- Acquisition of Dynamic Controls and the increased demand from
certain medical applications partially offset the reduction in
demand in Allied’s Vehicle markets due to COVID-19
- Vast majority of production continues as supplier for critical
industries
- Achieved gross margin of 30.4%, a 90 basis point improvement
driven by lean manufacturing and improved mix
Allied Motion Technologies Inc. (Nasdaq: AMOT) (“Allied Motion”
or “Company”), a designer and manufacturer that sells precision and
specialty controlled motion products and solutions to the global
market, today reported financial results for its first quarter
ended March 31, 2020. Results include the Dynamic Controls Group
(“Dynamic Controls”) acquisition that was completed on March 7,
2020.
Dick Warzala, Chairman and CEO, commented, “The business impact
due to COVID-19 started in March and was primarily related to a
decline in demand in our Vehicle markets. As we worked through the
various issues caused by COVID-19, our first and foremost
commitment was to our workforce and to ensure the health and safety
of all employees and their families. I personally want to thank our
global management team and all our employees who worked tirelessly
together to create a safe environment, while at the same time
making the necessary adjustments to ensure the needs of our
customers were continuing to be met. Wherever possible, our team is
working remotely, and our manufacturing operations have continued
to produce under stringent practices to protect our employees. I
believe we will come out of this crisis stronger and better than
ever as we operate within the guiding principles of our One Allied
Culture and the focus provided by our Long-Term Strategy.”
Mr. Warzala continued, “Our first quarter results were
relatively solid as we benefitted from the acquisition of Dynamic
Controls and the diversity of the markets we serve. Our global
operations worked closely together to ensure we responded quickly
to the rapidly evolving situation and to meet the significant
increases in demand for several of our products supplied to the
medical market. To ensure we meet short term demand, we have built
inventory in some facilities to address potential temporary
closures and we are working closely with our supply chains to
ensure critical materials are available, when needed. We also
remain intently focused on the long term strength and viability of
our company, with an increased emphasis on cash conservation,
adjusting our variable cost structure to align with market changes,
maintaining strong discipline over fixed costs, retaining our
critical talent, and keeping our team focused on securing several
new project opportunities as well as launching several new
growth-oriented product platforms. While this unparalleled
situation with the novel coronavirus pandemic has tested Allied’s
global response capabilities, our team has done an excellent job
creating safe work environments, operating remotely, supporting
customers’ needs, addressing costs and keeping our eye on the
future.”
First Quarter 2020 Results (Narrative compares with
prior-year period unless otherwise noted)
Revenue of $92.4 million was down 1.6%, and reflected lower
sales to the Vehicle market, partially offset by growth in
Industrial and Medical, which included contributions from Dynamic
Controls. Excluding foreign currency translation, which had a $1.4
million unfavorable impact, revenue was in line with the prior-year
period. Organic revenue declined 2.8% in the quarter. Revenue
excluding the effect of foreign currency translation is a non-GAAP
measure. The Company believes this measure is useful for analyzing
organic sales results. See the attached table for a description of
non-GAAP financial measures and reconciliation of Revenue to
Revenue excluding foreign currency translation.
Gross margin expanded 90 basis points to 30.4%, in large part
due to productivity and improved mix across a number of served
markets, including the favorable impact of Dynamic Controls.
Operating costs and expenses were up $1.0 million, or 23.1% of
revenue, largely due to the incremental expenses related to the
Dynamic Controls acquisition and associated business development
costs. As a result, operating income decreased 8.4% to $6.7 million
and operating margin declined 50 basis points to 7.3%.
First quarter net income was $4.0 million, or $0.42 per diluted
share, compared with $4.5 million, or $0.48 per diluted share.
Excluding business development costs, adjusted net income for the
2020 first quarter was $4.2 million, or $0.44 per diluted share.
See the attached table for a description of non-GAAP financial
measures and reconciliation table for Adjusted Net Income and
Diluted Earnings per Share.
Earnings before interest, taxes, depreciation, amortization,
stock compensation expense and business development costs
(“Adjusted EBITDA”) was $11.4 million for the first quarter
compared with $11.7 million in 2019. As a percent of sales,
Adjusted EBITDA remained relatively consistent at 12.4% versus the
first quarter of 2019. 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.
Customers and Supply Chain: Allied Motion operations continue
as supplier for critical industries
- One Allied approach to simplify interaction with customers
enables seamless continuity for receiving orders and requests for
quotes in all regions.
- Allied Motions’ global operations provide equipment used to
support critical industries including medical, defense and
agriculture qualifying the Company as an essential supplier. As a
result, Allied Motion’s manufacturing facilities remain operational
at this time. Staffing is being adjusted based on the demand in the
operations.
- Where needed, modifications to processes have been made to
accommodate for sufficient social distance and additional cleaning
protocols have been implemented. China operations were back to full
capacity by early March.
- Supply chain in China has mostly recovered. At this time,
supply chains in the U.S. and Europe are functioning.
Liquidity and Balance Sheet: Recent refinancing provides
financial flexibility
- Cash and cash equivalents at quarter end were $20.4 million
compared with $13.4 million at the end of 2019.
- Refinanced lending agreement in February 2020:
- Expanded capacity nearly 30%, or $50 million, to $225
million
- Accordion feature allows expansion of additional $75
million
- Increased leverage coverage ratio of net debt/EBITDA by 0.5x to
3.5x
- Total debt as of March 31, 2020 increased by $26.5 million to
$136.2 million from the end of 2019, and reflects funds used to
make the Dynamic Controls acquisition.
- Debt, net of cash, was $115.9 million, or 48.8% net debt to net
capitalization.
- Capital expenditures for the quarter were $1.7 million. The
Company will control capital expenditures in 2020 to a range of $10
million to $12 million that enables key projects to move forward
and defers lower priority activities.
- To conserve cash while supporting growth plans, Allied is
aligning variable costs with demand, maintaining key engineering
capabilities, freezing hiring activity and wages and tightly
controlling discretionary spending.
Mike Leach, Chief Financial Officer, commented, “We have
continued to demonstrate that our business is capable of generating
significant cash from operations. We are being proactive in
conserving cash during this downturn while preserving the talent
and infrastructure needed to drive future growth potential and to
continue to gain market share.”
Orders and Backlog Summary ($ in
thousands)
Q1
2020
Q4
2019
Q3
2019
Q2
2019
Q1
2019
Orders
$
92,923
$
86,315
$
90,726
$
95,317
$
93,744
Backlog
$
133,187
$
124,950
$
125,821
$
133,507
$
130,646
Foreign currency translation had an unfavorable $1.3 million
impact on first quarter orders compared with the prior-year
period.
The time to convert the majority of backlog to sales is
approximately three to six months. A nominal amount of previously
announced new Vehicle market awards is currently included in
backlog. The Company has begun shipments at very low levels for the
first of three seven-year awards totaling $225 million. With the
COVID-19 situation, Allied Motion now expects production for these
projects to remain flat through 2020 and begin to regain traction
in 2021.
Conference Call and Webcast
The Company will host a conference call and webcast on Thursday,
May 7, 2020 at 10:00 am ET. During the conference call, management
will review the financial and operating results and discuss Allied
Motion’s corporate strategy and outlook. A question and answer
session will follow.
To listen to the live call, dial (201) 689-8263. In addition,
the webcast and slide presentation may be found at:
www.alliedmotion.com/investor-relations
A telephonic replay will be available from 1:00 pm ET on the day
of the call through Thursday, May 14, 2020. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13700691 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 controlled motion products and solutions
used in a broad range of industries within our major served
markets, which include Vehicle, Medical, Aerospace & Defense,
and Industrial. Headquartered in Amherst, NY, the Company has
global operations and sells into markets across the United States,
Canada, South America, Europe and Asia.
Allied Motion is focused on controlled motion 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, active (electronic) and
passive (magnetic) filters for power quality and harmonic issues,
and other controlled motion-related products.
The Company’s growth strategy is focused on being the controlled
motion solutions leader in its selected target markets by
leveraging its “technology/know how” to develop integrated
precision solutions that utilize multiple Allied Motion
technologies to “change the game” and create higher value solutions
for its customers. The Company routinely posts news and other
important information on its website at
http://www.alliedmotion.com/.
Safe Harbor Statement
The statements in this news release and in the Company’s May 7,
2020 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. Examples of forward-looking
statements include, among others, statements the Company makes
regarding expected operating results, anticipated levels of capital
expenditures, the Company’s belief that it has sufficient liquidity
to fund its business operations, and expectations with respect to
the conversion of backlog to sales. Forward-looking statements are
neither historical facts nor assurances of future performance.
Instead, they are based only on the Company’s current beliefs,
expectations and assumptions regarding the future of the Company’s
business, future plans and strategies, projections, anticipated
events and trends, the economy and other future conditions. Because
forward-looking statements relate to the future, they are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict and many of which are outside of the
Company’s control. The Company’s actual results and financial
condition may differ materially from those indicated in the
forward-looking statements. Therefore, you should not rely on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, general economic and business conditions,
conditions affecting the industries served by the Company and its
subsidiaries, conditions affecting the Company's customers and
suppliers, competitor responses to the Company's products and
services, the overall market acceptance of such products and
services, the pace of bookings relative to shipments, the ability
to expand into new markets and geographic regions, the success in
acquiring new business, the impact of changes in income tax rates
or policies, the severity, magnitude and duration of the COVID-19
pandemic, including impacts of the pandemic and of businesses’ and
governments’ responses to the pandemic on our operations and
personnel, and on commercial activity and demand across our and our
customers’ businesses, and on global supply chains; our inability
to predict the extent to which the COVID-19 pandemic and related
impacts will continue to adversely impact our business operations,
financial performance, results of operations, financial position,
the prices of our securities and the achievement of our strategic
objectives and other factors disclosed in the Company's periodic
reports filed with the Securities and Exchange Commission. 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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME (In thousands, except per share data) (Unaudited)
For the three months ended
March 31,
2020
2019
Revenue
$
92,382
$
93,896
Cost of goods sold
64,340
66,234
Gross profit
28,042
27,662
Operating costs and expenses:
Selling
4,243
4,093
General and administrative
9,162
8,950
Engineering and development
6,234
5,807
Business development
247
53
Amortization of intangible assets
1,441
1,432
Total operating costs and expenses
21,327
20,335
Operating income
6,715
7,327
Other expense (income):
Interest expense
1,054
1,180
Other expense (income), net
59
(18
)
Total other expense, net
1,113
1,162
Income before income taxes
5,602
6,165
Provision for income taxes
(1,567
)
(1,695
)
Net income
$
4,035
$
4,470
Basic earnings per share:
Earnings per share
$
0.43
$
0.48
Basic weighted average common shares
9,453
9,340
Diluted earnings per share:
Earnings per share
$
0.42
$
0.48
Diluted weighted average common shares
9,516
9,375
Net income
$
4,035
$
4,470
Foreign currency translation
adjustment
(2,428
)
(887
)
Loss on derivatives
(1,088
)
(262
)
Comprehensive income
$
519
$
3,321
ALLIED MOTION TECHNOLOGIES
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except
per share data) (Unaudited)
March 31, 2020
December 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
20,383
$
13,416
Trade receivables, net of allowance for
doubtful accounts of $462 and $405 at March 31, 2020 and December
31, 2019, respectively
55,420
44,429
Inventories
60,090
53,385
Prepaid expenses and other assets
4,858
4,413
Total current assets
140,751
115,643
Property, plant and equipment, net
52,973
53,008
Deferred income taxes
650
490
Intangible assets, net
68,287
62,497
Goodwill
59,082
52,935
Right of use assets
18,221
16,420
Other long-term assets
4,026
4,835
Total Assets
$
343,990
$
305,828
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
31,299
$
23,640
Accrued liabilities
22,024
23,001
Total current liabilities
53,323
46,641
Long-term debt
136,244
109,765
Deferred income taxes
5,120
3,399
Pension and post-retirement
obligations
5,115
5,139
Right of use liabilities
14,684
13,715
Other long-term liabilities
7,811
7,975
Total liabilities
222,297
186,634
Stockholders’ Equity:
Common stock, no par value, authorized
50,000 shares; 9,711 and 9,599 shares issued and outstanding at
March 31, 2020 and December 31, 2019, respectively
39,406
37,136
Preferred stock, par value $1.00 per
share, authorized 5,000 shares; no shares issued or outstanding
-
-
Retained earnings
96,334
92,589
Accumulated other comprehensive loss
(14,047
)
(10,531
)
Total stockholders’ equity
121,693
119,194
Total Liabilities and Stockholders’
Equity
$
343,990
$
305,828
ALLIED MOTION TECHNOLOGIES
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
(Unaudited)
For the three months
ended
March 31,
2020
2019
Cash Flows From Operating
Activities:
Net income
$
4,035
$
4,470
Adjustments to reconcile net income to net
cash used in
operating activities
Depreciation and amortization
3,750
3,659
Deferred income taxes
(488
)
(297
)
Stock compensation expense
789
674
Debt issue cost amortization recorded in
interest expense
38
43
Other
72
347
Changes in operating assets and
liabilities, net of acquisition:
Trade receivables
(7,463
)
(10,941
)
Inventories
(3,978
)
1,291
Prepaid expenses and other assets
275
(161
)
Accounts payable
3,043
490
Accrued liabilities
(3,039
)
(2,014
)
Net cash used in operating activities
(2,966
)
(2,439
)
Cash Flows From Investing
Activities:
Purchase of property and equipment
(1,696
)
(2,505
)
Cash paid for acquisitions, net of cash
acquired
(14,541
)
-
Net cash used in investing activities
(16,237
)
(2,505
)
Cash Flows From Financing
Activities:
Borrowings on long term debt
26,979
6,568
Dividends paid to stockholders
-
-
Payment of debt issuance costs
(401
)
-
Stock transactions under employee benefit
stock plans
(256
)
(63
)
Net cash provided by financing
activities
26,322
6,505
Effect of foreign exchange rate changes on
cash
(152
)
(50
)
Net increase in cash and cash
equivalents
6,967
1,511
Cash and cash equivalents at beginning of
period
13,416
8,673
Cash and cash equivalents at end of
period
$
20,383
$
10,184
ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of Non-GAAP Financial Measures (In thousands)
(Unaudited)
In addition to reporting net income, a U.S. generally accepted
accounting principle (“GAAP”) measure, the Company presents Revenue
excluding foreign currency exchange rate impacts and Adjusted
EBITDA (earnings before interest, income taxes (benefit),
depreciation and amortization, stock compensation expense, business
development costs and non-income based tax assessment), which are
non-GAAP measures.
The Company believes that Revenue excluding foreign currency
exchange rate impacts is a useful measure in analyzing organic
sales results. The Company excludes the effect of currency
translation from revenue for this measure because currency
translation is not under management’s control, is subject to
volatility and can obscure underlying business trends. The portion
of revenue attributable to currency translation is calculated as
the difference between the current period revenue and the current
period revenue after applying foreign exchange rates from the prior
period.
The Company believes Adjusted EBITDA is often a useful measure
of a Company’s operating performance and is a significant basis
used by the Company’s management to evaluate and compare the core
operating performance of its business from period to period by
removing the impact of the capital structure (interest), tangible
and intangible asset base (depreciation and amortization), taxes,
stock-based compensation expense, business development costs
related to acquisitions, and other items that are not indicative of
the Company’s core operating performance. Adjusted EBITDA does not
represent and should not be considered as an alternative to net
income, operating income, net cash provided by operating activities
or any other measure for determining operating performance or
liquidity that is calculated in accordance with generally accepted
accounting principles.
The Company’s calculation of Revenue excluding foreign currency
exchange impacts for the three months ended March 31, 2020 is as
follows:
Three Months Ended
March 31, 2020
Revenue as reported
$
92,382
Foreign currency translation
1,423
Revenue excluding foreign currency
translation
$
93,805
The Company’s calculation of Adjusted EBITDA for the three
months ended March 31, 2020 and 2019 is as follows:
Three Months Ended
March 31,
2020
2019
Net income
$
4,035
$
4,470
Interest expense
1,054
1,180
Provision for income tax
1,567
1,695
Depreciation and amortization
3,750
3,659
EBITDA
10,406
11,004
Stock compensation expense
789
674
Business development costs
247
53
Adjusted EBITDA
$
11,442
$
11,731
ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of GAAP Net Income and Diluted Earnings per Share to
Non-GAAP Adjusted Net and Diluted Earnings per Share (In thousands,
except per share data) (Unaudited)
The Company’s calculation of Adjusted net income and Adjusted
diluted earnings per share for the three months ended March 31,
2020 and 2019 is as follows:
Three Months Ended
March 31,
2020
Per diluted share
2019
Per diluted share
Net income as reported
$
4,035
$
0.42
$
4,470
$
0.48
Non-GAAP adjustments, net of tax
Business development costs
178
0.02
38
0.00
Adjusted net income and diluted EPS
$
4,213
$
0.44
$
4,508
$
0.48
Weighted average diluted shares
outstanding
9,516
9,375
Adjusted net income and diluted EPS are defined as net income as
reported, adjusted for unusual non-recurring items. Adjusted net
income and diluted EPS are not a measure determined in accordance
with generally accepted accounting principles in the United States,
commonly known as GAAP, and may not be comparable to the measure as
used by other companies. Nevertheless, the Company believes that
providing non-GAAP information, such as adjusted net income and
diluted EPS are important for investors and other readers of the
Company’s financial statements and assists in understanding the
comparison of the current quarter’s and current year’s net income
and diluted EPS to the historical periods’ net income and diluted
EPS.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506006038/en/
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
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