Enerpac Tool Group Corp. · NYSE:EPAC
Enerpac Tool — Actuant — Investor Day (October 2016)
60 slides from Enerpac Tool's investor day presentation, Oct 6, 2016
Slide 1: Actuant Corporation 2016 Investor Day
Actuant Corporation 2016 Investor Day October 6, 2016 Grand Hyatt, NYC
Slide 2: Safe Harbor
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. Those factors are contained in Actuant’s Secur
Slide 3: Agenda
Agenda Time Activity Participants Detail 10:00am Kick-Off Bauer Welcome / Format Introductions 10:15-noon Various Topics Baker Vision / Strategy Multiple Segment Strategy Summaries Lampereur Business Model / Capital Allocation Noon-12:30 Break / Buffet Lunch 12:30-12:55 Table 1 Rotation Q&A 1:00-1:2
Slide 4: Actuant Q&A Table Attendees
Actuant Q&A Table Attendees Rotational Table Assignments Provided to Each Attendee (with name badge) Industrial Energy Steve Rennie Ken Bockhorst Randy Baker Karen Bauer Engineered Solutions Corporate/M&A Roger Roundhouse Andy Lampereur Gene Skogg Ted Wozniak 4
Slide 5: Actuant Five Year Vision
Actuant Five Year Vision Randy Baker 5
Slide 6: My Process
My Process • Assessed each of the businesses and visited 22 of our major facilities • Met and evaluated leaders across the company • Held customer and distributor meetings – oil & gas, industrial, construction, nuclear, manufacturing and aerospace • Collaborated to develop more focused, concise and
Slide 7: Summary Observations
Summary Observations Working Well Working to Improve • Robust financial systems & • Sales growth which outpaces end measures; working capital markets management, cash flow • Commercial effectiveness; focus on discipline the “mission critical”; under-invested • Many instances of strong in marketing/s
Slide 8: What Will Change
In a Nutshell • Establish Actuant as both an employer and acquirer of choice What • Institute world-class commercial effectiveness and share capture Will • Accelerate organic growth in attractive niche markets Change • Lean culture – Actuant LEAD System • We will grow and win • ROIC fundamentals • D
Slide 9: Our Vision
Our Vision Providing customers with the mission critical tools, systems and services that enable safe, and productive solutions, while earning superior returns for Actuant shareholders. Building a superior business through…… .. Creative new products … Opening new markets and regions …. Actuant’s “LE
Slide 10: Actuant Pathway to Growth
Actuant Pathway to Growth Expand industries and regions Commercial effectiveness and share Organic Growth capture Product innovation Drive Lean principles Operational Excellence Goal Zero safety Optimized cost position Expand product lines Strategic Acquisitions Increase global coverage Acquire comp
Slide 11: Our Company and Organization
Our Company and Organization • Leadership changes to enhance speed/decision making Baker - CEO • Streamline organizational effectiveness • Continue to assess/upgrade commercial talent Lampereur-CFO Bockhorst-Energy • Operational excellence • Driving a performance culture Skogg-HR Rennie-Industrial W
Slide 12: Economic Environment – Slow Growth
Economic Environment – Slow Growth Energy On & Off-Highway Infrastructure • Broad based demand • Long term positive drivers • General industrial activity growth • Global population • Oil growth • Globalization • Gas • Higher incomes • Nuclear • Urbanization • Safety – mission critical • Renewables •
Slide 13: Actuant's Growth Macros
Actuant’s Growth Macro’s Criteria Market / Industry Focus • Attractive financial metrics Energy including EBITA ROIC returns • System critical services • Mid/down stream emphasis • System critical, where safety and • O&G, renewables, nuclear, productivity are paramount hydroelectric & petrochemical
Slide 14: Portfolio Fit
Strategic Investment Zone – Core and Acquisition Organic Acquisitions Products & Services High System Critical Tools Portfolio Fit Solutions Services Low Low Growth & EBITDA Potential High 14
Slide 15: Portfolio Management
Portfolio Management Improve fundamentals Execution Measured portfolio improvements Cost position Tuck-in acquisitions Capital availability increases with market to strengthen best recovery businesses Commercial effectiveness De-lever with More meaningful improving EBITDA portfolio changes MRO/servi
Slide 16: Reinvigorate Lean Operations
Reinvigorate Lean Operations • Goal Zero - culture and performance • Best in class customer service - quality and delivery • Consistent productivity gains • Superior cost performance • Driving the optimal global footprint Performance Objectives Going Beyond $30 Million Savings 16
Slide 17: Manufacturing Lean Transformation
Manufacturing Lean Transformation Baseline Assessments & Value Streams • Manufacturing sites – 32 progressing to Lean excellence • Instill principles and utilize proven processes & tools Plant - Transformations • Lean culture company wide • Clear and measurable results – Safety – Quality – Delivery
Slide 18: Footprint Optimization Accelerated
Footprint Optimization Accelerated Strategy • Develop larger scale facilities • Leverage technical competencies and resources • Significant cost advantage • Attract higher talent Systematic Approach Over Five Years • Create competency centers - Manufacturing – assembly and machining - Service/Rental
Slide 19: Organization and Talent Strategy
Organization and Talent Strategy • Develop and upgrade talent – Sales force effectiveness – Engineering & marketing talent – Entry level talent pipeline in sales, operations, engineering • Incentives aligned with strategy • Reinvigorate LEAD as foundation of culture – 5,000 trained employees Septemb
Slide 20: Actuant Goals
Actuant Goals Core Sales Growth > Base Margin +100% FCF FCF= Acquisition Market Expansion Conversion Capital Annual deployment of Grow organic revenue Expanding EBITDA % - Consistently delivering free cash flow in above rate of end investment in best free cash flow in excess strategic tuck-in market
Slide 21: Actuant 5 Year Growth Plan
Actuant 5 Year Growth Plan Core growth above market 10% Total Sales CAGR with Core Sales • Expand industries and regions Growth > Market • Commercial effectiveness & share capture • Product innovation $750+ Million FCF = Acquisition Capital Driving world-class operations and service • Full deploymen
Slide 22: Actuant Investment Case
Actuant Investment Case Diversified industrial growth company with a portfolio of market-leading brands providing mission critical customer solutions LEAD is the foundation of Actuant’s culture and will drive operational excellence and growth Effective deployment of industry leading cash generation
Slide 23: Industrial – Steve Rennie
fo) 2 a Vs Ww z W Industrial Steve Rennie Aictuant 23
Slide 24: Industrial Growth Plan
Industrial Growth Plan Product/Service Range Expansion • Expand tool and bolting portfolio • Second-tier brand to take share Regional Penetration • APAC & EMEA – strengthen our product and channel position including through acquisitions Improving Channel Effectiveness • Protect the premium channel (
Slide 25: Regional Penetration
Regional Penetration Asia-Pacific Share Growth • Primary focus areas: - North Asia - Southeast Asia - China – lowest price point • Expanded sales coverage • Acquisitions and joint venture agreements - Ready-made distribution channel - New channel for Enerpac premium tools • Opportunities for product
Slide 26: Second-Tier Brand
Second-Tier Brand Trends Execution • Active shoppers with focus Products on price • Product / component rationalization • Expanding market segment • Product differentiation • Increased cost sensitivity with market downturn Channel – specific to each region • Purchasing practices require • Americas m
Slide 27: Product Range Expansion
Product Range Expansion Expand tools offering • Cutters & pullers • Additional products Expand bolting portfolio • Tensioners, pneumatic torque wrench & electric torque wrenches Gen II Integration of “smart” technology • Pumps, bolting, tools Integrated Solutions • Wheeled gantries & trailers • “Sma
Slide 28: Industrial Summary
Industrial Summary 2016 2021 • Expand sales ROW 20% ROW above market, NA 30% 40% world-class NA EBITDA margins 55% Europe 25% • Global market Europe penetration 30% • Organic and acquisition growth Other 5% Other 20% opportunities Construction Gen Ind 15% 30% Gen Ind 40% Construction IS 10% 10% Mini
Slide 29: Engineered Solutions
Engineered Solutions Roger Roundhouse 29
Slide 30: Engineered Solutions Growth Plan
Engineered Solutions Growth Plan Expanding Served Industries • Aerospace • Medical Regional Penetration • EMEA agriculture • NA off-highway human machine interface (HMI) displays • Truck emerging markets Commercial & Channel Effectiveness • Indispensable customer partnership • Mission critical syste
Slide 31: Commercial & Channel Effectiveness
Commercial & Channel Effectiveness • Reorganization of commercial operations Customer Examples – Regional accountability – Technical sales staff - subject matter engineering experts with design and application expertise – Clearly defined growth laneways – expanded served industries – Cross-sell larg
Slide 32: Product/Service Range Expansion
Product/Service Range Expansion Reliability & Productivity for Food – Feed – Fuel – Fiber Agriculture Precision Farming Moisture/Crop Sustainable Agronomics Sensors (“Do more with less”: Soil, water, fertilizer) Jobsite Efficiency, Safety, Security and Productivity Infrastructure Connected Safety Vi
Slide 33: Engineered Solutions Summary
Engineered Solutions Summary 2016 2021 ROW ROW 10% 15% • EBITDA margins improved to NA NA double digits 50% 50% Europe Europe • Mission critical 40% 35% OEM system solutions for safety Other Medical 5% Other • Organic and 5% 10% Truck acquisition growth Auto Truck Medical 10% 30% 10% 25% opportuniti
Slide 34: Energy – Ken Bockhorst
/ laa l I Energy aut Ken Bockhorst ie yy ie f ee —Aictuant 34
Slide 35: Energy Growth Plan
Energy Growth Plan Product/Service Range Expansion • Integrity assurance and verification • Specialty services • Heavy lifting and testing services Regional Penetration • Focus on high growth energy regions (Middle East, Africa, Caspian, SE Asia, Mexico) • Op-ex sector and downstream market share Ex
Slide 36: Expanding Served Industries
Expanding Served Industries Leverage core competency in synthetic fibers to develop products for Medical medical devices and surgical procedures – device actuators, ACL loops Specialty tethers customized for electrical/optical signal, power and strength needs of aerospace and aerostat sectors; Aeros
Slide 37: Product/Service Range Expansion
Product/Service Range Expansion PPS Continue to Bundle Specialty Services and Niche Products 37
Slide 38: Energy Summary
Energy Summary 2016 2021 • Growth above NA 25% NA 25% market, 20% ROW ROW EBITDA margins 40% 40% • Globalize Europe Europe differentiated 35% 35% MRO activities • Organic and acquisition growth Other Other opportunities Industrial5% 5% 10% Industrial 15% Onshore Onshore MRO MRO 30% Upstream/ 35% Cap
Slide 39: Financial Summary
Financial Summary Andy Lampereur 39
Slide 40: Actuant Business Model
Actuant Business Model Business Model Core Sales FCF= Acquisition +100% FCF Long-Term Growth > Market Capital Base Margin Expansion Conversion Metrics Grow organic Annual deployment Expanding EBITDA Consistently revenue above of free cash flow in % - investment in delivering free cash rate of end st
Slide 41: Fiscal 2017 Guidance Summary
Fiscal 2017 Guidance Summary (US$ in millions except EPS) F' 2016 F' 2017E Sales $1,149 $1,075 - 1,125 EBITDA $152 $145 - 160 Diluted EPS $1.22 $1.00 - 1.20 Free Cash Flow $112 $85 - 95 2016 excludes impairment, restructuring and divestiture net gain. 2017 guidance excludes restructuring and any fut
Slide 42: 2017 EPS Guidance Bridge
2017 EPS Guidance Bridge EPS Description 2016 EPS $1.22 FX ($0.02) -($0.03) Predominately GP Pound Higher income tax rate ($0.12) -($0.16) ~4% → ~15% effective tax rate Restructuring benefits $0.04 - $0.06 Year-over-year savings Acquisitions/Divestitures $0.05 - $0.07 Half year Larzep/PPS net of San
Slide 43: Fiscal 2017 Core Sales Expectations
Fiscal 2017 Core Sales Expectations Core Growth 2016 2017(est) 2017 1H 2017 2H Industrial (10)% Flat to +3% -LSD +LSD Energy (2)% (12) - (15)% -DD -LSD Engineered (6)% (2) to +1% -MSD +LSD Solutions Consolidated (6)% (2) - (6)% -MSD Flat Difficult Core Sales Comparisons in the First Half, Improving
Slide 44: 16th Consecutive Year of 100%+ Conversion
16th Consecutive Year of 100%+ Conversion Free Cash Flow Conversion Trend 300% 298% 254% 186% 140% 155% 137% 132% 120% 123% 127% 126% 127% 122% 121% 116% 114% 110% 100% 100% 80% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Provides Fuel for Growth 44
Slide 45: Capital Allocation
Capital Allocation • Capital deployment • Capital allocation priorities: strategies: ‒ Growth ‒ Deploy substantially all • Organic free cash flow in strategic, tuck-in acquisitions • Acquisitions ‒ Net debt/EBITDA leverage ‒ Share repurchases comfort zone maintained ‒ Dividend – no change in the 1.5
Slide 46: Strategic Plan 5 Year Goals: Core Sales Growth
Strategic Plan 5 Year Goals • Core sales growth “above market” through: 10% Total Sales CAGR with Core Sales Growth > Market ‒ Share capture Grow organic revenue ‒ New markets and geographies above rate of end markets ‒ New product introductions • Market rebound off of currently depressed “industria
Slide 47: Strategic Plan 5 Year Goals: Margin Expansion
Strategic Plan 5 Year Goals • EBITDA, EPS and cash flow growth through Base Margin Expansion margin expansion ‒ Leveraging sales volume growth on fixed Expanding EBITDA % - investment in best overhead base businesses and LEAD ‒ Approximately $50 million of benefit from current restructuring program
Slide 48: Strategic Plan 5 Year Goals: Capital Deployment
Strategic Plan 5 Year Goals • Disciplined, ROIC-focused capital deployment +100% FCF Conversion of free cash flow ‒ Free cash flow conversion of net earnings Consistently delivering free cash flow in excess over 100% of net earnings ‒ 1.5-2.5X net debt to EBITDA leverage zone ‒ Adequate cash flow an
Slide 49: Strategic Plan 5 Year Goals - Summary
Strategic Plan 5 Year Goals - Summary Goals Outcome • Organic growth above • Total sales growth CAGR market ~10% • Annual margin expansion • EBITDA growth CAGR +15% • Free cash flow > net earnings • Robust free cash flow growth and conversion • 1.5-2.5X net debt/EBITDA • 15-20% annual EPS • Double d
Slide 50: Session 1
Session 1 12:30 — 12:55 —Actuant
Slide 51: Session 2
Session 2 1:00 — 1:25 —Actuant
Slide 52: Session 3
Session 3 1:30 — 1:55 —Actuant
Slide 53: Session 4
Session 4 2:00 — 2:25 —Actuant
Slide 54: Wrap-Up
Wrap-Up Randy Baker —Aictuant
Slide 55: Actuant Pathway to Growth
Actuant Pathway to Growth Expand industries and regions Commercial effectiveness and share Organic Growth capture Product innovation Drive Lean principles Operational Excellence Goal Zero safety Optimized cost position Expand product lines Strategic Acquisitions Increase global coverage Acquire comp
Slide 56: Actuant Goals
Actuant Goals 10% Total Sales CAGR Base Margin +100% FCF $750+ Million FCF= with Core Sales Expansion Acquisition Capital Growth > Market Conversion Annual deployment of Grow organic revenue Expanding EBITDA % - Consistently delivering free cash flow on above rate of end investment in best free cash
Slide 57: Actuant Investment Case
Actuant Investment Case Diversified industrial growth company with a portfolio of market-leading brands providing mission critical customer solutions LEAD is the foundation of Actuant’s culture and will drive operational excellence and growth Effective deployment of industry leading cash generation
Slide 58: Appendix
Appendix —Actuant
Slide 59: Free Cash Flow / Cash Flow Conversion
Free Cash Flow / Cash Flow Conversion (US$ in millions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total EBITDA (1) $87 $84 $90 $106 $145 $181 $228 $260 $171 $185 $244 $283 $267 $246 $191 $152 Cash Interest (47) (30) (20) (12) (15) (23) (28) (35) (36) (27) (26) (
Slide 60: GAAP/Non-GAAP Reconciliations
GAAP/Non-GAAP Reconciliations (US$ in millions) EBITDA EPS 2016 2015 2016 2015 Net (Loss) Earnings ($105) $20 Net (Loss) Earnings Per Share ($1.78) $0.32 Net Financing Costs $29 $28 Impairment Charges $2.86 $1.33 Income Tax (Benefit) Expense ($25) $6 Restructuring Charges $0.17 $0.00 Depreciation &