Actuant Reports First Quarter 2019 Results; Updates Full Year 2019 Outlook

Actuant Corporation (NYSE: ATU) today announces results for its fiscal first quarter 2019 ended November 30, 2018.

Randy Baker, President and Chief Executive Officer, said, “Our solid quarterly results demonstrate sustained momentum as we drive growth and incremental profitability across our two business segments. In particular, growth for the Industrial Tools & Services segment was driven by strength in our premier Enerpac branded tools product line and improved profitability in our heavy lifting product category resulting from strategic changes to our product offerings in 2018. We also continued to focus on winning new product platforms at our key OEM customers and expanding operating margins in the Engineered Components & Systems segment. We are executing each segment’s strategy and believe we are well positioned to deliver enhanced shareholder value.”

Mr. Baker continued, “We also made progress with our portfolio optimization efforts, completing the sale of Cortland Fibron. In addition, we have begun processes to divest the remaining Cortland and Precision-Hayes International businesses. The proceeds from these transactions, cash generated from operations, and access to capital markets on reduced leverage, will provide us the fuel needed to continue to invest in our core tools business.”

• Consolidated net sales for the first quarter were $292.5 million, slightly higher than the $289.0 million recorded in the comparable prior year quarter. Core sales improved 3% year-over-year, while foreign currency rate changes reduced net sales by 2%. The net impact from the Mirage and Equalizer acquisitions, net of the Viking divestiture, was negligible.
• Fiscal 2019 first quarter net loss and EPS were ($17.5) million and $(0.29), compared to $5.2 million and $0.09, respectively, in the comparable prior year quarter.
  • Fiscal 2019 first quarter earnings included impairment & divestiture and other charges of $36.5 million ($33.8 million or $0.55 per share, after tax) primarily related to the anticipated sale of the Cortland US and Precision-Hayes International businesses as well as other divestiture related costs.
  • The first quarter of fiscal 2019 also included $0.4 million of restructuring charges ($0.3 million or less than $0.01 per share, after tax).
• Fiscal 2018 first quarter earnings included restructuring charges of $6.6 million ($6.3 million or $0.10 per share, after tax).
• Excluding impairment, divestiture and restructuring charges, adjusted EPS for the first quarter of fiscal 2019 was $0.27, compared to $0.19 in the comparable prior year period (see attached reconciliation of earnings).

(1) Excludes a minimal restructuring benefit and $1.4 million of restructuring charges in the first quarter of fiscal 2019 and 2018, respectively.

• First quarter fiscal 2019 IT&S segment net sales were $148.7 million, 5% higher than the prior year. The impact of foreign currency exchange rates reduced sales by 1% year-over-year and the Equalizer and Mirage acquisitions added 2%, resulting in a 4% year-over-year core sales increase.
• Top line growth including double-digit gains in the Americas, resulted from the continued strength of our end markets and investments in commercial effectiveness, despite difficult comparisons against strong net sales growth in the first quarter of fiscal 2018. Solid service growth in Europe and Middle East as well as product and service growth in Australia and Asia also contributed.
• Adjusted operating profit improved as a result of increased sales volume and improved margins on our heavy lift product line.

(2) The first quarter of fiscal 2019 excludes $36.5 million of impairment and other divestiture charges, along with $0.4 million of restructuring charges. The first quarter of 2018 excludes $1.1 million of restructuring charges.

• First quarter fiscal 2019 EC&S segment net sales were $143.9 million, a 2% decrease over the prior year. Excluding a 2% decline in net sales due to a stronger US Dollar and a 2% decline in sales due to the prior year divestiture of the Viking business, year-over-year core sales increased 2%.
• Core sales growth was driven by increased demand in automotive, off-highway vehicle and concrete tensioning markets, new platform wins starting production and price realization partially offset by reduced China truck demand.
• Adjusted operating profit margin improved on pricing and operating efficiencies.

Corporate Expenses and Income Taxes

• Corporate expenses for the first quarter of fiscal 2019 were $7.4 million, $1.4 million higher than the comparable prior year period, primarily resulting from stock compensation and consulting expenses.
• The first quarter effective income tax rate of approximately 13.7% was in line with expectations but lower than the prior year rate of 14.7%.

• Net debt at November 30, 2018 was approximately $322 million (total debt of $525 million less $203 million of cash), which increased approximately $40 million from the prior quarter end but declined by $68 million from first quarter of Fiscal 2018. Net Debt to Adjusted EBITDA was 2.1x at November 30, 2018.

Outlook

Mr. Baker concluded, "We achieved a solid start to fiscal 2019, and looking ahead to the rest of the year we expect to benefit from the actions we are taking to manage our portfolio and the strategic investments we have made in new product development, commercial effectiveness and operational excellence. We are on track to deliver our core growth and profitability targets and are focused on executing our strategies to deliver enhanced value for shareholders.”

The Company provided the following outlook for its expected results for the second quarter and for fiscal year 2019. Full fiscal year net sales outlook is being adjusted for the impact of the stronger dollar and the sale of the Cortland Fibron business. The remaining fiscal year net income and EPS outlook remains the same and is:

• Annual sales growth: Between 3% and 5%;
• Annual sales: $1.15 to $1.19 billion, which reflect the strengthening of the US Dollar and the sale of the Cortland Fibron business;
• Full year adjusted EPS: between $1.09 and $1.20, which includes an expected tax rate of 20%;
• Second quarter sales: $268 to $278 million and continue to expect the back half of our fiscal year to be even stronger;
• Second quarter adjusted EPS: range of $0.15 to $0.20; and
• Full year free cash flow: $80 to $85 million.

All guidance excludes restructuring, impairment & divestiture charges, one-time tax adjustments as well as the impact of potential future, acquisitions, dispositions, share repurchases and future tariffs.

Impact of Accounting Change

Effective September 1, 2018, Actuant adopted the new comprehensive revenue recognition accounting standard using a modified retrospective transition approach. Under this approach, revenues for prior periods have not been restated. Application of the new standard for the quarter ended November 30, 2018 had an immaterial impact on items reflected in the condensed consolidated statement of earnings as compared to amounts as determined under the revenue recognition accounting standard applicable during the three months ended November 30, 2017.

Conference Call Information

An investor conference call is scheduled for 10am CT today, December 20, 2018. 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. Among other risks and factors, Actuant’s results are 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, tax reform, foreign currency fluctuations and interest rate risk. See the Company’s Form 10-K for the fiscal year ended August 31, 2018 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.

Non-GAAP Financial Information

This press release contains financial measures that are not measures presented in conformity with GAAP. They include EBITDA, Adjusted EBITDA, Adjusted EPS, Adjusted Operating Profit, Free Cash Flow and Net Debt. This press release includes reconciliations of these non-GAAP measures to the most comparable GAAP measure, including in the tables attached to this press release. Management believes these non-GAAP measures are commonly used financial measures for investors to evaluate Actuant’s operating performance and financial position with respect to the periods presented and, when read in conjunction with the condensed consolidated financial statements, present a useful tool to evaluate ongoing operations and provide investors with metrics they can use to evaluate aspects of the Company’s performance from period to period. In addition, these are some of the factors management uses in internal evaluations of the overall performance of the Company’s business. Management acknowledges that there are many items that impact a company’s reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results. In addition, these non-GAAP measures are not necessarily comparable to similarly-titled measures used by other companies.

About Actuant Corporation

Actuant Corporation is a diversified industrial company serving customers from operations in more than 30 countries. The Actuant businesses are leaders in a broad array of niche markets including branded hydraulic tools and solutions; specialized products and services for energy markets and highly engineered position and motion control systems. The Company was founded in 1910 and is headquartered in Menomonee Falls, Wisconsin. Actuant trades on the NYSE under the symbol ATU. For further information on Actuant and its businesses, visit the Company's website at www.actuant.com.

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