Business context and reporting period
Allied Motion Technologies Inc. filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2012. The company designs, manufactures, and sells motion-control products and reported one operating segment. Note: the filing identifies the registrant as Allied Motion Technologies Inc., not “ALLIENT INC.”
Key financial metrics
Amounts are in thousands of dollars, except per-share data and percentages.
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Revenue | $24,316 | $27,331 | $77,999 | $82,917 |
| Gross margin | $7,099; 29% | $8,213; 30% | $22,887; 29% | $24,962; 30% |
| Operating income | $1,902 | $2,261 | $5,748 | $6,248 |
| Net income | $1,321 | $1,557 | $4,296 | $4,251 |
| Diluted EPS | $0.15 | $0.18 | $0.50 | $0.50 |
| EBITDA (non-GAAP) | $2,325 | $2,722 | $7,447 | $7,823 |
| Adjusted EBITDA (non-GAAP) | $2,485 | $2,913 | $7,830 | $8,337 |
For the nine months, cash from operations was $647, versus $3,576 in 2011; investing used $3,371, including acquisition consideration and capital expenditures; financing used $274, principally dividends. Cash declined $2,898 to $6,257. At September 30, total assets were $59,461, total liabilities $18,527, and stockholders’ equity $40,934. Debt obligations were $158, comprising a China facility; the U.S./Europe revolver had no balance. The company reported approximately $8.4 million available across credit lines and European overdraft facilities.
Material changes versus prior comparable periods
- Q3 revenue declined 11% year over year; management attributed 8 percentage points to lower volume and 3 to currency effects. Nine-month revenue fell 6%, with management attributing the decline about equally to currency and volume.
- All markets were down in Q3 except vehicle sales, which were flat. For the nine-month period, declines in industrial, distribution, and aerospace and defense were partly offset by medical and vehicle growth.
- Gross margin fell one percentage point in both comparisons, which management attributed primarily to lower fixed-overhead absorption on reduced sales.
- Q3 net income fell 15%; nine-month net income increased 1%, while operating income declined 8%.
- Orders were $20.2 million in Q3, down 41% year over year. Backlog was $33.2 million, down 20% year over year and 25% from December 31, 2011.
- Cash from operations decreased substantially year over year, which management linked to lower profits, higher incentive-bonus payments, and higher tax payments.
Outlook, commentary, risks, and unusual items
Management gave no quantified revenue or earnings guidance. It said it continued to pursue growth and profitability opportunities, emphasized gross-margin improvement, new products and integrated motion-control solutions, and described investments in operational excellence and expansion of its solution-center and sales capabilities. Management expected working capital, capital expenditures, and dividends to be funded by operating cash flow and available credit facilities.
The revolver was extended in October 2012 to mature October 26, 2014; the China credit facility was extended to October 2013. The company reported compliance with financial covenants at September 30, 2012. A $301 payment from a former Swedish landlord for early lease termination, net of moving expenses, contributed to nine-month other income. Adjusted EBITDA excludes this income and a $238 first-quarter charge to replace an incorrect electronic component. The filing identifies risks including economic weakness in the U.S. and Europe, lower customer demand and order volatility, currency movements, competition, product and technology execution, component availability, customer creditworthiness, and the ability to control costs and execute growth or acquisition plans. Management stated disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the registrant identity: the supplied filing is for Allied Motion Technologies Inc.; the request metadata says ALLIENT INC.
- Track order intake and backlog conversion, given the sharp fall in Q3 orders and backlog.
- Assess whether operating cash flow recovers and whether working-capital needs and capital spending remain supportable.
- Review gross-margin performance and the effect of lower production volume and foreign exchange.
- Distinguish GAAP results from EBITDA and adjusted EBITDA, which are non-GAAP measures, and assess the impact of the landlord payment and component-replacement charge.
- Monitor revolver availability, covenant compliance, and the company’s ability to sustain dividends while funding operations and investment.