Altra Reports Fourth-Quarter 2017 Results

Planet altra Inc.
Feb 21,2018

Altra Reports Fourth-Quarter 2017 Results

BRAINTREE, Mass., Feb. 21, 2018 (GLOBE NEWSWIRE) -- Altra Industrial Motion Corp. (Nasdaq:AIMC), a global manufacturer and marketer of electromechanical power transmission and motion control products, today announced unaudited financial results for the fourth quarter ended December 31, 2017.

Financial Highlights

  • Fourth-quarter 2017 net sales were $223.3 million, up 29.4% from $172.6 million in the fourth quarter of 2016. Excluding the impact of the Stromag acquisition, fourth-quarter net sales were up 9.1% from the same quarter of 2016.
  • Fourth-quarter net income was $12.4 million, or $0.43 per diluted share, compared with $1.7 million, or $0.06 per diluted share, in the fourth quarter of 2016.
  • Non-GAAP net income in Q4 2017 was $13.8 million, or $0.47 per diluted share, compared with $10.6 million, or $0.41 per diluted share, in the prior year quarter.* 
  • Cash flow from operations of $80.6 million led to free cash flow of $47.8 million for the year.*


*Reconciliation of Non-GAAP Net Income:

             
 Quarter Ended  Year to Date Ended   
 December 31,
2017
  December 31,
2016
  December 31,
2017
  December 31,
2016
  
Net Income $  12,440   $  1,668   $  51,427   $  25,140   
              
Restructuring and consolidation costs$  367   $  3,258   $  4,143   $  10,333   
Loss on extinguishment of convertible debt   -       1,989      1,797      1,989   
Impairment of intangible assets   -       6,568      -       6,568   
Legal fees associated with pursuit of unfair trade remedy   -       -       -       742   
Amortization of inventory fair value adjustment   -       -       2,347      -    
Loss on partial settlement of pension plans   1,720      -       1,720       -    
Acquisition related expenses   491       1,219      2,165      2,349   
Tax impact of above adjustments   (766)     (4,071)     (3,611)     (6,661)  
Revaluation of U.S. net deferred taxes   (7,818)     -       (7,818)     -    
Tax on foreign earnings deemed to be repatriated   7,374      -       7,374      -    
Non-GAAP net income*$  13,808   $  10,631   $  59,544   $  40,460   
Non-GAAP diluted earnings per share*$  0.47   $  0.41   $  2.05   $  1.56   
             


*Reconciliation of Free Cash Flow:

  Year to Date Ended
  December 31,
2017
 December 31,
2016
Net cash flows from operating activities   80,581     76,641 
Purchase of property, plant and equipment   (32,826 )    (18,941)
     
Free cash flow * $  47,755  $  57,700 
 


*Reconciliation of Non-GAAP Operating Margin:

         
  Quarter Ended Year to Date Ended
  December 31,
2017
 December 31,
2016
 December 31,
2017
 December 31,
2016
 Income from Operations$  18,903  $  6,025  $  80,987  $  47,546 
         
 Restructuring and consolidation costs$  367  $  3,258  $  4,143  $  10,333 
 Impairment of Intangible assets   -      6,568     -      6,568 
 Legal fees associated with pursuit of unfair trade remedy   -      -      -      742 
  Loss on partial settlement of pension plans   1,720     -      1,720     -  
 Amortization of inventory fair value adjustment   -      -   $  2,347     -  
 Acquisition related expenses   491     1,219     2,165     2,349 
   Non-GAAP income from operations*   21,481     17,070     91,362     67,538 
 Non-GAAP Income from operations as a percent of net sales 9.6%  9.9%  10.4%  9.5%
          

Management Comments

"We ended the year with record sales and Non-GAAP diluted earnings per share, and solid momentum as we move into 2018" said Carl Christenson, Altra's Chairman and CEO. "For Q4, we grew sales by 29.4% or by 9.1% excluding acquisitions, marking the fifth consecutive quarter of year-over-year growth. For the year, we reported sales growth of 23.7%, or 4.2% excluding acquisitions. We also executed on significant strategic initiatives during the year that drove an improvement in Non-GAAP operating income and will set us up for long term profitable growth. In 2017, GAAP diluted EPS grew 84% to $1.78 and non-GAAP diluted EPS increased 31.4% to an annual record of $2.05."* 

"We are excited by our prospects as we look ahead to 2018," added Christenson. "Bookings are positive across the vast majority of our end markets as the industrial economy continues to improve. We have accomplished a great deal in the past few years to position Altra for the upturn and capitalize on the current demand momentum. Notwithstanding the recent volatility in the equity markets, we look forward to moving ahead in what is shaping up to be a great year."

Business Outlook

Altra is providing guidance for full year 2018. The Company expects full-year 2018 sales in the range of $895 to $915 million, GAAP diluted EPS in the range of $2.12 to $2.20, and non-GAAP diluted EPS guidance in the range of $2.30 to $2.43. The Company currently expects its tax rate for the full year to be approximately 25% to 27% before discrete items, capital expenditures in the range of $25 to $27 million, and depreciation and amortization in the range of $38 to $40 million.*


*Reconciliation of 2018 Non-GAAP Net Income and Diluted EPS Guidance (Amounts in millions except per share information) Fiscal Year 2018 Fiscal Year 2018 Diluted EPS
Net Income per Share Diluted $61.8 - $64.1 $2.12 - $2.20
Restructuring and consolidation costs 2.0 - 4.0  
Loss on partial settlement of pension plan 5.3  
Tax impact of above adjustments** (1.9) - (2.4)  
Non-GAAP Diluted EPS Guidance $67.2 - $71.0  $2.30 - $2.43
(1) Adjustments are pre-tax, with net tax impact listed separately    
(2) Tax impact is calculated by multiplying the estimated effective tax rate for the period of 26.0% by the above items


Impact of Tax Legislation

For the fourth quarter, the Company is reporting a provisional $0.02 per share benefit to earnings as a result of the new tax legislation and has excluded this amount from the Non-GAAP diluted earnings per share calculation. These one-time adjustments resulted in a net tax benefit of $0.4 million which is comprised of a charge of $7.4 million related to the deemed repatriation of foreign earnings, and a benefit of $7.8 million for the revaluation of deferred taxes due to the federal rate changes. Going forward, due to the lowering of the U.S. corporate income tax rate, the Company expects its consolidated tax rate to be approximately 25% to 27%. 

Conference Call

The Company will conduct an investor conference call to discuss its unaudited fourth-quarter and full-year 2017 financial results today, February 21, 2018 at 10:00 a.m. ET. The public is invited to listen to the conference call by dialing (877) 407-8293 domestically or (201) 689-8349 for international access. A live webcast of the call will be available in the "Investor Relations" section of www.altramotion.com. Individuals may download charts that will be used during the call at www.altramotion.com under presentations in the Investor Relations section. The charts will be available after earnings are released. A replay of the recorded conference call will be available at the conclusion of the call through midnight on March 7, 2018. To listen to the replay, dial (877) 660-6853 domestically or (201) 612-7415 for international access (conference ID # 13676208). A webcast replay also will be available.

   
Altra Industrial Motion Corp.  
Consolidated Statements of Income Data:Quarter Ended Year to Date Ended  
In Thousands of Dollars, except per share amountsDecember 31,
2017
 December 31,
2016
 December 31,
2017
 December 31,
2016
  
 (Unaudited) (Unaudited) (Unaudited) (Unaudited)  
Net sales$  223,322  $  172,647  $  876,737  $  708,906   
Cost of sales 154,852    117,520   600,961   486,774   
Gross profit$  68,470   $  55,127  $  275,776  $  222,132   
Gross profit as a percent of net sales 30.7%  31.9%  31.5%  31.3%  
Selling, general & administrative expenses   41,480     34,944     164,492     140,492   
Research and development expenses   6,000     4,332     24,434     17,677   
Impairment of Intangible assets    -     6,568     -     6,568   
Restructuring Charges   367      3,258     4,143     9,849   
Loss on the partial settlement of pension plan   1,720     -     1,720     -   
Income from operations$  18,903   $  6,025  $  80,987  $  47,546   
Income from operations as a percent of net sales 8.5%  3.5%  9.2%  6.7%  
Interest expense, net   2,163     3,064     7,710     11,679   
Loss on write-off of deferred financing and extinguishment of convertible debt   -     1,989     1,797     1,989   
Other non-operating expense (income), net   323     431     353     (7)  
Income before income taxes$  16,417  $  541  $  71,127  $  33,885   
Provision/(Benefit) for income taxes   3,977     (1,127)    19,700     8,745   
Income tax rate 24.2%  -208.3%   27.7%  25.8%  
Net income    12,440     1,668     51,427     25,140   
          
Weighted Average common shares outstanding:         
Basic  29,011   25,889   28,949   25,719   
Diluted - includes impact of convertible debt redemptions 29,120   25,916   29,064   25,872   
Net income per share:          
Basic$  0.43  $  0.06  $  1.78  $  0.97   
Diluted$  0.43  $  0.06  $  1.78   $  0.97   
           
Reconciliation of Non-GAAP Income From Operations:         
Income from operations$  18,903  $  6,025  $  80,987  $  47,546   
Restructuring and consolidation costs   367     3,258     4,143     10,333   
Legal fees associated with pursuit of unfair trade remedy   -       -      -      742   
Amortization of inventory fair value adjustment   -      -      2,347     -     
Impairment of Intangible assets   -      6,568      -      6,568   
Loss on partial settlement pension plan   1,720     -      1,720      -    
Acquisition related expenses   491     1,219     2,165     2,349   
Non-GAAP income from operations *$  21,481  $  17,070  $  91,362  $  67,538   
          
Reconciliation of Non-GAAP Net Income:         
Net income$  12,440  $  1,668  $  51,427  $  25,140   
Restructuring and consolidation costs   367     3,258     4,143     10,333   
Loss on extinguishment of convertible debt   -      1,989     1,797     1,989   
Legal fees associated with pursuit of unfair trade remedy   -      -      -      742   
Amortization of inventory fair value adjustment   -      -      2,347     -    
Loss on partial settlement of pension plan   1,720     -      1,720     -    
Impairment of Intangible assets   -      6,568     -      6,568   
Acquisition related expenses   491     1,219     2,165     2,349   
Tax impact of above adjustments   (766)    (4,071)    (3,611)    (6,661)  
Revaluation of U.S. net deferred taxes   (7,818)    -      (7,818)    -    
Tax on foreign earnings deemed to be repatriated   7,374     -      7,374     -    
Non-GAAP net income *$  13,808  $  10,631  $  59,544  $  40,460   
Non-GAAP diluted earnings per share *$  0.47   (1)$  0.41  (2)$  2.05   (3)$  1.56   (4) 
          
(1) -  tax impact is calculated by multiplying the estimated effective tax rate for the period of 29.7% by the above items. 
(2) - tax impact for the above items is calculated by multiplying restructuring and consolidation costs, write-off of deferred financing and extinguishment of debt, and the impairment of intangible assets by the marginal tax rate plus acquisition related expense  multiplied by the estimated effective tax rate for the period of  26.5% by the above items. 
(3) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 29.7% by the above items 
(4) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.3% by the above items 
           


    
Consolidated Balance Sheets Years Ended December 31, 
In Thousands of Dollars 2017   2016 
    
Assets:   
 Current Assets   
Cash and cash equivalents$  51,994  $  69,118 
Trade receivables, net   135,499     120,319 
Inventories   145,611     139,840 
Income tax receivable   6,634     607 
Prepaid expenses and other current assets   17,344     10,429 
Assets held for sale   1,081     3,874 
Total current assets   358,163     344,187 
Property, plant and equipment, net   191,918     177,043 
Intangible assets, net   159,613     154,683 
Goodwill   206,040     188,841 
Deferred income taxes   2,608     2,510 
Other non-current assets, net   2,315     2,560 
Total assets$  920,657  $  869,824 
    
Liabilities and stockholders' equity   
Current liabilities   
Accounts payable$  68,014  $  60,845  
Accrued payroll   32,091     31,302 
Accruals and other current liabilities   32,921     35,080 
Income tax payable   9,082     706 
Current portion of long-term debt   384     43,690 
Total current liabilities   142,492     171,623 
Long-term debt, less current portion and net
  of unaccreted discount 
   275,587     325,969 
Deferred income taxes   52,250     61,084 
Pension liabilities   25,038     23,691 
Long-term taxes payable   6,322     694 
Other long-term liabilities    22,263     3,415 
Total stockholders' equity   396,705     283,348 
Total liabilities, and stockholders' equity$  920,657  $  869,824 
    
     
Reconciliation to operating working capital:   
Trade receivables, net   135,499     120,319 
Inventories   145,611     139,840 
Accounts payable   (68,014)    (60,845)
Operating working capital *$  213,096  $  199,314 
 


     
  Year to Date Ended  
  December 31,
2017
 December 31,
2016
  
       
Cash flows from operating activities      
Net income $  51,427  $  25,140   
Adjustments to reconcile net income to net cash flows:      
Depreciation    26,511     21,604   
Amortization of intangible assets    9,514     8,294   
Amortization and write-off of deferred financing costs    599     802   
Loss on foreign currency, net    381     259   
Amortization of inventory fair value adjustment    2,347     —   
Accretion of debt discount, net    —     4,005   
Loss on disposals and impairments    584     8,273   
Loss on extinguishment of debt    1,797     1,989   
Loss on partial settlement of pension plan    1,720     —   
Benefit for deferred taxes    (8,012)    (2,850)  
Stock based compensation    5,274     4,230   
Changes in assets and liabilities:      
Trade receivables    (8,103)    (4,140)  
Inventories    (2,379)    2,324   
Accounts payable and accrued liabilities    (2,994)    4,333   
Other current assets and liabilities    (3,178)    529   
Other operating assets and liabilities    5,093     1,849   
Net cash provided by operating activities     80,581     76,641   
Cash flows from investing activities      
Purchase of property, plant and equipment    (32,826)    (18,941)  
Proceeds from sale of property    3,221     —   
Acquisition of Stromag, net of cash received of $8.8 million    2,883     (187,967)  
Net cash used in investing activities    (26,722)    (206,908)  
Cash flows from financing activities      
Payment of debt issuance costs    —     (650)  
Payments on revolving credit facility    (79,536)    (31,861)  
Dividend payments    (18,259)    (11,667)  
Cash paid for convertible debt    (954)    —   
Payments of equipment, working capital notes, mortgages and other debt    (1,168)    (3,308)  
Proceeds from equipment, working capital notes, mortgages and other debt    —     2,729   
Borrowing under revolving credit facility    27,958     200,579   
Purchases of common stock under share repurchase program    —     (4,713)  
Shares surrendered for tax withholding    (2,089)    (1,337)  
Net cash (used)/provided in financing activities    (74,048)    149,772   
Effect of exchange rate changes on cash and cash equivalents    3,065     (707)  
Net change in cash and cash equivalents    (17,124)    18,798   
Cash and cash equivalents at beginning of year    69,118     50,320   
Cash and cash equivalents at end of period $  51,994  $  69,118   
       
Reconciliation to free cash flow:       
       
  Year to Date Ended  
  December 31,
2017
 December 31,
2016
  
Net cash flows from operating activities    80,581     76,641   
Purchase of property, plant and equipment    (32,826)    (18,941)  
       
Free cash flow * $  47,755  $  57,700   
       


      
Selected Segment Data Quarter Ended
December 31,
 Year to Date Ended
December 31,
 
In Thousands of Dollars, except per share amount  2017   2016   2017   2016  
Net Sales:         
Couplings, Clutches & Brakes $  114,577  $  74,181  $  441,887  $  305,406  
Electromagnetic Clutches & Brakes    64,042     52,773     251,505     217,856  
Gearing    47,244     46,964     191,789     192,003  
Eliminations    (2,541)    (1,271 )    (8,444)    (6,359) 
Total $  223,322  $  172,647  $  876,737  $  708,906  
          
Income from operations:         
Couplings, Clutches & Brakes $  14,184  $  7,068  $  47,215  $  27,509  
Electromagnetic Clutches & Brakes    5,880     6,287     27,774     26,406  
Gearing    4,434     5,438     22,238     22,718  
Restructuring and consolidation costs    (367)    (3,258)    (4,143)    (9,849)  
Loss on the partial settlement of pension plan    (1,720)    -       (1,720)    -   
Corporate*    (3,508)    (9,510)    (10,377)    (19,238) 
Total $  18,903  $  6,025  $  80,987  $  47,546  
 

*Quarter and Year to date period ended December 31, 2016 includes intangible asset impairment of $6.6 million.


About Altra Industrial Motion Corp

Altra Industrial Motion Corp., through its subsidiaries, is a leading global designer, producer and marketer of a wide range of electromechanical power transmission and motion control products. The Company brings together strong brands covering over 40 product lines with production facilities in twelve countries. Altra's leading brands include Ameridrives Couplings, Bauer Gear Motor, Bibby Turboflex, Boston Gear, Delroyd Worm Gear, Formsprag Clutch, Guardian Couplings, Huco, Industrial Clutch, Inertia Dynamics, Kilian Manufacturing, Lamiflex Couplings, Marland Clutch, Matrix, Nuttall Gear, Stieber Clutch, Stromag, Svendborg Brakes, TB Wood's, Twiflex, Warner Electric, Warner Linear, and Wichita Clutch. 

The Altra Industrial Motion Corp. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4038.

* Discussion of Non-GAAP Financial Measures

As used in this release and the accompanying slides posted on the Company's website, non-GAAP diluted earnings per share, non-GAAP income from operations and non-GAAP net income are each calculated using either net income or income from operations that excludes acquisition related costs, restructuring costs, and other income or charges that management does not consider to be directly related to the Company's core operating performance. Non-GAAP operating margin is calculated using income from operations that excludes charges that management does not consider to be directly related to the Company's core operating performance. Non-GAAP diluted earnings per share is calculated by dividing non-GAAP net income by GAAP weighted average shares outstanding (diluted). Non-GAAP free cash flow is calculated by deducting purchases of property, plant and equipment from net cash flows from operating activities. Non-GAAP operating working capital is calculated by deducting accounts payable from net trade receivables plus inventories.

Altra believes that the presentation of non-GAAP net income, non-GAAP income from operations, non-GAAP operating margin, non-GAAP diluted earnings per share, non-GAAP free cash flow and non-GAAP operating working capital provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations.

Forward-Looking Statements

All statements, other than statements of historical fact included in this release are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Forward-looking statements can generally be identified by phrases such as "believes," "expects," "potential," "continues," "may," "should," "seeks," "predicts," "anticipates," "intends," "projects," "estimates," "plans," "could," "designed", "should be," and other similar expressions that denote expectations of future or conditional events rather than statements of fact. Forward-looking statements also may relate to strategies, plans and objectives for, and potential results of, future operations, financial results, financial condition, business prospects, growth strategy and liquidity, and are based upon financial data, market assumptions and management's current business plans and beliefs or current estimates of future results or trends available only as of the time the statements are made, which may become out of date or incomplete. Forward-looking statements are inherently uncertain, and investors must recognize that events could differ significantly from our expectations. These statements include, but may not be limited to, our expectation of the improvements in the industrial economy, the statements under "Business Outlook," our expectations regarding economic conditions, our expectations regarding our tax rate and the Company's guidance for full year 2018.

In addition to the risks and uncertainties noted in this release, there are certain factors that could cause actual results to differ materially from those anticipated by some of the statements made. These include: (1) competitive pressures, (2) changes in economic conditions in the United States and abroad and the cyclical nature of our markets, (3) loss of distributors, (4) the ability to develop new products and respond to customer needs, (5) risks associated with international operations, including currency risks, (6) accuracy of estimated forecasts of OEM customers and the impact of the current global economic environment on our customers, (7) risks associated with a disruption to our supply chain, (8) fluctuations in the costs of raw materials used in our products, (9) product liability claims, (10) work stoppages and other labor issues, (11) changes in employment, environmental, tax and other laws and changes in the enforcement of laws, (12) loss of key management and other personnel, (13) risks associated with compliance with environmental laws, (14) the ability to successfully execute, manage and integrate key acquisitions and mergers, (15) failure to obtain or protect intellectual property rights, (16) risks associated with impairment of goodwill or intangibles assets, (17) failure of operating equipment or information technology infrastructure, (18) risks associated with our debt leverage and operating covenants under our debt instruments, (19) risks associated with restrictions contained in our Convertible Notes and Credit Facility, (20) risks associated with compliance with tax laws, (21) risks associated with the global recession and volatility and disruption in the global financial markets, (22) risks associated with implementation of our ERP system, (23) risks associated with the Svendborg, Guardian and Stromag acquisitions and integration and other acquisitions, (24) risks associated with certain minimum purchase agreements we have with suppliers, (25) risks associated with our exposure to variable interest rates and foreign currency exchange rates, (26) risks associated with interest rate swap contracts, (27) risks associated with our exposure to renewable energy markets, (28) risks related to regulations regarding conflict minerals, (29) risks related to restructuring and plant consolidations, and (30) other risks, uncertainties and other factors described in the Company's quarterly reports on Form 10-Q and annual reports on Form 10-K and in the Company's other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference. Except as required by applicable law, Altra Industrial Motion Corp. does not intend to, update or alter its forward looking statements, whether as a result of new information, future events or otherwise. AIMC-E

CONTACT:   

Altra Industrial Motion Corp.
Christian Storch, Chief Financial Officer
781-917-0541
Christian.storch@altramotion.com

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