Enerpac Tool Group Corp. · NYSE:EPAC
Enerpac Tool — Actuant — Investor Day (October 2014)
60 slides from Enerpac Tool's investor day presentation, Oct 7, 2014
Slide 1: Actuant Corporation 2014 Investor Day
Actuant Corporation 2014 Investor Day October 7, 2014 New York, NY
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 Goldstein Opening Remarks Multiple Transformational Progress – Operating Company, G+I, High Growth Markets, Acquisitions Lampereur Business Model / Capital Allocation Noon-12:30 Bre
Slide 4: Actuant Q&A Table Attendees
Actuant Q&A Table Attendees Rotational Table Assignments Provided to Each Attendee (with name badge) Industrial Energy Mark Sefcik Brian Kobylinski Engineered Solutions Corporate/M&A/HR Roger Roundhouse Andy Lampereur Mark Goldstein Ted Wozniak Sheri Grissom 4
Slide 5: Opening Remarks
Opening Remarks Mark Goldstein - CEO 5
Slide 6: Actuant's Vision
Actuant’s Vision Vision To grow Actuant’s revenue and improve profit margins across a diverse group of market leading businesses. We will be known as a growth company that is operationally excellent. 6
Slide 7: Fiscal 2014 Highlights
Fiscal 2014 Highlights • Leadership transition and changes – CEO, Segment & High Growth Market (HGM) leadership, others • Portfolio simplification via divestiture of Electrical segment, RV product line and Viking “people” business • Continued progress on Growth + Innovation cultural transformation •
Slide 8: Actuant Strategy Map
Actuant Strategy Map Actuant will double over five years with improving profit margins across a diverse Vision group of market leading businesses. We will be known as a growth company that is operationally excellent Business Model Financial 1.5-2.0X Deploy + 25-50 BPS >100% FCF Metric GDP FCF Base M
Slide 9: Leadership Updates
Leadership Updates Organization Structure • Eliminated COO position • Kobylinski to Energy Kobylinski Sefcik Roundhouse Goldstein Engineered Thomas • Promoted Sefcik to Energy & Industrial & CEO Solutions & LEAD Office China India Brazil Industrial • Roundhouse replaces Lampereur Blackmore in ES CFO
Slide 10: Portfolio Management Transformation
Portfolio Management Transformation Fiscal 2001 Fiscal 2008 Fiscal 2014 Sales $460 million Sales $1.6 billion Sales $1.4 billion OEM Electrical 2% Mining MRO Other 4% 12% Retail DIY Industrial MRO 13% Infrastructure Retail Electrical Industrial MRO Industrial MRO 20% 5% 20% 20% 20% Electrical Wholes
Slide 11: Macro Growth Markets – by Segment
Macro Growth Markets – by Segment Other NR/Sustain 6% 5% Other Global 19% Energy Infrst 35% 8% NR/Sustain 8% ATU Revenue Mix Energy Segment Energy Global 81% Food/Farm Infrst 11% 27% Energy Other 1% Global 3% Infrst NR/Sustain 14% 10% Energy Other 25% 46% ES Segment Industrial Segment Food/Farm 30%
Slide 12: Moving Forward
Moving Forward Accelerating activities in four primary areas which will: • Drive scale • Self-fund growth Scalable operating Narrower company • Tighten strategic M&A M&A fairways alignment Organic growth urgency • Accelerate HGM growth HGM “inside- out” While executing more strategies effectively, a
Slide 13: Operating Company – Accelerating a Scalable Business Model
Operating Company – Accelerating a Scalable Business Model Mark Goldstein 13
Slide 14: Operating Company - Overview
Operating Company - Overview Holding Company Operating Company Focus on individual businesses Coordinated and aligned strategies, customized by business and region Leaders responsible for individual Leaders responsible for Actuant; yet business results still accountable for business Slow decision ma
Slide 15: Scalable Business Model
Scalable Business Model Creating A Scalable Business Model - One Actuant • Eliminating duplicate processes / functions: example - Actuant Asia Sourcing • Standardizing and simplifying key processes: example – Credit & Collection • Common tools: example – Compass (performance management & goal settin
Slide 16: A Growth Company that is Operationally Excellent
“A Growth Company that is Operationally Excellent” • “Top to Shop” • Talent upgrade & mobility • Goal alignment • Performance calibration • Visibility & execution • Continuous improvement focus Strategy Talent Deployment Management High Performance Process Work Teams Excellence • Foundations via eLe
Slide 17: Activities Driving Self-Funded Growth Investments
Activities Driving Self-Funded Growth Investments • Back office simplification ‒ Enabled via measured ERP conversions ‒ Credit & collections, sales & use tax, disbursements centralization ‒ Beginning European shared service center ‒ Leverage India and China for engineering, IT and other services • O
Slide 18: Facility Optimization
Facility Optimization Recent Actions: • Akhisar, Turkey • Bangalore, India • Creston, IA • Columbus, WI • CPS Germany • Hong Kong • Lancaster, PA • Malaysia • Mississauga, Canada • Perth, Australia • Rio de Janeiro, Brazil Expansions • Singapore Close/Shrink Existing location 12 Individual Facility
Slide 19: Facility Investments
Facility Investments • Housing multiple product lines / Turkey – Power-Packer business units • Lean optimization / visual management • Facilitates: – G+I – Standardization – Low cost country assembly Wisconsin – Enerpac Australia – Pan-Actuant 19
Slide 20: Organic Growth Acceleration
Organic Growth Acceleration Mark Goldstein and Segment Leaders 20
Slide 21: Actuant's Macro Growth Market Focus
Actuant’s Macro Growth Market Focus Key Trends Energy Demand Global Infrastructure Food/Farm Productivity Natural Resources / • Global power generation • Emerging market build-out • Population growth Sustainability and oil & gas maintenance • Transportation • Affluence / protein diets • Mining / res
Slide 22: Targeted Growth Market Considerations
Targeted Growth Market Considerations • Broad evidence and data to support underlying market trends – significantly above GDP growth rates • Good fit for the niche products, services, and technologies provided by Actuant businesses • Existing presence within the market; understanding growth drivers,
Slide 23: Comprehensive Growth Strategy
Comprehensive Growth Strategy Buy M&A Strategy Acquisition Due Integration Targeting Diligence Growth Actuant/BU Laneways Strategic Objectives Make Opportunity Pressure Phase-Gate Commercialization Funnel Test Our G+I and M&A Strategies are Inextricably Linked 23
Slide 24: G+I – Accelerating Growth Urgency
G+I – Accelerating Growth Urgency • Continued cultural transformation • Striving for bigger ideas • Prioritizing best ideas, versus “watering” every new seed “Top 3 / Next 3” • Aligned capital and best people G+I Initiatives Contributing Incremental 1% to Core Sales Growth 24
Slide 25: More than Just New Products
More than Just New Products Thinking Differently About the Drivers of Growth • Voice of the customer – solving unmet needs • Global accounts • Sales force effectiveness, alignment and training • Channel expansions • Focus on recurring revenue / MRO • Influencing industry regulations • Sources of rev
Slide 26: G+I Example – Product Lifecycle Planning
G+I Example – Product Lifecycle Planning Defending Product Product Line Creating Growth Lines Repositioning Gauges Driveline Clusters HMI •Channel Driveline System •Commercial •Portfolio Auto •Cost •Functionality Ag Seeder •Strategic Customer Stabilization Smart Stabilizer Flex shaft Relationships R
Slide 27: Ag Seeder - G+I Update
Ag Seeder - G+I Update Original Initiative Overview Current / Future State of Initiative Actions / Results: • Operational improvements: Seeder layout and FMEA design reviews • “Standardized” product line expansion • Custom OEM development • ~$15 million annualized growth Next Three Years: • Building
Slide 28: Joint Integrity (JI) - G+I Update
Joint Integrity (JI) - G+I Update Original Initiative Overview Current / Future State of Initiative Actions / Results: • Multiple project wins • Aggressive alternative technology marketing • Funding for JI College and PCC1 Joint • >$100 million in project revenue booked Integrity Next Three Years: •
Slide 29: G+I Addition – Cortland Umbilical Expansion
G+I Addition – Cortland Umbilical Expansion Current / Future State of Initiative Actions / Results: • Prioritized as #1 Cortland growth initiative • Participated in M&A activities with key competitor validating market attractiveness • Record umbilical sales in 2014 • Business plan approval (capex an
Slide 30: G+I Addition – Hydratight Connectors
G+I Addition – Hydratight Connectors Current / Future State of Initiative Actions / Results: • AS Connector partnership to jointly supply subsea pipeline inspection, repair, and maintenance (IRM) solutions • Organization build – engineering and sales Next Three Years: • Build out diversified offerin
Slide 31: G+I Addition – Enerpac Pow'R-Lock
G+I Addition – Enerpac Pow’R-Lock Current / Future State of Initiative Actions / Results: • Launched August 2014 • Demonstration trailers deployed to mining and other related sites • Secured multiple unit orders with CAT; several other customers Next Three Years: • Build out multiple sizes and speci
Slide 32: G+I Addition – ENERPAC Brand Study
G+I Addition – ENERPAC Brand Study Actions Net Promoter Score • Leadership phone calls to “detractor” customer to gain +50 Feedback color on comments +47 • “Because it's a reliable company that produce their parts to the • Top four key issues highest possible standards” targeted for improvement focu
Slide 33: Accelerate High Growth Market Growth
Accelerate High Growth Market Growth Brian Kobylinski, EVP Energy & China 33
Slide 34: High Growth Markets (HGMs)
High Growth Markets (HGMs) • Creating share – 19% core sales growth in HGM’s in fiscal 2014 • Change in leadership structure to drive pan-Actuant strategies • Three pronged focus that varies by region ‒ Commercial ‒ Manufacturing and assembly ‒ Services ‒ Building “inside out” growth strategies Sign
Slide 35: Accelerate HGM Growth Strategy
Accelerate HGM Growth Strategy Outside-In Strategy Inside-Out Strategy Global business unit driven strategies that Locally created and driven strategies to compete targeted multi-national competition with unique competitive set and channels Insensitivity or lack of awareness of social Higher ability
Slide 36: Aligning Resources
Aligning Resources Three Year LCC +231 Headcount Change Core -115 • Shared services concept for back office • Investments made in local skills and competencies • Centers of Excellence created (India IT and engineering, China sourcing, and manufacturing) Note: LCC includes Brazil, India, China, Mexic
Slide 37: M&A
M&A Ted Wozniak – EVP, Corporate Development 37
Slide 38: M&A Market Update – Current Environment
M&A Market Update – Current Environment • Pipeline very active • Combination of mostly tuck-ins and a few larger potential platform businesses • Valuation multiples vary by size of business, end market, and business characteristic. Seller expectations remain extremely high • Acquisition focus & disc
Slide 39: Acquisition Process and Criteria
Acquisition Process and Criteria Niche exposure to strategic secular growth • Rigorous and standardized markets acquisition process (AIM or Acquisition Integration Model) Recurring revenue – replacement or service • Governed by robust business and segment strategic planning process Emerging market A
Slide 40: Assessment of Acquisitions – Last Five Years
Assessment of Acquisitions – Last Five Years In addition to strategic fit within a business/segment… Macro Tuck-In HGMs Recurring, Market Low Above Growth or Service, Leader Capital Avg Theme Platform Consumable Intensity Margins Hayes T Viking P CrossControl T TuroTest T Jeyco T Weasler P Selantic
Slide 41: Summary of Sizable Transactions – Last Five Years
Summary of Sizable Transactions – Last Five Years Purchase Revenue at Current Other Items Price (millions) Deal Revenue (millions) (millions) Cortland $230 $100 $120 • Strong LEAD adoption Sep 2008 • $75 in Energy • Capacity with little capital thus far Energy • Facility sharing with ATU Core CAGR ~
Slide 42: Cortland – Acquisition Assessment
Cortland – Acquisition Assessment Revenue at Deal Current Revenue (millions) (millions) Cortland $100 $120 Energy Sep 2008 • $75 in Energy Core CAGR ~5% • $25 Sanlo in ES Growth Strategies • Globalization of deep water • Challenging deal timing – cusp of great capabilities recession • Migration from
Slide 43: Viking – Acquisition Assessment
Viking – Acquisition Assessment Revenue at Deal Current Revenue (millions) (millions) Viking $90 $75 Aug 2013 Growth Strategies • Difficult start – rig push outs and North Sea (StatOil) spending cuts • Three primary growth laneways • Significant growth in Southeast Asia – Global offshore market stre
Slide 44: Weasler – Acquisition Assessment
Weasler – Acquisition Assessment Revenue at Deal Current Revenue (millions) (millions) Weasler $85 $105 June 2011 Core CAGR ~7% • Strong growth in both OEM and aftermarket, Growth Strategies just beginning to moderate • Global expansion – notably • Margins strong and consistent with acquisition Euro
Slide 45: Hayes Industries – Latest Acquisition
Hayes Industries – Latest Acquisition Purchase Price Revenue at Deal (millions) (millions) Hayes $31 $25 May 2014 Growth Strategies • Tuck-in to Enerpac’s Precision Sure-Lock • Leverage encapsulation business with complementary products in the technology in both elevated concrete tensioning infrastr
Slide 46: A Look Back
Summary - Acquisition Process Enhancements • Tighter alignment around macro growth A Look drivers Back • Clearer identification of synergies across the ATU platform • Routinely “post-mortem” all • Increased review of industry, market, transactions for both regulation and technology management and Bo
Slide 47: Our Foundation – What Hasn't Changed
Our Foundation – What Hasn’t Changed Andy Lampereur – CFO 47
Slide 48: Actuant Business Model
Actuant Business Model Business Model Long-Term 1.5-2.0X Deploy + 25-50 BPS >100% FCF Metrics GDP FCF Base Conversion Margins Execution of Model Can Mean Doubling of Business Over Five Years 48
Slide 49: Actuant Business Model: 3% Core Growth
Actuant Business Model Deployed $30M Op Margins 3% Core on tuck-in 4% EPS -140 Basis Increase (1) Growth Acquisition Points (1) HGM $164M of FCF Sales up $284M Share with 122% 19% Repurchases Conversion of Net Earnings (1) (1) Continuing operations, excluding RV divestiture gain 49
Slide 50: Consistency of Cash Flow Generation
Consistency of Cash Flow Generation Free Cash Flow $225 $205 $196 $158 $164 $145 Free Cash Flow Conversion Trend $150 300% 298% $75 254% $0 2010 2011 2012 2013 2014 186% 140% 137% 132% FCF per Share 120% 123% 127%126%127%122% 114%121%116% $3 $2.75 100% $2.62 100% $2.26 $2.10 $1.95 $2 80% 2001 2002 2
Slide 51: Capital Allocation
Capital Allocation • Capital deployment • Capital allocation priorities: strategies: ‒ Growth ‒ Deploy substantially all • Organic free cash flow in acquisitions • Acquisitions ‒ Maintain net debt/EBITDA ‒ Share Repurchases leverage in the 1.5-2.5x ‒ Dividend – no change range (currently 1.1x) • $60
Slide 52: Cash Return to Shareholders vs. Dividend
Cash Return to Shareholders vs. Dividend • Absent a meaningful change to our size or capital position, no change to dividend policy at this time • Continue to use opportunistic stock buybacks as our primary means of returning cash to shareholders • EPS accretive • Provides more flexibility to start
Slide 53: Cash Returned to Shareholders
Cash Returned to Shareholders Peer 1 • TTM dividends plus ATU 12.4% buy-backs as a % of Peer 2 market capitalization Peer 3 Peer 4 • Actuant second Peer 5 highest in ~30 Peer 6 company proxy Peer 7 Peer 8 compensation peer Peer 9 group plus select large Peer 10 cap diversified Peer 11 industrials Pe
Slide 54: 2015 EPS Guidance
2015 EPS Guidance EPS from Continuing Operations $2.50 $0.06 $0.18 $2.25 $0.08 $0.03 $0.33 $2.10 $0.15 $2.00 $1.95 $0.04 $0.07 $1.79 $1.75 $0.05 $1.50 FY14 RV Gain Tax Gain FX Adjusted Base Share Viking Income Tax Net M&A Incentive FY15 FY14 Business BuyBacks Retention Rate Comp MidPoint Baseline Fi
Slide 55: 2015 Potential – Pro Forma for Capital Allocation
2015 Potential – Pro Forma for Capital Allocation (US $ in millions, except per share amount) Proforma 2015 Guidance Assuming $200 million of stock buybacks (6.25 million shares @ $32/share) AND $200 million business acquisition @ 9x EBITDA 2015 Mid- With Stock With Buyback Point Buyback and Acquisi
Slide 56: Wrap-Up
Wrap-Up 56
Slide 57: Actuant Business Model
Actuant Business Model Business Model Long-Term 1.5-2.0X Deploy + 25-50 BPS >100% FCF Metrics GDP FCF Base Conversion Margins Execution of Model Can Mean Doubling of Business Over Five Years 57
Slide 58: Final Thoughts
Final Thoughts Through our recent actions, Actuant today… • Is simplified, yet still diverse • Is strategically linked to long-term macro growth themes • Holds leading market positions in niche markets • Generates higher margins • Has a stronger organization to execute the Vision • Has abundant capi
Slide 59: Final Q&A
Final Q&A Diversified End Markets, Customers & Geography Niche Market Leadership Positions Continuous Improvement Culture Experienced Disciplined Leadership Team and Acquisition & Strong Integration Strategy Insider Ownership Cash Flow / ROIC Focused 59
Slide 60: Free Cash Flow / Cash Flow Conversion
Free Cash Flow / Cash Flow Conversion (US$ in millions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total EBITDA $87 $84 $90 $106 $145 $181 $228 $260 $171 $185 $244 $283 $267 $246 Cash Interest (47) (30) (20) (12) (15) (23) (28) (35) (36) (27) (26) (26) (21) (21) Cash Taxes