Allient Inc (ALNT) 2008 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Allied Motion Technologies second-quarter 2008 conference call.

My name is Sylvana, and it will be my pleasure to assist you today.

At this time all participants are in a listen-only mode.

(Operator Instructions).

As a reminder, this conference is being recorded for replay purposes.

I would now like to introduce your host for today's call, Ms.

Sue Chiarmonte, Vice President and Treasurer.

You may proceed, ma'am.

Welcome to Allied Motion's conference call to discuss the quarter and six months ended June 30, 2008.

We appreciate your joining us for this call.

We distributed the press release earlier today and a copy is available on our website at www.AlliedMotion.com.

Today's call is being recorded.

It will be available for replay until August 11.

The call back number for the replay is 1-888-286-8010 and the pass code is 56217322.

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 website 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 the conference call.

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

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 and six months; Dick will then discuss the operations, I will make a brief closing statement, and we will then open up the call for questions at the end.

I would like to start by saying we had an excellent second quarter.

Last quarter, our first quarter, I reported that our revenues, profit and earnings per share were record highs since we restructured the Company in 2002.

And I am delighted to say we have raised the bar again with new record highs for the quarter ended June 30 of 2008.

We have now achieved four consecutive quarters of improved revenues and profit from the same periods of the prior years.

And some of the highlights of our achievements this quarter compared to the same quarter last year are as follows.

Net profit was up 188% over last year to just over $1 million.

Revenues were up 15% to $23.5 million.

Fully diluted earnings per share was up 160% to $0.13 per share for the quarter, which improves the trailing four quarters to $0.45 per share.

Our gross profit margin improved to 27% compared to 22% last year.

EBITDA was up $2.4 million, a 53% increase.

Our backlog is up 13% from the same time last year, and finally, our book value per share is $5.14.

So as you can see, we continue to make excellent progress in improving the growth and profitability of the Company.

Now I'm going to briefly review the detailed operating results for the second quarter and the six months ended June 30.

For the second quarter, the Company achieved net income of $1,001,000, or $0.13 per fully diluted share compared to net income of $347,000, or $0.05 per diluted share last year.

Revenues for the quarter increased 15% to $23.5 million from $20.4 million last year.

The 15% increase in revenues achieved in our second quarter of 2008 reflects a significant change in sales mix from last year.

Our 15% increase in revenues resulted from a 23% increase in sales from our aerospace and defense, medical, distribution and certain markets in our industrial and electronics market segments, such as pumps and instruments markets.

That was partially offset by an 8% downturn in recreation-related markets, such as recreation vehicles and marine markets.

The downturn in these markets reflect both the adverse effects of the economy and the continued competitive pressure of low-cost region competitors, which are primarily Chinese competitors.

56% of our sales for the quarter were to US customers with a balance of our sales to customers primarily in Europe and Canada.

Sales to US customers were down 3% for the quarter and sales to customers outside of the US were up 51%.

Of the 15% increase in sales, 5% was due to the weakness of the US dollar against the euro.

For the six months ended June 30, 2008, net income increased 81% from $1,062,000 to $1,925,000, and sales were up 10.5% from $42.4 million to $46.9 million.

Earnings per share fully diluted share were $0.26 per share this year compared to $0.15 last year and is 45% for the trailing four quarters, as I mentioned before.

Of the 10.5% increase in sales, 4.5% was due to the weakness of the US dollar against the euro.

Backlog at June 30 of 2008 was $32.3 million, up 13% from the same time last year and up 1% from the beginning of the year.

EBITDA for the first six months increased 27% to $4.7 million for this year from $3.7 million last year.

We had $682,000 of capital expenditures during the first half of 2008 compared with $828,000 last year.

As I said before, our gross profit margin for the quarter improved to 27% for both the second quarter and six months of this year compared to 22% and 23% for the second quarter and six months last year, respectively.

The margin improvement was driven by three factors.

First was from a change in sales mix, and that we achieved higher margins for most of the markets that we experienced increased sales, and we had less sales from markets where we achieved lower margins.

The second factor was from continuous improvement in efficiencies and reduction of costs.

And the third factor was from higher quantities of production from our Asian contract manufacturing facility.

Selling, general and administrative and engineering costs as a percent of sales increased to 19% for the quarter and six months this year from 17% last year.

Depreciation and amortization expense increased by $25,000 to $889,000 for the quarter and was $1,769,000 for the six months, an increase of $60,000 over the same period last year.

For the quarter and six months, interest expense was down $145,000 to $40,000, and down $304,000 to $99,000, respectively, for the same periods last year, reflecting less debt outstanding and lower borrowing costs.

The Company ended the quarter with $1,903,000 in cash, and $3.2 million in bank debt as compared to $9.7 million in bank debt outstanding last year at June 30.

Our net stockholders' equity at June 30, 2008 was $37 million or $5.14 per share.

Now I would like to ask Dick Warzala to discuss our operations.

Thank you.

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.

In our quarterly press release, I stated due to the broad diversification we have established our customer base, our current quarter results reflect Allied Motion's ability to weather short-term downturns in specific markets.

For example, housing, construction and recreational vehicles.

Our many new design wins and a strong pipeline of new applications and products continues to bode well for our future prospects.

As always, we remain committed to our strategy and our operations remain focused on supporting our customers through continuous improvements in quality, delivery, innovation and cost.

Allied Systematic Tools, or AST for short, implementation, low-cost region ramp-up, innovative new product development and our Six Sigma initiatives are the key drivers to our success.

I am also pleased to report the addition of several new employees this past quarter.

These additions will enhance our growth opportunities in the future and provide our customers with motion solutions that raise the bar.

During this call, I will take the opportunity to expand on these statements and provide you with additional insight into the activities that we feel are important as we move forward in the future.

Just like the first quarter of 2008, our broad market diversification has provided us the opportunity to grow, even though some of our markets are flat or have experienced declines.

We will continue to be cognizant of the benefits that this type of diversification provides as we continue our growth plans into the future.

I mentioned design wins and a strong pipeline of new applications and products and that they will be critical to our growth in the future.

We continue to emphasize our new product development efforts, that is, the innovation element of what we call QDIC.

We are excited about the new offerings, and a current update on some of these products follows.

First, our slotless, high-speed, brushless DC medical motors are raising the bar of performance and are meeting both ours and our customers' performance expectations and the opportunities in this space continue to increase.

Second, we have experienced some delays in the release of additional frame sizes of our extreme brushless DC motors with integrated electronics, and those are due to material tooling and sourcing issues.

We believe most of these issues are behind us now and we fully expect to have all planned frame sizes to market by the end of this year.

Last year at this time, we talked about improving the already high performance of our miniature motor/encoders used for defense applications, and we're using our achievements to open doors in additional applications that provide excellent opportunity for growth in the future.

Regarding our electronic drive and control developments, we have recently added personnel to our company that will provide us with the resources necessary to expand our capabilities and growth prospects in this area.

Our emphasis is on delivering engineered products to enhance our motor capabilities and provide our customers with application-specific solutions that optimize overall system performance.

At Allied, electronic motion control is an area that is critical to our growth expectations in the future, and we expect that the investments we're making today will pay dividends in the future.

We also have worked very closely with our customers in all of our markets to provide solutions that truly raise the bar.

We're doing so by emphasizing our ability to provide motor, gearing, feedback and electronic motion control solutions to meet the exact needs of their applications.

Our product platforms and our customization capability provides us with an important differentiating factor against our competition, and we will exploit this capability to provide us with additional design wins in the future.

While all of these new developments are exciting, I must remind you that it takes a good 12 to 18 months from product release before the results of these efforts are realized in production orders.

While our products are designed using a standard platform, most are customized to meet the exact needs of our customers, and once approved, our customers' products must then be introduced and sold in the market.

While I touch briefly on some of our new and exciting product development efforts, Allied Motion is unwavering and committed to implementing Allied Systematic Tools, or AST for short, to ensure continuous improvement in quality, delivery, cost and innovation.

Through the implementation of manufacturing cells and the utilization of other AST tools, we are continuously improving our designs, eliminating waste, reducing parts, travel distance and assembly times, improving assembly processes to eliminate the potential for error, and reducing setup times to provide improvements in our operations.

The improved utilization of our facilities and the ultimate reduction in floor space requirements provides us with the opportunity to grow our business in the future without expanding or building any new facilities.

With regards to quality systems, we continue to push forward and we're committed to practice the principles of Six Sigma.

We realize this is a journey and our efforts here will never end.

Updating you on our LCR operations, they continue to play an important role in helping meet the competitive needs of our customers.

While it is our strategy to differentiate ourselves from our competition through the utilization of our engineering resources to provide motion solutions that raise the bar, and customized optimal solutions to satisfy specific application requirements, we must also be able to defend our positions from the copycats who continue to flatter us by duplicating our designs.

In addition to providing us with the ability to compete, we view the Asian market as a growth opportunity, and are planning to expand our sales and engineering resources to directly support our customers' needs in that region.

Dick discussed this briefly, but I'll also give you a little more detail here on the markets.

For the last 12 months, our medical, aerospace and defense, electronics, industrial, and distribution markets experienced growth, while our vehicle markets were down when compared to the prior twelve-month period.

Comparing our market segment sales from year-to-date 2007 versus year-to-date 2008, our medical, aerospace and defense, distribution, electronics and industrial market segments experienced growth while our vehicle markets experienced a decline.

Further comparing the first quarter of this year 2008 to the second quarter of this year 2008, our medical, industrial and our electronics market segments experienced growth; our distribution market segment was flat; and our aerospace and defense and vehicle market segments were down.

With regard to our selling efforts, we recently held a global sales meeting and we completed the restructuring plans for our Company-wide sales organization.

We're truly excited with the addition of several experienced individuals to our sales team, and we're confident they will help lead Allied Motion to greater success in the future.

We will continue to release market specific motion solutions catalogs and in addition to our corporate overview and medical market solutions, we expect to release pump solutions, vehicle solutions in aerospace and defense solutions catalogs during 2008.

While these new catalogs are great selling tools, they're also duplicated on our new website, scheduled for launch in the third quarter of 2008.

I encourage you during the last quarter this year to look at the website as it has been transformed, just like our Company, to present Allied Motion as the leader it is in its served market segments.

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

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

As we have discussed before, our strategy for growth includes achieving organic growth as well as making complementary acquisitions.

We're now actively looking for appropriate companies to acquire, and are in preliminary discussions with a few companies.

We continue to be challenged by adverse economic conditions in certain of our markets, and by LCR competition, but we believe with the wide diversity of applications we enjoy in our markets, along with our new product introductions and our focused corporate strategy, we are in an excellent position to accomplish our long-term goals of increasing shareholder value through growth in sales and profitability.

Thank you.

And, operator, that concludes our prepared remarks, and we're now ready for questions.

(Operator Instructions).

At this time we don't have any questions.

I will pass the call over to Mr.

Richard Smith for closing remarks.

Thank you.

Well, I would like to thank you for joining us today.

If there's no questions, we will go ahead and conclude the conference, and we look forward to talking to you again after the next quarter.

Operator, I guess this concludes the conference call.

Thank you.

Thank you, ladies and gentlemen.

This concludes the presentation.

You may now disconnect.