Business context and reporting period
Allied Motion Technologies Inc. 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 six months ended June 30, 2015. The filing’s registrant is Allied Motion Technologies Inc.; this differs from the request metadata name “ALLIENT INC” and should be verified.
Key financial results
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Revenue | $60.479 | $62.069 | $120.059 | $122.504 |
| Gross profit / margin | $17.987 / 30% | $18.568 / 30% | $35.487 / 30% | $35.660 / 29% |
| Operating income | $5.735 | $5.485 | $11.366 | $10.056 |
| Net income | $3.125 | $2.693 | $6.101 | $4.841 |
| Diluted EPS | $0.34 | $0.29 | $0.66 | $0.53 |
| Operating cash flow | Not presented quarterly | $3.599 | $6.358 |
Q2 operating income rose 5% and net income rose 16% year over year despite a 3% revenue decline. For the first half, operating income rose 13% and net income rose 26% while revenue fell 2%. The company attributed the earnings improvement principally to volume growth and lower operating expenses. Q2 adjusted EBITDA was $8.114 million versus $7.613 million; first-half adjusted EBITDA was $16.242 million versus $14.604 million. These are non-GAAP measures.
Liquidity, debt and cash flow
Cash and equivalents were $11.336 million at June 30, 2015, down from $13.113 million at year-end 2014. Current assets were $74.570 million and current liabilities $37.284 million. First-half operating cash flow of $3.599 million was below the prior-year $6.358 million, primarily due to working-capital needs, including receivables and accrued liabilities. Capital spending was $2.708 million, compared with $1.571 million in the prior-year period. Cash decreased $1.777 million during the half.
Balance-sheet debt obligations totaled $73.259 million, including $9.884 million current and $63.375 million long-term; net debt was $61.923 million. The $30 million subordinated notes carry 14.5% interest (13% cash and 1.5% paid in kind), due in 2019. The term loan’s stated rate was 2.2% and its effective rate, including hedges, 2.65%. Approximately $14 million was available under the senior credit facilities. The company reported compliance with its debt covenants at quarter-end.
Material changes and management commentary
- Foreign exchange was a major headwind: Q2 revenue would have increased 5% at prior-year exchange rates rather than falling 3%; first-half revenue would have risen 6% rather than fallen 2%. Management estimated currency reduced reported revenue by about $5.0 million in Q2 and $9.4 million year to date.
- Bookings were $64.523 million in Q2, up from $63.474 million; first-half bookings were $122.666 million versus $127.868 million. Backlog was $75.605 million at June 30, versus $80.777 million a year earlier and $75.065 million at December 31, 2014.
- Growth was reported in aerospace and defense, medical, and electronics; vehicle was flat, while industrial and distribution were down. Management said its pipeline of new opportunities was expanding, including multi-product solutions. No specific financial guidance was provided.
- Q2 general and administrative expense declined 13%, partly because prior-year costs included reserves for a pricing dispute settled in Q4 2014 and because of lower 2015 spending. Engineering and development expense rose 7% in Q2, partly due to increased project costs at a European location.
Risks, contingencies and unusual items
- Foreign currency exposure affects reported revenue, assets and comprehensive income. First-half foreign-currency translation was a $3.562 million loss; Q2 translation was a $0.917 million gain. The company uses interest-rate swaps to hedge a portion of floating-rate debt.
- Two customers accounted for 34% of revenue and 32% of trade receivables during the 2015 periods, creating customer-concentration exposure.
- Management cited risks involving economic conditions, demand and customer viability, competition, product development, component availability, growth execution, acquisitions, financing, and cost control. It reported no material change to the risk factors in its prior-quarter filing.
- The company recorded a $0.104 million discrete tax benefit in Q2 related to a change in the valuation allowance. It also had foreign tax-loss and credit carryforwards expiring in 2015–2017. Management said ordinary-course litigation was not expected to have a significant adverse effect.
- Management stated disclosure controls were effective and reported no significant ERP implementation difficulties to date. ERP implementations were completed at U.S. and Sweden locations in Q1 and at a China location in Q2.
Most important facts for investors to verify
- Confirm the issuer identity: the filing is for Allied Motion Technologies Inc., not the “ALLIENT INC” named in the request metadata.
- Assess the durability of earnings and cash conversion given lower revenue, first-half operating cash flow decline, and working-capital use.
- Monitor foreign-exchange effects, bookings and backlog trends, and demand across the company’s end markets.
- Review debt repayment and interest burden, particularly the high-coupon subordinated notes, facility availability, and covenant headroom.
- Evaluate customer concentration, tax-asset realizability, pension assumptions, and the company’s stated operating and market risks.