Altra Industrial Motion Corp. (Nasdaq: AIMC) (“Altra” or the
“Company”), a leading global manufacturer and supplier of motion
control, power transmission and automation products, today
announced unaudited financial results for the second quarter ended
June 30, 2019. Except where otherwise noted, financial results for
the second quarter of 2019 include the A&S business whereas
results for the prior year period do not include financial results
of the A&S business on a proforma basis.
Second Quarter Financial Highlights
- Second-quarter 2019 net sales were $466.5 million, up 97% from
$237.3 million in the second quarter of 2018. Organic sales were
down 2.7% for the combined business on an unaudited pro forma
basis, compared to the second quarter of 2018. Excluding the impact
of foreign currency translation, Power Transmission Technologies
(PTT) segment sales were up 1.8% and Automation & Specialty
(A&S) segment sales were down 6.6% compared to the prior
year.*
- Second-quarter net income was $29.0 million, or $0.45 per
diluted share, compared with $19.0 million, or $0.65 per diluted
share, in the second quarter of 2018. Non-GAAP net income in the
second quarter of 2019 was $45.6 million, or $0.71 per diluted
share. This is compared with non-GAAP net income of $22.6 million,
or $0.78 per diluted share, in the second quarter of
2018.*
- Non-GAAP adjusted EBITDA in the second quarter of 2019 was
$95.5 million, or 20.5% of net sales, compared with $39.7 million,
or 16.7% of net sales, in the second quarter of 2018.*
- Operating income margin in the second quarter of 2019 was 12.2%
compared with 11.8% in the second quarter of 2018. Gross profit
margin in the second quarter of 2019 was 35.8%, a 280 basis point
increase over 33.0% in the second quarter of 2018. Non-GAAP
operating income margin in the second quarter of 2019 was 16.9%, a
390 basis point increase from 13.0% in the second quarter of
2018.*
- Cash flow from operations for the second quarter 2019 of $56.8
million led to free cash flow of $46.7 million, nearly double the
free cash flow generated in the first quarter of 2019. On a
year-to-date basis the Company has generated $72.0 million of free
cash flow.*
- $35.0 million of debt was paid down in the second quarter of
2019, with total debt pay down of $70.0 million since the closing
of the A&S merger on October 1, 2018.
Strategic Highlights
- Previously announced closure of significant Northeast facility
on track to be completed before the end of the year.
- Cross-selling sales funnel is growing as a result of strong
sales team collaboration
- On track to exceed $10.0 million to $12.0 million of synergies
in 2019 and deliver a total of $52.0 million of synergies by year
four, with strategic supply chain initiatives substantially ahead
of 2019 targets.
Management Comments
“During the second quarter, we experienced mixed business
conditions with some end markets quite strong while others were
weaker than expected. This impacted overall organic revenue and
earnings growth for Altra and resulted in a weaker-than-expected Q2
performance,” said Carl Christenson, Altra’s Chairman and Chief
Executive Officer.
“Most notably, we saw continued weakness across our
semi-conductor, robotics, turf and garden and agriculture markets
and a decline in revenues into the global truck markets. This was
partially offset by strength across the medical, mining, defense
and renewable energy end markets. Margins were up year-over-year,
reflecting the benefit of the A&S merger, but down sequentially
with Q2 gross profit margin of 35.8%, non-GAAP adjusted operating
income margin of 16.9% and non-GAAP adjusted EBITDA margin of
20.5%.* Our ongoing focus on cash management yielded a favorable
$46.7 million of free cash flow in the second quarter which is
nearly double the amount of cash that we generated in the first
quarter.*”
“The weakness we are seeing in the global industrial economy,
which is primarily due to the uncertainty regarding trade and
tariff’s and the recent downturn in industrial activity in Europe
and China, is expected to continue into the foreseeable future.
Although we are not anticipating the downturn to be long term or
exceptionally deep, to better align our cost structure with near
term dynamics we are accelerating cost reductions and other margin
improvement initiatives.”
“At the same time, we remain focused on executing on our
strategic priorities to position Altra to deliver on our promise as
a premier industrial company,” Christenson continued. “This
includes achieving our synergy targets by leveraging sales
collaborations, advancing our supply chain optimization efforts and
continuing to integrate our world-class business systems across the
combined organization. In addition, we remain focused on generating
strong free cash flow to expediently de-lever the balance
sheet.”
“Looking forward, we are resetting our 2019 guidance to reflect
our expectations for the mixed market conditions to continue
through the balance of the year,” continued Christenson. “Despite
this reset, I am confident that we are taking the necessary actions
to manage the near-term dynamics while focusing on the strategic
priorities that will advance Altra toward our long-term growth
goals of delivering a 425-basis points of Adjusted EBITDA margin
improvement by the end of 2022 and expediently deleveraging the
balance sheet to historical levels of less than 3x Net
Debt/Adjusted EBITDA.”
Business Outlook
Altra is revising its guidance for full year 2019 as
follows:
- Full-year 2019 sales in the range of $1,850 to $1,880
million.
- GAAP diluted EPS in the range of $1.81 to $1.95.
- Non-GAAP diluted EPS in the range of $2.81 to $2.97.*
- Non-GAAP adjusted EBITDA in the range of $385 to $400
million.*
- Tax rate for the full year is now expected to be approximately
23.5% to 25.0% before discrete items, capital expenditures in the
range of $50 to $55 million, and depreciation and amortization in
the range of $128 to $135 million.
Reconciliations of Non-GAAP Disclosures
(Amounts in Millions of Dollars, except per share
information)
*Reconciliation of Non-GAAP Net Income:
|
Quarter Ended June 30, |
|
|
Year to Date Ended June 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net income |
$ |
29.0 |
|
|
$ |
19.0 |
|
|
$ |
64.2 |
|
|
$ |
28.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
costs |
$ |
3.2 |
|
|
$ |
0.6 |
|
|
$ |
5.5 |
|
|
$ |
1.5 |
|
Acquisition
related stock compensation expense |
|
0.8 |
|
|
|
- |
|
|
|
1.9 |
|
|
|
- |
|
Supplier
warranty settlement |
|
- |
|
|
|
(2.0 |
) |
|
|
- |
|
|
|
(2.0 |
) |
Acquisition
related amortization expense |
|
17.6 |
|
|
|
2.4 |
|
|
|
35.4 |
|
|
|
4.9 |
|
Loss on partial
settlement of pension plan |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5.1 |
|
Acquisition
related expenses |
|
0.2 |
|
|
|
1.8 |
|
|
|
0.7 |
|
|
|
7.2 |
|
Tax impact of
above adjustments |
|
(5.2 |
) |
|
|
0.8 |
|
|
|
(10.4 |
) |
|
|
(0.9 |
) |
Non-GAAP net
income* |
$ |
45.6 |
|
|
$ |
22.6 |
|
|
$ |
97.3 |
|
|
$ |
43.8 |
|
Non-GAAP diluted
earnings per share* |
$ |
0.71 |
|
|
$ |
0.78 |
|
|
$ |
1.51 |
|
|
$ |
1.50 |
|
*Reconciliation of Free Cash Flow
|
Quarter Ended June 30, |
|
|
Year to Date Ended June 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Net cash flows
from operating activities |
$ |
56.8 |
|
|
$ |
25.4 |
|
|
$ |
96.1 |
|
|
$ |
29.1 |
|
Purchase of
property, plant and equipment |
|
(10.1 |
) |
|
|
(7.9 |
) |
|
|
(24.1 |
) |
|
|
(14.9 |
) |
Free cash
flow* |
$ |
46.7 |
|
|
$ |
17.5 |
|
|
$ |
72.0 |
|
|
$ |
14.2 |
|
*Reconciliation of Net Debt
|
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
Debt |
|
|
$ |
1,685.7 |
|
|
$ |
1,734.0 |
|
Cash |
|
|
|
(153.6 |
) |
|
|
(169.0 |
) |
Net debt* |
|
|
$ |
1,532.1 |
|
|
$ |
1,565.0 |
|
*Reconciliation of Non-GAAP Income from Operations:
|
Quarter Ended June 30, |
|
|
Year to Date Ended June 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Income from
operations |
$ |
57.1 |
|
|
$ |
28.0 |
|
|
$ |
123.5 |
|
|
$ |
47.8 |
|
Income from operations
as a percent of net sales |
|
12.2 |
% |
|
|
11.8 |
% |
|
|
13.0 |
% |
|
|
10.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
costs |
$ |
3.2 |
|
|
$ |
0.6 |
|
|
$ |
5.5 |
|
|
$ |
1.5 |
|
Acquisition related
stock compensation expense |
|
0.8 |
|
|
|
- |
|
|
|
1.9 |
|
|
|
- |
|
Supplier warranty
settlement |
|
- |
|
|
|
(2.0 |
) |
|
|
- |
|
|
|
(2.0 |
) |
Acquisition related
amortization expense |
|
17.6 |
|
|
|
2.4 |
|
|
|
35.4 |
|
|
|
4.9 |
|
Acquisition related
expenses |
|
0.2 |
|
|
|
1.8 |
|
|
|
0.7 |
|
|
|
7.2 |
|
Non-GAAP
income from operations* |
$ |
78.9 |
|
|
$ |
30.8 |
|
|
$ |
167.0 |
|
|
$ |
59.4 |
|
Non-GAAP Income from operations as a percent
of net sales |
|
16.9 |
% |
|
|
13.0 |
% |
|
|
17.6 |
% |
|
|
12.4 |
% |
*Reconciliation of GAAP to Non-GAAP Operating Income and
Operating Income Margin
Selected Statement of Income Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended June 30, 2019 |
|
|
Quarter Ended June 30, 2018 |
|
|
|
GAAP Operating Income |
|
|
Adjustments |
|
|
Non-GAAP Operating Income* |
|
|
GAAP Operating Income |
|
|
Adjustments |
|
|
Non-GAAP Operating Income* |
|
Net sales |
|
$ |
466.5 |
|
|
$ |
- |
|
|
$ |
466.5 |
|
|
$ |
237.3 |
|
|
$ |
- |
|
|
$ |
237.3 |
|
Cost of sales |
|
|
299.5 |
|
|
|
- |
|
|
|
299.5 |
|
|
|
159.1 |
|
|
|
(2.0 |
) |
|
|
161.1 |
|
Gross profit |
|
|
167.0 |
|
|
|
- |
|
|
|
167.0 |
|
|
|
78.2 |
|
|
|
(2.0 |
) |
|
|
76.2 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative expenses |
|
|
92.0 |
|
|
|
18.6 |
|
|
|
73.4 |
|
|
|
43.4 |
|
|
|
4.2 |
|
|
|
39.2 |
|
Research and development expenses |
|
|
14.7 |
|
|
|
- |
|
|
|
14.7 |
|
|
|
6.2 |
|
|
|
- |
|
|
|
6.2 |
|
Restructuring costs |
|
|
3.2 |
|
|
|
3.2 |
|
|
|
- |
|
|
|
0.6 |
|
|
|
0.6 |
|
|
|
- |
|
Income from
Operations |
|
$ |
57.1 |
|
|
$ |
21.8 |
|
|
$ |
78.9 |
|
|
$ |
28.0 |
|
|
$ |
2.8 |
|
|
$ |
30.8 |
|
GAAP and Non-GAAP Income from
operations as a percent of net sales |
|
|
12.2 |
% |
|
|
|
|
|
|
16.9 |
% |
|
|
11.8 |
% |
|
|
|
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to Date Ended June 30, 2019 |
|
|
Year to Date Ended June 30, 2018 |
|
|
|
GAAP Operating Income |
|
|
Adjustments |
|
|
Non-GAAP Operating Income* |
|
|
GAAP Operating Income |
|
|
Adjustments |
|
|
Non-GAAP Operating Income* |
|
Net sales |
|
$ |
949.3 |
|
|
$ |
- |
|
|
$ |
949.3 |
|
|
$ |
477.7 |
|
|
$ |
- |
|
|
$ |
477.7 |
|
Cost of sales |
|
|
607.4 |
|
|
|
- |
|
|
|
607.4 |
|
|
|
325.2 |
|
|
|
(2.0 |
) |
|
|
327.2 |
|
Gross profit |
|
|
341.9 |
|
|
|
- |
|
|
|
341.9 |
|
|
|
152.5 |
|
|
|
(2.0 |
) |
|
|
150.5 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative expenses |
|
|
182.9 |
|
|
|
38.0 |
|
|
|
144.9 |
|
|
|
90.5 |
|
|
|
12.1 |
|
|
|
78.4 |
|
Research and development expenses |
|
|
30.0 |
|
|
|
- |
|
|
|
30.0 |
|
|
|
12.7 |
|
|
|
- |
|
|
|
12.7 |
|
Restructuring costs |
|
|
5.5 |
|
|
|
5.5 |
|
|
|
- |
|
|
|
1.5 |
|
|
|
1.5 |
|
|
|
- |
|
Income from
Operations |
|
$ |
123.5 |
|
|
$ |
43.5 |
|
|
$ |
167 |
|
|
$ |
47.8 |
|
|
$ |
11.6 |
|
|
$ |
59.4 |
|
GAAP and Non-GAAP Income from
operations as a percent of net sales |
|
|
13.0 |
% |
|
|
|
|
|
|
17.6 |
% |
|
|
10.0 |
% |
|
|
|
|
|
|
12.4 |
% |
*Reconciliation of Non-GAAP Adjusted EBITDA and Non-GAAP
Adjusted EBITDA Margin:
|
Quarter Ended June 30, |
|
|
2019 |
|
|
2018 |
|
Net income |
$ |
29.0 |
|
|
$ |
19.0 |
|
|
|
|
|
|
|
|
|
Asset impairment
and other, net |
|
(0.3 |
) |
|
|
0.3 |
|
Tax expense |
|
9.1 |
|
|
|
7.2 |
|
Interest
expense |
|
18.6 |
|
|
|
2.1 |
|
Depreciation
expense |
|
14.6 |
|
|
|
6.9 |
|
Acquisition related
amortization expense |
|
17.6 |
|
|
|
2.4 |
|
Acquisition related
expenses |
|
0.2 |
|
|
|
1.8 |
|
Loss on partial
settlement of pension plans |
|
- |
|
|
|
- |
|
Stock compensation
expense |
|
3.5 |
|
|
|
1.4 |
|
Supplier warranty
settlement |
|
- |
|
|
|
(2.0 |
) |
Restructuring
costs |
|
3.2 |
|
|
|
0.6 |
|
Non-GAAP
adjusted EBITDA |
$ |
95.5 |
|
|
$ |
39.7 |
|
Non-GAAP adjusted
EBITDA as a percent of net sales |
|
20.5 |
% |
|
|
16.7 |
% |
*Reconciliation of 2019 Non-GAAP Net Income Guidance and
Non-GAAP Diluted EPS Guidance:
|
|
Projected Fiscal Year 2019 Net Income |
|
Projected Fiscal Year 2019 Diluted EPS |
Net income and
diluted earnings per share |
|
$116.8 - $125.8 |
|
$1.81 - $1.95 |
Restructuring
costs |
|
12.0 |
|
|
Acquisition
related stock compensation expense |
|
3.1 |
|
|
Acquisition
related amortization expense |
|
70.0 |
|
|
Acquisition
expense |
|
0.8 |
|
|
Tax impact of
above adjustments(1) (2) |
|
(21.5) - (20.2) |
|
|
Non-GAAP Net Income and Non-GAAP
Diluted EPS Guidance* |
|
$181.2 - $191.5 |
|
$2.81 - $2.97 |
(1) Adjustments are pre-tax, with net tax
impact listed separately |
|
|
|
|
(2)
Tax impact is calculated by multiplying the estimated effective tax
rate for the period of 23.5% - 25.0% by the above items |
*Reconciliation of 2019 Non-GAAP Adjusted EBITDA Guidance:
|
|
Fiscal Year 2019 |
|
Net income |
|
$116.8 - $125.8 |
|
Interest
expense |
|
76.0 - 75.0 |
|
Tax expense |
|
39.5 - 39.0 |
|
Depreciation
expense |
|
57.7 - 65.0 |
|
Acquisition
related amortization expense |
|
|
70.0 |
|
Stock based
compensation |
|
13.0 - 13.2 |
|
Restructuring
costs |
|
|
12.0 |
|
Non-GAAP adjusted
EBITDA* |
|
$385.0 - $400.0 |
|
Conference Call
The Company will conduct an investor conference call to discuss
its unaudited second quarter financial results on Thursday, July
25, 2019 at 10:00 a.m. ET. The public is invited to listen to the
conference call by dialing (866) 209-9085 domestically or (647)
689-5687 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 Events and 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 25 through
midnight on August 8, 2019. To listen to the replay, dial (800)
585-8367 domestically or (416) 621-4642 for international access
(Conference ID: 4918987). A webcast replay also will be
available.
About Altra Industrial Motion Corp.
Altra Industrial Motion Corp. is a premier industrial, global
manufacturer and supplier of electromechanical power transmission,
motion control and automation products, including highly engineered
power transmission, motion control and engine braking systems and
components. Altra's portfolio consists of 27 well-respected brands
including Bauer Gear Motor, Boston Gear, Jacobs Vehicle Systems,
Kollmorgen, Portescap, Stromag, Svendborg Brakes, TB Wood's,
Thomson and Warner Electric. Headquartered in Braintree,
Massachusetts, Altra has approximately 9,300 employees and over 50
production facilities in 16 countries around the world.
Altra Industrial Motion Corp. |
|
Consolidated Balance Sheets |
|
|
|
|
|
|
|
In Millions of Dollars |
June 30,
2019 |
|
|
December 31,
2018 |
|
Assets: |
(Unaudited) |
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
153.6 |
|
|
$ |
169.0 |
|
Trade receivables, net |
|
269.6 |
|
|
|
259.8 |
|
Inventories |
|
237.5 |
|
|
|
231.2 |
|
Income tax receivable |
|
15.0 |
|
|
|
10.2 |
|
Prepaid expenses and other current assets |
|
34.6 |
|
|
|
33.1 |
|
Assets held for sale |
|
- |
|
|
|
0.7 |
|
Total current assets |
|
710.3 |
|
|
|
704 |
|
Property, plant and equipment, net |
|
360.8 |
|
|
|
364.4 |
|
Intangible assets, net |
|
1,546.5 |
|
|
|
1,585.7 |
|
Goodwill |
|
1,686.1 |
|
|
|
1,662.3 |
|
Deferred income taxes |
|
0.9 |
|
|
|
4.9 |
|
Other non-current assets, net |
|
12.8 |
|
|
|
15.9 |
|
Operating lease, right of use asset |
|
40.4 |
|
|
|
- |
|
Total assets |
$ |
4,357.8 |
|
|
$ |
4,337.2 |
|
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
$ |
156.5 |
|
|
$ |
175.8 |
|
Accrued payroll |
|
54.5 |
|
|
|
57 |
|
Accruals and other current liabilities |
|
80.5 |
|
|
|
79.6 |
|
Income tax payable |
|
9.4 |
|
|
|
7.5 |
|
Current portion of long-term debt |
|
19.2 |
|
|
|
17.2 |
|
Operating lease liabilities |
|
14.3 |
|
|
|
- |
|
Total current liabilities |
|
334.4 |
|
|
|
337.1 |
|
Long-term debt, less current portion and net of unaccreted
discount |
|
1,642.5 |
|
|
|
1,690.9 |
|
Deferred income taxes |
|
401.2 |
|
|
|
393.2 |
|
Pension liabilities |
|
32.9 |
|
|
|
32.0 |
|
Long-term taxes payable |
|
4.5 |
|
|
|
5.4 |
|
Other long-term liabilities |
|
30.2 |
|
|
|
30.4 |
|
Operating lease liabilities, net of current portion |
|
27.7 |
|
|
|
- |
|
Total stockholders'
equity |
|
1,884.4 |
|
|
|
1,848.2 |
|
Total liabilities, and
stockholders' equity |
$ |
4,357.8 |
|
|
$ |
4,337.2 |
|
|
|
|
|
|
|
|
|
Reconciliation to operating
working capital: |
|
|
|
|
|
|
|
Trade receivables, net |
|
269.6 |
|
|
|
259.8 |
|
Inventories |
|
237.5 |
|
|
|
231.2 |
|
Accounts payable |
|
(156.5 |
) |
|
|
(175.8 |
) |
Non-GAAP operating working
capital* |
$ |
350.6 |
|
|
$ |
315.2 |
|
Consolidated
Statements of Income Data: |
Quarter Ended June 30, |
|
|
|
Year to Date Ended June 30, |
|
|
|
In Millions of Dollars |
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
(Unaudited) |
|
|
|
(Unaudited) |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
Net sales |
$ |
466.5 |
|
|
|
$ |
237.3 |
|
|
|
$ |
949.3 |
|
|
|
$ |
477.7 |
|
|
|
Cost of sales |
|
299.5 |
|
|
|
|
159.1 |
|
|
|
|
607.4 |
|
|
|
|
325.2 |
|
|
|
Gross profit |
$ |
167.0 |
|
|
|
$ |
78.2 |
|
|
|
$ |
341.9 |
|
|
|
$ |
152.5 |
|
|
|
Gross profit as a percent of net sales |
|
35.8 |
% |
|
|
|
33.0 |
% |
|
|
|
36.0 |
% |
|
|
|
31.9 |
% |
|
|
Selling, general &
administrative expenses |
|
92.0 |
|
|
|
|
43.4 |
|
|
|
|
182.9 |
|
|
|
|
90.5 |
|
|
|
Research and development
expenses |
|
14.7 |
|
|
|
|
6.2 |
|
|
|
|
30.0 |
|
|
|
|
12.7 |
|
|
|
Restructuring costs |
|
3.2 |
|
|
|
|
0.6 |
|
|
|
|
5.5 |
|
|
|
|
1.5 |
|
|
|
Income from operations |
$ |
57.1 |
|
|
|
$ |
28.0 |
|
|
|
$ |
123.5 |
|
|
|
$ |
47.8 |
|
|
|
Income from operations as a percent of net sales |
|
12.2 |
% |
|
|
|
11.8 |
% |
|
|
|
13.0 |
% |
|
|
|
10.0 |
% |
|
|
Loss on partial settlement of
pension plan |
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
5.1 |
|
|
|
Interest expense, net |
|
18.6 |
|
|
|
|
2.1 |
|
|
|
|
38.4 |
|
|
|
|
3.9 |
|
|
|
Other non-operating
expense/(income), net |
|
0.4 |
|
|
|
|
(0.3 |
) |
|
|
|
1.5 |
|
|
|
|
(0.4 |
) |
|
|
Income before income
taxes |
$ |
38.1 |
|
|
|
$ |
26.2 |
|
|
|
$ |
83.6 |
|
|
|
$ |
39.2 |
|
|
|
Provision/(Benefit) for income
taxes |
|
9.1 |
|
|
|
|
7.2 |
|
|
|
|
19.4 |
|
|
|
|
11.2 |
|
|
|
Income tax rate |
|
23.9 |
% |
|
|
|
27.5 |
% |
|
|
|
23.2 |
% |
|
|
|
28.6 |
% |
|
|
Net income |
$ |
29.0 |
|
|
|
$ |
19.0 |
|
|
|
$ |
64.2 |
|
|
|
$ |
28.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
64.3 |
|
|
|
|
29.0 |
|
|
|
|
64.3 |
|
|
|
|
29.1 |
|
|
|
Diluted |
|
64.5 |
|
|
|
|
29.1 |
|
|
|
|
64.5 |
|
|
|
|
29.2 |
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.45 |
|
|
|
$ |
0.66 |
|
|
|
$ |
1.0 |
|
|
|
$ |
0.96 |
|
|
|
Diluted |
$ |
0.45 |
|
|
|
$ |
0.65 |
|
|
|
$ |
1.0 |
|
|
|
$ |
0.96 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Non-GAAP Income From Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
$ |
57.1 |
|
|
|
$ |
28.0 |
|
|
|
$ |
123.5 |
|
|
|
$ |
47.8 |
|
|
|
Restructuring costs |
|
3.2 |
|
|
|
|
0.6 |
|
|
|
|
5.5 |
|
|
|
|
1.5 |
|
|
|
Acquisition related stock compensation expense |
|
0.8 |
|
|
|
|
- |
|
|
|
|
1.9 |
|
|
|
|
- |
|
|
|
Supplier warranty settlement |
|
- |
|
|
|
|
(2.0 |
) |
|
|
|
- |
|
|
|
|
(2.0 |
) |
|
|
Acquisition related amortization expense |
|
17.6 |
|
|
|
|
2.4 |
|
|
|
|
35.4 |
|
|
|
|
4.9 |
|
|
|
Acquisition related expenses |
|
0.2 |
|
|
|
|
1.8 |
|
|
|
|
0.7 |
|
|
|
|
7.2 |
|
|
|
Non-GAAP income from operations * |
$ |
78.9 |
|
|
|
$ |
30.8 |
|
|
|
$ |
167.0 |
|
|
|
$ |
59.4 |
|
|
|
Non-GAAP income from
operations as a percent of net sales |
|
16.9 |
% |
|
|
|
13.0 |
% |
|
|
|
17.6 |
% |
|
|
|
12.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Non-GAAP Net Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
29.0 |
|
|
|
$ |
19.0 |
|
|
|
$ |
64.2 |
|
|
|
$ |
28.0 |
|
|
|
Restructuring costs |
|
3.2 |
|
|
|
|
0.6 |
|
|
|
|
5.5 |
|
|
|
|
1.5 |
|
|
|
Acquisition related stock
compensation expense |
|
0.8 |
|
|
|
|
- |
|
|
|
|
1.9 |
|
|
|
|
- |
|
|
|
Supplier warranty
settlement |
|
- |
|
|
|
|
(2.0 |
) |
|
|
|
- |
|
|
|
|
(2.0 |
) |
|
|
Acquisition related
amortization expense |
|
17.6 |
|
|
|
|
2.4 |
|
|
|
|
35.4 |
|
|
|
|
4.9 |
|
|
|
Loss on partial settlement of
pension plan |
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
5.1 |
|
|
|
Acquisition related
expenses |
|
0.2 |
|
|
|
|
1.8 |
|
|
|
|
0.7 |
|
|
|
|
7.2 |
|
|
|
Tax impact of above
adjustments |
|
(5.2 |
) |
|
|
|
0.8 |
|
|
|
|
(10.4 |
) |
|
|
|
(0.9 |
) |
|
|
Non-GAAP net income * |
$ |
45.6 |
|
|
|
$ |
22.6 |
|
|
|
$ |
97.3 |
|
|
|
$ |
43.8 |
|
|
|
Non-GAAP diluted earnings per
share * |
$ |
0.71 |
|
|
(1) |
$ |
0.78 |
|
|
(2) |
$ |
1.51 |
|
|
(3) |
$ |
1.50 |
|
|
(4) |
(1) - Tax impact is calculated by
multiplying the estimated effective tax rate for the period of
23.9% by the above items. |
(2) - Tax impact
is calculated by multiplying the estimated effective tax rate for
the period of 24.2% by restructuring costs and acquisition related
amortization expense. Acquisition related expenses in the quarter
are not tax deductible, therefore the tax impact has been
eliminated. The supplier warranty settlement income is not taxable
in the local jurisdiction; therefore, no tax impact has been
assumed. |
(3) - Tax impact
is calculated by multiplying the estimated effective tax rate for
the period of 23.9% by the above items. |
(4) - Tax impact
is calculated by multiplying the estimated effective tax rate for
the period of 24.2% by restructuring and acquisition related
amortization expense, and the loss on settlement of pension plan.
Acquisition related expenses in the quarter are not tax deductible,
therefore the tax impact has been eliminated. The supplier warranty
settlement income is not taxable in the local jurisdiction;
therefore, no tax impact has been assumed. |
Cash flows from
operating activities |
|
Year to Date Ended June 30, |
|
In Millions of Dollars |
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
64.2 |
|
|
$ |
28.0 |
|
Adjustments to reconcile net
income to net operating cash flows: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
28.9 |
|
|
|
13.8 |
|
Amortization of intangible assets |
|
|
35.4 |
|
|
|
4.9 |
|
Amortization of deferred financing costs |
|
|
2.3 |
|
|
|
0.3 |
|
Loss on foreign currency, net |
|
|
0.8 |
|
|
|
— |
|
Loss on partial settlement of pension plan |
|
|
— |
|
|
|
5.1 |
|
Loss on disposal, impairment and other |
|
|
0.2 |
|
|
|
0.3 |
|
Stock based compensation |
|
|
7.0 |
|
|
|
2.7 |
|
Changes in assets and liabilities, net of assets acquired: |
|
|
|
|
|
|
|
|
Trade receivables |
|
|
(10.2 |
) |
|
|
(13.0 |
) |
Inventories |
|
|
(6.3 |
) |
|
|
(5.5 |
) |
Accounts payable, accrued payroll, accruals and current
liabilities |
|
|
(20.2 |
) |
|
|
2.0 |
|
Other current assets and liabilities |
|
|
(4.5 |
) |
|
|
(3.9 |
) |
Other operating assets and liabilities |
|
|
(1.5 |
) |
|
|
(5.6 |
) |
Net cash provided by operating activities |
|
|
96.1 |
|
|
|
29.1 |
|
Cash flows from
investing activities |
|
|
|
|
|
|
|
|
Purchase of property, plant
and equipment |
|
|
(24.1 |
) |
|
|
(14.9 |
) |
A&S acquisition purchase
price adjustment |
|
|
(13.5 |
) |
|
|
— |
|
Acquisition of Aluminium Die
Casting, S.r.L. |
|
|
— |
|
|
|
(2.7 |
) |
Proceeds from sale of
building |
|
|
0.3 |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(37.3 |
) |
|
|
(17.6 |
) |
Cash flows from
financing activities |
|
|
|
|
|
|
|
|
Payments on 2015 Revolving
Credit Facility |
|
|
— |
|
|
|
(24.4 |
) |
Payments on Term Loan
Facility |
|
|
(50.0 |
) |
|
|
— |
|
Dividend payments |
|
|
(22.0 |
) |
|
|
(10.0 |
) |
Borrowing under 2015 Revolving
Credit Facility |
|
|
— |
|
|
|
11.0 |
|
Payments of equipment, working
capital notes, mortgages and other debts |
|
|
(0.5 |
) |
|
|
(0.6 |
) |
Proceeds from issuance of
China debt |
|
|
2.4 |
|
|
|
— |
|
Shares surrendered for tax
withholding |
|
|
(2.3 |
) |
|
|
(1.5 |
) |
Net cash used in financing activities |
|
|
(72.4 |
) |
|
|
(25.5 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
|
(1.8 |
) |
|
|
0.1 |
|
Net change in cash and cash equivalents |
|
|
(15.4 |
) |
|
|
(13.9 |
) |
Cash and cash equivalents at
beginning of period |
|
|
169 |
|
|
|
52.0 |
|
Cash and cash equivalents at
end of period |
|
$ |
153.6 |
|
|
$ |
38.1 |
|
|
|
|
|
|
|
|
|
|
Reconciliation to free cash
flow: |
|
|
|
|
|
|
|
|
Net cash flows from operating
activities |
|
$ |
96.1 |
|
|
$ |
29.1 |
|
Purchase of property, plant
and equipment |
|
|
(24.1 |
) |
|
|
(14.9 |
) |
Free cash flow * |
|
$ |
72.0 |
|
|
$ |
14.2 |
|
Selected Segment
Data |
|
Quarter Ended June 30, |
|
|
Year to Date Ended June 30, |
|
In Millions of Dollars |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Transmission
Technologies |
|
$ |
234.9 |
|
|
$ |
237.3 |
|
|
$ |
469.8 |
|
|
$ |
477.7 |
|
Automation &
Specialty |
|
|
233.3 |
|
|
|
- |
|
|
|
482.4 |
|
|
|
- |
|
Inter-segment
eliminations |
|
|
(1.7 |
) |
|
|
- |
|
|
|
(2.9 |
) |
|
|
- |
|
Total |
|
$ |
466.5 |
|
|
$ |
237.3 |
|
|
$ |
949.3 |
|
|
$ |
477.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Transmission
Technologies |
|
$ |
31.9 |
|
|
$ |
33.2 |
|
|
$ |
60.8 |
|
|
$ |
61.5 |
|
Automation &
Specialty |
|
|
31.8 |
|
|
|
- |
|
|
|
72.4 |
|
|
|
- |
|
Corporate |
|
|
(3.4 |
) |
|
|
(4.6 |
) |
|
|
(4.2 |
) |
|
|
(12.2 |
) |
Restructuring
costs |
|
|
(3.2 |
) |
|
|
(0.6 |
) |
|
|
(5.5 |
) |
|
|
(1.5 |
) |
Total |
|
$ |
57.1 |
|
|
$ |
28.0 |
|
|
$ |
123.5 |
|
|
$ |
47.8 |
|
*Reconciliation of Non-GAAP Income from Operations by
Segment:
Selected Segment Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions of Dollars |
|
Quarter Ended June 30, 2019 |
|
|
Year to Date Ended June 30, 2019 |
|
|
|
Power Transmission Technologies |
|
|
Automation and Specialty |
|
|
Corporate |
|
|
Total |
|
|
Power Transmission Technologies |
|
|
Automation and Specialty |
|
|
Corporate |
|
|
Total |
|
Income from
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
$ |
30.1 |
|
|
$ |
30.4 |
|
|
$ |
(3.4 |
) |
|
$ |
57.1 |
|
|
$ |
57.9 |
|
|
$ |
69.8 |
|
|
$ |
(4.2 |
) |
|
$ |
123.5 |
|
Restructuring costs |
|
|
1.8 |
|
|
|
1.4 |
|
|
|
- |
|
|
|
3.2 |
|
|
|
2.9 |
|
|
|
2.6 |
|
|
|
- |
|
|
|
5.5 |
|
Acquisition related stock compensation expense |
|
|
- |
|
|
|
- |
|
|
|
0.8 |
|
|
|
0.8 |
|
|
|
- |
|
|
|
- |
|
|
|
1.9 |
|
|
|
1.9 |
|
Acquisition related amortization expense |
|
|
2.3 |
|
|
|
15.3 |
|
|
|
- |
|
|
|
17.6 |
|
|
|
4.6 |
|
|
|
30.8 |
|
|
|
- |
|
|
|
35.4 |
|
Acquisition related expenses |
|
|
- |
|
|
|
- |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
- |
|
|
|
- |
|
|
|
0.7 |
|
|
|
0.7 |
|
Total Non-GAAP Income
from operations |
|
$ |
34.2 |
|
|
$ |
47.1 |
|
|
$ |
(2.4 |
) |
|
$ |
78.9 |
|
|
$ |
65.4 |
|
|
$ |
103.2 |
|
|
$ |
(1.6 |
) |
|
$ |
167 |
|
Non-GAAP Income from
operations as a percentage of Segment net sales* |
|
|
14.6 |
% |
|
|
20.2 |
% |
|
|
|
|
|
|
16.9 |
% |
|
|
13.9 |
% |
|
|
21.4 |
% |
|
|
|
|
|
|
17.6 |
% |
* Discussion of Non-GAAP Financial Measures
The non-GAAP financial measures used in this release are
utilized by management in comparing our operating performance on a
consistent basis. We believe that these financial measures are
appropriate to enhance the overall understanding of our underlying
operating performance trends compared to historical and prospective
periods and our peers. We believe that these measures provide
important supplemental information to management and investors
regarding financial and business trends relating to the Company's
financial condition and results of operations as well as insight
into the compliance with our debt covenants. Non-GAAP financial
measures should not be considered in isolation from, or as a
substitute for, financial information calculated in accordance with
GAAP. Investors are encouraged to review the reconciliation of
these non-GAAP measures to their most directly comparable GAAP
financial measures. A reconciliation of non-GAAP financial measures
presented above to our GAAP results has been provided in the
financial tables included in this press release.
Organic SalesOrganic sales in this release excludes the impact
of foreign currency translation.
Non-GAAP Net Income, Non-GAAP income from operations, Non-GAAP
Diluted earnings per share, Non-GAAP operating income margin, and
Non-GAAP Net Income and Non-GAAP Diluted EPS GuidanceNon-GAAP net
income, non-GAAP income from operations, non-GAAP diluted earnings
per share, and non-GAAP net income and non-GAAP diluted earnings
per share guidance exclude acquisition related amortization,
acquisition related costs, acquisition related stock compensation
costs, restructuring costs and other income or charges that
management does not consider to be directly related to the
Company’s core operating performance, such as supplier warranty
settlement, loss on partial settlement of pension plans and the tax
impact of such adjustments. Non-GAAP diluted earnings per share is
calculated by dividing non-GAAP net income by GAAP weighted average
shares outstanding (diluted). Non-GAAP operating income margin is
calculated by dividing Non-GAAP income from operations by GAAP Net
Sales.
Non-GAAP adjusted EBITDA and Non-GAAP adjusted EBITDA
guidanceAdjusted EBITDA represents earnings before interest, taxes,
depreciation, acquisition related amortization, acquisition related
costs, restructuring costs, stock-based compensation, supplier
warranty settlement and other income or charges that management
does not consider to be directly related to the Company’s core
operating performance, such as asset impairment and other, net, and
loss on partial settlement of pension plans.
Non-GAAP Free cash flowNon-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 capitalNon-GAAP operating working
capital is calculated by deducting accounts payable from net trade
receivables plus inventories.
Net DebtNet debt is calculated by subtracting cash from total
debt.
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, the statements under “Business Outlook,” our
expectations regarding exceeding anticipated synergy targets, our
expectations regarding achieving strategic supply chain
initiatives, our expectations regarding the weakness in the global
industrial economy continuing in the foreseeable future and
anticipations regarding the length and scope of such downturn, as
well as our belief that we are taking the necessary actions to
manage near-term dynamics, our expectations regarding our tax rate,
our expectations regarding delevering our business and our ability
to continue delevering our business, including by generating strong
free cash flow, our expectations regarding our margin improvement
by the end of 2020, changes in how we calculate certain non-GAAP
measures, and the Company’s revised guidance for full year
2019.
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 political and 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, and the effects of tariffs
and other trade actions taken by the United States and other
countries (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, (19) risks associated with restrictions
contained in the agreements governing the Notes and the Altra
Credit Facilities, (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, Stromag, and A&S acquisitions
and integration and other acquisitions, (24) risks associated with
certain minimum purchase agreements we have with suppliers, (25)
risks related to our relationships with strategic partners, (26)
our ability to offset increased commodity and labor costs with
increased prices, (27) risks associated with our exposure to
variable interest rates and foreign currency exchange rates, (28)
risks associated with interest rate swap contracts, (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) risks
related to our acquisition of A&S, including (a) the
possibility that we may be unable to achieve expected synergies and
operating efficiencies in connection with the proposed transaction
within the expected time-frames or at all and to successfully
integrate A&S, (b) expected or targeted future financial and
operating performance and results, (c) operating costs, customer
loss and business disruption (including, without limitation,
difficulties in maintain relationships with employees, customers,
clients or suppliers) being greater than expected following the
transaction, (d) our ability to retain key executives and
employees, (e) slowdowns or downturns in economic conditions
generally and in the markets in which the A&S businesses
participate specifically, (f) lower than expected investments and
capital expenditures in equipment that utilizes components produced
by us or A&S, (g) lower than expected demand for our or
A&S’s repair and replacement businesses, (h) our ability to
successfully integrate the merged assets and the associated
technology and achieve operational efficiencies, (i) the
integration of A&S being more difficult, time-consuming or
costly than expected, (j) the inability to undertake certain
corporate actions that otherwise could be advantageous to comply
with certain tax covenants, (k) potential unknown liabilities and
unforeseen expenses related to the acquisition and (l) the impact
on our internal controls and compliance with the regulatory
requirements under the Sarbanes-Oxley Act of 2002, (33) the risk
associated with the UK vote to leave the European Union, (34)
Altra’s ability to achieve the efficiencies, savings and other
benefits anticipated from its cost reduction, margin improvement,
restructuring, plant consolidation and other business optimization
initiatives, (35) the risks associated with transitioning from
LIBOR to a replacement alternative reference rate, and (36) 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 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
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