Altra Industrial Motion Corp. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 21, 2016

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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 - 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.
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


Altra Industrial Motion Corp. Reports