Allied Motion Technologies Inc. — Q1 2014 Form 10-Q
Issuer note: The supplied filing is for Allied Motion Technologies Inc., not “ALLIENT INC.” It covers the three months ended March 31, 2014; financial amounts are in thousands of dollars unless noted.
Business context and reporting period
Allied Motion designs, manufactures, and sells motion-control products and integrated solutions for commercial motor, industrial, automotive, medical, aerospace, and defense markets. Results include Globe Motors, acquired October 18, 2013; therefore, reported year-over-year comparisons reflect the acquisition.
Financial performance and position
- Revenue: $60.4 million, up 140% from $25.1 million. Management attributed most of the increase to Globe; sales rose in all markets, particularly vehicle and aerospace and defense.
- Profitability: Gross profit was $17.1 million versus $7.5 million; gross margin declined to 28% from 30%. Operating income was $4.6 million versus $1.5 million. Net income was $2.1 million versus $1.0 million; diluted EPS was $0.24 versus $0.11.
- Costs and taxes: Operating expenses were $12.5 million, up 106%, including higher Globe-related amortization. The effective tax rate was 35%, versus 32%.
- Cash flow: Operations used $0.2 million of cash, compared with $1.1 million used in Q1 2013. Investing provided $0.9 million, including a $1.4 million Globe purchase-price adjustment; capital expenditures were $0.6 million. Financing used $1.1 million, including $1.25 million of term-loan principal payments. Cash decreased $0.5 million to $9.7 million.
- Debt and liquidity: Total debt was $86.5 million ($14.5 million current and $72.0 million long-term), versus $87.6 million at year-end 2013. Cash was $9.7 million; unused borrowing capacity under the senior facilities was approximately $7.3 million. The company reported compliance with debt covenants at quarter-end.
- Orders: Bookings were $64.4 million, compared with $21.0 million. Backlog was $79.7 million, versus $75.6 million at December 31, 2013 and $28.0 million at March 31, 2013.
Material changes versus the prior comparable period
Revenue and earnings increased substantially, primarily because the acquired Globe business contributed for the full quarter. Gross margin declined by two percentage points, which management attributed to Globe and sales mix. Interest expense increased to $1.6 million from $9 thousand, reflecting acquisition-related borrowing. The company also reported higher depreciation and amortization, including Globe intangible amortization.
Outlook, risks, contingencies, and unusual items
The filing gives no specific earnings or revenue guidance. Management said working capital, capital expenditures, and dividends were expected to be funded by operating cash flow and available credit. It cited the acquisition as the primary driver of increased sales and bookings; the filing does not quantify expected future synergies.
Risks discussed include economic and market conditions, customer demand and concentration, order-backlog conversion and delivery schedules, competition and technology changes, parts availability, customer creditworthiness, acquisition integration, financing availability, and cost control. Three customers represented 33% of Q1 2014 revenue and 43% of trade receivables. Globe’s purchase-price allocation remained subject to further adjustment. The company had $30 million of 14.5% subordinated notes, with 13% payable in cash and 1.5% in-kind. It estimated that $216 thousand of derivative-related accumulated other comprehensive income would be reclassified as additional interest expense over the next year.
Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. No material litigation or other specific contingency amount is detailed in the supplied filing text.
Important facts to verify
- Confirm the issuer identity: the filing names Allied Motion Technologies Inc., while the request metadata says ALLIENT INC.
- Check the adjusted EBITDA comparison: the narrative gives Q1 2013 adjusted EBITDA of $2.131 million, while the reconciliation table gives $2.058 million. Q1 2014 is shown as $6.990 million.
- Assess how much reported growth and backlog reflect Globe acquisition effects versus organic performance.
- Monitor gross-margin trends, customer concentration, receivables collection, and operating cash conversion.
- Review debt service, the high-coupon subordinated notes, available credit, and continued covenant compliance.