What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-03-10 compared with 2020-03-11 · 16 added, 572 removed, 43 unchanged (93% of the section changed)

Market for Registrant’s

Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Allied Motion’s common stock is listed on the Nasdaq Global

Market System and trades under the symbol AMOT.

The number of holders of record as reported by the Company’s transfer agent

of the Company’s common stock as of the close of business on March 11, 2020 was 237.

During 2019 and 2018, we declared regular quarterly cash dividends

on our common stock.

We paid $0.03 per quarter in 2019.

We paid $0.025 for the first quarter of 2018 and $0.03 per quarter for

the second, third and fourth quarters of 2018.

While it is our current intention to pay regular quarterly cash dividends, any decision

to pay future cash dividends will be made by our Board and will depend on our earnings, financial condition and other factors.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Allied Motion’s common stock is listed on the Nasdaq Global Market System and trades under the symbol AMOT.

The number of holders of record as reported by the Company’s transfer agent of the Company’s common stock as of the close of business on March 10, 2021 was 221.

During 2020 and 2019, we declared regular quarterly cash dividends on our common stock.

We paid $0.03 per quarter in 2020 and 2019.

While it is our current intention to pay regular quarterly cash dividends, any decision to pay future cash dividends will be made by our Board and will depend on our earnings, financial condition and other factors.

Performance Graph

The following performance

graph and tables reflect the five year change in the Company's cumulative total stockholder return on Common Stock as compared

with the cumulative total return of the NASDAQ Stock Market Index and the NASDAQ Electrical and Industrial Apparatus Index for

a $100 investment made on December 31, 2014, including reinvestment of any dividends.

The following performance graph and tables reflect the five year change in the Company’s cumulative total stockholder return on Common Stock as compared with the cumulative total return of the NASDAQ Stock Market Index and the S&P Electrical Components and Equipment Index for a $100 investment made on December 31, 2015, including reinvestment of any dividends.

Allied Motion Technologies

2 unchanged sentences

Issuer Purchases of Equity Securities

Total Number of Shares

Maximum Number of Shares

Number of Shares

Average Price Paid

Total Number of Shares

Purchased as Part of Publicly

Announced Plans or Programs

Maximum Number

that May Yet Be Purchased

Purchased (1)

Announced Plans or Programs

Under the Plans or Programs

2 unchanged sentences

12/01/20 to 12/31/20

As permitted under the Company’s equity compensation plan, these shares were withheld by the Company to satisfy tax withholding obligations for employees in connection with the vesting of stock.

(1) As permitted under the Company’s equity compensation plan, these shares were withheld by the Company to satisfy tax withholding obligations for employees in connection with the vesting of stock.

Shares withheld for tax withholding obligations do not affect the total number of shares available for repurchase under any approved common stock repurchase plan.

8 unchanged sentences

Working capital

Total assets (4)

Short-term debt

13 unchanged sentences

Net debt to capitalization (6)

(1) Includes the effect of the Dynamic Controls acquisition in the first quarter of 2020.

(2) Includes the effect of the Maval OE Steering and TCI acquisitions in the first and fourth quarters of 2018, respectively.

(3) Includes the effect of the Heidrive acquisition in the first quarter of 2016.

(4) Beginning in fiscal 2019, the Company recorded a $20,717 right-of-use lease asset in adopting ASU No.

2016-02, Leases (Topic 842) .

(5) Backlog is defined as confirmed orders for which the customer has provided a release and delivery date.

1 unchanged sentence

Capitalization is the sum of net debt and shareholders’ equity .

Management’s Discussion and Analysis

of Financial Condition and Results of Operations.

Amounts presented in Item 7 are in thousands, except per

We are a global company that designs, manufactures and sells

precision and specialty controlled motion components and systems used in a broad range of industries.

Our target markets include

Vehicle, Medical, Aerospace & Defense, and Industrial.

We are headquartered in Amherst, NY, and have operations in the

United States, Canada, Mexico, Europe and Asia.

We are known worldwide for our expertise in electro-magnetic, mechanical and electronic

motion technology.

We sell component and integrated controlled motion solutions to end customers and OEMs through our own direct

sales force and authorized manufacturers’

representatives and distributors.

Our products include brush and brushless DC motors,

brushless servo and torque motors, coreless DC motors, integrated brushless motor-drives, gearmotors, gearing, modular digital

servo drives, motion controllers, incremental and absolute optical encoders, active and passive filters for power quality and harmonic

issues, and other controlled motion-related products.

Financial Overview

Highlights for our fiscal year ended December 31, 2019,

Revenue was $371,084 for 2019 compared with $310,611 in 2018.

Growth was evident in all of our served markets.

Sales to U.S.

customers were 57% of total sales for 2019 and 53% of total sales for 2018, with the balance of sales to customers primarily in

Europe, Canada and Asia.

Gross profit was $112,584 for 2019, a 23% increase from $91,403 in 2018.

As a percentage of revenue, gross margin increased

90 basis points to 30.3% primarily due to a significant increase in revenues along with the leveraging of fixed costs.

Operating income was $29,443, or 8% of revenue, for 2019 compared with $23,229, or 7% of revenue, for 2018.

Net income was $17,022, or $1.80 per diluted share, compared with $15,925, or $1.70 per diluted share, for 2018.

Bookings were $366,103 for 2019 compared with $336,930 for 2018, an increase of 9%.

Backlog as of December 31, 2019

was $124,950, a decrease of 5% from $131,997 at year end 2018.

Debt of $109,765, net of cash of $13,416, decreased by $17,494 to $96,349 at December 31, 2019 from debt of $122,516,

net of cash of $8,673 of $113,843 at December 31, 2018.

We declared and paid a dividend of $0.03 per share for each quarter of 2019 pursuant to our quarterly dividend program.

to shareholders for 2019 and 2018 were $0.12 and $0.115 per diluted share, respectively.

The dividend payout ratio was 7% for both

2019 and 2018, when compared with the diluted earnings per share of $1.80 and $1.70, respectively.

The Company’s 2019 sales were 19% higher than in the prior

Our market position in all of our served markets continued to grow organically as well as through the addition of TCI

to our Company portfolio.

Net income was 7% higher in 2019 compared to 2018, and earnings

per diluted share increased by 6%.

These increases reflect increased sales and gross margin growth, both organically and

from acquisitions, along with a continued focus on cost control.

We remain focused on executing our strategy for growth while

streamlining the organization and emphasizing continuous improvement in quality, delivery, cost and innovation as we drive the

One Allied approach and expand our value proposition for our customers.

Solid strides continue to be made with our multi-product,

fully integrated solutions that are leading to increased business.

Also, we continue to build a pipeline of exciting market-based

application opportunities.

Sales cycles are long and the time from being selected for the solution development to full rate

production can be longer, yet we believe we continue to build a scalable foundation which can deliver strong returns on those

Our growth strategy is focused on becoming the controlled motion

solution leader in our selected target markets by further developing our products and services platform to utilize multiple Allied

Motion technologies to create increased value solutions for our customers.

Our strategy further defines Allied Motion as

being a “technology/know-how”

driven company and to be successful, we continue to invest in our areas of excellence.

We have set growth targets for our Company and we will align

and focus our resources to meet those targets.

First and foremost, we invest in our people as we believe that attracting

and retaining the right people is the most important element in our strategy.

We will continue to invest in applied and design

engineering resources.

Our strategic focus is addressing the critical issues that we

believe are necessary to meet the stated long-term goals and objectives of the Company.

The majority of the critical issues

are focused on growth initiatives for the Company.

One of these growth initiatives includes product line platform

development to meet the emerging needs of our selected target markets.

Our platform development emphasizes a combination

of our technologies to create increased value solutions for our customers.

The emphasis with new opportunities has evolved

from being an individual component provider to becoming a solutions provider whereby the new opportunities utilize multiple Allied

Motion technologies in a system solution approach.

We believe this approach will allow us to provide increased value to our

customers and improved margins for our Company.

Our strong financial condition, along with AST continuous improvement initiatives

in quality, delivery, and cost allow us to have a positive outlook for the continued long-term growth of our Company.

Outlook for 2020

In 2020, we will continue to focus on leveraging our resources

to expand our business in our served markets.

In addition, we will continue to execute the ongoing critical issues

as defined by our updated strategy, developed in 2017.

The critical issues from that strategy include:

1) Execute acquisition strategy to consolidate a fragmented market.

2) Pursue target (niche) markets where we can gain a leadership market position.

3) Develop leading edge products to meet the emerging needs of our target markets.

4) Utilize lean tools to enhance company performance.

5) Execute our long term strategy and set aggressive growth

and profitability goals to measure our success.

Allied Motion is an applied technology/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 controlled motion solutions that change the game ”

and to meet the emerging needs of our customers

in our served market segments.

In support of our sales efforts, we have three Solution Centers (United States, Europe

and Asia) that are providing the support required to sell multi-technology solutions.

We have announced a number of

multi-product controlled motion solution wins that will continue ramping up during 2020 and have a very active pipeline of

new opportunities where our integrated solution capability has provided us with a competitive advantage.

We anticipate

that our investment in these key resources will continue to drive our growth now and in the future.

We expect this

shift from a component supplier to a more complete solutions provider, along with the application of AST, to drive cost

Our global production footprint provides us with the opportunity

to be a value added supplier for global companies who require support around the world.

We will continue to evaluate and

find areas to leverage our current manufacturing and sales footprint to drive sales and improve efficiencies.

Critical Accounting Estimates

Management’s discussion and analysis of financial condition

and results of operations are based upon our consolidated financial statements which have been prepared in accordance with Generally

Accepted Accounting Principles (“GAAP”).

We make estimates and assumptions in the preparation of our consolidated financial

statements that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosures of contingent

assets and liabilities.

We base our estimates and judgments upon historical experience and other factors that are believed to be

reasonable under the circumstances.

Changes in estimates or assumptions could result in a material adjustment to the consolidated

financial statements.

We have identified several critical accounting estimates.

accounting estimate is considered critical if both:

(a) the nature of the estimates or assumptions is material due to the

levels of subjectivity and judgment involved, and (b) the impact of changes in the estimates and assumptions would have a

material effect on the consolidated financial statements.

This listing is not a comprehensive list of all of our accounting policies.

For further information regarding the application of these and other accounting policies, See Note 1, Business and Summary of

Significant Accounting Policies of the notes to consolidated financial statements contained in Item 8 of this report for additional

The Company’s critical accounting estimates include :

Revenue Recognition

The Company considers control of most products to transfer at

a single point in time when control is transferred to the customer, generally when the products are shipped in accordance with

an agreement and/or purchase order.

Control is defined as the ability to direct the use of and obtain substantially all of the

remaining benefits of the product.

The Company satisfies its performance obligations under a contract with a customer by transferring

goods and services generally in exchange for monetary consideration from the customer.

The Company considers the customer’s

purchase order, and the Company’s corresponding sales order acknowledgment as the contract with the customer.

In the normal

course of business, the Company does not accept product returns unless the item is defective as manufactured.

The Company establishes

provisions for estimated returns and warranties.

All contracts include a standard warranty clause to guarantee that the product

complies with agreed specifications.

At December 31, 2019 and 2018, the accrual for future warranty

obligations was $1,075 and $971, respectively.

The Company’s expense (income) for warranty obligations was $210 in 2019,

($13) in 2018, and $234 in 2017, respectively.

The length of the warranty period for the Company’s products is generally

three months to two years and varies significantly based on the product sold.

The Company calculates its warranty expense provision

based on its historical warranty experience and adjustments are made periodically to reflect actual warranty expenses.

future sales returns and allowances are higher than the Company’s historical experience, additional accruals may be required.

Inventories are measured on a first-in, first-out basis at the

lower of cost or net realizable value.

Net realizable value is the estimated selling prices in the ordinary course of business,

less reasonably predictable costs of completion, disposal, and transportation.

Inventory costing requires complex calculations

that include assumptions for overhead absorption, scrap, sample calculations, manufacturing yield estimates, costs to sell, and

the determination of which costs may be capitalized.

The valuation of inventory requires us to estimate obsolete or excess inventory,

as well as inventory that is not of saleable quality.

Historically, our inventory adjustment has been adequate to

cover our losses.

However, variations in methods or assumptions could have a material impact on our results.

If our demand forecast

for specific products is greater than actual demand and we fail to reduce manufacturing output accordingly, we could be required

to record additional inventory write-down or expense a greater amount of overhead costs, which would negatively impact our net

As of December 31, 2019, we have $53,385 of inventory recorded on our consolidated balance sheet, representing approximately

17% of total assets.

A 1% write-down of our inventory would decrease our 2019 net income by approximately $381, or $0.04 per diluted

Valuation of Goodwill and Other Long-Lived Assets

We make assumptions in establishing the carrying value, fair

value and, if applicable, the estimated lives of our goodwill, intangible and other long-lived assets.

Goodwill and intangible

assets determined to have an indefinite useful life are not amortized.

Instead, these assets are evaluated for impairment on an

annual basis and whenever events or business conditions change that could indicate that the asset is impaired.

Long-lived assets

are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group)

may not be recoverable.

Evaluation of goodwill for impairment

We test the reporting unit’s goodwill for impairment as

of October 31 st of each fiscal year and between annual tests if an event occurs or circumstances change that would

more-likely-than-not reduce the fair value of the reporting unit below its carrying value.

In conducting this annual impairment

testing, we may first perform a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair

value is less than its carrying value.

If not, no further goodwill impairment testing is required.

If it is more-likely-than-not

that the reporting unit’s fair value is less than its carrying value, or if we elect not to perform a qualitative assessment

of a reporting unit, a quantitative analysis is performed, in which the fair value of the reporting unit is compared to its net

If the net book value of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the excess,

limited to the amount of goodwill allocated to that reporting unit.

We performed a qualitative assessment of our single reporting

unit as of October 31, 2019.

As part of this analysis, we evaluated factors including, but not limited to, our market capitalization

and stock price performance, macro-economic conditions, market and industry conditions, cost factors, the competitive environment,

and the operational stability and overall financial performance of our reporting unit.

The assessment indicated that it was more

likely than not that the fair value of our reporting unit exceeded its respective carrying value.

Additionally, other positive

indicators considered since the last quantitative assessment were the achievement of substantially higher revenue during 2019,

along with continued expected growth during 2020.

As a result, we concluded that it was more-likely-than-not that the fair value

of the reporting unit exceeded its carrying value, and as such, a quantitative assessment was not required.

We do not believe that our reporting unit is at risk for impairment.

However, changes to the factors considered above could affect the estimated fair value of our reporting unit and could result in

a goodwill impairment charge in a future period.

We may be unaware of one or more significant factors that, if we had been aware

of, would cause our conclusion to change, which could result in a goodwill impairment charge in a future period.

As of December 31,

2019, we have $52,935 of goodwill recorded on our consolidated balance sheet, representing approximately 17% of total assets.

1% write-down of our goodwill would decrease our 2019 net income approximately $378, or $0.04 per diluted share.

Stock-based Compensation

Compensation expense for time-based restricted stock units are

measured at the grant date and recognized ratably over the vesting period.

We determine the fair value of time-based and performance-based

restricted stock units based on the closing market price of our common stock on the grant date.

The recognition of compensation

expense associated with performance-based restricted stock units requires judgment in assessing the probability of meeting the

performance goals, as well as defined criteria for assessing achievement of the performance-related goals.

For purposes of measuring

compensation expense, the number of shares ultimately expected to vest is estimated at each reporting date based on management’s

expectations regarding the relevant performance criteria.

The performance shares begin vesting only upon the achievement of the

performance criteria.

The achievement of the performance goals can impact the valuation and associated expense of the restricted

The assumptions used in accounting for the share-based payment

awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management

As a result, if circumstances change and we use different assumptions, our stock-based compensation expense could

be materially different in the future.

Impact of Recently Issued Accounting Pronouncements

In the normal course of business, we evaluate all new accounting

pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”),

Emerging Issues Task Force (“EITF”) or other authoritative accounting bodies to determine the potential impact they

may have on our Consolidated Financial Statements.

See Note 1, Business and Summary of Significant Accounting Policies

of the notes to consolidated financial statements contained in Item 8 of this report for additional information about these recently

issued accounting standards and their potential impact on our financial condition or results of operations.

Operating Results

The following discussion is a comparison between fiscal year

2019 and fiscal year 2018 results.

For a discussion of our results of operations for the year ended December 31, 2018 compared

to the year ended December 31, 2017, please refer to Item 7 of Part II, “Management’s Discussion and Analysis

of Financial Condition and Results of Operations”

in our Annual Report on Form 10-K for the fiscal year ended December 31,

2018, which was filed with the SEC on March 13, 2019.

Year 2019 compared to 2018

For the year ended

(Dollars in thousands, except per share data)

Cost of goods sold

Gross margin percentage

Operating costs and expenses:

General and administrative

Engineering and development

Business development

Amortization of intangible assets

Total operating costs and expenses

Operating income

Interest expense

Other (income) expense, net

Total other expense, net

Income before income taxes

Provision for income taxes

Effective tax rate

Diluted earnings per share

During 2019, we experienced growth in all of our served

Organic growth accounted for 9% of the 19% increase in sales in 2019 with the remainder due to acquisitions.

for 2019 were comprised of 57% to US customers and 43% to customers primarily in Europe, Canada and Asia.

The overall increase

in revenue was primarily due to increased volume.

The increase in revenue was 22% when excluding foreign currency impacts from

both 2019 and 2018.

See information included in “Non –

GAAP Measures”

below for a discussion of the non-GAAP

measure and reconciliation of revenue to revenue excluding foreign currency impacts.

ORDER BACKLOG:

The increase in orders in

2019 compared to 2018 is due to significant organic growth across all of the major markets served by the company, further enhanced

by the TCI acquisition.

The reduction in backlog is largely due to the timing of certain longer-term orders being placed in Q4

2018 not occurring in 2019 due to the term of those orders.

GROSS PROFIT AND GROSS MARGIN:

The 23% increase in gross profit

was largely due to increased volume attributable to growth in our served markets.

The 90 basis point improvement in gross margin

was due to the leveraging of fixed manufacturing costs along with beneficial product mix and improved operating efficiencies.

SELLING EXPENSES:

Selling expenses increased in 2019 compared

to 2018 primarily due to increased investment in and focused growth of the One Allied Sales Organization including the addition

of the TCI sales organization.

Selling expenses as a percentage of revenues were 4% for 2019 and 4% for 2018.

We anticipate

that the higher level of selling expenses as a percentage of revenues will continue in the future.

GENERAL AND ADMINISTRATIVE EXPENSES:

General and administrative

expenses increased in 2019 from 2018 largely due to higher incentive compensation resulting from strong financial performance,

as well as the TCI acquisition.

As a percentage of revenues, general and administrative expenses were 10% for 2019 and 2018.

ENGINEERING AND DEVELOPMENT EXPENSES:

Engineering and development

expenses increased by 16% in 2019 compared to 2018.

The increase is primarily due to the continued ramp up of development

projects to meet the future needs of target markets, particularly at our European locations, the addition of TCI, as well as supporting

growing customer application development needs.

As a percentage of revenues, engineering and development expenses were 6%

for 2019 and 2018.

BUSINESS DEVELOPMENT COSTS:

The Company incurred $113 of business

development costs during 2019 related potential new business opportunities.

The Company incurred $762 of business development costs

during 2018 related to the acquisitions of Maval OE Steering and TCI.

INTEREST EXPENSE:

Interest expense increased by 90% in 2019

compared to 2018 due to the increased borrowings in 2018 related to the acquisition of TCI.

AMORTIZATION OF INTANGIBLE ASSETS:

Amortization of intangible

assets increased 56% in 2019 compared to 2018, from $3,655 to $5,718 related to the increased intangible assets from the TCI acquisition.

INCOME TAXES:

The effective income tax rate as a percentage

of income before income taxes was 28.6% and 23.0% for the year ended December 31, 2019 and 2018, respectively.

year ended December 31, 2019, the effective tax rate includes a discrete tax provision of 1.8% related to settlement of a

tax audit in a foreign jurisdiction.

For the year ended December 31, 2019 and 2018, the effective rate is net of a discrete

tax benefit of (0.1%) and (2.3%), respectively, related primarily to the recognition of excess tax benefits for share-based payment

The effective rate before discrete items varies from the statutory

rate primarily due to differences in state taxes, the impact of international tax provisions in the US, the difference in US and

foreign tax rates and the mix of foreign and domestic income.

Refer to Note 9 of the Notes to Consolidated Financial

Statements for a reconciliation of statutory rates to tax provision rates.

NET INCOME AND ADJUSTED NET INCOME:

Net income increased during

2019 reflecting a significant increase in revenues and improved operating performance, offset by higher interest expense and income

Adjusted net income for the years ended December 31, 2019,

and 2018 were $17,920 and $16,276, respectively.

Adjusted diluted earnings per share for 2019 and 2018 were $1.89 and $1.74, respectively.

Adjusted net income and adjusted diluted earnings per share are non-GAAP measures.

Adjusted net income for 2019 excludes the third

quarter 2019 non-income based tax assessment of $384 and the income tax charge of $433 related to a tax assessment in a foreign

jurisdiction.

Adjusted net income for 2019 excludes $113 ($81 net of tax) and for 2018 excludes $762 ($586 net of tax) of business

development costs.

Adjusted net income for 2018 also excludes $235 of tax benefit resulting from the Tax Cuts and Jobs Act.

information included in “Non –

GAAP Measures”

below for a discussion of the non-GAAP measure and reconciliation

of net income to Adjusted net income and earnings per share to Adjusted earnings per share.

EBITDA AND ADJUSTED EBITDA:

EBITDA was $43,832 for 2019 compared

to $34,958 for 2018.

Adjusted EBITDA was $47,532 and $38,363 for 2019 and 2018, respectively.

EBITDA and adjusted EBITDA are non-GAAP

EBITDA consists of income before interest expense, provision for income taxes, and depreciation and amortization.

EBITDA also excludes stock compensation expense and certain other items.

Refer to information included in “Non - GAAP Measures”

below for a discussion of the non-GAAP measure and a reconciliation of net income to EBITDA and Adjusted EBITDA.

Non-GAAP Measures

Revenue excluding foreign currency exchange impacts, EBITDA

and Adjusted EBITDA are provided for information purposes only and are not measures of financial performance under GAAP.

Management believes the presentation of these financial measures

reflecting non-GAAP adjustments provides important supplemental information in evaluating the operating results of the Company

as distinct from results that include items that are not indicative of ongoing operating results;

in particular, those charges

and credits that are not directly related to operating unit performance, and that are not a helpful measure of the performance

of our underlying business particularly in light of their unpredictable nature.

These non-GAAP disclosure have limitations as analytical

tools, should not be viewed as a substitute for revenue and net income determined in accordance with GAAP, and should not be considered

in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor is it necessarily comparable

to non-GAAP performance measures that may be presented by other companies.

In addition, supplemental presentation should not be

construed as an inference that the Company’s future results will be unaffected by similar adjustments to net income determined

in accordance with GAAP.

The Company believes that revenue excluding foreign currency

exchange impacts is a useful measure in analyzing organic sales results.

The Company excludes the effect of currency translation

from revenue for this measure because currency translation is not under management’s control, is subject to volatility and

can obscure underlying business trends.

The portion of revenue attributable to currency translation is calculated as the difference

between the current period revenue and the current period revenue after applying foreign exchange rates from the prior period.

The Company believes EBITDA is often a useful measure of the

Company’s operating performance and is a significant basis used by the Company’s management to measure the operating

performance of the Company’s business because EBITDA excludes charges for depreciation, amortization and interest expense

that have resulted from our debt financings, as well as our provision for income tax expense.

EBITDA is frequently used as one

of the bases for comparing businesses in the Company’s industry.

The Company also believes that Adjusted EBITDA provides helpful

information about the operating performance of its business.

Adjusted EBITDA excludes stock compensation expense, as well as certain

income or expenses which are not indicative of the ongoing performance of the Company.

EBITDA and Adjusted EBITDA do not represent

and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any

other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting

The Company’s calculation of revenues excluding foreign

currency exchange impacts for 2019 and 2018 is as follows:

For the year ended December 31,

Revenue as reported

Currency impact

Revenue excluding foreign currency exchange impacts

The Company’s calculation of EBITDA and Adjusted EBITDA

for 2019 and 2018 is as follows:

For the year ended

Net income as reported

Interest expense

Provision for income tax

Depreciation and amortization

Stock compensation expense

Business development costs

Non-income based tax assessment

Adjusted EBITDA

Allied Motion’s management uses Adjusted net income and

Adjusted diluted earnings per share to assess the Company’s consolidated financial and operating performance.

income and Adjusted diluted earnings per share are provided for informational purposes only and are not a measure of financial

performance under generally accepted accounting principles.

These measures help management make decisions that are expected to

facilitate meeting current financial goals as well as achieve optimal financial performance.

Adjusted net income provides management

with a measure of financial performance of the Company based on operational factors as it removes the impact of certain non-routine

items from the Company’s operating results.

Adjusted diluted earnings per share provides management with an indication of

how Adjusted net income would be reflected on a per share basis for comparison to the GAAP diluted earnings per share measure.

Adjusted net income is a key metric used by senior management and the Company’s board of directors to review the consolidated

financial performance of the business.

This measure adjusts net income determined in accordance with GAAP to reflect changes in

financial results associated with the highlighted charges and income items.

The Company’s calculation of Adjusted net income and Adjusted

diluted earnings per share for years ended December 31, 2019 and 2018 is as follows:

For the year ended

Net income as reported

Non-GAAP adjustments, net of tax

Non-income based tax assessment

Income tax provision charge

Impact of the Tax Cuts and Jobs Act

Business development costs

Non-GAAP adjusted net income

Liquidity and Capital Resources

The Company’s liquidity position as measured by cash and

cash equivalents increased by $4,743 to a balance of $13,416 at December 31, 2019 from 2018.

Year Ended December 31,

Net cash provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Effect of foreign exchange rates on cash

Net increase (decrease) in cash and cash equivalents

During 2019, the increase in cash provided by operating activities

is primarily due to increased net income and improved working capital, primarily due to effective inventory management.

During 2018, the decrease in cash provided by operating activities

is primarily due to an increase in working capital needs to support growth in a period of tightened supply chain, primarily for

trade receivables and inventories.

The cash used for investing activities in 2019 reflects normal

purchases of property, plant, and equipment for the Company.

The cash used for investing activities in 2018 reflects the

acquisition of Maval OE Steering during the first quarter and TCI during the fourth quarter.

The cash paid for these acquisitions

was $77,413 net of cash acquired.

The cash used in financing activities during 2019 represents

mostly the paydown of long-term debt, with a small portion being attributed to dividends paid to stockholders.

The significant cash provided from financing activities during

2018 reflects the borrowings on our Revolving Facility (refer to Note 7 of the Notes to Consolidated Financial Statements for

definition and terms) for the two acquisitions completed during the year.

During the year ended December 31, 2019, the Company paid

dividends of $0.12 per share.

The Company’s working capital, capital expenditure and dividend requirements are expected

to be funded from cash provided by operations and amounts available under the Amended Credit Agreement (refer to Note 7 of the

Notes to Consolidated Financial Statements for definition and terms).

Contractual Obligations

The following table summarizes contractual obligations and borrowings

as of December 31, 2019 and the timing and effect that such commitments are expected to have on our liquidity and capital

requirements in future periods.

We expect to fund other commitments primarily with operating cash flows generated in the normal

course of business.

At December 31, 2019, our long-term contractual obligations were limited to debt and leases.

On February 12, 2020, the Company entered into a First

Amended and Restated Credit Agreement (the “Amended Credit Agreement”) for a $225 million revolving credit facility

(the “Amended Revolving Facility”).

Refer to Note 14 of the Notes to Consolidated Financial Statements for a

description of the Amended Credit Agreement and the Amended Revolving Facility.

Amounts below represent debt and interest payments

due based on the Amended Credit Facility as if it were in effect at December 31, 2019.

The Amended Credit Agreement term is

to February 2025.

The Prior credit agreement termination date was October 27, 2021.

Payments Due by Period

Operating leases

Debt Obligations (1)

Interest on Debt (2)

Amounts represent our debt obligations (net of deferred financing fees), as of December 31, 2019.

Amounts represent the estimated interest payments based

on the balances as of December 31, 2019 and applicable interest rates under the Amended Revolving Facility.

Qualitative and Quantitative Disclosures about

Foreign Currency

We have international operations in The Netherlands, Sweden,

Germany, China, Portugal, Canada, Czech Republic and Mexico, which expose us to foreign currency exchange rate fluctuations due

to transactions denominated in Euros, Swedish Krona, Chinese Renminbi, Canadian dollar, Czech Krona and Mexican pesos, respectively.

We continuously evaluate our foreign currency risk and we take action from time to time in order to best mitigate these risks.

A hypothetical 10% change in the value of the U.S.

dollar in relation to our most significant foreign currency exposures would

have had an impact of approximately $12,700 on our 2019 sales.

This amount is not indicative of the hypothetical net earnings

impact due to partially offsetting impacts on cost of sales and operating expenses in those currencies.

We estimate that

foreign currency exchange rate fluctuations decreased sales in 2019 compared to 2018 by approximately $7,800.

We translate all assets and liabilities of foreign operations,

where the U.S.

dollar is not the functional currency, at the period-end exchange rate and translate sales and expenses at the average

exchange rates in effect during the period.

The net effect of these translation adjustments is recorded in the Consolidated

Financial Statements as Comprehensive Income.

The translation adjustment was a loss of approximately $680 for 2019 and a

loss of $3,109 for 2018.

Translation adjustments are not adjusted for income taxes as they relate to permanent investments

in our foreign subsidiaries.

Net foreign currency transaction gains and losses included in total other expense, net amounted

to a loss of $111 and a gain of $169 in 2019 and 2018, respectively.

A hypothetical 10% change in the value of the U.S.

in relation to our most significant foreign currency net assets would have had an impact of approximately $7,000 and $6,000 on

our foreign net assets as of December 31, 2019 and 2018, respectively.

Interest Rates

On February 12, 2020, the Company entered into the Amended

Credit Agreement for the $225 million Amended Revolving Facility.

Refer to Note 14 of the Notes to Consolidated Financial Statements

for a description of the Amended Credit Agreement.

Amounts below represent payments due based on the Prior Credit Agreement

at December 31, 2019.

Interest rates on our Prior Credit Agreement are based on the

LIBOR plus a margin of 1.00% to 2.25% (currently 1.75%) or the Prime Rate plus a margin of 0% to 1.25% (currently 0.75%), in each

case depending on the Company’s ratio of total funded indebtedness to Consolidated EBITDA.

We use interest rate derivatives

to add stability to interest expense and to manage our exposure to interest rate movements.

We primarily use interest rate swaps

as part of our 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.

In February 2017, we entered into three interest rate swaps with a combined notional

amount of $40,000 that matures in February 2022.

As of December 31, 2019, we had $110,085 outstanding under

the Revolving Facility (excluding deferred financing fees), of which $40,000 is currently being hedged.

Refer to Note 7 of the

Notes to Consolidated Financial Statements for additional information about our outstanding debt.

A hypothetical one percentage

point (100 basis points) change in the Base Rate on the $70,085 of unhedged floating rate debt outstanding at December 31,

2019 would have an impact of approximately $701 on our interest expense for 2019.

A hypothetical one percentage point (100 basis

points) change in the Base Rate on the average unhedged floating rate debt outstanding during 2018 would not have a material impact

on our interest expense for 2018.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity