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Altra Reports Fourth-Quarter and Full Year 2015 Results, Provides 2016 Outlook

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February 17, 2016 7:00 AM EST

Delivered Strong Operating Cash Flows of $86.1 Million for the Year

Returned $32.2 Million to Shareholders Through Dividends and Stock Repurchases in 2015

BRAINTREE, Mass., Feb. 17, 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 fourth quarter and year ended December 31, 2015.

Financial Highlights

  • Fourth-quarter 2015 net sales were $173.6 million, compared with $192.0 million in the fourth quarter of 2014, a decrease of 9.6%. The decrease in net sales was driven by an organic sales decline of 6.6% and the unfavorable impact from foreign exchange of 3.8%, partially offset by a 0.8% favorable impact from pricing. 
  • Fourth-quarter gross margin increased 80 basis points to 31.2% from 30.4% a year ago despite the sales decline as a result of the success of the Company's margin improvement and strategic pricing initiatives. 
  • Fourth-quarter net income was $6.1 million, or $0.23 per diluted share, compared with $9.1 million, or $0.34 per diluted share, in the fourth quarter of 2014. Non-GAAP net income in the fourth quarter 2015 was $9.3 million, or $0.36 per diluted share, compared with $11.2 million, or $0.42 per diluted share, a year ago.* 
  • Strong cash flows from operations led to a record free cash flows of $63.2 million for the year.* 
  • The Company purchased $3.0 million, or approximately 115,000 shares, of Altra stock during the fourth quarter under its $50 million repurchase program. Since the program's inception in May 2014, the Company has purchased approximately $34.9 million, or 1.2 million shares, under the program. 
  • Altra announced the closure of its Changzhou, China facility during the fourth quarter which is expected to be completed during the first quarter of 2016.
  • Reconciliation of Non-GAAP Net Income*:
 Quarter Ended Year to Date Ended Quarter Ended Year to Date Ended
 December 31, 2015 December 31, 2014
Net income attributable to Altra Industrial Motion Corp.$6,107  $35,406  $9,059  $40,167 
        
Restructuring costs2,220  7,214  124  1,767 
Amortization of inventory fair value adjustment—  —  112  2,376 
Write-off of deferred financing fees500  500  —  — 
Legal fees associated with pursuit of unfair trade remedy430  430  —  — 
European workers compensation claim—  —  —  355 
Supplier warranty provision739  2,808  —  — 
Non-cash impact of partial pension settlement—  —  475  475 
Acquisition related expenses93  831  2,305  3,204 
Tax impact of above adjustments(775) (3,143) (902) (2,450)
Tax impact of foreign reorganizations$—  $(924) $—  $3,758 
Non-GAAP net income*$9,314  $43,122  $11,173  $49,652 
Non-GAAP diluted earnings per share*$0.36  $1.64  $0.42  $1.83 
        
In Thousands of Dollars, except per share amounts       

  • Reconciliation of Non-GAAP Gross Profit*:
 Quarter EndedYear to Date Ended Quarter EndedYear to Date Ended
 December 31, 2015December 31, 2014
Gross Profit$54,204 $228,463  $58,270 $248,869 
Gross profit as a percent of net sales31.2%30.6% 30.4%30.4%
Supplier warranty provision739 2,808  — — 
Amortization of inventory fair value adjustment— —  112 2,376 
Non-GAAP Gross Profit*$54,943 $231,271  $58,382 $251,245 
Non-GAAP Profit as a percent of net sales31.6%31.0% 30.4%30.6%
In Thousands of Dollars, except per share amounts     

Management Comments

“Amid a difficult economic environment, we were pleased with our operating performance during the fourth quarter,” said Carl Christenson, Altra’s Chairman and CEO. “We achieved an 80 basis point increase in gross margins during the quarter to 31.2% on a 9.6% decrease in sales due to lower raw material costs, outstanding control of other input costs and our successful pricing initiative.  We also made expected progress on our facility consolidation efforts.    We announced the closure of our Changzhou, China facility during the quarter and that closure is now essentially complete.   Adjusted operating income increased 20 basis points during the quarter.  As a result of our bottom-line performance, we generated record free cash flow during the year, allowing us to pay down $25 million on our credit facility and return $32.2 million to shareholders through the dividend and stock repurchase plan.”*

Business Outlook“We expect the decline in global industrial demand to result in lower year-over-year sales in 2016.   However, this affords us the opportunity to take aggressive action to improve our long term operating performance.  We have accelerated our facility consolidation plans and we will have consolidated six sites by the end of the second quarter.   In addition, we have expanded and accelerated our supply chain management efforts and are very excited about the results we are already seeing.   While this is an extremely difficult environment regarding pricing we achieved our three year goal in just over 2 years and still believe that we have some additional, albeit more difficult, opportunity.   Finally, we are really excited by our long term margin potential due to operating leverage when some of our distressed end markets rebound and the impact of the initiatives we are working on," concluded Christenson.

Altra is forecasting sales in the range of $700 to $720 million and non-GAAP diluted EPS in the range of $1.40 to $1.50 for 2016. This guidance is based on foreign exchange rates as of December 31, 2015, which may change. The Company expects its tax rate for the full year to be in the range of 29% to 31% before discrete items. Altra also expects 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 company will conduct an investor conference call to discuss its unaudited fourth quarter financial results on February 17, 2016 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 February 17 through midnight on March 2, 2016. To listen to the replay, dial (877) 660-6853 domestically or (201) 612-7415 for international access (conference ID # 13629944). A webcast replay also will be available.

Altra Industrial Motion Corp. 
Consolidated Statements of Income DataQuarter Ended Year to Date Ended 
In Thousands of Dollars, except per share amountDecember 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 
 (Unaudited) (Unaudited) (Unaudited) (Unaudited) 
         
Net sales$173,628  $191,961  $746,652  $819,817  
Cost of sales119,424  133,691  518,189  570,948  
Gross profit$54,204  $58,270  $228,463  $248,869  
Gross profit as a percent of net sales31.2% 30.4% 30.6% 30.4% 
Selling, general & administrative expenses33,484  38,643  139,217  156,471  
Research and development expenses4,312  3,803  17,818  15,522  
Restructuring Charges2,220  124  7,214  1,767  
Income from operations$14,188  $15,700  64,214  $75,109  
Income from operations as a percent of net sales8.2% 8.2% 8.6% 9.2% 
Interest expense, net3,306  3,003  12,164  11,994  
Other non-operating (income) expense, net357  (449) 963  (3) 
Income before income taxes$10,525  $13,146  $51,087  $63,118  
Provision for income taxes4,418  4,093  15,744  22,936  
Income tax rate42.0% 31.1% 30.8% 36.3% 
Net income6,107  9,053  35,343  40,182  
Net loss (income) attributable to non-controlling interest—  6  63  (15) 
Net income attributable to Altra Industrial Motion Corp.6,107  9,059  35,406  40,167  
         
         
Weighted Average common shares outstanding        
Basic26,091  26,434  26,064  26,713  
Diluted26,091  26,764  26,109  27,403  
         
Net income per share        
Basic$0.23  $0.34  $1.36  $1.50  
Diluted$0.23  $0.34  $1.36  $1.47  
         
Reconciliation of Non-GAAP Income From Operations:        
         
Income from operations$14,188  $15,700  $64,214  $75,109  
         
Restructuring costs2,220  124  7,214  1,767  
Amortization of inventory fair value adjustment—  112  —  2,376  
Legal fees associated with pursuit of unfair trade remedy430  —  430  —  
European workers compensation claim—  —  —  355  
Supplier warranty provision739  —  2,808  —  
Non-cash impact of partial pension settlement—  475  —  475  
Acquisition related expenses93  2,305  831  3,204  
Non-GAAP income from operations *$17,670  $18,716  $75,497  $83,286  
         
Reconciliation of Non-GAAP Net Income:        
         
Net income attributable to Altra Industrial Motion Corp.6,107  9,059  35,406  40,167  
         
Restructuring costs2,220  124  7,214  1,767  
Amortization of inventory fair value adjustment—  112  —  2,376  
Write-off of deferred financing fees500  —  500  —  
Legal fees associated with pursuit of unfair trade remedy430  —  430  —  
European workers compensation claim—  —  —  355  
Supplier warranty provision739  —  2,808  —  
Non-cash impact of partial pension settlement—  475  —  475  
Acquisition related expenses93  2,305  831  3,204  
Tax impact of above adjustments, excluding capitalized acquisition costs and China asset impairments(775) (902) (3,143) (2,450) 
Tax impact of foreign reorganizations—  —  (924) 3,758  
Non-GAAP net income *$9,314  $11,173  $43,122  $49,652  
         
         
Non-GAAP diluted earnings per share *$0.36  (1)$0.42  (2)$1.64  (3)$1.83  (4)
         
(1) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.0% by the above items
(2) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 29.9% by the above items
(3) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 25.4% by the above items
(4) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.4% by the above items

Consolidated Balance Sheets   
In Thousands of DollarsDecember 31, 2015 December 31, 2014
 (unaudited)  
Assets:   
Current Assets   
Cash and cash equivalents$50,320  $47,503 
Trade receivables, net94,720  106,458 
Inventories121,156  132,736 
Deferred income taxes—  — 
Income tax receivable5,146  6,247 
Prepaid expenses and other current assets11,217  8,617 
Assets held for use4,597  — 
Total current assets287,156  301,561 
Property, plant and equipment, net145,413  156,366 
Intangible assets, net96,069  110,730 
Goodwill97,309  102,087 
Deferred income taxes3,201  2,066 
Other non-current assets, net3,184  3,592 
Total assets$632,332  $676,402 
    
Liabilities, non-controlling interest and stockholders' equity   
Current liabilities   
Accounts payable$40,297  $44,298 
Accrued payroll22,312  23,254 
Accruals and other current liabilities34,990  33,591 
Deferred income taxes3,563  3,189 
Income tax payable—  — 
Current portion of long-term debt3,187  15,176 
Total current liabilities104,349  119,508 
Long-term debt, less current portion and net of unaccreted discount231,568  240,576 
Deferred income taxes44,185  45,185 
Pension liabilities8,328  9,993 
Long-term taxes payable647  629 
Other long-term liabilities688  869 
Redeemable non-controlling interest—  883 
Total stockholders' equity242,567  258,759 
Total liabilities, redeemable non-controlling interest and stockholders' equity$632,332  $676,402 
    
    
Reconciliation to operating working capital:   
Trade receivables, net94,720  106,458 
Inventories121,156  132,736 
Accounts payable(40,297) (44,298)
Operating working capital *$175,579  $194,896 
    

Consolidated Cash Flow Statements1  Year to Date Ended
In Thousands of DollarsDecember 31, 2015 December 31, 2014
 (Unaudited) (Unaudited)
Cash flows from operating activities   
Net income$35,343  $40,182 
Adjustments to reconcile net income to net cash flows:   
Depreciation21,559  23,118 
Amortization of intangible assets8,562  9,019 
Amortization of deferred financing costs1,366  927 
Loss on foreign currency, net(395) (157)
Amortization of inventory fair value adjustment—  2,376 
Accretion of debt discount, net3,694  3,407 
Loss on impairment / disposal of fixed assets2,003  (92)
Provision for deferred taxes(887) 2,712 
Stock based compensation4,004  3,101 
Changes in assets and liabilities:   
Trade receivables7,223  (1,050)
Inventories6,049  5,402 
Accounts payable and accrued liabilities2,816  (6,055)
Other current assets and liabilities(3,343) 860 
Other operating assets and liabilities(1,895) 749 
Net cash flows from operating activities86,099  84,499 
Cash flows from investing activities   
Purchase of property, plant and equipment(22,906) (28,050)
Proceeds from sale of property1,201  848 
Acquisition of Guardian, net of $2.0 million cash received—  (15,092)
Net cash flows from investing activities(21,705) (42,294)
Cash flows from financing activities   
Payment of debt issuance costs(1,006) — 
Payments on Term Loan Facility(130,063) (23,247)
Payments on Revolving Credit Facility(51,998) (9,190)
Dividend payments(14,928) (15,033)
Proceeds from equipment loan1,043  2,870 
Payment of equipment loans(3,480) (1,594)
Proceeds from mortgages7,355  3,647 
Borrowing under Revolving Credit Facility157,036  8,000 
Purchase of non-controlling interest in Lamiflex(878) — 
Shares surrendered for tax withholding(1,182) (1,158)
Payments on mortgages and other(384) (642)
Purchases of common stock under share repurchase program(17,298) (17,618)
Net cash flows from financing activities(55,783) (53,965)
Effect of exchange rate changes on cash and cash equivalents(5,794) (4,341)
Net change in cash and cash equivalents2,817  (16,101)
Cash and cash equivalents at beginning of year47,503  63,604 
Cash and cash equivalents at end of period$50,320  $47,503 
    
Reconciliation to free cash flow:   
Net cash flows from operating activities86,099  84,499 
Purchase of property, plant and equipment(22,906) (28,050)
    
Free cash flow *$63,193  $56,449 
    
1 Consolidated cash flow statement is subject to finalization

Altra Industrial Motion Corp.    
Selected Segment DataQuarter Ended Year to Date Ended
In Thousands of Dollars, except per share amountDecember 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014
 (Unaudited) (Unaudited) (Unaudited) (Unaudited)
        
Net Sales       
Couplings Clutches & Brakes$77,074  $97,456  $342,299  $396,089 
Electromagnetic Clutches & Brakes53,397  48,987  219,676  218,550 
Gearing44,653  47,150  192,252  212,628 
Eliminations(1,496) (1,632) (7,575) (7,450)
Total$173,628  $191,961  $746,652  $819,817 
        
Income from operations       
Couplings Clutches & Brakes$9,078  $14,159  $38,750  $49,299 
Electromagnetic Clutches & Brakes5,341  3,822  21,634  22,014 
Gearing4,072  4,047  21,094  22,698 
Restructuring(2,220) (124) (7,214) (1,767)
Corporate(2,083) (6,204) (10,050) (17,135)
Total$14,188  $15,700  $64,214  $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.

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 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," "forecasts" 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, 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 supply chain management, the Company’s progress on implementing profit improvement initiatives, including product pricing, 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 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 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, (31) risks related to restructuring and plant consolidations, and (32) 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
[email protected]

Source: Altra Industrial Motion Corp.

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