Addition of Automation & Specialty
Platform (“A&S Business”) Drives 110%
Year-Over-Year Increase in Q4 Sales to $469.2
Million
Altra Industrial Motion Corp. (Nasdaq: AIMC) (“Altra” or
“Company”), a leading global manufacturer and supplier of
electromechanical power transmission, motion control and automation
products, today announced unaudited financial results for the
fourth quarter ended December 31, 2018. In the fourth quarter,
Altra and Fortive Corporation (“Fortive”) consummated the
previously announced combination of Altra with four operating
companies from Fortive’s Automation & Specialty platform (the
“A&S business”). Except where otherwise noted, financial
results for the fourth quarter of 2018 include the A&S business
whereas financial results for the prior year period do not include
financial results of Altra and the A&S business on a combined
pro forma basis.
Financial Highlights
- Fourth-quarter 2018 net sales were $469.2 million an increase
of 110% compared to prior year period. Organic sales growth
was 5.5% for the combined business, on an unaudited pro forma
basis, compared with the fourth quarter of 2017. *
- Fourth-quarter net income was a loss of $5.0 million, or a loss
of $0.08 per diluted share, compared with net income of $12.4
million, or $0.43 per diluted share, in the fourth quarter of 2017.
The loss in the fourth-quarter was primarily driven by costs
related to the acquisition of the A&S business. Non-GAAP net
income in the fourth quarter of 2018 was $42.1 million, or $0.65
per diluted share, up 22.6% when compared with $15.5 million, or
$0.53 per diluted share, in the fourth quarter of 2017.
*
- Non-GAAP adjusted EBITDA in the fourth quarter of 2018 was
$95.3 million, or 20.3% of net sales, compared with $31.8
million, or 14.2% of net sales, in last year's fourth quarter.
*
- Gross profit margin in the fourth quarter of 2018 was 32.3% and
operating income margin was 3.9%. Fourth quarter Non-GAAP gross
profit margin was 35.4% and Non-GAAP operating income margin was
16.8%. *
- Cash flow from operations for the full year 2018 of $116.7
million led to free cash flow of $79.2 million, up 65% compared
with $47.8 million for 2017. Free cash flow conversion in 2018 was
greater than 200% of net income. *
- The Company commenced the reporting of financial results in two
segments; Automation & Specialty (“A&S”) and Power
Transmission Technologies (“PTT”).
Strategic Highlights
- Integration of the A&S business and Altra advancing on
track with tactical tasks essentially complete and minimal customer
disruption.
- On track to achieve $10 million to $12 million of synergies in
2019 and deliver a total of $52 million of synergies by the fourth
year following consummation of the acquisition of the A&S
business.
- Advanced strategic priority to expediently de-lever company
with the pay down of $25 million of debt since closing. Leverage at
the end of 2018 was 3.9x net debt to Non-GAAP adjusted EBITDA on an
unaudited pro-forma basis. *
Management Comments
“2018 was a transformational year for Altra as we completed the
A&S business acquisition, creating a $1.9 billion premier
industrial company,” Carl Christenson, Altra’s Chairman and CEO,
said. “Today, we are solidly positioned with an expanded portfolio
of technologies, increased exposure to end markets with attractive
secular trends, a proven world class business system, and strong
free cash flow generation.”
“We ended the year with a strong fourth quarter that, for the
first time, reflects the profile of the new Altra,” added
Christenson. “Fourth-quarter revenues of $469.2 million were more
than double the prior-year quarter. Operationally, our
performance came in at the high end of our expectations and we
delivered solid margins across the board with Non-GAAP gross profit
margin of 35.4%, Non-GAAP income from operations of 16.8%, and
Non-GAAP adjusted EBITDA margin of 20%.” *
“Since completing the A&S business transaction on October
first, the integration of the A&S business and Altra has
advanced exceptionally well,” said Christenson. “We have
substantially completed the tactical integration of the two
businesses, our sales teams have begun to collaborate to plan for
cross-selling opportunities, and the two corporate cultures have
merged extremely well.”
“Looking forward, our strategic priorities are to continue to
capitalize on our strong cash generation to de-lever while
implementing best practices from our world class business systems
across the organization to accelerate top- and bottom-line growth.
We are excited about the new growth markets that we have entered
and remain encouraged by the ongoing strength in several of our
historic markets. We expect to deliver continued sales, earnings
and free cash flow growth in 2019,” concluded Christenson.
Business Outlook
Altra is providing guidance for full year 2019. The Company
expects:
- Full-year 2019 sales are expected to be $1,920 - $1,950
million.
- GAAP diluted EPS in the range of $2.10 to $2.18.
- Non-GAAP diluted EPS in the range of $3.02 to $3.18. *
- Non-GAAP adjusted EBITDA in the range of $415 to $430 million.
*
- Tax rate for the full year to be approximately 25% to 26.5%
before discrete items, capital expenditures in the range of $60 to
$65 million, and depreciation and amortization in the range of $130
to $140 million.
Reconciliations of Non-GAAP Disclosures
*Reconciliation of Non-GAAP Net Income:(Amounts in thousands
except per share information)
|
Quarter Ended December 31, |
|
|
Year Ended December 31, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net income |
$ |
(4,980 |
) |
|
$ |
12,440 |
|
|
$ |
35,341 |
|
|
$ |
51,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and
consolidation costs |
$ |
2,330 |
|
|
$ |
367 |
|
|
$ |
4,449 |
|
|
$ |
4,143 |
|
Loss on write-off of
deferred financing and extinguishment of convertible debt |
|
1,247 |
|
|
|
- |
|
|
|
1,247 |
|
|
|
1,797 |
|
Acquisition related
stock compensation expense |
|
1,955 |
|
|
|
- |
|
|
|
1,955 |
|
|
|
- |
|
Amortization of
inventory fair value adjustment |
|
14,221 |
|
|
|
- |
|
|
|
14,221 |
|
|
|
2,347 |
|
Loss on partial
settlement of pension plan |
|
- |
|
|
|
1,720 |
|
|
|
5,086 |
|
|
|
1,720 |
|
Acquisition related
expenses |
|
24,293 |
|
|
|
491 |
|
|
|
36,165 |
|
|
|
2,165 |
|
Acquisition related
amortization expense |
|
17,898 |
|
|
|
2,375 |
|
|
|
25,194 |
|
|
|
9,514 |
|
Supplier warranty
settlement |
|
- |
|
|
|
- |
|
|
|
(1,980 |
) |
|
|
- |
|
Tax impact of above
adjustments |
|
(14,867 |
) |
|
|
(1,471 |
) |
|
|
(15,227 |
) |
|
|
(6,437 |
) |
Revaluation of U.S. net
deferred taxes |
|
- |
|
|
|
(7,818 |
) |
|
|
- |
|
|
|
(7,818 |
) |
Tax on foreign earnings
deemed to be repatriated |
|
- |
|
|
|
7,374 |
|
|
|
- |
|
|
|
7,374 |
|
Non-GAAP net
income* |
$ |
42,097 |
|
|
$ |
15,478 |
|
|
$ |
106,451 |
|
|
$ |
66,232 |
|
Non-GAAP diluted
earnings per share* |
$ |
0.65 |
|
|
$ |
0.53 |
|
|
$ |
2.86 |
|
|
$ |
2.28 |
|
*Reconciliation of Free Cash Flow:(Amounts in thousands except
per share information)
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
2018 |
|
|
2017 |
|
Net cash flows from
operating activities |
|
|
|
|
|
|
$ |
116,714 |
|
|
$ |
80,581 |
|
Purchase of property,
plant and equipment |
|
|
|
|
|
|
|
(37,531 |
) |
|
|
(32,826 |
) |
Free cash flow* |
|
|
|
|
|
|
$ |
79,183 |
|
|
$ |
47,755 |
|
*Reconciliation of Non-GAAP Operating Income Margin:(Amounts in
thousands except per share information)
|
Quarter Ended December 31, |
|
|
Year Ended December 31, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Income from
operations |
$ |
18,211 |
|
|
$ |
20,623 |
|
|
$ |
86,677 |
|
|
$ |
82,707 |
|
Income from operations as
a percent of net sales |
|
3.9 |
% |
|
|
9.2 |
% |
|
|
7.4 |
% |
|
|
9.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and
consolidation costs |
$ |
2,330 |
|
|
$ |
367 |
|
|
$ |
4,449 |
|
|
$ |
4,143 |
|
Acquisition related stock
compensation expense |
|
1,955 |
|
|
|
- |
|
|
|
1,955 |
|
|
|
- |
|
Amortization of inventory
fair value adjustment |
|
14,221 |
|
|
|
- |
|
|
|
14,221 |
|
|
|
2,347 |
|
Supplier warranty
settlement |
|
- |
|
|
|
- |
|
|
|
(1,980 |
) |
|
|
- |
|
Acquisition related
amortization expense |
|
17,898 |
|
|
|
2,375 |
|
|
|
25,194 |
|
|
|
9,514 |
|
Acquisition related
expenses |
|
24,293 |
|
|
|
491 |
|
|
|
36,165 |
|
|
|
2,165 |
|
Non-GAAP income
from operations* |
|
78,908 |
|
|
|
23,856 |
|
|
|
166,681 |
|
|
|
100,876 |
|
Non-GAAP Income from operations as a percent of
net sales |
|
16.8 |
% |
|
|
10.7 |
% |
|
|
14.2 |
% |
|
|
11.5 |
% |
*Reconciliation of Net Debt:(Amounts in thousands except per
share information)
|
|
|
|
|
|
Quarter Ended December 31, 2018 |
|
Total debt |
|
|
|
|
|
$ |
1,734,016 |
|
Cash |
|
|
|
|
|
|
(168,957 |
) |
Net debt |
|
|
|
|
|
$ |
1,565,059 |
|
*Reconciliation of Non-GAAP adjusted EBITDA:(Amounts in
thousands except per share information)
|
Quarter Ended December 31, |
|
|
Year Ended December 31, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net income |
$ |
(4,980 |
) |
|
$ |
12,440 |
|
|
$ |
35,341 |
|
|
$ |
51,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset impairment and
other, net |
|
(234 |
) |
|
|
760 |
|
|
|
263 |
|
|
|
965 |
|
Tax expense |
|
(579 |
) |
|
|
3,977 |
|
|
|
16,407 |
|
|
|
19,700 |
|
Interest expense |
|
22,744 |
|
|
|
2,163 |
|
|
|
28,601 |
|
|
|
7,710 |
|
Depreciation expense |
|
14,097 |
|
|
|
6,747 |
|
|
|
34,832 |
|
|
|
26,511 |
|
Acquisition related
amortization expense |
|
17,898 |
|
|
|
2,375 |
|
|
|
25,194 |
|
|
|
9,514 |
|
Loss on write-off of
deferred financing and extinguishment of convertible debt |
|
1,247 |
|
|
|
- |
|
|
|
1,247 |
|
|
|
1,797 |
|
Acquisition related
expenses |
|
24,293 |
|
|
|
491 |
|
|
|
36,165 |
|
|
|
2,165 |
|
Loss on partial settlement
of pension plans |
|
- |
|
|
|
1,720 |
|
|
|
5,086 |
|
|
|
1,720 |
|
Stock compensation
expense |
|
4,300 |
|
|
|
731 |
|
|
|
8,130 |
|
|
|
5,274 |
|
Amortization of fair value
of inventory |
|
14,221 |
|
|
|
- |
|
|
|
14,221 |
|
|
|
2,347 |
|
Supplier warranty
settlement |
|
- |
|
|
|
- |
|
|
|
(1,980 |
) |
|
|
- |
|
Restructuring and
consolidation expense |
|
2,330 |
|
|
|
367 |
|
|
|
4,449 |
|
|
|
4,143 |
|
Non-GAAP adjusted
EBITDA |
$ |
95,337 |
|
|
$ |
31,771 |
|
|
$ |
207,956 |
|
|
$ |
133,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated A&S Non-GAAP adjusted EBITDA for
the first three quarters of 2018 |
|
|
|
|
|
|
|
|
$ |
197,727 |
|
|
|
|
|
Proforma Combined Non-GAAP EBITDA |
|
|
|
|
|
|
|
|
$ |
405,683 |
|
|
|
|
|
*Reconciliation of 2019 Non-GAAP Diluted EPS:(Amounts in
thousands except per share information)
|
|
Fiscal
Year 2019 |
|
Fiscal
Year 2019 DilutedEPS |
Net income per share
diluted |
|
$135.8 - $141.1 |
|
$2.10 - $2.18 |
Restructuring and
consolidation costs |
|
5.0 -
7.0 |
|
|
Acquisition related
stock compensation expense |
|
4.9 |
|
|
Acquisition related
amortization expense |
|
70.0 -
75.0 |
|
|
Tax impact of above
adjustments** |
|
(20.6) - (22.4) |
|
|
Non-GAAP Diluted EPS
Guidance |
|
$195.2 - $205.7 |
|
$3.02 - $3.18 |
(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 25.8% by the above items |
*Reconciliation of 2019 Non-GAAP adjusted EBITDA:(Amounts in
thousands except per share information)
|
|
Fiscal
Year 2019 |
Net income per share
diluted |
|
$135.8 - $141.1 |
Interest expense |
|
80.0 -
77.5 |
Tax expense |
|
47.3 -
47.5 |
Depreciation
expense |
|
60.0 -
65.0 |
Acquisition related
amortization expense |
|
70.0 -
75.0 |
Stock based
compensation |
|
16.9 |
Restructuring and
consolidation costs |
|
5.0 - 7.0 |
Non-GAAP adjusted EBITDA
Guidance |
|
$415.0 - $430.0 |
Conference Call The Company will conduct an
investor conference call to discuss its unaudited fourth quarter
and full year 2018 financial results and 2019 business outlook on
Thursday, February 21, 2019 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 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 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 February 21,
2019 through midnight on March 7, 2019. To listen to the replay,
dial (877) 660-6853 domestically or (201) 612-7415 for
international access (conference ID # 13687178). A webcast replay
also will be available.
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets |
Years Ended December 31, |
|
In Thousands of Dollars |
2018 |
|
|
2017 |
|
Assets: |
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
168,957 |
|
|
$ |
51,994 |
|
Trade
receivables, net |
|
259,815 |
|
|
|
135,499 |
|
Inventories |
|
231,172 |
|
|
|
145,611 |
|
Income
tax receivable |
|
9,592 |
|
|
|
6,634 |
|
Prepaid
expenses and other current assets |
|
33,095 |
|
|
|
17,344 |
|
Assets
held for sale |
|
696 |
|
|
|
1,081 |
|
Total current
assets |
|
703,327 |
|
|
|
358,163 |
|
Property,
plant and equipment, net |
|
364,433 |
|
|
|
191,918 |
|
Intangible assets, net |
|
1,585,728 |
|
|
|
159,613 |
|
Goodwill |
|
1,663,068 |
|
|
|
206,040 |
|
Deferred
income taxes |
|
4,955 |
|
|
|
2,608 |
|
Other
non-current assets, net |
|
15,903 |
|
|
|
2,315 |
|
Total assets |
$ |
4,337,414 |
|
|
$ |
920,657 |
|
|
|
|
|
|
|
|
|
Liabilities and
stockholders' equity |
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
Accounts
payable |
$ |
186,748 |
|
|
$ |
68,014 |
|
Accrued
payroll |
|
56,979 |
|
|
|
32,091 |
|
Accruals
and other current liabilities |
|
68,653 |
|
|
|
32,921 |
|
Income
tax payable |
|
8,269 |
|
|
|
9,082 |
|
Current
portion of long-term debt |
|
17,188 |
|
|
|
384 |
|
Total
current liabilities |
|
337,837 |
|
|
|
142,492 |
|
Long-term
debt, less current portion and net of unaccreted
discount |
|
1,690,898 |
|
|
|
275,587 |
|
Deferred
income taxes |
|
393,762 |
|
|
|
52,250 |
|
Pension
liabilities |
|
31,976 |
|
|
|
25,038 |
|
Long-term
taxes payable |
|
4,839 |
|
|
|
6,322 |
|
Other
long-term liabilities |
|
29,906 |
|
|
|
22,263 |
|
Total stockholders'
equity |
|
1,848,196 |
|
|
|
396,705 |
|
Total liabilities, and
stockholders' equity |
$ |
4,337,414 |
|
|
$ |
920,657 |
|
|
|
|
|
|
|
|
|
Reconciliation to
operating working capital: |
|
|
|
|
|
|
|
Trade receivables,
net |
|
259,815 |
|
|
|
135,499 |
|
Inventories |
|
231,172 |
|
|
|
145,611 |
|
Accounts payable |
|
(186,748 |
) |
|
|
(68,014 |
) |
Non-GAAP operating
working capital* |
$ |
304,239 |
|
|
$ |
213,096 |
|
Consolidated
Statements of Income Data: |
Quarter Ended December 31, |
|
|
|
|
Year Ended December 31, |
|
|
In Thousands of
Dollars, except per share amounts |
2018 |
|
|
|
|
2017 |
|
|
|
|
2018 |
|
|
|
|
2017 |
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
Net sales |
$ |
469,151 |
|
|
|
|
$ |
223,322 |
|
|
|
|
$ |
1,175,342 |
|
|
|
|
$ |
876,737 |
|
|
Cost of sales |
|
317,461 |
|
|
|
|
|
154,852 |
|
|
|
|
|
799,231 |
|
|
|
|
|
600,961 |
|
|
Gross
profit |
$ |
151,690 |
|
|
|
|
$ |
68,470 |
|
|
|
|
$ |
376,111 |
|
|
|
|
$ |
275,776 |
|
|
Gross
profit as a percent of net sales |
|
32.3 |
% |
|
|
|
|
30.7 |
% |
|
|
|
|
32.0 |
% |
|
|
|
|
31.5 |
% |
|
Selling, general &
administrative expenses |
|
116,537 |
|
|
|
|
|
41,480 |
|
|
|
|
|
251,909 |
|
|
|
|
|
164,492 |
|
|
Research and
development expenses |
|
14,612 |
|
|
|
|
|
6,000 |
|
|
|
|
|
33,076 |
|
|
|
|
|
24,434 |
|
|
Restructuring and
consolidation costs |
|
2,330 |
|
|
|
|
|
367 |
|
|
|
|
|
4,449 |
|
|
|
|
|
4,143 |
|
|
Income
from operations |
$ |
18,211 |
|
|
|
|
$ |
20,623 |
|
|
|
|
$ |
86,677 |
|
|
|
|
$ |
82,707 |
|
|
Income
from operations as a percent of net sales |
|
3.9 |
% |
|
|
|
|
9.2 |
% |
|
|
|
|
7.4 |
% |
|
|
|
|
9.4 |
% |
|
Loss on partial
settlement of pension plan |
|
- |
|
|
|
|
|
1,720 |
|
|
|
|
|
5,086 |
|
|
|
|
|
1,720 |
|
|
Interest expense,
net |
|
22,744 |
|
|
|
|
|
2,163 |
|
|
|
|
|
28,601 |
|
|
|
|
|
7,710 |
|
|
Loss on write-off of
deferred financing and extinguishment of convertible debt |
|
1,247 |
|
|
|
|
|
- |
|
|
|
|
|
1,247 |
|
|
|
|
|
1,797 |
|
|
Other non-operating
expense (income), net |
|
(221 |
) |
|
|
|
|
323 |
|
|
|
|
|
(5 |
) |
|
|
|
|
353 |
|
|
Income before income
taxes |
$ |
(5,559 |
) |
|
|
|
$ |
16,417 |
|
|
|
|
$ |
51,748 |
|
|
|
|
$ |
71,127 |
|
|
Provision/(Benefit) for
income taxes |
|
(579 |
) |
|
|
|
|
3,977 |
|
|
|
|
|
16,407 |
|
|
|
|
|
19,700 |
|
|
Income tax rate |
|
10.4 |
% |
|
|
|
|
24.2 |
% |
|
|
|
|
31.7 |
% |
|
|
|
|
27.7 |
% |
|
Net
income |
|
(4,980 |
) |
|
|
|
|
12,440 |
|
|
|
|
|
35,341 |
|
|
|
|
|
51,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
64,018 |
|
|
|
|
|
29,011 |
|
|
|
|
|
37,868 |
|
|
|
|
|
28,949 |
|
|
Diluted -
includes impact of convertible debt redemptions |
|
64,419 |
|
|
|
|
|
29,120 |
|
|
|
|
|
38,380 |
|
|
|
|
|
29,064 |
|
|
Net income per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.08 |
) |
|
|
|
$ |
0.43 |
|
|
|
|
$ |
1.27 |
|
|
|
|
$ |
1.78 |
|
|
Diluted |
$ |
(0.08 |
) |
|
|
|
$ |
0.43 |
|
|
|
|
$ |
1.26 |
|
|
|
|
$ |
1.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Non-GAAP Gross Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
$ |
151,690 |
|
|
|
|
$ |
68,470 |
|
|
|
|
$ |
376,111 |
|
|
|
|
$ |
275,776 |
|
|
Amortization of inventory fair value adjustment |
|
14,221 |
|
|
|
|
|
- |
|
|
|
|
|
14,221 |
|
|
|
|
|
2,347 |
|
|
Non-GAAP gross
profit |
$ |
165,911 |
|
|
|
|
$ |
68,470 |
|
|
|
|
$ |
390,332 |
|
|
|
|
$ |
278,123 |
|
|
|
|
35.4 |
% |
|
|
|
|
30.7 |
% |
|
|
|
|
33.2 |
% |
|
|
|
|
31.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Non-GAAP Income From Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations |
$ |
18,211 |
|
|
|
|
$ |
20,623 |
|
|
|
|
$ |
86,677 |
|
|
|
|
$ |
82,707 |
|
|
Restructuring and consolidation costs |
|
2,330 |
|
|
|
|
|
367 |
|
|
|
|
|
4,449 |
|
|
|
|
|
4,143 |
|
|
Acquisition related stock compensation expense |
|
1,955 |
|
|
|
|
|
- |
|
|
|
|
|
1,955 |
|
|
|
|
|
- |
|
|
Amortization of inventory fair value adjustment |
|
14,221 |
|
|
|
|
|
- |
|
|
|
|
|
14,221 |
|
|
|
|
|
2,347 |
|
|
Supplier
warranty settlement |
|
- |
|
|
|
|
|
- |
|
|
|
|
|
(1,980 |
) |
|
|
|
|
- |
|
|
Acquisition related amortization expense |
|
17,898 |
|
|
|
|
|
2,375 |
|
|
|
|
|
25,194 |
|
|
|
|
|
9,514 |
|
|
Acquisition related expenses |
|
24,293 |
|
|
|
|
|
491 |
|
|
|
|
|
36,165 |
|
|
|
|
|
2,165 |
|
|
Non-GAAP
income from operations * |
$ |
78,908 |
|
|
|
|
$ |
23,856 |
|
|
|
|
$ |
166,681 |
|
|
|
|
$ |
100,876 |
|
|
|
|
16.8 |
% |
|
|
|
|
10.7 |
% |
|
|
|
|
14.2 |
% |
|
|
|
|
11.5 |
% |
|
Reconciliation
of Non-GAAP Net Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
(4,980 |
) |
|
|
|
$ |
12,440 |
|
|
|
|
$ |
35,341 |
|
|
|
|
$ |
51,427 |
|
|
Restructuring and
consolidation costs |
|
2,330 |
|
|
|
|
|
367 |
|
|
|
|
|
4,449 |
|
|
|
|
|
4,143 |
|
|
Loss on write-off of
deferred financing and extinguishment of convertible debt |
|
1,247 |
|
|
|
|
|
- |
|
|
|
|
|
1,247 |
|
|
|
|
|
1,797 |
|
|
Acquisition related
stock compensation expense |
|
1,955 |
|
|
|
|
|
- |
|
|
|
|
|
1,955 |
|
|
|
|
|
- |
|
|
Amortization of
inventory fair value adjustment |
|
14,221 |
|
|
|
|
|
- |
|
|
|
|
|
14,221 |
|
|
|
|
|
2,347 |
|
|
Loss on partial
settlement of pension plan |
|
- |
|
|
|
|
|
1,720 |
|
|
|
|
|
5,086 |
|
|
|
|
|
1,720 |
|
|
Acquisition related
expenses |
|
24,293 |
|
|
|
|
|
491 |
|
|
|
|
|
36,165 |
|
|
|
|
|
2,165 |
|
|
Acquisition related
amortization expense |
|
17,898 |
|
|
|
|
|
2,375 |
|
|
|
|
|
25,194 |
|
|
|
|
|
9,514 |
|
|
Supplier warranty
settlement |
|
- |
|
|
|
|
|
- |
|
|
|
|
|
(1,980 |
) |
|
|
|
|
- |
|
|
Tax impact of above
adjustments |
|
(14,867 |
) |
|
|
|
|
(1,471 |
) |
|
|
|
|
(15,227 |
) |
|
|
|
|
(6,437 |
) |
|
Revaluation of U.S. net
deferred taxes |
|
- |
|
|
|
|
|
(7,818 |
) |
|
|
|
|
- |
|
|
|
|
|
(7,818 |
) |
|
Tax on foreign earnings
deemed to be repatriated |
|
- |
|
|
|
|
|
7,374 |
|
|
|
|
|
- |
|
|
|
|
|
7,374 |
|
|
Non-GAAP net income
* |
$ |
42,097 |
|
|
|
|
$ |
15,478 |
|
|
|
|
$ |
106,451 |
|
|
|
|
$ |
66,232 |
|
|
Non-GAAP diluted
earnings per share * |
$ |
0.65 |
|
|
(1 |
) |
$ |
0.53 |
|
|
(2 |
) |
$ |
2.86 |
|
|
(3 |
) |
$ |
2.28 |
|
(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) - tax impact is calculated by
multiplying the estimated effective tax rate for the period of
24.0% by the above items. |
(2) - tax impact is calculated by
multiplying the estimated effective tax rate for the period of
29.7% by the above items. |
(3) - tax impact is calculated by
multiplying the estimated effective tax rate for the period of
24.0%. The tax impact for acquisition costs that are not tax
deductible has been eliminated. The supplier warranty settlement
income is not taxable in the local jurisdiction; therefore no tax
impact has been assumed. |
(4) - tax impact is calculated by
multiplying the estimated effective tax rate for the period of
29.7% by the above items. |
|
|
Years Ended December 31, |
|
|
|
2018 |
|
|
2017 |
|
Cash flows from
operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
35,341 |
|
|
$ |
51,427 |
|
Adjustments to reconcile
net income to net cash flows: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
34,832 |
|
|
|
26,511 |
|
Amortization
of intangible assets |
|
|
25,194 |
|
|
|
9,514 |
|
Amortization
of deferred financing costs |
|
|
1,146 |
|
|
|
599 |
|
Amortization
of inventory fair value adjustment |
|
|
14,221 |
|
|
|
2,347 |
|
Accretion of
debt discount, net |
|
|
119 |
|
|
|
— |
|
Loss on
disposals and impairments and other |
|
|
263 |
|
|
|
965 |
|
Loss on
extinguishment of debt |
|
|
1,247 |
|
|
|
1,797 |
|
Loss on
partial settlement of pension plans |
|
|
5,086 |
|
|
|
1,720 |
|
Gain on
settlement of cross currency swap |
|
|
(941 |
) |
|
|
— |
|
(Benefit)
provision for deferred taxes |
|
|
(9,880 |
) |
|
|
(8,012 |
) |
Stock based
compensation |
|
|
8,130 |
|
|
|
5,274 |
|
Changes in
assets and liabilities: |
|
|
|
|
|
|
|
|
Trade
receivables |
|
|
1,527 |
|
|
|
(8,103 |
) |
Inventories |
|
|
(14,012 |
) |
|
|
(2,379 |
) |
Accounts
payable and accrued liabilities |
|
|
24,684 |
|
|
|
(2,994 |
) |
Other
current assets and liabilities |
|
|
(9,436 |
) |
|
|
(3,178 |
) |
Other
operating assets and liabilities |
|
|
(807 |
) |
|
|
5,093 |
|
Net cash
provided by operating activities |
|
|
116,714 |
|
|
|
80,581 |
|
Cash flows from
investing activities |
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment |
|
|
(37,531 |
) |
|
|
(32,826 |
) |
Proceeds from sale of
property |
|
|
— |
|
|
|
3,221 |
|
Acquisition of Stromag,
net of cash received of $8.8 million |
|
|
— |
|
|
|
2,883 |
|
Acquisition of Aluminium
Die Casting, net of cash acquired |
|
|
(2,663 |
) |
|
|
— |
|
Acquisition of Automation
and Specialty, net of cash acquired |
|
|
(949,185 |
) |
|
|
— |
|
Net cash
used in investing activities |
|
|
(989,379 |
) |
|
|
(26,722 |
) |
Cash flows from
financing activities |
|
|
|
|
|
|
|
|
Payments of debt issuance
costs |
|
|
(33,213 |
) |
|
|
— |
|
Payments on term loan
facility |
|
|
(20,000 |
) |
|
|
— |
|
Payments on Revolving
Credit Facility |
|
|
(281,613 |
) |
|
|
(79,536 |
) |
Dividend payments |
|
|
(19,960 |
) |
|
|
(18,259 |
) |
Cash paid for redemption
of convertible debt |
|
|
— |
|
|
|
(954 |
) |
Borrowing under term loan
facility |
|
|
1,340,000 |
|
|
|
— |
|
Borrowing under Revolving
Credit Facility |
|
|
19,000 |
|
|
|
27,958 |
|
Payments of equipment,
working capital notes, mortgages and other debt |
|
|
(932 |
) |
|
|
(1,168 |
) |
Proceeds from equipment,
working capital notes, mortgages and other debt |
|
|
— |
|
|
|
— |
|
Shares surrendered for tax
withholding |
|
|
(3,036 |
) |
|
|
(2,089 |
) |
Altra Industrial Motion BV
swap termination |
|
|
(14,000 |
) |
|
|
— |
|
Purchases of common stock
under share repurchase program |
|
|
— |
|
|
|
— |
|
Net cash
(used)/provided in financing activities |
|
|
986,246 |
|
|
|
(74,048 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
|
3,382 |
|
|
|
3,065 |
|
Net change
in cash and cash equivalents |
|
|
116,963 |
|
|
|
(17,124 |
) |
Cash and cash equivalents
at beginning of year |
|
|
51,994 |
|
|
|
69,118 |
|
Cash and cash equivalents
at end of period |
|
$ |
168,957 |
|
|
$ |
51,994 |
|
|
|
|
|
|
|
|
|
|
Reconciliation to free
cash flow: |
|
|
|
|
|
|
|
|
Net cash flows from
operating activities |
|
|
116,714 |
|
|
|
80,581 |
|
Purchase of property,
plant and equipment |
|
|
(37,531 |
) |
|
|
(32,826 |
) |
Free cash flow * |
|
$ |
79,183 |
|
|
$ |
47,755 |
|
Selected Segment Data |
|
Quarter EndedDecember
31, |
|
|
Year Ended December 31, |
|
In Thousands of Dollars, except per share
amount |
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Net
Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Transmission
Technologies |
|
|
228,788 |
|
|
|
223,322 |
|
|
|
935,019 |
|
|
|
876,737 |
|
Automation &
Specialty |
|
|
241,710 |
|
|
|
- |
|
|
|
241,710 |
|
|
|
- |
|
Inter-segment
eliminations |
|
|
(1,347 |
) |
|
|
- |
|
|
|
(1,387 |
) |
|
|
- |
|
Total |
|
$ |
469,151 |
|
|
$ |
223,322 |
|
|
$ |
1,175,342 |
|
|
$ |
876,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Power Transmission
Technologies |
|
|
26,283 |
|
|
|
24,498 |
|
|
|
115,644 |
|
|
|
99,574 |
|
Automation &
Specialty |
|
|
41,918 |
|
|
|
- |
|
|
|
41,918 |
|
|
|
- |
|
Corporate |
|
|
(33,439 |
) |
|
|
(3,508 |
) |
|
|
(52,215 |
) |
|
|
(10,377 |
) |
Restructuring and
consolidation costs |
|
|
(2,330 |
) |
|
|
(367 |
) |
|
|
(4,449 |
) |
|
|
(4,143 |
) |
Amortization of inventory
fair value adjustment |
|
|
(14,221 |
) |
|
|
- |
|
|
|
(14,221 |
) |
|
|
(2,347 |
) |
Total |
|
$ |
18,211 |
|
|
$ |
20,623 |
|
|
$ |
86,677 |
|
|
$ |
82,707 |
|
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.
* Discussion of Non-GAAP Financial MeasuresThe
following non-GAAP financial measures 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, and
Non-GAAP Diluted earnings per shareNon-GAAP net income, non-GAAP
income from operations and non-GAAP diluted earnings per share
exclude acquisition related amortization, 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 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 gross profitNon-GAAP gross profit excludes amortization
of inventory fair value adjustment 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
margin is calculated by dividing Non-GAAP gross profit by GAAP Net
Sales.
Non-GAAP adjusted EBITDAAdjusted EBITDA represents earnings
before interest, taxes, depreciation, amortization, acquisition
related costs, restructuring costs, stock-based compensation and
other income or charges that management does not consider to be
directly related to the Company’s core operating
performance.
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 our tax rate, our expectations regarding our
of the A&S business and the impact of the A&S business on
our overall business, including, the amount and timing of the
expected synergies from the integration, our expectations regarding
strong cash generation, our ability to de-lever our business, our
expectations regarding growth opportunities and our ability to
drive growth, our expectations regarding our ability to serve our
customers and deliver value for our shareholders, our expectations
regarding the strength of the markets, and the Company’s 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.
CONTACT:Altra Industrial Motion Corp.Christian Storch, Chief
Financial Officer781-917-0541christian.storch@altramotion.com
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