Altra Industrial Motion
Oct 20, 2017

Altra Reports Third-Quarter 2017 Results

Achieves 24% Overall Sales Growth  
Strategic Initiatives and FX Tailwind Drive Strong Bottom Line Improvement
Company Raises Full-Year Guidance

BRAINTREE, Mass, Oct. 20, 2017 (GLOBE NEWSWIRE) -- Altra Industrial Motion Corp. ("Altra" or "the Company") (Nasdaq:AIMC), a global manufacturer and marketer of electromechanical power transmission and motion control products, today announced unaudited financial results for the third quarter ended September 30, 2017.

Financial Highlights

         
*Reconciliation of Non-GAAP Net Income: 
   
  
 Quarter Ended
  Year to Date Ended
  
  September 30,
2017

  September 30,
2016

  September 30,
2017

  September 30,
2016

  
Net Income $  13,277  $  5,313  $  38,987  $  23,472  
                 
Restructuring and consolidation costs$  680  $  3,881  $  3,776  $  7,075  
Loss on extinguishment of convertible debt   -      -      1,797     -   
Legal fees associated with pursuit of unfair trade remedy   -      208     -      742  
Amortization of inventory fair value adjustment   -      -      2,347     -   
Acquisition related expenses   108     1,130     1,674     1,130  
Tax impact of above adjustments   (225)    (1,494)    (2,845)    (2,590) 
Non-GAAP net income*$  13,840  $  9,038  $  45,736  $  29,829  
Non-GAAP diluted earnings per share*$  0.48  $  0.35   $  1.58  $  1.15  
  
         
*Reconciliation of Free Cash FlowYear to Date Ended
  
 September 30,
2017

  September 30,
2016

  
Net cash flows from operating activities$  43,289  $  46,894  
Purchase of property, plant and equipment   (23,261)    (15,684) 
                 
Free cash flow*$  20,028  $  31,210  
In Thousands of Dollars, except per share amounts        
         
         
*Reconciliation of Non-GAAP Operating Margin: 
   
  
 Quarter Ended
  Year to Date Ended
  
 September 30,
2017

  September 30,
2016

  September 30,
2017

   September 30,
2016
 
  
                 
Income from operations$  21,273  $  10,369  $  62,084  $  41,521  
Restructuring and consolidation costs   680     3,881     3,776     7,075  
Amortization of inventory fair value adjustment   -      -      2,347     -   
Legal fees associated with pursuitof unfair trade remedy   -      208     -       742  
Acquisition related expenses   108     1,130     1,674     1,130  
Non-GAAP income from operations *$  22,061  $  15,588  $  69,881  $  50,468  
Non-GAAP Income from operations as a percent of net sales*      10.3%  9.0%  10.7%  9.4% 
         

Management Comments

"We reported another excellent quarter with a 24% increase in overall sales, and a 3.8% increase in sales excluding acquisitions, as the industrial economy continues to improve," said Carl Christenson, Altra's Chairman and CEO. "This was the fourth consecutive quarter of year-over-year organic sales growth, which gives us increasing confidence that the upturn in certain previously challenged end markets is sustainable. As a result of the higher sales volumes, the success of our margin improvement initiatives and a tailwind from foreign exchange, we achieved a 130% increase in diluted GAAP EPS, a 37% increase in non-GAAP dilutive EPS, a 90 basis point increase in gross margin, and a 390 basis point increase in operating margin."* 

"With our margin improvement initiatives firmly ingrained in the culture of the organization, we are now capitalizing on the positive momentum in the industrial economy by driving organic growth initiatives," added Christenson. "Our sales and engineering teams are targeting specific strategic end markets with focused activities that are already generating new opportunities. If successful, these initiatives coupled with continued improvement in the demand environment and our lower cost structure should result in enhanced long-term profitability. At the same time, we continue to seek strategic acquisitions, but remain highly disciplined in that pursuit."

Business Outlook

Altra is raising its top and bottom line guidance for full year 2017. Altra expects full-year 2017 sales in the range of $860 to $870 million, net income in the range of $51.4 to $52.9 million and non-GAAP net income in the range of $58.2 to $59.7 million, GAAP diluted EPS in the range of $1.76 to $1.82, and non-GAAP diluted EPS guidance in the range of $2.00 to $2.06. The Company currently expects its tax rate for the full year to be approximately 29% to 31% before discrete items, capital expenditures of approximately $30 million, and depreciation and amortization in the range of $35 to $37 million.*

     
*Reconciliation of 2017 Non-GAAP Net Income and Diluted EPS Guidance (Amounts in               
millions except per share information)

       Fiscal Year 2017                Fiscal Year 2017     
Diluted earnings per
share
     
Net Income  $51.4 - $52.9  $1.76 - $1.82
Adjustments (1)    
Restructuring and consolidation costs 3.8  
Acquisition related expenses 1.7  
Amortization of inventory fair value adjustment 2.3  
Loss on extinguishment of debt 1.8  
Tax impact of above adjustments (2) (2.8)  
     
Non-GAAP Net Income $58.2 - $59.7 $2.00 - $2.06
     
(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 31.0% by the above items.
 

Conference Call

The Company will conduct an investor conference call to discuss its unaudited third-quarter 2017 financial results today, October 20, 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 November 3, 2017. To listen to the replay, dial (877) 660-6853 domestically or (201) 612-7415 for international access (conference ID # 13672230). 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 amountsSeptember 30,
2017

  September 30,
2016

  September 30,
2017

  September 30,
2016

  
 (Unaudited)   (Unaudited)  (Unaudited)  (Unaudited)  
         
Net sales$  214,623  $  173,132  $  653,415  $  536,259  
Cost of sales 145,610   118,957     446,109     369,254  
Gross profit$  69,013  $  54,175  $  207,306  $  167,005  
Gross profit as a percent of net sales 32.2%  31.3%  31.7%  31.1% 
Selling, general & administrative expenses   41,009     36,142     123,012     105,548  
Research and development expenses   6,051     4,267     18,434     13,345  
Restructuring Charges   680     3,397     3,776     6,591  
Income from operations$  21,273  $  10,369  $  62,084  $  41,521  
Income from operations as a percent of net sales 9.9%  6.0%  9.5%  7.7% 
Interest expense, net   1,811     2,815     5,547     8,615  
Other non-operating income, net   696     45     30     (438) 
Loss on extinguishment of convertible debt   -      -      1,797     -  
Income before income taxes$  18,766  $  7,509  $  54,710  $  33,344  
Provision for income taxes   5,489     2,196     15,723     9,872  
Income tax rate 29.2%  29.2%  28.7%  29.6% 
Net income    13,277     5,313     38,987     23,472  
                    
Weighted Average common shares outstanding        
Basic  29,008   25,726   28,912   25,684  
Diluted 29,074    26,021   29,001   25,813  
         
Net income per share        
Basic$  0.46  $  0.21  $  1.35  $   0.91  
Diluted$  0.46  $  0.20  $  1.35  $  0.91  
         
Reconciliation of Non-GAAP Income From Operations:        
         
Income from operations$  21,273  $  10,369  $  62,084  $  41,521  
         
Restructuring and consolidation costs   680     3,881     3,776     7,075  
Amortization of inventory fair value adjustment   -      -      2,347     -   
Legal fees associated with pursuit of unfair trade remedy   -      208     -      742  
Acquisition related expenses   108     1,130     1,674     1,130  
Non-GAAP income from operations *$  22,061  $  15,588  $  69,881  $  50,468  
Non-GAAP Income from operations as a percent of net sales*      10.3%  9.0%  10.7%  9.4% 
         
Reconciliation of Non-GAAP Net Income:        
         
Net income$  13,277  $  5,313  $  38,987  $  23,472  
         
Restructuring and consolidation costs   680     3,881     3,776     7,075   
Loss on extinguishment of convertible debt   -      -      1,797     -   
Legal fees associated with pursuit of unfair trade remedy   -      208     -      742  
Amortization of inventory fair value adjustment   -      -      2,347     -   
Acquisition related expenses   108     1,130      1,674     1,130  
Tax impact of above adjustments   (225)    (1,494)     (2,845)    (2,590) 
Non-GAAP net income *$  13,840  $  9,038  $  45,736  $  29,829  
                    
         
Non-GAAP diluted earnings per share *$  0.48    (1)$  0.35   (2)$  1.58   (3)$  1.15   (4)
         
(1) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 28.6% by the above items
(2) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 28.6% 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 28.9% by the above items
          


     
Consolidated Balance Sheets    
In Thousands of DollarsSeptember 30, 2017
  December 31, 2016
  
  (unaudited) 
   
  
Assets:        
 Current Assets    
Cash and cash equivalents$  53,151  $  69,118  
Trade receivables, net   136,511      120,319  
Inventories   153,014     139,840  
Income tax receivable   7,822     607  
Prepaid expenses and other current assets   16,671     10,429  
Assets held for sale   364     3,874  
Total current assets   367,533     344,187  
Property, plant and equipment, net   190,455     177,043  
Intangible assets, net   160,939     154,683  
Goodwill   203,574     188,841  
Deferred income taxes   1,383     2,510  
Other non-current assets, net   2,147     2,560  
Total assets$  926,031  $  869,824  
         
Liabilities and stockholders' equity    
Current liabilities    
Accounts payable$  59,624  $  60,845  
Accrued payroll   29,761     31,302  
Accruals and other current liabilities   38,137     35,080  
Income tax payable   8,887     706  
Current portion of long-term debt   380     43,690  
Total current liabilities   136,789      171,623  
Long-term debt, less current portion and net             
  of unaccreted discount 
   295,223     325,969  
Deferred income taxes   57,471     61,084  
Pension liabilities   27,269     23,691  
Other long-term liabilities   25,714     4,109  
Total stockholders' equity   383,565     283,348  
Total liabilities, and stockholders' equity$  926,031  $  869,824  
         
     
Reconciliation to operating working capital:    
Trade receivables, net   136,511     120,319  
Inventories   153,014     139,840  
Accounts payable   (59,624)    (60,845) 
Operating working capital *$  229,901  $  199,314  
         


          
  Quarter Ended
  
  September 30, 2017
  September 30, 2016
  
  (Unaudited)
  (Unaudited)
  
Cash flows from operating activities     
Net income $  38,987  $  23,472  
Adjustments to reconcile net income to net cash flows:     
Depreciation    19,764     16,235  
Amortization of intangible assets    7,139     6,384  
Amortization of deferred financing costs    449     590  
Loss/(Gain) on foreign currency, net    241     (130) 
Accretion of debt discount, net      2,970  
(Gain)/loss on disposal / impairment of fixed assets    (36)    582  
Loss on extinguishment of debt    1,797     —  
Stock based compensation    4,543     3,370  
Amortization of inventory fair value adjustment    2,347     —  
Changes in assets and liabilities:     
Trade receivables    (9,701)    (10,461) 
Inventories    (9,478)    (837) 
Accounts payable and accrued liabilities    (8,799)    3,226  
Other current assets and liabilities    (2,392)    728  
Other operating assets and liabilities    (1,572)    765  
Net cash provided by operating activities    43,289     46,894  
Cash flows from investing activities         
Purchase of property, plant and equipment    (23,261)    (15,684) 
Proceeds from sale of building    3,221     —  
Working capital settlement from prior year acquisition    2,883     —  
Net cash used in investing activities    (17,157)    (15,684) 
Cash flows from financing activities     
Payments on Revolving Credit Facility    (39,036)    (30,870) 
Dividend payments     (13,256)    (7,784) 
Borrowing under Revolving Credit Facility    7,000     3,000  
Payments of equipment, working capital notes, mortgages and other debt     (913)    (3,181) 
Cash paid for convertible debt    (954)    —  
Proceeds from equipment and working capital notes    —     2,893  
Shares surrendered for tax withholding    (2,089)    (1,288) 
Purchases of common stock under share repurchase program    —     (4,713) 
Net cash used in financing activities    (49,248)    (41,943) 
Effect of exchange rate changes on cash and cash equivalents    7,149     178  
Net change in cash and cash equivalents    (15,967)    (10,555) 
Cash and cash equivalents at beginning of year    69,118     50,320  
Cash and cash equivalents at end of period $  53,151  $  39,765  
          
Reconciliation to free cash flow:      
Net cash flows from operating activities    43,289     46,894  
Purchase of property, plant and equipment    (23,261)    (15,684) 
          
Free cash flow * $  20,028  $  31,210  
          


         
Altra Industrial Motion Corp.                
Selected Segment Data Quarter Ended
September 30,
  Year to date periods Ended
September 30,
 
In Thousands of Dollars, except per share amount         2017   2016   2017   2016 
Net Sales:                
Couplings, Clutches & Brakes $           110,109  $           77,446  $           327,310  $           231,225 
Electromagnetic Clutches & Brakes     58,304     50,680  $  187,463  $  165,083 
Gearing    48,368     47,023  $  144,545  $  145,038 
Eliminations    (2,158)    (2,017) $  (5,903) $  (5,087)
Total $  214,623  $  173,132  $  653,415  $  536,259  
                 
Income from operations:        
Couplings, Clutches & Brakes $  12,679  $  6,596  $  33,031  $  20,441 
Electromagnetic Clutches & Brakes    6,138     6,589  $  21,894  $  20,120 
Gearing     5,689     5,650  $  17,804  $  17,280 
Restructuring and consolidation costs    (680)    (3,397) $  (3,776) $  (6,591)
Corporate    (2,553)    (5,069) $  (6,869) $  (9,729)
Total $  21,273  $  10,369  $  62,084  $  41,521 
                 
          

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 eleven 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 gross profit is calculated using gross profit that excludes income or charges that management does not consider to be directly related to the Company's core operating performance. Non-GAAP gross profit margin is calculated by dividing non-GAAP income from operations by GAAP net sales. 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 gross profit 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, those related to expectations regarding economic conditions, expectations regarding the continued upturn of the Company's end markets, the expected benefit from the Company's strategic marketing initiatives and lower cost structure, the expected execution of the Company's strategic plan during the rest of the year, expectations of the Company's enhanced long-term profitability, expectations on the improvement in certain of the Company's end markets, the statements under our "Business Outlook", our acquisition strategies, our ability to execute our strategic plan, 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 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 the Company's closure of 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

Primary Logo

Source: Altra Industrial Motion Corp.

News Provided by Acquire Media