(1) Net of tax of ($218) and $132 for the years ended December 31, 2019 and 2018, respectively.
(2) Net of tax of $186, $2 and ($21) for the years ended December 31, 2019, 2018 and 2017, respectively.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
|
1.
|
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Business
Allied Motion Technologies Inc. (“Allied Motion”
or the “Company”) is engaged in the business of designing, manufacturing and selling controlled motion solutions, which
include integrated system solutions as well as individual controlled motion products, to a broad spectrum of customers throughout
the world primarily for the industrial, automotive, medical, and aerospace and defense markets.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.
For business combinations, we record net assets acquired and
liabilities assumed at their estimated fair values.
Cash and Cash Equivalents
Cash and cash equivalents include instruments which are readily
convertible into cash (original maturities of three months or less) and which are not subject to significant risk of changes in
interest rates.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount
and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable
credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable
may result in a requirement for additional allowances in the future. Activity in the allowance for doubtful accounts for
2019 and 2018 was as follows:
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
Beginning balance
|
|
$
|
530
|
|
|
$
|
341
|
|
Additional reserves
|
|
|
(5
|
)
|
|
|
192
|
|
Writeoffs
|
|
|
(132
|
)
|
|
|
-
|
|
Effect of foreign currency translation
|
|
|
12
|
|
|
|
(3
|
)
|
Ending balance
|
|
$
|
405
|
|
|
$
|
530
|
|
Inventories
Inventories include costs of materials, direct labor and manufacturing
overhead, and are stated at the lower of cost (first-in, first-out basis) or net realizable value, as follows:
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
Parts and raw materials
|
|
$
|
35,849
|
|
|
$
|
34,449
|
|
Work-in-process
|
|
|
6,951
|
|
|
|
7,557
|
|
Finished goods
|
|
|
10,585
|
|
|
|
12,965
|
|
Inventories
|
|
$
|
53,385
|
|
|
$
|
54,971
|
|
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
Property, Plant and Equipment
Property, plant and equipment is classified as follows (in thousands):
|
|
Useful lives
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Land
|
|
|
|
$
|
977
|
|
|
$
|
981
|
|
Building and improvements
|
|
5 - 39 years
|
|
|
13,366
|
|
|
|
13,054
|
|
Machinery, equipment, tools and dies
|
|
3 - 15 years
|
|
|
73,894
|
|
|
|
60,755
|
|
Furniture, fixtures and other
|
|
3 - 10 years
|
|
|
15,797
|
|
|
|
15,571
|
|
|
|
|
|
|
104,034
|
|
|
|
90,361
|
|
Less accumulated depreciation
|
|
|
|
|
(51,026
|
)
|
|
|
(42,326
|
)
|
Property, plant and equipment, net
|
|
|
|
$
|
53,008
|
|
|
$
|
48,035
|
|
Depreciation expense is provided using the straight-line method
over the estimated useful lives of the assets. Amortization of building improvements is provided using the straight-line
method over the life of the lease term or the life of the assets, whichever is shorter. Maintenance and repair costs are
charged to operations as incurred. Major additions and improvements are capitalized. The cost and related accumulated
depreciation of retired or sold property are removed from the accounts and the resulting gain or loss, if any, is reflected in
earnings.
Depreciation expense was $9,139, $7,921 and $7,055 in 2019,
2018 and 2017, respectively. Non-cash capital expenditures were $376 and $598 for the years
ended December 31, 2019 and 2018, respectively.
Intangible Assets
Intangible assets, other than goodwill, are recorded at cost
and are amortized over their estimated useful lives using the straight-line method. This method approximates the pattern of expected
cash flows over the remaining useful lives of the intangible assets.
Impairment of Long-Lived Assets
The Company reviews the carrying values of its long-lived assets,
including property, plant and equipment and intangible assets, whenever events or changes in circumstances indicate that such carrying
values may not be recoverable. Long-lived assets are carried at historical cost if the projected cash flows from their use
will recover their carrying amounts on an undiscounted basis and without considering interest. If projected cash flows are
less than their carrying value, the long-lived assets must be reduced to their estimated fair value. Considerable judgment
is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived assets. The Company
did not record any impairment charges for the years ended December 31, 2019, 2018 and 2017.
Goodwill
Goodwill represents the excess of the purchase price over the
fair value of identifiable net tangible and intangible assets acquired in a business combination.
Goodwill is not amortized, but is reviewed for impairment at
least annually or more frequently if impairment indicators arise. The Company has defined one reporting unit that is the
same as its operating segment. Goodwill is evaluated for impairment by first performing a qualitative assessment to determine
whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, that the fair value
of the reporting unit may be more likely than not less than carrying amount, or if significant adverse changes in the Company’s
future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required.
Additionally, the Company can elect to forgo the qualitative assessment and perform the quantitative test.
The first step of the quantitative test compares the fair value
of the reporting unit to its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value,
there is a potential impairment and the second step must be performed. The second step compares the implied fair value of goodwill
with the carrying amount of goodwill. If the carrying amount of goodwill exceeds the implied fair value, the excess is required
to be recorded as an impairment charge. The implied fair value of goodwill is determined by assigning
the fair value of the reporting unit to all the assets and liabilities of that unit (including any unrecognized intangible assets)
as if it had been acquired in a business combination. The Company has elected to perform the annual impairment assessment
for goodwill each year in the fourth quarter.
ALLIED MOTION
TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
At October 31, 2019, we performed our annual assessment
of fair value and concluded that there was no impairment related to goodwill. The Company did not record any impairment charges
for the years ended December 31, 2019, 2018 or 2017.
Other Long-Term Assets
Other long-term assets include securities that the Company has
purchased with the intent of funding the deferred compensation arrangements for certain executives of the Company. These
items are accounted for at fair value on a recurring basis. Any changes in value are included in net income in the Company’s
consolidated statements of income and comprehensive income.
Warranty
The Company offers warranty coverage for its products.
The length of the warranty period for its products is generally three months to two years and varies significantly based on the
product sold. The Company estimates the costs of repairing products under warranty based on the historical average cost of
the repairs. The assumptions used to estimate warranty accruals are re-evaluated periodically in light of actual experience
and, when appropriate, the accruals are adjusted. Estimated warranty costs are recorded at the time of sale of the related product,
and are considered a cost of goods sold.
Changes in the Company’s reserve for product warranty
claims during 2019, 2018 and 2017 were as follows (in thousands):
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
Warranty reserve at beginning of the year
|
|
$
|
971
|
|
|
$
|
922
|
|
|
$
|
830
|
|
Warranty reserves acquired
|
|
|
-
|
|
|
|
117
|
|
|
|
-
|
|
Provision
|
|
|
210
|
|
|
|
(13
|
)
|
|
|
234
|
|
Warranty expenditures
|
|
|
(101
|
)
|
|
|
(34
|
)
|
|
|
(200
|
)
|
Effect of foreign currency translation
|
|
|
(5
|
)
|
|
|
(21
|
)
|
|
|
58
|
|
Warranty reserve at end of year
|
|
$
|
1,075
|
|
|
$
|
971
|
|
|
$
|
922
|
|
Accrued Liabilities
Accrued liabilities consist of the following
(in thousands):
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Compensation and fringe benefits
|
|
$
|
12,967
|
|
|
$
|
11,642
|
|
Warranty reserve
|
|
|
1,075
|
|
|
|
971
|
|
Income taxes payable
|
|
|
2,231
|
|
|
|
1,182
|
|
Right of use liability
|
|
|
3,203
|
|
|
|
-
|
|
Other accrued expenses
|
|
|
3,525
|
|
|
|
4,927
|
|
|
|
$
|
23,001
|
|
|
$
|
18,722
|
|
Foreign Currency Translation
The assets and liabilities of the Company’s foreign subsidiaries
are translated into U.S. dollars using end of period exchange rates. Changes in reported amounts of assets and liabilities
of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies
and the U.S. dollar are included in foreign currency translation adjustment. Foreign currency translation adjustment is included
in accumulated other comprehensive loss, a component of stockholders’ equity in the accompanying consolidated statements
of stockholders’ equity. Revenue and expense transactions use an average rate prevailing during the month of the related
transaction. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency
other than the functional currency of each of the operating locations are included in the results of operations as incurred.
ALLIED MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
Revenue Recognition
Refer to Note 3, Revenue Recognition, for description
of the Company’s policies regarding revenue recognition.
Engineering and Development Costs
The Company is engaged in a variety of engineering and design
activities as well as basic research and development activities directed to the substantial improvement or new application of the
Company’s existing technologies. Engineering and development costs are expensed as incurred.
Basic and Diluted Income per Share
Basic income per share is computed by dividing net income or
loss by the weighted average number of shares of common stock outstanding. Diluted income per share is determined by dividing
the net income by the sum of (1) the weighted average number of common shares outstanding and (2) if not anti-dilutive,
the effect of stock awards determined utilizing the treasury stock method.
Basic and diluted weighted-average shares outstanding are as
follows:
|
|
Year ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Basic weighted average shares outstanding
|
|
|
9,398
|
|
|
|
9,265
|
|
|
|
9,153
|
|
Dilutive effect of equity awards
|
|
|
63
|
|
|
|
105
|
|
|
|
122
|
|
Diluted weighted average shares outstanding
|
|
|
9,461
|
|
|
|
9,370
|
|
|
|
9,275
|
|
For 2019, 2018 and 2017, the anti-dilutive common shares excluded
from the calculation of diluted income per share were immaterial.
Comprehensive Income
Comprehensive income is defined as the change in equity of a
business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes
all changes in equity during a period except those resulting from investments by and distributions to stockholders.
Fair Value Accounting
Authoritative guidance defines fair value as the price that
would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants
at the measurement date.
The guidance establishes a framework for measuring fair value,
which utilizes observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Company’s market assumptions. Preference is given to observable inputs.
These two types of inputs create the following three-level fair
value hierarchy:
Level 1:
|
Quoted prices for identical assets or liabilities in active markets.
|
|
|
Level 2:
|
Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable.
|
|
|
Level 3:
|
Significant inputs to the valuation model that are unobservable.
|
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
The Company’s financial assets and liabilities include
cash and cash equivalents, accounts receivable, debt obligations, accounts payable, and accrued liabilities. The carrying amounts
reported in the consolidated balance sheets for these assets approximate fair value because of the immediate or short-term maturities
of these financial instruments.
The following table presents the Company’s financial assets
that are accounted for at fair value on a recurring basis as of December 31, 2019 and 2018, respectively, by level within
the fair value hierarchy (in thousands):
|
|
December 31, 2019
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets (liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension plan assets
|
|
$
|
6,099
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Other long-term assets
|
|
|
4,690
|
|
|
|
-
|
|
|
|
-
|
|
Interest rate swaps
|
|
|
-
|
|
|
|
(363
|
)
|
|
|
-
|
|
|
|
|
December 31, 2018
|
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
Assets (liabilities)
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension plan assets
|
|
$
|
5,231
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Other long-term assets
|
|
|
3,962
|
|
|
|
-
|
|
|
|
-
|
|
Interest rate swaps
|
|
|
-
|
|
|
|
434
|
|
|
|
-
|
|
Derivative Financial Instruments
FASB’s Accounting Standards Codification (“ASC”)
No. 815, Derivatives and Hedging (“ASC 815”), provides the disclosure requirements for derivatives and
hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and
why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items,
and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance,
and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using
derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures
about credit-risk-related contingent features in derivative instruments.
As required by ASC 815, the Company records
all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on
the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply
hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives
designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss
recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash
flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though
hedge accounting does not apply, or the Company elects not to apply hedge accounting.
Income Taxes
The Tax Cuts and Jobs Act of 2017 (“Act”) was enacted
in the United States on December 22, 2017. The provisions of the Act significantly revised the U.S. Federal corporate
income tax rules and reduced the corporate tax rate from 35% to 21% for 2018 and future years. The Act also required companies
to record a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred.
The Company completed the accounting for the tax effects of enactment of the Act by December 31, 2018.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
The current provision for income taxes represents actual or
estimated amounts payable or refundable on tax return filings each year. Deferred tax assets and liabilities are recorded for the
estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the
accompanying consolidated balance sheets, and for operating loss and tax credit carryforwards. The change in deferred tax assets
and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax
laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment.
A valuation allowance may be provided to the extent management deems it is more likely than not that deferred tax assets will not
be realized. The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable income, in
the appropriate taxing jurisdictions, during the periods in which temporary differences, net operating losses and tax credits become
realizable. Management believes that it is more likely than not that the Company will realize the benefits of these temporary differences
and operating loss and tax credit carryforwards, net of valuation allowances.
It is the Company’s policy to include interest and penalties
related to income tax liabilities in income tax expense on the Consolidated Statements of Income and Comprehensive Income. In addition,
the Company records uncertain tax positions in accordance with ASC 740, Income Taxes, (“ASC 740”). ASC
740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial
statements. There were no uncertain tax benefits for the years ended December 31, 2019, 2018 and 2017 and no amounts were
recorded for interest and penalties related to unrecognized tax positions for the years ended December 31, 2019, 2018, and
2017.
Pension and Postretirement Welfare Plans
The Company records the service cost component of net benefit
costs in Cost of goods sold, Selling, and General and administrative expenses. The interest cost component of net benefit costs
is recorded in Interest expense and the remaining components of net benefit costs, amortization of net losses and expected return
on plan assets is recorded in Other (income) expense, net.
Concentration of Credit Risk
Trade receivables subject the Company to the potential for credit
risk. To reduce this risk, the Company performs evaluations of its customers’ financial condition and creditworthiness
at the time of sale, and updates those evaluations when necessary. See Note 13, Segment Information, for
additional information regarding customer concentration.
Use of Estimates
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires management to make certain estimates and assumptions.
Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain items in the prior year’s consolidated financial
statements and notes to consolidated financial statements have been reclassified to conform to the 2019 presentation. The reclassifications
had no effect on the reported results of operations. The tabular reconciliation of the Company’s income tax rates to the
federal statutory rates in Note 9, Income Taxes has been adjusted for 2018 and 2017 to conform to the 2019 presentation.
Recently adopted accounting pronouncements
In February 2016, the FASB issued Accounting
Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires lessees to recognize a
right-of-use (“ROU”) asset and a lease liability for all leases with terms greater than 12 months and also
requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases.
Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of
lease guidance is referred to as “ASC 842”.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
On January 1, 2019, the Company adopted ASC 842 using the
modified retrospective method for all lease arrangements at the beginning of the period of adoption. Results for reporting periods
beginning January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported
in accordance with the Company’s historic accounting under ASC 840, Leases. The standard had a material impact on the Company’s
consolidated balance sheet but did not have a significant impact on the Company’s consolidated net income and cash flows.
The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. For leases that commenced
before the effective date of ASC 842, the Company elected the permitted practical expedients to not reassess the following: (i) whether
any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial
direct costs for any existing leases. The Company also elected to exclude leases with a term of 12 months or less in the recognized
ROU assets and lease liabilities, when the likelihood of renewal is not probable.
As a result of the cumulative impact of adopting ASC 842, the
Company recorded operating lease ROU assets of $19,728 and operating lease liabilities of $20,350 as of January 1, 2019, primarily
related to real estate, equipment and automobile leases, based on the present value of the future lease payments on the date of
adoption. Refer to Note 10 - Leases for the additional disclosures required by ASC 842.
The Company determines if an arrangement is a lease at inception.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an
obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement
date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an
implicit interest rate, the Company uses its incremental borrowing rate based on the information available at commencement date
in determining the present value of lease payments. The ROU asset also consists of any prepaid lease payments and deferred rent
liabilities. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate
the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized
on a straight-line basis over the lease term as an operating expense. The Company has lease agreements which require payments for
lease and non-lease components and has elected to account for these as a single lease component.
In February 2018, the FASB issued ASU No. 2018-02, Income
Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income, to address a specific consequence of Act by allowing a reclassification from accumulated other comprehensive income
to retained earnings for stranded tax effects resulting from the Act’s reduction of the U.S. federal corporate income tax
rate. The Company adopted this ASU on January 1, 2019 on a prospective basis.
Recently issued accounting pronouncements
In August 2018, the FASB issued ASU No. 2018-13, Fair
Value Measurement (Topic 820), which modifies the disclosures on fair value measurements by removing the requirement to disclose
the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such
transfers. The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized
gains and losses included in other comprehensive income (loss). The ASU is effective for public entities for fiscal years beginning
after December 15, 2019 The Company has not historically had any transfers between Level 1 and Level 2 or assets or liabilities
measured at fair value under Level 3. The Company does not expect the adoption of this ASU to have a material impact on its consolidated
financial statements.
In September 2016, the FASB issued ASU 2016-13, Financial
Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance requires the
measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current
conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates
and judgments used in estimating credit losses. The new guidance is effective for fiscal years beginning after December 15,
2019. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial
statements. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles
- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The guidance in ASU 2017-04 eliminates the
requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment.
Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting
unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting
unit’s fair value. ASU 2017-04 is effective for annual and interim goodwill impairment tests in fiscal years beginning after
December 15, 2019, and should be applied on a prospective basis. The Company is currently evaluating the impact of adopting
this guidance on the Company’s consolidated financial statements. The Company does not expect the adoption of this ASU to
have a material impact on its consolidated financial statements.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
TCI
On December 6, 2018, the Company entered into a Unit Purchase
Agreement (the “Purchase Agreement”) with TCI, LLC, a Wisconsin limited liability company (“TCI”), and
the members of TCI (“Sellers”), pursuant to which Allied Motion acquired 100% of the issued and outstanding common
units of TCI from Sellers (the “Acquisition”) in a transaction valued at $64,135. A portion of the Acquisition consideration
was placed in escrow to secure payment of any post-closing adjustments to the purchase price and to secure the Sellers’ indemnification
obligations to Allied Motion. Cash consideration was funded from borrowings on the Company’s existing credit facilities.
The TCI acquisition broadened and strengthened the Company’s
position as a leading global diversified solutions provider in the controlled motion market. TCI has adjacent technologies and
capabilities that enable more efficient and longer life solutions for motion devices in a wide variety of demanding applications.
TCI’s technology and products are expected to be a valuable addition to the Company’s expanding suite of solution offerings.
The Company incurred $413 of transaction costs related to the
acquisition of TCI. Transaction costs are included in business development expenses on the consolidated statements of income and
comprehensive income. The Company accounted for the acquisition pursuant to ASC 805, Business Combinations. The allocation
of the purchase price paid for TCI is based on estimated fair values of the assets acquired and liabilities assumed of TCI as of
December 6, 2018 (in thousands):
Inventory
|
|
$
|
3,718
|
|
Accounts receivable
|
|
|
5,822
|
|
Other assets, net
|
|
|
303
|
|
Property, plant and equipment
|
|
|
3,464
|
|
Amortizable intangible assets
|
|
|
36,400
|
|
Goodwill
|
|
|
18,457
|
|
Current liabilities
|
|
|
(4,029
|
)
|
Net purchase price
|
|
$
|
64,135
|
|
During the second quarter 2019, the purchase price allocation
was revised to reflect an updated valuation of inventory, resulting in the adjusted purchase price of $64,135. The purchase price
excluded any cash on hand and any debt of TCI. The allocation of the purchase price was completed during the fourth quarter 2019.
The intangible assets acquired consisted of customer lists,
technology and a trade name, which are being amortized over 16, 15 and 19 years, respectively. Goodwill generated in the acquisition
is related to the assembled workforce, synergies between Allied Motion’s other locations and TCI that are expected to occur
as a result of the combined engineering knowledge, the ability of each of the locations to integrate each other’s products
into more fully integrated system solutions and Allied Motion’s ability to utilize TCI’s management knowledge in providing
complementary product offerings to the Company’s customers.
The goodwill resulting from the TCI acquisition is tax deductible.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
Pro forma Condensed Combined Financial Information (Unaudited)
The following presents the Company’s unaudited pro forma
financial information for the years ended December 31, 2018 and 2017 giving effect to the acquisition of TCI as if it had
occurred at January 1, 2017. Included in the pro forma information is: the additional depreciation and amortization resulting
from the valuation of amortizable tangible and intangible assets; interest on borrowings made by the Company; amortization of deferred
finance costs incurred to issue the borrowings; and removal of acquisition related transaction costs.
|
|
For the year ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Revenues
|
|
$
|
351,952
|
|
|
$
|
286,327
|
|
Net income
|
|
$
|
17,830
|
|
|
$
|
8,101
|
|
Diluted earnings per share
|
|
$
|
1.90
|
|
|
$
|
0.87
|
|
The pro forma financial results do not reflect adjustments for
anticipated operating efficiencies that the Company expects to achieve as a result of this acquisition. The pro forma financial
information is for informational purposes only and does not purport to present what the Company’s results would actually
have been had these transactions actually occurred on the date presented or to project the combined company’s results of
operations or financial position for any future period.
Maval OE Steering
On January 19, 2018, the Company purchased substantially
all of the operating assets associated with the original equipment steering business of Maval Industries, LLC (“Maval”)
for $13,312 in cash. Consistent with the Company’s strategy to provide higher level system solutions, the addition of the
Maval OE steering (“Maval OE Steering”) product line enables Allied to provide a fully integrated steering system solution
to its customers.
The following table represents the purchase price allocation
and summarizes the aggregate estimated fair value of the assets acquired (in thousands):
|
|
January 19, 2018
|
|
Intangible assets
|
|
$
|
3,870
|
|
Goodwill
|
|
|
6,001
|
|
Assets acquired (net of liabilities assumed)
|
|
|
3,441
|
|
Fair value of net assets acquired
|
|
$
|
13,312
|
|
Goodwill
represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired.
The purchase price allocation was completed during the fourth quarter 2018.
The goodwill resulting from the Maval OE Steering acquisition
is tax deductible.
Performance Obligations
Performance Obligations Satisfied at a Point in Time
The Company considers control of most products to transfer at
a single point in time when control is transferred to the customer, generally when the products are shipped in accordance with
an agreement and/or purchase order. Control is defined as the ability to direct the use of and obtain substantially all of the
remaining benefits of the product.
The Company satisfies its performance obligations under a contract
with a customer by transferring goods and services in exchange for generally monetary consideration from the customer. The Company
considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as the contract
with the customer. For some customers, control, and a sale, is transferred at a point in time when the product is delivered to
a customer. Sales, value add, and other taxes the Company collects concurrent
with revenue-producing activities are excluded from revenue.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
Nature of Goods and Services
The Company sells component and integrated controlled motion
solutions to end customers and original equipment manufacturers (“OEM’s”) through the Company’s own direct
sales force and authorized manufacturers’ representatives and distributors. The Company’s products include brush
and brushless DC motors, brushless servo and torque motors, coreless DC motors, integrated brushless motor-drives, gearmotors,
gearing, modular digital servo drives, motion controllers, incremental and absolute optical encoders, active and passive filters
for power quality and harmonic issues, and other controlled motion-related products. The Company’s target markets include
Vehicle, Medical, Aerospace & Defense and Industrial.
Determining the Transaction Price
The majority of the Company’s contracts have an original
duration of less than one year. For these contracts, the Company applies the practical expedient and therefore does not consider
the effects of the time value of money. For multiyear contracts, the Company uses judgment to determine whether there is a significant
financing component. These contracts are generally those in which the customer has made an up-front payment. Contracts that management
determines to include a significant financing component are discounted at the Company’s incremental borrowing rate. The Company
incurs interest expense and accrues a contract liability. As the Company satisfies performance obligations and recognizes revenue
from these contracts, interest expense is recognized simultaneously. Management does not have any contracts that include a significant
financing component as of December 31, 2019.
Disaggregation of Revenue
The Company disaggregates revenue from contracts with customers
into geographical regions and target markets. The Company determines that disaggregating revenue into these categories achieves
the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic
factors. As noted in Note 13, Segment Information, the Company’s business consists of one reportable segment. The
revenues by geography in the table below are revenues derived from the Company’s foreign subsidiaries as provided in Note
13. A reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions is provided in Note
13.
|
|
Year ended December 31,
|
|
Target Market
|
|
2019
|
|
|
2018
|
|
Vehicle
|
|
$
|
126,811
|
|
|
$
|
121,864
|
|
Industrial
|
|
|
124,196
|
|
|
|
101,332
|
|
Medical
|
|
|
51,586
|
|
|
|
43,239
|
|
Aerospace & Defense
|
|
|
47,748
|
|
|
|
35,927
|
|
Other
|
|
|
20,743
|
|
|
|
8,249
|
|
Total
|
|
$
|
371,084
|
|
|
$
|
310,611
|
|
|
|
Year ended December 31,
|
|
Geography
|
|
2019
|
|
|
2018
|
|
United States
|
|
$
|
244,347
|
|
|
$
|
184,507
|
|
Europe
|
|
|
124,914
|
|
|
|
123,771
|
|
Other
|
|
|
1,823
|
|
|
|
2,333
|
|
Total
|
|
$
|
371,084
|
|
|
$
|
310,611
|
|
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
Contract Balances
When the timing of the Company’s delivery of product is
different from the timing of the payments made by customers, the Company recognizes either a contract asset (performance precedes
customer payment) or a contract liability (customer payment precedes performance). Typically, contracts are paid in arrears and
are recognized as receivables after the Company considers whether a significant financing component exists.
The opening and closing balances of the Company’s receivables,
contract asset, and contract liability are as follows (in thousands):
|
|
December 31, 2019
|
|
|
|
|
Contract Asset
|
|
|
|
Contract
Liability
|
|
Opening balance
|
|
$
|
-
|
|
|
$
|
533
|
|
Closing balance
|
|
|
-
|
|
|
|
454
|
|
Decrease
|
|
$
|
-
|
|
|
$
|
(79
|
)
|
The difference between the opening and closing balances of the
Company’s contract assets and contract liabilities primarily results from the timing difference between the Company’s
performance and the customer’s payment. Nearly all of the opening balance of the contract liability was recognized as revenue
in 2019.
Significant Payment Terms
The Company’s contracts with its customers state the final
terms of the sale, including the description, quantity, and price of each product or service purchased. Payments are typically
due in full within 30-60 days of delivery. Since the customer agrees to a stated rate and price in the contract that do not vary
over the contract, the majority of contracts do not contain variable consideration.
Returns, Refunds, and Warranties
In the normal course of business, the Company does not accept
product returns unless the item is defective as manufactured. The Company establishes provisions for estimated returns and warranties.
All contracts include a standard warranty clause to guarantee that the product complies with agreed specifications.
Practical Expedients
Incremental costs of obtaining a contract - the Company
elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been
one year or less.
Remaining performance obligations - the Company elected
not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts
that are one year or less, as the revenue is expected to be recognized within the next year.
The time value of money - the Company elected not to
adjust the promised amount of consideration for the effects of the time value of money for contracts in which the anticipated period
between when the Company transfers the goods or services to the customer and when the customer pays is equal to one year or less.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
The change in the carrying amount of goodwill for 2019 and
2018 is as follows (in thousands):
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Beginning balance
|
|
$
|
52,639
|
|
|
$
|
29,531
|
|
Goodwill acquired (Note 2)
|
|
|
614
|
|
|
|
23,844
|
|
Effect of foreign currency translation
|
|
|
(318
|
)
|
|
|
(736
|
)
|
Ending balance
|
|
$
|
52,935
|
|
|
$
|
52,639
|
|
The purchase price allocation was finalized for the TCI acquisition
during the fourth quarter 2019.
Intangible assets on the Company’s consolidated balance
sheets consist of the following (in thousands):
|
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
|
Life
|
|
Gross
Amount
|
|
|
Accumulated
amortization
|
|
|
Net
Book
Value
|
|
|
Gross
Amount
|
|
|
Accumulated
amortization
|
|
|
Net
Book
Value
|
|
Customer lists
|
|
8 - 17 years
|
|
$
|
64,314
|
|
|
$
|
(19,311
|
)
|
|
$
|
45,003
|
|
|
$
|
64,439
|
|
|
$
|
(15,343
|
)
|
|
$
|
49,096
|
|
Trade name
|
|
10 - 19 years
|
|
|
12,222
|
|
|
|
(4,114
|
)
|
|
|
8,108
|
|
|
|
12,249
|
|
|
|
(3,305
|
)
|
|
|
8,944
|
|
Design and technologies
|
|
10 - 15 years
|
|
|
12,927
|
|
|
|
(3,554
|
)
|
|
|
9,373
|
|
|
|
13,023
|
|
|
|
(2,723
|
)
|
|
|
10,300
|
|
Patents
|
|
17
years
|
|
|
24
|
|
|
|
(11
|
)
|
|
|
13
|
|
|
|
24
|
|
|
|
(10
|
)
|
|
|
14
|
|
Total
|
|
|
|
$
|
89,487
|
|
|
$
|
(26,990
|
)
|
|
$
|
62,497
|
|
|
$
|
89,735
|
|
|
$
|
(21,381
|
)
|
|
$
|
68,354
|
|
Intangible assets resulting from the acquisition of TCI were
approximately $36,400 (Note 2). The intangible assets acquired consist of customer lists, a trade name and technology.
Intangible assets resulting from the acquisition of the Maval
OE Steering business were approximately $3,870 (Note 2). The intangible assets acquired consist of customer lists.
Total amortization expense for intangible assets for the years
2019, 2018 and 2017 was $5,718, $3,655 and $3,219, respectively.
Estimated amortization expense for intangible assets is as follows
(in thousands):
Year ending December 31,
|
|
Total
|
|
2020
|
|
$
|
5,719
|
|
2021
|
|
|
5,470
|
|
2022
|
|
|
5,470
|
|
2023
|
|
|
5,389
|
|
2024
|
|
|
5,087
|
|
Thereafter
|
|
|
35,362
|
|
|
|
$
|
62,497
|
|
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
|
6.
|
STOCK-BASED COMPENSATION PLANS
|
Stock Incentive Plans
The Company’s Stock Incentive Plans provide for the granting
of stock awards, including stock options, stock appreciation rights, and restricted stock, to employees and non-employees, including
directors of the Company.
As of December 31, 2019, the Company had 911,178
shares of common stock available for grant under stock incentive plans.
Restricted Stock
The following is a summary of restricted stock grants, fair
value and performance based awards:
For the year ended December 31,
|
|
Unvested
restricted stock
awards
|
|
|
Weighted average
grant date fair
value
|
|
|
Awards with
performance vesting
requirements
|
|
2019
|
|
|
109,530
|
|
|
$
|
41.95
|
|
|
|
76,877
|
|
2018
|
|
|
64,656
|
|
|
$
|
35.89
|
|
|
|
30,603
|
|
2017
|
|
|
105,785
|
|
|
$
|
22.56
|
|
|
|
28,025
|
|
The value at the date of award is amortized to compensation
expense over the related service period, which is generally three years for time vested grants. Short-term performance based
grants can be achieved over a period of one year, and long-term performance grants can be earned through December 31, 2022.
Earned grants are then subject to either a 3 year or 5 year service period. Shares of non-vested restricted stock are forfeited
if a recipient leaves the Company before the vesting date. Shares that are forfeited become available for future awards.
For performance-based awards, the Company assesses the probability of the achievement of the awards during the year and recognizes
expense accordingly.
The following is a summary of restricted stock activity during
years 2019, 2018 and 2017:
Balance, December 31, 2016
|
|
|
308,542
|
|
Awarded
|
|
|
105,785
|
|
Forfeited
|
|
|
(17,676
|
)
|
Vested
|
|
|
(174,683
|
)
|
Balance, December 31, 2017
|
|
|
221,968
|
|
Awarded
|
|
|
64,656
|
|
Forfeited
|
|
|
(18,867
|
)
|
Vested
|
|
|
(112,015
|
)
|
Balance, December 31, 2018
|
|
|
155,742
|
|
Awarded
|
|
|
109,530
|
|
Forfeited
|
|
|
(3,166
|
)
|
Vested
|
|
|
(75,404
|
)
|
Balance, December 31, 2019
|
|
|
186,702
|
|
ALLIED MOTION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share
data)
The following is a summary of performance based restricted stock
activity during years 2019, 2018 and 2017:
|
|
Total
performance grants
|
|
Outstanding, December 31, 2016
|
|
|
44,872
|
|
Awarded
|
|
|
28,025
|
|
Performance criteria met
|
|
|
(7,670
|
)
|
Forfeited
|
|
|
(27,445
|
)
|
Outstanding, December 31, 2017
|
|
|
37,782
|
|
Awarded
|
|
|
30,603
|
|
Performance criteria met
|
|
|
(66,525
|
)
|
Forfeited
|
|
|
(1,860
|
)
|
Outstanding, December 31, 2018
|
|
|
-
|
|
Awarded
|
|
|
76,877
|
|
Performance criteria met
|
|
|
(50,852
|
)
|
Forfeited
|
|
|
(549
|
)
|
Outstanding, December 31, 2019
|
|
|
25,476
|
|
The performance criteria and forfeitures in the above table
did not occur until the Board of Directors approved them during the February 2020, 2019 and 2018 meetings.
Share-Based Compensation Expense
Restricted Stock
During 2019, 2018 and 2017 compensation expense net of forfeitures
of $3,203, $2,643 and $2,026 was recorded, respectively. As of December 31, 2019, there was $4,151 of total unrecognized
compensation expense related to restricted stock awards, of which approximately $2,302 is expected to be recognized in 2020.
Employee Stock Ownership Plan
The Company sponsors an Employee Stock Ownership Plan (“ESOP”)
that covers all non-union U.S. employees who work over 1,000 hours per year. The terms of the ESOP require the Company
to make an annual contribution equal to the greater of i) the Board established percentage of pretax income before the contribution
(5% in 2019, 2018 and 2017) or ii) the annual interest payable on any loan outstanding to the Company from the ESOP.
Company contributions to the Plan accrued for 2019, 2018 and 2017, respectively, were $1,189, $1,090 and $849. These amounts
are included in general and administrative costs in the consolidated statements of income and comprehensive income.
Defined Contribution Plan
The Company sponsors the Allied Motion 401(k) Tax Advantaged
Investment Plan (“401(k)”) which covers substantially all its U.S. based employees. The plan provides for the
deferral of employee compensation under Section 401(k) and a discretionary Company match. In 2019, 2018 and 2017
this match was 100% per dollar of the first 3% of participant deferral and 50% per dollar of the next 2% contribution, up to 4%
of a total 5% participant deferral. Net costs related to this defined contribution plan were $1,362, $1,182 and $1,090 in
2019, 2018 and 2017, respectively.
Dividends
For the year ended December 31, 2019, a total of $0.12
per share on all outstanding shares was declared and paid. For the years ended December 31, 2018 and 2017 a total of $0.115
and $0.10 per share on all outstanding shares was declared and paid, respectively. Total dividends paid for the years ended
December 31, 2019, 2018 and 2017 were $1,170, $1,079 and $959, respectively. Based on the terms of the Company’s Credit
Agreement, dividends paid to shareholders are acceptable, subject to the Company’s compliance with the covenants under the
Credit Agreement.
ALLIED MOTION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share
data)
On February 12, 2020, the Company entered into a First
Amended and Restated Credit Agreement (the “Amended Credit Agreement”) for a $225 million revolving credit facility
(the “Amended Revolving Facility”). Refer to Note 14. Subsequent Event for information.
Debt obligations consisted of the following (in thousands):
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Long-term Debt
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility, long-term
|
(1)
|
|
$
|
110,085
|
|
|
$
|
123,010
|
|
Unamortized debt issuance costs
|
|
|
|
(320
|
)
|
|
|
(494
|
)
|
Long-term debt
|
|
|
$
|
109,765
|
|
|
$
|
122,516
|
|
(1)
The effective rate of the Revolving Credit Facility is 3.4% at December 31, 2019 including the impact of the Company's
interest rate swaps.
Prior Credit Agreement
On October 28, 2016, the Company entered into a Credit
Agreement (the “Credit Agreement”) for a $125,000 revolving credit facility (the “Revolving Facility”).
The Revolving Facility includes a $50,000 accordion amount and has an initial term of five years. HSBC Bank USA, National
Association is the administrative agent, HSBC Securities (USA) Inc. is the sole lead arranger and sole book runner, and Keybank
National Association and Wells Fargo Bank, National Association are co-syndication agents.
On December 6, 2018, the Company and certain of its subsidiaries
entered into a Second Amendment to the Credit Agreement to exercise the $50 million accordion feature of the Revolving Facility
add TCI as an additional guarantor. The Company’s credit facility, which matures in October 2021, increased capacity
from $125 million to $175 million with the additional borrowing capacity being provided by the existing lenders. Other terms and
conditions under the credit facility remain unchanged.
Borrowings under the Revolving Facility bear interest at the
LIBOR Rate (as defined in the Credit Agreement) plus a margin of 1.00% to 2.25% or the Prime Rate (as defined in the Credit Agreement)
plus a margin of 0% to 1.25%, in each case depending on the Company’s ratio of total funded indebtedness (as defined in the
Credit Agreement) to Consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”). At December 31,
2019, the applicable margin for LIBOR Rate borrowings was 1.75% and the applicable margin for Prime Rate borrowings was 0.75%.
In addition, the Company is required to pay a commitment fee of between 0.10% and 0.25% quarterly (currently 0.175%) on the unused
portion of the Revolving Facility, also based on the Company’s Total Leverage Ratio. The Revolving Facility is secured
by substantially all of the Company’s non-realty assets and is fully and unconditionally guaranteed by certain of the Company’s
subsidiaries.
Financial covenants under the Credit Agreement require the Company
to maintain a minimum interest coverage ratio (based on trailing twelve-month EBITDA) of at least 3.0:1.0 at the end of each fiscal
quarter. As provided under the Credit Agreement, the Company elected to temporarily increase the Total Leverage Ratio by
0.5x over the otherwise maximum during the twelve-month period following the TCI acquisition. In addition to the minimum
interest coverage ratio, the Company’s Total Leverage Ratio at the end of any fiscal quarter shall not be greater than 3.5:1.0
through December 31, 2019, 3.25:1.0 through June 30, 2020 and 3.0:1.0 thereafter. The Credit Agreement also includes
covenants and restrictions that limit the Company’s ability to incur additional indebtedness, merge, consolidate or sell
all or substantially all its assets and enter into transactions with an affiliate of the Company on other than an arms’ length
transaction. These covenants, which are described more fully in the Credit Agreement, to which reference is made for a complete
statement of the covenants, are subject to certain exceptions. The Company was in compliance with all covenants at December 31,
2019.
The Credit Agreement also includes customary events of default,
including failure to pay principal, interest or fees when due, failure to comply with covenants, if any representation or warranty
made by the Company is false or misleading in any material respect, default under certain other indebtedness, certain insolvency
or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, the occurrence
of certain ERISA events, the invalidity of the loan documents or a change in control of the Company. The amounts outstanding
under the Revolving Facility may be accelerated upon certain events of default.
ALLIED MOTION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share
data)
Other
The China Facility provides credit of approximately $1,435 (Chinese
Renminbi (“RMB”) 10,000). The China Facility is used for working capital and capital equipment needs at the Company’s
China operations, and the lender may demand payment at any time. The average balance for 2019 was $0 (RMB 0). At December 31,
2019, there was approximately $1,435 (RMB 10,000) available under the facility.
Deferred Financing Fees
Deferred financing costs net of accumulated
amortization were $320 as of December 31, 2019. These costs will be amortized over the 5 year term of the Amended Credit Facility
as defined in Note 14, Subsequent Events.
|
8.
|
DERIVATIVE FINANCIAL INSTRUMENTS
|
The Company is exposed to certain risks arising from both its
business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational
risks through management of its core business activities. The Company manages economic risks, including interest rate, and foreign
exchange risk primarily through the use of derivative financial instruments. Specifically, the Company enters into derivative financial
instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash
amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to
manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related
to the Company’s borrowings.
The Company’s objectives in using interest rate derivatives
are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the
Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated
as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments
over the life of the agreements without exchange of the underlying notional amount. In February 2017, the Company entered
into three interest rate swaps with a combined notional of $40,000 that mature in February 2022.
The changes in the fair value of derivatives designated and
that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income (Loss) and is subsequently reclassified
into earnings in the period that the hedged forecasted transaction affects earnings. During 2019 and 2018, such derivatives were
used to hedge the variable cash flows associated with existing variable-rate debt.
The Company estimates that an additional $149 will be reclassified
as an increase to interest expense over the next twelve months. Additionally, the Company does not use derivatives for trading
or speculative purposes and currently does not have any derivatives that are not designated as hedges.
The table below presents the fair value of the Company’s
derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2019,
and 2018 (in thousands):
|
|
|
|
Asset
Derivatives
|
|
|
|
|
Liability
Derivatives
|
|
|
|
|
|
Fair
value as of:
|
|
|
|
|
Fair
value as of:
|
|
|
|
|
|
December 31,
|
|
|
|
|
December 31,
|
|
Derivatives
designated as
hedging instruments
|
|
Balance
Sheet
Location
|
|
2019
|
|
|
2018
|
|
|
Balance
Sheet
Location
|
|
2019
|
|
|
2018
|
|
Interest rate products
|
|
Other long-term assets
|
|
$
|
-
|
|
|
$
|
566
|
|
|
Other long-term liabilities
|
|
$
|
363
|
|
|
$
|
-
|
|
ALLIED MOTION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share
data)
The table below presents the effect of cash flow hedge accounting
on other comprehensive income (loss) (OCI) for the years ended December 31, 2019, 2018 and 2017 (in thousands):
|
|
Amount
of gain (loss) recognized in OCI
|
|
|
|
on
derivatives
|
|
Derivatives
in cash flow hedging
|
|
|
|
relationships
|
|
Year
ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Interest rate products
|
|
$
|
(598
|
)
|
|
$
|
244
|
|
Location
of (gain) loss reclassified
|
|
|
|
from
accumulated OCI into
|
|
Amount
of (gain) loss reclassified from accumulated OCI into income
|
|
income
|
|
Year
ended December 31,
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
Interest expense
|
|
$
|
(113
|
)
|
$
|
(6
|
)
|
$
|
313
|
|
The tables below presents the effect of the Company’s
derivative financial instruments on the consolidated statements of income and comprehensive income for the years ended December 31,
2019, 2018 and 2017 (in thousands):
|
|
|
|
Total
amounts of income and expense line items presented that reflect the
|
|
Derivatives
designated as
|
|
|
|
effects
of cash flow hedges recorded
|
|
hedging
instruments
|
|
Income
Statement Location
|
|
Year
ended December 31,
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Interest rate products
|
|
Interest expense
|
|
$
|
5,134
|
|
|
$
|
2,701
|
|
|
$
|
2,474
|
|
The tables below present a gross presentation, the effects of
offsetting, and a net presentation of the Company’s derivatives as of December 31, 2019 and 2018. The net amounts of
derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value
provides the location that derivative assets and liabilities are presented on the consolidated balance sheets (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
amounts
|
|
|
Net
amounts of
|
|
|
Gross
amounts not offset in the consolidated
|
|
As
of
|
|
Gross
amounts
|
|
|
offset
in the
|
|
|
liabilities presented
in
|
|
|
balance
sheets
|
|
December 31,
|
|
of
recognized
|
|
|
consolidated
|
|
|
the consolidated
|
|
|
Financial
|
|
|
Cash
collateral
|
|
|
|
|
2019
|
|
liabilities
|
|
|
balance
sheets
|
|
|
balance
sheets
|
|
|
instruments
|
|
|
received
|
|
|
Net
amount
|
|
Derivatives
|
|
$
|
363
|
|
|
$
|
-
|
|
|
$
|
363
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
363
|
|
|
|
|
|
|
Gross amounts
|
|
|
Net amounts of assets
|
|
|
Gross amounts not offset in the consolidated
|
|
As of
|
|
Gross amounts
|
|
|
offset in the
|
|
|
presented in the
|
|
|
balance sheets
|
|
December 31,
|
|
of recognized
|
|
|
consolidated
|
|
|
consolidated balance
|
|
|
Financial
|
|
|
Cash collateral
|
|
|
|
|
2018
|
|
assets
|
|
|
balance sheets
|
|
|
sheets
|
|
|
instruments
|
|
|
received
|
|
|
Net amount
|
|
Derivatives
|
|
$
|
566
|
|
|
$
|
-
|
|
|
$
|
566
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
566
|
|
The Company has agreements with each of
its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in
default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
ALLIED MOTION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share
data)
The provision for income taxes is based on income before income
taxes as follows (in thousands):
|
|
For the year ended
|
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
December 31,
2017
|
|
Domestic
|
|
$
|
17,188
|
|
|
$
|
10,894
|
|
$
|
8,076
|
|
Foreign
|
|
|
6,653
|
|
|
|
9,787
|
|
|
8,060
|
|
Income before income taxes
|
|
$
|
23,841
|
|
|
$
|
20,681
|
|
$
|
16,136
|
|
Components of the total provision for income taxes are as follows
(in thousands):
|
|
For
the year ended
|
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
December 31,
2017
|
|
Current provision
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
4,313
|
|
|
$
|
1,663
|
|
$
|
4,750
|
|
Foreign
|
|
|
2,618
|
|
|
|
3,169
|
|
|
2,566
|
|
Total current provision
|
|
|
6,931
|
|
|
|
4,832
|
|
|
7,316
|
|
Deferred provision
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
199
|
|
|
|
675
|
|
|
925
|
|
Foreign
|
|
|
(311
|
)
|
|
|
(751
|
)
|
|
(141
|
)
|
Total deferred provision
|
|
|
(112
|
)
|
|
|
(76
|
)
|
|
784
|
|
Provision for income taxes
|
|
$
|
6,819
|
|
|
$
|
4,756
|
|
$
|
8,100
|
|
The provision for income taxes differs from the amount determined
by applying the federal statutory rate as follows:
|
|
For
the year ended
|
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
Tax provision, computed at statutory rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
|
|
35.0
|
%
|
State tax, net of federal impact
|
|
|
4.5
|
%
|
|
|
3.0
|
%
|
|
|
3.6
|
%
|
Change in valuation allowance
|
|
|
0.3
|
%
|
|
|
2.8
|
%
|
|
|
1.9
|
%
|
Effect of foreign tax rate differences
|
|
|
1.5
|
%
|
|
|
3.4
|
%
|
|
|
(4.2
|
)%
|
Permanent items, other
|
|
|
1.4
|
%
|
|
|
0.8
|
%
|
|
|
0.2
|
%
|
Section 162(m) compensation
|
|
|
1.1
|
%
|
|
|
0.1
|
%
|
|
|
0.0
|
%
|
R&D Credit
|
|
|
(2.5
|
)%
|
|
|
(0.8
|
)%
|
|
|
(2.2
|
)%
|
Restricted stock awards
|
|
|
(0.1
|
)%
|
|
|
(2.3
|
)%
|
|
|
(2.6
|
)%
|
Effect of Tax Cuts and Jobs Act
|
|
|
(0.4
|
)%
|
|
|
(5.1
|
)%
|
|
|
19.4
|
%
|
Tax examinations
|
|
|
1.8
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Other
|
|
|
0.0
|
%
|
|
|
0.1
|
%
|
|
|
(0.9
|
)%
|
Provision for income taxes
|
|
|
28.6
|
%
|
|
|
23.0
|
%
|
|
|
50.2
|
%
|
The Tax Cuts and Jobs Act was enacted on December 22, 2017.
The provisions of the Act significantly revised the U.S. corporate income tax rules and, among other things, required companies
to record a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and reduced the
US federal corporate tax rate from 35% to 21%, resulting in a remeasurement of deferred tax assets and liabilities.
In 2017, the Company recorded provisional amounts for certain
enactment date effects of the Act by applying the guidance of SEC Staff Accounting Bulletin No. 118 (“SAB 118”)
because the enactment date accounting for these effects had not been completed. In 2018, the Company completed its accounting for
these provisions and recorded an income tax benefit related to the enactment date effect of the Act.
ALLIED MOTION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
In 2017 the Company recognized a provisional amount of $3,133
for the effects of the one-time transition tax and of the rate reduction on its exiting deferred tax balances. This amount was
included as a component of the provision for income taxes. In 2018, the amount was adjusted to $2,898, resulting in a reduction
to the 2018 provision for income taxes by $235. The adjustments made to enactment date provisional amounts decreased the effective
tax rate in 2018 by 1.1%.
The one-time transition tax was based on total post-1986 earnings
and profits (“E&P”) which had been previously deferred from US income taxes. In 2017, the Company recorded a provisional
amount for the one-time transition tax liability resulting in a transition tax liability of $3,140 at December 31, 2017. Upon
further analyses of the Act and notices and regulations issued and proposed by the US Department of Treasury and the Internal Revenue
Service (“IRS”), the Company finalized its calculation of the transition tax liability during 2018. As a result, the
amount decreased by $17, which is included as a component of the provision for income taxes. The Company has elected to pay its
transition tax liability over the eight-year period provided in the Act. The Company had tax return overpayments that the IRS has
indicated will first be applied to the transition tax liability. As of December 31, 2019, the remaining balance of our transition
tax obligation is $1,858 which will be paid over the next several years. This amount is included in Other long term liabilities
on the consolidated balance sheet.
As of December 31, 2017, the Company remeasured certain
deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally
21%. The provisional amount recorded related to the remeasurement of deferred tax balances was $(7). Upon further analysis of certain
aspects of the Act and refinement of the Company’s calculations during 2018, the Company decreased this provision amount
by $218, which was included as a component of the provision for income taxes.
The tax effects of significant temporary differences and credit
and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows (in thousands):
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Noncurrent deferred tax assets:
|
|
|
|
|
|
|
|
|
Employee benefit plans
|
|
$
|
2,440
|
|
|
$
|
1,983
|
|
Net operating loss and tax credit carryforwards
|
|
|
1,675
|
|
|
|
1,507
|
|
Allowances and other
|
|
|
795
|
|
|
|
983
|
|
Other
|
|
|
428
|
|
|
|
326
|
|
Total noncurrent deferred tax assets
|
|
|
5,338
|
|
|
|
4,799
|
|
Valuation allowance
|
|
|
(1,077
|
)
|
|
|
(1,003
|
)
|
Net noncurrent deferred tax assets:
|
|
$
|
4,261
|
|
|
$
|
3,796
|
|
|
|
|
|
|
|
|
|
|
Net noncurrent deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
$
|
3,901
|
|
|
$
|
3,708
|
|
Goodwill and intangibles
|
|
|
2,885
|
|
|
|
3,188
|
|
Other
|
|
|
384
|
|
|
|
419
|
|
Total deferred tax liabilities
|
|
$
|
7,170
|
|
|
$
|
7,315
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset/(deferred tax liability)
|
|
$
|
(2,909
|
)
|
|
$
|
(3,519
|
)
|
Realization of the Company’s recorded deferred tax assets
is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain
benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards.
The Company generated excess foreign tax credits in 2017 due to the one-time transition tax required by enactment of the Tax Cuts
and Jobs Act in the amount of $0.9 million. The Company determined it is more likely than not that it will not realize a tax benefit
from these credits. Additionally, the Company has incurred net operating losses in certain states that it is more likely than not
will not be realized. The tax effect of these losses is $0.2 million. Therefore, the Company recognized a full valuation allowance
related to these foreign tax credits and state net operating losses.
The Company has foreign operating losses that relate to a foreign
subsidiary acquired in 2010. At the time of the acquisition, the Company could not conclude, on a more likely than not basis, that
it would ultimately realize tax benefits from these losses and credits, and therefore valued the deferred benefit at zero. In 2018,
the Company believed it is more likely than not it will realize the benefits of its deferred tax assets and recorded a full reversal
of the valuation allowance related to the foreign operating losses.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per
share data)
The amount of deferred tax assets considered realizable is subject
to adjustment in future periods if estimates of future taxable income are changed. The Company believes that it is more likely
than not that it will realize the benefits of its deferred tax assets, net of valuation allowances as of December 31, 2019.
The Company files income tax returns in various U.S. and foreign
taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major
tax jurisdictions for periods before 2016. With few exceptions, the Company is no longer subject to tax examinations in the foreign
jurisdictions for periods prior to 2015.
In general, it is the practice and intention of the Company
to reinvest the earnings of its non-domestic subsidiaries in activities outside the United States. Exceptions may be made on a
year-by-year basis to repatriate earnings of certain foreign subsidiaries based on cash needs in the United States.
Accounting Standards Update ASU No. 2016-02, Leases
(Topic 842), requires the Company to recognize a right of use (“ROU”) asset and a lease liability for all leases
with terms greater than 12 months. Refer to Note 1, Business and Summary of Significant Accounting Policies, for discussion
of the adoption of Topic 842.
The Company has operating leases for office space, manufacturing
equipment, computer equipment and automobiles. Many leases include one or more options to renew, some of which include options
to extend the leases for a long-term period, and some leases include options to terminate the leases within 30 days. In certain
of the Company’s lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for capital
area maintenance, utilities, inflation and/or changes in other indexes.
For the year ended December 31, 2019, the components of
operating lease expense were as follows (in thousands):
|
|
December 31, 2019
|
|
Fixed operating lease expense
|
|
$
|
4,018
|
|
Variable operating lease expense
|
|
|
733
|
|
|
|
$
|
4,751
|
|
Supplemental cash flow information related to the Company’s
operating leases for the year ended December 31, 2019 was as follows (in thousands):
Cash paid for amounts included in the measurement of operating leases
|
|
$
|
4,886
|
|
ROU assets obtained in exchange for operating lease obligations
|
|
$
|
20,717
|
|
ALLIED
MOTION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
The following table presents the lease balances within the consolidated
balance sheet, weighted average remaining lease term, and weighted average discount rates related to the Company’s operating
leases as of December 31, 2019 (in thousands except for the weighted average remaining lease term and weighted average discount
rate):
Lease assets and liabilities
|
|
Classification
|
|
Amount
|
|
Assets:
|
|
|
|
|
|
|
Right of use asset
|
|
Other long-term assets
|
|
$
|
16,420
|
|
Liabilities:
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Right of use liability, current
|
|
Accrued liabilities
|
|
$
|
3,203
|
|
Long-term
|
|
|
|
|
|
|
Right of use liability, long-term
|
|
Other long-term liabilities
|
|
|
13,715
|
|
Total ROU lease liabilities
|
|
|
|
$
|
16,918
|
|
Weighted average remaining lease term
|
|
|
|
|
8.27
|
|
Weighted average discount rate
|
|
|
|
|
2.91
|
%
|
The following table presents the maturity of the Company’s
operating lease liabilities as of December 31, 2019 (in thousands):
2020
|
|
$
|
3,635
|
|
2021
|
|
|
2,935
|
|
2022
|
|
|
2,328
|
|
2023
|
|
|
2,065
|
|
2024
|
|
|
1,641
|
|
Thereafter
|
|
|
6,087
|
|
Total undiscounted cash flows
|
|
|
18,691
|
|
Less: present value discount
|
|
|
(1,773
|
)
|
Total lease liabilities
|
|
$
|
16,918
|
|
As of December 31, 2019, the Company had no additional
significant operating or finance leases that had not yet commenced.
|
11.
|
COMMITMENTS AND CONTINGENCIES
|
Severance Benefit Agreements
As of December 31, 2019, the Company has annually renewable
severance benefit agreements with key employees which, among other things, provide inducement to the employees to continue to work
for the Company during and after any period of a potential change in control of the Company. The agreements provide the employees
with specified benefits upon the subsequent severance of employment in the event of change in control of the Company and are effective
for 24 months thereafter.
Litigation
The Company is involved in certain actions that have arisen
out of the ordinary course of business. Management believes that resolution of the actions will not have a significant adverse
effect on the Company’s consolidated financial statements.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
|
12.
|
DEFERRED COMPENSATION ARRANGEMENTS
|
The Company has deferred compensation arrangements with certain
key members of management. These arrangements provide the Board and its committees with another mechanism to provide pay
for performance based incentive compensation to certain executive participants. It also allows for the participants to make
certain deferrals into the plan. The amount of the liability is comprised of liabilities from previous contributions.
Amounts accrued relating to previous periods are $4,695 and $3,967 as of December 31, 2019 and 2018, respectively, and are
included in other long-term liabilities in the consolidated balance sheets.
The Company operates in one segment for the manufacture and
marketing of controlled motion products for OEM and end user applications. The Company’s chief operating decision maker
has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating
resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to
segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide
disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports
revenue.
Financial information related to the foreign subsidiaries is
summarized below (in thousands):
|
|
For the year ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Revenues derived from foreign subsidiaries
|
|
$
|
126,737
|
|
|
$
|
126,104
|
|
|
$
|
107,039
|
|
Identifiable assets outside of the United States are $95,777
and $88,400 as of December 31, 2019 and 2018, respectively.
Revenues derived from foreign subsidiaries and identifiable
assets outside of the United States are primarily attributable to Europe.
Sales to customers outside of the United States by all subsidiaries
were $159,365, $146,835 and $119,212 during 2019, 2018 and 2017, respectively.
For 2019, 2018 and 2017 one customer accounted for 16%, 19%
and 18% of revenues, respectively, and as of December 31, 2019 and 2018 for 17% and 13% of trade receivables, respectively.
Credit Agreement amendment
On February 12, 2020, Allied Motion Technologies Inc. (the
“Company”) entered into a First Amended and Restated Credit Agreement (the “Amended Credit Agreement”)
for a $225 million revolving credit facility (the “Amended Revolving Facility”). The significant changes made to the
Company’s existing credit facility by the Amended Credit Agreement include (i) increasing the maximum principal amount
from $175 million to $225 million, (ii) providing for a $75 million accordion amount, (iii) decreasing certain interest-rate
margins and fees, and (iv) extending the term to February 2025. HSBC Bank USA, National Association is the administrative
agent, and HSBC Securities (USA) Inc., KeyBank National Association, Wells Fargo Bank, National Association and Citizens Bank,
N.A. are joint lead arrangers.
Borrowings under the Amended Revolving Facility will bear interest
at the LIBOR Rate (as defined in the Amended Credit Agreement) plus a margin of 1.00% to 1.75% or the Alternative Base Rate (as
defined in the Amended Credit Agreement) plus a margin of 0% to 0.75%, in each case depending on the Company’s ratio of Funded
Indebtedness (as defined in the Amended Credit Agreement) to Consolidated EBITDA (the “Leverage Ratio”). Borrowings
under the Amended Revolving Facility will bear interest at a weighted average rate of 3.05% at February 12, 2020 (compared
to 3.30% prior to the Amended Revolving Facility). In addition, the Company is required to pay a commitment fee of between 0.10%
and 0.225% quarterly (currently 0.175%) on the unused portion of the Amended Revolving Facility, also based on the Company’s
Leverage Ratio. The Amended Revolving Facility is secured by substantially all of the Company’s non-realty assets and is
fully and unconditionally guaranteed by certain of the Company’s subsidiaries.
ALLIED
MOTION TECHNOLOGIES INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
Financial covenants under the Amended Credit Agreement require
the Company to maintain a minimum interest coverage ratio of at least 3.0:1.0 at the end of each fiscal quarter. In addition, the
Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 3.5:1.0; provided that the Company may
elect to temporarily increase the Leverage Ratio to 4.0:1.0 during the twelve-month period following a material acquisition under
the Amended Credit Agreement. The Amended Credit Agreement also includes covenants and restrictions that limit the Company’s
ability to incur additional indebtedness, merge, consolidate or sell all or substantially all of its assets and enter into transactions
with an affiliate of the Company on other than an arms’ length transaction. These covenants, which are described more fully
in the Amended Credit Agreement, to which reference is made for a complete statement of the covenants, are subject to certain exceptions.
The Amended Credit Agreement also includes customary events
of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, if any representation
or warranty made by the Company is false or misleading in any material respect, default under certain other indebtedness, certain
insolvency or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, the
occurrence of certain ERISA events, the invalidity of the loan documents or a change in control of the Company. The amounts outstanding
under the Amended Revolving Facility may be accelerated upon certain events of default.
Acquisition
On March 7, 2020, the Company acquired Dynamic Controls
Group (“Dynamic Controls”), a wholly owned subsidiary of Invacare Corporation, a market-leading designer and manufacturer
of equipment for the medical mobility and rehabilitation markets. Dynamic Controls brings strong leadership and a very experienced
electronics and software engineering design team that provides market leading electronic control solutions for the medical mobility
and rehabilitation markets. Dynamic’s product suite and solutions will further strengthen the Company’s medical market
position around patient mobility and rehabilitation, as well as enable it to further develop higher level solutions with embedded
electronics across our other major served markets. The Company paid $15,000 plus cash acquired at closing. The Company expects
to determine the preliminary purchase price allocation prior to the end of the first quarter of 2019.
ALLIED MOTION TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In
thousands, except share and per share data)
|
15.
|
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
|
Selected quarterly financial data for each of the four quarters
in years 2019 and 2018 is as follows (in thousands, except per share data):
Year 2019
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
Revenues
|
|
$
|
93,896
|
|
|
$
|
92,630
|
|
|
$
|
96,633
|
|
|
$
|
87,925
|
|
Gross profit
|
|
|
27,662
|
|
|
|
28,422
|
|
|
|
30,030
|
|
|
|
26,470
|
|
Net income
|
|
|
4,470
|
|
|
|
4,445
|
|
|
|
4,618
|
|
|
|
3,489
|
|
Basic earnings per share
|
|
|
0.48
|
|
|
|
0.47
|
|
|
|
0.49
|
|
|
|
0.37
|
|
Diluted earnings per share
|
|
|
0.48
|
|
|
|
0.47
|
|
|
|
0.49
|
|
|
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year 2018
|
|
|
First
Quarter
|
|
|
|
Second
Quarter
|
|
|
|
Third
Quarter
|
|
|
|
Fourth
Quarter
|
|
Revenues
|
|
$
|
76,576
|
|
|
$
|
79,981
|
|
|
$
|
80,092
|
|
|
$
|
73,962
|
|
Gross profit
|
|
|
22,554
|
|
|
|
23,517
|
|
|
|
23,762
|
|
|
|
21,570
|
|
Net income
|
|
|
4,198
|
|
|
|
4,231
|
|
|
|
4,860
|
|
|
|
2,636
|
|
Basic earnings per share
|
|
|
0.45
|
|
|
|
0.46
|
|
|
|
0.52
|
|
|
|
0.28
|
|
Diluted earnings per share
|
|
|
0.45
|
|
|
|
0.45
|
|
|
|
0.52
|
|
|
|
0.28
|
|
Note: The
sum of the quarterly net income per share (basic and diluted) may differ from the annual net income per share (basic and diluted)
because of differences in the weighted average number of common shares outstanding and the common shares used in the quarterly
and annual computations as well as differences in rounding.