Allied Motion Technologies Inc. (NASDAQ: AMOT) — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing identifies the registrant as Allied Motion Technologies Inc.; the request metadata names Allient Inc., so confirm the intended issuer. Dollar amounts below are in millions unless stated otherwise.
Business context and reporting period
Allied Motion designs, manufactures and sells controlled-motion components and systems for Vehicle, Medical, Aerospace & Defense, and Industrial markets. It operates globally and reports as one segment. The March 2020 acquisition of Dynamic Controls expanded its medical mobility and rehabilitation products and electronics capabilities.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $366.7 | $371.1 | Down 1% |
| Gross profit / margin | $108.6 / 29.6% | $112.6 / 30.3% | Margin down 0.7 percentage points |
| Operating income / margin | $23.0 / 6.3% | $29.4 / 7.9% | Down 22% |
| Net income | $13.6 | $17.0 | Down 20% |
| Diluted EPS | $1.43 | $1.80 | Down 21% |
| Cash from operations | $24.8 | $34.5 | Down $9.7 |
- Medical revenue increased more than 61% to $83.2 million, including Dynamic Controls. Vehicle revenue was $110.4 million, Industrial $114.1 million, and Aerospace & Defense $39.7 million; each of those markets declined year over year.
- Bookings rose 1% to $370.7 million; year-end backlog rose 13% to $141.3 million. Management cautioned that short lead times make backlog an unreliable indicator of future sales.
- Year-end cash was $23.1 million and working capital was $89.7 million; current ratio was 2.7. Debt was $120.1 million, or $96.9 million net of cash. The $225 million revolving facility had $104.3 million unused and matures in February 2025. The company reported covenant compliance.
- Operating cash flow was $24.8 million; capital expenditures were $9.4 million. Cash used for the Dynamic Controls acquisition was $14.7 million, net of cash acquired. Cash increased by $9.7 million during the year.
- Quarterly dividends were $0.03 per share. The Board later approved a 3-for-2 stock split, payable in April 2021.
Material changes versus 2019
- COVID-19 reduced demand in most served markets and disrupted suppliers and operations; a second-half rebound in Vehicle orders and strong Medical demand partly offset declines elsewhere.
- Gross margin fell 70 basis points. Management cited lower volume, Dynamic Controls fixed costs, and higher tariffs, freight and duties; cost-control and productivity measures partly mitigated the pressure.
- Operating income declined faster than revenue as operating expenses increased 3%, including higher engineering and development spending, while acquired-business costs and demand-related effects weighed on results. Interest expense fell 28% to $3.7 million, largely reflecting lower rates.
- Operating cash flow declined, with inventory investment and lower accrued liabilities among the stated factors. Inventory rose to $63.0 million from $53.4 million.
Outlook, risks and unusual items
- Management said the 2021 economic outlook remained uncertain but cited record backlog, diversified markets and operational agility as supports for profitable growth, efficiency and improved free cash flow. It provided no quantified financial guidance.
- Management expected COVID-related uncertainty and the effects of supply constraints and tariffs to continue into 2021. It said fourth-quarter demand included record orders, but supply constraints caused inefficiencies and additional costs that could persist over coming quarters.
- Key risks include pandemic-related demand and supply disruptions; dependence on qualified, sometimes single-source suppliers; raw-material, freight and tariff costs; customer concentration (one customer represented 15% of 2020 sales and 22% of year-end receivables); foreign-exchange and interest-rate exposure; and acquisition integration, cybersecurity, technology and execution risks.
- Dynamic Controls contributed $24.1 million of 2020 revenue and $0.9 million of earnings from its acquisition date. The company reported $473,000 of related transaction costs. Goodwill impairment testing found no indication of impairment.
- Non-GAAP adjusted net income was $14.3 million, versus GAAP net income of $13.6 million; adjusted diluted EPS was $1.50 versus GAAP EPS of $1.43. These figures exclude specified foreign-exchange, tax-assessment and business-development items.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Management and the auditor excluded Dynamic Controls from the 2020 internal-control assessment while the company assessed its controls.
Most important facts for investors to verify
- Confirm the filing’s issuer identity: Allied Motion Technologies Inc. (AMOT) versus the “Allient Inc” request label.
- Track whether Medical growth, Vehicle recovery and backlog convert into sustained revenue and margins, given management’s warning that backlog is not a reliable sales predictor.
- Monitor inventory levels, operating cash conversion, and the impact of supply constraints, tariffs and freight costs on gross margin.
- Review debt, covenant headroom and interest-rate exposure; $60.0 million of debt was hedged at year-end, with the remaining balance floating-rate.
- Assess integration and control remediation at Dynamic Controls, which was excluded from the year-end internal-control assessment.