Actuant Corp. (ATU) recently posted fiscal 2010 second-quarter net income of $7.2 million, compared to $3.2 million in the year-ago period. Excluding special items, adjusted earnings per share came in at 19 cents, beating the Zacks Consensus Estimate by 3 cents, or nearly 19% primarily as a result of stringent management initiatives to control costs.

During the quarter, Actuant reported essentially flat sales of $294.2 million, compared to $293.8 million in the year-ago quarter. The flat sales reflected favorable currency translations almost fully offset by a 3% decline in core sales (excluding the impact of currency, acquisitions and divestitures) coupled with a 1% decrease arising from European electrical bike and plumbing product line divestiture.


Sales from the Industrial segment slipped 3.5% to $69.2 million from $71.7 million in the year-ago period as demand remained weak across all regions and end markets. Adjusted operating margin improved by 60 basis points (bps) 22.9% as Actuant benefitted from restructuring efforts partially offset by increased incentive compensation.


During the quarter, sales dipped by 9.4% to $53.9 million, compared to $59.5 million in the prior year quarter. The division recorded a 14% decline in core sales as Actuant witnessed sluggish refinery maintenance, seismic exploration and project-based revenue. However, adjusted operating margin increased by 50 bps to 10.4% due to cost-saving initiatives.


Actuant’s Electrical division reported an 8.9% decrease in sales to $81.7 million from $89.7 million in the year-ago period, primarily due to lackluster demand from electric utility, commercial construction and European DIY (do-it-yourself) markets. However, adjusted operating margin surged to 6.0% from 2.7% in the year-ago quarter, primarily as a result of restructuring related cost savings.

Engineered Solutions

This segment recorded a strong sales growth of 22.6% year-over-year to $89.4 million as Actuant witnessed higher sales in global truck, automotive and specialty vehicle markets. The company also swung to an adjusted operating margin of 6.7%, from a negative 3.8% in the year-ago quarter mainly due to increased volumes and restructuring efforts.

Balance Sheet and Cash Flow

At the end of the quarter, Actuant had cash and cash equivalents of $15.7 million and long-term debt of $392.9 million, compared to $22.3 million of cash and $672.0 million of long-term debt in the prior year quarter. During the quarter, the company generated $11.1 million of cash from operations and received $7.5 million from products line divestiture, while deploying $10.6 million towards debt repayments and $3.6 million towards capital expenditure.

Guidance & Zacks Consensus

Looking ahead, Actuant now expects sales of $1.225 billion to $1.250 billion, adjusted earnings of 87 to 97 cents per share and free cash flow of $110 million during fiscal 2010. The company earlier predicted revenue of $1.20 billion to $1.25 billion and earnings of 82 to 97 cents per share for the fiscal. The revised guidance is in line with the Zacks Consensus Estimate of 95 cents per share, which jumped by 5 cents in just the past week as 8 of 11 covering analysts raised expectations.

For fiscal 2010 third quarter, Actuant anticipates adjusted earnings of 24 cents to 29 cents per share. This guidance is also in line with the Zacks Consensus Estimate of 27 cents per share, which moved up a penny over the past week as 5 of 10 covering analysts increased projections while 2 moved in the opposite direction.

Actuant is a diversified industrial company with operations in more than 30 countries. The company’s businesses operate in a broad array of niche markets including branded hydraulic and electrical tools and supplies; specialized products and services for energy related industries and highly engineered position and motion control systems.

Zacks Investment Research