Business context and reporting period
Allied Motion Technologies Inc. (the registrant named in the filing) designs, manufactures and sells motion-control products and systems for commercial motor, industrial, automotive, medical, and aerospace and defense markets. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2014. The filing metadata identifies “ALLIENT INC,” which does not match the registrant name in the filing.
Results include Globe Motors, acquired October 18, 2013, so reported comparisons with 2013 are not on a like-for-like basis.
Key financial results
Amounts below are in millions of dollars, except per-share data and percentages; the filing reports financial statement amounts in thousands.
| Metric | Q3 2014 | Q3 2013 | Nine months 2014 | Nine months 2013 |
|---|---|---|---|---|
| Revenue | $65.280 | $24.876 | $187.784 | $75.371 |
| Gross profit / margin | $19.612 / 30% | $7.238 / 29% | $55.272 / 29% | $22.296 / 30% |
| Operating income | $7.262 | $1.193 | $17.318 | $3.714 |
| Net income | $4.115 | $0.833 | $8.956 | $2.612 |
| Diluted EPS | $0.45 | $0.09 | $0.98 | $0.30 |
| Operating cash flow | Not separately provided | Not separately provided | $7.953 | $3.444 |
Q3 revenue rose 162% and net income rose 394%; nine-month revenue increased 149% and net income 243%. Management attributed the growth primarily to Globe, especially in vehicle and aerospace and defense markets. Q3 gross margin improved one percentage point year over year, while the nine-month margin declined one point, which management attributed mainly to Globe and sales mix. Operating expenses rose with the acquisition, but selling, G&A and engineering expenses were lower as a share of Q3 revenue than a year earlier.
Management reported Q3 EBITDA of $9.531 million and adjusted EBITDA of $9.901 million; nine-month amounts were $23.368 million and $24.505 million. These are non-GAAP measures and should be considered alongside GAAP results. Adjusted net income equaled reported net income in 2014; 2013 adjusted figures excluded acquisition-related business development costs and, for the nine-month period, relocation costs.
Cash, debt and liquidity
At September 30, 2014, cash and cash equivalents were $7.267 million, down $1.104 million from year-end 2013; an additional $1.800 million was restricted as collateral for China credit facilities. Total debt was $81.294 million ($12.294 million current and $69.000 million long-term), down from $87.645 million at December 31, 2013. Management said cash net of debt improved by $5.247 million.
Nine-month operating cash flow was $7.953 million, supported by higher earnings but partly offset by working-capital needs, including a $11.520 million use of cash from receivables and $3.259 million from inventories. Investing activities used $1.754 million, including $3.153 million for property and equipment and a $1.399 million acquisition-related working-capital adjustment receipt. Financing activities used $6.737 million, primarily for debt repayments; dividends paid were $0.730 million.
Debt included $30.000 million of senior subordinated notes bearing 14.5% interest (13% cash and 1.5% paid in kind), and a term loan whose effective rate, including hedges, was 2.64%. Approximately $10 million was available under the senior credit facilities. The company reported compliance with its financial covenants at quarter-end. Management expected working capital, capital expenditure and dividend needs to be funded by operating cash flow and available credit.
Business trends, risks and other notable items
- Q3 bookings were $66.739 million; backlog was $80.878 million at September 30, 2014, versus $27.476 million a year earlier. Management said the increases primarily reflected Globe. The filing also cites backlog of $75.599 million at December 31, 2013.
- Three customers represented 38% of Q3 revenue and 35% of nine-month revenue; those customers accounted for 46% of trade receivables at quarter-end. The filing does not identify them in the provided text.
- Foreign currency translation reduced comprehensive income by $3.214 million in Q3 and $3.539 million for the nine-month period. Management said currency effects on year-to-date revenue were nominal; Q3 revenue was affected by dollar strength.
- The company was refinancing its China credit facilities, with restricted cash to be released upon completion. The China facility was due to mature in October 2014.
- Management cited risks including economic and market conditions, customer demand and concentration, order backlog conversion, component availability, competition, technology and product acceptance, foreign exchange, financing access, acquisition integration, and cost control. No quantified financial guidance was provided.
- Management reported disclosure controls and procedures were effective at quarter-end and no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Confirm the issuer identity: the supplied metadata says ALLIENT INC, while the filing identifies Allied Motion Technologies Inc.
- Assess how much reported growth reflects Globe’s addition versus underlying organic growth; reported 2013 comparisons exclude Globe for the periods shown.
- Monitor customer concentration and receivables collection, given the three-customer revenue and receivables shares.
- Review debt service and refinancing exposure, particularly the 14.5% subordinated notes and the China facility maturity/refinancing status.
- Track working-capital cash use, backlog conversion, and whether operating cash flow supports investment, debt reduction and dividends.
- Evaluate the margin impact of acquisition-related sales mix and foreign exchange movements.