Allient Inc (ALNT) 2014 Q4 法說會逐字稿

Hello and thank you for standing by. Welcome to the Allied Motion Technologies Inc. fourth-quarter and full-year 2014 financial results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. (Operator Instructions) At this time, I would like to turn the conference over to Sue Chiarmonte, VP and Treasurer for Allied Motion Technologies. Please go ahead.

Thank you, Lori. Welcome to Allied Motion's conference call to discuss the quarter and year ended December 31, 2014. Thank you for joining us on the call today. We distributed our press release yesterday, and copies are available on our website at AlliedMotion.com. Today's call is being broadcast live on the Internet and will be available for replay immediately after the call for 90 days. To access the Internet broadcast or replay, go to the Company's website, click on the investor relations page and then click on the webcast icon.

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

I will now turn the call over to Dick Warzala, Chairman, President and CEO of Allied Motion Technologies.

Thank you, Sue, and welcome, everyone, to our fourth-quarter 2014 conference call. Please note that this quarter provides a full year of reporting that includes the Globe Motors results in our numbers.

Here's the plan for today's call. I will begin with a highlight of the year-to-date pro forma results and will then turn the call over to Rob Maida, our CFO, who will provide you with a complete and detailed financial review of the quarter and year-to-date results. After Rob returns the call to me, I will further elaborate on our earnings announcement press release and provide you with some additional insight as to the activities and opportunities we see for the future. Once that is complete, I will then open the mic for questions. I will start with some brief comments here.

At the beginning of 2014, we advised that we would be releasing unaudited pro forma information throughout 2014 as a means of providing a comparison of revenue, net income and earnings per share, giving effect to the acquisition of Globe Motors as compared to the historical results for Allied Motion.

Accordingly, the Company's pro forma financial information for the year ended December 31, 2013, giving effect to the acquisition of Globe Motors as if it had occurred at January 31, 2013, compared to the actual results for the same period of 2014 are as follows. With regard to revenue, the pro forma 2013 results were $220.7 million, and the actual 2014 results were $249.7 million in revenues. With net income, pro forma 2013, there was $8 million of net income in 2013 on a pro forma basis and $13.9 million of net income on an actual basis in 2014.

Our diluted earnings per share pro forma 2013 was $0.88 a share, and the actual 2014 was $1.51 per share.

As a reminder, included in the pro forma information is the additional depreciation amortization resulting from the evaluation of amortizable tangible and intangible assets, interest on borrowings made by the Company, amortization of deferred finance costs incurred to issue the borrowings, removal of acquisition-related transaction costs, removal of certain costs for which Allied Motion would be indemnified by the seller, and stock compensation expense related to shares issued to certain executives of Allied Motion as a result of the acquisition.

And now I'd like to turn the call over to Rob Maida. And once Rob is completed, he will come back to me, and I will give you a little more detail on the key activities and opportunities for 2015.

Thank you, Dick. As was reflected in our press release that was put out Wednesday evening, the Company achieved net income of $4.9 million, or $0.53 per diluted share, for the fourth quarter ended December 31, 2014. This compares to net income of $1.3 million, or $0.09 per diluted share, last year.

Included in net income for the quarter is $406,000 net of tax, representing a reversal of estimated costs associated with a dispute, which was settled during the quarter. Additionally, net income for the fourth quarter reflects lower income tax expense associated with our annual review of deferred tax assets and liabilities. The impact to Q4 earnings related to these adjustments is approximately $0.13 per fully diluted share.

EBITDA increased to $9 million for the quarter from $5.1 million for the same period last year, and adjusted EBITDA, which excludes stock compensation expense as well as certain other items, increased to $9.4 million in the fourth quarter compared to $6 million last year.

Revenues for the quarter were $61.9 million compared to $50.1 million for the same quarter last year and this is an increase of 23%, with 27% of the increase due to higher sales volume offset by 4% unfavorable currency change due to the dollar strengthening against both the euro and Swedish krona.

Looking at our total sales for the quarter, 67% were to US customers compared with 63% for the same period last year, with the balance of our sales to customers primarily in Europe, Sweden and Asia. The 23% or $11.8 million increase in sales reflects higher sales in most markets served, and is a result of the 31% or $9.8 million increase in sales to our US customers and an 11% or $2 million increase in sales to customers outside of the US.

Bookings for the quarter were $56.9 million compared to $51.7 million last year, or an increase of $5.2 million resulting from increases at most of our TUs.

Backlog decreased in the quarter from $80.9 million to $75.1 million, reflecting seasonality in customers utilizing inventory at year end. Backlog remained flat compared to December 31, 2013. Our gross profit margin increased slightly from 28% to 29% this quarter compared to last year. Operating expenses were up $400,000 for the quarter compared to the same time last year, primarily due to the inclusion of Globe operating expenses for Q4 2013, which were only at 2.5 months, given the acquisition occurred on October 18, 2013.

Interest expense slightly increased for the quarter to a total of $1.5 million from $1.4 million for the same period last year and, again, reflects a full quarter's expense in 2014 versus 2.5 months last year. We had $900,000 of capital expenditures during the quarter compared with $1 million last year.

For the year ended December 31, 2014, the Company reported net income of $13.9 million, or $1.51 per diluted share, compared to net income of $4 million, or $0.45 per diluted share, last year. Revenues increased 99% to $249.7 million compared to $125.5 million last year, with sales to US customers up 130% and foreign sales up 58%. Of the total 99% increase in sales, 101% is due to an increase in sales volume offset by 2% unfavorable currency change due to the dollar strengthening again against the euro and Swedish krona.

Looking at our total sales for the year, 66% were to US customers compared with 57% for the same period last year, with the balance of our sales to customers primarily in Europe, Sweden and Asia. The 99% or $124.2 million increase in sales reflects higher sales in most markets served and is the result of 130% or $93 million increase in sales to our US customers and a 58% or $31.2 million increase in sales to customers outside of the US.

Bookings for the year were $251.5 million compared to $121.1 million for the same period last year. And gross profit margin remained relatively unchanged at 29% for the year compared to last year.

Operating expenses were up $19.8 million for the year compared to last year, primarily due to the inclusion of Globe operating expenses along with increases in the Company's incentive compensation programs partially offset by lower acquisition costs when compared to 2013. Also included in operating expenses are higher engineering costs reflecting Allied Motion's continued investment in our technical resources to create an increasing number of new opportunities which meet the needs of our customers.

For the year, depreciation and amortization expense increased $4.4 million from $2.9 million to $7.3 million, while interest expense was up $4.9 million to a total expense of $6.4 million, again, reflecting the additional expense associated with the acquisition-related debt.

For the year, we had $4 million of capital expenditures compared with $3.1 million for the same period last year.

Adjusted EBITDA increased to $33.9 million for the year compared to $13.2 million last year. Additionally, last year excluded $1.9 million of acquisition-related expenses and $234,000 in expenses related to the move of our corporate offices to Amherst, New York.

Total outstanding debt at December 31, 2014, was $74.8 million compared to $87.6 million outstanding at December 31, 2013, and our cash position increased $2.9 million for the year. Therefore, our cash and debt position improved $15.7 million from December 31, 2013. Our DSO decreased to 44 days at December 31, 2014, from 49 days at the end of 2013, and inventory turns increased to 6 turns at December 31, 2014, compared to 5.1 turns at the end of 2013; again, all representing better overall AR and inventory management.

Our net stockholders equity at December 31, 2014, was $56 million, or $6.07 per share, compared to $48 million, or $5.28 per share, last year.

And finally, our Board of Directors just declared a $0.025 per-share cash dividend that is payable March 31, for shareholders of record as of March 18.

With that, I will now turn the meeting back over to Dick Warzala.

Thank you, Rob. What I would like to do now is just follow up on the comments in the press release on March 11 and give you a little bit more detail after that. But for those of you who haven't had a chance to read it, I'll go ahead and do that now.

The year 2014 was truly transformative for Allied Motion and a year of record performance, with sales nearly doubling, net income up 251%, earnings per share up 236% and EBITDA up 219% over the prior year.

As per our plan, Globe Motors and the core allied companies concentrated on growth synergies while allowing the operations to continue functioning with limited structural changes being made during the year.

When comparing the combined actual results of Allied and Globe for the year ended December 31, 2014, to the pro forma results of Allied and Globe for the same period of 2013, our revenues increased to $249.7 million from a pro forma of $220.7 million in 2013. Net income increased to $13.9 million from a pro forma of $8 million in 2013. And our earnings per diluted share increased to $1.51 per share from a pro forma of $0.88 a share in 2013.

For the year, our served markets including vehicle, aerospace and defense, medical and industrial were up, while electronics was down.

In the fourth quarter, we began the process of aligning our combined team to begin the implementation of our long-term strategy in support of our new growth and profitability objectives.

As we move forward into the future, the long-term success of our Company will be further enhanced by executing our strategy and leveraging our full capabilities to design innovative motion solutions that change the game and meet the current and emerging needs of our customers in our served market segments.

I will expand on the PR a little bit now. My quote in the PR starts by mentioning that 2014 was truly a transformative year for Allied Motion, with record performance in all areas of our business. And I believe the numbers speak for themselves. Of course, the acquisition of Globe Motors was a major contributor to the results and has positioned Allied nicely for the future.

While I didn't specifically mention cash flow in my comments, Rob has done that. And I think it's important to reemphasize that we did reduce our outstanding debt, net of cash position, to $61.7 million at the end of 2014 from $77.5 million at the end of 2013, an improvement of $15.7 million during the year. We also continued our quarterly dividend program, paying out $963,000, or $0.10 per share, in dividends to our shareholders. We made capital expenditures of $4 million, and we made interest payments on our debt of $6 million.

Note that with regard to the data provided for market comparisons, the data reflects the actual change that occurred for the combined entity of Globe and Allied Motion in 2014 over the actual data from Allied Motion with Globe added on October 18 of 2013.

The PR further stated that in the fourth quarter we began the process of aligning our combined team to begin the implementation of our long-term strategy in support of our new growth and profitability objectives. As we move forward into the future, the long-term success of our Company will be further enhanced by executing our strategy and leveraging our full capabilities to design innovative motion solutions that change the game and meet the current and emerging needs of our customers in our served market segments.

Moving into 2015, we will continue to focus on leveraging the growth synergies as provided by the Globe acquisition, and we will concentrate on executing the critical issues as defined by our strategy. We believe our past success can in large part be attributed to our commitment to creating and executing a well-defined, long-term strategy. And while our Company has evolved over the last several years, so has our strategy.

The major critical issues that we will focus on in 2015 which were an outcome of our strategy include the following; one, creating an effective corporate structure to leverage the resources and capabilities of the combined entity and to position us for further growth in the future; second one, continued implementation of a new ERP system to provide infrastructure necessary to support the planned growth of the Company. Now we've talked in the past about our ERP system implementation, been ongoing for a couple years, and the implementation is accelerating as we go -- will be accelerating as we go through the year here and into next year.

Implementation of a new and integrated website to better meet the needs of our current business environment. I think to expand on that a little bit more, we have a task in front of us to take the Globe website and the Allied website, merge them together, and to effectively communicate to the market about Allied Motion as one team going forward. And the environment, as we've seen, is the Web is a very important tool for our customers, and we will enhance that by making the investments necessary to provide the capabilities for them.

Next one, the implementation of a structured approach to identify the requirements of our target markets and to ultimately create and implement solutions to ensure we continually meet the requirements of our target market segments. We are well on the way for a program, as we speak, to identify what our markets are really looking for and require. And I think as we move through the year here, we will start to see some good success, some additional success that is an outcome of the program and process that we are implementing.

And, through the continued enhancement and development of our operational effectiveness team, we will implement AST to drive continuous improvement in all areas of our business.

Allied Motion is an applied technologies/know-how motion Company. And to grow, we will continue to invest in the technical resources to ensure we can move forward with our mantra to create motion solutions that change the game and meet the emerging needs of our customers and our served market segments.

In support of our sales efforts, our Solution Centers are coming online nicely and are providing the support required to sell and support multi-technology solutions. We anticipate that our investment in these key resources will help drive our growth now and in the future, and we plan to continue investing in these resources during 2015.

One constant, since our first strategy in 2002 up until our most recent update is implementing Allied Systematic Tools, or AST for short, to continuously improve efficiencies and eliminate waste throughout our Company. In doing such, we constantly focus on improving quality, delivering cost and innovation. AST is critical to and helps create the path of success in all aspects of our business and in all regions of the world. While we have defined several critical issues that will enhance our long-term success, we believe that AST is one of the key elements to ensure we maximize our success in the future.

And with that, operator, I will now open the mic for questions.

(Operator Instructions) Jim Gentrup, Val Vista Capital Management.

I'm a bit new to the story. We've been holding the shares for a while now. But I just was curious as to if you could expand a little bit more on your -- from the catalyst for top-line growth. Are you taking market share here in this environment, or are your markets expanding, growing? Can you just expand a little bit more on that?

Sure. As Rob mentioned in his section of the conference call here that -- he talked about our different operations and that we are experiencing growth in most of those. So we are seeing core growth to our business as well as the growth through the acquisition.

The market has been pretty solid here in 2014 for our types of equipment, and we do expect to see modest growth into next year. With regard to -- if you are new to the story -- in past conference calls we've spent some time discussing the activities, our pipeline and new projects that we are working on and several of those are coming online.

Our products typically take 18 months to two years and sometimes longer to get designed in before we can start to see sales or revenues as related to those application efforts. And we are quite excited about the number that are currently in the pipeline and starting to convert. So I think, to answer your question, it is both; markets are fairly decent, and we do see that we are taking market share.

And the Globe acquisition, has it created cross-selling opportunities? Have you -- well, I guess that's one question I have. And then the second one would be, have you changed your sales personnel much because of the acquisition?

Okay. The first question, has it created opportunities? And the answer is yes. And the opportunities primarily that we see is the ability to leverage the technology base that we have across the Company today into the same customer base that we have been servicing, and obviously also as we go look for new customers. So it's a leveraging of what we have to improve the solutions that we can provide to customers.

And also, as we've discussed in the past, we talk about multi-technology unit solutions. We are seeing an increase there. In the past, Allied has been made up of several companies, acquisitions that were fully autonomous, mostly component companies, meaning they sell one product or one type of product. And as we went through the build-up process here and acquired companies, we were looking for complementary-type companies that we could leverage that capability and sell more of what we had to offer to existing customer base and we are seeing a definite increase there.

Your second question with regard to the sales force, there has been limited or no change to the sales team to date. I did mention that one of our critical issues is the overall organization. We will start to see, as we roll out here in 2015, some changes occurring in that area.

Okay. I'll let somebody else jump in. Thank you, guys.

John Walthausen, Walthausen & Co.

I had a couple of questions particularly about your R&D spending. I see quarter by quarter it's moving up. Is that reflecting that you are doing better in terms of design-in wins than you expected? Or what is that reflecting?

Well, we never do better than I expect. But --

Good.

Anyways -- no, we are seeing successes. And it's also reflecting that we have made some conscious decisions to invest internally on some areas -- in certain areas that we see that we can leverage technology we currently have into some new markets and to leverage more technology what we have into some of those markets, which we believe we offer a good solution. So it's investing in markets that we believe have good success -- we will have additional good success for the future. And, yes, it is continue to invest in the internal resources. Because in order to take advantage of all the technology we offer, it does take another team of people who understand those and can apply those -- make sure we are applying the right technology in the new applications, but -- and I facetiously said I'm never satisfied. Of course, no one is. But I would say I am very encouraged by the wins that we are seeing and others that we see coming on board here soon.

Great. But in terms of the opportunities for design-ins in this year compared to last year, does it look like a more promising year or equal? Or are things choking back a little bit? And I guess also, would you expect that you're going to be continuing to increase your R&D spending?

I would say to you that we have discussed the fact that it takes a good 18 months to two years when you start before you get designed in and sometimes longer, depending on programs, before you start to see the benefits of that. And as we track our pipeline very closely, what I think is more encouraging, is very encouraging, here is that we are seeing successes as it's coming to the end of the seven-stage process that we track from a win standpoint.

So I think the Solution Center, as we mentioned, trying to gain a better understanding -- I think I may have discussed this before, but if I haven't and if I have, bear with me, is that when customers come to us today, they go to a central point. And the central point is our Solution Centers in North America, Europe and Asia. And when they come into the Solution Center, these people are trained to understand the technology throughout the entire Company. So we may be able to offer multiple solutions to that customer with our product mix that we have today. And we have done that. Sometimes it's really -- a customer has to make a call. For example, we sell brush and brushless motors. I won't bore you with a lot of details here, but there are certain benefits of a brushless motor versus a brush motor. But typically, they cost a little more.

The customer -- at that point, we can offer those solutions. And the customer has to make the call from a value proposition. Are they looking for the longer life, the higher reliability of a brushless motor? Or is the life, performance requirement -- does a brush motor satisfy that?

So that's the really nice part of what bringing Allied -- where Allied is today. We have combined these complementary technologies. We provided a place for our customers to go to come up with a solution and for us to be able to support it internally. And we will see more of that as we move on in the future.

Okay. And the part of the question you didn't answer was, do you expect that we will be spending more money this year than last year on R&D?

I do not.

Okay, okay. Then the final question I had was, when I look at the sequence of the general and administrative -- you dropped down a lot in the fourth quarter. Was that a reflection of -- there had been some accruals probably for bonuses and things like that which, in the end, were not earned? Or was that a drop down in expenses, the sustainable rate?

Good. It's a question I'll give over to Rob.

Okay.

The decrease in general and administrative expenses -- one of the things that I had mentioned earlier was related to where we were actually accruing for some estimated costs in a dispute that we had. That dispute was settled in Q4. And as I had mentioned, we had reversed what we had accrued or what we basically said was a true-up to what was settled. So a large portion of what you are seeing in G&A and the drop in G&A really reflects that adjustment in accrual for the fourth quarter.

Okay. So for projections, if I use the earlier quarters as a go-forward kind of basis, that's the right number to be using?

Yes. I would say that the previous quarters are probably more reflective and indicative of the G&A expense that we would incur.

I think, just to add to that a little bit, the numbers that, as Rob talked about, the true-up that occurred in the fourth quarter -- that accrual that we made in previous quarters obviously was reflected in previous quarters, and obviously the benefit that we saw in the fourth quarter. But that's -- on a year basis, on a year-over-your basis, it's an accurate number, of course.

Good, good. Thanks.

Bill Selby, Gabelli.

Just looking at the improvement in the EBITDA margin in the fourth quarter, part of that was what you just discussed. But I'm just wondering if part of it also is the success you are having with one, or one or two, customers that's allowing you to have some very good-margin business. And if so, is that going to carry over into this year? Thank you.

Okay, Bill. If I understand your question correctly, you are asking if the EBITDA improvement is being impacted by one or two customers. And I will tell you that it's more than one or two customers, of course. And the other question was if it will carry into 2015. And the answer is yes. We don't expect -- we have -- we are not aware of any significant loss of customers or business at this point in time.

So the higher -- and the margins, I think we have discussed a little bit about as we apply more of our technology, more value that's added in, we do believe that it is driving and should drive margins higher in the future.

So we have a wide range of applications. Some are very good margins and some aren't so good margins. The overall blend is what you see. And we do want to focus on, again, adding and investing in activities that we can leverage more technology in driving higher margins.

So if I haven't answered that, Bill, please come back to me for clarification.

No; thank you, and congratulations on a great quarter.

Ben Axler, Spruce Point Capital Management.

Congratulations on a good quarter and good year. I'm very interested in your capital allocation strategy going forward. Obviously, you pay a modest dividend, and the debt has been declining. You are in the middle of driving more synergies out of Globe. So is there a possibility that the dividend could increase and/or you could look to pay down some of your higher-cost mezz debt? Thank you.

I'll let Rob speak about the mezz debt and so forth, and we can talk about capital structure a little bit more. But go ahead, Rob.

Sure. Ben, to your point, the mezz debt unfortunately is in place where we don't have the ability for a prepayment before 2016. So the higher interest that we are paying, unfortunately, we don't have the ability to pay down that debt. I think the cash flow this year would have shown that, if we had that ability to actually prepay on that debt, we probably would have. But to answer your specific question about paying down the higher-interest mezz debt, unfortunately, we are pretty well locked in the structure until 2016.

Yes, in October of 2016. It's a three-year program. So there's no advantage. We have to pay that interest. It was a three-year commitment for the interest. So we are stuck.

So assuming you continue to enjoy healthy cash flow in 2015, what would then be your priorities for that cash flow?

Well, I think what you can expect here going forward is we focused on ensuring that we -- the acquisition of Globe, that our attention was there, and that we were working on the synergies and not looking at structural changes. As we go forward on our strategy, I mentioned has set some new goals and objectives for the Company. We are going to continue our growth plan. And now, with a year under our belts and confident of the cash that we can generate with a combined entity here, I believe you will see us be aggressive in the market to continue our growth strategy both through acquisition and, as I've already discussed, the internal investments on opportunities that we feel are high value for the long term.

So to your question about a dividend, we did discuss that. We have discussed the possibility of increasing the dividend. And I think I wouldn't expect it in the short term, although cash -- if the generation becomes stronger in the future, it's certainly something that we will continue to review.

Okay. Thank you very much.

Stanley Berger, SM Berger & Company.

Can you talk about your capacity, where you are and where you could be at the end of the year? And then also what products, end products, can we see some of your motors in?

Sure. Stanley, maybe if I clarify a little bit, you are talking about production capacity?

Correct.

Okay. We have plenty of capacity. That's all I can -- I mean, I state it that way. And that's a good question. We didn't really emphasize it much here in the conference call; we have talked about it in the past. It is the beauty of the footprint we have today and the complementary aspects of the acquisition over time here. We have good, strong production facilities in Europe, in North America and in Asia. For a company our size, I think it's pretty enviable to see -- to have those types of resources, and including what we would consider lower-cost production facilities, for example, in Portugal, in Mexico and in China.

So capacity is not an issue for us. We have plenty of capacity to expand and to grow. And we have capacity in every -- in the regions that we support and target geographic regions that we support. So that's not going to hold us back.

Types of applications -- we gave you the highlights at a high level. We could talk about some of those in a little bit more detail here to give you a flavor for the Company. But we say aerospace and defense, and in aerospace and defense, we are in missile systems, we are in guidance systems, we are on security type systems. We are in vehicles of many types, and the vehicle is our largest market. And it ranges from some automotive business to all types of automated guided vehicles for material handling, for off-road equipment, agricultural equipment, for construction equipment, for recreational equipment. So vehicles in many aspects. And all areas of vehicles, whether it's emissions control or whether it's steering or whether it's driving and many other motors that, as you know, are used in all kinds of vehicles today. There's a motor for everything. And we see the electrification in the vehicle market continuing.

In terms of medical, we are into many areas in the medical market, and just touch on a few here. We talk about robotics, whether it's prosthetics -- we are one of the leaders in that area -- or surgical robots or the surgical hand tools that are used in the surgical process itself, instrumentation, metering the applications. So it's medical, and diagnostic equipment is pretty far ranging and across the board.

Industrial applications -- again, it's how we classify that. So if you are in a construction business and you have construction tools, and I will talk about not the residential type but commercial construction tools, heavy-duty -- we are in that. We are in those markets.

So we are pretty well diversified, as you can tell. And I just touched on the surface of some of the applications. And that's what we like about the makeup of our Company right now: it is fairly well diversified. And as we look at these markets, we're in some pretty exciting ones in terms of leading-edge technology, certainly in the medical area and some of the aerospace and defense areas and then also in the bread-and-butter applications in the industrial markets. I hope that helps.

It does. Thank you.

I hope it helps. If you go to our website, there's -- I think you can see more details on those. If you just click on a market that you might be interested in, it will give you a representative sample of types of applications that we are involved in.

Thank you.

Jim Gentrup, Val Vista Capital Management.

Just back on the margins issue for a minute, as your capacity does get better globally, would you expect to have your gross margins increase?

Yes.

Okay. And then just speaking on below the line, then, on your operating expenses, is there continued leverage there as well? Because your synergies or your -- I think you talked about some efficiencies. Does that translate into more leverage there as well?

Yes.

Okay. All right. And then just on the bookings question; was foreign exchange an impact on bookings this quarter? Because that's about the only negative I can see out of your report today.

Jim, there is some impact, obviously, to the strengthening dollar included in both bookings; in sales and in bookings, yes. I think that that's an area of concern on a go-forward basis is if the euro and the Swedish krona continue to devalue, I think that that is a point of concern on a go-forward basis and could be a drag on earnings in the future. So we have got to watch that closely.

Now, that would impact your revenue that's denominated, obviously, in foreign currency. But does it also help you on the expense side because of the similar amount of expenses?

Yes. I think from a standpoint of impact on bottom line, I think we still feel pretty positive that that offset between being able to purchase or being able to sell in US dollars, denominated dollars, and purchase in denominated dollars -- that pretty much offsets. And we feel that we are pretty well hedged there. But certainly on the revenue line, as you pointed out, there could be some issue there.

Okay. And then just the CapEx question, the run rate is around $3.6 million. I think that's probably due to the ERP implementation. When you say it's going to accelerate, do we expect that $3.6 million number, then, to accelerate as well? Or is that a pretty good run rate?

No, I think that's a pretty good run rate, Jim, to answer your question. I don't expect that there would be more acceleration of expense there.

Okay. And then last question I have is just the Globe acquisition. Getting back to the category of design competencies, what did they give you that you didn't have? I don't want to, I guess -- I don't want to get -- there's probably a long answer to that, but the short version is fine, I just was curious what that added to your -- on the design side for you, so thanks.

Well, quickly, a couple things. And I think what I'll do is say, from a design side standpoint Globe has full capabilities for motors and electronics and systems solutions. And they were working on and providing solutions into the market. So across the board, they had a capability to design and engineer products that offered solutions, which is what we like.

But secondly, not so much on the design side but on the production side -- and we've talked about this in the past that Globe's commitment to producing zero-defect products is rubbing off within the rest of Allied. And they have had great successes on some of their production lines for delivering zero-defect products for many, many years. I think that, just as importantly, is one of the areas that we looked at and were very excited about as Globe came on board.

Good answer. Thanks, guys.

(Operator Instructions) Michael McCroskey, Princor Securities.

Help me out on a couple of things. You may have touched on this, but I didn't hear it before. The provision for income tax on this quarter is significantly lower on a percentage basis than I think on an ongoing basis. What's going on there?

Yes. I mentioned earlier, Michael, that the Company had lower income tax or effective income tax rate. And that's basically due to us going through an annual evaluation, if you will, an evaluation at year end on the deferred assets and deferred liabilities.

To be more specific, the Company annually assesses the amount of benefit that would be realized on a more-likely-than-not basis. An evaluation allowance is established for NOLs, if you will, an amount is forecasted, or a valuation allowance is established for the amount forecasted to expire unutilized.

During the year -- at year end, when we went through our evaluation, the amount, if you will, of forecasted benefit and, I'll say, the utilization of the NOLs was increased, resulting in a reduction in the valuation allowance. And that, hence, has an impact or a result of reducing the effective tax rate. So that's what's really going on in Q4. And, as I outlined earlier, the impact of a couple of adjustments, but just on the tax side the impact to Q4 is roughly $0.09 per share.

Okay. And on the --

And Michael, I just want to make sure that I state this. I wouldn't expect that that effective tax rate is going to be that low on a go-forward basis. It's just really adjusting -- it's really just adjusting for the forecast and the utilization that we looked at at the year end. So I wouldn't expect it. But on an annual basis I think that we will be more in line with what we've traditionally seen as our tax rate.

And that's generally around 29%, 30%, isn't it?

Correct.

To flesh out a little bit on the sales side. We are comparing to that quarter where we were short of 17 days, where we added Globe in, coming in on the 18th. But just to make sure on the broad strokes, from what I'm hearing and for the folks that aren't -- you all are still getting a little bit used to the seasonality. I think that question has come up in past quarters as to what to expect, balancing between these quarters. But with the changes you all made a little over a year back -- I know it's smoothing out. But if I'm hearing you correctly, the numbers that you are seeing, the wins, all of that -- all of this seems to be dropping into place. Even though we are looking at quarter-to-quarter sequential change, all of this seems to be in line. Is that -- that's a little broad. But am I in the ballpark on this?

Yes, you are.

Okay. And last question is on the debt reduction. Obviously, those are some good numbers coming down. We can't touch the mezzanine financing. But does that represent an acceleration of what the initial expectations were? Or are we just in line with the original amortization schedules?

No; we are in line with the original amortization schedules, Michael.

Okay, excellent. That's it. Great quarter. Thanks, guys, once again.

There are no further questions at this time. I will now hand the call back over to Dick Warzala for closing comments.

Thank you, Lori. Thank you, everyone, for a very active conference call and some excellent questions here. There were a few that were emailed in; I believe they have been answered during the call. One question that was emailed in, I'll let Rob answer that real quickly. It was regard to stock compensation expense and pension.

Yes, there was a question that came in as to how much was the stock compensation expense for the year and what the net liability is on the pension plan. And to answer that question, stock compensation expense for the year was about $1.5 million. And the net liability, the difference between our plan assets and projected benefit obligation of our defined benefit plan -- there is a net liability of about $1.8 million on that.

Okay. And that is the -- all the other questions have been answered.

Pardon me, gentlemen. We do have a follow-up question on the phone line. It comes from Michael McCroskey again, of Princor Securities.

Real quick, gentlemen. Has there been any discussion as far as stock split or dividend to try to increase the liquidity out there on the stock that's available on our float?

There has been discussion. No decision has been reached. And it's all really a part of the overall capitalization program and the growth program for the future. But there has been discussion. And, as I say, no definitive answer has come up with that yet on that.

Okay. With that, we will -- unless there's any other questions that somebody wants to pop in really quick here, I will give it a second. And the second is over. Thank all of you for participating. And hopefully we will have you all back here very shortly, in May, for our first-quarter 2015 conference call. Thanks again.

This concludes today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.