Actuant (ATU)

Q1 2012 Earnings Call

December 21, 2011 11:00 am ET


Andrew G. Lampereur - Chief Financial Officer and Executive Vice President

Robert C. Arzbaecher - Chairman, Chief Executive Officer and President

Karen Bauer - Director of Investor Relations

Mark E. Goldstein - Chief Operating Officer and Executive Vice President


Robert F. McCarthy - Robert W. Baird & Co. Incorporated, Research Division

Jamie Sullivan - RBC Capital Markets, LLC, Research Division

Andrew Obin - BofA Merrill Lynch, Research Division

R. Scott Graham - Jefferies & Company, Inc., Research Division

Jeffrey D. Hammond - KeyBanc Capital Markets Inc., Research Division

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

Charles D. Brady - BMO Capital Markets U.S.

James Bank

Robert Barry - UBS Investment Bank, Research Division

James C. Lucas - Janney Montgomery Scott LLC, Research Division

Ann P. Duignan - JP Morgan Chase & Co, Research Division



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Ladies and gentlemen, thank you for standing by. Welcome to the Actuant Corporation Quarter Earnings Conference Call. Today's participants are Bob Arzbaecher, President and Chief Executive Officer; Andy Lampereur, Executive Vice President and Chief Financial Officer; Karen Bauer, Communications and Investor Relations leader.

As a reminder, this call contains forward-looking statements that are subject to the Safe Harbor language in Actuant's press release issued today in Actuant's filings with the SEC. We are conducting a live meeting to coincide with the audio conference. If you would like to view the presentation online, please refer to your meeting invitation for details. As a reminder, this conference is being recorded Wednesday, December 21, 2011.

It is now my pleasure to turn the conference over to Mr. Arzbaecher. Please go ahead, sir.

Karen Bauer

Hi. It's actually Karen Bauer. Good morning, and welcome to our First Quarter Fiscal 2012 Conference Call. On the call with me today are Bob Arzbaecher, our Chief Executive Officer; Mark Goldstein, Chief Operating Officer; and Andy Lampereur, Chief Financial Officer.

I'd like to point out that our earnings release and the slide presentation supplementing today's call are available in the Investors section of our website.

And before we start, let me offer the following cautionary notes. During this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Investors are cautioned that forward-looking statements are inherently uncertain, and that there are a number of factors that could cause actual results to differ materially from these statements, and these factors are outlined in our SEC filings.

[Operator Instructions] And with that, I'll turn the call over to Bob.

Robert C. Arzbaecher

Thank you, Karen. Good morning, everybody, and thank you for joining us on our first quarter earnings call. I'm very pleased with Actuant's great start for the year, with both sales and earnings solidly above our guidance. EPS of $0.50 a share represents a 39% increase and is higher than our $0.40 to $0.45 guidance range. EBITDA margins are up in all 4 segments, reflecting our continued strong operational performance.

Including the just completed quarter, Actuant has now exceeded our 2008 peaks for sales, earnings and cash flow on a trailing 12-month basis. While there is no question we face an uncertain macroeconomic environment, Actuant's diversity is again showing its benefits as demonstrated in this quarter's results and our increased earnings guidance for the year.

With that overview, I'll turn it over to Andy to go through the specifics of the quarter and we'll come back and cover a number of topics later. Andy?

Andrew G. Lampereur

Thank you, Bob, and good morning, everyone. We are really happy with the solid start to fiscal 2012. We recorded sales of $393 million, which were above our guidance range due to better-than-expected results for Mastervolt and Weasler, which were both acquired last year, but neither are in our core sales figures yet. While we have puts and takes in core sales and other businesses and segments, in total, they were in line with our expectations.

Our operating profit grew 38% year-over-year, faster than the top line, meaning we had profit margin expansion. Our base operating profit margin expansion took place in most segments and was coupled -- and was a combination of good mix between the segments. That's what drove margins in excess of the forecast. The higher volume and margins resulted in a 39% year-over-year increase in EPS from continuing operations to the $0.50 that Bob mentioned.

Now let's walk through the income statement in more detail, starting first with sales. First quarter sales were up 23% year-over-year, with the 15% benefit from acquisitions, 1% from currency and 7% core growth. Core sales growth was generally in line with our expectations. As mentioned earlier, the majority of the top line upside came from stronger-than-anticipated sales from last year's 2 acquisitions: Mastervolt and Weasler.

From a geographic standpoint, all 3 regions reported year-over-year core sales growth, with North America leading the way followed by Asia-Pacific and Europe. Within the quarter, September was the lowest core sales growth month, followed by a rebound in the next 2 months. I'll provide more color on sales by segment later in the call.

We reported our eighth consecutive quarter of year-over-year operating profit margin expansion in the quarter. Consolidated margins were 14.6%, up 150 basis points from 1 year ago. These margins benefited from the incremental sales volume, operational improvements and favorable mix. The favorable mix reflected core sales growth being the highest in our most profitable segments, being Industrial and the Energy segment. Another positive, as Bob covered in his remarks, was the fact that EBITDA margins were up in all 4 segments during the quarter.

Now I'll provide some color and results by segment, starting out first with the Industrial segment, which had yet another outstanding quarter. Year-over-year, core sales came in at a strong 13%. Industrial's results included a strong showing in the traditional Enerpac industrial tools channel, which include some of the higher growth vertical markets such as mining, power gen, rail and oil and gas that we've discussed in the past.

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