UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 5, 1998
APPLIED POWER INC.
-----------------
(Exact name of Registrant as specified in its charter)
WISCONSIN 1-11288 39-0168610
--------- ------- ----------
(State of incorporation) (Commission File No.) (I.R.S. Employer Id. No.)
13000 WEST SILVER SPRING DRIVE
BUTLER, WISCONSIN 53007
MAILING ADDRESS: P. O. BOX 325, MILWAUKEE, WISCONSIN 53201
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(414) 781-6600
--------------
(Registrant's telephone number, including area code)
1
The undersigned registrant hereby amends Item 7 including the financial
statements, exhibits or other portions of financial information filed for VERO
Group plc ("VERO") on Form 8-K dated as of June 5, 1998 (the "VERO 8-K").
The financial statements and related footnotes as previously filed in the VERO
8-K have been amended to reflect that the financial data presented for VERO's
fiscal year ended December 31, 1996 is not covered by the audit opinion of Ernst
& Young for the year ended December 31, 1997 filed as part of the VERO 8-K. As
such, the 1996 financial data has been marked as "unaudited." Additionally,
footnote number 23 has been added to reconcile certain information presented
under generally accepted accounting principles in the United Kingdom to
generally accepted accounting principles in the United States. The related
updated accountants' consent as Exhibit 23 is also being filed.
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLIED POWER INC.
June 30, 1998 By: /s/ Robert C. Arzbaecher
-------------------------------------
Robert C. Arzbaecher
Vice President and
Chief Financial Officer
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- - -------------------------------------------
(a) Financial Statements of Businesses Acquired:
The following financial statements of VERO prepared in accordance with
generally accepted accounting principles in the United Kingdom are included
herein from pages 17 through 35 of VERO's 1997 Annual Report which is filed
herewith as Exhibit 99.1. These financial statements are not the statutory
accounts of VERO. The statutory accounts for the years ended December 31,
1997 and 1996 have been delivered to the Registrar of Companies for England
and Wales and the auditors' reports thereon were unqualified:
Report of Independent Auditors
Consolidated Profit and Loss Account for the years ended December 31,
1997 and 1996
Consolidated Balance Sheet as of December 31, 1997 and 1996
Consolidated Cash Flow Statement for the years ended December 31, 1997
and 1996
Consolidated Statement of Total Recognized Gains and Losses for the
years ended December 31, 1997 and 1996
Reconciliation of Movements in Consolidated Shareholders' Fund for the
years ended December 31, 1997 and 1996
Company Balance Sheet as of December 31, 1997 and 1996
Accounting Policies
Notes to the Accounts
(b) Pro Forma Financial Information:
The following unaudited pro forma condensed consolidated financial
statements of Applied Power Inc. and subsidiaries, reflecting the
acquisition of VERO, are filed herewith:
Introduction to Pro Forma Condensed Consolidated Financial Statements
of Applied Power Inc. and VERO Group plc
Applied Power Inc. and VERO Group plc Pro Forma Condensed Consolidated
Balance Sheet as of February 28, 1998 and the related Pro Forma
Condensed Consolidated Statement of Earnings for the six months then
ended (unaudited)
Pro Forma Condensed Consolidated Statement of Earnings for the year
ended August 31, 1997 (unaudited)
Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited)
(c) Exhibits:
See the Exhibit Index following the Signature page of this Report, which is
incorporated herein by reference.
5
APPLIED POWER INC. AND VERO GROUP PLC
INTRODUCTION TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------------------------
Unaudited
As described under Item 2 of this report, Applied Power Inc. (the "Company" or
"API"), through Applied Power Limited, a wholly owned subsidiary, acquired by
means of a tender offer and market purchases of shares over 90% of the
outstanding shares of common stock of VERO Group plc ("VERO") at a price of 192
pence per share in cash.
The following unaudited pro forma condensed consolidated balance sheet and
statements of earnings (the "pro forma statements") give effect to the
acquisition of VERO using the purchase method of accounting and are based on the
estimates and assumptions set forth in the notes to such pro forma statements.
The pro forma statements have been prepared by the Company utilizing the
historical financial statements of the Company and notes thereto which were
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997 and the unaudited condensed consolidated interim financial
information contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended February 28, 1998 and the audited financial statements and notes
thereto of VERO for the year ended December 31, 1997, included as Item 7(a) of
this report, and VERO's unaudited interim results for the six months ended June
30, 1997. VERO's reporting currency is the United Kingdom pound sterling and its
financial information in the accompanying pro forma combined financial
statements has been translated to the U.S. dollar in accordance with Statement
of Financial Accounting Standards No. 52, "Foreign Currency Translation." VERO's
historic financial statements are prepared in accordance with generally accepted
accounting principles in the United Kingdom ("UK GAAP"), however, VERO's
financial information in the accompanying pro forma combined financial
statements has been adjusted to confirm with generally accepted accounting
principles in the United States ("US GAAP"). The only material adjustment
required to conform with US GAAP related to goodwill. Under UK GAAP purchased
goodwill may be written off on acquisition directly against reserves. Under US
GAAP goodwill is capitalized and amortized by charges against income over the
period during which it is estimated it will be of benefit subject to a maximum
of 40 years. Accordingly, goodwill, net of amortization, was recorded in the pro
forma combined balance sheet at February 28, 1998 and the related amortization
expense included in the pro forma combined statements of earnings for the six
months ended February 28, 1998 and the twelve months ended August 31, 1997.
These pro forma statements have been prepared and included herein as required by
the rules and regulations of the Securities and Exchange Commission and are
provided for comparative purposes only. The pro forma statements are not
necessarily indicative of the future consolidated financial position and results
of operation or those which would have occurred had the acquisition been
consummated as of the dates reflected in the pro forma statements. In reviewing
the pro forma statements, the reader should consider the following:
1. The historical amounts of VERO were compiled to conform, as closely as
possible, to the fiscal year of the Company. The historical income
statement for VERO covers the twelve month period beginning January 1
through December 31. For pro forma purposes, the VERO income statement has
been adjusted to cover the twelve month period beginning July 1, 1996
through June 30, 1997.
2. The following pro forma financial statements do not reflect any adjustments
for the various synergies or cost reductions the Company expects to achieve
as a result of the acquisition.
6
APPLIED POWER INC. AND VERO GROUP PLC
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
API VERSA/TEK ZERO VERO
SIX MONTHS SEPTEMBER 1, SIX MONTHS SIX MONTHS
ENDED TO ENDED SUB-TOTAL ENDED TOTAL
FEBRUARY 28, OCTOBER 6, DECEMBER 31, PRO FORMA DECEMBER 31, PRO FORMA
1998(1) 1997(1) 1997(1) ADJUSTMENTS COMBINED 1997(1) ADJUSTMENTS COMBINED
------------ ------------ ------------ ----------- --------- ------------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net Sales.............. $425,834 $9,330 $131,375 $566,539 $83,927 $650,466
Cost of products sold.. 276,677 6,637 87,731 24 (4) 371 069 58,204 429,273
-------- ------ -------- ------ -------- ------- --------
Gross profit.......... 149,157 2,693 43,644 (24) 195,470 25,723 221,193
Engineering, selling
and administrative
expenses.............. 97,594 1,302 25,570 (706)(3) 123,760 17,987 141,747
Amortization of
intangible assets..... 5,201 -- -- 706 (3) 6,144 236 1,692 (5) 8,072
237 (4)
-------- ------ -------- ------ -------- ------- ------- --------
Operating earnings.... 46,362 1,391 18,074 (261) 65,566 7,500 (1,692) 71,374
Other Expenses
(Income):
Net financing costs... 9,470 (11) 1,964 763 (4) 12,186 201 6,493 (5) 18,880
Other--net............ (195) 100 (2,232)(10) (2,327) -- (2,327)
-------- ------ -------- ------ -------- ------- ------- --------
Net Earnings from
Continuing Operations
Before Income Tax
Expense............... 37,087 1,302 18,342 (1,024) 55,707 7,299 (8,185) 54,821
Income Tax Expense(11). 12,981 -- 6,636 (201)(4) 19,416 2,541 (2,155)(5) 19,802
-------- ------ -------- ------ -------- ------- ------- --------
Net Earnings from
Continuing Operations. $ 24,106 $1,302 $ 11,706 (10) $ (823) $ 36,291 $ 4,758 $(6,030) $ 35,019
======== ====== ======== ====== ======== ======= ======= ========
Net earnings from
continuing operations
per common and
equivalent share:
Basic................. $ 0.87 $ 0.95 (10) $ 0.95 $ 0.92
Diluted............... $ 0.82 $ 0.93 (10) $ 0.90 $ 0.87
Common and equivalent
shares used in
computing per share
amounts:
Basic................. 27,728 12,344 (1,852)(2) 38,220 38,220
Diluted............... 29,371 12,649 (1,897)(2) 40,123 40,123
See Notes to Unaudited Pro Forma Combined Financial Statements
7
APPLIED POWER INC. AND VERO GROUP PLC
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
EVEREST VERSA/TEK ZERO VERO
API SEPTEMBER 1, YEAR YEAR YEAR
YEAR ENDED TO ENDED ENDED SUB-TOTAL ENDED TOTAL
AUGUST 31, SEPTEMBER 26, JUNE 30, JUNE 30, ADJUST- PRO FORMA JUNE 30, ADJUST- PRO FORMA
1997 (1) 1996 (1) 1997 (1) 1997 (1) MENTS COMBINED 1997 (1) MENTS COMBINED
---------- ------------- --------- -------- -------- ---------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net Sales........... $672,316 $3,496 $95,288 $235,330 $ 5,701 (7) $1,012,131 $163,270 $1,175,401
Cost of products
sold............... 419,420 2,663 69,773 158,195 20 (6) 654,668 106,492 761,160
4,597 (7)
-------- ------ ------- -------- -------- ---------- -------- ----------
Gross profit....... 252,896 833 25,515 77,135 1,084 357,463 56,778 414,241
Engineering, selling
and administrative
expenses........... 173,200 304 14,552 46,377 (1,194)(3) 233,994 37,233 271,227
Amortization of 755 (7)
intangible assets.. 6,813 125 -- -- 1,194 (3) 11,289 473 3,384 (8) 15,146
145 (6)
3,012 (7)
-------- ------ ------- -------- -------- ---------- -------- -------- ----------
Operating earnings. 72,883 404 10,963 30,758 (2,828) 112,180 19,072 (3,384) 127,868
Other Expenses
(Income):
Net financing
costs............. 12,003 (23) (32) 4,095 282 (6) 25,832 653 12,986 (8) 39,471
9,507 (7)
Other--net......... (1,863) (47) 607 (1,393) (3)(7) (2,699) -- (2,699)
-------- ------ ------- -------- -------- ---------- -------- -------- ----------
Net Earnings from
Continuing
Operations Before
Income Tax Expense. 62,743 474 10,388 28,056 (12,614) 89,047 18,419 (16,370) 91,096
Income Tax
Expense (11)....... 20,705 -- 4,216 11,165 62 (6) 32,413 6,649 (4,464)(8) 34,598
(3,735)(7)
-------- ------ ------- -------- -------- ---------- -------- -------- ----------
Net Earnings from
Continuing
Operations......... $ 42,038 $ 474 $ 6,172 $ 16,891 $ (8,941) $ 56,634 $ 11,770 $(11,906) $ 56,498
======== ====== ======= ======== ======== ========== ======== ======== ==========
Net earnings from
continuing
operations per
common and
equivalent share:
Basic.............. $ 1.53 $ 1.38 $ 1.49 $ 1.49
Diluted............ $ 1.46 $ 1.36 $ 1.44 $ 1.44
Common and
equivalent shares
used in computing
per share amounts:
Basic.............. 27,530 12,213 (1,832)(2) 37,911 37,911
Diluted............ 28,754 12,450 (1,868)(2) 39,337 39,336
See Notes to Unaudited Pro Forma Combined Financial Statements
8
APPLIED POWER INC. AND VERO GROUP PLC
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
API ZERO SUB-TOTAL VERO TOTAL
FEBRUARY 28, DECEMBER 31, PRO FORMA DECEMBER 31, PRO FORMA
ASSETS 1998 (1) 1997 (1) ADJUSTMENTS COMBINED 1997 (1) ADJUSTMENTS COMBINED
------ ------------ ------------ ----------- --------- ------------ ----------- ----------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Current Assets
Cash and cash
equivalents........... $ 7,010 $ 22,051 $ 29,061 $ 6,756 $ 35,817
Short-term
investments........... -- 4,918 4,918 -- 4,918
Accounts receivable,
net................... 76,908 37,537 114,445 27,851 142,296
Inventories............ 130,190 34,137 164,327 22,765 187,092
Prepaid income tax..... 12,453 -- 12,453 -- 12,453
Prepaid expenses....... 11,116 3,736 14,852 2,020 16,872
--------- -------- --------- -------- ----------
Total Current Assets. 237,677 102,379 340,056 59,392 399,448
Investment in VERO
Group, PLV............. -- -- -- -- 192,384 (9a) --
(192,384)(9b)
Other Assets............ 10,397 17,259 (2,718)(3) 24,938 1,359 26,297
Goodwill................ 260,361 37,391 297,752 17,010 135,367 (9b) 450,129
Other Intangibles....... 46,688 -- 2,718 (3) 49,406 -- 49,406
Property, Plant and
Equipment.............. 257,259 106,776 364,035 37,154 401,189
Less: Accumulated
depreciation.......... (133,019) (57,444) (190,463) (8,892) (199,355)
--------- -------- --------- -------- ----------
Net Property, Plant and
Equipment.............. 124,240 49,332 173,572 28,262 201,834
--------- -------- ------- --------- -------- --------- ----------
Total Assets......... $ 679,363 $206,361 $ -- $ 885,724 $106,023 $ 135,367 $1,127,114
========= ======== ======= ========= ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities
Short-term borrowings.. $ 15,585 $ -- $ 15,585 $ 842 $ 16,427
Trade accounts
payable............... 62,335 7,827 70,162 14,993 85,155
Accrued compensation
and benefits.......... 28,207 7,246 35,453 -- 35,453
Income taxes payable... 4,118 573 4,691 4,757 9,448
Other current
liabilities........... 24,975 8,420 33,395 17,747 51,142
--------- -------- --------- -------- ----------
Total Current
Liabilities......... 135,220 24,066 159,286 38,339 197,625
Long-term Debt.......... 272,262 51,573 323,835 10,251 192,384 (9a) 526,470
Deferred Income Tax..... 16,913 -- 16,913 416 17,329
Other Deferred
Liabilities............ 27,241 13,084 40,325 -- 40,325
Shareholders' Equity
Common stock (API:
27,836,656 shares;
ZERO 12,391,197
shares; and
38,369,173 shares on
a pro forma combined
basis)................ 5,567 166 -- 5,733 4,964 (4,964) 5,733
Additional paid-in
capital............... 38,538 39,289 -- 77,827 30,094 (30,094) 77,827
Retained earnings...... 190,049 151,899 -- 341,948 23,578 (21,959) 343,567
Cumulative translation
adjustments........... (6,427) 100 (6,327) (1,619) (7,946)
Treasury stock......... -- (73,816) (73,816) -- (73,816)
--------- -------- --------- --------- -------- -------- ----------
Total Shareholders'
Equity.............. 227,727 117,638 345,365 57,017 (57,017)(9b) 345,365
--------- -------- --------- --------- -------- -------- ----------
Total Liabilities and
Shareholders'
Equity.............. $ 679,363 $206,361 $ -- $ 885,724 $106,023 $135,367 $1,127,114
========= ======== ========= ========= ======== ======== ==========
See Notes to Unaudited Pro Forma Combined Financial Statements
9
APPLIED POWER INC. AND VERO GROUP PLC
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1--PERIODS COMBINED
The Company's consolidated statements of earnings for the six months ended
February 28, 1998 (unaudited) and for the fiscal year ended August 31, 1997,
have been combined with the VERO consolidated statements of income for the six
months ended December 31, 1997 and for the twelve months ended June 30, 1997
(both unaudited) respectively. The Company's February 28, 1998 unaudited
consolidated balance sheet has been combined with VERO's December 31, 1997
audited consolidated balance sheet.
On April 6, 1998, the Company and ZERO Corporation ("ZERO") jointly announced
that they had entered a definitive strategic merger agreement in which a newly
created subsidiary of the Company will be merged into ZERO. Under the terms of
the merger, ZERO stockholders will receive .85 shares of the Company's common
stock for each share of ZERO common stock. Approved by the boards of directors
of both companies, consummation of the Merger is subject to approval by the
stockholders of both companies and satisfaction of certain other conditions. The
Merger would be accounted for as a pooling of interests and is expected to be
completed in July 1998. The unaudited pro forma combined financial data for the
six months ended February 28, 1998 includes the operating results of Versa
Technologies, Inc. ("Versa/Tek"), which was acquired by the Company on October
6, 1997, for the period from September 1 to October 6, 1997 and the operating
results of ZERO for the six months ended December 31, 1997. The unaudited pro
forma combined financial data for the year ended August 31, 1997 includes the
operating results of Everest Electronics Equipment, Inc. ("Everest"), which was
acquired by the Company on September 26, 1996, for the period from September 1
to September 26, 1996, and the operating results of Versa/Tek and ZERO for their
respective twelve months ended June 30, 1997. The operating results of Versa/Tek
and Everest subsequent to their acquisition dates, are included in the Company's
historic results (presented in the first column of the accompanying combined
financial statements) for the six months ended February 28, 1998 and the year
ended August 31, 1997.
VERO's reporting currency is the pound sterling and its financial information
in the accompanying pro forma combined financial statements has been translated
to the U.S. dollar in accordance with Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation." VERO's historic financial
statements are prepared in accordance with generally accepted accounting
principles in the United Kingdom ("UK GAAP"), however, VERO's financial
information in the accompanying pro forma combined financial statements has been
adjusted to conform with generally accepted accounting principles in the United
States ("US GAAP"). The only material adjustment required to conform with US
GAAP related to goodwill. Under UK GAAP purchased goodwill may be written off on
acquisition directly against reserves. Under US GAAP goodwill is capitalized and
amortized by charges against income over the period during which it is estimated
it will be of benefit subject to a maximum of 40 years. Accordingly, goodwill,
net of amortization, was recorded in the pro forma combined balance sheet at
February 28, 1998 and the related amortization expense included in the pro forma
combined statements of earnings for the six months ended February 28, 1998 and
the twelve months ended August 31, 1997.
10
NOTE 2--PRO FORMA NET EARNINGS PER SHARE
The unaudited pro forma combined net earnings per common share and per
common and equivalent share is based upon the weighted average number of
common and equivalent shares of API and ZERO outstanding for each period at
the Exchange Ratio of 0.85 shares of API Common Stock for each share of ZERO
Common Stock.
NOTE 3--RECLASSIFICATIONS (ZERO)
Certain reclassifications, none of which affect income from continuing
operations, have been made to the ZERO statements of income in the pro forma
combined statements of earnings to conform classifications of "Amortization of
intangible assets" and to ZERO's balance sheet in the pro forma combined
balance sheet to conform classifications of "Other intangibles."
NOTE 4--PRO FORMA ADJUSTMENTS (VERSA/TEK)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the six months ended February
28, 1998 as a result of the Versa/Tek acquisition.
1. Incremental interest expense on acquisition debt at a rate
of 6.5%................................................... $ (763)
2. Increase in depreciation expense resulting from adjustment
to carrying amount of plant and equipment being
depreciated over a 7 year life............................ (24)
3. Reflect amortization of increase in goodwill and
intangible assets arising from this transaction, over
periods of 10 to 30 years................................. (237)
4. Decrease in income taxes (net benefit) applying a 39%
effective US and Wisconsin state income tax rate to the
earnings of Versa/Tek, less the effect of pro forma
adjustments in 1, 2 and 3 above (with the exception of non-
deductible amortization).................................. 201
--------
$ (823)
========
NOTE 5--PRO FORMA ADJUSTMENTS (VERO)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the six months ended February
28, 1998 as a result of the VERO acquisition.
1. Incremental interest expense on acquisition debt at a rate of
6.75%........................................................ $(6,493)
2. Reflect amortization of goodwill arising from this
transaction, over a 40 year life............................. (1,692)
3. Decrease in income taxes (net benefit) applying a 37%
effective income tax rate to the earnings of VERO, less the
effect of pro forma adjustments in 1 and 2 above (with the
exception of non-deductible amortization).................... 2,155
-------
$(6,030)
=======
NOTE 6--PRO FORMA ADJUSTMENTS (EVEREST)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the year ended August 31,
1997 as a result of the Everest acquisition.
1. Incremental interest expense on acquisition debt at a rate of
6.5%......................................................... $ (282)
2. Increase in depreciation expense resulting from adjustment to
carrying amount of plant and equipment being depreciated over
a 7 year life................................................ (20)
3. Reflect amortization of goodwill arising from this
transaction, over a 25 year life............................. (145)
4. Increase in income taxes applying a 41% effective U.S. and
California state income tax rate to the earnings of Everest,
less the effect of pro forma adjustments in 1, 2 and 3 above. (62)
-------
$ (509)
=======
11
NOTE 7--PRO FORMA ADJUSTMENTS (VERSA/TEK)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the year ended August 31,
1997 to reflect a full year of Eder Industries in Versa/Tek (Eder was acquired
by Versa/Tek on October 31, 1996).
1. Add historical operating results of Eder for the four-month
period July 1, 1996 to 10/31/96 (date of Versa/Tek's
acquisition)
Net Sales................................................. $ 6,338
Cost of Products Sold..................................... (4,924)
Engineering, Selling and Administrative Expenses.......... (755)
Financing Costs........................................... (19)
Other Income.............................................. 3
2. Eliminate intercompany sales and purchases between Eder and
Versa/Tek................................................... 637
(637)
3. Incremental interest expense/elimination of interest income
relating to the cash borrowed/used in the acquisition at a
rate of 6.5%................................................ (333)
4. Increase in depreciation expense resulting from adjustment
to carrying amount of plant and equipment being depreciated
over periods of 10 to 30 years.............................. (24)
5. Reflect additional amortization of goodwill and other
intangibles arising from the Eder transaction over periods
of 3 to 40 years............................................ (163)
--------
$ 123
========
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the year ended August 31,
1997 as a result of the Versa Tek acquisition.
6. Incremental interest expense on acquisition debt at a
rate of 6.5%............................................. $ (9,155)
7. Increase in depreciation expense resulting from
adjustment to carrying amount of plant and equipment
being depreciated over a 7 year life..................... (286)
8. Reflect amortization of increase in goodwill and
intangible assets arising from this transaction over
periods of 10 to 40 years................................ (2,849)
9. Decrease in income taxes (net benefit) applying a 39%
effective US and Wisconsin state income tax rate to the
earnings of Versa/Tek, less the effect of pro forma
adjustments in 1 through 8 above (with the exception of
non-deductible amortization)............................. 3,735
---------
$ (8,555)
=========
NOTE 8--PRO FORMA ADJUSTMENTS (VERO)
The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for API's year ended August 31,
1997 as a result of the VERO acquisition.
1. Incremental interest expense on acquisition debt at a rate
of 6.75%.................................................. $(12,986)
2. Reflect amortization of goodwill arising from this
transaction, over a 40 year life.......................... (3,384)
3. Decrease in income taxes (net benefit) applying a 37%
effective income tax rate to the earnings of VERO, less
the effect of pro forma adjustments 1 and 2 above (with
the exception of non-deductible amortization)............. 4,464
---------
$(11,906)
=========
12
NOTE 9--PRO FORMA ADJUSTMENTS (VERO)
(a) The following pro forma adjustments are incorporated in the pro forma
combined balance sheet at February 28, 1998 as a result of the VERO acquisition.
Purchase price of outstanding shares.......................... $192,384
(b) The following pro forma adjustments are made to reflect estimated fair
value adjustments and to eliminate the investment in VERO:
VERO net assets--as reported.................................. $ 57,017
Fair value adjustments:
Record goodwill acquired.................................... 135,367
---------
Investment in VERO........................................ $192,384
=========
Because of the proximity of the transaction, API has not had adequate time to
complete its evaluation of the fair value of the net assets acquired in the VERO
transaction. As a result, no fair value adjustments have been reflected in these
pro forma statements.
NOTE 10--SPECIAL ITEM (ZERO)
Other Income--net for the six months ended December 31, 1997 includes life
insurance proceeds of $1,709 ($0.14 per share).
NOTE 11--INCOME TAX EXPENSE
Effective tax rates are higher than the statutory federal income tax rates
primarily due to state income taxes, net of federal benefit.
13
APPLIED POWER INC.
EXHIBIT INDEX
TO
FORM 8-K CURRENT REPORT
Date of Report: June 5, 1998
Exhibit Filed
Number Description Herewith
- - ------ ----------- --------
4.1 Multicurrency Credit Agreement X
dated as of June 18, 1998, among
Applied Power Inc. and Enerpac
B.V., as 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
BancAmerica Robertson Stephens
23 Consent of Ernst & Young X
99.1 Consolidated balance sheet of VERO X
Group plc and subsidiaries as of
December 31, 1997 and 1996 and related
consolidated profit and loss account and
cash flow for each of the two years in the
period ended December 31, 1997, and the
notes thereto and auditors' report thereon,
included herein in Item 7(a) of this report
15