Allied Motion Technologies Inc. — Q1 2012 Form 10-Q
Issuer note: The filing identifies the company as Allied Motion Technologies Inc.; this differs from the request metadata, “ALLIENT INC.” The unaudited quarter ended March 31, 2012. The company designs, manufactures, and sells motion-control products worldwide and reports one operating segment.
Financial performance
| Metric | Q1 2012 | Q1 2011 | Change / context |
|---|---|---|---|
| Revenue | $26.847 million | $26.724 million | Up 0.5%; sales volume rose about 1%, partly offset by currency effects. |
| Gross profit / margin | $7.637 million / 28% | $7.949 million / 30% | Margin declined 2 percentage points. |
| Operating income | $1.598 million | $1.807 million | Down about 12%. |
| Net income | $1.158 million | $1.213 million | Down about 5%; diluted EPS was $0.14 in both periods. |
| Operating cash flow | $(2.974) million | $(0.653) million | Higher bonus and tax payments and increased vendor payments contributed to the outflow. |
| Cash and cash equivalents | $4.581 million | $9.155 million at Dec. 31, 2011 | Declined $4.574 million during the quarter. |
| Total debt obligations | $0.158 million | $0.157 million at Dec. 31, 2011 | Primarily China facility borrowing; no revolving-credit balance. |
Amounts are in U.S. dollars. The company reported EBITDA of $2.104 million versus $2.350 million and adjusted EBITDA of $2.482 million versus $2.492 million; both are non-GAAP measures. Adjusted EBITDA excludes $0.238 million of non-recurring product-replacement expense and $0.140 million of stock compensation in 2012.
Liquidity, capital, and material changes
- Current assets were $35.919 million and current liabilities $11.765 million at March 31, 2012. Working capital was approximately $24.154 million.
- Cash used in investing was $1.936 million, including the final $1.350 million contingent payment for the 2010 Ostergrens acquisition; capital expenditures were $0.586 million.
- Cash provided by financing was $0.223 million, including $0.216 million of dividends paid. The quarterly dividend increased to $0.025 per share.
- Approximately $8.6 million was available under credit and overdraft facilities at quarter-end. The main credit agreement matures October 26, 2013; the company reported compliance with its financial covenants. The China credit facility matures in October 2012.
- Backlog was $40.9 million, up 6% year over year but down 7% from December 31, 2011. Orders were $23.0 million, compared with $26.4 million a year earlier.
Management commentary, outlook, and risks
- Medical, vehicle, and electronics sales increased year over year; industrial and aerospace and defense sales declined. Management noted some softening in European markets and a stronger U.S. dollar against the euro.
- Lower gross margin reflected sales mix and a one-time charge related to replacing products in the field after a supplier used an incorrect component.
- Management described continued investment in integrated motion-control products, electronic controls, operational improvements, global sales, and solution centers. It gave no specific numerical revenue or earnings guidance.
- Management expects working capital, capital expenditures, and dividends to be funded by operating cash flow and available credit facilities. Risks cited include economic and market conditions, customer demand and backlog conversion, competition and technology changes, component availability, foreign exchange, cost control, financing availability, and acquisition integration.
- Management stated that disclosure controls were effective and that no material change in internal control over financial reporting occurred during the quarter.
Important facts for investors to verify
- Confirm the issuer identity: the filing is for Allied Motion Technologies Inc., not “ALLIENT INC.”
- Assess whether the lower gross margin and the supplier-related product replacement charge are temporary or likely to recur.
- Monitor conversion of the $40.9 million backlog into orders, revenue, and cash, particularly given lower quarterly orders and negative operating cash flow.
- Review the April 20, 2012 credit-agreement amendment and the availability, covenants, and maturity of borrowing facilities.
- Evaluate the sustainability of the increased dividend alongside cash needs for operations, investment, and growth.