<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Mark One
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended November 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-11288
APPLIED POWER INC.
-----------------
(Exact name of Registrant as specified in its charter)
Wisconsin 39-0168610
--------- ----------
(State of incorporation) (I.R.S. Employer Id. No.)
13000 West Silver Spring Drive
Butler, Wisconsin 53007
Mailing address: P. O. Box 325, Milwaukee, Wisconsin 53201
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(414) 783-9279
--------------
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
Number of outstanding shares of Class A Common Stock: 38,726,880 as of December
31, 1998.
<PAGE>
APPLIED POWER INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1 - Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Statement of Earnings -
Three Months Ended November 30, 1998 and 1997............ 3
Condensed Consolidated Balance Sheet -
November 30, 1998 and August 31, 1998.................... 4
Condensed Consolidated Statement of Cash Flows -
Three Months Ended November 30, 1998 and 1997............ 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk....... 11
PART II - OTHER INFORMATION
- ---------------------------
Item 6 - Exhibits and Reports on Form 8-K................................. 11
SIGNATURE................................................................. 12
- ---------
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
- -----------------------------
APPLIED POWER INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended November 30,
-------------------------------
1998 1997
-------- --------
<S> <C> <C>
Net Sales $435,660 $275,375
Cost of Products Sold 298,258 179,693
-------- --------
Gross Profit 137,402 95,682
Engineering, Selling and Administrative Expenses 82,418 60,437
Amortization of Intangible Assets 7,065 2,680
Contract Termination Costs 7,824 -
-------- --------
Operating Earnings 40,095 32,565
Other Expense(Income):
Net financing costs 13,899 5,217
Gain on life insurance - (1,709)
Other - net (7) (192)
-------- --------
Earnings Before Income Tax Expense 26,203 29,249
Income Tax Expense 9,802 10,134
-------- --------
Net Earnings $ 16,401 $ 19,115
======== ========
Basic Earnings Per Share:
Earnings Per Share $ 0.42 $ 0.50
======== ========
Weighted Average Common Shares Outstanding (000's) 38,649 38,149
======== ========
Diluted Earnings Per Share:
Earnings Per Share $ 0.41 $ 0.48
======== ========
Weighted Average Common and Equivalent Shares Outstanding (000's) 40,078 40,035
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
APPLIED POWER INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share amounts)
(Unaudited)
November 30, August 31,
1998 1998
------------ -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,162 $ 6,349
Net accounts receivable 205,187 147,380
Net inventories 190,054 164,786
Prepaid expenses and deferred taxes 45,790 46,049
---------- ----------
Total Current Assets 449,193 364,564
Net Property, Plant and Equipment 275,657 225,170
Goodwill and Other Intangibles 846,008 542,869
Other Assets 39,983 42,119
---------- ----------
Total Assets $1,610,841 $1,174,722
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings $ - $ 91
Trade accounts payable 170,532 127,470
Accrued compensation and benefits 45,268 45,457
Income taxes payable 30,662 12,898
Other current liabilities 66,320 74,792
---------- ----------
Total Current Liabilities 312,782 260,708
Long-Term Debt 872,185 512,557
Deferred Income Taxes 23,084 23,065
Other Liabilities 39,853 36,510
Shareholders' Equity:
Class A common stock, $0.20 par value, authorized
80,000,000 shares issued and outstanding
38,674,551 and 38,626,068 shares, respectively 7,734 7,725
Additional paid-in capital 6,343 5,817
Accumulated other comprehensive income (2,758) (7,465)
Retained earnings 351,618 335,805
---------- ----------
Total Shareholders' Equity 362,937 341,882
---------- ----------
Total Liabilities and Shareholders' Equity $1,610,841 $1,174,722
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
APPLIED POWER INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended November 30,
-------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Operating Activities
- --------------------
Net Earnings $ 16,401 $ 19,115
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 18,759 9,813
Gain on sale of assets - (21)
Changes in operating assets and liabilities,
excluding the effects of business
acquisitions:
Accounts receivable (10,539) (2,455)
Inventories (6,428) 4,515
Prepaid expenses and other assets 2,665 2,240
Trade accounts payable 3,918 (5,454)
Other liabilities 5,049 (5,588)
Income taxes payable 10,546 (394)
--------- ---------
Net Cash Provided By Operating Activities 40,371 21,771
Investing Activities
- --------------------
Proceeds on the sale of property, plant and equipment 4,484 -
Purchases of property, plant and equipment (16,866) (10,400)
Cash used for business acquisitions (365,996) (152,728)
Merger related fees (8,100) -
Other 64 (158)
--------- ---------
Net Cash Used In Investing Activities (386,414) (163,286)
Financing Activities
- --------------------
Proceeds from issuance of long-term debt 278,762 141,878
Principal payments on long-term debt (27,806) (38,229)
Net (repayments) borrowings on short-term
credit facilities (2,433) 6,076
Net commercial paper borrowings 100,483 -
Debt financing costs (1,412) -
Additional receivables financed - 30,000
Dividends paid on common stock (588) (785)
Stock options exercised 535 1,944
Other - (213)
--------- ---------
Net Cash Provided By Financing Activities 347,541 140,671
Effect of Exchange Rate Changes on Cash 315 158
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 1,813 (686)
Cash and Cash Equivalents - Beginning of Period 6,349 22,047
Effect of the ZERO excluded period (as described
in Note A) - 9,859
--------- ---------
Cash and Cash Equivalents - End of Period $ 8,162 $ 31,220
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
APPLIED POWER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share amounts)
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements of
Applied Power Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial reporting and
with the instructions of Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
For additional information, refer to the consolidated financial statements and
footnotes thereto in the Company's 1998 Annual Report on Form 10-K.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been made. Such adjustments consist of only those of a
recurring nature. Operating results for the three months ended November 30, 1998
are not necessarily indicative of the results that may be expected for the
fiscal year ending August 31, 1999.
As described more fully in the Company's 1998 Annual Report on Form 10-K, in
July 1998 a subsidiary of the Company merged with ZERO Corporation ("ZERO") and
ZERO became a wholly-owned subsidiary of the Company. The merger with ZERO has
been accounted for as a pooling of interests. Prior to the merger, ZERO had a
March 31 fiscal year end. The consolidated financial statements as of and for
the year ended August 31, 1998 (including the Condensed Consolidated Balance
Sheet included herein) reflect the combination of an August 31 year end
consolidated financial position, results of operations and cash flows for ZERO.
The results of operations and cash flows for ZERO from April 1, 1997 to August
31, 1997 are reflected as an adjustment in the consolidated statement of cash
flow for the three months ended November 30, 1997.
Note B - Earnings Per Share
- ---------------------------
During its last fiscal year, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." Under the
new pronouncement, the dilutive effect of stock options is excluded from the
calculation of primary earnings per share, now called basic earnings per share.
Earnings per share information for all prior periods presented has been restated
to conform with the new calculation under SFAS No. 128.
The reconciliations between basic and diluted earnings per share are as follows:
<TABLE>
<CAPTION>
Three Months Ended
November 30,
------------------
1998 1997
------- -------
<S> <C> <C>
Numerator:
Net earnings for basic and diluted earnings per share $16,401 $19,115
Denominator:
Weighted average common shares outstanding for basic 38,649 38,149
earnings per share
Net effect of dilutive options based on the treasury
stock method using average market price 1,429 1,886
------- -------
Weighted average common and equivalent shares
outstanding for diluted earnings per share 40,078 40,035
======= =======
Basic Earnings Per Share $ 0.42 $ 0.50
======= =======
Diluted Earnings Per Share $ 0.41 $ 0.48
======= =======
</TABLE>
6
<PAGE>
Note C - Comprehensive Income
- -----------------------------
Effective September 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its components. The adoption of this
Statement had no impact on the Company's net earnings or shareholders' equity.
SFAS No. 130 requires the Company's foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income. Prior year financial statements have
been reclassified to conform with the requirements of SFAS No. 130. Total
comprehensive income, which was comprised of net earnings and foreign currency
adjustments, amounted to approximately $21,100 and $19,100 for the three months
ended November 30, 1998 and 1997, respectively.
Note D - Acquisitions
- ---------------------
On September 29, 1998, the Company, through its wholly-owned subsidiary, APW
Enclosure Systems Limited, accepted for payment all shares of Rubicon Group plc
("Rubicon") common stock which had been tendered pursuant to the APW Enclosure
Systems Limited tender offer (with a guaranteed loan note alternative) for all
outstanding shares of common stock at 2.35 pounds sterling per share and all
outstanding cumulative preference shares at 0.50 pounds sterling per share. The
tendered common shares accepted for payment exceeded 90 percent of the
outstanding common shares on October 8, 1998, and APW Enclosure Systems Limited
invoked Section 429 of the UK Companies Act of 1985, as amended, to acquire the
remaining outstanding common shares of Rubicon. APW Enclosure Systems Limited
now owns all of the common shares of Rubicon. Pursuant to the tender offer, APW
Enclosure Systems Limited purchased 27.2 percent of the outstanding preference
shares. The tender offer for the preference shares has terminated, and 72,810
preference shares, or 72.8 percent of the original outstanding preference
shares, continue to be owned by outside shareholders.
Cash paid for the transaction totaled approximately $362,000. Preliminary
allocations of the purchase price result in approximately $309,000 of goodwill.
To provide the necessary funds, the Company entered into a Multicurrency Credit
Agreement, dated as of October 14, 1998, providing for a $850,000, 5-year
revolving credit facility. The acquisition was accounted for using the purchase
method.
The following unaudited pro forma data summarize the results of operations for
the periods indicated as if the acquisition of Rubicon had been completed on
September 1, 1997, the beginning of the 1998 fiscal year. The pro forma data
give effect to actual operating results prior to the acquisition and adjustments
to interest expense, goodwill amortization and income tax expense. These pro
forma amounts do not purport to be indicative of the results that would have
actually been obtained if the acquisition had occurred on September 1, 1997 or
that may be obtained in the future.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months Ended November 30,
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $ 460,300 $ 349,254
Net Earnings $ 15,544 $ 19,417
Basic Earnings Per Share $ 0.40 $ 0.51
Shares Used in Computation 38,649 38,149
Diluted Earnings Per Share $ 0.39 $ 0.49
Shares Used in Computation 40,078 40,035
================================================================================
</TABLE>
Note E - Net Inventories
- ------------------------
It is not practical to segregate the amounts of raw materials, work-in-process
or finished goods at the respective balance sheet dates since the segregation is
possible only as the result of physical inventories which are taken at dates
different from the balance sheet dates. The systems at many of the Company's
operating units have not been designed to capture this segregation due to the
very short production cycle of their products and the minimal amount of work-in-
process.
7
<PAGE>
Note F - Merger, Restructuring and Other Non-recurring Charges
- --------------------------------------------------------------
During the fourth quarter of fiscal 1998, the Company recorded restructuring and
other one-time charges of $52,637, net of income tax benefit of $16,803. The
pre-tax charges of $69,440 related to costs associated with the merger of ZERO
Corporation, various plant consolidations and other cost reductions and product
rationalization efforts of the Company.
Approximately $19,200 and $21,500 of accrued merger and restructuring costs were
included in other current liabilities as of November 30, 1998 and August 31,
1998, respectively.
Note G - Subsequent Events
- --------------------------
On December 18, 1998, the Company amended its $90,000 accounts receivable
financing facility by increasing the amount of multi-currency accounts
receivable financing from $90,000 to $150,000. All other substantive terms of
the agreement remain the same.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
(Dollars in thousands, except per share amounts)
Results of Operations
- ---------------------
The Company reported record sales for the quarter ended November 30, 1998. Net
earnings for the first quarter of fiscal 1999 were $16,401, or $0.41 per share
on a diluted basis. Excluding one time items in the first quarter of fiscal 1998
and 1999, earnings were $21,095, or $0.53 per share on a diluted basis, an
increase of 23 percent over the $17,406, or $0.43 per share on a diluted basis,
in the previous year. The one-time items relate to a life insurance pre-tax gain
in ZERO of $1,709, or $0.05 per share on a diluted basis, recorded as other
income in the first quarter of 1998, and an Engineered Solutions contract
termination of $7,824, or $0.12 per share on a diluted basis, recorded to
operating expense in 1999. Sales for the three month period ended November 30,
1998 were $435,660, an increase of 58 percent over the $275,375 reported in the
comparable prior year period. Foreign currency translation had a negligible
effect on reported fiscal 1999 first quarter sales.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Three Months Ended November 30,
- --------------------------------------------------------------------------------
SALES BY SEGMENT 1998 1997 Change
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Enclosure Products and Systems $ 236,326 $ 96,620 145 %
Engineered Solutions 119,409 102,282 17 %
Tools and Supplies 79,925 76,473 5 %
- --------------------------------------------------------------------------------
Total $ 435,660 $ 275,375 58 %
================================================================================
</TABLE>
Revenues from Enclosure Products and Systems grew 145 percent, bolstered by
strategic acquisitions of the AA Manufacturing, PMP, PTI, Premier, Brown, VERO
and Rubicon businesses during fiscal 1998 and the first quarter of fiscal 1999,
which added approximately $129,800 in sales for the three months ended November
30, 1998.
Engineered Solutions reported a first quarter sales increase of 17 percent over
the comparable prior year period. Certain businesses purchased in the Versa/Tek
acquisition in the prior year combined to contribute approximately $10,400 in
sales to this segment in fiscal 1999. Internal growth, principally from
recreational vehicles and convertible top systems, also contributed to the
increased sales.
Revenues from Tools and Supplies increased five percent from the first quarter
of fiscal 1998. Acquisitions accounted for approximately $7,300 of the sales
increase. The effect of the fiscal 1998 acquisitions coupled with modest
internal growth in North America offset a decline in Asia.
8
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended November 30,
- ---------------------------------------------------------------------------------------------
GROSS PROFIT BY SEGMENT 1998 1997 Change
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enclosure Products and Systems $ 65,670 $ 34,831 89 %
Engineered Solutions 40,587 32,942 23 %
Tools and Supplies 31,145 27,909 12 %
- ---------------------------------------------------------------------------------------------
Total $137,402 $ 95,682 44 %
=============================================================================================
</TABLE>
Total gross profit increased 44 percent from the first quarter of fiscal 1998,
primarily due to increased sales volume and the resulting fixed manufacturing
cost leverage. Overall, the Company's gross profit percentage decreased to 31.5
percent from 34.7 percent for the three months ended November 30, 1998 and 1997,
respectively. The decrease is mainly attributable to the acquisition of lower
gross profit margin enclosure businesses within Enclosure Products and Systems.
<TABLE>
<CAPTION>
Three Months Ended November 30,
- -------------------------------------------------------------------------------------------------------------------
ENGINEERING, SELLING AND ADMIN. EXPENSES 1998 1997 Change
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Enclosure Products and Systems $40,530 $20,336 99 %
Engineered Solutions 19,637 17,377 13 %
Tools and Supplies 19,159 18,509 4 %
General Corporate 3,092 4,215 (27)%
- -------------------------------------------------------------------------------------------------------------------
Total $82,418 $60,437 36 %
===================================================================================================================
</TABLE>
First quarter engineering, selling and administrative ("operating") expenses
were 36 percent higher than reported in the first quarter of fiscal 1998,
reflecting the impact of acquisitions, which added approximately $19,200 in
operating expenses for the quarter, and the higher sales levels. In total,
operating expenses were reduced to 18.9 percent of net sales compared to 21.9
percent for the first quarter ended November 30, 1997. The reduction was the
result of continued efforts to aggressively manage spending levels throughout
the Company, along with the acquisition of businesses within Enclosure Products
and Systems, which have a lower percentage of operating expenses.
During the first quarter, the Company incurred a one-time charge of $4,700
after-tax, or $0.12 per share on a diluted basis, due to the cancellation of a
contract within the Engineered Solutions segment. The majority of these costs
were incurred prior to fiscal 1999.
Amortization expense for the quarter ended November 30, 1998 was higher than
that reported for the three months ended November 30, 1997 due to the
acquisitions made subsequent to the first quarter of fiscal 1998, including
primarily VERO and Rubicon.
The operating profit margin decreased to 9.2 percent compared to 11.8 percent
for the first quarter ended November 30, 1997. The decrease is a result of the
non-recurring contract termination charge in the first quarter of fiscal 1999
and increased amortization expense due to the acquisitions in fiscal 1998.
Net financing costs for the three months ended November 30, 1998 increased over
the prior year comparable period as a result of the additional borrowings for
the acquisitions subsequent to the first quarter of fiscal 1998.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents totaled $8,162 at November 30, 1998 and $6,349 at
August 31, 1998. In order to minimize net financing costs, the Company
intentionally maintains low cash balances by using available cash to reduce
short-term bank borrowings.
Net cash generated from operations, after considering non-cash items and changes
in operating assets and liabilities, totaled $40,371 and $21,771 for the three
month periods ended November 30, 1998 and 1997, respectively.
9
<PAGE>
Net cash used in investing activities totaled $386,414 for the first quarter of
fiscal 1999, $16,866 of which was used for capital expenditures and $361,696 for
the acquisition of Rubicon.
<TABLE>
<CAPTION>
TOTAL CAPITALIZATION November 30, 1998 August 31, 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shareholders' Equity $ 362,937 29% $341,882 39%
Total Debt 872,185 69% 512,648 58%
Deferred Taxes 23,084 2% 23,065 3%
- ------------------------------------------------------------------------------------------------------------
Total $1,258,206 100% $877,595 100%
============================================================================================================
</TABLE>
On October 14, 1998 the Company and Enerpac B.V., a Netherlands subsidiary of
the Company, as Borrowers, entered into a Multicurrency Credit Agreement,
providing for an $850,000, 5-year revolving credit facility (the "Facility"). In
conjunction with the closing of the Facility, the Company terminated its prior
$700,000, 5-year revolving credit facility (the "Prior Facility"), and used
certain funds received under the Facility to repay borrowings under the Prior
Facility. The Facility was used to finance expenses related to the acquisition
of Rubicon, provide for working capital, capital expenditures and for other
general corporate purposes. Outstanding debt at November 30, 1998 totaled
$872,185, an increase of approximately $359,600 since the beginning of the
fiscal year. Debt as a percentage of total capitalization ended the quarter at
69 percent, up from 58 percent at the beginning of the year. Dividends of $588
were paid, while the exercise of stock options generated an additional $535 of
cash.
Year 2000 Considerations
- ------------------------
As is the case for most companies, the Year 2000 computer issue creates a risk
for the Company. If systems do not correctly recognize date information when the
year changes to 2000, there could be a material adverse impact on the Company's
operations. However, the impact cannot be quantified at this time.
The Company is taking actions intended to ensure that its computer systems are
capable of processing periods for the Year 2000 and beyond. The Company has
developed and has clearly articulated a written policy that Year 2000 readiness
is an important responsibility for all its business leaders. In addition, the
Company is aggressively pursuing a comprehensive set of programs intended to
reduce the risk of disruptions due to the Year 2000 problem. Issues addressed in
the context of these efforts include, but are not limited to, creating
management awareness regarding the Year 2000 problem and the need to become Year
2000 ready, mitigating known Year 2000 readiness problems, communicating the
Company's Year 2000 readiness commitment to its customers, conducting a company-
wide Year 2000 readiness check, the official designation of Year 2000 readiness
contacts within each business unit, comprehensive testing and compliance
certification for all of the Company's mission-critical business and
manufacturing control systems, proactive Year 2000 compliance certification of
key suppliers, and the development of contingency plans to deal with emergent
Year 2000 situations. The Company expects to complete the majority of its
efforts in this area by the end of fiscal 1999. This should leave adequate time
to perform additional testing and make any further modifications that are deemed
necessary.
The Company is continuing an ongoing process of assessing potential Year 2000
risks and uncertainties. However, it is currently premature to define the most
reasonably likely worst case scenarios related to the Year 2000 problem. The
Company's Year 2000 readiness initiatives are intended to address its critical
business functions, and the Company currently expects to successfully mitigate
its controllable internal year 2000 issues. However, the Company also relies
upon third parties whose failure to identify and remediate their Year 2000
problems could have a material impact on the Company's operations and financial
condition. The Company's Year 2000 readiness efforts include attempting to
identify, assess and mitigate third party risks where possible. To date, no
third party has communicated to the Company Year 2000 problems that reasonably
could be expected to have a material impact on the Company's operations.
However, it is impossible for the Company to identify the potential impact and
all related costs and consequences of third parties, particularly those that
have not responded to inquiries by the Company as to Year 2000 readiness.
10
<PAGE>
Based on the current status of the Company's compliance and readiness efforts,
the costs associated with identified Year 2000 issues are not expected to have a
material effect on the results of operations or financial condition of the
Company. Most of the Company's business units have installed or are in the
process of installing new business management systems which go beyond just Year
2000 compliance. The costs of purchased software are capitalized. Some
businesses have chosen to upgrade existing systems to be compliant. These costs
are being expensed as incurred. Additionally, the Company is developing a
contingency plan to deal with any issues that are not resolved on a timely
basis. The Company historically has not quantified the costs of Year 2000
compliance and remediation, but believes costs incurred to date were immaterial.
The Company estimates remaining costs, including internal costs such as payroll
expenses incurred for the Year 2000 project, to range between $3,000 and $5,000,
which is expected to be funded with cash flow from operations.
At this time, the Company does not expect the reasonably foreseeable
consequences of the Year 2000 problem to have material adverse effects on the
Company's business, operations or financial condition. However, the Company
cannot be certain that it will not suffer business interruptions, either due to
its own Year 2000 problems or those of its customers or suppliers whose Year
2000 problems may make it difficult or impossible to fulfill their commitments
to the Company. Furthermore, the Year 2000 problem has many elements and
potential consequences, some of which may not be reasonably foreseeable, and
there can be no assurances that every material Year 2000 problem will be
identified and addressed or that unforeseen consequences will not arise and
possibly have a material adverse effect on the Company. Unanticipated factors
while implementing the changes necessary to mitigate Year 2000 problems,
including, but not limited to, the ability to locate and correct all relevant
codes in computer and imbedded systems, or the failure of critical third parties
to communicate and mitigate their Year 2000 problems could result in
unanticipated adverse impacts on the business activities or operations of the
Company.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
See Item 7A of the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1998.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) See Index to Exhibits on pages 13-14, which is incorporated herein by
reference.
(b) On October 14, 1998, the Company filed a Current Report on Form 8-K dated
September 29, 1998 reporting under Item 2 that the Company had accepted for
payment all Rubicon Group plc shares tendered pursuant to the Company's
tender offer to acquire all outstanding shares at a cash price of 2.35
pounds sterling for each common share and 0.50 pounds sterling for each
preference share. The required Item 7 historical and pro forma disclosures
were filed as an amendment to the Current Report on Form 8-K/A on December
11, 1998.
11
<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.
------------------
(Registrant)
Date: January 14, 1999 By: /s/Robert C. Arzbaecher
------------------------
Robert C. Arzbaecher
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer
and duly authorized to sign
on behalf of the registrant)
12
<PAGE>
APPLIED POWER INC.
(the "Registrant")
(Commission File No. 1-11288)
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 30, 1998
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Incorporated Herein Filed
Exhibit Description By Reference To Herewith
- --------- ---------------------------------------- -------------------------------------- ---------------
<S> <C> <C> <C>
4.1 Multicurrency Credit Agreement, dated Exhibit 4.4 to the Registrant's
as of October 14, 1998, among Applied Form 10-K for the fiscal year ended
Power Inc. and Enerpac B.V., as August 31, 1998 ("1998 10-K")
Borrowers, various financial
institutions from time to time party
thereto, as Lenders, The First
National Bank of Chicago, as
Syndication Agent, Societe Generale,
as Documentation Agent, and Bank of
America National Trust and Savings
Association, as Administrative Agent,
arranged by NationsBanc Montgomery
Securities LLC
4.2 (a) Receivables Purchase Agreement, Exhibit 4.1 to the Registrant's
dated as of November 20, 1997, among Form 10-Q for quarter ended
Applied Power Credit Corporation as November 30, 1997
Seller, Applied Power Inc.
individually and as Servicer and
Barton Capital Corporation as
Purchaser and Societe Generale as
Agent
(b) First Amendment to Receivables Exhibit 4.5(b) to 1998 10-K
Purchase Agreement dated as of August
28, 1998
(c) Second Amendment to Receivables X
Purchase Agreement dated as of
December 18, 1998
10.1 Description of Fiscal 1999 Management X
Bonus Arrangement
27.1 Financial Data Schedule X
27.2 Restated Financial Data Schedule X
(three month period ended November
30, 1997)
27.3 Restated Financial Data Schedule X
(six month period ended February 28,
1998)
</TABLE>
13
<PAGE>
APPLIED POWER INC.
(the "Registrant")
(Commission File No. 1-11288)
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 30, 1998
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Incorporated Herein Filed
Exhibit Description By Reference To Herewith
- --------- ---------------------------------------- -------------------------------------- ---------------
<S> <C> <C> <C>
27.4 Restated Financial Data Schedule X
(nine month period ended May 31, 1998)
27.5 Restated Financial Data Schedule X
(three month period ended November
30, 1996)
27.6 Restated Financial Data Schedule X
(six month period ended February 28,
1997)
27.7 Restated Financial Data Schedule X
(nine month period ended May 31, 1997)
99.1 Certificate of Trust of Applied Power X
Capital Trust I (Conformed copy)
99.2 Trust Agreement of Applied Power X
Capital Trust I (Conformed copy)
99.3 Certificate of Trust of Applied Power X
Capital Trust II (Conformed copy)
99.4 Trust Agreement of Applied Power X
Capital Trust II (Conformed copy)
</TABLE>
14
<PAGE>
Exhibit 4.2(c)
SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT dated as of
December 18, 1998 (the "Amendment") is entered into among APPLIED POWER CREDIT
CORPORATION, a Nevada corporation ("Seller"), APPLIED POWER INC., a Wisconsin
corporation, individually and as the initial Servicer (the "Servicer"), BARTON
CAPITAL CORPORATION, a Delaware corporation, as the Purchaser (the "Purchaser"),
and SOCIETE GENERALE, a banking corporation organized under the laws of France,
acting through its Chicago Branch, as agent for the Purchaser (in such capacity,
the "Agent").
R E C I T A L S
- - - - - - - -
A. The Seller, the Servicer, the Purchaser and the Agent have entered into
that certain Receivables Purchase Agreement, dated as of November 20, 1997 (as
heretofore amended, supplemented or otherwise modified, the "Receivables
Purchase Agreement"), pursuant to which Seller will sell to Purchaser certain
Undivided Interests in all outstanding Pool Receivables purchased by Seller from
the Originators pursuant to the Purchase and Sale Agreement (as defined in the
Receivables Purchase Agreement).
B. The parties to the Receivables Purchase Agreement desire to enter into
this Amendment to amend the Receivables Purchase Agreement.
1. Certain Defined Terms. Capitalized terms used but not defined herein
shall have the meanings set forth for such terms in Schedule I to the
Receivables Purchase Agreement.
2. Amendments to Receivables Purchase Agreement. The Receivables Purchase
Agreement is hereby amended as follows:
(a) Section 1.03(a) of the Receivables Purchase Agreement is hereby
amended by deleting the amount "$90,000,000" where it appears in such
Section and inserting in lieu thereof the amount "$150,000,000."
(b) The definition of "Demand Note" set forth in Schedule I to the
Receivables Purchase Agreement is hereby amended in its entirety as
follows:
"Demand Note" means the Second Amended and Restated Demand
Promissory Note, in the original principal amount of $24,000,000
issued by API to Seller.
(c) The definition of "Receivable" set forth in Schedule I to the
Receivables Purchase Agreement is hereby amended by adding, immediately
preceding the period at the end thereof, the following proviso:
"; provided, however, that the term "Receivable" shall not
include any right to payment to the Originator of which is Electronic
Solutions and the obligor of which is Allied Signal, Inc."
<PAGE>
3. Conditions to Effectiveness. This Amendment shall become effective on
the date hereof when all of the following conditions have been satisfied:
(a) All of the parties hereto shall have executed such Amendment;
(b) The Agent shall have received the written consent of the Majority
Purchasers (as defined in the Stand-By Purchase Agreement); and
(c) The Agent shall have received from the Seller a fee in the amount
of $35,000.
4. Effect of Amendment. Except as expressly amended and modified by this
Amendment, all provisions of the Receivables Purchase Agreement shall remain in
full force and effect. After this Amendment becomes effective, all references
in each of the Agreements to "this Agreement", "hereof", "herein", or words of
similar effect referring to such Agreement shall be deemed to be references to
the Receivables Purchase Agreement, as amended by this Amendment. This
Amendment shall not be deemed to expressly or impliedly waive, amend or
supplement any provision of the Agreements other than as set forth herein.
5. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, and each
counterpart shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
6. Governing Law. This Amendment shall be governed by, and construed in
accordance with the law of the State of Illinois without regard to any otherwise
applicable principles of conflicts of law.
7. Section Headings. The various headings of this Amendment are inserted
for convenience only and shall not affect the meaning or interpretation of this
Amendment or the Receivables Purchase Agreement or any provision hereof or
thereof.
[signature pages on next page]
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
APPLIED POWER CREDIT CORPORATION
By: /s/ James Maxwell IV
---------------------
Name: James Maxwell IV
Title: Assistant Treasurer
APPLIED POWER INC.
By: /s/ James Maxwell IV
---------------------
Name: James Maxwell IV
Title: Assistant Treasurer
3
<PAGE>
BARTON CAPITAL CORPORATION
By: /s/ Juliana Johnson
--------------------
Name: Juliana C. Johnson
Title: Vice President
SOCIETE GENERALE,
as the Agent
By: /s/ Martin J. Finan
---------------------
Name: Martin J. Finan
Title: Director
By: /s/ Bradley P. Summers
-----------------------
Name: Bradley P. Summers
Title: Director
4
<PAGE>
Exhibit 10.1
Executive Staff F'99 Bonus Plan Measurements and Criteria
Executive Staff Measurements:
- ----------------------------
The fiscal 1999 bonus plan for executive staff will consist of the following:
a) 50% APW Shareholder Value Generated (SVG)
b) 50% APW Earnings Per Share (EPS)
Supporting Definitions:
- ----------------------
Diluted Earnings Per Share = Net Income / Average Number of Common and Common
Equivalent Shares Outstanding during the period.
Shareholder Value Generated = Operating Profit (before amortization) less 8% of
Assets Deployed.
Assets Deployed = Adjusted Assets less Operating Liabilities
Bonus Measurement:
<TABLE>
<CAPTION>
0% 100% 200%
(Target)
-------------------------------------------------------------
<S> <C> <C> <C>
50% APW Shareholder Value Generated $100.0 MM $118.0 MM $130.0 MM
50% APW Earnings Per Share $2.00 $2.25 $2.40
</TABLE>
<TABLE>
<CAPTION>
Name Functional Area Proposed Bonus Payout @ 100%
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Sim CEO $600,000
Arzbaecher CFO $150,000
</TABLE>
<PAGE>
Engineered Solutions Multi-Business Unit Leaders F'99 Bonus Plan
Measurements and Criteria
Multi-Business Unit Leader Measurements:
- ----------------------------------------
The fiscal 1999 bonus plan for Engineered Solutions multi-business unit leader
will consist of the following:
a) 80% Engineered Solutions CMM (1)
b) 20% APW Financial Results (SVG and EPS - same as Executive Staff Targets)
Albrecht
0% 100% 200%
(Target)
--------------------------------------------------
ES CMM (2) $51.8 MM $60.8 MM $66.8 MM
Bonus Payout @ 100% $150,000
The business unit financial targets for fiscal 1999 have been established based
upon the business plans submitted by each business unit, current year Corporate
contribution requirements for profitability, and agreed upon long-term
investments.
(1) CMM = Internal Operating Profit - (20% x Monthly Net Assets)
(2) Targeted bonus plan levels for CMM may be modified during the plan year due
to mergers and acquisitions.
2
<PAGE>
Tools and Supplies Multi-Business Unit Leaders F'99 Bonus Plan
Measurements and Criteria
Multi-Business Unit Leader Measurements:
- ----------------------------------------
The fiscal 1999 bonus plan for Tools and Supplies multi-business unit leader
will consist of the following:
a) 80% Tools and Supplies CMM (1)
b) 20% APW Financial Results (SVG and EPS - same as Executive Staff Targets)
Boel
0% 100% 200%
(Target)
----------------------------------------------------
T&S CMM (2) $23.0 MM $29.0 MM $35.0 MM
Bonus Payout @ 100% $125,000
The business unit financial targets for fiscal 1999 have been established based
upon the business plans submitted by each business unit, current year Corporate
contribution requirements for profitability, and agreed upon long-term
investments.
(1) CMM = Internal Operating Profit - (20% x Monthly Net Assets)
(2) Targeted bonus plan levels for CMM may be modified during the plan year due
to mergers and acquisitions.
3
<PAGE>
Enclosure Products and Systems Multi-Business Units Leaders F'99 Bonus Plan
Measurements and Criteria
Multi-Business Unit Leader Measurements:
- ----------------------------------------
The fiscal 1999 bonus plan for Enclosure Products and Systems multi-business
unit leaders will consist of the following:
a) 80% respective Enclosure Products and Systems business unit's CMM (1)
b) 20% APW Financial Results (SVG and EPS - same as Executive Staff Targets)
Burkart
0% 100% 200%
(Target)
-------------------------------------------------
EPS CMM (2) $30.0 MM $36.0 MM $42.0 MM
Bonus Payout @ 100% $145,000
Wightman
0% 100% 200%
(Target)
-------------------------------------------------
EPS CMM (2) $6.0 MM $12.0 MM $16.0 MM
Bonus Payout @ 100% $170,000
The business unit financial targets for fiscal 1999 have been established based
upon the business plans submitted by each business unit, current year Corporate
contribution requirements for profitability, and agreed upon long-term
investments.
(1) CMM = Internal Operating Profit - (20% x Monthly Net Assets)
(2) Targeted bonus plan levels for CMM may be modified during the plan year due
to mergers and acquisitions.
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
unaudited financial statements of Applied Power Inc. for the three month period
ended November 30, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> NOV-30-1998
<CASH> 8,162
<SECURITIES> 0
<RECEIVABLES> 212,300
<ALLOWANCES> 7,113
<INVENTORY> 190,054
<CURRENT-ASSETS> 449,193
<PP&E> 476,563
<DEPRECIATION> 200,906
<TOTAL-ASSETS> 1,610,841
<CURRENT-LIABILITIES> 312,782
<BONDS> 872,185
0
0
<COMMON> 7,734
<OTHER-SE> 355,203
<TOTAL-LIABILITY-AND-EQUITY> 1,610,841
<SALES> 435,660
<TOTAL-REVENUES> 435,660
<CGS> 298,258
<TOTAL-COSTS> 298,258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,899
<INCOME-PRETAX> 26,203
<INCOME-TAX> 9,802
<INCOME-CONTINUING> 16,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,401
<EPS-PRIMARY> .42
<EPS-DILUTED> .41
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains restated <F1> summary financial information
extracted from the unaudited financial statements of Applied Power Inc. for the
three month period ended November 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 31,220
<SECURITIES> 0
<RECEIVABLES> 115,498
<ALLOWANCES> 5,713
<INVENTORY> 158,238
<CURRENT-ASSETS> 325,055
<PP&E> 356,022
<DEPRECIATION> 189,038
<TOTAL-ASSETS> 803,084
<CURRENT-LIABILITIES> 162,477
<BONDS> 256,598
0
0
<COMMON> 2,938
<OTHER-SE> 330,568
<TOTAL-LIABILITY-AND-EQUITY> 803,084
<SALES> 275,375
<TOTAL-REVENUES> 275,375
<CGS> 179,693
<TOTAL-COSTS> 179,693
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,217
<INCOME-PRETAX> 29,249
<INCOME-TAX> 10,134
<INCOME-CONTINUING> 19,115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,115
<EPS-PRIMARY> .50
<EPS-DILUTED> .48
<FN>
<F1> As restated to reflect the merger with ZERO Corporation which was
accounted for as a pooling of interests.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains restated<F1> summary financial information
extracted from the unaudited financial statements of Applied Power Inc. for the
six month period ended February 28, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 41,003
<SECURITIES> 0
<RECEIVABLES> 119,595
<ALLOWANCES> 5,645
<INVENTORY> 164,347
<CURRENT-ASSETS> 346,228
<PP&E> 364,704
<DEPRECIATION> 189,735
<TOTAL-ASSETS> 892,980
<CURRENT-LIABILITIES> 163,672
<BONDS> 323,910
0
0
<COMMON> 5,733
<OTHER-SE> 342,639
<TOTAL-LIABILITY-AND-EQUITY> 892,980
<SALES> 554,773
<TOTAL-REVENUES> 554,773
<CGS> 362,970
<TOTAL-COSTS> 362,970
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,363
<INCOME-PRETAX> 55,185
<INCOME-TAX> 19,532
<INCOME-CONTINUING> 35,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,652
<EPS-PRIMARY> .92
<EPS-DILUTED> .89
<FN>
<F1> As restated to reflect the merger with ZERO Corporation which was
accounted for as a pooling of interests.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains restated<F1> summary financial information
extracted from the unaudited financial statements of Applied Power Inc. for the
nine month period ended May 31, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> MAY-31-1998
<CASH> 43,016
<SECURITIES> 0
<RECEIVABLES> 124,332
<ALLOWANCES> 5,619
<INVENTORY> 162,506
<CURRENT-ASSETS> 354,823
<PP&E> 360,470
<DEPRECIATION> 180,934
<TOTAL-ASSETS> 949,455
<CURRENT-LIABILITIES> 186,022
<BONDS> 334,840
0
0
<COMMON> 5,753
<OTHER-SE> 367,284
<TOTAL-LIABILITY-AND-EQUITY> 949,455
<SALES> 858,714
<TOTAL-REVENUES> 858,714
<CGS> 560,467
<TOTAL-COSTS> 560,467
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,005
<INCOME-PRETAX> 92,158
<INCOME-TAX> 34,159
<INCOME-CONTINUING> 57,998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,998
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.44
<FN>
<F1> As restated to reflect the merger with ZERO Corporation which was
accounted for as a pooling of interests.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains restated<F1> summary financial information
extracted from the unaudited financial statements of Applied Power Inc. for the
three month period ended November 30, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 15,029
<SECURITIES> 0
<RECEIVABLES> 105,935
<ALLOWANCES> 5,024
<INVENTORY> 156,920
<CURRENT-ASSETS> 294,285
<PP&E> 266,175
<DEPRECIATION> 145,905
<TOTAL-ASSETS> 604,690
<CURRENT-LIABILITIES> 131,783
<BONDS> 167,373
0
0
<COMMON> 2,911
<OTHER-SE> 263,645
<TOTAL-LIABILITY-AND-EQUITY> 604,690
<SALES> 207,760
<TOTAL-REVENUES> 207,760
<CGS> 128,367
<TOTAL-COSTS> 128,367
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,675
<INCOME-PRETAX> 20,777
<INCOME-TAX> 7,436
<INCOME-CONTINUING> 13,341
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,341
<EPS-PRIMARY> .36
<EPS-DILUTED> .34
<FN>
<F1> As restated to reflect the merger with ZERO Corporation which was
accounted for as a pooling of interests.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains restated<F1> summary financial information
extracted from the unaudited financial statements of Applied Power Inc. for the
six month period ended February 28, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 11,278
<SECURITIES> 0
<RECEIVABLES> 106,954
<ALLOWANCES> 4,581
<INVENTORY> 158,029
<CURRENT-ASSETS> 292,308
<PP&E> 275,678
<DEPRECIATION> 148,418
<TOTAL-ASSETS> 613,546
<CURRENT-LIABILITIES> 126,158
<BONDS> 171,871
0
0
<COMMON> 2,920
<OTHER-SE> 273,496
<TOTAL-LIABILITY-AND-EQUITY> 613,546
<SALES> 418,317
<TOTAL-REVENUES> 418,317
<CGS> 261,118
<TOTAL-COSTS> 261,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,881
<INCOME-PRETAX> 41,327
<INCOME-TAX> 14,794
<INCOME-CONTINUING> 26,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,533
<EPS-PRIMARY> .71
<EPS-DILUTED> .68
<FN>
<F1> As restated to reflect the merger with ZERO Corporation which was
accounted for as a pooling of interests.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains restated<F1> summary financial information
extracted from the unaudited financial statements of Applied Power Inc. for the
nine month period ended May 31, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 17,830
<SECURITIES> 0
<RECEIVABLES> 122,752
<ALLOWANCES> 4,690
<INVENTORY> 155,066
<CURRENT-ASSETS> 311,407
<PP&E> 291,068
<DEPRECIATION> 160,366
<TOTAL-ASSETS> 635,336
<CURRENT-LIABILITIES> 130,356
<BONDS> 173,982
0
0
<COMMON> 2,922
<OTHER-SE> 287,991
<TOTAL-LIABILITY-AND-EQUITY> 635,336
<SALES> 650,702
<TOTAL-REVENUES> 650,702
<CGS> 409,702
<TOTAL-COSTS> 409,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,042
<INCOME-PRETAX> 64,892
<INCOME-TAX> 23,064
<INCOME-CONTINUING> 41,828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,828
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.07
<FN>
<F1> As restated to reflect the merger with ZERO Corporation which was
accounted for as a pooling of interests.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
CERTIFICATE OF TRUST
OF
APPLIED POWER CAPITAL TRUST I
This Certificate of Trust of Applied Power Capital Trust I (the
"Trust"), dated December 23, 1998, is being duly executed and filed by the
undersigned, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. C. (S)(S) 3801 et seq.).
------- -- ---
1. Name. The name of the business trust being formed hereby is
----
Applied Power Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee of
----------------
the Trust with a principal place of business in the State of Delaware are as
follows:
First Chicago Delaware Inc.
300 King Street
Wilmington, Delaware 19801
3. Effective Date. This Certificate of Trust shall be effective
--------------
immediately upon its filing with the Secretary of State of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
The First National Bank of Chicago,
as Trustee
By: /s/ Sandra L. Caruba
-----------------------------
Name: Sandra L. Caruba
Title: Vice President
First Chicago Delaware Inc.,
as Trustee
By: /s/ Sandra L. Caruba
-----------------------------
Name: Sandra L. Caruba
Title: Vice President
/s/ Richard G. Sim
----------------------------------
Richard G. Sim, as Trustee
/s/ Robert C. Arzbaecher
----------------------------------
Robert C. Arzbaecher, as Trustee
2
<PAGE>
EXHIBIT 99.2
TRUST AGREEMENT
OF
APPLIED POWER CAPITAL TRUST I
This Trust Agreement, dated as of December 23, 1998, between Applied
Power Inc., a Wisconsin corporation, as "Depositor," and The First National Bank
of Chicago, a national banking association organized under the laws of the
United States, First Chicago Delaware Inc., a Delaware corporation, Richard G.
Sim and Robert C. Arzbaecher, each solely as trustee and not in its or his
individual capacity, as "Trustees." The Depositor and the Trustees hereby agree
as follows:
Section 1. The Trust. The trust created hereby shall be known as
---------
Applied Power Capital Trust I (the "Trust"), in which name the Trustees, or the
Depositor to the extent provided herein, may conduct the business of the Trust,
make and execute contracts, and sue and be sued.
Section 2. The Trust Estate. The Depositor hereby assigns, transfers,
----------------
conveys and sets over to the Trustees the sum of $10. The Trustees hereby
acknowledge receipt of such amount in trust from the Depositor, which amount
shall constitute the initial trust estate. The Trustees hereby declare that they
will hold the trust estate in trust for the Depositor. It is the intention of
the parties hereto that the Trust created hereby constitute a business trust
under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (S)(S) 3801 et
------- --
seq. (the "Business Trust Act"), and that this document constitutes the
- ----
governing instrument of the Trust. The Trustees are hereby authorized and
directed to execute and file a certificate of trust with the Delaware Secretary
of State in accordance with the provisions of the Business Trust Act.
Section 3. Amended and Restated Trust Agreement. The Depositor and
------------------------------------
the Trustees will enter into an amended and restated Trust Agreement,
satisfactory to each such party and substantially in the form included as an
exhibit to the 1933 Act Registration Statement (as defined below), to provide
for the contemplated operation of the Trust created hereby and the issuance of
the Preferred Securities (as defined below) and common securities referred to
therein. Prior to the execution and delivery of such amended and restated Trust
Agreement, the Trustees shall not have any duty or obligation hereunder or with
respect to the trust estate, except as otherwise required by applicable law or
as may be necessary to obtain prior to such execution and delivery of any
licenses, consents or approvals required by applicable law or otherwise.
Section 4. Certain Authorizations. The Depositor and the Trustees
----------------------
hereby authorize the Depositor, as the sponsor of the Trust, (i) to file with
the Securities and Exchange Commission (the "Commission") and execute, in each
case on behalf of the Trust, (a) the Registration Statement on Form S-3 (the
"1933 Act Registration Statement"), including any pre-effective or post-
effective amendments to such 1933 Act Registration Statement (including the
prospectus and the exhibits contained therein), relating to the registration
under the Securities Act of 1933, as amended, of the preferred securities of the
Trust (the "Preferred Securities") and possibly certain other securities and (b)
a Registration Statement on Form 8-A (the "1934 Act Registration Statement")
(including all pre-effective and post-effective amendments thereto) relating to
the registration of the Preferred Securities of the Trust under Section 12(b) of
the Securities Exchange Act of 1934, as amended; (ii) to file with the New York
Stock Exchange or any other national stock exchange or The Nasdaq National
Market (each, an "Exchange") and
<PAGE>
execute on behalf of the Trust one or more listing applications and all other
applications, statements, certificates, agreements and other instruments as
shall be necessary or desirable to cause the Preferred Securities to be listed
on any of the Exchanges; (iii) to file and execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Preferred Securities under the securities
or blue sky laws, and to obtain any permits under the insurance laws of such
jurisdictions as the Depositor, on behalf of the Trust, may deem necessary or
desirable; (iv) to execute on behalf of the Trust letters or documents, or
instruments for filing with, a depository relating to the Preferred Securities;
and (v) to execute on behalf of the Trust one or more underwriting agreements
with one or more underwriters relating to the offering of the Preferred
Securities.
In the event that any filing referred to in clauses (i) through (iv)
above is required by the rules and regulations of the Commission, an Exchange or
any state securities or blue sky laws, to be executed on behalf of the Trust by
the Trustees, in their capacities as Trustees of the Trust, the Trustees are
hereby authorized and directed to join in any such filing and to execute on
behalf of the Trust any and all of the foregoing, it being understood that The
First National Bank of Chicago and First Chicago Delaware Inc., in their
capacities as Trustees of the Trust, shall not be required to join in any such
filing or execute on behalf of the Trust any such document unless required by
the rules and regulations of the Commission, an Exchange or any state securities
or blue sky laws. In connection with all of the foregoing, the Depositor and
each Trustee, solely in its capacity as Trustee of the Trust, hereby constitutes
and appoints Richard G. Sim and Robert C. Arzbaecher, and each of them, as his,
her or its, as the case may be, true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for the Depositor or in the
Depositor's name, place and stead, in any and all capacities, to sign the 1933
Act Registration Statement and any and all amendments (including post-effective
amendments) thereto and the 1934 Act Registration Statement and any and all
amendments (including post-effective amendments) thereto and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
Depositor might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their respective substitute
or substitutes, shall do or cause to be done by virtue hereof.
Section 5. Counterparts. This Trust Agreement may be executed in one
------------
or more counterparts.
Section 6. Trustees. The number of Trustees initially shall be four
--------
(4) and thereafter the number of Trustees shall be such number as shall be fixed
from time to time by a written instrument signed by the Depositor which may
increase or decrease the number of Trustees; provided, however, that to the
extent required by the Business Trust Act, one Trustee shall either be a natural
person who is a resident of the State of Delaware or, if not a natural person,
an entity which has its principal place of business in the State of Delaware and
otherwise meets the requirements of applicable Delaware law. Subject to the
foregoing, the Depositor is entitled to appoint or remove without cause any
Trustee at any time. A Trustee may resign upon thirty days' prior notice to the
Depositor.
-2-
<PAGE>
Section 7. Delaware Trustee. First Chicago Delaware Inc., in its
----------------
capacity as Trustee, shall not have any of the powers or duties of the Trustees
set forth herein (except as may be required under the Business Trust Act) and
shall be a Trustee of the Trust for the sole purpose of satisfying the
requirements of Section 3807(a) of the Business Trust Act.
Section 8. Governing Law. This Trust Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the State of Delaware (without
regard to conflict of laws principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
APPLIED POWER INC.,
as Depositor
/s/ Robert C. Arzbaecher
By: _________________________________
Name: Robert C. Arzbaecher
Title: Vice President and
Chief Financial Officer
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
/s/ Sandra L. Caruba
By: _________________________________
Name: Sandra L. Caruba
Title: Vice President
FIRST CHICAGO DELAWARE INC.,
as Trustee
/s/ Sandra L. Caruba
By: _________________________________
Name: Sandra L. Caruba
Title: Vice President
/s/ Richard G. Sim
------------------------------------
Richard G. Sim, as Trustee
/s/ Robert C. Arzbaecher
------------------------------------
Robert C. Arzbaecher, as Trustee
-3-
<PAGE>
EXHIBIT 99.3
CERTIFICATE OF TRUST
OF
APPLIED POWER CAPITAL TRUST II
This Certificate of Trust of Applied Power Capital Trust II (the
"Trust"), dated December 23, 1998, is being duly executed and filed by the
undersigned, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. C. (S)(S) 3801 et seq.).
------- -- ---
1. Name. The name of the business trust being formed hereby is Applied
----
Power Capital Trust II.
2. Delaware Trustee. The name and business address of the trustee of the
-----------------
Trust with a principal place of business in the State of Delaware are as
follows:
First Chicago Delaware Inc.
300 King Street
Wilmington, Delaware 19801
3. Effective Date. This Certificate of Trust shall be effective
---------------
immediately upon its filing with the Secretary of State of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
The First National Bank of Chicago,
as Trustee
/s/ Sandra L. Caruba
By: _____________________________
Name: Sandra L. Caruba
Title: Vice President
First Chicago Delaware Inc.,
as Trustee
/s/ Sandra L. Caruba
By: _____________________________
Name: Sandra L. Caruba
Title: Vice President
/s/ Richard G. Sim
------------------------------
Richard G. Sim, as Trustee
/s/ Robert C. Arzbaecher
-------------------------------
Robert C. Arzbaecher, as Trustee
2
<PAGE>
EXHIBIT 99.4
TRUST AGREEMENT
OF
APPLIED POWER CAPITAL TRUST II
This Trust Agreement, dated as of December 23, 1998, between Applied
Power Inc., a Wisconsin corporation, as "Depositor," and The First National Bank
of Chicago, a national banking association organized under the laws of the
United States, First Chicago Delaware Inc., a Delaware corporation, Richard G.
Sim and Robert C. Arzbaecher, each solely as trustee and not in its or his
individual capacity, as "Trustees." The Depositor and the Trustees hereby agree
as follows:
Section 1. The Trust. The trust created hereby shall be known as
---------
Applied Power Capital Trust II (the "Trust"), in which name the Trustees, or the
Depositor to the extent provided herein, may conduct the business of the Trust,
make and execute contracts, and sue and be sued.
Section 2. The Trust Estate. The Depositor hereby assigns, transfers,
----------------
conveys and sets over to the Trustees the sum of $10. The Trustees hereby
acknowledge receipt of such amount in trust from the Depositor, which amount
shall constitute the initial trust estate. The Trustees hereby declare that they
will hold the trust estate in trust for the Depositor. It is the intention of
the parties hereto that the Trust created hereby constitute a business trust
under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (S)(S) 3801 et
--- -
seq. (the "Business Trust Act"), and that this document constitutes the
governing instrument of the Trust. The Trustees are hereby authorized and
directed to execute and file a certificate of trust with the Delaware Secretary
of State in accordance with the provisions of the Business Trust Act.
Section 3. Amended and Restated Trust Agreement. The Depositor and
------------------------------------
the Trustees will enter into an amended and restated Trust Agreement,
satisfactory to each such party and substantially in the form included as an
exhibit to the 1933 Act Registration Statement (as defined below), to provide
for the contemplated operation of the Trust created hereby and the issuance of
the Preferred Securities (as defined below) and common securities referred to
therein. Prior to the execution and delivery of such amended and restated Trust
Agreement, the Trustees shall not have any duty or obligation hereunder or with
respect to the trust estate, except as otherwise required by applicable law or
as may be necessary to obtain prior to such execution and delivery of any
licenses, consents or approvals required by applicable law or otherwise.
Section 4. Certain Authorizations. The Depositor and the Trustees
----------------------
hereby authorize the Depositor, as the sponsor of the Trust, (i) to file with
the Securities and Exchange Commission (the "Commission") and execute, in each
case on behalf of the Trust, (a) the Registration Statement on Form S-3 (the
"1933 Act Registration Statement"), including any pre-effective or post-
effective amendments to such 1933 Act Registration Statement (including the
prospectus and the exhibits contained therein), relating to the registration
under the Securities Act of 1933, as amended, of the preferred securities of the
Trust (the "Preferred Securities") and possibly certain other securities and (b)
a Registration Statement on Form 8-A (the "1934 Act Registration Statement")
(including all pre-effective and post-effective amendments thereto) relating to
the registration of the Preferred Securities of the Trust under Section 12(b) of
the Securities Exchange Act of 1934, as amended; (ii) to file with the New York
Stock Exchange or any other national stock exchange or The Nasdaq National
Market (each, an "Exchange") and execute on behalf of the Trust one or more
listing applications and all other applications,
<PAGE>
statements, certificates, agreements and other instruments as shall be necessary
or desirable to cause the Preferred Securities to be listed on any of the
Exchanges; (iii) to file and execute on behalf of the Trust such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as shall be necessary or
desirable to register the Preferred Securities under the securities or blue sky
laws, and to obtain any permits under the insurance laws of such jurisdictions
as the Depositor, on behalf of the Trust, may deem necessary or desirable; (iv)
to execute on behalf of the Trust letters or documents, or instruments for
filing with, a depository relating to the Preferred Securities; and (v) to
execute on behalf of the Trust one or more underwriting agreements with one or
more underwriters relating to the offering of the Preferred Securities.
In the event that any filing referred to in clauses (i) through (iv)
above is required by the rules and regulations of the Commission, an Exchange or
any state securities or blue sky laws, to be executed on behalf of the Trust by
the Trustees, in their capacities as Trustees of the Trust, the Trustees are
hereby authorized and directed to join in any such filing and to execute on
behalf of the Trust any and all of the foregoing, it being understood that The
First National Bank of Chicago and First Chicago Delaware Inc., in their
capacities as Trustees of the Trust, shall not be required to join in any such
filing or execute on behalf of the Trust any such document unless required by
the rules and regulations of the Commission, an Exchange or any state securities
or blue sky laws. In connection with all of the foregoing, the Depositor and
each Trustee, solely in its capacity as Trustee of the Trust, hereby constitutes
and appoints Richard G. Sim and Robert C. Arzbaecher, and each of them, as his,
her or its, as the case may be, true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for the Depositor or in the
Depositor's name, place and stead, in any and all capacities, to sign the 1933
Act Registration Statement and any and all amendments (including post-effective
amendments) thereto and the 1934 Act Registration Statement and any and all
amendments (including post-effective amendments) thereto and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
Depositor might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their respective substitute
or substitutes, shall do or cause to be done by virtue hereof.
Section 5. Counterparts. This Trust Agreement may be executed in one
------------
or more counterparts.
Section 6. Trustees. The number of Trustees initially shall be four
--------
(4) and thereafter the number of Trustees shall be such number as shall be fixed
from time to time by a written instrument signed by the Depositor which may
increase or decrease the number of Trustees; provided, however, that to the
extent required by the Business Trust Act, one Trustee shall either be a natural
person who is a resident of the State of Delaware or, if not a natural person,
an entity which has its principal place of business in the State of Delaware and
otherwise meets the requirements of applicable Delaware law. Subject to the
foregoing, the Depositor is entitled to appoint or remove without cause any
Trustee at any time. A Trustee may resign upon thirty days' prior notice to the
Depositor.
-2-
<PAGE>
Section 7. Delaware Trustee. First Chicago Delaware Inc., in its
----------------
capacity as Trustee, shall not have any of the powers or duties of the Trustees
set forth herein (except as may be required under the Business Trust Act) and
shall be a Trustee of the Trust for the sole purpose of satisfying the
requirements of Section 3807(a) of the Business Trust Act.
Section 8. Governing Law. This Trust Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the State of Delaware (without
regard to conflict of laws principles).
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the day and year first above written.
APPLIED POWER INC.,
as Depositor
/s/ Robert C. Arzbaecher
By: _________________________________
Name: Robert C. Arzbaecher
Title: Vice President and
Chief Financial Officer
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
/s/ Sandra L. Caruba
By: _________________________________
Name: Sandra L. Caruba
Title: Vice President
FIRST CHICAGO DELAWARE INC.,
as Trustee
/s/ Sandra L. Caruba
By: _________________________________
Name: Sandra L. Caruba
Title: Vice President
/s/ Richard G. Sim
-------------------------------------
Richard G. Sim, as Trustee
/s/ Robert C. Arzbaecher
-------------------------------------
Robert C. Arzbaecher, as Trustee
-3-
