Actuant Reports Q2 Results; Increases Full Year Guidance

Actuant Corporation today announced results for its second quarter ended February 29, 2012.

Delivered record second quarter diluted earnings per share (“EPS”) of $0.43, a 43% year-over-year increase.

Core sales growth of 8% (total sales less the impact of acquisitions, divestitures and foreign currency rate changes) with double digit core sales growth in three of the four segments.

Year-over-year operating profit margin expansion of 190 basis points.

Cash flow from operations of $32 million, a year-over-year increase of 128%.

Completed the acquisition of Jeyco, strengthening our energy presence in the fast growing Australia/Southeast Asia region.

Increased full year EPS guidance to $1.98-2.08 reflecting strong second quarter results and expected continued momentum in the second half of the year.

Robert C. Arzbaecher, Chairman and CEO of Actuant commented, “We are very pleased with the results for the second quarter as sales, EPS and cash flow were all above expectations. During the normally seasonally weak second quarter, broad-based strength continued across many of our served end markets, resulting in an 8% increase in year-over-year core sales. We achieved record second quarter EPS of $0.43 through the combination of higher sales and robust year-over-year margin improvement. Our strategic initiatives and proven business model now have delivered nine consecutive quarters of year-over-year sales, margin and EPS growth and we are on track to deliver the highest free cash flow year in Actuant’s history. I want to thank our global team for their continued solid execution.”

Consolidated Results

Consolidated sales for the second quarter were $378 million, 14% higher than the comparable prior year quarter. Core sales increased 8% with acquisitions contributing 7% partially offset by a negative 1% impact of the stronger US dollar. Fiscal 2012 second quarter net earnings from continuing operations were $32.2 million compared to $22.1 million in the comparable prior year quarter. EPS of $0.43 in the second quarter of fiscal 2012 was 43% higher than the $0.30 in the comparable prior year quarter.

Sales for the six months ended February 29, 2012 were $771 million, 19% higher than the $649 million in the comparable prior year period. Excluding the 11% impact of acquisitions (insignificant foreign currency impact), year-to-date core sales increased 8%. Earnings and EPS from continuing operations for the six months ended February 29, 2012 were $69.3 million, or $0.94 per diluted share, compared to $48.8 million, or $0.66 per diluted share for the comparable prior year period.

Segment Results

Second quarter fiscal 2012 Industrial segment sales were $98 million, 11% higher than the prior year. The core sales increase of 11% (insignificant foreign currency impact) was driven by continued strong industrial demand across our served end markets and geographies. In addition, Growth + Innovation (“G+I”) initiatives, including new product introductions, mining & other vertical market strategies and penetration into emerging geographies such as India and South Africa, contributed to the sales increase. Year-over-year operating profit margins improved 440 basis points due primarily to the higher volumes, despite incremental G+I investments.

Fiscal 2012 second quarter year-over-year Energy segment sales increased 28% to $79 million. Excluding the 1% impact from acquisitions, core sales increased a robust 27% reflecting higher activity levels across the segment’s primary markets. Increased capital project activity in oil & gas, maintenance related spending, and strong sales to the power generation market, predominantly nuclear, were among the major drivers. Quoting activity and higher oil prices continue to support strong demand across the Energy segment’s served markets. Current year second quarter operating profit margin increased 370 basis points from the prior year due to higher volumes as well as income associated with the reduction of an acquisition earn out provision, partially offset by higher G+I spending.

Electrical segment fiscal 2012 second quarter sales were $77 million, 10% higher than the comparable prior year quarter. Core sales increased 14% with the impact of the stronger US dollar and Mastervolt of -1% and -3%, respectively. The strong core sales growth was broad based and reflected higher volumes in the industrial, utility, retail and marine aftermarket channels. Mastervolt revenue during the seasonally weak second quarter reflected modestly lower solar and marine volume on a comparable quarter basis, and is not included in the second quarter core sales metric as the acquisition was completed after the beginning of the prior year quarter. Second quarter operating profit margin increased 50 basis points from the prior year due to the higher volumes and improved Mastervolt profitability, partially offset by plant closure costs.

Second quarter fiscal 2012 Engineered Solutions segment sales increased 12% from the prior year to $124 million. Excluding the impact of the stronger US dollar (-1%), and the Weasler acquisition (+22%), year-over-year core sales declined 9%, in line with expectations. Second quarter sales reflected lower OEM production levels for heavy-duty trucks in China and Europe as well as a year-over-year decline in automotive sales. The segment benefited from higher activity levels in the North American heavy-duty truck, construction and agriculture markets. Second quarter operating profit margin declined 150 basis points year-over-year due to the lower core sales, partially offset by favorable acquisition mix.

Corporate

Corporate expenses for the second quarter of fiscal 2012 were $7.9 million, $0.3 million below the comparable prior year period as increased G+I spending at the corporate level was offset by lower incentive compensation costs.

Financial Position

Net debt at February 29, 2012 was $467 million (total debt of $525 million less $58 million of cash), a reduction of approximately $15 million during the quarter. The decline in net debt was the result of strong free cash flow during the quarter which more than offset the approximately $20 million deployed to acquire Jeyco. At February 29, 2012, the Company had net debt to EBITDA leverage of 1.6 times, and over $540 million of revolver availability.

Outlook

Commenting on Actuant’s outlook, Arzbaecher stated, “At the mid-point of fiscal 2012, we are extremely pleased with our financial performance, notably year-to-date EPS growth of over 40% and free cash flow tracking well ahead of last year, despite significant investments for future growth. We continue to expect overall sales and earnings will grow to record levels, albeit at a moderating pace, reflecting solid momentum, strong execution and the impact of our G+I initiatives.

Taking these factors into account, as well as the completed acquisition of Jeyco and current foreign currency exchange rates, we are raising our full year fiscal 2012 EPS and cash flow guidance. We now expect full year EPS to be in the $1.98-2.08 range, up from our previous guidance of $1.85-2.05. The mid-point of the new range would represent a 21% year-over-year increase in EPS from continuing operations. Given our strong cash flow to date, we project fiscal 2012 full year free cash flow to be in the $170-175 million range, compared to prior guidance of $165-170 million. The continued weak Euro relative to our prior expectations creates currency translation headwinds; consequently we are narrowing our sales guidance to $1.600-1.625 billion.

We expect third quarter sales to be in the $420-430 million range, with EPS of $0.55-0.60, a 13% year-over-year improvement at the mid-point of the range.

Consistent with past practice, all guidance excludes the impact of potential future acquisitions and share repurchases.

Actuant is executing well and delivering terrific results. Our balance sheet and cash flow are strong, which supports the execution of our business model focused on organic and acquisition driven sales, earnings and cash flow growth. We remain confident that Actuant is well positioned for future success.”

Conference Call Information

An investor conference call is scheduled for 10am CDT today, March 21, 2012. Webcast information and conference call materials will be made available on the Actuant company website (http://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.

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