Allient Inc (ALNT) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Q1 2008 Allied Motion Technologies, Inc.

earnings conference call.

(OPERATOR INSTRUCTIONS).

I would now like to turn the call over to Sue Chiarmonte, Vice President, Secretary and Treasurer.

Thank you.

Welcome to Allied Motion's conference call to discuss the quarter ended March 31, 2008.

We appreciate you joining us for this call.

We distributed the press release earlier today.

If you have not received this announcement, please call our corporate office at 303-799-8520 and request a copy to be faxed to you.

Today's call is being recorded.

It will be available for reply until May 12.

The callback number for the replay is 1-888-286-8010, and the passcode is 90060885.

This call is also being broadcast live on the Internet and will be available for replay immediately after the call for 90 days.

To access the Internet broadcast and replay, go to the Company's Web site, at www.Alliedmotion.com, and click on the Webcast icon.

As a reminder, please note that the Safe Harbor statements included in our press release also apply to all comments made on this conference call.

I will now turn the call over to Dick Smith, Chief Executive Officer of Allied Motion Technologies.

Thank you, Sue.

Good afternoon, and thank you for joining us today.

As usual, I have Dick Warzala, our President and Chief Operating Officer, on the call with me, and he will be making part of the presentation today.

Our agenda is that I will start with some general comments; I will then review the numbers for the quarter; Dick will then discuss the operations; and I will then make a brief closing statement; and we will then open up the call for questions.

I would like to start by saying we had a great first quarter.

Our revenues, profit, and earnings per share this quarter are record highs since we restructure the Company in 2002, and we have now achieved three consecutive quarters of improved revenues and profit from the same periods of the prior year.

Some of the highlights of our achievement this quarter are as follows.

Net profit was up 29% over last year to $924,000.

Revenues were up 6% to $23.3 million.

Fully diluted earnings per share was up 30% to $0.13 per share for the quarter, which improves the trailing four quarters to $0.37 per share.

Our gross profit margin improved to 26%, compared to 24% last year.

EBITDA was 2.3 million which was a 9% increase.

And our backlog is up 19% from the same time last year, and up 5% from the start of the quarter.

Our book value per share is $4.98.

And finally, I would like to report that our annual shareholders meeting was held on May 1st, and I am pleased to report that shareholders elected the slate of directors as proposed by the Company's Board of Directors for a one year-term.

Now I am going to briefly review the operating results for the quarter ended March 31st.

The Company, as I just said, achieved net income of $924,000, or $0.13 per fully diluted share.

That compares to net income of 715,000, or $0.10 per fully diluted share, last year, which, by the way, was our previous record-high quarterly profit.

Revenues for the quarter increased 6% to 23.3 million from [22] million last year.

The 6% increase in revenues achieved in our first quarter reflects a significant changes in sales mix from last year.

The increase reflects a 13% increase in sales from our aerospace and defense, medical, distribution, and certain markets in our industrial and electronics markets, such as pumps and instruments.

And those increases were partially offset by a 7% downturn in construction related markets, such as off-road equipment and industrial tools, plus downturns in the banking, truck and recreation-related markets, such as RVs and marine markets.

The downturn in these markets reflects both the adverse effects of the economy, and the continued competitive pressures of LCR competitors, which are primarily Chinese competitors.

58% of our sales for the quarter were to US customers, with the balance of our sales to customers primarily in Europe and Canada.

Sales to US customers were down 5% for the quarter, and sales to customers outside of the US were up 27%.

Of our total increase in sales, 3.8% was due to the weakness of the US dollar against the euro.

Backlog at March 31, 2008 was $33.6 million, up 19% from the same time last year and up 5% from the beginning of the quarter.

EBITDA, as I mentioned before, for the quarter increased 9% to 2.3 million this year compared to 2.1 million last year.

We had 312,000 of capital expenditures during the first quarter, compared with 419,000 last year.

As I had said before, our gross profit margin for the quarter improved to 26%, compared to 24% last year.

The margin improvement was driven by three factors.

First was from the change in sales mix, and that is that we achieved higher margins from most of the markets that we experienced increased sales in, and we have lower margins from those markets that declined this quarter.

The second factor was from continuous improvement in efficiencies, and third was from higher quantities of production from our Asian contract manufacturing facility.

Selling, general, administrative and engineering costs increased 16% over last year, and as a percent of sales were 19% and 18% for this year and last year, respectively.

Our selling expenses were up 16%, and our engineering development costs were up 6%, as we continued to strengthen our sales and engineering capabilities.

For the quarter, depreciation and amortization expense increased by $35,000 to $880,000, and interest expense was $59,000, or a decrease of 159,000 from the same quarter last year.

The Company ended the quarter with $705,000 in cash, 4.4 million in bank debt, and our stockholders' equity was $36.3 million at March 31st.

And that was the $4.98 per share.

I would now like to ask Dick to discuss our operations.

Thank you, Dick, and welcome, everyone.

Consistent with our past practice, Dick Smith has already provided the detailed financial results, and I will focus on reporting the key operating activities that drove the results.

Our record sales and earnings in the first quarter of 2008 reflects our emphasis on executing our strategy by continuously striving to improve all facets of our operations.

Last quarter, in an attempt to help our shareholders better understand Allied Motion, I spent a significant amount of time discussing the critical factors and key differentiating factors that truly drive our business.

Continuing with that theme, I will once again utilize this conference call to provide you with an update on the key factors that drive success in our marketplace.

First off, Allied Motion is made up of five operating companies that are internally-named technology units.

These technology units are linked together through our strategy with a driving force of applied motion control technology and know-how.

The technologies within all of our companies are brought to market by an expert team of market-focused sales, applications, and engineering personnel.

This team understands how to combine our product technologies into a high-value solution for our customers' applications.

The leveraging of our sales personnel and our technologies is a key factor to drive our growth now and in the future.

At Allied we manage our business to realize acceptable returns on all of our sales activities, and to accomplish this, we source components and manufacture products in Asia, Europe and in North America.

We also work with each of our customers to ensure the proper mix of manufacturing and logistics support is in place to optimally meet their requirements.

When all is said and done, we must bring a solution that is recognized by our customers to be of value to them, and in return, provide acceptable margins for us.

This is an ongoing process, and slowly but surely, we continue to utilize our strategic filters to ensure we are focusing our efforts in the right markets, where we do bring significant value to our customers.

While we recognize the need to be price competitive, product price alone is usually not the main driver for our customers.

Our customers demand quality, and they do not tolerate product failures.

Since most of our products are installed in higher-level assemblies and equipment, the cost to repair and/or replace faulty products in the field can far outweigh the initial cost of the product.

Overall, our never-ending emphasis on quality and ongoing quality improvements results in an enviable track record with our customers that provides us with an edge against our competition.

While quality is a given, achieving consistent and ongoing quality over the long run requires that we not only build quality products, it also requires expertise in application engineering, design engineering, and material sourcing.

While other companies may be pulling back in fear of a recession, Allied Motion has been aggressively interviewing to ensure we continually add the engineering talent that is critical to our growth and success in the future.

I am pleased to report that our efforts are bearing fruit, and these areas of excellence, as defined by our strategy, are stronger than ever before in the history of our company.

The process to ensure quality starts with applications engineering.

If you don't have the people who truly understand the motion requirements of a customer's application, there is a good chance you will fail in the long run.

To satisfy this requirement, you must have the skill set and engineering expertise to understand a customer's need and, as I previously mentioned, Allied Motion is continually adding and upgrading its application support around the world to ensure we can best meet that need.

By explaining our structure -- that is, technology units supported by market-based sales, applications and engineering teams -- it should help you realize that a competitive edge we enjoy is the breadth of our product line and the resulting solutions we can offer.

I've stressed the need for us to develop products and solutions that truly raise the bar of performance for our customers.

Today, our technology units have picked up the pace and are delivering more new products and solutions than ever before.

And for the sake of purpose and clarity, I will remind everyone that if you merely think of Allied Motion as a mid-performance motor supplier, you are thinking in the past, as we are not same company we were five years ago.

Allied has expanded its electronics capabilities to add additional value by incorporating electronic drive and control solutions to optimize the overall system solution.

Our high-performance motors are used in critical medical applications, where only the best will suffice, and also in many space-constrained applications, with a particular emphasis on alternative energy, green applications, and other vehicle-type applications where weight and space are at a premium.

Our encoder solutions continue to change the game in defense applications, as they provide the compact packaging, high-resolution, ruggedness and reliability that improves performance and cost-effectiveness for our customers.

And because of their superior performance, they are being designed into additional applications for the future.

And last but not least, we are expanding the breadth of our air moving solutions, which now includes both brush and brushless motors, drives and fan/blower systems for a more complete air moving solution.

Today at Allied Motion, motors are only part of our overall solution.

By combining our motors with electronics, feedback, gearing and air moving capabilities, a system solution is designed and quality is once again improved.

With an impressive array of new products continually coming to market, the challenge ahead will be to reeducate our customers as to how they view Allied Motion and its business units as their supplier of choice.

To facilitate this process, our market-specific catalogs and new Web site emphasizes the complete technology base of our company, including our people and our products.

Another element to ensure we provide the highest-quality products and solution is our global sourcing and supplier approval capabilities.

Our newly formed Allied Motion Asia entity is focused on identifying and improving suppliers that are not only cost competitive, but also capable of providing quality products on time and in a consistent manner.

While our entire team strives to eliminate potential problems before they happen, if one does occur, our global team is immediately deployed to quickly resolve the issue and maintain a continuous supply of product to our customers.

Our service is second to none, and the value of this service is truly realized in the most demanding of times for our customers that once again sets us apart from our competition.

Comparing our market segment sales for the trailing 12 months 2007 versus the trailing 12 months 2008, our aerospace and defense, electronics, distribution, industrial, and medical market segments experienced growth, while our vehicle market segment experienced a decline.

Further comparing the fourth quarter of 2007 to the first quarter of 2008, our aerospace defense, industrial and distribution market segments experienced growth, while our medical and vehicle market segments were down.

In summary, Allied Motion's quality-first mentality provides the stability and peace of mind for our customers in today's global marketplace.

As evidenced by our results, our company is strong, our balance sheet is strong, our new applications pipeline is strong and growing, and our ever-expanding new product pipeline will ensure we meet the emerging needs of our customers today and in the future.

To facilitate our growth, Allied will continually invest in our most vital resource, and that is our people, to ensure they are provided with the tools to be the best in the business.

I'll now turn this back over to Dick Smith for his closing remarks and comments.

Thank you, Dick.

As we have discussed today, we continue to make progress in improving the financial results of the Company, and in building the foundation necessary to achieve continued growth in sales and probability.

While we still have some challenges, we are very excited about our opportunities, and we remain very confident that we will accomplish our long-term goals of increasing shareholder value through growth in sales and profitability.

Operator, that concludes our prepared remarks, and we are now ready for questions.

(OPERATOR INSTRUCTIONS).

There are no questions at this time.

There was a question that was raised by one of our shareholders through an e-mail.

Let me address that.

The first question was what percent of Q1 revenues came from sales outside of the United States?

I covered that in my presentation, saying that 58% of our sales for the quarter were to US customers, which leaves 42% of our sales to customers outside of the United States.

Second question was percent of our Q1 revenues from our top 10 customers, and I can say that that's just a little bit under 30%.

The third question was requesting some guidance on our next three quarters.

As we have indicated in the past, we do not provide guidance on future performance.

Are there any other questions?

There are no questions at this time.

I would like to thank everyone for joining us today, and we look forward to talking to you again after the next quarter.

Operator, this concludes the conference call.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.