Altra Industrial Motion
Jul 21, 2016

Altra Reports Second-Quarter 2016 Results

Achieves Improvement in Gross Margin YOY Despite Sales Decline. Maintains Guidance for Full-Year 2016.

BRAINTREE, Mass., July 21, 2016 (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, 2016.

Financial Highlights

*Reconciliation of Non-GAAP Net Income:Quarter
Ended
 Year to Date
Ended
 Quarter
Ended
 Year to Date
Ended
 June 30, 2016 June 30, 2015
Net income attributable to Altra Industrial Motion Corp.$9,349  $18,159  $9,679  $19,078 
        
Restructuring costs1,641  3,194  2,587  4,343 
Acquisition related expenses      738 
            
Legal fees associated with pursuit of unfair trade remedy534  534     
Tax impact of above adjustments(632) (1,096) (779) (1,540)
Non-GAAP net income*$10,892  $20,791  $11,487  $22,619 
Non-GAAP diluted earnings per share*$0.42  $0.80  $0.43  $0.85 
 
*Reconciliation of Free Cash Flow:Year to Date Ended
 June 30,
2016
 June 30,
2015
Net cash flows from operating activities30,532  30,114 
Purchase of property, plant and equipment(10,861) (13,482)
 
Free cash flow *$19,671  $16,632 
In Thousands of Dollars, except per share amounts
 

Management Comments

"We are executing well on our actions to enhance Altra's long-term operating performance as the soft economic environment in many of our end markets persists," said Carl Christenson, Altra's Chairman and CEO. "We improved gross profit margin by 140 basis points in the second quarter to 31.9% on a 7% decline in sales as a result of our consolidation, supply chain and operational excellence initiatives. We have completed five facility consolidations, and two are in process, with expected total annualized savings of $5 million. We generated strong cash flow during the quarter, which enabled us to repurchase $2.2 million of Altra shares and pay down more than $23 million of debt."

Business Outlook

"We had been hopeful to see the beginnings of a recovery in the back half of this year. While comparisons with prior-year quarters will be easier, we do not see imminent catalysts that would result in improvements to our most out-of-favor end markets. At the same time, based on our solid first-half performance and near term outlook, we are maintaining our top-and-bottom-line guidance for the full year. Looking forward, we are encouraged by the benefits we already are experiencing from our consolidation, supply chain and operational excellence initiatives and expect these aggressive actions to result in significant long-term operating performance improvement."

Altra is maintaining its previous annual revenue guidance and expects full-year 2016 sales in the range of $700 to $720 million and diluted EPS in the range of $1.20 to $1.30 and non-GAAP diluted EPS guidance in the range of $1.40 to $1.50.* This guidance includes savings from the restructuring and consolidation actions taken to date. The Company expects its tax rate for the full year to be approximately 29% to 31%. Altra continues to expect capital expenditures in the range of $20 to $24 million and depreciation and amortization in the range of $30 to $32 million for 2016.

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 2016 Non-GAAP Diluted EPS Guidance:Projected Fiscal Year 2016
Net Income per share Diluted$1.20 - $1.30
Non-GAAP adjustments, net of tax, excludes acquisition related expenses, restructuring costs,  and other income or charges.$0.20  
Non-GAAP Diluted EPS$1.40 - $1.50
  

Conference Call

The Company will conduct an investor conference call to discuss its unaudited second-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 July 21 through midnight on August 4, 2016. To listen to the replay, dial (877) 660-6853 domestically or (201) 612-7415 for international access (conference ID #13641048). 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,
2016
 June 30,
2015
 June 30,
2016
 June 30,
2015
 
  (Unaudited)  (Unaudited) (Unaudited) (Unaudited) 
          
Net sales $182,674  $196,610  $363,127  $389,971  
Cost of sales 124,474  136,624  250,297  271,512  
Gross profit $58,200  $59,986  $112,830  $118,459  
Gross profit as a percent of net sales 31.9% 30.5% 31.1% 30.4% 
Selling, general & administrative expenses 35,870  35,152  69,406  71,454  
Research and development expenses 4,514  4,534  9,078  9,296   
Restructuring Charges 1,641  2,587  3,194  4,343  
Income from operations $16,175  $17,713   $31,152  $33,366  
Income from operations as a percent of net sales 8.9 % 9.0% 8.6% 8.6% 
Interest expense, net 2,904  2,978  5,800  5,934  
Other non-operating (income) expense, net (205) 750  (483) (79) 
Income before income taxes $13,476  $13,985  $25,835  $27,511  
Provision for income taxes 4,127  4,360  7,676  8,496  
Income tax rate 30.6%  31.2% 29.7% 30.9% 
Net income 9,349  9,625  18,159  19,015  
Net loss attributable to non-controlling interest   54    63  
Net income attributable to Altra Industrial Motion Corp. $9,349  $9,679  $18,159  $19,078  
          
          
Weighted Average common shares outstanding         
Basic 25,699  26,280  25,699  26,204  
Diluted 25,968  26,450  25,793  26,287  
          
Net income per share          
Basic $0.36  $0.37  $0.71  $0.73  
Diluted $0.36  $ 0.37  $0.70  $0.73  
          
Reconciliation of Non-GAAP Income From Operations:         
          
Income from operations $16,175  $17,713  $31,152  $33,366  
          
Restructuring costs 1,641  2,587  3,194  4,343  
Legal Fees associated with the pursuit of unfair trade remedy 534      534     
Acquisition related expenses       738  
Non-GAAP income from operations * $18,350  $20,300  $34,880  $38,447  
           
Reconciliation of Non-GAAP Net Income:         
           
Net income attributable to Altra Industrial Motion Corp. 9,349   9,679  18,159  19,078  
          
Restructuring costs 1,641  2,587  3,194  4,343  
Acquisition related expenses       738  
Legal Fees associated with the pursuit of unfair trade remedy 534    534    
Tax impact of above adjustments (632) (779) (1,096) (1,540) 
Non-GAAP net income * $10,892  $11,487  $20,791  $22,619  
          
          
Non-GAAP diluted earnings per share * $0.42  (1)$0.43  (2 )$0.80  (3)$0.85  (4)
     
(1) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 29.1% by the above items
(2) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.1% by the above items
(3) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 29.4% 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    
In Thousands of Dollars June 30, 2016  December 31, 2015
  (unaudited)  
Assets:    
Current Assets    
Cash and cash equivalents $34,330  $50,320 
Trade receivables, net 103,271  94,720 
Inventories 120,567  121,156 
Income tax receivable 1,419  5,146 
Prepaid expenses and other current assets 11,981  11,217 
Assets held for sale 4,728  4,597 
Total current assets 276,296  287,156 
Property, plant and equipment, net 145,569  145,413 
Intangible assets, net 92,497  96,069 
Goodwill 97,766  97,309 
Deferred income taxes 3,199  3,201 
Other non-current assets, net 2,656   3,184 
Total assets $617,983  $632,332 
     
Liabilities, and stockholders' equity    
Current liabilities    
Accounts payable $44,647  $40,297 
Accrued payroll 19,908  22,312 
Accruals and other current liabilities 34,737  34,990 
Income tax payable 3,021  3,563 
Current portion of long-term debt 708  3,187 
Total current liabilities 103,021  104,349 
Long-term debt, less current portion and net
  of unaccreted discount
 210,470  231,568 
Deferred income taxes 44,302  44,185 
Pension liabilities  8,839  8,328 
Long-term taxes payable 662  647 
Other long-term liabilities 699  688 
Total stockholders' equity
 249,990  242,567 
Total liabilities, and stockholders' equity
 $617,983  $632,332 
     
     
Reconciliation of operating working capital:    
Trade receivables, net 103,271  94,720 
Inventories 120,567  121,156 
Accounts payable (44,647) (40,297)
Operating working capital * $179,191  $ 175,579 
     


Consolidated Statements of Cash Flows    
In Thousands of Dollars
 Year to Date Ended
     
  June 30, 2016 June 30, 2015
  (Unaudited) (Unaudited)
Cash flows from operating activities    
Net income $18,159  $19,015 
Adjustments to reconcile net income to net cash flows:    
Depreciation 10,487  10,832 
Amortization of intangible assets 4,262  4,300 
Amortization of deferred financing costs 393  468 
(Gain) on foreign currency, net (100) (125)
Accretion of debt discount, net 1,962  1,810 
Loss on impairment / disposal of fixed assets 411  1,127 
Stock based compensation 2,312  2,215 
Changes in assets and liabilities:    
Trade receivables (8,890) (13,320)
Inventories 238  2,742 
Accounts payable and accrued liabilities 1,470  2,262 
Other current assets and liabilities (698) 74 
Other operating assets and liabilities 526  (1,286)
Net cash provided by operating activities 30,532  30,114 
Cash flows from investing activities    
Purchase of property, plant and equipment (10,861) (13,482)
Net cash used in investing activities (10,861) (13,482)
Cash flows from financing activities    
Payments on term loan facility   (11,445)
Payments on Revolving Credit Facility (26,507) (2,000)
Dividend payments (3,903)  (3,178)
Proceeds from equipment and working capital notes   1,100 
Payments of equipment and working capital notes (2,477) (2,396)
Proceeds from mortgages and other debt 3,112  3,012 
Borrowing under Revolving Credit Facility   6,000 
Purchase of non-controlling interest in Lamiflex   (878)
Shares surrendered for tax withholding (103) (128)
Payments on mortgages and other debt (68) (254)
Purchases of common stock under share repurchase program  (4,391) (8,006)
Net cash flows used in financing activities (34,337) (18,173)
Effect of exchange rate changes on cash and cash equivalents (1,324) (3,685)
Net change in cash and cash equivalents (15,990) (5,226)
Cash and cash equivalents at beginning of year 50,320  47,503 
Cash and cash equivalents at end of period $34,330  $42,277 
     
Reconciliation to free cash flow:    
Net cash flows from operating activities 30,532  30,114 
Purchase of property, plant and equipment (10,861) (13,482)
     
Free cash flow * $19,671  $16,632 
         


Altra Industrial Motion Corp.        
Selected Segment Data Quarter Ended Year to Date Ended
     
In Thousands of Dollars, except per share amount June 30, 2016 June 30, 2015 June 30, 2016 June 30, 2015
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Net Sales         
Couplings Clutches & Brakes $78,157  $90,351   $153,780  $179,466 
Electromagnetic Clutches & Brakes 57,053  58,250  114,402  115,886 
Gearing 49,096  49,611  98,015  98,817 
Eliminations (1,632) (1,602) (3,070) (4,198)
Total $182,674  $196,610  $363,127  $389,971 
         
Income from operations        
Couplings Clutches & Brakes $7,554  $10,809  $13,845  $20,763 
Electromagnetic Clutches & Brakes 7,068  6,194  13,531  11,522 
Gearing 5,867  6,076  11,629  10,825 
Restructuring (1,641) (2,587) (3,194) (4,343)
Corporate (2,673) (2,779) (4,659) (5,401)
Total $16,175  $17,713  $31,152  $33,366 
         

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 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 gross profit 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 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, those relating to the Company's progress on corporate initiatives, including its supply chain management initiative, the Company's views and assessment of economic conditions, foreign currency trends, end market conditions and industrial demand, the Company's expectations with respect to sales, 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 and the cost savings associated therewith, the impact and timing of the Company's cost management and restructuring activities on earnings, margins and shareholder value, the Company's unaudited 2016 financial information, and the Company's guidance for full year 2016.

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 and Guardian acquisitions and integration and other acquisitions, (24) risks associated with the closure of the Company's manufacturing facility in Changzhou, 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, (31) risks related to restructuring and plant consolidations, (32) risk associated with the UK vote to leave the European Union and (33) 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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Source: Altra Industrial Motion Corp.

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