Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 14, 2018 | Jun. 30, 2017 | |
Document and Entity Information | |||
Entity Registrant Name | ALLIED MOTION TECHNOLOGIES INC | ||
Entity Central Index Key | 46,129 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 185,806,370 | ||
Entity Common Stock, Shares Outstanding | 9,426,984 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 15,590 | $ 15,483 |
Trade receivables, net of allowance for doubtful accounts of $341 and $362 at December 31, 2017 and 2016, respectively | 31,822 | 26,104 |
Inventories | 32,568 | 31,098 |
Prepaid expenses and other assets | 3,460 | 3,120 |
Total current assets | 83,440 | 75,805 |
Property, plant and equipment, net | 38,403 | 37,474 |
Deferred income taxes | 14 | 923 |
Intangible assets, net | 32,073 | 34,252 |
Goodwill | 29,531 | 27,522 |
Other long term assets | 4,461 | 3,943 |
Total assets | 187,922 | 179,919 |
Current liabilities: | ||
Debt obligations | 461 | 936 |
Accounts payable | 15,351 | 13,204 |
Accrued liabilities | 14,270 | 10,678 |
Total current liabilities | 30,082 | 24,818 |
Long-term debt | 52,694 | 70,483 |
Deferred income taxes | 3,609 | 3,266 |
Pension and post-retirement obligations | 4,667 | 4,381 |
Other long term liabilities | 9,523 | 4,685 |
Total liabilities | 100,575 | 107,633 |
Commitments and contingencies (Note 9) | ||
Stockholders' Equity: | ||
Common stock, no par value, authorized 50,000 shares; 9,427 and 9,374 shares issued and outstanding at December 31, 2017 and 2016, respectively | 31,051 | 29,503 |
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding | ||
Retained earnings | 61,882 | 54,786 |
Accumulated other comprehensive loss | (5,586) | (12,003) |
Total stockholders' equity | 87,347 | 72,286 |
Total Liabilities and Stockholders' Equity | $ 187,922 | $ 179,919 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
CONSOLIDATED BALANCE SHEETS | ||
Trade receivables, allowance for doubtful accounts (in dollars) | $ 341 | $ 362 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, authorized shares | 50,000 | 50,000 |
Common stock, shares issued | 9,427 | 9,374 |
Common stock, shares outstanding | 9,427 | 9,374 |
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 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | ||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||
Revenues | $ 252,012 | $ 245,893 | $ 232,434 | |
Cost of goods sold | 176,333 | 172,889 | 163,662 | |
Gross profit | 75,679 | 73,004 | 68,772 | |
Operating costs and expenses: | ||||
Selling | 10,979 | 9,986 | 8,149 | |
General and administrative | 24,926 | 24,333 | 22,251 | |
Engineering and development | 17,542 | 16,170 | 14,229 | |
Business development | 213 | 428 | 569 | |
Amortization of intangible assets | 3,219 | 3,204 | 2,644 | |
Total operating costs and expenses | 56,879 | 54,121 | 47,842 | |
Operating income | 18,800 | 18,883 | 20,930 | |
Other expense (income): | ||||
Interest expense | 2,474 | 6,449 | 6,023 | |
Other expense (income), net | 190 | (369) | (514) | |
Total other expense (income) , net | 2,664 | 6,080 | 5,509 | |
Income before income taxes | 16,136 | 12,803 | 15,421 | |
Provision for income taxes | (8,100) | (3,725) | (4,347) | |
Net income | $ 8,036 | $ 9,078 | $ 11,074 | |
Basic earnings per share: | ||||
Earnings per share (in dollars per share) | $ 0.88 | $ 1.01 | $ 1.20 | |
Basic weighted average common shares (in shares) | 9,153 | 9,011 | 9,228 | |
Diluted earnings per share: | ||||
Earnings per share (in dollars per share) | $ 0.87 | $ 1 | $ 1.20 | |
Diluted weighted average common shares (in shares) | 9,275 | 9,105 | 9,238 | |
Net income | $ 8,036 | $ 9,078 | $ 11,074 | |
Other comprehensive income: | ||||
Foreign currency translation adjustment | 6,314 | (1,989) | (4,334) | |
Change in accumulated loss on derivatives | 226 | (3) | (25) | |
Pension adjustments | [1] | (123) | (134) | 165 |
Comprehensive income | $ 14,453 | $ 6,952 | $ 6,880 | |
[1] | Net of tax of $21, ($78) and $114 for the periods ending December 31, 2017, 2016 and 2015, respectively. |
CONSOLIDATED STATEMENTS OF INC5
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | |||
Tax portion on pension adjustments | $ 21 | $ (78) | $ 114 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Unamortized Cost of Equity Awards | Retained Earnings | Foreign Currency Translation Adjustments | Accumulated income (loss) on derivatives | Pension Adjustments | Total | |
Balances at Dec. 31, 2014 | $ 28,453 | $ (3,324) | $ 36,505 | $ (4,828) | $ (2) | $ (853) | $ 55,951 | |
Balances (in shares) at Dec. 31, 2014 | 9,213,000 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Stock transactions under employee benefit stock plans | $ 1,014 | 1,014 | ||||||
Stock transactions under employee benefit stock plans (in shares) | 37,000 | |||||||
Issuance of restricted stock, net of forfeitures | $ 2,064 | (2,040) | 24 | |||||
Issuance of restricted stock, net of forfeitures (in shares) | 76,000 | |||||||
Stock compensation expense | $ (7) | 1,751 | 1,744 | |||||
Shares withheld for payment of employee payroll taxes | $ (1,559) | (1,559) | ||||||
Shares withheld for payment of employee payroll taxes (in shares) | (50,000) | |||||||
Excess tax benefit from stock based compensation arrangements | $ 1,461 | 1,461 | ||||||
Comprehensive income loss | (4,334) | (25) | 279 | (4,080) | ||||
Tax effect | (114) | (114) | ||||||
Net income | 11,074 | 11,074 | ||||||
Dividends to stockholders | 11 | (929) | (918) | |||||
Balances at Dec. 31, 2015 | $ 31,437 | (3,613) | 46,650 | (9,162) | (27) | (688) | 64,597 | |
Balances (in shares) at Dec. 31, 2015 | 9,276,000 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Stock transactions under employee benefit stock plans | $ 839 | 839 | ||||||
Stock transactions under employee benefit stock plans (in shares) | 49,000 | |||||||
Issuance of restricted stock, net of forfeitures | $ 1,969 | (1,968) | 1 | |||||
Issuance of restricted stock, net of forfeitures (in shares) | 101,000 | |||||||
Stock compensation expense | 1,893 | 1,893 | ||||||
Shares withheld for payment of employee payroll taxes | $ (1,054) | (1,054) | ||||||
Shares withheld for payment of employee payroll taxes (in shares) | (52,000) | |||||||
Comprehensive income loss | (1,989) | (3) | (212) | (2,204) | ||||
Tax effect | 78 | 78 | ||||||
Net income | 9,078 | 9,078 | ||||||
Dividends to stockholders | (942) | (942) | ||||||
Balances at Dec. 31, 2016 | $ 33,191 | (3,688) | 54,786 | (11,151) | (30) | (822) | $ 72,286 | |
Balances (in shares) at Dec. 31, 2016 | 9,374,000 | 9,374 | ||||||
Increase (Decrease) in Stockholders' Equity | ||||||||
Stock transactions under employee benefit stock plans | $ 657 | $ 657 | ||||||
Stock transactions under employee benefit stock plans (in shares) | 28,000 | |||||||
Issuance of restricted stock, net of forfeitures | $ 2,138 | (1,599) | 539 | |||||
Issuance of restricted stock, net of forfeitures (in shares) | 88,000 | |||||||
Stock compensation expense | [1] | 1,865 | 1,865 | |||||
Shares withheld for payment of employee payroll taxes | $ (1,513) | (1,513) | ||||||
Shares withheld for payment of employee payroll taxes (in shares) | (63,000) | |||||||
Comprehensive income loss | 6,314 | 226 | (102) | 6,438 | ||||
Tax effect | (21) | (21) | ||||||
Net income | 8,036 | 8,036 | ||||||
Dividends to stockholders | (940) | (940) | ||||||
Balances at Dec. 31, 2017 | $ 34,473 | $ (3,422) | $ 61,882 | $ (4,837) | $ 196 | $ (945) | $ 87,347 | |
Balances (in shares) at Dec. 31, 2017 | 9,427,000 | 9,427 | ||||||
[1] | Net of $161 recorded to liability. |
CONSOLIDATED STATEMENTS OF STO7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) $ in Thousands | 12 Months Ended |
Dec. 31, 2017USD ($) | |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |
Stock compensation expense, net liability | $ 161 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash Flows From Operating Activities: | |||
Net income | $ 8,036 | $ 9,078 | $ 11,074 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 10,274 | 9,749 | 7,466 |
Deferred income taxes | 3,713 | 1,770 | 1,417 |
Excess tax benefit from stock-based payment arrangements | (1,461) | ||
Provision for doubtful accounts | 39 | 167 | 333 |
Provision for excess and obsolete inventory | 480 | 351 | 432 |
Provision for warranty | 234 | (138) | 142 |
Write-off of debt issue costs on Prior Credit agreement recorded in interest expense | 1,052 | ||
Debt issue cost amortization recorded in interest expense | 165 | 380 | |
Restricted stock compensation | 2,026 | 1,893 | 1,744 |
Other | (756) | (652) | 216 |
Changes in operating assets and liabilities, excluding changes due to acquisition: | |||
(Increase) decrease in trade receivables, net | (4,051) | (3,719) | 3,655 |
Decrease (increase) in inventories | 18 | (928) | (2,262) |
(Increase) decrease in prepaid expenses and other assets | (328) | 69 | (1,394) |
Increase (decrease) in accounts payable | 1,277 | (956) | (1,874) |
Increase (decrease) in accrued liabilities and other liabilities | 4,280 | (3,813) | 585 |
Net cash provided by operating activities | 25,407 | 14,303 | 20,073 |
Cash Flows From Investing Activities: | |||
Purchase of property and equipment | (6,201) | (5,188) | (4,730) |
Consideration paid for acquisition, net of cash acquired | (16,205) | ||
Net cash used in investing activities | (6,201) | (21,393) | (4,730) |
Cash Flows From Financing Activities: | |||
(Repayments) borrowings on lines-of-credit, net | (518) | (5,709) | 383 |
Principal payments of long-term debt | (18,389) | (67,125) | (6,375) |
Proceeds from issuance of long-term debt | 76,321 | ||
Payment of debt issuance costs | (745) | ||
Dividends paid to stockholders | (959) | (942) | (923) |
Shares withheld for payment of employee payroll taxes | (1,513) | (1,054) | (1,559) |
Excess tax benefit from stock-based payment arrangements | 1,461 | ||
Stock transactions under employee benefit stock plans | 1,213 | 834 | 918 |
Net cash provided by (used in) financing activities | (20,166) | 1,580 | (6,095) |
Effect of foreign exchange rate changes on cash | 1,067 | (285) | (1,083) |
Net increase (decrease) in cash and cash equivalents | 107 | (5,795) | 8,165 |
Cash and cash equivalents at beginning of period | 15,483 | 21,278 | 13,113 |
Cash and cash equivalents at end of period | 15,590 | 15,483 | 21,278 |
Net cash paid during the period for: | |||
Interest | 2,261 | 5,048 | 5,575 |
Income taxes | $ 2,087 | $ 1,148 | $ 2,125 |
BUSINESS AND SUMMARY OF SIGNIFI
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2017 | |
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Allied Motion Technologies Inc. (Allied Motion or the Company) is engaged in the business of designing, manufacturing and selling 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. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. For business combinations, we record net assets acquired and liabilities assumed at their estimated fair values. Cash and Cash Equivalents Cash and cash equivalents include instruments which are readily convertible into cash (original maturities of three months or less) and which are not subject to significant risk of changes in interest rates. Accounts Receivable Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. Activity in the allowance for doubtful accounts for 2017, 2016 and 2015 was as follows (in thousands): December 31, 2017 2016 2015 Beginning balance $ $ $ Additional reserves Writeoffs ) ) ) Effect of foreign currency translation ) Ending balance $ $ $ 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): December 31, 2017 2016 Parts and raw materials $ $ Work-in-process Finished goods Less reserves ) ) Inventories $ $ The Company recorded provisions for excess and obsolete inventories of approximately $480, $351 and $432 for 2017, 2016 and 2015, respectively. Property, Plant and Equipment Property, plant and equipment is classified as follows (in thousands): December 31, Useful lives 2017 2016 Land $ $ Building and improvements 5 - 39 years Machinery, equipment, tools and dies 3 - 15 years Furniture, fixtures and other 3 - 10 years Less accumulated depreciation ) ) Property, plant and equipment, net $ $ Depreciation expense is provided using the straight-line method over the estimated useful lives of the assets. Amortization of building improvements is provided using the straight-line method over the life of the lease term or the life of the assets, whichever is shorter. Maintenance and repair costs are charged to operations as incurred. Major additions and improvements are capitalized. The cost and related accumulated depreciation of retired or sold property are removed from the accounts and the resulting gain or loss, if any, is reflected in earnings. Depreciation expense was $7,055, $6,545 and $4,822 in 2017, 2016 and 2015, respectively. Intangible Assets Intangible assets, other than goodwill, are recorded at cost and are amortized over their estimated useful lives using the straight-line method. Impairment of Long-Lived Assets The Company reviews the carrying values of its long-lived assets, including property, plant and equipment and intangible assets, whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Long-lived assets are carried at historical cost if the projected cash flows from their use will recover their carrying amounts on an undiscounted basis and without considering interest. If projected cash flows are less than their carrying value, the long-lived assets must be reduced to their estimated fair value. Considerable judgment is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived assets. Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment at least annually or more frequently if impairment indicators arise. The Company has defined one reporting unit that is the same as its operating segment. Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, that the fair value of the reporting unit may be more likely than not less than carrying amount, or if significant adverse changes in the Company’s future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required. Additionally, the Company can elect to forgo the qualitative assessment and perform the quantitative test. The first step of the quantitative test compares the fair value of the reporting unit to its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, there is a potential impairment and the second step must be performed. The second step compares the implied fair value of goodwill with the carrying amount of goodwill. If the carrying amount of goodwill exceeds the implied fair value, the excess is required to be recorded as an impairment charge. The implied fair value of goodwill is determined by assigning the fair value of the reporting unit to all the assets and liabilities of that unit (including any unrecognized intangible assets) as if it had been acquired in a business combination. The Company has elected to perform the annual impairment assessment for goodwill each year in the fourth quarter. At October 31, 2017, we performed our annual assessment of fair value and concluded that there was no impairment related to goodwill. The Company did not record any impairment charges for the year ended December 31, 2017, 2016 or 2015. Other Long-Term Assets Other long-term assets include securities that the Company has purchased with the intent of funding the deferred compensation arrangements for certain executives of the Company. These items are accounted for at fair value on a recurring basis. Any changes in value are included in net income in the Company’s consolidated statements of income and comprehensive income. Warranty The Company offers warranty coverage for its products. The length of the warranty period for its products is generally three months to two years, and varies significantly based on the product sold. The Company estimates the costs of repairing products under warranty based on the historical average cost of the repairs. The assumptions used to estimate warranty accruals are 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 2017, 2016 and 2015 were as follows (in thousands): December 31, 2017 2016 2015 Warranty reserve at beginning of the year $ $ $ Warranty reserves acquired — — Provision ) Warranty expenditures ) ) ) Effect of foreign currency translation ) ) Warranty reserve at end of year $ $ $ Accrued Liabilities Accrued liabilities consist of the following (in thousands): December 31, 2017 2016 Compensation and fringe benefits $ $ Warranty reserve Income taxes payable Other accrued expenses $ $ Foreign Currency Translation The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using end of period exchange rates. Changes in reported amounts of assets and liabilities of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies and the U.S. dollar are included in foreign currency translation adjustment. Foreign currency translation adjustment is included in other comprehensive income, a component of stockholders’ equity in the accompanying consolidated statements of stockholders’ equity. Revenue and expense transactions use an average rate prevailing during the month of the related transaction. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of each of the Technology Units (“TUs”) are included in the results of operations as incurred. Revenue Recognition The Company recognizes revenue when products are shipped or delivered (shipping terms may be either FOB shipping point or destination) and title has passed to the customer, persuasive evidence of an arrangement exists, the selling price is fixed or determinable, and collectability is reasonably assured. The Company’s shipping and handling costs are included in cost of sales for all periods presented. Engineering and Development Costs The Company is engaged in a variety of engineering and design activities as well as basic research and development activities directed to the substantial improvement or new application of the Company’s existing technologies. Engineering and development costs are expensed as incurred. Basic and Diluted Income per Share Basic income per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding. Diluted income per share is determined by dividing the net income by the sum of (1) the weighted average number of common shares outstanding and (2) if not anti-dilutive, the effect of stock awards determined utilizing the treasury stock method. The dilutive effect of outstanding awards was 105,000, 94,000 and 10,000 shares for the years 2017, 2016 and 2015, respectively. Stock awards of 600 and 30,700 were excluded from the calculation of diluted income per share for 2017 and 2016, respectively. No stock awards were excluded from the calculation of diluted income per share for year 2015. Comprehensive Income Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by and distributions to stockholders. Fair Value Accounting Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a framework for measuring fair value, which utilizes observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. Preference is given to observable inputs. These two types of inputs create the following three-level fair value hierarchy: Level 1: Quoted prices for identical assets or liabilities in active markets. Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable. Level 3: Significant inputs to the valuation model that are unobservable. The Company’s financial assets and liabilities include cash and cash equivalents, accounts receivable, debt obligations, accounts payable, and accrued liabilities. The carrying amounts reported in the consolidated balance sheets for these assets approximate fair value because of the immediate or short-term maturities of these financial instruments. The following table presents the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis as of December 31, 2017 and 2016, respectively, by level within the fair value hierarchy (in thousands): December 31, 2017 Level 1 Level 2 Level 3 Assets (liabilities) Pension plan assets $ $ — $ — Other long term assets — — Interest rate swaps — — December 31, 2016 Level 1 Level 2 Level 3 Assets (liabilities) Pension plan assets $ $ — $ — Other long term assets — — Interest rate swaps — ) — Derivative Financial Instruments Disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative instruments. The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. Income Taxes The Tax Cuts and Jobs Act of 2017 was enacted in the United States on December 22, 2017. The provisions of the Act significantly revise the U.S. corporate income tax rules and requires companies to record a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and reduces the US federal corporate tax rate from 35% to 21%. As of December 31, 2017, the Company has not fully completed the accounting for the tax effects of enactment of the Act, however a reasonable estimate of the tax effects has been recorded in 2017. The amounts are provisional and subject to change as the determination of the impact of the income tax effects will require additional analysis of historical records, annual data, further interpretation of regulatory guidance that may be issued and actions the Company may take as a result of the Act. The current provision for income taxes represents actual or estimated amounts payable or refundable on tax return filings each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, and for operating loss and tax credit carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. A valuation allowance may be provided to the extent management deems it is more likely than not that deferred tax assets will not be realized. The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable income, in the appropriate taxing jurisdictions, during the periods in which temporary differences, net operating losses and tax credits become realizable. Management believes that it is more likely than not that the Company will realize the benefits of these temporary differences and operating loss and tax credit carryforwards, net of valuation allowances. Realization of an uncertain income tax position must have a “more likely than not” probability of being sustained based on technical merits before it can be recognized in the financial statements, assuming a review by tax authorities having all relevant information and applying current conventions. The Company does not have significant unrecognized tax benefits and does not anticipate a significant increase or decrease in unrecognized tax benefits within the next twelve months. Income tax related interest and penalties recognized in 2017, 2016 and 2015 are de minimus. Pension and Postretirement Welfare Plans The Company reports gains or losses and prior service costs or credits that arise during the period, but are not recognized as components of net periodic benefit cost, as a component of other comprehensive income, net of tax. Amounts recognized in accumulated other comprehensive income are adjusted as they are subsequently recognized as components of net periodic benefit cost pursuant to the recognition and amortization provisions of those Statements. Concentration of Credit Risk Trade receivables subject the Company to the potential for credit risk. To reduce this risk, the Company performs evaluations of its customers’ financial condition and creditworthiness at the time of sale, and updates those evaluations when necessary. See Note 11, Segment Information for additional information regarding customer concentration. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain items in the prior year’s consolidated financial statements and notes to consolidated financial statements have been reclassified to conform to the 2017 presentation. Recently adopted accounting pronouncements 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. We will adopt ASU 2014-09 and its amendments on a modified retrospective basis effective January 1, 2018. We do not expect that the adoption of ASU 2014-09 will 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. We do not expect a material change in our revenue recognition after implementation of the standard. 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 early adopting ASU 2017-12 in the first quarter of 2018 and does not expect an impact on its consolidated financial statements. 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 for 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 for the Company beginning on January 1, 2018. The Company does not expect the adoption of this ASU to 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. The new standard is effective for the Company beginning on January 1, 2018. The Company does not expect the adoption of this ASU to have a material impact on its condensed consolidated financial statements. In July 2015, the FASB issued ASU No. 2015-11, “ Simplifying the Measurement of Inventory .” The standard applies 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 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 standard is effective for fiscal years beginning after December 15, 2016. The Company adopted ASU 2015-11 effective January 1, 2017 and it had no impact on its consolidated financial statements. Recently issued accounting pronouncements In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” , to address a specific consequence of the Tax Cuts and Jobs Act (TCJA) by allowing a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the TCJA’s reduction of the U.S. federal corporate income tax rate. The ASU is effective for all entities for annual periods beginning after December 15, 2018, with early adoption permitted, and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. Management has not yet completed its assessment of the impact of the ASU on the Company’s Consolidated Financial Statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” . The guidance in ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. 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 June 2016, the FASB issued ASU 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” . This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. The new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. 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. |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL | |
GOODWILL | 2. GOODWILL The change in the carrying amount of goodwill for 2017, 2016 and 2015 is as follows (in thousands): December 31, 2017 2016 2015 Beginning balance $ $ $ Goodwill acquired — — Effect of foreign currency translation ) ) Ending balance $ $ $ |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2017 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | 3. INTANGIBLE ASSETS Intangible assets on the Company’s consolidated balance sheets consist of the following (in thousands): December 31, 2017 December 31, 2016 Life Gross Accumulated Net Book Gross Accumulated Net Book Customer lists 8 - 17 years $ $ ) $ $ $ ) $ Trade name 10 - 12 years ) ) Design and technologies 10 - 12 years ) ) Patents 17 years ) ) Total $ $ ) $ $ $ ) $ Total amortization expense for intangible assets for the years 2017, 2016 and 2015 was $3,219, $3,204 and $2,644, respectively. Estimated amortization expense for intangible assets is as follows: Year ending December 31, Total 2018 $ 2019 2020 2021 Thereafter $ |
STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS | 12 Months Ended |
Dec. 31, 2017 | |
STOCK-BASED COMPENSATION PLANS | |
STOCK-BASED COMPENSATION PLANS | 4. STOCK-BASED COMPENSATION PLANS Stock Incentive Plans The Company’s Stock Incentive Plans provide for the granting of stock awards, including stock options, stock appreciation rights, and restricted stock, to employees and non-employees, including directors of the Company. As of December 31, 2017, the Company had 1,081,911 shares of common stock available for grant under stock incentive plans. Restricted Stock The following is a summary of restricted stock grants, fair value and performance-based awards: For the year ended December 31, Unvested Weighted Awards with 2017 $ 2016 $ 2015 $ The value at the date of award is amortized to compensation expense over the related service period, which is generally three years for time vested grants. Short-term performance based grants can be achieved over a period of one year, and long-term performance grants can be earned through December 31, 2020. Earned grants are then subject to either a 3 year or 5 year service period. Shares of non-vested restricted stock are forfeited if a recipient leaves the Company before the vesting date. Shares that are forfeited become available for future awards. For performance-based awards, the Company assesses the probability of the achievement of the awards during the year and recognizes expense accordingly. The following is a summary of restricted stock activity during years 2017, 2016 and 2015: Number of Nonvested Balance, December 31, 2014 Awarded Forfeited ) Vested ) Balance, December 31, 2015 Awarded Forfeited ) Vested ) Balance, December 31, 2016 Awarded Forfeited ) Vested ) Balance, December 31, 2017 The following is a summary of performance-based restricted stock activity during years 2017, 2016 and 2015: Total Outstanding, December 31, 2014 Awarded Performance criteria met ) Forfeited ) Outstanding, December 31, 2015 Awarded Performance criteria met ) Forfeited ) Outstanding, December 31, 2016 Awarded Performance criteria met ) Forfeited ) Outstanding, December 31, 2017 The performance criteria and forfeitures in the above table did not occur until the Board of Directors approved them during the February 2018, 2017 and 2016 meetings. Share-Based Compensation Expense Restricted Stock During 2017, 2016 and 2015 compensation expense net of forfeitures of $2,026, $1,893 and $1,744 was respectively recorded. As of December 31, 2017, there was $2,704 of total unrecognized compensation expense related to restricted stock awards, of which approximately $1,692 is expected to be recognized in 2018. Employee Stock Ownership Plan The Company sponsors an Employee Stock Ownership Plan (“ESOP”) that covers all non-union U.S. employees who work over 1,000 hours per year. The terms of the ESOP require the Company to make an annual contribution equal to the greater of i) the Board established percentage of pretax income before the contribution (5% in 2017, 2016 and 2015) or ii) the annual interest payable on any loan outstanding to the Company from the ESOP. Company contributions to the Plan accrued for 2017, 2016 and 2015, respectively, were $849, $674 and $812. These amounts are included in general and administrative costs in the consolidated statements of income and comprehensive income. Defined Contribution Plan The Company sponsors the Allied Motion 401(k) Tax Advantaged Investment Plan (“401(k)”) which covers substantially all its U.S. based employees. The plan provides for the deferral of employee compensation under Section 401(k) and a discretionary Company match. In 2017, 2016 and 2015 this match was 100% per dollar of the first 3% of participant deferral and 50% per dollar of the next 2% contribution, up to 4% of a total 5% participant deferral. Net costs related to this defined contribution plan were $1,090, $1,085 and $1,076 in 2017, 2016 and 2015, respectively. Dividends For the years ended December 31, 2017, 2016 and 2015 a total of $0.10 per share on all outstanding shares was declared and paid. Total dividends paid for the years ended December 31, 2017, 2016 and 2015 were $959, $942 and $923, respectively. Based on the terms of the Company’s Credit Agreement, dividends paid to shareholders are acceptable, subject to the Company’s compliance with the covenants under the Credit Agreement. |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 12 Months Ended |
Dec. 31, 2017 | |
DEBT OBLIGATIONS | |
DEBT OBLIGATIONS | 5. DEBT OBLIGATIONS Debt obligations consisted of the following (in thousands): December 31, 2017 2016 Current Borrowings China Credit Facility (5.0% at December 31, 2017) $ $ Current borrowings $ $ Long-term Debt Revolving Credit Facility, long term (1) $ $ Unamortized debt issuance costs ) ) Long-term debt $ $ (1) The effective rate of the Revolver is 3.26% at December 31, 2017. Senior Secured Revolving Credit Facility On October 28, 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) for a $125,000 revolving credit facility (the “Revolving Facility”). The Revolving Facility includes a $50,000 accordion amount and has an initial term of five years. HSBC Bank USA, National Association is the administrative agent, HSBC Securities (USA) Inc. is the sole lead arranger and sole book runner, and Keybank National Association and Wells Fargo Bank, National Association are co-syndication agents. Borrowings under the Revolving Facility bear interest at the LIBOR Rate (as defined in the Credit Agreement) plus a margin of 1.00% to 2.25% or the Prime Rate (as defined in the Credit Agreement) plus a margin of 0% to 1.25%, in each case depending on the Company’s ratio of total funded indebtedness (as defined in the Credit Agreement) to Consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”). At December 31, 2017, the applicable margin for LIBOR Rate borrowings was 1.50% and the applicable margin for Prime Rate borrowings was 0.50%. In addition, the Company is required to pay a commitment fee of between 0.10% and 0.25% quarterly (currently 0.150%) on the unused portion of the Revolving facility, also based on the Company’s Total Leverage Ratio. The Revolving Facility is secured by substantially all of the Company’s non-realty assets and is fully and unconditionally guaranteed by certain of the Company’s subsidiaries. Financial covenants under the Credit Agreement require the Company to maintain a minimum interest coverage ratio (based on trailing twelve-month EBITDA) of at least 3.0:1.0 at the end of each fiscal quarter. In addition, the Company’s Total Leverage Ratio at the end of any fiscal quarter shall not be greater than 3.75:1.0 through March 31, 2017, 3.5:1.0 through September 30, 2017, 3.25:1.0 through March 31, 2018 and 3.0:1.0 thereafter; provided that the Company may elect to temporarily increase the Total Leverage Ratio by 0.5x over the otherwise maximum during the twelve-month period following a permitted acquisition under the Credit Agreement. The Credit Agreement also includes covenants and restrictions that limit the Company’s ability to incur additional indebtedness, merge, consolidate or sell all or substantially all its assets and enter into transactions with an affiliate of the Company on other than an arms’ length transaction. These covenants, which are described more fully in the Credit Agreement, to which reference is made for a complete statement of the covenants, are subject to certain exceptions. The Company was in compliance with all covenants at December 31, 2017. The Credit Agreement also includes customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, if any representation or warranty made by the Company is false or misleading in any material respect, default under certain other indebtedness, certain insolvency or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, the occurrence of certain ERISA events, the invalidity of the loan documents or a change in control of the Company. The amounts outstanding under the Revolving Facility may be accelerated upon certain events of default. Other The China Facility provides credit of approximately $1,537 (Chinese Renminbi (“RMB”) 10,000). The China Facility is used for working capital and capital equipment needs at the Company’s China operations, and the lender may demand payment at any time. The average balance for 2017 was $795 (RMB 5,375). At December 31, 2017, there was approximately $1,076 (RMB 7,000) available under the facility. Deferred Financing Fees In connection with the Senior Secured Credit Facility, the Company incurred $745 of deferred financing costs. These costs are offset against long-term debt in the consolidated balance sheets. The costs are deferred and amortized over a five-year term. Amortization of these costs is charged to interest expense in the accompanying consolidated statements of income and comprehensive income using the straight-line method. Deferred financing costs net of accumulated amortization were $572 as of December 31, 2017. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 12 Months Ended |
Dec. 31, 2017 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
DERIVATIVE FINANCIAL INSTRUMENTS | 6. DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to certain risk 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 risk primarily by managing the amount, sources and duration of its debt funding and 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 and borrowings. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During October 2013, the Company entered into two identical interest rate swaps with a combined notional of $25,000 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. In February 2017, the Company entered into three interest rate swaps with a combined notional of $40,000 that mature in February 2022. 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 2017, 2016 and 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 years ended December 31, 2017, 2016 and 2015. Amounts reported in accumulated other comprehensive income related to derivatives are reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The Company estimates that an additional $79 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 tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2017 and 2016 (in thousands): Fair Value as of December 31, Derivative Instrument Balance Sheet Classification 2017 2016 Interest Rate Swaps Other Assets $ $ — Fair Value as of December 31, Derivative Instrument Balance Sheet Classification 2017 2016 Interest Rate Swaps Other Liabilities $ — $ The effect of the Company’s derivative financial instruments on the condensed consolidated statement of income and comprehensive income is as follows (in thousands): Net deferral in OCI of derivatives For the year ended December 31, Derivative Instruments 2017 2016 Interest Rate Swaps $ $ Net reclassification from AOCI into income (effective portion) For the year ended December 31, Statement of earnings classification 2017 2016 2015 Interest expense $ $ $ |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
INCOME TAXES | 7. INCOME TAXES The provision for income taxes is based on income before income taxes as follows (in thousands): For the year ended December 31, 2017 2016 2015 Domestic $ $ $ Foreign Income before income taxes $ $ $ Components of the total provision for income taxes are as follows (in thousands): For the year ended December 31, 2017 2016 2015 Current provision (benefit) Domestic $ $ ) $ Foreign Total current provision Deferred provision Domestic Foreign ) Total deferred provision Provision for income taxes $ $ $ The provision for income taxes differs from the amount determined by applying the federal statutory rate as follows: For the year ended December 31, 2017 2016 2015 Tax provision, computed at statutory rate % % % State tax, net of federal impact % % % Change in valuation allowance % % )% Effect of foreign tax rate differences )% )% )% Permanent items, other % )% % R&D Credit )% )% )% Restricted Stock Awards )% )% % Effect of Tax Cuts and Jobs Act (1) % % % Other )% % )% Provision for income taxes % % % (1) A reconciliation of the 2017 effective tax rate excluding the adjustments related to the Tax Cuts and Jobs Act is as follows: Provision Tax rate As reported $ % Less: repatriation transition tax ) -19.5 % Plus: remeasurement of deferred tax assets and liabilities % As adjusted $ % The Tax Cuts and Jobs Act was enacted on December 22, 2017. The provisions of the Act significantly revise the U.S. corporate income tax rules and, among other things, requires companies to record a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and reduces the US federal corporate tax rate from 35% to 21%, resulting in a remeasurement of deferred tax assets and liabilities. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. The Company has not fully completed the accounting for the tax effects of enactment of the Act; however, as described below, we have made a reasonable estimate of the effects of the one-time transition tax and of the rate reduction on our existing deferred tax balances and has included these provisional amounts in its consolidated financial statements for the year ended December 31, 2017. For these items, we recognized a provisional amount of $3,133, which is included as a component of income tax expense from continuing operations. The one-time transition tax is based on total post-1986 earnings and profits (E&P) which have been previously deferred from US income taxes. The Company recorded a provisional amount for the one-time transition tax liability resulting in an increase in income tax expense of $3,140. The Company has not yet completed our calculation of the total post-1986 foreign E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the calculation of post-1986 foreign E&P previously deferred from US federal taxation and the amounts held in cash or other specified assets are finalized. The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, certain aspects of the Act and related calculations are still being analyzed. Further analysis could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax balance was $(7). In general, it is the practice and intention of the Company to reinvest the earnings of its non-domestic subsidiaries in activities outside the United States. Historically, such amounts would become subject to domestic taxation upon the remittance of dividends to the United States and under certain other circumstances. Exceptions may be made on a year-by-year basis to repatriate current year earnings of certain foreign subsidiaries based on cash needs in the United States, however, the Company does not intend to transfer amounts or pay dividends. No additional income taxes have been provided for any outside basis difference inherent in the Company’s foreign subsidiaries or any withholding taxes related to repatriation, as foreign earnings continue to be indefinitely reinvested outside of the United States. The tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows: December 31, 2017 2016 Noncurrent deferred tax assets: Employee benefit plans $ $ Allowances and other Net operating loss and tax credit carryforwards Other Total noncurrent deferred tax assets Valuation allowance ) ) Net noncurrent deferred tax assets: $ $ Net noncurrent deferred tax liabilities: Property and Equipment $ $ Goodwill and Intangibles Other Total deferred tax liabilities $ $ Net deferred tax asset/(deferred tax liability) $ ) $ ) The Company has foreign operating losses that relate to a foreign subsidiary acquired in 2010. At the time of the acquisition, the Company could not conclude, on a more likely than not basis, that it would ultimately realize tax benefits from these losses and credits, and therefore valued the deferred benefit at zero. The Company will continue to assess its ability to utilize any portion of the tax carryforward balance and whether it should adjust the amount of deferred tax asset related to this carryforward. Realization of the Company’s recorded deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards. During 2017, the Company utilized a portion of its net operating loss carryforwards. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. Management believes that it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of valuation allowances as of December 31, 2017. The Company files income tax returns in various U.S. and foreign taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before 2014. The Company is no longer subject to tax examinations in The Netherlands or Sweden for periods before 2012, in Germany for periods before 2013 and in Portugal for periods before 2014. The Company adopted ASU 2016-09 prospectively and ASU 2015-17 retrospectively as of January 1, 2016. These pronouncements impact the accounting and disclosure for income taxes (refer to Note 1, Recently Adopted Accounting Pronouncements section for more information. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 8. COMMITMENTS AND CONTINGENCIES Operating Leases At December 31, 2017, the Company maintains leases for certain facilities and equipment. The Company has entered into facility agreements, some of which contain provisions for future rent increases. The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent obligation, which is included in accrued liabilities in the accompanying consolidated balance sheets. Minimum future rental commitments under all non-cancelable operating leases are as follows (in thousands): Year ending December 31, Total 2018 $ 2019 2020 2021 2022 Thereafter $ Rental expense was $2,935, $2,720 and $1,946 in 2017, 2016 and 2015, respectively. Severance Benefit Agreements As of December 31, 2017, the Company has annually renewable severance benefit agreements with key employees which, among other things, provide inducement to the employees to continue to work for the Company during and after any period of a potential change in control of the Company. The agreements provide the employees with specified benefits upon the subsequent severance of employment in the event of change in control of the Company and are effective for 24 months thereafter. Litigation The Company is involved in certain actions that have arisen out of the ordinary course of business. Management believes that resolution of the actions will not have a significant adverse effect on the Company’s consolidated financial position or results of operations. |
DEFERRED COMPENSATION ARRANGEME
DEFERRED COMPENSATION ARRANGEMENTS | 12 Months Ended |
Dec. 31, 2017 | |
DEFERRED COMPENSATION ARRANGEMENTS | |
DEFERRED COMPENSATION ARRANGEMENTS | 9. DEFERRED COMPENSATION ARRANGEMENTS The Company has deferred compensation arrangements with certain key members of management. These arrangements provide the Board and its committees with the ability to make contributions based on the Company’s performance and discretionary contributions based on other factors as determined by the Board and its committees. It also allows for the participants to make certain deferrals into the plan. The amount of the liability is comprised of liabilities from previous contributions as well as the performance contribution for the year ended December 31, 2017. Amounts accrued relating to previous periods are $3,934 and $3,481 as of December 31, 2017 and December 31, 2016, respectively, and are included in noncurrent liabilities in the consolidated balance sheets. The amounts accrued as of December 31, 2017 and December 31, 2016, which relate to the performance contribution for 2017 and 2016 are $349 and $132, respectively, and are included in accrued liabilities on the consolidated balance sheets. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2017 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 10. SEGMENT INFORMATION 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 consolidated financial statements and within this note. The Company’s wholly owned international 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): For the year ended December 31, 2017 2016 2015 Revenues derived from foreign subsidiaries $ $ $ Identifiable assets outside of the United States are $84,652 and $73,378 as of December 31, 2017 and 2016, 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 $119,212, $111,993 and $80,029 during 2017, 2016 and 2015, respectively. For 2017, 2016 and 2015 one customer accounted for 18%, 19% and 24% of revenues, respectively, and as of December 31, 2017 for 15% of trade receivables, respectively. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Dec. 31, 2017 | |
SUBSEQUENT EVENT | |
SUBSEQUENT EVENT | 11. SUBSEQUENT EVENT Business Combination As part of the growth strategy of the Company, in January, 2018, the Company purchased substantially all of the operating assets associated with the original equipment steering business of Maval Industries, LLC (“Maval”). The Company is currently in a shared services agreement with Maval and is completing the production carve-out/separation of the businesses. The acquisition is expected to be neutral to slightly accretive to earnings for the Company in 2018. Once the carve-out is complete, the business will be located entirely within its own dedicated facility in Twinsburg, OH. |
SELECTED QUARTERLY FINANCIAL DA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | 12 Months Ended |
Dec. 31, 2017 | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | 12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected quarterly financial data for each of the four quarters in years 2017 and 2016 is as follows (in thousands, except per share data): Year 2017 First Quarter Second Quarter Third Quarter Fourth Quarter Revenues $ $ $ $ Gross profit Net income Basic earnings per share Diluted earnings per share Year 2016 (Revised) First Quarter Second Quarter Third Quarter Fourth Quarter Revenues $ $ $ $ Gross profit Net income Basic earnings per share Diluted earnings per share Note: The sum of the quarterly net income per share (basic and diluted) differs from the annual net income per share |
BUSINESS AND SUMMARY OF SIGNI21
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. For business combinations, we record net assets acquired and liabilities assumed at their estimated fair values. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include instruments which are readily convertible into cash (original maturities of three months or less) and which are not subject to significant risk of changes in interest rates. |
Accounts Receivable | Accounts Receivable Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. Activity in the allowance for doubtful accounts for 2017, 2016 and 2015 was as follows (in thousands): December 31, 2017 2016 2015 Beginning balance $ $ $ Additional reserves Writeoffs ) ) ) Effect of foreign currency translation ) Ending balance $ $ $ |
Inventories | 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): December 31, 2017 2016 Parts and raw materials $ $ Work-in-process Finished goods Less reserves ) ) Inventories $ $ The Company recorded provisions for excess and obsolete inventories of approximately $480, $351 and $432 for 2017, 2016 and 2015, respectively. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment is classified as follows (in thousands): December 31, Useful lives 2017 2016 Land $ $ Building and improvements 5 - 39 years Machinery, equipment, tools and dies 3 - 15 years Furniture, fixtures and other 3 - 10 years Less accumulated depreciation ) ) Property, plant and equipment, net $ $ Depreciation expense is provided using the straight-line method over the estimated useful lives of the assets. Amortization of building improvements is provided using the straight-line method over the life of the lease term or the life of the assets, whichever is shorter. Maintenance and repair costs are charged to operations as incurred. Major additions and improvements are capitalized. The cost and related accumulated depreciation of retired or sold property are removed from the accounts and the resulting gain or loss, if any, is reflected in earnings. Depreciation expense was $7,055, $6,545 and $4,822 in 2017, 2016 and 2015, respectively. |
Intangible Assets | Intangible Assets Intangible assets, other than goodwill, are recorded at cost and are amortized over their estimated useful lives using the straight-line method. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company reviews the carrying values of its long-lived assets, including property, plant and equipment and intangible assets, whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Long-lived assets are carried at historical cost if the projected cash flows from their use will recover their carrying amounts on an undiscounted basis and without considering interest. If projected cash flows are less than their carrying value, the long-lived assets must be reduced to their estimated fair value. Considerable judgment is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived assets. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment at least annually or more frequently if impairment indicators arise. The Company has defined one reporting unit that is the same as its operating segment. Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, that the fair value of the reporting unit may be more likely than not less than carrying amount, or if significant adverse changes in the Company’s future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required. Additionally, the Company can elect to forgo the qualitative assessment and perform the quantitative test. The first step of the quantitative test compares the fair value of the reporting unit to its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, there is a potential impairment and the second step must be performed. The second step compares the implied fair value of goodwill with the carrying amount of goodwill. If the carrying amount of goodwill exceeds the implied fair value, the excess is required to be recorded as an impairment charge. The implied fair value of goodwill is determined by assigning the fair value of the reporting unit to all the assets and liabilities of that unit (including any unrecognized intangible assets) as if it had been acquired in a business combination. The Company has elected to perform the annual impairment assessment for goodwill each year in the fourth quarter. At October 31, 2017, we performed our annual assessment of fair value and concluded that there was no impairment related to goodwill. The Company did not record any impairment charges for the year ended December 31, 2017, 2016 or 2015. |
Other Long-Term Assets | Other Long-Term Assets Other long-term assets include securities that the Company has purchased with the intent of funding the deferred compensation arrangements for certain executives of the Company. These items are accounted for at fair value on a recurring basis. Any changes in value are included in net income in the Company’s consolidated statements of income and comprehensive income. |
Warranty | Warranty The Company offers warranty coverage for its products. The length of the warranty period for its products is generally three months to two years, and varies significantly based on the product sold. The Company estimates the costs of repairing products under warranty based on the historical average cost of the repairs. The assumptions used to estimate warranty accruals are 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 2017, 2016 and 2015 were as follows (in thousands): December 31, 2017 2016 2015 Warranty reserve at beginning of the year $ $ $ Warranty reserves acquired — — Provision ) Warranty expenditures ) ) ) Effect of foreign currency translation ) ) Warranty reserve at end of year $ $ $ |
Accrued Liabilities | Accrued Liabilities Accrued liabilities consist of the following (in thousands): December 31, 2017 2016 Compensation and fringe benefits $ $ Warranty reserve Income taxes payable Other accrued expenses $ $ |
Foreign Currency Translation | Foreign Currency Translation The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using end of period exchange rates. Changes in reported amounts of assets and liabilities of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies and the U.S. dollar are included in foreign currency translation adjustment. Foreign currency translation adjustment is included in other comprehensive income, a component of stockholders’ equity in the accompanying consolidated statements of stockholders’ equity. Revenue and expense transactions use an average rate prevailing during the month of the related transaction. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of each of the Technology Units (“TUs”) are included in the results of operations as incurred. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when products are shipped or delivered (shipping terms may be either FOB shipping point or destination) and title has passed to the customer, persuasive evidence of an arrangement exists, the selling price is fixed or determinable, and collectability is reasonably assured. The Company’s shipping and handling costs are included in cost of sales for all periods presented. |
Engineering and Development Costs | Engineering and Development Costs The Company is engaged in a variety of engineering and design activities as well as basic research and development activities directed to the substantial improvement or new application of the Company’s existing technologies. Engineering and development costs are expensed as incurred. |
Basic and Diluted Income per Share | Basic and Diluted Income per Share Basic income per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding. Diluted income per share is determined by dividing the net income by the sum of (1) the weighted average number of common shares outstanding and (2) if not anti-dilutive, the effect of stock awards determined utilizing the treasury stock method. The dilutive effect of outstanding awards was 105,000, 94,000 and 10,000 shares for the years 2017, 2016 and 2015, respectively. Stock awards of 600 and 30,700 were excluded from the calculation of diluted income per share for 2017 and 2016, respectively. No stock awards were excluded from the calculation of diluted income per share for year 2015. |
Comprehensive Income | Comprehensive Income Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by and distributions to stockholders. |
Fair Value Accounting | Fair Value Accounting Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a framework for measuring fair value, which utilizes observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. Preference is given to observable inputs. These two types of inputs create the following three-level fair value hierarchy: Level 1: Quoted prices for identical assets or liabilities in active markets. Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable. Level 3: Significant inputs to the valuation model that are unobservable. The Company’s financial assets and liabilities include cash and cash equivalents, accounts receivable, debt obligations, accounts payable, and accrued liabilities. The carrying amounts reported in the consolidated balance sheets for these assets approximate fair value because of the immediate or short-term maturities of these financial instruments. The following table presents the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis as of December 31, 2017 and 2016, respectively, by level within the fair value hierarchy (in thousands): December 31, 2017 Level 1 Level 2 Level 3 Assets (liabilities) Pension plan assets $ $ — $ — Other long term assets — — Interest rate swaps — — December 31, 2016 Level 1 Level 2 Level 3 Assets (liabilities) Pension plan assets $ $ — $ — Other long term assets — — Interest rate swaps — ) — |
Derivative Financial Instruments | Derivative Financial Instruments Disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative instruments. The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. |
Income Taxes | Income Taxes The Tax Cuts and Jobs Act of 2017 was enacted in the United States on December 22, 2017. The provisions of the Act significantly revise the U.S. corporate income tax rules and requires companies to record a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and reduces the US federal corporate tax rate from 35% to 21%. As of December 31, 2017, the Company has not fully completed the accounting for the tax effects of enactment of the Act, however a reasonable estimate of the tax effects has been recorded in 2017. The amounts are provisional and subject to change as the determination of the impact of the income tax effects will require additional analysis of historical records, annual data, further interpretation of regulatory guidance that may be issued and actions the Company may take as a result of the Act. The current provision for income taxes represents actual or estimated amounts payable or refundable on tax return filings each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, and for operating loss and tax credit carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. A valuation allowance may be provided to the extent management deems it is more likely than not that deferred tax assets will not be realized. The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable income, in the appropriate taxing jurisdictions, during the periods in which temporary differences, net operating losses and tax credits become realizable. Management believes that it is more likely than not that the Company will realize the benefits of these temporary differences and operating loss and tax credit carryforwards, net of valuation allowances. Realization of an uncertain income tax position must have a “more likely than not” probability of being sustained based on technical merits before it can be recognized in the financial statements, assuming a review by tax authorities having all relevant information and applying current conventions. The Company does not have significant unrecognized tax benefits and does not anticipate a significant increase or decrease in unrecognized tax benefits within the next twelve months. Income tax related interest and penalties recognized in 2017, 2016 and 2015 are de minimus. |
Pension and Postretirement Welfare Plans | Pension and Postretirement Welfare Plans The Company reports gains or losses and prior service costs or credits that arise during the period, but are not recognized as components of net periodic benefit cost, as a component of other comprehensive income, net of tax. Amounts recognized in accumulated other comprehensive income are adjusted as they are subsequently recognized as components of net periodic benefit cost pursuant to the recognition and amortization provisions of those Statements. |
Concentration of Credit Risk | Concentration of Credit Risk Trade receivables subject the Company to the potential for credit risk. To reduce this risk, the Company performs evaluations of its customers’ financial condition and creditworthiness at the time of sale, and updates those evaluations when necessary. See Note 11, Segment Information for additional information regarding customer concentration. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Reclassifications | 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. |
Recently adopted accounting pronouncements | Recently adopted accounting pronouncements 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. We will adopt ASU 2014-09 and its amendments on a modified retrospective basis effective January 1, 2018. We do not expect that the adoption of ASU 2014-09 will 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. We do not expect a material change in our revenue recognition after implementation of the standard. 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 early adopting ASU 2017-12 in the first quarter of 2018 and does not expect an impact on its consolidated financial statements. 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 for 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 for the Company beginning on January 1, 2018. The Company does not expect the adoption of this ASU to 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. The new standard is effective for the Company beginning on January 1, 2018. The Company does not expect the adoption of this ASU to have a material impact on its condensed consolidated financial statements. In July 2015, the FASB issued ASU No. 2015-11, “ Simplifying the Measurement of Inventory .” The standard applies 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 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 standard is effective for fiscal years beginning after December 15, 2016. The Company adopted ASU 2015-11 effective January 1, 2017 and it had no impact on its consolidated financial statements. |
Recently issued accounting pronouncements | Recently issued accounting pronouncements In February 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” , to address a specific consequence of the Tax Cuts and Jobs Act (TCJA) by allowing a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the TCJA’s reduction of the U.S. federal corporate income tax rate. The ASU is effective for all entities for annual periods beginning after December 15, 2018, with early adoption permitted, and is to be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJA is recognized. Management has not yet completed its assessment of the impact of the ASU on the Company’s Consolidated Financial Statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” . The guidance in ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. 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 June 2016, the FASB issued ASU 2016-13, “ Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” . This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. The new guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. 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. |
BUSINESS AND SUMMARY OF SIGNI22
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of activity in the allowance for doubtful accounts | Activity in the allowance for doubtful accounts for 2017, 2016 and 2015 was as follows (in thousands): December 31, 2017 2016 2015 Beginning balance $ $ $ Additional reserves Writeoffs ) ) ) Effect of foreign currency translation ) Ending balance $ $ $ |
Schedule of inventories including 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 | 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): December 31, 2017 2016 Parts and raw materials $ $ Work-in-process Finished goods Less reserves ) ) Inventories $ $ |
Schedule of classification of property, plant and equipment | Property, plant and equipment is classified as follows (in thousands): December 31, Useful lives 2017 2016 Land $ $ Building and improvements 5 - 39 years Machinery, equipment, tools and dies 3 - 15 years Furniture, fixtures and other 3 - 10 years Less accumulated depreciation ) ) Property, plant and equipment, net $ $ |
Schedule of changes in the reserve for product warranty claims | Changes in the Company’s reserve for product warranty claims during 2017, 2016 and 2015 were as follows (in thousands): December 31, 2017 2016 2015 Warranty reserve at beginning of the year $ $ $ Warranty reserves acquired — — Provision ) Warranty expenditures ) ) ) Effect of foreign currency translation ) ) Warranty reserve at end of year $ $ $ |
Schedule of accrued liabilities | Accrued liabilities consist of the following (in thousands): December 31, 2017 2016 Compensation and fringe benefits $ $ Warranty reserve Income taxes payable Other accrued expenses $ $ |
Schedule of financial assets and liabilities that are accounted for at fair value on a recurring basis | The following table presents the Company’s financial assets and liabilities that are accounted for at fair value on a recurring basis as of December 31, 2017 and 2016, respectively, by level within the fair value hierarchy (in thousands): December 31, 2017 Level 1 Level 2 Level 3 Assets (liabilities) Pension plan assets $ $ — $ — Other long term assets — — Interest rate swaps — — December 31, 2016 Level 1 Level 2 Level 3 Assets (liabilities) Pension plan assets $ $ — $ — Other long term assets — — Interest rate swaps — ) — |
GOODWILL (Tables)
GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
GOODWILL | |
Schedule of change in the carrying amount of goodwill | The change in the carrying amount of goodwill for 2017, 2016 and 2015 is as follows (in thousands): December 31, 2017 2016 2015 Beginning balance $ $ $ Goodwill acquired — — Effect of foreign currency translation ) ) Ending balance $ $ $ |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INTANGIBLE ASSETS | |
Schedule of intangible assets | Intangible assets on the Company’s consolidated balance sheets consist of the following (in thousands): December 31, 2017 December 31, 2016 Life Gross Accumulated Net Book Gross Accumulated Net Book Customer lists 8 - 17 years $ $ ) $ $ $ ) $ Trade name 10 - 12 years ) ) Design and technologies 10 - 12 years ) ) Patents 17 years ) ) Total $ $ ) $ $ $ ) $ |
Schedule of estimated amortization expense for intangible assets | Year ending December 31, Total 2018 $ 2019 2020 2021 Thereafter $ |
STOCK-BASED COMPENSATION PLANS
STOCK-BASED COMPENSATION PLANS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
STOCK-BASED COMPENSATION PLANS | |
Summary of restricted stock grants, fair value and performance-based awards | For the year ended December 31, Unvested Weighted Awards with 2017 $ 2016 $ 2015 $ |
Summary of restricted stock activity | Number of Nonvested Balance, December 31, 2014 Awarded Forfeited ) Vested ) Balance, December 31, 2015 Awarded Forfeited ) Vested ) Balance, December 31, 2016 Awarded Forfeited ) Vested ) Balance, December 31, 2017 |
Summary of performance-based restricted stock activity | Total Outstanding, December 31, 2014 Awarded Performance criteria met ) Forfeited ) Outstanding, December 31, 2015 Awarded Performance criteria met ) Forfeited ) Outstanding, December 31, 2016 Awarded Performance criteria met ) Forfeited ) Outstanding, December 31, 2017 |
DEBT OBLIGATIONS (Tables)
DEBT OBLIGATIONS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
DEBT OBLIGATIONS | |
Schedule of debt obligations | Debt obligations consisted of the following (in thousands): December 31, 2017 2016 Current Borrowings China Credit Facility (5.0% at December 31, 2017) $ $ Current borrowings $ $ Long-term Debt Revolving Credit Facility, long term (1) $ $ Unamortized debt issuance costs ) ) Long-term debt $ $ (1) The effective rate of the Revolver is 3.26% at December 31, 2017. |
DERIVATIVE FINANCIAL INSTRUME27
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
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 tables below present the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2017 and 2016 (in thousands): Fair Value as of December 31, Derivative Instrument Balance Sheet Classification 2017 2016 Interest Rate Swaps Other Assets $ $ — Fair Value as of December 31, Derivative Instrument Balance Sheet Classification 2017 2016 Interest Rate Swaps Other Liabilities $ — $ |
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 statement of income and comprehensive income is as follows (in thousands): Net deferral in OCI of derivatives For the year ended December 31, Derivative Instruments 2017 2016 Interest Rate Swaps $ $ Net reclassification from AOCI into income (effective portion) For the year ended December 31, Statement of earnings classification 2017 2016 2015 Interest expense $ $ $ |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
INCOME TAXES | |
Schedule of provision for income taxes based on income before income taxes | The provision for income taxes is based on income before income taxes as follows (in thousands): For the year ended December 31, 2017 2016 2015 Domestic $ $ $ Foreign Income before income taxes $ $ $ |
Schedule of components of the total provision for income taxes | Components of the total provision for income taxes are as follows (in thousands): For the year ended December 31, 2017 2016 2015 Current provision (benefit) Domestic $ $ ) $ Foreign Total current provision Deferred provision Domestic Foreign ) Total deferred provision Provision for income taxes $ $ $ |
Schedule of differences in the provision for income taxes from the amount determined by applying the federal statutory rate | For the year ended December 31, 2017 2016 2015 Tax provision, computed at statutory rate % % % State tax, net of federal impact % % % Change in valuation allowance % % )% Effect of foreign tax rate differences )% )% )% Permanent items, other % )% % R&D Credit )% )% )% Restricted Stock Awards )% )% % Effect of Tax Cuts and Jobs Act (1) % % % Other )% % )% Provision for income taxes % % % (1) A reconciliation of the 2017 effective tax rate excluding the adjustments related to the Tax Cuts and Jobs Act is as follows: |
Effective tax rate excluding adjustments related to Tax Cuts and Jobs Act | Provision Tax rate As reported $ % Less: repatriation transition tax ) -19.5 % Plus: remeasurement of deferred tax assets and liabilities % As adjusted $ % |
Schedule of tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities | December 31, 2017 2016 Noncurrent deferred tax assets: Employee benefit plans $ $ Allowances and other Net operating loss and tax credit carryforwards Other Total noncurrent deferred tax assets Valuation allowance ) ) Net noncurrent deferred tax assets: $ $ Net noncurrent deferred tax liabilities: Property and Equipment $ $ Goodwill and Intangibles Other Total deferred tax liabilities $ $ Net deferred tax asset/(deferred tax liability) $ ) $ ) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of minimum future rental commitments under all non-cancelable operating leases | Minimum future rental commitments under all non-cancelable operating leases are as follows (in thousands): Year ending December 31, Total 2018 $ 2019 2020 2021 2022 Thereafter $ |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
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 year ended December 31, 2017 2016 2015 Revenues derived from foreign subsidiaries $ $ $ |
SELECTED QUARTERLY FINANCIAL 31
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | |
Schedule of selected quarterly financial data | Selected quarterly financial data for each of the four quarters in years 2017 and 2016 is as follows (in thousands, except per share data): Year 2017 First Quarter Second Quarter Third Quarter Fourth Quarter Revenues $ $ $ $ Gross profit Net income Basic earnings per share Diluted earnings per share Year 2016 (Revised) First Quarter Second Quarter Third Quarter Fourth Quarter Revenues $ $ $ $ Gross profit Net income Basic earnings per share Diluted earnings per share |
BUSINESS AND SUMMARY OF SIGNI32
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounts Receivable and Inventories (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Activity in the allowance for doubtful accounts | |||
Beginning balance | $ 362 | $ 611 | $ 367 |
Additional reserves | 39 | 167 | 333 |
Writeoffs | (61) | (414) | (117) |
Effect of foreign currency translation | 1 | (2) | 28 |
Ending balance | 341 | 362 | 611 |
Inventories | |||
Parts and raw materials | 24,910 | 23,978 | |
Work-in-process | 5,984 | 6,628 | |
Finished goods | 6,075 | 4,928 | |
Inventory, gross | 36,969 | 35,534 | |
Less reserves | (4,401) | (4,436) | |
Inventories | 32,568 | 31,098 | |
Provision for excess and obsolete inventory | $ 480 | $ 351 | $ 432 |
BUSINESS AND SUMMARY OF SIGNI33
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Property, plant and equipment | |||
Property, plant and equipment, gross | $ 73,685 | $ 65,208 | |
Less accumulated depreciation | (35,282) | (27,734) | |
Property, plant and equipment, net | 38,403 | 37,474 | |
Depreciation expense | 7,055 | 6,545 | $ 4,822 |
Land | |||
Property, plant and equipment | |||
Property, plant and equipment, gross | 993 | 962 | |
Building and improvements | |||
Property, plant and equipment | |||
Property, plant and equipment, gross | $ 10,678 | 9,911 | |
Building and improvements | Minimum | |||
Property, plant and equipment | |||
Useful lives | 5 years | ||
Building and improvements | Maximum | |||
Property, plant and equipment | |||
Useful lives | 39 years | ||
Machinery, equipment, tools and dies | |||
Property, plant and equipment | |||
Property, plant and equipment, gross | $ 49,083 | 44,247 | |
Machinery, equipment, tools and dies | Minimum | |||
Property, plant and equipment | |||
Useful lives | 3 years | ||
Machinery, equipment, tools and dies | Maximum | |||
Property, plant and equipment | |||
Useful lives | 15 years | ||
Furniture, fixtures and other | |||
Property, plant and equipment | |||
Property, plant and equipment, gross | $ 12,931 | $ 10,088 | |
Furniture, fixtures and other | Minimum | |||
Property, plant and equipment | |||
Useful lives | 3 years | ||
Furniture, fixtures and other | Maximum | |||
Property, plant and equipment | |||
Useful lives | 10 years |
BUSINESS AND SUMMARY OF SIGNI34
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) $ in Thousands | Oct. 31, 2017USD ($) | Dec. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Goodwill | ||||
Number of reporting units | item | 1 | |||
Goodwill impairment | $ | $ 0 | $ 0 | $ 0 | $ 0 |
BUSINESS AND SUMMARY OF SIGNI35
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Warranty, Accrued Liabilities, and Basic and Diluted Income per Share (Details) - USD ($) $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | |
Changes in the reserve for product warranty claims | |||||
Warranty reserve at beginning of the year | $ 830 | $ 780 | $ 786 | ||
Warranty reserves acquired | 297 | ||||
Provision | 234 | (138) | 142 | ||
Warranty expenditures | (200) | (96) | (123) | ||
Effect of foreign currency translation | 58 | (13) | (25) | ||
Warranty reserve at end of year | 922 | 830 | 780 | ||
Accrued Liabilities | |||||
Compensation and fringe benefits | $ 7,459 | $ 7,379 | |||
Warranty reserve | $ 830 | $ 780 | $ 786 | 922 | 830 |
Income taxes payable | 2,397 | 183 | |||
Other accrued expenses | 3,492 | 2,286 | |||
Accrued liabilities | $ 14,270 | $ 10,678 | |||
Basic and Diluted Income per Share from Continuing Operations | |||||
Dilutive effect of outstanding stock option awards (in shares) | 105,000 | 94,000 | 10,000 | ||
Stock awards excluded from the calculation of diluted income per share (in shares) | 600 | 30,700 | 0 | ||
Minimum | |||||
Warranty | |||||
Warranty period | 3 months | ||||
Maximum | |||||
Warranty | |||||
Warranty period | 2 years |
BUSINESS AND SUMMARY OF SIGNI36
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Accounting (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Assets (liabilities) | ||
Other long term assets | $ 4,461 | $ 3,943 |
Recurring basis | Level 1 | ||
Assets (liabilities) | ||
Pension plan assets | 5,362 | 4,948 |
Other long term assets | 3,929 | 3,476 |
Recurring basis | Level 2 | ||
Assets (liabilities) | ||
Interest rate swaps | $ 196 | |
Interest rate swaps | $ (30) |
BUSINESS AND SUMMARY OF SIGNI37
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes | ||||
US federal corporate tax rate | 35.00% | 34.00% | 34.00% | |
Forecast | ||||
Income Taxes | ||||
US federal corporate tax rate | 21.00% |
GOODWILL (Details)
GOODWILL (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Change in goodwill | |||
Beginning balance | $ 27,522 | $ 17,757 | $ 18,303 |
Goodwill acquired | 10,248 | ||
Effect of foreign currency translation | 2,009 | (483) | (546) |
Ending balance | $ 29,531 | $ 27,522 | $ 17,757 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Intangible assets subject to amortization | |||
Gross Amount | $ 50,043 | $ 48,467 | |
Accumulated amortization | (17,970) | (14,215) | |
Net Book Value | 32,073 | 34,252 | |
Amortization expense for intangible assets | 3,219 | 3,204 | $ 2,644 |
Estimated amortization expense | |||
2,018 | 3,268 | ||
2,019 | 3,268 | ||
2,020 | 3,268 | ||
2,021 | 3,002 | ||
Thereafter | 19,267 | ||
Net Book Value | 32,073 | 34,252 | |
Customer lists | |||
Intangible assets subject to amortization | |||
Gross Amount | 38,659 | 37,868 | |
Accumulated amortization | (12,721) | (10,087) | |
Net Book Value | 25,938 | 27,781 | |
Estimated amortization expense | |||
Net Book Value | $ 25,938 | 27,781 | |
Customer lists | Minimum | |||
Intangible assets subject to amortization | |||
Estimated Life | 8 years | ||
Customer lists | Maximum | |||
Intangible assets subject to amortization | |||
Estimated Life | 17 years | ||
Trade name | |||
Intangible assets subject to amortization | |||
Gross Amount | $ 6,213 | 6,038 | |
Accumulated amortization | (2,798) | (2,281) | |
Net Book Value | 3,415 | 3,757 | |
Estimated amortization expense | |||
Net Book Value | $ 3,415 | 3,757 | |
Trade name | Minimum | |||
Intangible assets subject to amortization | |||
Estimated Life | 10 years | ||
Trade name | Maximum | |||
Intangible assets subject to amortization | |||
Estimated Life | 12 years | ||
Design and technologies | |||
Intangible assets subject to amortization | |||
Gross Amount | $ 5,147 | 4,537 | |
Accumulated amortization | (2,443) | (1,840) | |
Net Book Value | 2,704 | 2,697 | |
Estimated amortization expense | |||
Net Book Value | $ 2,704 | 2,697 | |
Design and technologies | Minimum | |||
Intangible assets subject to amortization | |||
Estimated Life | 10 years | ||
Design and technologies | Maximum | |||
Intangible assets subject to amortization | |||
Estimated Life | 12 years | ||
Patents | |||
Intangible assets subject to amortization | |||
Gross Amount | $ 24 | 24 | |
Accumulated amortization | (8) | (7) | |
Net Book Value | $ 16 | 17 | |
Estimated Life | 17 years | ||
Estimated amortization expense | |||
Net Book Value | $ 16 | $ 17 |
STOCK-BASED COMPENSATION PLAN40
STOCK-BASED COMPENSATION PLANS - Stock Incentive Plans and Restricted Stock (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
STOCK-BASED COMPENSATION | |||
Shares of common stock available for grant under stock incentive plans | 1,081,911 | ||
Restricted Stock | |||
STOCK-BASED COMPENSATION | |||
Weighted average grant date fair value (in dollars per share) | $ 22.56 | $ 19.99 | $ 27.37 |
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) | 308,542 | 367,199 | 487,678 |
Awarded (in shares) | 105,785 | 105,662 | 76,714 |
Forfeited (in shares) | (17,676) | (5,912) | (7,066) |
Vested (in shares) | (174,683) | (158,407) | (190,127) |
Outstanding at end of period (in shares) | 221,968 | 308,542 | 367,199 |
Additional disclosures | |||
Compensation expense, net of forfeitures | $ 2,026 | $ 1,893 | $ 1,744 |
Unrecognized compensation expense | 2,704 | ||
Unrecognized compensation expense, expected to be recognized in next fiscal year | $ 1,692 | ||
Restricted Stock | Minimum | |||
STOCK-BASED COMPENSATION | |||
Service period of earned grants | 3 years | ||
Restricted Stock | Maximum | |||
STOCK-BASED COMPENSATION | |||
Service period of earned grants | 5 years | ||
Restricted Stock | Performance based vesting | |||
Number of Nonvested Restricted Shares | |||
Outstanding at beginning of period (in shares) | 44,872 | 29,188 | 5,892 |
Awarded (in shares) | 28,025 | 60,153 | 41,792 |
Performance criteria met (in shares) | (7,670) | (38,167) | (14,200) |
Forfeited (in shares) | (27,445) | (6,302) | (4,296) |
Outstanding at end of period (in shares) | 37,782 | 44,872 | 29,188 |
STOCK-BASED COMPENSATION PLAN41
STOCK-BASED COMPENSATION PLANS - Employee Stock Ownership Plan (Details) - ESOP $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017USD ($)h / yr | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Employee Stock Ownership Plan | |||
Minimum hours of work per year for employees to be covered under Employee Stock Ownership Plan (ESOP) | h / yr | 1,000 | ||
Annual contribution by employer as a percentage of pretax income before the contribution | 5.00% | 5.00% | 5.00% |
Company contributions | $ | $ 849 | $ 674 | $ 812 |
STOCK-BASED COMPENSATION PLAN42
STOCK-BASED COMPENSATION PLANS - Defined Contribution Plan and Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Defined Contribution Plan | |||
Matching percentage per dollar of the first 3% of participant deferral | 100.00% | 100.00% | 100.00% |
First specified percentage of participant deferral upon which employer matches 100% contribution per dollar | 3.00% | 3.00% | 3.00% |
Matching percentage per dollar of the next 2% contribution | 50.00% | 50.00% | 50.00% |
Next specified percentage of employee contribution upon which employer matches 50% contribution per dollar | 2.00% | 2.00% | 2.00% |
Participant deferral (as a percent) | 5.00% | 5.00% | 5.00% |
Net costs related to defined contribution plan | $ 1,090 | $ 1,085 | $ 1,076 |
Dividends | |||
Dividends paid (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 |
Total dividends paid | $ 959 | $ 942 | $ 923 |
Maximum | |||
Defined Contribution Plan | |||
Specified percentage of employee contribution upon which employer matches contribution | 4.00% | 4.00% | 4.00% |
DEBT OBLIGATIONS (Details)
DEBT OBLIGATIONS (Details) ¥ in Thousands, $ in Thousands | Dec. 31, 2017CNY (¥) | Oct. 28, 2016USD ($) | Dec. 31, 2017CNY (¥) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2017USD ($) |
Debt Obligations | ||||||
Current borrowings | $ 936 | $ 461 | ||||
Long-term debt | 70,483 | 52,694 | ||||
Unamortized debt issuance costs | (720) | (572) | ||||
Deferred financing costs | 745 | |||||
Revolving Credit Facility | ||||||
Debt Obligations | ||||||
Long-term debt | 71,203 | $ 53,266 | ||||
Effective rate (as a percent) | 3.26% | 3.26% | 3.26% | |||
Maximum borrowing capacity | $ 125,000 | |||||
Commitment fees on unused portion of the Revolving credit facility ( as a percent) | 0.15% | 0.15% | ||||
Minimum interest expense coverage ratio | 3 | 3 | 3 | |||
Increase in consolidated leverage ratio | 0.5 | 0.5 | 0.5 | |||
Revolving Credit Facility | Minimum | ||||||
Debt Obligations | ||||||
Commitment fees on unused portion of the Revolving credit facility ( as a percent) | 0.10% | 0.10% | ||||
Revolving Credit Facility | Maximum | ||||||
Debt Obligations | ||||||
Commitment fees on unused portion of the Revolving credit facility ( as a percent) | 0.25% | 0.25% | ||||
Revolving Credit Facility | LIBOR | ||||||
Debt Obligations | ||||||
Applicable margin (as a percent) | 1.50% | |||||
Revolving Credit Facility | LIBOR | Minimum | ||||||
Debt Obligations | ||||||
Applicable margin (as a percent) | 1.00% | |||||
Revolving Credit Facility | LIBOR | Maximum | ||||||
Debt Obligations | ||||||
Applicable margin (as a percent) | 2.25% | |||||
Revolving Credit Facility | Prime Rate | ||||||
Debt Obligations | ||||||
Applicable margin (as a percent) | 0.50% | |||||
Revolving Credit Facility | Prime Rate | Minimum | ||||||
Debt Obligations | ||||||
Applicable margin (as a percent) | 0.00% | |||||
Revolving Credit Facility | Prime Rate | Maximum | ||||||
Debt Obligations | ||||||
Applicable margin (as a percent) | 1.25% | |||||
Term Loan | ||||||
Debt Obligations | ||||||
Maximum borrowing capacity | $ 50,000 | |||||
Debt instrument term | 5 years | |||||
Senior Secured Credit Facility | ||||||
Debt Obligations | ||||||
Debt instrument term | 5 years | 5 years | ||||
Deferred financing costs | $ 745 | |||||
Deferred financing costs net of accumulated amortization | $ 572 | |||||
China Credit Facility | ||||||
Debt Obligations | ||||||
Current borrowings | $ 936 | $ 461 | ||||
Interest rate at period end (as a percent) | 5.00% | 5.00% | 5.00% | |||
Maximum borrowing capacity | ¥ 10,000 | ¥ 10,000 | $ 1,537 | |||
Average outstanding borrowings | 5,375 | $ 795 | ||||
Available borrowing capacity | ¥ 7,000 | ¥ 7,000 | $ 1,076 | |||
Quarter ending through March 31, 2017 | Revolving Credit Facility | ||||||
Debt Obligations | ||||||
Leverage ratio | 3.75 | 3.75 | 3.75 | |||
Quarter ending through September 30, 2017 | Revolving Credit Facility | ||||||
Debt Obligations | ||||||
Leverage ratio | 3.5 | 3.5 | 3.5 | |||
Quarter ending through March 31, 2018 | Revolving Credit Facility | ||||||
Debt Obligations | ||||||
Leverage ratio | 3.25 | 3.25 | 3.25 | |||
Quarter thereafter March 31, 2018 | Revolving Credit Facility | ||||||
Debt Obligations | ||||||
Leverage ratio | 3 | 3 | 3 |
DERIVATIVE FINANCIAL INSTRUME44
DERIVATIVE FINANCIAL INSTRUMENTS (Details) - Interest Rate Swaps $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Feb. 28, 2017USD ($)instrument | Oct. 31, 2013USD ($)instrument | |
Derivative financial instruments | |||||
Number of derivative instruments | instrument | 3 | 2 | |||
Notional amount of interest rate swap derivatives | $ 40,000 | $ 25,000 | |||
Notional amount of interest rate swap derivatives at maturity | $ 6,673 | ||||
Hedge ineffectiveness recorded in earnings | $ 0 | $ 0 | $ 0 | ||
Estimated amount to be reclassified as an increase to interest expense | 79 | ||||
Effect of derivative financial instruments on the condensed consolidated statement of income and comprehensive income | |||||
Net deferral in OCI of derivatives (effective portion) | 87 | 111 | |||
Other Assets | |||||
Derivative financial instruments | |||||
Fair value of derivative assets | 196 | ||||
Other Liabilities | |||||
Derivative financial instruments | |||||
Fair value of derivative liability | 30 | ||||
Interest expense | |||||
Effect of derivative financial instruments on the condensed consolidated statement of income and comprehensive income | |||||
Net reclassification from AOCI into income (effective portion) | $ 313 | $ 108 | $ 194 |
INCOME TAXES - Tax Effects and
INCOME TAXES - Tax Effects and Tax Cuts and Jobs Act (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Schedule of components of income before income taxes | ||||
Domestic | $ 8,076 | $ 4,288 | $ 7,676 | |
Foreign | 8,060 | 8,515 | 7,745 | |
Income before income taxes | 16,136 | 12,803 | 15,421 | |
Current provision (benefit) | ||||
Domestic | 4,750 | (70) | 1,936 | |
Foreign | 2,566 | 2,025 | 1,042 | |
Total current provision | 7,316 | 1,955 | 2,978 | |
Deferred provision | ||||
Domestic | 925 | 1,438 | 1,217 | |
Foreign | (141) | 332 | 152 | |
Total deferred provision | 784 | 1,770 | 1,369 | |
Provision for income taxes | $ 8,100 | $ 3,725 | $ 4,347 | |
Differences in the provision for income taxes from the amount determined by applying the federal statutory rate | ||||
Tax provision, computed at statutory rate (as a percent) | 35.00% | 34.00% | 34.00% | |
State tax, net of federal impact (as a percent) | 3.60% | 4.60% | 4.80% | |
Change in valuation allowance (as a percent) | 1.90% | 0.90% | (3.30%) | |
Effect of foreign tax rate differences (as a percent) | (4.20%) | (6.50%) | (6.10%) | |
Permanent items, other (as a percent) | 0.20% | (0.40%) | 0.90% | |
R&D Credit (as a percent) | (2.20%) | (1.70%) | (1.30%) | |
Restricted Stock Awards (as a percent) | (2.60%) | (2.70%) | 0.00% | |
Effect of Tax Cuts and Job Act (as a percent) | 19.40% | 0.00% | 0.00% | |
Other (as a percent) | (0.90%) | 0.90% | (0.80%) | |
Provision for income taxes (as a percent) | 50.20% | 29.10% | 28.20% | |
Effective tax rate excluding adjustments related to Tax Cuts and Jobs Act, Provision for income taxes | ||||
As reported | $ 8,100 | $ 3,725 | $ 4,347 | |
Less: repatriation transition tax | (3,140) | |||
Plus: remeasurement of deferred tax assets and liabilities | 7 | |||
As adjusted | $ 4,967 | |||
Effective tax rate excluding adjustments related to Tax Cuts and Jobs Act, Tax rate | ||||
As reported (as a percent) | 50.20% | 29.10% | 28.20% | |
Less: repatriation transition tax (as a percent) | (19.50%) | |||
Plus: remeasurement of deferred tax assets and liabilities (as a percent) | 0.10% | |||
As adjusted (as a percent) | 30.80% | |||
Recognized provisional amount included as a component of income tax expense from continuing operations | $ 3,133 | |||
Noncurrent deferred tax assets: | ||||
Employee benefit plans | 1,896 | $ 2,247 | ||
Allowances and other | 640 | 969 | ||
Net operating loss and tax credit carryforwards | 203 | 1,003 | ||
Other | 370 | 852 | ||
Total noncurrent deferred tax assets | 3,109 | 5,071 | ||
Valuation allowance | (50) | (557) | ||
Net noncurrent deferred tax assets: | 3,059 | 4,514 | ||
Net noncurrent deferred tax liabilities: | ||||
Property and Equipment | 3,001 | 3,445 | ||
Goodwill and Intangibles | 3,398 | 3,136 | ||
Other | 255 | 276 | ||
Total deferred tax liabilities | 6,654 | 6,857 | ||
Net deferred tax asset/(deferred tax liability) | $ (3,595) | $ (2,343) | ||
Forecast | ||||
Differences in the provision for income taxes from the amount determined by applying the federal statutory rate | ||||
Tax provision, computed at statutory rate (as a percent) | 21.00% |
INCOME TAXES - Additional Infor
INCOME TAXES - Additional Information (Details) $ in Thousands | Dec. 31, 2010USD ($) |
INCOME TAXES | |
Deferred tax benefit from acquired foreign operating losses and tax credit carryforwards | $ 0 |
COMMITMENTS AND CONTINGENCIES47
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Estimated future operating lease expense | |||
2,018 | $ 2,915 | ||
2,019 | 2,353 | ||
2,020 | 1,414 | ||
2,021 | 1,022 | ||
2,022 | 854 | ||
Thereafter | 1,394 | ||
Total | 9,952 | ||
Rental expense | |||
Rental expense | $ 2,935 | $ 2,720 | $ 1,946 |
Severance Benefit Agreements | |||
Rental expense | |||
Period of specified benefits to key employees Upon the subsequent severance of employment | 24 months |
DEFERRED COMPENSATION ARRANGE48
DEFERRED COMPENSATION ARRANGEMENTS (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
DEFERRED COMPENSATION ARRANGEMENTS | ||
Amount accrued | $ 3,934 | $ 3,481 |
Amount accrued included in accrued liabilities | $ 349 | $ 132 |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Sep. 30, 2016USD ($) | Jun. 30, 2016USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2017USD ($)segment | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Segment information | |||||||||||
Number of operating segments | segment | 1 | ||||||||||
Revenues derived from foreign subsidiaries | $ 65,355 | $ 64,968 | $ 60,335 | $ 61,354 | $ 55,343 | $ 61,040 | $ 65,835 | $ 63,675 | $ 252,012 | $ 245,893 | $ 232,434 |
Identifiable assets | 187,922 | 179,919 | $ 187,922 | $ 179,919 | |||||||
Revenues | |||||||||||
Segment information | |||||||||||
Percentage of concentration risk | 18.00% | 19.00% | 24.00% | ||||||||
Trade receivables | |||||||||||
Segment information | |||||||||||
Percentage of concentration risk | 15.00% | ||||||||||
Outside the United States | |||||||||||
Segment information | |||||||||||
Revenues derived from foreign subsidiaries | $ 119,212 | $ 111,993 | $ 80,029 | ||||||||
Identifiable assets | $ 84,652 | $ 73,378 | 84,652 | 73,378 | |||||||
Wholly owned foreign subsidiaries | |||||||||||
Segment information | |||||||||||
Revenues derived from foreign subsidiaries | $ 107,039 | $ 99,061 | $ 75,509 |
SELECTED QUARTERLY FINANCIAL 50
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) | |||||||||||
Revenues | $ 65,355 | $ 64,968 | $ 60,335 | $ 61,354 | $ 55,343 | $ 61,040 | $ 65,835 | $ 63,675 | $ 252,012 | $ 245,893 | $ 232,434 |
Gross profit | 20,551 | 19,546 | 17,881 | 17,701 | 16,728 | 17,907 | 19,864 | 18,505 | 75,679 | 73,004 | 68,772 |
Net income | $ 95 | $ 3,057 | $ 2,227 | $ 2,657 | $ 709 | $ 2,821 | $ 3,193 | $ 2,355 | $ 8,036 | $ 9,078 | $ 11,074 |
Basic earnings per share (in dollars per share) | $ 0.01 | $ 0.33 | $ 0.24 | $ 0.29 | $ 0.08 | $ 0.30 | $ 0.34 | $ 0.25 | $ 0.88 | $ 1.01 | $ 1.20 |
Diluted earnings per share (in dollars per share) | $ 0.01 | $ 0.33 | $ 0.24 | $ 0.29 | $ 0.08 | $ 0.30 | $ 0.34 | $ 0.25 | $ 0.87 | $ 1 | $ 1.20 |