Fiscal 2013 Fiscal 2013 Third Quarter Earnings Earnings June 19, - - PowerPoint PPT Presentation

Fiscal 2013 Fiscal 2013 Third Quarter Earnings Earnings

June 19, 2013 June 19, 2013

Safe 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. This includes statements differ significantly from expectations. This includes statements pertaining to, among other things, the planned divestiture of the Electrical segment, the potential timing thereof, and the prospects and expected financial results of Actuant after the planned transaction Those factors are contained in Actuant’s Securities and

• transaction. Those factors are contained in Actuant s Securities and

Exchange Commission filings. All estimates of future performance are as of June 19 2013 All estimates of future performance are as of June 19, 2013. In this presentation certain non-GAAP financial measures may be used Please see the supplemental financial schedules at the end of

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

this presentation, accompanying the Q3 Fiscal 2013 earnings press release, or refer to the Investors section of Actuant’s website (www.actuant.com) for a reconciliation to the appropriate GAAP measure

2

measure.

Third Quarter Snapshot

• Announced intent to divest Electrical segment,

reflected as discontinued operations for all periods

• Inflection in operating results with EPS from

continuing operations up 22% year-over-year to $0.62

• Consolidated core sales down 2%, sequentially

improved from -5% in Q2 with Energy and Industrial reporting solid core sales growth

• EBITDA margin of 19.6%, level with the prior year

despite core sales decline R h d 0 2 illi h f t k

• Repurchased 0.2 million shares of common stock

for approximately $5 million

3

Third Quarter EPS Reconciliation

F' 2012 F' 2013 GAAP Dil t d EPS $0 45 ($1 24) GAAP Diluted EPS $0.45 ($1.24) Debt refinancing costs $0.15

• $2.00

Non-cash Electrical writedown $2.00 Adjusted EPS $0.60 $0.76 Electrical operating results $0.09 $0.14 Non cash Electrical writedown p g $ $ Adjusted continuing EPS $0.51 $0.62

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Income Taxes (1)

Consolidated Effective Income Tax Rate Q1 Q2 Q3 Q4 Full Year Fiscal 2013 16.3% 15.7% 7.7% 21.8% 22.7% 22.0% 16.9% 20.8% Fiscal 2012

Lower Actuant Effective Tax Rate on a “Continuing Operations Basis” Due to Changes in the “Country of Origin” Mix of Pre-Tax Earnings

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(1) Continuing operations, excluding refinancing costs

Core Sales Trend (1)

Year-over-Year

20% $400

Sales (US$ in millions) Year over Year Core Sales Rate of Change

13% 8% 6% 10% 15% $350 3% 1% 0% 5% $300

• 5%
• 5%
• 2%
• 10%
• 5%

$250

• 15%

$200

Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13

Sequential Year Over Year Improvement with Solid Growth in Energy

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Sequential Year-Over-Year Improvement with Solid Growth in Energy and Industrial

(1) Continuing operations

Operating Profit Margin Trend (1)

240 250 220

200 300

(basis points) 30

100 200

30

• 20
• 50

(100)

Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13

220

(200) ( 00)

• 280
• 220

(300)

Significant Improvement in Year-Over-Year Margin Trends

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g p g

(1) Continuing operations

Industrial Segment

• Core growth of 2% with demonstrated

success with growth initiatives including strong Integrated Solutions and bolting sales.

2013 2012

y-o-y h

3rd Quarter

Financial Snapshot

(US$ in millions)

• Europe and China still impacted by

weak economic environment, although comparisons become easier.

2013 2012

change

Sales $111 $110 1% Op Income $32.4 $30.7 6% Op Margin 29.1% 27.9% 120

bps

• Profit margins highest in last two years
• n higher volumes, lower incentive

compensation and other costs. Sales Trend

Sales Core Sales Change

20% $120

19% 13% 11%

10% 15% $100

5% 7% 2% 1% 2%

0% 5% $60 $80

8

• 5%

$40

Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13

Energy Segment

• Double digit growth in Cortland’s deep

water umbilical, ropes and cables.

Non-energy markets (e.g.

defense) continue to be weak

2013 2012

y-o-y h

3rd Quarter

Financial Snapshot

(US$ in millions)

defense) continue to be weak.

• Hydratight core sales up due to global
• il & gas MRO activity despite tough

comparisons to robust NA nuclear

2013 2012

change

Sales $99 $96 3% Op Income $19.7 $18.5 7% Op Margin 19.9% 19.2% 70

bps

maintenance in prior year.

• Margins higher due primarily to

volume. Sales Trend

Sales Core Sales Change

28% 30% $110 28% 12% 27% 23% 14% 20% $80 $90 $100 4%

• 1%

5% 0% 10% $50 $60 $70

9

• 10%

$40

Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13

Engineered Solutions Segment

• Europe truck demand inflected with

year-over-year sales growth.

• Difficult comparisons for NA truck,

agriculture and global off-highway

2013 2012

y-o-y change

3rd Quarter

Financial Snapshot

(US$ in millions)

agriculture and global off highway equipment.

• Continued weak Europe auto.
• Lower volume, unfavorable mix and

2013 2012

change

Sales $134 $137

• 2%

Op Income $12.8 $18.5

• 31%

Op Margin 9.5% 13.5% (400) bps

Lower volume, unfavorable mix and restructuring costs result in year-over- year margin decline. Sales Trend

10% $150

Sales Core Sales Change

• 2%

0%

• 5%

0% 5% $110 $130

• 9%
• 11%
• 14%
• 17%
• 12%
• 10%
• 20%
• 15%
• 10%

$70 $90

10

• 25%

20% $50

Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13

Third Quarter Cash Flow / Net Debt

(US$ in millions)

Free Cash Flow (1) Net Debt Reconciliation

( )

EBITDA $82 Capital Expenditures (7) Cash Interest (1) Net Debt - Feb 28, 2013 $304 Share repurchases 5 FX/Other (1) Cash Interest (1) Cash Taxes (12) Working Capital/Other 15 Free Cash Flow $77 FX/Other (1) Free Cash Flow (77) Net Debt - May 31, 2013 $231 Free Cash Flow $77 Net Debt/EBITDA (2) 0.8X Net Debt/Capitalization 18%

All Time Strongest Balance Sheet & Liquidity

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(1) Includes cash flow from Electrical segment (2) Includes pro-forma adjustment for full year impact of recent acquisitions, includes Electrical EBITDA as proceeds not yet received

Well Positioned within Secular Growth Markets

Key Trends

Natural Resources / Sustainability

• Mining / resources

E i i d ti

Global Infrastructure

• Emerging market build-out
• Transportation

Food/Farm Productivity

• Population growth
• Affluence / protein diets

Energy Demand

• Global power generation

and oil & gas maintenance N i t ll ti

Key Trends

• Emission reduction

solutions

• Alternative energy (wind)
• Energy efficiency (power

gen)

• Bridges, tunnels
• Rail
• Construction equipment
• Biofuels
• Agriculture equipment
• Efficient seeding

technology

• New installations
• Demanding technology &

methods (deep water, oil sands, natural gas)

• Alternative energy

gen) Alternative energy (nuclear, wind)

Key Products / Technology

• EGR, turbocharger and
• ther air flow values
• Joint Integrity solutions

N l i t t l

• Integrated solutions –

heavy lift technologies

• Instrumentation & controls

PTO d i li

• ther air flow values
• Mining safety & productivity

MRO solutions

• Nuclear maintenance tools
• Pipeline connectors
• Heavy lift rope / slings
• Seismic exploration cables

heavy lift technologies

• Hydraulic cylinders
• Concrete tensioning
• Truck cab-tilt & latch
• PTO drivelines
• Seeding systems
• Flexible shafts

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High Growth Market Opportunities

• Secular growth trends tie in well to the high growth markets

including China, India, Brazil, Middle East and South Africa among others Africa, among others.

• Energy, Industrial and Engineered Solutions have ample

high growth market opportunities.

• Currently represents small portion of total sales – sizable
• pportunity for expansion.

ROW 20% 20% Europe 30% NA 50%

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30%

Fiscal 2013 Guidance Update (1)

(US$ in millions except EPS)

Change Fiscal Change Fourth Quarter Full Year Change Fiscal Change Q4 2013 from PY 2013 from PY Sales $320 - 330 0% - 2% $1,275 -1,285 flat

Fourth Quarter Assumptions:

Diluted EPS (1) $0.48 - 0.53 0%- 10% $1.85 -1.90 1% - 4%

Fourth Quarter Assumptions:

• Core sales growth of approximately -1% to +1%
• Margin expansion
• Tax rate approximately 25%
• Free cash flow of $75-$85 million
• Excludes future acquisitions, divestitures and stock repurchases

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Excludes future acquisitions, divestitures and stock repurchases

(1) Continuing operations, excluding 2012 debt refinancing costs. Quarters may not add to full year due to rounding.

Fiscal 2014 Initial Outlook (1)

(US$ in millions except EPS) (US$ in millions except EPS)

Fiscal Fiscal 2013 2014 Change g Sales $1,275- 1,285 $1,315-1,340 3% - 5% Diluted EPS $1 85 1 90 $1 95 2 05 5% 10%

Assumptions:

• Excludes future acquisitions divestitures and share repurchases

Diluted EPS $1.85 - 1.90 $1.95 -2.05 5% - 10%

• Excludes future acquisitions, divestitures and share repurchases
• Full year core sales growth of 3-5%
• Key FX rates – approximately $1.30/1€ and $1.55/1£
• Margin expansion of 50-75 basis points

Margin expansion of 50 75 basis points

• ~19-20% effective tax rate
• Shares outstanding 76-77 million
• Free cash flow ~$175 million; ~110% conversion of net earnings

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; g

(1) Continuing operations

Factors Impacting 2014 Outlook

+ Continued low global GDP growth Continued “quiet” restructuring efforts + Easier comparisons to 2013 destocking G I i t i l di Higher incentive compensation costs C ti d i t t i + G+I impact including new product launches + Ongoing operational Continued investments in best growth (G+I)

• pportunities

+ Ongoing operational excellence initiatives + Benefit of prior period Higher effective tax rate Benefit of prior period restructuring efforts %

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5 – 10% Base Business Earnings Improvement

Capital Deployment

Theoretical Benefit of

$0 25

Theoretical Benefit of Stock Buybacks Acquisition Capacity

• $600 million revolver availability
• Cash

(Assumes $33/share buy back cost using balance sheet cash) $0.20

$0.20 $0.25

Cash

+ $161 million at 5/31/2013 + $75-85 million Q4 FCF + $175 million 2014 FCF

EPS Accretion

$0 10 $0.15

$0.15

+ $175 million 2014 FCF = >$400 million total cash + $ Electrical Proceeds

1 2 X d b /EBITDA

$0.05 $0.10

$0.05 $0.10

• 1.5 – 2.5X target net debt/EBITDA
• perating zone; 0.8X currently

Could deploy at least $1 billion in

acquisitions at 8X EV/EBITDA and

$0.00 2 4 6 8

acqu s o s a 8 / a d still be in targeted leverage zone

• ne year out

Shares Repurchased in Millions 17

Actuant Has Substantial Growth Capital

Shares Repurchased in Millions

Executing Longstanding Business Model

Business Business Model 1.5-2.0X GDP Deploy FCF + 25-50 BPS Base >100% FCF Conversion Long-Term M t i GDP FCF Base Margins Conversion Metrics

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Execution of Model Results In Doubling of Business Every Five Years

Q & A

Future Key Dates:

• Fourth Quarter Fiscal 2013 Earnings – October 1, 2013
• Save the Date – 2013 Investor Day – October 7, 2013

Appendix

Reconciliation of Non-GAAP Measures

(US$ i illi )

EBITDA Free Cash Flow

(US$ in millions)

Q3 Q3 2012 2013

EBITDA

Q3 Q3 2012 2013

Free Cash Flow

Net Earnings $34.4 ($93.0) Discontinued Operations, net of tax ($6.7) $139.1 Net Financing Costs $24.1 $6.2 Income Tax Expense $4 5 $3 8 Cash From Operations $77.3 $76.0 Capital Expenditures ($7.0) ($7.2) Sale of PP&E $0.7 $0.1 St k O ti E i $0 9 $7 9 Income Tax Expense $4.5 $3.8 Depreciation & Amortization $10.9 $11.4

EBITDA from Continuing Operations

$67.2 $67.5 Stock Option Exercises $0.9 $7.9 Debt Refinancing Call Premium $10.4 $0.0 Other ($0.5) $0.1 Free Cash Flow (1) $81.8 $76.9

(1) Total Actuant, including Electrical 21