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 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.