Actuant uses third-quarter free cash flow of $65 million to trim debt

By Jennifer Lanning Drey

Portland, Ore., June 17 - Actuant Corp. generated nearly $65 million of free cash flow in the third quarter of fiscal 2009, which allowed the company to lower net debt to $594 million at May 31, Andy Lampereur, the company's chief financial officer, said Wednesday during its quarterly earnings conference call.

Third-quarter cash flow included a $37 million reduction in primary working capital, he said.

Actuant had $13.3 million of cash and cash equivalents at May 31.

The company continues to look for additional opportunities to maximize its cash, including sale-leaseback transactions, he said.

Responding to a question on whether the company may look to make changes to its capital structure, Lampereur said, "The good news is it looks like all of the markets are open, whether it's high-yield bonds, bank loans or even equity, so certainly if we decide to look at something, the markets are open, but there's nothing in progress."

At May 31, Actuant's leverage ratio was 2.97 times, and the fixed-charge coverage ratio was 2.20 times.

As previously reported, Actuant recently amended its credit facility going forward to revise the leverage and fixed-charge coverage ratios. As a result, the maximum leverage ratio is 4.0 times through Aug. 31 and 4.5 times for Nov. 30 and Feb. 28, 2010.

The fixed-charge coverage ratio decreased to 1.65 times from 1.75 times.

"While we didn't have to do the amendment now, as a covenant violation was not imminent in the third quarter, we decided to remove the uncertainty by just amending the facility to provide more cushion," Lampereur said.

Actuant posted third-quarter sales of $290 million, compared to sales of $445 million in the same period of 2008. Excluding the impact of foreign currency rate changes and acquisitions, core sales declined by 33%.

Moving forward, the company plans to execute restructuring and cost-reduction actions, while also focusing on reducing inventory.

The company expects free cash flow of approximately $125 million for the full year.

Actuant is a Butler, Wis.-based diversified industrial company.

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