OREANDA-NEWS.  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

  • Second-quarter 2016 net sales were $182.7 million, compared with $196.6 million in the second quarter of 2015, a decrease of 7.1%. The reduction in net sales was driven by an unfavorable impact from foreign exchange of 1.0% and an organic sales decline of 6.1%.
  • Second-quarter net income was $9.3 million, or $0.36 per diluted share, compared with $9.6 million, or $0.37 per diluted share, in the second quarter of 2015. Non-GAAP net income in the second quarter of 2016 was $10.9 million, or non-GAAP diluted earnings per share of $0.42, compared with $11.5 million, or non-GAAP diluted earnings per share of $0.43, a year ago.*
  • Strong cash flow from operations of $30.5 million led to free cash flow of $19.7 million for the first six months.*
  • The Company returned to shareholders $2.2 million by repurchasing approximately 80,190 shares during the second quarter under its $50 million repurchase program. Since the program's inception in May 2014, the Company has purchased approximately $39.3 million, or 1.4 million shares, under the program.
*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 costs 1,641     3,194     2,587     4,343  
Acquisition related expenses —     —     —     738  
                       
Legal fees associated with pursuit of unfair trade remedy 534     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 activities 30,532     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.

* 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.