Filing summary
Registrant: The filing identifies the company as Allied Motion Technologies Inc., although the request metadata names Allient Inc. Period: Three months ended March 31, 2016; unaudited. Financial statement amounts below are in thousands of dollars, except per-share data.
Business context and results
Allied designs, manufactures and sells motion-control products and systems for markets including vehicle, medical, aerospace and defense, electronics, and industrial. Results include Heidrive GmbH from its January 12, 2016 acquisition.
- Revenue increased 7% to $63,675 from $59,580. Management attributed growth to Heidrive and higher medical, electronics and industrial sales, partly offset by lower vehicle and aerospace and defense sales.
- Gross profit rose 4% to $18,277, but gross margin narrowed to 28.7% from 29.4%, primarily due to product mix.
- Operating income fell 20% to $4,532; operating margin was approximately 7.1%, versus 9.5% a year earlier. Operating expenses increased 16%, including higher engineering, G&A, selling and amortization costs.
- Net income decreased 29% to $2,127 from $2,976. Diluted EPS was $0.23 versus $0.32. The 2016 tax rate was 28.7%, including a $160 discrete tax benefit from early adoption of stock-compensation guidance.
- EBITDA was $6,787 versus $7,704; adjusted EBITDA was $7,383 versus $8,137. Adjusted net income was $2,183, or $0.24 per diluted share, excluding $56 after tax of acquisition-related business-development costs. These are non-GAAP measures.
- Bookings rose 14% to $66,391 and backlog increased 15% to $81,704; management said the increases largely reflected Heidrive.
Cash flow, liquidity and debt
- Operating cash flow was negative $6,915, compared with positive $669 in Q1 2015. Management cited higher working-capital needs, including receivables, and settlement of acquired Heidrive liabilities.
- Investing cash outflow was $17,984, including $17,000 paid for Heidrive net of cash acquired; capital expenditures were $984.
- Financing provided $9,571, including $10,859 of foreign-revolver borrowing used partly to fund the acquisition. Cash declined by $14,962 to $6,316.
- At March 31, cash was $6,316 and current assets and current liabilities were $72,304 and $49,161, respectively. The company reported approximately $18,600 available under its senior credit facilities and $210 available under the China facility.
- Balance-sheet current and long-term debt totaled approximately $76,984, compared with $67,378 at year-end 2015. This includes $30,000 of subordinated notes bearing 14.5% interest (13% cash, 1.5% paid in kind). The filing separately reports $76,608 of obligations under the Credit Agreement and Note Agreement.
- The company was in compliance with credit-agreement covenants at quarter-end. Management said working capital, capital expenditures and dividends are expected to be funded by operating cash flow and available credit.
Material changes, outlook and risks
- Heidrive was acquired for an adjusted purchase price of $19,329, funded with cash and foreign-revolver borrowings. Purchase-price allocation and acquired intangible-asset lives remained subject to finalization.
- Management described 2016 as a year of organizational change and investment, citing multi-product solution production wins, North American sales realignment, productivity efforts and investment in engineering and motion solutions. It said it intended to restructure a significant portion of debt later in 2016; no specific terms or financial guidance were provided.
- Key stated risks include economic and currency conditions, customer demand and concentration, competition and technology changes, supply availability, execution of growth and acquisition strategies, and integration of acquired businesses. One customer represented 18% of quarterly revenue. A hypothetical 10% dollar movement against major currencies could affect quarterly sales by about $2,500; currency movements reduced Q1 2016 sales by an estimated $350 versus Q1 2015.
- The company reported ordinary-course litigation and said resolution was not expected to significantly adversely affect its financial position or results. It reported no material changes to previously disclosed risk factors and stated disclosure controls were effective.
Important facts to verify
- Final Heidrive purchase-price allocation, acquired intangible lives, and any purchase-price adjustments or management bonuses.
- Progress and terms of the planned debt restructuring, covenant headroom, and the cost of high-interest subordinated notes.
- Whether operating cash flow and liquidity recover as working-capital demands and acquisition integration evolve.
- Contribution of Heidrive versus organic growth to bookings, backlog, revenue and margin trends; monitor customer concentration and foreign-exchange exposure.