Actuant Reports First Quarter Results
MILWAUKEE--(BUSINESS WIRE)-- Actuant Corporation (NYSE: ATU) today announced sales and earnings for its first quarter ended November 30, 2008.
Highlights
-- Reported first quarter results with sales of $380 million and diluted
earnings per share ("EPS") of $0.45, excluding a $26.6 million ($0.26
per diluted share) asset impairment charge, in line with December 10,
2008 revised guidance. (See attached reconciliation of earnings).
-- Completed acquisition of the Cortland Companies on September 26, 2008
for approximately $230 million.
-- Amended and expanded the Company's credit agreement, increasing
borrowing capacity from $405 million to $515 million and extending the
maturity to November 2011.
-- Over $240 million of existing liquidity including the revolving credit
facility and available cash.
-- Core sales growth of 12% in the Industrial segment.
-- EBITDA margin expansion of 70 basis points.
Sales for the quarter declined 8% to $380 million compared to $415 million in the first quarter of fiscal 2008. Excluding the impact of foreign currency rate changes (-3%) and acquisitions (+6%), core sales declined 11%.
Net income and EPS in the fiscal 2009 first quarter were $11.6 million and $0.19, respectively compared to $27.4 million and $0.43, respectively, in the comparable quarter last year. Fiscal 2009 first quarter results include a non-cash impairment charge related to the Company's recreational vehicle ("RV") product line of $26.6 million, or $0.26 per diluted share. First quarter 2008 results included European Electrical restructuring charges of $5.5 million, or $0.09 per diluted share. Excluding these items, EPS was $0.45 in the first quarter of fiscal 2009, 13% lower than the $0.52 per diluted share in the prior year's quarter. (See attached reconciliation of earnings).
Robert C. Arzbaecher, Chairman and CEO of Actuant commented, "We experienced a challenging first quarter as the speed and magnitude of declining end market demand was extraordinary. While overall core sales declined 11% in the quarter, we did see continued strong performance from our Industrial segment which delivered 12% year-over-year core sales improvement. This was driven by the diversity of its end markets and geographies, the maintenance nature of its products and services as well as its strong brands and market positions. We were also pleased with the performance of the recently acquired Cortland business, and the integration activities and financial results are progressing as anticipated."
Segment Results
Industrial Segment
(US $ in millions)
Three Months Ended
November 30,
2008 2007
Sales $ 164.5 $ 137.1
Operating Profit $ 41.5 $ 38.0
Operating Profit % 25.3 % 27.7 %
First quarter fiscal 2009 Industrial segment sales increased 20% to $165 million. Excluding currency translation and acquisitions, Industrial segment core sales grew 12% driven by continued strong global demand for joint integrity maintenance products and services for the oil & gas and power generation markets, as well as for high-force hydraulic tools. Acquisitions contributed approximately 14% of the segment's sales growth, while the strengthening US dollar caused a 6% sales decline. First quarter operating profit margin declined 240 basis points from the prior year due to unfavorable sales and acquisition mix.
Electrical Segment
(US $ in millions)
Three Months Ended
November 30,
2008 2007
Sales $ 102.0 $ 134.0
Operating Profit (1) $ 3.8 $ 10.4
Operating Profit % 3.7 % 7.8 %
(1) Results for the three months ended November 30, 2007 exclude European Electrical restructuring charges of $5.5 million.
Fiscal 2009 first quarter Electrical segment sales declined 24% to $102 million. Core sales decreased 22% reflecting continued weak demand from retail, marine and transformer customers, the impact of SKU reductions in the European Electrical product line and the previously disclosed loss of certain retail business in North America. Segment operating profit margin declined to 3.7% reflecting lower production volumes, unfavorable sales mix and costs associated with facility consolidations and headcount reductions. Total headcount declined approximately 9% since August 31, 2008 and has been reduced by more than 25% during the past year.
Actuation Systems Segment
(US $ in millions)
Three Months Ended
November 30,
2008 2007
Sales $ 85.3 $ 112.9
Operating Profit (2) $ 6.0 $ 10.1
Operating Profit % 7.0 % 8.9 %
(2) Results for the three months ended November 30, 2008 exclude the $26.6 million pre-tax RV asset impairment charge.
Actuation Systems segment first quarter fiscal 2009 sales declined 24% (-24% core, -3% currency translation and +3% acquisitions) to $85 million reflecting sharply lower demand from the Company's RV, European truck and automotive customers. Operating profit margins were 190 basis points lower than the prior year due primarily to the impact of lower production levels. Excluding the addition of Cortland Sanlo, the segment's headcount was reduced by approximately 12% since August 31, 2008.
The Company recorded a non-cash asset impairment charge (primarily goodwill) in the first quarter of fiscal 2009 related to the RV product line, which currently generates approximately two percent of Actuant's consolidated revenues. The Company's sales to the motorhome industry's three largest Original Equipment Manufacturers (OEMs) declined approximately 75% during the first quarter of fiscal 2009, reflecting lower retail sell-through and dealer inventory reduction efforts. Given current credit market conditions and low consumer confidence levels, the Company does not expect RV demand will improve in the near term.
Engineered Products Segment
(US $ in millions)
Three Months Ended
November 30,
2008 2007
Sales $ 28.1 $ 31.2
Operating Profit $ 3.1 $ 4.2
Operating Profit % 11.1 % 13.6 %
Fiscal 2009 first quarter Engineered Products segment sales decreased to $28 million from $31 million in the prior year reflecting a 9% core sales decline. The 11.1% operating profit margin in the first quarter reflects the lower volumes as well as costs associated with headcount reductions.
Corporate
First quarter fiscal 2009 corporate expenses were $3.2 million lower than the comparable prior year period due primarily to a reduction in incentive compensation expense and other spending cuts.
Financial Position
Net debt at November 30, 2008 was $670 million (total debt of $700 million less $30 million of cash), an increase of $218 million from the beginning of the quarter. During the quarter the Company deployed approximately $230 million of capital to complete the acquisition of Cortland and approximately $5 million in debt issuance costs. Actuant's first quarter cash flow was also impacted by seasonal trends including the payment of prior year employee incentive compensation.
The Company had $244 million of available liquidity at November 30, 2008 including committed revolver capacity of $214 million and $30 million of cash. The Company's debt due within the next twelve months is less than $6 million.
Outlook
On December 10, 2008 the Company provided full year fiscal 2009 sales and EPS guidance in the range of $1.50-1.55 billion and $1.60-1.80 per share (excluding the RV asset impairment charge), respectively. In addition to confirming that guidance, the Company provided its outlook for the second fiscal quarter. Sales and EPS are expected to be in the range of $335-355 million, and $0.20-0.28 per share, respectively.
Arzbaecher continued "We are taking actions to further reduce costs and optimize cash flow in response to market challenges. Excluding employees added through the Cortland acquisition, we reduced headcount in the first quarter by over 500, or about 7% of our global workforce. We are carefully reviewing capital expenditures and working to reduce working capital. We believe our financial liquidity and variable cost structure provide us with ample flexibility to navigate these challenging times and capitalize on growth opportunities."
Conference Call Information
An investor conference call is scheduled for 10am CT today, December 18, 2008. 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.
About Actuant
Actuant, headquartered in Butler, Wisconsin, is a diversified industrial company with operations in more than 30 countries. The Actuant businesses are market leaders in highly engineered position and motion control systems and branded hydraulic and electrical tools and supplies. Since its creation through a spin-off in 2000, Actuant has grown its sales from $482 million to $1.66 billion in fiscal 2008. The Company employs a workforce of more than 7,000 worldwide. Actuant trades on the NYSE under the symbol ATU. For further information on Actuant and its business units, 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,
2008 2008
ASSETS
Current assets
Cash and cash equivalents $ 30,218 $ 122,549
Accounts receivable, net 211,576 226,564
Inventories, net 223,450 215,391
Deferred income taxes 11,729 11,870
Other current assets 15,901 16,092
Total current assets 492,874 592,466
Property, plant and equipment, net 141,200 134,550
Goodwill 698,446 639,862
Other intangible assets, net 381,749 292,359
Other long-term assets 13,512 9,145
Total assets $ 1,727,781 $ 1,668,382
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ - $ 339
Trade accounts payable 145,426 166,863
Accrued compensation and benefits 33,189 59,023
Income taxes payable 24,136 24,867
Current maturities of long-term debt 4,336 -
Other current liabilities 66,829 60,033
Total current liabilities 273,916 311,125
Long-term debt, less current maturities 696,049 573,818
Deferred income taxes 125,152 99,634
Pension and postretirement benefit accruals 25,902 27,641
Other long-term liabilities 26,062 26,658
Shareholders' equity
Capital stock 11,276 11,200
Additional paid-in capital (318,627 ) (324,898 )
Accumulated other comprehensive income (59,590 ) 7,149
Stock held in trust (2,336 ) (2,081 )
Deferred compensation liability 2,336 2,081
Retained earnings 947,641 936,055
Total shareholders' equity 580,700 629,506
Total liabilities and shareholders' equity $ 1,727,781 $ 1,668,382
Actuant Corporation
Condensed Consolidated Statements of Earnings
(Dollars in thousands except per share amounts)
(Unaudited)
Three Months Ended
November 30, November 30,
2008 2007
Net sales $ 379,980 $ 415,143
Cost of products sold 248,088 274,309
Gross profit 131,892 140,834
Selling, administrative and engineering expenses 76,218 81,296
European electrical restructuring charge - 5,521
Impairment charge 26,553 -
Amortization of intangible assets 4,457 3,257
Operating profit 24,664 50,760
Financing costs, net 12,235 9,300
Other (income) expense, net (534 ) (1,110 )
Earnings from operations before income
tax expense and minority interest 12,963 42,570
Income tax expense 1,370 15,149
Minority interest, net of income taxes (5 ) (6 )
Net earnings $ 11,598 $ 27,427
Earnings per share
Basic $ 0.21 $ 0.49
Diluted 0.19 0.43
Weighted average common shares outstanding
Basic 56,022 55,609
Diluted 64,395 64,654
Actuant Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
November 30, November 30,
2008 2007
Operating Activities
Net earnings $ 11,598 $ 27,427
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 12,747 10,464
Stock-based compensation expense 1,537 1,603
Provision (benefit) for deferred income taxes (10,360 ) 6,220
Impairment charge 26,552 -
Other 64 192
Changes in operating assets and liabilities,
excluding the effects of the business acquisitions
Accounts receivable 4,974 (22,767 )
Accounts receivable securitization program 483 4,924
Inventories (5,332 ) (7,024 )
Prepaid expenses and other assets (38 ) 948
Trade accounts payable (19,683 ) 238
Income taxes payable 1,895 2,452
Accrued compensation and benefits (21,074 ) (8,298 )
Other accrued liabilities 12,457 12,345
Net cash provided by operating activities 15,820 28,724
Investing Activities
Proceeds from sale of property, plant and equipment 94 8,321
Capital expenditures (7,634 ) (9,036 )
Business acquisitions, net of cash acquired (231,768 ) (47,437 )
Net cash used in investing activities (239,308 ) (48,152 )
Financing Activities
Net borrowings on revolving credit facilities and 187,995 134
other debt
Proceeds from term loan 115,000 -
Principal repayments on term loans (155,000 ) (994 )
Debt issuance and amendment costs (5,333 ) -
Cash dividend (2,251 ) (2,221 )
Stock option exercises, related tax benefits, and 2,479 2,013
other
Net cash provided by (used in) financing activities 142,890 (1,068 )
Effect of exchange rate changes on cash (11,733 ) 2,557
Net decrease in cash and cash equivalents (92,331 ) (17,939 )
Cash and cash equivalents - beginning of period 122,549 86,680
Cash and cash equivalents - end of period $ 30,218 $ 68,741
ACTUANT
CORPORATION
SUPPLEMENTAL
UNAUDITED DATA
(Dollars in
thousands)
FISCAL 2008 FISCAL 2009
Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
SALES
INDUSTRIAL $ $ $ $ $ 586,898 $ $
SEGMENT 137,089 130,802 160,035 158,972 164,506 164,506
ELECTRICAL 133,962 130,779 129,142 111,915 505,798 101,999 101,999
SEGMENT
ACTUATION
SYSTEMS 112,899 109,764 122,850 100,070 445,583 85,347 85,347
SEGMENT
ENGINEERED
PRODUCTS 31,193 28,284 32,629 33,558 125,664 28,128 28,128
SEGMENT
TOTAL $ $ $ $ $ $ $
415,143 399,629 444,656 404,515 1,663,943 379,980 379,980
% SALES GROWTH
INDUSTRIAL 32% 36% 38% 29% 34% 20% 20%
SEGMENT
ELECTRICAL 10% 6% 1% -15% 0% -24% -24%
SEGMENT
ACTUATION
SYSTEMS 7% 12% 10% -4% 6% -24% -24%
SEGMENT
ENGINEERED
PRODUCTS 174% 22% 9% 12% 33% -10% -10%
SEGMENT
TOTAL 21% 17% 15% 4% 14% -8% -8%
OPERATING
PROFIT
INDUSTRIAL $ $ $ $ $ 161,794 $ 41,544 $ 41,544
SEGMENT 37,976 32,757 43,692 47,369
ELECTRICAL 10,426 11,239 8,074 3,858 33,596 3,762 3,762
SEGMENT
ACTUATION
SYSTEMS 10,059 8,301 13,705 8,263 40,328 5,979 5,979
SEGMENT
ENGINEERED
PRODUCTS 4,235 3,146 4,260 5,373 17,014 3,129 3,129
SEGMENT
CORPORATE / (6,415) (7,743) (8,203) (8,549) (30,910) (3,197) (3,197)
GENERAL
TOTAL -
EXCLUDING $ $ $ $
IMPAIRMENT / 56,281 47,700 61,528 56,314 $ 221,822 $ 51,217 $ 51,217
RESTRUCTURING
CHARGES
IMPAIRMENT - - - - - (26,553) (26,553)
CHARGE
EUROPEAN
ELECTRICAL (5,521) (4,952) - - (10,473) - -
RESTRUCTURING
CHARGE
TOTAL $ $ $ $ $ 211,349 $ 24,664 $ 24,664
50,760 42,748 61,528 56,314
OPERATING
PROFIT %
INDUSTRIAL 27.7% 25.0% 27.3% 29.8% 27.6% 25.3% 25.3%
SEGMENT
ELECTRICAL 7.8% 8.6% 6.3% 3.4% 6.6% 3.7% 3.7%
SEGMENT
ACTUATION
SYSTEMS 8.9% 7.6% 11.2% 8.3% 9.1% 7.0% 7.0%
SEGMENT
ENGINEERED
PRODUCTS 13.6% 11.1% 13.1% 16.0% 13.5% 11.1% 11.1%
SEGMENT
TOTAL
(INCLUDING
CORPORATE) -
EXCLUDING 13.6% 11.9% 13.8% 13.9% 13.3% 13.5% 13.5%
IMPAIRMENT /
RESTRUCTURING
CHARGES
EBITDA
INDUSTRIAL $ $ $ $ $ 181,342 $ 48,600 $ 48,600
SEGMENT 42,570 37,386 48,388 52,998
ELECTRICAL 13,226 13,661 10,562 6,087 43,535 5,144 5,144
SEGMENT
ACTUATION
SYSTEMS 13,292 11,428 16,402 12,136 53,258 9,336 9,336
SEGMENT
ENGINEERED
PRODUCTS 5,399 4,445 5,400 6,451 21,695 4,527 4,527
SEGMENT
CORPORATE / (6,632) (7,522) (7,991) (8,163) (30,308) (3,110) (3,110)
GENERAL
TOTAL -
EXCLUDING $ $ $ $
IMPAIRMENT / 67,855 59,398 72,761 69,509 $ 269,522 $ 64,497 $ 64,497
RESTRUCTURING
CHARGES
IMPAIRMENT - - - - - (26,553) (26,553)
CHARGE
EUROPEAN
ELECTRICAL (5,521) (4,952) - - (10,473) - -
RESTRUCTURING
CHARGE
TOTAL $ $ $ $ $ 259,049 $ 37,944 $ 37,944
62,334 54,446 72,761 69,509
EBITDA %
INDUSTRIAL 31.1% 28.6% 30.2% 33.3% 30.9% 29.5% 29.5%
SEGMENT
ELECTRICAL 9.9% 10.4% 8.2% 5.4% 8.6% 5.0% 5.0%
SEGMENT
ACTUATION
SYSTEMS 11.8% 10.4% 13.4% 12.1% 12.0% 10.9% 10.9%
SEGMENT
ENGINEERED
PRODUCTS 17.3% 15.7% 16.5% 19.2% 17.3% 16.1% 16.1%
SEGMENT
TOTAL
(INCLUDING
CORPORATE) -
EXCLUDING 16.3% 14.9% 16.4% 17.2% 16.2% 17.0% 17.0%
IMPAIRMENT /
RESTRUCTURING
CHARGES
Note: The total of the individual quarters may not equal the annual total due to rounding.
ACTUANT CORPORATION
Reconciliation of GAAP measures to non-GAAP measures
(Dollars in thousands, except for per share amounts)
FISCAL 2008 FISCAL 2009
Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
NET EARNINGS
EXCLUDING
RESTRUCTURING
CHARGE AND TAX
ADJUSTMENTS /
CREDITS (1)
NET EARNINGS $ 27,427 $ 22,239 $ 38,635 $ 34,243 $ 122,544 $ 11,598 $ 11,598
(GAAP MEASURE)
RESTRUCTURING
CHARGES, NET 5,521 4,729 - - 10,250 - -
OF TAX
BENEFIT
IMPAIRMENT
CHARGE, NET - - - - - 16,463 16,463
OF TAX
BENEFIT
TAX
ADJUSTMENTS / - - (2,625 ) - (2,625 ) - -
CREDITS
TOTAL (NON-GAAP $ 32,948 $ 26,968 $ 36,010 $ 34,243 $ 130,169 $ 28,061 $ 28,061
MEASURE)
DILUTED EARNINGS
PER SHARE
EXCLUDING
RESTRUCTURING
CHARGE AND TAX
ADJUSTMENTS /
CREDITS (1)
NET EARNINGS $ 0.43 $ 0.35 $ 0.60 $ 0.54 $ 1.93 $ 0.19 $ 0.19
(GAAP MEASURE)
RESTRUCTURING
CHARGES, NET 0.09 0.07 - - 0.16 - -
OF TAX
BENEFIT
IMPAIRMENT
CHARGE, NET - - - - - 0.26 0.26
OF TAX
BENEFIT
TAX
ADJUSTMENTS / - - (0.04 ) - (0.04 ) - -
CREDITS
TOTAL (NON-GAAP $ 0.52 $ 0.43 $ 0.56 $ 0.54 $ 2.05 $ 0.45 $ 0.45
MEASURE)
EBITDA (2)
NET EARNINGS $ 27,427 $ 22,239 $ 38,635 $ 34,243 $ 122,544 $ 11,598 $ 11,598
(GAAP MEASURE)
FINANCING 9,300 9,032 9,190 8,887 36,409 12,235 12,235
COSTS, NET
INCOME TAX 15,149 12,154 13,465 14,598 55,365 1,370 1,370
EXPENSE
DEPRECIATION
& 10,464 11,028 11,434 11,783 44,709 12,746 12,746
AMORTIZATION
MINORITY
INTEREST, NET (6 ) (7 ) 37 (2 ) 22 (5 ) (5 )
OF INCOME TAX
EBITDA
(NON-GAAP $ 62,334 $ 54,446 $ 72,761 $ 69,509 $ 259,049 $ 37,944 $ 37,944
MEASURE)
IMPAIRMENT - - - - - 26,553 26,553
CHARGE
EUROPEAN
ELECTRICAL 5,521 4,952 - - 10,473 - -
RESTRUCTURING
CHARGE
EBITDA
(NON-GAAP
MEASURE) - $ 67,855 $ 59,398 $ 72,761 $ 69,509 $ 269,522 $ 64,497 $ 64,497
EXCLUDING
RESTRUCTURING
CHARGE
Net earnings and diluted earnings per share excluding restructuring charges and income tax adjustments /
credits represent net earnings and diluted earnings per share per the Consolidated Statement of Earnings net
of charges or credits for items to be highlighted for comparability purposes. These measures should not be
(1) 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 do not equal
diluted earnings per share excluding restructuring charges and income tax adjustments / credits due to
rounding.
EBITDA represents net earnings before financing costs, net, income tax expense, depreciation & amortization
and minority interest. 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 Consolidated
Statements of Earnings data. EBITDA should not be considered as an alternative to net earnings or operating
(2) 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. The total of the individual quarters may not equal the annual total due to rounding.
Source: Actuant Corporation
Released December 18, 2008