UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
February 18, 2014
Date of Report (Date of earliest event reported)
 
 
 
 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)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
 
¨
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
On February 18, 2015, Altra Industrial Motion Corp. (“the Company”) announced certain unaudited financial results for the fourth quarter and full year ended December 31, 2014. A copy of the announcement is attached hereto as Exhibit 99.1, which is incorporated by reference herein. On February 18, 2015, the Company will hold a conference call with investors to discuss unaudited fourth quarter and year end results. The chart presentation to be used during the call is attached hereto as Exhibit 99.2 to this report and is incorporated by reference herein.

Item 9.01
Financial Statements and Exhibits
(d) Exhibits
 
99.1
  
Press release of Altra Industrial Motion Corp., dated February 18, 2015.
 
 
99.2
  
Charts to be used during the investor conference call on February 18, 2015.





EXHIBIT
INDEX
  
 
 
 
99.1
  
Press release of Altra Industrial Motion Corp., dated February 18, 2015.
 
 
99.2
  
Charts to be used during the investor conference call on February 18, 2015.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
ALTRA INDUSTRIAL MOTION CORP.
 
/s/ Carl R. Christenson
Name:
 
Carl R. Christenson
Title:
 
Chairman and Chief Executive Officer
Date: February 18, 2015






Altra Reports Fourth-Quarter 2014 Results
Returned Over $32 Million to Shareholders During 2014

BRAINTREE, Mass., February 18, 2015 -- Altra Industrial Motion Corp(Nasdaq:AIMC), a global manufacturer and marketer of electromechanical power transmission and motion control products, today announced unaudited financial results for the fourth quarter and year ended December 31, 2014.
Financial Highlights
Fourth-quarter 2014 net sales were $192.0 million, compared with $180.5 million in the fourth quarter of 2013, an increase of 6.3%. Excluding the impact of the Svendborg and Guardian acquisitions, fourth-quarter sales were $164.8 million, a decrease of 6.5% from the same quarter of 2013.
Fourth-quarter net income was $9.1 million, or $0.34 per diluted share, compared with $7.2 million, or $0.27 per diluted share, in the fourth quarter of 2013. Non-GAAP net income in Q4 2014 increased to $11.2 million, or $0.42 per diluted share, from $10.1 million, or $0.38 per diluted share, a year ago.*
The Company purchased $4.8 million in Altra stock, or approximately 162,500 shares, during the fourth quarter under its $50 million repurchase program. Since the program's inception during 2014, the Company has purchased approximately $17.6 million, or 545,000 shares under the program.
 
Reconciliation of Non-GAAP Net Income*:
 
Quarter Ended
Year to date ended
Quarter Ended
Year to date ended
 
December 31, 2014
December 31, 2013
Net income attributable to Altra Industrial Motion Corp.
9,059

40,167

7,205

40,275

 
 
 
 
 
Restructuring costs
124

1,767

456

1,111

Amortization of inventory fair value adjustment
112

2,376



European workers compensation claim

355

640

640

Acquisition related expenses
2,305

3,204

2,164

2,529

Non-cash impact of partial pension settlement
475

475

 
 
Tax impact of above adjustments, excluding capitalized acquisition costs
(902
)
(2,450
)
(343
)
(662
)
Tax impact of foreign reorganization

3,758



Non-GAAP net income*
$
11,173

$
49,652

$
10,122

$
43,893

Non-GAAP diluted earnings per share*
$
0.42

$
1.83

$
0.38

$
1.64




Management Comments
"Our fourth-quarter performance exceeded our expectations, as we saw strong performance in certain end markets particularly the renewable energy market," said Carl Christenson, Altra's Chairman and CEO. “This performance came despite a challenging global economic environment and sluggishness in several of our other end markets. Our consistent execution on our profit improvement initiatives has driven robust cash generation, which enabled Altra to return more than $32 million to shareholders through quarterly dividends and our stock repurchase program during 2014.”

Business Outlook
“In 2015, we face sizable headwinds from foreign currency translation, weakness in Europe and Russia, and challenging dynamics in our oil & gas, agriculture and mining end markets,” said Christenson. While we are facing a difficult year in 2015, we will focus on initiatives that drive cost management throughout our organization. These initiatives will include among other things discretionary expense reduction, supplier cost negotiations and other actions to bring SG&A expense in line with the expected decline in revenues. We expect the results of our efforts to gradually contribute to our performance as we proceed throughout 2015.”
Altra is currently forecasting sales in the range of $765 to $800 million and non-GAAP diluted EPS in the range of $1.65 to $1.85 for 2015. This guidance assumes a substantial reduction in oil & gas market revenues from 2014 and significant negative impact from foreign exchange rates of approximately $40 million in revenues, based on the current spot rates versus the average rates we experienced in 2014. We also expect continued softening in the Company’s agriculture end market and continued weakness in the European and Russian economies. The Company expects its tax rate for the full year to be approximately 30% to 32% before discrete items. Altra also expects capital expenditures in the range of $24 to $26 million and depreciation and amortization in the range of $30 to $32 million.*

The company will conduct an investor conference call to discuss its unaudited fourth quarter financial results today, February 18, 2015, at 5:00 p.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 "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 February 18 through midnight on March 4, 2015. To listen to the replay, dial (877) 660-6853 domestically or (201) 612-7415 for international access (conference ID # 13601322). A webcast replay also will be available at www.altramotion.com.






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, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31
2013
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Net sales
$
191,961

 
$
180,530

 
$
819,817

 
$
722,218

 
Cost of sales
133,691

 
128,725

 
570,948

 
506,837

 
Gross profit
$
58,270

 
$
51,805

 
$
248,869

 
$
215,381

 
Gross profit as a percent of net sales
30.4
%
 
28.7
%
 
30.4
%
 
29.8
%
 
Selling, general & administrative expenses
38,643

 
33,413

 
156,471

 
130,155

 
Research and development expenses
3,803

 
3,386

 
15,522

 
12,536

 
Restructuring Charges
124

 
456

 
1,767

 
1,111

 
Income from operations
$
15,700

 
$
14,550

 
$
75,109

 
$
71,579

 
Income from operations as a percent of net sales
8.2
%
 
8.1
%
 
9.2
%
 
9.9
%
 
Interest expense, net
3,003

 
2,756

 
11,994

 
10,586

 
Other non-operating expense (income), net
(449
)
 
874

 
(3
)
 
1,657

 
Income before income taxes
$
13,146

 
$
10,920

 
$
63,118

 
$
59,336

 
Provision for income taxes
4,093

 
3,728

 
22,936

 
19,151

 
Income tax rate
31.1
%
 
34.1
%
 
36.3
%
 
32.3
%
 
Net income
9,053

 
7,192

 
40,182

 
40,185

 
   Net loss (income) attributable to non-controlling interest
6

 
13

 
(15
)
 
90

 
Net income attributable to Altra Industrial Motion Corp.
9,059

 
7,205

 
40,167

 
40,275

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average common shares outstanding
 
 
 
 
 
 
 
 
Basic
26,434

 
26,818

 
26,713

 
26,766

 
Diluted
26,764

 
26,837

 
27,403

 
26,841

 
 
 
 
 
 
 
 
 
 
Net income per share
 
 
 
 
 
 
 
 
Basic
$
0.34

 
$
0.27

 
$
1.50

 
$
1.50

 
Diluted
$
0.34

 
$
0.27

 
$
1.47

 
$
1.50

 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Income From Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from operations
$
15,700

 
$
14,550

 
$
75,109

 
$
71,579

 
 
 
 
 
 
 
 
 
 
Restructuring costs
124

 
456

 
1,767

 
1,111

 
Amortization of inventory fair value adjustment
112

 

 
2,376

 

 
European workers compensation claim

 
640

 
355

 
640

 
Non-cash impact of partial pension settlement
475

 

 
475

 

 
Acquisition related expenses
2,305

 
2,164

 
3,204

 
2,529

 
Non-GAAP income from operations *
$
18,716

 
$
17,810

 
$
83,286

 
$
75,859

 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Net Income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Altra Industrial Motion Corp.
9,059

 
7,205

 
40,167

 
40,275

 
 
 
 
 
 
 
 
 
 
Restructuring costs
124

 
456

 
1,767

 
1,111

 
Amortization of inventory fair value adjustment
112

 

 
2,376

 

 
European workers compensation claim

 
640

 
355

 
640

 
Acquisition related expenses
2,305

 
2,164

 
3,204

 
2,529

 
Non-cash impact of partial pension settlement
475

 

 
475

 

 
Tax impact of above adjustments, excluding capitalized acquisition costs
(902
)
 
(343
)
 
(2,450
)
 
(662
)
 
Tax impact of foreign reorganization

 

 
3,758

 

 
Non-GAAP net income *
$
11,173

 
$
10,122

 
$
49,652

 
$
43,893

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP diluted earnings per share *
$
0.42

(1)
$
0.38

(2)
$
1.83

(3)
$
1.64

(4)
 
 
 
 
 
 
 
 
 
(1) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 29.9% by the above items
 
(2) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 31.3% by the above items
 
(3) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 30.0% by the above items
 
(4) - tax impact is calculated by multiplying the estimated effective tax rate for the period of 37.8% by the above items
 



Consolidated Balance Sheets
 
 
 
In Thousands of Dollars
December 31, 2014
 
December 31, 2013
 
(unaudited)
 
 
Assets:
 
 
 
 Current Assets
 
 
 
Cash and cash equivalents
$
47,503

 
$
63,604

Trade receivables, net
106,458

 
109,084

Inventories
132,736

 
143,665

Deferred income taxes
9,240

 
9,754

Income tax receivable
6,247

 
5,032

Prepaid expenses and other current assets
8,617

 
18,066

Total current assets
310,801

 
349,205

Property, plant and equipment, net
156,366

 
157,535

Intangible assets, net
110,730

 
118,768

Goodwill
102,087

 
104,339

Deferred income taxes
987

 
934

Other non-current assets, net
3,592

 
4,895

Total assets
$
684,563


$
735,676

 
 
 
 
Liabilities and stockholders' equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
44,298

 
$
51,180

Accrued payroll
23,254

 
23,983

Accruals and other current liabilities
33,591

 
34,979

Deferred income taxes
120

 
44

Income tax payable
3,189

 
12,963

Current portion of long-term debt
15,176

 
16,924

Total current liabilities
119,628

 
140,073

Long-term debt, less current portion and net
   of unaccreted discount
240,576

 
261,348

Deferred income taxes
53,226

 
53,813

Pension liabilities
9,993

 
8,025

Long-term taxes payable
629

 
1,038

Other long-term liabilities
869

 
1,055

Redeemable non-controlling interest
883

 
991

Total stockholders' equity
258,759

 
269,333

Total liabilities, non-controlling interest and stockholders' equity
$
684,563

 
$
735,676

 
 
 
 
 
 
 
 
Reconciliation to operating working capital:
 
 
 
Trade receivables, net
106,458

 
109,084

Inventories
132,736

 
143,665

Accounts payable
(44,298
)
 
(51,180
)
Operating working capital *
$
194,896

 
$
201,569

 
 
 
 



 
Year to Date Ended
 
December 31, 2014
 
December 31, 2013
 
(Unaudited)
 
(Unaudited)
Cash flows from operating activities
 
 
 
Net income
$
40,182

 
$
40,185

Adjustments to reconcile net income to net cash flows:
 
 
 
    Depreciation
23,118

 
21,419

    Amortization of intangible assets
9,019

 
6,505

    Amortization of deferred financing costs
927

 
873

    (Gain)/Loss on foreign currency, net
(157
)
 
742

    Amortization of inventory fair value adjustment
2,376

 

    Accretion of debt discount, net
3,407

 
3,143

    (Gain) / Loss on disposal of fixed assets
(92
)
 
147

    Provision for deferred taxes
2,712

 
3,464

    Stock based compensation
3,101

 
3,173

    Changes in assets and liabilities:
 
 
 
       Trade receivables
(1,050
)
 
5,791

       Inventories
5,402

 
6,412

       Accounts payable and accrued liabilities
(6,055
)
 
(708
)
       Other current assets and liabilities
860

 
2,156

       Other operating assets and liabilities
749

 
(3,677
)
    Net cash flows from operating activities
84,499

 
89,625

Cash flows from investing activities
 
 
 
Purchase of property, plant and equipment
(28,050
)
 
(27,823
)
Proceeds from sale of Mt. Pleasant Facility

 
578

Proceeds from sale of land
848

 

Acquisition of Svendborg, net of $7.5 million cash received

 
(94,613
)
Cash paid to escrow agent for Svendborg Transfer Pricing Claim liability

 
(8,147
)
Acquisition of Guardian, net of $2.0 million cash acquired
(15,092
)
 

    Net cash flows from investing activities
(42,294
)
 
(130,005
)
Cash flows from financing activities
 
 
 
Payment of debt issuance costs

 
(670
)
Payments on Term Loan Facility
(23,247
)
 

Payments on Revolving Credit Facility
(9,190
)
 

Dividend payments
(15,033
)
 
(7,548
)
Proceeds from Equipment and Working Capital Notes
2,870

 
2,999

Payments of Equipment and Working Capital Notes
(1,594
)
 

Borrowing under Revolving Credit Facility
8,000

 
21,198

Proceeds from Bauer Mortgage
3,647

 

Borrowing under additional term loan

 
68,871

Payments on Former Term Loan

 
(5,625
)
Payments on Former Revolving Credit Facility

 
(59,304
)
Shares surrendered for tax withholdings
(1,158
)
 
(1,174
)
Payments on mortgages and other debt
(642
)
 
(756
)
Common stock repurchase under share repurchase program
(17,618
)
 

    Net cash flows from financing activities
(53,965
)
 
17,991

Effect of exchange rate changes on cash and cash equivalents
(4,341
)
 
839

    Net change in cash and cash equivalents
(16,101
)
 
(21,550
)
Cash and cash equivalents at beginning of year
63,604

 
85,154

Cash and cash equivalents at end of period
$
47,503

 
$
63,604

 
 
 
 



Reconciliation to free cash flow:
 
 
 
Net cash flows from operating activities
84,499

 
89,625

Purchase of property, plant and equipment
(28,050
)
 
(27,823
)
 
 
 
 
Free cash flow *
$
56,449

 
$
61,802

 
 
 
 




Altra Industrial Motion Corp.
Selected Segment Data
Quarter Ended
 
Year to Date Ended
In Thousands of Dollars, except per share amount
December 31, 2014
 
December 31, 2013
 
December 31, 2014
 
December 31
2013
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
 
 
 
 
 
 
Net Sales
 
 
 
 
 
 
 
Clutches & Brakes
$
101,394

 
$
87,557

 
$
426,293

 
$
336,616

Couplings
33,260

 
29,363

 
134,464

 
125,169

Gearing and Power Transmission Components
58,335

 
64,693

 
264,514

 
265,154

Eliminations
(1,028
)
 
(1,083
)
 
(5,454
)
 
(4,721
)
Total
$
191,961

 
$
180,530

 
$
819,817

 
$
722,218

 
 
 
 
 
 
 
 
Income from operations
 
 
 
 
 
 
 
Clutches & Brakes
$
14,335

 
$
12,440

 
$
53,386

 
$
48,150

Couplings
3,515

 
3,146

 
16,091

 
15,021

Gearing and Power Transmission Components
4,176

 
6,151

 
24,533

 
23,881

Restructuring
(124
)
 
(456
)
 
(1,767
)
 
(1,111
)
Corporate
(6,202
)
 
(6,731
)
 
(17,134
)
 
(14,362
)
Total
$
15,700

 
$
14,550

 
$
75,109

 
$
71,579

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

About Altra Industrial Motion Corp.
Altra Industrial Motion Corp., through its subsidiaries, is a leading global designer, producer and marketer of a wide range of electromechanical power transmission products. The Company brings together strong brands covering over 40 product lines with production facilities in 11 countries. Altra's leading brands include Ameridrives Couplings, Bauer Gear Motor, Bibby Turboflex, Boston Gear, Delroyd Worm Gear, Formsprag Clutch, Guardian Couplings, Huco, Industrial Clutch, Inertia Dynamics, Kilian Manufacturing, Lamiflex Couplings, Marland Clutch, Matrix, Nuttall Gear, Stieber Clutch, Svendborg Brakes, TB Wood's, Twiflex, Warner Electric, Warner Linear, and Wichita Clutch.
The Altra Industrial Motion Corp. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4038.
* Discussion of Non-GAAP Financial Measures



As used in this release and the accompanying slides posted on the Company's website, non-GAAP diluted earnings per share, non-GAAP income from operations and non-GAAP net income are each calculated using either net income or income from operations that excludes acquisition related 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 free cash flow is calculated by deducting purchases of property, plant and equipment from net cash flows from operating activities. Non-GAAP operating working capital is calculated by deducting accounts payable from net trade receivables plus inventories.
Altra believes that the presentation of non-GAAP net income, non-GAAP income from operations, non-GAAP diluted earnings per share, non-GAAP free cash flow and non-GAAP operating working capital provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations.

Forward-Looking Statements
All statements, other than statements of historical fact included in this release are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Forward-looking statements can generally be identified by phrases such as "believes," "expects," "potential," "continues," "may," "should," "seeks," "predicts," "anticipates," "intends," "projects," "estimates," "plans," "could," "designed", "should be," and other similar expressions that denote expectations of future or conditional events rather than statements of fact. Forward-looking statements also may relate to strategies, plans and objectives for, and potential results of, future operations, financial results, financial condition, business prospects, growth strategy and liquidity, and are based upon financial data, market assumptions and management's current business plans and beliefs or current estimates of future results or trends available only as of the time the statements are made, which may become out of date or incomplete. Forward-looking statements are inherently uncertain, and investors must recognize that events could differ significantly from our expectations. These statements include, but may not be limited to, those relating to the Company's progress on corporate initiatives, strategic pricing, the Company's views and assessment of economic conditions, foreign currency trends, end market conditions and industrial demand, the Company’s progress on executing its acquisition and organic growth strategies, the Company’s progress on implementing profit improvement initiatives, the impact of potential cost management and restructuring activities on SG&A expense and earnings, the Company's unaudited 2014 financial information, and the Company's guidance for full year 2015.
 
In addition to the risks and uncertainties noted in this release, there are certain factors that could cause actual results to differ materially from those anticipated by some of the statements made. These include: (1) competitive pressures, (2) changes in economic conditions in the United States and abroad and the cyclical nature of our markets, (3) loss of distributors, (4) the ability to develop new products and respond to customer needs, (5) risks associated with international operations, including currency risks, (6) accuracy of estimated forecasts of OEM customers and the impact of the current global economic environment on our customers, (7) risks associated with a disruption to our supply chain, (8) fluctuations in the costs of raw materials used in our products, (9) product liability claims, (10) work stoppages and other labor issues, (11) changes in employment, environmental, tax and other laws and changes in the enforcement of laws, (12) loss of key management and other personnel, (13) changes in pension and



retirement liabilities, (14) risks associated with compliance with environmental laws, (15) the ability to successfully execute, manage and integrate key acquisitions and mergers, (16) failure to obtain or protect intellectual property rights, (17) risks associated with impairment of goodwill or intangibles assets, (18) failure of operating equipment or information technology infrastructure, (19) risks associated with our debt leverage and operating covenants under our debt instruments, (20) risks associated with restrictions contained in our Convertible Notes and Credit Facility, (21) risks associated with compliance with tax laws, (22) risks associated with the global recession and volatility and disruption in the global financial markets, (23) risks associated with implementation of our new ERP system, (24) risks associated with the Bauer, Lamiflex, Svendborg and Guardian acquisitions and integration and other acquisitions, (25) risks associated with the Company's investment in a new manufacturing facility in China, (26) risks associated with certain minimum purchase agreements we have with suppliers, (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 the potential dilution of our common stock as a result of our convertible notes, (30) risks associated with our exposure to renewable energy markets, (31) risks related to regulations regarding conflict minerals, and (32) other risks, uncertainties and other factors described in the Company's quarterly reports on Form 10-Q and annual reports on Form 10-K and in the Company's other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference. Except as required by applicable law, Altra Industrial Motion Corp. does not intend to, update or alter its forward looking statements, whether as a result of new information, future events or otherwise. AIMC-E
CONTACT:    

Altra Industrial Motion Corp.
Christian Storch, Chief Financial Officer
781-917-0541
Christian.storch@altramotion.com




Fourth-Quarter 2014 Results February 18, 2015 5:00 PM ET Dial In Number 877-407-8293 Domestic 201-689-8349 International Webcast at www.altramotion.com Replay Number Through March 4, 2015 877-660-6853 Domestic 201-612-7415 International Conference ID: # 13601322 Webcast Replay at www.altramotion.com


 
Safe Harbor Statement Cautionary Statement Regarding Forward Looking Statements • All statements, other than statements of historical fact included in this release are forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Forward-looking statements can generally be identified by phrases such as "believes," "expects," "potential," "continues," "may," "should," "seeks," "predicts," "anticipates," "intends," "projects," "estimates," "plans," "could," "designed", "should be," and other similar expressions that denote expectations of future or conditional events rather than statements of fact. Forward-looking statements also may relate to strategies, plans and objectives for, and potential results of, future operations, financial results, financial condition, business prospects, growth strategy and liquidity, and are based upon financial data, market assumptions and management's current business plans and beliefs or current estimates of future results or trends available only as of the time the statements are made, which may become out of date or incomplete. Forward-looking statements are inherently uncertain, and investors must recognize that events could differ significantly from our expectations. These statements include, but may not be limited to, those relating to the Company's progress on corporate initiatives, strategic pricing, the Company's views and assessment of economic conditions, foreign currency trends, end market conditions and industrial demand, the Company’s progress on executing its acquisition and organic growth strategies, the Company’s progress on implementing profit improvement initiatives, the impact of potential cost management and restructuring activities on SG&A expense and earnings, the Company's unaudited 2014 financial information, and the Company's guidance for full year 2015. • In addition to the risks and uncertainties noted in this release, there are certain factors that could cause actual results to differ materially from those anticipated by some of the statements made. These include: (1) competitive pressures, (2) changes in economic conditions in the United States and abroad and the cyclical nature of our markets, (3) loss of distributors, (4) the ability to develop new products and respond to customer needs, (5) risks associated with international operations, including currency risks, (6) accuracy of estimated forecasts of OEM customers and the impact of the current global economic environment on our customers, (7) risks associated with a disruption to our supply chain, (8) fluctuations in the costs of raw materials used in our products, (9) product liability claims, (10) work stoppages and other labor issues, (11) changes in employment, environmental, tax and other laws and changes in the enforcement of laws, (12) loss of key management and other personnel, (13) changes in pension and retirement liabilities, (14) risks associated with compliance with environmental laws, (15) the ability to successfully execute, manage and integrate key acquisitions and mergers, (16) failure to obtain or protect intellectual property rights, (17) risks associated with impairment of goodwill or intangibles assets, (18) failure of operating equipment or information technology infrastructure, (19) risks associated with our debt leverage and operating covenants under our debt instruments, (20) risks associated with restrictions contained in our Convertible Notes and Credit Facility, (21) risks associated with compliance with tax laws, (22) risks associated with the global recession and volatility and disruption in the global financial markets, (23) risks associated with implementation of our new ERP system, (24) risks associated with the Bauer, Lamiflex, Svendborg and Guardian acquisitions and integration and other acquisitions, (25) risks associated with the Company's investment in a new manufacturing facility in China, (26) risks associated with certain minimum purchase agreements we have with suppliers, (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 the potential dilution of our common stock as a result of our convertible notes, (30) risks associated with our exposure to renewable energy markets, (31) risks related to regulations regarding conflict minerals, and (32) other risks, uncertainties and other factors described in the Company's quarterly reports on Form 10-Q and annual reports on Form 10-K and in the Company's other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference. Except as required by applicable law, Altra Industrial Motion Corp. does not intend to, update or alter its forward looking statements, whether as a result of new information, future events or otherwise 1


 
Fourth-Quarter 2014 Highlights • Revenues increased 6.3% from the fourth quarter of 2013 • Non-GAAP earnings increased 10.9% to $11.2 million, or $0.42 per diluted share, during the quarter * • Experienced a mixed end market environment and a weakening global economy • Changes to our tax structure delivered expected improvements in our tax rate • Healthcare costs improved sequentially and plan design changes were implemented for 2015 to mitigate costs 2


 
End Market Review • Sales at Distribution were unchanged year over year • Turf and Garden sales were flat compared to the prior year and we expect 2015 to grow in the low to mid single digits • Ag market deteriorated further as lower commodity prices have reduced new investment • Transportation was modestly higher in the quarter due to strong automotive sales • Oil and gas demand has begun to decline significantly with the drop in oil prices • Alternative energy performed well during the quarter, primarily driven by Asia • Mining was down year over year but flat sequentially 3


 
Fourth-Quarter 2014 Financial Highlights QTD QTD Q4 2014 Q4 2013 $ Change % Change Net Sales $192.0 $180.5 $11.4 6.3% Gross Profit $58.3 $51.8 $6.5 12.5% % of Revenues 30.4% 28.7% SG&A $38.6 $33.4 $5.2 15.6% % of Revenues 20.1% 18.5% Income from operations $15.7 $14.6 $1.1 7.5% % of Revenues 8.2% 8.1% Net Income $9.1 $7.2 $1.9 26.4% % of Revenues 4.7% 4.0% Earnings Per Share: Diluted $0.34 $0.27 $0.07 25.9% Weighted Average Common Shares Outstanding: Diluted 26,764 26,837 (73) -0.3% ($ millions) 4


 
Fourth-Quarter 2014 Selected Segment Data QTD QTD Q4 2014 Q4 2013 $ Change % Change Clutches and Brakes Net Sales $101.4 $87.6 $13.8 15.8% Income from operations $14.3 $12.4 $1.9 15.3% % of Net Sales 14.1% 14.2% Couplings Net Sales $33.3 $29.4 $3.9 13.3% Income from operations $3.5 $3.1 $0.4 12.9% % of Net Sales 10.5% 10.5% Gearing and Power Transmission Components Net Sales $58.3 $64.7 ($6.4) -9.9% Income from operations $4.2 $6.2 ($2.0) -32.3% % of Net Sales 7.2% 9.6% ($ millions) 5


 
Non-GAAP Measures * Non-GAAP Net Income (amounts in millions) Q4 2014 Q4 2013 Reported Net Income $9.1 $7.2 Restructuring costs 0.1 0.5 Amortization of inventory fair value adjustment 0.1 - European w orkers compensation claim - 0.6 Non-cash impact of partial pension settlement 0.5 - Acquisition related expenses 2.3 2.2 Tax impact of above adjustments (0.9) (1) (0.3) (2) Non-GAAP net income $11.2 $10.1 Non-GAAP diluted earnings per share $0.42 $0.38 (1) tax impact is calculated by multiplying the estimated effective tax rate, 29.9% by the above items (2) tax impact is calculated by multiplying the estimated effective tax rate, 31.3% by the above items Non-GAAP Operating Income (amount in millions) Q4 2014 Q4 2013 Reported Income from Operations $15.7 $14.6 Restructuring costs 0.1 0.5 Amortization of inventory fair value adjustment 0.1 - European w orkers compensation claim - 0.6 Non-cash impact of partial pension settlement 0.5 - Acquisition related expenses 2.3 2.2 Non-GAAP income from operations $18.7 $17.8 6 YTD Free Cash Flow (amounts in millions) 2014 2013 $84.5 $89.6 (28.1) (27.8) Free cash flow $56.4 $61.8 Purchase of property, plant and equipment Net Cash flow s from operating activities


 
Balance Sheet Highlights Balance Sheet Highlights (amounts in millions) Q4 2014 Q4 2013 Cash $47.5 $63.6 Total Debt $268.5 $294.4 Total Debt less Cash $221.0 46.1% $230.8 46.2% Shareholders' Equity $258.8 53.9% $269.3 53.8% Shareholders' Equity plus Debt, less Cash $479.8 100.0% $500.1 100.0% 7 Continue to maintain strong balance sheet


 
Fourth-Quarter 2014 Operating Working Capital * Balance Sheet (amounts in millions) Reconciliation of Operating Working Capital: Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013 Accounts Receivable 106.5$ 117.9$ 125.4$ 120.7$ 109.1$ Inventories 132.7 135.4 136.3 139.7 143.7 Accounts Payable (44.3) (43.9) (53.3) (52.5) (51.2) Operating Working Capital 194.9$ 209.4$ 208.4$ 207.9$ 201.6$ 8 Since acquisition, Svendborg has decreased inventory by more than €5m, or 27%, and doubled inventory turns


 
2015 Outlook • $765 - $800 Million in sales • $1.65 - $1.85 Non-GAAP diluted earnings per share * • $24 - $26 Million in capital expenditures • $30 - $32 Million in depreciation and amortization • Tax rate approximately 30% - 32% before discrete items 9


 
Guidance Assumptions • Fx impact is $40.0 million decline in sales and $0.10 decline in EPS using current spot rates versus 2014 average rates • Oil and gas impact is $17.0 million decline in sales and $0.17 decline in EPS based on current oil prices • Other impacts: – Decline in Ag market due to decrease in commodity prices and previous investment in equipment – Continued weakness in Europe – Russian economic uncertainty – Brazil start-up costs – SAP implementation costs roll off – Strategic pricing continues at expected levels 10


 
Summary • 35% decline in the price of oil expected to reduce demand for our products in that market • Strong US dollar expected to have a significant impact on our international operations • Investments in the Ag market continue to decline • We are focusing on a number of substantive initiatives to reduce expenses • Our balance sheet is solid and we will continue to pursue strategic investments • Returned over $32 million to shareholders during 2014 11


 
Discussion of Non-GAAP Measures * As used in this release and the accompanying slides posted on the Company's website, non-GAAP diluted earnings per share, non-GAAP income from operations and non-GAAP net income are each calculated using either net income or income from operations that excludes acquisition related 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 free cash flow is calculated by deducting purchases of property, plant and equipment from net cash flows from operating activities. Non-GAAP operating working capital is calculated by deducting accounts payable from net trade receivables plus inventories. Altra believes that the presentation of non-GAAP net income, non-GAAP income from operations, non- GAAP diluted earnings per share, non-GAAP free cash flow and non-GAAP operating working capital provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. 12


 
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