Altra Reports Second-Quarter 2020 Results
Altra Industrial Motion Corp. (AIMC) reported Q2 2020 financial results, revealing net sales of $400.8 million, down from $466.5 million in Q2 2019. Organic sales declined 12.5%. Net income reached $21.7 million, or $0.34 per diluted share, compared to $29.0 million, or $0.45 per share in the prior year. Effective cost management led to a strong operating cash flow of $38.8 million and a $24 million reduction in debt. Altra updated its 2020 guidance, projecting sales between $1,580 million to $1,640 million, amid ongoing COVID-19 uncertainties.
- Net income increased to $21.7 million in Q2 2020 from $29.0 million in Q2 2019.
- Operating income margin improved to 13.0% from 12.2% year-over-year.
- Non-GAAP Adjusted EBITDA rose to $88.9 million, 22.2% of net sales.
- Agile cost management resulted in $38.8 million operating cash flow and $24 million debt repayment.
- Net sales fell to $400.8 million, down 14.1% compared to Q2 2019.
- Organic sales declined by 12.5% year-over-year.
- Non-GAAP Net Income decreased to $38.6 million from $45.6 million in Q2 2019.
- Cash flow from operations decreased from $56.8 million in Q2 2019 to $38.8 million.
Q2 Financial Performance Exceeds Sales and Profitability Expectations
Proactive Cost Management Supports Strong Operating Cash Flow
Reduced Debt by
Raises 2020 Guidance
BRAINTREE, Mass., July 24, 2020 (GLOBE NEWSWIRE) -- 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, 2020.
Q2 Financial Highlights
- Second-quarter 2020 net sales were
$400.8 million compared with$466.5 million in the second-quarter of 2019. Second-quarter 2020 organic sales were down12.5% compared with the second-quarter of 2019. Excluding the impact of foreign currency translation, Power Transmission Technologies (PTT) segment sales were down14.9% and Automation & Specialty (A&S) segment sales were down10.3% compared with the prior year.* - For the second-quarter of 2020, the Company reported net income of
$21.7 million , or$0.34 per diluted share, which compares with net income of$29.0 million , or$0.45 per diluted share, in the second-quarter of 2019. - Non-GAAP Net Income in the second-quarter of 2020 was
$38.6 million , or$0.60 per diluted share. This is compared with Non-GAAP Net Income of$45.6 million , or$0.71 per diluted share, in the second-quarter of 2019.* - Non-GAAP Adjusted EBITDA in the second-quarter of 2020 was
$88.9 million , or22.2% of net sales, compared with$95.5 million , or20.5% of net sales, in the second-quarter of 2019.* - Operating income margin in the second-quarter of 2020 was
13.0% , compared with operating income margin of12.2% in the second-quarter of 2019. Non-GAAP Operating Income Margin in the second-quarter of 2020 was17.8% , compared with16.9% in the second quarter of 2019.* - Cash flow from operations for the second-quarter of 2020 was
$38.8 million , compared with cash flow from operations of$56.8 million in the second-quarter of 2019. Non-GAAP Free Cash Flow was$29.7 million compared with Non-GAAP Free Cash Flow of$46.7 million in the second-quarter of 2019. Non-GAAP Adjusted Free Cash Flow, which excludes the impact of the interest rate swap termination payment was$64.4 million in the second-quarter of 2020.* - Paid down
$24.0 million on the Company’s outstanding term loan in Q2 and ended the quarter with leverage of 3.8x total net debt to LTM non-GAAP adjusted EBITDA on an unaudited basis. At the end of the second-quarter, Altra’s cash balance and availability under the revolving credit facility totaled approximately$514.9 million .*
COVID-19 Impact and Response
Prioritizing Employee Safety
Altra continues to manage through the COVID-19 pandemic with the guiding principle of safeguarding its employees, customers and shareholders. The Company is maintaining the protocols developed by its Pandemic Response Team and following guidance from national, state and local governmental and health authorities.
Ensuring Business Continuity
The Company’s Business Continuity Task Force was highly successful in ensuring continuity of supply for its customers and reopening manufacturing facilities impacted by the pandemic. During the second-quarter, Altra experienced minimal supply chain disruption and all material manufacturing facilities continued to be operational.
Effective Cost Management
Altra continued to take aggressive actions to reduce costs to protect the Company’s balance sheet and strengthen its financial flexibility. These included furloughs, merit increase suspensions, executive wage rollbacks, discretionary spending reductions, corporate travel suspension, and service provider and other expense reductions. In addition, the Company benefited from lower U.S. healthcare expenses during the second-quarter on a year-over-year basis as a result of a significant decline in preventative and other non-emergency medical care for employees. U.S. healthcare expenses are anticipated to return to historical levels as employees resume normal levels of medical care, and the Company does not expect to see the same level of benefit in the second half of the year.
Management Comments
“Altra’s second-quarter execution was outstanding as we exceeded our expectations for both revenue and profitability and demonstrated our ability to perform well in a downturn,” said Carl Christenson, Altra’s Chairman and Chief Executive Officer. “The broad diversity of our end markets as a result of the merger has clearly helped mitigate the financial impact of the current economic crisis. Sales were higher than expected due to the outperformance of select markets – including the Class 8 truck and wind turbine markets in China – and better-than-anticipated overall demand during a tough macro-economic environment. Our aggressive actions to reduce costs led to the excellent bottom-line performance as well as strong cash flow generation and debt reduction.
“I am beyond proud of the Altra team around the globe as they continue to strive to keep fellow employees healthy by vigilantly maintaining safety protocols, while at the same time sustaining business continuity and positioning Altra for success in the post-pandemic world,” said Christenson. “We expect that certain of our markets will benefit as we move beyond COVID-19, such as factory automation, robotics, medical equipment and food processing.
“While visibility in the second half of the year remains limited due to the uncertainty around COVID-19, we believe we are well positioned to deliver on our new guidance assuming that we maintain current order rates. Against a challenging backdrop, we have demonstrated the incredible resilience of our business model and our team’s ability to take actions very quickly to maintain good cash flow and continue to reduce debt during a downturn. We are controlling what we can control in the short-term while protecting the necessary resources to drive growth and thrive as a premier industrial company for the long term when the global economy recovers,” concluded Christenson.
Business Outlook
While it is difficult to predict the severity and duration of the pandemic, Altra is updating its guidance to reflect management’s best estimate and practical assessment of the financial impact of COVID-19 to the Company’s business at this time. The guidance assumes that order levels remain steady. Management is closely monitoring the situation and is prepared to implement further cost-reduction measures should topline demand decelerate.
Altra is updating guidance for full year 2020 as follows:
- Full-year 2020 sales in the range of
$1,580 million to$1,640 million . - GAAP diluted EPS in the range of a loss of
$1.16 t o a loss of$0.94 . - Non-GAAP diluted EPS in the range of
$2.05 t o$2.30 .* - Non-GAAP adjusted EBITDA in the range of
$305.0 million to$330.0 million .* - Tax rate for the full year of approximately
21% to23% before discrete items, capital expenditures in the range of$40 t o$45 million , and depreciation and amortization in the range of$124 t o$127 million . - Non-GAAP Adjusted Free cash flow in the range of
$160 million to$200 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, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
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| Restructuring costs | $ | 1.5 | $ | 3.2 | $ | 3.1 | $ | 5.5 | |||||||
| Acquisition related stock compensation expense | 0.5 | 0.8 | 1.0 | 1.9 | |||||||||||
| Acquisition related amortization expense | 17.3 | 17.6 | 34.8 | 35.4 | |||||||||||
| Acquisition related expenses | — | 0.2 | — | 0.7 | |||||||||||
| Non-cash amortization of interest rate swap expense | 2.2 | — | 2.2 | — | |||||||||||
| Impairment of intangible assets - trademarks | — | — | 8.4 | — | |||||||||||
| Cross currency interest rate swap settlement fee | — | — | 0.9 | — | |||||||||||
| Tax impact of above adjustments | (4.6 | ) | (5.2 | ) | (10.9 | ) | (10.4 | ) | |||||||
| 2019 tax benefit due to income tax rate change | — | — | (2.8 | ) | — | ||||||||||
| Impairment of intangible assets - goodwill | — | — | 139.1 | — | |||||||||||
| Non-GAAP net income* | $ | 38.6 | $ | 45.6 | $ | 80.8 | $ | 97.3 | |||||||
| Non-GAAP diluted earnings per share* | $ | 0.60 | $ | 0.71 | $ | 1.25 | $ | 1.51 |
*Reconciliation of Non-GAAP Free Cash Flow and Non-GAAP Adjusted Free Cash Flow
| Quarter Ended June 30, | Year to Date Ended June 30, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
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| Purchase of property, plant and equipment | $ | (9.1 | ) | $ | (10.1 | ) | (17.3 | ) | $ | (24.1 | ) | ||||
| Non-GAAP Free cash flow* | $ | 29.7 | $ | 46.7 | $ | 56.4 | $ | 72.0 | |||||||
| Payment for interest rate swap settlement | 34.7 | — | 34.7 | — | |||||||||||
| Non-GAAP Adjusted free cash flow* | $ | 64.4 | $ | 46.7 | $ | 91.1 | $ | 72.0 |
*Reconciliation of Net Debt
| June 30, 2020 | December 31, 2019 | ||||||
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| Cash | (220.1 | ) | (167.3 | ) | |||
| Net debt* | $ | 1,352.8 | $ | 1,436.7 |
*Reconciliation of Non-GAAP Income From Operations:
| Quarter Ended June 30, | Year to Date Ended June 30, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||
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| Income from operations as a percent of net sales | 13.0 | % | 12.2 | % | -5.5 | % | 13.0 | % | |||||||
| Restructuring costs | $ | 1.5 | $ | 3.2 | $ | 3.1 | $ | 5.5 | |||||||
| Acquisition related stock compensation expense | 0.5 | 0.8 | 1.0 | 1.9 | |||||||||||
| Acquisition related amortization expense | 17.3 | 17.6 | 34.8 | 35.4 | |||||||||||
| Impairment of goodwill and intangible asset | — | — | 147.5 | — | |||||||||||
| Acquisition related expenses | — | 0.2 | — | 0.7 | |||||||||||
| Non-GAAP income from operations* | $ | 71.4 | $ | 78.9 | $ | 140.5 | $ | 167.0 | |||||||
| Non-GAAP Income from operations as a percent of net sales | 17.8 | % | 16.9 | % | 16.8 | % | 17.6 | % |
*Reconciliation of GAAP to Non-GAAP Operating Income and Operating Income Margin
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| Quarter Ended June 30, 2020 | Quarter Ended June 30, 2019 | ||||||||||||||||||||||
| GAAP Operating Income | Adjustments | Non-GAAP Operating Income* | GAAP Operating Income | Adjustments | Non-GAAP Operating Income* | ||||||||||||||||||
| Net sales | $ | 400.8 | $ | — | $ | 400.8 | $ | 466.5 | $ | — | $ | 466.5 | |||||||||||
| Cost of sales | 257.4 | — | 257.4 | 299.5 | — | 299.5 | |||||||||||||||||
| Gross profit | 143.4 | — | 143.4 | 167.0 | — | 167.0 | |||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Selling, general & administrative expenses | 75.8 | 17.8 | 58.0 | 92.0 | 18.6 | 73.4 | |||||||||||||||||
| Research and development expenses | 14.0 | — | 14.0 | 14.7 | — | 14.7 | |||||||||||||||||
| Restructuring costs | 1.5 | 1.5 | - | 3.2 | 3.2 | — | |||||||||||||||||
| (Loss)/Income from Operations | $ | 52.1 | $ | 19.3 | $ | 71.4 | $ | 57.1 | $ | 21.8 | $ | 78.9 | |||||||||||
| GAAP and Non-GAAP Income from operations as a percent of net sales | 13.0 | % | 17.8 | % | 12.2 | % | 16.9 | % | |||||||||||||||
| Year to Date Ended June 30, 2020 | Year to Date Ended June 30, 2019 | ||||||||||||||||||||||
| GAAP Operating Income | Adjustments | Non-GAAP Operating Income* | GAAP Operating Income | Adjustments | Non-GAAP Operating Income* | ||||||||||||||||||
| Net sales | $ | 835.0 | $ | — | $ | 835.0 | $ | 949.3 | $ | — | $ | 949.3 | |||||||||||
| Cost of sales | 538.6 | — | 538.6 | 607.4 | — | 607.4 | |||||||||||||||||
| Gross profit | 296.4 | — | 296.4 | 341.9 | — | 341.9 | |||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Selling, general & administrative expenses | 162.9 | 35.8 | 127.1 | 182.9 | 38.0 | 144.9 | |||||||||||||||||
| Impairment of goodwill and intangible asset | 147.5 | 147.5 | — | — | — | — | |||||||||||||||||
| Research and development expenses | 28.8 | — | 28.8 | 30.0 | — | 30.0 | |||||||||||||||||
| Restructuring costs | 3.1 | 3.1 | — | 5.5 | 5.5 | — | |||||||||||||||||
| Income from Operations | $ | (45.9 | ) | $ | 186.4 | $ | 140.5 | $ | 123.5 | $ | 43.5 | $ | 167.0 | ||||||||||
| GAAP and Non-GAAP Income from operations as a percent of net sales | -5.5 | % | 16.8 | % | 13.0 | % | 17.6 | % |
*Reconciliation of Non-GAAP Adjusted EBITDA and Non-GAAP Adjusted EBITDA Margin:
| Quarter Ended June 30, | |||||||
| 2020 | 2019 | ||||||
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| Asset impairment and other, net | 2.0 | (0.3 | ) | ||||
| Tax expense | 9.1 | 9.1 | |||||
| Interest expense | 18.8 | 18.6 | |||||
| Depreciation expense | 14.7 | 14.6 | |||||
| Acquisition related amortization expense | 17.3 | 17.6 | |||||
| Acquisition related expenses | — | 0.2 | |||||
| Stock compensation expense | 3.8 | 3.5 | |||||
| Restructuring costs | 1.5 | 3.2 | |||||
| Non-GAAP adjusted EBITDA | $ | 88.9 | $ | 95.5 | |||
| Non-GAAP adjusted EBITDA as a percent of net sales | 22.2 | % | 20.5 | % |
*Reconciliation of 2020 Non-GAAP Net Income Guidance and Non-GAAP Diluted EPS Guidance:
| 56%; width: | 21%; width: | 1%; width: | 1%; width: | 21%; width: |
| Net (loss) and diluted earnings per share | ( | ( | ||
| Restructuring costs | 3.7 - 5.7 | |||
| 62%; min-width: | 17%; min-width: | 1%; min-width: | 1%; min-width: | 18%; min-width: |
| Acquisition related stock compensation expense | 1.8 | |||
| Acquisition related amortization expense | 68.7 - 70.0 | |||
| Impairment of intangibles assets - trademarks | 8.4 | |||
| 43%; min-width: | 5%; min-width: | 1%; min-width: | 1%; min-width: | 40%; min-width: |
| Tax impact of above adjustments (1) (2) | (20.8 - 22.5) | |||
| Impairment of intangible assets - goodwill | 139.1 | |||
| 2019 tax benefit due to income tax rate change | (2.8) | |||
| Non-GAAP Net Income and Non-GAAP Diluted EPS Guidance* | ||||
| (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 |
*Reconciliation of 2020 Non-GAAP Adjusted EBITDA Guidance:
| 79%; width: | 21%; width: |
| Net (loss) | ( |
| Interest expense | 75.1 -75.4 |
| Tax expense | 15.6 - 20.0 |
| Depreciation expense | 55.3 - 57.0 |
| Acquisition related amortization expense | 68.7 - 70.0 |
| Stock based compensation | 14.2 - 14.9 |
| Impairment of goodwill and intangible asset | 147.5 |
| Restructuring costs | 3.7 - 5.7 |
| Non-GAAP adjusted EBITDA* |
Conference Call
The Company will conduct an investor conference call to discuss its unaudited second quarter 2020 financial results on Friday, July 24, 2020 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 24th through midnight on August 7, 2020. To listen to the replay, dial (800) 585-8367 domestically or (416) 621-4642 for international access (Conference ID: 6459679). 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 9,200 employees and over 50 production facilities in 16 countries around the world.
| Altra Industrial Motion Corp. | |||||||
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| In millions of dollars | June 30, 2020 | December 31, 2019 | |||||
| Assets: | (Unaudited) | ||||||
| Current Assets | |||||||
| Cash and cash equivalents | $ | 220.1 | $ | 167.3 | |||
| Trade receivables, net | 230.6 | 243.2 | |||||
| Inventories | 223.1 | 222.5 | |||||
| Income tax receivable | 6.4 | 5.2 | |||||
| Prepaid expenses and other current assets | 35.8 | 29.1 | |||||
| Total current assets | 716.0 | 667.3 | |||||
| Property, plant and equipment, net | 339.7 | 354.4 | |||||
| Goodwill | 1,543.0 | 1,694.9 | |||||
| Intangible assets, net | 1,450.4 | 1,502.4 | |||||
| Deferred income taxes | 1.0 | 3.0 | |||||
| Other non-current assets, net | 9.2 | 25.1 | |||||
| Operating lease, right of use asset | 41.4 | 36.6 | |||||
| Total assets | $ | 4,100.7 | $ | 4,283.7 | |||
| Liabilities and stockholders' equity | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 140.1 | $ | 154.7 | |||
| Accrued payroll | 57.3 | 58.3 | |||||
| Accruals and other current liabilities | 75.7 | 82.0 | |||||
| Income tax payable | 11.9 | 13.2 | |||||
| Current portion of long-term debt | 17.0 | 18.0 | |||||
| Operating lease liabilities | 13.0 | 13.5 | |||||
| Total current liabilities | 315.0 | 339.7 | |||||
| Long-term debt, less current portion and net of unaccreted discount | 1,535.6 | 1,563.8 | |||||
| Deferred income taxes | 368.2 | 369.1 | |||||
| Pension liabilities | 30.5 | 30.8 | |||||
| Long-term taxes payable | 2.7 | 4.5 | |||||
| Other long-term liabilities | 9.8 | 28.8 | |||||
| Operating lease liabilities, net of current portion | 30.4 | 24.7 | |||||
| Total stockholders' equity | 1,808.5 | 1,922.3 | |||||
| Total liabilities, and stockholders' equity | $ | 4,100.7 | $ | 4,283.7 | |||
| Reconciliation to operating working capital: | |||||||
| Trade receivables, net | $ | 230.6 | $ | 243.2 | |||
| Inventories | 223.1 | 222.5 | |||||
| Accounts payable | (140.1 | ) | (154.7 | ) | |||
| Non-GAAP operating working capital* | $ | 313.6 | $ | 311.0 |
| Consolidated Statements of Income Data: | Quarter Ended June 30, | Year to Date Ended June 30, | ||||||||||||||||||||||
| In millions of dollars | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||
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| Cost of sales | 257.4 | 299.5 | 538.6 | 607.4 | ||||||||||||||||||||
| Gross profit | $ | 143.4 | $ | 167.0 | $ | 296.4 | $ | 341.9 | ||||||||||||||||
| Gross profit as a percent of net sales | 35.8 | % | 35.8 | % | 35.5 | % | 36.0 | % | ||||||||||||||||
| Selling, general & administrative expenses | 75.8 | 92.0 | 162.9 | 182.9 | ||||||||||||||||||||
| Impairment of goodwill and intangible asset | — | — | 147.5 | — | ||||||||||||||||||||
| Research and development expenses | 14.0 | 14.7 | 28.8 | 30.0 | ||||||||||||||||||||
| Restructuring costs | 1.5 | 3.2 | 3.1 | 5.5 | ||||||||||||||||||||
| (Loss)/Income from operations | $ | 52.1 | $ | 57.1 | $ | (45.9 | ) | $ | 123.5 | |||||||||||||||
| Income from operations as a percent of net sales | 13.0 | % | 12.2 | % | -5.5 | % | 13.0 | % | ||||||||||||||||
| Interest expense, net | 18.8 | 18.6 | 36.2 | 38.4 | ||||||||||||||||||||
| Other non-operating (income)/expense, net | 2.5 | 0.4 | 1.1 | 1.5 | ||||||||||||||||||||
| (Loss)/Income before income taxes | $ | 30.8 | $ | 38.1 | $ | (83.2 | ) | $ | 83.6 | |||||||||||||||
| Provision for income taxes | 9.1 | 9.1 | 11.8 | 19.4 | ||||||||||||||||||||
| Income tax rate | 29.5 | % | 23.9 | % | -14.2 | % | 23.2 | % | ||||||||||||||||
| Net (loss)/income | $ | 21.7 | $ | 29.0 | $ | (95.0 | ) | $ | 64.2 | |||||||||||||||
| Weighted Average common shares outstanding: | ||||||||||||||||||||||||
| Basic | 64.6 | 64.3 | 64.5 | 64.3 | ||||||||||||||||||||
| Diluted | 64.7 | 64.5 | 64.5 | 64.5 | ||||||||||||||||||||
| Net (loss)/income per share: | ||||||||||||||||||||||||
| Basic | $ | 0.34 | $ | 0.45 | $ | (1.47 | ) | $ | 1.00 | |||||||||||||||
| Diluted | $ | 0.34 | $ | 0.45 | $ | (1.47 | ) | $ | 1.00 | |||||||||||||||
| Reconciliation of Non-GAAP Income from Operations: | ||||||||||||||||||||||||
| (Loss)/Income from operations | $ | 52.1 | $ | 57.1 | $ | (45.9 | ) | $ | 123.5 | |||||||||||||||
| Restructuring costs | 1.5 | 3.2 | 3.1 | 5.5 | ||||||||||||||||||||
| Acquisition related stock compensation expense | 0.5 | 0.8 | 1.0 | 1.9 | ||||||||||||||||||||
| Acquisition related amortization expense | 17.3 | 17.6 | 34.8 | 35.4 | ||||||||||||||||||||
| Impairment of goodwill and intangible asset | — | — | 147.5 | — | ||||||||||||||||||||
| Acquisition related expenses | — | 0.2 | — | 0.7 | ||||||||||||||||||||
| Non-GAAP income from operations * | $ | 71.4 | $ | 78.9 | $ | 140.5 | $ | 167.0 | ||||||||||||||||
| Non-GAAP income from operations as a percent of net sales | 17.8 | % | 16.9 | % | 16.8 | % | 17.6 | % | ||||||||||||||||
| Reconciliation of Non-GAAP Net (Loss)/Income: | ||||||||||||||||||||||||
| Net (loss)/income | $ | 21.7 | $ | 29.0 | $ | (95.0 | ) | $ | 64.2 | |||||||||||||||
| Restructuring costs | 1.5 | 3.2 | 3.1 | 5.5 | ||||||||||||||||||||
| Acquisition related stock compensation expense | 0.5 | 0.8 | 1.0 | 1.9 | ||||||||||||||||||||
| Acquisition related amortization expense | 17.3 | 17.6 | 34.8 | 35.4 | ||||||||||||||||||||
| Acquisition related expenses | — | 0.2 | — | 0.7 | ||||||||||||||||||||
| Non-cash amortization of interest rate swap expense | 2.2 | — | 2.2 | — | ||||||||||||||||||||
| Impairment of intangible assets - trademarks | — | — | 8.4 | — | ||||||||||||||||||||
| Cross currency interest rate swap settlement fee | — | — | 0.9 | — | ||||||||||||||||||||
| Tax impact of above adjustments | (4.6 | ) | (5.2 | ) | (10.9 | ) | (10.4 | ) | ||||||||||||||||
| 2019 tax benefit due to income tax rate change | — | — | (2.8 | ) | — | |||||||||||||||||||
| Impairment of intangible assets - goodwill | — | — | 139.1 | — | ||||||||||||||||||||
| Non-GAAP net income * | $ | 38.6 | $ | 45.6 | $ | 80.8 | $ | 97.3 | ||||||||||||||||
| Non-GAAP diluted earnings per share * | $ | 0.60 | (1 | ) | $ | 0.71 | (2 | ) | $ | 1.25 | (3 | ) | $ | 1.51 | (4 | ) | ||||||||
| (1) Tax impact is calculated by multiplying the estimated effective tax rate for the period of | ||||||||||||||||||||||||
| (2) Tax impact is calculated by multiplying the estimated effective tax rate for the period of | ||||||||||||||||||||||||
| (3) Tax impact is calculated by multiplying the estimated effective tax rate for the period of | ||||||||||||||||||||||||
| (4) Tax impact is calculated by multiplying the estimated effective tax rate for the period of |
| Cash flows from operating activities | Year to Date Ended June 30, | ||||||
| In millions of dollars | 2020 | 2019 | |||||
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| Net (loss)/income | $ | (95.0 | ) | $ | 64.2 | ||
| Adjustments to reconcile net income to net operating cash flows: | |||||||
| Depreciation | 29.3 | 28.9 | |||||
| Amortization of intangible assets | 34.8 | 35.4 | |||||
| Amortization of deferred financing costs | 2.3 | 2.3 | |||||
| Accretion of debt discount | 0.2 | — | |||||
| Non-cash amortization of interest rate swap expense | 2.2 | — | |||||
| Impairment of goodwill and intangible asset | 147.5 | — | |||||
| Payment for interest rate swap settlement | (34.7 | ) | — | ||||
| (Gain)/Loss on foreign currency, net | (0.1 | ) | 0.8 | ||||
| Loss on disposal, impairment and other | — | 0.2 | |||||
| Stock-based compensation | 7.1 | 7.0 | |||||
| Changes in assets and liabilities: | |||||||
| Trade receivables | 10.9 | (10.2 | ) | ||||
| Inventories | (3.6 | ) | (6.3 | ) | |||
| Accounts payable, accrued payroll, accruals and current liabilities | (10.8 | ) | (20.2 | ) | |||
| Other current assets and liabilities | (14.6 | ) | (4.5 | ) | |||
| Other operating assets and liabilities | (1.8 | ) | (1.5 | ) | |||
| Net cash provided by operating activities | 73.7 | 96.1 | |||||
| Cash flows from investing activities | |||||||
| Purchase of property, plant and equipment | (17.3 | ) | (24.1 | ) | |||
| A&S acquisition purchase price adjustment | — | (13.5 | ) | ||||
| Proceeds from cross currency interest rate swap settlement | 56.2 | 0.3 | |||||
| Net cash provided by (used in) investing activities | 38.9 | (37.3 | ) | ||||
| Cash flows from financing activities | |||||||
| Borrowing under Revolving Credit Facility | 100.0 | — | |||||
| Payments on Revolving Credit Facility | (100.0 | ) | — | ||||
| Payments on Term Loan Facility | (30.0 | ) | (50.0 | ) | |||
| Dividend payments | (22.3 | ) | (22.0 | ) | |||
| Net payments on financing leases, mortgages, and other obligations | (0.2 | ) | (0.5 | ) | |||
| Net proceeds/(payments) from China debt | (0.6 | ) | 2.4 | ||||
| Shares surrendered for tax withholding | (2.0 | ) | (2.3 | ) | |||
| Net cash used in financing activities | (55.1 | ) | (72.4 | ) | |||
| Effect of exchange rate changes on cash and cash equivalents | (4.7 | ) | (1.8 | ) | |||
| Net change in cash and cash equivalents | 52.8 | (15.4 | ) | ||||
| Cash and cash equivalents at beginning of period | 167.3 | 169.0 | |||||
| Cash and cash equivalents at end of period | $ | 220.1 | $ | 153.6 | |||
| Reconciliation to Free Cash Flow: | |||||||
| Net cash flows from operating activities | $ | 73.7 | $ | 96.1 | |||
| Purchase of property, plant and equipment | (17.3 | ) | (24.1 | ) | |||
| Free Cash Flow * | 56.4 | 72.0 | |||||
| Payment for interest rate swap settlement | 34.7 | — | |||||
| Adjusted Free Cash Flow * | $ | 91.1 | $ | 72.0 |
| Selected Segment Data | Quarter Ended June 30, | Year to Date Ended June 30, | |||||||||||||
| In millions of dollars | 2020 | 2019 | 2020 | 2019 | |||||||||||
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| Power Transmission Technologies | $ | 196.3 | $ | 234.9 | $ | 413.0 | $ | 469.8 | |||||||
| Automation & Specialty | 205.8 | 233.3 | 424.4 | 482.4 | |||||||||||
| Inter-segment eliminations | (1.3 | ) | (1.7 | ) | (2.4 | ) | (2.9 | ) | |||||||
| Total | $ | 400.8 | $ | 466.5 | $ | 835.0 | $ | 949.3 | |||||||
| (Loss)/Income from operations: | |||||||||||||||
| Power Transmission Technologies | $ | 23.9 | $ | 31.9 | $ | 49.5 | $ | 60.8 | |||||||
| Automation & Specialty | 26.0 | 31.8 | (92.6 | ) | 72.4 | ||||||||||
| Corporate | 3.7 | (3.4 | ) | 0.3 | (4.2 | ) | |||||||||
| Restructuring costs | (1.5 | ) | (3.2 | ) | (3.1 | ) | (5.5 | ) | |||||||
| Total | $ | 52.1 | $ | 57.1 | $ | (45.9 | ) | $ | 123.5 |
*Reconciliation of Non-GAAP Income from Operations by Segment:
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| In millions of dollars | Quarter Ended June 30, 2020 | Year to Date Ended June 30, 2020 | |||||||||||||||||||||||||||||
| Power Transmission Technologies | Automation and Specialty | Corporate | Total | Power Transmission Technologies | Automation and Specialty | Corporate | Total | ||||||||||||||||||||||||
| Income/(loss) from operations: | |||||||||||||||||||||||||||||||
| Income/(loss) from operations | $ | 23.6 | $ | 24.8 | $ | 3.7 | $ | 52.1 | $ | 48.6 | $ | (94.8 | ) | $ | 0.3 | $ | (45.9 | ) | |||||||||||||
| Restructuring costs | 0.3 | 1.2 | — | 1.5 | 0.9 | 2.2 | — | 3.1 | |||||||||||||||||||||||
| Acquisition related stock compensation expense | — | — | 0.5 | 0.5 | — | — | 1.0 | 1.0 | |||||||||||||||||||||||
| Impairment of goodwill and intangible asset | — | — | — | — | — | 147.5 | — | 147.5 | |||||||||||||||||||||||
| Acquisition related amortization expense | 2.2 | 15.1 | — | 17.3 | 4.5 | 30.3 | — | 34.8 | |||||||||||||||||||||||
| Total Non-GAAP Income/(loss) from operations | $ | 26.1 | $ | 41.1 | $ | 4.2 | $ | 71.4 | $ | 54.0 | $ | 85.2 | $ | 1.3 | $ | 140.5 | |||||||||||||||
| Non-GAAP Income from operations as a percentage of Segment net sales* | 13.3 | % | 20.0 | % | 17.8 | % | 13.1 | % | 20.1 | % | 16.8 | % |
* 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 Sales
Organic 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 Diluted EPS Guidance
Non-GAAP Net Income, Non-GAAP Income From Operations, Non-GAAP Diluted Earnings Per Share, and Non-GAAP Diluted Earnings Per Share Guidance exclude acquisition related amortization expense, acquisition related expense, acquisition related stock compensation expense, restructuring and consolidation costs, non-cash amortization of interest rate swap expense 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 Adjusted EBITDA
Adjusted EBITDA represents earnings before interest, taxes, depreciation, acquisition related amortization, acquisition related costs, restructuring costs, stock-based compensation, asset impairment and other income or charges that management does not consider to be directly related to the Company’s core operating performance.
Non-GAAP Adjusted EBITDA Margin
Non-GAAP Adjusted EBITDA margin is calculated by dividing Non-GAAP Adjusted EBITDA by GAAP Net Sales.
Non-GAAP Free Cash Flow
Non-GAAP Free Cash Flow is calculated by deducting purchases of property, plant and equipment and adding back the payment for interest rate swap settlement from net cash flows from operating activities.
Non-GAAP Adjusted Free Cash Flow
Non-GAAP Adjusted Free Cash Flow is calculated by adding back the payment for the interest rate swap settlement to Non-GAAP Free Cash Flow.
Non-GAAP Operating Working Capital
Non-GAAP Operating Working Capital is calculated by deducting accounts payable from net trade receivables plus inventories.
Net Debt
Net 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,” statements regarding expectations with respect to the Company continuing to benefit from lower U.S. healthcare expenses and statements regarding the COVID-19 pandemic and (a) the Company’s navigation through such pandemic, (b) expectations regarding the ability of certain of the Company’s markets to benefit following recovery from such pandemic, such as factory automation, robotics, medical equipment and food processing, (c) limited visibility due to the uncertainty of such pandemic and the Company’s belief that it is well positioned to deliver on its 2020 guidance assuming it maintains current order rates and (d) the Company’s ability to control what it can control in the short-term while protecting the necessary resources to drive growth and thrive as a premier industrial company for the long term when the global economy recovers.
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, including cyber-attacks or other security breaches, and failure to comply with data privacy laws or regulations, (18) risks associated with our debt leverage, (19) risks associated with restrictions contained in the agreements governing Altra’s
AIMC-E
CONTACT:
Altra Industrial Motion Corp.
Christian Storch, Chief Financial Officer
781-917-0541
christian.storch@altramotion.com
FAQ
What were Altra's Q2 2020 net sales and how do they compare to Q2 2019?
How much did Altra reduce its debt in Q2 2020?
What is Altra's projected sales range for full year 2020?
What was the net income for Altra in Q2 2020?
How did Altra's operating cash flow perform in Q2 2020?
