Altra Industrial Motion
Feb 27, 2017

Altra Reports Fourth-Quarter and Full-Year 2016 Results, Provides 2017 Outlook

BRAINTREE, Mass., Feb. 27, 2017 (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 and year-ended December 31, 2016.

Financial Highlights

Reconciliation of Non-GAAP Net Income*:

 Quarter Ended  Year to Date Ended  Quarter Ended  Year to Date Ended 
 December 31, 2016  December 31, 2015 
                
Net Income attributable to Altra Industrial Motion Corp.$1,668  $25,140  $6,107   $35,406 
                
Restructuring and consolidation costs$3,258  $10,333  $2,220  $7,214 
Write-off deferred financing costs and extinguishment of debt 1,989   1,989   500   500 
Legal fees associated with pursuit of unfair trade remedy -   742   430   430 
Warranty provision related to Svendborg Acquisition -   -   739   2,808 
Acquisition related expenses 1,219   2,349   93   831 
Impairment of Intangible assets 6,568   6,568         
Tax impact of above adjustments (4,071)  (6,661)  (775)  (3,143)
Tax impact of foreign reorganizations -   -   -   (924)
Non-GAAP net income*$10,631  $40,460  $9,314  $43,122 
Non-GAAP diluted earnings per share*$0.41  $1.56  $0.36   $1.64 
                

Reconciliation of Free cash flow*:      

 Year to Date Ended 
 December 31, 2016  December 31, 2015 
Net cash flows from operating activities$76,641  $86,816 
Purchase of property, plant and equipment (18,941)  (22,906)
  
Free cash flow*$57,700  $63,910 
In Thousands of Dollars, except per share amounts       

Management Comments

"We concluded the year with fourth-quarter financial results that were in line with our expectations amidst continuing difficult conditions in many of our end markets," said Carl Christenson, Altra's Chairman and CEO. "We achieved year-over-year gains in the fourth-quarter in both volume and pricing, but that growth was more than offset by foreign exchange headwinds. At the same time, we performed well on the bottom line due to the progress we are making on the key elements of our profit improvement strategy, including our consolidation, supply chain, pricing and operational excellence initiatives. We completed one plant closure during the fourth quarter and closed an additional facility in the current quarter, bringing the total number of consolidations to eight."

"During the fourth quarter, we closed on the Stromag acquisition, which provides Altra with complementary products, increased presence in key geographic regions and penetration into new growth end markets. This was the largest acquisition we have completed to date and despite this transaction our leverage profile still allows us to continue to pursue additional bolt-on acquisitions."

Business Outlook

"We believe that we have hit the trough in certain of our served markets that have been challenged, although we do not expect an immediate or significant improvement in those markets in the near term. There remains much uncertainty. In addition, we expect to face meaningful revenue and EPS headwinds relating to foreign exchange, assuming that the Dollar remains strong. At the same time, we believe that the success of our consolidation, supply chain, pricing and operational excellence initiatives will enable us to enhance margins and accelerate profitability when our markets do rebound. Finally, we are very pleased with the addition of the Stromag business which we expect to be accretive this year."    

Altra expects full-year 2017 sales in the range of $835 to $855 million, GAAP diluted EPS in the range of $1.64 to $1.74, and non-GAAP diluted EPS in the range of $1.75 to $1.85. The Company expects its tax rate for the full year to be approximately 30% to 32% before discrete items. Altra expects capital expenditures in the range of $25 to $30 million and depreciation and amortization in the range of $38 to $42 million*.

The following table reconciles GAAP diluted earnings per share to non-GAAP diluted earnings per share and does not take in to account any unknown factors that may impact the business.

     
*Reconciliation of 2017 Non-GAAP Diluted EPS Guidance Fiscal Year 2017
   
Net Income per Share Diluted $1.64 - $1.74
Restructuring and consolidation costs 0.05 
Acquisition related expenses 0.02 
Inventory step-up 0.05 
Loss on extinguishment of debt 0.04 
Tax impact of above adjustments** (0.05)
Non-GAAP Diluted EPS Guidance $1.75 - $1.85
     
** Tax impact is calculated by multiplying the estimated effective tax rate for the period of 31% by the above items.

Conference Call

The Company will conduct an investor conference call to discuss its unaudited fourth-quarter 2016 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. 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 February 27 through midnight on March 13, 2017. To listen to the replay, dial (877) 660-6853 domestically or (201) 612-7415 for international access (conference ID #13654961). A webcast replay also will be available.

Altra Industrial Motion Corp.  
                       
         
Consolidated Statements of Income Data:Quarters Ended    Year to Date Ended  
In Thousands of Dollars, except per share amountsDecember 31, 2016    December 31, 2015    December 31, 2016    December 31, 2015  
 (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)  
                       
Net sales$172,647    $173,628    $708,906     $746,652  
Cost of sales 117,520     119,424     486,774     518,189  
Gross profit$55,127    $54,204    $222,132    $228,463  
Gross profit as a percent of net sales 31.9%     31.2%    31.3%    30.6% 
Selling, general & administrative expenses 34,944     33,484     140,492     139,217  
Research and development expenses 4,332     4,312     17,677     17,818   
Impairment of Intangible assets 6,568     -     6,568     -  
Restructuring Charges 3,258     2,220     9,849     7,214  
Income from operations$6,025    $14,188    $47,546    $64,214  
Income from operations as a percent of net sales 3.5%    8.2%    6.7%    8.6% 
Interest expense, net 3,064     3,306     11,679     12,164  
Loss on write-off of deferred financing and extinguishment of convertible debt  1,989     -     1,989     -  
Other non-operating expense (income), net 431     357     (7)    963   
Income before income taxes$541    $10,525    $33,885    $51,087  
(Benefit)/Provision for income taxes (1,127)    4,418     8,745     15,744  
Income tax rate -208.3%    42.0%    25.8%    30.8% 
Net income 1,668     6,107     25,140     35,343  
Net loss attributable to non-controlling interest -     -     -     63  
Net income attributable to Altra Industrial Motion Corp.$1,668    $6,107    $25,140    $35,406  
                       
                       
Weighted Average common shares outstanding                      
Basic 25,889     26,091     25,719     26,064  
Diluted - includes impact of convertible debt redemptions 25,916     26,091     25,872     26,109  
                       
                       
                        
Net income per share                      
Basic$0.06    $0.23    $0.97    $1.36  
Diluted$0.06     $0.23    $0.97    $ 1.36  
                       
Reconciliation of Non-GAAP Income From Operations:                      
                         
Income from operations$6,025    $14,188    $47,546    $64,214  
                       
Restructuring and consolidation costs  3,258     2,220     10,333     7,214  
Legal fees associated with pursuit of unfair trade remedy -     430     742     430  
Impairment of Intangible assets  6,568     -     6,568     -  
Warranty provision related to Svendborg Acquisition -     739     -     2,808  
Acquisition related expenses 1,219      93     2,349     831  
                        
Non-GAAP income from operations *$17,070     $17,670    $67,538    $75,497  
                       
Reconciliation of Non-GAAP Net Income:                      
                       
Net income attributable to Altra Industrial Motion Corp.$1,668    $6,107    $25,140    $35,406  
                       
Restructuring and consolidation costs 3,258     2,220     10,333     7,214  
Write-off deferred financing costs and extinguishment of debt 1,989     500     1,989     500  
Legal fees associated with pursuit of unfair trade remedy -     430     742     430  
Warranty provision related to Svendborg Acquisition -     739     -     2,808  
Impairment of Intangible assets 6,568     -     6,568      -  
Acquisition related expenses 1,219     93     2,349     831  
Tax impact of above adjustments (4,071)    (775)    (6,661)    (3,143) 
Tax impact of foreign reorganizations -     -      -     (924) 
Non-GAAP net income * $10,631    $9,314    $40,460    $43,122  
                       
                         
Non-GAAP diluted earnings per share *$0.41  (1)$0.36  (2)$1.56  (3)$1.64  
                       
                        
(1) - 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 TB Woods impairment by the marginal tax rate plus the acquisition related expenses multiplied by the estimated effective tax rate for the period of 26.5% by the above items
(2) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.0% 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 25.4% by the above items
 


        
Consolidated Balance SheetsYears Ended December 31, 
In Thousands of Dollars2016  2015 
         
Assets:       
 Current Assets       
Cash and cash equivalents$69,118  $50,320 
Trade receivables, net 120,319    94,720 
Inventories 139,840   121,156 
Income tax receivable 607   5,146 
Prepaid expenses and other current assets 10,429   11,217 
Assets held for sale 3,874   4,597 
Total current assets 344,187   287,156 
Property, plant and equipment, net 177,043   145,413 
Intangible assets, net 154,683   96,069 
Goodwill 188,841   97,309 
Deferred income taxes 2,510   3,201 
Other non-current assets, net 2,560   3,184 
Total assets$869,824  $632,332 
        
Liabilities and stockholders' equity       
Current liabilities       
Accounts payable$60,845  $40,297 
Accrued payroll 31,302   22,312 
Accruals and other current liabilities 35,080    34,990 
Income tax payable 706   3,563 
Current portion of long-term debt 43,690   3,187 
Total current liabilities 171,623   104,349 
Long-term debt, less current portion and net of unaccreted discount 325,969   231,568 
Deferred income taxes 61,084   44,185 
Pension liabilities 23,691   8,328 
Other long-term liabilities 4,109   1,335 
Total stockholders' equity 283,348   242,567 
Total liabilities, and stockholders' equity $869,824  $632,332 
        
        
Reconciliation to operating working capital:        
Trade receivables, net 120,319   94,720 
Inventories 139,840   121,156 
Accounts payable (60,845)  (40,297)
Operating working capital *$199,314  $175,579 
        


  Year to Date Ended 
  December 31,
2016
  December 31,
2015
 
          
Cash flows from operating activities        
Net income $25,140   $35,343 
Adjustments to reconcile net income to net cash flows:        
Depreciation   21,604   21,559 
Amortization of intangible assets  8,294    8,562 
Amortization and write-off of deferred financing costs  802   1,366 
Loss (Gain) on foreign currency, net  259    (395)
Accretion of debt discount, net  4,005   3,694 
Loss on disposals and impairments  8,273   2,003 
Loss on extinguishment of debt  1,989    
(Benefit) for deferred taxes  (2,850)  (170)
Stock based compensation  4,230   4,004 
Changes in assets and liabilities:        
Trade receivables  (4,140)  7,223 
Inventories  2,324    6,049 
Accounts payable and accrued liabilities  4,333   2,816 
Other current assets and liabilities  529   (3,343)
Other operating assets and liabilities  1,849   (1,895)
Net cash provided by operating activities  76,641   86,816 
Cash flows from investing activities         
Purchase of property, plant and equipment  (18,941)  (22,906)
Proceeds from sale of property     1,201 
Acquisition of Stromag, net of cash received of $8.8 million  (187,967)    
Net cash used in investing activities  (206,908)  (21,705)
Cash flows from financing activities        
Payment of debt issuance costs  (650)  (1,006)
Payment on term loan facility     (130,063)
Payments on revolving credit facility  (31,861)  (14,998)
Dividend payments  (11,667)  (14,928)
Payments of equipment, working capital notes, mortgages and other debt  (3,308)  (3,864)
Payments from equipment, working capital notes, mortgages and other debt  2,729   8,398 
Borrowing under revolving credit facility  200,579   120,036 
Purchase of non-controlling interest in Lamiflex     (878)
Purchases of common stock under share repurchase program  (4,713)  (17,298)
Shares surrendered for tax withholding  (1,337)  (1,182)
Net cash provided (used) in financing activities  149,772   (55,783)
Effect of exchange rate changes on cash and cash equivalents  (707)  (6,511)
Net change in cash and cash equivalents  18,798   2,817 
Cash and cash equivalents at beginning of year  50,320   47,503 
Cash and cash equivalents at end of period  $69,118  $50,320 
         
Reconciliation to free cash flow:        
Net cash flows from operating activities  76,641   86,816 
Purchase of property, plant and equipment  (18,941)  (22,906)
         
Free cash flow * $57,700   $63,910 
         


Altra Industrial Motion Corp.                
Selected Segment Data Quarters Ended
December 31,
  Year to date periods Ended
December 31,
 
In Thousands of Dollars, except per share amount 2016  2015  2016  2015 
Net Sales:                
Couplings, Clutches & Brakes $74,181  $77,074  $305,406  $342,299 
Electromagnetic Clutches & Brakes  52,773   53,397    217,856   219,676 
Gearing  46,964   44,653   192,003   192,252 
Eliminations  (1,271)  (1,496)  (6,359)  (7,575)
Total  $172,647  $173,628  $708,906  $746,652 
                  
Income from operations:                 
Couplings, Clutches & Brakes $7,068  $9,078  $27,509  $49,299 
Electromagnetic Clutches & Brakes  6,287   5,341   26,406   22,014 
Gearing  5,438   4,072   22,718   22,698 
Restructuring and consolidation costs   (3,258)  (2,220)  (9,849)  (1,767)
Corporate   (9,510)  (2,083)  (19,238)   (17,135)
Total $6,025  $14,188  $47,546  $75,109 
                 

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.

* 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 expenses, 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 gross profit, 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, the expected financial impact of the Stromag acquisition, the Company's expectations regarding the impact of certain interest rate and currency swap transactions, the statements under our "Business Outlook", our expectations regarding economic conditions, our expectations regarding the impact of foreign exchange rates, the impact of certain restructuring activities, and the Company's guidance for full year 2017.

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 Credit Facility, (20) risks associated with compliance with tax laws, (21) risks associated with the 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 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 our exposure to renewable energy markets, (29) risks related to regulations regarding conflict minerals, (30) risks related to restructuring and plant consolidations, 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

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