10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2014

Commission File Number

0-04041

ALLIED MOTION TECHNOLOGIES INC.

(Exact name of Registrant as Specified in Its Charter)

Colorado	84-0518115
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

455 Commerce Drive, Suite 4

Amherst, New York 14228

(Address of Principal Executive offices, including zip code)

(716) 242-8634

(Registrant’s Telephone Number, Including Area Code)

(Former Address, if Changed Since Last Report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety (90) days.  Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).  Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  x

Number of Shares of the only class of Common Stock outstanding:  9,241,301 as of May 15, 2014

ALLIED MOTION TECHNOLOGIES INC.

INDEX

			Page No.
PART I.  FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets March 31, 2014 and December 31, 2013	1
		Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2014 and 2013	2
		Unaudited Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2014 and 2013	3
		Unaudited notes to Condensed Consolidated Financial Statements	4
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results Of Operations	11
	Item 4.	Controls and Procedures	16
PART II.  OTHER INFORMATION
	Item 5.	Other Information	16
	Item 6.	Exhibits	16

ALLIED MOTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, except per share data)

(Unaudited)

	March 31, 2014		December 31, 2013
Assets
Current Assets:
Cash and cash equivalents	$	9,718	$	10,171
Trade receivables, net of allowance for doubtful accounts of $860 and $802 at March 31, 2014 and December 31, 2013, respectively	33,267		27,123
Inventories, net	24,283		24,430
Deferred income taxes	2,438		2,961
Prepaid expenses and other assets	2,842		2,602
Total Current Assets	72,548		67,287
Property, plant and equipment, net	37,870		40,111
Deferred income taxes	3,246		3,246
Intangible assets, net	34,542		35,222
Goodwill	19,434		20,233
Other long term assets	4,152		4,878
Total Assets	$	171,792	$	170,977
Liabilities and Stockholders’ Equity
Current Liabilities:
Debt obligations	14,547		14,145
Accounts payable	16,907		15,478
Accrued liabilities	9,619		9,898
Income taxes payable	2,146		2,729
Total Current Liabilities	43,219		42,250
Long-term debt	72,000		73,500
Deferred income taxes	1,716		2,327
Deferred compensation arrangements	2,062		2,599
Pension and post-retirement obligations	2,224		2,298
Total Liabilities	121,221		122,974
Commitments and Contingencies
Stockholders’ Equity:
Common stock, no par value, authorized 50,000 shares; 9,241 and 9,091 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively	24,464		23,771
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding	—		—
Retained earnings	25,485		23,608
Accumulated other comprehensive income (loss)	622		624
Total Stockholders’ Equity	50,571		48,003
Total Liabilities and Stockholders’ Equity	$	171,792	$	170,977

See accompanying notes to condensed consolidated financial statements.

1

ALLIED MOTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In Thousands, except per share data)

(Unaudited)

	For the three months ended
	March 31, 2014			March 31, 2013
Revenues	$	60,435		$	25,143
Cost of goods sold	43,343			17,620
Gross margin	17,092			7,523
Operating costs and expenses:
Selling	2,110			1,293
General and administrative	6,216			2,942
Engineering and development	3,517			1,747
Amortization of intangible assets	678			84
Total operating costs and expenses	12,521			6,066
Operating income	4,571			1,457
Other expense (income):
Interest expense	1,638			9
Other (income) expense, net	(352		)	36
Total other expense, net	1,286			45
Income before income taxes	3,285			1,412
Provision for income taxes	(1,137		)	(452		)
Net income	$	2,148		$	960
Foreign currency translation adjustment	7			(460		)
Change in accumulated loss on derivatives	(9		)	—
Comprehensive income	$	2,146		$	500
Basic earnings per share:
Earnings per share	$	0.24		$	0.11
Basic weighted average common shares	9,130			8,733
Diluted earnings per share:
Earnings per share	$	0.24		$	0.11
Diluted weighted average common shares	9,130			8,733

See accompanying notes to condensed consolidated financial statements.

2

ALLIED MOTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	For the three months ended
	March 31			March 31,
	2014			2013
Cash Flows From Operating Activities:
Net income	$	2,148		$	960
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,688			413
Deferred income taxes	537			49
Stock compensation expense	379			224
Other	1,467			32
Changes in operating assets and liabilities:
Trade receivables	(6,446		)	(2,043		)
Inventories, net	(57		)	608
Prepaid expenses and other assets	101			(357		)
Accounts payable	1,431			(93		)
Accrued liabilities	(1,440		)	(924		)
Net cash used in operating activities	(192		)	(1,131		)
Cash Flows From Investing Activities:
Proceeds related to working capital adjustment on acquisition	1,434			—
Purchase of property and equipment	(584		)	(298		)
Net cash provided by (used in) investing activities	850			(298		)
Cash Flows From Financing Activities:
Borrowings on lines-of-credit, net	164			—
Principal payments of long-term debt	(1,250		)	—
Dividends paid to stockholders	(271		)	(210		)
Stock transactions under employee benefit stock plans	304			403
Net cash (used in) provided by financing activities	(1,053		)	193
Effect of foreign exchange rate changes on cash	(58		)	(72		)
Net decrease in cash and cash equivalents	(453		)	(1,308		)
Cash and cash equivalents at beginning of period	10,171			9,728
Cash and cash equivalents at end of period	$	9,718		$	8,420

See accompanying notes to condensed consolidated financial statements.

3

ALLIED MOTION TECHNOLOGIES INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1.BASIS OF PREPARATION AND PRESENTATION

Allied Motion Technologies Inc. (Allied Motion or the Company) is engaged in the business of designing, manufacturing and selling motion control solutions, which include integrated system solutions as well as individual motion control products, to a broad spectrum of customers throughout the world primarily for the commercial motor, industrial motion, automotive control, medical, and aerospace and defense markets.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant inter-company accounts and transactions have been eliminated in consolidation.

The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using end of period exchange rates.  Changes in reported amounts of assets and liabilities of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies and the U.S. dollar are included in foreign currency translation adjustment.  Foreign currency translation adjustment is included in accumulated other comprehensive income, a component of stockholders’ equity in the accompanying condensed consolidated balance sheets.  Revenue and expense transactions use an average rate prevailing during the month of the related transaction.  Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of each Technology Unit (“TU”) are included in the results of operations as incurred.

The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and include all adjustments which are, in the opinion of management, necessary for a fair presentation.  Certain information and footnote disclosures normally included in financial statements which are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.  The Company believes that the disclosures herein are adequate to make the information presented not misleading.  The financial data for the interim periods may not necessarily be indicative of results to be expected for the year.

The preparation of financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions.  Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

It is suggested that the accompanying condensed consolidated interim financial statements be read in conjunction with the Consolidated Financial Statements and related Notes to such statements included in the Annual Report on Form 10-K for the year ended December 31, 2013 that was previously filed by the Company.

2.ACQUISITIONS

On October 18, 2013, the Company acquired Globe Motors, Inc., a Delaware corporation (“Globe Motors” or “Globe”) from Safran USA, Inc. (the “Seller”), for approximately $90,000 in cash.

Globe Motors is headquartered in Dayton, Ohio, and has manufacturing facilities located in the U.S, Portugal and Mexico.  The initial purchase price of $90,000 was comprised of $4,300 cash paid at closing, as well as funds acquired from the new Credit Agreement and Senior Subordinated Notes.  During the first quarter of 2014, the Company received $1,434 from the Seller for a working capital adjustment, reducing the purchase price to $88,566.

The Company accounted for the acquisition pursuant to ASC 805, “Business Combinations.”  The purchase price allocation is subject to further adjustment upon finalization of the opening balance sheet.

4

ALLIED MOTION TECHNOLOGIES INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The preliminary purchase price allocated to the underlying net assets based on fair value as of the acquisition date is as follows (in thousands):

	March 31,
	2014
Trade receivables, net	$	16,567
Inventories, net	11,142
Prepaid expenses and other assets	2,860
Property, plant and equipment	28,286
Amortizable intangible assets	33,530
Goodwill	13,418
Accounts payable	(10,622		)
Accrued liabilities	(6,615		)
Net purchase price	$	88,566

The purchase price allocation excludes any cash on hand and any debt of Globe Motors.  The purchase price allocation has been revised to reflect an updated valuation of property, plant and equipment, adjustments to income taxes and the offsetting adjustments to goodwill.

The intangible assets acquired consist of customer lists and a tradename, which are being amortized over 15 and 10 years, respectively.  Goodwill generated in the acquisition is related to the assembled workforce, synergies between Allied Motion’s other Technology Units (“TUs”) and Globe Motors that will occur as a result of the combined engineering knowledge, the ability of each of the TU’s to integrate each other’s products into more fully integrated system solutions and Allied Motion’s ability to utilize Globe’s management knowledge in providing complementary product offerings to the Company’s customers.

Pro forma Condensed Combined Financial Information (Unaudited)

The following presents the Company’s unaudited pro forma financial information for the quarter ended March 31, 2013 giving effect to the acquisition of Globe Motors as if it had occurred at January 1, 2013.  Included in the pro forma information is:  the additional depreciation and amortization resulting from the valuation of amortizable tangible and intangible assets; interest on borrowings made by the Company; amortization of deferred finance costs incurred to issue the borrowings; removal of acquisition related transaction costs; removal of certain costs for which Allied Motion would be indemnified by the seller and stock compensation expense related to shares issued to certain executives of Allied Motion as a result of the acquisition.

	For the quarter ended
	March 31, 2013
Revenues	$	50,439
Net income	$	1,089
Diluted net income per share	$	0.12

The pro forma adjustments do not reflect adjustments for anticipated operating efficiencies that the Company expects to achieve as a result of this acquisition.  The pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would actually have been had these transactions actually occurred on the dates presented or to project the combined company’s results of operations or financial position for any future period.

5

ALLIED MOTION TECHNOLOGIES INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

3.INVENTORIES

Inventories include costs of materials, direct labor and manufacturing overhead, and are stated at the lower of cost (first-in, first-out basis) or market, as follows (in thousands):

	March 31,			December 31,
	2014			2013
Parts and raw materials	$	20,279		$	20,649
Work-in-process	3,506			3,369
Finished goods	4,502			4,350
	28,287			28,368
Less reserves	(4,004		)	(3,938		)
Inventories, net	$	24,283		$	24,430

4.PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is classified as follows (in thousands):

	March 31,			December 31
	2014			2013
Land	$	654		$	654
Building and improvements	9,879			9,748
Machinery, equipment, tools and dies	38,201			40,237
Furniture, fixtures and other	4,936			4,544
	53,670			55,183
Less accumulated depreciation	(15,800		)	(15,072		)
Property, plant and equipment, net	$	37,870		$	40,111

Depreciation expense was approximately $1,010 and $329 for the quarters ended March 31, 2014 and 2013, respectively.

5.GOODWILL

The change in the carrying amount of goodwill for the quarter ended March 31, 2014 is as follows (in thousands):

	March 31,
	2014
Beginning balance	$	20,233
Acquisition adjustments	(792		)
Effect of foreign currency translation	(7		)
Ending balance	$	19,434

The acquisition adjustments relate to revisions in the purchase price allocation for Globe for changes to the value assigned to property, plant and equipment and the tax effect of the changes in value (Note 2).

6

ALLIED MOTION TECHNOLOGIES INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

6.INTANGIBLE ASSETS

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

		March 31, 2014							December 31, 2013
	Life	Gross Amount		Accumulated amortization			Net Book Value		Gross Amount		Accumulated amortization			Net Book Value
Customer lists	8 - 15 years	$	34,163	$	(4,352	)	$	29,811	$	34,166	$	(3,821	)	$	30,345
Trade name	10 years	4,775		(1,118		)	3,657		4,775		(1,012		)	3,763
Design and technologies	8 - 10 years	2,728		(1,675		)	1,053		2,730		(1,637		)	1,093
Patents		24		(3		)	21		24		(3		)	21
Total		$	41,690	$	(7,148	)	$	34,542	$	41,695	$	(6,473	)	$	35,222

Amortization expense for intangible assets was $678 and $84 for the quarters ending March 31, 2014 and 2013, respectively.

7.STOCK-BASED COMPENSATION

Stock Incentive Plans

The Company’s Stock Incentive Plans provide for the granting of stock awards, including restricted stock, stock options and stock appreciation rights, to employees and non-employees, including directors of the Company.

Restricted Stock

For the three months ended March 31, 2014, 156,696 shares of unvested restricted stock were awarded at a market value of $11.18.  Of the restricted shares granted, 80,591 shares have performance based vesting conditions.  The value of the shares is amortized to compensation expense over the related service period, which is normally three years, or over the estimated performance period.  Shares of unvested restricted stock are forfeited if a recipient leaves the Company before the vesting date.  Shares that are forfeited become available for future awards.

The following is a summary of restricted stock activity for the three months ended March 31, 2014:

	Number of
	Shares
Outstanding at beginning of period	520,195
Awarded	156,696
Forfeited	(34,944	)
Vested	(96,339	)
Outstanding at end of period	545,608

For the quarters ended March 31, 2014 and 2013, stock compensation expense, net of forfeitures, of $379 and $224 was recorded, respectively.

7

ALLIED MOTION TECHNOLOGIES INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

8.DEBT OBLIGATIONS

Debt obligations consisted of the following (in thousands):

	March 31, 2014		December 31, 2013
Current Borrowings
Revolving Credit Facility (2.7% at March 31, 2014)	$	7,725	$	7,725
China Credit Facility (6.3% at March 31, 2014)	1,322		1,170
Term Loan, current portion, (2.7% at March 31, 2014) (1)	5,500		5,250
Current borrowings	$	14,547	$	14,145
Long-term Debt
Term Loan, noncurrent (2.7% at March 31, 2014) (1)	$	42,000	$	43,500
Subordinated Notes (14.5%, 13% Cash, 1.5% PIK)	30,000		30,000
Long-term debt	$	72,000	$	73,500

(1)The effective rate of the Term Loan including the impact of the related hedges is 3.14%.

Credit Agreement

The Company’s Credit Agreement provides for a $15,000 five-year revolving credit facility and a $50,000 five-year term loan (collectively the “Senior Credit Facilities”).

Borrowings under the Senior Credit Facilities are subject to terms defined in the Credit Agreement.  Borrowings bear interest at either the Base Rate plus a margin of 0.25% to 2.00% (currently 1.50%) or the Eurocurrency Rate plus a margin of 1.25% to 3.00% (currently 2.50%), in each case depending on the Company’s ratio of total funded indebtedness to Consolidated EBITDA (the “Total Leverage Ratio”).

Principal installments are payable on the Term Loan in varying percentages quarterly through September 30, 2018 with a balloon payment at maturity.  The Senior Credit Facilities are secured by substantially all of the Company’s assets.  The average outstanding borrowings for 2014 for the Senior Credit Facilities were $56,100.  At March 31, 2014, there was approximately $7,300 available under the Senior Credit Facilities.

The Credit Agreement contains certain financial covenants related to maximum leverage and minimum fixed charge coverage.  The Credit Agreement also includes other covenants and restrictions, including limits on the amount of certain types of capital expenditures.  The Company was in compliance with all covenants at March 31, 2014.

Senior Subordinated Notes

Under the Company’s Note Agreement, the Company sold $30,000 of 14.50% Senior Subordinated Notes due October 18, 2019 (the “Notes”) to Prudential Capital Partners IV, L.P. and its affiliates in a private placement.  The interest rate on the Notes is 14.50% with 13.00% payable in cash and 1.50% payable in-kind, quarterly in arrears and the outstanding principal amount of the Notes, together with any accrued and unpaid interest is due on October 18, 2019.  The Company may prepay the Notes at any time after October 18, 2016, in whole or in part, at 100% of the principal amount.  The Notes are unsecured obligations of the Company and are fully and unconditionally guaranteed by certain of the Company’s subsidiaries.

Other

The Company also has a Credit Facility in China providing credit of approximately $1,540 (Chinese Renminbi (“RMB”) 9,500).  This facility is used for working capital and capital equipment needs at the Company’s China operations, and will mature in October 2014.  The average balance for 2014 was $1,330 (RMB 8,100).  At March 31, 2014, there was approximately $200 (RMB 1,400) available under the facility.

8

ALLIED MOTION TECHNOLOGIES INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

9.DERIVATIVE FINANCIAL INSTRUMENTS

The Company did not use derivative contracts prior to the acquisition of Globe Motors, Inc. in October, 2013.

The Company’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements.  To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  During October 2013, the Company entered into two Interest Rate Swaps with a combined notional of $25,000 that amortize quarterly to a notional of $6,673 at maturity.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.  During the first quarter of 2014, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.  There was no hedge ineffectiveness recorded in the Company’s earnings during the three months ended March 31, 2014.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.  The Company estimates that an additional $216 will be reclassified as an increase to interest expense over the next year.

Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, 2014 (in thousands):

		March 31, 2014
Derivative Instrument	Balance Sheet Location	Fair Value
Interest Rate Swaps	Prepaid expenses and other assets	$	32

The effect of the Company’s derivative financial instruments on the condensed consolidated statement of income and comprehensive income is as follows (in thousands):

For the quarter ended March 31, 2014				For the quarter ended March 31, 2014				For the quarter ended March 31, 2014
Derivative Instruments	Net deferral in OCI of derivatives (effective portion)			Statement of earnings classification	Net reclassification from AOCI into income (effective portion)			Statement of earnings classification	Amount recognized in income (ineffective portion and amount excluded from effectiveness testing)
Interest Rate Swaps	$	(68	)	Interest expense	$	(58	)	Other (expense)	$	—

10.DIVIDENDS PER SHARE

The Company declared and paid a quarterly dividend of $0.025 per share in the first quarter of 2014 and 2013.  Total dividends paid in the first three months of 2014 and 2013 were $271 and $210, respectively.

9

ALLIED MOTION TECHNOLOGIES INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

11.SEGMENT INFORMATION

ASC Topic “Segment Reporting” requires disclosure of operating segments, which as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company operates in one segment for the manufacture and marketing of motion control products for original equipment manufacturers and end user applications.  In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.  Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.  All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes.  Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying condensed consolidated financial statements and within this note.

The Company’s wholly owned foreign subsidiaries, located in The Netherlands, Sweden, Canada, Asia, Portugal and Mexico are included in the accompanying condensed consolidated financial statements.

Financial information related to the foreign subsidiaries is summarized below (in thousands):

	For the three months ended and as of March 31,
	2014		2013
Revenues derived from foreign subsidiaries	$	19,288	$	11,093
Identifiable assets as of March 31,	58,497		27,174

Sales to customers outside of the United States by all subsidiaries were $21,891 and $12,305 during the quarters ended March 31, 2014 and 2013, respectively.

During the three months ended March 31, 2014, three customers accounted for 33% of total revenues and 43% of trade receivables.  During the three months ended March 31, 2013, no single customer accounted for more than 10% of total revenues or trade receivables.

10

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

All statements contained herein that are not statements of historical fact constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the word “believe,” “anticipate,” “expect,” “project,” “intend,” “will continue,” “will likely result,” “should” or words or phrases of similar meaning.  Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results of the Company to differ materially from the forward-looking statements.  The risks and uncertainties include those associated with the present economic circumstances in the United States and throughout Europe, general business and economic conditions in the Company’s motion markets, introduction of new technologies, products and competitors, the ability to protect the Company’s intellectual property, the ability of the Company to sustain, manage or forecast its growth and product acceptance, success of new corporate strategies and implementation of defined critical issues designed for growth and improvement in profits, the continued success of the Company’s customers to allow the Company to realize revenues from its order backlog and to support the Company’s expected delivery schedules, the continued viability of the Company’s customers and their ability to adapt to changing technology and product demand, the loss of significant customers or enforceability of the Company’s contracts in connection with a merger, acquisition, disposition, bankruptcy, or otherwise, the ability of the Company to meet the technical specifications of its customers, the continued availability of parts and components, increased competition and changes in competitor responses to the Company’s products and services, changes in government regulations, availability of financing, the ability of the Company’s lenders and financial institutions to provide additional funds if needed for operations or for making future acquisitions or the ability of the Company to obtain alternate financing if present sources of financing are terminated, the ability to attract and retain qualified personnel who can design new applications and products for the motion industry, the ability of the Company to identify and consummate favorable acquisitions to support external growth and new technology, the ability of the Company to successfully integrate an acquired business into the Company’s business model without substantial costs, delays, or problems, the ability of the Company to establish low cost region manufacturing and component sourcing capabilities, and the ability of the Company to control costs, including relocation costs, for the purpose of improving profitability. The Company’s ability to compete in this market depends upon its capacity to anticipate the need for new products, and to continue to design and market those products to meet customers’ needs in a competitive world.  Actual results, events and performance may differ materially.  Readers are cautioned not to place undue reliance on these forward-looking statements as a prediction of actual results.  The Company has no obligation or intent to release publicly any revisions to any forward looking statements, whether as a result of new information, future events, or otherwise.

New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  The Company’s expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis; however, the Company makes no assurance that expectations, beliefs or projections will be achieved.

Amounts in thousands, except per share data

1st Quarter Overview

Revenues for the quarter ended March 31, 2014 more than doubled results from first quarter of 2013, increasing by 140%.  The increase is due to higher sales in vehicle and aerospace and defense markets resulting from the acquisition of Globe Motors, Inc. (“Globe”) during the fourth quarter of 2013.  Sales to Customers both inside and outside of the U.S. increased.

Bookings for the quarter ended March 31, 2014 were $64,394 compared to March 31, 2013 bookings of $20,974.  Backlog as of March 31, 2014 was $79,686 compared to $75,599 as of December 31, 2013, respectively.

From a Cash Flow perspective, our cash net of debt position increased by $645 from December 31, 2013.  We also declared and paid a dividend of $0.025 per share pursuant to our quarterly dividend program during the first quarter 2014. Dividends to shareholders for the trailing twelve months were $0.10 per share, or a dividend payout ratio of 18% when compared to the earnings per share of $0.57.

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Operating Results

Quarter Ended March 31, 2014 compared to Quarter Ended March 31, 2013

	For the quarter ended						Increase
	March 31,						(decrease)
(in thousands)	2014			2013			$			%
Revenues	$	60,435		$	25,143		$	35,292		140	%
Cost of products sold	43,343			17,620			25,723			146	%
Gross margin	17,092			7,523			9,569			127	%
Gross margin percentage	28		%	30		%
Operating costs and expenses:
Selling	2,110			1,293			817			63	%
General and administrative	6,216			2,942			3,274			111	%
Engineering and development	3,517			1,747			1,770			101	%
Amortization of intangible assets	678			84			594			707	%
Total operating costs and expenses	12,521			6,066			6,455			106	%
Operating income	4,571			1,457			3,114			214	%
Interest expense	1,638			9			1,629
Other income	(352		)	36			(388		)
Total other expense (income)	1,286			45			1,241
Income before income taxes	3,285			1,412			1,873			133	%
Provision for income taxes	(1,137		)	(452		)	(685		)	152	%
Net Income	$	2,148		$	960		$	1,188		124	%

NET INCOME:  Net income increased from 2013 to 2014 primarily due to increased profit contribution from the Globe acquisition.  Globe is included in our results as of October 18, 2013.

EBITDA AND ADJUSTED EBITDA:  EBITDA was $6,611 for the first quarter of 2014 compared to $1,834 for the same quarter last year.  Adjusted EBITDA was $6,990 and $2,131 for the first quarter of 2014 and 2013, respectively.  EBITDA and adjusted EBITDA are non-GAAP measurements.  EBITDA consists of income before interest expense, provision for income taxes, and depreciation and amortization.  Adjusted EBITDA also excludes stock compensation expense and certain other nonrecurring items.  See information included in “Non - GAAP Measures” below for a reconciliation of net income to EBITDA and adjusted EBITDA.

REVENUES:  Overall, the Company experienced revenue increases in all of our markets, most significantly in the vehicle and aerospace and defense markets.

The 140% increase in sales in the first quarter of 2014 is primarily due to the acquisition of Globe and consists of significant additions to our vehicle and aerospace and defense markets.  The increase is comprised of a 200% increase in sales to US customers and a 78% increase in sales to non-US customers.  64% of our sales for the quarter were to US customers with the remaining 36% of our sales to customers primarily in Europe, Canada and Asia.  Of the  increase in revenues, 139% was due to an increase in sales volume for the quarter and 1% was due to the dollar weakening against the foreign currencies where we do business, primarily the Euro and the Swedish Krona.

ORDER BACKLOG:  Bookings for the quarter ended March 31, 2014 were $64,394 compared to last year’s bookings of $20,974.  Backlog as of March 31, 2014 was $79,686 compared to $28,020 as of March 31, 2013.  The increases in both bookings and backlog in 2014 is primarily the result of the acquisition of Globe.

GROSS MARGIN:  Gross margin as a percentage of revenues was 28% and 30% for the quarters ended March 31, 2014 and 2013, respectively.  The decline in margin is primarily due to the acquisition of Globe along with changes in sales mix (increased portion of sales of lower margin business offset partially by a decreased proportion of sales in higher margin business).

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SELLING EXPENSES:  Selling expenses increased in the first quarter of 2014 with the addition of Globe.  However, selling expenses as a percentage of revenues were 3% and 5% in the first quarter of 2014 and 2013, respectively.

GENERAL AND ADMINISTRATIVE EXPENSES:  General and administrative expenses increased by 111% in the first quarter 2014 from the first quarter 2013 due to the addition of Globe, combined with increased  incentive compensation.  As a percentage of revenues, general and administrative expenses decreased to 10% for the period ended March 31, 2014 compared to 12% for the same period in 2013.

ENGINEERING AND DEVELOPMENT EXPENSES:  Engineering and development expenses increased by 101% in the first quarter of 2014 compared to the same quarter last year due to the addition of Globe.  As a percentage of revenues, engineering and development expenses were 6% and 7% for the first quarter of 2014 and 2013, respectively.

AMORTIZATION OF INTANGIBLE ASSETS:  Amortization of intangible assets expense was $678 in the quarter ended March 31, 2014 compared to $84 for the same quarter last year.  The increase is the result of amortization for Globe’s intangible assets.

INCOME TAXES:  The effective income tax rate as a percentage of income before income taxes was 35% and 32% for the quarters ended March 31, 2014 and 2013, respectively.  The effective rate is higher than the same quarter of last year primarily due to the effect on deferred taxes of a statutory rate reduction in a foreign jurisdiction and increased domestic income that is taxed at higher rates.

Non-GAAP Measures

EBITDA and Adjusted EBITDA are provided for information purposes only and are not measures of financial performance under generally accepted accounting principles.

Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information in evaluating the operating results of the Company as distinct from results that include items that are not indicative of ongoing operating results; in particular, those charges and credits that are not directly related to operating unit performance, and that are not a helpful measure of the performance of our underlying business particularly in light of their unpredictable nature. This non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for net income determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.  In addition, supplemental presentation should not be construed as an inference that the Company’s future results will be unaffected by similar adjustments to net income determined in accordance with GAAP.

The Company believes EBITDA is often a useful measure of a Company’s operating performance and is a significant basis used by the Company’s management to measure the operating performance of the Company’s business because EBITDA excludes charges for depreciation, amortization and interest expense that have resulted from our debt financings, as well as our provision for income tax expense.  EBITDA is frequently used as one of the bases for comparing businesses in the Company’s industry.

The Company also believes that Adjusted EBITDA provides helpful information about the operating performance of its business.  Adjusted EBITDA excludes stock compensation expense, as well as certain income or expenses which are not indicative of the ongoing performance of the Company.  EBITDA and Adjusted EBITDA do not represent and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting principles.

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The Company’s calculation of EBITDA and Adjusted EBITDA for the three months ended March 31, 2014 and 2013 is as follows (in thousands):

	For the three months ended
	March 31,
	2014		2013
Net income as reported	$	2,148	$	960
Interest expense	1,638		9
Provision for income tax	1,137		452
Depreciation and amortization	1,688		413
EBITDA	6,611		1,834
Stock compensation expense	379		224
Adjusted EBITDA	$	6,990	$	2,058

Liquidity and Capital Resources

The Company’s liquidity position as measured by cash and cash equivalents increased by $1,298, to a balance of $9,718 at March 31, 2014 from March 31, 2013.  During the first three months of 2014, operations used $192 in cash compared to $1,131 of cash used for the same period of 2013.  The decrease in cash used is primarily due to the higher level of earnings, partially offset by an increase in working capital.

Net cash provided by investing activities was $850 for the first quarter of 2014 compared to $298 of cash used for the first quarter of 2013.  The increase is due to cash received for a $1,434 purchase price adjustment related to the Globe acquisition.  In the three months ended March 31, 2014, purchases of property and equipment were $584 compared to $298 for the same period of last year.

Net cash used for financing activities was $1,053 for the three months ended March 31, 2014 compared to cash provided of $193 for the same period last year.  The decrease in 2014 is due to payments on our long-term debt.

The Credit Agreement contains certain financial covenants related to maximum leverage and minimum fixed charge coverage.  The Credit Agreement also includes other covenants and restrictions, including limits on the amount of certain types of capital expenditures.  The Company was in compliance with all covenants at March 31, 2014.

As of March 31, 2014, the amount available to borrow under the Company’s various lines-of-credit was approximately $7,300.

During the three months ended March 31, 2014, the Company paid dividends of $0.025 per share.  The Company’s working capital, capital expenditure and dividend requirements are expected to be funded from cash provided by operations and amounts available under the Credit Agreement.

Critical Accounting Policies

The Company has prepared its financial statements in conformity with accounting principles generally accepted in the United States, and these statements necessarily include some amounts that are based on informed judgments and estimates of management.  The Company’s significant accounting policies are discussed in Note 1 in the Annual Report on Form 10-K for the year ended December 31, 2013.  The policies are reviewed on a regular basis.  The Company’s critical accounting policies are subject to judgments and uncertainties which affect the application of such policies.  The Company uses historical experience and all available information to make these judgments and estimates.  As discussed below the Company’s financial position or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of such policies.  In the event estimates or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.  The Company’s critical accounting policies include:

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.  The allowance is based on historical experience and judgments based on current economic and customer specific factors.  Significant judgments are made by management in connection with establishing the

14

Company’s customers’ ability to pay at the time of shipment.  Despite this assessment, from time to time, the Company’s customers are unable to meet their payment obligations.  The Company continues to monitor customers’ credit worthiness, and use judgment in establishing the estimated amounts of customer receivables which may not be collected.  A significant change in the liquidity or financial position of the Company’s customers could have a material adverse impact on the collectability of accounts receivable and future operating results.

Inventory is valued at the lower of cost or market.  The Company monitors and forecasts expected inventory needs based on sales forecasts.  Inventory is written down or written off when it becomes obsolete or when it is deemed excess.  These determinations involve the exercise of significant judgment by management.  If actual market conditions are significantly different from those projected by management, the recorded reserve may be adjusted, and such adjustments may have a significant impact on the Company’s results of operations.  Demand for the Company’s products can fluctuate significantly, and in the past the Company has recorded substantial charges for inventory obsolescence.

The Company records deferred tax assets and liabilities for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts recorded in the consolidated financial statements, and for operating loss and tax credit carryforwards.  Realization of the recorded deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdiction in future years to obtain benefit from the reversal of net deductible temporary differences and from tax credit and operating loss carryforwards.  A valuation allowance is provided to the extent that management deems it more likely than not that the net deferred tax assets will not be realized.  The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed.

The Company provides pension and postretirement benefits for certain domestic retirees and records the cost of the obligations based on estimates.  The net periodic costs are recognized as employees render the services necessary to earn the benefits.  Several assumptions are used to calculate the expense and liability related to the plans including the discount rate, the expected rate of return on plan assets, the future rate of compensation increases and health care cost increases.  The discount rate is selected based on a bond pricing model that relates to the projected future cash flows of benefit obligations.  Actuarial assumptions used are based on demographic factors such as retirement and mortality.  Actual results could vary materially from the Company’s actuarial assumptions, which may have an impact on the amount of reported expense or liability for pension or postretirement benefits.

15

Item 4.  Controls and Procedures

The Company’s controls and procedures include those designed to ensure that material information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of management, the Company’s chief executive officer and chief financial officer evaluated the effectiveness of the Company’s disclosure controls and procedures designed to ensure that information is recorded, processed, summarized and reported in a timely manner as required by Exchange Act reports such as this Form 10-Q and concluded that as of the end of the Company’s most recent fiscal quarter they are effective.

There have not been any changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2014 that have materially affected or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.OTHER INFORMATION

Item 5.  Other Information

The Company held its annual stockholders’ meeting on May 13, 2014.  At the annual meeting, the stockholders of the Company (i) elected the six director nominees, (ii) approved, on an advisory basis, the compensation awarded to the Company’s Named Executive Officers for 2013, (iii) and ratified the appointment of EKS&H LLLP as the Company’s independent registered public accounting firm for the 2014 fiscal year.

The results of the voting for the six director nominees were as follows:

Nominee	For	Against	Abstentions	Broker Non-votes
Richard D. Federico	5,207,251	53,921	7,430	3,239,184
S.R. Heath	4,845,037	415,454	8,111	3,239,184
Gerald J. Laber	5,206,165	55,110	7,327	3,239,184
Richard D. Smith	4,822,378	438,794	7,430	3,239,184
James J. Tanous	5,187,386	72,879	8,337	3,239,184
Richard S. Warzala	5,201,681	59,417	7,504	3,239,184

The results for the advisory vote on executive compensation for 2013 were as follows:

For	Against	Abstentions	Broker Non-Votes
5,111,743	88,392	68,927	3,239,184

The results of the voting for the ratification of EKS&H as the Company’s independent registered public accounting firm for the 2014 fiscal year were as follows:

For	Against	Abstentions
8,455,302	28,720	23,764

Item 6.Exhibits

(a)Exhibits

10.1Compensation Program for Non-Employee Directors (Incorporated by reference to the Company’s Form 8-K filed February 19, 2014).

10.2Amended and Restated Non-Employee Director Stock in Lieu of Cash Retainer Plan (filed herewith)

31.1Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

16

32.1Certification of the Chief Executive Officer pursuant to 18    U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2Certification of the Chief Financial Officer pursuant to 18    U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101The following materials from Allied Motion Technologies Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, formatted in XBRL (eXtensible Business Reporting Language):  (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations and comprehensive income, (iii) condensed consolidated statements of cash flows and (iv) the notes to the consolidated financial statements.*

*Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

17

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATE:	May 15, 2014	ALLIED MOTION TECHNOLOGIES INC.
		By:	/s/ Robert P. Maida
		Robert P. Maida
		Chief Financial Officer

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EX-10.2

EXHIBIT 10.2

Allied Motion Technologies Inc.
Non-Employee Director
Stock in Lieu of Cash Retainer Plan
Adopted November 3, 2010
Amended and Restated May 13, 2014

Election Procedure.  Each non-employee director may elect to forego receipt of all or a portion of any Board, Committee or special retainer otherwise payable in cash under the Company’s non-employee director compensation program in exchange for Common Stock issued under this Plan.  The number of shares of Common Stock received by any non-employee director with respect to a payment date shall equal the amount of foregone cash retainer divided by the Fair Market Value (as defined below) of a share of Common Stock on the relevant payment date, rounded down to the nearest whole share, with the dollar amount of any fractional share paid in cash on the payment date.  If the cash retainer would be paid during a blackout period as defined in the Company’s Insider Trading Policy, then the payment date as used herein for the purchase of shares will be the first day of the next Trading Window as defined in the Insider Trading Policy.  For the purpose of this Plan, the Fair Market Value of a share of common stock on a given date shall be the consolidated closing bid price on that date as reported by the NASDAQ Stock Market.  If there are no common stock transactions on such date, the Fair Market Value shall be determined as of the immediately preceding date on which there were common stock transactions.

Election.  A non-employee director may elect Common Stock in place of cash by submitting a written or electronic election to the Company’s Secretary, in such form as the Company determines, by the date established by the Company prior to such payment date.

Number of Authorized Shares.  There are 100,000 shares of the Company’s Common Stock reserved for issuance pursuant to this Plan.

Adjustments in Authorized Shares.  If a dividend or other distribution, recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution, or other similar corporate transaction or event affects the Company’s Common Stock, then the Company shall, in such manner as it may determine equitable, substitute or adjust any or all of the remaining limits on the number and kind of shares available under the Plan.

Share Shortfalls.  If any election under this Plan would cause the number of shares of Common Stock required to be issued under this Plan to exceed the authorized shares, then any then current elections of non-employee directors shall be reduced or disregarded to the extent necessary, as determined by the Compensation Committee in an equitable manner, to avoid exceeding the authorized shares.  No further elections shall be made or shall be valid until such time, if any, as additional shares of Common Stock become available for purchase under this Plan.

Inside Information.  All purchases of Company stock are subject to compliance with Section 16 of the Securities Exchange Act of 1934, as amended, and the Company’s Insider Trading policy including the defined Trading Window.

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Richard S. Warzala, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Allied Motion Technologies Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 15, 2014	/s/ Richard S. Warzala
	Richard S. Warzala
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Robert P. Maida, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Allied Motion Technologies Inc. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 15, 2014	/s/ Robert P. Maida
	Robert P. Maida
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of Periodic Financial Reports

Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Allied Motion Technologies Inc. (the “Company”) certifies to his knowledge that:

(1)The Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2014 fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

(2)The information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2014	/s/ Richard S. Warzala
	Richard S. Warzala
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification of Periodic Financial Reports

Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Allied Motion Technologies Inc. (the “Company”) certifies to his knowledge that:

(1)The Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2014 fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

(2)The information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 15, 2014	/s/ Robert P. Maida
	Robert P. Maida
	Chief Financial Officer

XML

DERIVATIVE FINANCIAL INSTRUMENTS (Details) (Interest Rate Swaps, USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Oct. 31, 2013 DerivativeInstrument
Derivative financial instruments
Number of derivative instruments		2
Notional amount of interest rate swap derivatives		$ 25,000
Notional amount of interest rate swap derivatives at maturity		6,673
Hedge ineffectiveness recorded in earnings	0
Estimated amount to be reclassified as an increase to interest expense	216
Interest expense
Effect of derivative financial instruments on the consolidated statement of income and comprehensive income
Net deferral in OCI of derivatives (effective portion)	(68)
Other (expense)
Effect of derivative financial instruments on the consolidated statement of income and comprehensive income
Net reclassification from AOCI into income (effective portion)	(58)
Prepaid expenses and other assets
Derivative financial instruments
Fair value of derivatives	$ 32

XML

SEGMENT INFORMATION (Tables)

3 Months Ended

Mar. 31, 2014

SEGMENT INFORMATION

Schedule of financial information related to the foreign subsidiaries

Financial information related to the foreign subsidiaries is summarized below (in thousands):

	For the three months ended and as of March 31,
	2014		2013
Revenues derived from foreign subsidiaries	$	19,288	$	11,093
Identifiable assets as of March 31,	58,497		27,174

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PROPERTY, PLANT AND EQUIPMENT

3 Months Ended

Mar. 31, 2014

PROPERTY, PLANT AND EQUIPMENT

PROPERTY, PLANT AND EQUIPMENT

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is classified as follows (in thousands):

	March 31,			December 31
	2014			2013
Land	$	654		$	654
Building and improvements	9,879			9,748
Machinery, equipment, tools and dies	38,201			40,237
Furniture, fixtures and other	4,936			4,544
	53,670			55,183
Less accumulated depreciation	(15,800		)	(15,072		)
Property, plant and equipment, net	$	37,870		$	40,111

Depreciation expense was approximately $1,010 and $329 for the quarters ended March 31, 2014 and 2013, respectively.

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GOODWILL (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Change in goodwill
Beginning balance	$ 20,233
Acquisition adjustments	(792)
Effect of foreign currency translation	(7)
Ending balance	$ 19,434

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PROPERTY, PLANT AND EQUIPMENT (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, gross	$ 53,670		$ 55,183
Less accumulated depreciation	(15,800)		(15,072)
Property, plant and equipment, net	37,870		40,111
Depreciation expense	1,010	329
Land
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, gross	654		654
Building and improvements
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, gross	9,879		9,748
Machinery, equipment, tools and dies
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, gross	38,201		40,237
Furniture, fixtures and other
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, gross	$ 4,936		$ 4,544

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INTANGIBLE ASSETS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Intangible assets subject to amortization
Gross Amount	$ 41,690		$ 41,695
Accumulated amortization	(7,148)		(6,473)
Net Book Value	34,542		35,222
Amortization expense for intangible assets	678	84
Customer lists
Intangible assets subject to amortization
Gross Amount	34,163		34,166
Accumulated amortization	(4,352)		(3,821)
Net Book Value	29,811		30,345
Customer lists | Minimum
Intangible assets subject to amortization
Estimated Life	8 years
Customer lists | Maximum
Intangible assets subject to amortization
Estimated Life	15 years
Trade name
Intangible assets subject to amortization
Gross Amount	4,775		4,775
Accumulated amortization	(1,118)		(1,012)
Net Book Value	3,657		3,763
Estimated Life	10 years
Design and technologies
Intangible assets subject to amortization
Gross Amount	2,728		2,730
Accumulated amortization	(1,675)		(1,637)
Net Book Value	1,053		1,093
Design and technologies | Minimum
Intangible assets subject to amortization
Estimated Life	8 years
Design and technologies | Maximum
Intangible assets subject to amortization
Estimated Life	10 years
Patents
Intangible assets subject to amortization
Gross Amount	24		24
Accumulated amortization	(3)		(3)
Net Book Value	$ 21		$ 21

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STOCK-BASED COMPENSATION (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Additional disclosures
Compensation expense, net of forfeitures	$ 379	$ 224
Restricted Stock
Stock-Based Compensation
Weighted average value (in dollars per share)	$ 11.18
Service period over which value of the shares is amortized to compensation expense	3 years
Number of Nonvested Restricted Shares
Outstanding at beginning of period (in shares)	520,195
Awarded (in shares)	156,696
Forfeited (in shares)	(34,944)
Vested (in shares)	(96,339)
Outstanding at end of period (in shares)	545,608
Additional disclosures
Compensation expense, net of forfeitures	$ 379	$ 224
Restricted Stock | Performance based vesting
Number of Nonvested Restricted Shares
Awarded (in shares)	80,591

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INVENTORIES

3 Months Ended

Mar. 31, 2014

INVENTORIES

INVENTORIES

3. INVENTORIES

Inventories include costs of materials, direct labor and manufacturing overhead, and are stated at the lower of cost (first-in, first-out basis) or market, as follows (in thousands):

	March 31,			December 31,
	2014			2013
Parts and raw materials	$	20,279		$	20,649
Work-in-process	3,506			3,369
Finished goods	4,502			4,350
	28,287			28,368
Less reserves	(4,004		)	(3,938		)
Inventories, net	$	24,283		$	24,430

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DEBT OBLIGATIONS (Details) In Thousands, unless otherwise specified			3 Months Ended									3 Months Ended		3 Months Ended		3 Months Ended
	Mar. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Mar. 31, 2014 Senior Credit Facilities USD ($)	Mar. 31, 2014 Senior Credit Facilities Base Rate	Mar. 31, 2014 Senior Credit Facilities Base Rate Minimum	Mar. 31, 2014 Senior Credit Facilities Base Rate Maximum	Mar. 31, 2014 Senior Credit Facilities Eurocurrency Rate	Mar. 31, 2014 Senior Credit Facilities Eurocurrency Rate Minimum	Mar. 31, 2014 Senior Credit Facilities Eurocurrency Rate Maximum	Mar. 31, 2014 Revolving Credit Facility USD ($)	Dec. 31, 2013 Revolving Credit Facility USD ($)	Mar. 31, 2014 Term Loan USD ($)	Dec. 31, 2013 Term Loan USD ($)	Mar. 31, 2014 China Credit Facility USD ($)	Dec. 31, 2013 China Credit Facility USD ($)	Mar. 31, 2014 China Credit Facility Chinese Renminbi ("RMB") CNY	Mar. 31, 2014 Subordinated Notes USD ($)	Dec. 31, 2013 Subordinated Notes USD ($)
Debt Obligations
Current borrowings	$ 14,547	$ 14,145								$ 7,725	$ 7,725	$ 5,500	$ 5,250	$ 1,322	$ 1,170
Interest rate at period end (as a percent)										2.70%		2.70%		6.30%
Long-term debt	72,000	73,500										42,000	43,500				30,000	30,000
Effective rate (as a percent)												3.14%
Interest rate (as a percent)																	14.50%
Interest rate payable in cash (as a percent)																	13.00%
Interest rate payable in-kind (as a percent)																	1.50%
Maximum borrowing capacity										15,000		50,000		1,540		9,500
Debt instrument term										5 years		5 years
Principal amount of debt borrowed																	30,000
Reference rate				Base Rate			Eurocurrency Rate
Applicable margin (as a percent)				1.50%	0.25%	2.00%	2.50%	1.25%	3.00%
Average outstanding borrowings			56,100											1,330		8,100
Available borrowing capacity			$ 7,300											$ 200		1,400
Percentage of principal amount of notes that may prepay																	100.00%

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Current Assets:
Cash and cash equivalents	$ 9,718	$ 10,171
Trade receivables, net of allowance for doubtful accounts of $860 and $802 at March 31, 2014 and December 31, 2013, respectively	33,267	27,123
Inventories, net	24,283	24,430
Deferred income taxes	2,438	2,961
Prepaid expenses and other assets	2,842	2,602
Total Current Assets	72,548	67,287
Property, plant and equipment, net	37,870	40,111
Deferred income taxes	3,246	3,246
Intangible assets, net	34,542	35,222
Goodwill	19,434	20,233
Other long term assets	4,152	4,878
Total Assets	171,792	170,977
Current Liabilities:
Debt obligations	14,547	14,145
Accounts payable	16,907	15,478
Accrued liabilities	9,619	9,898
Income taxes payable	2,146	2,729
Total Current Liabilities	43,219	42,250
Long-term debt	72,000	73,500
Deferred income taxes	1,716	2,327
Deferred compensation arrangements	2,062	2,599
Pension and post-retirement obligations	2,224	2,298
Total Liabilities	121,221	122,974
Commitments and Contingencies
Stockholders' Equity:
Common stock, no par value, authorized 50,000 shares; 9,241 and 9,091 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively	24,464	23,771
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding
Retained earnings	25,485	23,608
Accumulated other comprehensive income (loss)	622	624
Total Stockholders' Equity	50,571	48,003
Total Liabilities and Stockholders' Equity	$ 171,792	$ 170,977

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BASIS OF PREPARATION AND PRESENTATION

3 Months Ended

Mar. 31, 2014

BASIS OF PREPARATION AND PRESENTATION

BASIS OF PREPARATION AND PRESENTATION

1. BASIS OF PREPARATION AND PRESENTATION

Allied Motion Technologies Inc. (Allied Motion or the Company) is engaged in the business of designing, manufacturing and selling motion control solutions, which include integrated system solutions as well as individual motion control products, to a broad spectrum of customers throughout the world primarily for the commercial motor, industrial motion, automotive control, medical, and aerospace and defense markets.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.  All significant inter-company accounts and transactions have been eliminated in consolidation.

The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using end of period exchange rates.  Changes in reported amounts of assets and liabilities of foreign subsidiaries that occur as a result of changes in exchange rates between foreign subsidiaries’ functional currencies and the U.S. dollar are included in foreign currency translation adjustment.  Foreign currency translation adjustment is included in accumulated other comprehensive income, a component of stockholders’ equity in the accompanying condensed consolidated balance sheets.  Revenue and expense transactions use an average rate prevailing during the month of the related transaction.  Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of each Technology Unit (“TU”) are included in the results of operations as incurred.

The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and include all adjustments which are, in the opinion of management, necessary for a fair presentation.  Certain information and footnote disclosures normally included in financial statements which are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations.  The Company believes that the disclosures herein are adequate to make the information presented not misleading.  The financial data for the interim periods may not necessarily be indicative of results to be expected for the year.

The preparation of financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions.  Such estimates and assumptions affect the reported amounts of assets and liabilities as well as disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

It is suggested that the accompanying condensed consolidated interim financial statements be read in conjunction with the Consolidated Financial Statements and related Notes to such statements included in the Annual Report on Form 10-K for the year ended December 31, 2013 that was previously filed by the Company.

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SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 segment	Mar. 31, 2013	Dec. 31, 2013
SEGMENT INFORMATION
Number of operating segments	1
Segment information
Revenues	$ 60,435	$ 25,143
Identifiable assets	171,792		170,977
Total Revenue | Customer Concentration Risk
Segment information
Number of customers	3
Percentage of concentration risk	33.00%
Trade receivables | Credit Concentration Risk
Segment information
Number of customers	3
Percentage of concentration risk	43.00%
Outside the United States
Segment information
Revenues	21,891	12,305
Wholly owned foreign subsidiaries
Segment information
Revenues	19,288	11,093
Identifiable assets	$ 58,497	$ 27,174

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2014

STOCK-BASED COMPENSATION

Summary of restricted stock activity

The following is a summary of restricted stock activity for the three months ended March 31, 2014:

	Number of
	Shares
Outstanding at beginning of period	520,195
Awarded	156,696
Forfeited	(34,944	)
Vested	(96,339	)
Outstanding at end of period	545,608

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2014

DERIVATIVE FINANCIAL INSTRUMENTS

Schedule of fair value of the Company's derivative financial instruments as well as their classification on the condensed consolidated balance sheets

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, 2014 (in thousands):

		March 31, 2014
Derivative Instrument	Balance Sheet Location	Fair Value
Interest Rate Swaps	Prepaid expenses and other assets	$	32

Schedule of effect of the Company's derivative financial instruments on the condensed consolidated statement of income and comprehensive income

The effect of the Company’s derivative financial instruments on the condensed consolidated statement of income and comprehensive income is as follows (in thousands):

For the quarter ended March 31, 2014				For the quarter ended March 31, 2014				For the quarter ended March 31, 2014
Derivative Instruments	Net deferral in OCI of derivatives (effective portion)			Statement of earnings classification	Net reclassification from AOCI into income (effective portion)			Statement of earnings classification	Amount recognized in income (ineffective portion and amount excluded from effectiveness testing)
Interest Rate Swaps	$	(68	)	Interest expense	$	(58	)	Other (expense)	$	—

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ACQUISITIONS

3 Months Ended

Mar. 31, 2014

ACQUISITIONS

ACQUISITIONS

2. ACQUISITIONS

On October 18, 2013, the Company acquired Globe Motors, Inc., a Delaware corporation (“Globe Motors” or “Globe”) from Safran USA, Inc. (the “Seller”), for approximately $90,000 in cash.

Globe Motors is headquartered in Dayton, Ohio, and has manufacturing facilities located in the U.S, Portugal and Mexico.  The initial purchase price of $90,000 was comprised of $4,300 cash paid at closing, as well as funds acquired from the new Credit Agreement and Senior Subordinated Notes.  During the first quarter of 2014, the Company received $1,434 from the Seller for a working capital adjustment, reducing the purchase price to $88,566.

The Company accounted for the acquisition pursuant to ASC 805, “Business Combinations.”  The purchase price allocation is subject to further adjustment upon finalization of the opening balance sheet.

The preliminary purchase price allocated to the underlying net assets based on fair value as of the acquisition date is as follows (in thousands):

	March 31,
	2014
Trade receivables, net	$	16,567
Inventories, net	11,142
Prepaid expenses and other assets	2,860
Property, plant and equipment	28,286
Amortizable intangible assets	33,530
Goodwill	13,418
Accounts payable	(10,622		)
Accrued liabilities	(6,615		)
Net purchase price	$	88,566

The purchase price allocation excludes any cash on hand and any debt of Globe Motors.  The purchase price allocation has been revised to reflect an updated valuation of property, plant and equipment, adjustments to income taxes and the offsetting adjustments to goodwill.

The intangible assets acquired consist of customer lists and a tradename, which are being amortized over 15 and 10 years, respectively.  Goodwill generated in the acquisition is related to the assembled workforce, synergies between Allied Motion’s other Technology Units (“TUs”) and Globe Motors that will occur as a result of the combined engineering knowledge, the ability of each of the TU’s to integrate each other’s products into more fully integrated system solutions and Allied Motion’s ability to utilize Globe’s management knowledge in providing complementary product offerings to the Company’s customers.

Pro forma Condensed Combined Financial Information (Unaudited)

The following presents the Company’s unaudited pro forma financial information for the quarter ended March 31, 2013 giving effect to the acquisition of Globe Motors as if it had occurred at January 1, 2013.  Included in the pro forma information is:  the additional depreciation and amortization resulting from the valuation of amortizable tangible and intangible assets; interest on borrowings made by the Company; amortization of deferred finance costs incurred to issue the borrowings; removal of acquisition related transaction costs; removal of certain costs for which Allied Motion would be indemnified by the seller and stock compensation expense related to shares issued to certain executives of Allied Motion as a result of the acquisition.

	For the quarter ended
	March 31, 2013
Revenues	$	50,439
Net income	$	1,089
Diluted net income per share	$	0.12

The pro forma adjustments do not reflect adjustments for anticipated operating efficiencies that the Company expects to achieve as a result of this acquisition.  The pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would actually have been had these transactions actually occurred on the dates presented or to project the combined company’s results of operations or financial position for any future period.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
CONDENSED CONSOLIDATED BALANCE SHEETS
Trade receivables, allowance for doubtful accounts (in dollars)	$ 860	$ 802
Common stock, par value (in dollars per share)
Common stock, authorized shares	50,000	50,000
Common stock, shares issued	9,241	9,091
Common stock, shares outstanding	9,241	9,091
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, authorized shares	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

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ACQUISITIONS (Tables)

3 Months Ended

Mar. 31, 2014

ACQUISITIONS

Schedule of purchase price allocation

The preliminary purchase price allocated to the underlying net assets based on fair value as of the acquisition date is as follows (in thousands):

	March 31,
	2014
Trade receivables, net	$	16,567
Inventories, net	11,142
Prepaid expenses and other assets	2,860
Property, plant and equipment	28,286
Amortizable intangible assets	33,530
Goodwill	13,418
Accounts payable	(10,622		)
Accrued liabilities	(6,615		)
Net purchase price	$	88,566

Schedule of unaudited pro forma financial information

	For the quarter ended
	March 31, 2013
Revenues	$	50,439
Net income	$	1,089
Diluted net income per share	$	0.12

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 15, 2014
Document and Entity Information
Entity Registrant Name	ALLIED MOTION TECHNOLOGIES INC
Entity Central Index Key	0000046129
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,241,301
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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INVENTORIES (Tables)

3 Months Ended

Mar. 31, 2014

INVENTORIES

Schedule of inventories including costs of materials, direct labor and manufacturing overhead, and stated at the lower of cost (first-in, first-out basis) or market

Inventories include costs of materials, direct labor and manufacturing overhead, and are stated at the lower of cost (first-in, first-out basis) or market, as follows (in thousands):

	March 31,			December 31,
	2014			2013
Parts and raw materials	$	20,279		$	20,649
Work-in-process	3,506			3,369
Finished goods	4,502			4,350
	28,287			28,368
Less reserves	(4,004		)	(3,938		)
Inventories, net	$	24,283		$	24,430

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Revenues	$ 60,435	$ 25,143
Cost of goods sold	43,343	17,620
Gross margin	17,092	7,523
Operating costs and expenses:
Selling	2,110	1,293
General and administrative	6,216	2,942
Engineering and development	3,517	1,747
Amortization of intangible assets	678	84
Total operating costs and expenses	12,521	6,066
Operating income	4,571	1,457
Other expense (income):
Interest expense	1,638	9
Other (income) expense, net	(352)	36
Total other expense, net	1,286	45
Income before income taxes	3,285	1,412
Provision for income taxes	(1,137)	(452)
Net income	2,148	960
Foreign currency translation adjustment	7	(460)
Change in accumulated loss on derivatives	(9)
Comprehensive income	$ 2,146	$ 500
Basic earnings per share:
Earnings per share (in dollars per share)	$ 0.24	$ 0.11
Basic weighted average common shares (in shares)	9,130	8,733
Diluted earnings per share:
Earnings per share (in dollars per share)	$ 0.24	$ 0.11
Diluted weighted average common shares (in shares)	9,130	8,733

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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2014

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

7. STOCK-BASED COMPENSATION

Stock Incentive Plans

The Company’s Stock Incentive Plans provide for the granting of stock awards, including restricted stock, stock options and stock appreciation rights, to employees and non-employees, including directors of the Company.

Restricted Stock

For the three months ended March 31, 2014, 156,696 shares of unvested restricted stock were awarded at a market value of $11.18.  Of the restricted shares granted, 80,591 shares have performance based vesting conditions.  The value of the shares is amortized to compensation expense over the related service period, which is normally three years, or over the estimated performance period.  Shares of unvested restricted stock are forfeited if a recipient leaves the Company before the vesting date.  Shares that are forfeited become available for future awards.

The following is a summary of restricted stock activity for the three months ended March 31, 2014:

	Number of
	Shares
Outstanding at beginning of period	520,195
Awarded	156,696
Forfeited	(34,944	)
Vested	(96,339	)
Outstanding at end of period	545,608

For the quarters ended March 31, 2014 and 2013, stock compensation expense, net of forfeitures, of $379 and $224 was recorded, respectively.

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INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2014

INTANGIBLE ASSETS

INTANGIBLE ASSETS

6. INTANGIBLE ASSETS

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

		March 31, 2014							December 31, 2013
	Life	Gross Amount		Accumulated amortization			Net Book Value		Gross Amount		Accumulated amortization			Net Book Value
Customer lists	8 - 15 years	$	34,163	$	(4,352	)	$	29,811	$	34,166	$	(3,821	)	$	30,345
Trade name	10 years	4,775		(1,118		)	3,657		4,775		(1,012		)	3,763
Design and technologies	8 - 10 years	2,728		(1,675		)	1,053		2,730		(1,637		)	1,093
Patents		24		(3		)	21		24		(3		)	21
Total		$	41,690	$	(7,148	)	$	34,542	$	41,695	$	(6,473	)	$	35,222

Amortization expense for intangible assets was $678 and $84 for the quarters ending March 31, 2014 and 2013, respectively.

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DEBT OBLIGATIONS (Tables)

3 Months Ended

Mar. 31, 2014

DEBT OBLIGATIONS

Schedule of debt obligations

Debt obligations consisted of the following (in thousands):

	March 31, 2014		December 31, 2013
Current Borrowings
Revolving Credit Facility (2.7% at March 31, 2014)	$	7,725	$	7,725
China Credit Facility (6.3% at March 31, 2014)	1,322		1,170
Term Loan, current portion, (2.7% at March 31, 2014) (1)	5,500		5,250
Current borrowings	$	14,547	$	14,145
Long-term Debt
Term Loan, noncurrent (2.7% at March 31, 2014) (1)	$	42,000	$	43,500
Subordinated Notes (14.5%, 13% Cash, 1.5% PIK)	30,000		30,000
Long-term debt	$	72,000	$	73,500

(1) The effective rate of the Term Loan including the impact of the related hedges is 3.14%.

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PROPERTY, PLANT AND EQUIPMENT (Tables)

3 Months Ended

Mar. 31, 2014

PROPERTY, PLANT AND EQUIPMENT

Schedule of classification of property, plant and equipment

Property, plant and equipment is classified as follows (in thousands):

	March 31,			December 31
	2014			2013
Land	$	654		$	654
Building and improvements	9,879			9,748
Machinery, equipment, tools and dies	38,201			40,237
Furniture, fixtures and other	4,936			4,544
	53,670			55,183
Less accumulated depreciation	(15,800		)	(15,072		)
Property, plant and equipment, net	$	37,870		$	40,111

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DIVIDENDS PER SHARE

3 Months Ended

Mar. 31, 2014

DIVIDENDS PER SHARE

DIVIDENDS PER SHARE

10. DIVIDENDS PER SHARE

The Company declared and paid a quarterly dividend of $0.025 per share in the first quarter of 2014 and 2013.  Total dividends paid in the first three months of 2014 and 2013 were $271 and $210, respectively.

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DEBT OBLIGATIONS

3 Months Ended

Mar. 31, 2014

DEBT OBLIGATIONS

DEBT OBLIGATIONS

8. DEBT OBLIGATIONS

Debt obligations consisted of the following (in thousands):

	March 31, 2014		December 31, 2013
Current Borrowings
Revolving Credit Facility (2.7% at March 31, 2014)	$	7,725	$	7,725
China Credit Facility (6.3% at March 31, 2014)	1,322		1,170
Term Loan, current portion, (2.7% at March 31, 2014) (1)	5,500		5,250
Current borrowings	$	14,547	$	14,145
Long-term Debt
Term Loan, noncurrent (2.7% at March 31, 2014) (1)	$	42,000	$	43,500
Subordinated Notes (14.5%, 13% Cash, 1.5% PIK)	30,000		30,000
Long-term debt	$	72,000	$	73,500

(1) The effective rate of the Term Loan including the impact of the related hedges is 3.14%.

Credit Agreement

The Company’s Credit Agreement provides for a $15,000 five-year revolving credit facility and a $50,000 five-year term loan (collectively the “Senior Credit Facilities”).

Borrowings under the Senior Credit Facilities are subject to terms defined in the Credit Agreement.  Borrowings bear interest at either the Base Rate plus a margin of 0.25% to 2.00% (currently 1.50%) or the Eurocurrency Rate plus a margin of 1.25% to 3.00% (currently 2.50%), in each case depending on the Company’s ratio of total funded indebtedness to Consolidated EBITDA (the “Total Leverage Ratio”).

Principal installments are payable on the Term Loan in varying percentages quarterly through September 30, 2018 with a balloon payment at maturity.  The Senior Credit Facilities are secured by substantially all of the Company’s assets.  The average outstanding borrowings for 2014 for the Senior Credit Facilities were $56,100.  At March 31, 2014, there was approximately $7,300 available under the Senior Credit Facilities.

The Credit Agreement contains certain financial covenants related to maximum leverage and minimum fixed charge coverage.  The Credit Agreement also includes other covenants and restrictions, including limits on the amount of certain types of capital expenditures.  The Company was in compliance with all covenants at March 31, 2014.

Senior Subordinated Notes

Under the Company’s Note Agreement, the Company sold $30,000 of 14.50% Senior Subordinated Notes due October 18, 2019 (the “Notes”) to Prudential Capital Partners IV, L.P. and its affiliates in a private placement.  The interest rate on the Notes is 14.50% with 13.00% payable in cash and 1.50% payable in-kind, quarterly in arrears and the outstanding principal amount of the Notes, together with any accrued and unpaid interest is due on October 18, 2019.  The Company may prepay the Notes at any time after October 18, 2016, in whole or in part, at 100% of the principal amount.  The Notes are unsecured obligations of the Company and are fully and unconditionally guaranteed by certain of the Company’s subsidiaries.

Other

The Company also has a Credit Facility in China providing credit of approximately $1,540 (Chinese Renminbi (“RMB”) 9,500).  This facility is used for working capital and capital equipment needs at the Company’s China operations, and will mature in October 2014.  The average balance for 2014 was $1,330 (RMB 8,100).  At March 31, 2014, there was approximately $200 (RMB 1,400) available under the facility.

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DERIVATIVE FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2014

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

9. DERIVATIVE FINANCIAL INSTRUMENTS

The Company did not use derivative contracts prior to the acquisition of Globe Motors, Inc. in October, 2013.

The Company’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements.  To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  During October 2013, the Company entered into two Interest Rate Swaps with a combined notional of $25,000 that amortize quarterly to a notional of $6,673 at maturity.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.  During the first quarter of 2014, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.  There was no hedge ineffectiveness recorded in the Company’s earnings during the three months ended March 31, 2014.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.  The Company estimates that an additional $216 will be reclassified as an increase to interest expense over the next year.

Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, 2014 (in thousands):

		March 31, 2014
Derivative Instrument	Balance Sheet Location	Fair Value
Interest Rate Swaps	Prepaid expenses and other assets	$	32

The effect of the Company’s derivative financial instruments on the condensed consolidated statement of income and comprehensive income is as follows (in thousands):

For the quarter ended March 31, 2014				For the quarter ended March 31, 2014				For the quarter ended March 31, 2014
Derivative Instruments	Net deferral in OCI of derivatives (effective portion)			Statement of earnings classification	Net reclassification from AOCI into income (effective portion)			Statement of earnings classification	Amount recognized in income (ineffective portion and amount excluded from effectiveness testing)
Interest Rate Swaps	$	(68	)	Interest expense	$	(58	)	Other (expense)	$	—

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SEGMENT INFORMATION

3 Months Ended

Mar. 31, 2014

SEGMENT INFORMATION

SEGMENT INFORMATION

11. SEGMENT INFORMATION

ASC Topic “Segment Reporting” requires disclosure of operating segments, which as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

The Company operates in one segment for the manufacture and marketing of motion control products for original equipment manufacturers and end user applications.  In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.  Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.  All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes.  Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying condensed consolidated financial statements and within this note.

The Company’s wholly owned foreign subsidiaries, located in The Netherlands, Sweden, Canada, Asia, Portugal and Mexico are included in the accompanying condensed consolidated financial statements.

Financial information related to the foreign subsidiaries is summarized below (in thousands):

	For the three months ended and as of March 31,
	2014		2013
Revenues derived from foreign subsidiaries	$	19,288	$	11,093
Identifiable assets as of March 31,	58,497		27,174

Sales to customers outside of the United States by all subsidiaries were $21,891 and $12,305 during the quarters ended March 31, 2014 and 2013, respectively.

During the three months ended March 31, 2014, three customers accounted for 33% of total revenues and 43% of trade receivables.  During the three months ended March 31, 2013, no single customer accounted for more than 10% of total revenues or trade receivables.

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DIVIDENDS PER SHARE (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
DIVIDENDS PER SHARE
Dividends declared and paid (in dollars per share)	$ 0.025	$ 0.025
Total dividends paid	$ 271	$ 210

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INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2014

INTANGIBLE ASSETS

Schedule of intangible assets

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

		March 31, 2014							December 31, 2013
	Life	Gross Amount		Accumulated amortization			Net Book Value		Gross Amount		Accumulated amortization			Net Book Value
Customer lists	8 - 15 years	$	34,163	$	(4,352	)	$	29,811	$	34,166	$	(3,821	)	$	30,345
Trade name	10 years	4,775		(1,118		)	3,657		4,775		(1,012		)	3,763
Design and technologies	8 - 10 years	2,728		(1,675		)	1,053		2,730		(1,637		)	1,093
Patents		24		(3		)	21		24		(3		)	21
Total		$	41,690	$	(7,148	)	$	34,542	$	41,695	$	(6,473	)	$	35,222

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ACQUISITIONS (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		0 Months Ended	3 Months Ended		0 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Oct. 18, 2013 Globe Motors	Mar. 31, 2014 Globe Motors	Mar. 31, 2013 Globe Motors	Oct. 18, 2013 Globe Motors Customer lists	Oct. 18, 2013 Globe Motors Trade name
ACQUISITIONS
Cash consideration paid			$ 90,000
Cash paid for acquisition			4,300
Amount received from seller for working capital adjustment	1,434			1,434
Purchase price allocation
Trade receivables, net			16,567
Inventories, net			11,142
Prepaid expenses and other assets			2,860
Property, plant and equipment			28,286
Amortizable intangible assets			33,530
Goodwill	19,434	20,233	13,418
Accounts payable			(10,622)
Accrued liabilities			(6,615)
Net purchase price			88,566
Amortization period of intangible assets						15 years	10 years
Unaudited pro forma financial information
Revenues					50,439
Net income					$ 1,089
Diluted net income per share (in dollars per share)					$ 0.12

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash Flows From Operating Activities:
Net income	$ 2,148	$ 960
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,688	413
Deferred income taxes	537	49
Stock compensation expense	379	224
Other	1,467	32
Changes in operating assets and liabilities:
Trade receivables	(6,446)	(2,043)
Inventories, net	(57)	608
Prepaid expenses and other assets	101	(357)
Accounts payable	1,431	(93)
Accrued liabilities	(1,440)	(924)
Net cash used in operating activities	(192)	(1,131)
Cash Flows From Investing Activities:
Proceeds related to working capital adjustment on acquisition	1,434
Purchase of property and equipment	(584)	(298)
Net cash provided by (used in) investing activities	850	(298)
Cash Flows From Financing Activities:
Borrowings on lines-of-credit, net	164
Principal payments of long-term debt	(1,250)
Dividends paid to stockholders	(271)	(210)
Stock transactions under employee benefit stock plans	304	403
Net cash (used in) provided by financing activities	(1,053)	193
Effect of foreign exchange rate changes on cash	(58)	(72)
Net decrease in cash and cash equivalents	(453)	(1,308)
Cash and cash equivalents at beginning of period	10,171	9,728
Cash and cash equivalents at end of period	$ 9,718	$ 8,420

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GOODWILL

3 Months Ended

Mar. 31, 2014

GOODWILL

GOODWILL

5. GOODWILL

The change in the carrying amount of goodwill for the quarter ended March 31, 2014 is as follows (in thousands):

	March 31,
	2014
Beginning balance	$	20,233
Acquisition adjustments	(792		)
Effect of foreign currency translation	(7		)
Ending balance	$	19,434

The acquisition adjustments relate to revisions in the purchase price allocation for Globe for changes to the value assigned to property, plant and equipment and the tax effect of the changes in value (Note 2).

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INVENTORIES (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
INVENTORIES
Parts and raw materials	$ 20,279	$ 20,649
Work-in-process	3,506	3,369
Finished goods	4,502	4,350
Inventory, gross	28,287	28,368
Less reserves	(4,004)	(3,938)
Inventories, net	$ 24,283	$ 24,430

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GOODWILL (Tables)

3 Months Ended

Mar. 31, 2014

GOODWILL

Schedule of change in the carrying amount of goodwill

The change in the carrying amount of goodwill for the quarter ended March 31, 2014 is as follows (in thousands):

	March 31,
	2014
Beginning balance	$	20,233
Acquisition adjustments	(792		)
Effect of foreign currency translation	(7		)
Ending balance	$	19,434