UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Form 10-Q~~

~~Quarterly Report Pursuant to Section 13 or 15(d)~~

~~of the Securities Exchange Act of 1934~~

For the quarterly period ended ~~September 30, 2017~~March 31, 2021.

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________to _________________________

Commission ~~File Number~~ file number 0-04041

ALLIED MOTION TECHNOLOGIES ~~INC.~~INC.

(Exact name of Registrant as Specified in Its Charter)

Colorado
84-0518115
(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

495 Commerce Drive, Amherst, New York
~~14228~~

(Address of principal executive offices)

14228
(Zip Code)

~~(716)~~ (716) 242-8634

(Registrant’s Telephone Number, Including Area Code)

(Former Address, if Changed Since Last Report)

Title of each class

Trading Symbol
Name of each exchange on which registered
Common stock

AMOT

NASDAQ

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days. Yes  x⌧  No  o◻
Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit ~~and post~~ such files). Yes  x⌧  No  o◻
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act. ~~(Check one):~~

Large accelerated filer o◻
Accelerated filer ⌧
~~Accelerated~~Non-accelerated filer x◻

Smaller reporting company ☐
~~Non-accelerated filer~~ o
~~(Do not check if a~~
~~smaller reporting~~
~~company)~~
~~Smaller reporting~~
~~company~~ o
Emerging growth
company o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o☐  No  x
⌧
Number of Shares of the only class of Common Stock outstanding: ~~9,452,969~~14,703,934 as of ~~November 1, 2017~~May 5, 2021

Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
INDEX

~~Page No.~~
PART I. FINANCIAL INFORMATION
Page No.

Item 1.
Financial Statements

Condensed Consolidated Balance Sheets —– Unaudited
1

Condensed Consolidated Statements of ~~Operations~~Income and Comprehensive Income —– Unaudited
2

Condensed Consolidated Statements of Stockholders’ Equity – Unaudited
3

Condensed Consolidated Statements of Cash Flows —– Unaudited
34

Notes to Condensed Consolidated Financial Statements - Unaudited
45

Item 2.
~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations
1317

Item 3.
Quantitative and Qualitative Disclosures About Market Risk
1922

Item 4.
Controls and Procedures
23
~~Item 4.~~
~~Controls and Procedures~~
20
PART II. OTHER INFORMATION
23

~~Item 1A.~~
~~Risk Factors~~
20
~~Item 5.~~
~~Other Information~~
20
~~Item 6.~~
~~Exhibits~~
20
Item 1A.
Risk Factors
23

Item 5.
Unregistered Sales of Equity Securities and Use of Proceeds
24

Item 6.
Other Information
24

Item 7.
Exhibits
24

Table of Contents

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

March 31,

December 31,


2021

2020

Assets

Current assets:

Cash and cash equivalents

$
24,725

$
23,131

Trade receivables, net of provision for credit losses of $509 and $382 at March 31, 2021 and December 31, 2020, respectively

56,252

47,377

Inventories

61,429

62,978

Prepaid expenses and other assets

7,150

8,728

Total current assets

149,556

142,214

Property, plant and equipment, net

54,808

55,428

Deferred income taxes

7,456

330

Intangible assets, net

63,856

65,859

Goodwill

60,902

61,860

Right of use assets

18,881

19,023

Other long-term assets

4,526

4,483

Total Assets

$
359,985

$
349,197

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$
32,382

$
27,668

Accrued liabilities

23,314

24,862

Total current liabilities

55,696

52,530

Long-term debt

119,882

120,079

Deferred income taxes

4,658

4,659

Pension and post-retirement obligations

5,045

5,340

Right of use liabilities

14,895

14,975

Other long-term liabilities

6,761

8,558

Total liabilities

206,937

206,141

Stockholders’ Equity:

Common stock, 0 par value, authorized 50,000 shares; 14,724 and 14,632 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

42,936

41,278

Preferred stock, par value $1.00 per share, authorized 5,000 shares; 0 shares issued or outstanding

—

—

Retained earnings

116,698

105,065

Accumulated other comprehensive loss

(6,586)

(3,287)

Total stockholders’ equity

153,048

143,056

Total Liabilities and Stockholders’ Equity

$
359,985

$
349,197

September 30,
2017

December 31,
2016

Assets

Current assets:

Cash and cash equivalents

$
17,600

$
15,483

Trade receivables, net of allowance for doubtful accounts of $379 and $362 at September 30, 2017 and December 31, 2016, respectively

34,493

26,104

Inventories

32,779

31,098

Prepaid expenses and other assets

3,096

3,120

Total current assets

87,968

75,805

Property, plant and equipment, net

38,157

37,474

Deferred income taxes

492

923

Intangible assets, net

32,776

34,252

Goodwill

29,305

27,522

Other long term assets

4,343

3,943

Total assets

$
193,041

$
179,919

Liabilities and Stockholders’ Equity

Current liabilities:

Debt obligations

526

936

Accounts payable

17,156

13,204

Accrued liabilities

13,742

10,678

Total current liabilities

31,424

24,818

Long-term debt

61,995

70,483

Deferred income taxes

3,129

3,266

Pension and post-retirement obligations

4,403

4,381

Other long term liabilities

5,386

4,685

Total liabilities

106,337

107,633

Stockholders’ Equity:

Common stock, no par value, authorized 50,000 shares; 9,453 and 9,374 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

31,244

29,503

Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding

—

—

Retained earnings

62,033

54,786

Accumulated other comprehensive loss

(6,573
)
(12,003
)
Total stockholders’ equity

86,704

72,286

Total Liabilities and Stockholders’ Equity

$
193,041

$
179,919

See accompanying notes to condensed consolidated financial statements.

1
Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME AND COMPREHENSIVE INCOME
(In thousands, except per share data)
(Unaudited)

For the three months ended

March 31,


2021

2020

Revenues

$
101,677

$
92,382

Cost of goods sold

71,609

64,340

Gross profit

30,068

28,042

Operating costs and expenses:

Selling

4,218

4,243

General and administrative

10,748

9,162

Engineering and development

6,959

6,234

Business development

19

247

Amortization of intangible assets

1,512

1,441

Total operating costs and expenses

23,456

21,327

Operating income

6,612

6,715

Other expense, net:

Interest expense

861

1,054

Other (income) expense, net

(119)

59

Total other expense, net

742

1,113

Income before income taxes

5,870

5,602

Income tax benefit (provision)

6,057

(1,567)

Net income

$
11,927

$
4,035

Basic earnings per share:

Earnings per share

$
0.83

$
0.28

Basic weighted average common shares

14,306

14,180

Diluted earnings per share:

Earnings per share

$
0.83

$
0.28

Diluted weighted average common shares

14,438

14,274

Net income

$
11,927

$
4,035

Other comprehensive income:

Foreign currency translation adjustment

(4,007)

(2,428)

Gain (loss) on derivatives

708

(1,088)

Comprehensive income

$
8,628

$
519

For the three months ended

For the nine months ended

September 30,

September 30,

2017

2016

2017

2016

Revenues

$
64,968

$
61,040

$
186,657

$
190,550

Cost of goods sold

45,422

43,133

131,529

134,274

Gross profit

19,546

17,907

55,128

56,276

Operating costs and expenses:

Selling

2,822

2,431

8,135

7,490

General and administrative

6,255

5,264

17,985

17,551

Engineering and development

4,389

3,961

12,984

12,185

Business development

—

123

—

341

Amortization of intangible assets

813

802

2,405

2,409

Total operating costs and expenses

14,279

12,581

41,509

39,976

Operating income

5,267

5,326

13,619

16,300

Other expense (income):

Interest expense

633

1,504

1,797

4,626

Other expense, net

65

(75
)
135

(190
)
Total other expense, net

698

1,429

1,932

4,436

Income before income taxes

4,569

3,897

11,687

11,864

Provision for income taxes

(1,512
)
(1,076
)
(3,746
)
(3,495
)
Net income

$
3,057

$
2,821

$
7,941

$
8,369

Basic earnings per share:

Earnings per share

$
0.33

$
0.30

$
0.87

$
0.90

Basic weighted average common shares

9,173

9,350

9,137

9,325

Diluted earnings per share:

Earnings per share

$
0.33

$
0.30

$
0.86

$
0.90

Diluted weighted average common shares

9,294

9,350

9,265

9,325

Net income

$
3,057

$
2,821

$
7,941

$
8,369

Foreign currency translation adjustment

1,829

383

5,608

1,346

Change in accumulated (loss) income on derivatives

45

66

(178
)
(56
)
Comprehensive income (loss)

$
4,931

$
3,270

$
13,371

$
9,659

See accompanying notes to condensed consolidated financial statements.

2
Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY
(In ~~thousands)~~thousands, except per share data)
(Unaudited)

For the nine months ended

September 30,

2017

2016

Cash Flows From Operating Activities:

Net income

$
7,941

$
8,369

Adjustments to reconcile net income to net cash provided by operating activities (net of working capital acquired in 2016):

Depreciation and amortization

7,590

7,309

Deferred income taxes

(99
)
1,345

Stock compensation expense

1,473

1,370

Debt issue cost amortization recorded in interest expense

113

—

Other

(26
)
(455
)
Changes in operating assets and liabilities:

Trade receivables

(6,887
)
(5,739
)
Inventories

(379
)
613

Prepaid expenses and other assets

17

1,252

Accounts payable

3,106

(525
)
Accrued liabilities

2,464

(3,574
)
Net cash provided by operating activities

15,313

9,965

Cash Flows From Investing Activities:

Purchase of property and equipment

(4,220
)
(3,694
)
Consideration paid for acquisition, net of cash acquired ($2,329)

—

(16,049
)
Net cash used in investing activities

(4,220
)
(19,743
)

Cash Flows From Financing Activities:

Borrowings on lines-of-credit, net

(441
)
6,802

Principal payments of long-term debt

(9,114
)
(5,625
)
Dividends paid to stockholders

(709
)
(700
)
Stock transactions under employee benefit stock plans

355

268

Net cash (used in) provided by financing activities

(9,909
)
745

Effect of foreign exchange rate changes on cash

933

297

Net increase (decrease) in cash and cash equivalents

2,117

(8,736
)
Cash and cash equivalents at beginning of period

15,483

21,278

Cash and cash equivalents at end of period

$
17,600

$
12,542


Common Stock


Accumulated Other Comprehensive Income (Loss)


Foreign

Unamortized

Common Stock

Currency

Accumulated

Total

Cost of Equity

and Paid-in

Retained

Translation

income (loss)

Pension

Stockholders'
(In thousands except per share data)

Shares

Amount

Awards

Capital

Earnings

Adjustments

on derivatives

adjustments

Equity
Balances, December 31, 2020

14,632

$
47,085

$
(5,807)

$
41,278

$
105,065

$
(216)

$
(1,438)

$
(1,633)

$
143,056
Stock transactions under employee benefit stock plans

32

988

988

988
Issuance of restricted stock, net of forfeitures

81

3,001

(2,872)

129

129
Stock-based compensation expense

797

797

797
Shares withheld for payment of employee payroll taxes

(21)

(256)

(256)

(256)
Comprehensive (loss) income

(4,007)

929

(3,078)
Tax effect of derivative transactions

(221)

(221)
Net income

11,927

11,927
Dividends to stockholders - $0.02

(294)

(294)
Balances, March 31, 2021

14,724

$
50,818

$
(7,882)

$
42,936

$
116,698

$
(4,223)

$
(730)

$
(1,633)

$
153,048


Common Stock


Accumulated Other Comprehensive Income (Loss)


Foreign

Unamortized

Common Stock

Currency

Accumulated

Total

Cost of Equity

and Paid-in

Retained

Translation

income (loss)

Pension

Stockholders'


Shares

Amount

Awards

Capital

Earnings

Adjustments

on derivatives

adjustments

Equity
Balances, December 31, 2019

14,399

$
41,642

$
(4,506)

$
37,136

$
92,589

$
(8,626)

$
(277)

$
(1,628)

$
119,194
Stock transactions under employee benefit stock plans

48

1,252

1,252

1,252
Issuance of restricted stock, net of forfeitures

156

3,574

(3,089)

485

485
Stock-based compensation expense

789

789

789
Shares withheld for payment of employee payroll taxes

(36)

(256)

(256)

(256)
Comprehensive loss

(2,428)

(1,432)

(3,860)
Tax effect

344

344
Net income

4,035

4,035
Dividends to stockholders - $0.02

(290)

(290)
Balances, March 31, 2020

14,567

$
46,212

$
(6,806)

$
39,406

$
96,334

$
(11,054)

$
(1,365)

$
(1,628)

$
121,693

See accompanying notes to condensed consolidated financial statements.

3
Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

For the three months ended

March 31,


2021

2020

Cash Flows From Operating Activities:

Net income

$
11,927

$
4,035

Adjustments to reconcile net income to net cash provided by (used in) operating activities

Depreciation and amortization

4,431

3,750
��
Deferred income taxes

(7,029)

(488)

Stock-based compensation expense

797

789

Debt issue cost amortization recorded in interest expense

35

38

Other

890

72

Changes in operating assets and liabilities, net of acquisition:

Trade receivables

(9,912)

(7,463)

Inventories

56

(3,978)

Prepaid expenses and other assets

1,862

275

Accounts payable

4,994

3,043

Accrued liabilities

(2,484)

(3,039)

Net cash provided by (used in) operating activities

5,567

(2,966)

Cash Flows From Investing Activities:

Purchase of property and equipment

(3,076)

(1,696)

Consideration paid for acquisitions, net of cash acquired

—

(14,541)

Net cash used in investing activities

(3,076)

(16,237)

Cash Flows From Financing Activities:

Proceeds from issuance of long-term debt

—

26,979

Payment of debt issuance costs

—

(401)

Tax withholdings related to net share settlements of restricted stock

(256)

(256)

Net cash (used in) provided by financing activities

(256)

26,322

Effect of foreign exchange rate changes on cash

(641)

(152)

Net increase in cash and cash equivalents

1,594

6,967

Cash and cash equivalents at beginning of period

23,131

13,416

Cash and cash equivalents at end of period

$
24,725

$
20,383

Supplemental disclosure of cash flow information:

Property, plant and equipment purchases in accounts payable or accrued expenses

$
793

$
540

See accompanying notes to condensed consolidated financial statements.

4
Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

1.    BASIS OF PREPARATION AND PRESENTATION
Allied Motion Technologies Inc. ~~(Allied Motion~~(“Allied Motion” or the ~~Company)~~“Company”) is engaged in the business of designing, manufacturing and selling controlled motion ~~control~~ solutions, which include integrated system solutions as well as individual controlled motion ~~control~~ products, to a broad spectrum of customers throughout the ~~world primarily for the commercial motor, industrial motion, automotive control, medical,~~world. The Company’s target markets include Vehicle, Medical, Aerospace & Defense and ~~aerospace and defense markets.~~Industrial.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All ~~significant inter-company~~intercompany accounts and transactions have been eliminated in consolidation.
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 the 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 ~~income,~~loss, a component of stockholders’ equity in the accompanying condensed consolidated ~~balance sheets.~~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 ~~Technology Unit (“TU”)~~of the foreign subsidiaries are included in the results of operations as incurred.
The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and include all adjustments which are, in the opinion of management, necessary for a fair presentation. Certain information and footnote disclosures normally included in financial statements which are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures herein are adequate to make the information presented not misleading. The financial data for the interim periods may not necessarily be indicative of results to be expected for the year.
The preparation of financial statements in accordance with U.S. GAAP 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 condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.
It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the Consolidated Financial Statements and related Notes to such statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 that was previously filed by the Company.

~~Error Correction~~Stock Split

On March 10, 2021, the Board of Directors approved a 3-for-2 common stock split to be paid in the form of a stock dividend to holders of record on April 16, 2021. The ~~Company’s quarterly~~additional shares were issued on April 30, 2021. In lieu of fractional shares, shareholders received a cash payment based on the closing share price of the common stock on the record date. All share and per share information presented in the condensed consolidated financial statements have been adjusted to reflect the stock split on a retrospective basis for ~~each~~all periods presented.

5
Table of the quarters included in its Form 10-Qs for the year ended December 31, 2016 contained an error related to the elimination of intercompany cost of sales. The error was corrected as of December 31, 2016, but since the adjustment was not material to any of the quarters the Form 10-Qs will not be amended. Management has determined the effects to be neither quantitatively or qualitatively material to the financial statements included in any of the Form 10-Qs filed during 2016.Contents
~~The following table illustrates the correction of the error as shown in the statement of operations in Form 10-Q:~~
Year 2016

First
Quarter

Second
Quarter

Third
Quarter

Net income as reported

$
2,127

$
2,942

$
2,520

Effect on cost of goods sold

(228
)
(251
)
(301
)
Net income as revised

$
2,355

$
3,193

$
2,821

ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

2.    REVENUE RECOGNITION
Performance Obligations
Performance Obligations Satisfied at a Point in Time
The ~~following table illustrates~~Company considers control of most products to transfer at a single point in time, generally when the ~~correction~~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 ~~error~~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 monetary consideration from the customer. The Company considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as ~~recorded~~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 we collect concurrent with revenue-producing activities are excluded from revenue.
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 March 31, 2021.
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 below in Note 17, Segment Information, the Company’s business consists of 1 reportable segment. The foreign revenues by geography in the table below are revenues derived from the Company's foreign subsidiaries as detailed in Note 17.

6
Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

A disaggregation of revenue by target market and geography is provided below (in thousands).

Three months ended

March 31,
Target Market

2021

2020
Vehicle

$
34,451

$
28,055
Industrial

31,303

33,351
Medical

23,289

14,551
Aerospace & Defense

7,442

11,142
Other

5,192

5,283
Total

$
101,677

$
92,382

Three months ended

March 31,

Geography

2021

2020

United States

$
56,642

$
56,369

Europe

37,162

33,133

Asia-Pacific

7,873

2,880

Total

$
101,677

$
92,382

Contract Balances
When the timing of the Company’s ~~financial statements during~~delivery of product is different from the ~~fourth quarter 2016:~~
Year 2016

Fourth
Quarter

Net income as recorded

$
1,489

Effect on cost of goods sold

780

Net income as revised

$
709

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 ~~third quarter~~opening and ~~year to date 2016 financial statements presented have been revised to reflect the error correction. The impact~~closing balances of the ~~correction on basic~~Company’s contract liabilities are as follows (in thousands):


March 31,

December 31,

2021

2020
Contract liabilities in accrued liabilities

$
801

$
898
Contract liabilities in other long-term liabilities

251

262

$
1,052

$
1,160

The difference between the opening and ~~fully diluted earnings~~closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment.
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.
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ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share ~~for the third quarter and year to date 2016 was an increase of $0.03 and $0.09, respectively.~~data)

~~Reclassifications~~
~~Certain items in the prior year’s consolidated financial statements and notes to consolidated financial statements have been reclassified to conform to the 2017 presentation.~~
2.3.    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 (in thousands):

September 30,
2017

December 31,
2016

Parts and raw materials

$
23,914

$
23,978

Work-in-progress

7,948

6,628

Finished goods

5,380

4,928

37,242

35,534

Less reserves

(4,463
)
(4,436
)
Inventories

$
32,779

$
31,098


March 31,

December 31,

2021

2020

Parts and raw materials

$
44,753

$
44,750

Work-in-process

5,318

6,186

Finished goods

11,358

12,042

$
61,429

$
62,978

4.    PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is classified as follows (in thousands):




March 31,

December 31,

Useful lives

2021

2020
Land

$
987

$
999
Building and improvements

5 - 39 years

14,086

14,169
Machinery, equipment, tools and dies

3 - 15 years

79,150

79,738
Construction work in progress

6,235

6,821
Furniture, fixtures and other

3 - 10 years

18,923

16,313

119,381

118,040
Less accumulated depreciation

(64,573)

(62,612)
Property, plant and equipment, net

$
54,808

$
55,428

Depreciation expense was approximately $2,919 and $2,309 for the three months ended March 31, 2021 and 2020, respectively.

5.    GOODWILL
The change in the carrying amount of goodwill for the three months ended March 31, 2021 is as follows (in thousands):

March 31,

2021

Beginning balance
$
61,860

Effect of foreign currency translation

(958)

Ending balance
$
60,902

3.6.    INTANGIBLE ASSETS
Intangible assets on the Company’s condensed consolidated balance sheets consist of the following (in thousands):

March 31, 2021

December 31, 2020




Gross

Accumulated

Net Book

Gross

Accumulated

Net Book

Life

Amount

amortization

Value

Amount

amortization

Value
Customer lists

8 - 17 years

$
69,405

$
(24,520)

$
44,885

$
69,833

$
(23,636)

$
46,197
Trade name

10 - 19 years

13,934

(5,260)

8,674

14,055

(5,061)

8,994
Design and technologies

10 - 15 years

15,232

(4,946)

10,286

15,531

(4,874)

10,657
Patents

17 years

24

(13)

11

24

(13)

11
Total

$
98,595

$
(34,739)

$
63,856

$
99,443

$
(33,584)

$
65,859

Amortization expense for intangible assets was $1,512 and $1,441 for the three months ended March 31, 2021 and 2020, respectively.
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ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

Estimated future intangible asset amortization expense as of March 31, 2021 is as follows (in thousands):

Estimated


Amortization Expense
Remainder of 2021

$
4,512
2022

6,065
2023

6,080
2024

5,751
2025

5,734
2026

5,722
Thereafter

29,992
Total estimated amortization expense

$
63,856

7.    STOCK-BASED COMPENSATION
Stock Incentive Plans
The Company’s Stock Incentive Plans provide for the granting of stock awards, including restricted stock, stock options and stock appreciation rights, to employees and non-employees, including directors of the Company.
Restricted Stock
For the ~~nine~~three months ended ~~September 30, 2017, 105,785~~March 31, 2021, 94,985 shares of unvested restricted stock were awarded at a weighted average market value of ~~$22.56.~~$31.63. Of the restricted shares granted, ~~28,025~~62,672 shares have ~~performance based~~performance-based vesting conditions. The value of the shares is amortized to compensation expense over the related service period, which is normally three years, or over the estimated performance period. Shares of unvested restricted stock are generally forfeited if a recipient leaves the Company before the vesting date. Shares that are forfeited become available for future awards.
The following is a summary of restricted stock activity for the three-months ended March 31, 2021:

Number of

shares
Outstanding at beginning of period
357,342
Awarded
94,985
Vested
(57,855)
Forfeited
(9,620)
Outstanding at end of period
384,852

Stock-based compensation expense, net of forfeitures, of $797 and $789 was recorded for the three months ended March 31, 2021 and 2020, respectively.

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ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

~~The following is a summary of restricted stock activity for the nine months ended September 30, 2017:~~
~~Number of~~
~~shares~~
~~Outstanding at beginning of period~~
~~308,542~~
~~Awarded~~
~~105,785~~
~~Vested~~
~~(123,716~~
)
~~Forfeited~~
~~(16,403~~
)
~~Outstanding at end of period~~
~~274,208~~
Stock based compensation expense, net of forfeitures of $518 and $395 was recorded for the quarter ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, stock compensation expense, net of forfeitures, of $1,473 and $1,370 was recorded, respectively.
4.8.    ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):

September 30,
2017

December 31,
2016

March 31,

December 31,


2021

2020
Compensation and fringe benefits

$
6,471

$
7,379

$
9,408

$
11,184
Warranty reserve

924

830

2,119

1,571
Income taxes payable

2,470

183

1,753

1,459
Right of use liabilities

4,543

4,666
Other accrued expenses

3,877

2,286

5,491

5,982

$
13,742

$
10,678

$
23,314

$
24,862

Changes in the Company’s reserve for product warranty claims during 2021 were as follows (in thousands):

March 31,

2021

Warranty reserve at beginning of the year
$
1,571

Provision

608

Warranty expenditures

(35)

Effect of foreign currency translation

(25)

Warranty reserve at end of year
$
2,119

5.9.    DEBT OBLIGATIONS
Debt obligations consisted of the following (in thousands):

September 30,
2017

December 31,
2016

Current Borrowings

China Credit Facility (5.0% at September 30, 2017)

$
526

$
936

Current borrowings

$
526

$
936

Long-term Debt

Revolving Credit Facility, long term (1)

$
62,604

$
71,203

Unamortized debt issuance costs

(609
)
(720
)
Long-term debt

$
61,995

$
70,483

March 31,

December 31,


2021

2020
Long-term Debt

Revolving Credit Facility, long-term (1)

$
120,424

$
120,656
Unamortized debt issuance costs

(542)

(577)
Long-term debt

$
119,882

$
120,079
(1) ~~The effective rate of the Revolver is 3.37% at September 30, 2017.~~
The effective rate of the Amended Revolving Facility is 2.49% at March 31, 2021.
Amended Revolving Credit ~~Agreement~~Facility
~~On October 28, 2016, the Company entered into a~~The First Amended and Restated Credit Agreement (the ~~“Credit~~“Amended Credit Agreement”) ~~for~~includes a ~~$125,000~~$225 million revolving credit facility (the ~~“Revolving Credit~~“Amended Revolving Facility”). The ~~Revolving Facility~~Amended Credit Agreement includes (i) a ~~$50,000~~maximum principal amount of $225 million, (ii) a $75 million accordion amount, and ~~has an initial term~~(iii) a maturity date of five years. HSBC Bank USA, National Association is the administrative agent, HSBC Securities (USA) Inc. is the sole lead arranger, and KeyBank National Association and Wells Fargo Bank, National Association are co-syndication agents.
~~ALLIED MOTION TECHNOLOGIES INC.~~
~~UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands, except per share data)~~
February 2025.
Borrowings under the Amended Revolving ~~Credit~~ Facility ~~are subject to terms defined in the Credit Agreement. Borrowings~~ bear interest at the LIBOR Rate (as defined in the Amended Credit Agreement) plus a margin of 1.00% to ~~2.25%~~1.75% or the Prime Rate (as defined in the Amended Credit Agreement) plus a margin of 0% to ~~1.25%~~0.75%, in each case depending on the Company’s ratio of total funded indebtedness (as defined in the Amended Credit Agreement) to Consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”). At ~~September 30, 2017,~~March 31, 2021, the applicable margin for LIBOR Rate borrowings was ~~1.75%~~ 1.625% and the applicable margin for Prime Rate borrowings was ~~0.75%~~0.625%. In addition, the Company is required to pay a commitment fee of between 0.10% and ~~0.25%~~0.225% quarterly ~~(currently 0.175%)~~(0.20% at March 31, 2021) on the unused portion of the Amended Revolving ~~Credit~~ Facility, also based on the Company’s Total 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.
The Amended Credit Agreement contains certain financial covenants related to minimum interest coverage and total leverage ratio at the end of each quarter. The Amended Credit Agreement also includes other covenants and restrictions, including limits on the amount
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ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

of additional indebtedness, and restrictions on the Company’s ability to merge ~~consolidate~~ or sell all, or substantially all, of its assets. The Company was in compliance with all covenants at ~~September 30, 2017.~~March 31, 2021.
As of March 31, 2021, the unused Amended Revolving Facility was $104,576. The amount available to borrow may be reduced based upon the Company’s debt and EBITDA levels, which impacts its covenant calculations.
Other
The China Credit Facility provides credit of ~~approximately $1,503~~$1,526 (Chinese Renminbi ~~(“RMB”~~10,000) ~~10,000)~~(“the China Facility”). The China Facility is a demand revolving facility used for working capital and capital equipment needs at the Company’s China operations. The ~~average~~term is annual and may be cancelled at the bank’s discretion. The interest rate shall be agreed upon by the Lender and the Borrower before the Utilization Date (as defined in the China Facility) and shall be specified in the Utilization Request (as defined in the China Facility). Collateral for the facility is a guarantee issued by the Company. There have been 0 borrowings during the three months ended March 31, 2021 or 2020, respectively, and there is 0 balance ~~for 2017 was $907 (RMB 6,167). At September 30, 2017, there was approximately $977 (RMB 6,500) available under~~in the ~~facility.~~China Facility at March 31, 2021 and December 31, 2020.

6.10.    DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to certain ~~risk~~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, ~~liquidity~~ and ~~credit~~foreign exchange risk primarily ~~by managing the amount, sources and duration of its debt funding and~~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 ~~receipt or~~ 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 ~~receipts and its known or expected cash~~ payments principally related to the Company’s ~~investments~~borrowings.
Beginning in the first quarter of 2021, the Company began entering into contracts with 30-day maturities to hedge its short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, New Zealand Dollar, Chinese Renminbi) other than the subsidiary’s functional currency and ~~borrowings.~~are adjusted to current values using period-end exchange rates. The resulting gains or losses are recorded in other (income) expense, net in the condensed consolidated statements of income and comprehensive income. To minimize foreign currency exposure, the Company had foreign currency contracts with notional amounts of $8,000 at March 30, 2021. The foreign currency contracts are recorded in the condensed consolidated balance sheets at fair value and resulting gains or losses are recorded in other (income) expense, net in the condensed consolidated statements of income and comprehensive income. During the first quarter of 2021, we recorded a $140 loss on foreign currency contracts which is included in other (income) expense, net and generally offset the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other (income) expense, net.
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. ~~During October 2013,~~In February 2017, the Company entered into ~~two identical~~3 interest rate swaps with a combined notional amount of ~~$25,000~~$40,000 that amortize quarterly to a notional of $6,673 at the September 2018 maturity. One of these interest rate swaps is currently active. The Company terminated the other interest rate swap during October 2016 as part of its debt refinancing.mature in February 2022. In ~~February 2017,~~March 2020, the Company entered into ~~three~~2 additional interest rate swaps with a combined notional amount of ~~$40,000~~$20,000 that increases to $60,000 in March 2022 and matures in ~~February 2022.~~December 2024.
The ~~effective portion of~~ changes in the fair value of interest rate derivatives designated and that qualify as cash flow hedges is recorded in ~~Accumulated Other Comprehensive Income~~accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During ~~2017~~2021 and ~~2016,~~2020, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. There was no hedge ineffectiveness recorded in the Company’s earnings during the quarters ended September 30, 2017 and 2016.
~~Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.~~ The Company estimates that an additional ~~$211~~$860 will be reclassified as an increase to interest expense over the next ~~year.~~
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.~~purposes.
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Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

The ~~tables~~table below ~~present~~presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~2020 (in thousands):

Fair Value

Derivative Instruments

Balance Sheet Classification

September 30, 2017

December 31, 2016

Interest Rate Swaps

Other Liabilities

$
208

$
30

Liability Derivatives

Fair value as of:

Derivatives designated as

Balance Sheet

March 31,

December 31,

hedging instruments

Location

2021

2020

Interest rate products

Accrued liabilities

$
677

$
—

Interest rate products

Other long-term liabilities

284

1,889

Foreign currency contracts

Accrued liabilities

14

—

$
975

$
1,889

The tables below present the effect of cash flow hedge accounting on other comprehensive income (loss) (“OCI”) for the three months ended March 31, 2021 and 2020 (in thousands):

Amount of pre-tax gain (loss) recognized

in OCI on derivatives

Derivatives in cash flow hedging relationships

Three months ended March 31,


2021

2020

Interest rate products

$
704

$
(1,463)

Amount of pre-tax (loss) gain reclassified

from accumulated OCI into income

Location of (loss) gain reclassified

Three months ended March 31,

from accumulated OCI into income

2021

2020






Interest expense

$
(225)

$
(31)

The table below presents the effect of the Company’s derivative financial instruments on the condensed consolidated ~~statement~~statements of income and comprehensive income ~~is as follows~~for the three months ended March 31, 2021 and 2020 (in thousands):

Net deferral in OCI of derivatives (effective portion)

For the quarter ended

For the nine months ended

September 30,

September 30,

Derivative Instruments

2017

2016

2017

2016

Interest Rate Swaps

$
(34
)
$
39

$
(417
)
$
(145
)

Total amounts of income and expense

line items presented that reflect the

effects of cash flow hedges recorded

Three months ended March 31,

Derivatives designated as hedging instruments

Income Statement Location

2021

2020

Interest rate products

Interest Expense

$
861

$
1,054

Net reclassification from AOCI into income (effective portion)

For the quarter ended

For the nine months ended

Statement of earnings

September 30,

September 30,

classification

2017

2016

2017

2016

Interest expense

$
79

$
27

$
239

$
89

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Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of March 31, 2021 and December 31, 2020. 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 in the condensed consolidated balance sheets (in thousands).

Gross amounts

Net amounts of liabilities

Gross amounts not offset in the consolidated
As of

Gross amounts

offset in the

presented in the

balance sheets
March 31,

of recognized

consolidated

consolidated

Financial

Cash collateral

2021

liabilities

balance sheets

balance sheets

instruments

received

Net amount
Derivatives

$
983

$
8

$
975

$
—

$
—

$
975

Gross amounts

Net amounts of liabilities

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

Financial

Cash collateral

2020

liabilities

balance sheets

balance sheets

instruments

received

Net amount
Derivatives

$
1,889

$
—

$
1,889

$
—

$
—

$
1,889

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.

11.   FAIR VALUE
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.

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 condensed consolidated balance sheets for these assets and liabilities approximate their fair value because of the immediate or short-term maturities of these financial instruments.
The following tables presents the Company’s financial assets that are accounted for at fair value on a recurring basis as of March 31, 2021 and December 31, 2020, respectively, by level within the fair value hierarchy (in thousands):

March 31, 2021


Level 1

Level 2

Level 3
Assets (liabilities)

Pension plan assets

$
6,685

$
—

$
—
Deferred compensation plan assets

4,365

—

—
Interest rate swaps

—

(961)

—
Foreign currency hedge contracts

—

(14)

—

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ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

December 31, 2020


Level 1

Level 2

Level 3
Assets (liabilities)

Pension plan assets

$
6,347

$
—

$
—
Deferred compensation plan assets

5,386

—

—
Interest rate swaps

—

(1,889)

—

7.12.    INCOME TAXES
The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility of the effective tax rate due to several factors, including changes in the mix of the pre-tax income and the jurisdictions to which it relates, changes in tax laws, ~~and foreign tax holidays,~~ settlements with taxing authorities and foreign currency fluctuations.
The Company has net operating loss carryforwards in an international jurisdiction expiring in 2017. The Company evaluates the future realizability of the tax loss and credit carryforwards considering the anticipated future earnings and tax planning strategies in the international jurisdictions.

The effective income tax rate as a percentage of income before income taxes was ~~33.1%~~(103.2)% and ~~27.6% in the third quarter 2017 and 2016, respectively and 32.1% and 29.5%~~28.0% for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. The 2016 effective tax rates are revised from 29.9% to 27.6% for the third quarter 2016 and from 31.5% to 29.5% for the nine months ended September 30, 2016 to reflect the revised income resulting from the error correction described in Note 1. The effective tax ~~rates include~~rate is net of a discrete tax ~~(benefit) provision~~benefit of (130.5)% and a discrete tax expense of 0.3%, for the three months ended March 31, 2021 and 2020, respectively. The discrete benefit in the three months ended March 31, 2021 is related primarily to the recognition of net operating loss carryforwards resulting from tax legislation enacted in New Zealand during the period which changes our ability to use the carryforwards in future periods. The discrete tax ~~effect of share-based payment awards as follows:~~expense for the ~~third quarter~~three months ended March 31, 2020 related primarily to share-based payments.
13.    LEASES
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 ~~2017~~which include options to extend the leases for a ~~net discrete tax benefit~~long-term period, and some leases include options to terminate the leases within 30 days. In certain of ~~(0.2%)~~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.
Short term and variable lease expense were not material in any of the periods presented.

Supplemental cash flow information related to the Company’s operating leases for the ~~third quarter of 2016 a net discrete tax provision 0.2%.   For the nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, a net discrete tax benefit of (1.2%) in each period.~~2020 was as follows (in thousands):

March 31,

2021

2020

Cash paid for amounts included in the measurement of operating leases

$
1,339

$
1,001

ROU assets obtained in exchange for operating lease obligations

$
1,553

$
2,710

The ~~effective rate before discrete items varies from~~following table presents the ~~statutory rate due to permanent differences in state taxes and~~maturity of the ~~difference in US and foreign tax rates and the mix~~Company’s operating lease liabilities as of ~~foreign and domestic income.~~March 31, 2021 (in thousands):

Remainder of 2021

$
3,773
2022


4,094
2023

3,045
2024

2,368
2025

2,183
2026

1,146
Thereafter

4,327
Total undiscounted cash flows

$
20,936
Less: present value discount

(1,498)
Total lease liabilities

$
19,438

14
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ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

As of March 31, 2021, the Company had no additional significant operating or finance leases that had not yet commenced.
The Company leases certain facilities from a company for which one of our executive officers is a part owner. In connection with such leases, the Company made payments to the lessor of $0.5 million during the year ended December 31, 2020 and is obligated to make payments of $0.7 million during the year ending December 31, 2021. Future minimum lease payments under the leases as of March 31, 2021 are $8.4 million.
8.14.    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated Other Comprehensive Income (Loss) (“AOCI”) for the ~~quarter~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 is comprised of the following (in thousands):

Foreign Currency

Defined Benefit

Tax effect of

Translation


Plan Liability

Cash Flow Hedges

Cash Flow Hedges

Adjustment

Total
At December 31, 2020

$
(1,633)

$
(1,889)

$
451

$
(216)

$
(3,287)
Unrealized gain on cash flow hedges

—

704

(167)

—

537
Amounts reclassified from AOCI

—

225

(54)

—

171
Foreign currency translation loss

—

—

—

(4,007)

(4,007)
At March 31, 2021

$
(1,633)

$
(960)

$
230

$
(4,223)

$
(6,586)

Defined Benefit
Plan Liability

Cash Flow
Hedges

Foreign Currency
Translation
Adjustment

Total

At June 30, 2017

$
(822
)
$
(253
)
$
(7,372
)
$
(8,447
)
Unrealized loss on cash flow hedges

—

(34
)
—

(34
)
Amounts reclassified from AOCI

—

79

—

79

Foreign currency translation gain

—

—

1,829

1,829

At September 30, 2017

$
(822
)
$
(208
)
$
(5,543
)
$
(6,573
)

Foreign Currency

Defined Benefit

Tax effect of

Translation


Plan Liability

Cash Flow Hedges

Cash Flow Hedges

Adjustment

Total
At December 31, 2019

$
(1,628)

$
(363)

$
86

$
(8,626)

$
(10,531)
Unrealized loss on cash flow hedges

—

(1,463)

351

—

(1,112)
Amounts reclassified from AOCI

—

31

(7)

—

24
Foreign currency translation loss

—

—

—

(2,428)

(2,428)
At March 31, 2020

$
(1,628)

$
(1,795)

$
430

$
(11,054)

$
(14,047)

Defined Benefit
Plan Liability

Cash Flow
Hedges

Foreign Currency
Translation
Adjustment

Total

At June 30, 2016

$
(688
)
$
(149
)
$
(8,199
)
(9,036
)
Unrealized loss on cash flow hedges

—

39

—

39

Amounts reclassified from AOCI

—

27

—

27

Foreign currency translation gain

—

—

383

383

At September 30, 2016

$
(688
)
$
(83
)
$
(7,816
)
$
(8,587
)
~~Accumulated Other Comprehensive Income for the nine months ended September 30, 2017 and 2016 is comprised of the following (in thousands):~~

Defined
Benefit Plan
Liability

Cash Flow
Hedges

Foreign Currency
Translation
Adjustment

Total

At December 31, 2016

$
(822
)
$
(30
)
$
(11,151
)
$
(12,003
)
Unrealized loss on cash flow hedges

—

(417
)
—

(417
)
Amounts reclassified from AOCI

—

239

—

239

Foreign currency translation gain

—

—

5,608

5,608

At September 30, 2017

$
(822
)
$
(208
)
$
(5,543
)
$
(6,573
)

Defined Benefit
Plan Liability

Cash Flow
Hedges

Foreign Currency
Translation
Adjustment

Total

At December 31, 2015

$
(688
)
$
(27
)
$
(9,162
)
$
(9,877
)
Unrealized loss on cash flow hedges

—

(145
)
—

(145
)
Amounts reclassified from AOCI

—

89

—

89

Foreign currency translation gain

—

—

1,346

1,346

At September 30, 2016

$
(688
)
$
(83
)
$
(7,816
)
$
(8,587
)

The realized ~~gains~~losses relating to the Company’s interest rate swap hedges were reclassified from accumulated other comprehensive income (loss) and included in interest expense in the ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations~~income and ~~Comprehensive Income.~~comprehensive income.
15.    DIVIDENDS PER SHARE
The Company declared a quarterly dividend of $0.02 per share in the three months ended March 31, 2021 and 2020, respectively. Total dividends declared were $294 and $290 in the three months ended March 31, 2021 and 2020, respectively. The declared dividends were paid in April 2021 and 2020, respectively.
16.    EARNINGS PER SHARE
Basic and diluted weighted-average shares outstanding are as follows (in thousands):

Three months ended

March 31,


2021

2020

Basic weighted average shares outstanding

14,306

14,180

Dilutive effect of equity awards

132

94

Diluted weighted average shares outstanding

14,438

14,274

For the three months ended March 31, 2021 and 2020, the anti-dilutive common shares excluded from the calculation of diluted earnings per share were immaterial.
15
Table of Contents
ALLIED MOTION TECHNOLOGIES INC.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)

9.~~DIVIDENDS PER SHARE~~
~~The Company declared a quarterly dividend of $0.025 per share in each of the three quarters of 2017 and 2016. Total year to date dividends declared in 2017 and 2016 were $709 and $708, respectively.~~
~~10.~~~~EARNINGS PER SHARE~~
~~Basic and diluted weighted-average shares outstanding are as follows:~~

Three months ended September 30,

Nine months ended September 30,

2017

2016

2017

2016

Basic weighted average shares outstanding

9,173

9,350

9,137

9,325

Dilutive effect of equity awards

121

—

128

—

Diluted weighted average shares outstanding

9,294

9,350

9,265

9,325

For the three and nine months ended September 30, 2017 there were 2,412 and 6,157 common shares, respectively, subject to equity-based awards excluded from the calculation of diluted earnings per share as they would be anti-dilutive.
~~11.~~17.    SEGMENT INFORMATION
ASC Topic “Segment Reporting” requires disclosure of operating segments, which as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company operates in ~~one~~1 segment for the manufacture and marketing of controlled motion ~~control~~ products for ~~original equipment manufacturers and~~ end user and OEM applications. ~~In accordance with the “Segment Reporting” Topic of the ASC, the~~The Company’s chief operating decision maker ~~has been identified as~~is 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. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying condensed consolidated financial statements and within this note.
~~The Company’s wholly owned foreign subsidiaries, located in The Netherlands, Sweden, Germany, Portugal, China and Mexico are included in the accompanying condensed consolidated financial statements.~~
Financial information related to the foreign subsidiaries is summarized below (in thousands):

Three months ended

March 31,


2021

2020

Revenues derived from foreign subsidiaries

$
45,035

$
36,013

For the three months ended

For the nine months ended

September 30,

September 30,

2017

2016

2017

2016

Revenues derived from foreign subsidiaries

$
27,265

$
23,218

$
77,360

$
75,138

~~Identifiable foreign assets were $83,502 and $73,378 as of September 30, 2017 and December 31, 2016, respectively.~~

Revenues derived from foreign subsidiaries and identifiable assets outside of the United States are ~~primarily~~ attributable to ~~Europe.~~
~~ALLIED MOTION TECHNOLOGIES INC.~~Europe and Asia-Pacific.
~~UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~Identifiable foreign assets were $133,775 and $133,466 as of March 31, 2021 and December 31, 2020, respectively.
~~(In thousands, except per share data)~~
Sales to customers outside of the United States by all subsidiaries were ~~$30,409~~$49,655 and ~~$26,670~~$43,389 during the ~~quarters ended September 30, 2017 and 2016, respectively; and $86,130 and $84,904 for the nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively.
For ~~third quarter 2017~~the three months ended March 31, 2021 and ~~2016,~~2020, one customer accounted for ~~18%~~16% and ~~24% of revenues, respectively; and for the year to date 2017 and 2016 for 19% and 20%~~13% of revenues, respectively. As of ~~September 30, 2017~~March 31, 2021 and December 31, 2020 this customer represented 19% and 22% of trade ~~receivables.~~
receivables, respectively.
~~12.~~18.    RECENT ACCOUNTING PRONOUNCEMENTS
Recently adopted accounting pronouncements
In ~~July 2015,~~December 2019, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU No. 2015-11, “~~Accounting Standards Update (“ASU”) 2019-12, Simplifying the ~~Measurement of Inventory~~Accounting for Income Taxes (Topic 740). .” The standard ~~applies~~simplifies the accounting for income taxes by removing certain exceptions to ~~inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within~~ the ~~scope of the standard at the lower of cost~~general principles in ASC Topic 740, and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amendments in ASU 2015-11 more closely align the measurement of inventory in U.S. GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). The standardclarifies existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, ~~2016.~~2020. The Company adopted this ASU ~~2015-11 effective~~on January 1, ~~2017 and it had no impact on its consolidated financial statements.~~
~~Recently issued accounting pronouncements~~
~~In August 2017, the FASB issued ASU 2017-12,~~ ~~“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”~~. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance. All transition requirements and elections should be applied to hedging relationships existing (that is, hedging relationships in which the hedging instrument has not expired, been sold, terminated, or exercised or the entity has not removed the designation of the hedging relationship) on the date of adoption. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The Company is currently evaluating the impact of adopting this guidance.
~~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 applied2021 on a prospective ~~basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company is currently evaluating the impact of adopting this guidance.~~
~~In January 2017, the FASB issued ASU 2017-01, “~~~~Business Combinations (Topic 805): Clarifying the Definition of a Business”.~~  The amendments affect all companies that must determine whether they have acquired or sold a business.  The amendments are intended to help companies and evaluate whether transactions should be accounted forbasis, as acquisitions (or disposals) of assets or businesses.  The amendments provide a more robust framework to use in determining when a set of assets and activities is a business.  The new standard is effective forthere were no relevant matters impacting the Company ~~beginning on January 1, 2018.  The Company does not expect~~for which retrospective application was required, and the adoption ~~of this ASU to~~did not have a material impact on its condensed consolidated financial statements.
~~In August 2016, the FASB issued ASU 2016-15,~~ ~~“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.”~~ The objective of ASU 2016-15 is to reduce existing diversity in practice by addressing eight specific cash flow issues related to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within
~~ALLIED MOTION TECHNOLOGIES INC.~~16
~~UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands, except per share data)~~
~~those fiscal years. Early adoption is permitted. If early adopted, an entity must adopt all the amendments in the same period. The Company is currently evaluating the impact~~Table of ~~the adoption of ASU 2016-15 on the Company’s financial statements.~~Contents
~~In February 2016, the FASB issued ASU 2016-02, which amends the FASB Accounting Standards Codification and creates Topic 842, “~~~~Leases~~~~.” The new topic supersedes Topic 840, “~~~~Leases~~,” and increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosures of key information about leasing arrangements. The guidance is effective for reporting periods beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method. The Company is currently assessing the impact this guidance will have on its consolidated financial statements.
~~In May 2014, the FASB issued ASU 2014-09, “~~~~Revenue from Contracts with Customers”~~ which is a comprehensive new revenue recognition model. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for our interim and annual reporting periods beginning January 1, 2018, and is to be adopted using either a full retrospective or modified retrospective transition method. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We do not plan to early adopt the guidance. We plan to adopt ASU 2014-09 and its amendments on a modified retrospective basis and are continuing to assess all future impacts of the guidance by reviewing our current contracts with customers to identify potential differences that could result from applying the new guidance. Based on our initial review, we expect that the adoption of ASU 2014-09 will not have a material impact on our consolidated financial statements. A significant majority of our revenue is recorded when we invoice customers and is largely aligned with the meeting of identified performance obligations under ASU 2014-09. Although at this time we don’t expect a material change in our revenue recognition, in the remainder of 2017 we expect to continue to evaluate the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements. As we complete our overall assessment, we are evaluating our accounting policies and practices, business processes, systems and controls to determine if changes are necessary to support the new revenue recognition and disclosure requirements. Our assessment will be completed during the year ending December 31, 2017.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
All statements contained herein that are not statements of historical fact constitute “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 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; the introduction of new technologies and the impact of competitive products; the ability to protect the Company’s intellectual property; our ability to sustain, manage or forecast its growth and product acceptance to accurately align capacity with demand; the continued success of our customers and the ability to realize the full amounts reflected in our order backlog as revenue; the loss of significant customers or the enforceability of the Company’s contracts in connection with a merger, acquisition, disposition, bankruptcy, or otherwise; our ability to meet the technical specifications of our customers; the performance of subcontractors or suppliers and the continued availability of parts and components; changes in government regulations; the availability of financing and our access to capital markets, borrowings, or financial transactions to hedge certain risks; the ability to attract and retain qualified personnel who can design new applications and products for the motion industry; the ability to implement our corporate strategies designed for growth and improvement in profits including to identify and consummate favorable acquisitions to support external growth and the development of new technologies; the ability to successfully integrate an acquired business into our business model without substantial costs, delays, or problems; our ~~the~~ ability to control costs, including the establishment and operation of low cost region manufacturing and component sourcing capabilities; and the additional risk factors discussed under “Item 1A. Risk Factors” in Part II of this report and in the Company’s Annual Report in Form 10-K. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these ~~forward-looking~~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.
New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. The Company’s expectations, beliefs and projections are ~~the and are~~ believed to have a reasonable basis; however, the Company makes no assurance that expectations, beliefs or projections will be achieved.
Overview
We are a global company that designs, manufactures and sells precision and specialty controlled motion ~~control~~ components and systems used in a broad range of industries. Our target markets include Vehicle, Medical, Aerospace & Defense, ~~(A&D),~~ and ~~Industrial/Electronics.~~Industrial. We are headquartered in Amherst, NY, and have operations in the ~~United States, Canada, Mexico,~~North America, Europe and ~~Asia.~~Asia-Pacific. We are known worldwide for our expertise in electro-magnetic, mechanical and electronic motion technology. We sell component and integrated controlled motion ~~control~~ solutions to end customers and ~~original equipment manufacturers (“OEMs”)~~OEMs through our own direct sales force and authorized manufacturers’ representatives and distributors. Our 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 ~~motion control-related~~controlled motion-related products.
~~Financial overview~~Business Environment
The ~~third~~ongoing outbreak of the novel strain of Coronavirus (“COVID-19”) will continue to create significant disruptions to the U.S. and global economies and will continue to adversely affect portions of our business, including our supply chain and operations. We have experienced reductions in customer demand in several of our served markets during periods of 2020 and 2021 due to the impact of COVID-19, however we have experienced rebounds in several other served markets, including a record level of total bookings in the
17
Table of Contents
first quarter ~~results exceeded~~of 2021. We have been impacted by reduced operational status of our ~~expectations~~suppliers which has impacted the predictability of our supply chain. During 2021, we expect the impact of COVID-19 on our operations will continue to challenge many aspects of our business, particularly our supply chain, while providing opportunities in certain markets.
In response to the worldwide outbreak, we have taken and will continue to take proactive, aggressive action to protect the health and safety of our employees, customers, partners, suppliers and communities. We enacted rigorous safety measures in all of our sites, including implementing social distancing protocols, incorporating a work from home environment at certain times for those employees that do not need to be physically present on the manufacturing floor or in a lab to perform their work, suspending travel, implementing temperature checks at the entrances to our facilities, extensively and frequently disinfecting our workspaces and providing masks and other protective equipment to those employees who must be physically present. These measures have been implemented on a worldwide basis and we are continuing to monitor and act in accordance with government authorities requirements or recommendations and evolving best practices.
Our Company provides essential and important products, including those that our customers rely on to address COVID-19. We manufacture and deliver critical motion control components, including electronic drives, motors and control assemblies to manufacturers of medical equipment including respirators, ventilators, infusion pumps, medical fluid pumps and other breathing assist equipment required to care for patients with respiratory issues including COVID-19. We are also a long-term, qualified supplier to leading medical device manufacturers of ventilators and respirators around the world.
Global demand and capacity to produce ventilators increased significantly during portions of 2020, and we are a reliable supplier of the critical motion control components it requires. The Company rapidly deployed resources to increase production capacity to meet the surge in demand that has been experienced for certain types of medical products related to combatting the COVID-19 virus. While the demand for certain items, such as ~~a result~~ventilators, is returning to normalized levels, we also continue to provide solutions to suppliers of ~~improving economic conditions~~other types of medical equipment, including surgical tools and equipment, surgical robots, diagnostic equipment, test equipment, patient mobility and rehabilitation equipment, hospital beds and mobile equipment carts.
Our worldwide locations are considered to be essential suppliers to our customers and therefore most of our locations have remained substantially operational during the outbreak while implementing the enhanced safety procedures.
We have taken actions since the beginning of the pandemic to strengthen our liquidity and financial condition. We renewed and increased ~~demand~~our revolving credit facility (“Amended Revolving Facility”) to $225 million through February 2025 (refer to Note 9, Debt Obligations from our ~~target markets. We achieved considerable growth within~~condensed consolidated financial statements). Through this amendment we lowered our ~~Medical~~cost of debt, and ~~Industrial/Electronics markets. We have seen solid demand for~~secured more favorable covenants. This liquidity preserves our ~~servo motor products that are used in factory automation solutions. As previously announced in October, 2017, we secured a contract for $6,800 in~~financial flexibility during the ~~defense market which is further evidence that our target market strategy~~pandemic and ~~focused selling efforts are beginning~~subsequent to ~~yield benefits.~~
The benefit of improved market conditions, the successful victories with new solutions in more applications and the addition of new customers have led to orders strengthening through the year and our backlog achieving a new record level. We have a
~~solid pipeline of sales opportunities and are methodically adding new channel partners for our distribution strategy.~~it. We believe that our cash flows from operations and borrowing capacity are sufficient to support our short and long-term liquidity needs.
To conserve cash and maximize operational efficiency while supporting growth plans, we are ~~executing~~continuing to ~~plan~~align variable costs with demand, maintaining key engineering capabilities, and ~~believe~~controlling discretionary spending. The Company continues to closely monitor events and conditions resulting from COVID-19 and the resulting impact on all forms of incentive compensation.
The extent of the impact of the COVID-19 outbreak on our operational and financial performance will continue to depend on future developments, including the duration and spread of the virus, the potential for additional waves, its impact on our customers and the range of governmental reactions to the pandemic, which cannot be predicted at this time. We will continue to proactively respond to the situation and will take further actions as warranted to alter our business operations as necessary.
Stock Split
On April 30, 2021, we ~~are creating~~effected a ~~strong business foundation upon which~~3-for-2 stock split. References to ~~grow.~~
numbers of shares of common stock and per share data have been adjusted to reflect the stock split on a retrospective basis. Refer to Note 1, Basis of Preparation and Presentation in the notes to condensed consolidated financial statements of Part I, Item 1 of this Form 10-Q for further information.
Recent Accounting Pronouncements
Refer to Note 18, Recent Accounting Pronouncements in the notes to condensed consolidated financial statements of Part 1, Item 1 of this Form 10-Q for information regarding recently adopted accounting standards and their potential impact on our financial condition or results of operations.
18
Table of Contents
Operating Results
Quarter ended ~~September 30, 2017~~March 31, 2021 compared to quarter ended ~~September 30, 2016~~March 31, 2020

For the quarter ended

2017 vs. 2016

September 30,

Variance

(in thousands)

2017

2016

$

%

For the three months ended

2021 vs. 2020

March 31,

Variance

(Dollars in thousands, except per share data)

2021

2020

$

%

Revenues

$
64,968

$
61,040

$
3,928

6
%

$
101,677

$
92,382

$
9,295

10
%
Cost of goods sold

45,422

43,133

2,289

5
%

71,609

64,340

7,269

11
%
Gross profit

19,546

17,907

1,639

9
%

30,068

28,042

2,026

7
%
Gross margin percentage

30.1
%
29.3
%

29.6
%

30.4
%





Operating costs and expenses:









Selling

2,822

2,431

391

16
%

4,218

4,243

(25)

(1)
%
General and administrative

6,255

5,264

991

19
%

10,748

9,162

1,586

17
%
Engineering and development

4,389

3,961

428

11
%

6,959

6,234

725

12
%
Business development

—

123

(123
)
100
%

19

247

(228)

(92)
%
Amortization of intangible assets

813

802

11

1
%

1,512

1,441

71

5
%
Total operating costs and expenses

14,279

12,581

1,698

13
%

23,456

21,327

2,129

10
%
Operating income

5,267

5,326

(59
)
(1
)%

6,612

6,715

(103)

(2)
%
Interest expense

633

1,504

(871
)
(58
)%

861

1,054

(193)

(18)
%
Other income (expense)

65

(75
)
140

(187
)%
Other (income) expense, net

(119)

59

(178)

(302)
%
Total other expense

698

1,429

(731
)
(51
)%

742

1,113

(371)

(33)
%
Income before income taxes

4,569

3,897

672

17
%

5,870

5,602

268

5
%
Provision for income taxes

(1,512
)
(1,076
)
(436
)
41
%
Net Income

$
3,057

$
2,821

$
236

8
%

Income tax benefit (provision)

6,057

(1,567)

7,624

(487)
%
Net income

$
11,927

$
4,035

$
7,892

196
%









Effective tax rate

33.1
%
27.6
%
6
%
20
%

(103.2)
%

28.0
%

(131.2)

(469)
%
Diluted earnings per share

$
0.33

$
0.30

$
0.03

10
%

$
0.83

$
0.28

$
0.55

196
%
Bookings

$
72,964

$
59,088

$
13,876

23
%

$
114,644

$
92,923

$
21,721

23
%
Backlog

$
93,547

$
77,683

$
15,864

20
%

$
152,262

$
133,187

$
19,075

14
%

~~NET INCOME: Net income increased during the third quarter due to higher volumes driving gross margin improvement and the recognition of continued interest rate savings.~~
EBITDA AND ADJUSTED EBITDA: EBITDA was $7,832 for the third quarter of 2017 compared to $7,860 for the same quarter last year. Adjusted EBITDA was $8,351 and $8,378 for the third quarter of 2017 and 2016, respectively. EBITDA and adjusted EBITDA are non-GAAP measurements. EBITDA consists of income before interest expense, provision for income taxes, and depreciation and amortization. Adjusted EBITDA also excludes stock compensation expense and certain other items. Refer to information included in “Non - GAAP Measures” below for a reconciliation of net income to EBITDA and adjusted EBITDA.
REVENUES: For the quarter, the increase in revenues reflects ~~increased~~improved sales in certain markets we serve, specifically Medical and Vehicle. The addition of Dynamic Controls for a full quarter and the strong demand for medical equipment contributed to the strong Medical market revenues during the quarter. These increases were partially offset by declines primarily in ~~all of~~ our ~~markets except for the Vehicle~~Industrial and Aerospace & Defense markets.

Sales to U.S. customers were ~~53%~~51% of total sales for the first quarter 2021 compared with ~~56%~~53% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and ~~Asia.~~ ~~Sales volume increased by 4% for the quarter and there was a 2%~~Asia-Pacific. The overall increase in ~~sales~~revenue was due to a 5.4% volume increase in addition to a 4.6% favorable currency impact. See information included in “Non – GAAP Measures” below for a discussion of the ~~dollar weakening against~~non-GAAP measure and a reconciliation of revenue to revenue excluding foreign currency impacts.

ORDER BOOKINGS AND BACKLOG: We experienced a record level of bookings during the ~~foreign currencies where we do business, primarily the Euro and the Swedish Krona.~~
~~ORDER BACKLOG:~~first quarter of 2021. The increase in bookings in the ~~third~~first quarter of ~~2017~~2021 compared to the ~~third~~first quarter of ~~2016~~2020 is largely due to ~~the increased demand across all~~increases in our Medical and Vehicle markets, including a full quarter of ~~our markets outside of Vehicle.~~bookings from Dynamic Controls. The increase in backlog as of ~~September 30, 2017,~~March 31, 2021, compared to at ~~September 30, 2016 is attributable~~March 31, 2020 was also related to ~~our strategy in penetrating deeper into specific markets and an increase in long term orders with firm production releases from domestic and European customers.~~these factors.

GROSS PROFIT AND GROSS MARGIN: Gross margin ~~increased in third~~decreased to 29.6% for the first quarter ~~2017~~of 2021, compared to ~~third~~30.4% for the first quarter ~~2016~~of 2020. The decrease in gross margin percentage was largely driven by increased costs resulting from the tight supply chain and the decision to incur incremental costs to ensure on time deliveries to customers. Additionally, we incurred higher than normal warranty costs during the first quarter of 2021 due to a warranty claim during the ~~increased sales volumes.~~period.

SELLING EXPENSES: Selling expenses ~~increased~~decreased 1% in the ~~third~~first quarter of ~~2017~~2021 compared to the same period of ~~2016 primarily due~~2020. The addition of Dynamic Controls for a full quarter was offset by cost control efforts related to ~~increased investment and growth of~~ the ~~One Allied Sales Organization.~~COVID-19 pandemic, specifically travel restrictions. Selling expenses as a percentage of revenues were 4%4.1% in the ~~third~~first quarter of ~~2017 and 2016.~~2021 compared to 4.6% for the same period last year.

19
Table of Contents
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses increased by ~~19%~~17% in the ~~third~~first quarter ~~2017~~2021 from the ~~third~~first quarter ~~2016.~~2020 due to the incremental expenses from Dynamic Controls for a full quarter and costs associated with incentive compensation. As a percentage of revenues, general and administrative expenses ~~increased to 10%~~were 10.6% for the ~~period~~quarter ended ~~September 30, 2017~~March 31, 2021 compared to 9%9.9% for the same period in ~~2016. The increase relates largely to increased incentive compensation accruals resulting from an improved level of profitability.~~2020.

ENGINEERING AND DEVELOPMENT EXPENSES: Engineering and development expenses increased by ~~11%~~12% in the ~~third~~first quarter of ~~2017~~2021 compared to the same quarter last year. Part of the increase relates to the addition of Dynamic Controls for a full quarter, whose focus is electronics and software engineering. The increase is ~~primarily~~also due to the continued ramp up of development projects to meet the future needs of target markets, ~~primarily at our European locations.~~as well as supporting growing customer application development needs. As a percentage of revenues, engineering and development expenses were 7%6.8% for the ~~third~~ quarter ~~of 2017 and 2016.~~
~~BUSINESS DEVELOPMENT COSTS: The Company did not incur any business development costs~~ended March 31, 2021 compared to 6.7% for ~~the third quarter of 2017. For~~ the same period in ~~2016, the Company incurred $123 of business development costs partially related to the acquisition of Heidrive GmbH on January 12, 2016.~~2020.

AMORTIZATION OF INTANGIBLE ASSETS: Amortization expense ~~was flat between~~increased 5% in the ~~third~~first quarter of ~~2017~~2021 compared to the ~~third~~first quarter of ~~2016.~~2020 due to the 2021 interim period including a full quarter of amortization of the intangible assets acquired in the acquisition of Dynamic Controls.

INTEREST EXPENSE: Interest expense decreased by $193 in the first quarter 2021 due to lower interest rates compared to the same period in 2020.

INCOME TAXES: The effective income tax rate as a percentage of income before income taxes was ~~33.1%~~(103.2)% and ~~27.6%~~28.0% in the ~~third~~first quarter ~~2017~~2021 and ~~2016,~~2020, respectively. ~~The 2016 effective tax rates are revised from 29.9% to 27.6% for the third quarter 2016 to reflect the revised income resulting from the error correction described in Note 1.~~ The effective tax ~~rates include~~rate is net of a discrete tax ~~(benefit) provision~~benefit of (130.5)% and a discrete tax expense of 0.3%, for the first quarters of 2021 and 2020, respectively. The discrete benefit in the first quarter of 2021 is primarily related to the recognition of net operating loss carryforwards resulting from tax legislation enacted in New Zealand during the ~~tax~~period.

NET INCOME: Net income increased during the first quarter 2021 compared to the first quarter 2020 reflecting the results of increased revenue, as well as the effect of ~~share-based payment awards as follows: for the third quarter of 2017~~ a ~~net~~$7.4 million discrete tax benefit in the current period, partially offset to some extent by increased operating expenses as a result of ~~(0.2%) and~~the inclusion of Dynamic Controls for ~~the third quarter of 2016~~ a net discrete tax provision 0.2%. The effective tax rate differs from the statutory rate primarily due to differences in foreign tax rates. The effective rate is higher for the third quarter 2017 than 2016 due to the mix of income from domestic vs. foreign jurisdictions.
~~Nine months ended September 30, 2017 compared to nine months ended September 30, 2016~~full quarter.

For the nine months ended

2017 vs. 2016

September 30,

Variance

(in thousands)

2017

2016

$

%

Revenues

$
186,657

$
190,550

$
(3,893
)
(2
)%
Cost of goods sold

131,529

134,274

(2,745
)
(2
)%
Gross profit

55,128

56,276

(1,148
)
(2
)%
Gross margin percentage

29.5
%
29.5
%

Operating costs and expenses:

Selling

8,135

7,490

645

9
%
General and administrative

17,985

17,551

434

2
%
Engineering and development

12,984

12,185

799

7
%
Business development

—

341

(341
)
100
%
Amortization of intangible assets

2,405

2,409

(4
)
(0
)%
Total operating costs and expenses

41,509

39,976

1,533

4
%
Operating income

13,619

16,300

(2,681
)
(16
)%
Interest expense

1,797

4,626

(2,829
)
(61
)%
Other income (expense)

135

(190
)
325

(171
)%
Total other expense

1,932

4,436

(2,504
)
(56
)%
Income before income taxes

11,687

11,864

(177
)
(1
)%
Provision for income taxes

(3,746
)
(3,495
)
(251
)
7
%
Net Income

$
7,941

$
8,369

$
(428
)
(5
)%

Effective tax rate

32.1
%
29.5
%
3
%
9
%
Diluted earnings per share

$
0.86

$
0.90

$
(0.04
)
(4
)%
Bookings

$
199,177

$
193,826

$
5,351

3
%
Backlog

$
93,547

$
77,683

$
15,864

20
%

~~NET INCOME: Net income decreased during 2017 due predominantly to the impact of decreased volumes in our Vehicle market.~~
EBITDA AND ADJUSTED EBITDA: EBITDA was ~~$21,074~~$11,162 for ~~2017~~the first quarter of 2021 compared to ~~$23,799~~$10,406 for the same quarter last year. The increase in the first quarter of 2021 compared to the first quarter of 2020 is primarily due to higher gross profit driven by sales growth, partially offset by lower gross margins and increased operating expenses. Adjusted EBITDA was ~~$22,547~~$11,966 and ~~$24,687~~$11,534 for ~~2017~~the first quarters of 2021 and ~~2016,~~2020, respectively. EBITDA and ~~adjusted~~Adjusted EBITDA are non-GAAP measurements. EBITDA consists of income before interest expense, ~~provision~~benefit (provision) for income taxes, and depreciation and amortization. Adjusted EBITDA also excludes ~~stock~~stock-based compensation expense, foreign currency gain/loss, and certain other items. Refer to information included in ~~“Non - GAAP~~“Non-GAAP Measures” below for a reconciliation of net income to EBITDA and ~~adjusted~~Adjusted EBITDA.
~~REVENUES: For 2017, the decrease in revenues reflects lower sales in our Vehicle market. All other markets that Allied serves have shown increases year over year.~~
~~Sales to U.S. customers were 54% of total sales for 2017 compared with 55% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia.~~
ORDER BACKLOG: The increase in orders from year-to-date 2016 to year-to-date 2017 is reflective of the overall increase in demand across our served markets outside of Vehicle. The increase in backlog as of September 30, 2017 compared to at September 30, 2016 is attributable to our strategy in penetrating deeper into specific markets, and an increase in long term orders with firm production releases at both domestic and European customers.
~~GROSS PROFIT AND MARGIN: Gross profit and margin was flat between 2017 and 2016.~~
SELLING EXPENSES: Selling expenses increased in 2017 compared to 2016 primarily due to increased investment and focused growth of the One Allied Sales Organization. Selling expenses as a percentage of revenues were consistent at 4% for 2017 and 2016.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses increased by 3% in 2017 compared to 2016 largely due to increased incentive compensation expense. As a percentage of revenues, general and administrative expenses increased to 10% for 2017 from 9% in 2016.
ENGINEERING AND DEVELOPMENT EXPENSES: Engineering and development expenses increased by 7% in 2017 compared to 2016. The increase is primarily due to the continued ramp up of development projects to meet the future needs of target markets, particularly at our European locations as well as supporting growing customer application development. As a percentage of revenues, engineering and development expenses were 7% for 2017 and 6% for 2016.
~~BUSINESS DEVELOPMENT COSTS: The Company incurred $341 of business development costs during 2016 related to the acquisition of Heidrive GmbH on January 12, 2016.~~
~~AMORTIZATION OF INTANGIBLE ASSETS: Amortization expense was flat in 2017 compared to 2016.~~
INCOME TAXES: The effective income tax rate as a percentage of income before income taxes was 32.1% and 29.5% for the nine months ended September 30, 2017 and 2016, respectively. The 2016 effective tax rates are revised from 31.5% to 29.5% for the nine months ended September 30, 2016 to reflect the revised income resulting from the error correction described in Note 1. The effective tax rates include a discrete tax (benefit) provision related to the recognition of the tax effect of share-based payment awards. For the nine months ended September 30, 2017 and 2016, there was a net discrete tax benefit of (1.2%) in each period. The effective tax rate differs from the statutory rate primarily due to differences in foreign tax rates. The effective rate is higher for the nine months ended September 30, 2017 than 2016 due to the mix of income from domestic vs. foreign jurisdictions.
Non-GAAP Measures
Revenue excluding foreign currency exchange impacts, EBITDA and Adjusted EBITDA are provided for information purposes only and are not measures of financial performance under GAAP.
~~The Company~~Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company as distinct from results that include items that are not indicative of ongoing operating ~~results; in~~results. In particular, those charges and credits that are not directly related to operating unit performance, and that are not a helpful measure of the performance of our underlying business particularly in light of their unpredictable nature. ~~This~~These non-GAAP ~~disclosure has~~disclosures have limitations as an analytical ~~tool,~~tools, should not be viewed as a substitute for revenue and net income determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. In addition, supplemental presentation should not be construed as an inference that the Company’s future results will be unaffected by similar adjustments to net income determined in accordance with GAAP.
The Company believes that revenue excluding foreign currency exchange impacts is a useful measure in analyzing 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
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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 EBITDA is often a useful measure of a Company’s operating performance and is a significant basis used by the Company’s management to measure the operating performance of the Company’s business because EBITDA excludes charges for depreciation, amortization and interest expense that have resulted from our debt financings, acquisitions, as well as our provision for income tax expense. EBITDA is frequently used as one of the bases for comparing businesses in the Company’s industry.
The Company also believes that Adjusted EBITDA provides helpful information about the operating performance of its business. Adjusted EBITDA excludes ~~stock~~stock-based compensation expense, as well as certain income or expenses which are not indicative of the ongoing performance of the Company. EBITDA and Adjusted EBITDA do 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.~~GAAP.
The Company’s calculation of revenues excluding foreign currency exchange impacts for the three months ended March 31, 2021 is as follows (in thousands):

Three months ended


March 31, 2021
Revenue as reported

$
101,677
Currency impact (favorable) unfavorable

(4,274)
Revenue excluding foreign currency exchange impacts

$
97,403

The Company’s calculation of EBITDA and Adjusted EBITDA for the ~~quarters~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020 is as follows (in thousands):


Three months ended

March 31,


2021

2020
Net income as reported

$
11,927

$
4,035
Interest expense

861

1,054
(Benefit) provision for income tax

(6,057)

1,567
Depreciation and amortization

4,431

3,750
EBITDA

11,162

10,406
Stock-based compensation expense

797

789
Business development costs

19

247
Foreign currency (gain) loss

(12)

92
Adjusted EBITDA

$
11,966

$
11,534

For the three months ended

For the nine months ended

September 30,

September 30,

2017

2016

2017

2016

Net income as reported

$
3,057

$
2,821

$
7,941

$
8,369

Interest expense

633

1,504

1,797

4,626

Provision for income tax

1,512

1,076

3,746

3,495

Depreciation and amortization

2,630

2,459

7,590

7,309

EBITDA

7,832

7,860

21,074

23,799

Stock compensation expense

519

395

1,473

1,370

Business development costs

—

123

—

341

Insurance recoveries

—

—

—

(823
)
Adjusted EBITDA

$
8,351

$
8,378

$
22,547

$
24,687

Liquidity and Capital Resources
The Company’s liquidity position as measured by cash and cash equivalents increased by ~~$5,060~~$1,594 to a balance of ~~$17,302~~$24,725 at ~~September 30, 2017~~March 31, 2021 from December 31, ~~2016.~~2020.



2021 vs.


Three Months Ended

2020

March 31,

Variance


2021

2020

$

Net cash provided by (used in) operating activities

$
5,567

$
(2,966)

$
8,533

Net cash used in investing activities

(3,076)

(16,237)

13,161

Net cash (used in) provided by financing activities

(256)

26,322

(26,578)

Effect of foreign exchange rates on cash

(641)

(152)
��

(489)

Net increase in cash and cash equivalents

$
1,594

$
6,967

$
(5,373)

Nine months ended
September 30,

2017 vs. 2016

2017

2016

$

Net cash provided by (used in) operating activities

$
15,312

$
9,965

$
5,347

Net cash used in investing activities

(4,220
)
(19,743
)
15,523

Net cash (used in) provided by financing activities

(9,908
)
745

(10,653
)
Effect of foreign exchange rates on cash

933

297

636

Net increase (decrease) in cash and cash equivalents

$
2,117

$
(8,736
)
$
10,853

~~The 2017~~During the three months ended March 31, 2021, the increase in cash provided by operating activities ~~reflects the favorable~~is primarily due to cash provided from working capital ~~dynamics~~activity in 2021 compared to 2020 and net income adjusted for non-cash items. Working capital activity in the three months ended March 31, 2020, most notably inventory, were impacted by the push out of ~~Allied Motion. During 2016,~~orders related to the COVID-19 pandemic, building inventory for new product launches and purchasing additional inventory in order to secure supply.
21
Table of Contents
Cash used in investing activities in the three months ended March 31, 2021 relates entirely to purchases of property and equipment. Purchases of property and equipment were $3,076 during the three months ended March 31, 2021 compared to $1,696 during the three months ended March 31, 2020 reflecting continued commitments to capital expenditure projects supporting growth initiatives. Cash used in investing activities in the prior year period included a $14,541 outflow related to the acquisition of Dynamic Controls. Capital expenditures are expected to be between $12,000 and $15,000 for 2021.
The decrease in cash provided by ~~operating activities was primarily due to the impact of the Heidrive acquisition which created certain working capital needs, primarily related to trade receivables and acquired liabilities.~~
~~The significant cash used for investing~~financing activities in ~~2016~~the three months ended March 31, 2021 from the three months ended March 31, 2020 reflects the Amended Revolving Facility borrowing for the acquisition of ~~Heidrive~~Dynamic Controls for approximately $26,000 in the first quarter ~~for $16,049 net~~ of ~~cash acquired. For the period ending September 30, 2017, purchases of property and equipment were $4,220 compared to $3,694 for the comparable period of 2016.~~
The change in cash used in financing activities reflects the 2016 use of the existing foreign revolver of $10,859 (€10,000) to partially finance the Heidrive acquisition. During 2017, payments of $9,114 were made towards the Revolving Credit Facility obligation.2020. At ~~September 30, 2017,~~March 31, 2021, we had ~~approximately $62,604~~$120,424 of obligations under the Amended Revolving ~~Credit Facility.~~
Facility, excluding deferred financing costs.
The Amended Credit Agreement contains certain financial covenants related to minimum interest coverage and total leverage ratio at the end of each quarter. The Amended Credit Agreement also includes other covenants and restrictions, including limits on the amount of additional indebtedness, and restrictions on the ability to merge, consolidate or sell all or substantially all our assets. We were in compliance with all covenants at ~~September 30, 2017.~~
March 31, 2021.
As of ~~September 30, 2017,~~March 31, 2021, the unused Amended Revolving Facility was $104,576. The amount available to borrow ~~under the~~may be lower and may vary from period to period based upon our debt and EBITDA levels, which impacts our covenant calculations. The Amended Credit Agreement ~~was approximately $62,396.~~
matures in February 2025.
There were ~~approximately $409 (RMB 3,000 RMB) of payments for~~no borrowings under the China Facility during the ~~year to date 2017.~~ three months ended March 31, 2021 and 2020, respectively.
The ~~balance at September 30, 2017 was $526 (RMB 3,500). At September 30, 2017, there was approximately $977 (RMB 6,500) available under the facility.~~
~~During the quarter ended September 30, 2017, the~~ Company ~~paid~~declared dividends of ~~$0.025~~$0.02 per ~~share. The Company’s working capital, capital expenditure~~share during the three months ended March 31, 2021 and ~~dividend requirements are expected~~2020, respectively.

Although there is ongoing uncertainty related to the anticipated impact of the COVID-19 outbreak on our future results, we believe our diverse markets, and the steps we have taken to strengthen our balance sheet, such as retaining cash to support shorter term needs and extending the maturity of our revolving credit facility in the first quarter of 2020 leaves us well-positioned to manage our business through the crisis as it continues to unfold. We have reviewed numerous potential scenarios in connection with the impact of COVID-19 on our Company. Based on our analysis, we believe our existing balances of cash, the flexibility of our Amended Credit Agreement and our currently anticipated operating cash flows will be ~~funded from~~sufficient to meet our cash ~~provided by operations and amounts available under~~needs arising in the ~~Credit Agreement.~~ordinary course of business for the next twelve months.

Item 3. Qualitative and Quantitative Disclosures about Market Risk
Foreign Currency
~~The Company has~~We have foreign operations in The Netherlands, Sweden, Germany, China, Portugal, ~~Canada,~~ Czech Republic, Canada, Mexico, the United Kingdom and ~~Mexico,~~New Zealand which expose the Company to foreign currency exchange rate fluctuations due to transactions denominated in Euros, Swedish Krona, Chinese ~~Yuan~~ Renminbi, Czech Krona, Canadian dollar, ~~and~~ Mexican pesos, British Pound Sterling and New Zealand dollar, respectively. ~~The Company~~We continuously ~~evaluates its~~evaluate our foreign currency risk and will take action from time to time in order to best mitigate these risks. A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency exposures would have had an impact of approximately ~~$2,900~~$4,500 on our ~~third~~first quarter ~~2017 sales and $8,300 on our year to date 2017~~2021 sales. ~~These amounts are~~This amount is not indicative of the hypothetical net earnings impact due to partially offsetting impacts on cost of sales and operating expenses in those currencies. ~~The Company estimates~~We estimate that foreign currency exchange rate fluctuations during the ~~three months~~quarter ended ~~September 30, 2017~~March 31, 2021 increased sales in comparison to ~~the three months~~quarter ended ~~September 30, 2016~~March 31, 2020 by ~~approximately $1,300. On a year to date basis, we estimate that foreign currency exchange rate fluctuations decreased sales in 2017 compared to 2016 by approximately $500.~~$4,274.
~~The Company translates~~We translate all assets and liabilities of ~~its~~our foreign operations, where the U.S. dollar is not the functional currency, at the period-end exchange rate and translate sales and expenses at the average exchange rates in effect during the period. The net effect of these translation adjustments is recorded in the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements as ~~Comprehensive Income.~~comprehensive income. The translation adjustment was a ~~gain~~loss of ~~approximately $1,800~~$4,007 and ~~$400 in~~a loss of $2,428 for the ~~third~~first quarter of ~~2017~~2021 and ~~2016, respectively. The translation adjustment was a gain of approximately $5,600 and $1,300 for year to date 2017 and 2016,~~2020, respectively. Translation adjustments are not adjusted for income taxes as they relate to permanent investments in our foreign subsidiaries. Net foreign currency transaction gains and losses included in other income, net amounted to a loss of $109 and a gain of $5 for the third quarter of 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, a loss of $262 and $20 were recognized in other income, respectively. A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency net assets would have had an impact of approximately ~~$7,300~~$9,900 on our foreign net assets as of ~~September 30, 2017.~~March 31, 2021. Beginning in the first quarter of 2021, we began entering into contracts to hedge our short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, New Zealand Dollar, Chinese Renminbi) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates. The resulting gains or losses are recorded in other (income) expense, net in the condensed consolidated statements of
22
~~Interest Rates~~Table of Contents
~~Interest rates~~income and comprehensive income. The foreign currency contracts are recorded in the condensed consolidated balance sheets at fair value and resulting gains or losses are recorded in other (income) expense, net in the condensed consolidated statements of income and comprehensive income. During the first quarter of 2021, we recorded a $140 loss on foreign currency contracts which is included in other (income) expense, net and generally offset the gains or losses from the foreign currency adjustments on the ~~Company’s~~intercompany balances that are also included in other (income) expense, net. Net foreign currency transaction gains and losses included in other expense, net amounted to a gain of $12 and a loss of $92 for the first quarter of 2021 and 2020, respectively.
Interest Rates
Borrowings under the Amended Revolving Facility ~~are based on~~bear interest at the LIBOR Rate plus a margin of 1.00% to ~~2.25% (currently~~ 1.75%) (1.625% at March 31, 2021) or the Prime Rate plus a margin of 0% to ~~1.25% (currently~~ 0.75%) (0.625% at March 31, 2021), in each case depending on the Company’s ratio of total funded indebtedness to Consolidated trailing twelve-month EBITDA. ~~The Company uses~~We use interest rate derivatives to add stability to interest expense and to manage ~~its~~our exposure to interest rate movements. ~~The Company~~We primarily ~~uses~~use interest rate swaps as part of ~~its~~our 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. During October 2013, the Company entered into two interest rate swaps with a combined notional of $25,000 (representing 50% of the Term Loan balance at that time) that amortize quarterly to a notional of $6,673 at maturity. The notional amount changes over time as loan payments are made. As a requirement of the debt refinance, one of the swaps was liquidated.   In February 2017, the Company entered into three interest rate swaps with a combined notional amount of $40,000 that ~~matures~~mature in February 2022. In March 2020, the Company entered into two additional interest rate swaps with a combined notional amount of $20,000 that increases to $60,000 in March 2022 and matures in December 2024.
As of ~~September 30, 2017, the Company~~March 31, 2021, we had ~~$62,604~~$120,424 outstanding under the Amended Revolving Facility (excluding deferred financing fees), of which ~~$45,281~~$60,000 is currently being hedged. Refer to Note 69, Debt Obligations of the Notes to ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements for additional information about our outstanding debt. A hypothetical one percentage point (100 basis points) change in the Base Rate on the ~~$17,323~~$60,424 of unhedged floating rate debt outstanding at ~~September 30, 2017~~March 31, 2021 would ~~not~~ have approximately a ~~material~~$150 impact on ~~its~~our interest expense for the ~~third~~first quarter ~~2017 or nine months ending September 30, 2017, respectively.~~of 2021.

Item 4. Controls and Procedures
Conclusion regarding the effectiveness of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (principal accounting officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30, 2017.~~March 31, 2021. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on ~~management’s~~this evaluation, ~~of our disclosure controls~~the Company’s principal executive officer and ~~procedures as of September 30, 2017, our Chief Executive Officer and Chief Financial Officer~~principal financial officer concluded that, as of ~~such date, our~~March 31, 2021, the Company’s disclosure controls and procedures were effective.
Changes in internal control over financial reporting
The Company is in the process of implementing a financial reporting system, Hyperion Financial Management (HFM), as part of a multi-year plan to integrate and upgrade our systems and processes. The implementation has occurred in phases throughout 2017 and is expected to be completed during the fourth quarter 2017. Currently the Company is utilizing HFM in parallel with its existing financial reporting process until validation and testing is completed.
As part of the HFM implementation, certain changes to our processes and procedures have and will continue to occur. These changes will result in changes to our internal control over financial reporting. While HFM is designed to strengthen our internal financial controls by automating certain manual processes and standardizing business processes and reporting across our organization, management will continue to evaluate and monitor our internal controls as each of the affected areas evolve.
During the quarter ended ~~September 30, 2017,~~March 31, 2021, there ~~have been~~were no ~~other~~ changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial ~~reporting~~.reporting.

PART II.OTHER INFORMATION
Item 1A. Risk Factors
There have been no material changes to the risk factors disclosed in the Company’s Form 10-K for the year ended December 31, ~~2016,~~2020, except to the extent factual information disclosed elsewhere in this ~~form~~Form 10-Q relates to such risk factors. For a full discussion of these risk factors, please refer to “Item 1A. Risk Factors” in the ~~2016~~2020 Annual Report ~~in Form~~and 10-K.

23
Table of Contents
Item 5. Unregistered Sales of Equity Securities and Use of Proceeds






Total Number of Shares

Maximum Number of Shares

Number of Shares

Average Price Paid

Purchased as Part of Publicly

that May Yet Be Purchased
Period

Purchased^{(1) (2)}

per Share ⁽²⁾

Announced Plans or Programs

Under the Plans or Programs
01/01/21 to 01/31/21

4,553

$
34.63

—

—
02/01/21 to 02/28/21

—

—

—

—
03/01/21 to 03/31/21

16,827

34.35

—

—
Total

21,380

$

—

—

(1) As permitted under the Company’s equity compensation plan, these shares were withheld by the Company to satisfy tax withholding obligations in connection with the vesting of stock. Shares withheld for tax withholding obligations do not affect the total number of shares available for repurchase under any approved common stock repurchase plan. At March 31, 2021, the Company did not have an authorized stock repurchase plan in place.

(2) Shares of common stock and related per share amounts give retroactive effect for stock splits. A three-for-two common stock split, effected as a stock dividend, occurred on April 30, 2021.

Item 5.6. Other Information
None.

Item 6.7.Exhibits
~~(a)~~                           ~~Exhibits~~

(a)
Exhibits

10.1
Third Amendment to Employment Agreement between Allied Motion Technologies Inc. and Richard S. Warzala dated March 17, 2021. (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed March 23, 2021.)

10.2
Form of Employment Agreement (Entered into with Michael R. Leach, Robert P. Maida, Ashish R. Bendre and Geoffrey C. Rondeau each dated March 17, 2021.) (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed March 23, 2021.)

10.3
Managing Director’s Contract of Employment between Heidrive GmbH and Helmut Pirthauer dated December 3, 2016. (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed March 23, 2021.)

10.4
First Amendment to Managing Director’s Contract of Employment between Heidrive GmbH and Helmut Pirthauer dated March 12, 2018. (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed March 23, 2021.)

10.5
Second Amendment to Managing Director’s Contract of Employment between Heidrive GmbH and Helmut Pirthauer dated March 18, 2021. (Incorporated by reference to Exhibit 10.5 to the Company’s Form 8-K filed March 23, 2021.)

31.1
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1 SCH
Inline XBRL Taxonomy Extension Schema Document (filed herewith).
~~101~~

The following materials from Allied Motion Technologies Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations and comprehensive income, (iii) condensed consolidated statements of cash flows and (iv) the notes to the consolidated financial statements.
24
Table of Contents
101.2 CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith).

101.3 DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith).

101.4 LAB
Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith).

101.5 PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith).

104
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in exhibits 101.*) (filed herewith).

25
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATE:
~~November 1, 2017~~
May 5, 2021
ALLIED MOTION TECHNOLOGIES INC.

By:
/s/ Michael R. Leach

Michael R. Leach

Chief Financial Officer

22

26


Colorado		84-0518115
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

495 Commerce Drive, Amherst, New York		~~14228~~
(Address of principal executive offices)		14228 (Zip Code)

Title of each class		Trading Symbol		Name of each exchange on which registered
Common stock		AMOT		NASDAQ

			~~Page No.~~

PART I. FINANCIAL INFORMATION				Page No.

	Item 1.	Financial Statements

		Condensed Consolidated Balance Sheets —– Unaudited		1

		Condensed Consolidated Statements of ~~Operations~~Income and Comprehensive Income —– Unaudited		2

		Condensed Consolidated Statements of Stockholders’ Equity – Unaudited		3

		Condensed Consolidated Statements of Cash Flows —– Unaudited		34

		Notes to Condensed Consolidated Financial Statements - Unaudited		45

	Item 2.	~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations		1317

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		1922

	Item 4.	Controls and Procedures		23
~~Item 4.~~				~~Controls and Procedures~~	20

PART II. OTHER INFORMATION			23

~~Item 1A.~~	~~Risk Factors~~		20

~~Item 5.~~	~~Other Information~~		20

~~Item 6.~~	~~Exhibits~~		20
	Item 1A.	Risk Factors		23

	Item 5.	Unregistered Sales of Equity Securities and Use of Proceeds		24

	Item 6.	Other Information		24

	Item 7.	Exhibits		24


	March 31,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	24,725	$	23,131
Trade receivables, net of provision for credit losses of $509 and $382 at March 31, 2021 and December 31, 2020, respectively		56,252		47,377
Inventories		61,429		62,978
Prepaid expenses and other assets		7,150		8,728
Total current assets		149,556		142,214
Property, plant and equipment, net		54,808		55,428
Deferred income taxes		7,456		330
Intangible assets, net		63,856		65,859
Goodwill		60,902		61,860
Right of use assets		18,881		19,023
Other long-term assets		4,526		4,483
Total Assets	$	359,985	$	349,197
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	32,382	$	27,668
Accrued liabilities		23,314		24,862
Total current liabilities		55,696		52,530
Long-term debt		119,882		120,079
Deferred income taxes		4,658		4,659
Pension and post-retirement obligations		5,045		5,340
Right of use liabilities		14,895		14,975
Other long-term liabilities		6,761		8,558
Total liabilities		206,937		206,141
Stockholders’ Equity:
Common stock, 0 par value, authorized 50,000 shares; 14,724 and 14,632 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		42,936		41,278
Preferred stock, par value $1.00 per share, authorized 5,000 shares; 0 shares issued or outstanding		—		—
Retained earnings		116,698		105,065
Accumulated other comprehensive loss		(6,586)		(3,287)
Total stockholders’ equity		153,048		143,056
Total Liabilities and Stockholders’ Equity	$	359,985	$	349,197

	September 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	17,600		$	15,483
Trade receivables, net of allowance for doubtful accounts of $379 and $362 at September 30, 2017 and December 31, 2016, respectively	34,493			26,104
Inventories	32,779			31,098
Prepaid expenses and other assets	3,096			3,120
Total current assets	87,968			75,805
Property, plant and equipment, net	38,157			37,474
Deferred income taxes	492			923
Intangible assets, net	32,776			34,252
Goodwill	29,305			27,522
Other long term assets	4,343			3,943
Total assets	$	193,041		$	179,919
Liabilities and Stockholders’ Equity
Current liabilities:
Debt obligations	526			936
Accounts payable	17,156			13,204
Accrued liabilities	13,742			10,678
Total current liabilities	31,424			24,818
Long-term debt	61,995			70,483
Deferred income taxes	3,129			3,266
Pension and post-retirement obligations	4,403			4,381
Other long term liabilities	5,386			4,685
Total liabilities	106,337			107,633
Stockholders’ Equity:
Common stock, no par value, authorized 50,000 shares; 9,453 and 9,374 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	31,244			29,503
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding	—			—
Retained earnings	62,033			54,786
Accumulated other comprehensive loss	(6,573		)	(12,003		)
Total stockholders’ equity	86,704			72,286
Total Liabilities and Stockholders’ Equity	$	193,041		$	179,919


	For the three months ended
	March 31,
	2021		2020
Revenues	$	101,677	$	92,382
Cost of goods sold		71,609		64,340
Gross profit		30,068		28,042
Operating costs and expenses:
Selling		4,218		4,243
General and administrative		10,748		9,162
Engineering and development		6,959		6,234
Business development		19		247
Amortization of intangible assets		1,512		1,441
Total operating costs and expenses		23,456		21,327
Operating income		6,612		6,715
Other expense, net:
Interest expense		861		1,054
Other (income) expense, net		(119)		59
Total other expense, net		742		1,113
Income before income taxes		5,870		5,602
Income tax benefit (provision)		6,057		(1,567)
Net income	$	11,927	$	4,035
Basic earnings per share:
Earnings per share	$	0.83	$	0.28
Basic weighted average common shares		14,306		14,180
Diluted earnings per share:
Earnings per share	$	0.83	$	0.28
Diluted weighted average common shares		14,438		14,274
Net income	$	11,927	$	4,035
Other comprehensive income:
Foreign currency translation adjustment		(4,007)		(2,428)
Gain (loss) on derivatives		708		(1,088)
Comprehensive income	$	8,628	$	519

	For the three months ended						For the nine months ended
	September 30,						September 30,
	2017			2016			2017			2016
Revenues	$	64,968		$	61,040		$	186,657		$	190,550
Cost of goods sold	45,422			43,133			131,529			134,274
Gross profit	19,546			17,907			55,128			56,276
Operating costs and expenses:
Selling	2,822			2,431			8,135			7,490
General and administrative	6,255			5,264			17,985			17,551
Engineering and development	4,389			3,961			12,984			12,185
Business development	—			123			—			341
Amortization of intangible assets	813			802			2,405			2,409
Total operating costs and expenses	14,279			12,581			41,509			39,976
Operating income	5,267			5,326			13,619			16,300
Other expense (income):
Interest expense	633			1,504			1,797			4,626
Other expense, net	65			(75		)	135			(190		)
Total other expense, net	698			1,429			1,932			4,436
Income before income taxes	4,569			3,897			11,687			11,864
Provision for income taxes	(1,512		)	(1,076		)	(3,746		)	(3,495		)
Net income	$	3,057		$	2,821		$	7,941		$	8,369

Basic earnings per share:
Earnings per share	$	0.33		$	0.30		$	0.87		$	0.90
Basic weighted average common shares	9,173			9,350			9,137			9,325
Diluted earnings per share:
Earnings per share	$	0.33		$	0.30		$	0.86		$	0.90
Diluted weighted average common shares	9,294			9,350			9,265			9,325

Net income	$	3,057		$	2,821		$	7,941		$	8,369

Foreign currency translation adjustment	1,829			383			5,608			1,346
Change in accumulated (loss) income on derivatives	45			66			(178		)	(56		)
Comprehensive income (loss)	$	4,931		$	3,270		$	13,371		$	9,659


	Common Stock									Accumulated Other Comprehensive Income (Loss)
										Foreign
				Unamortized		Common Stock				Currency		Accumulated				Total
				Cost of Equity		and Paid-in		Retained		Translation		income (loss)		Pension		Stockholders'
(In thousands except per share data)	Shares	Amount		Awards		Capital		Earnings		Adjustments		on derivatives		adjustments		Equity
Balances, December 31, 2020	14,632	$	47,085	$	(5,807)	$	41,278	$	105,065	$	(216)	$	(1,438)	$	(1,633)	$	143,056
Stock transactions under employee benefit stock plans	32		988				988										988
Issuance of restricted stock, net of forfeitures	81		3,001		(2,872)		129										129
Stock-based compensation expense					797		797										797
Shares withheld for payment of employee payroll taxes	(21)		(256)				(256)										(256)
Comprehensive (loss) income											(4,007)		929				(3,078)
Tax effect of derivative transactions													(221)				(221)
Net income									11,927								11,927
Dividends to stockholders - $0.02									(294)								(294)
Balances, March 31, 2021	14,724	$	50,818	$	(7,882)	$	42,936	$	116,698	$	(4,223)	$	(730)	$	(1,633)	$	153,048

Year 2016	First Quarter			Second Quarter			Third Quarter
Net income as reported	$	2,127		$	2,942		$	2,520
Effect on cost of goods sold	(228		)	(251		)	(301		)
Net income as revised	$	2,355		$	3,193		$	2,821


	Three months ended
	March 31,
Target Market	2021		2020
Vehicle	$	34,451	$	28,055
Industrial		31,303		33,351
Medical		23,289		14,551
Aerospace & Defense		7,442		11,142
Other		5,192		5,283
Total	$	101,677	$	92,382


	Three months ended
	March 31,
Geography	2021		2020
United States	$	56,642	$	56,369
Europe		37,162		33,133
Asia-Pacific		7,873		2,880
Total	$	101,677	$	92,382

Year 2016	Fourth Quarter
Net income as recorded	$	1,489
Effect on cost of goods sold	780
Net income as revised	$	709

	September 30, 2017			December 31, 2016
Parts and raw materials	$	23,914		$	23,978
Work-in-progress	7,948			6,628
Finished goods	5,380			4,928
	37,242			35,534
Less reserves	(4,463		)	(4,436		)
Inventories	$	32,779		$	31,098


		March 31,		December 31,
	Useful lives	2021		2020
Land		$	987	$	999
Building and improvements	5 - 39 years		14,086		14,169
Machinery, equipment, tools and dies	3 - 15 years		79,150		79,738
Construction work in progress			6,235		6,821
Furniture, fixtures and other	3 - 10 years		18,923		16,313
			119,381		118,040
Less accumulated depreciation			(64,573)		(62,612)
Property, plant and equipment, net		$	54,808	$	55,428


	March 31,
		2021
Beginning balance	$	61,860
Effect of foreign currency translation		(958)
Ending balance	$	60,902


		March 31, 2021						December 31, 2020
		Gross		Accumulated		Net Book		Gross		Accumulated		Net Book
	Life	Amount		amortization		Value		Amount		amortization		Value
Customer lists	8 - 17 years	$	69,405	$	(24,520)	$	44,885	$	69,833	$	(23,636)	$	46,197
Trade name	10 - 19 years		13,934		(5,260)		8,674		14,055		(5,061)		8,994
Design and technologies	10 - 15 years		15,232		(4,946)		10,286		15,531		(4,874)		10,657
Patents	17 years		24		(13)		11		24		(13)		11
Total		$	98,595	$	(34,739)	$	63,856	$	99,443	$	(33,584)	$	65,859


	Estimated
	Amortization Expense
Remainder of 2021	$	4,512
2022		6,065
2023		6,080
2024		5,751
2025		5,734
2026		5,722
Thereafter		29,992
Total estimated amortization expense	$	63,856


		Number of
		shares
Outstanding at beginning of period		357,342
Awarded		94,985
Vested		(57,855)
Forfeited		(9,620)
Outstanding at end of period		384,852

	~~Number of~~ ~~shares~~
~~Outstanding at beginning of period~~	~~308,542~~
~~Awarded~~	~~105,785~~
~~Vested~~	~~(123,716~~	)
~~Forfeited~~	~~(16,403~~	)
~~Outstanding at end of period~~	~~274,208~~


	March 31,
	2021
Warranty reserve at beginning of the year	$	1,571
Provision		608
Warranty expenditures		(35)
Effect of foreign currency translation		(25)
Warranty reserve at end of year	$	2,119

	September 30, 2017			December 31, 2016
Current Borrowings
China Credit Facility (5.0% at September 30, 2017)	$	526		$	936
Current borrowings	$	526		$	936

Long-term Debt
Revolving Credit Facility, long term (1)	$	62,604		$	71,203
Unamortized debt issuance costs	(609		)	(720		)
Long-term debt	$	61,995		$	70,483

		Fair Value
Derivative Instruments	Balance Sheet Classification	September 30, 2017		December 31, 2016
Interest Rate Swaps	Other Liabilities	$	208	$	30


		Liability Derivatives
		Fair value as of:
Derivatives designated as	Balance Sheet	March 31,		December 31,
hedging instruments	Location	2021		2020
Interest rate products	Accrued liabilities	$	677	$	—
Interest rate products	Other long-term liabilities		284		1,889
Foreign currency contracts	Accrued liabilities		14		—
		$	975	$	1,889


	Amount of pre-tax gain (loss) recognized
	in OCI on derivatives
Derivatives in cash flow hedging relationships	Three months ended March 31,
	2021		2020
Interest rate products	$	704	$	(1,463)


	Amount of pre-tax (loss) gain reclassified
	from accumulated OCI into income
Location of (loss) gain reclassified	Three months ended March 31,
from accumulated OCI into income	2021		2020

Interest expense	$	(225)	$	(31)

	Net deferral in OCI of derivatives (effective portion)
	For the quarter ended					For the nine months ended
	September 30,					September 30,
Derivative Instruments	2017			2016		2017			2016
Interest Rate Swaps	$	(34	)	$	39	$	(417	)	$	(145	)


		Total amounts of income and expense
		line items presented that reflect the
		effects of cash flow hedges recorded
		Three months ended March 31,
Derivatives designated as hedging instruments	Income Statement Location	2021		2020
Interest rate products	Interest Expense	$	861	$	1,054

	Net reclassification from AOCI into income (effective portion)
	For the quarter ended				For the nine months ended
Statement of earnings	September 30,				September 30,
classification	2017		2016		2017		2016
Interest expense	$	79	$	27	$	239	$	89


	March 31, 2021
	Level 1		Level 2		Level 3
Assets (liabilities)
Pension plan assets	$	6,685	$	—	$	—
Deferred compensation plan assets		4,365		—		—
Interest rate swaps		—		(961)		—
Foreign currency hedge contracts		—		(14)		—


Remainder of 2021	$	3,773
2022		4,094
2023		3,045
2024		2,368
2025		2,183
2026		1,146
Thereafter		4,327
Total undiscounted cash flows	$	20,936
Less: present value discount		(1,498)
Total lease liabilities	$	19,438