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): September 29, 1998*
APPLIED POWER INC.
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(Exact name of Registrant as specified in its charter)
Wisconsin 1-11288 39-0168610
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(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
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(Address of principal executive offices) (Zip Code)
(414) 783-9279
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(Registrant's telephone number, including area code)
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* This Amendment is filed pursuant to the provisions of paragraph (a)(4) of Item
7 of Form 8-K.
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report dated as of
September 29, 1998 on Form 8-K (the "9/29/98 8-K"):
Item 2. Acquisition or Disposition of Assets
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Acquisition of Rubicon
On September 1, 1998, Applied Power Inc. ("Applied Power") announced that
it had reached agreement with the Board of Directors of Rubicon Group plc
("Rubicon") on the terms of a recommended cash tender offer (with a guaranteed
loan note alternative) to be made by APW Enclosure Systems Limited, a United
Kingdom subsidiary of Applied Power (the "Purchaser"), to acquire the entire
issued share capital of Rubicon (the "Offer"). The Rubicon common shares are
publicly traded on the London Stock Exchange. Pursuant to the tender offer,
which commenced September 1, 1998 and was made by Goldman, Sachs & Co., an
investment banking firm, on behalf of the Purchaser, the Purchaser offered to
pay 2.35 pounds sterling, net to the seller in cash, for each of Rubicon's
approximately 88 million issued common shares and .50 pounds sterling, net to
the seller in cash, for each of Rubicon's approximately 100,000 cumulative
preference shares (the "Offer Price"). The Offer Price valued Rubicon's entire
issued share capital at approximately 207 million pounds sterling, or
approximately $346 million.
On September 29, 1998, Applied Power announced that the Purchaser had
accepted for payment all the Rubicon shares which had been tendered pursuant to
the Offer at the Offer Price. The tendered shares accepted for payment as of
September 29, 1998 totaled over 66.8% of the outstanding common shares and 12.6%
of the outstanding preference shares. Apart from these, the Purchaser acquired
or agreed to acquire another 19.7% of Rubicon's issued common shares, so that
after accepting the shares tendered, the Purchaser owned or had accepted over
86.5% of Rubicon's common shares and 12.6% of the preference shares.
The Offer remained open. The tendered common shares accepted for payment
under the Offer exceeded 90% of the outstanding common shares on October 8,
1998, and the Purchaser invoked Section 429 of the UK Companies Act of 1985, as
amended, to acquire the remaining outstanding common shares of Rubicon. The
Purchaser now owns all of the common shares of Rubicon. The Purchaser has also
accepted for payment under the Offer, 27.2% of the preference shares. The Offer
for the preference shares remains open.
Rubicon is a United Kingdom company that manufactures complex electronic
enclosures and related system sub-assemblies and bonded magnets. The
acquisition of Rubicon will further expand Applied Power's electronic enclosures
capabilities in Europe and will enhance its ability to supply backplanes, power
supplies, and thermal management solutions and the integration of these
components and others into the enclosure. In its fiscal year ended May 31,
1998, Rubicon earned 20.7 million pounds sterling of operating profit
(approximately $33.7 million) on sales of 241.1 million pounds sterling
(approximately $393.5 million). Of those sales, 33.6% were outside Europe.
Applied Power is undertaking a thorough review of Rubicon's operations and
studying the manner in which its operations can best be optimized within Applied
Power, and intends to take such actions as a result of this review as may be
deemed appropriate under the circumstances. Applied Power currently intends to
continue the primary business operations of Rubicon, and to continue to use the
physical assets of Rubicon's primary business operations for that purpose, while
integrating such operations with its own.
2
Financing of the Offer
The total amount of funds required to acquire all of the Rubicon shares is
currently estimated to be approximately $357 million, including related fees and
expenses. The Purchaser obtained all of the funds it expended from Applied
Power. To provide the necessary funds, Applied Power and Enerpac B.V., a
Netherlands subsidiary of Applied Power, as Borrowers, entered into a
Multicurrency Credit Agreement, dated as of October 14, 1998 (the "Credit
Agreement"), with Bank of America National Trust and Savings Association, as
Administrative Agent, The First National Bank of Chicago, as Syndication Agent,
Societe Generale, as Documentation Agent, and various financial institutions
from time to time party thereto as Lenders, providing for a $850 million 5-year
revolving credit facility (the "Facility"). The Credit Agreement was arranged
by NationsBanc Montgomery Securities LLC.
In conjunction with the closing of the Facility, Applied Power terminated
its prior $700 million 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 is to be used to finance the Offer, to refinance
existing indebtedness (including the Prior Facility), and to provide for working
capital, capital expenditures and for other general corporate purposes.
Item 7. Financial Statements and Exhibits
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Pursuant to the provisions of paragraph (a)(4) of Item 7 of Form 8-K, Item 7 of
the 9/29/98 8-K is hereby amended to file the financial statements of Rubicon
Group plc ("Rubicon") for the year ended May 31, 1998 required to be filed
pursuant to Item 7(a) and the pro forma financial information required to be
filed pursuant to Item 7(b) in connection with the acquisition of Rubicon as
reported in Item 2 of the 9/29/98 8-K.
(a) Financial Statements of Business Acquired:
The following financial statements of Rubicon prepared in accordance with
generally accepted accounting principles in the United Kingdom are
incorporated herein by reference to pages 23 through 45 of Rubicon's 1998
Annual Report, which pages are filed herewith as Exhibit 99.1. These
financial statements are not the statutory accounts of Rubicon. The
statutory accounts for the year ended May 31, 1998 have been delivered to
the Registrar of Companies for England and Wales and the auditors' report
thereon was unqualified:
Directors' Report
Report of the Independent Chartered Accountants
Consolidated Profit and Loss Account for the year ended May 31, 1998
Consolidated Balance Sheet at May 31, 1998
Company Balance Sheet at May 31, 1998
Consolidated Cash Flow Statement for the year ended May 31, 1998
Statement of Recognised Gains and Losses for the year ended May 31,
1998
Notes to the Financial Statements
3
(b) Pro Forma Financial Information:
The following unaudited pro forma condensed consolidated financial
statements of Applied Power Inc. and subsidiaries, reflecting the
acquisition of Rubicon, are filed herewith:
Introduction to Pro Forma Condensed Consolidated Financial Statements
of Applied Power Inc. and Rubicon Group plc (unaudited)
Pro Forma Condensed Consolidated Statement of Earnings for the year
ended August 31, 1998 (unaudited)
Pro Forma Condensed Consolidated Balance Sheet as of August 31, 1998
(unaudited)
Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited)
(c) Exhibits:
See the Exhibit Index of this Report, which is incorporated herein by
reference.
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APPLIED POWER INC. AND RUBICON GROUP PLC
INTRODUCTION TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Unaudited
As described under Item 2 of this report, originally filed on September 29,
1998, as amended hereby, Applied Power Inc. (the "Company"), through a wholly-
owned subsidiary, acquired by means of a tender offer and market purchases of
shares all of the outstanding common shares and over 27% of the outstanding
preference shares of stock of Rubicon Group plc ("Rubicon").
The following unaudited pro forma condensed consolidated balance sheet and
statement of earnings (the "pro forma statements") give effect to the
acquisition of Rubicon 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 audited 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, 1998 and the audited financial statements and notes
thereto of Rubicon for the fiscal year ended May 31, 1998, incorporated by
reference in Item 7(a) of this report. Rubicon's reporting currency is the
United Kingdom pound sterling and its financial information in the accompanying
pro forma combined financial statement has been translated to the US Dollar in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation."
Rubicon's historical financial statements are prepared in accordance with
generally accepted accounting principles in the United Kingdom ("UK GAAP"),
however, Rubicon's financial information in the accompanying pro forma
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 is 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. Goodwill previously written off directly to reserves in the
unaudited pro forma condensed consolidated balance sheet at August 31, 1998 was
approximately $128.7 million. No attempt has been made to identify future
differences between UK GAAP and US GAAP as the result of prescribed changes in
accounting standards. Regulatory bodies that promulgate UK GAAP and US GAAP have
significant project ongoing that could affect future comparisons such as this
one. Also, no attempt has been made to identify future differences between UK
GAAP and US GAAP that may affect the financial statements as a result of
transactions or events that may occur in the future.
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 operations 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 Rubicon were compiled to conform, as closely as
possible, to the fiscal year of the Company. The historical consolidated
profit and loss account for Rubicon covers the twelve month period beginning
June 1, 1997 through May 31, 1998 and the historical consolidated balance
sheet is as of May 31, 1998.
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.
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APPLIED POWER INC. AND SUBSIDIARIES
AND RUBICON GROUP PLC
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Unaudited
YEAR ENDED AUGUST 31, 1998
(Amounts in Thousands except per share amounts)
Historical Pro forma Pro forma
API Rubicon Adjustments Consolidated
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Net sales $1,230,689 $241,937 $1,472,626
Cost of products sold 835,716 199,765 1,035,481
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Gross Profit 394,973 42,172 437,145
Engineering, selling and
administrative expenses 269,227 17,434 286,661
Amortization of intangible assets 20,353 3,465 $ 4,423 (2a) 28,241
Restructuring charges 20,298 - 20,298
Merger related expenses 9,276 - 9,276
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Operating Earnings 75,819 21,273 (4,423) 92,669
Other Expense(Income):
Net financing costs 28,531 3,557 24,070 (2a) 56,158
Other - net (10,097) (377) (10,474)
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Earnings from Continuing Operations
Before Income Tax Expense 57,385 18,093 (28,493) 46,985
Income Tax Expense 30,698 6,005 (6,941) (2a) 29,762
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Earnings from Continuing Operations $ 26,687 $ 12,088 $(21,552) $ 17,223
========== ======== ======== ==========
Basic Earnings Per Share:
Earnings from Continuing
Operations Per Share $ 0.70 $ 0.45
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Weighted Average Common
Shares Outstanding (000's) 38,380 38,380
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Diluted Earnings Per Share:
Earnings from Continuing
Operations Per Share $ 0.66 $ 0.43
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Weighted Average Common
and Equivalent Shares
Outstanding (000's) 40,174 40,174
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See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
6
APPLIED POWER INC. AND SUBSIDIARIES
AND RUBICON GROUP PLC
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
AUGUST 31, 1998
(Dollars in Thousands)
Historical Pro forma Pro forma
API Rubicon Adjustments Consolidated
---------- -------- ----------- ------------
ASSETS
Current Assets
Cash and cash equivalents $ 6,349 $ 35,166 $ 41,515
Accounts receivable 147,380 37,418 184,798
Inventories 164,786 22,187 186,973
Deferred income taxes 29,905 2,688 32,593
Prepaid expenses 16,144 2,824 18,968
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Total Current Assets 364,564 100,283 464,847
Investment in Rubicon Group plc - - 356,591 (2b) -
(356,591) (2c)
Property, Plant and Equipment - net 225,170 33,757 258,927
Goodwill 499,973 131,663 176,935 (2c) 808,571
Other Intangibles 42,896 255 43,151
Other Assets 42,119 18,480 60,599
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Total Assets $1,174,722 $284,438 $ 176,935 $1,636,095
========== ======== ========= ==========
LIABILITES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $ 91 $ 3,179 $ 3,270
Trade accounts payable 127,470 38,847 166,317
Accrued compensation and benefits 45,457 - 45,457
Income taxes payable 12,898 8,973 21,871
Other current liabilities 74,792 38,733 113,525
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Total Current Liabilities 260,708 89,732 350,440
Long-term Debt 512,557 4,990 356,591 (2b) 874,138
Deferred Income Taxes 23,065 1,146 24,211
Other Deferred Liabilities 36,510 8,914 45,424
Shareholders' Equity
Common stock 7,725 14,860 (14,860) 7,725
Additional paid-in capital 5,817 206,786 (206,786) 5,817
Retained earnings 335,805 (40,305) 40,305 335,805
Cumulative translation adjustment (7,465) (1,685) 1,685 (7,465)
---------- -------- --------- ----------
Total Shareholders' Equity 341,882 179,656 (179,656) (2c) 341,882
---------- -------- --------- ----------
Total Liabilities and Shareholders' Equity $1,174,722 $284,438 $ 176,935 $1,636,095
========== ======== ========= ==========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
7
APPLIED POWER INC. AND RUBICON GROUP PLC
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
Unaudited
(Dollars in Thousands)
Note 1 - Periods Combined
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The Company's consolidated statement of earnings for the twelve months ended
August 31, 1998 has been combined with the Rubicon consolidated statement of
income for the twelve months ended May 31, 1998.
Rubicon's reporting currency is the pound sterling and its financial information
in the accompanying pro forma condensed consolidated financial statements has
been translated to the US Dollar in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation." Rubicon's
historical financial statements are prepared in accordance with generally
accepted accounting principles in the United Kingdom ("UK GAAP"), however,
Rubicon's financial information in the accompanying pro forma condensed
consolidated 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 is 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 condensed consolidated balance sheet
at August 31, 1998 and the related amortization expense included in the pro
forma condensed consolidated statement of earnings for the year ended August 31,
1998.
Note 2 - Pro Forma Adjustments
- ------------------------------
(a) The following pro forma adjustments are incorporated in the pro forma
condensed consolidated statement of earnings for the year ended August 31,
1998 as a result of the Rubicon acquisition:
1. Incremental interest expense on acquisition debt at a rate of 6.75% $ (24,070)
2. Reflect amortization of goodwill arising from this transaction, over
a 40 year life (4,423)
3. Decrease in income taxes (tax benefit) applying a 37% effective
income tax rate to the earnings of Rubicon, less the effect of pro
forma adjustments 1 and 2 above (with the exception of
non-deductible amortization) 6,941
----------
$ (21,552)
==========
8
APPLIED POWER INC. AND RUBICON GROUP PLC
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
Unaudited
(Dollars in Thousands)
(b) The following pro forma adjustments are incorporated in the pro forma
condensed consolidated balance sheet at August 31, 1998 as a result of the
Rubicon acquisition:
Purchase price of outstanding shares $ 356,591
(c) The following pro forma adjustments are made to reflect estimated fair
value adjustments and to eliminate the investment in Rubicon:
Rubicon net assets - as reported $ 179,656
Fair value adjustments:
Record goodwill acquired 176,935
---------
Investment in Rubicon $ 356,591
=========
Because of the proximity of the transaction, the Company has not had adequate
time to complete its evaluation of the fair value of the net assets acquired in
the Rubicon transaction. As a result, no fair value adjustments have been
reflected in these pro forma statements.
Note 3 - 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, and the inability
to deduct certain amounts of intangible amortization for tax purposes.
9
SIGNATURE
Pursuant to the requirements 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.
Date: December 11, 1998 By: /s/ Robert C. Arzbaecher
-------------------------------
Robert C. Arzbaecher,
Senior Vice President and
Chief Financial Officer
10
APPLIED POWER INC.
(the "Registrant")
(Commission File No. 1-11288)
EXHIBIT INDEX
to
FORM 8-K CURRENT REPORT
Date of Report: September 29, 1998
Incorporated Herein Filed
Exhibit Description By Reference To Herewith
- -------- --------------------------------------- -------------------------------- -------------
4.1 Multicurrency Credit Agreement, Exhibit 4.4 to the
dated as of October 14, 1998, among Registrant's Form 10-K for
Applied Power Inc. and Enerpac B.V., the fiscal year ended August
as Borrowers, various financial 31, 1998
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
23 Consent of PricewaterhouseCoopers LLP X*
99.1 Consolidated balance sheet of X*
Rubicon Group plc and subsidiaries
as of May 31, 1998 and related
consolidated profit and loss
accounts, cash flow statement and
statement of recognised gains and
losses for the year ended May 31,
1998, and the notes thereto and the
auditors' report thereon,
incorporated by reference in Item
7(a) of this report.
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* Filed with Amendment No. 1.
11