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ALLIENT INC

ALLIENT INCALNTEarnings & Financial Report

Nasdaq · Industrials · Instruments For Meas & Testing of Electricity & Elec Signals

Allient Inc is a global technology and manufacturing firm that designs, produces, and distributes precision motion, control, and power solutions. It serves core segments including aerospace, defense, medical, industrial automation, and commercial mobility, with operations across North America, Europe, and Asia-Pacific.

What changed in ALLIENT INC's 10-K — 2022 vs 2023

Top changes in ALLIENT INC's 2023 10-K

172 paragraphs added · 184 removed · 142 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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We may face additional economic and 8 Table of Contents operational impacts from ESG regulations as well as impacts from our suppliers and customers as they adhere to the laws and regulations. International Operations Our operations outside the United States are conducted through wholly-owned foreign subsidiaries and are located in North America, Europe, and Asia-Pacific.
We may face additional economic and operational impacts from ESG regulations as well as impacts from our suppliers and customers as they adhere to the laws and regulations. 8 Table of Contents International Operations Our operations outside the United States are conducted through wholly-owned foreign subsidiaries and are located in North America, Europe, and Asia-Pacific.
ACQUISITIONS Airex, LLC: 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 products and solutions for the aerospace and defense, life sciences, semiconductor, and commercial industrial applications .
Airex, LLC: 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 products and solutions for the aerospace and defense, life sciences, semiconductor, and commercial industrial applications .
We are headquartered in Amherst, NY, and have global operations and sell to markets across the United States, Canada, South America, Europe and Asia-Pacific. We are known worldwide for our expertise in electro-magnetic, mechanical and electronic motion technology.
We are headquartered in Amherst, NY, and have global production operations and sell to markets across the United States, Canada, South America, Europe and Asia-Pacific. We are known worldwide for our expertise in electro-magnetic, mechanical and electronic motion technology.
We expect our recent acquisitions will further drive our success. Our strong financial condition, along with Allied Systematic Tools (“AST”) continuous improvement initiatives in quality, delivery, and cost provide a positive outlook for the continued long-term growth and profitability of the Company.
We expect our recent acquisitions will further drive our success. Our strong financial condition, along with Allient Systematic Tools (“AST”) continuous improvement initiatives in quality, delivery, and cost provide a positive outlook for the continued long-term growth and profitability of the Company.
MARKETS AND APPLICATIONS The Company’s growth strategy is focused on becoming the recognized leader in designing products and innovating controlled motion solutions in its selected target markets by further developing its products and service platform to utilize multiple Allied Motion technologies to provide enhanced solutions, products, and value for its customers.
MARKETS AND APPLICATIONS The Company’s growth strategy is focused on becoming the recognized leader in designing products and innovating controlled motion solutions in its selected target markets by further developing its products and service platform to utilize multiple Allient technologies to provide enhanced solutions, products, and value for its customers.
Our strategy further defines Allied Motion as being a “technology/know-how” driven company and to remain successful, the company continuously invests in its area of excellence. This platform development emphasizes a combination of technologies to create enhanced products, solutions, and value to meet the emerging needs of the Company’s selected target markets.
Our strategy further defines Allient as being a “technology/know-how” driven company and to remain successful, the company continuously invests in its area of excellence. This platform development emphasizes a combination of technologies to create enhanced products, solutions, and value to meet the emerging needs of the Company’s selected target markets.
Environmental Issues The Company takes its responsibility to be a good steward of the environment seriously and we adopt policies and procedures under the guidance of the Board of Directors that advance our performance.
The Company takes its responsibility to be a good steward of the environment seriously and we adopt policies and procedures under the guidance of the Board of Directors that advance our performance.
We believe our competitive advantages include our electro-magnetic, mechanical and electronic controlled motion expertise, the breadth 7 Table of Contents of our motor technologies and our ability to integrate these technologies with our encoders, gearing, power electronics, digital control technologies and network/feedback communications capabilities, as well as our global presence.
We believe our competitive advantages include our electro-magnetic, mechanical and electronic controlled motion expertise, the breadth of our motor technologies and our ability to integrate these technologies with our encoders, gearing, power electronics, digital control technologies and network/feedback communications capabilities, as well as our global presence.
We cannot quickly establish additional or replacement suppliers for these materials in some cases because of these rigid requirements. For these critical raw materials, we maintain minimum safety stock levels and partner with suppliers through contract to help ensure the continuity of supply.
We cannot quickly establish additional or replacement suppliers for these materials in some cases because of these rigid requirements. For these critical raw materials, we maintain minimum safety stock levels and partner with 7 Table of Contents suppliers through contract to help ensure the continuity of supply.
Allied Motion was established in 1962 under the laws of Colorado and operates in the United States, Canada, Mexico, Europe and Asia-Pacific. We are headquartered in Amherst, New York and the mailing address of our corporate headquarters is 495 Commerce Drive, Suite 3, Amherst, New York 14228. The telephone number at this location is (716) 242-8634. Our website is www.alliedmotion.com.
Allient was established in 1962 under the laws of Colorado and operates in the United States, Canada, Mexico, Europe and Asia-Pacific. We are headquartered in Amherst, New York and the mailing address of our corporate headquarters is 495 Commerce Drive, Suite 3, Amherst, New York 14228. The telephone number at this location is (716) 242-8634. Our website is www.allient.com.
Medical : surgical robots, prosthetics, electric powered surgical hand pieces, programmable pumps to meter and administer infusions associated with chemotherapy, pain control and antibiotics, nuclear imaging systems, radiology 6 Table of Contents equipment, automated pharmacy dispensing equipment, kidney dialysis equipment, respiratory ventilators, heart pumps, and patient handling equipment (e.g., wheel chairs, scooters, stair lifts, patient lifts, transport tables and hospital beds).
Medical : surgical robots, prosthetics, electric powered surgical hand pieces, programmable pumps to meter and administer infusions associated with chemotherapy, pain control and antibiotics, nuclear imaging systems, radiology equipment, automated pharmacy dispensing equipment, kidney dialysis equipment, respiratory ventilators, heart pumps, and patient handling equipment (e.g., wheel chairs, scooters, stair lifts, patient lifts, transport tables and hospital beds).
Our competitors include Altra Industrial Motion, Ametek, Inc., Parker Hannifin Corporation and other smaller competitors. Availability and Prices of Parts and Raw Materials We purchase critical raw materials from a limited number of suppliers due to the technically challenging requirements of the supplied product and/or the lengthy process required to qualify these materials both internally and with our customers.
Our competitors include Ametek, Inc., Parker Hannifin Corporation, Regal Rexnord, and other smaller competitors. Availability and Prices of Parts and Raw Materials We purchase critical raw materials from a limited number of suppliers due to the technically challenging requirements of the supplied product and/or the lengthy process required to qualify these materials both internally and with our customers.
Our engineering and development expenditures for the years ended December 31, 2022 and 2021 were $38,561 and $27,818, respectively, or 8% and 7% of sales in 2022 and 2021, respectively. We believe E&D is critical to our ongoing success and expect to continue to invest at similar levels in the future.
Our engineering and development expenditures for the years ended December 31, 2023 and 2022 were $41,665 and $38,561, respectively, or 7% and 8% of sales in 2023 and 2022, respectively. We believe E&D is critical to our ongoing success and expect to continue to invest at similar levels in the future.
In addition to providing sales and applications support, the solution center function may include final assembly, integration and tests as required to support customers within their geographic region. Sales Backlog: Backlog as of December 31, 2022 was $330,078 compared with $249,927 as of December 31, 2021.
In addition to providing sales and applications support, the solution center function may include final assembly, integration and tests as required to support customers within their geographic region. Sales Backlog: Backlog as of December 31, 2023 was $276,093 compared with $330,078 as of December 31, 2022.
The information required by this item is set forth in Note 13, Segment Information, of the notes to consolidated financial statements contained in Item 8 of this report. Human Capital Employment At December 31, 2022, we employed 2,254 full-time employees worldwide.
The information required by this item is set forth in Note 14, Segment Information, of the notes to consolidated financial statements contained in Item 8 of this report. Human Capital Employment At December 31, 2023, we employed 2,287 full-time employees worldwide.
Of those, approximately 57% are located in North America, 33% are located in Europe and the remainder are located in Asia-Pacific. As of December 31, 2022, 18% of our total workforce were employed in engineering functions, demonstrating our commitment to invest significantly in engineering resources.
Of those, approximately 55% are located in North America, 35% are located in Europe and the remainder are located in Asia-Pacific. As of December 31, 2023, 18% of our total workforce were employed in engineering functions, demonstrating our commitment to invest significantly in engineering resources.
We trade under the ticker symbol “AMOT” on the NASDAQ exchange. The Company maintains a website at www.alliedmotion.com.
We trade under the ticker symbol “ALNT” on the NASDAQ exchange. The Company maintains a website at www.allient.com.
As discussed herein, as a result of the COVID-19 pandemic and supply chain disruptions, we have experienced increased costs and have purposely increased certain inventories to manage global supply chain issues.
As discussed herein, because of the supply chain disruptions, we have experienced increased costs and have purposely increased certain inventories to manage global supply chain issues.
It has programs that emphasize that each employee in the organization is responsible for safety in the workplace. The Company provides a comprehensive safety program that focuses on a zero-incident mindset by providing ongoing training opportunities and review of safety activities and initiative.
It has programs that emphasize that each employee in the organization is responsible for safety in the workplace. The Company provides a comprehensive safety program that focuses on a zero-incident mindset by providing ongoing training opportunities and review of safety activities and initiative. This highly visible effort encourages employee engagement and active management and leadership involvement.
Ethical Business Practices The Company is dedicated to conducting its business with integrity and responsibility. The Company promotes honest and ethical conduct, and the Board has adopted a Code of Ethics and Business Conduct which applies to all employees, directors, and officers.
The Company promotes honest and ethical conduct, and the Board has adopted a Code of Ethics and Business Conduct which applies to all employees, directors, and officers.
Included in backlog as of December 31, 2022 is $21,222 from the acquisitions completed in 2022. The time to convert the majority of backlog to sales is approximately three to nine months. Given the short product lead times, we do not believe that the amount of our backlog of orders is a reliable indication of our future sales.
The time to convert the majority of backlog to sales is approximately three to nine months. Given the short product lead times, we do not believe that the amount of our backlog of orders is a reliable indication of our future sales.
We may on occasion receive multi-year orders from customers for product to be delivered on demand over that time frame. There is no assurance that the Company’s backlog from these customers will be converted into revenue. Major Customer Sales to one customer were 11% of total sales in 2022 and 15% of total sales in 2021.
We may on occasion receive multi-year orders from customers for product to be delivered on demand over that time frame. There is no assurance that the Company’s backlog from these customers will be converted into revenue.
Through the One Team approach for providing products and controlled motion solutions that best address customers’ needs, the Company has broadened the knowledge and skills of its direct sales force, while creating sales and service support in its Solution Centers.
Through the One Team approach for providing products and controlled motion solutions that best address customers’ needs, the Company has broadened the knowledge and skills of its direct sales force, while creating sales and service support in its Solution Centers. This enables the entire sales organization to be capable of selling all products designed, developed and produced by Allient globally.
OTHER FACTORS IMPACTING OUR OPERATIONS Sales and Marketing We design and develop our products within our Technology Centers and can manufacture these products and solutions in various facilities located in the United States, Canada, Mexico, Europe and Asia-Pacific.
OTHER FACTORS IMPACTING OUR OPERATIONS Sales and Marketing We design and develop our products within our Technology Centers and can manufacture these products and solutions in various facilities located in the United States, Canada, Mexico, Europe and Asia-Pacific. We also operate Allient Solution Centers that evaluate and focus all Allient products to create integrated controlled motion solutions for our customers.
We, our customers, and our suppliers also began to experience the effect of a higher interest rate environment. Gross domestic product growth slowed throughout 2022 largely due to the widespread impacts of inflation, increasing interest rates, and more restrictive financial conditions. Supply chain disruptions, labor shortages, and global inflation remain persistent, along with elevated geopolitical instability.
We, our customers, and our suppliers also experienced the effect of a higher interest rate environment. Gross domestic product growth slowed throughout 2022 largely due to the widespread impacts of inflation, increasing interest rates, and more restrictive financial conditions.
Item 1. Business. OVERVIEW Allied Motion Technologies Inc. (“Allied Motion” or the “Company” or “we” or “our”) is a global company that designs, manufactures and sells precision and specialty controlled motion components and systems used in a broad range of industries. Our target markets include Industrial, Vehicle, Medical, and Aerospace & Defense (A&D).
We are a global company that designs, manufactures and sells precision and specialty controlled motion components and systems used in a broad range of industries. Our target markets include Industrial, Vehicle, Medical, and Aerospace & Defense (A&D).
Of these expenditures, no material amounts were charged directly to customers, although we record non-recurring engineering charges to certain customers for custom engineering required to develop products that meet the customer’s specifications.
Of these expenditures, no material amounts were charged directly to customers, although we record non-recurring engineering charges to certain customers for custom engineering required to develop products that meet the customer’s specifications. Environmental Issues On December 14, 2023, Allient published its inaugural Sustainability Report covering the Company’s fiscal year 2022.
While most of the Company’s sales are directly to OEMs, it has expanded its market reach through Distribution channels. Allied Motion Solution Centers : Allied Motion has Solution Centers in China, Europe and North America that enable the design and sale of individual component products as well as integrated controlled motion systems that utilize multiple Allied Motion products and technologies.
Allient Solution Centers : Allient has Solution Centers in China, Europe and North America that enable the design and sale of individual component products as well as integrated controlled motion systems that utilize multiple Allient products and technologies.
The Company is also committed to providing equal opportunity in all aspects of employment. The Company does not engage in or tolerate unlawful conduct, including discrimination, intimidation, or harassment. The Company strives to establish relationships with key organizations and associations that foster diversity and inclusion initiatives in the communities where it is located.
Diversity, Equity, and Inclusion The Company is committed to apply fair labor practices while respecting the national and local laws of the countries and communities where we have operations. The Company is also committed to providing equal opportunity in all aspects of employment. The Company does not engage in or tolerate unlawful conduct, including discrimination, intimidation, or harassment.
This enables the entire sales organization to be capable of selling all products designed, developed and produced by Allied Motion globally. The Company’s primary channels to market include the direct sales force and external authorized Sales Representatives, Agents and Distributors that provide field coverage in Asia-Pacific, Europe, Canada, Israel and the Americas.
The Company’s primary channels to market include the direct sales force and external authorized Sales Representatives, Agents and Distributors that provide field coverage in Asia-Pacific, Europe, Canada, Israel and the Americas. While most of the Company’s sales are directly to OEMs, it has expanded its market reach through Distribution channels.
The controlled motion market is highly fragmented with many competitors, some of which are substantially larger and have greater resources than Allied Motion.
Competitive Environment Our products and solutions are sold into the global market with a large and diverse group of competitors that vary by product, geography, industry and application. The controlled motion market is highly fragmented with many competitors, some of which are substantially larger and have greater resources than Allient.
The Company is committed to identifying a talented and innovative workforce through a culture that promotes human equity and emphasizes the benefits of a diverse and inclusive workforce and pipeline of talent. The Human Capital and Compensation Committee is responsible for setting the tone at the top and the oversight of the Company’s diversity and inclusion initiatives.
The Company strives to establish relationships with key organizations and associations that foster 9 Table of Contents diversity and inclusion initiatives in the communities where it is located. The Company is committed to identifying a talented and innovative workforce through a culture that promotes human equity and emphasizes the benefits of a diverse and inclusive workforce and pipeline of talent.
We also operate Allied Motion Solution Centers that evaluate and focus all Allied Motion products to create integrated controlled motion solutions for our customers. We sell our products and solutions globally to a broad spectrum of customers through our own direct sales force and authorized manufacturers’ representatives and distributors. Our customers include end users and original equipment manufacturers (“OEMs”).
We sell our products and solutions globally to a broad spectrum of customers through our own direct sales force and authorized manufacturers’ representatives and distributors. Our customers include end users and original 6 Table of Contents equipment manufacturers (“OEMs”). Allient Organization: The Company’s sales organization is focused on becoming the best sales and service force in its industry.
A copy of both Codes is also available in print to any stockholder upon written request addressed to Allied Motion Technologies Inc., 495 Commerce Drive, Suite 3, Amherst, NY 14228-2313, Attention: Secretary. Recent Events The continued presence of COVID-19 has and will likely continue to create uncertainties and disruptions to the Company as well as the global economy.
A copy of both Codes is also available in print to any stockholder upon written request addressed to Allient Inc., 495 Commerce Drive, Suite 3, Amherst, NY 14228-2313, Attention: Secretary. Recent Events In 2023 we refined our strategy to expand our vertical market focus to accelerate our growth.
ThinGap expands the Company’s precision motion capabilities and advances its strategy to provide integrated motion solutions in the robotics, semiconductor, and instrumentation markets. Spectrum Controls: On December 30, 2021, we acquired Spectrum Controls, Inc. (“Spectrum Controls”), a Washington headquartered innovator and manufacturer of I/O and Universal Communications Gateway products.
ThinGap expands the 5 Table of Contents Company’s precision motion capabilities and advances its strategy to provide integrated motion solutions in the robotics, semiconductor, and instrumentation markets.
The impact of the conflict on our operational and financial performance will depend on future developments that cannot be predicted. The Company does not believe the impact on our results to be material at this time. The Inflation Reduction Act of 2022 (the “IRA”) was signed into law in August 2022.
The impact of the conflicts on our operational and financial performance will depend on future developments that cannot be predicted.
Specifically, the current conflict in Ukraine has created geopolitical unrest resulting in economic uncertainty and 4 Table of Contents volatility with regard to energy prices, interest rates and our supply chain. We are monitoring the developments as they unfold in order to react accordingly.
The current geopolitical conflicts are creating higher levels of economic uncertainty and increased volatility with respect to energy prices, interest rates, our supply chain, and certain customer ordering patterns. We are closely monitoring the developments and continue to adjust our production platform to react to changing customer ordering patterns and realize efficiencies.
We believe the diversification of the target markets and customers we serve reduces our exposure to negative developments with any single customer. Competitive Environment Our products and solutions are sold into the global market with a large and diverse group of competitors that vary by product, geography, industry and application.
Major Customers Sales to one customer (Customer A) were 10% of total sales in 2023 and 11% of total sales in 2022 and to another customer (Customer B) were 12% of total sales in 2023. We believe the broad diversification of the target markets and customers we serve reduces our exposure to negative developments with any single customer.
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This has resulted in operational and financial challenges and risks. In response, we implemented extensive additional health and safety protocols from time to time in keeping with governmental requirements and best practices.
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Item 1. Business. OVERVIEW 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”.
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As a result of the continued evolving presence of variants of the virus, and related global impacts, there are likely to be ongoing disruptions to certain supply chains as well as impacts on customer demand that may present additional challenges and volatility to our business. During 2022, inflation negatively impacted our input costs and pricing, primarily for labor and materials.
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The name change reflects the Company’s commitment to and progress in transforming its business 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.
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The IRA is federal legislation designed to raise revenue from lowering of prescription drug prices and imposition of certain corporate tax measures, while authorizing spending on energy and climate change initiatives, subsidizing the Affordable Care Act, and enacting certain tax reforms. Management continues to monitor any potential impact of the IRA on our results.
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Throughout its history, the Company has expanded our capabilities to be a leading global provider of motion solutions. More recently, we have been building our controls and power technologies, both organically and through acquisitions. The evolution of these additional pillars of our business enhances our overall value proposition, expands our addressable markets and is aligned with mega technology trends.
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No immediate or direct effect from the legislation is anticipated to have a material impact on our results at this time. The CHIPS and Science Act (“CHIPS”) was signed into law in August 2022. CHIPS is a federal statue providing funding for research and domestic production of semiconductors.
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These advancements required us to refine our strategy to leverage the value opportunity that exists in three technology pillars – Motion, Controls and Power. In addition, we are structuring our organization with focused market selling and support teams to increase solution sales opportunities under our new brand -Allient.
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Additional funding can be provided through CHIPS to various federal agencies as well as towards climate science research. No immediate or direct material effect from the legislation is anticipated to have a material impact on our results at this time.
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This refined strategy is reflected in the change of our corporate name from Allied Motion Technologies Inc. to Allient Inc, short for Allied Nexus Technologies.
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Beginning in the last half of 2021, certain regions of China experienced energy shortages which have, for brief periods of time, impacted our facilities. The impact was not material to our results during 2021 and 2022, however, there continue to be uncertainties related to the energy shortages that may impact us in 2023 and beyond.
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Allient captures the opportunity that exists at the nexus of these three technology pillars and recognizes the unique capabilities the combination offers. 4 Table of Contents Beginning in 2022 and continuing into 2023, inflation negatively impacted our input costs and pricing, primarily for labor and materials.
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We have been able to proactively mitigate the impact of the restrictions on energy usage to date by managing our scheduling at the impacted facilities.
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While gross domestic products began to rebound in 2023, the factors contributing to supply chain disruptions, labor shortages, and global inflation remained persistent into 2023, along with elevated geopolitical instability. There are varying degress of impact on our customers, and thus our business around the world, with Europe experiencing the greatest amount of stress in 2023.
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Spectrum Controls designs and manufactures a wide range of highly sophisticated I/O modules, marquee displays, and 5 Table of Contents industrial gateways for broad industrial controls applications through partnerships with Programmable Logic Controller (“PLC”) manufacturers and distributors.
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Changing order patterns, supply chain disruptions, and the evolution of our business have required us to carry larger inventories in 2023 and 2022 to meet the needs of our customers, especially as they return to a new normal after the disruptions caused by the COVID-19 pandemic.
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This acquisition provides us with the opportunity to enhance our position as a value-added solutions supplier to the industrial automation and industrial controls market. ALIO Industries: On November 4, 2021, we acquired ALIO Industries (“ALIO”), a Colorado headquartered innovator and manufacturer of advanced linear and rotary motion systems for nano-precision applications .
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In addition, aerospace and defense customers ordering patterns continue to change quickly based on the geopolitical conflicts and sovereign governments priorities and budgets to address those conflicts. RECENT ACQUISITIONS Sierramotion: On September 22, 2023, the Company acquired 100% of the interest in Sierramotion Inc.
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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 will enhance our portfolio of motion solution offerings.
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(“Sierramotion”), a privately-owned company specializing in designing and engineering turn-key motion components and mechatronic (mechanical, electrical, and control) solutions for robotic, medical, industrial, defense, semiconductor, and other precision applications. Sierramotion has experience and know-how designing and applying products in electro-mechanical systems with moving magnets or moving coils for rotary, linear, and arc shaped applications.
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ORMEC Systems Corp. : On November 2, 2021, the Company acquired 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.
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They provide customized design and integration capabilities, testing, performance simulations, prototype development, and low volume production for a variety of high precision and custom critical applications.
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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.
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All operations of Airex were moved from New Hampshire to our Tulsa, Oklahoma facility in late 2023.
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Allied Motion Sales Organization: The Company’s sales organization is focused on becoming the best sales and service force in its industry.
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Included in backlog as of December 31, 2023 is $2,344 from the acquisition completed in 2023. The decrease in our backlog is partially driven by the return of our customers to more normal ordering patterns subsequent to the disruptions in business and supply chains which occurred during the COVID-19 pandemic.
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This highly visible effort encourages employee engagement and active management and leadership involvement. ​ ​ 9 Table of Contents Diversity and Inclusion The Company is committed to apply fair labor practices while respecting the national and local laws of the countries and communities where we have operations.
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The report highlights Allient’s vision for and approach to corporate sustainability and details key initiatives it is undertaking in the areas of environmental stewardship, social responsibility and well-being, and corporate governance.
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The report outlines key achievements as well as disclosing key and pertinent data in alignment with the Sustainability Accounting Standards Board and the Task Force on Climate-Related Financial Disclosures reporting standards.
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The Human Capital and Compensation Committee is responsible for setting the tone at the top and the oversight of the Company’s diversity and inclusion initiatives. Ethical Business Practices The Company is dedicated to conducting its business with integrity and responsibility.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

27 edited+2 added−7 removed91 unchanged
If our senior management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could be adversely affected. ​ The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities. ​ Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquired it.
If our senior management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could be adversely affected. ​ The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities. ​ Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the company before we acquire it.
In the past, we have had cybersecurity incidents and we have made, and continue to make investments, seeking to address these threats, including monitoring of networks and systems, hiring of experts to evaluate and test our systems, employee training and security policies for employees and third-party providers. ​ The frequency and the techniques used in these attacks has increased significantly and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.
In the past, we have had cybersecurity incidents and we have made, and continue to make investments, seeking to address these threats, including monitoring of networks and systems, hiring of experts to evaluate and test our systems, employee training and security policies for employees and third-party providers. ​ The frequency and the techniques used in these attacks have increased significantly and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.
Our effective tax rate may be affected by shifts in our mix of earnings in countries with varying statutory tax rates, changes in reinvested foreign earnings, alterations to tax rates, regulations or interpretations and outcomes of any audits performed on previous tax returns. ​ Our operating results could fluctuate significantly. ​ Our quarterly and annual operating results are affected by a wide variety of factors that could materially adversely affect revenues and profitability, including: the timing of customer orders and the deferral or cancellation of orders previously received, the level of orders received which can be shipped in a quarter, fulfilling backlog on a timely basis, competitive pressures on selling prices, changes in the mix of products sold, the unavailability or delays in the receipt of critical inventories, the timing of investments in engineering and development, development of and response to new technologies, and delays in new product qualifications. ​ As a result of the foregoing and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect our business, financial condition, operating results and stock price. ​ We may never realize the full value of our substantial intangible assets. ​ These intangible assets consist primarily of goodwill, customer lists, trade names and technology arising from our acquisitions.
Our effective tax rate may be affected by shifts in our mix of earnings in countries with varying statutory tax rates, changes in reinvested foreign earnings, alterations to tax rates, regulations or interpretations and outcomes of any audits performed on previous tax returns. ​ 16 Table of Contents Our operating results could fluctuate significantly. ​ Our quarterly and annual operating results are affected by a wide variety of factors that could materially adversely affect revenues and profitability, including: the timing of customer orders and the deferral or cancellation of orders previously received, the level of orders received which can be shipped in a quarter, fulfilling backlog on a timely basis, competitive pressures on selling prices, changes in the mix of products sold, the unavailability or delays in the receipt of critical inventories, the timing of investments in engineering and development, development of and response to new technologies, and delays in new product qualifications. ​ As a result of the foregoing and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect our business, financial condition, operating results and stock price. ​ We may never realize the full value of our substantial intangible assets. ​ These intangible assets consist primarily of goodwill, customer lists, trade names and technology arising from our acquisitions.
Although these blackouts have not materially impacted our operations, it remains a risk we may face in the future. ​ STRATEGIC RISKS ​ Our strong organic growth has been and will continue to be enhanced by strategic acquisitions that complement, enhance or expand our business.
Although these blackouts have not materially impacted on our operations, it remains a risk we may face in the future. ​ STRATEGIC RISKS ​ Our strong organic growth has been and will continue to be enhanced by strategic acquisitions that complement, enhance or expand our business.
If our IT systems are damaged or cease to function properly, the networks or service providers we rely upon fail to function properly, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches (including ransomware, denial-of-service attacks, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and 11 Table of Contents availability of our technology systems and data) and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to potential disruption in operations, loss of customers, reputational, competitive and business harm as well as significant costs from remediation, ransom payments, litigation and regulatory actions. ​ We are also subject to an increasing number of evolving data privacy and security laws and regulations.
If our IT systems are damaged or cease to function properly, the networks or service providers we rely upon fail to function properly, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches (including ransomware, denial-of-service attacks, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and availability of our technology systems and data) and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to potential disruption in operations, loss of customers, reputational, competitive and business harm as well as significant costs from remediation, ransom payments, litigation and regulatory actions. ​ We are also subject to an increasing number of evolving data privacy and security laws and regulations.
We cannot assure that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial results. ​ We intend to develop new products and solutions and expand into new markets, which may not be successful and could harm our operating results. ​ We intend to expand into new markets and develop new and modified products and solutions based on our existing technologies and engineering capabilities, including the continued expansion of our controlled motion systems and 15 Table of Contents integrated electronics.
We cannot assure that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that adversely affect our financial results. ​ We intend to develop new products and solutions and expand into new markets, which may not be successful and could harm our operating results. ​ We intend to expand into new markets and develop new and modified products and solutions based on our existing technologies and engineering capabilities, including the continued expansion of our controlled motion systems and integrated electronics.
Any of these manufacturing problems could result in significant costs and liability, as well as negative publicity and damage to our reputation that could reduce demand for our products. ​ ​ 14 Table of Contents We face the potential harms of natural disasters, pandemics, acts of war, terrorism, international conflicts or other disruptions to our operations. ​ Natural disasters, pandemics, acts or threats of war or terrorism, international conflicts, political instability, and the actions taken by governments could cause damage to or disrupt our business operations, our suppliers or our customers, and could create economic instability.
Any of these manufacturing problems could result in significant costs and liability, as well as negative publicity and damage to our reputation that could reduce demand for our products. ​ We face the potential harms of natural disasters, pandemics, acts of war, terrorism, international conflicts or other disruptions to our operations. ​ Natural disasters, pandemics, acts or threats of war or terrorism, international conflicts, political instability, and the actions taken by governments could cause damage to or disrupt our business operations, our suppliers or our customers, and could create economic instability.
Any interruption in the supply from any supplier that serves as a sole source could delay product shipments and have a material adverse effect on our business, financial condition and results of operations. ​ ​ 12 Table of Contents Our profits may decline if the price of raw materials rise and we cannot recover the increases from our customers. ​ We use various raw materials, such as copper, steel, zinc and rare earth magnets, in our manufacturing operations.
Any interruption in the supply from any supplier that serves as a sole source could delay product shipments and have a material adverse effect on our business, financial condition and results of operations. ​ Our profits may decline if the price of raw materials rise and we cannot recover the increases from our customers. ​ We use various raw materials, such as copper, steel, zinc and rare earth magnets, in our manufacturing operations.
An interruption in our access to external financing or financial transactions to hedge risk could affect our business prospects and financial condition. ​ Our indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to our indebtedness could adversely affect our liquidity and financial results. ​ Our ability to service our indebtedness depends on our financial performance, which is affected by prevailing economic 16 Table of Contents conditions and financial, business, regulatory and other factors.
An interruption in our access to external financing or financial transactions to hedge risk could affect our business prospects and financial condition. ​ Our indebtedness may limit our operations and our use of our cash flow, and any failure to comply with the covenants that apply to our indebtedness could adversely affect our liquidity and financial results. ​ Our ability to service our indebtedness depends on our financial performance, which is affected by prevailing economic conditions and financial, business, regulatory and other factors.
These actions may lead to reduced revenues, lower margins and/or a decline in market share, any of which may adversely affect our business, financial condition and results of operations. ​ Quality problems with our products and solutions could harm our reputation, erode our competitive advantage and could result in warranty claims and additional costs. ​ Quality is important to us and our customers, and our products and solutions are held to high quality and performance standards.
These actions may lead to reduced revenues, lower margins and/or a decline in market share, any of which may adversely affect our business, financial condition and results of operations. ​ ​ ​ ​ 12 Table of Contents Quality problems with our products and solutions could harm our reputation, erode our competitive advantage and could result in warranty claims and additional costs. ​ Quality is important to us and our customers, and our products and solutions are held to high quality and performance standards.
Any alleged or actual violations of these regulations may subject us to government scrutiny, severe criminal or civil sanctions and other liabilities and could negatively affect our business, reputation, operating results and financial condition. 18 Table of Contents We are required to comply with various import laws and export control and economic sanctions laws, which may affect our transactions with certain customers, business partners and other persons and dealings between our employees and subsidiaries.
Any alleged or actual violations of these regulations may subject us to government scrutiny, severe criminal or civil sanctions and other liabilities and could negatively affect our business, reputation, operating results and financial condition. ​ We are required to comply with various import laws and export control and economic sanctions laws, which may affect our transactions with certain customers, business partners and other persons and dealings between our employees and subsidiaries.
This litigation could result in significant costs and divert our management’s focus away from operations. ​ We are subject to a variety of litigation and other legal and regulatory proceedings in the course of our business that could adversely affect our financial results. ​ We are subject to a variety of litigation and other legal and regulatory proceedings incidental to our business, including claims for damages arising out of the use of products or services and claims relating to intellectual property, employment, tax, commercial disputes, competition, sales and trading practices, environmental, personal injury, insurance coverage, acquisition, as well as regulatory investigations or enforcement.
This litigation could result in significant costs and divert our management’s focus away from operations. ​ We are subject to a variety of litigation and other legal and regulatory proceedings in the normal course of our business that could adversely affect our financial results. ​ We are subject to a variety of litigation and other legal and regulatory proceedings incidental to our business, including claims for damages arising out of the use of products or services and claims relating to intellectual property, 18 Table of Contents employment, tax, commercial disputes, competition, sales and trading practices, environmental, personal injury, insurance coverage, acquisition, as well as regulatory investigations or enforcement.
While the failure of any single cost containment effort by itself would most likely not significantly impact our results, we cannot give any assurances that we will be successful in controlling material and labor costs to maintain a competitive cost structure. ​ There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure.
While the failure of any single cost containment effort by itself would most likely not significantly 17 Table of Contents impact our results, we cannot give any assurances that we will be successful in controlling material and labor costs to maintain a competitive cost structure. ​ There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure.
Our inability, for technological or other reasons, to successfully develop and introduce new and innovative products and solutions could result in a loss of customers and lower revenues. ​ We face the challenge of accurately aligning our capacity with our demand. ​ We have experienced capacity constraints and longer lead times for certain products and solutions in times of growing demand and have also experienced idle capacity as economies slow or demand for certain products decline.
Our inability, for technological or other reasons, to successfully develop and introduce new and innovative products and solutions could result in a loss of customers and lower revenues. 13 Table of Contents ​ We face the challenge of accurately aligning our capacity with our demand. ​ We have experienced capacity constraints and longer lead times for certain products and solutions in times of growing demand and have also experienced idle capacity as economies slow or demand for certain products decline.
We may not be able to find or complete these transactions, and, if completed, we may experience operational and financial risks in connection with our acquisitions that prevent us from realizing the anticipated benefits and may materially adversely affect our business, financial condition and operating results. ​ Acquisitions are part of our strategic growth plans.
We may not be able to find or complete these transactions, and, if completed, we may experience operational and financial risks in connection with our acquisitions that prevent us from realizing the anticipated benefits and may materially adversely affect our business, financial condition and operating results. ​ ​ 14 Table of Contents Acquisitions are part of our strategic growth plans.
Costs incurred related to the information security breach did not have a material adverse effect on our results of operations in the years ended December 31, 2022, 2021, and 2020.
Costs incurred related to the information security breach did not have a material adverse effect on our results of operations in the years ended December 31, 2023, 2022, and 2021.
In addition, we rely on networks and services, including internet sites, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in conducting our business.
In addition, we rely on networks and services, including internet sites, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, 10 Table of Contents hosted, provided and/or used by third-parties or their vendors, to assist in conducting our business.
There is currently aggressive competition for employees who have experience in technology and engineering. We may not be able to continue to attract and retain engineers or other qualified technical personnel 13 Table of Contents necessary for the development and growth of our business or to replace personnel who may leave our employ in the future.
There is currently aggressive competition for employees who have experience in technology and engineering. We may not be able to continue to attract and retain engineers or other qualified technical personnel necessary for the development and growth of our business or to replace personnel who may leave our employ in the future.
For new associates, and on an annual basis therefore the Company requires associates to take security awareness training and has an on-going phishing recognition training and testing programs. ​ We rely on suppliers to provide equipment, components and services, which creates certain risks and uncertainties that may adversely affect our business. ​ Our business requires that we buy equipment, components and services from third parties.
For new associates, and on an annual basis therefore the Company requires associates to take security awareness training and has an on-going phishing recognition training and testing programs. ​ ​ ​ ​ ​ 11 Table of Contents We rely on suppliers to provide equipment, components and services, which creates certain risks and uncertainties that may adversely affect our business. ​ Our business requires that we buy equipment, components and services from third parties.
These activities expose us to risks, including those related to political and economic uncertainties, transportation delays, labor market disruptions and challenges to protect our intellectual property. ​ FINANCIAL RISKS ​ Foreign currency exchange rates may adversely affect our financial results. ​ Sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our financial results.
These activities expose us to risks, including those related to political and economic uncertainties, transportation delays, labor market disruptions and challenges to protect our intellectual property. ​ 15 Table of Contents FINANCIAL RISKS ​ Foreign currency exchange rates may adversely affect our financial results. ​ Sales and purchases in currencies other than the U.S. dollar expose us to fluctuations in foreign currencies relative to the U.S. dollar and may adversely affect our financial results.
In addition, the laws and regulations governing security of data on IT systems is evolving and adding another layer of complexity in the form of new requirements.
In addition, the laws and regulations governing security of data on IT systems are evolving and adding another layer of complexity in the form of new requirements.
Amortization expenses relating to these intangible assets will continue to reduce our future earnings. ​ 17 Table of Contents Increased healthcare, pension and other costs under the Company’s benefit plans could adversely affect the Company’s financial condition and results of operations. ​ We provide health benefits to many of our employees and the costs to provide such benefits continue to increase annually.
Amortization expenses relating to these intangible assets will continue to reduce our future earnings. ​ Increased healthcare, pension and other costs under the Company’s benefit plans could adversely affect the Company’s financial condition and results of operations. ​ We provide health benefits to many of our employees and the costs of providing such benefits continue to increase annually.
As Europe continues to face impacts from the conflict in Ukraine and sanctions between the European Union and Russia, there are concerns about the availability and costs related to providing resources to meet the energy needs of Europe.
As Europe continues to face impacts from the conflicts in the middle east and in Ukraine and sanctions between the European Union and Russia, there are concerns about the availability and costs related to providing resources to meet the energy needs of Europe.
In addition, we cannot predict the affect that additional or modified environmental regulations may have on us or our customers. 19 Table of Contents ​ Item 1B. Unresolved Staff Comments. Not applicable. ​
In addition, we cannot predict the affect that additional or modified environmental regulations may have on us or our customers. ​ ​ Item 1B. Unresolved Staff Comments. None. ​ ​
We cannot guarantee that we will be able to increase manufacturing capacity to a level that meets demand for our products and solutions, which could prevent us from meeting increased customer demand and could harm our business. However, if we overestimate our demand and overbuild our capacity, we may have significantly underutilized assets and we may experience reduced margins.
We cannot guarantee that we will be able to increase manufacturing capacity, and with the support of sufficiently skilled and cost-effective labor, to a level that meets demand for our products and solutions, which could prevent us from meeting increased customer demand and could harm our business.
The discontinuation of LIBOR is not expected to materially impact our interest rate exposure. ​ Unforeseen exposure to additional income tax liabilities may negatively affect our operating results. ​ Our distribution of taxable income is subject to domestic tax and, as a result of our significant manufacturing and sales presence in foreign countries, foreign tax.
Any such actions could have a material adverse effect on our business, financial condition, results of operations and liquidity. ​ ​ Unforeseen exposure to additional income tax liabilities may negatively affect our operating results. ​ Our distribution of taxable income is subject to domestic tax and, as a result of our significant manufacturing and sales presence in foreign countries, foreign tax.
These risk factors should be considered in addition to our cautionary comments concerning forward-looking statements in this Report, including statements related to markets for our products and trends in our business that involve a number of risks and uncertainties. ​ RISKS RELATED TO THE COVID-19 PANDEMIC ​ Our financial condition and results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19 . ​ The COVID-19 pandemic subjected our business, operations, financial performance, cash flows and financial condition to a number of risks.
These risk factors should be considered in addition to our cautionary comments concerning forward-looking statements in this Report, including statements related to markets for our products and trends in our business that involve a number of risks and uncertainties. ​ OPERATIONAL RISKS ​ Our global sales and operations are subject to a variety of economic, market and financial risks and costs that could affect our profitability and operating results. ​ We do business around the world and are continuing our strategy of enhancing our global optimization.
Removed
We have faced increased operational challenges and costs from the need to protect employee health and safety, workplace disruptions and restrictions on the movement of people, raw materials and goods, both at our own facilities and at our customers and suppliers.
Added
All third parties contracted by the Company have been vetted and have significant reputations in the industry. As such, controls from the third party vendors have been deemed to be adequate prior to any goods or services having been provided.
Removed
The COVID-19 pandemic continues to create challenges for the global economy, and the ultimate impacts and significance of these challenges to our business, financial condition, results of operations, and cash flows will depend greatly on the future course of the COVID-19 pandemic. ​ The COVID-19 pandemic drove changes in our customers’ priorities and practices, as our customers in both the United States and globally confront competing budget priorities and more limited resources.
Added
However, if we overestimate our demand and overbuild our capacity, we may have significantly underutilized assets and we may experience reduced margins.
Removed
To the extent that COVID-19 continues to impact demand for our products and solutions or impairs the viability of some of our customers, our financial condition, results of operations, and cash flows could be adversely affected, and those impacts could be material. ​ The magnitude and duration of the impact of the COVID-19 pandemic on the global economy and the world’s response continue to be uncertain.
Removed
To the extent the pandemic continues to adversely affect portions of our business and our overall operating and financial results, it may also adversely affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results.
Removed
The extent of the pandemic’s effect on our business will depend on future developments, including the duration, spread and intensity of the pandemic and the successful distribution, acceptance, and efficacy of vaccines for COVID-19, all of which are uncertain and difficult to predict. ​ ​ ​ ​ 10 Table of Contents OPERATIONAL RISKS ​ Our global sales and operations are subject to a variety of economic, market and financial risks and costs that could affect our profitability and operating results. ​ We do business around the world and are continuing our strategy of enhancing our global optimization.
Removed
Any such actions could have a material adverse effect on our business, financial condition, results of operations and liquidity. ​ In addition, certain of our variable rate debt uses Term Standard Overnight Financing Rate ("SOFR") as a benchmark for establishing the interest rate, a portion of which is hedged with London Interbank Offering Rate (“LIBOR”) based interest rate derivatives.
Removed
LIBOR has been the subject of proposals for reform, and is currently scheduled to be discontinued on June 30, 2023. The Company expects to amend LIBOR-based interest rate derivative agreements by negotiating new SOFR-based agreements.

Item 2. Properties

Properties — owned and leased real estate

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As of December 31, 2022, the Company occupies facilities as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ ​ Square ​ Owned Description / Use ​ Location ​ Footage ​ Or Leased Corporate headquarters Amherst, New York 6,000 Leased Office and manufacturing facility Amherst, New York 6,000 Leased Office and manufacturing facility ​ Arvada, Colorado ​ 15,000 ​ Leased Office and manufacturing facility ​ Bellevue, Washington ​ 30,000 ​ Leased Office and manufacturing facility ​ Camarillo, California ​ 14,500 ​ Leased Office and manufacturing facility Changzhou, China 40,000 Leased Office Christchurch, New Zealand 27,000 Leased Office Dayton, Ohio 29,000 Owned Office and manufacturing facility Dayton, Ohio 25,000 Leased Office and manufacturing facility Dordrecht, The Netherlands 32,000 Leased Office and manufacturing facility Dothan, Alabama 88,000 Owned Office Ferndown, Great Britain 1,000 Leased Office and manufacturing facility Germantown, Wisconsin 99,000 Leased Office and manufacturing facilities Kelheim, Germany 154,000 Leased Office Kidderminster, Great Britain 6,200 Leased Office and manufacturing facility ​ London, Ontario, Canada ​ 48,500 ​ Leased Office and manufacturing facility Mrakov, Czech Republic 42,000 Leased Office Oakville, Ontario, Canada 3,500 Leased Office and manufacturing facility Owosso, Michigan 85,000 Owned Office and manufacturing facility Porto, Portugal 53,000 Owned Office and manufacturing facility Reynosa, Mexico 50,000 Leased Office and manufacturing facility ​ Rochester, New York ​ 15,000 ​ Leased Office ​ Roseville, Michigan ​ 5,300 ​ Leased Office and manufacturing facility ​ Somersworth, New Hampshire ​ 15,000 ​ Leased Office and manufacturing facility Stockholm, Sweden 25,000 Leased Office and manufacturing facility Suzhou, China 41,000 Leased Office and manufacturing facility Tulsa, Oklahoma 172,000 Leased Office and manufacturing facility Watertown, New York 107,000 Owned ​ The Company’s management believes the above-described facilities are adequate to meet the Company’s current and foreseeable needs.
As of December 31, 2023, the Company occupies facilities as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate ​ ​ ​ ​ ​ Square ​ Owned Description / Use ​ Location ​ Footage ​ Or Leased Corporate headquarters and manufacturing facility Amherst, New York 21,300 Leased Office and manufacturing facility ​ Arvada, Colorado ​ 15,000 ​ Leased Office and manufacturing facility ​ Bellevue, Washington ​ 30,000 ​ Leased Office and manufacturing facility ​ Camarillo, California ​ 14,500 ​ Leased Office and manufacturing facility Changzhou, China 40,000 Leased Office Christchurch, New Zealand 27,000 Leased Office Dayton, Ohio 29,000 Owned Office and manufacturing facility Dayton, Ohio 25,000 Leased Office and manufacturing facility Dordrecht, The Netherlands 32,000 Leased Office and manufacturing facility Dothan, Alabama 88,000 Owned Office and manufacturing facility Germantown, Wisconsin 99,000 Leased Office and manufacturing facilities Kelheim, Germany 154,000 Leased Office Kidderminster, Great Britain 6,200 Leased Office and manufacturing facility ​ London, Ontario, Canada ​ 48,500 ​ Leased Office and manufacturing facility ​ Loomis, California ​ 3,600 ​ Leased Office and manufacturing facility Mrakov, Czech Republic 42,000 Leased Office Oakville, Ontario, Canada 3,500 Leased Office and manufacturing facility Owosso, Michigan 85,000 Owned Office and manufacturing facility Porto, Portugal 53,000 Owned Office and manufacturing facility Reynosa, Mexico 50,000 Leased Office and manufacturing facility ​ Rochester, New York ​ 15,000 ​ Leased Office ​ Roseville, Michigan ​ 5,300 ​ Leased Office and manufacturing facility Stockholm, Sweden 25,000 Leased Office and manufacturing facility Suzhou, China 41,000 Leased Office and manufacturing facility Tulsa, Oklahoma 172,000 Leased Office and manufacturing facility Watertown, New York 107,000 Owned ​ The Company’s management believes the above-described facilities are adequate to meet the Company’s current and foreseeable needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings. 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. ​ Item 4. Mine Safety Disclosures. Not applicable. 20 Table of Contents PART II
Item 3. Legal Proceedings. 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. ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Shares withheld for tax withholding obligations do not affect the total number of shares available for repurchase under any approved common stock repurchase plan. At December 31, 2022, the Company did not have an authorized stock repurchase plan in place . ​ Item 6. [Reserved] ​ ​ ​ 22 Table of Contents
Shares withheld for tax withholding obligations do not affect the total number of shares available for repurchase under any approved common stock repurchase plan. At December 31, 2023, the Company did not have an authorized stock repurchase plan in place . ​ Item 6. [Reserved] ​ 23 Table of Contents
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Allied Motion’s common stock is listed on the Nasdaq Global Market System and trades under the symbol AMOT.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Allient’s common stock is listed on the Nasdaq Global Market System and trades under the symbol ALNT.
The number of holders of record as reported by the Company’s transfer agent of the Company’s common stock as of the close of business on March 7, 2023 was 226. Dividends During 2022 and 2021, we declared regular quarterly cash dividends on our common stock. We paid $0.025 in each quarter of 2022.
The number of holders of record as reported by the Company’s transfer agent of the Company’s common stock as of the close of business on March 5, 2024 was 218. Dividends During 2023 and 2022, we declared regular quarterly cash dividends on our common stock.
We paid $0.02 in the first quarter of 2021 and $0.025 per quarter for the remainder of 2021 . While it is our current intention to pay regular quarterly cash dividends, any decision to pay future cash dividends will be made by our Board and will depend on our earnings, financial condition and other factors.
While it is our current intention to pay regular quarterly cash dividends, any decision to pay future cash dividends will be made by our Board and will depend on our earnings, financial condition and other factors.
Performance Graph The following performance graph and tables reflect the five year change in the Company’s cumulative total stockholder return on Common Stock as compared with the cumulative total return of the NASDAQ Stock Market Index and the S&P Electrical Components and Equipment Index for a $100 investment made on December 31, 2017, including reinvestment of any dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Allied Motion Technologies ​ $ 100.00 ​ $ 135.39 ​ $ 147.40 ​ $ 155.82 ​ $ 167.34 ​ $ 160.14 NASDAQ (U.S.) ​ $ 100.00 ​ $ 97.16 ​ $ 132.81 ​ $ 192.47 ​ $ 235.15 ​ $ 158.65 S&P Electrical Components & Equipment ​ $ 100.00 ​ $ 85.84 ​ $ 118.91 ​ $ 143.57 ​ $ 188.59 ​ $ 163.48 Peer Group ​ $ 100.00 ​ $ 91.22 ​ $ 108.53 ​ $ 132.50 ​ $ 153.88 ​ $ 130.04 ​ The above performance graph is a transitional graph as the Company transitions from the S&P Electrical Components & Equipment index to a Peer Group which includes the following stocks: LSI Industries, Moog, Inc., Onto Innovation, Preformed Line, Proto Labs, Inc., Helios Tech Inc., Thermon Group, Altra Industrial Motion, Astronics Corporation, Aeroenvironment, Columbus McKinnon, Franklin Electric, and Novanta, Inc.
Performance Graph The following performance graph and tables reflect the five year change in the Company’s cumulative total stockholder return on Common Stock as compared with the cumulative total return of the NASDAQ Stock Market Index and our custom Peer Group for a $100 investment made on December 31, 2018, including reinvestment of any dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Allient Inc. ​ $ 100.00 ​ $ 108.87 ​ $ 115.09 ​ $ 123.60 ​ $ 118.28 ​ $ 103.00 NASDAQ (U.S.) ​ $ 100.00 ​ $ 136.69 ​ $ 198.10 ​ $ 242.03 ​ $ 163.28 ​ $ 236.17 Peer Group ​ $ 100.00 ​ $ 118.97 ​ $ 145.25 ​ $ 168.68 ​ $ 142.55 ​ $ 199.73 ​ The Peer Group in the above graph includes the following stocks: LSI Industries, Moog, Inc., Onto Innovation, Preformed Line, Proto Labs, Inc., Helios Tech Inc., Thermon Group, Altra Industrial Motion, Astronics Corporation, Aeroenvironment, Columbus McKinnon, Franklin Electric, and Novanta, Inc. 22 Table of Contents Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares Maximum Number of Shares ​ ​ Number of Shares ​ Average Price Paid ​ Purchased as Part of Publicly ​ that May Yet Be Purchased Period ​ Purchased (1) ​ per Share ​ Announced Plans or Programs ​ Under the Plans or Programs 10/01/23 to 10/31/23 — ​ $ — — — 11/01/23 to 11/30/23 385 ​ 26.19 — — 12/01/23 to 12/31/23 8,868 ​ 29.15 — — Total 9,253 ​ $ 29.02 — — (1) As permitted under the Company’s equity compensation plan, these shares were withheld by the Company to satisfy tax withholding obligations for employees in connection with the vesting of stock.
Removed
The Company believes this Peer Group is a closer representation of our industries and market capitalization. 21 Table of Contents ​ Issuer Purchases of Equity Securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Shares Maximum Number of Shares ​ ​ Number of Shares ​ Average Price Paid ​ Purchased as Part of Publicly ​ that May Yet Be Purchased Period ​ Purchased (1) ​ per Share ​ Announced Plans or Programs ​ Under the Plans or Programs 10/01/22 to 10/31/22 — ​ $ — — — 11/01/22 to 11/30/22 — ​ — — — 12/01/22 to 12/31/22 8,500 ​ 35.22 — — Total 8,500 ​ $ 35.22 — — (1) As permitted under the Company’s equity compensation plan, these shares were withheld by the Company to satisfy tax withholding obligations for employees in connection with the vesting of stock.
Added
We paid $0.025 in the first quarter of 2023 and $0.03 in the second, third, and fourth quarter of 2023, and $0.025 in each quarter of 2022.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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In conducting this annual impairment test, we may first perform a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value. If we determine that it is not more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, no further goodwill impairment testing is required.
In conducting this annual impairment test, we may first perform a qualitative assessment of whether it is more-likely-than-not that the reporting unit’s fair value is less than its carrying value. If we determine that it is not more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, no further goodwill impairment testing is required.
Our strategic focus is addressing the critical issues that we believe are necessary to meet the stated long-term goals and objectives of the Company. The majority of the critical issues are focused on growth and profitability initiatives for the Company. One of these initiatives includes product line platform development to meet the emerging needs of our target markets.
Our strategic focus is addressing the critical issues that we believe are necessary to meet the stated long-term goals and objectives of the Company. The majority of the critical issues are focused on growth and profitability initiatives for the Company. One of these initiatives includes product line platform development and rationalization to meet the emerging needs of our target markets.
We remain focused on executing our strategy for growth while streamlining the organization and emphasizing continuous improvement in quality, delivery, cost and innovation as we drive the One Allied approach and expand our value proposition for our customers. Solid strides continue to be made with our multi-product, fully integrated solutions that are leading to increased business.
We remain focused on executing our strategy for growth while streamlining the organization and emphasizing continuous improvement in quality, delivery, cost and innovation as we drive the One Allient approach and expand our value proposition for our customers. Solid strides continue to be made with our multi-product, fully integrated solutions that are leading to increased business.
Our strong financial condition, along with AST continuous improvement initiatives in quality, delivery, and cost allow us to have a positive outlook for the continued long-term growth of our Company. Outlook for 2023 In recent years, we navigated a difficult environment related to the COVID-19 pandemic, while advancing our strategic priorities and delivering solid results.
Our strong financial condition, along with AST continuous improvement initiatives in quality, delivery, and cost allow us to have a positive outlook for the continued long-term growth of our Company. Outlook for 2024 In recent years, we navigated a difficult environment related to the COVID-19 pandemic, while advancing our strategic priorities and delivering solid results.
Allied Motion is an applied technology/know-how motion company, and to grow, we will continue to invest in the technical resources to ensure we can move forward with our mantra to “ create controlled motion solutions that change the game ” and to meet the emerging needs of our customers in our served market segments.
Allient is an applied technology/know-how motion company, and to grow, we will continue to invest in the technical resources to ensure we can move forward with our mantra to “ create controlled motion solutions that change the game ” and to meet the emerging needs of our customers in our served market segments.
Our Strategy Our growth strategy is focused on becoming a leading global controlled motion solution provider in our selected target markets by further developing our products and services platform to utilize multiple Allied Motion technologies which create increased value solutions for our customers.
Our Strategy Our growth strategy is focused on becoming a leading global controlled motion solution provider in our selected target markets by further developing our products and services platform to utilize multiple Allient technologies which create increased value solutions for our customers.
We experienced record orders in 2022, reflecting increases in our Vehicle and Industrial markets. This demand, combined with supply chain constraints, resulted in some inefficiencies and additional costs as our teams worked hard to support and meet customer demand and schedules.
We experienced record orders in 2023, reflecting increases in our Industrial and Vehicle markets. This demand, combined with supply chain constraints, resulted in some inefficiencies and additional costs as our teams worked hard to support and meet customer demand and schedules.
If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the excess, limited to the amount of goodwill allocated to that reporting unit. We performed a qualitative assessment of our single reporting unit as of October 31, 2022.
If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the excess, limited to the amount of goodwill allocated to that reporting unit. We performed a qualitative assessment of our single reporting unit as of October 31, 2023.
For a discussion of our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on March 9, 2022.
For a discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, please refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 7, 2023.
Our record level of backlog, diversified end market penetration and demonstrated agility position us well to perform across varied market trends and give us confidence that we can drive further efficiency, profitable growth and increased free cash flow while delivering long-term value for our shareholders.
Our record level of backlog, diversified end market penetration and demonstrated agility position us well to perform across varied market trends and 25 Table of Contents give us confidence that we can drive further efficiency, profitable growth and increased free cash flow while delivering long-term value for our shareholders.
See Note 1, Business and Summary of Significant Accounting Policies of the notes to consolidated financial statements contained in Item 8 of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations. ​ ​ ​ ​ ​ ​ ​ ​ 27 Table of Contents Operating Results The following discussion is a comparison between fiscal year 2022 and fiscal year 2021 results.
See Note 1, Business and Summary of Significant Accounting Policies of the notes to consolidated financial statements contained in Item 8 of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 28 Table of Contents Operating Results The following discussion is a comparison between fiscal year 2023 and fiscal year 2022 results.
In addition to our strategy described above, time and resources have been spent during 2022 to further understand the ESG ecosystem and developments impacting stakeholder expectations and assess our performance.
In addition to our strategy described above, time and resources have been spent during 2023 to further understand the ESG ecosystem and developments impacting stakeholder expectations and assess our performance.
The Company considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as the contract with the customer. In the normal course of business, the Company does not accept product returns unless the item is defective as manufactured. The Company establishes provisions for estimated returns and warranties.
The Company considers the customer’s purchase 26 Table of Contents order, and the Company’s corresponding sales order acknowledgment as the contract with the customer. In the normal course of business, the Company does not accept product returns unless the item is defective as manufactured. The Company establishes provisions for estimated returns and warranties.
Our strategy further defines Allied Motion as being a “technology/know-how” driven company and to be successful, we continue to invest in our areas of excellence. We have set growth targets for our Company and we will focus and align our resources to meet those targets.
Our strategy further defines Allient as being a “technology/know-how” driven company and to be successful, we continue to invest in our areas of excellence. We have set growth targets for our Company and we will focus and align our resources to meet those targets.
SELLING EXPENSES: Selling expenses increased 27% during 2022 compared to 2021 primarily due to increased costs in connection with our acquisitions as well as sales commissions related to the revenue growth. Selling expenses as a percentage of revenues were comparable at 4% during 2022 and 2021.
SELLING EXPENSES: Selling expenses increased 13% during 2023 compared to 2022 primarily due to sales commissions related to the revenue growth as well as increased costs in connection with our acquisitions. Selling expenses as a percentage of revenues were comparable at 4% during 2023 and 2022.
As of December 31, 2022, we have $117,108 of inventory recorded on our consolidated balance sheet, representing approximately 20% of total assets. A 1% write-down of our inventory would decrease our 2022 net income by approximately $860, or $0.05 per diluted share.
As of December 31, 2023, we have $117,686 of inventory recorded on our consolidated balance sheet, representing approximately 20% of total assets. A 1% write-down of our inventory would decrease our 2023 net income by approximately $900, or $0.05 per diluted share.
As a percentage of revenue, gross margin increased 130 basis points to 31.3% in 2022 from 30.0% in 2021. The gross margin increase was largely driven by volume increases of higher margin products in our Industrial and A&D markets compared to lower volumes of pandemic related Medical market products with lower margins, combined with pricing and margin accretive acquisitions.
As a percentage of revenue, gross margin increased 40 basis points to 31.7% in 2023 from 31.3% in 2022. The gross margin increase was largely driven by volume increases of higher margin products primarily in our Industrial and A&D markets compared to lower volumes of pandemic related Medical market products with lower margins, combined with pricing and margin accretive acquisitions.
However, changes to the factors considered above could affect the estimated fair value of our reporting unit and could result in a goodwill impairment charge in a future period. As of December 31, 2022, we have $126,366 of goodwill recorded on our consolidated balance sheet, representing approximately 21% of total assets.
However, changes to the factors considered above could affect the estimated fair value of our reporting unit and could result in a goodwill impairment charge in a future period. As of December 31, 2023, we have $131,338 of goodwill recorded on our consolidated balance sheet, representing approximately 22% of total assets.
The increase is primarily due to increased costs in connection with our acquisitions and the continued ramp up of development projects to meet the future needs of target markets, as well as supporting growing customer application development needs.
ENGINEERING AND DEVELOPMENT EXPENSES: Engineering and development expenses increased by 8% in 2023 compared to 2022. The increase is primarily due to the continued ramp up of development projects to meet the future needs of target markets and supporting growing customer application development needs, as well as increased costs in connection with our acquisitions.
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); provided that the Company may elect to temporarily increase the Leverage Ratio by 0.5x during the twelve-month period following a material acquisition under the Amended Credit Agreement (“acquisition leverage increase”), subject to certain exceptions.
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 0.5x during the twelve-month period following a material acquisition under the Amended Credit Agreement (“acquisition leverage increase”), subject to certain exceptions.
Our platform development emphasizes a combination of our technologies to create increased value solutions for our customers. The emphasis with new opportunities has evolved from being an individual component provider to becoming a solutions provider whereby the new opportunities utilize multiple Allied Motion technologies in a system solution approach.
Our platform development emphasizes a combination of our technologies to create increased value solutions for our customers while seeking operating efficiencies. The emphasis on new opportunities has evolved from being an individual component provider to becoming a solutions provider whereby the new opportunities utilize multiple Allient technologies in a system solution approach.
Based on our analysis, we believe our existing balances of cash, the flexibility of our Amended Credit Agreement and our currently anticipated operating cash flows will be more than sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months. ​
Based on our analysis, we believe our existing balances of cash, our currently anticipated operating cash flows, and our available financing under agreements in place will be more than sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months. ​
The effective rate differs from the statutory rate primarily due to state income taxes, the impact of foreign tax provisions in the US, the impact of the mix of foreign and domestic income and foreign tax rates, section 162(m) compensation limits, and the benefit of Research and Development tax credits.
The effective rate differs from the statutory rate primarily due to state income taxes, the impact of foreign tax provisions in the U.S., foreign tax rate differences, Section 162(m) compensation limits, and the benefit of Research and Development tax credits and incentives.
In addition, we will continue to execute the ongoing critical issues as defined by our Board approved strategy. 24 Table of Contents The critical issues from that strategy include: 1) Further develop our structure to Win within our selected target markets and customers 2) Improve speed of play in all areas of our business through process improvement 3) Strengthen our balance sheet by improving working capital turns and driving margin improvement.
The critical issues from that strategy include: 1) Further develop our structure to Win within our selected target markets and customers 2) Improve speed of play in all areas of our business through process improvement 3) Strengthen our balance sheet by improving working capital turns and driving margin improvement.
Dividends to shareholders for 2022 and 2021 were $0.10 and $0.095 per share, respectively. The dividend payout ratio was 9% and 6% for 2022 and 2021, respectively when compared with the diluted earnings per share of $1.09 and $1.66, respectively.
Dividends to shareholders for 2023 and 2022 were $0.115 and $0.10 per share, respectively. The dividend payout ratio was 8% and 9% for 2023 and 2022, respectively when compared with the diluted earnings per share of $1.48 and $1.09, respectively.
Impact of Recently Issued Accounting Pronouncements In the normal course of business, we evaluate all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”) or other authoritative accounting bodies to determine the potential impact they may have on our consolidated financial statements.
These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. ​ Impact of Recently Issued Accounting Pronouncements In the normal course of business, we evaluate all new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), Securities and Exchange Commission (“SEC”), Emerging Issues Task Force (“EITF”) or other authoritative accounting bodies to determine the potential impact they may have on our consolidated financial statements.
Sales to U.S. customers were 58% of total sales for 2022 and 54% for 2021, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific. ● Gross profit was $157,259 for 2022, a 30% increase from $121,056 in 2021.
Sales to U.S. customers were 59% of total sales for 2023 and 58% for 2022, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific. ● Gross profit was $183,683 for 2023, a 17% increase from $157,259 in 2022.
We believe this approach will allow us to provide increased value to our customers and improved margins for our Company, and are demonstrated in our acquisitions completed in the second quarter of 2022 as well as the fourth quarter of 2021.
We believe this approach will allow us to provide increased value to our customers and improved margins for our Company and are demonstrated in our acquisitions completed in 2023 and 2022.
Debt payments of $7,585 and $12,248 were made during 2022 and 2021, respectively. At December 31, 2022, the Company had $227,060 of obligations under the Amended Revolving Facility, excluding deferred financing costs.
Debt payments of $28,395 and $7,585 were made during 2023 and 2022, respectively. At December 31, 2023, the Company had $210,120 of obligations under the Amended Revolving Facility, excluding deferred financing costs.
The margin expansion was muted by higher material and labor costs as well as costs associated with addressing the challenging global supply chain environment to meet the needs of our customers. ● Operating income was $31,656 for 2022 compared with $26,026 for 2021, or 6% of revenue in each year. ● Net income was $17,389 for 2022, or $1.09 per diluted share, compared with $24,094, or $1.66 per diluted share, for 2021.
The margin expansion continues to be muted, to some extent, by higher material and labor costs as well as costs associated with addressing the challenging global supply chain environment to meet the needs of our customers. ● Operating income was $42,314 for 2023 compared with $31,656 for 2022, or 7.3% and 6.3% of revenue in 2023 and 2022, respectively. ● Net income was $24,097 for 2023, or $1.48 per diluted share, compared with $17,389, or $1.09 per diluted share, for 2022.
AMORTIZATION OF INTANGIBLE ASSETS: Amortization of intangible assets increased 79% in 2022 compared to 2021, due to the inclusion of the full year of intangible asset amortization of the 2021 acquisitions and the incremental intangible asset amortization from the 2022 acquisitions.
AMORTIZATION OF INTANGIBLE ASSETS: Amortization of intangible assets increased 10% in 2023 compared to 2022, due to the inclusion of the full year of intangible asset amortization of the 2022 acquisitions and, to a lesser extent, the incremental intangible asset amortization from the 2023 acquisition.
The Company was in compliance with all covenants at December 31, 2022. As of December 31, 2022, the unused Amended Revolving Facility was $52,940. The amount available to borrow may be lower and may vary from period to period based upon our debt and EBITDA levels, which impacts our covenant calculations. The Amended Credit Agreement matures in February 2025.
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. The amount available to borrow may be lower and may vary from period to period based upon our debt and EBITDA levels, which impacts our covenant calculations.
There were no borrowings under the China Facility during 2022 or 2021. The Company declared dividends, in total, of $0.10 and $0.095 per share during 2022 and 2021, respectively.
The Amended Credit Agreement matures in February 2025. There were no borrowings under the China Facility during 2023 or 2022. The Company closed the China Facility during 2023. The Company declared dividends, in total, of $0.115 and $0.10 per share during 2023 and 2022, respectively.
All contracts include a standard warranty clause to guarantee that the product complies with agreed specifications. 25 Table of Contents Inventories Inventories are measured on a first-in, first-out basis at the lower of cost or net realizable value.
All contracts include a standard warranty clause to guarantee that the product complies with agreed specifications. Inventories Inventories are measured on a first-in, first-out basis at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Business Combinations The Company allocates the purchase price of an acquired company, including when applicable, the acquisition date fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill.
A 1% write-down of our goodwill would decrease our 2023 net income by approximately $1,000, or $0.06 per diluted share. 27 Table of Contents Business Combinations The Company allocates the purchase price of an acquired company, including when applicable, the acquisition date fair value of contingent consideration between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values, with the residual of the purchase price recorded as goodwill.
Although there is ongoing uncertainty related to the continued impact of COVID-19 and variants on our future results, we believe our diverse markets, our strong market position in many of our businesses, and the steps we have taken to 32 Table of Contents strengthen our balance sheet, such as retaining cash to support shorter term needs and amending our revolving credit facility in 2022 leaves us well-positioned to manage our business through the ongoing impacts of the pandemic as it continues to unfold.
We believe our diverse markets, our strong market position in many of our businesses, and the steps we have taken to strengthen our balance sheet, such as retaining cash to support shorter term needs and amending our revolving credit facility leaves us well-positioned to manage our business.
The increase in backlog as of December 31, 2022, compared to December 31, 2021 includes incremental backlog of $21,222 from the three acquisitions that were completed during 2022. 28 Table of Contents GROSS PROFIT AND GROSS MARGIN: Gross margins improved to 31.3% for 2022, compared to 30.0% for 2021.
The decrease in backlog as of December 31, 2023, compared to December 31, 2022 includes incremental backlog of $2,344 from the acquisition that was completed during 2023. 29 Table of Contents GROSS PROFIT AND GROSS MARGIN: Gross margins improved to 31.7% for 2023, compared to 31.3% for 2022.
The increase in gross margin percentage was largely driven by volume increases of higher margin products in our Industrial and A&D markets compared to lower volumes of pandemic related Medical market products with lower margins, combined with pricing and margin accretive acquisitions.
The increase in gross margin percentage was largely driven by volume increases of higher margin products primarily in our Industrial and A&D markets combined with pricing and margin accretive acquisitions. The margin expansion continues to be muted, to some extent, by the continued increases in material and labor costs..
INTEREST EXPENSE: Interest expense increased by 138% in 2022 compared to 2021 primarily due to higher debt levels in 2022 compared to 2021, largely relating to business acquisition activity, and, to a lesser extent, higher interest rates, offset in part by interest rate swaps. INCOME TAXES: For 2022 and 2021, the effective income tax rate was 26.6% and (4.2)%, respectively.
INTEREST EXPENSE: Interest expense increased by 61% in 2023 compared to 2022 primarily due to higher interest rates, offset in part by the impact of interest rate swaps. INCOME TAXES: For 2023 and 2022, the effective income tax rate was 18.9% and 26.6%, respectively.
See information included in “Non–GAAP Measures” below for a discussion of the non-GAAP measure and reconciliation of net income to Adjusted net income and diluted earnings per share to Adjusted diluted earnings per share. EBITDA AND ADJUSTED EBITDA: EBITDA was $56,859 for 2022 compared to $44,456 for 2021. Adjusted EBITDA was $65,549 and $49,937 for 2022 and 2021, respectively.
Adjusted diluted earnings per share for 2023 and 2022 were $2.30 and $1.88, respectively. Adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See information included in “Non–GAAP Measures” below for a discussion of the non-GAAP measure and reconciliation of net income to Adjusted net income and diluted earnings per share to Adjusted diluted earnings per share.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses increased by 19% during 2022 compared to 2021 due primarily to increased costs in connection with our acquisitions. As a percentage of revenues, general and administrative expenses were 10% and 11% in 2022 and 2021, respectively. ENGINEERING AND DEVELOPMENT EXPENSES: Engineering and development expenses increased by 39% in 2022 compared to 2021.
GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses increased by 15% during 2023 compared to 2022 due primarily to incentive compensation-related expenses due to current year Company performance and increased costs in connection with our acquisitions. As a percentage of revenues, general and administrative expenses were comparable at 10% in both 2023 and 2022.
The increase reflects the economic recovery and the increases in demand from many of our served markets, as certain markets were negatively affected in the prior year period due to the economic environment brought on by the COVID-19 pandemic. Our sales for 2022 were comprised of 58% to U.S. customers and 42% to customers primarily in Europe, Canada and Asia-Pacific.
The increase reflects the economic recovery and the increases in demand from many of our served markets, as certain markets continued to experience supply chain constraints in the prior year period impacting customer order patterns and lead times . Our sales for 2023 were comprised of 59% to U.S. customers and 41% to customers primarily in Europe, Canada and Asia-Pacific.
Refer to information included in “Non-GAAP Measures” below for a discussion of the non-GAAP measure and a reconciliation of net income to EBITDA and Adjusted EBITDA.
Refer to information included in “Non-GAAP Measures” below for a discussion of the non-GAAP measure and a reconciliation of net income to EBITDA and Adjusted EBITDA. 30 Table of Contents Non-GAAP Measures Organic growth, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted earnings per share are provided for information purposes only and are not measures of financial performance under GAAP.
Financial Overview Highlights for our fiscal year ended December 31, 2022, include: ● Revenue was $502,988 for 2022 compared with $403,516 in 2021. The increase in revenues reflects improved sales in certain markets we serve, specifically Industrial and A&D.
Financial Overview Highlights for our fiscal year ended December 31, 2023, include: ● Revenue was $578,634 for 2023 compared with $502,988 in 2022. The increase in revenues reflects the economic growth and increases in demand from many of our served markets.
See information included in “Non – GAAP Measures” below for a discussion of the non-GAAP measure and reconciliation of revenue to revenue excluding foreign currency impacts. ORDER BOOKINGS AND BACKLOG: The 22% increase in orders in 2022 compared to 2021 is due to a 27% increase in volume partially offset by a 5% unfavorable currency impact.
The overall increase in revenue was due to a 15% volume increase and a minimal foreign currency impact. The acquisitions completed in 2022 and 2023 contributed an incremental $10,057 of revenues in 2023. See information included in “Non – GAAP Measures” below for a discussion of the non-GAAP measure and reconciliation of revenue to revenue excluding foreign currency impacts.
Year 2022 compared to 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended 2022 vs. 2021 ​ ​ ​ December 31, ​ Variance (Dollars in thousands, except per share data) 2022 2021 ​ $ % ​ Revenues ​ $ 502,988 ​ $ 403,516 ​ $ 99,472 ​ 25 % Cost of goods sold ​ 345,729 ​ ​ 282,460 ​ 63,269 ​ 22 % Gross profit ​ 157,259 ​ 121,056 ​ 36,203 ​ 30 % Gross margin percentage ​ 31.3 % 30.0 % ​ ​ Operating costs and expenses: ​ ​ ​ ​ ​ Selling ​ 21,877 ​ ​ 17,249 ​ 4,628 ​ 27 % General and administrative ​ 50,677 ​ ​ 42,419 ​ 8,258 ​ 19 % Engineering and development ​ 38,561 ​ ​ 27,818 ​ 10,743 ​ 39 % Business development ​ 3,319 ​ ​ 1,299 ​ 2,020 ​ 156 % Amortization of intangible assets ​ 11,169 ​ ​ 6,245 ​ 4,924 ​ 79 % Total operating costs and expenses ​ 125,603 ​ 95,030 ​ 30,573 ​ 32 % Operating income ​ 31,656 ​ 26,026 ​ 5,630 ​ 22 % Interest expense ​ 7,692 ​ 3,236 ​ 4,456 ​ 138 % Other expense (income), net ​ 283 ​ (323) ​ 606 ​ NM % Total other expense ​ 7,975 ​ 2,913 ​ 5,062 ​ 174 % Income before income taxes ​ 23,681 ​ 23,113 ​ 568 ​ 2 % Income tax (provision) benefit ​ (6,292) ​ 981 ​ (7,273) ​ NM % Net income ​ $ 17,389 ​ $ 24,094 ​ $ (6,705) ​ (28) % ​ ​ ​ ​ ​ ​ Effective tax rate ​ 26.6 % (4.2) % ​ ​ ​ ​ ​ Diluted earnings per share ​ $ 1.09 ​ $ 1.66 ​ $ (0.57) ​ (34) % Bookings ​ $ 566,226 ​ $ 468,449 ​ $ 97,777 ​ 21 % Backlog ​ $ 330,078 ​ $ 249,927 ​ $ 80,151 ​ 32 % ​ REVENUES: The increase in revenues in 2022 reflects improved sales in certain markets we serve, specifically Industrial and A&D.
Year 2023 compared to 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended 2023 vs. 2022 ​ ​ ​ December 31, ​ Variance (Dollars in thousands, except per share data) 2023 2022 ​ $ % ​ Revenues ​ $ 578,634 ​ $ 502,988 ​ $ 75,646 ​ 15 % Cost of goods sold ​ 394,951 ​ 345,729 ​ 49,222 ​ 14 % Gross profit ​ 183,683 ​ 157,259 ​ 26,424 ​ 17 % Gross margin percentage ​ 31.7 % 31.3 % ​ ​ Operating costs and expenses: ​ ​ ​ ​ ​ Selling ​ 24,713 ​ 21,877 ​ 2,836 ​ 13 % General and administrative ​ 58,403 ​ 50,677 ​ 7,726 ​ 15 % Engineering and development ​ 41,665 ​ 38,561 ​ 3,104 ​ 8 % Business development ​ 4,275 ​ 3,319 ​ 956 ​ 29 % Amortization of intangible assets ​ 12,313 ​ 11,169 ​ 1,144 ​ 10 % Total operating costs and expenses ​ 141,369 ​ 125,603 ​ 15,766 ​ 13 % Operating income ​ 42,314 ​ 31,656 ​ 10,658 ​ 34 % Interest expense ​ 12,383 ​ 7,692 ​ 4,691 ​ 61 % Other expense, net ​ 231 ​ 283 ​ (52) ​ (18) % Total other expense, net ​ 12,614 ​ 7,975 ​ 4,639 ​ 58 % Income before income taxes ​ 29,700 ​ 23,681 ​ 6,019 ​ 25 % Income tax provision ​ (5,603) ​ (6,292) ​ 689 ​ (11) % Net income ​ $ 24,097 ​ $ 17,389 ​ $ 6,708 ​ 39 % ​ ​ ​ ​ ​ ​ Effective tax rate ​ 18.9 % 26.6 % ​ ​ ​ ​ ​ Diluted earnings per share ​ $ 1.48 ​ $ 1.09 ​ $ 0.39 ​ 36 % Bookings ​ $ 520,275 ​ $ 566,226 ​ $ (45,951) ​ (8) % Backlog ​ $ 276,093 ​ $ 330,078 ​ $ (53,985) ​ (16) % ​ ​ REVENUES: The increase in revenues in 2023 reflects improved sales in certain markets we serve, specifically Industrial and A&D.
This measure adjusts net income determined in accordance with GAAP to reflect changes in financial results associated with the highlighted expense and income items. 30 Table of Contents The Company’s calculation of revenue excluding foreign currency exchange impacts for 2022 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2022 2021 Revenue as reported ​ $ 502,988 ​ $ 403,516 Currency impact unfavorable (favorable) ​ 22,263 ​ (8,332) Revenue excluding foreign currency exchange impacts ​ $ 525,251 ​ $ 395,184 ​ ​ ​ ​ ​ ​ ​ ​ The Company’s calculation of EBITDA and Adjusted EBITDA for 2022 and 2021 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ 2022 2021 Net income as reported ​ $ 17,389 ​ $ 24,094 Interest expense ​ 7,692 ​ 3,236 Provision (benefit) for income tax ​ 6,292 ​ (981) Depreciation and amortization ​ 25,486 ​ 18,107 EBITDA ​ 56,859 ​ 44,456 Stock-based compensation expense ​ 5,073 ​ 4,161 Business development costs ​ 3,319 ​ 1,299 Foreign currency loss ​ ​ 298 ​ ​ 21 Adjusted EBITDA ​ $ 65,549 ​ $ 49,937 ​ ​ ​ ​ ​ ​ ​ ​ The Company’s calculation of Adjusted net income and Adjusted diluted earnings per share for years ended December 31, 2022 and 2021 is as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ ​ ​ Per diluted ​ ​ Per diluted ​ ​ 2022 ​ share ​ 2021 ​ share Net income as reported ​ $ 17,389 ​ $ 1.09 ​ $ 24,094 ​ $ 1.66 Non-GAAP adjustments, net of tax ​ ​ ​ ​ Discrete income tax benefit ​ — ​ — ​ (7,373) ​ (0.51) Amortization of intangible assets - net ​ 9,812 ​ 0.62 ​ 4,938 ​ 0.34 Income tax valuation allowance ​ — ​ ​ — ​ 506 ​ 0.04 Foreign currency loss - net ​ 228 ​ 0.01 ​ 18 ​ — Business development costs - net ​ 2,542 ​ 0.16 ​ 998 ​ 0.07 Non-GAAP adjusted net income and diluted earnings per share ​ $ 29,971 ​ $ 1.88 ​ $ 23,181 ​ $ 1.60 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31 Table of Contents Liquidity and Capital Resources The Company’s liquidity position as measured by cash and cash equivalents increased by $8,151 to a balance of $30,614 at December 31, 2022 from 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 vs. 2021 ​ 2022 2021 $ Net cash provided by operating activities ​ $ 5,596 ​ $ 25,402 ​ $ (19,806) Net cash used in investing activities ​ ​ (60,011) ​ (60,970) ​ 959 Net cash provided by financing activities ​ ​ 63,605 ​ 35,832 ​ 27,773 Effect of foreign exchange rates on cash ​ ​ (1,039) ​ (932) ​ (107) Net increase (decrease) in cash and cash equivalents ​ $ 8,151 ​ $ (668) ​ $ 8,819 ​ Of the $30,614 cash and cash equivalents on hand at December 31, 2022, $18,566 was located at our foreign subsidiaries and may be subject to withholding tax if repatriated to the U.S.
The Company’s calculation of organic growth for 2023 is as follows: ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, 2023 Revenue increase over prior year ​ ​ 15.0 % Less: Impact of acquisitions and foreign currency ​ ​ 1.9 ​ Organic growth ​ ​ 13.1 % 31 Table of Contents ​ ​ The Company’s calculation of EBITDA and Adjusted EBITDA for 2023 and 2022 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ 2023 2022 Net income as reported ​ $ 24,097 ​ $ 17,389 Interest expense ​ 12,383 ​ 7,692 Provision for income tax ​ 5,603 ​ 6,292 Depreciation and amortization ​ 25,068 ​ 25,486 EBITDA ​ 67,151 ​ 56,859 Stock-based compensation expense ​ 5,477 ​ 5,073 Business development costs ​ 4,275 ​ 3,319 Foreign currency loss ​ ​ 281 ​ ​ 298 Adjusted EBITDA ​ $ 77,184 ​ $ 65,549 ​ ​ ​ ​ ​ ​ ​ ​ The Company’s calculation of Adjusted net income and Adjusted diluted earnings per share for years ended December 31, 2023 and 2022 is as follows (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ ​ ​ Per diluted ​ ​ Per diluted ​ ​ 2023 ​ share ​ 2022 ​ share Net income as reported ​ $ 24,097 ​ $ 1.48 ​ $ 17,389 ​ $ 1.09 Non-GAAP adjustments, net of tax (1) ​ ​ ​ ​ Amortization of intangible assets – net ​ 9,752 ​ 0.60 ​ 9,812 ​ 0.62 Foreign currency loss – net ​ 223 ​ 0.01 ​ 228 ​ 0.01 Business development costs – net ​ 3,386 ​ 0.21 ​ 2,542 ​ 0.16 Non-GAAP adjusted net income and adjusted diluted earnings per share ​ $ 37,458 ​ $ 2.30 ​ $ 29,971 ​ $ 1.88 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Applies a blended federal, state, and foreign tax rate of approximately 21% in 2023 and 23% in 2022 applicable to the non-GAAP adjustments. ​ Liquidity and Capital Resources The Company’s liquidity position as measured by cash and cash equivalents increased by $1,287 to a balance of $31,901 at December 31, 2023 from 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 vs. 2022 (in thousands): 2023 2022 $ Net cash provided by operating activities ​ $ 45,038 ​ $ 5,596 ​ $ 39,442 Net cash used in investing activities ​ ​ (22,607) ​ (60,011) ​ 37,404 Net cash (used in) provided by financing activities ​ ​ (21,317) ​ 63,605 ​ (84,922) Effect of foreign exchange rates on cash ​ ​ 173 ​ (1,039) ​ 1,212 Net increase in cash and cash equivalents ​ $ 1,287 ​ $ 8,151 ​ $ (6,864) ​ Of the $31,901 cash and cash equivalents on hand at December 31, 2023, $20,704 was located at our foreign subsidiaries and may be subject to withholding tax if repatriated to the U.S. 32 Table of Contents During 2023, the cash provided by operating activities increased from 2022 primarily due to increases in net income, adjusted for non-cash items, as well as improvements in working capital, most notably receivables and inventories, due to improvement in 2023 of supply chains as inventories had been significantly impacted by supply chain disruptions during 2022.
As a percentage of revenues, engineering and development expenses were comparable at 8% and 7% for the years ended December 31, 2022 and 2021, respectively. BUSINESS DEVELOPMENT COSTS: The increase in business development costs in 2022 compared to 2021 is due to additional acquisition related costs due to increased merger and acquisition activity and costs related to manufacturing footprint rationalization.
As a percentage of revenues, engineering and development expenses were 7% and 8% for the years ended December 31, 2023 and 2022, respectively.
In 2023, we will focus on leveraging our resources to expand our business in our selected target markets.
In 2024, we will focus on leveraging our resources to expand our business in our selected target markets. In addition, we will continue to execute the ongoing critical issues as defined by our Board approved strategy.
EBITDA and Adjusted EBITDA are non-GAAP measures. EBITDA consists of income before interest expense, provision (benefit) for income taxes, and depreciation and amortization. Adjusted EBITDA also excludes stock-based compensation expense, foreign currency gain/loss and 29 Table of Contents certain other items.
Adjusted EBITDA also excludes stock-based compensation expense, foreign currency gain/loss and certain other items.
Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory costing requires complex calculations that include assumptions for overhead absorption, scrap, sample calculations, manufacturing yield estimates, costs to sell, and the determination of which costs may be capitalized.
Inventory costing requires complex calculations that include assumptions for overhead absorption, scrap, sample calculations, manufacturing yield estimates, costs to sell, and the determination of which costs may be capitalized. The 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.
Included in backlog as of December 31, 2022 is $21,222 contributed by 2022 business acquisitions. ● Debt of $235,454, net of cash of $30,614, increased by $68,343 to $204,840 at December 31, 2022 from debt of $158,960, net of cash of $22,463 of $136,497 at December 31, 2021, primarily as a result of debt to fund acquisitions completed in 2022 and a finance lease obligation in connection with a manufacturing facility expansion. 23 Table of Contents ● We declared and paid a dividend of $0.025 in each quarter of 2022 and declared and paid a dividend of $0.02 in the first quarter of 2021 and $0.025 per quarter for the remainder of 2021 pursuant to our quarterly dividend program.
Included in backlog as of December 31, 2023 is $2,344 contributed by the 2023 business acquisition. 24 Table of Contents ● Debt of $218,402, net of cash of $31,901, decreased by $18,339 to $186,501 at December 31, 2023 from debt of $235,454, net of cash of $30,614 of $204,840 at December 31, 2022, primarily as a result of payments made on debt from cash flows generated by operations, offset in part by borrowings to fund acquisition activities and capital expenditures. ● We declared and paid a dividend of $0.025 in the first quarter of 2023 and $0.03 in each of the second, third, and fourth quarters of 2023 and declared and paid a dividend of $0.025 in each quarter of 2022 pursuant to our quarterly dividend program.
NET INCOME AND ADJUSTED NET INCOME: Net income decreased during 2022 compared to 2021, reflecting the impact of the effect of a $7,373 discrete income tax benefit in the first quarter of 2021 . Operating income increased, reflecting increased revenues and higher gross margin, partially offset by an increase in operating expenses.
NET INCOME AND ADJUSTED NET INCOME: Net income increased during 2023 compared to 2022, primarily due to operating income increases, reflecting increased revenues and higher gross margin, partially offset by an increase in operating expenses and interest expense. Adjusted net income for the years ended December 31, 2023 and 2022 was $37,458 and $29,971, respectively.
The Company expects 2023 capital expenditures to be approximately $18,000 to $23,000. The increase in cash provided by financing activities in 2022 from 2021 includes Amended Revolving Facility borrowings of $71,000 to fund business acquisition activity in the second quarter of 2022, as compared to the $50,500 to fund the three acquisitions in the fourth quarter of 2021.
The 2023 activity includes Amended Revolving Facility borrowings of $7,000 to fund business acquisition activity in the third quarter of 2023, as compared to the $71,000 to fund the three acquisitions in the second quarter of 2022 and, to a lesser extent, inventory requirements during uncertain supply chain environments in 2022.
The valuation of inventory requires us to estimate obsolete or excess inventory, as well as inventory that is not of saleable quality. Historically, our inventory adjustment has been adequate to cover our losses. However, variations in methods or assumptions could have a material impact on our results.
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. Historically, our inventory adjustment has been adequate to cover our losses. However, variations in methods or assumptions could have a material impact on our results.
Net income was 28% lower in 2022 compared to 2021, and earnings per diluted share decreased by 34% as the 2021 results include the impact of a $7,373 (or $0.51 per diluted share) discrete tax benefit in the first quarter of 2021. ● Bookings were a record $566,226 for 2022 compared with $468,449 for 2021, an increase of 21%.
Net income was 39% higher in 2023 compared to 2022, and earnings per diluted share increased by 36% as compared to 2022. ● Bookings were $520,275 for 2023 compared with $566,226 for 2022, a decrease of 8%.
Removed
The increase reflects the economic growth and increases in demand from many of our served markets, as certain markets were negatively affected in the prior year period due to the economic environment brought on by the COVID-19 pandemic . The acquisitions completed in 2021 and 2022 contributed an incremental $73,146 of revenues in 2022.
Added
Certain markets, primarily Industrial, experienced supply-chain constraints in the prior year period impacting customer order patterns and lead times, which began to normalize in 2023. The acquisitions completed in 2022 and 2023 contributed an incremental $10,057 of revenues in 2023.
Removed
Backlog as of December 31, 2022 was $330,078, an increase of 32% from $249,927 at year end 2021.
Added
Decreases in bookings are primarily due to a normalization of customer order patterns as lead times are reducing due to improvement in the global supply chain environment, and, to a lesser extent, economic softening in some European markets. Backlog as of December 31, 2023 was $276,093, a decrease of 16% from $330,078 at year end 2022.
Removed
A 1% write-down of our goodwill would decrease our 2022 net income approximately $924, or $0.06 per diluted share.
Added
ORDER BOOKINGS AND BACKLOG: The 8% decrease in orders in 2023 compared to 2022 is due to an 8% decrease in volume with minimal foreign currency impact.
Removed
These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. During the year ended December 31, 2022, we completed three business combinations for an aggregate purchase price of $57,658.
Added
Decreases in bookings are primarily due to a normalization of customer order patterns as lead times are reducing due to improvement in the global supply chain environment and, to a lesser extent, economic softening in some European markets. The acquisitions completed in 2022 and 2023 contributed an incremental $7,380 of orders in 2023.
Removed
We identified and assigned value to identifiable intangible assets of customer lists, technology, and trade names, and estimated the useful lives over which these intangible assets would be amortized.
Added
BUSINESS DEVELOPMENT COSTS: The increase in business development costs in 2023 compared to 2022 is largely due to fair value changes of contingent consideration of $1.9 million related to acquisitions, manufacturing footprint rationalization, and costs incurred due to current period acquisition activities, offset by lower acquisition-related costs in 2023.
Removed
The estimated fair values 26 Table of Contents 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. The fair value estimates resulted in identifiable intangible assets, in the aggregate, of $28,611.
Added
The effective tax rate for 2023 was lower than the effective tax rate for 2022 primarily due to increases in certain credits and incentives, the realization of certain deferred income tax assets that had been reserved in prior years, as well as the impact of the mix of foreign and domestic income.
Removed
The resulting goodwill, in the aggregate, from these three acquisitions was $21,556. Stock-based Compensation Compensation expense for time-based restricted stock units is measured at the grant date and recognized ratably over the vesting period. We determine the fair value of time-based and performance-based restricted stock units based on the closing market price of our common stock on the grant date.
Added
EBITDA AND ADJUSTED EBITDA: EBITDA was $67,151 for 2023 compared to $56,859 for 2022. Adjusted EBITDA was $77,184 and $65,549 for 2023 and 2022, respectively. EBITDA and Adjusted EBITDA are non-GAAP measures. EBITDA consists of income before interest expense, provision for income taxes, and depreciation and amortization.
Removed
The recognition of compensation expense associated with performance-based restricted stock units requires judgment in assessing the probability of meeting the performance goals, as well as defined criteria for assessing achievement of the performance-related goals.
Added
This measure adjusts net income determined in accordance with GAAP to reflect changes in financial results associated with the highlighted expense and income items. Organic growth is reported revenues adjusted for the impact of foreign currency and the revenue contribution from acquisitions.
Removed
For purposes of measuring compensation expense, the number of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. The performance shares begin vesting only upon the achievement of the performance criteria. The achievement of the performance goals can impact the valuation and associated expense of the restricted stock units.
Added
The cash used in investing activities in 2023 decreased as compared with 2022, due to less acquisition activity and, to a lesser extent, timing of capital expenditures. The Company expects 2024 capital expenditures to be approximately $16,000 to $20,000.
Removed
The assumptions used in accounting for the share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if circumstances change and we use different assumptions, our stock-based compensation expense could be materially different in the future.
Added
Cash used in financing activities in 2023 as compared to cash provided from financing activities in 2022 reflects the increase in debt payments made during 2023 due to cash generated from operations, as well as lower debt borrowings due to less acquisition activity as compared to 2022.
Removed
The overall increase in revenue was due to a 30% volume increase partially offset by a 5% unfavorable currency impact. The acquisitions completed in 2021 and 2022 contributed an incremental $73,146 of revenues in 2022.
Added
We continually assess our liquidity and cash positions taking geopolitical and other uncertainties into consideration.
Removed
The increase in bookings during 2022 compared to 2021 is largely due to increases in our Industrial and A&D markets reflecting improvements in the general economy along with growth in our core businesses. The overall increase in orders was due to a 27% volume increase partially offset by a 6% unfavorable currency impact.
Removed
The acquisitions completed in 2021 and 2022 contributed an incremental $120,529 of orders in 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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We translate all assets and liabilities of foreign operations, where the U.S. dollar is not the functional currency, at the period-end exchange rate and translate sales and expenses at the average exchange rates in effect during the period. The net effect of these translation adjustments is recorded in the consolidated financial statements as comprehensive income.
We translate all assets and liabilities of our foreign operations, where the U.S. dollar is not the functional currency, at the period-end exchange rate and translate sales and expenses at the average exchange rates in effect during the period. The net effect of these translation adjustments is recorded in the consolidated financial statements as comprehensive (loss) income.
Qualitative and Quantitative Disclosures about Market Risk Foreign Currency We have international operations in The Netherlands, Sweden, Germany, China, Portugal, Canada, Czech Republic, Mexico, the United Kingdom and New Zealand which expose us to foreign currency exchange rate fluctuations due to transactions denominated in Euros, Swedish Krona, Chinese Renminbi, Canadian dollar, Czech Krona, Mexican pesos, British Pound Sterling, and New Zealand dollar, respectively.
Qualitative and Quantitative Disclosures about Market Risk Foreign Currency We have international operations in The Netherlands, Sweden, Germany, China, Portugal, Canada, Czech Republic, Mexico, the United Kingdom and New Zealand which expose us to foreign currency exchange rate fluctuations due to 33 Table of Contents transactions denominated in Euros, Swedish Krona, Chinese Renminbi, Canadian dollar, Czech Krona, Mexican pesos, British Pound Sterling, and New Zealand dollar, respectively.
Interest Rates Interest rates on our Amended Credit Agreement are based on Term SOFR plus a margin of 1.00% to 2.25% (1.75% at December 31, 2022), depending on the Company’s ratio of total funded indebtedness to consolidated EBITDA. We use interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements.
Interest Rates Interest rates on our Amended Credit Agreement are based on Term SOFR plus a margin of 1.00% to 2.25% (1.625% at December 31, 2023), depending on the Company’s ratio of total funded indebtedness to consolidated EBITDA. We use interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements.
During the years ended December 31, 2022 and 2021, we recorded losses of $1,109 and $170, respectively, which is included in other expense (income), net and generally offset the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other expense (income), net.
During the years ended December 31, 2023 and 2022, we recorded losses of $115 and $1,109, respectively, which is included in other expense (income), net and generally offset the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other expense (income), net.
This amount is not indicative of the hypothetical net earnings impact due to partially offsetting impacts on cost of sales and operating expenses in those currencies. We estimate that foreign currency exchange rate fluctuations decreased sales in 2022 compared to 2021 by approximately $22,263.
This amount is not indicative of the hypothetical net earnings impact due to partially offsetting impacts on cost of sales and operating expenses in those currencies. We estimate that foreign currency exchange rate fluctuations decreased sales in 2023 compared to 2022 by approximately $258.
We continuously evaluate our foreign currency risk and we take action from time to time in order to best mitigate these risks. A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency exposures would have had an impact of approximately $17,514 on our 2022 sales.
We continuously evaluate our foreign currency risk and we take action from time to time in order to best mitigate these risks. A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency exposures would have had an impact of approximately $19,175 on our 2023 sales.
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 $18,981 and $13,500 at December 31, 2022 and 2021, respectively.
The resulting gains or losses are recorded in other expense (income), 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 $22,193 and $18,981 at December 31, 2023 and 2022, respectively.
In March 2022 the Company entered into an additional interest rate swap with a notional amount of $40,000 that matures in December 33 Table of Contents 2026. ​ As of December 31, 2022, we had $227,060 outstanding under the Amended Revolving Facility (excluding deferred financing fees), of which $100,000 is currently being hedged.
In March 2022 the Company entered into an additional interest rate swap with a notional amount of $40,000 that matures in December 2026. ​ As of December 31, 2023, we had $210,120 outstanding under the Amended Revolving Facility (excluding deferred financing fees), of which $100,000 is currently being hedged.
Beginning in the first quarter of 2021, we began entering into contracts to hedge our short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, Canadian Dollar, New Zealand Dollar, Chinese Renminbi, Swedish Krona) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates.
We have contracts to hedge our short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, Canadian Dollar, New Zealand Dollar, Chinese Renminbi, Swedish Krona) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates.
A hypothetical one percentage point (100 basis points) change in the Base Rate on the $99,395 of unhedged floating rate debt outstanding at December 31, 2021 would have an impact of approximately $994 on our interest expense for 2021. ​ ​ ​ 34 Table of Contents
A hypothetical one percentage point (100 basis points) change in the Base Rate on the $110,120 of unhedged floating rate debt outstanding at December 31, 2023 would have an impact of approximately $1,101 on our interest expense for 2023. ​ ​ ​ ​ 34 Table of Contents
A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency net assets would have had an impact of approximately $15,335 and $11,000 on our foreign net assets as of December 31, 2022 and 2021, respectively.
A hypothetical 10% change in the value of the U.S. dollar in relation to our most significant foreign currency net assets would have had an impact of approximately $16,280 on our foreign net assets as of December 31, 2023.
Net foreign currency transaction gains and losses included in total other expense (income), net amounted to gains of $298 in 2022 and losses of $21 in 2021.
Net foreign currency transaction gains and losses included in total other expense (income), net amounted to a loss of $281 and a gain of $298 in 2023 and 2022, respectively.
The translation adjustment were losses of $9,516 and $7,193 for 2022 and 2021, respectively. Translation adjustments are not adjusted for income taxes as they relate to permanent investments in our foreign subsidiaries.
The translation adjustment was a gain of $3,669 and a loss of $9,516 for the years ended December 31, 2023 and 2022, respectively. Translation adjustments are not adjusted for income taxes as they relate to permanent investments in our foreign subsidiaries.
Refer to Note 7, Debt Obligations , of the notes to consolidated financial statements for additional information about our outstanding debt. A hypothetical one percentage point (100 basis points) change in the Base Rate on the $127,060 of unhedged floating rate debt outstanding at December 31, 2022 would have an impact of approximately $1,271 on our interest expense for 2022.
Refer to Note 7, Debt Obligations , of the notes to consolidated financial statements for additional information about our outstanding debt.

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