Altra Industrial Motion
Jul 23, 2015

Altra Reports Second-Quarter 2015 Results

Announces Next Steps in Its Business Simplification Efforts

BRAINTREE, Mass., July 23, 2015 (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 second quarter ended June 30, 2015.

Financial Highlights

         
  Quarter Ended Year to Date
Ended
Quarter Ended Year to Date
Ended
  June 30, 2015 June 30, 2014
Net income attributable to Altra Industrial Motion Corp. $ 9,679 $ 19,078 $ 12,797 $ 24,162  
           
Restructuring costs 2,587 4,343  
Amortization of inventory fair value adjustment 2,151  
Acquisition related expenses 738 455 881  
           
Tax impact of above adjustments (779) (1,540) (142) (956)  
Non-GAAP net income* $ 11,487 $ 22,619 $ 13,110 $ 26,238  
Non-GAAP diluted earnings per share* $ 0.43 $ 0.85 $ 0.48 $ 0.96  
         
In Thousands of Dollars, except per share amounts        

Management Comments

"Altra delivered a solid performance during the second quarter, particularly given the challenging global economic environment and ongoing weakness in several of our key end markets," said Carl Christenson, Altra's Chairman and CEO. "We increased our quarterly cash dividend by 25 percent during the quarter, boosting returns to shareholders. We are also very excited about our opportunity to improve our cost structure and we have initiated three facility consolidations as part of our efforts to streamline the business."

Business Simplification Plan

Altra today announced the next steps of its Business Simplification Plan ("the Plan") to improve business effectiveness, reduce the number of facilities, streamline the Company's cost structure, increase margins, and enhance shareholder value.

As part of the Plan, Altra expects to reduce the number of facilities it operates by approximately 20-30 percent. This includes three consolidations that are currently underway, in Illinois, France and South Africa. The Plan also seeks to optimize the Company's supply chain to better leverage its global spend. As the Company executes this plan, it will benefit from the investments made in its IT system.

"We expect to begin realizing savings from our actions during the second half of 2015 and to complete these actions by the end of 2018. We ultimately expect to achieve annual savings of approximately $15 million. Given the weakness in a number of our major end markets, this is the right time to take these actions," Christenson said. "We built Altra through a series of acquisitions during the past 10 years. Now we have the opportunity to take these simplification actions as a step towards making Altra one fully integrated company."

Business Outlook

"The market and currency headwinds we forecast at the beginning of 2015 have materialized as expected," Christenson said. "From a geographic perspective, sentiment in Europe has improved somewhat, while it appears that the outlook for the North American distribution channel has softened. Meanwhile, China is still growing but at a slower pace than initially thought and the oil & gas, agriculture, mining and metals end markets, which are some of our largest markets, remain challenging.

"Even as we face economic and end market challenges, we are making solid progress on our strategic initiatives. The Bauer profit improvement plan is continuing to show signs of success, and our strategic pricing initiative is adding to margins as expected. Finally, our efforts to streamline the business will play a principal role in our drive to achieve our operating margin target of 15 percent."

Altra is maintaining its previous guidance and expects sales in the range of $760 to $780 million and non-GAAP diluted EPS guidance in the range of $1.60 to $1.75 for 2015. This guidance includes savings from the restructuring actions taken to date. The Company expects its tax rate for the full year to be approximately 30% to 32% before discrete items. Altra continues to expect capital expenditures in the range of $24 to $26 million and depreciation and amortization in the range of $30 to $32 million.*

Conference Call

The Company will conduct an investor conference call to discuss its unaudited second quarter financial results this morning 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 and asking to participate in the ALTRA conference call. 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 on July 23 through midnight on August 6, 2015. To listen to the replay, dial (877) 660-6853 domestically or (201) 612-7415 for international access (conference ID # 13614312). 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 amount June 30,
2015
  June 30,
2014
  June 30,
2015
  June 30, 2014  
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)  
Net sales $ 196,610   $ 215,198   $ 389,971   $ 425,336  
Cost of sales 136,624   148,728   271,512   297,070  
Gross profit $ 59,986   $ 66,470   $ 118,459   $ 128,266  
Gross profit as a percent of net sales 30.5%   30.9%   30.4%   30.2%  
Selling, general & administrative expenses 35,152   40,499   71,454   78,761  
Research and development expenses 4,534   4,012   9,296   7,901  
Restructuring Charges 2,587     4,343    
Income from operations $ 17,713   $ 21,959   $ 33,366   $ 41,604  
Income from operations as a percent of net sales 9.0%   10.2%   8.6%   9.8%  
Interest expense, net 2,978   2,972   5,934   5,991  
Other non-operating (income) expense, net 750   225   (79)   759  
Income before income taxes $ 13,985   $ 18,762   $ 27,511   $ 34,854  
Provision for income taxes 4,360   5,944   8,496   10,673  
Income tax rate 31.2%   31.7%   30.9%   30.6%  
Net income 9,625   12,818   19,015   24,181  
Net loss attributable to non-controlling interest 54   (21)   63   (19)  
Net income attributable to Altra Industrial Motion Corp. 9,679   12,797   19,078   24,162  
Weighted Average common shares outstanding                
Basic 26,280   26,816   26,204   26,823  
Diluted 26,450   27,546   26,287   27,647  
                 
Net income per share                
Basic $ 0.37   $ 0.48    $ 0.73    $ 0.90  
Diluted $ 0.37   $ 0.46    $ 0.73    $ 0.87  
                 
Reconciliation of Non-GAAP Income From Operations:                
Income from operations $ 17,713   $ 21,959   $ 33,366   $ 41,604  
Restructuring costs 2,587     4,343    
Amortization of inventory fair value adjustment       2,151  
Acquisition related expenses   455   738   881  
Non-GAAP income from operations * $ 20,300   $ 22,414   $ 38,447   $ 44,636  
                 
Reconciliation of Non-GAAP Net Income:                
                 
Net income attributable to Altra Industrial Motion Corp. 9,679   12,797   19,078   24,162  
Restructuring costs 2,587     4,343    
Amortization of inventory fair value adjustment       2,151  
Acquisition related expenses   455   738   881  
                 
Tax impact of above adjustments (779)   (142)   (1,540)   (956)  
Non-GAAP net income * $ 11,487   $ 13,110   $ 22,619   $ 26,238  
                 
Non-GAAP diluted earnings per share * $ 0.43 (1) $ 0.48 (2) $ 0.85 (3) $ 0.96 (4)
 
(1) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.1% by the above items
(2) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 31.2% by the above items
(3) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.3% by the above items
(4) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 31.5% by the above items
     
     
Consolidated Balance Sheets    
In Thousands of Dollars June 30, 2015 December 31, 2014
  (unaudited)  
Assets:    
Current Assets    
Cash and cash equivalents $ 42,277 $ 47,503
Trade receivables, net 117,334 106,458
Inventories 126,956 132,736
Deferred income taxes 9,136 9,240
Income tax receivable 3,795 6,247
Prepaid expenses and other current assets 8,400 8,617
Total current assets 307,898 310,801
Property, plant and equipment, net 153,536 156,366
Intangible assets, net 101,880 110,730
Goodwill 99,014 102,087
Deferred income taxes 935 987
Other non-current assets, net 3,006 3,592
Total assets $ 666,269 $ 684,563
     
Liabilities, non-controlling interest and stockholders' equity    
Current liabilities    
Accounts payable $ 47,486 $ 44,298
Accrued payroll 20,702 23,254
Accruals and other current liabilities 33,298 33,591
Deferred income taxes 125 120
Income tax payable 2,550 3,189
Current portion of long-term debt 13,804 15,176
Total current liabilities 117,965 119,628
Long-term debt, less current portion and net of unaccreted discount 233,857 240,576
Deferred income taxes 52,255 53,226
Pension liabilities 8,173 9,993
Long-term taxes payable 643 629
Other long-term liabilities 761 869
Redeemable non-controlling interest 883
Total stockholders' equity 252,615 258,759
Total liabilities, redeemable non-controlling interest and stockholders' equity $ 666,269 $ 684,563
     
Reconciliation to operating working capital:    
Trade receivables, net 117,334 106,458
Inventories 126,956 132,736
Accounts payable (47,486) (44,298)
Operating working capital * $ 196,804 $ 194,896
   
   
  Year to Date Ended
  June 30, 2015 June 30, 2014
  (Unaudited) (Unaudited)
Cash flows from operating activities    
Net income $ 19,015 $ 24,181
Adjustments to reconcile net income to net cash flows:    
 Depreciation 10,832 11,481
 Amortization of intangible assets 4,300 4,545
 Amortization of deferred financing costs 468 466
 (Gain)/Loss on foreign currency, net (125) 137
 Amortization of inventory fair value adjustment 2,151
 Accretion of debt discount, net 1,810 1,669
 Loss on impairment / disposal of fixed assets 1,127 235
 Stock based compensation 2,215 1,830
 Changes in assets and liabilities:    
 Trade receivables (13,320) (17,029)
 Inventories 2,742 5,021
 Accounts payable and accrued liabilities 2,262 (655)
 Other current assets and liabilities 74 3,910
 Other operating assets and liabilities (1,286) (211)
 Net cash flows from operating activities 30,114 37,731
Cash flows from investing activities    
Purchase of property, plant and equipment (13,482) (10,923)
 Net cash flows from investing activities (13,482) (10,923)
Cash flows from financing activities    
Payments on Term Loan Facility (11,445) (12,650)
Payments on Revolving Credit Facility (2,000) (6,190)
Dividend payments (3,178) (5,403)
Proceeds from Equipment and Working Capital Notes 1,100 1,610
Payment of Equipment and Working Capital Notes (2,396)
Proceeds from Bauer Mortgage 3,012
Borrowing under Revolving Credit Facility 6,000 5,000
Purchase of non-controlling interest in Lamiflex (878)
Shares surrendered for tax withholdings (128) (132)
Payments on mortgages and other debt (254) (371)
Purchases of common stock under share repurchase program (8,006) (2,907)
 Net cash flows from financing activities (18,173) (21,043)
Effect of exchange rate changes on cash and cash equivalents (3,685) (201)
 Net change in cash and cash equivalents (5,226) 5,564
Cash and cash equivalents at beginning of year 47,503 63,604
Cash and cash equivalents at end of period $ 42,277 $ 69,168
     
Reconciliation to free cash flow:    
Net cash flows from operating activities 30,114 37,731
Purchase of property, plant and equipment (13,482) (10,923)
     
Free cash flow * $ 16,632 $ 26,808
     
Altra Industrial Motion Corp.    
Selected Segment Data Quarter Ended Year to Date Ended
In Thousands of Dollars, except per share amount June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Net Sales        
Clutches & Brakes $ 105,538 $ 110,952 $ 207,133 $ 223,971
Couplings 31,717 35,039 63,651 66,027
Gearing and Power Transmission Components 60,634 71,053 122,099 138,350
Eliminations (1,279) (1,846) (2,912) (3,012)
Total $ 196,610 $ 215,198 $ 389,971 $ 425,336
         
Income from operations        
Clutches & Brakes $ 13,325 $ 14,279 $ 25,068 $ 27,153
Couplings 3,562 4,440 6,450 7,922
Gearing and Power Transmission Components 6,192 7,631 11,594 13,166
Restructuring (2,587) (4,343)
Corporate (2,779) (4,391) (5,403) (6,637)
Total $ 17,713 $ 21,959 $ 33,366 $ 41,604
         

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 products. The Company brings together strong brands covering over 40 product lines with production facilities in 12 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, 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 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 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, those relating to the Company's progress on corporate initiatives and strategic pricing, the reduction, and the related timing, in the number of Company facilities, the optimization of the Company's supply chain, including the timing thereof, the Company's views and assessment of economic conditions, foreign currency trends, end market conditions and industrial demand, the Company's progress on executing its acquisition and organic growth strategies and new product development, the Company's progress on implementing profit improvement initiatives, the Company's progress and future plans on implementing and pursuing consolidation and cost reduction activities, the impact and timing of the Company's Business Simplification Plan and other potential cost management and restructuring activities on earnings, margins and shareholder value, the Company's unaudited 2015 financial information, and the Company's guidance for full year 2015.

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 Lamiflex, Svendborg and Guardian acquisitions and integration and other acquisitions, (24) risks associated with the Company's investment in a manufacturing facility in China, (25) risks associated with certain minimum purchase agreements we have with suppliers, (26) risks associated with our exposure to variable interest rates and foreign currency exchange rates, (27) risks associated with interest rate swap contracts, (28) risks associated with the potential dilution of our common stock as a result of our convertible notes, (29) risks associated with our exposure to renewable energy markets, (30) risks related to regulations regarding conflict minerals, and (31) 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

Altra Industrial Motion Corp Logo

Source: Altra Industrial Motion Corp.

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