Actuant Reports First Quarter Results; Reaffirms Fiscal 2014 Guidance

Actuant Corporation (NYSE: ATU) today announced results for its first quarter ended November 30, 2013.

Highlights
  • Total sales increased 10% compared to the prior year with core sales growth of 5% (total sales excluding the impact of acquisitions, divestitures and foreign exchange rates), acquisitions contributing 6% and unfavorable foreign exchange rate changes of 1%.
  • Diluted earnings per share from continuing operations (“EPS”) were $0.44, a 7% increase compared to the prior year.
  • Strong cash flow from operations of $33 million, up from $12 million in the comparable prior year period.
  • Repurchased 0.4 million shares of common stock for $15 million in the quarter.
  • Introduced second quarter EPS guidance in the range of $0.29-0.33 per share.
  • Completed the previously announced sale of the Electrical segment for $258 million in gross proceeds on December 13, 2013.

Robert C. Arzbaecher, Chairman and CEO of Actuant, commented, “Actuant’s first quarter results met our expectations for sales, earnings and cash flow. Strong core sales growth of 5% was due to significantly higher activity in the Engineered Solutions segment, while Industrial and Energy continued to experience cautious spending patterns by customers. Margins improved in both Industrial and Engineered Solutions, however, Energy experienced the collective impact of unfavorable mix and inefficiencies which we are actively working to address. Our first quarter free cash flow was strong, and we utilized $15 million of it for share buy-backs in the quarter. With the recent proceeds from the divestiture of the Electrical segment, our financial position is very strong and provides substantial capital for future growth.”

Consolidated Results

Continuing Operations

Consolidated sales for the first quarter were $340 million, 10% higher than the $308 million in the comparable prior year quarter. Core sales increased 5%, foreign currency rate changes reduced sales 1%, while acquisitions contributed 6% to total sales. Fiscal 2014 first quarter net earnings and EPS from continuing operations were $33.0 million, or $0.44 per share, compared to $30.6 million and $0.41, respectively, in the comparable prior year quarter.

Discontinued Operations

Results from discontinued operations represent the financial results of the Electrical segment for all periods presented. The Company completed the sale of the segment for $258 million in cash on December 13, 2013.

Segment Results

Industrial Segment
 

(US $ in millions)
Three Months Ended November 30,
2013   2012
Sales $98.6 $101.1
Operating Profit $26.9 $27.0
Operating Profit % 27.3% 26.7%
 

First quarter fiscal 2014 Industrial segment sales were $99 million, 2% lower than the prior year. The 2% core sales decline was due to lower global Integrated Solutions activity compared to the prior year’s robust levels. This was partially offset by a modest increase in Industrial Tool demand, notably in North America and Europe. First quarter operating profit margin of 27.3% was 60 basis points higher than the comparable prior year period due to favorable mix and effective cost management.
 

Energy Segment

(US $ in millions)
Three Months Ended November 30,
2013   2012
Sales $107.9 $90.8
Operating Profit $8.9 $15.4
Operating Profit % 8.3% 17.0%
 

Fiscal 2014 first quarter year-over-year Energy segment sales increased 19% to $108 million. Excluding the 21% benefit from acquisitions and the unfavorable 1% foreign currency exchange rate change impact, core sales declined 1% from the prior year. Cortland’s core sales increased due to higher demand for synthetic rope, seismic and defense products, while Hydratight experienced a modest core sales decline due to continued difficult comparisons in the North American nuclear maintenance market as well as lower North American rental revenue. First quarter operating profit margin declined due primarily to the collective impact of acquisition mix, unfavorable sales and customer mix, and higher costs due to labor utilization inefficiencies. Cost reduction and process improvement actions are being taken in the segment and, combined with new contract wins, the Company expects improved sales and margin performance in the second half of the fiscal year.
 

Engineered Solutions Segment

(US $ in millions)
Three Months Ended November 30,
2013   2012
Sales $133.0 $115.9
Operating Profit $13.2 $7.6
Operating Profit % 9.9% 6.6%
 

First quarter fiscal 2014 Engineered Solutions segment sales increased 15% from the prior year to $133 million. Excluding the 1% decline from the previously completed product line divestiture and 1% increase from the stronger Euro, core sales increased 15%. First quarter sales reflect significantly higher European heavy-duty truck production in advance of the Euro 6 emissions standards change, as well as strong China truck demand. In addition, sales benefited from higher activity in the agriculture market, notably from new product launches. First quarter operating profit margin increased 330 basis points due to the higher volumes and benefit of prior restructuring actions.

Corporate and Income Taxes

Corporate expenses for the first quarter of fiscal 2014 were $5.4 million, $1.2 million below the comparable prior year period due to cost reduction efforts. The effective income tax rate for the quarter was in line with the Company’s guidance, and lower than the prior year due to the benefit of tax reduction initiatives.

Financial Position

Net debt at November 30, 2013 was $393 million (total debt of $503 million less $110 million of cash), approximately $17 million below fiscal year end. Approximately $15 million of first quarter cash flow was used to repurchase 0.4 million shares of common stock. At November 30, 2013, the Company had a net debt to EBITDA leverage ratio of 1.3, and nearly $500 million in revolver availability.

Outlook

Arzbaecher continued, "We are on track with our fiscal year financial targets, despite a weak start in the Energy segment which we are actively addressing. We remain focused on investing for long-term growth through both Growth + Innovation (G+I) and acquisitions, as well as managing our costs and maintaining a strong balance sheet. Despite continued volatility across the global markets, we are starting to see signs of growth in certain end markets. Taking into account our first quarter results, current exchange rate environment and business trends, we are reaffirming our full year fiscal 2014 sales and EPS guidance. We expect fiscal 2014 sales to be approximately $1.410-1.450 billion, with core sales growth of 3-5% for the year. EPS is expected to be in the range of $2.00-2.10.

We expect second quarter sales to be in the $330-340 million range, with EPS of $0.29-0.33. The second quarter outlook incorporates the normal seasonal slowdown experienced across nearly all of our underlying businesses, as well as an approximately 25% effective tax rate.

Consistent with past practice, all guidance excludes the impact of potential future acquisitions and additional share repurchases. With our projected $190 million of fiscal 2014 free cash flow and the net proceeds from the Electrical segment divestiture, 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 10 am CT today, December 19, 2013. 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.

(tables follow)
 
Actuant Corporation
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
         
November 30, August 31,
2013 2013
 
ASSETS
Current assets
Cash and cash equivalents $ 109,542 $ 103,986
Accounts receivable, net 221,528 219,075
Inventories, net 155,129 142,549
Deferred income taxes 18,585 18,796
Other current assets 32,636 28,228
Assets of discontinued operations   270,106     272,606  
Total current assets 807,526 785,240
 
Property, plant and equipment, net 205,328 201,496
Goodwill 745,476 734,952
Other intangible assets, net 375,307 376,692
Other long-term assets   30,228     20,952  
 
Total assets $ 2,163,865   $ 2,119,332  
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable $ 159,275 $ 154,049
Accrued compensation and benefits 41,413 43,800
Current maturities of debt 1,125 -
Income taxes payable 10,464 14,014
Other current liabilities 60,964 56,899
Liabilities of discontinued operations   53,233     53,080  
Total current liabilities 326,474 321,842
 
Long-term debt 501,875 515,000
Deferred income taxes 118,277 115,865
Pension and postretirement benefit accruals 19,167 20,698
Other long-term liabilities 66,373 65,660
 
Shareholders' equity
Capital stock 15,475 15,399
Additional paid-in capital 63,423 49,758
Treasury stock (120,267 ) (104,915 )
Retained earnings 1,224,725 1,188,685
Accumulated other comprehensive loss (51,657 ) (68,660 )
Stock held in trust (3,199 ) (3,124 )
Deferred compensation liability   3,199     3,124  
Total shareholders' equity   1,131,699     1,080,267  
 
Total liabilities and shareholders' equity $ 2,163,865   $ 2,119,332  

 
Actuant Corporation
Condensed Consolidated Statements of Earnings
(Dollars in thousands except per share amounts)
(Unaudited)
       
 
Three Months Ended
November 30, November 30,
2013   2012
 
Net sales $ 339,556 $ 307,809
Cost of products sold   207,776     183,441
Gross profit 131,780 124,368
 
Selling, administrative and engineering expenses 81,918 74,860
Amortization of intangible assets   6,215     6,034
Operating profit 43,647 43,474
 
Financing costs, net 6,750 6,322
Other expense, net   1,141     644
Earnings from continuing operations before income tax expense 35,756 36,508
 
Income tax expense   2,751     5,957
Earnings from continuing operations 33,005 30,551
Earnings from discontinued operations, net of income taxes   3,032     5,792
Net earnings $ 36,037   $ 36,343
 
Earnings from continuing operations per share
Basic $ 0.45 $ 0.42
Diluted 0.44 0.41
 
Earnings per share
Basic $ 0.49 $ 0.50
Diluted 0.48 0.49
 
Weighted average common shares outstanding
Basic 73,085 72,791
Diluted 75,011 74,271

 
Actuant Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
   
Three Months Ended
November 30, November 30,
2013 2012
 
Operating Activities
Net earnings $ 36,037 $ 36,343
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 16,204 14,449
Stock-based compensation expense 4,103 3,477
Benefit for deferred income taxes (8,408 ) (3,156 )
Amortization of debt discount and debt issuance costs 560 496
Other non-cash adjustments (867 ) (177 )
Changes in components of working capital and other:
Accounts receivable 7,040 4,539
Inventories (11,634 ) (11,318 )
Prepaid expenses and other assets (3,049 ) (6,143 )
Trade accounts payable 2,560 (11,548 )
Income taxes payable (3,189 ) 1,161
Accrued compensation and benefits (2,595 ) (13,953 )
Other accrued liabilities   (3,816 )   (1,895 )
Net cash provided by operating activities 32,946 12,275
 
Investing Activities
Proceeds from sale of property, plant and equipment 1,913 977
Capital expenditures (11,257 ) (7,689 )
Business acquisitions, net of cash acquired   -     (83 )
Net cash used in investing activities (9,344 ) (6,795 )
 
Financing Activities
Net repayments on revolving credit facilities and other debt (12,000 ) -
Principal repayments on term loan - (1,250 )
Purchase of treasury shares (15,352 ) (7,142 )
Payment of contingent consideration (414 ) -
Stock option exercises and related tax benefits 10,562 5,473
Cash dividend   (2,919 )   (2,911 )
Net cash used in financing activities (20,123 ) (5,830 )
 
Effect of exchange rate changes on cash   2,077     477  
Net increase in cash and cash equivalents 5,556 127
Cash and cash equivalents - beginning of period   103,986     68,184  
Cash and cash equivalents - end of period $ 109,542   $ 68,311  

                       
ACTUANT CORPORATION
SUPPLEMENTAL UNAUDITED DATA FROM CONTINUING OPERATIONS
  (Dollars in thousands)
 
FISCAL 2013 FISCAL 2014
Q1   Q2   Q3   Q4   TOTAL Q1   Q2     Q3     Q4   TOTAL
SALES
INDUSTRIAL SEGMENT $ 101,122 $ 98,999 $ 111,308 $ 111,191 $ 422,620 $ 98,641 $ 98,641
ENERGY SEGMENT 90,769 80,794 99,158 92,651 363,372 107,925 107,925
ENGINEERED SOLUTIONS SEGMENT   115,918       120,675       133,739       123,418       493,750     132,990                       132,990  
TOTAL $ 307,809     $ 300,468     $ 344,205     $ 327,260     $ 1,279,742   $ 339,556                     $ 339,556  
 
% SALES GROWTH
INDUSTRIAL SEGMENT 1 % 1 % 1 % 1 % 1 % -2 % -2 %
ENERGY SEGMENT 13 % 2 % 3 % -1 % 4 % 19 % 19 %
ENGINEERED SOLUTIONS SEGMENT -10 % -2 % -2 % 4 % -3 % 15 % 15 %
TOTAL -1 % 0 % 0 % 2 % 0 % 10 % 10 %
 
OPERATING PROFIT (LOSS)
INDUSTRIAL SEGMENT $ 27,006 $ 26,350 $ 32,426 $ 31,862 $ 117,644 $ 26,897 $ 26,897
ENERGY SEGMENT 15,387 9,677 19,736 18,480 63,280 8,923 8,923
ENGINEERED SOLUTIONS SEGMENT 7,625 8,275 12,754 11,674 40,328 13,190 13,190
CORPORATE / GENERAL   (6,544 )     (7,431 )     (7,874 )     (9,258 )     (31,107 )   (5,363 )                     (5,363 )
TOTAL $ 43,474     $ 36,871     $ 57,042     $ 52,758     $ 190,145   $ 43,647                     $ 43,647  
 
OPERATING PROFIT %
INDUSTRIAL SEGMENT 26.7 % 26.6 % 29.1 % 28.7 % 27.8 % 27.3 % 27.3 %
ENERGY SEGMENT 17.0 % 12.0 % 19.9 % 19.9 % 17.4 % 8.3 % 8.3 %
ENGINEERED SOLUTIONS SEGMENT 6.6 % 6.9 % 9.5 % 9.5 % 8.2 % 9.9 % 9.9 %
TOTAL (INCLUDING CORPORATE) 14.1 % 12.3 % 16.6 % 16.1 % 14.9 % 12.9 % 12.9 %
 
EBITDA
INDUSTRIAL SEGMENT $ 29,033 $ 28,471 $ 34,374 $ 33,742 $ 125,620 $ 28,657 $ 28,657
ENERGY SEGMENT 19,694 14,278 23,977 22,185 80,134 17,923 17,923
ENGINEERED SOLUTIONS SEGMENT 12,047 12,611 16,700 15,659 57,017 17,365 17,365
CORPORATE / GENERAL   (6,195 )     (6,582 )     (7,556 )     (8,556 )     (28,889 )   (5,235 )                     (5,235 )
TOTAL $ 54,579     $ 48,778     $ 67,495     $ 63,030     $ 233,882   $ 58,710                     $ 58,710  
 
EBITDA %
INDUSTRIAL SEGMENT 28.7 % 28.8 % 30.9 % 30.3 % 29.7 % 29.1 % 29.1 %
ENERGY SEGMENT 21.7 % 17.7 % 24.2 % 23.9 % 22.1 % 16.6 % 16.6 %
ENGINEERED SOLUTIONS SEGMENT 10.4 % 10.5 % 12.5 % 12.7 % 11.5 % 13.1 % 13.1 %
TOTAL (INCLUDING CORPORATE) 17.7 % 16.2 % 19.6 % 19.3 % 18.3 % 17.3 % 17.3 %

 
ACTUANT CORPORATION
SUPPLEMENTAL UNAUDITED DATA
RECONCILIATION OF GAAP MEASURE TO NON-GAAP MEASURES
  (Dollars in thousands, except for per share amounts)
                           
 
FISCAL 2013 FISCAL 2014
Q1   Q2   Q3   Q4   TOTAL Q1   Q2     Q3     Q4   TOTAL
EARNINGS (LOSS) BEFORE SPECIAL ITEMS (1)
NET EARNINGS (LOSS) $ 36,343 $ 28,435 $ (92,983 ) $ 58,253 $ 30,048 $ 36,037 $ 36,037
LOSS (EARNINGS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX   (5,792 )     (2,601 )     139,060       (13,138 )     117,529     (3,032 )                     (3,032 )
EARNINGS FROM CONTINUING OPERATIONS 30,551 25,834 46,077 45,115 147,577 33,005 33,005
INCOME TAX ADJUSTMENT   -       -       -       (10,596 )     (10,596 )   -                       -  
TOTAL $ 30,551     $ 25,834     $ 46,077     $ 34,519     $ 136,981   $ 33,005                     $ 33,005  
 
DILUTED EARNINGS (LOSS) PER SHARE, BEFORE
SPECIAL ITEMS (1)
NET EARNINGS (LOSS) $ 0.49 $ 0.38 $ (1.24 ) $ 0.78 $ 0.40 $ 0.48 $ 0.48
LOSS (EARNINGS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX   (0.08 )     (0.03 )     1.86       (0.18 )     1.58     (0.04 )                     0.04  
EARNINGS FROM CONTINUING OPERATIONS 0.41 0.35 0.62 0.60 1.98 0.44 0.44
INCOME TAX ADJUSTMENT   -       -       -       (0.14 )     (0.14 )   -                       -  
TOTAL $ 0.41     $ 0.35     $ 0.62     $ 0.46     $ 1.84   $ 0.44                     $ 0.44  
 
 
EBITDA (2)
NET EARNINGS (LOSS) (GAAP MEASURE) $ 36,343 $ 28,435 $ (92,983 ) $ 58,253 $ 30,048 $ 36,037 $ 36,037
LOSS (EARNINGS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX   (5,792 )     (2,601 )     139,060       (13,138 )     117,529     (3,032 )                     (3,032 )
EARNINGS FROM CONTINUING OPERATIONS 30,551 25,834 46,077 45,115 147,577 33,005 33,005
FINANCING COSTS, NET 6,322 6,260 6,229 6,026 24,837 6,750 6,750
INCOME TAX EXPENSE 5,957 4,814 3,825 776 15,372 2,751 2,751
DEPRECIATION & AMORTIZATION   11,749       11,870       11,364       11,113       46,096     16,204                       16,204  
EBITDA - EXCLUDING DISCONTINUED OPERATIONS (NON-GAAP MEASURE) $ 54,579     $ 48,778     $ 67,495     $ 63,030     $ 233,882   $ 58,710                     $ 58,710  
 
FOOTNOTES
 
NOTE: The total of the individual quarters may not equal the annual total due to rounding.
 
(1) Earnings (loss) and diluted earnings (loss) per share, excluding special items (income tax adjustments and discontinued operations), represent net earnings (loss) and diluted earnings (loss) 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 (loss) or diluted earnings (loss) 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 (loss) 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.
 

Copyright Business Wire 2010

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