Actuant Reports Fourth Quarter and Full Year Fiscal 2012 Results

Actuant Reports Fourth Quarter and Full Year Fiscal 2012 Results

MILWAUKEE--(BUSINESS WIRE)-- Actuant Corporation (NYS: ATU) today announced results for its fourth quarter and fiscal year ended August 31, 2012.

Highlights

  • Fourth quarter diluted earnings per share ("EPS") of $0.55, an increase of 10% year-over-year. For the full year, EPS increased 24% to $2.08 from $1.68 in the prior year (all periods represent results from continuing operations, excluding special items - see attached reconciliation of earnings.)

  • Core sales growth of 3% and 5% for the fourth quarter and full year, respectively (total sales less the impact of acquisitions, divestitures and foreign currency rate changes) with solid growth in three of the four segments.

  • Year-over-year operating profit margin expansion (excluding the previously announced impairment charge) of 20 basis points for the fourth quarter and 110 basis points for the full year.

  • Cash flow from operations of $53 million for the fourth quarter and a record $182 million for fiscal 2012.

  • Completed the acquisition of CrossControl in the fourth quarter, improving the technology positioning of Maxima. Deployed a total of $70 million on three tuck-in acquisitions during fiscal 2012.

  • Repurchased 2.7 million common shares in fiscal 2012 for $63 million including 0.9 million shares for $24 million in the fourth quarter.

  • Updated full year fiscal 2013 guidance with revised sales and EPS ranges of $1.68-1.72 billion and $2.20-2.30, respectively, excluding the impact of future acquisitions and potential share repurchases.


Robert C. Arzbaecher, Chairman and CEO of Actuant commented, "We closed out fiscal 2012 with fourth quarter results at the high end of our expectations, excluding the impairment charge. As anticipated, core sales growth moderated but was positive in the majority of the portfolio. We successfully converted on this sales growth and achieved a 10% increase in EPS despite the toughest comparables of the year from a foreign currency perspective. Our cash flow was outstanding and helped drive free cash flow to net income conversion in excess of 100% for the 12th consecutive year."

Consolidated Results

Consolidated sales for the fourth quarter were $405 million compared to $403 million in the comparable prior year quarter. Core sales increased 3% with acquisitions contributing 2%, offset by the negative 5% impact of the weaker Euro. The fiscal 2012 fourth quarter net loss from continuing operations was $16.5 million, or $0.23 per share compared to net earnings and EPS from continuing operations of $37.3 million and $0.50, respectively, in the comparable prior year quarter. The current year quarter included the previously announced $62.5 million pre-tax ($0.77 per diluted share after tax) non-cash asset impairment charge related to the Mastervolt business. Excluding this charge, fiscal 2012 fourth quarter EPS from continuing operations of $0.55 was 10% higher than the $0.50 in the prior year quarter. (See attached reconciliation of earnings.)

Sales for the year ended August 31, 2012 were $1.61 billion, 11% higher than the $1.45 billion in the prior year. Excluding the 8% impact from acquisitions and negative 2% impact of the weaker Euro, full year core sales increased 5%. Earnings and EPS from continuing operations for the year ended August 31, 2012 were $87.3 million and $1.17, respectively, compared to $124.5 million and $1.68 in the prior year. Fiscal 2012 results include pre-tax debt refinancing costs of $16.8 million, or $0.15 per diluted share after tax and a non-cash asset impairment charge of $62.5 million pre-tax, or $0.76 per diluted share after tax. Excluding these costs, fiscal 2012 EPS from continuing operations of $2.08 was 24% higher than the $1.68 in the prior year. (See attached reconciliation of earnings.)

Commenting on the full year results, Arzbaecher stated, "Fiscal 2012 results illustrate the benefit of Actuant's diversity and growth oriented business model. We delivered core sales growth for the year of 5% and deployed $70 million in tuck-in acquisitions with a focus on higher growth markets. Adjusted operating profit improved 110 basis points, despite incremental investment in our Growth + Innovation ("G+I") initiatives. We generated 24% EPS growth, excluding special items, well above our initial 2012 guidance. This was accomplished through a combination of improved sales and operating performance, a stronger capital structure with lower interest expense and outstanding shares, and the benefit of tuck-in acquisitions. This in turn drove record free cash flow and reduced Actuant's debt to EBITDA leverage to the lowest level in our history. These record results are a testament to the consistent execution of our proven business model and I want to thank Actuant employees across the organization for their efforts in achieving this strong performance."

Segment Results

Industrial Segment

(US $ in millions)

Three Months Ended August 31,

Year Ended August 31,

2012

2011

2012

2011

Sales

$110.6

$108.9

$419.3

$393.0

Operating Profit

$29.5

$28.6

$114.8

$98.4

Operating Profit %

26.6%

26.2%

27.4%

25.0%

Fourth quarter fiscal 2012 Industrial segment sales were $111 million, 2% higher than the prior year. Excluding the 5% negative impact of foreign currency rate changes, core sales increased 7% over the prior year. The improvement was driven by generally strong industrial tool demand in North America. Continued execution on G+I initiatives and vertical market strategies, along with solid Integrated Solutions demand, also contributed to the growth. Year-over-year operating profit margins in the fourth quarter improved 40 basis points due primarily to the higher volumes, partially offset by incremental G+I investments and unfavorable mix.

Energy Segment

(US $ in millions)

Three Months Ended August 31,

Year Ended August 31,

2012

2011

2012

2011

Sales

$93.4

$82.7

$349.2

$293.1

Operating Profit

$18.8

$17.2

$62.2

$49.3

Operating Profit %

20.2%

20.7%

17.8%

16.8%

Fiscal 2012 fourth quarter year-over-year Energy segment sales increased 13% to $93 million. Excluding the 4% impact from acquisitions and negative 5% impact from foreign currency rate changes, core sales increased 14% from the prior year's robust levels. Maintenance spending in oil & gas, power generation, refinery and petrochemical markets, along with higher industry-wide capital expenditures on offshore energy development, were the primary growth drivers. Quoting activity and current oil prices continue to support strong demand across the Energy segment's served markets. Fourth quarter operating profit margin was the highest of the year, but declined 50 basis points from the prior year due to unfavorable mix and increased G+I spending.

Electrical Segment

(US $ in millions)

Three Months Ended August 31,

Year Ended August 31,

2012

2011

2012

2011

Sales

$82.9

$80.1

$328.8

$286.0

Operating (Loss) Profit

($54.2)

$6.5

($34.6)

$20.7

Adj. Operating Profit (1)

$8.3

$6.5

$27.9

$20.7

Adj. Operating Profit % (1)

10.0%

8.1%

8.5%

7.2%

(1) Excludes fourth quarter fiscal 2012 non-cash asset impairment charge of $62.5 million.

Electrical segment fiscal 2012 fourth quarter sales were $83 million, 4% higher than the comparable prior year quarter. Core sales increased 7%, while the impact of the weaker Euro was a 3% headwind. The core sales growth was broad based and reflected higher volumes in the solar, industrial, retail and marine aftermarket channels. The marine OEM market, most notably in Europe, was weaker than the prior year. Fourth quarter adjusted operating profit margin increased 190 basis points from the prior year due to the higher volumes and improved Mastervolt profitability, which more than offset restructuring costs in the quarter.

Engineered Solutions Segment

(US $ in millions)

Three Months Ended August 31,

Year Ended August 31,

2012

2011

2012

2011

Sales

$118.4

$131.7

$508.1

$473.2

Operating Profit

$10.1

$16.4

$60.9

$63.6

Operating Profit %

8.5%

12.5%

12.0%

13.4%

Fourth quarter fiscal 2012 Engineered Solutions segment sales decreased 10% from the prior year to $118 million. Excluding the 5% impact from acquisitions and negative 5% impact from foreign currency rate changes, core sales declined 14%. Fourth quarter sales reflected lower OEM production levels for heavy-duty trucks in China and Europe as well as a significant decline in automotive sales. Demand in the global agriculture and other off-highway equipment markets, as well as the North American heavy-duty truck market, moderated from recent quarters. Fourth quarter operating profit margin declined 400 basis points from the prior year due to the lower volumes.

Corporate

Corporate expenses for the fourth quarter of fiscal 2012 were $8.7 million, $3.0 million below the comparable prior year period as lower incentive compensation, idle facility and acquisition related costs was partially offset by increased G+I spending at the corporate level.

Financial Position

Net debt at August 31, 2012 was $329 million (total debt of $397 million less $68 million of cash), an increase of approximately $10 million during the quarter. During the fourth quarter the Company deployed approximately $40 million of cash for the CrossControl acquisition and $24 million in stock repurchases (buy-back of approximately 0.9 million shares of common stock) which more than offset the strong fourth quarter operating cash flow. At August 31, 2012, the Company had a net debt to EBITDA leverage ratio of 1.1 times, and its entire $600 million revolver available.

Outlook

Arzbaecher continued, "Our outlook for fiscal 2013 assumes that the global economy and worldwide industrial activity continue to reflect uncertainty, with moderating growth in the US and weakness in Europe and emerging markets. We anticipate fiscal 2013 core sales growth of 3-5%, outpacing underlying GDP in the economies we serve due to our diverse portfolio and company-specific growth initiatives. We expect total sales of $1.68-1.72 billion, taking into account an average US dollar to Euro exchange rate of 1.25 and carryover acquisition revenue of approximately $50 million. On a year-over-year basis, the higher volumes coupled with operational excellence initiatives, lower interest costs and completed share repurchases should result in fiscal 2013 EPS of $2.20-2.30, compared to our previous guidance of $2.15-2.30. We expect full year free cash flow of approximately $200 million.

We expect first quarter fiscal 2013 sales in the $390-395 million range and EPS of $0.48-0.52. Results in the first fiscal quarter reflect the toughest comparables of the fiscal year for both foreign currency and core growth, and include the impact of lower anticipated production schedules at certain customers served by the Engineered Solutions segment.

Our guidance excludes the impact of any future acquisitions and share repurchases, as the timing and investment levels are unknown. However, the acquisition pipeline is robust and, with our strong cash flow and capital structure, we are well positioned financially to fund both growth investments and opportunistic share buy-backs.

In summary, we are targeting record sales, earnings and cash flow in fiscal 2013, reflecting the benefit of our diverse business portfolio, demonstrated operational capabilities and a focus on our G+I initiatives. We believe ongoing execution of our proven business model will enable Actuant to continue to create shareholder value."

Conference Call Information

An investor conference call is scheduled for 10am CDT today, September 27, 2012. Webcast information and conference call materials will be made available on the Actuant company website (www.actuant.com) prior to the start of the call.

Safe Harbor Statement

Certain of the above comments represent forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Management cautions that these statements are based on current estimates of future performance and are highly dependent upon a variety of factors, which could cause actual results to differ from these estimates. Actuant's results are also subject to general economic conditions, variation in demand from customers, the impact of geopolitical activity on the economy, continued market acceptance of the Company's new product introductions, the successful integration of acquisitions, restructuring, operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material and labor cost increases, foreign currency fluctuations and interest rate risk. See the Company's Form 10-K filed with the Securities and Exchange Commission for further information regarding risk factors. Actuant disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

About Actuant Corporation

Actuant Corporation is a diversified industrial company with operations in more than 30 countries. The Actuant businesses are leaders in a broad array of niche markets including branded hydraulic and electrical tools and supplies; specialized products and services for energy markets and highly engineered position and motion control systems. The Company was founded in 1910 and is headquartered in Menomonee Falls, Wisconsin. Actuant trades on the NYSE under the symbol ATU. For further information on Actuant and its businesses, visit the Company's website at www.actuant.com.

(tables follow)

Actuant Corporation

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

August 31,

August 31,

2012

2011

ASSETS

Current assets

Cash and cash equivalents

$

68,184

$

44,221

Accounts receivable, net

234,756

223,760

Inventories, net

211,690

223,235

Deferred income taxes

22,583

34,830

Other current assets

24,068

22,807

Total current assets

561,281

548,853

Property, plant and equipment, net

115,884

128,649

Goodwill

866,412

888,466

Other intangible assets, net

445,884

479,406

Other long-term assets

17,658

17,843

Total assets

$

2,007,119

$

2,063,217

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Trade accounts payable

$

174,746

$

170,084

Accrued compensation and benefits

58,817

71,639

Short term borrowings and current maturities of debt

7,500

2,690

Income taxes payable

5,778

19,342

Other current liabilities

72,165

66,770

Total current liabilities

319,006

330,525

Long-term debt

390,000

522,727

Deferred income taxes

132,653

172,259

Pension and postretirement benefit accruals

26,442

18,864

Other long-term liabilities

87,182

99,829

Shareholders' equity

Capital stock

15,102

13,731

Additional paid-in capital

7,725

(154,231

)

Treasury stock

(63,083

)

-

Retained earnings

1,161,564

1,077,192

Accumulated other comprehensive loss

(69,472

)

(17,679

)

Stock held in trust

(2,689

)

(2,137

)

Deferred compensation liability

2,689

2,137

Total shareholders' equity

1,051,836

919,013

Total liabilities and shareholders' equity

$

2,007,119

$

2,063,217

Actuant Corporation

Condensed Consolidated Statements of Operations

(Dollars in thousands except per share amounts)

(Unaudited)

Three Months Ended

Twelve Months Ended

August 31,

August 31,

August 31,

August 31,

2012

2011

2012

2011

Net sales

$

405,304

$

403,436

$

1,605,342

$

1,445,323

Cost of products sold

247,953

248,455

987,971

889,424

Gross profit

157,351

154,981

617,371

555,899

Selling, administrative and engineering expenses

91,756

90,409

355,691

334,862

Impairment charge

62,464

-

62,464

-

Amortization of intangible assets

7,590

7,621

29,274

27,467

Operating profit (loss)

(4,459

)

56,951

169,942

193,570

Financing costs, net

6,281

8,479

29,560

32,119

Debt refinancing charges

-

-

16,830

-

Other expense, net

148

968

3,238

2,244

Earnings (loss) from continuing operations before income tax expense

(10,888

)

47,504

120,314

159,207

Income tax expense

5,572

10,171

33,024

34,711

Earnings (loss) from continuing operations

(16,460

)

37,333

87,290

124,496

Income (loss) from discontinued operations, net of income taxes

-

4,049

-

(12,937

)

Net earnings (loss)

$

(16,460

)

$

41,382

$

87,290

$

111,559

Earnings (loss) from continuing operations per share

Basic

$

(0.23

)

$

0.55

$

1.25