Allied Motion Technologies Inc. — FY 2012 Form 10-K
Reporting period: Year ended December 31, 2012; includes unaudited fourth-quarter results. The filing names the registrant as Allied Motion Technologies Inc., rather than “ALLIENT INC” in the request metadata.
Business context
The company designs, manufactures and sells motors, motion controls, gearing and optical encoders, including integrated motion-control solutions, to global OEMs and other customers. Its markets include medical, industrial, commercial motors, aerospace and defense. It reports one operating segment. Medical sales increased in 2012; most other major markets declined.
Financial performance and liquidity
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Revenue | $101.968 million | $110.941 million |
| Gross profit / margin | $29.640 million / 29% | $33.531 million / 30% |
| Operating income | $7.128 million | $9.652 million |
| Net income | $5.397 million | $6.967 million |
| Diluted earnings per share | $0.63 | $0.81 |
| Operating cash flow | $4.604 million | $8.881 million |
| Capital expenditures | $2.597 million | $1.849 million |
- Fourth-quarter revenue was $23.969 million versus $28.024 million in Q4 2011; net income was $1.101 million versus $2.716 million. Diluted EPS was $0.13 versus $0.32.
- Cash and cash equivalents were $9.728 million at year-end, up $0.573 million. Total debt was $0.397 million; unused borrowing capacity across credit facilities was reported at approximately $8.3 million.
- Current assets were $38.029 million and current liabilities $12.071 million. The company reported total assets of $60.967 million and total liabilities of $18.815 million.
- EBITDA was $9.309 million and adjusted EBITDA $9.918 million, both non-GAAP measures. Adjusted EBITDA excludes stock compensation and certain items; see the filing’s reconciliation.
Changes versus prior year
- Revenue declined 8%: approximately 6% from lower volume and 2% from unfavorable foreign-currency translation. U.S. sales fell 4%; non-U.S. sales fell 13%.
- Gross profit fell $3.891 million and gross margin decreased about one percentage point, reflecting sales mix, lower fixed-overhead absorption and a warranty charge.
- Net income fell 23% as reported. 2011 included a $1.101 million earn-out adjustment gain related to the Östergrens acquisition; excluding that item, management said 2012 net income was down 8% from adjusted 2011 net income.
- Orders were approximately $90 million, down from $117 million; year-end backlog was $32.915 million, down 25% from $44.005 million. The filing cautions that blanket-order timing affects comparability and backlog may not convert to revenue.
- Cash from operations declined $4.277 million, which management attributed to lower profits, higher incentive-bonus payments and higher tax payments. Investing cash use included $1.350 million of final Östergrens acquisition consideration.
Outlook, risks and unusual items
- Management expected markets to stabilize and improve during 2013, with conditions strengthening in the second half. It gave no quantified revenue or earnings guidance.
- Planned priorities included continued investment in engineering, sales and solution centers; expanded China production capacity; gross-margin improvement; and operational-efficiency initiatives. Management expected operating cash flow and available lender financing to fund growth and dividends.
- The board continued quarterly dividends; 2012 payments totaled $0.10 per share. A $0.025-per-share dividend was declared for payment in March 2013.
- A supplier-provided incorrect electronic component in a printed circuit board led to a $342,000 warranty provision for expected replacement costs. Total 2012 warranty provision was $579,000; year-end warranty accrual was $551,000.
- Risks identified include economic weakness, customer demand and order timing, foreign exchange, competition, product acceptance and technical requirements, component availability, acquisition integration, financing access and cost control. Pension funding is exposed to investment performance and interest-rate changes.
- Ordinary-course litigation was not expected by management to materially harm financial position or results. Change-in-control severance payments for four key employees could total approximately $5.252 million if triggered. The company reported compliance with credit covenants at year-end.
Important facts for investors to verify
- Whether bookings and backlog stabilized after the disclosed decline, bearing in mind the company changed its blanket-order booking method beginning in 2013.
- Whether the 2012 market weakness, particularly outside the U.S., reversed as management expected and whether the medical-market strength continued.
- Whether gross margin recovered and the supplier-related warranty issue caused further costs beyond the disclosed accrual.
- Whether planned China capacity, ERP-related investment and other growth spending generated returns without pressuring cash flow or liquidity.
- Whether pension assumptions, deferred tax asset realizability and any litigation or contingent obligations changed materially after year-end.
The independent auditor issued an unqualified opinion on the consolidated financial statements. Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2012; the auditor did not express an opinion on internal control effectiveness.