Allient Inc. (ALNT) Q4 2014 Earnings Report, Transcript and Summary

Hello, and thank you for standing by. Welcome to the Allied Motion Technologies Inc. Fourth Quarter and Full Year 2014 Financial Results Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Sue Chiarmonte, VP and Treasurer for Allied Motion Technologies. Please go ahead.

Thank you, Lori. Welcome to Allied Motion's conference call to discuss the quarter and year ended December 31, 2014, and thank you for joining us on the call today. We distributed our press release yesterday and copies are available on our website at alliedmotion.com. Today's call is being broadcast live on the Internet and will be available for replay immediately after the call for 90 days. To access the Internet broadcast or replay, go to the company's website, click on the Investor Relations page and then click on the webcast icon. As a reminder, please note that the Safe Harbor statements included in the press release also apply to all comments made on this conference call. I will now turn the call over to Dick Warzala, Chairman, President and CEO of Allied Motion Technologies.

Thank you, Sue. And welcome everyone to our fourth quarter 2014 conference call. Please note that this quarter provides a full year reporting that includes for Globe Motors results in our numbers. Here is the plan for today's call, I will begin with a highlight of the year-to-date pro forma results and will then turn the call over to Rob Maida, our CFO, who will provide you with a complete and detailed financial review of the quarter and year-to-date results. After Rob returns the call to me, I will further elaborate on our earnings announcement press release and provide you with some additional insight as for the activities and opportunities we see for the future. Once that is complete, I will then open the mikes for question. I'll start with some brief comments here. At the beginning of 2014 we advised that we would be releasing unaudited pro forma information throughout 2014 as a means of providing a comparison of revenue, net income, and earnings per share giving effect to the acquisition of Globe Motors as compared to their historical results for Allied Motion. Accordingly, the company's pro forma financial information for the year ended December 31, 2013 giving effect to the acquisition of Globe Motors as if it had occurred at January 1, 2013 compared to the actual results for the same period of 2014 are as follows. With regard to revenue the pro forma 2013 results were $220.7 million and the actual 2014 results were $249.7 million in revenues. With net income, pro forma 2013 there was $8 million of net income in 2013 on a pro forma basis and $13.9 million of net income on an actual basis of 2014. For diluted earnings per share, pro forma 2013 was $0.88 a share and the actual 2014 was $1.51 per share. As a reminder, included in the pro forma information is the additional depreciation and amortization resulting from the valuation of amortizable, tangible and intangible assets. Interest and borrowings made by the company, amortization of deferred finance cost 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. And now I'd like to turn the call over to Rob Maida. And once Rob’s completed he will come back to me and I'll give you a little more detail on the key activities and opportunities for 2015.

Thank you, Dick. As was reflected in our press release that was put out Wednesday evening, the company achieved net income of $4.9 million or $0.53 per diluted share for the fourth quarter ended December 31, 2014. This compares to net income of $1.3 million or $0.09 per diluted share last year. Included in that income for the quarter is $406,000 net of tax representing a reversal of estimated cost associated with a dispute which was settled during the quarter. Additionally, net income for the fourth quarter reflects lower income tax expense associated with our annual review of deferred tax assets and liabilities. The impact of Q4 earnings related to these adjustments is approximately $0.13 for the fully diluted share. EBITDA increased to $9 million for the quarter from $5.1 million for the same period last year and adjusted EBITDA, which excludes stock compensation expense as well as certain other items increased to $9.4 million in the fourth quarter compared to $6 million last year. Revenues for the quarter were $61.9 million, compared to $50.1 million for the same quarter last year, and this is an increase of 23% with 27% of the increase due to higher sales volume offset by 4% unfavorable currency change due to the dollar strengthening against both the Euro and Swedish Kronor. Looking at our total sales for the quarter, 67% were to U.S. customers compared with 63% for the same period last year, with the balance of our sales to customers primarily in Europe, Sweden and Asia. The 23% or $11.8 million increase in sales reflects higher sales in most markets served and is a result of the 31% or $9.8 million increase in sales to our U.S. customers, and 11% or $2 million increase in sales to customers outside the U.S. Bookings for the quarter were $56.9 million compared to $51.7 million last year, or an increase of $5.2 million resulting from increases at most of our TUs. Backlog decreased in the quarter from $80.9 million to $75.1 million reflecting seasonality and customers utilizing inventory at year end. Backlog remained flat compared to December 31, 2013. Our gross profit margins increased slightly from 28% to 29% this quarter compared to the last year. Operating expenses were up $400,000 for the quarter compared to the same time last year, primarily due to the inclusion of Globe operating expenses for Q4 2013 which were only two and a half months given the acquisition occurred on October 18, 2013. Interest expense slightly increased for the quarter to a total of $1.5 million from $1.4 million for the same period last year and again reflects a full quarters expense in 2014 versus two and a half months last year. We had $900,000 of capital expenditures during the quarter compared with $1 million last year. For the year ended December 31, 2014, the company reported net income of $13.9 million or $1.51 per diluted share, compared to net income of $4 million or $0.45 per diluted share last year. Revenues increased to 99% to $249.7 million compared to $125.5 million last year with sales to U.S. customers up 130% and foreign sales up 58%. Of the total 99% increase in sales a 101% is due to an increase in sales volume offset by2% unfavorable currency change due to the dollar strengthening again against the Euro and Swedish Kronor. Looking at our total sales for the year, 66% were to U.S. customers compared with 57% for the same period last year, with the balance of our sales to customers primarily in Europe, Sweden and Asia. The 99% or $124.2 million increase in sales reflect highest sales in most market served and is the result of 130% or $93 million increase in sales to our U.S. customers, and a 58% or $31.2 million increase in sales to customers outside of the U.S. Bookings for the year were $251.5 million compared to $121.1 million for the same period last year. And gross profit margin remained relatively unchanged at 29% for the year compared to last year. Operating expenses were up $19.8 million for the year compared to last year primarily due to the inclusion of Globe operating expenses along with increases in the company's incentive compensation programs, partially offset by lower acquisition cost when compared to 2013. Also included in operating expenses are higher engineering costs reflecting Allied Motion's continued investment in our technical resources to create increasing number of new opportunities which meet the needs of our customers. For the year depreciation and amortization expense increased $4.4 million from $2.9 million to $7.3 million, while interest expense was up $4.9 million to a total expense of $6.4 million again reflecting the additional expense associated with the acquisition related debt. For the year we had $4 million of capital expenditures compared with $3.1 million for the same period last year. Adjusted EBITDA increased to $33.9 million for the year compared to $13.2 million last year. Additionally, last year excluded $1.9 million of acquisition related expenses and $234,000 in expenses related to the move of our corporate offices to Amherst, New York. Total outstanding debt at December 31, 2014 was $74.8 million compared to $87.6 million outstanding at December 31, 2013 and our cash position increased to $2.9 million for the year. Therefore, our cash and debt position improved $15.7 million from December 31, 2013. Our DSO decreased to 44 days at December 31, 2014 from 49 days at the end of 2013 inventory turns increased to six turns at December 31, 2014 compared to 5.1 turns at the end of 2013, again, all representing better overall AR and inventory management. Our net stockholders equity at December 31, 2014 was $56 million or $6.07 per share compared to $48 million or $5.28 per share last year. And finally, our Board of Directors just declared a $2.5 per share cash dividend that is payable March 31 for shareholders of record as of March 18. With that, I will now turn the meeting back over to Dick Warzala.

Thank you, Rob. What I like to do now is just follow-up on comments and the press release on March 11 and give you a little bit more detail after that but for those of you who haven't had a chance to read it, I'll go ahead and do that now. The year 2014 was truly transforming for Allied Motion and a year of record performance with sales nearly doubling, net income up 251%, earnings per share up 236%, and EBITDA up 219% over the prior year. As per our plan, Globe Motors and the core Allied companies concentrated in growth synergies while allowing the operations to continue functioning with limited structural changes being made during the year. When comparing the combined actual results of Allied and Globe for the year ended December 31, 2014, to the pro forma results of Allied and Globe for the same period of 2013, our revenues increased to $249.7 million from the pro forma of $220.7 million in 2013; net income increased to $13.9 million from the pro forma of $8 million in 2013, and our earnings per share increased to $1.51 per share from a pro forma of $0.88 a share in 2013. For the year our served markets including Vehicle, Aerospace and Defense, Medical and Industrial were up, while Electronics was down. In the fourth quarter we began the process of aligning our combined team to begin the implementation of our long-term strategy in support of our new growth and profitability objectives. As we move forward into the future, the long-term success of our company will be further enhanced by executing our strategy and leveraging our full capabilities to design innovative motion solutions that change the game and meet the current and emerging needs of our customers in our served market segments. I'll expand on the PR a little bit now, my quote in the PR starts by mentioning that 2014 was truly a transformative year for Allied Motion with record performance in all areas of our business, and I believe the number speak for themselves. Of course the acquisition of Globe Motors was the major contributor to the results and has positioned Allied nicely for the future. While I didn't specifically mention my comments, Rob has done that and I think it's important to reemphasize that we did reduce our outstanding debt, net of cash position to $61.7 million at the end of 2014 from $77.5 million at the end of 2013, an improvement of $15.7 million during the year. We also continued our quarterly dividend program, paid out $963,000 or $0.10 per share in dividends to our shareholders, we made capital expenditures of $4 million, and we made interest payments on our debt of $6 million. Note that with regard to the data provided for market comparisons, the data reflects the actual change that occurred for the combined entity of Globe and Allied Motion in 2014 over the actual data from Allied Motion with Globe added on October 18, 2013. The PR further stated that in the fourth quarter we began the process of aligning our combined team to begin the implementation of our long-term strategy in support of our new growth and profitability objectives. As we move forward into the future the long term success of our company will be further enhanced by executing our strategy and leveraging our full capabilities to design innovative motion solutions that change the game and meet the current and emerging needs of our customers in our served market segments. Moving into 2015 we will continue to focus on leveraging the growth synergies as provided by the Globe acquisition and we will concentrate on executing the critical issues as defined by our strategy. We believe our past success can in large part be attributed to our commitment to creating and executing a well-defined long-term strategy and while our company has evolved over the last several years, so has our strategy. The major critical issues that we will focus on in 2015 which were an outcome of our strategy include the following; one, creating an effective corporate structure to leverage the resources and capabilities of the combined entity and to position us for further growth in the future. Second one, continued implementation of a new ERP system to provide the infrastructure necessary to support the planned growth of the company, now we've talked in the past about our ERP system implementation, it's been ongoing for a couple of years and the implementation is accelerating as we go - it will be accelerating as we go through the year here and into next year. The implementation of a new integrated website to better meet the needs of our current business environment, and I think to expand on that a little bit more we have a task in front of us to take the Globe website and the Allied website merging together and to effectively communicate to the market about Allied Motion as one team going forward, and the environment as we've seen is - the web is a very important tool for our customers and we will enhance that by making investments necessary to provide the capabilities for them. Next one, the implementation of a structured approach to identify the requirements of our target markets and to ultimately create and implement solutions to ensure we continually meet the requirements of our target market segments. We are well underway for a program as we speak to identify what our markets are really looking for and require, and I think as we move through the year here we'll start to see some good success, some additional success that frays an outcome of the programing process that we are implementing. And through the continued enhancement and development of our operational effectiveness team, they will implement AST to drive continues improvement in all areas of our business. Allied Motion is an applied technology / know-how motion company, and to grow we will continue to invest in the technical resources to ensure we can move forward with our mantra to create motion solutions that change the game and meet emerging needs of our customers in our served market segments. Since the part of our sales efforts, our solution centers are coming online nicely and are providing the support required to sell and support multi-technology solutions. We anticipate that our investment in these key resources will help drive our growth now and in the future and we plan to continue investing in these resources during 2015. One constant since our first strategy in 2002, up until our most recent update is implementing Allied Systematic Tools, or AST for short, to continuously improve efficiencies and eliminate waste throughout our company. In doing such we constantly focus on improving quality, delivery, cost, and innovation. AST is critical to and helps create the path of success in all aspects of our business and in all regions of the world. While we have defined several critical issues that will enhance our long-term success, we believe that AST is one of the key elements to ensure we maximize our success in the future. And with that operator, I will now open the mikes for questions.

Thank you. [Operator Instructions] The first question today comes from Jim Jentrap [ph] of Alvista Capital Management. Please go ahead Sir.

Good morning gentlemen.

Good morning, Jim.

I'm bit new to the story, we've been holding the shares for a while now but I just curious as to if you could expand a little bit more on your sort of the canvas on the topline - for topline growth, are you taking market share here in this environment or are your markets expanding growing? Can you just expand a little more on that.

Sure. As Rob mentioned in his section of the conference call here that - he talked about our different operations and that we're experiencing growth in most of those. So we are seeing core growth to our business as well as the growth through the acquisition. The market has been pretty solid here in 2014 for our types of the equipment and we do expect to see modest growth into next year. With regard to - if you are new to the story, in the past conference calls we've spent some time discussing the activities, our pipeline, and new projects that we're working on and several of those are coming online. Our products typically take 18 months to two years and sometimes longer to get designed in before we can start to see sales or revenues as related to those application efforts. And we are quite excited about the number that are currently in the pipeline and starting to convert, so I think to answer your question it's both, market surge are fairly decent and we do see that we are taking market share.

And the Globe acquisition, has it created cross selling opportunities, have you –I guess that's one question I have. And then the second one would be, have you changed your sales personal much because of the acquisition?

Okay. The first question, has it created opportunities, and the answer is yes, and the opportunities - primarily that we see is the ability to leverage the technology base that we have across the company today into the same customer base that we've been servicing and obviously also as we go and look for new customers. So it's a leveraging of what we have to improve the solutions that we can provide to customers. And also as we've discussed in the past, we talk about multi-technology unit solutions, we're seeing an increase there. In the past, Allied has been made up of several companies acquisitions that were fully autonomous, mostly component companies, meaning they sell one product or one type of product. And as we went through the buildup process here in acquired companies we were looking for complimentary type companies that we could leverage that capability and sell more off what we had to offer to existing customer base and we are seeing a definite increase there. Your second question was regard to the salesforce, there has been limited or no change to the sales team to-date. I did mention that one of our critical issues is the overall organization and we will start to see, as we roll out here in 2015, some changes occurring in that area.

Okay. I'll let somebody else jump in. Thank you, guys.

No problem, thank you.

The next question comes from John Walthizen [ph] of Walthizen & Company. Please go ahead Sir.

Good morning, Dick. I had a couple of questions, particularly about your R&D spending, I see quarter-by-quarter it's moving up. Is that reflecting that you're doing better in terms of designing wins than you expected or what is that reflecting?

Well, we never do better than I expect but anyways, we are seeing success and it's also reflecting that we made some conscious decisions to invest internally in certain areas that we see - that we can leverage by technology we currently have into some new markets and to leverage more technology what we have into some of those markets which we believe we offer a good solution. So it's investing in markets that we believe have good success, where we will have additional good success for the future. And yes, it is continue to invest in the internal resources because in order to take advantage of all the technology we offer it does take another team of people who understand those and can apply those, make sure we're applying the right technology in the new applications. But - and I have said I'm never satisfied, of course no one is, but I would say I'm very encouraged by the wins that we are seeing and others that we see come in on board here soon.

Good, good. In terms of the opportunities for designing in this year compared to last year, does it look like a more promising year or equal or are things jerking back a little bit. And I guess also, would you expect that you're going to be continuing to increase your R&D spending?

I would say to you that we discussed the fact that it takes a good 18 months to two years when you start before you get - sometimes longer depending on programs before you start to see the benefits of that. As we track our pipeline very closely what I think is more encouraging, is very encouraging here is that we are seeing successes and it's coming to the end of the seven stage process that we track from a win standpoint. So I think the solution center as we mentioned trying to gain an understanding, a better understanding, I think I may have discussed this before but if I haven't - if I have bear with me, is that when customers come to us today they go to a central point and the central point is our solution centers in North America, Europe and Asia; and when they come into the solution center these people are trained to understand the technology throughout the entire company. So we may be able to offer multiple solutions to that customer with our product mix that we have today and we have done that and sometimes it's really - customer has to make a call, for example, we sell brush and brushless motors, I won’t bore you with lot of details there, but there are certain benefits of a brushless motor versus a brush motor, but typically they cost a little more. The customer - at that point we can offer those solutions and the customer has to make the call from a value proposition, are they looking for the longer life, the higher reliability of a brushless motor or is the life performance requirement as a brush motor satisfy that. So that's the really nice part of what - bringing where Allied is today, we've combined these complimentary technologies, we provided a place for our customers to go - to come up with a solution and for us to be able to support it internally. So that's - and we'll see more of that as we move in on in the future.

Okay. The part of the question you didn't answer was do you expect that we'll be spending more money this year than last year on R&D?

I do not.

Okay. And then the final question I had was, when I look at the secret itself, the general and administrative - you dropped down a lot in the fourth quarter, was that a reflection of there have been some accrue as probably for bonuses and things like that which in the end were not earned or was that a dropdown in expenses as sustainable rate?

Good, it's a question I'll give over to Rob.

The decrease in general and administrative expenses, one of the things that I had mentioned earlier was related to where we were actually accruing for some estimated cost in the dispute that we had, that dispute was settled in Q4 and as I had mentioned we had reversed what we had accrued or what we basically said was a true up to what were settled. So a large portion of what you're seeing in G&A and the drop in G&A really reflects that adjusted accrual for the fourth quarter.

Okay. So for projects if I use the earlier quarters as a go forward kind of basis that's the right number to be using?

Yes, I would say that the previous quarters are probably more reflective and indicative of the G&A expense that we would incur.

Just to add to that a little bit, the numbers that as Rob talked about the true up that occurred in the fourth quarter, I mean that accrual we made in previous quarters obviously reflected - it was reflected in the previous quarters and obviously the benefit that we saw in the fourth quarter but it's on a year-over-year basis, it's an accurate number of course.

Good, good, thanks.

The next question comes from Bill Selby of Gabelli. Please go ahead.

Hi, good morning.

Good morning, Bill.

Just looking at the improvement in the EBITDA margin of the fourth quarter, part of that was what you just discussed. And I'm just wondering if part of it also is - is the success you're having with one or two customers that's allowing you to have some very good margin business, and if so is that going to carry over into this year? Thank you.

Okay Bill, if I understand you correct - your question correctly, you're asking if the EBITDA improvement is being impacted by one or two customers and I will tell you that it's more than one or two customers of course. And the other question was if it will carry into 2015 and the answer is yes, we don't expect and we have - we're not aware of any significant loss of customers or business at this point in time. So the higher - and the margins I think we've discussed a little bit about - as we apply more of our technology, more value that's added in we do believe that it is driving and should drive margins higher in the future. So we have a wide range of applications and some are very good margins and some aren’t so good margins, and the only door is what you see and we do want to focus on again adding and investing in activities that we can leverage more technology in driving higher margins. So if I haven't answered that Bill, please come back to me for clarification.

No, thank you, and congratulations on a great quarter.

Thank you very much.

The next question comes from Ben Ackler [ph] of Spruce Point Capital Management. Please go ahead.

Hi guys, congratulations on a good quarter and good year.

Thank you, Ben.

I'm very interested in your capital allocation strategy going forward. Obviously you pay a modest dividend and the debts been declining, you're in the middle of driving more synergies at a globe or is there a possibility that the dividend could increase and you could look to pay down some of your higher cost misdebt [ph]? Thank you.

I'll let Rob speak about the misdebt and so far that we can talk about capital structure a little bit more, but go ahead Rob.

Sure. Ben, to your point the misdebt unfortunately is in place where we don't have the ability for pre-payment before 2016. So the higher interest that we're paying unfortunately we don't have the ability to pay down net debt, I think the cash flow this year would have shown them, if we had that ability to actually prepay on net debt we probably would have but to answer your specific question about paying down the higher interest misdebt, unfortunately we're pretty well locked in the structure until 2016.

Yes, in October of 2016, it's a three year program. So there is no advantage, I mean we have to pay that interest, it was a three year commitment for the interest. So we're stuck at it.

So assuming you continue to enjoy healthy cash flow in 2015 what would then be your priorities for that cash flow?

Well I think what you can expect here going forward is we focused on ensuring that we - the acquisition of Globe, that our tension was there and that we were working on the synergies and not looking at structural changes. As we go forward, and our strategy had mentioned has set some new goals and objectives for the company, we are going to continue our growth plan and now with a year under our belts and confident of the cash that we can generate with a combined entity here I believe you’ll see us be aggressive in the market to continue our growth strategy, both through acquisition and as I've already discussed the internal investments on opportunities that we feel are high value for the long-term. So your question about dividend, I would - we did discuss that, we have discussed the possibility of increasing the dividend and I think I wouldn’t expect it in the short-term although cash, the generation becomes stronger in the future, it's certainly something that we will continue to review.

Alright, thank you very much.

The next question comes from Stanley Burger [ph] of SM Burger & Company. Please go ahead.

Thank you. Can you talk about your capacity, where you are and where you could at the end of the year? And then also what products and products can we see some of the inner motors then.

Sure. Stanley, maybe in I clarify a little bit, you're talking about production capacity?

Correct.

Okay. We have plenty of capacity, that's all I can say - I mean as I stated that way and that's a good question and we didn't really emphasize it much here in the conference call. We have talked about it in the past is the beauty of the footprint we have today and the complimentary aspects of the acquisitions overtime here. We have good strong production facilities in Europe and North America, and in Asia. For a company our size I think it's pretty enviable to see - to add those types of resources and including what we would consider lower cost production facilities for example, in Portugal, in Mexico, and in China. So capacity is not an issue for us, we have plenty of capacity to expand and to grow and we have capacity in every regions that we support and target, geographic regions that we support. So that's not going to hold us back. Types of applications, we gave you the highlights at a high level and we can talk about some of those in a little bit more detail here to give you a flavor for the company. We say Aerospace and Defense, we're in missile systems, we're in guidance systems, we're on security type systems wherein vehicles of many types and vehicles is our largest market and it ranges from some automotive business to all types of automated guided vehicles for material handling, for off road equipment, agricultural equipment, for construction equipment, for recreational equipment. So vehicles in many aspects, and all areas of vehicles, whether it's missions control or whether it's steering or whether it's driving and many other motors that are used in all kinds of vehicles. Today there is a motor for everything and we see the electrification in the vehicle market continuing. In terms of medical, we're into many areas in the medical market and just touch on a few here, we talk about robotics whether it's prosthetics, we're one of the leaders in that area or surgical robots or the surgical hand tools that are used in the surgical process itself; instrumentation, metering applications, so it's medical and diagnostic equipment is pretty far raging and across the board. Industrial applications, again it's how we classify that; so if you're in a construction business and you have construction tools then I will talk about not the residential type but commercial construction tools, heavy duty, we're in that; we're in those markets. So we're pretty well diversified as you can tell and I just touched on the surface of somebody applications and that's what we like about the make-up of our company right now, it is fairly well diversified and as we look at these markets we're in some pretty exciting ones in terms of leading edge technology, certainly in the medical area and some of the aerospace and defense areas, and then also in the bread and butter applications, in the industrial markets. I hope that helps?

It does, thank you.

If you go to our website, there is - I think you can see more details on those if you just click on the market that you might be interested in and they will give you a represented sample of types of applications that we are involved in.

Thank you.

You're welcome.

The next question is a follow-up from Jim Jentrap [ph] of Alvista Capital Management. Please go ahead Sir.

Yes, just to back on the margins as you implemented. Has your capacity does get better, globally would you expect to have your gross margins increase?

Yes.

Okay. And then just speaking on below the line on your operating expenses, is there a continued leverage there as well because we're - your synergies are your - I think you talked about some efficiencies, does that translate into more leverage there as well?

Yes.

Okay. And then just on the bookings question, was foreign exchange an impact on bookings this quarter because that's about the only negative I can see at the year report today.

There is some impact obviously to the strengthening dollar included in both bookings and sales and in bookings, yes. I think that that's an area of concern on a go-forward basis is, if the Euro and the Swedish Kronor continue to devalue, I think that is a point of concern on a go forward basis and could be a drag on earnings in the future. So we got to watch that closely. Now that's would impact your revenue that's denominated overall in foreign currency but does to also help you on the expense side because of the similar amount of expenses. Yes, I think from a standpoint of impact on bottom line, I think we still feel pretty positive that offset between being able to purchase or being able to sell in U.S. dollar, denominated dollars and purchase in denominators dollars, that pretty much offsets and we feel that we're pretty well hedged there. But certainly on the revenue line, as you pointed out, there could be some issue here.

Okay. And then just your CapEx question, the run rate is around $3.6 million, I think that's probably due to the ERP implementation, when you say it's going to accelerate, do we expect that $3.6 million to accelerate as well or is that a pretty good run rate?

No, I think that's a pretty good run rate Jim to answer your question. I don't expect that there would be more acceleration of expense there.

Okay. And then last question I have is just the Globe acquisition, getting back to design, the category of designed competencies, what did it give you that you didn't have, I don't want to - I guess, I don't want to - just probably a long answer to that but the short version is fine, I just was curious what that kind of added to your on the design side? Thanks.

Sure, quickly a couple of things and I think what I will do say from a design side standpoint, Globe has full capabilities for motors, electronics and system solutions and they were working on it providing solutions into the market, so across the board they had a capability to design and engineer products that offered solutions which is what we liked. But secondly, not so much on the design side but on the production side, we've talked about this in the past that Globe’s commitment to producing zero defect products is rubbing off within the rest of Allied and they’ve had great successes on some of their production lines for delivering zero defect products for many, many years. So I think that just as importantly is one of the areas that we looked at were very excited about as Globe came on board.

Good answer, thanks guys.

Okay.

[Operator Instructions] The next question comes from Michael Murkowski of Print Core Securities [ph]. Please go ahead.

How are you doing gentlemen?

Good Michael, how are you?

Help me out on a couple of things. You may have touched on this but I didn't hear it before, the provision for income taxes on this quarter is significantly lower on a percentage basis than I think on an ongoing basis, what's going on there?

I mentioned earlier Michael that the company had lower income tax or effective income tax rate and that's basically due to us going through an annual evaluation if you will, an evaluation at year end on a deferred assets and deferred liabilities. To be more specific, the company annually asses the amount of benefit that would be realized on a more likely than not basis, evaluation allowances established for NOLs if you will, an amount is forecasted or evaluation allowance is established for the amount forecasted that will expire unutilized. During the year - I think year end, when we went through our evaluation the amount if you will, the forecasted benefit and I'll say the utilization of the NOLs was increased resulting in a reduction in evaluation allowance, and that has an impact on our result of reducing the effective tax rate. So that's what's really going on what Q4 and as I outlined earlier, the impact of a couple of adjustments but just on the tax side the impact at Q4 is roughly $0.09 per share.

Okay. And on the –

Michael, I just wanted to make sure that I state this, I wouldn’t expect that that effective tax rate is going to be that long on a go forward basis, it's just really adjusting for the forecast and utilization that we looked at, at the year end. So I wouldn’t expect it but on an annual basis I think that we'll be more in line with what we've traditionally seen as our tax rate.

I mean that's certainly around 29, 30 [ph]?

Correct.

Alright. I had a little bit on the sale side, we're comparing to that quarter where we were short, about 17 days where we had Globe coming in on the 18th but just to make sure in the broad strokes from what I'm hearing and for the folks that aren’t - you all are still getting a little bit used to the seasonality. I think that question has come up in the past quarters as to what they expect balancing between these quarters but with the changes you all made little over a year back, I know it's smoothing out but if I'm hearing you correctly, the numbers that you're saying, the winds all of that, all of this seems to be dropping into place even though we're looking at its quarter-to-quarter sequential change. All of this seem to be in line, is that - that's a little broad but I made my mind, and tying the ballpark on this?

Yes, you are.

Okay. And last question is on the debt reduction, obviously those are some good numbers coming down, we can't touch the mezzanine financing, but does that represent an acceleration of what the initial expectations were, we're just in line with the original amortization schedules?

No, we're in line with the original amortization schedule Michael.

Okay, excellent. That's it, great quarter, thanks guys once again.

Thank you.

There are no further questions at this time. I will now hand the call back over to Dick Warzala for closing comments.

Thank you, Lori. Thank you everyone for a very active conference call and some excellent questions here. There were a few that were emailed in, I believe they’ve been answered during the call, one question did - that was emailed in and I let Rob answer that very quickly. It was regard to stop compensation in pension. Yes there was a question that came in as to how much was the stock compensation expense for the year and what the net liability is on the pension plant. And to answer that question, stock compensation expense for the year was about $1.5 million and the net liability, the difference between our plan and projected benefit obligation of our defined benefit plan. There is a net liability of about $1.8 million on that. Okay, and that is the - all the other questions have been answered.

Gentlemen, we do have a follow-up question on the phone line. It comes from Michael Murkowski again of Print Core Securities.

Real quick gentlemen, has there been any discussion as far as stock split or dividend but try to increase some liquidity out there on the stock better belong on float?

There has been discussions, no decision has been reached. And it's all - you're really a part of the overall capitalization program and the growth program for the future but there has been discussion, and as I said no apps, no definitive answer has come up with that yet on that. Okay with that, we'll - unless there is any other questions that somebody wants to pop-in really quick here, give it a second. And seconds over, thank all of you for participating and hopefully we'll have you all back here very shortly and May for our first quarter 2015 conference call. Thanks again.

This concludes today's conference call. You may now disconnect your lines. Thank you for participating. And have a pleasant day.