Allied motion reports second quarter 2017 results
Amherst, n.y.--(business wire)--allied motion technologies inc. (nasdaq:amot) (“company”), a designer and manufacturer that sells precision motion control products and solutions to the global market, today reported financial results for the second quarter ended june 30, 2017. “the second quarter results were generally in line with our expectations given the persistent weakness in our vehicle market,” commented dick warzala, chairman and ceo of allied motion. “encouragingly, on a trailing twelve-month basis, we have achieved considerable growth within our medical, industrial/electronics and aerospace & defense markets. notably, we are seeing very strong response to our solutions for factory automation. another area of focus has been on expanding our channels to market through the use of distributors. though still a small contributor to total revenue, early indications have been positive.” furthering one allied by reorganizing motor operations in north america the company announced that it is reorganizing and realigning its north america motor operations into one business as allied motion - north american motors which will report to robert p. maida, the company’s vice president of operational excellence. this new structure enables allied motion to unlock and scale innovation while unifying processes across the organization, to significantly increase its value proposition and help insure the company “wins” those opportunities critical to its future. mr. maida’s lean manufacturing knowledge and broad business experience provides the leadership required to better position the company for long-term growth and profitability. mr. warzala commented, “through the year, we have been adapting operations to address lower volume from our vehicle market, and are now implementing major organizational changes to our motor operations in north america to eliminate redundancies and accelerate efforts to capture operational and sales synergies. the reorganization will align sales, engineering and manufacturing with our target markets to increase market penetration. we believe these changes will further our one allied approach to meet customers’ needs through a more collaborative organization and improve our speed to market with new solutions.” second quarter 2017 results (narrative compares with prior-year period unless otherwise noted) revenue was $60.3 million, down $5.5 million, or 8.4%. the change reflects higher sales to the industrial/electronics and medical markets as well as a significant increase in distribution sales, more than offset by sluggish demand within the vehicle market and the timing of some aerospace business. excluding the unfavorable effects of foreign currency exchange (fx), second quarter revenue was $61.3 million, down $4.5 million, or 6.9%, from the prior-year period. sales to u.s. customers were 54% of total sales for the quarter compared with 55% for the same period last year, with the balance of sales to customers primarily in europe, canada and asia. gross profit was $17.9 million, or 29.6% of revenue, compared with $19.9 million, or 30.2% of revenue. the 60 basis point decline in gross margin was due to lower volume. total operating costs and expenses were up slightly by $0.2 million, or 1.8%, to $13.9 million. general and administrative (g&a) expenses were $6.0 million. g&a expenses declined more than 10% when excluding a $0.8 million insurance proceed benefit from last year’s second quarter. the decline was the result of synergies, cost control and lower incentive compensation. as a percent of sales, selling expenses were up 50 basis points to 4.5%, and reflected the addition of new sales management and other personnel additions. the $0.1 million in business development costs in the 2016 second quarter was carryover from the heidrive acquisition. engineering and development (“e&d”) was up 5.5%, or $0.2 million, to $4.4 million and increased as a percent of revenue to 7.3% from 6.3%. the increase in e&d investments were focused on customer specific motion solutions and reflects the growing pipeline of motion solution opportunities. operating income was $4.0 million compared with $6.2 million. given the lower cost of debt with the new credit facility in 2016, interest expense decreased $1.0 million, or nearly 60%, to $0.6 million. the effective tax rate in the first quarter was 31.8%. the company anticipates its effective tax rate for 2017 to be approximately 29% to 32%. net income was $2.2 million, or $0.24 per diluted share, compared with $3.2 million, or $0.34 per diluted share. earnings before interest, taxes, depreciation, amortization, stock compensation expense, and business development costs (“adjusted ebitda”) was $6.9 million, or 11.4% of revenue, compared with $8.7 million, or 13.2%, in the prior-year period. the company believes that, when used in conjunction with measures prepared in accordance with u.s. generally accepted accounting principles, adjusted ebitda, which is a non-gaap measure, helps in the understanding of its operating performance. see the attached tables for a description of non-gaap financial measures and reconciliation tables for constant currency and adjusted ebitda. year-to-date (ytd) 2017 results (narrative compares with prior-year period unless otherwise noted) the same factors affecting the second quarter results had a similar impact on results in the 2017 first half. sales to u.s. customers were 54% of total sales on a year-to-date basis compared with 55% for the same period last year. g&a expenses declined $0.6 million, or 4.5%, to $11.7 million and when excluding the insurance benefit from 2016, g&a was down 10%. e&d as a percent of revenue increased to 7.1% in the first half of 2017 from 6.4%. net income was $4.9 million, or $0.53 per diluted share, for the first half of 2017. balance sheet and cash flow review cash and cash equivalents at the end of the second quarter were $14.7 million compared with $15.5 million at 2016 year-end. year-to-date cash provided by operations was $7.4 million, up measurably from $1.7 million during the first half of 2016. the increase reflects working capital changes, particularly in the prior-year period which had more cash used for trade receivables and settlement of liabilities due to the heidrive acquisition. capital expenditures of $2.7 million included productivity and growth initiatives. capital expenditures in 2017 are expected to be somewhat similar to 2016, at approximately $5 million to $6 million. debt was reduced by $5.5 million, using cash generated from operations and cash on hand, to $65.9 million at quarter-end compared with $71.4 million at year-end 2016. debt, net of cash, was $51.2 million, or 38.5% of net debt to capitalization. orders and backlog summary ($ in thousands) $ 60,459 $ 56,543 $ 59,088 $ 68,347 $ 77,954 $ 78,602 $ 77,683 $ 80,742 the sequential quarterly increase in orders was mostly the result of strength in the company’s medical, industrial, and aerospace & defense markets. the company also saw increased demand through distributors. the decrease in orders compared with the prior-year second quarter reflect softness in the company’s vehicle market. excluding the negative $1.0 million impact of fx, orders were $66.8 million in the 2017 second quarter, down $1.6 million, or 2%, from the prior year. backlog was up 5.6% over the prior-year period and a more substantial 9.4% since the end of the sequential 2017 first quarter. the time to convert the majority of backlog to sales is approximately three to six months. the recent incremental increase in backlog is considered more long-term than typical, and is expected to be converted to sales within the next twelve months. mr. warzala concluded, “orders have been strengthening throughout the year and we ended the quarter with a record backlog. given the nature of the backlog, we do not expect to see the full benefit of the increase until 2018.” conference call and webcast the company will host a conference call and webcast on thursday, august 3, 2017 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, participants can dial (778) 327-3988. in addition, the call will be webcast live and may be found at: http://www.alliedmotion.com/investors a telephonic replay will be available from 1:00 pm et on the day of the call through thursday, august 10, 2017. to listen to the archived call, dial (412) 317-6671 and enter replay pin number 10003155 or access the webcast replay via the company’s website. a transcript will also be posted to the website once available. about allied motion technologies inc. allied motion (nasdaq: amot) designs, manufactures and sells precision and specialty motion control components and systems used in a broad range of industries within our major served markets, which include vehicle, medical, aerospace & defense, and industrial/electronics. the company is headquartered in amherst, ny, has global operations and sells into markets across the united states, canada, south america, europe and asia. allied motion is focused on motion control applications and is known worldwide for its expertise in electro-magnetic, mechanical and electronic motion technology. its products include brush and brushless dc motors, brushless servo and torque motors, coreless dc motors, integrated brushless motor-drives, gear motors, gearing, modular digital servo drives, motion controllers, incremental and absolute optical encoders, and other associated motion control-related products. the company’s growth strategy is focused on becoming the motion solution leader in its selected target markets by leveraging its “technology/know how” to develop integrated precision motion solutions that utilize multiple allied motion technologies to “change the game” and create higher value solutions for its customers. the company routinely posts news and other important information on its website at http://www.alliedmotion.com/. safe harbor statement the statements in this news release and in the company’s august 3, 2017 conference call that relate to future plans, events or performance are “forward-looking statements” within the meaning of the private securities litigation reform act of 1995. forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the word “believe,” “anticipate,” “expect,” “project,” “intend,” “will continue,” “will likely result,” “should” or words or phrases of similar meaning. forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from the expected results described in the forward-looking statements. the risks and uncertainties include those associated with: the domestic and foreign general business and economic conditions in the markets we serve, including political and currency risks and adverse changes in local legal and regulatory environments; the introduction of new technologies and the impact of competitive products; the ability to protect the company’s intellectual property; our ability to sustain, manage or forecast its growth and product acceptance to accurately align capacity with demand; the continued success of our customers and the ability to realize the full amounts reflected in our order backlog as revenue; the loss of significant customers or the enforceability of the company’s contracts in connection with a merger, acquisition, disposition, bankruptcy, or otherwise; our ability to meet the technical specifications of our customers; the performance of subcontractors or suppliers and the continued availability of parts and components; changes in government regulations; the availability of financing and our access to capital markets, borrowings, or financial transactions to hedge certain risks; the company's ability to realize the annual interest expense savings from its debt refinancing; the ability to attract and retain qualified personnel who can design new applications and products for the motion industry; the ability to implement our corporate strategies designed for growth and improvement in profits including to identify and consummate favorable acquisitions to support external growth and the development of new technologies; the ability to successfully integrate an acquired business into our business model without substantial costs, delays, or problems; our ability to control costs, including the establishment and operation of low cost region manufacturing and component sourcing capabilities; and other risks and uncertainties detailed from time to time in the company’s sec filings. actual results, events and performance may differ materially. readers are cautioned not to place undue reliance on these forward-looking statements as a prediction of actual results. any forward-looking statement speaks only as of the date on which it is made. new risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. the company has no obligation or intent to release publicly any revisions to any forward looking statements, whether as a result of new information, future events, or otherwise. financial tables follow allied motion technologies inc. consolidated statements of income (in thousands, except per share data) (unaudited) allied motion technologies inc. consolidated balance sheets (in thousands, except per share data) june 30,2017 december 31,2016 allied motion technologies inc. consolidated statements of cash flows (in thousands) (unaudited) allied motion technologies inc. reconciliation of non-gaap financial measures (in thousands) in addition to reporting net income, a u.s. generally accepted accounting principle (“gaap”) measure, the company presents adjusted ebitda (earnings before interest, income taxes, depreciation and amortization, stock compensation expense, and business development costs), which is a non-gaap measure. the company believes adjusted ebitda is often a useful measure of a company’s operating performance and is a significant basis used by the company’s management to evaluate and compare the core operating performance of its business from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, stock-based compensation expense, business development costs related to acquisitions, and other items that are not indicative of the company’s core operating performance. adjusted ebitda does not represent and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting principles. the company’s calculation of adjusted ebitda for the three and six months ended june 30, 2017 and 2016 is as follows: allied motion technologies inc. reconciliation of non-gaap financial measures (in thousands) constant currency presentation the company believes constant currency information provides valuable supplemental information that facilitates period-to-period comparisons of the company's business performance. the constant currency presentation, which is a non-gaap measure, excludes the impact of fluctuations in foreign currency exchange rates. constant currency results are calculated by translating current period results in local currency using the prior year's currency conversion rate. the following table reconciles reported amounts to constant currency amounts for the three and six months ended june 30, 2017. % increase (decrease)compared with prioryear amounts % increase (decrease)compared with prioryear amounts
