 1997
and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------------
Net sales
<S> <C> <C> <C>
Enclosures and Accessories $205,845,000 $175,119,000 $152,378,000
Other 52,900,000 50,323,000 53,869,000
- ---------------------------------------------------------------------------------------------------
Consolidated $258,745,000 $225,442,000 $206,247,000
- ---------------------------------------------------------------------------------------------------
Operating income
Enclosures and Accessories $ 38,240,000 $ 31,312,000 $ 30,547,000
Other 954,000/1/ 4,222,000 2,435,000
Corporate (7,260,000) (6,745,000) (6,376,000)
- ---------------------------------------------------------------------------------------------------
Consolidated $ 31,934,000 $ 28,789,000 $ 26,606,000
- ---------------------------------------------------------------------------------------------------
Identifiable assets at year end
Enclosures and Accessories $118,563,000 $102,194,000 $ 99,570,000
Other 36,366,000 46,519,000 47,264,000
Corporate 62,069,000 37,243,000 19,004,000
- ---------------------------------------------------------------------------------------------------
Consolidated $216,998,000 $185,956,000 $165,838,000
- ---------------------------------------------------------------------------------------------------
Depreciation and amortization
Enclosures and Accessories $ 5,244,000 $ 4,283,000 $ 3,280,000
Other 1,780,000 1,966,000 1,789,000
- ---------------------------------------------------------------------------------------------------
Consolidated $ 7,024,000 $ 6,249,000 $ 5,069,000
- ---------------------------------------------------------------------------------------------------
Capital expenditures
Enclosures and Accessories $ 13,181,000 $ 9,063,000 $ 6,573,000
Other 1,404,000 1,759,000 2,084,000
- ---------------------------------------------------------------------------------------------------
Consolidated $ 14,585,000 $ 10,822,000 $ 8,657,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
/1/ Includes $4,500,000 provision for loss on sale of European subsidiary (Note
12)
The Company's Enclosures and Accessories segment consists of products that serve
the system packaging, thermal management and engineered case requirements of the
telecommunications, instrumentation, data processing and government/military
markets of the electronics industry. These products include card cages for
printed circuit boards, backplanes, filter fan packages and microprocessor-
controlled fan trays, blowers, motorized impellers, heat exchangers, air
conditioners and computerized thermal management controls, electronic cabinets
and consoles, cable management racks, deep drawn aluminum ZERO boxes and cases,
fabricated cases, specialized case hardware and other specialized enclosures
sold to the electronics industry. The Company also manufactures and sells air
cargo enclosures and hardware, aluminum luggage, camera cases, industrial
carrying cases, food service containers and other custom metal products.
34
<PAGE>
The following presents a summary of operations by geographic area as of and for
the years ended March 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
U.S. operations $ 228,827,000 $201,784,000 $183,662,000
European operations 29,918,000 23,658,000 22,585,000
- ---------------------------------------------------------------------------------------------------
Consolidated $ 258,745,000 $225,442,000 $206,247,000
- ---------------------------------------------------------------------------------------------------
Net sales between operations $ 3,158,000 $ 2,198,000 $ 3,230,000
- ---------------------------------------------------------------------------------------------------
Operating income
U.S. operations $ 34,436,000 $ 29,444,000 $ 25,163,000
European operations (2,502,000)/1/ (655,000) 1,443,000
- ---------------------------------------------------------------------------------------------------
Consolidated $ 31,934,000 $ 28,789,000 $ 26,606,000
- ---------------------------------------------------------------------------------------------------
Identifiable assets at year end
U.S. operations $ 209,492,000 $168,242,000 $149,394,000
European operations 7,506,000 17,714,000 16,444,000
- ---------------------------------------------------------------------------------------------------
Consolidated $ 216,998,000 $185,956,000 $165,838,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
/1/ Includes $4,500,000 provision for loss on sale of European subsidiary (Note
12)
Total export sales from U.S. operations and net sales from European operations
were $45,817,000, $36,276,000, and $34,323,000, or 18%, 16% and 17% of total net
sales, for the fiscal years ended March 31, 1998, 1997 and 1996, respectively.
Sales under U.S. government contracts and subcontracts were less than of 10% of
total sales in fiscal 1998, 1997 and 1996.
NOTE 12
Special Items
During 1998, the Company recognized a $7,024,000 pre-tax net gain consisting of
the following:
<TABLE>
- ----------------------------------------------------------------------------
<S> <C>
Gain from life insurance $ 1,709,000
Gain from sale of property 9,815,000
Provision for estimated loss on sale of subsidiary (4,500,000)
- ----------------------------------------------------------------------------
Special Items $ 7,024,000
- ----------------------------------------------------------------------------
</TABLE>
The Company recognized a non-taxable gain of $1,709,000 in the second quarter of
fiscal 1998 from insurance proceeds on the life of its former Vice President of
Marketing and Sales. In March 1998, the Company completed the sale of its
facility in Burbank, California. The sale price consisted of cash of $8,740,000
and a receivable of $4,000,000 included in Other Current Assets in the
Consolidated Balance Sheet, resulting in a pre-tax gain of $9,815,000.
During the fourth quarter of fiscal 1998, the Company completed its evaluation
of a European subsidiary and approved a plan for its disposition. As of March
31, 1998, this subsidiary is classified as net assets held for sale and is
included in noncurrent Other Assets in the Consolidated Balance Sheet. Based on
the Company's evaluation of this subsidiary, a $4,500,000 nonrecurring charge
was recorded in fiscal 1998.
NOTE 13
Subsequent Events
On April 6, 1998, the Company entered into a definitive merger agreement with
Applied Power Inc. ("API") pursuant to which it would become a wholly owned
subsidiary of API (the "Merger"). Stockholders of the Company would receive
0.85 share of API for each share of ZERO stock. The merger agreement has been
approved by both companies' boards but is subject to stockholder approval and
satisfaction of other conditions. The Merger is structured to be tax free to
ZERO stockholders and will be accounted for as a pooling of interests.
Completion of the Merger is expected in July 1998.
35
<PAGE>
================================================================================
Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Income Basic Diluted
Net Gross Before Net Earnings per Earnings per
Quarter Ended: Sales Profit Income Taxes Income Share Share
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998 $62,818,000 $22,137,000 $14,553,000 $7,871,000 $0.63 $0.62
December 31, 1997 66,910,000 22,118,000 8,619,000 5,189,000 0.42 0.41
September 30, 1997 64,465,000 21,526,000 9,723,000 6,517,000 0.53 0.52
June 30, 1997 64,552,000 21,578,000 8,005,000 4,803,000 0.39 0.38
March 31, 1997 $58,845,000 $18,975,000 $ 6,863,000 $4,167,000 $0.34 $0.33
December 31, 1996 58,546,000 19,210,000 6,878,000 4,199,000 0.34 0.34
September 30, 1996 53,387,000 17,372,000 6,310,000 3,722,000 0.31 0.30
June 30, 1996 54,664,000 18,754,000 6,430,000 3,800,000 0.31 0.31
</TABLE>
36
<PAGE>
SCHEDULE II
ZERO CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Doubtful
Balance at Provision Accounts Balance at
Beginning of Charged to Written Other End of
Year Income Off/1/ Deductions/2/ Year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
April 1, 1997 to March 31, 1998 $607,000 $387,000 $(135,000) $(41,000) $ 818,000
April 1, 1996 to March 31, 1997 $759,000 $101,000 $(253,000) $ 607,000
April 1, 1995 to March 31, 1996 $724,000 $236,000 $(201,000) $ 759,000
</TABLE>
- -----------------
/1/ Net of recoveries
/2/ Adjusted for net assets held for sale (see Note 12 of Notes to Consolidated
Financial Statements)
37
<PAGE>
Exhibit 99.2
APPLIED POWER COMPLETES MERGER WITH
ZERO CORPORATION
MILWAUKEE, July 31, 1998 -- Applied Power Inc. (APW - NYSE) and ZERO
Corporation (ZRO - NYSE) announced today that at special meetings for both
companies, shareholders voted to approve the merger of a newly created
subsidiary of Applied Power into ZERO. The merger was completed after the
shareholder meetings. Under the terms of the agreement, ZERO stockholders
receive .850 shares of APW common stock for each share of ZERO common stock, or
approximately 11.2 million shares. This equates to a purchase price of
approximately $386 million based on the July 30, 1998 closing stock price for
APW.
Richard G. Sim, Chairman and CEO of APW stated, "We are very pleased
to complete this transaction. APW and ZERO shared the vision of creating a
worldwide company which supports customers with a broad spectrum of electronic
packaging products on a global basis. Our electronic enclosure systems strategy
operates with three basic principles:
1. To be the premier company in providing standard and
customized electronic enclosures on a global basis.
2. To be able to offer our customers either a standalone or fully
integrated product. Our enclosure business brings significant
experience in thermal management, power supplies, multi-layer
backplanes and to a limited extent, PC board capabilities. All of
these can be provided as separate components or fully integrated in
the enclosure.
3. We focus on a diverse end user industry, including
telecommunication, semiconductor fabrication, computer networking,
medical and various other computer and electronic applications."
Sim continued, "Over the last two years and culminating with the ZERO
transaction, APW has purchased 10 enclosure companies operating out of 28
facilities in North America, Europe and Asia. Our acquisition strategy is to
continue to grow this segment, both in geographic coverage and component and
integration services that can be added to the enclosure based on the customer's
requirements."
Applied Power Inc., headquartered in Butler, Wisconsin, is a global
company comprised of three business segments. Technical Environments and
Enclosures provides technical furniture and electrical and electronic enclosure
systems. Engineered Solutions supplies components and systems using thermal
management, actuation and vibration control technologies to a diverse group of
OEM customers. Tools and Supplies provide industrial and electrical tools and
accessories through various distributor and retail channels worldwide.
38
<PAGE>
With headquarters in Los Angeles, ZERO's primary business is
protecting electronics. ZERO's system packaging, thermal management and
engineered cases serve the telecommunications, instrumentation and data-
processing markets. ZERO also produces the famous line of ZERO Halliburton(R)
cases for consumers worldwide and cargo containers and proprietary loading
systems to the airline industry.
For further information contact:
Applied Power Inc.
Robert C. Arzbaecher
Vice President and Chief Financial Officer
414-781-6600
To receive a faxed copy of this or other recent Applied Power communications,
please call the Company's "News on Demand" service at 1-800-549-0679.
39
<PAGE>
Page 3
APPLIED POWER INC.-RESTATED TO INCLUDE ZERO
FINANCIAL DATA PACKAGE (UNAUDITED)
($'s in 000's, except per share amounts)
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
FISCAL 1997
---------------------------------------------------------
Q1 Q2 Q3 Q4 Year
-- -- -- -- ----
<S> <C> <C> <C> <C> <C>
- ---------------------
INCOME DATA
- ---------------------
Sales $207,760 $210,557 $232,385 $247,057 $897,758
Percent Sales Growth Over Prior Year 11% 12% 17% 22% 15%
Operating Profit $ 23,687 $ 23,684 $ 26,976 $ 27,325 $101,672
---------------------------------------------------------
Percent of Sales 11.4% 11.2% 11.6% 11.1% 11.3%
EBITDA $ 32,062 $ 33,021 $ 35,976 $ 35,950 $137,010
---------------------------------------------------------
Percent of Sales 15.4% 15.7% 15.5% 14.6% 15.3%
- ---------------------
SHARE DATA
- ---------------------
Basic EPS $ 0.35 $ 0.35 $ 0.40 $ 0.42 $ 1.53
---------------------------------------------------------
Basic EPS Growth Over Prior Year 25% 17% 25% 20% 21%
Diluted EPS $ 0.34 $ 0.34 $ 0.39 $ 0.41 $ 1.47
---------------------------------------------------------
Diluted EPS Growth Over Prior Year 26% 17% 26% 17% 20%
EBITDA/Diluted Share $ 0.82 $ 0.84 $ 0.91 $ 0.91 $ 3.49
---------------------------------------------------------
EBITDA Per Share Growth Over Prior Year 30% 25% 32% 20% 26%
Cash Dividend Per Share $ 0.045 $ 0.045 $ 0.045 $ 0.045 $ 0.180
---------------------------------------------------------
Average Shares Outstanding (in 000's):
Basic 37,697 37,876 37,939 38,028 37,880
---------------------------------------------------------
Diluted 38,905 39,241 39,332 39,679 39,307
---------------------------------------------------------
- ---------------------
BALANCE SHEET DATA
- ---------------------
Net Primary Working Capital (PWC) $209,604 $212,552 $217,558 $207,978
---------------------------------------------------------
Net PWC as a % of Annualized Sales 25% 25% 23% 21%
Debt $188,258 $196,467 $191,119 $174,594
---------------------------------------------------------
Percent Market Capitalization 26.4% 26.7% 23.5% 16.3%
Percent Debt-to-Total Capital 40.2% 40.0% 37.0% 35.3%
EBITDA Interest Coverage 8.7x 7.9x 8.6x 8.7x
- ---------------------
CASH FLOW DATA
- ---------------------
Depreciation and Amortization $ 7,526 $ 8,128 $ 8,111 $ 7,347 $ 31,112
---------------------------------------------------------
Capital Expenditures $ 8,606 $ 8,231 $ 9,365 $ 7,261 $ 33,463
---------------------------------------------------------
Cash Flow from Operations $ 17,800 $ 6,170 $ 23,934 $ 36,130 $ 84,034
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1998
--------------------------------------------
Q1 Q2 Q3 YTD
-- -- -- ---
<S> <C> <C> <C> <C>
- ---------------------
INCOME DATA
- ---------------------
Sales $273,154 $284,055 $304,471 $861,680
Percent Sales Growth Over Prior Year 31% 35% 31% 32%
Operating Profit $ 31,675 $ 32,761 $ 38,645 $103,082
--------------------------------------------
Percent of Sales 11.6% 11.5% 12.7% 12.0%
EBITDA $ 41,825(1) $ 44,423 $ 51,624(2) $137,872
--------------------------------------------
Percent of Sales 15.3% 15.6% 17.0% 16.0%
- ---------------------
SHARE DATA
- ---------------------
Basic EPS $ 0.45(1) $ 0.45 $ 0.51(2) $ 1.40
--------------------------------------------
Basic EPS Growth Over Prior Year 29% 29% 28% 28%
Diluted EPS $ 0.42(1) $ 0.43 $ 0.49(2) $ 1.34
--------------------------------------------
Diluted EPS Growth Over Prior Year 24% 26% 26% 26%
EBITDA/Diluted Share $ 1.04(1) $ 1.10 $ 1.28(2) $ 3.43
--------------------------------------------
EBITDA Per Share Growth Over Prior Year 27% 31% 41% 36%
Cash Dividend Per Share $ 0.045 $ 0.045 $ 0.045 $ 0.135
--------------------------------------------
Average Shares Outstanding (in 000's):
Basic 38,149 38,292 38,459 38,300
--------------------------------------------
Diluted 40,034 40,210 40,297 40,200
--------------------------------------------
- ---------------------
BALANCE SHEET DATA
- ---------------------
Net Primary Working Capital (PWC) $201,886 $208,610 $205,157
--------------------------------
Net PWC as a % of Annualized Sales 18% 18% 17%
Debt $283,181 $339,420 $372,244
--------------------------------
Percent Market Capitalization 24.9% 25.9% 29.7%
Percent Debt-to-Total Capital 45.2% 48.4% 49.0%
EBITDA Interest Coverage 8.1 x 7.1 x 7.6 x
- ---------------------
CASH FLOW DATA
- ---------------------
Depreciation and Amortization $ 9,671 $ 10,907 $ 11,599 $ 32,178
--------------------------------------------
Capital Expenditures $ 10,013 $ 11,558 $ 14,537 $ 36,108
--------------------------------------------
Cash Flow from Operations $ 17,120 $ 31,819 $ 29,310 $ 78,249
--------------------------------------------
(1) Excludes $1.71 million gain on life insurance
proceeds or $0.14 per diluted share recorded at Zero.
(2) Excludes $9.815 million gain on sale of Burbank, CA
facility and ($4.5) million charge due to the
discontinuance of a European subsidiary, $0.25 per
diluted share recorded at Zero.
</TABLE>
40
<PAGE>
Page 4
APPLIED POWER INC.-RESTATED TO INCLUDE ZERO
FINANCIAL DATA PACKAGE (UNAUDITED)
($'s in 000's, except per share amounts)
FINANCIAL HIGHLIGHTS
- --------------------
<TABLE>
<CAPTION>
FISCAL 1997
-------------------------------------------------------------------------------------
INCOME DATA APW ZERO Q1 APW ZERO Q2
- -------------------- --- ---- -- --- ---- --
<S> <C> <C> <C> <C> <C> <C>
Sales $153,096 $54,664 $207,760 $157,170 $53,387 $210,557
Percent Sales Growth Over Prior Year 10% 12% 11% 15% 4% 12%
Operating Profit $ 16,905 $ 6,782 23,687 $ 16,823 $ 6,861 $ 23,684
-------------------------------------------------------------------------------------
Percent of Sales 11.0% 12.4% 11.4% 10.7% 12.9% 11.2%
EBITDA $ 22,706 $ 9,356 $ 32,062 $ 23,687 $ 9,334 $ 33,021
-------------------------------------------------------------------------------------
Percent of Sales 14.8% 17.1% 15.4% 15.1% 17.5% 15.7%
- --------------------
SHARE DATA
- --------------------
Basic EPS $ 0.35 $ 0.35 $ 0.34 $ 0.35
-------------------------------------------------------------------------------------
Basic EPS Growth Over Prior Year 21% 25% 17% 17%
Diluted EPS $ 0.34 $ 0.34 $ 0.33 $ 0.34
-------------------------------------------------------------------------------------
Diluted EPS Growth Over Prior Year 21% 26% 22% 17%
EBITDA/Diluted Share $ 0.80 $ 0.82 $ 0.83 0.84
-------------------------------------------------------------------------------------
EBITDA Per Share Growth Over Prior Year 21% 30% 24% 25%
-------------------------------------------------------------------------------------
Cash Dividend Per Share $ 0.015 $ 0.030 $ 0.045 $ 0.015 $ 0.030 $ 0.045
Average Shares Outstanding (in 000's):
Basic $ 27,396 $ 37,697 27,536 $ 37,876
-------------------------------------------------------------------------------------
Diluted $ 28,372 38,905 28,692 $ 39,241
-------------------------------------------------------------------------------------
- --------------------
BALANCE SHEET DATA
- --------------------
Net Primary Working Capital (PWC) $154,522 $55,082 $209,604 $155,064 $57,488 $212,552
-------------------------------------------------------------------------------------
Net PWC as a % of Annualized Sales 25% 25% 25% 25% 27% 25%
-------------------------------------------------------------------------------------
Debt $136,732 $51,526 $188,258 $144,945 $51,522 $196,467
-------------------------------------------------------------------------------------
Percent Market Capitalization 27.5% 23.8% 26.4% 26.9% 26.2% 26.7%
Percent Debt-to-Total Capital 41.6% 36.8% 40.2% 42.3% 35.8% 40.0%
EBITDA Interest Coverage 8.6 8.9 8.7x 7.4 9.2 7.9x
- --------------------
CASH FLOW DATA
- --------------------
Depreciation and Amortization $ 5,735 $ 1,791 $ 7,526 $ 6,254 $ 1,874 $ 8,128
-------------------------------------------------------------------------------------
Capital Expenditures $ 4,927 $ 3,679 $ 8,606 $ 5,935 $ 2,296 $ 8,231
-------------------------------------------------------------------------------------
Cash Flow from Operations $ 9,066 $ 8,734 $ 17,800 $ 5,049 $ 1,121 $ 6,170
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- --------------------
FISCAL 1997
--------------------------------------------------------------------------------------
- --------------------
INCOME DATA APW ZERO Q3 APW ZERO Q4 Year
- -------------------- --- ---- -- --- ---- -- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $173,839 $58,546 $232,385 $186,212 $ 58,845 $247,057 $897,758
Percent Sales Growth Over Prior Year 18% 16% 17% 28% 5% 22% 15%
Operating Profit $ 19,363 $ 7,613 $ 26,976 $ 19,792 $ 7,533 $ 27,325 $101,672
--------------------------------------------------------------------------------------
Percent of Sales 11.1% 13.0% 11.6% 10.5% 12.8% 11.1% 11.3%
EBITDA $ 26,015 $ 9,961 $ 35,976 $ 26,001 $ 9,949 $ 35,950 $137,010
--------------------------------------------------------------------------------------
Percent of Sales 15.0% 17.0% 15.5% 13.8% 16.9% 14.6% 15.3%
- --------------------
SHARE DATA
- --------------------
Basic EPS $ 0.40 $ 0.40 $ 0.43 $ 0.42 $ 1.53
--------------------------------------------------------------------------------------
Basic EPS Growth Over Prior Year 18% 25% 26% 20% 21%
Diluted EPS $ 0.39 $ 0.39 $ 0.41 $ 0.41 $ 1.47
--------------------------------------------------------------------------------------
Diluted EPS Growth Over Prior Year 18% 26% 24% 17% 20%
EBITDA/Diluted Share $ 0.90 $ 0.91 $ 0.89 $ 0.91 $ 3.49
--------------------------------------------------------------------------------------
EBITDA Per Share Growth Over Prior Year 22% 32% 20% 20% 26%
Cash Dividend Per Share $ 0.015 $ 0.030 $ 0.045 $ 0.015 $ 0.030 $ 0.045 $ 0.180
--------------------------------------------------------------------------------------
Average Shares Outstanding (in 000's):
Basic 27,586 37,939 27,620 38,028 37,880
--------------------------------------------------------------------------------------
Diluted 28,808 39,332 29,076 39,679 39,307
--------------------------------------------------------------------------------------
- --------------------
BALANCE SHEET DATA
- --------------------
Net Primary Working Capital (PWC) $156,555 $61,003 $217,558 $145,903 $ 62,075 $207,978
--------------------------------------------------------------------------------------
Net PWC as a % of Annualized Sales 23% 26% 23% 19% 26% 21%
Debt $139,488 $51,631 $191,119 $123,091 $ 51,503 $174,594
--------------------------------------------------------------------------------------
Percent Market Capitalization 23.0% 24.9% 23.5% 14.0% 26.4% 16.3%
Percent Debt-to-Total Capital 40.1% 34.8% 37.0% 36.0% 33.7% 35.3%
EBITDA Interest Coverage 8.3 9.8 8.6x 8.6 9.2 8.7x
- --------------------
CASH FLOW DATA
- --------------------
Depreciation and Amortization $ 6,183 $ 1,928 $ 8,111 $ 5,491 $ 1,856 $ 7,347 $ 31,112
--------------------------------------------------------------------------------------
Capital Expenditures $ 7,346 $ 2,019 $ 9,365 $ 4,433 $ 2,828 $ 7,261 $ 33,463
--------------------------------------------------------------------------------------
Cash Flow from Operations $ 20,586 $ 3,348 $ 23,934 $ 30,129 $ 6,001 $ 36,130 $ 84,034
--------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
Page 5
APPLIED POWER INC.-RESTATED TO INCLUDE ZERO
FINANCIAL DATA PACKAGE (UNAUDITED)
($'s in 000's, except per share amounts)
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- --------------------
FISCAL 1998
------------------------------------------------------------
APW ZERO Q1 APW ZERO Q2
--- ---- -- --- ---- --
<S> <C> <C> <C> <C> <C> <C>
- --------------------
INCOME DATA
- --------------------
Sales $208,689 $64,465 $273,154 $217,145 $66,910 $284,055
Percent Sales Growth Over Prior Year 36% 18% 31% 38% 25% 35%
Operating Profit $ 23,009 $ 8,666 $ 31,675 $ 23,353 $ 9,408 $ 32,761
------------------------------------------------------------
Percent of Sales 11.0% 13.4% 11.6% 10.8% 14.1% 11.5%
EBITDA $ 30,557 $11,244 $ 41,825(1) $ 32,326 $12,076 $ 44,423
------------------------------------------------------------
Percent of Sales 14.6% 17.4% 15.3% 14.9% 18.0% 15.6%
- --------------------
SHARE DATA
- --------------------
Basic EPS $ 0.44 $ 0.45(1) $ 0.43 $ 0.45
------------------------------------------------------------
Basic EPS Growth Over Prior Year 26% 29% 26% 29%
Diluted EPS $ 0.42 $ 0.42(1) $ 0.40 $ 0.43
------------------------------------------------------------
Diluted EPS Growth Over Prior Year 24% 24% 21% 26%
EBITDA/Diluted Share $ 1.04 $ 1.04(1) $ 1.10 $ 1.10
------------------------------------------------------------
EBITDA Per Share Growth Over Prior Year 30% 27% 33% 31%
Cash Dividend Per Share $ 0.015 $ 0.030 $ 0.045 $ 0.015 $ 0.030 $ 0.045
------------------------------------------------------------
Average Shares Outstanding (in 000's):
Basic 27,682 38,149 27,775 38,292
------------------------------------------------------------
Diluted 29,302 40,034 29,439 40,210
------------------------------------------------------------
- --------------------
BALANCE SHEET DATA
- --------------------
Net Primary Working Capital (PWC) $138,379 $63,507 $201,886 $144,763 $63,847 $208,610
------------------------------------------------------------
Net PWC as a % of Annualized Sales 17% 25% 18% 17% 24% 18%
Debt $231,672 $51,509 $283,181 $287,847 $51,573 $339,420
------------------------------------------------------------
Percent Market Capitalization 27.4% 17.5% 24.9% 28.8% 16.6% 25.9%
Percent Debt-to-Total Capital 49.9% 31.5% 45.2% 54.1% 30.5% 48.4%
EBITDA Interest Coverage 7.4 11.3 8.1x 6.1 12.5 7.1
- --------------------
CASH FLOW DATA
- --------------------
Depreciation and Amortization $ 7,661 $ 2,010 $ 9,671 $ 8,664 $ 2,243 $ 10,907
------------------------------------------------------------
Capital Expenditures $ 7,247 $ 2,766 $ 10,013 $ 6,910 $ 4,648 $ 11,558
------------------------------------------------------------
Cash Flow from Operations $ 9,741 $ 7,379 $ 17,120 $ 17,699 $14,120 $ 31,819
------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------
APW ZERO Q3 Q4 YTD
--- ---- -- -- ---
<S> <C> <C> <C> <C> <C>
- --------------------
INCOME DATA
- --------------------
Sales $241,653 $62,818 $304,471 $861,680
Percent Sales Growth Over Prior Year 39% 7% 31% 32%
Operating Profit $ 29,036 $ 9,609 $ 38,645 $103,082
---------------------------------------------------
Percent of Sales 12.0% 15.3% 12.7% 12.0%
EBITDA $ 38,607 $12,992 $ 51,624(2) $137,872
---------------------------------------------------
Percent of Sales 16.0% 20.7% 17.0% 16.0%
- --------------------
SHARE DATA
- --------------------
Basic EPS $ 0.54 $ 0.51(2) $ 1.40
---------------------------------------------------
Basic EPS Growth Over Prior Year 35% 28% 28%
Diluted EPS $ 0.51 $ 0.49(2) $ 1.34
---------------------------------------------------
Diluted EPS Growth Over Prior Year 31% 26% 26%
EBITDA/Diluted Share $ 1.31 $ 1.28(2) $ 3.43
---------------------------------------------------
EBITDA Per Share Growth Over Prior Year 46% 41% 36%
Cash Dividend Per Share $ 0.015 $ 0.030 $ 0.045 $ 0.135
---------------------------------------------------
Average Shares Outstanding (in 000's):
Basic 27,911 38,459 38,300
---------------------------------------------------
Diluted 29,539 40,297 40,200
---------------------------------------------------
- --------------------
BALANCE SHEET DATA
- --------------------
Net Primary Working Capital (PWC) $146,920 $58,237 $205,157
-----------------------------------------
Net PWC as a % of Annualized Sales 15% 23% 17%
Debt $321,689 $50,555 $372,244
-----------------------------------------
Percent Market Capitalization 33.7% 17.0% 29.7%
Percent Debt-to-Total Capital 55.1% 28.6% 49.0%
EBITDA Interest Coverage 6.5 15.5 7.6x
- --------------------
CASH FLOW DATA
- --------------------
Depreciation and Amortization $ 9,421 $ 2,178 $ 11,599 $ 32,178
---------------------------------------------------
Capital Expenditures $ 10,027 $ 4,510 $ 14,537 $ 36,108
---------------------------------------------------
Cash Flow from Operations $ 22,305 $ 7,005 $ 29,310 $ 78,249
---------------------------------------------------
</TABLE>
(1) Excludes $1.71 million gain on life insurance proceeds or $0.14 per diluted
share recorded at Zero.
(2) Excludes $9.815 million gain on sale of Burbank, CA facility and ($4.5)
million charge due to the discontinuance of a European subsidiary, $0.25 per
diluted share recorded at Zero.
42
