FORM 8-K |
ALTRA INDUSTRIAL MOTION CORP. (Exact name of registrant as specified in its charter) | ||
Delaware | 001-33209 | 61-1478870 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
300 Granite Street, Suite 201 Braintree, Massachusetts | 02184 | |||
(Address of principal executive offices) | (Zip Code) |
(781) 917-0600 (Registrant’s telephone number, including area code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
99.1 | Press release of Altra Industrial Motion Corp., dated February 17, 2016. | |
99.2 | Charts to be used during the investor conference call on February 17, 2016. |
EXHIBIT INDEX | ||
99.1 | Press release of Altra Industrial Motion Corp., dated February 17, 2016. | |
99.2 | Charts to be used during the investor conference call on February 17, 2016. |
ALTRA INDUSTRIAL MOTION CORP. | ||
/s/ Carl R. Christenson | ||
Name: | Carl R. Christenson | |
Title: | Chairman and Chief Executive Officer |
• | Fourth-quarter 2015 net sales were $173.6 million, compared with $192.0 million in the fourth quarter of 2014, a decrease of 9.6%. The decrease in net sales was driven by an organic sales decline of 6.6% and the unfavorable impact from foreign exchange of 3.8%, partially offset by a 0.8% favorable impact from pricing. |
• | Fourth-quarter gross margin increased 80 basis points to 31.2% from 30.4% a year ago despite the sales decline as a result of the success of the Company's margin improvement and strategic pricing initiatives. |
• | Fourth-quarter net income was $6.1 million, or $0.23 per diluted share, compared with $9.1 million, or $0.34 per diluted share, in the fourth quarter of 2014. Non-GAAP net income in the fourth quarter 2015 was $9.3 million, or $0.36 per diluted share, compared with $11.2 million, or $0.42 per diluted share, a year ago.* |
• | Strong cash flows from operations led to a record free cash flows of $63.2 million for the year.* |
• | The Company purchased $3.0 million, or approximately 115,000 shares, of Altra stock during the fourth quarter under its $50 million repurchase program. Since the program's inception in May 2014, the Company has purchased approximately $34.9 million, or 1.2 million shares, under the program. |
• | Altra announced the closure of its Changzhou, China facility during the fourth quarter which is expected to be completed during the first quarter of 2016. |
• | Reconciliation of Non-GAAP Net Income*: |
Quarter Ended | Year to Date Ended | Quarter Ended | Year to Date Ended | ||||||||||||
December 31, 2015 | December 31, 2014 | ||||||||||||||
Net income attributable to Altra Industrial Motion Corp. | $ | 6,107 | $ | 35,406 | $ | 9,059 | $ | 40,167 | |||||||
Restructuring costs | 2,220 | 7,214 | 124 | 1,767 | |||||||||||
Amortization of inventory fair value adjustment | — | — | 112 | 2,376 | |||||||||||
Write-off of deferred financing fees | 500 | 500 | — | — | |||||||||||
Legal fees associated with pursuit of unfair trade remedy | 430 | 430 | — | — | |||||||||||
European workers compensation claim | — | — | — | 355 | |||||||||||
Supplier warranty provision | 739 | 2,808 | — | — | |||||||||||
Non-cash impact of partial pension settlement | — | — | 475 | 475 | |||||||||||
Acquisition related expenses | 93 | 831 | 2,305 | 3,204 | |||||||||||
Tax impact of above adjustments | (775 | ) | (3,143 | ) | (902 | ) | (2,450 | ) | |||||||
Tax impact of foreign reorganizations | $ | — | $ | (924 | ) | $ | — | $ | 3,758 | ||||||
Non-GAAP net income* | $ | 9,314 | $ | 43,122 | $ | 11,173 | $ | 49,652 | |||||||
Non-GAAP diluted earnings per share* | $ | 0.36 | $ | 1.64 | $ | 0.42 | $ | 1.83 | |||||||
In Thousands of Dollars, except per share amounts |
• | Reconciliation of Non-GAAP Gross Profit*: |
Quarter Ended | Year to Date Ended | Quarter Ended | Year to Date Ended | ||||||||||
December 31, 2015 | December 31, 2014 | ||||||||||||
Gross Profit | $ | 54,204 | $ | 228,463 | $ | 58,270 | $ | 248,869 | |||||
Gross profit as a percent of net sales | 31.2 | % | 30.6 | % | 30.4 | % | 30.4 | % | |||||
Supplier warranty provision | 739 | 2,808 | — | — | |||||||||
Amortization of inventory fair value adjustment | — | — | 112 | 2,376 | |||||||||
Non-GAAP Gross Profit* | $ | 54,943 | $ | 231,271 | $ | 58,382 | $ | 251,245 | |||||
Non-GAAP Profit as a percent of net sales | 31.6 | % | 31.0 | % | 30.4 | % | 30.6 | % | |||||
In Thousands of Dollars, except per share amounts |
Altra Industrial Motion Corp. | ||||||||||||||||
Consolidated Statements of Income Data | Quarter Ended | Year to Date Ended | ||||||||||||||
In Thousands of Dollars, except per share amount | December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | ||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Net sales | $ | 173,628 | $ | 191,961 | $ | 746,652 | $ | 819,817 | ||||||||
Cost of sales | 119,424 | 133,691 | 518,189 | 570,948 | ||||||||||||
Gross profit | $ | 54,204 | $ | 58,270 | $ | 228,463 | $ | 248,869 | ||||||||
Gross profit as a percent of net sales | 31.2 | % | 30.4 | % | 30.6 | % | 30.4 | % | ||||||||
Selling, general & administrative expenses | 33,484 | 38,643 | 139,217 | 156,471 | ||||||||||||
Research and development expenses | 4,312 | 3,803 | 17,818 | 15,522 | ||||||||||||
Restructuring Charges | 2,220 | 124 | 7,214 | 1,767 | ||||||||||||
Income from operations | $ | 14,188 | $ | 15,700 | 64,214 | $ | 75,109 | |||||||||
Income from operations as a percent of net sales | 8.2 | % | 8.2 | % | 8.6 | % | 9.2 | % | ||||||||
Interest expense, net | 3,306 | 3,003 | 12,164 | 11,994 | ||||||||||||
Other non-operating (income) expense, net | 357 | (449 | ) | 963 | (3 | ) | ||||||||||
Income before income taxes | $ | 10,525 | $ | 13,146 | $ | 51,087 | $ | 63,118 | ||||||||
Provision for income taxes | 4,418 | 4,093 | 15,744 | 22,936 | ||||||||||||
Income tax rate | 42.0 | % | 31.1 | % | 30.8 | % | 36.3 | % | ||||||||
Net income | 6,107 | 9,053 | 35,343 | 40,182 | ||||||||||||
Net loss (income) attributable to non-controlling interest | — | 6 | 63 | (15 | ) | |||||||||||
Net income attributable to Altra Industrial Motion Corp. | 6,107 | 9,059 | 35,406 | 40,167 | ||||||||||||
Weighted Average common shares outstanding | ||||||||||||||||
Basic | 26,091 | 26,434 | 26,064 | 26,713 | ||||||||||||
Diluted | 26,091 | 26,764 | 26,109 | 27,403 | ||||||||||||
Net income per share | ||||||||||||||||
Basic | $ | 0.23 | $ | 0.34 | $ | 1.36 | $ | 1.50 | ||||||||
Diluted | $ | 0.23 | $ | 0.34 | $ | 1.36 | $ | 1.47 | ||||||||
Reconciliation of Non-GAAP Income From Operations: | ||||||||||||||||
Income from operations | $ | 14,188 | $ | 15,700 | $ | 64,214 | $ | 75,109 | ||||||||
Restructuring costs | 2,220 | 124 | 7,214 | 1,767 | ||||||||||||
Amortization of inventory fair value adjustment | — | 112 | — | 2,376 | ||||||||||||
Legal fees associated with pursuit of unfair trade remedy | 430 | — | 430 | — | ||||||||||||
European workers compensation claim | — | — | — | 355 | ||||||||||||
Supplier warranty provision | 739 | — | 2,808 | — | ||||||||||||
Non-cash impact of partial pension settlement | — | 475 | — | 475 | ||||||||||||
Acquisition related expenses | 93 | 2,305 | 831 | 3,204 | ||||||||||||
Non-GAAP income from operations * | $ | 17,670 | $ | 18,716 | $ | 75,497 | $ | 83,286 | ||||||||
Reconciliation of Non-GAAP Net Income: | ||||||||||||||||
Net income attributable to Altra Industrial Motion Corp. | 6,107 | 9,059 | 35,406 | 40,167 | ||||||||||||
Restructuring costs | 2,220 | 124 | 7,214 | 1,767 | ||||||||||||
Amortization of inventory fair value adjustment | — | 112 | — | 2,376 | ||||||||||||
Write-off of deferred financing fees | 500 | — | 500 | — | ||||||||||||
Legal fees associated with pursuit of unfair trade remedy | 430 | — | 430 | — | ||||||||||||
European workers compensation claim | — | — | — | 355 | ||||||||||||
Supplier warranty provision | 739 | — | 2,808 | — | ||||||||||||
Non-cash impact of partial pension settlement | — | 475 | — | 475 | ||||||||||||
Acquisition related expenses | 93 | 2,305 | 831 | 3,204 | ||||||||||||
Tax impact of above adjustments, excluding capitalized acquisition costs and China asset impairments | (775 | ) | (902 | ) | (3,143 | ) | (2,450 | ) | ||||||||
Tax impact of foreign reorganizations | — | — | (924 | ) | 3,758 | |||||||||||
Non-GAAP net income * | $ | 9,314 | $ | 11,173 | $ | 43,122 | $ | 49,652 | ||||||||
Non-GAAP diluted earnings per share * | $ | 0.36 | (1) | $ | 0.42 | (2) | $ | 1.64 | (3) | $ | 1.83 | (4) | ||||
(1) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.0% by the above items | ||||||||||||||||
(2) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 29.9% by the above items | ||||||||||||||||
(3) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 25.4% by the above items | ||||||||||||||||
(4) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.4% by the above items |
Consolidated Balance Sheets | |||||||
In Thousands of Dollars | December 31, 2015 | December 31, 2014 | |||||
(unaudited) | |||||||
Assets: | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 50,320 | $ | 47,503 | |||
Trade receivables, net | 94,720 | 106,458 | |||||
Inventories | 121,156 | 132,736 | |||||
Deferred income taxes | — | — | |||||
Income tax receivable | 5,146 | 6,247 | |||||
Prepaid expenses and other current assets | 11,217 | 8,617 | |||||
Assets held for use | 4,597 | — | |||||
Total current assets | 287,156 | 301,561 | |||||
Property, plant and equipment, net | 145,413 | 156,366 | |||||
Intangible assets, net | 96,069 | 110,730 | |||||
Goodwill | 97,309 | 102,087 | |||||
Deferred income taxes | 3,201 | 2,066 | |||||
Other non-current assets, net | 3,184 | 3,592 | |||||
Total assets | $ | 632,332 | $ | 676,402 | |||
Liabilities, non-controlling interest and stockholders' equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 40,297 | $ | 44,298 | |||
Accrued payroll | 22,312 | 23,254 | |||||
Accruals and other current liabilities | 34,990 | 33,591 | |||||
Deferred income taxes | 3,563 | 3,189 | |||||
Income tax payable | — | — | |||||
Current portion of long-term debt | 3,187 | 15,176 | |||||
Total current liabilities | 104,349 | 119,508 | |||||
Long-term debt, less current portion and net of unaccreted discount | 231,568 | 240,576 | |||||
Deferred income taxes | 44,185 | 45,185 | |||||
Pension liabilities | 8,328 | 9,993 | |||||
Long-term taxes payable | 647 | 629 | |||||
Other long-term liabilities | 688 | 869 | |||||
Redeemable non-controlling interest | — | 883 | |||||
Total stockholders' equity | 242,567 | 258,759 | |||||
Total liabilities, redeemable non-controlling interest and stockholders' equity | $ | 632,332 | $ | 676,402 | |||
Reconciliation to operating working capital: | |||||||
Trade receivables, net | 94,720 | 106,458 | |||||
Inventories | 121,156 | 132,736 | |||||
Accounts payable | (40,297 | ) | (44,298 | ) | |||
Operating working capital * | $ | 175,579 | $ | 194,896 | |||
Consolidated Cash Flow Statement 1 | Year to Date Ended | ||||||
In thousands of Dollars | December 31, 2015 | December 31, 2014 | |||||
(Unaudited) | (Unaudited) | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 35,343 | $ | 40,182 | |||
Adjustments to reconcile net income to net cash flows: | |||||||
Depreciation | 21,559 | 23,118 | |||||
Amortization of intangible assets | 8,562 | 9,019 | |||||
Amortization of deferred financing costs | 1,366 | 927 | |||||
Loss on foreign currency, net | (395 | ) | (157 | ) | |||
Amortization of inventory fair value adjustment | — | 2,376 | |||||
Accretion of debt discount, net | 3,694 | 3,407 | |||||
Loss on impairment / disposal of fixed assets | 2,003 | (92 | ) | ||||
Provision for deferred taxes | (887 | ) | 2,712 | ||||
Stock based compensation | 4,004 | 3,101 | |||||
Changes in assets and liabilities: | |||||||
Trade receivables | 7,223 | (1,050 | ) | ||||
Inventories | 6,049 | 5,402 | |||||
Accounts payable and accrued liabilities | 2,816 | (6,055 | ) | ||||
Other current assets and liabilities | (3,343 | ) | 860 | ||||
Other operating assets and liabilities | (1,895 | ) | 749 | ||||
Net cash flows from operating activities | 86,099 | 84,499 | |||||
Cash flows from investing activities | |||||||
Purchase of property, plant and equipment | (22,906 | ) | (28,050 | ) | |||
Proceeds from sale of property | 1,201 | 848 | |||||
Acquisition of Guardian, net of $2.0 million cash received | — | (15,092 | ) | ||||
Net cash flows from investing activities | (21,705 | ) | (42,294 | ) | |||
Cash flows from financing activities | |||||||
Payment of debt issuance costs | (1,006 | ) | — | ||||
Payments on Term Loan Facility | (130,063 | ) | (23,247 | ) | |||
Payments on Revolving Credit Facility | (51,998 | ) | (9,190 | ) | |||
Dividend payments | (14,928 | ) | (15,033 | ) | |||
Proceeds from equipment loan | 1,043 | 2,870 | |||||
Payment of equipment loans | (3,480 | ) | (1,594 | ) | |||
Proceeds from mortgages | 7,355 | 3,647 | |||||
Borrowing under Revolving Credit Facility | 157,036 | 8,000 | |||||
Purchase of non-controlling interest in Lamiflex | (878 | ) | — | ||||
Shares surrendered for tax withholding | (1,182 | ) | (1,158 | ) | |||
Payments on mortgages and other | (384 | ) | (642 | ) | |||
Purchases of common stock under share repurchase program | (17,298 | ) | (17,618 | ) | |||
Net cash flows from financing activities | (55,783 | ) | (53,965 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (5,794 | ) | (4,341 | ) | |||
Net change in cash and cash equivalents | 2,817 | (16,101 | ) | ||||
Cash and cash equivalents at beginning of year | 47,503 | 63,604 | |||||
Cash and cash equivalents at end of period | $ | 50,320 | $ | 47,503 | |||
Reconciliation to free cash flow: | |||||||
Net cash flows from operating activities | 86,099 | 84,499 | |||||
Purchase of property, plant and equipment | (22,906 | ) | (28,050 | ) | |||
Free cash flow * | $ | 63,193 | $ | 56,449 | |||
1 Consolidated cash flow statement is subject to finalization |
Altra Industrial Motion Corp. | |||||||||||||||
Selected Segment Data | Quarter Ended | Year to Date Ended | |||||||||||||
In Thousands of Dollars, except per share amount | December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | |||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
Net Sales | |||||||||||||||
Couplings Clutches & Brakes | $ | 77,074 | $ | 97,456 | $ | 342,299 | $ | 396,089 | |||||||
Electromagnetic Clutches & Brakes | 53,397 | 48,987 | 219,676 | 218,550 | |||||||||||
Gearing | 44,653 | 47,150 | 192,252 | 212,628 | |||||||||||
Eliminations | (1,496 | ) | (1,632 | ) | (7,575 | ) | (7,450 | ) | |||||||
Total | $ | 173,628 | $ | 191,961 | $ | 746,652 | $ | 819,817 | |||||||
Income from operations | |||||||||||||||
Couplings Clutches & Brakes | $ | 9,078 | $ | 14,159 | $ | 38,750 | $ | 49,299 | |||||||
Electromagnetic Clutches & Brakes | 5,341 | 3,822 | 21,634 | 22,014 | |||||||||||
Gearing | 4,072 | 4,047 | 21,094 | 22,698 | |||||||||||
Restructuring | (2,220 | ) | (124 | ) | (7,214 | ) | (1,767 | ) | |||||||
Corporate | (2,083 | ) | (6,204 | ) | (10,050 | ) | (17,135 | ) | |||||||
Total | $ | 14,188 | $ | 15,700 | $ | 64,214 | $ | 75,109 | |||||||
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