Enerpac Tool Group Corp. · NYSE:EPAC
Enerpac Tool — Actuant — Investor Day (October 2012)
72 slides from Enerpac Tool's investor day presentation, Oct 2, 2012
Slide 1: Actuant Corporation 2012 Investor Day
Actuant Corporation 2012 Investor Day October 2, 2012 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 f t factors andd uncertainties t i ti that th t may cause actual t l results lt to t differ diff significantly from expectations. Those factors a
Slide 3: Agenda
Agenda Time Activity Participants Detail 10:00 Kick-Off Bauer Welcome/Format Introduction Arzbaecher Opening Remarks 10:30-12:00 ATU Updates Bauer ATU “Misconceptions” Various G+I At Work Wozniak Acquisition Strategy / Update Goldstein Op Ex in Focus 12:00-12:30 Break and All Break and Buffet Lunch
Slide 4: Table Attendees / Guests
Table Attendees / Guests Rotational R t ti l Table T bl Assignments A i t Provided P id d to t Each E h Attendee (with name badge) Industrial Electrical Brian Kobylinski David Scheer Ted Wozniak Andy Lampereur Energy E Engineered E i d Solutions S l ti Jan de Koning Bill Blackmore Mark Goldstein Bob
Slide 5: Opening Remarks
Opening Remarks B bA Bob Arzbaecher b h - 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. excellent 6
Slide 7: On the Right Path…
On the Right Path… Growth + • …to becoming a growth company Innovation that is operationally excellent (G+I) Disciplined p • Evolutionary change - enhancing Acquisitions (AIM) capabilities and institutionalizing processes Operational Excellence • Moving away from cyclical to (LEAD) focus on more att
Slide 8: Executing Longstanding Business Model
Executing Longstanding Business Model Business Model Long-Term 1.5-2.0X Deploy + 25-50 BPS >100% FCF Metrics GDP FCF Base Conversion Margins On the Right Path - Consistently Generating Strong Cash Flow 8
Slide 9: Fiscal 2012 Highlights
Fiscal 2012 Highlights • Core growth of 5% • Significant progress on Growth + Innovation cultural transformation • Robust free cash flow - $196 million representing 126% conversion of net earnings • Generated 24% increase in EPS from continuing operations to $2 $2.08 08 (1) • Improved operating marg
Slide 10: Investment Performance (stock return CAGR)
Investment Performance (stock return CAGR) 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% 1-Year 3-Year 5-Year 10-Year Since Spin ATU S&P 500 Russell 2000 Strong Investment Performance in Fiscal 2012 Represents TSR CAGR through August 31, 2012 10
Slide 11: In Summary…
In Summary… • Consistent strategy & strong execution drive shareholder returns • Expect similar macro to 2012 but experienced and agile team prepared if environment changes • Today Today’s s key messages: – We continue to build growth capabilities and are seeing results – Secular growth trends provi
Slide 12: Common Actuant Misconceptions
Common Actuant Misconceptions K Karen B Bauer - IR 12
Slide 13: "What the Street Doesn't Get"
“What the Street Doesn’t Get” Virtually Every Investor Meeting We Hold Ends With…. • What is the street missing with your story? • What common misperceptions do you hear most from investors? • What do you think investors “don’t get” about Actuant? 13
Slide 14: "What the Street Doesn't Get"
“What the Street Doesn’t Get” Using Your Voting Tool – We Will Go Through Top Things g the Street “Doesn’t Get” About Actuant 1. I’ll ask a question 2. Using your voting tool, select your preferred answer (but WAIT until timer begins to count down) 3. Results will display instantly 4. I’ll address t
Slide 15: "What the Street Doesn't Get"
“What the Street Doesn’t Get” • Actuant’s diversity makes it complex to manage –A Agree g –B Neutral –C Disagree g –D Don’t know 15
Slide 16: Actuant Is Not That Complex to Manage
Actuant Is Not That Complex to Manage • Highly scalable organization structure - segment leaders serve as “mini” COO’s • Knowledgeable and engaged business leaders drive: – Entrepreneurial “front end”– marketing, engineering, sales, etc – Leveraged “back end” – standardization & simplification, LEAD
Slide 17: Leadership Updates
Leadership Updates • New Leadership Team Members/Roles Ӎ Steve Rennie – Specialty Power Transmission (Weasler/Elliott) Business Leader Ӎ John Thomas – VP LEAD Office Ӎ Kathy Johnston – Cortland Business Leader Arzbaecher CEO Boel Lampereur Goldstein Grissom Wozniak EVP CFO COO Human Resources Corpor
Slide 18: "What the Street Doesn't Get"
“What the Street Doesn’t Get” • The energy segment performance is primarily tied to? –A Oil prices p –B Rig counts –C Drilling g activity y –D North Sea activity –E Maintenance 18
Slide 19: Energy Segment Drivers
Energy Segment Drivers MRO to a diverse group of Petrochem Aero/Other Energy end markets is the Refineries primary p y driver Power Gen • But “all of the above” are relevant in Nuclear Offshore some way Capital – Oil prices represent “confidence” Related Projects indicator for capital and maintenanc
Slide 20: "What the Street Doesn't Get"
“What the Street Doesn’t Get” • For acquisitions, you primarily compete against other multi-industry strategics who are bigger and can outbid you –A Agree –B Disagree –C Don’t know 20
Slide 21: M&A Competitive Environment
M&A Competitive Environment Acquisitions Since 2009 • Given niche market focus, Private competition seldom involves other Auction Negotiation multi-industry lti i d t public bli companies i – Two thirds represent individual negotiation – Auction represents remaining third – competition split evenly
Slide 22: "What the Street Doesn't Get"
“What the Street Doesn’t Get” • Actuant is too diverse and the acquisitions simply add to that diversity –A Agree –B Neutral –C Di Disagree –D Don’t Know 22
Slide 23: Focused on Growth Platforms
Focused on Growth Platforms • Actuant has a focused growth strategy centered around four primary secular trends • Filter for capital deployment and portfolio management decisions • Will remain diversified,, but clear categories g of growth g laneways Energy Demand Global Infrastructure Food/Farm Pro
Slide 24: End Market Transformation Since Recession
End Market Transformation Since Recession 2008 2012 Other O h Other 14% Industrial 20% Mining Industrial/MRO MRO 4% 22% 22% Infrastructure Marine 4% 5% CE/Vehicles 5% Electrical Wholesale Marine 6% 5% Retail/DIY Retail/DIY Energy Auto 15% 5% 23% 9% Auto 5% Truck Agg 11% Energy 8% Truck 14% 9% I Incr
Slide 25: "What the Street Doesn't Get"
“What the Street Doesn’t Get” • Actuant revenues are cyclical and tied to OEM builds and capital expenditures. Aftermarket / MRO account for only what percent of Actuant Actuant’s s revenue? –A ~5% –B ~15% 15% –C ~25% –D ~50% 50% 25
Slide 26: Sizable and Growing Maintenance/Aftermarket
Sizable and Growing Maintenance/Aftermarket Actuant Revenue by Category • IIncreasing i since i Service/AM 20% 2008/2009 recession • Acquisition and organic OEM or growth criteria Capital 50% • G+I - moving beyond products d t tto add dd MRO 30% services and new go- to-market strategies Service/Afte
Slide 27: "What the Street Doesn't Get"
“What the Street Doesn’t Get” • Your growth strategy, which includes acquisitions, has resulted in declining ROIC. –A Agree –B Neutral –C Di Disagree –D Don’t Know 27
Slide 28: Improving ROIC Trend
Improving ROIC Trend Pre-tax ROIC 25% 21.7% 21.8% 20.9% 19.3% 20% 17.1% 15.4% 15% 12.6% 10% 5% 0% Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 ROIC = EBITA Net Debt + Book Equity ROIC in Similar Range Despite Approx. $1 Billion of Capital Deployed Since 2006 EBITA is pro forma to provide full LT
Slide 29: Growth + Innovation In Action
Growth + Innovation In Action On the right path to becoming a growth company that is operationally excellent 29
Slide 30: Actuant Growth Process
Actuant Growth Process Strategic Priorities Opportunity Funnel Pressure Test Selection Phase‐Gate Commercialization Surveying the Market, Products, Services, Early and Deep Refining ideas, Development process Performance to plan Definingg Strategy gy Programs g and Engagement g g with and fundingg f
Slide 31: G+I At Work – What You'll Hear
G+I At Work – What You’ll Hear • Stories of G+I at various stages of the process • Macro themes • Emerging E i markets k t Kobylinski • CAT Dozer Lift System • Enerpac Integrated Solutions Blackmore • Commercial Marine Actuation de Koning • Gorgon – One Year Update • Hydratight Service Playbook Sche
Slide 32: CAT Dozer Lift System
CAT Dozer Lift System • VOC identified need – safe / speed in D11 dozer maintenance • Design D i solution l ti tto promote t safety f t / productivity d ti it / uptime ti of equipment • Embedded engineer at CAT - custom design/lift points ensures safety • Targeted revenue opportunity = $10 million b
Slide 33: Enerpac Integrated Solutions
Enerpac Integrated Solutions Chernobyl Encapsulation • IS approx. $60 million segment of Enerpac • G+I activities – Proactive project generation – Improved processes and visibility (risk management, quotations, operations) – Building emerging market Las Vegas Wheel business – Linked to vertical mark
Slide 34: Commercial Marine Actuation
Commercial Marine Actuation • Power-Packer end market extension – commercial marine cargo/door • Current solutions involve extensive hosing, multiple activation points and unsafe locations • Developed “Self Self Contained Unit” Unit after in depth VOC Ӎ Reduce cost (installation and maintenance) Ӎ L
Slide 35: Marine Actuation - Differentiated Solution
Marine Actuation - Differentiated Solution • Pressure Test –European customers • Product refined –new modular design to use on multiple vessels Figure 1: Shell Door locking system with hydraulic tubes • DNV approval in process (Norske Veritas) • Patent protected • First order shipped • Target revenu
Slide 36: Gorgon – Year One Update
Gorgon – Year One Update • Consultancy built on Hydratight technical authority • Entry at early point in project lifecycle • Clear safety/environmental agenda • Compliance C li & auditing diti - assured result • Initial contract of $10 million, million now expected to increase to $40–45 million over
Slide 37: Gorgon – Closer Look
Gorgon – Closer Look Excerpt from Chevron Gorgon website • Infrastructure built Pre-assembled rack modules, constructed at various global locations, arrive on Barrow Island. From here they are offloaded and undergo a thorough at various locations quarantine inspection. In total, 53 module shipments
Slide 38: Hydratight Service Playbook
Hydratight Service Playbook • Market Launch Playbook – “process” for cross-selling or launching of technologies g – Develop future vision for global growth for the capability – Value proposition of capability identified in home market – Build rapid launch playbook for testing and rapidly scaling mar
Slide 39: Marine Electric Propulsion
Marine Electric Propulsion • Electric propulsion – similar to vehicles (hybrid or full electric) • Emissions regulations and rising fuel costs underlying demand driver – also boat OEM desire for differentiation • Technology uses intelligent electronics with reserve energy to run onboard electronics
Slide 40: Emerging Markets
Emerging Markets Commercial Manufacturing • Oil & gas / energy • Global Customers • DPATS Model • Construction / infrastructure • ‘I id O ‘Inside Out’t’ St Strategy t • Supply Chain • Agriculture • Market Mapping • Distribution • Vertical Market • Logistics • Mining Focus • Industrial MRO Center of
Slide 41: Brazil
Brazil • Leverage Turotest infrastructure (e.g. back office) • Localize content/sourcing • E t d to Extend t other th ATU businesses b i (W (Weasler, l Power-Packer, P P k etc) t ) • Grow local and global customer relationships (CAT, Komatsu, AGCO, CNH, BP, Chevron) • Build local customer relationsh
Slide 42: India
India • Built-out experienced management team • Market entry ease utilizing existing ATU infrastructure Ӎ Enerpac p / Hydratight y g p presence Ӎ Power-Packer truck facility • Low-cost manufacturing g base • Shared services for savings and technological advancement – e.g. LCC Engineering • Acquisiti
Slide 43: Global Customers
Global Customers • Trusted business partner – less focus on price and annual line reviews • Leverage investment and research to g gain access to other similar accounts • Pressure test - potential expansion to other common global accounts examples include: 43
Slide 44: Example: CAT Supplier Fair
Example: CAT Supplier Fair • Global Supplier Fair – Concept Brochure Theme • Unique, technology collaboration event • CAT has stated a technology strategy to develop world-class customer value by collaborating with strategic suppliers Identified Potential Revenue = From $15 million to >$200 $200 mil
Slide 45: Growth via Acquisitions
Growth via Acquisitions T dW Ted Wozniak i k – EVP C Corporate D Development l On the right path to becoming a growth company that is operationally excellent 45
Slide 46: Acquisitions Remain Key Growth Driver
Acquisitions Remain Key Growth Driver Objectives Deploy Annual Free Cash Flow – On Average Maintain leverage within 1.5-2.5X Net Debt / EBITDA range Track Record Pre-2009 2009 2010 2011 2012 $940M $235M $45M $313M $70M Sizable acquisitions q include 46
Slide 47: Criteria Example: Weasler Acquisition Assessment
Criteria Example: Weasler Acquisition Assessment Segment dustrial ectrical ergy Ene Ele Ind ES √ ways Fina Emerging √ Market Share Leader wth Lanew Market √ ancial Mettrics Asset √ >GDP Growth Recurring Low Capital Revenue √ Deployment Intensity Grow S i Service √ Margins >ATU >Segment √ √ √ margins
Slide 48: Strategy: Platform Build-Outs
Strategy: Platform Build-Outs • Focused around major growth themes • Extend capabilities / leverage end market / expand geographically hi ll • Classic Example: Hydratight • Two more recent build-outs: Ӎ Cortland Ӎ Maxima 48
Slide 49: Rope and Cable Platform - Themes
Rope and Cable Platform - Themes • Globalization of deep water capabilities • Migration from wire rope to synthetic • System sell with slings slings, anchors anchors, etc etc. • Mooring systems • Enerpac Integrated Solutions (heavy lifting applications) leverage 49
Slide 50: Instrumentation & Controls - Themes
Instrumentation & Controls - Themes • Multi-tiered product portfolio • Opportunities within all four strategic t t i growth th platforms l tf • Geographic and global customer coverage • Technology systems development expertise 50
Slide 51: M&A Market Update
M&A Market Update • Pipeline active • Multiples vary significantly by asset • No discernible impact of potential US capital gains tax law changes • Acquisition focus & discipline – “Targeting process” in place in all segments and businesses – Focus on • Higher growth end markets tied to attractive s
Slide 52: Maintaining Operational Excellence Focus
Maintaining Operational Excellence Focus Mark Goldstein - COO On the right path to becoming a growth company that is operationally excellent 52
Slide 53: Acquisition Integration Synergies
Acquisition Integration Synergies • Weasler – One Year Later Ӎ Working capital constant despite nearly 10% t line top li growth th 5S in the Small Clamp Cell Ӎ Expanded capacity with no capital – OEE and continued outsourcing of components Ӎ Reduced lead times / safety stock with SIOP (sales, invent
Slide 54: Activities Driving Margin Expansion
Activities Driving Margin Expansion • Facility Optimization/Upgrades • New Enerpac facility Ӎ “Ideal state” layout enables flow and SIOP Existing, compartmentalized facility in Ӎ Configurable to expand for future C l b established Columbus t bli h d iin 1959 1959. consolidations/acquisition integrat
Slide 55: Break and Lunch Buffet
B k and Break dLLunch hBBuffet ff t 12 30 Begin 12:30 B i S Segmentt Q&A R Roundtable dt bl Rotations 55
Slide 56: Closing Remarks
Closing Remarks Andy Lampereur – CFO Bob Arzbaecher - CEO 56
Slide 57: Leveraging Investments
Leveraging Investments F' 2011 F' 2012 Change S l Sales $1 445 $1,445 $1 605 $1,605 11% Core Growth 5% EBITDA (1) $244 $283 16% Margins 16.9% 17.7% 80 b ps EPS (1) $1.68 $ $2.08 $ 24% Headcount (2) 6,175 6,300 2% Investing in Growth + Innovation while Simplifying Operations and Back Office (1) Conti
Slide 58: Working Capital – Cash Flow Driver
Working Capital – Cash Flow Driver Aug 31, 2011 Aug 31, 2012 PWC $277 million $272 million PWC % Sales 17.2% 16.8% • Significant reductions in inventory inventory, especially retail electrical and solar • Receivables aging best in company history • ROIC focus drives past and future PWC improvement –
Slide 59: Consistency of Cash Flow Generation
Consistency of Cash Flow Generation $200 Free Cash Flow $196 $158 $150 $145 $150 $100 Free Cash Flow Conversion Trend $50 300% 298% $0 254% 2009 2010 2011 2012 FCF Yield (at August 31) 186% 16% 14.2% 14% 140% 12% 10.4% 9.8% 9.1% 137% 132% 10% 120% 121% 116% 123% 127% 126% 8% 114% 6% 100% 4% 100% 2%
Slide 60: Record Level of Capital Availability
Record Level of Capital Availability Net Debt/EBITDA Leverage Assumes deployment of $500M of 2.0 capital on acquisitions at average 8X EBITDA multiple. Leverage still at lower end of comfort zone 1.7 1.5 1.1 1.0 Assumes no deployment of 05 0.5 capital – all 04 0.4 2013 free cash flow to reduce debt
Slide 61: 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 Means Doubling g of Business Every Five Years 61
Slide 62: Capital Allocation Priorities
Capital Allocation Priorities Three Year (F2010-2012) Free • Growth Cash Flow Deployment – Organic g $500 – Acquisitions…tuck-ins and larger transactions/ $400 platforms $300 • Share Repurchases – opportunistic pp $200 • Dividend – no change $100 F’12 shares h $0 repurchased 2.7M Acquisitions Buy-Ba
Slide 63: Critical to Achieve Vision - People
Critical to Achieve Vision - People • Continuous improvement in succession planning • Key talent additions to supplement internal learning & development • Actuant Leadership Expectations (ALE) – defined behaviors at all organization i ti llevelsl • Management Development Programs (MDP) – college rot
Slide 64: Focused Board and Management Team
Focused Board and Management Team • Diverse & complementary backgrounds • Continually developing / acquiring leadership talent • Incentive compensation objectives strongly aligned with shareholder interests • Acting decisively for shareholders • IInsider id stock t k ownership hi (management/employe
Slide 65: On the Right Path to Achieving Vision
On the Right Path to Achieving Vision ($ in millions except per share data. Fiscal years ended August 31) Sales $1,680- $400 EBITDA $297- $2,000 $1,720 $307 $1,605 $283 $1,446 $260 $1,600 $1,445 $300 $244 $1,274 $228 $1,118 $1,161 $1 161 $181 $ $185 $1,041 $200 $171 $1,200 $144 $967 $106 $727 $87 $8
Slide 66: In Summary…
In Summary… Actuant Remains a Strong Investment Opportunity ► Proven management g team ► Improving cash flow / ROIC business model ► Clear strategy and goals ► Secular growth markets provide a broad array of core and acquisition opportunities ► Positioned to deliver profitable, sustainable growth &
Slide 67: Final Q&A
Final Q&A Diversified End Markets, Customers & Geography Niche Market Leadership Positions Continuous Improvement Culture Experienced Disciplined Leadership Team and Acquisition & Strong Integration g Strategy gy I id Ownership Insider O hi Cash Flow / ROIC Focused 67
Slide 68: Supplemental Information
Supplemental Information 68
Slide 69: EBITDA Reconciliation
EBITDA Reconciliation ((US$ $ in millions)) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EBITDA Net Earnings $24 ($3) $29 $35 $71 $96 $114 $126 $26 $70 $124 $87 Net Financing Costs 49 33 21 14 17 26 33 36 42 32 32 46 Income Tax Expense 16 8 16 15 35 33 47 56 1 19 35 33 Depreciation &
Slide 70: Diluted Earnings Per Share Excluding Special Items
Diluted Earnings Per Share Excluding Special Items 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Diluted Earnings per Share (EPS) $ 0.71 $ (0.06) $ 0.59 $ 0.66 $ 1.21 $ 1.56 $ 1.83 $ 1.98 $ 0.43 $ 0.97 $ 1.68 $ 1.17 Net of Tax Adjustments: Change in Accounting Principal 0.17 Discontinu
Slide 71: 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 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)
Slide 72: Focused on Underlying Secular Growth Trends
Focused on Underlying Secular Growth Trends 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 • Mini