AMHERST, N.Y.--(BUSINESS WIRE)--Allied Motion Technologies Inc. (NASDAQ:AMOT) (“Company”), a designer and manufacturer that sells precision motion control products and solutions to the global market, today reported financial results for the fourth quarter and full year ended December 31, 2017.
- Fourth quarter revenue increased 18.1% to $65.4 million; Achieved record revenue in 2017 of $252.0 million
- Reported earnings per share for the year was $0.87, which reflects a $0.35 per share one-time charge associated with the impact of tax reform
- Operating income doubled to $5.2 million in the quarter
- 2017 orders up 8.6% to a record $272 million; Backlog grew to record level of $100.7 million
- Not included in the backlog are previously announced new business awards of $225.0 million that were received in the last eleven months and will start shipping in 2019
- Total debt down $18.3 million to $53.2 million at year-end; Net debt to capitalization ratio improved to 30.1% from 43.6% at the end of 2016
- Cash generated from operations was $25.4 million in 2017, up from $14.3 million in 2016
- Acquired the original equipment (“OE”) steering business of Maval Industries, LLC in January 2018; Addition of OE product line enables Allied to provide a fully integrated steering system solution to its customers
“Our fourth quarter results were very strong and drove record revenue for the year,” commented Dick Warzala, Chairman and CEO of Allied Motion. “During 2017, we gained greater traction and market share in many of our served markets, won important and significant new awards, generated considerable cash and made progress streamlining the organization. Absent the one-time impact of tax reform, our earnings were also measurably higher for both the quarter and the year. And, our emphasis on utilizing our Allied Systematic Tool kit (AST) to drive continuous improvements in Quality, Delivery, Cost and Innovation, contributed measurably to our solid performance. AST is an integral element of Allied’s culture.”
Mr. Warzala added, “Our contract wins over the last year are a testament to our ability to build highly reliable, quality products and custom engineered solutions, and they substantiate the strategic investments we have made to grow and diversify our business. We won significant, new business in not only our Vehicle market, but also in our Medical, Industrial, and Aerospace and Defense markets. With these wins, we are creating a larger base of business that enhances our ability to realize continuous and sustainable organic growth well into the future.”
Fourth Quarter 2017 Results (Narrative compares with prior-year period unless otherwise noted)
Revenue was $65.4 million, up $10.0 million, or 18.1%. The increase reflects growth across all of the Company’s served markets, to include significantly higher sales to the Vehicle market. Excluding the favorable effects of foreign currency exchange (FX), fourth quarter revenue was $62.8 million, up 13.5%. Sales to U.S. customers were 49% of total sales for the quarter compared with 51% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia.
Gross profit for the quarter rose $3.8 million to $20.6 million, while gross margin improved 120 basis points to 31.4%. The expansion in gross margin was due to more favorable mix and higher volume.
Operating costs and expenses were up $1.2 million to $15.4 million primarily due to increased investments in the sales and engineering organization. Within operating expenses, engineering and development (“E&D”) was $4.6 million, up 14.4%, although as a percent of revenue, E&D decreased 20 basis points to 7.0%.
Operating income was $5.2 million, double the prior-year-period, and operating margin expanded 320 basis points to 7.9%.
Interest expense decreased $1.1 million, or nearly 63%, to $0.7 million in the quarter, which was due to reduced debt levels and lower cost of debt with the new credit facility established in November 2016.
The effective tax rate for the quarter was 97.9% compared with 24.5% in the prior-year period. The higher rate reflects an estimated transition tax of $3.1 million on the deemed repatriation of foreign earnings resulting from the U.S. Tax Cuts and Jobs Act (“the Tax Act”). This one-time expense was recorded to taxes in the fourth quarter and negatively impacted diluted earnings per share $0.35, resulting in fourth quarter net income of $95 thousand, or $0.01 per diluted share. The Tax Act contains other provisions that did not materially impact the Company, including the revaluation of deferred tax balances.
Earnings before interest, taxes, depreciation, amortization, stock compensation expense and business development costs (“Adjusted EBITDA”) was $8.6 million, up $2.8 million or 47.5%. As a percent of sales, Adjusted EBITDA was 13.1% compared with 10.5% in the prior-year period. The Company believes that, when used in conjunction with measures prepared in accordance with U.S. generally accepted accounting principles, Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its operating performance. See the attached table for a description of non-GAAP financial measures and reconciliation table for Adjusted EBITDA.
Full Year 2017 Results (Narrative compares with prior-year period unless otherwise noted)
Record revenue of $252.0 million was up $6.1 million, or 2.5%. Increased demand from the Industrial/Electronics, Medical and Aerospace & Defense markets as well as improvement in distribution sales more than offset lower demand in the Company’s Vehicle market. Sales to U.S. customers were 53% of total sales compared with 54% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia. The impact of FX fluctuations was favorable $1.7 million for the year.
Gross profit increased nearly 4% to $75.7 million, and gross margin was up 30 basis points to 30.0%.
Operating costs and expenses were up $2.8 million, or 5.1%, to $56.9 million. The increase was due to reasons similar to those in the quarter. E&D was up $1.4 million, or 8.5%, to $17.5 million and increased as a percent of revenue to 7.0% from 6.6%. The increase in E&D investments was to develop standardized product platforms and provide customized motion solutions for customers. As a result, operating income was $18.8 million, down slightly from the prior-year period.
Interest expense decreased $4.0 million, or 61.6%, to $2.5 million due to the debt refinancing in November 2016 and lower debt balances.
The effective tax rate for 2017 was 50.2%, due to implementation of the Tax Act. As a result, net income for the year was $8.0 million, or $0.87 per diluted share. The Company anticipates its effective tax rate for 2018 to range from 22% to 26%.
Full year Adjusted EBITDA was $31.1 million, up 2% over 2016. As a percent of sales, Adjusted EBITDA was 12.3% compared with 12.4% in 2016.
Balance Sheet and Cash Flow Review
Cash and cash equivalents at the end of 2017 were $15.6 million compared with $15.5 million at the end of 2016. Cash provided by operations was $25.4 million, an increase of $11.1 million, and was used to pay down debt and fund $6.2 million of capital expenditures during the year.
The Company expects to invest $13 million to $16 million in capital expenditures during fiscal 2018. The higher level of capital expenditures is to support the significant recent project wins announced over the last year.
Total debt was $53.2 million at year-end, down $18.3 million from 2016. Debt, net of cash, was $37.6 million, or 30.1% of net debt to capitalization, down from 43.6% at the end of 2016.
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Orders and Backlog Summary ($ in thousands) |
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Q4 2017 |
Q3 2017 |
Q2 2017 |
Q1 2017 |
Q4 2016 |
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| Orders | $ | 72,764 | $ | 72,964 | $ | 65,754 | $ | 60,459 | $ | 56,543 | |||||||||||
| Backlog | $ | 100,708 | $ | 93,547 | $ | 85,250 | $ | 77,954 | $ | 78,602 | |||||||||||
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FY 2017 |
FY 2016 |
$ Change |
% Change |
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| Orders | $ | 271,941 | $ | 250,369 | $ | 21,572 | 8.6% | ||||||||||
The year-over-year increase in orders and backlog reflect strength across all of the Company’s served markets. The impact on orders from FX fluctuations was favorable $2.6 million in the fourth quarter and $2.0 million in the full year period.
Backlog was up 28% over the prior year-end period and increased nearly 8% since the end of the trailing third quarter. The time to convert the majority of backlog to sales is approximately three to six months.
Mr. Warzala concluded, “We have begun 2018 with a strong backlog, an excellent pipeline of opportunities and an acquisition that enhances our value proposition by enabling us to provide fully-integrated steering solutions to our customers. We are excited about the momentum we are building and we will stay on course by executing our growth strategy to create additional value for all of our stakeholders.”
Conference Call and Webcast
The Company will host a conference call and webcast on Thursday, March 15, 2018 at 11:00 am ET. During the conference call, management will review the financial and operating results and discuss Allied Motion’s corporate strategy and outlook. A question and answer session will follow.
To listen to the live call, participants can call (778) 327-3988. In addition, the call will be webcast live and may be found at: http://www.alliedmotion.com/investors
A telephonic replay will be available from 2:00 pm ET on the day of the call through Thursday, March 22, 2018. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 10004297 or access the webcast replay via the Company’s website. A transcript will also be posted to the website once available.
About Allied Motion Technologies Inc.
Allied Motion (NASDAQ: AMOT) designs, manufactures and sells precision and specialty motion control components and systems used in a broad range of industries within our major served markets, which include Vehicle, Medical, Aerospace & Defense, and Industrial/Electronics. The Company is headquartered in Amherst, NY, has global operations and sells into markets across the United States, Canada, South America, Europe and Asia.
Allied Motion is focused on motion control applications and is known worldwide for its expertise in electro-magnetic, mechanical and electronic motion technology. Its products include brush and brushless DC motors, brushless servo and torque motors, coreless DC motors, integrated brushless motor-drives, gear motors, gearing, modular digital servo drives, motion controllers, incremental and absolute optical encoders, and other associated motion control-related products.
The Company’s growth strategy is focused on becoming the motion solution leader in its selected target markets by leveraging its “technology/know how” to develop integrated precision motion solutions that utilize multiple Allied Motion technologies to “change the game” and create higher value solutions for its customers. The Company routinely posts news and other important information on its website at http://www.alliedmotion.com/.
Safe Harbor Statement
The statements in this news release and in the Company’s March 15, 2018 conference call that relate to future plans, events or performance are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the word “believe,” “anticipate,” “expect,” “project,” “intend,” “will continue,” “will likely result,” “should” or words or phrases of similar meaning. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from the expected results described in the forward-looking statements. The risks and uncertainties include those associated with: the domestic and foreign general business and economic conditions in the markets we serve, including political and currency risks and adverse changes in local legal and regulatory environments; the introduction of new technologies and the impact of competitive products; the ability to protect the Company’s intellectual property; our ability to sustain, manage or forecast its growth and product acceptance to accurately align capacity with demand; the continued success of our customers and the ability to realize the full amounts reflected in our order backlog as revenue; the loss of significant customers or the enforceability of the Company’s contracts in connection with a merger, acquisition, disposition, bankruptcy, or otherwise; our ability to meet the technical specifications of our customers; the performance of subcontractors or suppliers and the continued availability of parts and components; changes in government regulations; the availability of financing and our access to capital markets, borrowings, or financial transactions to hedge certain risks; the Company's ability to realize the annual interest expense savings from its debt refinancing; the ability to attract and retain qualified personnel who can design new applications and products for the motion industry; the ability to implement our corporate strategies designed for growth and improvement in profits including to identify and consummate favorable acquisitions to support external growth and the development of new technologies; the ability to successfully integrate an acquired business into our business model without substantial costs, delays, or problems; our ability to control costs, including the establishment and operation of lowcost region manufacturing and component sourcing capabilities; and other risks and uncertainties detailed from time to time in the Company’s SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements as a prediction of actual results. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. The Company has no obligation or intent to release publicly any revisions to any forward looking statements, whether as a result of new information, future events, or otherwise.
FINANCIAL TABLES FOLLOW
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ALLIED MOTION TECHNOLOGIES INC. |
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For the three months |
For the year |
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| December 31, | December 31, | ||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Revenue | $ | 65,355 | $ | 55,343 | $ | 252,012 | $ | 245,893 | |||||||||||||
| Cost of goods sold | 44,804 | 38,615 | 176,333 | 172,889 | |||||||||||||||||
| Gross profit | 20,551 | 16,728 | 75,679 | 73,004 | |||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||
| Selling | 2,844 | 2,496 | 10,979 | 9,986 | |||||||||||||||||
| General and administrative | 6,941 | 6,782 | 24,926 | 24,333 | |||||||||||||||||
| Engineering and development | 4,558 | 3,985 | 17,542 | 16,170 | |||||||||||||||||
| Business development | 213 | 87 | 213 | 428 | |||||||||||||||||
| Amortization of intangible assets | 814 | 795 | 3,219 | 3,204 | |||||||||||||||||
| Total operating costs and expenses | 15,370 | 14,145 | 56,879 | 54,121 | |||||||||||||||||
| Operating income | 5,181 | 2,583 | 18,800 | 18,883 | |||||||||||||||||
| Other expense (income): | |||||||||||||||||||||
| Interest expense | 677 | 1,823 | 2,474 | 6,449 | |||||||||||||||||
| Other expense, net | 55 | (179 | ) | 190 | (369 | ) | |||||||||||||||
| Total other expense, net | 732 | 1,644 | 2,664 | 6,080 | |||||||||||||||||
| Income before income taxes | 4,449 | 939 | 16,136 | 12,803 | |||||||||||||||||
| Provision for income taxes | (4,354 | ) | (230 | ) | (8,100 | ) | (3,725 | ) | |||||||||||||
| Net income | $ | 95 | $ | 709 | $ | 8,036 | $ | 9,078 | |||||||||||||
| Basic earnings per share: | |||||||||||||||||||||
| Earnings per share | $ | 0.01 | $ | 0.08 | $ | 0.88 | $ | 1.01 | |||||||||||||
| Basic weighted average common shares | 9,198 | 9,057 | 9,153 | 9,011 | |||||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||
| Earnings per share | $ | 0.01 | $ | 0.08 | $ | 0.87 | $ | 1.00 | |||||||||||||
| Diluted weighted average common shares | 9,303 | 9,174 | 9,275 | 9,105 | |||||||||||||||||
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ALLIED MOTION TECHNOLOGIES INC. |
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| December 31, | |||||||||||
| 2017 | 2016 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 15,590 | $ | 15,483 | |||||||
| Trade receivables, net of allowance for doubtful accounts of $341 | |||||||||||
| and $362 at December 31, 2017 and 2016, respectively | 31,822 | 26,104 | |||||||||
| Inventories | 32,568 | 31,098 | |||||||||
| Prepaid expenses and other assets | 3,460 | 3,120 | |||||||||
| Total current assets | 83,440 | 75,805 | |||||||||
| Property, plant and equipment, net | 38,403 | 37,474 | |||||||||
| Deferred income taxes | 14 | 923 | |||||||||
| Intangible assets, net | 32,073 | 34,252 | |||||||||
| Goodwill | 29,531 | 27,522 | |||||||||
| Other long-term assets | 4,461 | 3,943 | |||||||||
| Total assets | $ | 187,922 | $ | 179,919 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Current liabilities: | |||||||||||
| Debt obligations | 461 | 936 | |||||||||
| Accounts payable | 15,351 | 13,204 | |||||||||
| Accrued liabilities | 14,270 | 10,678 | |||||||||
| Total current liabilities | 30,082 | 24,818 | |||||||||
| Long-term debt | 52,694 | 70,483 | |||||||||
| Deferred income taxes | 3,609 | 3,266 | |||||||||
| Pension and post-retirement obligations | 4,667 | 4,381 | |||||||||
| Other long term liabilities | 9,523 | 4,685 | |||||||||
| Total liabilities | 100,575 | 107,633 | |||||||||
| Stockholders’ Equity: | |||||||||||
| Common stock, no par value, authorized 50,000 shares; 9,427 and | |||||||||||
| 9,374 shares issued and outstanding at December 31, 2017 and | |||||||||||
| 2016, respectively | 31,051 | 29,503 | |||||||||
| Preferred stock, par value $1.00 per share, authorized 5,000 shares; | |||||||||||
| no shares issued or outstanding | - | - | |||||||||
| Retained earnings | 61,882 | 54,786 | |||||||||
| Accumulated other comprehensive loss | (5,586 | ) | (12,003 | ) | |||||||
| Total stockholders’ equity | 87,347 | 72,286 | |||||||||
| Total Liabilities and Stockholders’ Equity | $ | 187,922 | $ | 179,919 | |||||||
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ALLIED MOTION TECHNOLOGIES INC. |
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For the year ended |
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| 2017 | 2016 | ||||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net income | $ | 8,036 | $ | 9,078 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 10,274 | 9,749 | |||||||||
| Deferred income taxes | 3,713 | 1,770 | |||||||||
| Provision for doubtful accounts | 39 | 167 | |||||||||
| Provision for excess and obsolete inventory | 480 | 351 | |||||||||
| Provision for warranty | 234 | (138 | ) | ||||||||
| Write-off of debt issue costs on Prior Credit agreement recorded in | |||||||||||
| interest expense | - | 1,052 | |||||||||
| Debt issue cost amortization recorded in interest expense | 165 | 380 | |||||||||
| Restricted stock compensation | 2,026 | 1,893 | |||||||||
| Other | (756 | ) | (652 | ) | |||||||
| Changes in operating assets and liabilities, excluding changes due to acquisition: | |||||||||||
| (Increase) in trade receivables, net | (4,051 | ) | (3,719 | ) | |||||||
| Decrease (increase) in inventories | 18 | (928 | ) | ||||||||
| (Increase) decrease in prepaid expenses and other assets | (328 | ) | 69 | ||||||||
| Increase (decrease) in accounts payable | 1,277 | (956 | ) | ||||||||
| Increase (decrease) in accrued liabilities and other liabilities | 4,280 | (3,813 | ) | ||||||||
| Net cash provided by operating activities | 25,407 | 14,303 | |||||||||
| Cash Flows From Investing Activities: | |||||||||||
| Purchase of property and equipment | (6,201 | ) | (5,188 | ) | |||||||
| Consideration paid for acquisition, net of cash acquired | - | (16,205 | ) | ||||||||
| Net cash used in investing activities | (6,201 | ) | (21,393 | ) | |||||||
| Cash Flows From Financing Activities: | |||||||||||
| (Repayments) borrowings on lines-of-credit, net | (518 | ) | (5,709 | ) | |||||||
| Principal payments of long-term debt | (18,389 | ) | (67,125 | ) | |||||||
| Proceeds from issuance of long-term debt | - | 76,321 | |||||||||
| Payment of debt issuance costs | - | (745 | ) | ||||||||
| Dividends paid to stockholders | (959 | ) | (942 | ) | |||||||
| Shares withheld for payment of employee payroll taxes | (1,513 | ) | (1,054 | ) | |||||||
| Stock transactions under employee benefit stock plans | 1,213 | 834 | |||||||||
| Net cash provided by (used in) financing activities | (20,166 | ) | 1,580 | ||||||||
| Effect of foreign exchange rate changes on cash | 1,067 | (285 | ) | ||||||||
| Net increase (decrease) in cash and cash equivalents | 107 | (5,795 | ) | ||||||||
| Cash and cash equivalents at beginning of period | 15,483 | 21,278 | |||||||||
| Cash and cash equivalents at end of period | 15,590 | 15,483 | |||||||||
ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of
Non-GAAP Financial Measures
(In thousands)
In addition to reporting net income, a U.S. generally accepted accounting principle (“GAAP”) measure, the Company presents Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, stock compensation expense, business development costs and insurance recoveries), which is a non-GAAP measure. The Company believes Adjusted EBITDA is often a useful measure of a Company’s operating performance and is a significant basis used by the Company’s management to evaluate and compare the core operating performance of its business from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, stock-based compensation expense, business development costs related to acquisitions, and other items that are not indicative of the Company’s core operating performance. Adjusted EBITDA does not represent and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting principles.
The Company’s calculation of Adjusted EBITDA for the three months and full year ended December 31, 2017 and 2016 is as follows:
| Three Months Ended | ||||||||||
| December 31, | ||||||||||
| 2017 | 2016 | |||||||||
| Net income | $ | 95 | $ | 709 | ||||||
| Interest expense | 677 | 1,823 | ||||||||
| Provision for income tax | 4,354 | 230 | ||||||||
| Depreciation and amortization | 2,684 | 2,440 | ||||||||
| EBITDA | $ | 7,810 | $ | 5,202 | ||||||
| Stock compensation expense | 553 | 523 | ||||||||
| Business development costs | 213 | 87 | ||||||||
| Adjusted EBITDA | $ | 8,576 | $ | 5,812 | ||||||
| Full Year Ended | ||||||||||
| December 31, | ||||||||||
| 2017 | 2016 | |||||||||
| Net income | $ | 8,036 | $ | 9,078 | ||||||
| Interest expense | 2,474 | 6,449 | ||||||||
| Provision for income tax | 8,100 | 3,725 | ||||||||
| Depreciation and amortization | 10,274 | 9,749 | ||||||||
| EBITDA | $ | 28,884 | $ | 29,001 | ||||||
| Stock compensation expense | 2,026 | 1,893 | ||||||||
| Business development costs | 213 | 428 | ||||||||
| Insurance recoveries | - | (823 | ) | |||||||
| Adjusted EBITDA | $ | 31,123 | $ | 30,499 | ||||||
