Actuant Reports First Quarter Results

Actuant Reports First Quarter Results

MILWAUKEE--(BUSINESS WIRE)-- Actuant Corporation (NYS: ATU) today announced results for its first quarter ended November 30, 2012.


Highlights

  • Total sales declined 4% compared to the prior year with acquisitions contributing 4%, the weaker Euro a 1% headwind, and core sales down 7%.

  • Diluted earnings per share ("EPS") were $0.49, a 2% reduction compared to the prior year.

  • Operating profit margins were 13.6%, a 100 basis point reduction from the prior year due primarily to the impact of lower volumes, most notably in the Engineered Solutions segment.

  • Repurchased 0.3 million shares of common stock for $7 million in the quarter.

  • Introduced second quarter EPS guidance in the range of $0.34-0.38 per share.

Robert C. Arzbaecher, Chairman and CEO of Actuant commented, "Actuant's first quarter results reflect our customers' cautious approaches to spending and managing inventory levels in light of economic uncertainty. Despite the benefit of prior year acquisitions and continued core growth in both the Industrial and Energy segments, overall revenue declined. This was primarily the result of significant customer production declines across various OEM markets such as heavy-duty truck and off-highway equipment to reduce inventories, as well as weak solar sales in the Electrical segment. During the past ninety days, we initiated both temporary and structural cost reduction actions to allow us to continue to invest in long-term growth while protecting earnings in the current weak environment."

Consolidated Results

Consolidated sales for the first quarter were $377 million, 4% lower than the $393 million in the comparable prior year quarter. Core sales declined 7%; the weaker Euro reduced sales 1% while acquisitions contributed 4% to total sales. Fiscal 2013 first quarter net earnings and EPS were $36.3 million, or $0.49 per share, compared to $37.2 million and $0.50, respectively, in the comparable prior year quarter.

Segment Results

Industrial Segment
(US $ in millions)

Three Months Ended

November 30,

2012

2011

Sales

$101.1

$100.3

Operating Profit

$27.0

$27.9

Operating Profit %

26.7%

27.9%

First quarter fiscal 2013 Industrial segment sales were $101 million, 1% higher than the prior year. Excluding the 1% negative impact of foreign currency rate changes, core sales increased 2% driven by higher global Integrated Solutions activity and steady industrial demand in most regions outside of Western Europe. First quarter operating profit margin of 26.7% was in line with expectations as the benefit of higher volumes was more than offset by unfavorable mix and incremental Growth + Innovation (G+I) investments.

Energy Segment
(US $ in millions)

Three Months Ended

November 30,

2012

2011

Sales

$90.8

$80.4

Operating Profit

$15.4

$13.2

Operating Profit %

17.0%

16.4%

Fiscal 2013 first quarter year-over-year Energy segment sales increased 13% to $91 million. Excluding the 9% impact from acquisitions, core sales increased 4% from the prior year's strong levels. Hydratight experienced double digit core sales growth on the strength of continued robust maintenance spending in oil & gas, power generation, and other energy markets. Cortland core sales were down from the prior year, but are expected to rebound given the high order intake in the first quarter. Quoting activity and relatively stable energy prices continue to support demand across the Energy segment's served markets. First quarter operating profit margin increased 60 basis points from the prior year due primarily to favorable mix and volume leverage.

Electrical Segment
(US $ in millions)

Three Months Ended

November 30,

2012

2011

Sales

$69.4

$82.8

Operating Profit

$7.8

$5.0

Operating Profit %

11.3%

6.0%

Electrical segment fiscal 2013 first quarter sales were $69 million, 16% lower than the comparable prior year quarter. The 16% core sales decrease reflected significantly lower solar inverter shipments compared to the prior year due to the combination of weak current year demand and aggressive sales promotions in the prior year. In addition, the impact of channel inventory reductions across the segment's served North American markets, and lower industrial transformer demand contributed to the sales decline. First quarter operating profit margin increased 530 basis points from the prior year due to the benefit of prior year restructuring actions, as well as a fire related insurance recovery at Mastervolt.

Engineered Solutions Segment
(US $ in millions)

Three Months Ended

November 30,

2012

2011

Sales

$115.9

$129.3

Operating Profit

$7.6

$19.0

Operating Profit %

6.6%

14.7%

First quarter fiscal 2013 Engineered Solutions segment sales decreased 10% from the prior year to $116 million. Excluding the 8% impact from acquisitions and negative 1% impact from the weaker Euro, core sales declined 17%. First quarter sales reflect significantly lower OEM production levels for heavy-duty trucks, off-highway equipment and convertible autos, in part to reduce inventory levels. Demand in the global agriculture market moderated, partially reflecting the US drought impact on aftermarket sales. First quarter operating profit margin declined due to the lower volumes and restructuring actions taken in the segment.

Corporate and Income Taxes

Corporate expenses for the first quarter of fiscal 2013 were $6.5 million, $1.3 million below the comparable prior year period due primarily to lower incentive compensation. The effective income tax rate for the quarter was lower than the prior year due to the execution of certain tax reduction initiatives.

Financial Position

Net debt at November 30, 2012 was $328 million (total debt of $396 million less $68 million of cash), essentially unchanged from fiscal year end. Actuant's first quarter cash flow was impacted by the payment of fiscal 2012 incentive compensation and 401(k) company contributions, as well as an increase in primary working capital. Additionally, the Company deployed approximately $7 million for the repurchase of 0.3 million shares of common stock. At November 30, 2012, the Company had a net debt to EBITDA leverage ratio of 1.2, and its entire $600 million revolver available.

Outlook

Arzbaecher continued, "The economic picture remains cloudy as we start the second quarter of fiscal 2013. Our customers remain cautious with ordering patterns, and most OEMs are continuing to reduce inventory by ordering at a slower pace than their end market sell-through levels. Although these conditions make organic growth more challenging in the near-term, we remain focused on investing for long-term growth through both G+I and acquisitions, as well as managing our costs and maintaining a strong balance sheet.

While we are seeing indications that market conditions are firming up in some areas, volatility and uncertainty also persist. At this point, our full year EPS guidance remains unchanged, yet we believe that the probability of attaining the high end of the range is low if current economic conditions and uncertainty continue. We expect fiscal 2013 sales to be approximately $1.600-1.625 billion, with core sales for the year down 1-3%.

We expect second quarter fiscal 2013 sales in the $360-370 million range and EPS of $0.34-0.38. The second quarter historically represents the seasonally weakest quarter of the fiscal year, and we expect to see the continued impact of economic uncertainty including customer inventory reductions, most notably in the Engineered Solutions segment. However, we are forecasting year-over-year sales growth in both the Industrial and Energy segments.

Consistent with our normal practice, the guidance excludes the impact of any future acquisitions and share repurchases. With our projected $200 million of fiscal 2013 free cash flow and strong capital structure, we are well positioned financially to fund both growth investments and opportunistic share buy-backs.

In summary, we continue to expect a challenging first half of fiscal 2013, followed by modest growth in the second half of the year. We remain confident in the fundamental strength of the Actuant businesses, have the right long-term growth strategies in place, and the operating experience to manage through the current environment."

Conference Call Information

An investor conference call is scheduled for 10 am CT today, December 19, 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 serving customers from 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)

November 30,

August 31,

2012

2012

ASSETS

Current assets

Cash and cash equivalents

$

68,311

$

68,184

Accounts receivable, net

232,267

234,756

Inventories, net

225,084

211,690

Deferred income taxes

22,785

22,583

Other current assets

30,121

24,068

Total current assets

578,568

561,281

Property, plant and equipment, net

117,759

115,884

Goodwill

871,698

866,412

Other intangible assets, net

440,188

445,884

Other long-term assets

17,243

17,658

Total assets

$

2,025,456

$

2,007,119

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Trade accounts payable

$

164,665

$

174,746

Accrued compensation and benefits

43,696

58,817

Current maturities of debt

8,750

7,500

Income taxes payable

5,982

5,778

Other current liabilities

66,754

72,165

Total current liabilities

289,847

319,006

Long-term debt

387,500

390,000

Deferred income taxes

129,951

132,653

Pension and postretirement benefit accruals

26,233

26,442

Other long-term liabilities

89,927

87,182

Shareholders' equity

Capital stock

15,158

15,102

Additional paid-in capital

16,450

7,725

Treasury stock

(70,225

)

(63,083

)

Retained earnings

1,197,912

1,161,564

Accumulated other comprehensive loss

(57,297

)

(69,472

)

Stock held in trust

(2,340

)

(2,689

)

Deferred compensation liability

2,340

2,689

Total shareholders' equity

1,101,998

1,051,836

Total liabilities and shareholders' equity

$

2,025,456

$

2,007,119

Actuant Corporation

Condensed Consolidated Statements of Earnings

(Dollars in thousands except per share amounts)

(Unaudited)

Three Months Ended

November 30,

November 30,

2012

2011

Net sales

$

377,248

$

392,799

Cost of products sold

230,262

240,191

Gross profit

146,986

152,608

Selling, administrative and engineering expenses

87,830

88,109

Amortization of intangible assets

7,854

7,218

Operating profit

51,302

57,281

Financing costs, net

6,322

8,222

Other expense, net

364

657

Earnings before income tax expense

44,616

48,402

Income tax expense

8,273

11,228

Net earnings

$

36,343

$

37,174

Earnings per share

Basic

$

0.50

$

0.54

Diluted

0.49

0.50

Weighted average common shares outstanding

Basic

72,791

68,421

Diluted

74,271

75,142

Actuant Corporation

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

November 30,

November 30,

2012

2011

Operating Activities

Net earnings

$

36,343

$

37,174

Adjustments to reconcile net earnings to net cash provided by

operating activities:

Depreciation and amortization

14,449

13,540

Stock-based compensation expense

3,477

3,543

Benefit for deferred income taxes

(3,156

)

(950

)

Amortization of debt discount and debt issuance costs

496

497

Other non-cash adjustments

(177

)

58

Changes in components of working capital and other:

Accounts receivable

4,539

(9,597

)

Inventories

(11,318

)

(2,595

)

Prepaid expenses and other assets

(6,143

)

(825

)

Trade accounts payable

(11,548

)

(2,886

)

Income taxes payable

1,161

1,216

Accrued compensation and benefits

(13,953

)

(19,169

)

Other accrued liabilities

(1,895

)

469

Net cash provided by operating activities

12,275

20,475

Investing Activities

Proceeds from sale of property, plant and equipment

977

5,918

Capital expenditures

(7,689

)

(5,595

)

Business acquisitions, net of cash acquired

(83

)

(290

)

Net cash provided by (used in) investing activities

(6,795

)

33

Financing Activities

Net borrowings on revolving credit facilities and other debt

-

4,809

Principal repayments on term loan

(1,250

)