Business context and reporting period
Allied Motion Technologies, Inc. designs, manufactures and sells motors, motion controls, gearing and encoders, including integrated motion-control systems, for medical, vehicle, industrial, electronics, aerospace and defense markets. This Form 10-K covers the fiscal year ended December 31, 2011; figures are generally in U.S. dollars. The filing identifies the registrant as Allied Motion Technologies, Inc., although the request metadata says “ALLIENT INC.”
Key financial metrics
| Metric | 2011 | 2010 |
|---|---|---|
| Revenue | $110.941 million | $80.591 million |
| Gross profit / margin | $33.531 million / 30% | $22.692 million / 28% |
| Operating income | $9.652 million | $4.972 million |
| Net income | $6.967 million | $3.585 million |
| Diluted earnings per share | $0.81 | $0.45 |
| Cash from operations | $8.881 million | $7.168 million |
| Cash and cash equivalents at year-end | $9.155 million | $3.553 million |
| Total debt at year-end | $157,000 | $795,000 |
Year-end current assets were $38.408 million and current liabilities were $16.140 million. Cash less debt was approximately $9.0 million. Capital expenditures were $1.849 million. Non-GAAP EBITDA was $11.774 million and Adjusted EBITDA was $11.376 million; the company cautions these measures are not substitutes for GAAP performance or liquidity measures.
For the fourth quarter of 2011, revenue was $28.024 million and net income was $2.716 million, compared with $21.140 million and $983,000, respectively, in fourth-quarter 2010.
Material changes versus the prior comparable period
- Revenue rose 38%; management attributed 11% growth to existing businesses and 27% of the increase to businesses acquired in 2010. Sales volume accounted for 36 percentage points of the increase and favorable currency for 2 points.
- Net income increased 94%. The 2011 result included a $1.101 million gain from reducing the estimated earnout liability for the Östergrens acquisition. Management reported that excluding this adjustment, net income increased 64% and diluted EPS was $0.68.
- Gross margin expanded by 2 percentage points, which management attributed to cost reduction and a greater mix of higher-value systems and custom-engineered products.
- Operating cash flow increased by $1.713 million. Cash increased by $5.602 million, while investing cash outflow fell to $2.181 million from $8.317 million, when acquisition payments were made.
- Backlog rose 16% to approximately $44.005 million from $37.856 million. Orders were approximately $117 million, compared with $92 million in 2010.
Outlook, risks, contingencies and unusual items
- Management’s 2012 planning assumptions were minimal growth in Europe, modest growth in North America and strongest growth in Asia. No specific revenue or earnings guidance was provided.
- Management plans to emphasize gross-margin improvement, cost reduction, electronic motion control, integrated solutions, Asia expansion and operational efficiency. It expected operating cash flow to fund growth initiatives and support the dividend.
- The company began quarterly dividends in 2011; it paid $0.04 per share for the year and announced a first-quarter 2012 dividend of $0.025 per share, up from $0.02.
- Approximately $1.313 million of Östergrens contingent consideration was recorded as payable at year-end and expected to be paid in the first quarter of 2012. The $1.101 million estimate reduction was recorded as 2011 operating profit.
- Available borrowing capacity was approximately $8.4 million under the U.S./Europe revolver, plus about $550,000 under the China facility and about $700,000 under European overdraft facilities. The credit agreement contains financial covenants; the company reported compliance at year-end. The revolver matures October 2013.
- Risks cited include economic conditions, customer demand and backlog conversion, competition, product acceptance and technical execution, supply and cost pressures, foreign currency, financing availability, growth management, acquisitions and integration, and attracting qualified personnel. Backlog is not assured of conversion to revenue; some commercial-motor customers take shipments on a pull system.
- Four key employees’ change-in-control severance agreements could require approximately $5.028 million in payments if triggering events occur. Ordinary-course litigation was not expected by management to materially affect financial position or results.
- The pension plan was underfunded by approximately $2.138 million at year-end; the company expected to contribute about $439,000 in 2012. Management also noted pension funding sensitivity to investment returns and interest rates.
- The independent auditor gave an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor was not engaged to express an opinion on internal-control effectiveness.
Important facts for investors to verify
- Confirm the issuer identity and ticker: the filing is for Allied Motion Technologies, Inc. (Nasdaq: AMOT), not a company named “ALLIENT INC.”
- Assess how much of 2011 growth and earnings improvement was organic versus acquisition-related, and how results compare after removing the $1.101 million earnout benefit.
- Check subsequent realization of the $44.005 million backlog, particularly orders subject to customer pull schedules.
- Verify payment of the $1.313 million contingent consideration and the effect of ongoing dividends and investment spending on cash.
- Monitor gross-margin progress, pension funding, covenant compliance and the company’s ability to meet its 2012 regional growth and operational targets.