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Form 8-K Altra Industrial Motion For: Oct 23

October 23, 2015 7:09 AM EDT


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
October 23, 2015
Date of Report (Date of earliest event reported)
 
 
 
 ALTRA INDUSTRIAL MOTION CORP.
(Exact name of registrant as specified in its charter)
 
 
 

Delaware
 
001-33209
 
61-1478870
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
300 Granite Street, Suite 201
Braintree, Massachusetts
 
02184
(Address of principal executive offices)
 
(Zip Code)
(781) 917-0600
(Registrant’s telephone number, including area code)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 2.02
Results of Operations and Financial Condition
On October 23, 2015, Altra Industrial Motion Corp. (“the Company”) announced certain unaudited financial results for the third quarter ended September 30, 2015. A copy of the announcement is attached hereto as Exhibit 99.1, which is incorporated by reference herein. On October 23, 2015, the Company will hold a conference call with investors to discuss unaudited third quarter results. The chart presentation to be used during the call is attached hereto as Exhibit 99.2 to this report and is incorporated by reference herein.

Item 9.01
Financial Statements and Exhibits
(d) Exhibits
 
99.1
  
Press release of Altra Industrial Motion Corp., dated October 23, 2015.
 
 
99.2
  
Charts to be used during the investor conference call on October 23, 2015.





EXHIBIT
INDEX
  
 
 
 
99.1
  
Press release of Altra Industrial Motion Corp., dated October 23, 2015.
 
 
99.2
  
Charts to be used during the investor conference call on October 23, 2015.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
ALTRA INDUSTRIAL MOTION CORP.
 
/s/ Carl R. Christenson
Name:
 
Carl R. Christenson
Title:
 
Chairman and Chief Executive Officer
Date: October 23, 2015



Altra Reports Third-Quarter 2015 Results
Delivered Strong Operating Cash Flow During the Quarter
Returned $6.3 Million to Shareholders Through Stock Repurchases




BRAINTREE, Mass., October 23, 2015 - 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 third quarter ended September 30, 2015.
Financial Highlights
Third-quarter 2015 net sales were $183.1 million, compared with $202.5 million in the third quarter of 2014, a decrease of 9.6%. The decrease in net sales was driven by an unfavorable impact from foreign exchange of 5.7% and an organic sales decline of 3.9%.
Third-quarter net income was $10.2 million, or $0.39 per diluted share, compared with $6.9 million, or $0.25 per diluted share, in the third quarter of 2014. Non-GAAP net income in Q3 2015 was $11.3 million, or $0.43 per diluted share, compared with $12.2 million, or $0.45 per diluted share, a year ago.*
Strong cash flow from operations led to free cash flows of $27.7 million during the quarter.
The Company accelerated its purchases of Altra stock, purchasing $6.3 million, or approximately 254,000 shares, during the third quarter under its $50 million repurchase program. Since the program's inception in May 2014, the Company has purchased approximately $31.9 million, or 1.1 million shares, under the program.
Altra amended its credit facility on October 22, 2015. The amendment resulted in a two-year extension of the term, the elimination of the existing term loans, more favorable pricing and an increase in total borrowing capacity under the new, all revolver, $350 million facility.
During the third quarter, the Company realigned its three business segments as part of its business simplification efforts. This new structure is better aligned across Altra’s end markets and will better facilitate the Company’s strategic initiatives for growth, procurement and facility consolidation.

 



Reconciliation of Non-GAAP Net Income*:

 
Quarter Ended
 
Year to Date Ended
 
Quarter Ended
 
Year to Date Ended
 
September 30, 2015
 
September 30, 2014
Net income attributable to Altra Industrial Motion Corp.
$
10,221

 
$
29,299

 
$
6,946

 
$
31,108

 
 
 
 
 
 
 
 
Restructuring costs
651

 
4,994

 
1,643

 
1,643

Amortization of inventory fair value adjustment

 

 
113

 
2,264

European workers compensation claim

 

 
355

 
355

Supplier warranty provision
2,069

 
2,069

 

 

Acquisition related expenses
77

 
738

 
18

 
899

Tax impact of above adjustments
(828
)
 
(2,368
)
 
(592
)
 
(1,548
)
Tax impact of foreign reorganizations
$
(924
)
 
$
(924
)
 
$
3,758

 
$
3,758

Non-GAAP net income*
$
11,266

 
$
33,808

 
$
12,241

 
$
38,479

Non-GAAP diluted earnings per share*
$
0.43

 
$
1.28

 
$
0.45

 
$
1.41

 
 
 
 
 
 
 
 
In Thousands of Dollars, except per share amounts
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Gross Profit*:

 
Quarter Ended
Year to Date Ended
 
Quarter Ended
Year to Date Ended
 
September 30, 2015
 
September 30, 2014
Gross Profit
$
55,800

$
174,259

 
$
62,333

$
190,599

Gross profit as a percent of net sales
30.5
%
30.4
%
 
30.8
%
30.4
%
Supplier warranty provision
2,069

2,069

 


Amortization of inventory fair value adjustment


 
113

2,264

Non-GAAP Gross Profit*
$
57,869

$
176,328

 
$
62,446

$
192,863

Non-GAAP Profit as a percent of net sales
31.6
%
30.8
%
 
30.8
%
30.7
%
In Thousands of Dollars, except per share amounts
 
 
 
 
 





Management Comments
“Altra again delivered strong results during the third quarter on excellent execution of our cost-reduction and restructuring initiatives combined with lower material costs," said Carl Christenson, Altra's Chairman and CEO. "Despite a nearly 10% decline in revenues we increased non-GAAP gross profit margin by 80 basis points year over year. We were also very pleased with our cash generation during the quarter bringing year to date free cash flow to over $44 million. In addition, we amended and extended our credit facility, which provides us with increased liquidity, more flexibility and better pricing as we continue to manage all cost areas efficiently for the benefit of shareholders.”*

Business Outlook
“We have seen a broad based decline in global industrial demand through the first nine months of 2015. Furthermore we expect the challenges in our agriculture, oil & gas, mining and metals end markets to continue for some time, as many OEMs have just begun to implement restructuring and cost reduction programs. Additionally, we have seen end markets that were previously unaffected begin to soften,” Christenson said. “From a geographic perspective, sentiment in Europe appears stable, while the outlook for North American industrial activity deteriorated further and the outlook in Asia remains uncertain."
“As these conditions persist, we are managing the business to the level of market demand. We expect ongoing benefits from the restructuring and cost reduction initiatives we began earlier this year. These initiatives include the Bauer profit improvement plan, which has gained significant traction at the bottom line. We are excited about the progress we have made and the additional opportunities we have to improve margins under our business simplification plan.”
As a result of weakness in certain of the company’s end markets, Altra is lowering its previous annual revenue guidance and expects annual sales in the range of $745 to $755 million. The Company is also narrowing its non-GAAP diluted EPS guidance to the range of $1.60 to $1.68 for 2015. This guidance includes savings from the restructuring actions taken to date. The Company now expects its tax rate for the full year to be approximately 29% to 31% before discrete items. Altra continues to expect capital expenditures in the range of $24 to $26 million and now expects depreciation and amortization in the range of $30 to $31 million.*
Conference Call
The Company will conduct an investor conference call to discuss its unaudited third 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. 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 October 23 through midnight on October 30, 2015. To listen to the replay, dial (877) 660-6853 domestically or (201) 612-7415 for international access (conference ID #13622162). 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
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Net sales
$
183,053

 
$
202,520

 
$
573,024

 
$
627,856

 
Cost of sales
127,253

 
140,187

 
398,765

 
437,257

 
Gross profit
$
55,800

 
$
62,333

 
$
174,259

 
$
190,599

 
Gross profit as a percent of net sales
30.5
%
 
30.8
%
 
30.4
%
 
30.4
%
 
Selling, general & administrative expenses
34,279

 
39,067

 
105,733

 
117,828

 
Research and development expenses
4,210

 
3,818

 
13,506

 
11,719

 
Restructuring Charges
651

 
1,643

 
4,994

 
1,643

 
Income from operations
$
16,660

 
$
17,805

 
$
50,026

 
$
59,409

 
Income from operations as a percent of net sales
9.1
%
 
8.8
%
 
8.7
%
 
9.5
%
 
Interest expense, net
2,924

 
3,000

 
8,858

 
8,991

 
Other non-operating (income) expense, net
685

 
(313
)
 
606

 
446

 
Income before income taxes
$
13,051

 
$
15,118

 
$
40,562

 
$
49,972

 
Provision for income taxes
2,830

 
8,170

 
11,326

 
18,843

 
Income tax rate
21.7
%
 
54.0
%
 
27.9
%
 
37.7
%
 
Net income
10,221

 
6,948

 
29,236

 
31,129

 
Net loss (income) attributable to non-controlling interest

 
(2
)
 
63

 
(21
)
 
Net income attributable to Altra Industrial Motion Corp.
10,221

 
6,946

 
29,299

 
31,108

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average common shares outstanding
 
 
 
 
 
 
 
 
Basic
26,145

 
26,648

 
26,140

 
26,785

 
Diluted
26,145

 
27,334

 
26,184

 
27,557

 
 
 
 
 
 
 
 
 
 
Net income per share
 
 
 
 
 
 
 
 
Basic
$
0.39

 
$
0.26

 
$
1.12

 
$
1.16

 
Diluted
$
0.39

 
$
0.25

 
$
1.12

 
$
1.13

 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Income From Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from operations
$
16,660

 
$
17,805

 
$
50,026

 
$
59,409

 
 
 
 
 
 
 
 
 
 
Restructuring costs
651

 
1,643

 
4,994

 
1,643

 
Amortization of inventory fair value adjustment

 
113

 

 
2,264

 
European workers compensation claim

 
355

 

 
355

 
Supplier warranty provision
2,069

 

 
2,069

 

 
Acquisition related expenses
77

 
18

 
738

 
899

 
Non-GAAP income from operations *
$
19,457

 
$
19,934

 
$
57,827

 
$
64,570

 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Net Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Altra Industrial Motion Corp.
10,221

 
6,946

 
29,299

 
31,108

 
 
 
 
 
 
 
 
 
 
Restructuring costs
651

 
1,643

 
4,994

 
1,643

 
Amortization of inventory fair value adjustment

 
113

 

 
2,264

 
European workers compensation claim

 
355

 

 
355

 
Supplier warranty provision
2,069

 

 
2,069

 

 
Acquisition related expenses
77

 
18

 
738

 
899

 
Tax impact of above adjustments
(828
)
 
(592
)
 
(2,368
)
 
(1,548
)
 
Tax impact of foreign reorganizations
(924
)
 
3,758

 
(924
)
 
3,758

 
Non-GAAP net income *
$
11,266

 
$
12,241

 
$
33,808

 
$
38,479

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP diluted earnings per share *
$
0.43

(1)
$
0.45

(2)
$
1.28

(3)
$
1.41

(4)
 
 
 
 
 
 
 
 
 
(1) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 29.6% by the above items
(2) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 27.8% by the above items
(3) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.4% by the above items
(4) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.0% by the above items



Consolidated Balance Sheets
 
 
 
In Thousands of Dollars
September 30, 2015
 
December 31, 2014
 
(unaudited)
 
 
Assets:
 
 
 
 Current Assets
 
 
 
Cash and cash equivalents
$
49,649

 
$
47,503

Trade receivables, net
104,400

 
106,458

Inventories
126,036

 
132,736

Deferred income taxes
9,162

 
9,240

Income tax receivable
3,634

 
6,247

Prepaid expenses and other current assets
11,089

 
8,617

Total current assets
303,970

 
310,801

Property, plant and equipment, net
152,760

 
156,366

Intangible assets, net
99,480

 
110,730

Goodwill
98,314

 
102,087

Deferred income taxes
902

 
987

Other non-current assets, net
2,641

 
3,592

Total assets
$
658,067


$
684,563

 
 
 
 
Liabilities, non-controlling interest and stockholders' equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
46,565

 
$
44,298

Accrued payroll
21,691

 
23,254

Accruals and other current liabilities
37,849

 
33,591

Deferred income taxes
122

 
120

Income tax payable
2,148

 
3,189

Current portion of long-term debt
12,713

 
15,176

Total current liabilities
121,088

 
119,628

Long-term debt, less current portion and net
   of unaccreted discount
227,189

 
240,576

Deferred income taxes
51,893

 
53,226

Pension liabilities
8,474

 
9,993

Long-term taxes payable
650

 
629

Other long-term liabilities
701

 
869

Redeemable non-controlling interest

 
883

Total stockholders' equity
248,072

 
258,759

Total liabilities, redeemable non-controlling interest and stockholders' equity
$
658,067

 
$
684,563

 
 
 
 
 
 
 
 
Reconciliation to operating working capital:
 
 
 
Trade receivables, net
104,400

 
106,458

Inventories
126,036

 
132,736

Accounts payable
(46,565
)
 
(44,298
)
Operating working capital *
$
183,871

 
$
194,896

 
 
 
 



 
Year to Date Ended
 
September 30, 2015
 
September 30, 2014
 
(Unaudited)
 
(Unaudited)
Cash flows from operating activities
 
 
 
Net income
$
29,236

 
$
31,129

Adjustments to reconcile net income to net cash flows:
 
 

    Depreciation
16,232

 
17,238

    Amortization of intangible assets
6,437

 
6,884

    Amortization of deferred financing costs
689

 
699

    (Gain)/Loss on foreign currency, net
(128
)
 
461

    Amortization of inventory fair value adjustment

 
2,264

    Accretion of debt discount, net
2,740

 
2,527

    Loss on impairment / disposal of fixed assets
856

 
195

    Provision for deferred taxes

 
1,350

    Stock based compensation
3,231

 
2,633

    Changes in assets and liabilities:
 
 
 
       Trade receivables
(1,552
)
 
(11,452
)
       Inventories
2,367

 
5,276

       Accounts payable and accrued liabilities
7,106

 
(6,682
)
       Other current assets and liabilities
(2,609
)
 
9,704

       Other operating assets and liabilities
(1,060
)
 
(188
)
    Net cash flows from operating activities
63,545

 
62,038

Cash flows from investing activities
 
 
 
Purchase of property, plant and equipment
(19,181
)
 
(16,464
)
Proceeds from sale of land
1,201

 
274

Acquisition of Guardian, net of $2.0 million cash received

 
(15,092
)
    Net cash flows from investing activities
(17,980
)
 
(31,282
)
Cash flows from financing activities
 
 
 
Payments on Term Loan Facility
(16,027
)
 
(21,478
)
Payments on Revolving Credit Facility
(9,000
)
 
(9,190
)
Dividend payments
(7,130
)
 
(8,644
)
Proceeds from equipment loan
1,100

 
2,245

Payment of equipment loans
(3,639
)
 
(1,028
)
Proceeds from mortgages
7,085

 

Borrowing under Revolving Credit Facility
6,000

 
5,000

Purchase of non-controlling interest in Lamiflex
(878
)
 

Shares surrendered for tax withholding
(1,182
)
 
(1,447
)
Payments on mortgages and other
(352
)
 
(435
)
Purchases of common stock under share repurchase program
(14,285
)
 
(12,816
)
    Net cash flows from financing activities
(38,308
)
 
(47,793
)
Effect of exchange rate changes on cash and cash equivalents
(5,111
)
 
(3,573
)
    Net change in cash and cash equivalents
2,146

 
(20,610
)
Cash and cash equivalents at beginning of year
47,503

 
63,604

Cash and cash equivalents at end of period
$
49,649

 
$
42,994

 
 
 
 
Reconciliation to free cash flow:
 
 
 
Net cash flows from operating activities
63,545

 
62,038

Purchase of property, plant and equipment
(19,181
)
 
(16,464
)
 
 
 
 
Free cash flow *
$
44,364

 
$
45,574

 
 
 
 







Altra Industrial Motion Corp.
 
 
 
 
Selected Segment Data
Quarter Ended
 
Year to Date Ended
In Thousands of Dollars, except per share amount
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
Couplings Clutches & Brakes
$
85,760

 
$
100,363

 
$
265,225

 
$
298,633

Electromagnetic Clutches & Brakes
50,393

 
49,793

 
166,279

 
169,563

Gearing
48,783

 
54,028

 
147,599

 
165,478

Eliminations
(1,883
)
 
(1,664
)
 
(6,079
)
 
(5,818
)
Total
$
183,053

 
$
202,520

 
$
573,024

 
$
627,856

 
 
 
 
 
 
 
 
Income from operations
 
 
 
 
 
 
 
Couplings Clutches & Brakes
$
8,910

 
$
13,107

 
$
29,672

 
$
35,140

Electromagnetic Clutches & Brakes
4,771

 
4,071

 
16,293

 
18,192

Gearing
6,197

 
6,566

 
17,022

 
18,651

Restructuring
(651
)
 
(1,643
)
 
(4,994
)
 
(1,643
)
Corporate
(2,567
)
 
(4,296
)
 
(7,967
)
 
(10,931
)
Total
$
16,660

 
$
17,805

 
$
50,026

 
$
59,409

 
 
 
 
 
 
 
 

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 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, 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



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


Third Quarter 2015 Results October 23, 2015 10:00 AM ET Dial In Number 877-407-8293 Domestic 201-689-8349 International Webcast at www.altramotion.com Replay Through October 30, 2015 877-660-6853 Domestic 201-612-7415 International Conference ID: # 13622162 Webcast Replay at www.altramotion.com


 
Safe Harbor Statement Cautionary Statement Regarding 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, 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 fu ture 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 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. 1


 
Third Quarter 2015 Highlights • Revenues decreased 9.6% from the third quarter of 2014, primarily from foreign exchange (5.7% FX and 3.9% Organic) • Non-GAAP earnings were $11.3 million, or $0.43 per diluted share, during the quarter * • Strong free cash flow of $27.7 million* • Amended and extended credit facility 2


 
Segments Realigned • Combines former Heavy Duty & Overrunning Clutch Brake Group with Couplings and TB Wood's to form the new Couplings, Clutches & Brakes segment • Aligns segments to core end markets and creates synergistic opportunities within and across segments • Simplifies organizational structure, improves efficiency Gearing Electric Clutches & Brakes (ECB) Couplings, Clutches & Brakes (CCB) 3 Key End Markets • Food Processing • Material Handling • Metals • Transportation • Turf & Garden • Farm & Ag • Forklift & Elevator • Motion Control • Oil & Gas • Renewable Energy • Metals & Mining • Aerospace Core Products • Gear Motors • Gear Drives • Bearing Assemblies • Couplings • Heavy Duty CB • Overrunning Clutches • Belted Drives • Electromagnetic Clutches & Brakes • Linear Actuators CCB 47% ECB 27% Gearing 26% Percent of 2014 Revenues


 
End Market Review • Sales at Distribution were down sequentially and year over year due to further erosion in oil and gas and metals market • Turf and Garden sales were up strongly compared to a year ago • Ag market down sharply in 2015 • Oil and gas down as expected year to date • Alternative energy was up modestly during the quarter • Metals weakened during the quarter and was off substantially from a year ago • Mining was down year over year, but grew sequentially • Aerospace and Defense essentially flat 4


 
Q3 2015 Financial Highlights 5 Q3 2015 Q3 2014 $ Change % Change Net Sales $183.1 $202.5 ($19.4) -10% Gross Profit $55.8 $62.3 ($6.5) -10% % of Revenues 30.5% 30.8% SG&A $34.3 $39.1 ($4.8) -12% % of Revenues 18.7% 19.3% Income from operations $16.7 $17.8 ($1.1) -6% % of Revenues 9.1% 8.8% Net Income $10.2 $6.9 $3.3 48% % of Revenues 5.6% 3.4% Earnings Per Share: Diluted $0.39 $0.25 $0.14 56% Non-GAAP Diluted * $0.43 $0.45 ($0.02) -4% Weighted Average Common Shares Outstanding: Diluted 26,145 27,334 (1,189) -4% ($ millions)


 
Selected Segment Data 6 Third Quarter Q3 2015 Q3 2014 Diff Q3 2015 Q3 2014 Diff Q3 2015 Q3 2014 Diff Net Sales $85.8 $100.4 ($14.6) $50.4 $49.8 $0.6 $48.8 $54.0 ($5.2) Income From Operations $8.9 $13.1 ($4.2) $4.8 $4.1 $0.7 $6.2 $6.6 ($0.4) % of Net Sales 10.4% 13.0% 9.5% 8.2% 12.7% 12.2% Year-to-Date YTD 2015 YTD 2014 Diff YTD 2015 YTD 2014 Diff YTD 2015 YTD 2014 Diff Net Sales $265.2 $298.6 ($33.4) $166.3 $169.6 ($3.3) $147.6 $165.5 ($17.9) Income From Operations $29.7 $35.1 ($5.4) $16.3 $18.2 ($1.9) $17.0 $18.7 ($1.7) % of Net Sales 11.2% 11.8% 9.8% 10.7% 11.5% 11.3% $ Millions Couplings, Clutches & Brakes (CCB) Electric Clutches & Brakes (ECB) Gearing


 
Balance Sheet Highlights • Extended and amended credit facility through 2020 • Total Debt less Cash decreased by approximately $21.9 7 Balance Sheet Highlights (amounts in millions) Q3 2015 Q3 2014 Cash $49.6 $43.0 Total Debt $249.9 $265.2 Total Debt less Cash $200.3 44.7% $222.2 45.3% Shareholders' Equity $248.1 55.3% $268.3 54.7% Shareholders' Equity plus Debt, less Cash $448.4 100.0% $490.5 100.0% Total Debt Less Cash 44.7% Shareholders' Equity 55.3%


 
Strong Cash Flow Performance • Despite declining sales, operating cash flow increased to over $63 million YTD • Free cash flow increased nearly $28 million during the quarter * • Fourteenth consecutive dividend paid • Stock Buyback accelerated to $6.3 million, or approximately 254,000 shares 8 ($ Millions) Q3 YTD 2015 Q3 YTD 2014 Operating Cash-flow $63.5 $62.0 Less Capex ($19.2) ($16.5) Free Cash Flow* $44.3 $45.5 Free cash flow % of Net Income 152% 146% Depreciation and Amortization $22.7 $24.1 $44 $44 $45 $45 $46 $46 Q3 2015 YTD Q3 2014 YTD FCF ($ M illio ns) Free Cash Flow*


 
Revised 2015 Guidance • $745 - $755 Million in sales • $1.60 - $1.68 Non-GAAP diluted earnings per share * • $24 - $26 Million in capital expenditures • $30 - $31 Million in depreciation and amortization • Tax rate approximately 29% - 31% before discrete items 9


 
Business Simplification On Track 10 Long Term Objective YTD Results Current Status Operational Improvements Reduce the number of facilities by 20% to 30% • Restructuring and cost reductions have improved margins • Bauer improvement is on track • Facility consolidations are on track Strategic Pricing Operating profit improvement of 150 bps • Approximately 50 bps improvement as planned • Pricing environment is becoming more challenging Supply Chain Management Implement hybrid SCM structure to reduce material spend • Training curriculum substantially complete and first course to begin in November • Significant material savings impacted P&L in Q3 SAP Deployment Entire organization on the same instance of SAP • Next phase of implementation to begin in second half of 2016 Revenue Growth Growth in excess of GDP • Key end market decline and FX rate headwinds overwhelm continued success in marketplace Lean Market leader for lead time and on time delivery Market leader for innovative solution responsiveness • Model Value Stream results are meeting expectations


 
Upcoming Calendar Events • Upcoming Industrial Conferences include: • Baird 2015 Industrial Conference, Chicago, IL, November 11, 2015 • Stephens, 2015 Fall Investment Conference, New York, NY, November 10, 2015 Investor Relations Contact Information: Christian Storch Chief Financial Officer [email protected] 781-917-0541 11


 
Discussion of Non-GAAP 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 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. 12


 
Appendix Non-GAAP Measures * 13 Non-GAAP Net Income (amounts in millions) Q3 2015 Q3 2014 Reported Net Income $10.2 $6.9 Restructuring Costs 0.7 1.6 Amortization of inventory fair value adjustment - 0.1 European workers compensation claim - 0.4 Supplier warranty provision 2.1 - Acquisition related expenses 0.1 0.0 Tax impact of above adjustments (0.8) (0.6) Tax impact of foreign reorganization (0.9) (1) 3.8 (2) Non-GAAP net income 11.3 12.2 Non-GAAP diluted earnings per share $0.43 $0.45 (1) tax impact is calculated by multiplying the estimated effective tax rate, 29.6% by the above items (2) tax impact is calculated by multiplying the estimated effective tax rate, 27.8% by the above items Operating Income (amounts in millions) Q3 2015 Q3 2014 Reported Income from Operations $16.7 $17.8 Restructuring Costs 0.7 1.6 Amortization of inventory fair value adjustment - 0.1 European workers compensation claim - 0.4 Supplier warranty provision 2.1 - Acquisition related expenses 0.1 0.0 Non-GAAP income from operations $19.5 $19.9 Non-GAAP Gross Profit (amounts in millions) Q3 2015 Q3 2014 Reported Gross Profit $55.8 $62.3 Amortization of inventory fair value adjustment - 0.1 Supplier warranty provision 2.1 - Non-GAAP income from operations $57.9 $62.4 Operating W rking Capital (amounts in millions) Q3 2015 Q3 2014 Accounts Receivable $104.4 $117.9 Inventories 126.0 135.4 Accounts Pa able (46.6) (43.9) Operating Working Capital $183.8 $209.4 Fr e Cash Flow ( m ts in millions) Q3 2015 YTD Q3 2014 YTD Q3 2015 Q3 2014 Operating Cash Flow $63.5 $62.0 $33.4 $24.3 Less Capex (19.2) (16.5) (5.7) (5.6) Free Cash Flow $44.3 $45.5 $27.7 $18.7


 


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