Fisc Fiscal 2019 al 2019 Four ourth Q th Quar uarter ter Ear - - PowerPoint PPT Presentation

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Fisc Fiscal 2019 al 2019 Four ourth Q th Quar uarter ter Ear Earnings nings Sept ember 26, 2019 1 Sa Safe e Harbor Harbor Statements in this presentation that are not historical are considered forward - looking statements and

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Fisc Fiscal 2019 al 2019 Four

  • urth Q

th Quar uarter ter Ear Earnings nings

Sept ember 26, 2019

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Sa Safe e Harbor Harbor

Statements in this presentation that are not historical are considered “forward-looking statements” and are subject to change based on various factors and uncertainties that may cause actual results to differ significantly from expectations. Those factors are contained in Actuant Corporation’s Securities and Exchange Commission filings. All estimates of future performance are as of September 26, 2019. Actuant Corporation’s (doing business as Enerpac Tool Group) inclusion of these estimates or targets in the presentation is not an update, confirmation, affirmation or disavowal of the estimates or targets. In this presentation certain non-GAAP financial measures may be

  • used. Please see the supplemental financial schedules at the end of

this presentation or accompanying the Q4 Fiscal 2019 earnings press release for a reconciliation to the appropriate GAAP measure.

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La Laun unch h of

  • f t

the he N New ew Compa Company ny

General Industrial Bolting Technology Hydraulic Pumps Lifting Systems

  • New doing business as name and stock symbol “EPAC” (ticker effective October 7, 2019)
  • Serving the Light and Heavy Industrial tool market - $8b
  • We are a premium brand with a 110 years history of providing:

Highest precision and reliability Innovation to solve the most difficult maintenance and assembly problems With a focus on Safety

  • Focused on four product families with:

14 tools categories Serving 13 vertical industries

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4

En Ener erpa pac Too

  • ol

l Gr Grou

  • up

Core Growth Above Market

  • Well positioned for continued growth
  • 80%+ of sales from high margin Tool & Rental
  • New product development increasing toward 10%
  • Commercial operations gaining share

Driving World-Class Operations and Service

  • 13 plant locations positioned to serve local markets
  • Lean manufacturing at all locations
  • 2500+ engaged and dedicated employees

Disciplined Capital Deployment

  • Investments for growth
  • Maintaining a strong balance sheet
  • Strategic acquisitions within the tool sectors
  • Returning capital to share holders – Share buybacks

13 Manufacturing locations 2500+ Employees 2000+ Distributors Over 4000 points of sale

73% 27% Tools Service

Sales Distribution

Manpower Rental

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5

  • Core sales decline of 3%; impact of strong US Dollar (2%)
  • Strategic exit of low margin service business in North America
  • Decelerating growth, particularly in Europe
  • Offset by solid medical sales growth
  • Adjusted Operating Profit margin consistent with FY’18
  • Adjusted EBITDA margin slightly lower on reduced volume
  • Adjusted EPS consistent with Q4 FY’18
  • Financial leverage at 1.7x and improved versus prior year 1.9x
  • Allocated capital to repurchase approximately one million shares of common stock

and prepay debt of ~$13.8 million

Q4 Q4 Res esults ults

$166 $158

2018 2019

Net Sales

$0.21 $0.21

2018 2019

Adjusted EPS*

12.1% 12.1%

2018 2019

Adjusted Operating Profit %*

*Adjusted Operating Margin, EBITDA Margin and EPS excludes restructuring, impairment and other charges identified in the accompanying reconciliations to GAAP measures.

15.3% 14.8%

2018 2019

Adjusted EBITDA %*

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Solid full year results

  • Core sales growth of 4%; impact of strong US Dollar (2%)
  • IT&S core growth of 5%
  • Adjusted Operating Profit increased 21% with Adjusted Operating Profit Margin

expansion of 190bps

  • Adjusted EBITDA margin expansion of 150bps
  • Adjusted EPS growth of 49% YOY
  • Financial leverage at 1.7x and improved versus prior year of 1.9x

201 2019 9 Full Full Year ear Reca ecap p

$641 $655

2018 2019

Net Sales

$0.49 $0.73

2018 2019

Adjusted EPS*

10.1% 12.0%

2018 2019

Adjusted Operating Profit %*

*Adjusted Operating Margin, EBITDA Margin and EPS excludes restructuring, impairment and other charges identified in the accompanying reconciliations to GAAP measures.

13.2% 14.7%

2018 2019

Adjusted EBITDA %*

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Four

  • urth Q

th Quar uarter ter 2019 C 2019 Compar

  • mparable

ble Results esults

(US$ in millions except Diluted EPS)

F' 2018 F' 2019 Change Sales $166 $158

  • 5%

$20 $19

  • 5%

12.1% 12.1%

n/c

Adjusted Diluted EPS(1) $0.21 $0.21 0% Adjusted Operating Profit(1)

(1) Excluding restructuring, impairment and other specified charges. See the accompanying reconciliation tables.

Adjusted Operating Profit

  • Maintained operating margin % despite reduction in

sales

  • Benefits from North American service

restructuring offset by decreased volume

  • Decremental margins less than 12%
  • Includes $3.3 million of overhead costs

previously allocated to EC&S segment Sales

  • Core sales decline of 3%
  • IT&S sales (4%)
  • Strategic exit from low margin service sales
  • Market deceleration, especially in Europe
  • North America and rest of world roughly flat ex

service sales exits

  • Cortland +5%
  • Realized expected acceleration in medical sales

growth

  • New Product Development – 7 new products launched

Adjusted Diluted EPS

  • EPS flat year over year
  • Adjusted Operating Profit as outlined above
  • Reduced interest expense due to debt reduction
  • Tax rate improvement versus prior year
  • Lower profits in Europe
  • Reduced GILTI tax
  • Planning actions
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Net S Net Sales ales Waterf terfall all

The stronger dollar, strategic exits and market deceleration drove lower sales. US and rest of world (ex Europe) were relatively flat – Europe down due to Brexit and geopolitical issues.

$158 $3 $2 $5 $166 $2 $140 $145 $150 $155 $160 $165 $170 Q4 '18 Net Sales FX Translation Strategic Exits Pricing Volume Q4 '19 Net Sales

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Adjuste Adjusted d Ope Operating ting Pr Profit

  • fit Wate

terf rfall all*

* Includes certain Non-GAAP financial measures. See the accompanying reconciliation tables for additional details.

Strategic exits provided an immediate benefit which partially offset a portion of the impact from reduced

  • volume. The price/cost/tariff net impact was slightly positive due to known future cost increases.

Operating Margin % flat year on year at 12.1%

$19 $1 $2 $20 $1 $1 $10 $12 $14 $16 $18 $20 $22 $24 Q4 '18 Operating Profit FX Translation Strategic Exits Pricing, Net of Tariffs Volume Q4 '19 Operating Profit

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Adjuste Adjusted d EBI EBITD TDA A Wate terf rfalls alls*

* Includes certain Non-GAAP financial measures. See the accompanying reconciliation tables for additional details.

Adjusted EBITDA benefited slightly from service restructuring offset by decreased volume year-over-year.

$23 $1 $2 $1 $26 $1 $1 $16 $18 $20 $22 $24 $26 $28 Q4 '18 EBITDA FX Translation Strategic Exits Pricing, Net of Tariffs Volume Other Q4 '19 EBITDA

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Four

  • urth Q

th Quar uarter ter 2019 C 2019 Compar

  • mparable

ble Results esults

(US$ in millions except Diluted EPS)

F' 2018 F' 2019 Change Sales $166 $158

  • 5%

$20 $19

  • 5%

12.1% 12.1%

n/c

Adjusted Diluted EPS(1) $0.21 $0.21 0% Adjusted Operating Profit(1)

(1) Excluding restructuring, impairment and other specified charges. See the accompanying reconciliation tables.

Adjusted Operating Profit

  • Maintained operating margin % despite reduction in

sales

  • Benefits from North American service

restructuring offset by decreased volume

  • Decremental margins less than 12%
  • Includes $3.3 million of overhead costs

previously allocated to EC&S segment Sales

  • Core sales decline of 3%
  • IT&S sales (4%)
  • Strategic exit from low margin service sales
  • Market deceleration, especially in Europe
  • North America and rest of world roughly flat ex

service sales exits

  • Cortland +5%
  • Realized expected acceleration in medical sales

growth

  • New Product Development – 7 new products launched

Adjusted Diluted EPS

  • EPS flat year over year
  • Adjusted Operating Profit as outlined above
  • Reduced interest expense due to debt reduction
  • Tax rate improvement versus prior year
  • Lower profits in Europe
  • Reduced GILTI tax
  • Planning actions
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21.4% 20.7%

2018 2019

$153 $145

2018 2019

$154.5 128.8 $156.2 $148.7 $138.6 130.2 $147.2 $136.6 $142.0 136.9 $158.7 $153.4 $148.7 $166.7 $144.6

$100 $110 $120 $130 $140 $150 $160 $170 $180 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19

Ind Industrial T ustrial Too

  • ols

ls & S & Ser ervice vices s

*Excludes restructuring, impairment and other specified charges. See the accompanying reconciliation tables.

  • Core sales decline resulted from strategic exit
  • f unprofitable service sales in North America.

Decelerating demand during the quarter resulted in flat sales in most regions except Europe where fall off was greater.

  • Nearly 40 new product families launched in

FY’19

  • Adjusted Operating Profit % remained steady

from restructuring benefit, product mix and incentive comp reduction

Net Sales

18.8% 18.8%

2018 2019

Adjusted Operating Profit %*

Launched 7 new products in Q4

Q4 Net Sales Adjusted EBITDA %*

Fourth Quarter FY’18 vs FY’19

IT&S Net Sales

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IT&S IT&S Cor Core Sales e Sales Tren end

$142 $137 $159 $153 $149 $150 $167 $145

  • 5%

0% 5% 10% $0 $50 $100 $150 $200 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Service HLT Tools tools trend line product core change

Net Sales (US$ in millions) Year-over-Year Core Sales % change

Product core sales declined in the quarter primarily driven by large custom HLT projects in fiscal 2018 that did not repeat in the current year.

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Free Cash ee Cash Flo low w - Le Lever erage ge Cont Continues inues to Impr to Improve

(1) Adjusted for noncash stock compensation expense and excludes impairment charge. Includes certain Non-GAAP financial measures. See the accompanying reconciliation tables for additional details.

Net Debt Reconciliation Net Debt – May 31, 2019 $274 FX/Other 3 Purchase of Treasury Stock 22 Free Cash Flow (50) Net Debt – Aug 31, 2019 $249 Net Debt/Adjusted EBITDA (1) 1.7

1.9 1.7

2018 2019 Financial Leverage (Aug 31)

FY’20 FCF Guidance of $50-$75M assumes

  • $10-$20M reduction in working

capital

  • Lower cash taxes and interest offset

by cash restructuring and other divestiture charges

  • Capex – approximately $10M

$27 $11 $14 $17 $21 $9 $7 $10 $9 $100 $16 $9

  • 20

40 60 80 100 120 140

FCF F'18 EBITDA (CO) EBITDA (DO) Stock Option Proceeds Cash Taxes Paid Accr. Comp & Benefits Cash Divestiture Costs Cap Ex PWC (CO) PWC (DO) Other WC FCF F'19

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Sales Sales Wate terf rfall all - Guida Guidanc nce

Decrease in top line year-over-year due to strategic exits, foreign currency along with market softness partially offset by NPD and other commercial actions.

  • Stronger US

Dollar

  • Total~ $55
  • Service ~$25
  • Non-Core Product Lines

~$30

  • Service: Non-recurring

large service projects along with slowing market

  • Medical growth
  • Product: NPD and other

commercial actions partially

  • ffset by softening market
  • Guidance

range of $575-$600

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FY’20 EBITDA and EPS Assumptions

EBITDA Assumptions –

  • Actions taken to date and in FY’20 expected to result in EBITDA margin improvement of ~200bps in FY’20
  • EBITDA margin expansion from
  • Strategic exits – Improved profitability from our decision to exit $55 million of non-core service and product lines
  • EC&S corporate costs recovery – approximately $9 million from Transition Services Agreement which will begin at close
  • Partially offset by
  • Increased incentive compensation and other costs
  • Reduced service profit margin – primarily large service projects not expected to repeat in FY’20
  • Cortland facility optimization project
  • As a result of certain product and market dynamics, made the decision to exit the cable business.
  • In conjunction with this exit, rationalizing a portion of the manufacturing footprint.
  • Expect this will result in future margin expansion but will be a cost this fiscal year

EPS Key Assumption

  • For purposes of guidance, assumed all EC&S proceeds are used to pay down term loan following close of transaction
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Macr Macro Ind

  • Industr

ustry y Dyna Dynami mics cs

  • General economic factors – Pre Recession

growth rates, with inflationary concerns

– Global GDP: US & Euro Area decline – PMI declining – Commodity prices increasing

  • Industrial Tools & Services

– Slowing activity in the major markets – Dealer inventory control – Conservative dealer sales forecast – O&G service: minimal growth

US PMI GDP Growth Rate USA Euro Area

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Fisc Fiscal 202 al 2020 0 Cor Core e Sa Sales les Ex Expe pecta ctati tion

  • ns
  • Industrial Tools & Services

– Retail demand slower in major regions – Tools: new product contribution and commercial actions offset by modest market decline of 0-3% – Services: Non-recurring service projects; modest market decline

  • Cortland Medical & Industrial

– Strong medical sales growth +10 – 15% – Flat industrial rope sales and exiting cable business

Core Growth FY 2020 Industrial Tools (1%) – 3% Service (9%) – (5%) Cortland 0% – 4% Consolidated (3%) – 1%

FY’20 core growth estimates exclude strategic exits in both product and service

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Fisc Fiscal 202 al 2020 0 Gui Guida danc nce e Su Summar mmary

(US$ in millions except EPS)

Assumptions

  • Key FX rates – approximately $1.10/1€ and

$1.22/1£

  • Shares outstanding ~61 million
  • Free cash flow $50-$75 million
  • Tax rate ~ 20%

2019 2020E Net Sales $655 $575-$600

  • Adj. EBITDA*

$96 $94-$104

  • Adj. Diluted EPS*

$0.73 $0.68-$0.81 2019 2020E Net Sales $159 $135-$144

  • Adj. EBITDA*

$19 $17.5-$20.5

  • Adj. Diluted EPS*

$0.11 $0.08-$0.12 Full Year First Quarter

2020 guidance excludes restructuring, impairment & divestiture charges and other tax adjustments. 2020 guidance also excludes any future acquisitions, divestitures

  • r stock repurchases not specially identified.

* Includes certain Non-GAAP financial measures. See the accompanying reconciliation tables for additional details.

Expect consolidated full year core sales to be (3%) to 1% driven by NPD and other commercial actions along with medical growth offset by softness in the market.

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Q&A Q&A

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Appen ppendix dix

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Fou

  • urth

th Qua Quarte ter 20 r 2019 19 GAAP GAAP vs vs Non Non-GAAP GAAP Reconcil ilia iation tion

Impairment & Divestiture Charges include:

  • $4.3 million charge primarily related to the write-off of a customer list tied to the service business exited in the fourth

quarter Restructuring & Other Exit Charges include:

  • $6.3 million charge primarily relates to the strategic exit of service offerings

Tax Reform Charges include:

  • Income tax increase resulting from an adjustment to the original provision for US tax reform

GAAP Impairment & Divestiture Charges Restructuring & Other Exit Charges Tax Reform Charges Adjusted Sales $158.3 $158.3 $8.0 ($6.2) ($4.8) $0.0 $19.1 Income Taxes $1.6 ($1.9) $1.4 $2.7 ($0.6) ($0.6) ($4.3) ($6.3) ($2.7) $12.8 Effective tax rate 153.1% Diluted EPS ($0.01) ($0.07) ($0.10) ($0.05) $0.21 Net Income Operating Profit

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Rec econ

  • ncili

ciliati tion

  • n o
  • f N

Non

  • n-GA

GAAP Me AP Measu asures es

Q4 Q4 2019 2018 Net Earnings ($1) $11 Net Financing Costs $6 $8 Income Taxes $2 $0 Depreciation & Amortization $5 $5 Restructuring Charges $5 $1 Impairment/Divestiture $6 $0

Adjusted EBITDA

$23 $26

Adjusted EBITDA

Full Year Full Year 2019 2018 Cash From Operations $54 $106 Capital Expenditures ($28) ($21) Stock Option Proceeds $1 $15 Other $0 $0 Free Cash Flow $27 $100

Free Cash Flow

(US$ in millions)

  • The Enerpac Tool Group fiscal 2019 Q4 earnings release and full GAAP to non-GAAP reconciliation is available
  • nline at: https://www.enerpactoolgroup.com/investors/quarterly-results/
  • All amounts throughout presentation are presented as US$ in millions, other than per share amounts or unless
  • therwise noted
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