RBC Capital Markets-Global. Conference. Las Vegas

Transcription

1 RBC Capital Markets-Global Industrial Conference September September 10, 2013 Las Vegas

2 Safe Harbor Statements in this presentation that are not historical are considered forwardlooking 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 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 Exchange Commission filings. All estimates of future performance are as of June 19, Actuant s 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 refer to the supplemental schedules included at the end of this presentation or the third quarter fiscal 2013 earnings press release statements on the Investors section of Actuant s website ( for a reconciliation to the appropriate GAAP measure. 2

3 Recent Activity 3

4 Acquisition of Viking SeaTech Acquired Viking SeaTech for approximately $225M (August 27, 2013) Annual revenues of approximately $90M with above Energy segment average EBITDA margins Offshore services provider with leadership in mooring design, layout, installation, rental, maintenance and inspection Three key growth laneways Global offshore market strength Extend technology and accelerate growth in emerging markets (e.g. SE Asia, Africa, etc) Leverage Hydratight (e.g. Morgrip) and dcortland product t( (e.g. rope) through Viking 4

5 Electrical Segment Divestiture Streamlines strategy and refocuses remaining businesses to take advantage of: Core competencies Identified global mega-growth trends High growth market penetration Transformational change in portfolio toward higher growth and returns Simplifies business profile Electrical best positioned to grow with owner focused on the Electrical space Process on track and expected to be completed by early 2014 Enhancing Shareholder Value Through Portfolio Management 5

6 CEO Transition August 2013 January 2014 Thereafter Bob Arzbaecher Arzbaecher officially Arzbaecher remains announces intention to retire as CEO of Actuant steps down as CEO Chairman of the Board of Directors (subject to annual shareholder vote) Mark Goldstein named President and added to Board of Directors Goldstein becomes CEO Goldstein holds position of President and CEO Position of COO eliminated 6

7 Actuant Snapshot 7

8 Three Key Takeaways for Investors 1. Simplifying and reshaping the portfolio toward higher growth / higher margin businesses 2. Growth focused including: Growth + Innovation traction Secular growth trends / emerging markets Acquisitions iti 3. Acquisitions supported by capital allocation flexibility Untapped revolver, strong free cash flow and Electrical proceeds provide a potential $1 billion of available capital 8

9 Executing Longstanding Business Model Business Model Long-Term X Deploy BPS Metrics GDP FCF Base Margins >100% FCF Conversion Execution of Model Results In Doubling of Business Every Five Years 9

10 Well Positioned within Secular Growth Markets Energy Demand Global Infrastructure Key Trends Food/Farm Productivity Natural Resources / Sustainability Global power generation Emerging market build-out Population growth and oil & gas maintenance Transportation Affluence / protein diets Mining / resources New installations Bridges, tunnels Biofuels Emission reduction Demanding technology & solutions Rail Agriculture equipment methods (offshore, subsea, oil sands, natural gas, Off-highway equipment Efficient seeding Alternative energy (wind) fracking) (productivity & safety) technology Rental and Services Joint Integrity solutions Nuclear maintenance tools Pipeline connectors Rope / slings / moorings Umbilicals Key Products / Technology Integrated solutions heavy lift technologies High force hydraulic tools Concrete tensioning Truck cab-tilt & latch HMI displays HMI displays PTO drivelines Seeding systems Flexible shafts Energy efficiency (power gen) EGR, turbocharger and other air flow values Mining safety & productivity MRO solutions HMI displays 10

11 Supporting Growth + Innovation Developing Long Term Sustainable Process Core Growth (G + I) Building on robust M&A and (G + I) operational excellence processes G+I focused on sustainable core growth process Innovation / new product development Emerging markets Leveraging common customers and secular growth trends Commitment to successful execution - investing in skills and R&D Disciplined Acquisitions (AIM) Operational Excellence (LEAD) ROIC Focused Business Model Portfolio Management Leadership 11

12 Capital Deployment Acquisition Capacity $600 million revolver availability Cash + $161 million at 5/31/ $75-85 million Q4 FCF + $175 million 2014 FCF = >$400 million total cash + $ Electrical Proceeds X target net debt/ebitda operating zone; 0.8X currently Could deploy at least $1 billion in acquisitions s at 8X EV/EBITDA and still be in targeted leverage zone one year out EPS Accretion $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 Theoretical Benefit of Stock Buybacks (Assumes $33/share buy back cost using balance sheet cash) $0.05 $0.10 Actuant Has Substantial Growth Capital $0.15 $ Shares Repurchased in Millions 12

13 Financial Highlights 13

14 Fiscal 2013 Third Quarter Snapshot (Quarter ended May 31, 2013) Core sales down 2%, sequential improvement from -5% Energy and Industrial positive ES sequential improvement with destocking abating Year-over-year operating profit margin down 50 basis points on volume and production declines, restructuring costs EPS increased 22% to $0.62 (1) Strong free cash flow of $77 million Repurchased 0.2 million common shares for $5 million (i n mil l ions, except per shar e amounts) Q3 F'2013 (1) Sales $344 Core Growth -2% EBITDA $68 Margin 19.6% Diluted EPS $0.62 Y-O-Y increase 22% Free Cash Flow $77 Net Debt/EBITDA 08X 0.8X Results Reflect Expected Second Half Inflection (1) Income statement data from continuing operations only data excludes debt refinancing charge. 14

15 Fiscal 2014 Initial Outlook (1) (as of June 19, 2013; excludes Viking SeaTech) (US$ in millions except EPS) Fiscal Fiscal Change Sales $1,275-1,285 $1,315-1,340 3% - 5% Diluted EPS $ $ % - 10% Assumptions: 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 basis points ~19-20% effective tax rate Shares outstanding million Free cash flow ~$175 million; ~110% conversion of net earnings (1) Continuing operations 15

16 Factors Impacting 2014 Outlook + Continued low global GDP growth + Easier comparisons to 2013 destocking + G+I impact including new product launches + Ongoing operational excellence initiatives Continued quiet restructuring efforts Higher incentive compensation costs Continued investments t in best growth (G+I) opportunities Higher effective tax rate + Benefit of prior period restructuring efforts 5 10% Base Business Earnings Improvement 16

17 Questions?? Diversified End Markets, Customers & Geography Niche Market Leadership Positions Continuous Improvement Culture Experienced Leadership Team and Strong Insider Ownership Disciplined Acquisition & Integration Strategy Cash Flow / ROIC Focused 17

18 General Actuant Overview 18

19 Actuant Overview Diversified Industrial Business Focused on Profitable Growth TTM Revenue $1.3 Billion Founded d in 1910 Three segments leading niche market positions Continuous improvement culture ROIC / cash flow focused Disciplined acquisition & integration strategy Significant diversification End markets Geographies Customers Engineered Solutions 38% ROW 20% Europe 30% Energy 29% Industrial 33% North America 50% 19

20 Industrial High Force Hydraulics US $ in millions Sales $300 $393 $419 EBITDA $78.2 $ $ EBITDA % 26.1% 27.1% 29.1% Industry leader Global, value added distribution Vast array of end market applications MRO & General Industrial Mining, rail, energy, agriculture, marine, aerospace, defense, power generation, shipbuilding, workholding. Energy 15% Mining 10% Integrated Solutions 15% Other 10% Europe 30% ROW 25% Integrated Solutions General Industrial 50% Special Project / Infrastructure North America 45% 20

21 Energy MRO and Critical Connections US $ in millions Sales $236 $293 $349 EBITDA $48.6 $64.5 $79.2 EBITDA % 20.6% 22.0% 22.7% Joint Integrity Global oil & gas, nuclear, petrochem and power generation Maintenance and Repair product, rental and technical manpower services for safety critical joints Critical Connections Power Gen/ Alt Energy 15% Industrial 10% Aero & Defense 5% Exploration 5% ROW 35% Highly engineered, custom designed and mission critical Dynamic umbilicals Synthetic rope and slings Capital Projects 15% Refinery MRO 15% O&G MRO 30% Other 5% Europe 30% North America 35% Mooring systems 21

22 Engineered Solutions Motion Control US $ in millions Sales $391 $473 $508 EBITDA $50.9 $77.5 $74.44 EBITDA % 13.0% 16.4% 14.6% Leader position & motion control Europe / ROW HD truck cab-tilt Automotive convertible top Patient handling Emission control air valves Power transmission agriculture drivelines and flexible shafts Severe-duty vehicle instrumentation & displays At Auto 15% Agriculture 25% Specialty Vehicles 20% Medical 5% Other 10% Truck 25% NA 60% Europe 35% ROW 5% 22

23 Acquisitions - Another Growth Driver Criteria Niche exposure to strategic secular growth markets Recurring revenue replacement or service Objectives Deploy Annual Free Cash Flow On Average Maintain leverage within X Net Debt / EBITDA range Track Record Acquisitio on Criteria Emerging market presence Cost and sales synergies Leadership in niche market Pre-2010 $1,175M Sizable acquisitions include 2010 $45M 2011 $313M 2012 $70M 2013 $225M Attractive EBITA ROIC returns Strong management teams 23

24 Cash Flow Focused Pre-tax EBITA ROIC Trend 25% 20% 21.7% 20.9% 21.8% 15.4% 17.1% 19.3% 15% 12.6% 10% 5% Cash Flow Focused 0% Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Driver of incentive 298% compensation CMM Asset light business model (Assemblers with cap ex < 2% of sales) Working capital focus 300% Free Cash Flow Conversion Trend 254% 186% 140% 120% 137% 114% 121% 116% 127% 126% 100% 100% 80% Leverage Ratio 4 Net Debt/EBITDA Leverage All amounts continue to include Electrical Segment results 0 Spin

25 Supplemental Data 25

26 Free Cash Flow / Cash Flow Conversion (US$in millions) Total EBITDA $87 $84 $90 $106 $145 $181 $228 $260 $171 $185 $244 $283 Cash Interest (47) (30) (20) (12) (15) (23) (28) (35) (36) (27) (26) (26) Cash Taxes (9) (14) (18) (21) (16) (28) (36) (48) (20) (7) (23) (55) Capital Expenditures (5) (7) (13) (11) (15) (20) (31) (44) (21) (20) (23) (23) PWC/Other 24 (8) 8 (6) (14) (8) (14) 17 Free Cash Flow $50 $25 $47 $56 $85 $102 $148 $151 $150 $145 $158 $196 Net Earnings (1) $17 $25 $34 $49 $70 $88 $112 $123 $59 $78 $124 $155 Free Cash Flow 298% 100% 137% 114% 121% 116% 132% 123% 254% 186% 127% 126% Conversion (1) Net earnings excluding special items - excludes restructuring and impairment charges, discontinued operations, debt extinguishment charges and non-recurring income tax gains. 26