<PAGE>
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 25, 2000
APPLIED POWER INC.
(Exact name of Registrant as specified in its charter)
Wisconsin 1-11288 39-0168610
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
Mailing address: P.O. Box 325, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (262) 523-7600
<PAGE>
Item 5. Other Events.
In response to inquiries as to the pro forma May 31, 2000 results of
Applied Power Inc. after the spin-off of its Electronics Business, Applied Power
Inc. has prepared the following pro forma data which gives effect to (1) the
spin-off of the Electronics Business, (2) the completed divestitures of Air
Cargo Equipment Corporation (May 26, 2000) and Barry Wright Corporation (June
30, 2000), and (3) the internal restructuring necessary to accomplish the spin-
off.
<PAGE>
Definitions (1) "Actuant," "we," "us" and "our" refer to Actuant
Corporation (Applied Power Inc.'s name after the Distribution (as defined below)
and approval of the name change by its shareholders) and its subsidiaries, which
upon the Distribution will own and conduct the Industrial Business (as defined
below); (2) "APW" refers to APW Ltd. and its subsidiaries, which upon the
Distribution will own and conduct the Electronics Business (as defined below);
(3) "Applied Power" refers to Applied Power Inc. and its subsidiaries before the
Distribution; (4) "Industrial Business" refers to Applied Power's branded
electrical and industrial tools and supplies businesses and motion control
systems businesses; (5) "Electronics Business" refers to Applied Power's
integrated electronics enclosures business; (6) "Distribution" refers to the
spin-off by Applied Power of the Electronics Business and the related debt
realignment; (7) "Divestitures" refers to the recently completed sales by
Applied Power of its vibration isolation business, known as Barry Controls, and
its aerospace cargo products business, known as Air Cargo; (8) "Non-continuing
Businesses" refers to units that have been sold or will not be a part of Actuant
after the Distribution, consisting of Barry Controls, Air Cargo, Samuel Groves,
Moxness, GB Everest and Magnets; (9) "Transactions" refers to the Distribution,
the related corporate restructuring transactions and the Divestitures; and (10)
"pro forma" means after giving effect to the Transactions as if they had
occurred on the day immediately prior to the first day of the financial period
being referenced, in the case of the statement of earnings data, or as of the
referenced date, in the case of balance sheet data (except for Transactions
occurring prior to that date).
Applied Power's financial statements presented reflect the Electronics
Business as discontinued operations. The continuing operations consist of the
Industrial Business and, for purposes of historical financial data only, the
Non-continuing Businesses.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected historical financial data have been derived from the
consolidated financial statements of Applied Power. The statement of earnings
data for each of the fiscal years ended August 31, 1997, 1998, and 1999 and the
balance sheet data as of August 31, 1998 and 1999 have been derived from audited
Consolidated Financial Statements. The balance sheet data as of August 31, 1997
has been derived from unaudited consolidated financial statements of Applied
Power. The statement of earnings data for the nine months ended May 31, 1999 and
May 31, 2000 and the balance sheet data as of those dates have been derived from
unaudited consolidated financial statements of Applied Power. Operating results
for the nine months ended May 31, 2000 are not necessarily indicative of the
results that may be expected for the entire fiscal year ending August 31, 2000.
The financial data presented in the following table reflect all business
units other than the Electronics Business, which will be spun off to
shareholders in the Distribution. Financial data presented in the table include
the Non-continuing Businesses. As a result, the selected financial data in the
following table are not fully representative of the group of business units that
will comprise Actuant after the Distribution. We have included a separate
financial data table in "footnote 9 below" that includes only those units of
Applied Power that will comprise Actuant after the Distribution.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended August 31, May 31,
-------------------------- -----------------
1997(2) 1998(2) 1999 1999 2000
------ ------ -------- -------- --------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Earnings
Data(1):
Net sales............... $522.4 $637.5 $ 695.7 $ 524.4 $ 535.7
Gross profit............ 180.5 200.9 252.7 190.3 193.8
Operating
expenses(3)(4)(5)...... 139.8 179.0 144.5 113.4 106.3
Operating earnings...... 35.8 9.3 99.4 70.2 81.6
Earnings from continuing
operations............. 22.6 0.1 34.6 24.7 35.0
Diluted earnings per
share from continuing
operations............. 0.57 0.00 0.86 0.62 0.87
Cash dividends per
share(6)............... 0.06 0.06 0.06 0.03 0.03
Balance Sheet Data (at
end of period)(1):
Total assets(7)......... $486.4 $711.5 $1,059.9 $1,074.0 $1,035.5
Total debt(8)........... 54.8 225.2 521.2 558.9 456.9
</TABLE>
--------
(1) We completed various acquisitions and divestitures that impact the
comparability of the selected financial data presented in the table.
(2) Operating results for fiscal 1997 and 1998 include merger, restructuring
and other non-recurring charges that were recognized in cost of sales and
operating expenses. Such expenses totaled $6.2 million and $56.9 million on
a pre-tax basis in fiscal 1997 and 1998, respectively.
(3) Operating expenses in fiscal 1999 include a $7.8 million pre-tax charge due
to the cancellation of a contract. For the nine months ended May 31, 2000,
we recorded a $1.4 million pre-tax gain when we recovered costs in excess
of what we anticipated when the loss was initially recorded.
<PAGE>
(4) Operating expenses for the nine months ended May 31, 2000 include a $4.4
million pre-tax charge for investment banking, legal, accounting and other
fees and expenses associated with the Distribution.
(5) Operating expenses include engineering, selling and administrative
expenses, contract termination costs (recovery), corporate reorganization
charges, merger related expenses, and all of Applied Power's general
corporate expenses (which include expenditures on resources and services
that supported the Electronics Business). Total general corporate expenses
were as follows:
<TABLE>
<CAPTION>
Fiscal Period Amount
------------- -------------
(in millions)
<S> <C>
1997...................................................... $15.2
1998 (excluding expenses in Note 2 above)................. 17.5
1999...................................................... 12.1
Nine months ended May 31, 1999............................ 9.1
Nine months ended May 31, 2000 (excluding expenses in Note
4 above)................................................. 9.2
</TABLE>
Such amounts include the general corporate expenses for Zero Corporation
("ZERO") for periods both prior to and after its merger with Applied Power
in fiscal 1998. The merger was accounted for using the pooling of
interests method of accounting, with all of Applied Power's historical
results restated to include the historical results of ZERO. The majority
of ZERO's general corporate expenses was eliminated shortly after its
acquisition, as its corporate support functions were provided by existing
Applied Power corporate personnel. We expect general corporate expenses to
decrease following the Distribution due to the need for fewer employees
performing such functions and a reduction in the size of the organization
being supported by such corporate personnel. We believe that the expenses
required to support such general corporate functions in fiscal 1999 and
the nine months ended May 31, 2000, had the Distribution been completed
prior to the beginning of the period, would have been approximately $4.7
million and $3.9 million, respectively.
(6) Applied Power split its stock two-for-one in fiscal 1998. All dividend and
per share data have been adjusted for this stock split. Actuant does not
intend to pay dividends following the Distribution.
(7) Includes net assets of discontinued operations as follows:
<TABLE>
<CAPTION>
Balance Sheet Date Balance
------------------ -------------
(in millions)
<S> <C>
August 31, 1997............................................. $ 86.2
August 31, 1998............................................. 249.7
August 31, 1999............................................. 598.5
May 31, 1999................................................ 604.1
May 31, 2000................................................ 597.5
</TABLE>
(8) Historically, Applied Power incurred indebtedness at the parent company
level or at a limited number of subsidiaries, rather than at the operating
unit or segment level. Debt in the table reflects our debt balance after an
allocation was made to the Electronics Business, which is reported in
discontinued operations. The debt allocated to the Electronics Business was
based on the estimated debt expected to be assigned to APW in the debt
realignment related to the Distribution. Historical net financing costs
were allocated based on the debt allocation using the historical weighted-
average rate. Our debt and capitalization will change as a result of the
Distribution.
<PAGE>
(9) The following consolidated financial data are derived from the audited
consolidated financial statements of Applied Power for each of the three years
ended August 31, 1999 and the unaudited consolidated financial statements of
Applied Power for the nine months ended May 31, 1999 and May 31, 2000. The
adjusted historical financial data in the following table differs from the
consolidated financial information in the Consolidated Financial Statements
because we excluded the financial data of the Non-continuing Businesses. The
unaudited pro forma consolidated statement of earnings data give effect to the
Transactions as if they had occurred on August 31, 1999 and the unaudited pro
forma consolidated balance sheet data give effect to the Transactions as if they
had occurred on May 31, 2000 except for the sale of Air Cargo, which occurred on
May 26, 2000.
In the opinion of management, the following data include all necessary
adjustments for the fair presentation of the information set forth. Results for
interim periods are not necessarily indicative of the results for the full
year.
<TABLE>
<CAPTION>
Pro
Forma
Twelve Twelve
Year Ended August Nine Months Months Months
31, Ended May 31, Ended Ended
--------------------- ------------- May 31, May 31,
1997 1998 1999 1999 2000 2000 2000(b)
------ ------ ------ ------ ------ ------- -------
(in millions, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Earnings Data(a):
Net sales...................... $538.2(c)
Adjusted net sales............. $381.8 $482.1 $527.5 $398.3 $406.1 $535.2
Adjusted gross profit(d)....... 132.3 151.0 189.5 143.9 147.7 193.3
Adjusted operating expenses
excluding general corporate
expenses(e)................... 93.3 126.0 99.7 79.7 69.1 89.1
General corporate expenses(f).. 15.2 17.5 12.1 9.1 9.2 12.2 5.0
Adjusted operating
earnings(e)................... 20.3 (3.5) 71.5 50.4 64.7 85.8
Cash interest expense ......... 52.5
Other Financial Data(a):
Adjusted depreciation.......... 8.9 10.8 10.4 8.4 8.3 10.3
Adjusted amortization of
intangible assets............. 3.4 11.1 6.2 4.7 4.7 6.1
Adjusted capital expenditures.. 10.2 15.4 13.7 12.4 6.0 7.3
Total debt..................... 450.0
</TABLE>
--------
(a) Adjusted items exclude results of the Non-continuing Businesses.
(b) Includes the reported operating results, until the date of its disposition,
of Samuel Groves, a business unit sold by Applied Power on November 23,
1999. For the twelve months ended May 31, 2000, Samuel Groves had net sales
of $3.0 million and EBITDA of $0.1 million. All adjusted operating data
exclude the results of Samuel Groves.
(c) Pro forma net sales of $538.2 million differs from the $535.2 million of
adjusted net sales for the twelve months ended May 31, 2000 by $3.0 million
of net sales attributable to the divested Samuel Groves
<PAGE>
business unit. Pro forma adjusted EBITDA of $112.4 million differs from the
$105.2 million of adjusted EBITDA for the twelve months ended May 31, 2000
by $7.2 million of excess historical general corporate expenses over $5.0
million, the amount management believes would have been incurred by Actuant
had the Distribution occurred on the day immediately prior to the first day
of such period.
(d) Includes $3.3 million and $17.7 million in fiscal 1997 and 1998,
respectively, for non-recurring restructuring charges.
(e) Includes $2.9 million and $34.2 million of restructuring charges in fiscal
1997 and 1998, respectively; $7.8 million of contract termination costs in
fiscal 1999 and the nine months ended May 31, 1999; $1.4 million of
contract termination recovery in the nine months ended May 31, 2000; and
$4.4 million of corporate reorganization expenses in the nine months ended
May 31, 2000.
(f) General corporate expenses include all general corporate expenses related
to Applied Power, including costs incurred to support both the Industrial
Business and the Electronics Business. In accordance with generally
accepted accounting principles, none of these expenses has been allocated
to discontinued operations. We expect general corporate expenses to
decrease following the Distribution due to the need for fewer corporate
employees and a reduction in the size of the organization being supported.
We believe that the expenses required to support general corporate
functions in the nine months ended May 31, 2000, fiscal 1999 and the twelve
months ended May 31, 2000, had the Distribution been completed prior to the
beginning of the periods, would have been approximately $3.9 million, $4.7
million and $5.0 million, respectively.
(g) "EBITDA" is defined as operating earnings before depreciation, amortization
and certain restructuring and other non-recurring items. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and our calculation thereof may not be comparable to that
reported by other companies. We believe that EBITDA provides useful
information regarding our ability to service and/or incur indebtedness.
EBITDA does not take into account our working capital requirements, debt
service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
use. Pro forma twelve months ended May 31, 2000 EBITDA was $112.4 million.
"Adjusted EBITDA" is defined as EBITDA excluding results of the Non-
continuing Businesses. Adjusted EBITDA includes all general corporate
expenses of Applied Power, including costs incurred to support both the
Industrial Business and the Electronics Business. Accordingly, we believe
that, had we been a stand-alone entity during the periods presented, our
EBITDA would have been higher than the EBITDA presented in the above table.
The following is a reconciliation of operating earnings as reported in the
Consolidated Financial Statements to the adjusted EBITDA as displayed in the
table below:
<TABLE>
<CAPTION>
Pro Forma
Nine Months Twelve Twelve
Year Ended August 31, Ended May 31, Months Months
--------------------- -------------- Ended Ended
May 31, May 31,
1997 1998 1999 1999 2000 2000 2000
--------------------- ------ ------- ------- ---------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating earnings...... $ 35.8 $ 9.3 $ 99.4 $ 70.2 $ 81.6 $110.8 $ 97.7
Depreciation............ 14.8 17.0 17.3 13.8 12.3 15.8 10.1
Amortization of
intangible assets...... 5.0 12.6 8.7 6.7 5.9 7.9 6.1
Contract termination
costs (recovery)....... -- -- 7.8 7.8 (1.4) (1.4) (1.4)
Corporate reorganization
expenses............... -- -- -- -- 4.4 4.4 --
Restructuring charges... 6.2 38.0 -- -- -- -- --
Merger related
expenses............... -- 9.3 -- -- -- -- --
Provision for loss on
sale of subsidiary..... -- 4.5 -- -- -- -- --
------ ------ ------- ------ ------- ------ ------
EBITDA.................. $ 61.8 $90.7 $ 133.2 $ 98.5 $ 102.8 $137.5 $112.4
Less: operating earnings
from Non-continuing
Businesses............. 15.4 12.7 27.9 19.8 16.9 25.0
Less: depreciation and
amortization of
intangible assets of
Non-continuing
Businesses............. 7.4 7.7 9.5 7.4 5.3 7.3
------ ------ ------- ------ ------- ------
Adjusted EBITDA......... $38.9 $70.3 $95.8 $ 71.3 $ 80.7 $105.2
====== ====== ======= ====== ======= ======
</TABLE>
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited historical capitalization of
Applied Power as of May 31, 2000, and the unaudited pro forma capitalization of
Actuant as of May 31, 2000 after giving effect to the Transactions including
the issuance of debt under the Actuant Credit Facility, the issuance of the
Notes and the estimated fees and expenses related thereto, each as if they had
occurred on that date.
<TABLE>
<CAPTION>
May 31, 2000
-----------------------
Historical Pro Forma(1)
---------- ------------
(in millions)
<S> <C> <C>
Cash and cash equivalents............................... $ 6.8 $ 6.8
====== =======
Existing long-term debt(2).............................. $456.9 $ --
The Actuant Credit Facility(3).......................... -- 252.6
The Notes, net of discount.............................. -- 197.4
------ -------
Total debt(4)......................................... 456.9 450.0
------ -------
Shareholders' equity(5)................................. 462.8 (146.8)
------ -------
Total capitalization.................................. $919.7 $ 303.2
====== =======
</TABLE>
--------
(1) Gives effect to the Transactions, including the issuance of debt under the
Actuant Credit Facility, the issuance of the Notes and the estimated fees
and expenses related thereto. The pro forma capitalization assumes that 100%
of the 1999 Notes are purchased in the Tender Offer. As of July 20, 2000,
approximately 93.1% of the 1999 Notes had been tendered. If less than all of
the 1999 Notes are tendered, the borrowings under the Actuant Credit
Facility will be lower.
(2) Historical long-term debt excludes $43.8 million of an off-balance sheet
accounts receivable financing facility which will be retired upon the
consummation of the Distribution. Immediately following the Distribution,
Actuant will not have an accounts receivable financing program. The
existing long-term debt balance excludes $287.4 million of debt allocated
to the Electronics Business, which is included in net assets of
discontinued operations on the consolidated balance sheet.
(3) The Actuant Credit Facility consists of $240.0 million in term loans which
will be borrowed upon the consummation of the Distribution and a $100.0
million revolving credit facility, approximately $12.6 million of which
will be drawn upon consummation of the Distribution.
(4) Prior to the Distribution, most of Applied Power's debt instruments were
held at the corporate level. Applied Power's historical debt has been
allocated between the Industrial Business and the Electronics Business
based on the amount of debt expected to be assumed by the Electronics
Business in the Distribution. The amount allocated to the Electronics
Business was based in part on an estimate of anticipated cash flow of
Applied Power from May 31, 2000 to the date of the Distribution. The amount
of debt allocated to the Industrial Business will approximate four times
EBITDA of Actuant pro forma for the Transactions for the four fiscal
quarters preceding the date of the Distribution and will be reflected in an
agreement to be finalized between APW and Actuant.
(5) The reduction in shareholders' equity reflects the following items, net of
tax effect:
<TABLE>
<CAPTION>
May 31, 2000
-------------
(in millions)
<S> <C>
The Distribution.............................................. $(597.5)
Estimated final allocation of debt to APW..................... (85.9)
Write-off of unamortized historical debt issuance costs....... (0.4)
Estimated transaction costs, including Tender Offer premium... (16.7)
Estimated gain on the Divestitures............................ 90.9
-------
$(609.6)
=======
</TABLE>
In accordance with generally accepted accounting principles, the
Distribution results in a net reduction in Applied Power's historical
shareholders' equity as the total assets being distributed to APW in the
Distribution exceed the total liabilities being distributed. The excess of
total assets over total liabilities requires a corresponding reduction in
shareholders' equity.
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated statements of earnings and
unaudited pro forma consolidated balance sheet present the consolidated results
of Applied Power and its financial position, adjusted to give effect to the
Transactions, including the issuance of the Notes, the issuance of debt under
the Actuant Credit Facility and the estimated fees and expenses related
thereto. The unaudited pro forma consolidated statements of earnings for the
nine and twelve months ended May 31, 2000 and the fiscal year ended August 31,
1999 give effect to the Transactions as if they had occurred on the day prior
to the beginning of the period being referenced. The unaudited pro forma
consolidated balance sheet data give effect to the Transactions as if they had
occurred on May 31, 2000 except for the sale of Air Cargo which occurred on May
26, 2000.
The unaudited pro forma consolidated financial statements have been derived
from the historical consolidated financial statements of Applied Power. The pro
forma adjustments, as described in the notes that follow, are based upon
available information and upon certain assumptions that management believes are
reasonable. You should read this information in conjunction with the
Consolidated Financial Statements. The unaudited pro forma consolidated
financial statements are included for comparative purposes only and do not
purport to be indicative of the results of Actuant in the future or what the
financial position and results of operations would have been had Actuant been a
separate, stand-alone entity during the periods shown.
21
<PAGE>
Unaudited Pro Forma Consolidated Statement of Earnings
(in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended May 31, 2000
------------------------------------------------
Excluded Other Pro
Historical Businesses(1) Adjustments Forma(2)
---------- ------------- ----------- --------
<S> <C> <C> <C> <C>
Net sales................... $535,655 $(128,261) $ -- $407,394
Cost of products sold....... 341,816 (82,447) -- 259,369
-------- --------- -------- --------
Gross profit................ 193,839 (45,814) -- 148,025
Engineering, selling and
administrative expenses.... 103,329 (27,625) (5,281)(3) 70,423
Amortization of intangible
assets..................... 5,902 (1,208) -- 4,694
Contract termination
recovery................... (1,446) -- -- (1,446)
Corporate reorganization
expenses................... 4,449 -- (4,449)(4) --
-------- --------- -------- --------
Operating earnings.......... 81,605 (16,981) 9,730 74,354
Other expense (income):
Net financing costs......... 27,892 -- 13,008 (5) 40,900
Other income--net........... (823) 146 -- (677)
-------- --------- -------- --------
Earnings from continuing
operations before income
tax expense................ 54,536 (17,127) (3,278) 34,131
Income tax expense.......... 19,584 -- (5,590)(6) 13,994
-------- --------- -------- --------
Net earnings from continuing
operations................. 34,952 (17,127) 2,312 20,137
Earnings from discontinued
operations................. 34,232 -- (34,232)(7) --
-------- --------- -------- --------
Earnings before
extraordinary item......... 69,184 (17,127) (31,920) 20,137
Extraordinary loss.......... (12,186) -- -- (12,186)
-------- --------- -------- --------
Net earnings................ $ 56,998 $ (17,127) $(31,920) $ 7,951
======== ========= ======== ========
Basic earnings per share:
Earnings from continuing
operations per share....... $ 0.89 $ 0.51
Discontinued operations per
share...................... 0.88 --
Extraordinary loss per
share...................... (0.31) (0.31)
-------- --------
Net earnings per share...... $ 1.46 $ 0.20
======== ========
Weighted average common
shares outstanding......... 39,045 39,045
======== ========
Diluted earnings per share:
Earnings from continuing
operations per share....... $ 0.87 $ 0.50
Discontinued operations per
share...................... 0.85 --
Extraordinary loss per
share...................... (0.30) (0.30)
-------- --------
Net earnings per share...... $ 1.42 $ 0.20
======== ========
Weighted average common and
equivalent shares
outstanding................ 40,302 40,302
======== ========
Other Data:
Depreciation and
amortization............... $ 18,224 $ (5,204) $ -- $ 13,020
Capital expenditures........ 9,170 (3,223) -- 5,947
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
<PAGE>
Unaudited Pro Forma Consolidated Statement of Earnings
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended August 31, 1999
------------------------------------------------
Excluded Other Pro
Historical Businesses(1) Adjustments Forma(2)
---------- ------------- ----------- --------
<S> <C> <C> <C> <C>
Net sales.................... $695,704 $(158,867) $ -- $536,837
Cost of products sold........ 443,020 (98,092) -- 344,928
-------- --------- -------- --------
Gross profit................. 252,684 (60,775) -- 191,909
Engineering, selling and
administrative expenses..... 136,671 (30,530) (7,399)(3) 98,742
Amortization of intangible
assets...................... 8,748 (2,589) -- 6,159
Contract termination costs... 7,824 -- -- 7,824
Corporate reorganization
expenses.................... -- -- -- --
-------- --------- -------- --------
Operating earnings........... 99,441 (27,656) 7,399 79,184
Other expense (income):
Net financing costs.......... 41,181 -- 13,353 (5) 54,534
Other expense (income)--net.. 850 (143) -- 707
-------- --------- -------- --------
Earnings from continuing
operations before income tax
expense..................... 57,410 (27,513) (5,954) 23,943
Income tax expense........... 22,830 -- (13,013)(6) 9,817
-------- --------- -------- --------
Net earnings from continuing
operations.................. 34,580 (27,513) 7,059 14,126
Earnings from discontinued
operations.................. 44,817 -- (44,817)(7) --
-------- --------- -------- --------
Net earnings................. $ 79,397 $ (27,513) $(37,758) $ 14,126
======== ========= ======== ========
Basic earnings per share:
Earnings from continuing
operations per share........ $ 0.89 $ 0.36
Discontinued operations per
share....................... 1.15 --
-------- --------
Net earnings per share....... $ 2.04 $ 0.36
======== ========
Weighted average common
shares outstanding.......... 38,825 38,825
======== ========
Diluted earnings per share:
Earnings from continuing
operations per share........ $ 0.86 $ 0.35
Discontinued operations per
share....................... 1.12 --
-------- --------
Net earnings per share....... $ 1.98 $ 0.35
======== ========
Weighted average common and
equivalent shares
outstanding................. 40,200 40,200
======== ========
Other Data:
Depreciation and
amortization................ $ 26,056 $ (9,197) $ -- $ 16,859
Capital expenditures......... 22,885 (9,062) -- 13,823
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
<PAGE>
Unaudited Pro Forma Consolidated Statement of Earnings
(in thousands, except per share data)
<TABLE>
<CAPTION>
Twelve Months Ended May 31, 2000
------------------------------------------------
Excluded Other Pro
Historical Businesses(1) Adjustments Forma(2)
---------- ------------- ----------- --------
<S> <C> <C> <C> <C>
Net sales................... $707,003 $(168,796) $ -- $538,207
Cost of products sold....... 450,732 (106,479) -- 344,253
-------- --------- -------- --------
Gross profit................ 256,271 (62,317) -- 193,954
Engineering, selling and
administrative expenses.... 134,442 (35,314) (7,204)(3) 91,924
Amortization of intangible
assets..................... 7,994 (1,879) -- 6,115
Contract termination
recovery................... (1,446) -- -- (1,446)
Corporate reorganization
expenses................... 4,449 -- (4,449)(4) --
-------- --------- -------- --------
Operating earnings.......... 110,832 (25,124) 11,653 97,361
Other expense (income):
Net financing costs......... 38,435 -- 16,099 (5) 54,534
Other income--net........... (152) (352) -- (504)
-------- --------- -------- --------
Earnings from continuing
operations before income
tax expense................ 72,549 (24,772) (4,446) 43,331
Income tax expense.......... 27,751 -- (9,985)(6) 17,766
-------- --------- -------- --------
Net earnings from continuing
operations................. 44,798 (24,772) 5,539 25,565
Earnings from discontinued
operations................. 47,568 -- (47,568)(7) --
-------- --------- -------- --------
Earnings before
extraordinary item......... 92,366 (24,772) (42,029) 25,565
Extraordinary loss.......... (12,186) -- -- (12,186)
-------- --------- -------- --------
Net earnings................ $ 80,180 $ (24,772) $(42,029) $ 13,379
======== ========= ======== ========
Basic earnings per share:
Earnings from continuing
operations per share....... $ 1.14 $ 0.65
Discontinued operations per
share...................... 1.22 --
Extraordinary loss per
share...................... (0.31) (0.31)
-------- --------
Net earnings per share...... $ 2.05 $ 0.34
======== ========
Weighted average common
shares outstanding......... 39,024 39,024
======== ========
Diluted earnings per share:
Earnings from continuing
operations per share....... $ 1.11 $ 0.63
Discontinued operations per
share...................... 1.18 --
Extraordinary loss per
share...................... (0.30) (0.30)
-------- --------
Net earnings per share...... $ 1.99 $ 0.33
======== ========
Weighted average common and
equivalent shares
outstanding................ 40,275 40,275
======== ========
Other Data:
Depreciation and
amortization............... $ 23,823 $ (7,309) $ -- $ 16,514
Capital expenditures........ 10,793 (3,490) -- 7,303
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statements of Earnings
(1) Reflects the elimination of historical operating results for the Air Cargo
and Barry Controls businesses, which were sold in May 2000 and June 2000,
respectively, and the Magnets business, which will become part of APW in
connection with the Distribution.
(2) Includes the operating results, until the date of its disposition, of
Samuel Groves, a business unit sold by Applied Power on November 23, 1999.
Operating results of this divested business for the pro forma periods
presented were as follows:
<TABLE>
<CAPTION>
Nine Months Twelve
Ended Year Ended Months Ended
May 31, August 31, May 31,
2000 1999 2000
----------- ---------- ------------
(in thousands)
<S> <C> <C> <C>
Net sales................................ $1,340 $9,385 $3,032
Gross profit............................. 348 2,466 723
Operating earnings....................... (58) 290 (101)
EBITDA................................... 4 631 52
Capital expenditures..................... -- 75 17
</TABLE>
(3) Engineering, selling and administrative expenses include all general
corporate expenses related to Applied Power, including costs incurred to
support both the Industrial Business and the Electronics Business. In
accordance with generally accepted accounting principles, none of these
expenses has been allocated to discontinued operations. The adjustment
reflects the elimination of the excess of historical general corporate
expenses over the amounts management believes would have been incurred by
Actuant had the Distribution taken place at the beginning of such periods.
The remainder represents salaries and benefits for positions in corporate
finance, treasury, tax, human resource and general management as well as
certain outside service fees expected to continue, including audit,
insurance and legal costs. For the nine and twelve month periods ended May
31, 2000 and fiscal 1999, pro forma general corporate expenses were $3.9
million, $5.0 million and $4.7 million, respectively.
(4) Reflects the adjustment to exclude investment banking, legal, accounting
and other fees and expenses associated with the Distribution.
(5) Reflects the elimination of historical net financing costs and the
inclusion of estimated pro forma net financing costs based on the debt
realignment related to the Distribution as follows:
<TABLE>
<CAPTION>
Nine Months Year Twelve
Ended Ended Months Ended
May 31, August 31, May 31,
2000 1999 2000
----------- ---------- ------------
(in thousands)
<S> <C> <C> <C>
The Actuant Credit Facility--Revolver
and Tranche A Term
Loan at 9.47%......................... $ 9,063 $12,084 $12,084
The Actuant Credit Facility--Tranche B
Term Loan at 10.47%................... 9,816 13,088 13,088
The Notes at 13.0%..................... 19,500 26,000 26,000
Non-cash amortization of the discount
on Notes.............................. 227 303 303
Non-cash amortization of debt issuance
costs ................................ 1,314 1,752 1,752
Other financing costs.................. 980 1,307 1,307
------- ------- -------
Estimated pro forma net financing
costs................................. 40,900 54,534 54,534
Less: historical net financing costs... 27,892 41,181 38,435
------- ------- -------
Pro forma adjustment................... $13,008 $13,353 $16,099
======= ======= =======
</TABLE>
LIBOR assumed in the above calculations is 6.72%. A 0.25% change in LIBOR
for the Actuant Credit Facility would result in an approximate $0.6 million
change in annual pro forma net financing costs.
<PAGE>
(6) Represents the adjustment required to arrive at an estimated income tax
expense after the Distribution. The increase in the effective pro forma tax
rate results from lower utilization of foreign tax credits.
(7) Reflects elimination of the net operating results of the Electronics
Business.
"EBITDA" is defined as operating earnings before depreciation, amortization
and certain restructuring and other non-recurring items. Restructuring and
other non-recurring items included in the pro forma consolidated statement
of earnings are contract termination costs, contract termination recovery
and corporate reorganization expenses. EBITDA does not represent and should
not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principles, and
our calculation thereof may not be comparable to that reported by other
companies. We believe that EBITDA provides useful information regarding our
ability to service and/or incur indebtedness. EBITDA does not take into
account our working capital requirements, debt service requirements and
other commitments and, accordingly, is not necessarily indicative of
amounts that may be available for discretionary use.
<TABLE>
<CAPTION>
Excluded Other Pro
EBITDA: Historical Businesses(1) Adjustments Forma(2)
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Nine Months Ended May 31, 2000 $ 102,832 $ (22,185) $ 5,281 $ 85,928
========= ========= ======== =========
Year Ended August 31, 1999 $ 133,321 $ (36,853) $ 7,399 $ 103,867
========= ========= ======== =========
Twelve Months Ended May 31, 2000 $ 137,658 $ (32,433) $ 7,204 $ 112,429
========= ========= ======== =========
</TABLE>
<PAGE>
Unaudited Pro Forma Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
May 31, 2000
---------------------------------------------------
Excluded Other
Historical Businesses(1) Adjustments Pro Forma
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............. $ 6,808 $ -- $ -- $ 6,808
Accounts receivable,
net..................... 79,732 (25,975) 43,803 (2) 97,560
Inventories, net......... 93,276 (24,280) -- 68,996
Prepaid expenses......... 7,122 (1,167) 40,000 (3) 45,955
Deferred income taxes.... 8,599 (2,705) -- 5,894
---------- --------- --------- ---------
Total current assets..... 195,537 (54,127) 83,803 225,213
Property, plant and
equipment............... 176,862 (44,592) -- 132,270
Less: accumulated
depreciation............ (106,183) 24,167 -- (82,016)
---------- --------- --------- ---------
Net property, plant and
equipment............... 70,679 (20,425) -- 50,254
Goodwill, net of
accumulated
amortization............ 140,696 (27,678) -- 113,018
Other intangibles, net of
accumulated
amortization............ 28,750 (4,812) -- 23,938
Net assets of
discontinued
operations.............. 597,489 -- (597,489)(4) --
Other assets............. 2,385 -- 14,320 (5) 16,705
---------- --------- --------- ---------
Total assets............. $1,035,536 $(107,042) $(499,366) $ 429,128
========== ========= ========= =========
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings.... $ -- $ -- $ -- $ --
Trade accounts payable... 55,730 (11,224) -- 44,506
Accrued compensation and
benefits................ 16,448 (2,494) -- 13,954
Income taxes payable..... 1,118 (6,744) 28,448 (6) 22,822
Other current
liabilities............. 18,464 2,049 10,000 (7) 30,513
---------- --------- --------- ---------
Total current
liabilities............. 91,760 (18,413) 38,448 111,795
Long-term debt........... 456,907 (157,500) 150,593 (8) 450,000
Deferred income taxes.... 8,485 (9,163) -- (678)
Other deferred
liabilities............. 15,620 (862) -- 14,758
Shareholders' equity:
Common stock............. 7,822 -- -- 7,822
Additional paid-in
capital................. 14,255 -- (648,583)(9) (634,328)
Retained earnings........ 468,104 78,896 (57,128)(10) 489,872
Accumulated other
comprehensive income.... (27,417) -- 17,304 (11) (10,113)
---------- --------- --------- ---------
Total shareholders'
equity.................. 462,764 78,896 (688,407) (146,747)
---------- --------- --------- ---------
Total liabilities and
shareholders' equity.... $1,035,536 $(107,042) $(499,366) $ 429,128
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these pro forma consolidated
financial statements.
<PAGE>
Notes to Unaudited Pro Forma Consolidated Balance Sheet
(1) Reflects the historical financial position as of May 31, 2000 of the Barry
Controls business which was sold in June 2000, and the Magnets business,
which will become part of APW in connection with the Distribution.
(2) Historically, Applied Power, through a wholly-owned limited purpose
subsidiary, sold participating interests in a pool of its trade accounts
receivable to financial institutions. Immediately following the
Distribution, we will not have an accounts receivable financing program.
The adjustment represents the amount of accounts receivable relating to the
Industrial Business sold as of May 31, 2000.
(3) Reflects APW's agreement to reimburse Applied Power for the estimated tax
liability created by the corporate restructuring transactions related to
the Distribution, including the transactions that makes APW Ltd. a Bermuda
corporation. A corresponding liability is reflected in income taxes
payable.
(4) Reflects the transfer of the net assets of the Electronics Business in the
Distribution.
(5) Reflects estimated new debt issuance costs of approximately $15.0 million
that will be incurred as a result of the debt realignment related to the
Distribution, net of a write-off of $0.7 million of unamortized costs
related to former debt agreements.
(6) Represents the estimated tax liability increase (decrease) due to certain
other pro forma adjustments as follows:
<TABLE>
<CAPTION>
May 31, 2000
--------------
(in thousands)
<S> <C>
Estimated taxes on corporate restructuring transactions (see
Note 3 above)............................................... $40,000
Write-off of unamortized historical debt issuance costs (see
Note 5 above)............................................... (272)
Estimated costs associated with effecting the Transactions
including estimated Tender Offer premium (see Notes 7 and 8
below)...................................................... (11,280)
-------
Pro forma adjustment......................................... $28,448
=======
</TABLE>
(7) Represents the accrual of the estimated investment banking, legal,
accounting and other fees and expenses associated with the Transactions.
(8) A reconciliation of the pro forma adjustments to long-term debt is as
follows:
<TABLE>
<CAPTION>
May 31, 2000
--------------
(in thousands)
<S> <C>
Accounts receivable financing facility (see Note 2 above)... $ 43,803
Estimated debt issuance costs (see Note 5 above)............ 15,000
Final allocation per debt realignment and other............. 91,790
--------
Pro forma adjustment........................................ $150,593
========
</TABLE>
<PAGE>
(9) Reflects changes to additional paid-in capital account impacted by pro
forma adjustments as follows:
<TABLE>
<CAPTION>
May 31, 2000
--------------
(in thousands)
<S> <C>
The Distribution (see Note 4 above)......................... $(597,489)
Estimated taxes on corporate restructuring transactions (see
Note 3 above).............................................. 40,000
Estimated final allocation of debt.......................... (73,790)
Cumulative translation adjustment (see Note 11 below)....... (17,304)
---------
Pro forma adjustment........................................ $(648,583)
=========
</TABLE>
(10) Reflects changes to retained earnings generated by pro forma adjustments,
net of tax effect, as follows:
<TABLE>
<CAPTION>
May 31, 2000
--------------
(in thousands)
<S> <C>
Estimated taxes on corporate restructuring transactions
(see Note 3 above)........................................ $(40,000)
Write-off of unamortized historical debt issuance costs
(see Note 5 above)........................................ (408)
Estimated transaction costs and other...................... (16,720)
--------
Pro forma adjustment....................................... $(57,128)
========
</TABLE>
(11) Reflects elimination of the portion of the cumulative translation account
attributable to the Electronics Business.
<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: July __, 2000 By:_____________________________
Richard D. Carroll
Vice President-Finance
(Duly authorized to sign on behalf
of the Registrant)
