ALLIENT INC 10-K

Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ To the stockholders and the Board of Directors of Allied Motion Technologies Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Allied Motion Technologies Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2021 expressed an unqualified opinion on the Company's internal control over financial reporting. Change in Accounting Principle ​ In fiscal 2019, the Company changed its method of accounting for leases due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842) , as amended, using the option to not restate comparative periods and apply the standard as of the date of initial application. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matter ​ The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 33 Table of Contents Inventories – Refer to Note 1 to the financial statements Critical Audit Matter Description Inventories are measured on a first-in, first-out basis at the lower of cost or net realizable value. The valuation of inventory requires the Company to estimate obsolete or excess inventory, as well as inventory that is not of saleable quality. The Company’s estimate of the appropriate amount of obsolete or excess inventory, as well as inventory that is not of saleable quality, uses certain inputs and involves judgment. Such inputs include data associated with historic trends, the demand forecast for inventory on-hand which includes customer purchase order data, and item-specific estimates about the timing or level of demand for a specific part. Inventories at December 31, 2020 totaled $63 million. ​ We identified the estimate of obsolete or excess inventory, as well as inventory that is not of saleable quality, as a critical audit matter because of the significant amount of judgment required by management when evaluating demand forecasts and assumptions for item-specific estimates about the timing or level of demand for a specific part. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of the demand forecast for inventory on-hand and item-specific estimates about the timing or level of demand for a specific part. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the valuation of obsolete or excess inventory, as well as inventory that is not of saleable quality, included the following, among others: ● We tested the effectiveness of controls over management’s review of the periodic calculation of the valuation for obsolete or excess inventory, or inventory that is not of saleable quality. ● We tested management’s process for determining the valuation of inventory, including: o We evaluated the appropriateness of specified inputs supporting management’s estimate, including the historic inventory trends and the demand forecasts. o We tested the demand forecasts by obtaining documentation to support customer orders, historical and future sales used in the Company’s analysis. o We evaluated the appropriateness of management’s methodology and assumptions used in developing the estimate, including item-specific estimates about the timing or level of demand for a specific part. o We evaluated management’s ability to accurately estimate obsolete, excess, or inventory that is not of saleable quality by comparing actual results to management’s historical estimates. o We evaluated inventory write-offs subsequent to December 31, 2020, for indications that the estimate for obsolete, excess, or inventory that is not of saleable quality may be understated. ​ /s/ Deloitte & Touche LLP ​ ​ ​ Williamsville, New York ​ March 10, 2021 ​ ​ We have served as the Company’s auditor since 2018. ​ 34 Table of Contents ALLIED MOTION TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2020 2019 Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 23,131 ​ $ 13,416 Trade receivables, net of provision for credit losses of $ 382 and allowance for doubtful accounts of $ 405 at December 31, 2020 and December 31, 2019, respectively ​ ​ 47,377 ​ ​ 44,429 Inventories ​ 62,978 ​ 53,385 Prepaid expenses and other assets ​ 8,728 ​ 4,413 Total current assets ​ 142,214 ​ 115,643 Property, plant and equipment, net ​ 55,428 ​ 53,008 Deferred income taxes ​ 330 ​ 490 Intangible assets, net ​ 65,859 ​ 62,497 Goodwill ​ 61,860 ​ 52,935 Right of use assets ​ ​ 19,023 ​ ​ 16,420 Other long-term assets ​ 4,483 ​ 4,835 Total Assets ​ $ 349,197 ​ $ 305,828 Liabilities and Stockholders’ Equity ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 27,668 ​ $ 23,640 Accrued liabilities ​ 24,862 ​ 23,001 Total current liabilities ​ 52,530 ​ 46,641 Long-term debt ​ 120,079 ​ 109,765 Deferred income taxes ​ 4,659 ​ 3,399 Pension and post-retirement obligations ​ 5,340 ​ 5,139 Right of use liabilities ​ ​ 14,975 ​ ​ 13,715 Other long-term liabilities ​ ​ 8,558 ​ ​ 7,975 Total liabilities ​ 206,141 ​ 186,634 Commitments and contingencies (Note 11) ​ ​ ​ ​ ​ ​ Stockholders’ Equity: ​ ​ ​ ​ ​ ​ Common stock, no par value, authorized 50,000 shares; 9,754 and 9,599 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively ​ 41,278 ​ 37,136 Preferred stock, par value $ 1.00 per share, authorized 5,000 shares; no shares issued or outstanding ​ — ​ — Retained earnings ​ 105,065 ​ 92,589 Accumulated other comprehensive loss ​ ( 3,287 ) ​ ( 10,531 ) Total stockholders’ equity ​ 143,056 ​ 119,194 Total Liabilities and Stockholders’ Equity ​ $ 349,197 ​ $ 305,828 ​ See accompanying notes to consolidated financial statements. ​ 35 Table of Contents ALLIED MOTION TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ December 31, ​ December 31, ​ 2020 2019 2018 Revenues ​ $ 366,694 ​ $ 371,084 ​ $ 310,611 Cost of goods sold ​ 258,119 ​ 258,500 ​ 219,208 Gross profit ​ 108,575 ​ 112,584 ​ 91,403 Operating costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Selling ​ 15,392 ​ 16,536 ​ 11,807 General and administrative ​ 38,301 ​ 37,688 ​ 32,037 Engineering and development ​ 25,487 ​ 23,086 ​ 19,913 Business development ​ 473 ​ 113 ​ 762 Amortization of intangible assets ​ 5,928 ​ 5,718 ​ 3,655 Total operating costs and expenses ​ 85,581 ​ 83,141 ​ 68,174 Operating income ​ 22,994 ​ 29,443 ​ 23,229 Other expense, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest expense ​ 3,716 ​ 5,134 ​ 2,701 Other expense (income), net ​ 502 ​ 468 ​ ( 153 ) Total other expense, net ​ 4,218 ​ 5,602 ​ 2,548 Income before income taxes ​ 18,776 ​ 23,841 ​ 20,681 Provision for income taxes ​ ( 5,133 ) ​ ( 6,819 ) ​ ( 4,756 ) Net income ​ $ 13,643 ​ $ 17,022 ​ $ 15,925 Basic earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share ​ $ 1.44 ​ $ 1.81 ​ $ 1.72 Basic weighted average common shares ​ 9,495 ​ 9,398 ​ 9,265 Diluted earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share ​ $ 1.43 ​ $ 1.80 ​ $ 1.70 Diluted weighted average common shares ​ 9,555 ​ 9,461 ​ 9,370 Net income ​ $ 13,643 ​ $ 17,022 ​ $ 15,925 Foreign currency translation adjustment ​ ​ 8,410 ​ ​ ( 680 ) ​ ​ ( 3,109 ) Change in accumulated income (loss) on derivatives ​ ​ ( 1,161 ) ​ ​ ( 711 ) ​ ​ 238 Pension adjustments ​ ​ ( 5 ) ​ ​ ( 622 ) ​ ​ ( 61 ) Comprehensive income ​ $ 20,887 ​ $ 15,009 ​ $ 12,993 ​ See accompanying notes to consolidated financial statements. ​ 36 Table of Contents ALLIED MOTION TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Accumulated Other Comprehensive Income (Loss) ​ ​ ​ ​ ​ ​ ​ Unamortized ​ ​ ​ Foreign Currency ​ Accumulated ​ ​ ​ Total ​ ​ ​ ​ ​ ​ Cost of Equity ​ Retained ​ Translation ​ income (loss) on ​ Pension ​ Stockholders' (In thousands except per share data) Shares Amount Awards Earnings Adjustments derivatives Adjustments Equity Balances, December 31, 2017 9,427 ​ $ 34,473 ​ $ ( 3,422 ) ​ $ 61,882 ​ $ ( 4,837 ) ​ $ 196 ​ $ ( 945 ) ​ $ 87,347 Stock transactions under employee benefit stock plans 26 ​ 852 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 852 Issuance of restricted stock, net of forfeitures 92 ​ 3,033 ​ ( 1,859 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,174 Stock compensation expense ​ ​ ​ ​ ​ ​ 2,115 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,115 Shares withheld for payment of employee payroll taxes ​ ( 60 ) ​ ​ ( 1,579 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,579 ) Comprehensive (loss) income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 3,109 ) ​ 370 ​ ( 63 ) ​ ( 2,802 ) Tax effect ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 132 ) ​ 2 ​ ( 130 ) Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ 15,925 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15,925 Dividends to stockholders - $ 0.115 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,089 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,089 ) Balances, December 31, 2018 9,485 ​ ​ 36,779 ​ ​ ( 3,166 ) ​ ​ 76,718 ​ ​ ( 7,946 ) ​ ​ 434 ​ ​ ( 1,006 ) ​ ​ 101,813 Stock transactions under employee benefit stock plans 27 ​ 1,089 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,089 Issuance of restricted stock, net of forfeitures 107 ​ 4,520 ​ ( 4,191 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 329 Stock compensation expense ​ ​ ​ ​ ​ ​ 2,851 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,851 Shares withheld for payment of employee payroll taxes ​ ( 20 ) ​ ​ ( 746 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 746 ) Comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 680 ) ​ ( 929 ) ​ ( 808 ) ​ ( 2,417 ) Tax effect ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 218 ​ 186 ​ 404 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ 17,022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 17,022 Dividends to stockholders - $ 0.12 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,151 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,151 ) Balances, December 31, 2019 9,599 ​ ​ 41,642 ​ ​ ( 4,506 ) ​ ​ 92,589 ​ ​ ( 8,626 ) ​ ​ ( 277 ) ​ ​ ( 1,628 ) ​ ​ 119,194 Stock transactions under employee benefit stock plans 32 ​ ​ 1,252 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,252 Issuance of restricted stock, net of forfeitures 154 ​ ​ 5,223 ​ ​ ( 4,851 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 372 Stock compensation expense ​ ​ ​ ​ ​ ​ ​ 3,550 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,550 Shares withheld for payment of employee payroll taxes ​ ( 31 ) ​ ​ ( 1,032 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,032 ) Comprehensive income (loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8,410 ​ ​ ( 1,526 ) ​ ​ ( 5 ) ​ 6,879 Tax effect ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 365 ​ ​ ​ ​ 365 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 13,643 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 13,643 Dividends to stockholders - $ 0.12 per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,167 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 1,167 ) Balances, December 31, 2020 9,754 ​ $ 47,085 ​ $ ( 5,807 ) ​ $ 105,065 ​ $ ( 216 ) ​ $ ( 1,438 ) ​ $ ( 1,633 ) ​ $ 143,056 ​ See accompanying notes to consolidated financial statements. ​ 37 Table of Contents ALLIED MOTION TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ December 31, ​ December 31, ​ 2020 2019 2018 Cash Flows From Operating Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 13,643 ​ $ 17,022 ​ $ 15,925 Adjustments to reconcile net income to net cash provided by operating activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 15,985 ​ 14,857 ​ 11,576 Deferred income taxes ​ ( 519 ) ​ ( 112 ) ​ ( 76 ) Loss on sale of assets ​ ​ 97 ​ ​ 247 ​ ​ 19 Provision for doubtful accounts ​ ​ 91 ​ ​ ( 5 ) ​ ​ 192 Provision for excess and obsolete inventory ​ 1,106 ​ 408 ​ 682 Provision for warranty ​ ​ 34 ​ ​ 210 ​ ​ ( 13 ) Debt issue cost amortization recorded in interest expense ​ ​ 144 ​ ​ 174 ​ ​ 148 Restricted stock compensation ​ 3,550 ​ 3,203 ​ 2,643 Other ​ ( 521 ) ​ 21 ​ 57 Changes in operating assets and liabilities, net of acquisition: ​ ​ ​ ​ ​ ​ ​ ​ ​ Trade receivables ​ 2,711 ​ ( 1,456 ) ​ ( 4,110 ) Inventories ​ ( 4,686 ) ​ 70 ​ ( 17,327 ) Prepaid expenses and other assets ​ ( 2,264 ) ​ ( 517 ) ​ ( 835 ) Accounts payable ​ ( 1,874 ) ​ ( 1,809 ) ​ 6,533 Accrued liabilities ​ ( 2,659 ) ​ 2,217 ​ 2,038 Net cash provided by operating activities ​ 24,838 ​ 34,530 ​ 17,452 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flows From Investing Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Consideration paid for acquisitions, net of cash acquired ​ ( 14,728 ) ​ — ​ ( 77,413 ) Purchase of property and equipment ​ ​ ( 9,371 ) ​ ​ ( 14,882 ) ​ ​ ( 14,333 ) Net cash used in investing activities ​ ( 24,099 ) ​ ( 14,882 ) ​ ( 91,746 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flows From Financing Activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Repayments on lines of credit ​ ​ — ​ ​ — ​ ​ ( 454 ) Principal payments of long-term debt ​ ​ ( 16,897 ) ​ ​ ( 22,500 ) ​ ​ ( 13,278 ) Proceeds from issuance of long-term debt ​ 26,979 ​ 9,639 ​ 83,163 Payment of debt issuance costs ​ ( 401 ) ​ — ​ ( 72 ) Sale of restricted stock ​ ​ — ​ ​ — ​ ​ 1,076 Dividends paid to stockholders ​ ( 1,160 ) ​ ( 1,170 ) ​ ( 1,079 ) Tax withholdings related to net share settlements of restricted stock ​ ​ ( 1,032 ) ​ ​ ( 746 ) ​ ​ ( 1,579 ) Net cash provided by (used in) financing activities ​ 7,489 ​ ( 14,777 ) ​ 67,777 Effect of foreign exchange rate changes on cash ​ 1,487 ​ ( 128 ) ​ ( 400 ) Net increase (decrease) in cash and cash equivalents ​ 9,715 ​ 4,743 ​ ( 6,917 ) Cash and cash equivalents at beginning of period ​ 13,416 ​ 8,673 ​ 15,590 Cash and cash equivalents at end of period ​ $ 23,131 ​ $ 13,416 ​ $ 8,673 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest paid ​ $ 3,586 ​ $ 5,342 ​ $ 2,272 Income taxes paid ​ $ 8,563 ​ $ 2,051 ​ $ 7,014 Property, plant and equipment purchases in accounts payable or accrued expenses ​ $ 596 ​ $ 378 ​ $ 599 ​ See accompanying notes to consolidated financial statements. ​ ​ 38 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Allied Motion Technologies Inc. (“Allied Motion” or the “Company”) is engaged in the business of designing, manufacturing and selling precision and specialty controlled motion components and systems, which include integrated system solutions as well as individual controlled motion products, to a broad spectrum of customers throughout the world primarily for the vehicle, medical, aerospace and defense, and industrial markets. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. For business combinations, we record net assets acquired and liabilities assumed at their estimated fair values. Cash and Cash Equivalents Cash and cash equivalents include instruments which are readily convertible into cash (original maturities of three months or less) and which are not subject to significant risk of changes in interest rates. Accounts Receivable Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The provision for credit losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional provisions in the future. Activity in the provision for credit losses for 2020 and 2019 was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 December 31, 2019 Beginning balance ​ $ 405 ​ $ 530 Additional reserves ​ 91 ​ ( 5 ) Write-offs ​ ( 123 ) ​ ( 132 ) Effect of foreign currency translation ​ ​ 9 ​ ​ 12 Ending balance ​ $ 382 ​ $ 405 ​ Inventories Inventories include costs of materials, direct labor and manufacturing overhead, and are stated at the lower of cost (first-in, first-out basis) or net realizable value, as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 December 31, 2019 Parts and raw materials ​ $ 44,750 ​ $ 35,849 Work-in-process ​ 6,186 ​ 6,951 Finished goods ​ 12,042 ​ 10,585 ​ ​ $ 62,978 ​ $ 53,385 ​ ​ 39 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Property, Plant and Equipment Property, plant and equipment is classified as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ Useful lives ​ 2020 ​ 2019 Land ​ ​ ​ $ 999 ​ $ 977 Building and improvements 5 - 39 years ​ 14,169 ​ 13,366 Machinery, equipment, tools and dies 3 - 15 years ​ 79,738 ​ 58,358 Construction work in progress ​ ​ ​ ​ 6,821 ​ ​ 15,536 Furniture, fixtures and other 3 - 10 years ​ 16,313 ​ 15,797 ​ ​ ​ ​ 118,040 ​ 104,034 Less accumulated depreciation ​ ​ ​ ( 62,612 ) ​ ( 51,026 ) Property, plant and equipment, net ​ ​ ​ $ 55,428 ​ $ 53,008 ​ Depreciation expense is provided using the straight-line method over the estimated useful lives of the assets. Amortization of building improvements is provided using the straight-line method over the life of the lease term or the life of the asset, whichever is shorter. Maintenance and repair costs are charged to operations as incurred. Major additions and improvements are capitalized. The cost and related accumulated depreciation of retired or sold property are removed from the accounts and the resulting gain or loss, if any, is reflected in earnings. Depreciation expense was $ 10,057 , $ 9,139 and $ 7,921 in 2020, 2019 and 2018, respectively. Intangible Assets Intangible assets, other than goodwill, are recorded at cost and are amortized over their estimated useful lives using an accelerated or straight-line method which approximates the pattern of expected cash flows over the remaining useful lives of the intangible assets. Impairment of Long-Lived Assets The Company reviews the carrying values of its long-lived assets, including property, plant and equipment and intangible assets, on an annual basis and whenever events or changes in circumstances indicate that such carrying values may not be recoverable. Long-lived assets are carried at historical cost if the projected cash flows from their use will recover their carrying amounts on an undiscounted basis and without considering interest. If projected cash flows are less than their carrying value, the long-lived assets must be reduced to their estimated fair value. Considerable judgment is required to project such cash flows and, if required, estimate the fair value of the impaired long-lived assets. The Company did not record any impairment charges for the years ended December 31, 2020, 2019 and 2018. Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment at least annually or more frequently if impairment indicators arise. The Company has defined one reporting unit that is the same as its operating segment. Goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, that the fair value of the reporting unit may be more likely than not less than carrying amount, or if significant adverse changes in the Company’s future financial performance occur that could materially impact fair value, a quantitative goodwill impairment test would be required. Additionally, the Company can 40 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) elect to forgo the qualitative assessment and perform the quantitative test. If the qualitative assessment indicates that the quantitative analysis should be performed, or if management elects to bypass a qualitative assessment, the Company then evaluates goodwill for impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill. At October 31, 2020, we performed our annual goodwill impairment test and determined, after performing a qualitative test of the reporting unit, that it is more likely than not that the fair value of the reporting unit exceeds its carrying amount. Accordingly, there was no indication of impairment and the quantitative impairment test was not performed. The Company did not record any impairment charges for the years ended December 31, 2020, 2019 or 2018. Other Long-Term Assets Other long-term assets include securities that the Company has purchased with the intent of funding the deferred compensation arrangements for certain executives of the Company. These items are accounted for at fair value on a recurring basis. Any changes in value are included in net income in the Company’s consolidated statements of income and comprehensive income. Warranty The Company offers warranty coverage for its products. The length of the warranty period for its products is generally three months to two years and varies significantly based on the product sold. The Company estimates the costs of repairing products under warranty based on the historical average cost of the repairs. The assumptions used to estimate warranty accruals are re-evaluated periodically in light of actual experience and, when appropriate, the accruals are adjusted. Estimated warranty costs are recorded at the time of sale of the related product, and are considered a cost of goods sold. Changes in the Company’s reserve for product warranty claims during 2020, 2019 and 2018 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ December 31, ​ 2020 2019 2018 Warranty reserve at beginning of the year ​ $ 1,075 ​ $ 971 ​ $ 922 Warranty reserves acquired ​ 465 ​ — ​ 117 Provision ​ 34 ​ 210 ​ ( 13 ) Warranty expenditures ​ ( 97 ) ​ ( 101 ) ​ ( 34 ) Effect of foreign currency translation ​ 94 ​ ( 5 ) ​ ( 21 ) Warranty reserve at end of year ​ $ 1,571 ​ $ 1,075 ​ $ 971 ​ Accrued Liabilities Accrued liabilities consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 2019 Compensation and fringe benefits ​ $ 11,184 ​ $ 12,967 Warranty reserve ​ 1,571 ​ 1,075 Income taxes payable ​ ​ 1,459 ​ ​ 2,231 Right of use liabilities ​ ​ 4,666 ​ ​ 3,203 Other accrued expenses ​ 5,982 ​ 3,525 ​ ​ $ 24,862 ​ $ 23,001 ​ 41 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Foreign Currency Translation The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using end of period exchange rates. Changes in reported amounts of assets and liabilities of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies and the U.S. dollar are included in foreign currency translation adjustment. Foreign currency translation adjustment is included in accumulated other comprehensive loss, a component of stockholders’ equity in the accompanying consolidated statements of stockholders’ equity. Revenue and expense transactions use an average rate prevailing during the month of the related transaction. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of each of the operating locations are included in the results of operations as incurred. Revenue Recognition Refer to Note 3, Revenue Recognition , for description of the Company’s policies regarding revenue recognition. Engineering and Development Costs The Company is engaged in a variety of engineering and design activities as well as basic research and development activities directed to the substantial improvement or new application of the Company’s existing technologies. Engineering and design as well as research and development costs are expensed as incurred. Basic and Diluted Income per Share Basic income per share is computed by dividing net income or loss by the weighted average number of shares of common stock outstanding. Diluted income per share is determined by dividing the net income by the sum of (1) the weighted average number of common shares outstanding and (2) if not anti-dilutive, the effect of stock awards determined utilizing the treasury stock method. Basic and diluted weighted-average shares outstanding are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2020 2019 2018 Basic weighted average shares outstanding 9,495 9,398 9,265 Dilutive effect of equity awards 60 63 105 Diluted weighted average shares outstanding 9,555 9,461 9,370 ​ For 2020, 2019 and 2018, the anti-dilutive common shares excluded from the calculation of diluted income per share were immaterial. Comprehensive Income Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by and distributions to stockholders. Fair Value Accounting Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. 42 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The guidance establishes a framework for measuring fair value, which utilizes observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. Preference is given to observable inputs. These two types of inputs create the following three-level fair value hierarchy: Level 1: Quoted prices for identical assets or liabilities in active markets. Level 2: Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable. Level 3: Significant inputs to the valuation model that are unobservable. ​ The Company’s financial assets and liabilities include cash and cash equivalents, accounts receivable, debt obligations, accounts payable, and accrued liabilities. The carrying amounts reported in the consolidated balance sheets for these assets approximate fair value because of the immediate or short-term maturities of these financial instruments. The following table presents the Company’s financial assets that are accounted for at fair value on a recurring basis as of December 31, 2020 and 2019, respectively, by level within the fair value hierarchy (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ Level 1 Level 2 Level 3 Assets (liabilities) ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension plan assets ​ $ 6,347 ​ $ — ​ $ — Deferred compensation plan assets ​ 5,386 ​ — ​ — Interest rate swaps ​ — ​ ( 1,889 ) ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2019 ​ Level 1 Level 2 Level 3 Assets (liabilities) ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension plan assets ​ $ 6,099 ​ $ — ​ $ — Deferred compensation plan assets ​ 4,690 ​ — ​ — Interest rate swaps ​ — ​ ( 363 ) ​ — ​ Derivative Financial Instruments Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") No. 815, Derivatives and Hedging ("ASC 815"), provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. As required by ASC 815, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow 43 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply, or the Company elects not to apply hedge accounting. Income Taxes The current provision for income taxes represents actual or estimated amounts payable or refundable on tax return filings each year. Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, and for operating loss and tax credit carryforwards. The change in deferred tax assets and liabilities for the period measures the deferred tax provision or benefit for the period. Effects of changes in enacted tax laws on deferred tax assets and liabilities are reflected as adjustments to the tax provision or benefit in the period of enactment. A valuation allowance may be provided to the extent management deems it is more likely than not that deferred tax assets will not be realized. The ultimate realization of net deferred tax assets is dependent upon the generation of future taxable income, in the appropriate taxing jurisdictions, during the periods in which temporary differences, net operating losses and tax credits become realizable. Management believes that it is more likely than not that the Company will realize the benefits of these temporary differences and operating loss and tax credit carryforwards, net of valuation allowances. It is the Company's policy to include interest and penalties related to income tax liabilities in income tax expense on the consolidated statements of income and comprehensive Income. In addition, the Company records uncertain tax positions in accordance with ASC 740, Income Taxes , ("ASC 740"). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. There were no uncertain tax benefits for the years ended December 31, 2020, 2019 and 2018 and no amounts were recorded for interest and penalties related to unrecognized tax positions for the years ended December 31, 2020, 2019, and 2018. Pension and Postretirement Welfare Plans The Company records the service cost component of net benefit costs in Cost of goods sold, Selling, and General and administrative expenses. The interest cost component of net benefit costs is recorded in Interest expense and the remaining components of net benefit costs, amortization of net losses and expected return on plan assets is recorded in Other expense, net. Concentration of Credit Risk Trade receivables subject the Company to the potential for credit risk. To reduce this risk, the Company performs evaluations of its customers’ financial condition and creditworthiness at the time of sale, and updates those evaluations when necessary. See Note 13, Segment Information, for additional information regarding customer concentration. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 44 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Recently adopted accounting pronouncements In June 2016, FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . This guidance requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance also requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses. The new guidance is effective for fiscal years beginning after December 15, 2019. The Company adopted this ASU on January 1, 2020 applying the modified retrospective approach and the adoption did not have a material impact on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . The guidance in ASU 2017-04 eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company adopted this standard on January 1, 2020 on a prospective basis and the adoption did not have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) , which modifies the disclosures on fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. The ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss). The ASU is effective for public entities for fiscal years beginning after December 15, 2019. The Company has not historically had any transfers between Level 1 and Level 2 or assets or liabilities measured at fair value under Level 3. The Company adopted this ASU on January 1, 2020 on a prospective basis and the adoption did not have a material impact on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This guidance provides relief for impacted areas as it relates to impending reference rate reform and contains optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other areas or transactions, subject to meeting certain criteria, that are impacted by reference rate reform. This ASU is effective upon issuance for all entities and elections of certain optional expedients are required to apply the provisions of the guidance. The Company adopted this ASU effective January 1, 2020 on a prospective basis, and the Company has elected the expedients related to the probability of hedged interest payments, regardless of any expected future modification in terms related to reference rate reform, as well as the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Should the Company elect further optional expedients as it relates to reference rate reform, disclosure of those elections will be done in the fiscal period in which the elections are made. The adoption did not have a material impact on its consolidated financial statement s. ​ 2. ACQUISITIONS Dynamic Controls On March 7, 2020, the Company acquired 100 % of the issued and outstanding share capital of the Dynamic Controls Group (“Dynamic Controls”), a wholly owned subsidiary of Invacare Corporation, a market-leading designer and manufacturer of equipment for the medical mobility and rehabilitation markets. The purchase price was funded using borrowings under the Amended Revolving Facility (Note 7). The purchase price was subject to adjustments based on a determination of closing net working capital. 45 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Dynamic Controls brings strong leadership and a very experienced electronics and software engineering design team, providing market leading electronic control solutions and products that will further strengthen the Company’s medical market position, as well as enable it to further develop higher level solutions with embedded electronics across our other major served markets. The Company incurred $ 473 of transaction costs related to the acquisition of Dynamic Controls in 2020, which are included in business development expenses on the consolidated statements of income and comprehensive income. The Company accounted for the acquisition pursuant to FASB ASC 805, Business Combinations . The allocation of the purchase price paid for Dynamic Controls is based on estimated fair values of the assets acquired and liabilities assumed of Dynamic Controls as of March 7, 2020 and is as follows (in thousands): ​ ​ ​ ​ ​ Cash and cash equivalents $ 11,437 Accounts receivable ​ ​ 4,129 Inventory ​ ​ 3,329 Other assets, net ​ 769 Property, plant and equipment ​ 1,185 Right of use assets ​ ​ 2,735 Intangible assets ​ ​ 7,800 Goodwill ​ 6,629 Current liabilities ​ ​ ( 7,354 ) Lease liabilities ​ ​ ( 2,739 ) Net deferred income tax liabilities ​ ​ ( 1,755 ) Net purchase price ​ $ 26,165 ​ During the second quarter of 2020, measurement period adjustments primarily related to deferred income taxes and the true-up of closing net working capital were recognized, which resulted in a reduction of goodwill by $ 268 . During the third quarter of 2020, measurement period adjustments related primarily to tax liabilities were recognized, which resulted in an increase of goodwill by $ 77 . The allocation of the purchase price was finalized during the fourth quarter of 2020. The intangible assets acquired consist of customer lists of $ 4,400 , technology of $ 1,900 and a trade name of $ 1,500 , which are being amortized over 16 , 13 and 18 years , respectively. Goodwill generated in the acquisition is related to the assembled workforce, synergies between Allied Motion’s other operations and Dynamic Controls that are expected to occur as a result of the combined engineering knowledge, the ability of each of the operations to integrate each other’s products into more fully integrated system solutions and Allied Motion’s ability to utilize Dynamic Controls’ management knowledge in providing complementary product offerings to the Company’s customers. The operating results of this acquisition are included in our consolidated financial statements beginning on the date of the acquisition. Included within the consolidated statement of income and comprehensive income for the year ended December 31, 2020, revenues and earnings related to Dynamic Controls were $ 24,124 and $ 945 , respectively. ​ 46 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The following unaudited pro forma financial information presents the combined results of operations if the Dynamic Controls acquisition had occurred as of January 1, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ 2020 2019 Revenues ​ $ 371,856 ​ $ 401,345 Net income ​ $ 14,255 ​ $ 17,779 Earnings per share - basic ​ $ 1.50 ​ $ 1.89 Earnings per share - diluted ​ $ 1.49 ​ $ 1.88 ​ The pro forma information includes certain adjustments, including depreciation and amortization expense, interest expense, and certain other adjustments, together with related income tax effects. The pro forma amounts do not reflect adjustments for anticipated operating efficiencies that the Company expects to achieve as a result of this acquisition. The pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would have been had these transactions actually occurred on the date presented or to project the combined company’s results of operations or financial position for any future period. The goodwill resulting from the Dynamic Controls acquisition is not tax deductible. 3. REVENUE RECOGNITION Performance Obligations Performance Obligations Satisfied at a Point in Time 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 in exchange for generally 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. For some customers, control, and a sale, is transferred at a point in time when the product is delivered to a customer. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Nature of Goods and Services The Company sells component and integrated controlled motion solutions to end customers and original equipment manufacturers (“OEM’s”) through the Company’s own direct sales force and authorized manufacturers’ representatives and distributors. The Company’s products include brushed 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. The Company’s target markets include Vehicle, Medical, Aerospace & Defense and Industrial. 47 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Determining the Transaction Price The majority of the Company’s contracts have an original duration of less than one year. For these contracts, the Company applies the practical expedient and therefore does not consider the effects of the time value of money. For multiyear contracts, the Company uses judgment to determine whether there is a significant financing component. These contracts are generally those in which the customer has made an up-front payment. Contracts that management determines to include a significant financing component are discounted at the Company’s incremental borrowing rate. The Company incurs interest expense and accrues a contract liability. As the Company satisfies performance obligations and recognizes revenue from these contracts, interest expense is recognized simultaneously. Management does not have any contracts that include a significant financing component as of December 31, 2020. Disaggregation of Revenue The Company disaggregates revenue from contracts with customers into geographical regions and target markets. The Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. As noted in Note 13, Segment Information , the Company’s business consists of one reportable segment. The revenues by geography in the table below are revenues derived from the Company’s foreign subsidiaries as provided in Note 13. A reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions is provided in Note 13. The Company’s disaggregated revenues are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, Target Market ​ 2020 2019 Vehicle ​ $ 110,365 ​ $ 126,811 Industrial ​ 114,143 ​ 124,196 Medical ​ 83,191 ​ 51,586 Aerospace & Defense ​ 39,711 ​ 47,748 Other ​ 19,284 ​ 20,743 Total ​ $ 366,694 ​ $ 371,084 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, Geography ​ 2020 2019 United States ​ $ 214,203 ​ $ 244,347 Europe ​ 126,985 ​ 124,914 Asia-Pacific ​ 25,506 ​ 1,823 Total ​ $ 366,694 ​ $ 371,084 ​ Contract Balances When the timing of the Company’s delivery of product is different from the timing of the payments made by customers, the Company recognizes either a contract asset (performance precedes customer payment) or a contract liability (customer payment precedes performance). Typically, contracts are paid in arrears and are recognized as receivables after the Company considers whether a significant financing component exists. The opening and closing balances of the Company’s contract liability are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2020 ​ 2019 Contract liabilities in accrued liabilities ​ $ 898 ​ $ 454 Contract liabilities in other long-term liabilities ​ ​ 262 ​ ​ - ​ ​ $ 1,160 ​ $ 454 ​ 48 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The difference between the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment. Significant Payment Terms The Company’s contracts with its customers state the final terms of the sale, including the description, quantity, and price of each product or service purchased. Payments are typically due in full within 30-60 days of delivery. Since the customer agrees to a stated rate and price in the contract that do not vary over the contract, the majority of contracts do not contain variable consideration. Returns, Refunds, and Warranties 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. Practical Expedients Incremental costs of obtaining a contract - the Company elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been one year or less . Remaining performance obligations - the Company elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts that are one year or less , as the revenue is expected to be recognized within the next year. Time value of money - the Company elected not to adjust the promised amount of consideration for the effects of the time value of money for contracts in which the anticipated period between when the Company transfers the goods or services to the customer and when the customer pays is equal to one year or less . ​ 4. GOODWILL The change in the carrying amount of goodwill for 2020 and 2019 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ 2019 ​ Beginning balance $ 52,935 ​ $ 52,639 ​ Goodwill acquired (Note 2) ​ 6,629 ​ ​ 614 ​ Effect of foreign currency translation 2,296 ​ ( 318 ) ​ Ending balance $ 61,860 ​ $ 52,935 ​ ​ The purchase price allocation was finalized for the Dynamic Controls acquisition during the fourth quarter of 2020. ​ 49 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) 5. INTANGIBLE ASSETS Intangible assets on the Company’s consolidated balance sheets consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ December 31, 2019 ​ ​ Gross Accumulated Net Book Gross Accumulated Net Book ​ ​ Life ​ Amount ​ amortization ​ Value ​ Amount ​ amortization ​ Value Customer lists 8 - 17 years ​ $ 69,833 ​ $ ( 23,636 ) ​ $ 46,197 ​ $ 64,314 ​ $ ( 19,311 ) ​ $ 45,003 Trade name 10 - 19 years ​ 14,055 ​ ( 5,061 ) ​ 8,994 ​ 12,222 ​ ( 4,114 ) ​ 8,108 Design and technologies 10 - 15 years ​ 15,531 ​ ( 4,874 ) ​ 10,657 ​ 12,927 ​ ( 3,554 ) ​ 9,373 Patents ​ 17 years ​ 24 ​ ( 13 ) ​ 11 ​ 24 ​ ( 11 ) ​ 13 Total ​ ​ ​ $ 99,443 ​ $ ( 33,584 ) ​ $ 65,859 ​ $ 89,487 ​ $ ( 26,990 ) ​ $ 62,497 ​ Intangible assets resulting from the acquisition of Dynamic Controls were approximately $ 7,800 (Note 2). The intangible assets acquired consist of customer lists, technology, and a trade name. Total amortization expense for intangible assets for the years 2020, 2019 and 2018 was $ 5,928 , $ 5,718 and $ 3,655 , respectively. Estimated amortization expense for intangible assets is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ Estimated ​ Amortization Expense 2021 ​ $ 6,059 2022 ​ 6,110 2023 ​ 6,127 2024 ​ ​ 5,798 2025 ​ 5,780 Thereafter ​ 35,985 Total estimated amortization expense ​ $ 65,859 ​ ​ 6. STOCK-BASED COMPENSATION PLANS Stock Incentive Plans The Company’s Stock Incentive Plans provide for the granting of stock awards, including stock options, stock appreciation rights, and restricted stock, to employees and non-employees, including directors of the Company. As of December 31, 2020, the Company had 753,187 shares of common stock available for grant under stock incentive plans. 50 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Restricted Stock The following is a summary of restricted stock grants, fair value and performance based awards: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Awards with ​ Unvested ​ Weighted average performance ​ ​ restricted stock ​ grant date fair ​ vesting For the year ended December 31, awards value requirements 2020 ​ 160,437 ​ $ 33.51 ​ 100,403 2019 ​ 109,530 ​ $ 41.95 ​ 76,877 2018 ​ 64,656 ​ $ 35.89 ​ 30,603 ​ The value at the date of award is amortized to compensation expense over the related service period, which is generally three years for time vested grants. Short-term performance based grants can be achieved over a period of one year, and long-term performance grants can be earned through December 31, 2022. Earned grants are then subject to either a 3 year or 5 year service period. Shares of non-vested restricted stock are forfeited if a recipient leaves the Company before the vesting date. Shares that are forfeited become available for future awards. For performance-based awards, the Company assesses the probability of the achievement of the awards during the year and recognizes expense accordingly. The following is a summary of restricted stock activity during years 2020, 2019 and 2018: ​ ​ ​ ​ ​ ​ Number of ​ shares Balance, December 31, 2017 221,968 Awarded 64,656 Forfeited ( 18,867 ) Vested ( 112,015 ) Balance, December 31, 2018 155,742 Awarded 109,530 Forfeited ( 3,166 ) Vested ( 75,404 ) Balance, December 31, 2019 186,702 Awarded 160,437 Forfeited ( 2,446 ) Vested ( 106,465 ) Balance, December 31, 2020 238,228 ​ 51 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The following is a summary of performance based restricted stock activity during years 2020, 2019 and 2018: ​ ​ ​ ​ ​ ​ Total performance ​ grants Outstanding, December 31, 2017 ​ 37,782 Awarded ​ 30,603 Performance criteria met ​ ( 66,525 ) Forfeited ​ ( 1,860 ) Outstanding, December 31, 2018 ​ — Awarded ​ 76,877 Performance criteria met ​ ( 50,852 ) Forfeited ​ ( 549 ) Outstanding, December 31, 2019 ​ 25,476 Awarded ​ 100,403 Performance criteria met ​ ( 64,384 ) Forfeited ​ ( 2,155 ) Outstanding, December 31, 2020 ​ 59,340 ​ The performance criteria and forfeitures in the above table did not occur until the Board of Directors approved them during the March 2021, and February 2020 and 2019 meetings. Share-Based Compensation Expense Restricted Stock During 2020, 2019 and 2018 compensation expense net of forfeitures of $ 3,550 , $ 3,203 and $ 2,643 was recorded, respectively. As of December 31, 2020, there was $ 4,100 of total unrecognized compensation expense related to restricted stock awards, of which approximately $ 2,236 is expected to be recognized in 2021. Employee Stock Ownership Plan The Company sponsors an Employee Stock Ownership Plan (“ESOP”) that covers all non-union U.S. employees who work over 1,000 hours per year. The terms of the ESOP require the Company to make an annual contribution equal to the greater of i) the Board established percentage of pretax income before the contribution ( 5 % in 2020, 2019 and 2018) or ii) the annual interest payable on any loan outstanding to the Company from the ESOP. Company contributions to the Plan accrued for 2020, 2019 and 2018, were $ 988 , $ 1,189 and $ 1,090 , respectively. These amounts are included in general and administrative costs in the consolidated statements of income and comprehensive income. Defined Contribution Plan The Company sponsors the Allied Motion 401(k) Tax Advantaged Investment Plan (“401(k)”) which covers substantially all its U.S. based employees. The plan provides for the deferral of employee compensation under Section 401(k) and a discretionary Company match. In 2020, 2019 and 2018 this match was 100 % per dollar of the first 3 % of participant deferral and 50 % per dollar of the next 2 % contribution, up to 4 % of a total 5 % participant deferral. Net costs related to this defined contribution plan were $ 1,774 , $ 1,362 and $ 1,182 in 2020, 2019 and 2018, respectively. 52 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Dividends For each of the years ended December 31, 2020 and 2019 a total of $ 0.12 per share on all outstanding shares was declared and paid, respectively. For the year ended December 31, 2018 a total of $ 0.115 per share on all outstanding shares was declared and paid. Total dividends paid for the years ended December 31, 2020, 2019 and 2018 were $ 1,160 , $ 1,170 and $ 1,079 , respectively. Based on the terms of the Company’s Credit Agreement, dividends paid to shareholders are acceptable, subject to the Company’s compliance with the covenants under the Credit Agreement. ​ 7. DEBT OBLIGATIONS Debt obligations consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 2019 Long-term Debt ​ ​ ​ ​ ​ ​ Revolving Credit Facility, long-term (1) ​ $ 120,656 ​ $ 110,085 Unamortized debt issuance costs ​ ​ ( 577 ) ​ ​ ( 320 ) Long-term debt ​ $ 120,079 ​ $ 109,765 (1) The effective rate of the Revolving Credit Facility is 2.5 % at December 31, 2020 including the impact of the Company's interest rate swaps. Amended Revolving Credit Facility 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”). The significant changes made to the Company’s prior credit facility by the Amended Credit Agreement include (i) increasing the maximum principal amount from $ 175 million to $ 225 million, (ii) providing for a $ 75 million accordion amount, (iii) decreasing certain interest-rate margins and fees, and (iv) extending the term to February 2025 from the original term of October 2021. HSBC Bank USA, National Association is the administrative agent, and HSBC Securities (USA) Inc., KeyBank N.A, Wells Fargo Bank, N.A and Citizens Bank, N.A. are joint lead arrangers. Borrowings under the Amended Revolving Facility bear interest at the LIBOR Rate (as defined in the Amended Credit Agreement) plus a margin of 1.00 % to 1.75 % or the Prime Rate (as defined in the Amended Credit Agreement) plus a margin of 0 % to 0.75 %, in each case depending on the Company’s ratio of total funded indebtedness (as defined in the Amended Credit Agreement) to Consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”). At December 31, 2020, the applicable margin for LIBOR Rate borrowings was 1.625 % and the applicable margin for Prime Rate borrowings was 0.625 %. In addition, the Company is required to pay a commitment fee of between 0.10 % and 0.225 % quarterly ( 0.20 % at December 31, 2020) on the unused portion of the Amended Revolving Facility, also based on the Company’s Total Leverage Ratio. The Amended Revolving Facility is secured by substantially all of the Company’s non-realty assets and is fully and unconditionally guaranteed by certain of the Company’s subsidiaries. The Amended Credit Agreement contains certain financial covenants related to minimum interest coverage and total leverage ratio at the end of each quarter. The Amended Credit Agreement also includes other covenants and restrictions, including limits on the amount of additional indebtedness, and restrictions on the Company’s ability to merge or sell all, or substantially all, of its assets. The Company was in compliance with all covenants at December 31, 2020. As of December 31, 2020, the unused Amended Revolving Facility was $ 104,344 . The amount available to borrow may be reduced based upon our debt and EBITDA levels, which impacts our covenant calculations. 53 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Other The China Credit Facility provides credit of $ 1,467 (Chinese Renminbi 10,000 ) (“the China Facility”). The China Facility is a demand revolving facility used for working capital and capital equipment needs at the Company’s China operations. The term is annual and may be cancelled at the bank’s discretion. The interest rate shall be agreed upon by the Lender and the Borrower before the Utilization Date (as defined in the China Facility) and shall be specified in the Utilization Request (as defined in the China Facility). Collateral for the facility is a guarantee issued by the Company. There were no borrowings under the China Facility during 2020 or 2019. Deferred Financing Fees Deferred financing costs net of accumulated amortization were $ 577 as of December 31, 2020. These costs will be amortized over the term of the Amended Credit Facility. ​ 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, and foreign exchange risk primarily through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to the Company’s borrowings. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In February 2017, the Company entered into three interest rate swaps with a combined notional of $ 40,000 that mature in February 2022. In March 2020, the Company entered into two additional interest rate swaps with a combined notional amount of $ 20,000 that increases to $ 60,000 in March 2022 and matures in December 2024. The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2020 and 2019, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The Company estimates that an additional $ 904 will be reclassified as an increase to interest expense over the next twelve months. Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. 54 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2020, and 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Liability Derivatives ​ ​ ​ ​ Fair value as of: Derivatives designated as ​ Balance Sheet ​ December 31, hedging instruments Location 2020 2019 Interest rate products ​ Other long-term liabilities ​ $ 1,889 ​ $ 363 ​ The table below presents the effect of cash flow hedge accounting on other comprehensive income (loss) (OCI) for the years ended December 31, 2020, 2019 and 2018 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of pre-tax loss recognized in OCI ​ ​ on derivatives Derivatives in cash flow hedging relationships ​ Year ended December 31, ​ 2020 2019 Interest rate products ​ $ ( 2,163 ) ​ $ ( 816 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location of (loss) gain reclassified ​ Amount of pre-tax (loss) gain reclassified from accumulated OCI into income from accumulated OCI into income ​ Year ended December 31, ​ 2020 2019 2018 Interest expense ​ $ ( 637 ) ​ $ 113 ​ $ 6 ​ The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of income and comprehensive income for the years ended December 31, 2020, 2019 and 2018 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total amounts of income and expense line items presented ​ ​ ​ ​ that reflect the effects of cash flow hedges recorded ​ ​ ​ ​ Year ended December 31, Derivatives designated as hedging instruments Income Statement Location 2020 2019 2018 Interest rate products Interest Expense ​ $ 3,716 ​ $ 5,134 ​ $ 2,701 ​ The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2020 and 2019. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross amounts ​ Net amounts of liabilities ​ Gross amounts not offset in the consolidated As of ​ Gross amounts ​ offset in the ​ presented in the ​ balance sheets December 31, ​ of recognized ​ consolidated ​ consolidated ​ Financial ​ Cash collateral ​ ​ ​ 2020 liabilities balance sheets balance sheets instruments received Net amount Derivatives ​ $ 1,889 ​ $ — ​ $ 1,889 ​ $ — ​ $ — ​ $ 1,889 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross amounts ​ Net amounts of liabilities ​ Gross amounts not offset in the consolidated As of ​ Gross amounts ​ offset in the ​ presented in the ​ balance sheets December 31, ​ of recognized ​ consolidated ​ consolidated ​ Financial ​ Cash collateral ​ ​ ​ 2019 liabilities balance sheets balance sheets instruments received Net amount Derivatives ​ $ 363 ​ $ — ​ $ 363 ​ $ — ​ $ — ​ $ 363 ​ The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. 55 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) ​ 9. INCOME TAXES The provision for income taxes is based on income before income taxes as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ December 31, ​ December 31, ​ 2020 2019 2018 Domestic ​ $ 8,478 ​ $ 17,188 ​ $ 10,894 Foreign ​ 10,298 ​ 6,653 ​ 9,787 Income before income taxes ​ $ 18,776 ​ $ 23,841 ​ $ 20,681 ​ 56 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) Components of the total provision for income taxes are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ December 31, ​ December 31, ​ 2020 2019 2018 Current provision ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ 2,167 ​ $ 4,313 ​ $ 1,663 Foreign ​ 3,485 ​ 2,618 ​ 3,169 Total current provision ​ 5,652 ​ 6,931 ​ 4,832 Deferred provision ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ 288 ​ 199 ​ 675 Foreign ​ ( 807 ) ​ ( 311 ) ​ ( 751 ) Total deferred provision ​ ( 519 ) ​ ( 112 ) ​ ( 76 ) Provision for income taxes ​ $ 5,133 ​ $ 6,819 ​ $ 4,756 ​ The provision for income taxes differs from the amount determined by applying the federal statutory rate as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ December 31, ​ December 31, ​ ​ 2020 2019 2018 Tax provision, computed at statutory rate 21.0 % 21.0 % 21.0 % State tax, net of federal impact 4.2 % 4.5 % 3.0 % Change in valuation allowance ​ 0.0 % 0.3 % 2.8 % Effect of foreign tax rate differences 4.3 % 1.5 % 3.4 % Permanent items, other ​ ( 0.2 ) % 1.4 % 0.8 % Section 162(m) compensation ​ 2.2 % 1.1 % 0.1 % R&D Credit ​ ( 3.6 ) % ( 2.5 ) % ( 0.8 ) % Restricted stock awards ​ 0.6 % ( 0.1 ) % ( 2.3 ) % Effect of Tax Cuts and Jobs Act ​ ( 1.3 ) % ( 0.4 ) % ( 5.1 ) % Subpart F income ​ 1.3 % 0.0 % 0.0 % Tax examinations ​ 0.0 % 1.8 % 0.0 % Other ( 1.2 ) % 0.0 % 0.1 % Provision for income taxes 27.3 % 28.6 % 23.0 % ​ ​ 57 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2020 2019 Noncurrent deferred tax assets: ​ ​ ​ ​ ​ ​ Employee benefit plans ​ $ 2,500 ​ $ 2,440 Net operating loss and tax credit carryforwards ​ ​ 2,217 ​ ​ 1,675 Accrued expenses and reserves ​ ​ 969 ​ ​ 795 Other ​ 697 ​ 428 Total noncurrent deferred tax assets ​ 6,383 ​ 5,338 Valuation allowance ​ ( 1,176 ) ​ ( 1,077 ) Net noncurrent deferred tax assets: ​ $ 5,207 ​ $ 4,261 ​ ​ ​ ​ ​ ​ ​ Net noncurrent deferred tax liabilities: ​ ​ ​ ​ ​ ​ Property and equipment ​ $ 3,448 ​ $ 3,901 Goodwill and intangibles ​ ​ 5,629 ​ 2,885 Other ​ ​ 459 ​ ​ 384 Total noncurrent deferred tax liabilities ​ $ 9,536 ​ $ 7,170 ​ ​ ​ ​ ​ ​ ​ Net deferred tax asset/(deferred tax liability) ​ $ ( 4,329 ) ​ $ ( 2,909 ) ​ ​ ​ ​ ​ ​ ​ Presented as follows: ​ ​ ​ ​ ​ ​ Noncurrent deferred income tax assets ​ $ 330 ​ $ 490 Noncurrent deferred income tax liabilities ​ ​ ( 4,659 ) ​ ​ ( 3,399 ) Net deferred tax liability ​ $ ( 4,329 ) ​ $ ( 2,909 ) ​ As of December 31, 2020, the Company has the following gross carryforwards available: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ ​ Jurisdiction ​ Tax Attribute ​ (in thousands) ​ Begin to expire U.S. State ​ Net Operating Losses (1) $ 4,139 2024 ​ International ​ Net Operating Losses (1) $ 1,519 2025 ​ International ​ Net Operating Losses - Unlimited Carryforward (1) $ 718 ​ No expiration ​ U.S. Federal ​ Foreign Tax Credits $ 1,003 ​ 2027 ​ International ​ R&D Tax Credits $ 574 ​ 2025 ​ (1) Net operating losses (NOL’s) are presented as pre-tax amounts. ​ Realization of the Company’s recorded deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards. The Company generated excess foreign tax credits in 2017 due to the one-time transition tax required by enactment of the Tax Cuts and Jobs Act in the amount of $ 0.9 million. The Company determined it is more likely than not that it will not realize a tax benefit from these credits. Additionally, the Company has incurred net operating losses in certain states that it is more likely than not will not be realized. The tax effect of these losses is $ 0.2 million. Therefore, the Company recognized a full valuation allowance related to these foreign tax credits and state net operating losses. ​ The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. The Company believes that it is more likely than not that it will realize the benefits of its deferred tax assets, net of valuation allowances as of December 31, 2020. 58 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) ​ The Company files income tax returns in various U.S. and foreign taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before 2017. With few exceptions, the Company is no longer subject to tax examinations in the foreign jurisdictions for periods prior to 2017. The Company completed an IRS tax audit for tax year 2017 with no adjustments made to taxable income. ​ In general, it is the practice and intention of the Company to reinvest the earnings of its non-domestic subsidiaries in activities outside the United States. Exceptions may be made on a year-by-year basis to repatriate earnings of certain foreign subsidiaries based on cash needs in the United States. The Company intends to distribute a portion of these foreign earnings which have been previously taxed in the United States. As of December 31, 2020, foreign withholding taxes of $ 275 have been provided for unremitted earnings of foreign subsidiaries based on the amounts of anticipated distributions. The Company does not intend to distribute the remaining previously taxed earnings resulting from the one-time transition tax under the Tax Cuts and Jobs Act, and has not recorded any deferred taxes related to such amounts. The remaining excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries is permanently reinvested, and the determination of any deferred tax liability on this amount is not practicable. ​ It is the Company’s policy to include interest and penalties related to income tax liabilities in income tax expense on the consolidated statements of income and comprehensive income. In addition, the Company records uncertain tax positions in accordance with ASC 740. ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. The were no uncertain tax benefits for the years ended December 31, 2020, 2019 and 2018 and no amounts were recorded for interest and penalties related to unrecognized tax positions for the years ended December 31, 2020, 2019, and 2018. ​ 10. LEASES The Company has operating leases for office space, manufacturing equipment, computer equipment and automobiles. The Company did not have any finance leases in 2020 or 2019. Many leases include one or more options to renew, some of which include options to extend the leases for a long-term period, and some leases include options to terminate the leases within 30 days . In certain of the Company's lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for capital area maintenance, utilities, inflation and/or changes in other indexes. For the years ended December 31, 2020 and 2019, the components of operating lease expense were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ December 31, ​ ​ 2020 ​ ​ 2019 Fixed operating lease expense ​ $ 4,548 ​ $ 4,018 Variable operating lease expense ​ $ 547 ​ $ 499 Short-term lease expense ​ $ 234 ​ $ 234 ​ Supplemental cash flow information related to the Company’s operating leases for the years ended December 31, 2020 and 2019 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2020 ​ 2019 Cash paid for amounts included in the measurement of operating leases $ 4,601 ​ $ 4,886 Right of use ("ROU") assets obtained in exchange for operating lease obligations ​ $ 3,626 ​ $ 373 ROU assets recorded upon adoption of ASC 842, Leases ​ $ — ​ $ 20,344 ROU assets obtained in acquisitions (Note 2) ​ $ 2,735 ​ $ — ​ 59 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The following table presents weighted average remaining lease term and discount rates related to the Company’s operating leases as of December 31, 2020 and 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ ​ 2020 ​ ​ 2019 ​ ​ Weighted average remaining lease term (in years) ​ 6.83 ​ ​ 8.27 ​ ​ Weighted average discount rate ​ 2.25 % ​ 2.91 % ​ ​ The following table presents the maturity of the Company’s operating lease liabilities as of December 31, 2020 (in thousands): ​ ​ ​ ​ 2021 $ 5,043 2022 ​ 4,013 2023 ​ 2,935 2024 ​ 2,282 2025 ​ ​ 2,096 Thereafter ​ 4,606 Total undiscounted cash flows ​ $ 20,975 Less: present value discount ​ ​ ( 1,334 ) Total lease liabilities ​ $ 19,641 ​ As of December 31, 2020, the Company had no additional significant operating or finance leases that had not yet commenced. ​ 11. COMMITMENTS AND CONTINGENCIES Severance Benefit Agreements As of December 31, 2020, the Company has annually renewable severance benefit agreements with key employees which, among other things, provide inducement to the employees to continue to work for the Company during and after any period of a potential change in control of the Company. The agreements provide the employees with specified benefits upon the subsequent severance of employment in the event of change in control of the Company and are effective for 24 months thereafter. Litigation The Company is involved in certain actions that have arisen out of the ordinary course of business. Management believes that resolution of the actions will not have a significant adverse effect on the Company’s consolidated financial statements. ​ 12. DEFERRED COMPENSATION ARRANGEMENTS The Company has deferred compensation arrangements with certain key members of management. These arrangements provide the Board and its committees with another mechanism to provide pay for performance based incentive compensation to certain executive participants. It also allows for the participants to make certain deferrals into the plan. The amount of the liability is comprised of liabilities from previous contributions. Amounts accrued relating to previous periods are $ 5,386 and $ 4,695 as of December 31, 2020 and 2019, respectively, of which $ 4,329 and $ 4,695 are included in other long-term liabilities in the consolidated balance sheets at December 31, 2020 and 2019 and $ 1,057 is included within accrued liabilities as of December 31, 2020, relating to the amounts to be paid in 2021. ​ 60 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) 13. SEGMENT INFORMATION The Company operates in one segment for the manufacture and marketing of controlled motion products for OEM and end user applications. The Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. Financial information related to the foreign subsidiaries is summarized below (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2020 2019 2018 Revenues derived from foreign subsidiaries ​ $ 152,491 ​ $ 126,737 ​ $ 126,104 ​ Identifiable assets outside of the United States are $ 133,466 and $ 95,777 as of December 31, 2020 and 2019, respectively. Revenues derived from foreign subsidiaries and identifiable assets outside of the United States are primarily attributable to Europe, China and New Zealand. Sales to customers outside of the United States by all subsidiaries were $ 171,847 , $ 159,365 and $ 146,835 during 2020, 2019 and 2018, respectively. For 2020, 2019 and 2018 one customer accounted for 15 %, 16 % and 19 % of revenues, respectively, and as of December 31, 2020 and 2019 for 22 % and 17 % of trade receivables, respectively. ​ 14. SUBSEQUENT EVENT On March 10, 2021, the Board of Directors approved a 3 -for-2 common stock split to be paid in the form of a stock dividend to holders of record on April 16, 2021. The additional shares are expected to be issued on April 30, 2021. In lieu of fractional shares, shareholders will receive a cash payment based on the closing share price of the common stock on the record date. ​ 61 Table of Contents ALLIED MOTION TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected quarterly financial data for each of the four quarters in years 2020 and 2019 is as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Second Third Fourth Year 2020 ​ Quarter ​ Quarter ​ Quarter ​ Quarter Revenues ​ $ 92,382 ​ $ 86,661 ​ $ 94,653 ​ $ 92,998 Gross profit ​ 28,042 ​ 26,460 ​ 28,140 ​ 25,933 Net income ​ 4,035 ​ 2,896 ​ 4,013 ​ 2,699 Basic earnings per share ​ 0.43 ​ 0.30 ​ 0.42 ​ 0.28 Diluted earnings per share ​ 0.42 ​ 0.30 ​ 0.42 ​ 0.28 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ First Second Third Fourth Year 2019 ​ Quarter ​ Quarter ​ Quarter ​ Quarter Revenues ​ $ 93,896 ​ $ 92,630 ​ $ 96,633 ​ $ 87,925 Gross profit ​ 27,662 ​ 28,422 ​ 30,030 ​ 26,470 Net income ​ 4,470 ​ 4,445 ​ 4,618 ​ 3,489 Basic earnings per share ​ 0.48 ​ 0.47 ​ 0.49 ​ 0.37 Diluted earnings per share ​ 0.48 ​ 0.47 ​ 0.49 ​ 0.37 ​ Note: The sum of the quarterly net income per share (basic and diluted) may differ from the annual net income per share (basic and diluted) because of differences in the weighted average number of common shares outstanding and the common shares used in the quarterly and annual computations as well as differences in rounding. ​ ​ 62 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable. ​