ATU Actuant Corp

Actuant Corporation (NYSE: ATU) today announced results for its first quarter ended November 30, 2014.

Highlights

• Total sales declined 3% compared to the prior year with core sales down 1% (total sales excluding the impact of acquisitions, divestitures and foreign exchange rates). Net acquisitions and divestitures were neutral while unfavorable foreign exchange rate changes were 2%.
• Diluted earnings per share from continuing operations (“EPS”) were $0.38, compared to $0.44 in the prior year. Fiscal 2015 first quarter EPS was impacted by the stronger US Dollar, a higher effective income tax rate ($0.08) and an unfavorable litigation charge ($0.02).
• Repurchased 3.3 million shares of common stock for $104 million in the quarter.
• Updated the full year sales and EPS guidance, now expected to be in the range of $1.33-1.37 billion and $1.85-2.00 per share, respectively.

Mark E. Goldstein, President and CEO of Actuant commented, “Our first quarter results included solid performance from the Energy segment, especially from Viking which posted its best quarter under Actuant ownership. Conditions in oil & gas markets have deteriorated in the last 60 days, but did not significantly impact our Energy segment in the quarter. Offsetting the strong Energy segment results were sluggish demand in other markets and foreign currency headwinds. We expected difficult comparisons in the Engineered Solutions segment with the prior year’s European truck pre-buy, but demand in most other markets in the Industrial and Engineered Solutions segments didn’t improve. Cash flow in the first quarter reflected normal seasonal weakness, as well as tax payments on fiscal 2014 business divestitures and increased working capital. We used our liquidity to return over $100 million to shareholders in the first quarter in the form of stock buy-backs and our annual cash dividend. Our strong financial position continues to provide great flexibility for Actuant.”

Consolidated Results

Continuing Operations

Consolidated sales for the first quarter were $328 million, 3% lower than the $340 million in the comparable prior year quarter. Core sales declined 1%, foreign currency rate changes reduced sales 2%, while the impact of acquisitions and divestitures on sales offset one another. Fiscal 2015 first quarter net earnings and EPS from continuing operations were $24.7 million, or $0.38 per share, compared to $33.0 million and $0.44, respectively, in the comparable prior year quarter.

Excluding the impact of the stronger US Dollar, a higher effective income tax rate in fiscal 2015 and the litigation charge, first quarter EPS grew year-over-year, primarily reflecting the benefit of share repurchases.

 

Segment Results

  Industrial Segment

(US $ in millions)

  Three Months Ended November 30, 2014   2013 Sales $102.4 $98.6 Operating Profit $26.7 $26.9 Operating Profit % 26.1% 27.3%  

First quarter fiscal 2015 Industrial segment sales were $102 million, 4% higher than the prior year. The Hayes Industries acquisition contributed 8% to total sales growth while unfavorable currency translation was a 3% headwind, resulting in a 1% core sales decline. Lower activity levels in global Integrated Solutions drove the year-over-year decline as customers continue to be very cautious launching major projects due to economic uncertainty. Industrial Tool demand continued its uneven pattern with sales up modestly, led by the Asia Pacific region. First quarter operating profit margin of 26.1% was in line with expectations, and 120 basis points below the comparable prior year period due to acquisition mix.

  Energy Segment

(US $ in millions)

  Three Months Ended November 30, 2014   2013 Sales $111.5 $107.9 Operating Profit $12.4 $8.9 Operating Profit % 11.2% 8.3%  

Fiscal 2015 first quarter year-over-year Energy segment sales increased 3% to $112 million. Excluding the unfavorable 3% foreign currency headwind, core sales increased 6% from the prior year. Viking revenues increased strongly on higher activity levels in Australia/Southeast Asia, despite slower North Sea activity. Hydratight’s core sales increased as well, due to higher maintenance activity globally, most notably in North America and AsiaPac. Cortland’s core sales declined due to lower seismic demand and difficult comparisons in the marine market. First quarter operating profit margin improved significantly due to the collective impact of higher sales, favorable mix, and lower retention contract amortization at Viking.

Due to the approximate 35% decline in oil prices over the past 90 days, conditions in the oil & gas markets globally are changing rapidly. Results in the first quarter reflected little of these decelerating market conditions. However, the Company’s revised guidance reflects lowered expectations for the segment given the anticipated impact of reduced customer capital spending on the Cortland and Viking businesses. The Hydratight business is expected to be the least impacted due to its maintenance focus and broader energy market diversification.

  Engineered Solutions Segment

(US $ in millions)

  Three Months Ended November 30, 2014   2013 Sales $113.8 $133.0 Operating Profit $6.3 $13.2 Operating Profit % 5.5% 9.9%  

First quarter fiscal 2015 Engineered Solutions segment sales were $114 million, 14% below the prior year. Excluding the 5% decline from the RV product line divestiture and 2% decrease from the stronger US Dollar, core sales were 7% lower year-over-year. First quarter sales reflect a difficult comparison from last year’s strong European heavy-duty truck production in advance of the Euro 6 emissions standards change. In addition, sales in the convertible auto and off-highway equipment markets declined year-over-year. Agriculture sales also weakened modestly, the result of lower crop prices. First quarter operating profit margin declined due to the lower sales and significantly reduced absorption on the lower production volumes.

Corporate and Income Taxes

Corporate expenses for the first quarter of fiscal 2015 were $7.2 million, $1.8 million higher than the comparable prior year period due to an unfavorable pre-tax litigation charge of $2.0 million. The effective income tax rate of 24% for the quarter was higher than the Company’s guidance, and significantly higher than the approximately 8% rate in the prior year, which included the benefit of certain tax reduction initiatives.

Financial Position

Net debt at November 30, 2014 was $427 million (total debt of $514 million less $87 million of cash), approximately $146 million higher than fiscal year end. During the quarter, approximately $104 million of cash was used to repurchase 3.3 million shares of common stock. Cash taxes related to the RV divestiture, increased working capital, and unfavorable foreign currency movements also impacted the net debt position. At November 30, 2014, the Company had a net debt to EBITDA leverage ratio of 1.8, and nearly $475 million in revolver availability.

Outlook

Goldstein continued, "We are beginning to see the increased impact of the recent sharp decline in oil prices on order patterns and pricing within our oil & gas markets, both within the Energy and Industrial segments. We also are experiencing sluggish demand in certain of our other markets, notably off-highway equipment and agriculture. The US Dollar has also strengthened resulting in further headwinds. We expect these trends to continue for the near future, and are therefore lowering full year sales and earnings expectations. We are aggressively managing our cost structure to help mitigate the impact of these factors. Partially offsetting these is a lower share count due to 3.9 million of completed share repurchases on a fiscal year-to-date basis, which should benefit full year EPS by $0.05. Taking all of this into consideration, we now expect full year fiscal 2015 sales to be approximately $1.33-1.37 billion, with core sales growth of -1 to +2% for the year. EPS is expected to be in the range of $1.85-2.00. We expect free cash flow of approximately $150 million in fiscal 2015.

We continue to believe that over the long term, worldwide demand for energy will be strong and our niche leadership positions, predominately in maintenance related products and services, offer attractive growth potential. In addition, we remain focused on investing for growth through both Growth + Innovation (G+I) and acquisitions.

We expect second quarter sales to be in the $310-320 million range, with EPS of $0.25-0.30. In addition to the more challenging economic and currency environment, the second quarter outlook incorporates the normal seasonal slowdown experienced across nearly all of our businesses.

Consistent with past practice, all guidance excludes the impact of potential future acquisitions and additional share repurchases. With our solid balance sheet and expected free cash flow, we are well positioned financially to fund both growth investments and opportunistic share buy-backs."

Conference Call Information

An investor conference call is scheduled for 10am CT today, December 18, 2014. 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 tools and solutions; 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.

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Actuant Corporation

Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited)           November 30, August 31, 2014 2014   ASSETS Current assets Cash and cash equivalents $ 87,275 $ 109,012 Accounts receivable, net 221,719 227,008 Inventories, net 164,517 162,620 Deferred income taxes 10,384 11,050 Other current assets   40,453     33,300   Total current assets 524,348 542,990   Property, plant and equipment, net 163,915 169,101 Goodwill 714,956 742,770 Other intangible assets, net 346,214 365,177 Other long-term assets   38,031     36,841     Total assets $ 1,787,464   $ 1,856,879       LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade accounts payable $ 135,095 $ 145,798 Accrued compensation and benefits 42,408 52,964 Current maturities of debt and short-term borrowings 7,619 4,500 Income taxes payable 9,664 38,347 Other current liabilities   58,594     57,512   Total current liabilities 253,380 299,121   Long-term debt 506,250 385,500 Deferred income taxes 92,699 96,970 Pension and postretirement benefit accruals 14,558 15,699 Other long-term liabilities   58,843     57,878   Total liabilities 925,730 855,168   Shareholders' equity Capital stock 15,715 15,695 Additional paid-in capital 96,099 93,449 Treasury stock (493,042 ) (388,627 ) Retained earnings 1,374,333 1,349,602 Accumulated other comprehensive loss (131,371 ) (68,408 ) Stock held in trust (4,153 ) (4,083 ) Deferred compensation liability   4,153     4,083   Total shareholders' equity   861,734     1,001,711     Total liabilities and shareholders' equity $ 1,787,464   $ 1,856,879     Actuant Corporation Condensed Consolidated Statements of Earnings (Dollars in thousands except per share amounts) (Unaudited)       Three Months Ended November 30, November 30, 2014   2013   Net sales $ 327,765 $ 339,556 Cost of products sold   200,789       207,776 Gross profit 126,976 131,780   Selling, administrative and engineering expenses 82,472 81,918 Amortization of intangible assets   6,286       6,215 Operating profit 38,218 43,647   Financing costs, net 6,191 6,750 Other (income) expense, net   (439 )     1,141 Earnings from continuing operations before income tax expense 32,466 35,756   Income tax expense   7,792       2,751 Earnings from continuing operations 24,674 33,005 Earnings from discontinued operations, net of income taxes   -       3,032 Net earnings $ 24,674     $ 36,037   Earnings from continuing operations per share Basic $ 0.38 $ 0.45 Diluted 0.38 0.44   Earnings per share Basic $ 0.38 $ 0.49 Diluted 0.38 0.48   Weighted average common shares outstanding Basic 64,357 73,085 Diluted 65,599 75,011   Actuant Corporation Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)     Three Months Ended November 30, November 30, 2014 2013   Operating Activities Net earnings $ 24,674 $ 36,037 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 13,708 16,204 Stock-based compensation expense 3,546 4,103 Benefit for deferred income taxes (1,352 ) (8,408 ) Amortization of debt discount and debt issuance costs 423 560 Other non-cash adjustments 146 (867 ) Changes in components of working capital and other: Accounts receivable (3,629 ) 7,040 Inventories (6,500 ) (11,634 ) Prepaid expenses and other assets (10,698 ) (3,049 ) Trade accounts payable (7,398 ) 2,560 Income taxes payable (28,007 ) (3,189 ) Accrued compensation and benefits (9,963 ) (2,595 ) Other accrued liabilities   (68 )   (3,816 ) Cash (used in) provided by operating activities (25,118 ) 32,946   Investing Activities Proceeds from sale of property, plant and equipment 225 1,913 Capital expenditures   (7,986 )   (11,257 ) Cash used in investing activities (7,761 ) (9,344 )   Financing Activities Net borrowings (repayments) on revolving credit facilities and other debt 123,869 (12,000 ) Purchase of treasury shares (104,415 ) (15,352 ) Payment of contingent acquisition consideration - (414 ) Stock option exercises and related tax benefits 2,287 10,562 Cash dividend   (2,598 )   (2,919 ) Cash provided by (used in) financing activities 19,143 (20,123 )   Effect of exchange rate changes on cash   (8,001 )   2,077   Net (decrease) increase in cash and cash equivalents (21,737 ) 5,556 Cash and cash equivalents - beginning of period   109,012     103,986   Cash and cash equivalents - end of period $ 87,275   $ 109,542     ACTUANT CORPORATION SUPPLEMENTAL UNAUDITED DATA FROM CONTINUING OPERATIONS   (Dollars in thousands)         FISCAL 2014 FISCAL 2015 Q1 Q2 Q3 Q4 TOTAL Q1 Q2   Q3   Q4 TOTAL SALES INDUSTRIAL SEGMENT $ 98,641 $ 93,571 $ 109,809 $ 111,880 $ 413,901 $ 102,413 $ 102,413 ENERGY SEGMENT 107,925 106,031 125,231 123,181 462,368 111,522 111,522 ENGINEERED SOLUTIONS SEGMENT   132,990     128,168     143,147     119,288     523,593     113,830               113,830   TOTAL $ 339,556   $ 327,770   $ 378,187   $ 354,349   $ 1,399,862   $ 327,765             $ 327,765     % SALES GROWTH INDUSTRIAL SEGMENT -2 % -5 % -1 % 1 % -2 % 4 % 4 % ENERGY SEGMENT 19 % 31 % 26 % 33 % 27 % 3 % 3 % ENGINEERED SOLUTIONS SEGMENT 15 % 6 % 7 % -3 % 6 % -14 % -14 % TOTAL 10 % 9 % 10 % 8 % 9 % -3 % -3 %   OPERATING PROFIT (LOSS) INDUSTRIAL SEGMENT $ 26,897 $ 26,477 $ 34,123 $ 32,752 $ 120,249 $ 26,705 $ 26,705 ENERGY SEGMENT 8,923 9,504 19,936 18,049 56,412 12,442 12,442 ENGINEERED SOLUTIONS SEGMENT 13,190 9,548 13,560 5,638 41,936 6,278 6,278 CORPORATE / GENERAL   (5,363 )   (6,548 )   (8,839 )   (8,234 )   (28,984 )   (7,207 )             (7,207 ) TOTAL - EXCLUDING GAIN ON PRODUCT LINE DIVESTITURE $ 43,647 $ 38,981 $ 58,780 $ 48,205 $ 189,613 $ 38,218 $ 38,218 GAIN ON PRODUCT LINE DIVESTITURE   -     -     -     13,495     13,495     -               -   TOTAL $ 43,647   $ 38,981   $ 58,780   $ 61,700   $ 203,108   $ 38,218             $ 38,218     OPERATING PROFIT % INDUSTRIAL SEGMENT 27.3 % 28.3 % 31.1 % 29.3 % 29.1 % 26.1 % 26.1 % ENERGY SEGMENT 8.3 % 9.0 % 15.9 % 14.7 % 12.2 % 11.2 % 11.2 % ENGINEERED SOLUTIONS SEGMENT 9.9 % 7.4 % 9.5 % 4.7 % 8.0 % 5.5 % 5.5 %

TOTAL (INCLUDING CORPORATE) - EXCLUDING GAIN ONPRODUCT LINE DIVESTITURE

12.9 % 11.9 % 15.5 % 13.6 % 13.5 % 11.7 % 11.7 %   EBITDA INDUSTRIAL SEGMENT $ 28,657 $ 27,907 $ 35,426 $ 35,017 $ 127,007 $ 28,715 $ 28,715 ENERGY SEGMENT 17,923 18,130 27,898 24,809 88,760 20,011 20,011 ENGINEERED SOLUTIONS SEGMENT 17,365 13,581 18,464 9,046 58,456 11,514 11,514 CORPORATE / GENERAL   (5,235 )   (6,202 )   (8,659 )   (7,916 )   (28,012 )   (7,875 )             (7,875 ) TOTAL - EXCLUDING GAIN ON PRODUCT LINE DIVESTITURE $ 58,710 $ 53,416 $ 73,129 $ 60,956 $ 246,211 $ 52,365 $ 52,365 GAIN ON PRODUCT LINE DIVESTITURE   -     -     -     13,495     13,495     -               -   TOTAL $ 58,710   $ 53,416   $ 73,129   $ 74,451   $ 259,706   $ 52,365             $ 52,365     EBITDA % INDUSTRIAL SEGMENT 29.1 % 29.8 % 32.3 % 31.3 % 30.7 % 28.0 % 28.0 % ENERGY SEGMENT 16.6 % 17.1 % 22.3 % 20.1 % 19.2 % 17.9 % 17.9 % ENGINEERED SOLUTIONS SEGMENT 13.1 % 10.6 % 12.9 % 7.6 % 11.2 % 10.1 % 10.1 %

TOTAL (INCLUDING CORPORATE) - EXCLUDING GAIN ONPRODUCT LINE DIVESTITURE

17.3 % 16.3 % 19.3 % 17.2 % 17.6 % 16.0 % 16.0 %   ACTUANT CORPORATION SUPPLEMENTAL UNAUDITED DATA RECONCILIATION OF GAAP MEASURE TO NON-GAAP MEASURES   (Dollars in thousands, except for per share amounts)               FISCAL 2014 FISCAL 2015 Q1 Q2 Q3 Q4 TOTAL Q1 Q2   Q3   Q4 TOTAL EARNINGS BEFORE SPECIAL ITEMS (1) NET EARNINGS $ 36,037 $ 41,392 $ 50,557 $ 35,587 $ 163,573 $ 24,674 $ 24,674 EARNINGS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX   (3,032 )   (19,088 )   -   -     (22,120 )   -             - EARNINGS FROM CONTINUING OPERATIONS 33,005 22,304 50,557 35,587 141,453 24,674 24,674 GAIN ON PRODUCT LINE DIVESTITURE, NET OF INCOME TAX   -     -     -   (2,813 )   (2,813 )   -             - TOTAL $ 33,005   $ 22,304   $ 50,557 $ 32,774   $ 138,640   $ 24,674           $ 24,674   DILUTED EARNINGS PER SHARE, BEFORE SPECIAL ITEMS (1) NET EARNINGS $ 0.48 $ 0.56 $ 0.70 $ 0.51 $ 2.26 $ 0.38 $ 0.38 EARNINGS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX   (0.04 )   (0.26 )   -   -     (0.31 )   -             - EARNINGS FROM CONTINUING OPERATIONS 0.44 0.30 0.70 0.51 1.95 0.38 0.38 GAIN ON PRODUCT LINE DIVESTITURE, NET OF INCOME TAX   -     -     -   (0.04 )   (0.04 )   -             - TOTAL $ 0.44   $ 0.30   $ 0.70 $ 0.47   $ 1.91   $ 0.38           $ 0.38     EBITDA (2) NET EARNINGS (GAAP MEASURE) $ 36,037 $ 41,392 $ 50,557 $ 35,587 $ 163,573 $ 24,674 $ 24,674 EARNINGS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX   (3,032 )   (19,088 )   -   -     (22,120 )   -             - EARNINGS FROM CONTINUING OPERATIONS 33,005 22,304 50,557 35,587 141,453 24,674 24,674 FINANCING COSTS, NET 6,750 6,262 5,932 6,101 25,045 6,191 6,191 INCOME TAX EXPENSE 2,751 9,089 1,671 19,062 32,573 7,792 7,792 DEPRECIATION & AMORTIZATION   16,204     15,761     14,969   13,701     60,635     13,708             13,708

EBITDA - EXCLUDING DISCONTINUEDOPERATIONS (NON-GAAP MEASURE)

$ 58,710 $ 53,416 $ 73,129 $ 74,451 $ 259,706 $ 52,365 $ 52,365 GAIN ON PRODUCT LINE DIVESTITURE   -     -     -   (13,495 )   (13,495 )   -             -

EBITDA - EXCLUDING GAIN ON PRODUCT LINEDIVESTITURE (NON-GAAP MEASURE)

$ 58,710   $ 53,416   $ 73,129 $ 60,956   $ 246,211   $ 52,365           $ 52,365  

FOOTNOTES

NOTE: The total of the individual quarters may not equal the annual total due to rounding.

1. Earnings and diluted earnings per share, excluding special items (discontinued operations and gain on product line divestiture), represent net earnings and diluted earnings per share per the Condensed Consolidated Statements of Earnings net of charges or credits for items to be highlighted for comparability purposes. These measures should not be considered as an alternative to net earnings or diluted earnings per share as an indicator of the Company's operating performance. However, this presentation is important to investors for understanding the operating results of the current portfolio of Actuant companies. The total of the individual components may not equal due to rounding.
2. EBITDA represents net earnings before financing costs, net, income tax expense, discontinued operations and depreciation & amortization. EBITDA is not a calculation based upon generally accepted accounting principles (GAAP). The amounts included in the EBITDA calculation, however, are derived from amounts included in the Condensed Consolidated Statements of Earnings data. EBITDA should not be considered as an alternative to net earnings or operating profit as an indicator of the Company's operating performance, or as an alternative to operating cash flows as a measure of liquidity. Actuant has presented EBITDA because it regularly reviews this as a measure of the Company's ability to incur and service debt. In addition, EBITDA is used by many of our investors and lenders, and is presented as a convenience to them. However, the EBITDA measure presented may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation.

Actuant CorporationKaren Bauer, 262-293-1562Communications & Investor Relations Leader