What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-05 compared with 2023-03-07 · 225 added, 356 removed, 642 unchanged (48% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Allied Motion Technologies Inc.

To the stockholders and the Board of Directors of Allient 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, 2022 and 2021, 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, 2022, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Allient Inc.

and subsidiaries (formerly Allied Motion Technologies Inc.

and subsidiaries) (the “Company”) as of December 31, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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Such inputs include data associated with historic trends, the demand forecast for inventory on-hand which includes customer orders, and item specific estimates about the timing or level of demand for a specific part.

Inventories at December 31, 2022 totaled approximately $117.1 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 the demand forecast for inventory on-hand 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 .

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 the 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 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 design, implementation, and operating effectiveness of controls over management’s review of the periodic calculation of the valuation for obsolete or excess inventory, as well as inventory that is not of saleable quality.

● We tested the effectiveness of internal controls over management’s review of the periodic calculation of the valuation for obsolete or excess inventory, as well as 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 forecast for inventory on-hand 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 or excess inventory, as well as 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, 2022 for indications that the estimate for obsolete or excess inventory, as well as inventory that is not of saleable quality may be understated.

o We evaluated inventory ratios such as days sales of inventory and inventory turnover on a quarter-by-quarter basis.

– We evaluated the appropriateness of specified inputs supporting management’s estimate, including the historic inventory trends and the forecasts.

– We evaluated whether the appropriateness of management’s methodology and assumptions used in developing the estimate are reasonable and consistent with the nature of the inventory, including the evaluation of item specific estimates about the timing or level of demand for a specific part.

– We evaluated management’s ability to accurately estimate obsolete or excess inventory, as well as inventory that is not of saleable quality by comparing actual results to management’s historical estimates.

– We considered events and trends discussed in industry and analyst reports and disclosed in recent press releases from the Company’s major customers (including financial information) when evaluating the reasonableness of their assumptions.

In addition, we also considered any changes within the business, including restructuring events and strategic changes.

/s/ Deloitte & Touche LLP

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We have served as the Company’s auditor since 2018.

ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS

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See accompanying notes to consolidated financial statements.

ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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Diluted weighted average common shares

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation adjustment

Change in accumulated income (loss) on derivatives

Pension adjustments

Change in accumulated (loss) income on derivatives, net of tax

Pension adjustments, net of tax

Comprehensive income

See accompanying notes to consolidated financial statements.

ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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Foreign Currency

Cost of Equity

income (loss) on

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Issuance of restricted stock, net of forfeitures

Share issuance in connection with acquisitions

Stock compensation expense

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Shares withheld for payment of employee payroll taxes

Comprehensive (loss) income

Comprehensive income (loss)

Dividends to stockholders - $ 0.115 per share

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See accompanying notes to consolidated financial statements.

ALLIED MOTION TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Debt issue cost amortization recorded in interest expense

Changes in operating assets and liabilities, net of acquisition:

Changes in operating assets and liabilities, net of acquisitions:

Trade receivables

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Tax withholdings related to net share settlements of restricted stock

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of foreign exchange rate changes on cash

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

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See accompanying notes to consolidated financial statements.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 Industrial, Vehicle, Medical, and Aerospace & Defense markets.

Effective August 23, 2023, Allied Motion Technologies Inc.

(“Allied Motion”) changed its name to Allient Inc.

(“Allient” or the “Company”).

In conjunction with the name change, Allient’s ticker symbol has changed from “AMOT” to “ALNT”.

The name change reflects the Company’s evolution of its business to transform from a products-based business in motion control to a solutions-oriented company that addresses its customers’ requirements for Motion, Controls and Power technologies for a multitude of applications.

The Company is engaged in the business of designing, manufacturing, and selling precision motion, control, power and structural composites to provide integrated system solutions as well as individual products, to a broad spectrum of customers throughout the world primarily for the industrial, vehicle, medical, and aerospace and defense markets.

Principles of Consolidation

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Finished goods

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Machinery, equipment, tools and dies

Construction work in progress

Construction in progress

Furniture, fixtures and other

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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 its 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

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Company can elect to forgo the qualitative assessment and perform the quantitative test.

Additionally, the Company can 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.

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Other Long-Term Assets

Other long-term assets include interest rate derivatives that the Company has entered into in response to the variable interest rate exposure on long-term debt, as well as securities that the Company has purchased with the intent of funding the deferred compensation arrangements for certain executives of the Company.

Other long-term assets include the noncurrent portion of interest rate derivatives of $ 2,177 that the Company has entered into in response to the variable interest rate exposure on long-term debt, as well as 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.

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Ending balance

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Warranty reserve

Income taxes payable

Operating lease liabilities – current

Finance lease obligations – current

Deferred revenue

Contract liabilities

Contingent consideration – current

Other accrued expenses

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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 other (income) expense, net as incurred.

Revenue Recognition

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(1) the weighted average number of common shares outstanding and (2) if not anti-dilutive, the effect of potential common shares determined utilizing the treasury stock method.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Diluted weighted average shares outstanding

For 2022, 2021 and 2020, the anti-dilutive common shares excluded from the calculation of diluted income per share were immaterial.

For 2023, 2022 and 2021, the anti-dilutive common shares excluded from the calculation of diluted income per share were 22,000 , 15,000 , and 2,000 , respectively.

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.

The Company’s comprehensive income as reported in the Consolidated Statements of Income and Comprehensive Income includes net income, foreign currency translation adjustments, the net change in cash flow hedges, net of tax, and defined benefit plan liability adjustments, net of tax.

The Consolidated Statements of Income and Comprehensive Income and Note 13, Accumulated Other Comprehensive Income , contain additional information on the computation of the Company’s comprehensive income.

Fair Value Accounting

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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.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Contingent consideration

The contingent consideration fair value measurement in connection with the acquisition of ALIO Industries (“ALIO”) is based on significant inputs not observable in the market and therefore constitute Level 3 inputs within the fair value hierarchy.

The Company determines the initial fair value of contingent consideration liabilities using a Monte Carlo valuation model, which involves a simulation of future earnings generated during the earn out-period using management’s best estimates, or a probability-weighted discounted cash flow analysis.

The contingent consideration fair value measurement represents amounts in connection with the acquisitions of Sierramotion, which has a maximum amount of $ 2,000 , and ALIO, which does not have a maximum amount.

The measurements are based on significant inputs not observable in the market and therefore constitute Level 3 inputs within the fair value hierarchy.

The contingent consideration at December 31, 2023 for the acquisition of Sierramotion consists of Company stock and was paid in January 2024 at the maximum amount of $ 2,000 .

The contingent consideration at December 31, 2023 for the acquisition of ALIO is paid 50 % in Company stock and 50 % cash, the current portion of which was $ 5,720 and has been paid in February 2024.

Changes to contingent consideration since December 31, 2022 include a $ 2,000 increase due to the acquisition of Sierramotion in the current period and an increase of $ 1,890 , which is included in business development in the consolidated statements of income and comprehensive income, of the estimated fair value of the ALIO contingent consideration related to updated inputs to the timing of anticipated earnings of the acquired entity.

Of the total contingent consideration payable as of December 31, 2023, $ 7,720 was paid in January and February 2024 and is included in accrued liabilities and $ 270 is payable, if earned, in the first half of 2025 and included in other long-term liabilities on the consolidated balance sheet as of December 31, 2023.

Contingent consideration of $ 4,100 is included in other long-term liabilities as of December 31, 2022.

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:

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") No.

(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.

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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.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

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 hedges.

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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.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The current provision for income taxes represents actual or estimated amounts payable or refundable on tax return filings each year.

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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").

Pension and Postretirement Welfare Plans

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Actual results could differ from those estimates.

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 were issued on April 30, 2021.

In lieu of fractional shares, shareholders received a cash payment based on the closing share price of the common stock on the record date.

All share and per share information presented in the consolidated financial statements have been adjusted to reflect the stock split on a retrospective basis for all periods presented.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Twinsburg Consolidation

In September 2021, the Company announced its plans to consolidate its manufacturing facility in Twinsburg, Ohio with its Watertown, New York and Reynosa, Mexico facilities in 2022.

Costs of $ 913 and $ 545 are included in business development on the consolidated statement of income and comprehensive income for the years ended December 31, 2022 and 2021, respectively, related to the consolidation of the Twinsburg facility.

Costs incurred include accelerated lease costs, severance and other payroll related costs, and accelerated depreciation.

The consolidation has been completed as of December 31, 2022.

There are no expenses anticipated to be incurred in 2023 nor any associated accrued liabilities as of December 31, 2022.

Accounting pronouncements not yet adopted

In December 2022, the FASB issued Accounting Standards Update (“ASU”) 2022-06, "Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848"

from December 31, 2022 to December 31, 2024, which is superseding the date from ASU No.

2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting."

This ASU relates to LIBOR or other referenced rates that will be discontinued due to reference rate reform.

The update provides optional expedients to modify contracts under these referenced rates for all entities.

The standard is optional, effective for any interim reporting period beginning March 12, 2020 through December 31, 2024.

Recent Accounting Developments - Not Yet Adopted

In November 2023, the Financial Accounting Standards Board, (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures".

This ASU relates to required disclosures of certain information about reportable segments.

The update adds additional required disclosures on an annual basis as well as expands the requirements for quarterly disclosures.

The standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning December 15, 2024.

The Company is assessing the impact of adopting the standard on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

This enhances the disclosures around rate reconciliation, income taxes paid, and other related topics.

The standard is effective for annual periods beginning after December 15, 2024.

The Company is assessing the impact of adopting the standard on our consolidated financial statements.

On September 22, 2023, the Company acquired 100 % of the ownership interest in Sierramotion Inc.

(“Sierramotion”), a company headquartered in California, that specializes in designing and engineering turn-key motion components and mechatronic solutions for robotic, medical, industrial, defense, semiconductor, and other precision applications.

The preliminary purchase price for Sierramotion of $ 8.4 million includes $ 2.0 million of contingent consideration payable which was paid in January 2024 (Note 1) and at closing consisted of a combination of cash and Company stock.

The intangible assets of $ 4,100 and goodwill of $ 2,876 are expected to be deductible for tax purposes.

The preliminary purchase price allocation is subject to adjustments based on a determination of certain tax matters.

Transaction costs for the acquisition were not material.

The operating results of this acquisition are included in the consolidated financial statements beginning on the acquisition date and the revenue and earnings in the current year interim periods presented are not material.

The revenue and earnings of Sierramotion included within the consolidated statement of income and comprehensive income for the year ended December 31, 2023 is not material.

On May 30, 2022, the Company acquired 100 % of the direct and indirect legal and beneficial ownership of the shares of FPH Group Inc., a corporation incorporated pursuant to the laws of the Province of Ontario and the membership interests of Transtar International, LLC, a Michigan limited liability company, collectively “FPH”.

FPH is an Ontario, Canada headquartered industry leader in the development of technically advanced, reliable and cost-effective electrical drive systems which provide high torque and precision motion for the defense industry, as well as light weighting technologies for existing and future ground-based vehicles in the defense industry.

FPH provides concept engineering, prototyping, validation, and production.

FPH also develops composites, advanced materials and hybrid products and systems that achieve significant weight reduction and higher strength.

This acquisition provides the Company with a deeper penetration within defense applications including the necessary manufacturing licenses and certifications.

The initial purchase price was $ 42,159 consisting of cash of $ 39,359 funded through borrowings under the Amended Revolving Facility, $ 550 in Company stock ( 22,886 shares at $ 24.01 closing stock price on May 27, 2022), and $ 2,250 in the form of 93,728 exchangeable shares (based on the closing price of an equivalent share of the Company’s common stock) of an indirect wholly-owned subsidiary of the Company, each of which is initially exchangeable into one share of Company common stock, subject to adjustment, in accordance with a Support Agreement entered into concurrently with the closing of the transaction.

Subsequent to the acquisition date, the Company made measurement period adjustments to the initial purchase price allocation due to adjustments to closing working capital and income tax matters which resulted in a decrease of the purchase price of $ 1,119 , a decrease in trade receivables of $ 61 , an increase of deferred income tax liabilities of $ 1,607 , an increase in other current liabilities of $ 621 , and an increase to goodwill of $ 1,170 .

The purchase price allocation is subject to adjustments based on a final determination of certain tax matters.

The Company incurred $ 1,057 of transaction costs related to the acquisition of FPH, which are included in business development on the condensed consolidated statements of income and comprehensive income.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The preliminary allocation of the purchase price paid for FPH is based on estimated fair values of the assets acquired and liabilities assumed of FPH as of May 30, 2022, and is as follows (in thousands):

The final purchase price for FPH was $ 41,316 , including a measurement period adjustment during 2023, resulting in a decrease to inventories of $ 1,080 , an increase to purchase price of $ 276 , and an increase to goodwill of $ 1,356 .

The final allocation of the purchase price paid for FPH is based on fair values of the assets acquired and liabilities assumed of FPH and is as follows (in thousands):

Cash and cash equivalents

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Property, plant, and equipment

Right of use assets

Operating lease assets

Intangible assets

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Deferred revenue

Lease liabilities

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Operating lease liabilities

Net deferred income tax liabilities

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The intangible assets acquired consist of customer lists of $ 16,173 , technology of $ 5,731 , and a trade name of $ 707 , which are being amortized over 12 , 10 and 10 years, respectively.

Goodwill generated in the acquisition is related to the assembled workforce, synergies between Allied Motion’s other operations and FPH 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 FPH’s management knowledge in providing complementary product offerings to the Company’s customers.

The operating results of this acquisition are included in the consolidated financial statements beginning on the date of the acquisition.

Revenue of FPH included within the consolidated statements of income and comprehensive income for the year ended December 31, 2022 was $ 12,113 .

Earnings were $ 607 inclusive of $ 1,426 of intangible amortization in the year ended December 31, 2022.

The goodwill resulting from the FPH acquisition is tax deductible.

ThinGap and Airex

On May 24, 2022, the Company acquired 100 % of the outstanding stock of ThinGap, Inc.

(“ThinGap”), a privately-owned California headquartered developer and manufacturer of high performance, zero clogging slotless motors for use in aerospace, defense, and medical applications that require precise performance in a compact, yet high-torque-to-volume solutions.

ThinGap designs, engineers, and manufactures low profile, brushless DC motor kits and assemblies that utilize a proprietary wave-wound stator architecture and highly optimized rotors.

ThinGap expands the Company’s precision motion capabilities and advances its strategy to provide integrated motion solutions in the robotics, semiconductor, and instrumentation markets.

(“ThinGap”), a privately-owned California headquartered developer and manufacturer of high performance, zero cogging slotless motors for use in aerospace, defense, and medical applications that require precise performance in a compact, yet high-torque-to-volume solutions.

On June 17, 2022, the Company acquired 100 % of the membership interests of Airex, LLC (“Airex”), a privately-owned New Hampshire headquartered developer of high precision electromagnetic components and solutions for the aerospace and defense, life sciences, semiconductor, and commercial industrial applications.

Airex combines its patented winding technology with robotic manufacturing to produce linear motors – ironless and iron core, rotary motors, voice coils, wound electromagnetic components and sub-components.

Airex expands the Company’s motor offerings as well as enhances its quality systems to support broad mission critical defense programs, as well as other high demanding industries.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The purchase price, collectively, for ThinGap and Airex was $ 16,527 , comprised of $ 8,224 in cash funded through borrowings under the Amended Revolving Credit Facility and $ 8,303 in Company stock ( 376,500 shares, of which 29,631 shares are subject to an indemnification holdback, at a weighted average stock price of $ 22.05 ).

The purchase price, collectively, for ThinGap and Airex was $ 16,618 .

The initial purchase price, collectively, for ThinGap and Airex was $ 16,527 , comprised of $ 8,224 in cash funded through borrowings under the Amended Revolving Credit Facility and $ 8,303 in Company stock ( 376,500 shares, of which 29,631 shares are subject to an indemnification holdback, at a weighted average stock price of $ 22.05 ).

Subsequent to the acquisition dates, the Company made measurement period adjustments to the initial purchase price allocation due to adjustments to closing working capital which resulted in an increase of purchase price of $ 91 , an increase in deferred revenue of $ 181 , and an increase to goodwill of $ 272 .

These purchase price allocations are subject to adjustments based on a final determination of certain tax matters.

The Company incurred $ 257 of transaction costs related to these acquisitions in 2022, which are included in business development on the condensed consolidated statements of income and comprehensive income.

The preliminary allocation of the purchase price paid is based on estimated fair values of the assets acquired and liabilities assumed as of May 24, 2022 for ThinGap and June 17, 2022 for Airex and is, collectively, as follows:

Cash and cash equivalents

Trade receivables

Other assets, net

Property, plant, and equipment

Right of use assets

Intangible assets

Other current liabilities

Deferred revenue

Lease liabilities

Net deferred income tax liabilities

Net purchase price

There were no measurement period adjustments during 2023 related to the ThinGap and Airex acquisitions.

The purchase price allocations of each of these acquisitions are final.

The intangible assets acquired consist of customer lists of $ 3,800 , technology of $ 2,000 and trade names of $ 200 , which are being amortized over weighted average useful lives of 10 , 12.5 and 10 years , respectively.

Goodwill generated in these acquisitions is related to the assembled workforce, synergies with Allied Motion’s other operations that are expected to occur as a result of the combined engineering knowledge, the ability of the operations to integrate products into more fully integrated system solutions and Allied Motion’s ability to utilize ThinGap and Airex management knowledge in providing complementary product offerings to the Company’s customers.

The operating results of these acquisitions are included in the consolidated financial statements beginning on the date of the acquisition.

Revenue included within the consolidated statement of income and comprehensive (loss) income for the year ended December 31, 2022, related to ThinGap and Airex, collectively, was $ 4,217 .

Earnings were $ 337 inclusive of $ 653 of intangible amortization for the year ended December 31, 2022, respectively.

The goodwill resulting from the ThinGap acquisition is not tax deductible.

The goodwill resulting from the Airex acquisition is tax deductible.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

2021 Acquisitions

Goodwill generated in the above acquisitions is related to the assembled workforce, synergies with Allient’s other operations that are expected to occur as a result of the combined engineering knowledge, the ability of the operations to integrate products into more fully integrated system solutions and Allient’s ability to utilize ThinGap and Airex management knowledge in providing complementary product offerings to the Company’s customers.

Spectrum Controls

On December 30, 2021, the Company acquired Spectrum Controls, Inc.

(“Spectrum Controls”), a Washington headquartered innovator and manufacturer of industrial Input/Output (“I/O”) and universal communications gateway products.

Spectrum Controls designs and manufactures a wide range of highly sophisticated I/O modules, marquee displays, and industrial gateways for broad industrial controls applications through partnerships with programmable logic controller (“PLC”) manufacturers and distributors.

This acquisition provides the Company with the opportunity to enhance its position as a value-added solutions supplier to the industrial automation and industrial controls market.

The purchase price was $ 68,711 , consisting of $ 44,046 paid at closing, $ 26,076 in cash funded through borrowings under the Amended Revolving Facility and $ 17,970 in Company stock ( 502,512 shares at $ 35.76 closing stock price on December 29, 2021).

The remaining $ 24,665 of purchase price represents the acquisition date fair value of two remaining payments of $ 12,500 each to be paid in two equal installments no later than January 4, 2023 and January 4, 2024, respectively, comprised of 50 % cash and 50 % in Company stock.

The December 30, 2021 acquisition of Spectrum Controls, Inc.

(“Spectrum Controls”) included two deferred acquisition payments of which $ 12,500 (comprised of 50 % cash and 50 % Company stock) was paid in January 2023.

One remaining payment as of December 31, 2023 of $ 12,500 was paid in January 2024, comprised of 50 % cash and 50 % in Company stock.

As of December 31, 2023, $ 12,500 is included in accrued liabilities on the consolidated balance sheet.

As of December 31, 2022, $ 12,500 is included in accrued liabilities and $ 12,277 is included in other long-term liabilities on the consolidated balance sheet

On January 4, 2023, the contractual payment of both cash and Company stock was made for the first required deferred acquisition payment.

Subsequent to the acquisition date, the Company made immaterial measurement period adjustments to the initial purchase price allocation due to adjustments to closing working capital.

The allocation of the purchase price is final.

The Company incurred $ 191 and $ 93 of transaction costs related to the acquisition of Spectrum Controls in 2022 and 2021, respectively, which are included in business development on the consolidated statements of income and comprehensive income.

The allocation of the purchase price paid for Spectrum Controls is based on fair values of the assets acquired and liabilities assumed of Spectrum Controls as of December 30, 2021 and is as follows (in thousands):

Cash and cash equivalents

Trade receivables

Other assets, net

Property, plant and equipment

Intangible assets

Current liabilities

Net purchase price

The intangible assets acquired consist of customer lists of $ 21,000 , technology of $ 13,500 , and a trade name of $ 300 , which are being amortized over 18 , 10 and 10 years , respectively.

Goodwill generated in the acquisition is related to the assembled workforce, synergies between Allied Motion’s other operations and Spectrum 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 Spectrum Controls’ management knowledge in providing complementary product offerings to the Company’s customers.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The operating results of this acquisition are included in the consolidated financial statements beginning on the date of the acquisition.

Revenue and earnings related to Spectrum Controls included within the consolidated statement of income and comprehensive income for the year ended December 31, 2021 were inconsequential.

The goodwill resulting from the Spectrum Controls acquisition is tax deductible.

On November 2, 2021, the Company acquired 100 % of the outstanding stock of ORMEC Systems Corp.

(“ORMEC”), a New York headquartered developer and manufacturer of mission critical electro-mechanical automation solutions and motion control products including multi-axis controls, electronic drives and actuators for the automation and aerospace industries.

In addition to its products, ORMEC designs and manufactures complete electro-mechanical and software solutions for custom automation applications.

ORMEC strengthens the Company’s technical expertise and adds a higher level of precision motion control systems and solutions to its offerings.

On November 4, 2021, the Company acquired 100 % of ALIO Industries (“ALIO”), a Colorado headquartered innovator and manufacturer of advanced linear and rotary motion systems for nano-precision applications .

ALIO designs, engineers, and manufactures nano technology motion systems for state-of-the-art applications in silicon photonics, micro

assembly, digital pathology, genome sequencing, laser processing and microelectronics.

ALIO is well recognized for their technology and expertise in nanometer level positioning.

This expertise in high precision positioning and robotic technology solutions is expected to enhance the Company’s portfolio of motion solution offerings.

The purchase price, collectively, for ORMEC and ALIO was $ 33,458 , comprised of $ 23,333 in cash funded through borrowings under the Amended Revolving Credit Facility, $ 5,526 in Company stock ( 150,038 shares at a weighted average stock price of $ 36.83 ), and the fair value of contingent consideration of $ 4,900 , offset by a $ 301 estimated working capital provision.

Subsequent to the acquisition dates, the Company made immaterial measurement period adjustments to the initial purchase price allocation due to adjustments to closing working capital.

The allocation of purchase price is final.

The Company incurred $ 130 and $ 409 of transaction costs related to these acquisitions in 2022 and 2021, respectively, which is included in business development on the consolidated statements of income and comprehensive income.

The allocation of the purchase price paid is based on fair values of the assets acquired and liabilities assumed as of November 2, 2021 for ORMEC and November 4, 2021 for ALIO and is, collectively, as follows (in thousands):

Cash and cash equivalents

Trade receivables

Other assets, net

Property, plant and equipment

Right of use assets

Intangible assets

Other current liabilities

Deferred revenue

Lease liabilities

Net deferred income tax liabilities

Net purchase price

ALLIED MOTION TECHNOLOGIES INC.

The estimated fair value of these identifiable intangible assets were based upon discounted cash flow models, which include assumptions such as forecasted cash flows, customer attrition rates, discount rates, and royalty rates.

Goodwill generated in the acquisitions are related to the assembled workforce, synergies between Allient’s other operations and the acquired company that are expected to occur as a result of the combined engineering knowledge, the ability of each

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The intangible assets acquired consist of technology of $ 5,700 , customer lists of $ 4,000 , and trade names of $ 500 , which are being amortized over weighted average useful lives of 11 , 6 and 10 years , respectively.

Goodwill generated in these acquisitions is related to the assembled workforce, synergies with Allied Motion’s other operations that are expected to occur as a result of the combined engineering knowledge, the ability of the operations to integrate products into more fully integrated system solutions and Allied Motion’s ability to utilize ORMEC and ALIO’s management knowledge in providing complementary product offerings to the Company’s customers.

The operating results of these acquisitions are included in the consolidated financial statements beginning on the date of the acquisition.

Revenue included within the consolidated statement of income and comprehensive income for the year ended December 31, 2021, related to ORMEC and ALIO, collectively, was $ 2,063 and earnings were not material.

The acquisition of ALIO includes contingent consideration initially measured at a fair value of $ 4,900 .

This consideration was reduced by $ 800 during the year ended December 31, 2022, based upon fair valuation of the contingent consideration, and due to an anticipated shift in the timing of the earnings of the acquired entity, largely reflecting supply chain issues experienced within the industry.

Contingent consideration of $ 4,100 is included in other long-term liabilities as of December 31, 2022.

A further explanation of the valuation process is disclosed in Note 1, Business and Summary of Significant Accounting Policies .

The contingent consideration represents the estimated fair value of the Company’s obligations, under a purchase agreement, to make additional payments if certain earnings goals are met through 2024.

The goodwill resulting from the ORMEC acquisition is not tax deductible.

The goodwill resulting from the ALIO acquisition is tax deductible.

Pro Forma Financial Information

The following pro forma financial information presents the combined results of operations if the FPH, ThinGap, and Airex acquisitions had occurred as of January 1, 2021 and Spectrum Controls, ORMEC, and ALIO as of January 1, 2020.

of the operations to integrate each other’s products into more fully integrated system solutions and Allient’s ability to utilize acquired management knowledge in providing complementary product offerings to the Company’s customers.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the combined results of operations if the FPH, ThinGap, and Airex acquisitions had occurred as of January 1, 2021.

Year ended December 31,

Income before income taxes

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 information includes certain adjustments, including depreciation and amortization expense, interest expense, and certain other adjustments.

The pro forma amounts do not reflect adjustments for anticipated operating efficiencies that the Company expects to achieve as a result of these acquisitions.

5 unchanged sentences

Control is defined as the ability to direct the use of and obtain substantially all of the remaining benefits of the product.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

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.

3 unchanged sentences

The Company’s target markets include Industrial, Vehicle, Medical, and Aerospace & Defense.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Determining the Transaction Price

17 unchanged sentences

Aerospace & Defense

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Distribution and Other

Year ended December 31,

3 unchanged sentences

Typically, contracts are paid in arrears and are recognized as receivables after the Company considers whether a significant financing component exists.

Backlog represents written firm orders from a customer to deliver products and, in the case of blanket purchase orders, only includes the portion of the order for which a schedule or release has been agreed to with the customer.

We believe our backlog represents our unsatisfied or partially unsatisfied performance obligations.

Backlog as of December 31, 2023 was $ 276,093 .

The Company expects to recognize 85 % of these performance obligations within the next twelve months with the remaining amount recognized between one and two years .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The opening and closing balances of the Company’s contract liability are as follows (in thousands):

2 unchanged sentences

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 as well as balances assumed in acquisitions.

In the years ended December 31, 2023 and 2022, the Company recognized revenue of $ 4,211 and $ 2,307 , respectively, that was included in the opening contract liabilities balance.

Significant Payment Terms

8 unchanged sentences

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.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

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 .

1 unchanged sentence

Beginning balance

Goodwill acquired (Note 2)

Goodwill acquired

Impact of measurement period adjustments of acquisitions (Note 2)

1 unchanged sentence

Ending balance

The purchase price allocations for FPH, ThinGap, and Airex are not final as of December 31, 2022.

Adjustments to these allocations may result in changes to the amounts recorded for goodwill in future periods.

The purchase price allocation was finalized for ORMEC, ALIO and Spectrum Controls during 2022.

The purchase price allocation for Sierramotion is not final as of December 31, 2023.

Adjustments to this allocation may result in changes to the amounts recorded for goodwill in future periods.

The purchase price allocation was finalized for FPH, ThinGap, and Airex during 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

INTANGIBLE ASSETS

Intangible assets on the Company’s consolidated balance sheets consist of the following (in thousands):

Weighted Average

December 31, 2023

1 unchanged sentence

Customer lists

10 - 19 years

Design and technologies

10 - 15 years

Intangible assets resulting from the 2022 acquisitions of FPH, ThinGap, and Airex were $ 28,611 (Note 2).

Intangible assets resulting from the 2021 acquisitions of ORMEC, ALIO and Spectrum Controls were $ 45,000 (Note 2).

Intangible assets resulting from the 2023 acquisition of Sierramotion was $ 4,100 and from the 2022 acquisitions of FPH, ThinGap, and Airex were $ 28,611 (Note 2).

The intangible assets acquired consist of customer lists, technology, and trade names.

Total amortization expense for intangible assets for the years 2023, 2022 and 2021 was $ 12,313 , $ 11,169 and $ 6,245 , respectively.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Estimated amortization expense for intangible assets is as follows (in thousands):

Year ending December 31,

Amortization Expense

4 unchanged sentences

As of December 31, 2023, the Company had 745,260 shares of common stock available for grant under stock incentive plans.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Restricted Stock

5 unchanged sentences

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, 2023.

Earned grants are then subject to either a 3 year or 5 year service period.

Performance-based grants are generally subject to 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.

1 unchanged sentence

For performance-based awards, the Company assesses the probability of the achievement of the awards during the year and recognizes expense accordingly.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The following is a summary of restricted stock activity during years 2023, 2022 and 2021:

Balance, December 31, 2019

Balance, December 31, 2020

Balance, December 31, 2021

Balance, December 31, 2022

The following is a summary of performance based restricted stock activity during years 2022, 2021 and 2020:

Total performance

Outstanding, December 31, 2019

Performance criteria met

Outstanding, December 31, 2020

Performance criteria met

Outstanding, December 31, 2021

Performance criteria met

Outstanding, December 31, 2022

The performance criteria and forfeitures in the above table did not occur until the Board of Directors approved them during the March 2023, March 2022 and March 2021 meetings.

Unvested Balance, December 31, 2020

Unvested Balance, December 31, 2021

Unvested Balance, December 31, 2022

Unvested Balance, December 31, 2023

Share-Based Compensation Expense

5 unchanged sentences

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 2022, 2021 and 2020)

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

or ii) the annual interest payable on any loan outstanding to the Company from the ESOP.

i) the Board established percentage of pretax income before the contribution ( 5 % in 2023, 2022, and 2021) or ii) the annual interest payable on any loan outstanding to the Company from the ESOP.

Company contributions to the Plan accrued for 2023, 2022 and 2021, were $ 1,591 , $ 1,248 , and $ 1,206 , respectively.

These amounts are included in general and administrative costs in the consolidated statements of income and comprehensive income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Defined Contribution Plan

The Company sponsors the Allied Motion 401(k) Tax Advantaged Investment Plan (“401(k)”) which covers substantially all its U.S.

The Company sponsors the Allient 401(k) Tax Advantaged Investment Plan (“401(k)”) which covers substantially all its U.S.

based employees.

2 unchanged sentences

Net costs related to this defined contribution plan were $ 2,590 , $ 2,146 , and $ 1,672 in 2023, 2022, and 2021, respectively.

These amounts are included in general and administrative costs in the consolidated statements of income and comprehensive income.

For the years ended December 31, 2023, 2022 and 2021 a total of $ 0.115 , $ 0.100 , and $ 0.095 per share on all outstanding shares was declared and paid, respectively.

10 unchanged sentences

Amended Revolving Credit Facility

The Second Amended and Restated Credit Agreement (the “Amended Credit Agreement”), dated as of August 23, 2022, includes a $ 280 million revolving credit facility (the “Amended Revolving Facility”), increased from $ 225 million in the previous credit agreement, under which comparative periods are reported.

Additionally, the referenced index was amended to be the Term Standard Overnight Financing Rate (“SOFR”), whereas the previous credit agreement utilized the London Interbank Offering Rate (LIBOR) as the referenced interest rate.

The Amended Credit Agreement eliminates the previous $ 75 million accordion feature and maintains the original maturity date of February 2025.

Borrowings under the Amended Revolving Facility bear interest at an annual rate equal to the Adjusted SOFR (as defined in the Amended Credit Agreement) which is subject to a floor of 0.00 % plus an appicable rate ranging from 1.00 % to 2.25 % based on the Company’s ratio of total funded indebtedness to consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”).

At December 31, 2022, the applicable SOFR-based borrowing rate was 1.75 % .

As indicated in Note 15, Subsequent Events , the Company entered into the Third Amended and Restated Credit Agreement dated March 1, 2024.

Borrowings under the Amended Revolving Facility bear interest at an annual rate equal to the Adjusted SOFR (as defined in the Amended Credit Agreement) which is subject to a floor of 0.00 % plus an appicable rate ranging from 1.00 % to 2.25 % ( 1.625 % as of December 31, 2023) based on the Company’s ratio of total funded indebtedness to consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”).

A credit spread adjustment of 0.10 % to 0.275 % is also carried on the Amended Revolving Facility.

In addition, the Company is required to pay a commitment fee of between 0.10 % and 0.275 % annually on the unused portion of the Amended Revolving Facility, also based on the Company’s Total Leverage Ratio.

The Amended Revolving Facility is

ALLIED MOTION TECHNOLOGIES INC.

In addition, the Company is required to pay a commitment fee of between 0.10 % and 0.275 % annually on the unused portion of the Amended Revolving Facility, also based on the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

secured by substantially all of the Company’s non-realty assets and is fully and unconditionally guaranteed by certain of the Company’s subsidiaries.

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 includes covenants and restrictions that limit the Company’s ability to incur additional indebtedness, make certain investments, create, incur or assume certain liens, merge, consolidate or sell all or substantially all of its assets and enter into transactions with an affiliate of the Company on other than an arms’ length transaction.

1 unchanged sentence

The Amended Credit Agreement contains financial covenants that require that the Company maintain a minimum interest coverage ratio of at least 3.0 to 1.0 at the end of each fiscal quarter.

In addition, the Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 4.0 to 1.0 ratio (reduced to 3.5 :1.0 for quarters ending on or after December 31, 2023);

In addition, the Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 3.5 to 1.0 ratio ;

provided that the Company may elect to temporarily increase the Leverage Ratio by 0.5 x during the twelve-month period following a material acquisition under the Amended Credit Agreement (“acquisition leverage increase”), subject to certain exceptions.

The Company was in compliance with all covenants at December 31, 2022.

The Company was in compliance with all covenants at December 31, 2023 as well as at each quarter end during 2023.

As of December 31, 2023, the unused Amended Revolving Facility was $ 69,880 .

1 unchanged sentence

The China Credit Facility provides credit of $ 1,450 (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.

The China Facility was a demand revolving facility used for working capital and capital equipment needs at the Company’s China operations.

There were no borrowings under the China Facility during 2023 or 2022.

The Company closed the China Facility during 2023.

DERIVATIVE FINANCIAL INSTRUMENTS

2 unchanged sentences

The Company manages economic risks, including interest rate, and foreign exchange risk primarily through the use of derivative financial instruments.

Beginning in the first quarter of 2021, the Company began entering into foreign currency contracts with 30-day maturities to hedge its short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, New Zealand Dollar, Chinese Renminbi, Swedish Krona, and Canadian Dollar) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates.

Beginning in 2021, the Company began entering into foreign currency contracts with 30-day maturities to hedge its short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, New Zealand Dollar, Chinese Renminbi, Swedish Krona, and Canadian Dollar) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates.

The resulting gains or losses are recorded in other (income) expense, net in the consolidated statements of income and comprehensive income.

To minimize foreign currency exposure, the Company had foreign currency contracts with notional amounts of $ 18,891 at December 31, 2022.

To minimize foreign currency exposure, the Company had foreign currency contracts with notional amounts of $ 22,193 and $ 18,891 at December 31, 2023 and 2022, respectively.

The foreign currency contracts are recorded in the consolidated balance sheets at fair value and resulting gains or losses are recorded in other expense (income), net in the consolidated statements of income and comprehensive income.

2 unchanged sentences

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

ALLIED MOTION TECHNOLOGIES INC.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

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 matured in February 2022.

In March 2020, the Company entered into two additional interest rate swaps with a combined notional amount of $ 20,000 that increased to $ 60,000 in March 2022 and matures in December 2024.

agreements without exchange of the underlying notional amount.

In March 2020, the Company entered into two interest rate swaps with a combined notional amount of $ 20,000 that increased to $ 60,000 in March 2022 and mature in December 2024.

In March 2022 the Company entered into an additional interest rate swap with a notional amount of $ 40,000 that matures in December 2026.

12 unchanged sentences

Prepaid expenses and other assets

Interest rate products

Interest rate swaps

Prepaid expenses and other assets

Interest rate swaps

Other long-term assets

Liability Derivatives

Fair value as of:

Derivatives designated as

Balance Sheet

hedging instruments

Foreign currency contracts

Accrued liabilities

Interest rate products

Accrued liabilities

The table below presents the effect of cash flow hedge accounting on other comprehensive (loss) income (OCI) for the years ended December 31, 2023, 2022 and 2021 (in thousands):

Amount of pre-tax loss recognized in OCI

Amount of pre-tax (gain) loss recognized in OCI

on derivatives

1 unchanged sentence

Year ended December 31,

Interest rate products

Interest rate swaps

Location of gain (loss) reclassified

3 unchanged sentences

Interest expense

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

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, 2023, 2022 and 2021 (in thousands):

4 unchanged sentences

Income Statement Location

Interest rate products

Interest rate swaps

Interest Expense

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2022 and 2021.

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).

Derivative assets :

Gross amounts

Gross amounts not offset in the consolidated

Gross amounts

offset in the

presented in the

balance sheets

of recognized

Cash collateral

balance sheets

Gross amounts

Gross amounts not offset in the consolidated

Gross amounts

offset in the

presented in the

balance sheets

of recognized

Cash collateral

balance sheets

Derivative liabilities:

Gross amounts

of liabilities

Gross amounts not offset in the consolidated

Gross amounts

offset in the

presented in the

balance sheets

of recognized

Cash collateral

balance sheets

Gross amounts

of liabilities

Gross amounts not offset in the consolidated

Gross amounts

offset in the

presented in the

balance sheets

of recognized

Cash collateral

balance sheets

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.

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

The Company does not have any offsetting of derivatives as of December 31, 2023 and 2022.

The provision for income taxes is based on income before income taxes as follows (in thousands):

5 unchanged sentences

Total current provision

Deferred provision

Total deferred (benefit) provision

Deferred benefit

Total deferred benefit

Income tax provision (benefit)

5 unchanged sentences

Effect of foreign tax rate differences

Permanent items, other

Section 162(m) compensation

R&D Credit and incentives

Effect of Tax Cuts and Jobs Act

4 unchanged sentences

Provision for income taxes

ALLIED MOTION TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18 unchanged sentences

Noncurrent deferred income tax liabilities

Net deferred tax liability

Net deferred tax asset (liability)

As of December 31, 2023, the Company has the following gross carryforwards available (in thousands):

8 unchanged sentences

International

R&D Tax Credits

Investment Tax Credits

R&D Tax Credits

2 unchanged sentences

Management considers the scheduled reversal of deferred tax liabilities, projected verifiable future taxable income and tax planning strategies in making this assessment.

In 2022, noncurrent deferred tax assets includes the effects of capitalization and amortization of R&D expenses as required by the 2017 Tax Cuts and Jobs Act.

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 $ 910 and foreign tax credits

ALLIED MOTION TECHNOLOGIES INC.

Starting in 2022, noncurrent deferred tax assets includes the effects of capitalization and amortization of R&D expenses as required by the 2017 Tax Cuts and Jobs Act.

The Company generated excess foreign tax credits in 2017 due to the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

were generated in the amount of $ 92 as a result of a dividend paid from Canada.

The Company determined it is more likely than not that it will not realize a tax benefit from these credits.

The Company has incurred net operating losses in certain states with a tax effected benefit of $ 429 that it is more likely than not will not be realized.

Additionally, the Company has carryforwards of net operating losses and tax credits generated in foreign jurisdictions and has determined it is more likely than not it would not realize a tax benefit of $ 1,600 .

one-time transition tax required by enactment of the Tax Cuts and Jobs Act in the amount of $ 910 and foreign tax credits were generated in the amount of $ 92 as a result of a dividend paid from Canada and, at that time, determined it was more likely than not that it will not realize a tax benefit from these credits.

The Company has incurred net operating losses in certain states with a tax effected benefit of $ 318 as of December 31, 2023 that it is more likely than not will not be realized.

The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed.

5 unchanged sentences

With few exceptions, the Company is no longer subject to tax examinations in the foreign jurisdictions for periods prior to 2018.

Due to a New Zealand tax legislation change in 2021 allowing for the use of pre-acquisition net operating loss carryforwards to be utilized on the acquirer's future period tax returns, the Company recognized $ 8,328 of net operating loss carryforwards generated in pre-acquisition periods by the Dynamic Controls New Zealand entities.

Due to a New Zealand tax legislation change in 2021 allowing for the use of pre-acquisition net operating loss carryforwards to be utilized on the acquirer's future period tax returns, the Company recognized, in 2021, $ 8,328 of net operating loss carryforwards generated in pre-acquisition periods by the Dynamic Controls New Zealand entities.

The net operating loss carryforwards are now available for use by the Company beginning with the New Zealand tax returns filed for the 2020 tax period.

1 unchanged sentence

The Company reduced the unrecognized tax benefit in 2021 as a result of the seller filing its 2020 New Zealand tax return and utilizing $ 68 of the net operating loss carryforwards.

The Company reduced the unrecognized tax benefit in 2022 by $ 19 2 as a result of the lapse in the statute of limitations on the 2016 tax return.

The Company will adjust this unrecognized tax benefit in light of changing facts and circumstances and with the lapse of the statute of limitations.

3 unchanged sentences

Additions from tax legislation changes for net operating loss carryforwards

Reductions related to net operating loss usage on 2020 tax returns

Currency Translation

Reductions related to the lapse of the statute of limitations

Effect of foreign currency translation

Ending balance

___________________________

(1) No other unrecognized tax benefits were recognized in periods prior to the year ended December 31, 2021 that, if recognized, would reduce the effective tax rate.

It is reasonably possible that a reduction of approximately $ 0.2 million of the balance of unrecognized tax benefits may occur within the next twelve months as a result of the lapse of the statute of limitations.

As of December 31, 2023, approximately $ 0.6 million of unrecognized tax benefits would favorably impact the effective tax rate, if recognized.

It is the Company’s policy to include interest and penalties related to income tax liabilities in income tax expense in the consolidated statements of income and comprehensive income.

In addition, the Company records uncertain tax positions in accordance with ASC 740.

No interest or penalties related to income tax liabilities were recognized for the years ended December 31, 2022, 2021 and 2020.

No material interest or penalties related to income tax liabilities were recognized for the years ended December 31, 2023, 2022, and 2021.

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.

In 2021, the Company distributed a portion of these foreign earnings which have been previously taxed in the United States and remitted $ 236 of foreign withholding taxes.

ALLIED MOTION TECHNOLOGIES INC.

In 2021, the Company distributed a portion of these

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

foreign earnings which have been previously taxed in the United States and remitted $ 236 of foreign withholding taxes.

In 2021, the Company made distributions between its German subsidiaries and remitted $ 1,493 of foreign withholding taxes.

13 unchanged sentences

Supplemental cash flow information related to the Company’s operating and finance leases for the years ended December 31, 2023 and 2022 are as follows (in thousands):

Cash paid for amounts included in the measurement of operating leases

Cash paid for amounts included in the measurement of finance lease obligations

Right of use ("ROU") assets obtained in exchange for operating lease obligations

ROU assets obtained in acquisitions for operating lease obligations (Note 2)

ROU assets obtained in exchange for finance lease obligations

ALLIED MOTION TECHNOLOGIES INC.

Cash paid for operating leases

Cash paid for interest on finance lease obligations

Assets acquired under operating leases

Assets acquired under finance leases

Operating lease assets obtained in acquisitions

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9 unchanged sentences

Total lease liabilities

As of December 31, 2022, the Company has entered into leases for building renewal and expansion, with future minimum lease payments of $ 7,999 that have not yet commenced.

The Company leases certain facilities from companies for which a member of management is a part owner.

12 unchanged sentences

The amount of the liability is comprised of liabilities from previous contributions.

Amounts accrued relating to previous periods are $ 3,870 and $ 4,636 as of

ALLIED MOTION TECHNOLOGIES INC.

Amounts accrued relating to previous periods are $ 4,305 and $ 3,870 as of December 31, 2023 and 2022, respectively, which is included in other long-term liabilities in the consolidated balance sheets at December 31, 2023 and 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

December 31, 2022 and 2021, respectively, which is included in other long-term liabilities in the consolidated balance sheets at December 31, 2022 and 2021.

ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated Other Comprehensive (Loss) Income (“AOCI”) for the years ended December 31, 2023 and 2022 is comprised of the following:

Foreign Currency

Defined Benefit

Tax Effect of

Plan Liability

Cash Flow Hedges

At December 31, 2022

Unrealized gain (loss) on cash flow hedges

Amounts reclassified from AOCI

Pension adjustments, net of tax

Foreign currency translation gain

At December 31, 2023

Foreign Currency

Defined Benefit

Tax Effect of

Plan Liability

Cash Flow Hedges

At December 31, 2021

Unrealized gain (loss) on cash flow hedges

Amounts reclassified from AOCI

Pension adjustments, net of tax

Foreign currency translation loss

At December 31, 2022

SEGMENT INFORMATION

7 unchanged sentences

Revenues derived from foreign subsidiaries and identifiable assets outside of the United States are primarily attributable to Europe, China, Mexico and New Zealand.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

Sales to customers outside of the United States by all subsidiaries were $ 239,897 , $ 214,017 and $ 185,288 during 2023, 2022, and 2021, respectively.

For 2022, 2021 and 2020 one customer accounted for 11 %, 15 % and 15 % of revenues, respectively, and as of December 31, 2022 and 2021 for 8 % and 10 % of trade receivables, respectively.

For 2023, 2022, and 2021 one customer (Customer A) accounted for 10 %, 11 %, and 15 % of revenues, respectively, and one customer (Customer B) accounted for 12 % in 2023 and less than 10 % in 2022 and 2021.

As of December 31, 2023 and 2022 Customer B accounted for 15 % and 10 % of trade receivables, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share data)

SUBSEQUENT EVENTS

Credit Agreement Amendment

On March 1, 2024, the Company entered into a Third Amended and Restated Credit Agreement (the “2024 Amended Credit Agreement”) for a $ 280 million revolving credit facility (the “2024 Amended Revolving Facility”).

The significant changes made to the Company’s existing credit facility by the 2024 Amended Credit Agreement include:

i) providing for a $ 50 million accordion amount and ii) extending the term to March 1, 2029.

Additionally, the Company has entered into a $150 million fixed-rate private shelf facility (the “2024 Note Payable Agreement”) under which no note borrowings have occurred to date.

These agreements, collectively, are referred to as the “2024 Credit and Note Payable Agreements”.

Borrowings under the 2024 Amended Revolving Facility will bear interest at the Term SOFR Rate (as defined in the 2024 Amended Credit Agreement) plus a margin of 1.25 % to 2.50 % or the Alternative Base Rate (as defined in the Amended Credit Agreement) plus a margin of 0.25 % to 1.50 %, in each case depending on the Company’s ratio of Funded Indebtedness (as defined in the 2024 Amended Credit Agreement) to Consolidated EBITDA (the “Leverage Ratio”).

In addition, the Company is required to pay a commitment fee of between 0.15 % and 0.325 % quarterly (currently 0.275 %) on the unused portion of the 2024 Amended Revolving Facility, also based on the Company’s Leverage Ratio.

The 2024 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.

Financial covenants under the 2024 Credit and Note Payable Agreements require the Company to maintain a minimum interest coverage ratio of at least 3.0 :1.0 at the end of each fiscal quarter.

In addition, the Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 4.25 :1.0 through December 31, 2024 or greater than 3.75 to 1.0 as of the end of any fiscal quarter thereafter;

provided that the Company may elect to temporarily increase the Leverage Ratio to by 0.5 :1.0 following a material acquisition under the 2024 Credit and Note Payable Agreements.

The 2024 Credit and Note Payable Agreements also include covenants and restrictions that limit the Company’s ability to incur additional indebtedness, merge, consolidate or sell all or substantially all of its assets and enter into transactions with an affiliate of the Company on other than an arms’ length transaction.

These covenants, which are described more fully in the 2024 Credit and Note Payable Agreements, to which reference is made for a complete statement of the covenants, are subject to certain exceptions.

The 2024 Credit and Note Payable Agreements also include customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, if any representation or warranty made by the Company is false or misleading in any material respect, default under certain other indebtedness, certain insolvency or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, the occurrence of certain ERISA events, the invalidity of the loan documents or a change in control of the Company.

The amounts outstanding under the Amended Revolving Facility may be accelerated upon certain events of default.

On January 11, 2024, the Company acquired 100 % of the outstanding shares of SNC Manufacturing Co., Inc.

(a Wisconsin corporation) and Acutran de Mexico, S.A.

(a Mexican corporation), (collectively “SNC”), a premier designer and global manufacturer of electrical transformers serving blue-chip customers in defense, industrial automation, alternative power generation and energy, including electric utilities and renewable energy.

The purchase price consisted of $ 20.0 million in cash paid at closing, subject to customary post-closing working capital adjustments.

The Company expects to determine the preliminary purchase price allocation prior to the end of the first quarter of 2024.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

1 unchanged sentence

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 8. Financial Statements and Supplementary Data