Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 6-May-15 | |
Document and Entity Information | ||
Entity Registrant Name | ALLIED MOTION TECHNOLOGIES INC | |
Entity Central Index Key | 46129 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 9,288,784 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Current Assets: | ||
Cash and cash equivalents | $11,043 | $13,113 |
Trade receivables, net of allowance for doubtful accounts of $437 and $367 at March 31, 2015 and December 31, 2014, respectively | 29,961 | 27,745 |
Inventories, net | 25,117 | 25,371 |
Deferred income taxes | 1,504 | 1,888 |
Prepaid expenses and other assets | 2,547 | 2,667 |
Total Current Assets | 70,172 | 70,784 |
Property, plant and equipment, net | 35,973 | 37,041 |
Deferred income taxes | 2,910 | 2,723 |
Intangible assets, net | 31,957 | 32,791 |
Goodwill | 17,733 | 18,303 |
Other long term assets | 4,368 | 3,998 |
Total Assets | 163,113 | 165,640 |
Current Liabilities: | ||
Debt obligations | 8,420 | 7,723 |
Accounts payable | 16,763 | 15,510 |
Accrued liabilities | 9,085 | 12,330 |
Income taxes payable | 1,014 | 393 |
Total Current Liabilities | 35,282 | 35,956 |
Long-term debt | 65,250 | 67,125 |
Deferred income taxes | 1,131 | 1,299 |
Deferred compensation arrangements | 2,649 | 2,167 |
Pension and post-retirement obligations | 3,079 | 3,142 |
Total Liabilities | 107,391 | 109,689 |
Commitments and Contingencies | ||
Stockholders' Equity: | ||
Common stock, no par value, authorized 50,000 shares; 9,304 and 9,213 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively | 26,736 | 25,129 |
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding | ||
Retained earnings | 39,248 | 36,505 |
Accumulated other comprehensive income (loss) | -10,262 | -5,683 |
Total Stockholders' Equity | 55,722 | 55,951 |
Total Liabilities and Stockholders' Equity | $163,113 | $165,640 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, except Per Share data, unless otherwise specified | ||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Trade receivables, allowance for doubtful accounts (in dollars) | $437 | $367 |
Common stock, par value (in dollars per share) | $0 | $0 |
Common stock, authorized shares | 50,000 | 50,000 |
Common stock, shares issued | 9,304 | 9,213 |
Common stock, shares outstanding | 9,304 | 9,213 |
Preferred stock, par value (in dollars per share) | $1 | $1 |
Preferred stock, authorized shares | 5,000 | 5,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||
Revenues | $59,580 | $60,435 |
Cost of goods sold | 42,080 | 43,343 |
Gross margin | 17,500 | 17,092 |
Operating costs and expenses: | ||
Selling | 2,208 | 2,110 |
General and administrative | 5,553 | 6,216 |
Engineering and development | 3,446 | 3,517 |
Amortization of intangible assets | 662 | 678 |
Total operating costs and expenses | 11,869 | 12,521 |
Operating income | 5,631 | 4,571 |
Other expense (income): | ||
Interest expense | 1,515 | 1,638 |
Other income, net | -266 | -352 |
Total other expense, net | 1,249 | 1,286 |
Income before income taxes | 4,382 | 3,285 |
Provision for income taxes | -1,406 | -1,137 |
Net income | 2,976 | 2,148 |
Basic earnings per share: | ||
Earnings per share (in dollars per share) | $0.32 | $0.24 |
Basic weighted average common shares (in shares) | 9,208 | 9,130 |
Diluted earnings per share: | ||
Earnings per share (in dollars per share) | $0.32 | $0.24 |
Diluted weighted average common shares (in shares) | 9,208 | 9,130 |
Net income | 2,976 | 2,148 |
Foreign currency translation adjustment | -4,479 | 7 |
Change in accumulated income (loss) on derivatives | -100 | -9 |
Comprehensive (loss) income | ($1,603) | $2,146 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Cash Flows From Operating Activities: | ||
Net income | $2,976 | $2,148 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 1,807 | 1,688 |
Deferred income taxes | 50 | 537 |
Stock compensation expense | 433 | 379 |
Other | -190 | 1,467 |
Changes in operating assets and liabilities: | ||
Trade receivables | -3,395 | -6,446 |
Inventories, net | -728 | -57 |
Prepaid expenses and other assets | -50 | 101 |
Accounts payable | 1,891 | 1,431 |
Accrued liabilities | -2,117 | -1,480 |
Net cash provided by (used in) operating activities | 677 | -232 |
Cash Flows From Investing Activities: | ||
Proceeds related to working capital adjustment on acquisition | 1,434 | |
Purchase of property and equipment | -1,436 | -584 |
Net cash provided by (used in) investing activities | -1,436 | 850 |
Cash Flows From Financing Activities: | ||
Borrowings on lines-of-credit, net | 315 | 164 |
Principal payments of long-term debt | -1,500 | -1,250 |
Dividends paid to stockholders | -233 | -231 |
Stock transactions under employee benefit stock plans | 1,171 | 304 |
Net cash used in financing activities | -247 | -1,013 |
Effect of foreign exchange rate changes on cash | -1,064 | -58 |
Net decrease in cash and cash equivalents | -2,070 | -453 |
Cash and cash equivalents at beginning of period | 13,113 | 10,171 |
Cash and cash equivalents at end of period | $11,043 | $9,718 |
BASIS_OF_PREPARATION_AND_PRESE
BASIS OF PREPARATION AND PRESENTATION | 3 Months Ended |
Mar. 31, 2015 | |
BASIS OF PREPARATION AND PRESENTATION | |
BASIS OF PREPARATION AND PRESENTATION | |
1.BASIS OF PREPARATION AND PRESENTATION | |
Allied Motion Technologies Inc. (Allied Motion or the Company) is engaged in the business of designing, manufacturing and selling motion control solutions, which include integrated system solutions as well as individual motion control products, to a broad spectrum of customers throughout the world primarily for the commercial motor, industrial motion, automotive control, medical, and aerospace and defense markets. | |
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company 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 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, a component of stockholders’ equity in the accompanying condensed consolidated balance sheets. 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”) 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 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 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, 2014 that was previously filed by the Company. | |
INVENTORIES
INVENTORIES | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
INVENTORIES | ||||||||
INVENTORIES | ||||||||
2.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 market, as follows (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Parts and raw materials | $ | 21,479 | $ | 21,573 | ||||
Work-in-process | 3,234 | 2,924 | ||||||
Finished goods | 3,931 | 4,403 | ||||||
28,644 | 28,900 | |||||||
Less reserves | (3,527 | ) | (3,529 | ) | ||||
Inventories, net | $ | 25,117 | $ | 25,371 | ||||
PROPERTY_PLANT_AND_EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||
3.PROPERTY, PLANT AND EQUIPMENT | ||||||||
Property, plant and equipment is classified as follows (in thousands): | ||||||||
March 31, | December 31 | |||||||
2015 | 2014 | |||||||
Land | $ | 969 | $ | 996 | ||||
Building and improvements | 9,374 | 9,324 | ||||||
Machinery, equipment, tools and dies | 36,721 | 37,426 | ||||||
Furniture, fixtures and other | 7,221 | 6,778 | ||||||
54,285 | 54,524 | |||||||
Less accumulated depreciation | (18,312 | ) | (17,483 | ) | ||||
Property, plant and equipment, net | $ | 35,973 | $ | 37,041 | ||||
Depreciation expense was approximately $1,145 and $1,010 for the quarters ended March 31, 2015 and 2014, respectively. | ||||||||
GOODWILL
GOODWILL | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
GOODWILL | ||||||||
GOODWILL | ||||||||
4.GOODWILL | ||||||||
The change in the carrying amount of goodwill for the quarter ended March 31, 2015 and year ended December 31, 2014 is as follows (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Beginning balance | $ | 18,303 | $ | 20,233 | ||||
Acquisition adjustments | — | (1,223 | ) | |||||
Effect of foreign currency translation | (570 | ) | (707 | ) | ||||
Ending balance | $ | 17,733 | $ | 18,303 | ||||
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 3 Months Ended | |||||||||||||||||||||
Mar. 31, 2015 | ||||||||||||||||||||||
INTANGIBLE ASSETS | ||||||||||||||||||||||
INTANGIBLE ASSETS | ||||||||||||||||||||||
5.INTANGIBLE ASSETS | ||||||||||||||||||||||
Intangible assets on the Company’s condensed consolidated balance sheets consist of the following (in thousands): | ||||||||||||||||||||||
March 31, 2015 | December 31, 2014 | |||||||||||||||||||||
Life | Gross | Accumulated | Net Book | Gross | Accumulated | Net Book | ||||||||||||||||
Amount | amortization | Value | Amount | amortization | Value | |||||||||||||||||
Customer lists | 8 - 15 years | $ | 34,139 | $ | (6,179 | ) | $ | 27,960 | $ | 34,379 | $ | (5,801 | ) | $ | 28,578 | |||||||
Trade name | 10 years | 4,775 | (1,505 | ) | 3,270 | 4,775 | (1,409 | ) | 3,366 | |||||||||||||
Design and technologies | 8 - 10 years | 2,178 | (1,470 | ) | 708 | 2,425 | (1,598 | ) | 827 | |||||||||||||
Patents | 24 | (5 | ) | 19 | 24 | (4 | ) | 20 | ||||||||||||||
Total | $ | 41,116 | $ | (9,159 | ) | $ | 31,957 | $ | 41,603 | $ | (8,812 | ) | $ | 32,791 | ||||||||
Amortization expense for intangible assets was $662 and $678 for the quarters ending March 31, 2015 and 2014, respectively. | ||||||||||||||||||||||
Estimated future intangible asset amortization expense as of March 31, 2015 is as follows (in thousands): | ||||||||||||||||||||||
Estimated | ||||||||||||||||||||||
Amortization | ||||||||||||||||||||||
Expense | ||||||||||||||||||||||
Remainder of 2015 | $ | 1,980 | ||||||||||||||||||||
2016 | 2,640 | |||||||||||||||||||||
2017 | 2,640 | |||||||||||||||||||||
2018 | 2,640 | |||||||||||||||||||||
2019 | 2,640 | |||||||||||||||||||||
Thereafter | 19,417 | |||||||||||||||||||||
Total estimated amortization expense | $ | 31,957 | ||||||||||||||||||||
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended | |||
Mar. 31, 2015 | ||||
STOCK-BASED COMPENSATION | ||||
STOCK-BASED COMPENSATION | ||||
6.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 three months ended March 31, 2015, 72,991 shares of unvested restricted stock were awarded at a weighted average market value of $27.55. Of the restricted shares granted, 41,792 shares have 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 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, 2015: | ||||
Number of shares | ||||
Outstanding at beginning of period | 487,678 | |||
Awarded | 72,991 | |||
Vested | (134,502 | ) | ||
Forfeited | (6,700 | ) | ||
Outstanding at end of period | 419,467 | |||
For the quarters ended March 31, 2015 and 2014, stock compensation expense, net of forfeitures, of $433 and $379 was recorded, respectively. | ||||
ACCRUED_LIABILITIES
ACCRUED LIABILITIES | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
ACCRUED LIABILITIES | ||||||||
ACCRUED LIABILITIES | ||||||||
7.ACCRUED LIABILITIES | ||||||||
Accrued liabilities consist of the following (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Compensation and fringe benefits | $ | 5,780 | $ | 9,696 | ||||
Warranty reserve | 758 | 786 | ||||||
Other accrued expenses | 2,547 | 1,848 | ||||||
$ | 9,085 | $ | 12,330 | |||||
DEBT_OBLIGATIONS
DEBT OBLIGATIONS | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
DEBT OBLIGATIONS | ||||||||
DEBT OBLIGATIONS | ||||||||
8.DEBT OBLIGATIONS | ||||||||
Debt obligations consisted of the following (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Current Borrowings | ||||||||
Revolving Credit Facility | $ | — | $ | — | ||||
China Credit Facility (6.4% at March 31, 2015) | 1,670 | 1,348 | ||||||
Term Loan, current portion, (2.2% at March 31, 2015)(1) | 6,750 | 6,375 | ||||||
Current borrowings | $ | 8,420 | $ | 7,723 | ||||
Long-term Debt | ||||||||
Term Loan, noncurrent (2.2% at March 31, 2015)(1) | $ | 35,250 | $ | 37,125 | ||||
Subordinated Notes (14.5%, 13% Cash, 1.5% PIK) | 30,000 | 30,000 | ||||||
Long-term debt | $ | 65,250 | $ | 67,125 | ||||
-1 | The effective rate of the Term Loan including the impact of the related hedges is 2.65%. | |||||||
Credit Agreement | ||||||||
The Company’s Credit Agreement provides for a $15,000 five-year revolving credit facility and a $50,000 five-year term loan (collectively the “Senior Credit Facilities”). | ||||||||
Borrowings under the Senior Credit Facilities are subject to terms defined in the Credit Agreement. Borrowings bear interest at either the Base Rate plus a margin of 0.25% to 2.00% (currently 1.50%) or the Eurocurrency Rate plus a margin of 1.25% to 3.00% (currently 2.0%), in each case depending on the Company’s ratio of total funded indebtedness to Consolidated EBITDA (the “Total Leverage Ratio”). | ||||||||
Principal installments are payable on the Term Loan in varying percentages quarterly through September 30, 2018 with a balloon payment at maturity. The Senior Credit Facilities are secured by substantially all of the Company’s assets. The average outstanding borrowings for 2015 for the Senior Credit Facilities were $43,000. At March 31, 2015, there was approximately $15,000 available under the Senior Credit Facilities. | ||||||||
The Credit Agreement contains certain financial covenants related to maximum leverage and minimum fixed charge coverage. The Credit Agreement also includes other covenants and restrictions, including limits on the amount of certain types of capital expenditures. The Company was in compliance with all covenants at March 31, 2015. | ||||||||
Senior Subordinated Notes | ||||||||
Under the Company’s Note Agreement, the Company sold $30,000 of 14.50% Senior Subordinated Notes due October 18, 2019 (the “Notes”) to Prudential Capital Partners IV, L.P. and its affiliates in a private placement. The interest rate on the Notes is 14.50% with 13.00% payable in cash and 1.50% payable in-kind, quarterly in arrears and the outstanding principal amount of the Notes, together with any accrued and unpaid interest is due on October 18, 2019. The Company may prepay the Notes at any time after October 18, 2016, in whole or in part, at 100% of the principal amount. The Notes are unsecured obligations of the Company and are fully and unconditionally guaranteed by certain of the Company’s subsidiaries. | ||||||||
Other | ||||||||
The Company has a China Credit Facility that provides credit of approximately $1,955 (Chinese Renminbi (‘‘RMB’’) 12,000). The China Facility is used for working capital and capital equipment needs at the Company’s China operations, and will mature in November, 2017. The average balance for 2015 was $1,560 (RMB 9,600). At March 31, 2015, there was approximately $290 (RMB 1,790) available under the facility. | ||||||||
Maturities of long-term debt as of March 31, 2015 are as follows (in thousands): | ||||||||
Total | ||||||||
Remainder of 2015 | $ | 6,545 | ||||||
2016 | 8,219 | |||||||
2017 | 10,374 | |||||||
2018 | 18,532 | |||||||
2019 | 30,000 | |||||||
Total | $ | 73,670 | ||||||
FAIR_VALUE
FAIR VALUE | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
FAIR VALUE | |||||||||||
FAIR VALUE | |||||||||||
9.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 approximate fair value because of the immediate or short-term maturities of these financial instruments. | |||||||||||
The following table presents the Company’s financial assets that are accounted for at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, respectively, by level within the fair value hierarchy (in thousands): | |||||||||||
March 31, 2015 | |||||||||||
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Pension Plan Assets | $ | 5,175 | $ | — | $ | — | |||||
Other long term assets | 2,644 | — | — | ||||||||
Interest rate swaps | — | (102 | ) | — | |||||||
December 31, 2014 | |||||||||||
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Pension Plan Assets | $ | 5,095 | $ | — | $ | — | |||||
Other long term assets | 2,162 | — | — | ||||||||
Interest rate swaps | — | (2 | ) | — | |||||||
DERIVATIVE_FINANCIAL_INSTRUMEN
DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended | |||||||||||||||
Mar. 31, 2015 | ||||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||||||||||||||
10.DERIVATIVE FINANCIAL INSTRUMENTS | ||||||||||||||||
The Company’s objective in using interest rate derivatives is 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, 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 of March 31, 2015 the amount hedged was $21,000. | ||||||||||||||||
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the first quarter of 2015, 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 three months ended March 31, 2015 and March 31, 2014, respectively. | ||||||||||||||||
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 $155 will be reclassified as an increase to interest expense over the next year. | ||||||||||||||||
Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. | ||||||||||||||||
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, 2015 (in thousands): | ||||||||||||||||
Fair Value | ||||||||||||||||
Derivative Instrument | Balance Sheet Location | March 31, | December 31, | |||||||||||||
2015 | 2014 | |||||||||||||||
Interest Rate Swaps | Accrued liabilities | $ | (102 | ) | $ | (2 | ) | |||||||||
Total Liabilities | $ | (102 | ) | $ | (2 | ) | ||||||||||
The effect of the Company’s derivative financial instruments on the condensed consolidated statements of income and comprehensive income is as follows (in thousands): | ||||||||||||||||
Net deferral in OCI of | Net reclassification from AOCI | |||||||||||||||
derivatives (effective portion) | Statement of | into income (effective portion) | ||||||||||||||
Derivative | For the quarter ended March 31, | earnings | For the quarter ended March 31, | |||||||||||||
Instruments | 2015 | 2014 | classification | 2015 | 2014 | |||||||||||
Interest Rate Swaps | $ | (151 | ) | $ | (68 | ) | Interest expense | $ | (51 | ) | $ | (58 | ) | |||
Amount recognized in income | ||||||||||||||||
(ineffective portion and amount | ||||||||||||||||
excluded from effectiveness | ||||||||||||||||
Statement of | testing) | |||||||||||||||
earnings | For the quarter ended March 31, | |||||||||||||||
classification | 2015 | 2014 | ||||||||||||||
Other (expense) | $ | — | $ | — | ||||||||||||
INCOME_TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2015 | |
INCOME TAXES | |
INCOME TAXES | |
11.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 effective income tax rate as a percentage of income before income taxes was 32.1% and 34.6% in the first quarter 2015 and 2014, respectively. The effective tax rate for the first quarter of 2015 and 2014 is lower than the statutory rate primarily due to differences in state and foreign tax rates and the mix of foreign and domestic sales. The effective tax rate for 2015 is lower than 2014 primarily due to state taxes. | |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
12.COMMITMENTS AND CONTINGENCIES | ||||||||
Warranty | ||||||||
The Company offers warranty coverage for its products. The length of the warranty period for its products varies significantly based on the product being sold. The Company estimates the costs of repairing products under warranty based on the historical average cost of the repairs. The assumptions used to estimate warranty accruals are reevaluated periodically in light of actual experience and, when appropriate, the accruals are adjusted. Estimated warranty costs are recorded at the time of sale of the related product, and are considered a cost of sale. Changes in the Company’s reserve for product warranty claims during 2015 and 2014 were as follows (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Warranty reserve at beginning of the year | $ | 786 | $ | 629 | ||||
Provision | 24 | 234 | ||||||
Warranty expenditures | (26 | ) | (40 | ) | ||||
Effect of foreign currency translation | (26 | ) | (37 | ) | ||||
Warranty reserve at end of the period | $ | 758 | $ | 786 | ||||
Operating Leases | ||||||||
The Company is party to various operating leases for buildings, equipment and software. Estimated future operating lease expense is as follows (in thousands): | ||||||||
Lease Expense | ||||||||
Remainder of 2015 | $ | 1,315 | ||||||
2016 | 1,679 | |||||||
2017 | 1,228 | |||||||
2018 | 1,047 | |||||||
2019 | 719 | |||||||
Thereafter | 2,315 | |||||||
Total | $ | 8,303 | ||||||
Litigation | ||||||||
The Company is involved in certain actions that have arisen out of the ordinary course of business. Management believes that resolution of the actions will not have a significant adverse effect on the Company’s consolidated financial position or results of operations. | ||||||||
ACCUMULATED_OTHER_COMPREHENSIV
ACCUMULATED OTHER COMPREHENSIVE INCOME | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | ||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | ||||||||||||||
13.ACCUMULATED OTHER COMPREHENSIVE INCOME | ||||||||||||||
Accumulated Other Comprehensive Income is comprised of the following (in thousands): | ||||||||||||||
Defined | Cash Flow | Foreign | Total | |||||||||||
Benefit | Hedges | Currency | ||||||||||||
Plan | Translation | |||||||||||||
Liability | Adjustment | |||||||||||||
At December 31, 2014 | $ | (853 | ) | $ | (2 | ) | $ | (4,828 | ) | $ | (5,683 | ) | ||
Unrealized loss on cash flow hedges | — | (151 | ) | — | (151 | ) | ||||||||
Realized (gain) loss on interest rate swap hedges | — | 51 | — | 51 | ||||||||||
Foreign currency translation loss | — | — | (4,479 | ) | (4,479 | ) | ||||||||
At March 31, 2015 | $ | (853 | ) | $ | (102 | ) | $ | (9,307 | ) | $ | (10,262 | ) | ||
Defined | Cash Flow | Foreign | Total | |||||||||||
Benefit | Hedges | Currency | ||||||||||||
Plan | Translation | |||||||||||||
Liability | Adjustment | |||||||||||||
At December 31, 2013 | $ | (190 | ) | $ | 41 | $ | 773 | $ | 624 | |||||
Unrealized loss on cash flow hedges | — | (67 | ) | — | (67 | ) | ||||||||
Realized (gain) loss on interest rate swap hedges | — | 58 | — | 58 | ||||||||||
Foreign currency translation loss | — | — | 7 | 7 | ||||||||||
At March 31, 2014 | $ | (190 | ) | $ | 32 | $ | 780 | $ | 622 | |||||
The realized (gain) loss relating to the Company’s interest rate swap hedges were reclassified from Accumulated Other Comprehensive Income and included in Interest Expense in the Condensed Consolidated Statements of Operations and Comprehensive Income. | ||||||||||||||
PENSION_AND_POSTRETIREMENT_PLA
PENSION AND POSTRETIREMENT PLANS | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
PENSION AND POSTRETIREMENT PLANS | ||||||||
PENSION AND POSTRETIREMENT PLANS | ||||||||
14.PENSION AND POSTRETIREMENT PLANS | ||||||||
The expenses we record for our pension and other postretirement benefit pension plans depend on factors such as changes in market interest rates, the value of plan assets, mortality assumptions and health care trend rates. Significant unfavorable changes in these factors would increase our expenses. Our pension plan assets consist primarily of equity and fixed income securities. If the performance of investments in the plan does not meet the Company’s assumptions, the excess obligation may increase and the Company may have to record additional costs and/or contribute additional funds to the pension plan. An increase in pension expenses and contributions could decrease the Company’s cash available to pay its outstanding obligations as well as impact net income. | ||||||||
Our postretirement plan is unfunded. We record expense as employees render the services necessary to earn the benefits. The expenses are based on estimates including health care cost increases, retirement and mortality. Actual results may vary materially from estimates which could result in an increase to our expense and decrease in net income. | ||||||||
Pension Plan | ||||||||
Motor Products - Owosso has a defined benefit pension plan covering substantially all of its hourly union employees hired prior to April 10, 2002. The benefits are based on years of service, the employee’s compensation during the last three years of employment, and accumulated employee contributions. | ||||||||
Components of net periodic pension expense included in the condensed consolidated statements of operations and comprehensive income for the quarters ending March 31, 2015 and 2014 are as follows (in thousands): | ||||||||
For the three months ended | ||||||||
March 31, 2015 | March 31, 2014 | |||||||
Service cost | $ | 27 | $ | 21 | ||||
Interest cost | 68 | 66 | ||||||
Expected return on assets | 48 | 11 | ||||||
Amortization of net loss | (82 | ) | (85 | ) | ||||
Net periodic pension expense | $ | 61 | $ | 13 | ||||
The Company expects to contribute approximately $166 to the Pension Plan during 2015. For the quarter ended March 31, 2015 there were $59 of cash contributions made to the plan. Benefits expected to be paid from the Pension Plan during 2015 are $309. For the quarter ended March 31, 2015 there were $70 of benefit payments paid to participants. | ||||||||
Post Retirement Welfare Plan | ||||||||
Motor Products-Owosso provides postretirement medical insurance and life insurance benefits to current and former employees hired before January 1, 1994 who retire from Motor Products. Employees who retire after January 1, 2005 must have twenty or more years of continuous service in order to be eligible for retiree medical benefits. Partial contributions from retirees are required for the medical insurance benefits. The Company’s portion of the medical insurance premiums is funded from the general assets of the Company. The Company recognizes the expected cost of providing such post-retirement benefits during employees’ active service periods. | ||||||||
Components of net periodic postretirement benefit income included in the condensed consolidated statements of operations and comprehensive income for the quarters ending March 31, 2015 and 2014 are as follows (in thousands): | ||||||||
For the three months ended | ||||||||
March 31, | March 31, | |||||||
2015 | 2014 | |||||||
Service cost | $ | 2 | $ | 2 | ||||
Interest cost | 13 | 14 | ||||||
Amortization of net gain | (18 | ) | (19 | ) | ||||
Amortization of prior service cost | (3 | ) | (3 | ) | ||||
Net postretirement benefit | $ | (6 | ) | $ | (6 | ) | ||
Benefit payments for the Post Retirement Welfare Plan during 2015 are expected to be $51. | ||||||||
DIVIDENDS_PER_SHARE
DIVIDENDS PER SHARE | 3 Months Ended |
Mar. 31, 2015 | |
DIVIDENDS PER SHARE | |
DIVIDENDS PER SHARE | |
15.DIVIDENDS PER SHARE | |
The Company declared and paid a quarterly dividend of $0.025 per share in the first quarter of 2015 and 2014. Total dividends paid in the first three months of 2015 and 2014 were $233 and $231, respectively. | |
SEGMENT_INFORMATION
SEGMENT INFORMATION | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
SEGMENT INFORMATION | ||||||||
SEGMENT INFORMATION | ||||||||
16.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 segment for the manufacture and marketing of motion control products for original equipment manufacturers and end user applications. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. 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, China, Portugal and Mexico are included in the accompanying condensed consolidated financial statements. | ||||||||
Financial information related to the foreign subsidiaries is summarized below (in thousands): | ||||||||
For the three months ended | ||||||||
and as of March 31, | ||||||||
2015 | 2014 | |||||||
Revenues derived from foreign subsidiaries | $ | 18,941 | $ | 20,152 | ||||
Identifiable assets were $52,596 and $53,479 as of March 31, 2015 and December 31, 2014, respectively. | ||||||||
Revenues derived from foreign subsidiaries and identifiable assets outside of the United States are primarily attributable to Europe. | ||||||||
Sales to customers outside of the United States by all subsidiaries were $19,745 and $21,630 during the first quarter of 2015 and 2014, respectively. | ||||||||
During the quarter ended March 31, 2015, two customers accounted for 32% of total revenues and 34% of trade receivables. During the quarter ended March 31, 2014, three customers accounted for 33% of total revenues and 42% of trade receivables. | ||||||||
RECENT_ACCOUNTING_PRONOUNCEMEN
RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Mar. 31, 2015 | |
RECENT ACCOUNTING PRONOUNCEMENTS. | |
Recent Accounting Pronouncements. | |
17.RECENT ACCOUNTING PRONOUNCEMENTS | |
Recently adopted accounting pronouncements | |
Effective January 1, 2015, we adopted Accounting Standards Update (“ASU”) No. 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” which eliminates from GAAP the concept of extraordinary items. However, the presentation and disclosure guidance for items that are unusual in nature or infrequent in occurrence was retained. We adopted the updated guidance prospectively. The adoption of this update concerns presentation and disclosure only as it relates to our condensed consolidated financial statements. | |
Effective January 1, 2015, we adopted ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure requirements. To qualify as a discontinued operation the standard requires a disposal to represent a strategic shift that has, or will have, a major effect on an entity’s operations and financial results. The standard also expands the disclosures for discontinued operations and requires new disclosures related to individually material dispositions that do not qualify as discontinued operations. The standard is effective prospectively for fiscal years beginning after December 15, 2014. The significance of this guidance for the Company is dependent on any qualifying dispositions or disposals. | |
Recently issued accounting pronouncements | |
In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” The update requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and represents a change in accounting principle. The update is effective for fiscal years beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued. ASU 2015-03 is not expected to have a material impact on the Company’s condensed consolidated financial statements | |
INVENTORIES_Tables
INVENTORIES (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
INVENTORIES | ||||||||
Schedule of inventories including costs of materials, direct labor and manufacturing overhead, and stated at the lower of cost (first-in, first-out basis) or market | ||||||||
Inventories include costs of materials, direct labor and manufacturing overhead, and are stated at the lower of cost (first-in, first-out basis) or market, as follows (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Parts and raw materials | $ | 21,479 | $ | 21,573 | ||||
Work-in-process | 3,234 | 2,924 | ||||||
Finished goods | 3,931 | 4,403 | ||||||
28,644 | 28,900 | |||||||
Less reserves | (3,527 | ) | (3,529 | ) | ||||
Inventories, net | $ | 25,117 | $ | 25,371 | ||||
PROPERTY_PLANT_AND_EQUIPMENT_T
PROPERTY, PLANT AND EQUIPMENT (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||
Schedule of classification of property, plant and equipment | ||||||||
Property, plant and equipment is classified as follows (in thousands): | ||||||||
March 31, | December 31 | |||||||
2015 | 2014 | |||||||
Land | $ | 969 | $ | 996 | ||||
Building and improvements | 9,374 | 9,324 | ||||||
Machinery, equipment, tools and dies | 36,721 | 37,426 | ||||||
Furniture, fixtures and other | 7,221 | 6,778 | ||||||
54,285 | 54,524 | |||||||
Less accumulated depreciation | (18,312 | ) | (17,483 | ) | ||||
Property, plant and equipment, net | $ | 35,973 | $ | 37,041 | ||||
GOODWILL_Tables
GOODWILL (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
GOODWILL | ||||||||
Schedule of change in the carrying amount of goodwill | ||||||||
The change in the carrying amount of goodwill for the quarter ended March 31, 2015 and year ended December 31, 2014 is as follows (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Beginning balance | $ | 18,303 | $ | 20,233 | ||||
Acquisition adjustments | — | (1,223 | ) | |||||
Effect of foreign currency translation | (570 | ) | (707 | ) | ||||
Ending balance | $ | 17,733 | $ | 18,303 | ||||
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 3 Months Ended | |||||||||||||||||||||
Mar. 31, 2015 | ||||||||||||||||||||||
INTANGIBLE ASSETS | ||||||||||||||||||||||
Schedule of intangible assets | ||||||||||||||||||||||
Intangible assets on the Company’s condensed consolidated balance sheets consist of the following (in thousands): | ||||||||||||||||||||||
March 31, 2015 | December 31, 2014 | |||||||||||||||||||||
Life | Gross | Accumulated | Net Book | Gross | Accumulated | Net Book | ||||||||||||||||
Amount | amortization | Value | Amount | amortization | Value | |||||||||||||||||
Customer lists | 8 - 15 years | $ | 34,139 | $ | (6,179 | ) | $ | 27,960 | $ | 34,379 | $ | (5,801 | ) | $ | 28,578 | |||||||
Trade name | 10 years | 4,775 | (1,505 | ) | 3,270 | 4,775 | (1,409 | ) | 3,366 | |||||||||||||
Design and technologies | 8 - 10 years | 2,178 | (1,470 | ) | 708 | 2,425 | (1,598 | ) | 827 | |||||||||||||
Patents | 24 | (5 | ) | 19 | 24 | (4 | ) | 20 | ||||||||||||||
Total | $ | 41,116 | $ | (9,159 | ) | $ | 31,957 | $ | 41,603 | $ | (8,812 | ) | $ | 32,791 | ||||||||
Schedule of estimated amortization expense for intangible assets | Estimated future intangible asset amortization expense as of March 31, 2015 is as follows (in thousands): | |||||||||||||||||||||
Estimated | ||||||||||||||||||||||
Amortization | ||||||||||||||||||||||
Expense | ||||||||||||||||||||||
Remainder of 2015 | $ | 1,980 | ||||||||||||||||||||
2016 | 2,640 | |||||||||||||||||||||
2017 | 2,640 | |||||||||||||||||||||
2018 | 2,640 | |||||||||||||||||||||
2019 | 2,640 | |||||||||||||||||||||
Thereafter | 19,417 | |||||||||||||||||||||
Total estimated amortization expense | $ | 31,957 | ||||||||||||||||||||
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended | |||
Mar. 31, 2015 | ||||
STOCK-BASED COMPENSATION | ||||
Summary of restricted stock activity | ||||
Number of shares | ||||
Outstanding at beginning of period | 487,678 | |||
Awarded | 72,991 | |||
Vested | (134,502 | ) | ||
Forfeited | (6,700 | ) | ||
Outstanding at end of period | 419,467 | |||
ACCRUED_LIABILITIES_Tables
ACCRUED LIABILITIES (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
ACCRUED LIABILITIES | ||||||||
Schedule of accrued liabilities | ||||||||
Accrued liabilities consist of the following (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Compensation and fringe benefits | $ | 5,780 | $ | 9,696 | ||||
Warranty reserve | 758 | 786 | ||||||
Other accrued expenses | 2,547 | 1,848 | ||||||
$ | 9,085 | $ | 12,330 | |||||
DEBT_OBLIGATIONS_Tables
DEBT OBLIGATIONS (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
DEBT OBLIGATIONS | ||||||||
Schedule of debt obligations | ||||||||
Debt obligations consisted of the following (in thousands): | ||||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Current Borrowings | ||||||||
Revolving Credit Facility | $ | — | $ | — | ||||
China Credit Facility (6.4% at March 31, 2015) | 1,670 | 1,348 | ||||||
Term Loan, current portion, (2.2% at March 31, 2015)(1) | 6,750 | 6,375 | ||||||
Current borrowings | $ | 8,420 | $ | 7,723 | ||||
Long-term Debt | ||||||||
Term Loan, noncurrent (2.2% at March 31, 2015)(1) | $ | 35,250 | $ | 37,125 | ||||
Subordinated Notes (14.5%, 13% Cash, 1.5% PIK) | 30,000 | 30,000 | ||||||
Long-term debt | $ | 65,250 | $ | 67,125 | ||||
-1 | The effective rate of the Term Loan including the impact of the related hedges is 2.65%. | |||||||
Schedule of maturities of long-term debt | ||||||||
Maturities of long-term debt as of March 31, 2015 are as follows (in thousands): | ||||||||
Total | ||||||||
Remainder of 2015 | $ | 6,545 | ||||||
2016 | 8,219 | |||||||
2017 | 10,374 | |||||||
2018 | 18,532 | |||||||
2019 | 30,000 | |||||||
Total | $ | 73,670 | ||||||
FAIR_VALUE_Tables
FAIR VALUE (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2015 | |||||||||||
FAIR VALUE | |||||||||||
Schedule of financial assets accounted for at fair value on a recurring basis | |||||||||||
The following table presents the Company’s financial assets that are accounted for at fair value on a recurring basis as of March 31, 2015 and December 31, 2014, respectively, by level within the fair value hierarchy (in thousands): | |||||||||||
March 31, 2015 | |||||||||||
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Pension Plan Assets | $ | 5,175 | $ | — | $ | — | |||||
Other long term assets | 2,644 | — | — | ||||||||
Interest rate swaps | — | (102 | ) | — | |||||||
December 31, 2014 | |||||||||||
Level 1 | Level 2 | Level 3 | |||||||||
Assets | |||||||||||
Pension Plan Assets | $ | 5,095 | $ | — | $ | — | |||||
Other long term assets | 2,162 | — | — | ||||||||
Interest rate swaps | — | (2 | ) | — | |||||||
DERIVATIVE_FINANCIAL_INSTRUMEN1
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended | |||||||||||||||
Mar. 31, 2015 | ||||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS | ||||||||||||||||
Schedule of fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets | ||||||||||||||||
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, 2015 (in thousands): | ||||||||||||||||
Fair Value | ||||||||||||||||
Derivative Instrument | Balance Sheet Location | March 31, | December 31, | |||||||||||||
2015 | 2014 | |||||||||||||||
Interest Rate Swaps | Accrued liabilities | $ | (102 | ) | $ | (2 | ) | |||||||||
Total Liabilities | $ | (102 | ) | $ | (2 | ) | ||||||||||
Schedule of effect of the Company's derivative financial instruments on the condensed consolidated statement of income and comprehensive income | ||||||||||||||||
The effect of the Company’s derivative financial instruments on the condensed consolidated statements of income and comprehensive income is as follows (in thousands): | ||||||||||||||||
Net deferral in OCI of | Net reclassification from AOCI | |||||||||||||||
derivatives (effective portion) | Statement of | into income (effective portion) | ||||||||||||||
Derivative | For the quarter ended March 31, | earnings | For the quarter ended March 31, | |||||||||||||
Instruments | 2015 | 2014 | classification | 2015 | 2014 | |||||||||||
Interest Rate Swaps | $ | (151 | ) | $ | (68 | ) | Interest expense | $ | (51 | ) | $ | (58 | ) | |||
Amount recognized in income | ||||||||||||||||
(ineffective portion and amount | ||||||||||||||||
excluded from effectiveness | ||||||||||||||||
Statement of | testing) | |||||||||||||||
earnings | For the quarter ended March 31, | |||||||||||||||
classification | 2015 | 2014 | ||||||||||||||
Other (expense) | $ | — | $ | — | ||||||||||||
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
COMMITMENTS AND CONTINGENCIES | ||||||||
Schedule of changes in the reserve for product warranty claims | Changes in the Company’s reserve for product warranty claims during 2015 and 2014 were as follows (in thousands): | |||||||
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
Warranty reserve at beginning of the year | $ | 786 | $ | 629 | ||||
Provision | 24 | 234 | ||||||
Warranty expenditures | (26 | ) | (40 | ) | ||||
Effect of foreign currency translation | (26 | ) | (37 | ) | ||||
Warranty reserve at end of the period | $ | 758 | $ | 786 | ||||
Schedule of estimated future operating lease expense | Estimated future operating lease expense is as follows (in thousands): | |||||||
Lease Expense | ||||||||
Remainder of 2015 | $ | 1,315 | ||||||
2016 | 1,679 | |||||||
2017 | 1,228 | |||||||
2018 | 1,047 | |||||||
2019 | 719 | |||||||
Thereafter | 2,315 | |||||||
Total | $ | 8,303 | ||||||
ACCUMULATED_OTHER_COMPREHENSIV1
ACCUMULATED OTHER COMPREHENSIVE INCOME (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE INCOME | ||||||||||||||
Schedule of accumulated other comprehensive income | ||||||||||||||
Accumulated Other Comprehensive Income is comprised of the following (in thousands): | ||||||||||||||
Defined | Cash Flow | Foreign | Total | |||||||||||
Benefit | Hedges | Currency | ||||||||||||
Plan | Translation | |||||||||||||
Liability | Adjustment | |||||||||||||
At December 31, 2014 | $ | (853 | ) | $ | (2 | ) | $ | (4,828 | ) | $ | (5,683 | ) | ||
Unrealized loss on cash flow hedges | — | (151 | ) | — | (151 | ) | ||||||||
Realized (gain) loss on interest rate swap hedges | — | 51 | — | 51 | ||||||||||
Foreign currency translation loss | — | — | (4,479 | ) | (4,479 | ) | ||||||||
At March 31, 2015 | $ | (853 | ) | $ | (102 | ) | $ | (9,307 | ) | $ | (10,262 | ) | ||
Defined | Cash Flow | Foreign | Total | |||||||||||
Benefit | Hedges | Currency | ||||||||||||
Plan | Translation | |||||||||||||
Liability | Adjustment | |||||||||||||
At December 31, 2013 | $ | (190 | ) | $ | 41 | $ | 773 | $ | 624 | |||||
Unrealized loss on cash flow hedges | — | (67 | ) | — | (67 | ) | ||||||||
Realized (gain) loss on interest rate swap hedges | — | 58 | — | 58 | ||||||||||
Foreign currency translation loss | — | — | 7 | 7 | ||||||||||
At March 31, 2014 | $ | (190 | ) | $ | 32 | $ | 780 | $ | 622 | |||||
PENSION_AND_POSTRETIREMENT_PLA1
PENSION AND POSTRETIREMENT PLANS (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Pension Plan | ||||||||
Pension and Postretirement plan | ||||||||
Schedule of components of net periodic expense | Components of net periodic pension expense included in the condensed consolidated statements of operations and comprehensive income for the quarters ending March 31, 2015 and 2014 are as follows (in thousands): | |||||||
For the three months ended | ||||||||
March 31, 2015 | March 31, 2014 | |||||||
Service cost | $ | 27 | $ | 21 | ||||
Interest cost | 68 | 66 | ||||||
Expected return on assets | 48 | 11 | ||||||
Amortization of net loss | (82 | ) | (85 | ) | ||||
Net periodic pension expense | $ | 61 | $ | 13 | ||||
Postretirement Welfare Plan | ||||||||
Pension and Postretirement plan | ||||||||
Schedule of components of net periodic expense | ||||||||
Components of net periodic postretirement benefit income included in the condensed consolidated statements of operations and comprehensive income for the quarters ending March 31, 2015 and 2014 are as follows (in thousands): | ||||||||
For the three months ended | ||||||||
March 31, | March 31, | |||||||
2015 | 2014 | |||||||
Service cost | $ | 2 | $ | 2 | ||||
Interest cost | 13 | 14 | ||||||
Amortization of net gain | (18 | ) | (19 | ) | ||||
Amortization of prior service cost | (3 | ) | (3 | ) | ||||
Net postretirement benefit | $ | (6 | ) | $ | (6 | ) | ||
SEGMENT_INFORMATION_Tables
SEGMENT INFORMATION (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
SEGMENT INFORMATION | ||||||||
Schedule of financial information related to the foreign subsidiaries | ||||||||
Financial information related to the foreign subsidiaries is summarized below (in thousands): | ||||||||
For the three months ended | ||||||||
and as of March 31, | ||||||||
2015 | 2014 | |||||||
Revenues derived from foreign subsidiaries | $ | 18,941 | $ | 20,152 | ||||
INVENTORIES_Details
INVENTORIES (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
INVENTORIES | ||
Parts and raw materials | $21,479 | $21,573 |
Work-in-process | 3,234 | 2,924 |
Finished goods | 3,931 | 4,403 |
Inventory, gross | 28,644 | 28,900 |
Less reserves | -3,527 | -3,529 |
Inventories, net | $25,117 | $25,371 |
PROPERTY_PLANT_AND_EQUIPMENT_D
PROPERTY, PLANT AND EQUIPMENT (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Property, plant and equipment | |||
Property, plant and equipment, gross | $54,285 | $54,524 | |
Less accumulated depreciation | -18,312 | -17,483 | |
Property, plant and equipment, net | 35,973 | 37,041 | |
Depreciation expense | 1,145 | 1,010 | |
Land | |||
Property, plant and equipment | |||
Property, plant and equipment, gross | 969 | 996 | |
Building and improvements | |||
Property, plant and equipment | |||
Property, plant and equipment, gross | 9,374 | 9,324 | |
Machinery, equipment, tools and dies | |||
Property, plant and equipment | |||
Property, plant and equipment, gross | 36,721 | 37,426 | |
Furniture, fixtures and other | |||
Property, plant and equipment | |||
Property, plant and equipment, gross | $7,221 | $6,778 |
GOODWILL_Details
GOODWILL (Details) (USD $) | 3 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Dec. 31, 2014 |
Change in goodwill | ||
Beginning balance | $18,303 | $20,233 |
Acquisition adjustments | -1,223 | |
Effect of foreign currency translation | -570 | -707 |
Ending balance | $17,733 | $18,303 |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Intangible assets subject to amortization | |||
Gross Amount | $41,116 | $41,603 | |
Accumulated amortization | -9,159 | -8,812 | |
Net Book Value | 31,957 | 32,791 | |
Amortization expense for intangible assets | 662 | 678 | |
Estimated amortization expense | |||
Remainder of 2015 | 1,980 | ||
2016 | 2,640 | ||
2017 | 2,640 | ||
2018 | 2,640 | ||
2019 | 2,640 | ||
Thereafter | 19,417 | ||
Net Book Value | 31,957 | 32,791 | |
Customer lists | |||
Intangible assets subject to amortization | |||
Gross Amount | 34,139 | 34,379 | |
Accumulated amortization | -6,179 | -5,801 | |
Net Book Value | 27,960 | 28,578 | |
Estimated amortization expense | |||
Net Book Value | 27,960 | 28,578 | |
Customer lists | Minimum | |||
Intangible assets subject to amortization | |||
Estimated Life | 8 years | ||
Customer lists | Maximum | |||
Intangible assets subject to amortization | |||
Estimated Life | 15 years | ||
Trade name | |||
Intangible assets subject to amortization | |||
Gross Amount | 4,775 | 4,775 | |
Accumulated amortization | -1,505 | -1,409 | |
Net Book Value | 3,270 | 3,366 | |
Estimated Life | 10 years | ||
Estimated amortization expense | |||
Net Book Value | 3,270 | 3,366 | |
Design and technologies | |||
Intangible assets subject to amortization | |||
Gross Amount | 2,178 | 2,425 | |
Accumulated amortization | -1,470 | -1,598 | |
Net Book Value | 708 | 827 | |
Estimated amortization expense | |||
Net Book Value | 708 | 827 | |
Design and technologies | Minimum | |||
Intangible assets subject to amortization | |||
Estimated Life | 8 years | ||
Design and technologies | Maximum | |||
Intangible assets subject to amortization | |||
Estimated Life | 10 years | ||
Patents | |||
Intangible assets subject to amortization | |||
Gross Amount | 24 | 24 | |
Accumulated amortization | -5 | -4 | |
Net Book Value | 19 | 20 | |
Estimated amortization expense | |||
Net Book Value | $19 | $20 |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Additional disclosures | ||
Compensation expense, net of forfeitures | $433 | $379 |
Restricted Stock | ||
Stock-Based Compensation | ||
Weighted average value (in dollars per share) | $27.55 | |
Service period over which value of the shares is amortized to compensation expense | 3 years | |
Number of Nonvested Restricted Shares | ||
Outstanding at beginning of period (in shares) | 487,678 | |
Awarded/Granted (in shares) | 72,991 | |
Vested (in shares) | -134,502 | |
Forfeited (in shares) | -6,700 | |
Outstanding at end of period (in shares) | 419,467 | |
Additional disclosures | ||
Compensation expense, net of forfeitures | $433 | $379 |
Restricted Stock | Performance based vesting | ||
Number of Nonvested Restricted Shares | ||
Awarded/Granted (in shares) | 41,792 |
ACCRUED_LIABILITIES_Details
ACCRUED LIABILITIES (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |||
ACCRUED LIABILITIES | |||
Compensation and fringe benefits | $5,780 | $9,696 | |
Warranty reserve | 758 | 786 | 629 |
Other accrued expenses | 2,547 | 1,848 | |
Accrued liabilities | $9,085 | $12,330 |
DEBT_OBLIGATIONS_Details
DEBT OBLIGATIONS (Details) | Mar. 31, 2015 | Dec. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2015 | Mar. 31, 2015 | Mar. 31, 2015 | Mar. 31, 2015 | Mar. 31, 2015 | Mar. 31, 2015 | Mar. 31, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Mar. 31, 2015 | Dec. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | USD ($) | USD ($) | Senior Credit Facilities | Senior Credit Facilities | Senior Credit Facilities | Senior Credit Facilities | Senior Credit Facilities | Senior Credit Facilities | Senior Credit Facilities | Revolving Credit Facility | Term Loan | Term Loan | China Credit Facility | China Credit Facility | China Credit Facility | Subordinated Notes | Subordinated Notes |
USD ($) | Base Rate | Base Rate | Base Rate | Eurocurrency Rate | Eurocurrency Rate | Eurocurrency Rate | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | Chinese Renminbi ("RMB") | USD ($) | USD ($) | |||
Minimum | Maximum | Minimum | Maximum | CNY | |||||||||||||
Debt Obligations | |||||||||||||||||
Current borrowings | $8,420 | $7,723 | $6,750 | $6,375 | $1,670 | $1,348 | |||||||||||
Interest rate at period end (as a percent) | 2.20% | 6.40% | |||||||||||||||
Long-term debt | 65,250 | 67,125 | 35,250 | 37,125 | 30,000 | 30,000 | |||||||||||
Effective rate (as a percent) | 2.65% | ||||||||||||||||
Interest rate (as a percent) | 14.50% | 14.50% | |||||||||||||||
Interest rate payable in cash (as a percent) | 13.00% | 13.00% | |||||||||||||||
Interest rate payable in-kind (as a percent) | 1.50% | 1.50% | |||||||||||||||
Maximum borrowing capacity | 15,000 | 50,000 | 1,955 | 12,000 | |||||||||||||
Debt instrument term | 5 years | 5 years | |||||||||||||||
Principal amount of debt borrowed | 30,000 | ||||||||||||||||
Applicable margin (as a percent) | 1.50% | 0.25% | 2.00% | 2.00% | 1.25% | 3.00% | |||||||||||
Average outstanding borrowings | 43,000 | 1,560 | 9,600 | ||||||||||||||
Available borrowing capacity | 15,000 | 290 | 1,790 | ||||||||||||||
Percentage of principal amount of notes that may prepay | 100.00% | ||||||||||||||||
Maturities of long-term debt | |||||||||||||||||
Remainder of 2015 | 6,545 | ||||||||||||||||
2016 | 8,219 | ||||||||||||||||
2017 | 10,374 | ||||||||||||||||
2018 | 18,532 | ||||||||||||||||
2019 | 30,000 | ||||||||||||||||
Total | $73,670 |
FAIR_VALUE_Details
FAIR VALUE (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Assets | ||
Other long term assets | $4,368 | $3,998 |
Recurring basis | Level 1 | ||
Assets | ||
Pension Plan Assets | 5,175 | 5,095 |
Other long term assets | 2,644 | 2,162 |
Recurring basis | Level 2 | ||
Assets | ||
Interest rate swaps | ($102) | ($2) |
DERIVATIVE_FINANCIAL_INSTRUMEN2
DERIVATIVE FINANCIAL INSTRUMENTS (Details) (Interest Rate Swaps, USD $) | 3 Months Ended | |||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Oct. 31, 2013 | Dec. 31, 2014 |
derivative | ||||
Derivative financial instruments | ||||
Number of derivative instruments | 2 | |||
Notional amount of interest rate swap derivatives | $25,000 | |||
Ratio of notional amount to term loan (as a percent) | 50.00% | |||
Notional amount of interest rate swap derivatives at maturity | 6,673 | |||
Amount hedged | 21,000 | |||
Hedge ineffectiveness recorded in earnings | 0 | 0 | ||
Estimated amount to be reclassified as an increase to interest expense | 155 | |||
Effect of derivative financial instruments on the consolidated statement of income and comprehensive income | ||||
Net deferral in OCI of derivatives (effective portion) | -151 | -68 | ||
Interest expense | ||||
Effect of derivative financial instruments on the consolidated statement of income and comprehensive income | ||||
Net reclassification from AOCI into income (effective portion) | -51 | -58 | ||
Accrued liabilities. | ||||
Derivative financial instruments | ||||
Interest rate swaps | -102 | -2 | ||
Total Liabilities | ||||
Derivative financial instruments | ||||
Interest rate swaps | ($102) | ($2) |
INCOME_TAXES_Details
INCOME TAXES (Details) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Effective income tax rate | ||
Effective income tax rate (as a percent) | 32.10% | 34.60% |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 3 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Dec. 31, 2014 |
Changes in the reserve for product warranty claims | ||
Warranty reserve at beginning of the year | $786 | $629 |
Provision | 24 | 234 |
Warranty expenditures | -26 | -40 |
Effect of foreign currency translation | -26 | -37 |
Warranty reserve at end of year | 758 | 786 |
Estimated future operating lease expense | ||
Remainder of 2015 | 1,315 | |
2016 | 1,679 | |
2017 | 1,228 | |
2018 | 1,047 | |
2019 | 719 | |
Thereafter | 2,315 | |
Total | $8,303 |
ACCUMULATED_OTHER_COMPREHENSIV2
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) (USD $) | 3 Months Ended | |||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | Dec. 31, 2013 |
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | ($5,683) | $624 | ||
Unrealized loss on cash flow hedges | -151 | -67 | ||
Realized (gain) loss on interest rate swap hedges | 51 | 58 | ||
Foreign currency translation loss | -4,479 | 7 | ||
Balance at the end of the period | -10,262 | 622 | ||
Defined Benefit Plan Liability | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | -853 | -190 | ||
Balance at the end of the period | -853 | -190 | -853 | -190 |
Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | -2 | 41 | ||
Unrealized loss on cash flow hedges | -151 | -67 | ||
Realized (gain) loss on interest rate swap hedges | 51 | 58 | ||
Balance at the end of the period | -102 | 32 | ||
Foreign Currency Translation Adjustment | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | -4,828 | 773 | ||
Foreign currency translation loss | -4,479 | 7 | ||
Balance at the end of the period | ($9,307) | $780 |
PENSION_AND_POSTRETIREMENT_PLA2
PENSION AND POSTRETIREMENT PLANS (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Pension Plan | ||
Pension and Postretirement plan | ||
Number of last years of employment in which the employee's compensation is considered for determining benefits | 3 years | |
Components of net periodic expense | ||
Service cost | $27 | $21 |
Interest cost | 68 | 66 |
Expected return on assets | -82 | -85 |
Amortization of net (gain) loss | 48 | 11 |
Net periodic expense (benefit) | 61 | 13 |
Expected contributions during current fiscal year | 166 | |
Employer contributions | 59 | |
Expected benefit payment during the year | 309 | |
Benefits paid | 70 | |
Postretirement Welfare Plan | ||
Pension and Postretirement plan | ||
Requisite service period for employees who retire after January 1, 2005 in order to be eligible for retiree medical benefits | 20 years | |
Components of net periodic expense | ||
Service cost | 2 | 2 |
Interest cost | 13 | 14 |
Amortization of net (gain) loss | -18 | -19 |
Amortization of prior service cost | -3 | -3 |
Net periodic expense (benefit) | -6 | -6 |
Expected benefit payment during the year | $51 |
DIVIDENDS_PER_SHARE_Details
DIVIDENDS PER SHARE (Details) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
DIVIDENDS PER SHARE | ||
Dividends declared and paid (in dollars per share) | $0.03 | $0.03 |
Total dividends paid | $233 | $231 |
SEGMENT_INFORMATION_Details
SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
segment | |||
SEGMENT INFORMATION | |||
Number of operating segments | 1 | ||
Segment information | |||
Revenues | $59,580 | $60,435 | |
Identifiable assets | 163,113 | 165,640 | |
Total Revenue | Customer | |||
Segment information | |||
Number of customers | 2 | 3 | |
Percentage of concentration risk | 32.00% | 33.00% | |
Trade receivables. | Credit Concentration Risk | |||
Segment information | |||
Number of customers | 2 | 3 | |
Percentage of concentration risk | 34.00% | 42.00% | |
Outside the United States | |||
Segment information | |||
Revenues | 19,745 | 21,630 | |
Wholly owned foreign subsidiaries | |||
Segment information | |||
Revenues | 18,941 | 20,152 | |
Identifiable assets | $52,596 | $53,479 |