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Article by DailyStocks_admin    (07-23-08 05:33 AM)

The Daily Magic Formula Stock for 07/22/2008 is Actuant Corp. According to the Magic Formula Investing Web Site, the ebit yield is 10% and the EBIT ROIC is 50-75 %.

Dailystocks.com only deals with facts, not biased journalism. What is a better way than to go to the SEC Filings? It's not exciting reading, but it makes you money. We cut and paste the important information from SEC filings for you to get started on your research on a specific company.


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BUSINESS OVERVIEW

General



Actuant Corporation, headquartered in Butler, Wisconsin, is a Wisconsin corporation incorporated in 1910. The Company is a manufacturer of a broad range of industrial products and systems. In fiscal 2000, the Company went through a spin off and spun off its electronics division. The Company is organized into four operating and reportable segments as follows: Industrial, Electrical, Actuation Systems and Engineered Products.



The Industrial segment is primarily involved in the design, manufacture, and distribution of branded hydraulic tools to the industrial, oil & gas, power generation, construction, and production automation markets. The Industrial segment also provides manpower services and tool rental to the global joint integrity market. The Electrical segment is primarily involved in the design, manufacture, and distribution of electrical tools and supplies to the retail, electrical wholesale, original equipment manufacturer (“OEM”), and marine markets. The Actuation Systems segment primarily focuses on developing and marketing highly engineered position and motion control systems for OEMs in the recreational vehicle, automotive, truck, and other industrial markets. The Engineered Products segment designs and manufactures various products for industrial markets.



Our long-term goal is to grow annual diluted earnings per share excluding unusual or non-recurring items (“EPS”) faster than most multi-industry peers. We intend to leverage our leading market positions to generate annual internal sales growth that exceeds the annual growth rates of the gross domestic product in the geographic regions in which we operate. In addition to internal sales growth, we are focused on acquiring complementary businesses. Following an acquisition, we seek to drive cost reductions, develop additional cross-selling opportunities and deepen customer relationships. We also focus on profit margin expansion and cash flow generation to achieve our EPS growth goal. Our LEAD (“Lean Enterprise Across Disciplines”) process utilizes various continuous improvement techniques to drive out costs and improve efficiencies across all locations and functions worldwide, thereby expanding profit margins. Strong cash flow generation is achieved by maximizing returns on assets and minimizing primary working capital needs. The cash flow that results from efficient asset management and improved profitability is used to reduce debt and fund additional acquisitions and internal growth opportunities. Our application of this strategy has generated profitable growth over the past seven years.

Description of Business Segments



Industrial



We believe the Industrial business is a leading global supplier of hydraulic tools, supplies and services for the general industrial, construction, oil & gas, power generation and production automation markets. We design, produce, and market our industrial tools primarily through our Enerpac, Precision Sure-Lock, Hydratight, TTF, Injectaseal, and D.L. Ricci brand names. The following is a summary of our Industrial segment product lines:



High Force Hydraulic tools . We believe Enerpac is a leading global supplier of specialized high-force hydraulic industrial tools operating at very high pressures of approximately 5,000 pounds per square inch to 12,000 pounds per square inch. The hydraulic tool line consists of a broad range of products that are generally sold by industrial and specialty fluid power distributors to customers in the construction, mining, steel mill, cement, rail, oil and gas, and general maintenance industries. While the majority of its customers are specialty fluid power distributors, Enerpac also works closely with major global construction firms to supply products that are used in major infrastructure projects. Enerpac’s products allow users to apply controlled force and motion to increase productivity, reduce labor costs and make work safer and easier to perform. In addition to specialty fluid power distributors and global construction firms, Enerpac maintains strong customer relationships with leading industrial distributors such as W.W. Grainger, Applied Industrial Technologies, and MSC.



We also believe Enerpac is a leading supplier of hydraulic workholding components and systems. Workholding products hold parts in position in metal cutting machine tools during the machining process. The products are marketed through distributors to the automotive, machine tool and fixture design markets.

Enerpac also offers customized hydraulic products and systems that are sold to construction firms or directly to OEM customers. Our product development staff works closely with customers to develop hydraulic solutions for specific industrial or construction applications.



Precision Sure-Lock and TTF maintain a leading market position in the concrete pre- and post-tensioning product markets in the U.S. and Europe, respectively. Products include one-time use and reusable chucks and wedges, stressing jacks, and anchors that are used by concrete tensioning system designers, fabricators, and installers. Primary end markets include residential and commercial construction, bridges and infrastructure, and underground mining and tunnels.



Joint Integrity. Hydratight, D.L. Ricci and Injectaseal provide joint integrity solutions to the global oil & gas and power generation markets. Products include hydraulic torque wrenches, bolt tensioners and portable machining equipment, which are sold to service providers and through distribution, or rented to end users. These products are used in the maintenance of joints on oil rigs, refineries and pipelines as well as fossil fuel and nuclear power plants. We also provide manpower services whereby our employees perform bolting, machining and joint integrity work for customers. Sales and services are provided to customers in emerging markets as well as in the North Sea, Middle East, South America, China, Asia, Gulf of Mexico and the tar sands of Canada. This business maintains strong relationships with a variety of leading oil & gas firms such as Statoil, BJ Services, British Petroleum, and Shell.



Electrical



We believe the Electrical business is a leading supplier of a wide array of branded specialized electrical tools and supplies in North America and Europe to electrical wholesale distributors, catalog houses, retail home centers, hardware cooperatives, and the retail marine distribution channel. We design, produce, and market our electrical tools and supplies using strong established brand names such as Acme Electric, Actown, Gardner Bender, Marinco, BH Electronics, Kopp, and Dresco. Our Electrical business provides thousands of stock keeping units (“SKUs”), most of which are designed and manufactured by us in the United States and Germany. The electrical businesses share core competencies in product branding, distribution and channel management, global sourcing, and managing the logistics of SKU intensive product lines. The following is a summary of the Electrical segment product lines:



North American Electrical – The North American Electrical product line includes electrical tools and supplies sold to the North American retail home center, hardware cooperatives and retail automotive aftermarket, supplying thousands of SKUs through a variety of distribution channels. The primary brands utilized in this product line include Gardner Bender, Del City, A.W. Sperry, and Calterm. Customers include leading retailers such as Lowe’s, The Home Depot, Menards, True Value, Ace Hardware, Wal-Mart, and Sears. Principal products include the following:




Cable ties, staples, fasteners and wire management




Wire connectors, solderless terminals and lugs




Conduit bending and fishing equipment




Electrical hand tools




Electrical testers and meters




Electric wire and cable




Plugs, sockets and other automotive products



European Electrical – The European Electrical product line includes electrical tools and supplies sold to the German, Benelux and Austrian retail home center, wholesale distribution and OEM markets. European Electrical products are also sold in Eastern European markets such as Hungary, Poland, the Czech Republic, and Russia, as well as Scandinavia. The primary brands include Kopp and Dresco. Customers include leading retailers such as Praktiker (Metro Group), Hagebau/Zeus, Rewe, Hornbach, Baumax, Praxis, Gamma and Formido. Principal products include the following:




Wall switches and receptacles




Circuit breakers




Multiple socket outlets and surge protectors




Electrical hand tools




Cable ties, staples, fasteners and wire management




Electric wire and cable




Plumbing accessories




Bicycle accessories



Specialty Electrical – Principal products of the Specialty Electrical product line include a broad offering of electrical products and systems for harsh environments sold under the Ancor, Marinco, Guest, AFI, Nicro, B.E.P Marine and BH Electronics brand names. These products are sold to boat manufacturers such as Chapparall, Mastercraft, Sea Ray, and Bayliner, marine retailers such as West Marine and Boaters World, catalog businesses such as Cabelas and Bass Pro Shops and other marine aftermarket distributors. Approximately one-half of Specialty Electrical sales are to non-marine and harsh environment markets, including the outdoor theatrical and event lighting, recreational vehicle, medical, industrial, and power generation markets. Customers in these non-marine markets include Applied Materials, Fleetwood, and Kohler. The majority of its sales are in North America, with additional revenues being derived in Europe, New Zealand, and Australia. Specialty Electrical’s main products include the following:




Cable ties and wire management




Battery distribution, switches and chargers




Electrical receptacles, plugs, switches, and accessories




Control panels and digital monitoring systems




Electric wire and cable




Ship-to-shore and heavy duty power cords



Professional Electrical – The Professional Electrical product line includes a broad range of single-phase, dry type transformers sold into the low voltage segment of the North American transformer market, as well as custom toroidal transformers, coils, neon transformers and LED lighting systems. Approximately one-quarter of its products are sold in the US through a wholesale distribution network of approximately 2,000 electrical distributors, including Affiliated Distributors, IMARK, CED, and Rexel, with the balance directly to a variety of OEMs such as Siemens, Powerware, Intermatic and General Electric. Products are sold under the Acme Electric, Actown, and Amveco brand names.



Actuation Systems



We believe that the Actuation Systems business is a leading global designer and manufacturer of customized position and motion control systems and products for OEMs in a variety of niche industrial markets. The segment works with its customers to provide customized solutions, primarily in the recreational vehicle (“RV”), heavy-duty truck, and automotive markets. Products include RV slide-out, leveling and retractable step and cargo tray systems, hydraulic cab-tilt and latching systems for heavy-duty trucks, electro-hydraulic automotive convertible top latching and actuation systems, air handling and turbo charger components and systems for the heavy-duty truck market, and flexible shafts for a variety of end markets. We believe that the segment’s principal brands, Power-Packer, Power Gear, Kwikee, B.W. Elliott, and Gits are recognized for their engineering quality and integrated custom design product lines in the Actuation Systems segment summarized below:



Truck Actuation Systems – The Truck Actuation Systems product line includes customized position and motion control systems and products for OEMs in the heavy-duty truck market. Primary products include hydraulic cab-tilt and latching systems, actuators used in air handling/turbocharger systems, and exhaust gas recovery systems used by diesel engine manufacturers. These products are sold to leading OEMs such as Volvo, Iveco, Scania, Detroit Diesel, Garrett Turbochargers, Holset Engineering, IHI, and Borg Warner under the Power Packer, Gits, and Yvel brand names. The majority of Truck Actuation Systems sales are in Europe and North America, with an emerging presence in China and other Asian countries.



Recreational Vehicle Actuation Systems – The Recreational Vehicle Actuation Systems product line consists of electric and hydraulic powered slide-out, step and leveling systems for the RV market under the Power Gear and Kwikee brand names. Slide-out systems, which are typically comprised of sensors, electronic controls, and either hydraulic pumps and cylinders or electric motors, allow an RV owner to increase a room’s size by telescoping a section of the room’s wall outward. Leveling systems typically consist of hydraulic cylinders, a 12-volt DC hydraulic motor pump and an electronic control system and are capable of leveling motor homes to within three degrees of fully horizontal. Retractable steps, which are comprised of 12-volt gear motors, along with fabricated steps, allow the RV owners to easily access the RV. Most sales are generated in North America, although we also supply product to the European RV market. We supply most of the major US RV OEMs including Fleetwood, Winnebago, and Monaco. Approximately 90% of our sales to this market are for the motorhome sector of the RV market with the balance in the travel trailer sector.



Automotive Actuation Systems – The Automotive Actuation Systems product line includes electro-hydraulic automotive convertible top actuation and latching systems. These systems are comprised of sensors, electronic controls, hydraulic cylinders, latches, electric motors and a hydraulic pump. Our convertible top actuation systems are utilized on both retractable soft and hard top vehicles. We are the supplier of the convertible top actuation system on various automotive platforms with OEM’s including Daimler Chrysler, Audi, Volkswagen, Renault, Peugeot, Saab, General Motors, and Ford. We maintain strong relationships with leading customers such as Wilhelm Karmann GmbH, CTS Dachsysteme, Edscha, and Webasto. Approximately 80% of our Automotive Actuation Systems are manufactured in Europe.



Engineered Products



We provide a variety of products and engineered solutions to other niche markets. The brands used to market these products are as follows:




We engineer, manufacture, and market electronic controls, components, and systems for low-to-medium volume severe-duty applications. Products are sold to the marine, agricultural, off-highway, industrial, specialty vehicle, and automotive aftermarket under the Datcon, Stewart Warner, and AST brand names.




Milwaukee Cylinder produces a broad range of hydraulic and pneumatic tie-rod cylinders for a wide variety of applications including automated production lines, machine tools, machinery, boat drives and material handling.




Nielsen Sessions offers a comprehensive line of case, container and industrial hardware. Products include a variety of hinges, latches, handles, caster plates and accessories.




Acme Aerospace manufactures and sells cell fibrous nickel cadmium batteries, battery chargers, power management systems, power supplies and converters used in a variety of aerospace and defense applications. Such products are sold to aerospace OEMs, military contractors, the U.S. military, and commercial airlines.




Turner Electric engineers, manufactures, and markets high voltage switch products to the North American electric utility industry consisting primarily of air break switches, load break interrupters and accessory equipment.



International Business



Actuant is a global company. In fiscal 2007, we derived approximately 52% of our net sales from the United States, 39% from Europe, 7% from Asia, 1% from Canada, and 1% from South and Latin America. International sales are influenced by fluctuations in exchange rates of foreign currencies, foreign economic conditions and other factors associated with foreign trade. We serve a global customer base and have implemented a global infrastructure for the manufacturing, sourcing, distribution and sales of our products. Our global scale and infrastructure enable us to meet the needs of our customers with global operations, which supports our strong relationships with many customers who are leaders in their industries.



Distribution and Marketing



The Industrial segment sells products through distributors and OEM channels, while our Electrical segment sells its products through a combination of distributors, direct sales personnel and manufacturer’s representatives into the retail, distribution and OEM distribution channels. Our distributor networks are one of our key competitive strengths in providing exceptional service to our end customers.



Retail We utilize a combination of internal account managers and independent manufacturers’ representatives to serve the retail customers of our Electrical segment, including home centers, specialty marine and automotive retailers, mass merchandisers and hardware cooperatives. Sales and marketing personnel provide significant marketing support, including promotional planning, sales programs, retail point-of-purchase materials and displays, effective product packaging, strong advertising programs, and state of the art merchandising.



Wholesale Distribution The Industrial and portions of the Electrical segments sell products through thousands of wholesale distributors via internal direct sales managers dedicated to the distributor channel and independent sales representatives. Due to the fragmentation of the distribution channel, we rely extensively on independent manufacturers’ representatives to provide ongoing customer sales and service support.



OEM Sales to this channel are made through a combination of internal direct field sales representatives, independent sales representatives, catalogs, telemarketers and the internet.



Products in the Actuation Systems and the Engineered Products segments are primarily marketed directly to OEMs through a direct technical sales organization. Most product lines also have dedicated market managers as well as a technical support organization. We utilize an experienced sales force, organized by end-market, that typically resides in the manufacturing facilities and report to market sales leaders that are based in the primary engineering facilities for their respective market areas. Within the Actuation Systems and Engineered Products segments, engineering capabilities, technical service and established customer relationships are key competitive advantages in winning new contracts.



Product Development and Engineering



We have earned a reputation for design and engineering expertise and for the creation of highly engineered innovative products. We maintain engineering staff at several locations that design new products and make improvements to existing product lines. Research and development costs are expensed as incurred. Expenditures for research and development were $11.6 million, $9.7 million, and $8.7 million in fiscal 2007, 2006 and 2005, respectively. We have developed several proprietary technologies and hold over 775 patents, including pending applications, across the world.



Competition



We generally have numerous competitors in each of our markets, but believe that we are well positioned to compete successfully. Although we face larger competitors in some markets, the majority of our competition in our niche markets is primarily composed of small, regional competitors who often lack the infrastructure and financial resources to support global customers. Given our diversity we generally do not compete with the same competitors in more than one of our business segments. We believe that our global scale and infrastructure help to build and maintain strong relationships with major customers.

Patents and Trademarks



We own numerous United States and foreign patents and trademarks. No individual patent or trademark is believed to be of such importance that its termination would have a material adverse effect on our businesses.



Manufacturing and Operations



Our manufacturing operations primarily consist of light assembly operations. However, we do have plastic injection molding and machining operations and automated welding and painting lines in certain businesses. We have implemented single piece flow methodology in most of our manufacturing plants, which reduces inventory levels, lowers “re-work” costs and shortens lead time to customers. We manufacture the majority of the products we sell, but strategically outsource components and finished goods from an established global network of qualified suppliers. Components are purchased from a variety of suppliers, including those in low cost countries such as China. We have built strong relationships with our key suppliers over many years, and while we single source many of our components, we believe that in most cases there are several qualified alternative sources.



Order Backlogs and Seasonality



We had an order backlog of approximately $231.9 million and $159.5 million at August 31, 2007 and 2006, respectively. Our order backlog has significantly increased as a result of acquired businesses and core growth. Substantially all orders are expected to be completed prior to the end of fiscal 2008. Our Industrial and Electrical segments have relatively short order-to-ship cycles, while our OEM-oriented Actuation System and Engineered Product segments have longer cycles, and therefore typically have larger backlogs. Our consolidated sales are not subject to significant seasonal fluctuations.



Employees



At August 31, 2007, we employed approximately 7,400 people. Our employees are not subject to any collective bargaining agreements with the exception of approximately 200 domestic production employees and employees covered by government-mandated collective labor agreements in some international locations. We believe working relationships with our employees are good.



Environmental Matters



Our operations, like those of all industrial businesses, are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those regulating discharges of hazardous materials into the air and water, the storage and disposal of such materials, and the clean-up of soil and groundwater contamination. Pursuant to certain environmental laws, a current or prior owner or operator of a site may be liable for the cost of an investigation and any remediation of contamination, and persons who arrange for disposal or treatment of hazardous materials may be liable for such costs at a disposal or treatment site, whether or not the person owned or operated it. These laws impose strict, and under certain circumstances, joint and several liability.

We believe that we are in material compliance with applicable environmental laws. Compliance with these laws has and will require expenditures on an ongoing basis. Soil and groundwater contamination has been identified at a few facilities that we operate or formerly owned or operated. We are also a party to state and local environmental matters, and have provided environmental indemnifications for several divested business units, and as such retain responsibility for certain potential environmental liabilities.



Environmental expenditures over the last three years have not been material, and we believe that the costs for known environmental matters are not likely to have a material adverse effect on our financial position, results of operations or cash flows. Nevertheless, more stringent environmental laws, unanticipated, burdensome remedy requirements, or discovery of previously unknown conditions could have a material adverse effect upon our financial condition and results of operations. Environmental remediation accruals in our Consolidated Balance Sheets are not significant. For further information, see Note 14, “Contingencies and Litigation” in the Notes to Consolidated Financial Statements.

CEO BACKGROUND

Robert C. Arzbaecher, President and Chief Executive Officer and Chairman of the Board of Directors. Mr. Arzbaecher was named President and Chief Executive Officer of the Company in August 2000. He served as Vice President and Chief Financial Officer of Actuant starting in 1994 and Senior Vice President in 1998. He served as Vice President, Finance of Tools & Supplies from 1993 to 1994. He joined Actuant in 1992 as Corporate Controller. From 1988 through 1991, Mr. Arzbaecher was employed by Grabill Aerospace Industries LTD, where he last held the position of Chief Financial Officer.



William S. Blackmore, Executive Vice President—Actuation Systems and Engineered Products. Mr. Blackmore was named leader of the Engineered Solutions business in fiscal year 2004. He joined the Company as leader of the Engineered Solutions-Americas business in fiscal year 2002. Prior to joining Actuant, he served as President of Integrated Systems—Americas at APW Ltd. from 2000 to 2001 and as President, Rexnord Gear and Coupling Products (“Rexnord”) from 1997 to 2000. Prior to 1997 Mr. Blackmore held various general management positions at Rexnord and Pillar Industries.



Gustav H.P. Boel, Executive Vice President and member of the Board of Directors. Mr. Boel has been associated with the Company for over 25 years, currently as a member of the Board of Directors and an Executive Vice President in charge of our LEAD initiatives. Following the spin-off of the Company’s Electronics segment in fiscal 2000, he left the Company as an employee but served as a member of the Board of Directors. During this time he was employed by APW Ltd., where he last held the position of Senior Vice President. In September 2002, he rejoined the Company as an employee and was named business leader of the European Electrical business in addition to his Board responsibilities. Prior to the spin-off, he held various positions with Actuant, including President of the Industrial business segment, President of Engineered Solutions Europe and President of Enerpac.



Mark E. Goldstein, Chief Operating Officer. Mr. Goldstein was appointed to the newly created position of Chief Operating Officer in fiscal 2007. He joined the Company in fiscal year 2001 as the leader of the Gardner Bender business and was appointed Executive Vice President—Tools and Supplies in 2003. Prior to joining Actuant he held senior sales, marketing and operations management positions at The Stanley Works, most recently as President, Stanley Door Systems. Mr. Goldstein was employed by The Stanley Works for 22 years.

Andrew G. Lampereur, Executive Vice President and Chief Financial Officer. Mr. Lampereur joined Actuant in 1993 as Corporate Controller, a position he held until 1996 when he was appointed Vice President of Finance for Gardner Bender. In 1998, Mr. Lampereur was appointed Vice President, General Manager for Gardner Bender. He was appointed to his present position in August 2000. Prior to joining Actuant, Mr. Lampereur held a number of financial management positions at Terex Corporation.



Theodore C. Wozniak, Vice President of Business Development. Mr. Wozniak joined Actuant in April 2006 in his current position. Prior to joining Actuant, Mr. Wozniak held senior investment banking positions at Wachovia Securities, most recently as Managing Director of the Industrial Growth Corporate Finance Group. Mr. Wozniak was employed by Wachovia Securities for ten years. Prior to 1996, Mr. Wozniak held various investment banking positions at First Chicago Capital Markets, and Riggs National Corporation.

MANAGEMENT DISCUSSION FROM LATEST 10K

Background



As discussed in Item 1, “Business”, we are a diversified global provider of a broad range of industrial products and systems organized under four operating segments.



The Industrial segment is primarily involved in the design, manufacture and distribution of branded hydraulic and mechanical tools to the construction, industrial, oil & gas, and production automation markets. In addition, this segment provides manpower services and product rental to the global joint integrity market. The Electrical segment is primarily involved in the design, manufacture, and distribution of electrical tools and supplies to the retail home center, hardware cooperative, electrical wholesale and marine markets. The Actuation Systems segment focuses on developing and marketing value-added, customized motion control systems and equipment for original equipment manufacturers in the recreational vehicle, automotive, truck, and other industrial markets. The Engineered Products segment designs and manufactures a variety of products for industrial markets. The Company has not aggregated individual operating segments within these reportable segments. The Company evaluates segment performance based primarily on net sales and operating profit.

Our long-term goal is to grow annual diluted earnings per share excluding unusual or non-recurring items (“EPS”) faster than most multi-industry peers. We intend to leverage our leading market positions to generate annual internal sales growth that exceeds the annual growth rates of the gross domestic product in the geographic regions in which we operate. In addition to internal sales growth, we are focused on acquiring complementary businesses. Following an acquisition, we seek to drive cost reductions, develop additional cross-selling opportunities and deepen customer relationships. We also focus on profit margin expansion and cash flow generation to achieve our EPS growth goal. Our LEAD (“Lean Enterprise Across Disciplines”) process utilizes various continuous improvement techniques to drive out costs and improve efficiencies across all locations and functions worldwide, thereby expanding profit margins. Strong cash flow generation is achieved by maximizing returns on assets and minimizing primary working capital needs. The cash flow that results from efficient asset management and improved profitability is used to reduce debt and fund additional acquisitions and internal growth opportunities. Our application of this strategy has generated profitable growth over the past seven years.



Results of Operations

The comparability of the operating results for the fiscal years ended August 31, 2007, 2006, and 2005 has been significantly impacted by acquisitions. The results of operations for acquired businesses are included in our reported results of operations only since their respective acquisition dates. See Note 2, “Acquisitions” in Notes to Consolidated Financial Statements for further discussion. In addition to the impact of acquisitions on operating results, currency translation rates can influence our reported results given that approximately 48% of our sales are denominated in currencies other than the US dollar. The weakening of the US dollar over the past fiscal year favorably impacted comparisons of fiscal 2007 to fiscal 2006 results due to the translation of non-US dollar denominated subsidiary results. The strengthening of the U.S. dollar for fiscal 2006 as compared to 2005 unfavorably impacted comparisons of fiscal 2006 to fiscal 2005 results.

Consolidated net sales increased by approximately $258 million, or 21%, from $1,201 million in fiscal 2006 to $1,459 million in fiscal 2007. Excluding $164 million of sales from acquired businesses and the $25 million favorable impact of foreign currency exchange rate changes on translated results, fiscal 2007 consolidated net sales increased approximately 6%. Consolidated net sales increased by approximately $225 million, or 23%, from $976 million in fiscal 2005 to $1,201 million in fiscal 2006. Excluding $176 million of sales from acquired businesses and the $14 million unfavorable impact of foreign currency exchange rate changes on translated results, fiscal 2006 consolidated net sales increased approximately 9%. Net sales at the segment level are discussed in further detail below.



Consolidated operating profit for fiscal year 2007 was $186 million, compared with $154 million for fiscal year 2006 and $123 million for fiscal year 2005. The comparability between periods is impacted by acquisitions and pre-tax restructuring charges of $5 million recorded in both fiscal 2007 and fiscal 2006 (see Note 3, “Restructuring Reserves” in Notes to Consolidated Financial Statements for further discussion). The changes in consolidated operating profit at the segment level are discussed in further detail below.

Fiscal 2007 compared to Fiscal 2006



Industrial Segment



Industrial segment net sales in fiscal 2007 increased approximately $102 million, or 31%, to $427 million from $325 million in fiscal 2006. Excluding sales from the five acquisitions completed since the beginning of fiscal 2006 and the $14 million favorable impact of foreign currency rate changes on translated results, sales grew 13%. The sales increase reflects strong demand in the oil, gas and power generation markets as well as the industrial maintenance, repair and operations (MRO) markets benefiting both the joint integrity and hydraulic tools product lines, and price increases.



Electrical Segment



Electrical segment net sales in fiscal 2007 increased approximately $74 million, or 17%, to $506 million from $432 million in fiscal 2006. Excluding sales from the three acquisitions completed since the beginning of fiscal 2006 and the $13 million favorable impact of foreign currency rate changes on translated results, sales grew 3% as a result of strong original equipment manufacturer demand in the professional electrical product line and the net effect of price increases to offset rising copper prices, both of which were partially reduced by the slow down in the North American residential construction market (impacting the North American Electrical product line) and the OEM boat building market (impacting the Specialty Electrical product line).



Actuation Systems Segment



Net sales in the Actuation Systems segment increased approximately $33 million, or 9%, in fiscal 2007 to $419 million. Excluding the $14 million favorable impact of foreign currency rate changes on translated results, sales grew 5% as a result of higher shipments of RV and Auto actuation systems product lines offset by a reduction in Truck actuation systems sales. RV actuation systems sales increased 11% primarily due to market share gains and an improved balancing of OEM RV production with retail RV demand. As a result of new convertible automotive platform introductions in 2006, including the Volkswagen EOS, Pontiac G6, Volvo C70, and Mitsubishi Eclipse, sales of auto actuation systems (excluding the impact of foreign currency rate changes) increased 8% in fiscal 2007. Finally, sales of truck actuation systems declined 2% on a year-over-year basis due to the effects of the pre-buy stemming from the adoption of new more stringent North American diesel engine emissions standards that took effect on January 1, 2007, which resulted in a surge in OEM production levels in late calendar 2006, followed by significantly lower OEM production levels in calendar 2007.



Engineered Products Segment



Engineered Products segment net sales increased $49 million, or 84%, to $107 million in 2007. Excluding sales from the Maxima acquisition, sales increased 8%, primarily the result of strong demand reflecting favorable economic conditions in the aerospace, hardware, and utility end markets.



Fiscal 2006 compared to Fiscal 2005



Industrial Segment



Industrial segment net sales in fiscal 2006 increased approximately $106 million, or 48%, to $325 million from $219 million in fiscal 2005. Excluding sales from an acquired business and the $1 million unfavorable impact of foreign currency rate changes on translated results, sales grew 16% primarily as a result of improved economic conditions which drove higher worldwide industrial demand as well as price increases due to rising raw material costs.



Electrical Segment



Electrical segment net sales in fiscal 2006 increased approximately $67 million, or 18%, to $432 million from $365 million in fiscal 2005. Excluding sales from an acquired business and the $5 million unfavorable impact of foreign currency rate changes on translated results, sales grew 8% due to the combination of increased demand due to more favorable economic conditions, new product introduction, the full year impact of retail customer product line resets in fiscal 2005, and increased selling prices due to rising raw material costs.



Actuation Systems Segment



Net sales in the Actuation Systems segment increased approximately $35 million, or 10%, in fiscal 2006 to $386 million. Excluding sales from acquired businesses and the $6 million unfavorable impact of foreign currency rate changes on translated results, sales grew 5%. This growth resulted from strong demand during the later part of fiscal 2006 due to pre-buying activity in advance of new North American diesel engine emission standards and new convertible top model launches in 2006, both of which were partially offset by reduced retail demand for recreational vehicles due, in part, to OEM overbuilds in prior years.



Engineered Products Segment



Engineered Products segment net sales increased $17 million, or 41%, to $58 million in 2006. Excluding sales from acquired businesses, sales grew 11% compared to fiscal 2005 as a result of the benefits of continued strength of the North American economy.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations for the Three and Nine Months Ended May 31, 2008 and 2007

The comparability of the operating results for the three and nine months ended May 31, 2008 to the prior year periods is impacted by acquisitions. Listed below are the acquisitions completed since September 1, 2006.

The operating results of acquired businesses are included in the Company’s reported results of operations only since their respective acquisition dates. In addition to the impact of acquisitions, changes in currency translation rates can impact the comparability of our results since approximately half of our sales are denominated in currencies other than the US dollar. The weakening of the US dollar has favorably impacted fiscal 2008 results compared to the prior year.

Consolidated net sales increased by $59.6 million, or 15%, from $385.1 million for the three months ended May 31, 2007 to $444.7 million for the three months ended May 31, 2008. Excluding $29.6 million of sales from acquired businesses and the $23.5 million favorable foreign currency impact, fiscal 2008 third quarter consolidated net sales increased 2%. Fiscal 2008 year-to-date sales increased by $190.3 million, or 18%, from $1,069.1 million in the comparable prior year period to $1,259.4 million in the current year. Excluding $100.1 million of sales from acquired businesses and the $58.5 million favorable impact of foreign currency exchange rate changes, sales for the nine months ended May 31, 2008 increased 3% compared to the prior year period. The changes in sales at the segment level are discussed in further detail below.

Operating profit for the three months ended May 31, 2008 was $61.5 million, compared with $52.5 million for the three months ended May 31, 2007. Operating profit for the nine months ended May 31, 2008 was $155.0 million, compared to $132.9 million for the nine months ended May 31, 2007. The comparability between periods is impacted by acquisitions, foreign currency exchange rate changes, increased sales and profit margins. The nine month comparability is also impacted by European Electrical restructuring provisions recorded during the period. The changes in operating profit at the segment level are discussed in further detail below.

Industrial Segment

Industrial segment net sales increased by $44.2 million, or 38%, from $115.8 million for the three months ended May 31, 2007 to $160.0 million for the three months ended May 31, 2008. During the nine months ended May 31, 2008, Industrial net sales increased by $111.6 million, or 35%, from $316.3 million for the nine months ended May 31, 2007 to $427.9 million. Excluding sales from acquisitions and favorable impact of foreign currency rate changes, core sales grew 14% for both the three and nine months ended May 31, 2008 and 2007. The core sales growth reflects a continuation of strong global demand for Joint Integrity and High Force Hydraulic tools product lines, as well as services provided for the robust oil & gas and power generation markets, along with modest price increases.

Electrical Segment

Electrical net sales increased by $1.6 million, or 1%, from $127.6 million for the three months ended May 31, 2007 to $129.2 million for the three months ended May 31, 2008. During the nine months ended May 31, 2008, Electrical net sales increased by $20.6 million, or 6%, from $373.3 million for the nine months ended May 31, 2007 to $393.9 million. Excluding the acquisition of BH Electronics in June 2007 and the favorable impact of foreign currency rate changes, core sales declined 10% and 6% for the three and nine months ended May 31, 2008, respectively. The decline is the result of lower demand in the retail Do-It-Yourself (“DIY”), transformer, and marine markets. Approximately 65% of the Electrical Segment sales are generated in North America, where economic conditions have deteriorated since the prior year, including a sharp decline in consumer confidence. Year-over-year comparisons were also negatively affected by our strategic decision to exit low margin products in the European Electrical product line as part of our recently concluded restructuring program.

Actuation Systems Segment

Actuation Systems net sales increased by $11.1 million, or 10%, from $111.8 million for the three months ended May 31, 2007 to $122.9 million for the three months ended May 31, 2008. During the nine months ended May 31, 2008, Actuation Systems net sales increased by $30.4 million, or 10%, from $315.1 million to $345.5 million. Excluding the favorable impact of foreign currency rate changes, core sales grew 1% and 2% for the three and nine months ended May 31, 2008, respectively, reflecting strong demand from our global Truck and Auto customers offset by significantly lower Recreational Vehicle (“RV”) market sales volume. Truck sales increased due to robust European new truck build rates and higher prototype and replacement part volumes in North America, while Auto sales increased modestly as a result of new model launches. RV product line sales declined during the periods under review, including a 27% decrease in the three months ended May 31, 2008, due to the combined impact of higher fuel prices, reduced consumer confidence and economic conditions. We expect RV market demand to continue to be weak for the next few quarters based on RV OEM feedback.

Engineered Products Segment

Engineered Products net sales increased by $2.7 million, from $29.9 million for the three months ended May 31, 2007 to $32.6 million for the three months ended May 31, 2008. For the nine months ended May 31, 2008, Engineered Products net sales increased $27.7 million, to $92.1 million, due to the Maxima acquisition and core sales growth. Core sales grew 6% in the third quarter and 11% year-to-date over the comparable prior year periods, primarily due to strong demand in the agriculture, aerospace, container hardware, and utility markets.

Industrial Segment

Industrial operating profit increased by $10.4 million, or 31%, from $33.3 million for the three months ended May 31, 2007 to $43.7 million for the three months ended May 31, 2008. For the nine months ended May 31, 2008, Industrial operating profit increased by $27.9 million, or 32%, from $86.5 million for the nine months ended May 31, 2007 to $114.4 million. Operating profit grew as a result of increased sales volumes from existing businesses, higher production levels resulting in increased absorption of fixed costs, price increases, acquisitions, operating efficiencies resulting from continuous improvement initiatives and the favorable impact of foreign exchange rates; partially offset by unfavorable sales and acquisition mix, higher intangible asset amortization, higher incentive compensation expense, increased cost of certain raw materials and investments in sales and marketing initiatives.

Electrical Segment

Electrical operating profit decreased by $1.8 million, or 18%, from $9.9 million for the three months ended May 31, 2007 to $8.1 million for the three months ended May 31, 2008. For the nine months ended May 31, 2008, Electrical operating profit decreased by $5.6 million, or 22%, from $24.9 million for the nine months ended May 31, 2007 to $19.3 million. Operating profit declined as a result of lower sales, production levels and unfavorable sales mix, despite margin improvements in the European Electrical product line. While we expect continued short term weakness in the Electrical segment due to weak consumer demand, we are continuing to reduce costs to counter the impact of lower volumes.

The European Electrical restructuring program was completed during the second quarter of fiscal 2008 at a cumulative pre-tax cost of $20.8 million. This program is expected to generate pre-tax savings of $7 to $8 million annually (See Note 3 “Restructuring”).

Actuation Systems Segment

Actuation Systems operating profit increased by $2.7 million, or 25%, from $11.0 million to $13.7 million for the three months ended May 31, 2007 and 2008, respectively. Actuation Systems operating profit increased by $4.6 million, or 16%, from $27.5 million to $32.1 million for the nine months ended May 31, 2007 and 2008, respectively. The operating profit improvement resulted from increased volumes, continued operating efficiency improvements, customer pricing and favorable foreign exchange rates. These were partially offset by facility consolidation costs and input material price inflation.

Engineered Products Segment

Engineered Products operating profit increased by $0.2 million, or 5% from $4.0 million for the three months ended May 31, 2007 to $4.2 million for the three months ended May 31, 2008. For the nine months ended May 31, 2008, Engineered Products operating profit increased by $2.8 million to $11.6 million from $8.8 million during the nine months ended May 31, 2007. The operating profit growth was due to higher sales volumes, customer price increases, and increased low cost country sourcing partially offset by the facility relocation and downsizing costs, increased cost of certain purchased components and higher incentive compensation costs.

Corporate

Corporate expenses increased by approximately $2.5 million to $8.2 million for the three months ended May 31, 2008 and by approximately $7.6 million to $22.4 million for the nine months ended May 31, 2008. The increases were the result of higher staffing levels to support business expansion, expenses to support corporate-wide training initiatives, higher incentive compensation expense, start-up costs for our Taicang, China facility, and increased income tax consulting fees.

Financing Costs, net

Financing costs increased from $24.2 million to $27.5 million for the nine months ended May 31, 2008 when compared to the nine months ended May 31, 2007, a $3.3 million increase as a result of higher average debt levels due to timing of acquisitions.

Income Taxes

Our income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are higher or lower than the U.S. federal statutory rate, state tax rates in the jurisdictions where we do business, and our ability to utilize various tax credits and net operating loss carryforwards. The effective income tax rate for the three and nine months ended May 31, 2008 was 25.8% and 31.6% compared to 30.8% and 31.3% during the three and nine months ended May 31, 2007, respectively. The third quarter fiscal 2008 tax rate includes the benefit of tax reserve adjustments of $2.6 million resulting from favorable book provision to tax return adjustments, settling tax audits for amounts less than previously accrued and the lapsing of various tax statutes of limitations. There were no similar adjustments for the three month period ended May 31, 2007. The effective income tax rate was higher in the nine months ended May 31, 2008 than the other periods presented primarily as a result of no tax benefit being recorded for the majority of the European Electrical restructuring charges.

Restructuring

We initiated plans to restructure the European Electrical product line within the Electrical segment during the fourth quarter of fiscal 2006. These plans were designed to reduce operating costs and improve profitability. During the quarter ended February 29, 2008, we completed these restructuring activities resulting in cumulative pre-tax restructuring provisions totaling $20.8 million.

The remaining $7.0 million of accrued restructuring costs at May 31, 2008 represents severance cost of approximately $0.6 million, lease exit costs of approximately $4.3 million, and product line rationalization costs of $2.1 million. The severance and product line rationalization costs will be paid during fiscal 2008 and 2009, while the lease exit costs will be paid over the remaining 12 year term of the lease.

Liquidity and Capital Resources

Cash and cash equivalents totaled $91.1 million and $86.7 million at May 31, 2008 and August 31, 2007, respectively.

We generated $125.2 million of cash from operating activities during the nine months ended May 31, 2008 compared to $129.4 million during the nine months ended May 31, 2007. Cash provided by operating activities is primarily used to fund capital expenditures, acquisitions and debt repayments. Despite net earnings growth in the current year, our net cash provided by operating activities declined modestly from the prior year due to an increase in our accounts receivable balance.

Cash used in investing activities totaled $128.9 million and $149.0 million during the nine months ended May 31, 2008 and 2007, respectively. We spent $110.1 million on acquisitions in the current year, including the purchase of TK and SPS. In the comparative prior year period, we completed four acquisitions, requiring cash funding of $132.6 million. Additionally, capital expenditures increased due to ERP system upgrades, rental fleet additions, and construction of a new facility in China. We funded a portion of these additions with approximately $9.5 million of proceeds generated from the sale of certain (including sale-leaseback) facilities during the nine months ended May 31, 2008.

Net cash provided by financing activities totaled $3.1 million and $66.4 million during the nine months ended May 31, 2008 and 2007, respectively. The cash provided by financing activities during fiscal 2007 primarily relates to the proceeds from $155.0 million of additional term loans offset by other debt repayments.

At May 31, 2008, we had approximately $250.0 million of availability under our bank revolving credit line. We believe that such availability, combined with our $91.1 million of cash on hand and future operating cash flows, will be adequate to meet operating needs, debt service, funding of tuck-in acquisitions, and capital expenditure requirements for the foreseeable future.

CONF CALL

Bob Arzbaecher

Today we reported our third quarter results at the high end of both our sales and earnings guidance. The highlights included EPS of $0.60 a share, which included a $0.04 tax gain. Excluding this gain and the restructuring charges in the prior year, we had EPS growth of 17% for the quarter and are now up 22% on a year-to-date basis.

EBITDA margins expanded 50 basis points to 16.4. Sales were $445 million. That’s Actuant’s highest ever, reflecting a 15% year-over-year growth. If you exclude acquisitions and currency, core growth was 2%. Strong cash flow of $49 million, in line with our expectations for the quarter and on track for $140 million free cash flow target for the year.

This was a quarter where you see the benefits of our diversified business model. Actuant continued to deliver strong sales, EBITDA, earnings and cash flow. Diversity by a customer, end market and geography helped cushion certain weaknesses in some of our end markets. This same diversity has allowed us to deliver 27 consecutive quarters of EPS improvement.

With that, I’ll turn it over to Andy to go through the numbers.

Andy Lampereur

First quarter, as Bob mentioned, came together well and you can see it on this slide. We generated 15% sales growth. EBITDA grew 19%, more than sales, meaning we expanded our margins during the quarter, and we had another great quarter of cash flow.

In summary, 17% EPS growth, excluding the special items Bob mentioned. The increased earnings reflected the combination of sales growth and margin expansion with contributions coming from both our base businesses and acquisitions.

On a GAAP basis, we reported second quarter diluted earnings per share of $0.60 a share. This includes a $0.04 a share income tax gain relating to 2007 tax return to book provision adjustments. Last year’s third quarter, meanwhile, included some European Electrical restructuring costs. If we backed both of these items out of our comparison of third quarter results, our diluted EPS increased 17% from $0.48 a share last year to $0.56 this year.

As you can see on this slide, the 15% sales growth was comprised of 2% core growth; 6% from foreign currency changes and the remaining 7% from acquisitions. Now, similar to the past several quarters, the industrial segment led the way with 38% sales growth, including 14% core growth in the quarter. Two of our other three segments also reported core sales growth, Actuation Systems at 1%, and Engineered Products with 5%.

The Electrical segment felt the impact of weaker consumer demand during the third quarter and reported a 10% core sales decline. The Electrical segment market conditions have become more challenging due to weaker consumer spending. I’ll hold off on providing more color on sales until I review segment by segment results in a few minutes.

Now, in addition to sales growth, our third quarter earnings were driven by profit margin expansion. You can see that on this slide, which is a comparison of some of our key operating metrics for each of the last four quarters. Our third quarter EBITDA margins increased 50 basis points year-over-year from 15.9% to 16.4%. This was primarily driven by favorable segment sales mix and nice margin improvement from the Actuation Systems segment.

Among the factors that worked against our margins this quarter were higher investments in growth initiatives in our Industrial segment; higher incentive compensation accruals in a number of the units, including corporate; unfavorable product mix within certain of the segments; and higher corporate expenses, which included personnel and start-up costs for our new plant in Taicang, China.

While there were some puts and takes between the segments and businesses within each of the segments, I was pretty happy overall with the segments with Actuant’s margin performance this quarter.

Now, if we look on a year-to-date basis through the first nine months, our EBITDA margins are up above 80 basis points, better than the original 40 to 60 basis points of expansion we projected at one year ago. At that time, we had mentioned that our second half margin’s expansion would be lower than the first half on account of tougher second half comps, and that’s still in line with our current thinking.

Now I’m going to step down a level from our consolidated results, and I’ll cover segment level results for each of the four business segments, starting first with our Industrial segment.

The Industrial segment had another big quarter with better than 30% growth in both sales and operating profit. Core sales, the weaker U.S. dollar, and acquisitions all contributed to the record quarter. Our core sales growth for the segment was very robust at 14% with Enerpac and Hydratight businesses each generating 14% core sales growth.

In the case of Enerpac, that was the highest growth of the year, and for Hydratight, its sixth consecutive quarter of double-digit core sales growth. Underlying market demand in Hydratight’s core oil and gas, and power generation maintenance markets continues strong and shows no sign of slowing. Meanwhile, Enerpac continues to do very well in pursuing wealthy industrial market niches such as shipbuilding, infrastructure, and mining.

Industrial profit margins remained strong during the quarter, although slightly lower than the prior year. This is more due to targeted investments in growth initiatives, incentive compensation accruals, and unfavorable mix within both Enerpac and Hydratight during the quarter, really more so than any other change in the underlying profit trends of the businesses. Both units are executing extremely well.

Additionally, during the quarter within this segment, solid progress was made in acquisition integration for both the Templeton, Kenly and the Superior Plant Services acquisitions. The sales forces at TK and Enerpac will combine during the quarter, while integration kick-off meetings and LEAD training sessions and events were completed at Superior Plant services. We’re encouraged by the early financial result for both of these acquisitions, and feel there is additional synergies to be realized over the next year.

Now, turning to our Electrical segment, we had overall sales growth of 1% due to acquisitions and the weaker U.S. dollar. Core sales, however, declined 10%, with reductions in each of the Electrical segments for reportable product lines.

In addition to weak consumer demand, we also had sales headwinds due to the SKU reduction in European Electrical and the GB market share lost at Lowe’s we discussed last quarter. Weak consumer confidence and spending was evident in the 6% to 8% same-store sales declines reported by both Home Depot and Lowe’s in their most recent quarter, which was a sequential deterioration from the prior quarter.

We also saw similar negative retail trends in Europe, and from the marine and transformer markets. Since our Electrical segment is more U.S.-centric than our Actuation Systems and Industrial segments, as well as more consumer-facing, conditions became more challenging as the quarter and the year progressed.

Now, unfortunately, this core sales decline adversely impacted the Electrical segment margins, as did the unfavorable sales mix. These two more than offset the decent margin expansion we enjoyed during the quarter in our European Electrical business. Given our expectations of continued weakness in the Electrical segment due to weaker consumer confidence and the full year impact of SKU reductions in Europe, we are actively reducing cost to counter the lower volume.

In addition to a 15% year-over-year headcount reduction already in place in this segment, we’ve raised prices in all four Electrical product lines to offset recent commodity cost inflation. We’ve moved to four-day workweeks in certain of the businesses. We’re transferring additional production out of the U.S. and into Mexico in the fourth quarter for transformers, and we recently divested a small Kopp circuit breaker plant and product line in the former East Germany.

On top of this, we’ve aggressively raised prices on certain product lines in Europe in order to increase profitability to an acceptable level or to just get out of these product lines. To date, we’ve accomplished some of both. All of these actions will reduce our cost structure in Electrical and better position the segment for margin expansion as we go forward.

Next is the Actuation Systems segment, which other than a very weak RV OEM demand had a really strong third quarter. Truck continued to enjoy strong demand with core sales growth at 20%, with both North America and Europe participating, while auto core sales were up in low single digits. Unfortunately, the core sales in RV were down 27%, much worse than the 15% to 18% decline we had discussed in our forecast for last quarter.

Motorhome retail sales and underlying OEM production rates fell significantly during the quarter as did consumer confidence, and are expected to remain very weak for some time. At current levels today, motorhome build rates are running about half what they were back in 2004.

Despite the profit margin drag from the lower RV production levels, the overall Actuation Systems segment operating profit margins improved 140 basis points in the quarter, benefiting from improved auto margins and favorable sales mix within the segment. We expect that the consumer-driven RV weakness will continue to be a headwind for the balance of the calendar year, but remain very bullish on the longer-term prospects of the Actuation Systems segment in total over the next several years.

Our confidence in doubling the Gits business’ revenue to $100 million by 2011 only grew stronger during the quarter, with solid progress on a number of emissions-related projects. Additionally, the outlook for convertible tops remains strong, including 10% to 15% core growth next year. In summary, there are a lot of good things happening in this segment.

I will wrap up my comments on segment level results with a couple of comments on the Engineered Products segment. Sales growth in this segment continues strong with a respectable 6% core growth during the quarter. While segment operating profit margins declined modestly year-over-year, the entire reduction was due to higher incentive compensation provisions this quarter. The underlying performance in this segment also was very good.

Well, that’s it for my comments on sales, earnings, and margins for the quarter. However, before turning it back to Bob, I just wanted to make a couple more comments on cash flow and debt.

I was pretty happy with the third quarter cash flow and working capital management. As Bob mentioned, we had generated $49 million of free cash flow and we now have $91 million of cash on the balance sheet and our entire $250 million revolver available. So, funding capacity for future growth, including acquisitions is in great shape. Our free cash flow focus and conversion of free cash flow remains strong, and we are projecting current-year free cash flow of approximately $140 million.

Bob Arzbaecher

As you can probably tell, we feel pretty good about our third quarter results. Core growth at 2% margin expansion, completion of the SPS acquisition, and strong cash flow all contributed to another great quarter.

What we’re finding is that in this economic slowdown we’re experiencing now, the results are not linear. If you look at our businesses that serve commodity markets, like oil and gas with Hydratight, the growth has really been excellent. I’d put a piece of Enerpac into this category, also.

If you look at North American industrial markets, while growth rates have been positive, they have been moderating. We see this with some of Enerpac, with Elliott, Gits, Turner, portions of the Pro/E business and Specialty Electrical.

If you look at our consumer-facing businesses, it’s a recession. We’ve seen this in our DIY Electrical business, RV, marine, North American convertible tops, and some parts of the Pro/E business. For Actuant, these slowdowns today are only affecting our North American businesses. European core growth was solidly in the mid-single digits for the quarter, and we generated high teens growth in Asia.

The reason for mentioning this is Actuant’s diversity. We continue to believe that Actuant’s diversity is a huge asset for shareholders. It creates more consistent results. It limits our single customer risk, with only 17% of our revenue with our top 10 customers. Our diverse markets allow us to find lots of opportunities to do niche acquisitions, and finally, the diversity allows us to leverage our global opportunities by sharing facilities, cross-selling customers, and sharing best practices across businesses, segments, and markets.

We have a “feed the eagles” mentality at Actuant. That means we preferentially feed our growth-year businesses in the form of both acquisition capital and internal investments. Today, that’s the entire Industrial segment, the Gits business within Actuation Systems, and the Maxima business within Engineered Products, just to name the highlights. Market diversity and selectively investing in capital where it gets the highest returns, these are the hallmarks that have made Actuant successful since the spin-off in 2000.

Now, let’s talk about acquisitions. To date, we’ve completed two acquisitions in fiscal 2008, Templeton, Kenly and Superior Plant Services, deploying about a little over $100 million in capital. As Andy mentioned, both of these acquisitions are performing well.

We continue to have a full funnel of activity that we’re working on. A key focus continues to be smaller transactions, $25 million to $75 million in size, and acquisitions that leverage our key markets of industrial tools, electrical products, Actuation Systems, and other Engineered Products and systems.

One area that we’ve made a lot of progress on in the past few years has been M&A idea generation that comes from the business unit level. About half of our acquisitions over the last few years have been privately negotiated, non-auctioned deals that were identified at our business unit level.

Going a little deeper into these tuck-in acquisitions and talk about some of the key areas we’re focusing on. We’re very focused on expanding Enerpac’s product line within industrial tools. The Templeton, Kenly acquisition was a great example of this. We added railroad tools that we previously didn’t offer, and we’ve been able to leverage our existing global distribution channels.

Another area of high focus is our Hydratight platform. The deeper we get into the joint integrity markets, the more we realize the untapped potential we have for growth in this market opportunity.

Shifting to Electrical, we see good opportunities with our three-pronged approach of serving harsh environment electrical, the professional electrical channel, and retail channels. We believe there are excellent opportunities to leverage acquisitions across these end markets, and in fact, have found synergies outside of the Electrical segment to other segments within Actuant.

An example of this is our BH Electronics acquisition. We were able to leverage our harsh environment electrical product line, but we were also able to bring Maxima in for a growth opportunity with the bulk market in terms of gauges and sensors.

Lastly, let me talk about bigger acquisitions. Currently, we are pursuing a few ideas in the $200 million to $600 million weight, what we would define as new platforms. As a point of reference, we regularly have one to two ideas of this size in our acquisition funnel over the last couple of years, so this really isn’t a big change from what we’ve been operating under.

What we’ve come to recognize, as we’ve pursued these larger deals, is that while the ones we pursue are bigger deals, many of them serve the same markets that we serve today. So, while we call them a new platform, investors could come to the conclusion that they’re really just expansions of currently served markets.

The other phenomenon is that transactions larger than $100 million tend to get a lot of attention from other strategic buyers. While private equity groups have largely been on the sideline, strategics have closed this gap. We have seen no reduction in valuation multiples on bigger deals, although we do seem to have peaked in terms of valuation. So, they’re not going up, but they’re not going down.

Against this backdrop, we continue to be very disciplined in terms of valuation metrics. We continue to spend most of our time looking at smaller transactions that have made up our acquisition activity over the last three years. We believe smaller transactions are less risky, tend to have lower valuation metrics, and have more potential synergies with our existing businesses.

Now let’s turn to guidance. As you see in our press release this morning, we’ve provided EPS guidance of $0.51 to $0.55 per share for the fourth quarter on sales of $410 million to $420 million. As a reminder, the fourth quarter is seasonably weaker than the third at Actuant, on account of European holiday shutdowns at many of the OEMs. This fourth quarter outlook results in full year EPS guidance of $2.02 to $2.06, excluding the tax gain and the Europe Electrical restructuring.

Assuming we hit the midpoint of this EPS range, Actuant will have generated 15% growth in sales and 18% growth in EPS over fiscal 2007, and have met and/or exceeded our long-term goal of 15% to 20% EPS growth for the seventh consecutive year. Further, if we hit our projected $140 million of free cash flow that I referred to earlier, we will have generated free cash flow conversion in excess of net income for the eighth consecutive year.

Moving to fiscal 2009, which for Actuant begins September 1, we are providing initial EPS guidance of $2.25 to $2.35 per share on sales of $1.75 billion. Some additional color on this guidance, we would expect our core growth to be in the low single digit neighborhood. As we saw in 2008, Industrial will lead the pack with high single digit growth, Engineered Products and Actuation Systems with mid single digit growth, and Electrical negative, due to the consumer confidence exposure that we talked about earlier.

At $1.75 billion estimate is done in current FX dollars, so we do not expect any material strengthening or weakening of the U.S. dollars. We would expect margin expansion at both the operating profit and EBITDA level in the range of 50 to 75 basis points, partially driven by operating improvements and also the favorable mix of industrial sales. Our effective tax rate for fiscal ‘09 should be around 30%, and our capital expenditures should be around $45 million. That would equate to free cash flow of $150 million to $155 million.

We would expect in 2009 to use this cash flow to fund future acquisitions. These are not included in the sales and earnings guidance. In the past two years, we have been targeting to complete $150 million to $200 million of acquisitions annually. We plan to expand this range slightly in 2009 to $150 million to $250 million in terms of acquisitions. This does not necessarily mean bigger deals; probably more deals or more velocity deals. Given our ROIC and cash flow focus, future deals, when completed, should be accretive to today’s 2009 earnings guidance.

When you’re thinking about 2009, I want you to remember that this is pretty consistent with our initial look over the last two years. As you see on this slide, we normally come out with guidance growth in the 10% to 15% area, and then we increase this guidance on acquisitions or as results dictate. If you look at our 2008 preliminary guidance as it shows here on this slide, we’ve raised that guidance three times due to these factors.

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