AMOT Allied Motion Technologies Inc

Allied Motion Technologies Inc. (NASDAQ:AMOT) (“Company”), a global designer and manufacturer of motion control products and solutions, today reported financial results for the second quarter ended June 30, 2016. Results include the acquisition of Heidrive GmbH (“Heidrive”) acquired on January 12, 2016.

Second Quarter 2016 Performance 

• Achieved revenue of $65.8 million; up 8.9% over prior-year period
• Gross margin was 29.8%; Operating income increased 4.0%
• Net income declined 5.9% on higher effective tax rate of 34.7%
• Adjusted EBITDA* increased 4.1% to $8.4 million
• Debt restructuring expected to be completed in the second half of 2016

*Please see the attached tables for a reconciliation of GAAP net income to Adjusted EBITDA

Dick Warzala, Chairman and CEO of Allied Motion, commented, “Results in the quarter were as expected and favorably affected by our acquisition of Heidrive.  Sales to our Medical, Aerospace & Defense and Industrials/Electronics markets had solid double digit growth while our Vehicle market declined slightly primarily due to end-of-life wind downs on a couple of projects. As we advance our global growth strategy and transformation to a precision motion control solutions provider, we are expanding our opportunity pipeline with new applications and new customers while focusing our resources toward higher margin, multi-product solutions. We expect in time both scale and revenue diversity will help to diminish the variability of sales to specific markets and customers within quarters.”

Mr. Warzala concluded, “We continue to develop custom applications created for specific customer needs that utilize our extensive technical and engineering knowledge. We are applying this capability to expand our customers and our geographic reach. We are seeing traction with our efforts in new projects, with some moving into production this year and others planned for 2017 and beyond. In the meantime, our attention is on executing our strategy in what appears to be a continuing slow growth economic environment.” 

Second Quarter 2016 Results (Narrative compares with prior year period unless otherwise noted)

($ in thousands, except per share amounts)	Q2 2016				Q2 2015					$ Change				% Change
Revenue	$		65,835		$		60,479			$		5,356			8.9	%
Gross profit			19,613				17,987					1,626			9.0	%
Gross profit margin			29.8	%			29.7	%
Operating income			5,963				5,735					228			4.0	%
Operating margin			9.1	%			9.5	%
Net income			2,942				3,125					(183	)		(5.9	)%
Diluted earnings per share	$		0.31		$		0.34			$		(0.03	)		(8.8	)%

Strong sales in most markets helped to counter lower sales in our Vehicle market. Sales to U.S. customers were 55% of total sales for the quarter compared with 64% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia. 

Higher operating expenses in the quarter included the addition of Heidrive as well as investments in personnel, systems and engineering and development (E&D) to support the Company’s growth. General and administrative expenses had a $0.8 million benefit from insurance proceeds related to a fire in a warehouse facility in Europe last year. E&D as a percent of revenue was 6.3%, up 20 basis points. The $0.1 million in business development costs was carryover from the Heidrive acquisition. Selling, general and administrative expenses (SG&A) as a percent of revenue was 12.9% compared with 13.0% in the prior-year period.  

While operating income grew and income before income taxes improved 6.1% to $4.5 million, the 8.4 point higher effective tax rate of 34.7% resulted in lower net income.  Last year’s second quarter benefited from the reversal of a valuation allowance. The Company anticipates its effective tax rate for 2016 will be approximately 32%. 

Second quarter earnings before interest, taxes, depreciation, amortization, stock compensation business development expense and insurance recovery (“Adjusted EBITDA”) were $8.4 million, or 12.8% of sales, up 4.1% over $8.1 million, or 13.4% of sales, 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.

Year-to-date (YTD) 2016 Results (Narrative compares with prior year period unless otherwise noted)

($ in thousands, except per share amounts)	YTD 2016				YTD 2015					$ Change				% Change
Revenue	$		129,510		$		120,059			$		9,451			7.9	%
Gross profit			37,890				35,487					2,403			6.8	%
Gross profit margin			29.3	%			29.6	%
Operating income			10,495				11,366					(871	)		(7.7	)%
Operating margin			8.1	%			9.5	%
Net income			5,069				6,101					(1,032	)		(16.9	)%
Diluted earnings per share	$		0.54		$		0.66			$		(0.12	)		(18.2	)%

The same factors affecting the second quarter results had a similar impact on results in the 2016 first half. Sales to U.S. customers were 55% of total sales on a year-to-date basis compared with 65% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia. 

E&D as a percent of revenue increased to 6.4% in the first half of 2016 from 6.0% in the first half of 2015. Higher E&D spending is for product development for customer applications. SG&A as a percent of revenue increased to 13.4% from 13.0% in the prior-year period.

June 30, 2016 Balance Sheet and Cash Flow Review

Cash and cash equivalents at the end of the quarter were $10.4 million compared with $21.3 million at 2015 year end. The Company paid cash to fund approximately one-half of the total purchase price of Heidrive in January 2016.

Cash provided by operations year-to-date was $1.7 million compared with $3.6 million in the prior-year period. Capital expenditures were $2.4 million in the first half of 2016.

Total debt was $73.6 million compared with $67.4 million at December 31, 2015. The increase was due to the Heidrive acquisition. Debt, net of cash, was $63.2 million, or 47% of net debt to capitalization.

Bookings and Backlog Summary ($ in thousands)

	Q2 2016			Q1 2016			Q4 2015		Q3 2015		Q2 2015
Bookings	$	68,347	$		66,391	$		54,159	$	55,115	$	64,523
Backlog	$	80,742	$		81,704	$		70,999	$	67,820	$	75,605

	YTD 2016		YTD 2015		$ Change		% Change
Bookings	$	134,738	$	122,666	$	12,072			9.8	%

Growth in most markets drove improved bookings and backlog.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, August 4, 2016 at 11:00am 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, pre-registration is required and can be completed via the pre-register link below to receive a return email containing the dial-in number and a unique PIN to gain immediate access to the call.

Pre-registration link: http://services.choruscall.ca/DiamondPassRegistration/register?confirmationNumber=10001388&linkSecurityString=15ded8624

The listen-only audio webcast can be monitored at: http://www.alliedmotion.com/investors

A telephonic replay will be available from 2:00pm ET on the day of the call through Thursday, August 11, 2016. To listen to the archived call, dial (858) 384-5517 and enter replay pin number 10001388 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, Electronics and Industrial. 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 press release and in the Company’s August 4, 2016 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 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 the ability to control costs, including the establishment and operation of low cost 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

ALLIED MOTION TECHNOLOGIES INC.CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)

		For the three months ended								For the six months ended
		June 30,								June 30,
			2016				2015				2016				2015
		(Unaudited)								(Unaudited)
Revenue		$	65,835			$	60,479			$	129,510			$	120,059
Cost of goods sold			46,222				42,492				91,620				84,572
Gross margin			19,613				17,987				37,890				35,487
Operating costs and expenses:
Selling			2,635				2,063				5,059				4,271
General and administrative			5,878				5,822				12,287				11,375
Engineering and development			4,174				3,707				8,224				7,153
Business development			135				-				218				-
Amortization of intangible assets			828				660				1,607				1,322
Total operating costs and expenses			13,650				12,252				27,395				24,121
Operating income			5,963				5,735				10,495				11,366
Other expense (income):
Interest expense			1,590				1,511				3,122				3,026
Other expense, net			(130	)			(19	)			(115	)			(285	)
Total other expense, net			1,460				1,492				3,007				2,741
Income before income taxes			4,503				4,243				7,488				8,625
Provision for income taxes			(1,561	)			(1,118	)			(2,419	)			(2,524	)
Net income		$	2,942			$	3,125			$	5,069			$	6,101
Basic earnings per share:
Earnings per share		$	0.31			$	0.34			$	0.54			$	0.66
Basic weighted average common shares			9,343				9,264				9,312				9,225
Diluted earnings per share:
Earnings per share		$	0.31			$	0.34			$	0.54			$	0.66
Diluted weighted average common shares			9,343				9,264				9,312				9,225

ALLIED MOTION TECHNOLOGIES INC.CONSOLIDATED BALANCE SHEETS(In thousands, except per share data)

		June 30,  2016				December 31, 2015
Assets		(Unaudited)
Current Assets:
Cash and cash equivalents		$	10,362			$	21,278
Trade receivables, net of allowance for doubtful accounts of $783 and $611 at June 30, 2016 and December 31, 2015, respectively			31,965				22,710
Inventories, net			30,079				26,175
Prepaid expenses and other assets			2,904				3,749
Total Current Assets			75,310				73,912
Property, plant and equipment, net			38,626				35,315
Deferred income taxes			1,533				2,548
Intangible assets, net			36,288				29,984
Goodwill			28,095				17,757
Other long term assets			3,902				2,631
Total Assets		$	183,754			$	162,147
Liabilities and Stockholders’ Equity
Current Liabilities:
Debt obligations			21,055				9,860
Accounts payable			14,492				13,000
Accrued liabilities			13,901				11,121
Total Current Liabilities			49,448				33,981
Long-term debt			52,555				57,518
Deferred income taxes			2,875				630
Deferred compensation arrangements			3,413				2,636
Pension and post-retirement obligations			4,177				2,785
Total Liabilities			112,468				97,550
Commitments and Contingencies
Stockholders’ Equity:
Common stock, no par value, authorized 50,000 shares; 9,396 and 9,276 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively			29,078				27,824
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding			-				-
Retained earnings			51,244				46,650
Accumulated other comprehensive loss			(9,036	)			(9,877	)
Total Stockholders’ Equity			71,286				64,597
Total Liabilities and Stockholders’ Equity		$	183,754			$	162,147

ALLIED MOTION TECHNOLOGIES INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)

		For the six months ended
		June 30,
			2016				2015
Cash Flows From Operating Activities:		(Unaudited)
Net income		$	5,069			$	6,101
Adjustments to reconcile net income to net cash provided by (used in) operating activities (net of working capital acquired):
Depreciation and amortization			4,850				3,665
Deferred income taxes			859				555
Stock compensation expense			974				926
Other			(314	)			272
Changes in operating assets and liabilities:
Trade receivables			(8,992	)			(5,975	)
Inventories, net			689				(1,514	)
Prepaid expenses and other assets			1,389				(666	)
Accounts payable			(39	)			1,757
Accrued liabilities			(2,810	)			(1,519	)
Net cash provided by operating activities			1,675				3,602
Cash Flows From Investing Activities:
Consideration paid for acquisition, net of cash acquired			(16,049	)			-
Purchase of property and equipment			(2,382	)			(2,708	)
Net cash used in investing activities			(18,431	)			(2,708	)
Cash Flows From Financing Activities:
Borrowings on lines-of-credit, net			9,534				1,398
Principal payments of long-term debt			(3,750	)			(3,000	)
Dividends paid to stockholders			(473	)			(468	)
Stock transactions under employee benefit stock plans			268				223
Net cash provided by (used in) financing activities			5,579				(1,847	)
Effect of foreign exchange rate changes on cash			261				(824	)
Net decrease in cash and cash equivalents			(10,916	)			(1,777	)
Cash and cash equivalents at beginning of period			21,278				13,113
Cash and cash equivalents at end of period		$	10,362			$	11,336

ALLIED MOTION TECHNOLOGIES INC. (In thousands)

Reconciliation of Non-GAAP Financial Measures 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 measure the operating performance of the Company’s business because Adjusted EBITDA excludes charges for depreciation and amortization, and interest expense resulting from our debt financings, as well as our provision for income tax expense, stock compensation expense and business development costs. 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 and six months ended June 30, 2016 and 2015 is as follows:

		Three Months Ended
		June 30,
			2016				2015
Net income		$	2,942			$	3,125
Interest expense			1,590				1,511
Provision for income tax			1,561				1,118
Depreciation and amortization			2,580				1,858
EBITDA		$	8,673			$	7,612
Stock compensation expense			461				502
Business development costs			135				-
Insurance recoveries			(823	)			-
Adjusted EBITDA		$	8,446			$	8,114

		Six Months Ended
		June 30,
			2016				2015
Net income		$	5,069			$	6,101
Interest expense			3,122				3,026
Provision for income tax			2,419				2,524
Depreciation and amortization			4,850				3,665
EBITDA		$	15,460			$	15,316
Stock compensation expense			974				926
Business development costs			218				-
Insurance recoveries			(823	)			-
Adjusted EBITDA		$	15,829			$	16,242

 

Company Contact: 
Sue Chiarmonte
Allied Motion Technologies Inc. 
Phone:  716-242-8634 x602 
Email:  sue.chiarmonte@alliedmotion.com 

Investor Contact:
Deborah K. Pawlowski
Kei Advisors LLC
Phone:  716-843-3908
Email:  dpawlowski@keiadvisors.com