0001558370-23-003041 | 10-K | XBRL Viewer | Allied Motion Technologies INC

ACQUISITIONS

2. ACQUISITIONS

FPH Group

On May 30, 2022, the Company acquired 100% of the direct and indirect legal and beneficial ownership of the shares of FPH Group Inc., a corporation incorporated pursuant to the laws of the Province of Ontario and the membership interests of Transtar International, LLC, a Michigan limited liability company, collectively “FPH”. FPH is an Ontario, Canada headquartered industry leader in the development of technically advanced, reliable and cost-effective electrical drive systems which provide high torque and precision motion for the defense industry, as well as light weighting technologies for existing and future ground-based vehicles in the defense industry. FPH provides concept engineering, prototyping, validation, and production. FPH also develops composites, advanced materials and hybrid products and systems that achieve significant weight reduction and higher strength. This acquisition provides the Company with a deeper penetration within defense applications including the necessary manufacturing licenses and certifications.

The initial purchase price was $42,159 consisting of cash of $39,359 funded through borrowings under the Amended Revolving Facility, $550 in Company stock (22,886 shares at $24.01 closing stock price on May 27, 2022), and $2,250 in the form of 93,728 exchangeable shares (based on the closing price of an equivalent share of the Company’s common stock) of an indirect wholly-owned subsidiary of the Company, each of which is initially exchangeable into one share of Company common stock, subject to adjustment, in accordance with a Support Agreement entered into concurrently with the closing of the transaction. Subsequent to the acquisition date, the Company made measurement period adjustments to the initial purchase price allocation due to adjustments to closing working capital and income tax matters which resulted in a decrease of the purchase price of $1,119, a decrease in trade receivables of $61, an increase of deferred income tax liabilities of $1,607, an increase in other current liabilities of $621, and an increase to goodwill of $1,170. The purchase price allocation is subject to adjustments based on a final determination of certain tax matters.

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

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


Cash and cash equivalents	$	1,755
Trade receivables		3,100
Inventories		4,576
Other assets, net		174
Property, plant, and equipment		624
Right of use assets		4,165
Intangible assets		22,611
Goodwill		14,484
Other current liabilities		(1,577)
Deferred revenue		(776)
Lease liabilities		(4,165)
Net deferred income tax liabilities		(3,931)
Net purchase price	$	41,040

The intangible assets acquired consist of customer lists of $16,173, technology of $5,731, and a trade name of $707, which are being amortized over 12, 10 and 10 years, respectively. Goodwill generated in the acquisition is related to the assembled workforce, synergies between Allied Motion’s other operations and FPH that are expected to occur as a result of the combined engineering knowledge, the ability of each of the operations to integrate each other’s products into more fully integrated system solutions and Allied Motion’s ability to utilize FPH’s management knowledge in providing complementary product offerings to the Company’s customers.

The operating results of this acquisition are included in the consolidated financial statements beginning on the date of the acquisition. Revenue of FPH included within the consolidated statements of income and comprehensive income for the year ended December 31, 2022 was $12,113. Earnings were $607 inclusive of $1,426 of intangible amortization in the year ended December 31, 2022.

The goodwill resulting from the FPH acquisition is tax deductible.

ThinGap and Airex

On May 24, 2022, the Company acquired 100% of the outstanding stock of ThinGap, Inc. (“ThinGap”), a privately-owned California headquartered developer and manufacturer of high performance, zero clogging slotless motors for use in aerospace, defense, and medical applications that require precise performance in a compact, yet high-torque-to-volume solutions. ThinGap designs, engineers, and manufactures low profile, brushless DC motor kits and assemblies that utilize a proprietary wave-wound stator architecture and highly optimized rotors. ThinGap expands the Company’s precision motion capabilities and advances its strategy to provide integrated motion solutions in the robotics, semiconductor, and instrumentation markets.

On June 17, 2022, the Company acquired 100% of the membership interests of Airex, LLC (“Airex”), a privately-owned New Hampshire headquartered developer of high precision electromagnetic components and solutions for the aerospace and defense, life sciences, semiconductor, and commercial industrial applications. Airex combines its patented winding technology with robotic manufacturing to produce linear motors – ironless and iron core, rotary motors, voice coils, wound electromagnetic components and sub-components. Airex expands the Company’s motor offerings as well as enhances its quality systems to support broad mission critical defense programs, as well as other high demanding industries.

The purchase price, collectively, for ThinGap and Airex was $16,527, comprised of $8,224 in cash funded through borrowings under the Amended Revolving Credit Facility and $8,303 in Company stock (376,500 shares, of which 29,631 shares are subject to an indemnification holdback, at a weighted average stock price of $22.05). Subsequent to the acquisition dates, the Company made measurement period adjustments to the initial purchase price allocation due to adjustments to closing working capital which resulted in an increase of purchase price of $91, an increase in deferred revenue of $181, and an increase to goodwill of $272. These purchase price allocations are subject to adjustments based on a final determination of certain tax matters.

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

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


Cash and cash equivalents	$	1,074
Trade receivables		1,295
Inventories		1,686
Other assets, net		636
Property, plant, and equipment		202
Right of use assets		888
Intangible assets		6,000
Goodwill		7,072
Other current liabilities		(574)
Deferred revenue		(426)
Lease liabilities		(888)
Net deferred income tax liabilities		(347)
Net purchase price	$	16,618

The intangible assets acquired consist of customer lists of $3,800, technology of $2,000 and trade names of $200, which are being amortized over weighted average useful lives of 10, 12.5 and 10 years, respectively. Goodwill generated in these acquisitions is related to the assembled workforce, synergies with Allied Motion’s other operations that are expected to occur as a result of the combined engineering knowledge, the ability of the operations to integrate products into more fully integrated system solutions and Allied Motion’s ability to utilize ThinGap and Airex management knowledge in providing complementary product offerings to the Company’s customers.

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

2021 Acquisitions

Spectrum Controls

On December 30, 2021, the Company acquired Spectrum Controls, Inc. (“Spectrum Controls”), a Washington headquartered innovator and manufacturer of industrial Input/Output (“I/O”) and universal communications gateway products. Spectrum Controls designs and manufactures a wide range of highly sophisticated I/O modules, marquee displays, and industrial gateways for broad industrial controls applications through partnerships with programmable logic controller (“PLC”) manufacturers and distributors. This acquisition provides the Company with the opportunity to enhance its position as a value-added solutions supplier to the industrial automation and industrial controls market.

The purchase price was $68,711, consisting of $44,046 paid at closing, $26,076 in cash funded through borrowings under the Amended Revolving Facility and $17,970 in Company stock (502,512 shares at $35.76 closing stock price on December 29, 2021). The remaining $24,665 of purchase price represents the acquisition date fair value of two remaining payments of $12,500 each to be paid in two equal installments no later than January 4, 2023 and January 4, 2024, respectively, comprised of 50% cash and 50% in Company stock. As of December 31, 2022, $12,500 is included in accrued liabilities and $12,277 is included in other long-term liabilities on the consolidated balance sheet. On January 4, 2023, the contractual payment of both cash and Company stock was made for the first required deferred acquisition payment. Subsequent to the acquisition date, the Company made immaterial measurement period adjustments to the initial purchase price allocation due to adjustments to closing working capital. The allocation of the purchase price is final.

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

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


Cash and cash equivalents	$	96
Trade receivables		3,612
Inventories		4,052
Other assets, net		560
Property, plant and equipment		278
Intangible assets		34,800
Goodwill		26,608
Current liabilities		(1,267)
Net purchase price	$	68,739

The intangible assets acquired consist of customer lists of $21,000, technology of $13,500, and a trade name of $300, which are being amortized over 18, 10 and 10 years, respectively. Goodwill generated in the acquisition is related to the assembled workforce, synergies between Allied Motion’s other operations and Spectrum Controls that are expected to occur as a result of the combined engineering knowledge, the ability of each of the operations to integrate each other’s products into more fully integrated system solutions and Allied Motion’s ability to utilize Spectrum Controls’ management knowledge in providing complementary product offerings to the Company’s customers.

The operating results of this acquisition are included in the consolidated financial statements beginning on the date of the acquisition. Revenue and earnings related to Spectrum Controls included within the consolidated statement of income and comprehensive income for the year ended December 31, 2021 were inconsequential.

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

ORMEC & ALIO

On November 2, 2021, the Company acquired 100% of the outstanding stock of ORMEC Systems Corp. (“ORMEC”), a New York headquartered developer and manufacturer of mission critical electro-mechanical automation solutions and motion control products including multi-axis controls, electronic drives and actuators for the automation and aerospace industries. In addition to its products, ORMEC designs and manufactures complete electro-mechanical and software solutions for custom automation applications. ORMEC strengthens the Company’s technical expertise and adds a higher level of precision motion control systems and solutions to its offerings.

On November 4, 2021, the Company acquired 100% of ALIO Industries (“ALIO”), a Colorado headquartered innovator and manufacturer of advanced linear and rotary motion systems for nano-precision applications. ALIO designs, engineers, and manufactures nano technology motion systems for state-of-the-art applications in silicon photonics, micro

assembly, digital pathology, genome sequencing, laser processing and microelectronics. ALIO is well recognized for their technology and expertise in nanometer level positioning. This expertise in high precision positioning and robotic technology solutions is expected to enhance the Company’s portfolio of motion solution offerings.

The purchase price, collectively, for ORMEC and ALIO was $33,458, comprised of $23,333 in cash funded through borrowings under the Amended Revolving Credit Facility, $5,526 in Company stock (150,038 shares at a weighted average stock price of $36.83), and the fair value of contingent consideration of $4,900, offset by a $301 estimated working capital provision. Subsequent to the acquisition dates, the Company made immaterial measurement period adjustments to the initial purchase price allocation due to adjustments to closing working capital. The allocation of purchase price is final.

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

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


Cash and cash equivalents	$	2,059
Trade receivables		1,416
Inventories		2,802
Other assets, net		88
Property, plant and equipment		669
Right of use assets		1,005
Intangible assets		10,200
Goodwill		20,114
Other current liabilities		(1,028)
Deferred revenue		(2,063)
Lease liabilities		(1,005)
Net deferred income tax liabilities		(662)
Net purchase price	$	33,595

The intangible assets acquired consist of technology of $5,700, customer lists of $4,000, and trade names of $500, which are being amortized over weighted average useful lives of 11, 6 and 10 years, respectively. Goodwill generated in these acquisitions is related to the assembled workforce, synergies with Allied Motion’s other operations that are expected to occur as a result of the combined engineering knowledge, the ability of the operations to integrate products into more fully integrated system solutions and Allied Motion’s ability to utilize ORMEC and ALIO’s management knowledge in providing complementary product offerings to the Company’s customers.

The operating results of these acquisitions are included in the consolidated financial statements beginning on the date of the acquisition. Revenue included within the consolidated statement of income and comprehensive income for the year ended December 31, 2021, related to ORMEC and ALIO, collectively, was $2,063 and earnings were not material. The acquisition of ALIO includes contingent consideration initially measured at a fair value of $4,900. This consideration was reduced by $800 during the year ended December 31, 2022, based upon fair valuation of the contingent consideration, and due to an anticipated shift in the timing of the earnings of the acquired entity, largely reflecting supply chain issues experienced within the industry. Contingent consideration of $4,100 is included in other long-term liabilities as of December 31, 2022. A further explanation of the valuation process is disclosed in Note 1, Business and Summary of Significant Accounting Policies. The contingent consideration represents the estimated fair value of the Company’s obligations, under a purchase agreement, to make additional payments if certain earnings goals are met through 2024.

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

Pro Forma Financial Information

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



	Year ended December 31,
	2022		2021		2020
Revenues	$	513,803	$	470,589	$	415,577
Income before income taxes		28,032		22,883		17,633

The pro forma information includes certain adjustments, including depreciation and amortization expense, interest expense, and certain other adjustments, together with related income tax effects. The pro forma amounts do not reflect adjustments for anticipated operating efficiencies that the Company expects to achieve as a result of these acquisitions. The pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would have been had these transactions actually occurred on the date presented or to project the combined company’s results of operations or financial position for any future period.

REVENUE RECOGNITION

12 Months Ended

Dec. 31, 2022

REVENUE RECOGNITION

REVENUE RECOGNITION

3. REVENUE RECOGNITION

Performance Obligations

Performance Obligations Satisfied at a Point in Time

The Company considers control of most products to transfer at a single point in time when control is transferred to the customer, generally when the products are shipped in accordance with an agreement and/or purchase order. Control is defined as the ability to direct the use of and obtain substantially all of the remaining benefits of the product.

The Company satisfies its performance obligations under a contract with a customer by transferring goods and services in exchange for generally monetary consideration from the customer. The Company considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as the contract with the customer. For some customers, control, and a sale, is transferred at a point in time when the product is delivered to a customer.

Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue.

Nature of Goods and Services

The Company sells component and integrated controlled motion solutions to end customers and original equipment manufacturers (“OEM’s”) through the Company’s own direct sales force and authorized manufacturers’ representatives and distributors. The Company’s products include brushed and brushless DC motors, brushless servo and torque motors, coreless DC motors, integrated brushless motor-drives, gearmotors, gearing, modular digital servo drives, motion controllers, incremental and absolute optical encoders, active and passive filters for power quality and harmonic issues, and other controlled motion-related products. The Company’s target markets include Industrial, Vehicle, Medical, and Aerospace & Defense.

Determining the Transaction Price

The majority of the Company’s contracts have an original duration of less than one year. For these contracts, the Company applies the practical expedient and therefore does not consider the effects of the time value of money. For multiyear contracts, the Company uses judgment to determine whether there is a significant financing component. These contracts are generally those in which the customer has made an up-front payment. Contracts that management determines to include a significant financing component are discounted at the Company’s incremental borrowing rate. The Company incurs interest expense and accrues a contract liability. As the Company satisfies performance obligations and recognizes revenue from these contracts, interest expense is recognized simultaneously. Management does not have any contracts that include a significant financing component as of December 31, 2022.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into geographical regions and target markets. The Company determines that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. As noted in Note 13, Segment Information, the Company’s business consists of one reportable segment.

The revenues by geography in the table below are revenues derived from the Company’s foreign subsidiaries as provided in Note 13. A reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions is provided in Note 13. The Company’s disaggregated revenues are as follows (in thousands):



	Year ended December 31,
Target Market	2022		2021		2020
Industrial	$	193,290	$	135,440	$	114,143
Vehicle		130,436		129,835		110,365
Medical		85,113		86,129		83,191
Aerospace & Defense		70,193		31,746		39,711
Other		23,956		20,366		19,284
Total	$	502,988	$	403,516	$	366,694

	Year ended December 31,
Geography	2022		2021		2020
North America (primarily U.S.)	$	337,768	$	239,528	$	214,203
Europe		130,018		129,414		126,985
Asia-Pacific		35,202		34,574		25,506
Total	$	502,988	$	403,516	$	366,694

Contract Balances

When the timing of the Company’s delivery of product is different from the timing of the payments made by customers, the Company recognizes either a contract asset (performance precedes customer payment) or a contract liability (customer payment precedes performance). Typically, contracts are paid in arrears and are recognized as receivables after the Company considers whether a significant financing component exists.

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


	December 31,
	2022		2021
Contract liabilities in accrued liabilities	$	4,807	$	2,425
Contract liabilities in other long-term liabilities		19		242
	$	4,826	$	2,667

The difference between the opening and closing balances of the Company’s contract liabilities primarily results from the timing difference between the Company’s performance and the customer’s payment as well as balances assumed in acquisitions.

Significant Payment Terms

The Company’s contracts with its customers state the final terms of the sale, including the description, quantity, and price of each product or service purchased. Payments are typically due in full within 30-60 days of delivery. Since the customer agrees to a stated rate and price in the contract that do not vary over the contract, the majority of contracts do not contain variable consideration.

Returns, Refunds, and Warranties

In the normal course of business, the Company does not accept product returns unless the item is defective as manufactured. The Company establishes provisions for estimated returns and warranties. All contracts include a standard warranty clause to guarantee that the product complies with agreed specifications.

Practical Expedients

Incremental costs of obtaining a contract - the Company elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been one year or less.

Remaining performance obligations - the Company elected not to disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts that are one year or less, as the revenue is expected to be recognized within the next year.

Time value of money - the Company elected not to adjust the promised amount of consideration for the effects of the time value of money for contracts in which the anticipated period between when the Company transfers the goods or services to the customer and when the customer pays is equal to one year or less.

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
-Topic 606
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-Paragraph 12
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-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

STOCK-BASED COMPENSATION PLANS

GOODWILL

12 Months Ended

Dec. 31, 2022

GOODWILL

GOODWILL

4. GOODWILL

The change in the carrying amount of goodwill for 2022 and 2021 is as follows (in thousands):


		December 31,		December 31,
		2022		2021
Beginning balance	$	106,633		61,860
Goodwill acquired (Note 2)		21,556		46,431
Impact of measurement period adjustments of acquisitions (Note 2)		291		—
Effect of foreign currency translation		(2,114)		(1,658)
Ending balance	$	126,366	$	106,633

The purchase price allocations for FPH, ThinGap, and Airex are not final as of December 31, 2022. Adjustments to these allocations may result in changes to the amounts recorded for goodwill in future periods. The purchase price allocation was finalized for ORMEC, ALIO and Spectrum Controls during 2022.

INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2022

INTANGIBLE ASSETS

INTANGIBLE ASSETS

5. INTANGIBLE ASSETS

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


		December 31, 2022						December 31, 2021
		Gross		Accumulated		Net Book		Gross		Accumulated		Net Book
	Life	Amount		Amortization		Value		Amount		Amortization		Value
Customer lists	5 - 18 years	$	112,378	$	(34,377)	$	78,001	$	94,079	$	(27,639)	$	66,440
Trade name	10 - 19 years		15,320		(6,900)		8,421		14,649		(5,927)		8,722
Design and technologies	10 - 15 years		41,212		(8,558)		32,654		34,241		(5,617)		28,624
Total		$	168,910	$	(49,835)	$	119,075	$	142,969	$	(39,183)	$	103,786

Intangible assets resulting from the 2022 acquisitions of FPH, ThinGap, and Airex were $28,611 (Note 2). Intangible assets resulting from the 2021 acquisitions of ORMEC, ALIO and Spectrum Controls were $45,000 (Note 2). The intangible assets acquired consist of customer lists, technology, and trade names.

Total amortization expense for intangible assets for the years 2022, 2021 and 2020 was $11,169, $6,245 and $5,928, respectively.

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


	Estimated
	Amortization Expense
2023	$	12,206
2024		11,880
2025		11,864
2026		11,766
2027		11,323
Thereafter		60,036
Total estimated amortization expense	$	119,075

STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2022

STOCK-BASED COMPENSATION PLANS

6. STOCK-BASED COMPENSATION PLANS

Stock Incentive Plans

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

As of December 31, 2022, the Company had 848,631 shares of common stock available for grant under stock incentive plans.

Restricted Stock

The following is a summary of restricted stock grants, fair value and performance based awards:


				Awards with
	Unvested	Weighted average		performance
	restricted stock	grant date fair		vesting
For the year ended December 31,	awards	value		requirements
2022	182,497	$	33.21	111,251
2021	109,462	$	32.06	63,432
2020	240,656	$	22.34	150,605

The value at the date of award is amortized to compensation expense over the related service period, which is generally three years for time vested grants. Short-term performance based grants can be achieved over a period of one year, and long-term performance grants can be earned through December 31, 2023. Earned grants are then subject to either a 3 year or 5 year service period. Shares of non-vested restricted stock are forfeited if a recipient leaves the Company before the vesting date. Shares that are forfeited become available for future awards. For performance-based awards, the Company assesses the probability of the achievement of the awards during the year and recognizes expense accordingly.

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


		Number of
		shares
Balance, December 31, 2019		280,053
Awarded		240,656
Vested		(159,698)
Forfeited		(3,669)
Balance, December 31, 2020		357,342
Awarded		109,462
Vested		(162,419)
Forfeited		(10,808)
Balance, December 31, 2021		293,577
Awarded		182,497
Vested		(156,847)
Forfeited		(14,280)
Balance, December 31, 2022		304,947

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


		Total performance
		grants
Outstanding, December 31, 2019		38,214
Awarded		150,605
Performance criteria met		(96,576)
Forfeited		(3,233)
Outstanding, December 31, 2020		89,010
Awarded		63,432
Performance criteria met		(42,290)
Forfeited		(10,229)
Outstanding, December 31, 2021		99,923
Awarded		111,251
Performance criteria met		(97,342)
Forfeited		(9,174)
Outstanding, December 31, 2022		104,658

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

Share-Based Compensation Expense

During 2022, 2021 and 2020 compensation expense net of forfeitures of $5,073, $4,161 and $3,550 was recorded, respectively. As of December 31, 2022, there was $7,527 of total unrecognized compensation expense related to restricted stock awards, of which approximately $4,902 is expected to be recognized in 2023.

Employee Stock Ownership Plan

The Company sponsors an Employee Stock Ownership Plan (“ESOP”) that covers all non-union U.S. employees who work over 1,000 hours per year. The terms of the ESOP require the Company to make an annual contribution equal to the greater of: i) the Board established percentage of pretax income before the contribution (5% in 2022, 2021 and 2020)

or ii) the annual interest payable on any loan outstanding to the Company from the ESOP. Company contributions to the Plan accrued for 2022, 2021 and 2020, were $1,248, $1,206 and $988, respectively. These amounts are included in general and administrative costs in the consolidated statements of income and comprehensive income.

Defined Contribution Plan

The Company sponsors the Allied Motion 401(k) Tax Advantaged Investment Plan (“401(k)”) which covers substantially all its U.S. based employees. The plan provides for the deferral of employee compensation under Section 401(k) and a discretionary Company match. In 2022, 2021 and 2020 this match was 100% per dollar of the first 3% of participant deferral and 50% per dollar of the next 2% contribution, up to 4% of a total 5% participant deferral. Net costs related to this defined contribution plan were $2,146, $1,672 and $1,774 in 2022, 2021 and 2020, respectively.

Dividends

For the years ended December 31, 2022, 2021 and 2020 a total of $0.100, $0.095 and $0.08 per share on all outstanding shares was declared and paid, respectively. Total dividends paid for the years ended December 31, 2022, 2021 and 2020 were $1,536, $1,371 and $1,160, respectively. Based on the terms of the Company’s Credit Agreement, dividends paid to shareholders are acceptable, subject to the Company’s compliance with the covenants under the Credit Agreement.

DEBT OBLIGATIONS

12 Months Ended

Dec. 31, 2022

DEBT OBLIGATIONS

DEBT OBLIGATIONS

7. DEBT OBLIGATIONS

Debt obligations consisted of the following (in thousands):


	December 31,		December 31,
	2022		2021
Long-term Debt
Revolving Credit Facility, long-term (1)	$	227,060	$	159,395
Unamortized debt issuance costs		(625)		(435)
Finance lease obligations - noncurrent		9,019		—
Long-term debt	$	235,454	$	158,960

(1)	The effective rate of the Revolving Credit Facility is 4.69% at December 31, 2022 including the impact of the Company's interest rate swaps.

Amended Revolving Credit Facility

The Second Amended and Restated Credit Agreement (the “Amended Credit Agreement”), dated as of August 23, 2022, includes a $280 million revolving credit facility (the “Amended Revolving Facility”), increased from $225 million in the previous credit agreement, under which comparative periods are reported. Additionally, the referenced index was amended to be the Term Standard Overnight Financing Rate (“SOFR”), whereas the previous credit agreement utilized the London Interbank Offering Rate (LIBOR) as the referenced interest rate. The Amended Credit Agreement eliminates the previous $75 million accordion feature and maintains the original maturity date of February 2025.

Borrowings under the Amended Revolving Facility bear interest at an annual rate equal to the Adjusted SOFR (as defined in the Amended Credit Agreement) which is subject to a floor of 0.00% plus an appicable rate ranging from 1.00% to 2.25% based on the Company’s ratio of total funded indebtedness to consolidated trailing twelve-month EBITDA (the “Total Leverage Ratio”). At December 31, 2022, the applicable SOFR-based borrowing rate was 1.75%. A credit spread adjustment of 0.10% to 0.275% is also carried on the Amended Revolving Facility. In addition, the Company is required to pay a commitment fee of between 0.10% and 0.275% annually on the unused portion of the Amended Revolving Facility, also based on the Company’s Total Leverage Ratio. The Amended Revolving Facility is

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

The Amended Credit Agreement includes covenants and restrictions that limit the Company’s ability to incur additional indebtedness, make certain investments, create, incur or assume certain liens, merge, consolidate or sell all or substantially all of its assets and enter into transactions with an affiliate of the Company on other than an arms’ length transaction. These covenants, which are described more fully in the Amended Credit Agreement, to which reference is made for a complete statement of the covenants, are subject to certain exceptions. The Amended Credit Agreement contains financial covenants that require that the Company maintain a minimum interest coverage ratio of at least 3.0 to 1.0 at the end of each fiscal quarter. In addition, the Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 4.0 to 1.0 ratio (reduced to 3.5:1.0 for quarters ending on or after December 31, 2023); provided that the Company may elect to temporarily increase the Leverage Ratio by 0.5x during the twelve-month period following a material acquisition under the Amended Credit Agreement (“acquisition leverage increase”), subject to certain exceptions. The Company was in compliance with all covenants at December 31, 2022.

As of December 31, 2022, the unused Amended Revolving Facility was $52,940. The amount available to borrow may be reduced based upon the Company’s debt and EBITDA levels, which impacts its covenant calculations.

Other

The China Credit Facility provides credit of $1,450 (Chinese Renminbi 10,000) (“the China Facility”). The China Facility is a demand revolving facility used for working capital and capital equipment needs at the Company’s China operations. The term is annual and may be cancelled at the bank’s discretion. The interest rate shall be agreed upon by the Lender and the Borrower before the Utilization Date (as defined in the China Facility) and shall be specified in the Utilization Request (as defined in the China Facility). Collateral for the facility is a guarantee issued by the Company. There were no borrowings under the China Facility during 2022 or 2021.

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2022

DERIVATIVE FINANCIAL INSTRUMENTS

8. DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, and foreign exchange risk primarily through the use of derivative financial instruments.

Beginning in the first quarter of 2021, the Company began entering into foreign currency contracts with 30-day maturities to hedge its short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, New Zealand Dollar, Chinese Renminbi, Swedish Krona, and Canadian Dollar) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates. The resulting gains or losses are recorded in other (income) expense, net in the consolidated statements of income and comprehensive income. To minimize foreign currency exposure, the Company had foreign currency contracts with notional amounts of $18,891 at December 31, 2022. The foreign currency contracts are recorded in the consolidated balance sheets at fair value and resulting gains or losses are recorded in other expense (income), net in the consolidated statements of income and comprehensive income. During the year ended December 31, 2022, the Company had losses of $1,109 on foreign currency contracts which is included in other expense (income), net and generally offset the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other expense (income), net.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt

of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In February 2017, the Company entered into three interest rate swaps with a combined notional of $40,000 that matured in February 2022. In March 2020, the Company entered into two additional interest rate swaps with a combined notional amount of $20,000 that increased to $60,000 in March 2022 and matures in December 2024. In March 2022 the Company entered into an additional interest rate swap with a notional amount of $40,000 that matures in December 2026. As of December 31, 2022, the Company holds notional amounts of $100,000 in interest rate derivatives.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2022 and 2021, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

The Company estimates that an additional $3,534 will be reclassified as a reduction to interest expense over the next twelve months. Additionally, the Company does not use derivatives for trading or speculative purposes.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2022 and 2021 (in thousands):


		Asset Derivatives
		Fair value as of:
Derivatives designated as	Balance Sheet	December 31,		December 31,
hedging instruments	Location	2022		2021
Foreign currency contracts	Prepaid expenses and other assets	$	48	$	39
Interest rate products	Other long-term assets		7,236		340
		$	7,284	$	379

		Liability Derivatives
		Fair value as of:
Derivatives designated as	Balance Sheet	December 31,		December 31,
hedging instruments	Location	2022		2021
Foreign currency contracts	Accrued liabilities	$	—	$	—
Interest rate products	Accrued liabilities		—		120
		$	—	$	120

The table below presents the effect of cash flow hedge accounting on other comprehensive (loss) income (OCI) for the years ended December 31, 2022, 2021 and 2020 (in thousands):


	Amount of pre-tax loss recognized in OCI
	on derivatives
Derivatives in cash flow hedging relationships	Year ended December 31,
	2022		2021		2020
Interest rate products	$	7,621	$	1,180	$	(2,163)




Location of gain (loss) reclassified	Amount of pre-tax gain (loss) reclassified from accumulated OCI into income
from accumulated OCI into income	Year ended December 31,
	2022		2021		2020
Interest expense	$	532	$	(929)	$	(637)

The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of income and comprehensive income for the years ended December 31, 2022, 2021 and 2020 (in thousands):



		Total amounts of income and expense line items presented
		that reflect the effects of cash flow hedges recorded
		Year ended December 31,
Derivatives designated as hedging instruments	Income Statement Location	2022		2021		2020
Interest rate products	Interest Expense	$	7,692	$	3,236	$	3,716

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of December 31, 2022 and 2021. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets (in thousands).

Derivative assets:

Net amounts

Gross amounts

of assets

Gross amounts not offset in the consolidated

As of

Gross amounts

offset in the

presented in the

balance sheets

December 31,

of recognized

consolidated

Financial

Cash collateral

2022

assets

balance sheets

instruments

received

Net amount

Derivatives

7,284

—

7,284

—

7,284

Net amounts

Gross amounts

of assets

Gross amounts not offset in the consolidated

As of

Gross amounts

offset in the

presented in the

balance sheets

December 31,

of recognized

consolidated

Financial

Cash collateral

2021

assets

balance sheets

instruments

received

Net amount

Derivatives

387

379

—

379

Derivative liabilities:

Net amounts

Gross amounts

of liabilities

Gross amounts not offset in the consolidated

As of

Gross amounts

offset in the

presented in the

balance sheets

December 31,

of recognized

consolidated

Financial

Cash collateral

2022

liabilities

balance sheets

instruments

received

Net amount

Derivatives

—

Net amounts

Gross amounts

of liabilities

Gross amounts not offset in the consolidated

As of

Gross amounts

offset in the

presented in the

balance sheets

December 31,

of recognized

consolidated

Financial

Cash collateral

2021

liabilities

balance sheets

instruments

received

Net amount

Derivatives

120

—

120

—

120

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

INCOME TAXES

12 Months Ended

Dec. 31, 2022

INCOME TAXES

INCOME TAXES

9. INCOME TAXES

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


	For the year ended
	December 31,		December 31,		December 31,
	2022		2021		2020
Domestic	$	7,707	$	10,642	$	8,478
Foreign		15,974		12,471		10,298
Income before income taxes	$	23,681	$	23,113	$	18,776

Components of the total income tax provision (benefit) are as follows (in thousands):


	For the year ended
	December 31,		December 31,		December 31,
	2022		2021		2020
Current provision
Domestic	$	5,903	$	1,866	$	2,167
Foreign		4,111		3,288		3,485
Total current provision		10,014		5,154		5,652
Deferred provision
Domestic		(3,915)		649		288
Foreign		193		(6,784)		(807)
Total deferred (benefit) provision		(3,722)		(6,135)		(519)
Income tax provision (benefit)	$	6,292	$	(981)	$	5,133

The provision (benefit) for income taxes differs from the amount determined by applying the federal statutory rate as follows:


	For the year ended
	December 31,		December 31,		December 31,
	2022		2021		2020
Tax provision, computed at statutory rate	21.0	%	21.0	%	21.0	%
State tax, net of federal impact	1.3	%	2.2	%	4.2	%
Change in valuation allowance	(0.1)	%	7.2	%	0.0	%
Effect of foreign tax rate differences	3.9	%	3.9	%	4.3	%
Permanent items, other	0.2	%	0.2	%	(0.2)	%
Section 162(m) compensation	3.1	%	3.0	%	2.2	%
R&D Credit	(3.9)	%	(2.8)	%	(3.6)	%
Effect of Tax Cuts and Jobs Act	0.1	%	1.2	%	(1.3)	%
Subpart F income	(0.1)	%	(1.0)	%	1.3	%
Investment tax credits	0.0	%	(5.6)	%	0.0	%
Net operating loss carryforwards	0.0	%	(37.2)	%	0.0	%
Unrecognized tax benefits	0.0	%	4.9	%	0.0	%
Other	1.1	%	(1.2)	%	(0.6)	%
Provision for income taxes	26.6	%	(4.2)	%	27.3	%

The tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows (in thousands):


	December 31,		December 31,
	2022		2021
Noncurrent deferred tax assets:
Employee benefit plans	$	2,122	$	2,085
Net operating loss and tax credit carryforwards		8,277		9,802
Accrued expenses and reserves		1,672		915
Research and development costs		4,520		—
Other		328		218
Total noncurrent deferred tax assets		16,919		13,020
Valuation allowance		(3,031)		(2,896)
Net noncurrent deferred tax assets:	$	13,888	$	10,124

Net noncurrent deferred tax liabilities:
Property and equipment	$	3,187	$	3,238
Goodwill and intangibles		10,944		6,484
Interest rate swap derivatives		1,678		—
Other		142		121
Total noncurrent deferred tax liabilities	$	15,951	$	9,843

Net deferred tax asset/(deferred tax liability)	$	(2,063)	$	281

Presented as follows:
Noncurrent deferred income tax assets	$	4,199	$	5,321
Noncurrent deferred income tax liabilities		(6,262)		(5,040)
Net deferred tax liability	$	(2,063)	$	281

As of December 31, 2022, the Company has the following gross carryforwards available (in thousands):


			Amount
Jurisdiction	Tax Attribute		(in thousands)	Begin to expire
U.S. State	Net Operating Losses ⁽¹⁾	$	11,189	2024
International	Net Operating Losses - Unlimited Carryforward ⁽¹⁾	$	21,133	No expiration
U.S. Federal	Foreign Tax Credits	$	1,003	2028
International	R&D Tax Credits	$	374	2024
U.S. Federal	R&D Tax Credits	$	95	2036

(1)

Net operating losses (NOL’s) are presented as pre-tax amounts.

Realization of the Company’s recorded deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards. Management considers the scheduled reversal of deferred tax liabilities, projected verifiable future taxable income and tax planning strategies in making this assessment.

In 2022, noncurrent deferred tax assets includes the effects of capitalization and amortization of R&D expenses as required by the 2017 Tax Cuts and Jobs Act. The Company generated excess foreign tax credits in 2017 due to the one-time transition tax required by enactment of the Tax Cuts and Jobs Act in the amount of $910 and foreign tax credits

were generated in the amount of $92 as a result of a dividend paid from Canada. The Company determined it is more likely than not that it will not realize a tax benefit from these credits. The Company has incurred net operating losses in certain states with a tax effected benefit of $429 that it is more likely than not will not be realized. Additionally, the Company has carryforwards of net operating losses and tax credits generated in foreign jurisdictions and has determined it is more likely than not it would not realize a tax benefit of $1,600. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. The Company believes that it is more likely than not that it will realize the benefits of its deferred tax assets, net of valuation allowances as of December 31, 2022.

The Company files income tax returns in various U.S. and foreign taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before 2019. With few exceptions, the Company is no longer subject to tax examinations in the foreign jurisdictions for periods prior to 2017.

Due to a New Zealand tax legislation change in 2021 allowing for the use of pre-acquisition net operating loss carryforwards to be utilized on the acquirer's future period tax returns, the Company recognized $8,328 of net operating loss carryforwards generated in pre-acquisition periods by the Dynamic Controls New Zealand entities. The net operating loss carryforwards are now available for use by the Company beginning with the New Zealand tax returns filed for the 2020 tax period. The Company evaluated the tax legislation and considered the tax periods open for adjustment by the tax authorities which include the 2016-2020 tax years and has determined it is more likely than not it will not realize a benefit on $1,125 of the net operating loss carryforwards. The Company reduced the unrecognized tax benefit in 2021 as a result of the seller filing its 2020 New Zealand tax return and utilizing $68 of the net operating loss carryforwards. The Company reduced the unrecognized tax benefit in 2022 by $192 as a result of the lapse in the statute of limitations on the 2016 tax return. The Company will adjust this unrecognized tax benefit in light of changing facts and circumstances and with the lapse of the statute of limitations. The lapse of the statute of limitations would be recorded as an adjustment to the provision for income taxes in the period of the statute closure.

The summary of changes to the unrecognized tax benefit for the year ended December 31, 2022 is as follows (in thousands):


	December 31,
	2022
Beginning balance	$	1,057
Additions from tax legislation changes for net operating loss carryforwards		—
Reductions related to net operating loss usage on 2020 tax returns		(192)
Currency Translation		(79)
Ending balance	$	786
___________________________
(1) No other unrecognized tax benefits were recognized in periods prior to the year ended December 31, 2021 that, if recognized, would reduce the effective tax rate.

It is the Company’s policy to include interest and penalties related to income tax liabilities in income tax expense in the consolidated statements of income and comprehensive income. In addition, the Company records uncertain tax positions in accordance with ASC 740. No interest or penalties related to income tax liabilities were recognized for the years ended December 31, 2022, 2021 and 2020.

In general, it is the practice and intention of the Company to reinvest the earnings of its non-domestic subsidiaries in activities outside the United States. Exceptions may be made on a year-by-year basis to repatriate earnings of certain foreign subsidiaries based on cash needs in the United States. In 2021, the Company distributed a portion of these foreign earnings which have been previously taxed in the United States and remitted $236 of foreign withholding taxes.

In 2021, the Company made distributions between its German subsidiaries and remitted $1,493 of foreign withholding taxes. No deferred tax liabilities have been recorded for these distributions as the foreign withholding taxes are refundable on the German income tax return filed in 2022. No further withholding taxes are anticipated to be paid in future years related to this distribution and it is not anticipated to be remitted to the United States.

The Company does not intend to distribute the remaining previously taxed earnings resulting from the one-time transition tax under the Tax Cuts and Jobs Act or capital in foreign subsidiaries, and has not recorded any deferred taxes related to such amounts. The remaining excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries is permanently reinvested, and the determination of any deferred tax liability on this amount is not practicable.

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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COMMITMENTS AND CONTINGENCIES

LEASES

12 Months Ended

Dec. 31, 2022

LEASES

LEASES

10. LEASES

The Company has operating leases for office space, manufacturing facilities and equipment, computer equipment and automobiles. Many leases include one or more options to renew, some of which include options to extend the leases for a long-term period, and some leases include options to terminate the leases within 30 days. In certain of the Company's lease agreements, the rental payments are adjusted periodically to reflect actual charges incurred for capital area maintenance, utilities, inflation and/or changes in other indexes.

The Company’s finance lease obligations relate to a manufacturing facility. As of December 31, 2022, finance lease assets of $8,839 are included in property, plant, and equipment, net, finance lease obligations of $377 are included in accrued liabilities, and $9,019 are included in long-term debt on the consolidated balance sheet.

For the years ended December 31, 2022 and 2021, the components of operating lease expense were as follows (in thousands):


	December 31,			December 31,
	2022			2021
Fixed operating lease expense	$	5,507	$	5,105
Variable operating lease expense		187		707
Short-term lease expense		1,246		237
	$	6,940	$	6,049

Supplemental cash flow information related to the Company’s operating and finance leases for the years ended December 31, 2022 and 2021 are as follows (in thousands):


	December 31,		December 31,
	2022		2021
Cash paid for amounts included in the measurement of operating leases	$	5,191	$	5,321
Cash paid for amounts included in the measurement of finance lease obligations	$	736	$	—
Right of use ("ROU") assets obtained in exchange for operating lease obligations	$	9,592	$	2,482
ROU assets obtained in acquisitions for operating lease obligations (Note 2)	$	5,053	$	1,005
ROU assets obtained in exchange for finance lease obligations	$	9,471	$	—

The following table presents weighted average remaining lease term and discount rates related to the Company’s operating leases as of December 31, 2022 and 2021:


	December 31,
	2022			2021
Weighted average remaining lease term (in years)		6.75			6.41
Weighted average discount rate		3.66	%		2.28	%

The following table presents the maturity of the Company’s operating and finance lease liabilities as of December 31, 2022 (in thousands):


	Operating Leases		Finance Leases
2023		5,027		799
2024		4,446		815
2025		3,688		831
2026		3,316		848
2027		2,832		867
Thereafter		6,773		8,769
Total undiscounted cash flows	$	26,082	$	12,929
Less: present value discount		(3,064)		(3,533)
Total lease liabilities	$	23,018	$	9,396

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

The Company leases certain facilities from companies for which a member of management is a part owner. In connection with such leases, the Company made payments to the lessor of $1,529 and $706 during the years ended December 31, 2022 and 2021, respectively. Future minimum lease payments under these leases as of December 31, 2022 are $13,455.

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2022

COMMITMENTS AND CONTINGENCIES

11. COMMITMENTS AND CONTINGENCIES

Severance Benefit Agreements

As of December 31, 2022, the Company has annually renewable employment agreements with certain of its executive officers. Among other things, the agreements provide for payments and other benefits if the employee’s employment terminates under certain circumstances, including the employee’s death, disability, voluntary resignation with good reason and involuntary termination without cause, as well as voluntary resignation with good reason and involuntary termination without cause within 90 days prior to or 24 months following a change in control of the Company.

Litigation

The Company is involved in certain actions that have arisen out of the ordinary course of business. Management believes that resolution of the actions will not have a significant adverse effect on the Company’s consolidated financial statements.

DEFERRED COMPENSATION ARRANGEMENTS

12 Months Ended

Dec. 31, 2022

DEFERRED COMPENSATION ARRANGEMENTS

DEFERRED COMPENSATION ARRANGEMENTS

12. DEFERRED COMPENSATION ARRANGEMENTS

The Company has a deferred compensation arrangement with its Chief Executive Officer. This arrangement provides the Board and its committees with another mechanism to provide pay for performance based incentive compensation. It also allows for the Chief Executive Officer to make certain deferrals into the plan. The amount of the liability is comprised of liabilities from previous contributions. Amounts accrued relating to previous periods are $3,870 and $4,636 as of

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

SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2022

SEGMENT INFORMATION

SEGMENT INFORMATION

13. SEGMENT INFORMATION

The Company operates in one segment for the manufacture and marketing of controlled motion products and solutions for OEM and end user applications. The Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue.

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



	For the year ended December 31,
	2022		2021		2020
Revenues derived from foreign subsidiaries	$	165,220	$	163,988	$	152,491

Identifiable foreign fixed assets were $34,879 and $32,807 as of December 31, 2022 and 2021, respectively.

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

Sales to customers outside of the United States by all subsidiaries were $214,017, $185,288 and $171,847 during 2022, 2021 and 2020, respectively.

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

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2022

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

For business combinations, net assets acquired and liabilities assumed are recorded at their estimated fair values.

Cash and Cash Equivalents

Accounts Receivable


	December 31, 2022		December 31, 2021
Beginning balance	$	506	$	382
Additional reserves		803		174
Write-offs		(107)		(44)
Effect of foreign currency translation		(10)		(6)
Ending balance	$	1,192	$	506

Inventories


	December 31, 2022		December 31, 2021
Beginning balance	$	506	$	382
Additional reserves		803		174
Write-offs		(107)		(44)
Effect of foreign currency translation		(10)		(6)
Ending balance	$	1,192	$	506

Property, Plant and Equipment

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


		December 31,		December 31,
	Useful lives	2022		2021
Land		$	965	$	979
Building and improvements	5 - 39 years		25,093		14,398
Machinery, equipment, tools and dies	3 - 15 years		89,144		82,898
Construction work in progress			14,197		9,582
Furniture, fixtures and other	3 - 10 years		22,462		21,794
			151,860		129,651
Less accumulated depreciation			(83,220)		(72,668)
Property, plant, and equipment, net		$	68,640	$	56,983

Depreciation expense was $12,676, $11,862 and $10,057 in 2022, 2021 and 2020, respectively.

Intangible Assets

Impairment of Long-Lived Assets

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination.

Other Long-Term Assets

Warranty

Changes in the Company’s reserve for product warranty claims during 2022, 2021 and 2020 were as follows (in thousands):


	December 31,		December 31,		December 31,
	2022		2021		2020
Beginning balance	$	1,869	$	1,571	$	1,075
Warranty reserves acquired		45		15		465
Provision		(66)		543		34
Warranty expenditures		409		(204)		(97)
Effect of foreign currency translation		(97)		(56)		94
Ending balance	$	2,160	$	1,869	$	1,571

Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


	December 31,		December 31,
	2022		2021
Compensation and fringe benefits	$	15,818	$	14,666
Accrued business acquisition consideration		12,500		12,388
Warranty reserve		2,160		1,869
Operating lease liabilities - current		4,224		4,532
Finance lease obligations - current		377		—
Deferred revenue		4,807		2,425
Other accrued expenses		8,235		5,776
	$	48,121	$	41,656

Foreign Currency Translation

Revenue Recognition

Refer to Note 3, Revenue Recognition, for description of the Company’s policies regarding revenue recognition.

Engineering and Development Costs

Basic and Diluted Earnings per Share

Basic and diluted weighted-average shares outstanding are as follows (in thousands):



	Year ended December 31,
	2022	2021	2020
Basic weighted average shares outstanding	15,448	14,413	14,243
Dilutive effect of potential common shares	503	104	90
Diluted weighted average shares outstanding	15,951	14,517	14,333

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

Comprehensive Income

Fair Value Accounting

Level 1: Quoted prices for identical assets or liabilities in active markets.

Level 3: Significant inputs to the valuation model that are unobservable.


	December 31, 2022
	Level 1		Level 2		Level 3
Assets (liabilities)
Pension plan assets	$	5,324	$	—	$	—
Deferred compensation plan assets		3,870		—		—
Foreign currency hedge contracts		—		48		—
Interest rate swaps, net		—		7,236		—
Contingent consideration		—		—		(4,100)


	December 31, 2021
	Level 1		Level 2		Level 3
Assets (liabilities)
Pension plan assets	$	6,899	$	—	$	—
Deferred compensation plan assets		4,636		—		—
Foreign currency hedge contracts		—		39		—
Interest rate swaps, net		—		220		—
Contingent consideration		—		—		(4,900)

Derivative Financial Instruments

Income Taxes

Pension and Postretirement Welfare Plans

Concentration of Credit Risk

Use of Estimates

Stock Split

Twinsburg Consolidation

Recently adopted accounting pronouncements

Accounting pronouncements not yet adopted

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2022

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of activity in the allowance for doubtful accounts

Activity in the provision for credit losses for 2022 and 2021 was as follows (in thousands):


	December 31, 2022		December 31, 2021
Beginning balance	$	506	$	382
Additional reserves		803		174
Write-offs		(107)		(44)
Effect of foreign currency translation		(10)		(6)
Ending balance	$	1,192	$	506

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

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



	December 31, 2022		December 31, 2021
Parts and raw materials	$	89,100	$	65,223
Work-in-process		11,686		9,529
Finished goods		16,322		14,981
	$	117,108	$	89,733

Schedule of classification of property, plant and equipment

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


		December 31,		December 31,
	Useful lives	2022		2021
Land		$	965	$	979
Building and improvements	5 - 39 years		25,093		14,398
Machinery, equipment, tools and dies	3 - 15 years		89,144		82,898
Construction work in progress			14,197		9,582
Furniture, fixtures and other	3 - 10 years		22,462		21,794
			151,860		129,651
Less accumulated depreciation			(83,220)		(72,668)
Property, plant, and equipment, net		$	68,640	$	56,983

Schedule of changes in the reserve for product warranty claims

Changes in the Company’s reserve for product warranty claims during 2022, 2021 and 2020 were as follows (in thousands):


	December 31,		December 31,		December 31,
	2022		2021		2020
Beginning balance	$	1,869	$	1,571	$	1,075
Warranty reserves acquired		45		15		465
Provision		(66)		543		34
Warranty expenditures		409		(204)		(97)
Effect of foreign currency translation		(97)		(56)		94
Ending balance	$	2,160	$	1,869	$	1,571

Schedule of accrued liabilities

Accrued liabilities consist of the following (in thousands):


	December 31,		December 31,
	2022		2021
Compensation and fringe benefits	$	15,818	$	14,666
Accrued business acquisition consideration		12,500		12,388
Warranty reserve		2,160		1,869
Operating lease liabilities - current		4,224		4,532
Finance lease obligations - current		377		—
Deferred revenue		4,807		2,425
Other accrued expenses		8,235		5,776
	$	48,121	$	41,656

Schedule of basic and diluted weighted-average shares outstanding

Basic and diluted weighted-average shares outstanding are as follows (in thousands):



	Year ended December 31,
	2022	2021	2020
Basic weighted average shares outstanding	15,448	14,413	14,243
Dilutive effect of potential common shares	503	104	90
Diluted weighted average shares outstanding	15,951	14,517	14,333

Schedule of financial assets that are accounted for at fair value on a recurring basis


	December 31, 2022
	Level 1		Level 2		Level 3
Assets (liabilities)
Pension plan assets	$	5,324	$	—	$	—
Deferred compensation plan assets		3,870		—		—
Foreign currency hedge contracts		—		48		—
Interest rate swaps, net		—		7,236		—
Contingent consideration		—		—		(4,100)


	December 31, 2021
	Level 1		Level 2		Level 3
Assets (liabilities)
Pension plan assets	$	6,899	$	—	$	—
Deferred compensation plan assets		4,636		—		—
Foreign currency hedge contracts		—		39		—
Interest rate swaps, net		—		220		—
Contingent consideration		—		—		(4,900)

ACQUISITIONS (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of unaudited pro forma financial information



	Year ended December 31,
	2022		2021		2020
Revenues	$	513,803	$	470,589	$	415,577
Income before income taxes		28,032		22,883		17,633

FPH Group

Schedule of purchase price allocation and estimated fair value of the assets acquired


Cash and cash equivalents	$	1,755
Trade receivables		3,100
Inventories		4,576
Other assets, net		174
Property, plant, and equipment		624
Right of use assets		4,165
Intangible assets		22,611
Goodwill		14,484
Other current liabilities		(1,577)
Deferred revenue		(776)
Lease liabilities		(4,165)
Net deferred income tax liabilities		(3,931)
Net purchase price	$	41,040

Spectrum Controls

Schedule of purchase price allocation and estimated fair value of the assets acquired


Cash and cash equivalents	$	96
Trade receivables		3,612
Inventories		4,052
Other assets, net		560
Property, plant and equipment		278
Intangible assets		34,800
Goodwill		26,608
Current liabilities		(1,267)
Net purchase price	$	68,739

ThinGap and Airex

Schedule of purchase price allocation and estimated fair value of the assets acquired


Cash and cash equivalents	$	1,074
Trade receivables		1,295
Inventories		1,686
Other assets, net		636
Property, plant, and equipment		202
Right of use assets		888
Intangible assets		6,000
Goodwill		7,072
Other current liabilities		(574)
Deferred revenue		(426)
Lease liabilities		(888)
Net deferred income tax liabilities		(347)
Net purchase price	$	16,618

ORMEC and ALIO

Schedule of purchase price allocation and estimated fair value of the assets acquired


Cash and cash equivalents	$	2,059
Trade receivables		1,416
Inventories		2,802
Other assets, net		88
Property, plant and equipment		669
Right of use assets		1,005
Intangible assets		10,200
Goodwill		20,114
Other current liabilities		(1,028)
Deferred revenue		(2,063)
Lease liabilities		(1,005)
Net deferred income tax liabilities		(662)
Net purchase price	$	33,595

REVENUE RECOGNITION (Tables)

12 Months Ended

Dec. 31, 2022

REVENUE RECOGNITION

Schedule of reconciliation of disaggregated revenue by target market and geography

The Company’s disaggregated revenues are as follows (in thousands):



	Year ended December 31,
Target Market	2022		2021		2020
Industrial	$	193,290	$	135,440	$	114,143
Vehicle		130,436		129,835		110,365
Medical		85,113		86,129		83,191
Aerospace & Defense		70,193		31,746		39,711
Other		23,956		20,366		19,284
Total	$	502,988	$	403,516	$	366,694

	Year ended December 31,
Geography	2022		2021		2020
North America (primarily U.S.)	$	337,768	$	239,528	$	214,203
Europe		130,018		129,414		126,985
Asia-Pacific		35,202		34,574		25,506
Total	$	502,988	$	403,516	$	366,694

Schedule of opening and closing balances of the Company's receivables, contract asset, and contract liability

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


	December 31,
	2022		2021
Contract liabilities in accrued liabilities	$	4,807	$	2,425
Contract liabilities in other long-term liabilities		19		242
	$	4,826	$	2,667

GOODWILL (Tables)

12 Months Ended

Dec. 31, 2022

GOODWILL

Schedule of change in the carrying amount of goodwill

The change in the carrying amount of goodwill for 2022 and 2021 is as follows (in thousands):


		December 31,		December 31,
		2022		2021
Beginning balance	$	106,633		61,860
Goodwill acquired (Note 2)		21,556		46,431
Impact of measurement period adjustments of acquisitions (Note 2)		291		—
Effect of foreign currency translation		(2,114)		(1,658)
Ending balance	$	126,366	$	106,633

Tabular disclosure of goodwill by reportable segment and in total which includes a rollforward schedule.

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Schedule of intangible assets

INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2022

INTANGIBLE ASSETS

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


		December 31, 2022						December 31, 2021
		Gross		Accumulated		Net Book		Gross		Accumulated		Net Book
	Life	Amount		Amortization		Value		Amount		Amortization		Value
Customer lists	5 - 18 years	$	112,378	$	(34,377)	$	78,001	$	94,079	$	(27,639)	$	66,440
Trade name	10 - 19 years		15,320		(6,900)		8,421		14,649		(5,927)		8,722
Design and technologies	10 - 15 years		41,212		(8,558)		32,654		34,241		(5,617)		28,624
Total		$	168,910	$	(49,835)	$	119,075	$	142,969	$	(39,183)	$	103,786

Schedule of estimated amortization expense for intangible assets

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


	Estimated
	Amortization Expense
2023	$	12,206
2024		11,880
2025		11,864
2026		11,766
2027		11,323
Thereafter		60,036
Total estimated amortization expense	$	119,075

STOCK-BASED COMPENSATION PLANS (Tables)

12 Months Ended

Dec. 31, 2022

STOCK-BASED COMPENSATION PLANS

Summary of restricted stock grants, fair value and performance based awards


				Awards with
	Unvested	Weighted average		performance
	restricted stock	grant date fair		vesting
For the year ended December 31,	awards	value		requirements
2022	182,497	$	33.21	111,251
2021	109,462	$	32.06	63,432
2020	240,656	$	22.34	150,605

Summary of restricted stock activity


		Number of
		shares
Balance, December 31, 2019		280,053
Awarded		240,656
Vested		(159,698)
Forfeited		(3,669)
Balance, December 31, 2020		357,342
Awarded		109,462
Vested		(162,419)
Forfeited		(10,808)
Balance, December 31, 2021		293,577
Awarded		182,497
Vested		(156,847)
Forfeited		(14,280)
Balance, December 31, 2022		304,947

Summary of performance based restricted stock activity


		Total performance
		grants
Outstanding, December 31, 2019		38,214
Awarded		150,605
Performance criteria met		(96,576)
Forfeited		(3,233)
Outstanding, December 31, 2020		89,010
Awarded		63,432
Performance criteria met		(42,290)
Forfeited		(10,229)
Outstanding, December 31, 2021		99,923
Awarded		111,251
Performance criteria met		(97,342)
Forfeited		(9,174)
Outstanding, December 31, 2022		104,658

DEBT OBLIGATIONS (Tables)

12 Months Ended

Dec. 31, 2022

DEBT OBLIGATIONS

Schedule of debt obligations

Debt obligations consisted of the following (in thousands):


	December 31,		December 31,
	2022		2021
Long-term Debt
Revolving Credit Facility, long-term (1)	$	227,060	$	159,395
Unamortized debt issuance costs		(625)		(435)
Finance lease obligations - noncurrent		9,019		—
Long-term debt	$	235,454	$	158,960

(1)	The effective rate of the Revolving Credit Facility is 4.69% at December 31, 2022 including the impact of the Company's interest rate swaps.

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

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

DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2022

DERIVATIVE FINANCIAL INSTRUMENTS


		Asset Derivatives
		Fair value as of:
Derivatives designated as	Balance Sheet	December 31,		December 31,
hedging instruments	Location	2022		2021
Foreign currency contracts	Prepaid expenses and other assets	$	48	$	39
Interest rate products	Other long-term assets		7,236		340
		$	7,284	$	379

		Liability Derivatives
		Fair value as of:
Derivatives designated as	Balance Sheet	December 31,		December 31,
hedging instruments	Location	2022		2021
Foreign currency contracts	Accrued liabilities	$	—	$	—
Interest rate products	Accrued liabilities		—		120
		$	—	$	120

Schedule of effect of cash flow hedge accounting on other comprehensive income (loss) (OCI)

The table below presents the effect of cash flow hedge accounting on other comprehensive (loss) income (OCI) for the years ended December 31, 2022, 2021 and 2020 (in thousands):


	Amount of pre-tax loss recognized in OCI
	on derivatives
Derivatives in cash flow hedging relationships	Year ended December 31,
	2022		2021		2020
Interest rate products	$	7,621	$	1,180	$	(2,163)




Location of gain (loss) reclassified	Amount of pre-tax gain (loss) reclassified from accumulated OCI into income
from accumulated OCI into income	Year ended December 31,
	2022		2021		2020
Interest expense	$	532	$	(929)	$	(637)

Schedule of effect of the Company's derivative financial instruments on the condensed consolidated statements of income and comprehensive (loss) income



		Total amounts of income and expense line items presented
		that reflect the effects of cash flow hedges recorded
		Year ended December 31,
Derivatives designated as hedging instruments	Income Statement Location	2022		2021		2020
Interest rate products	Interest Expense	$	7,692	$	3,236	$	3,716

Schedule of fair value provides the location that derivative assets and liabilities

Derivative assets:

Net amounts

Gross amounts

of assets

Gross amounts not offset in the consolidated

As of

Gross amounts

offset in the

presented in the

balance sheets

December 31,

of recognized

consolidated

Financial

Cash collateral

2022

assets

balance sheets

instruments

received

Net amount

Derivatives

7,284

—

7,284

—

7,284

Net amounts

Gross amounts

of assets

Gross amounts not offset in the consolidated

As of

Gross amounts

offset in the

presented in the

balance sheets

December 31,

of recognized

consolidated

Financial

Cash collateral

2021

assets

balance sheets

instruments

received

Net amount

Derivatives

387

379

—

379

Derivative liabilities:

Net amounts

Gross amounts

of liabilities

Gross amounts not offset in the consolidated

As of

Gross amounts

offset in the

presented in the

balance sheets

December 31,

of recognized

consolidated

Financial

Cash collateral

2022

liabilities

balance sheets

instruments

received

Net amount

Derivatives

—

Net amounts

Gross amounts

of liabilities

Gross amounts not offset in the consolidated

As of

Gross amounts

offset in the

presented in the

balance sheets

December 31,

of recognized

consolidated

Financial

Cash collateral

2021

liabilities

balance sheets

instruments

received

Net amount

Derivatives

120

—

120

—

120

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

INCOME TAXES

Schedule of provision for income taxes based on income before income taxes

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


	For the year ended
	December 31,		December 31,		December 31,
	2022		2021		2020
Domestic	$	7,707	$	10,642	$	8,478
Foreign		15,974		12,471		10,298
Income before income taxes	$	23,681	$	23,113	$	18,776

Schedule of components of the total income tax provision (benefit)

Components of the total income tax provision (benefit) are as follows (in thousands):


	For the year ended
	December 31,		December 31,		December 31,
	2022		2021		2020
Current provision
Domestic	$	5,903	$	1,866	$	2,167
Foreign		4,111		3,288		3,485
Total current provision		10,014		5,154		5,652
Deferred provision
Domestic		(3,915)		649		288
Foreign		193		(6,784)		(807)
Total deferred (benefit) provision		(3,722)		(6,135)		(519)
Income tax provision (benefit)	$	6,292	$	(981)	$	5,133

Schedule of differences in the provision (benefit) for income taxes from the amount determined by applying the federal statutory rate


	For the year ended
	December 31,		December 31,		December 31,
	2022		2021		2020
Tax provision, computed at statutory rate	21.0	%	21.0	%	21.0	%
State tax, net of federal impact	1.3	%	2.2	%	4.2	%
Change in valuation allowance	(0.1)	%	7.2	%	0.0	%
Effect of foreign tax rate differences	3.9	%	3.9	%	4.3	%
Permanent items, other	0.2	%	0.2	%	(0.2)	%
Section 162(m) compensation	3.1	%	3.0	%	2.2	%
R&D Credit	(3.9)	%	(2.8)	%	(3.6)	%
Effect of Tax Cuts and Jobs Act	0.1	%	1.2	%	(1.3)	%
Subpart F income	(0.1)	%	(1.0)	%	1.3	%
Investment tax credits	0.0	%	(5.6)	%	0.0	%
Net operating loss carryforwards	0.0	%	(37.2)	%	0.0	%
Unrecognized tax benefits	0.0	%	4.9	%	0.0	%
Other	1.1	%	(1.2)	%	(0.6)	%
Provision for income taxes	26.6	%	(4.2)	%	27.3	%

Schedule of tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities

The tax effects of significant temporary differences and credit and operating loss carryforwards that give rise to the net deferred tax assets and tax liabilities are as follows (in thousands):


	December 31,		December 31,
	2022		2021
Noncurrent deferred tax assets:
Employee benefit plans	$	2,122	$	2,085
Net operating loss and tax credit carryforwards		8,277		9,802
Accrued expenses and reserves		1,672		915
Research and development costs		4,520		—
Other		328		218
Total noncurrent deferred tax assets		16,919		13,020
Valuation allowance		(3,031)		(2,896)
Net noncurrent deferred tax assets:	$	13,888	$	10,124

Net noncurrent deferred tax liabilities:
Property and equipment	$	3,187	$	3,238
Goodwill and intangibles		10,944		6,484
Interest rate swap derivatives		1,678		—
Other		142		121
Total noncurrent deferred tax liabilities	$	15,951	$	9,843

Net deferred tax asset/(deferred tax liability)	$	(2,063)	$	281

Presented as follows:
Noncurrent deferred income tax assets	$	4,199	$	5,321
Noncurrent deferred income tax liabilities		(6,262)		(5,040)
Net deferred tax liability	$	(2,063)	$	281

Schedule of operating loss and tax credit gross carryforwards

As of December 31, 2022, the Company has the following gross carryforwards available (in thousands):


			Amount
Jurisdiction	Tax Attribute		(in thousands)	Begin to expire
U.S. State	Net Operating Losses ⁽¹⁾	$	11,189	2024
International	Net Operating Losses - Unlimited Carryforward ⁽¹⁾	$	21,133	No expiration
U.S. Federal	Foreign Tax Credits	$	1,003	2028
International	R&D Tax Credits	$	374	2024
U.S. Federal	R&D Tax Credits	$	95	2036

(1)

Net operating losses (NOL’s) are presented as pre-tax amounts.

Schedule of changes to the unrecognized tax benefit

The summary of changes to the unrecognized tax benefit for the year ended December 31, 2022 is as follows (in thousands):


	December 31,
	2022
Beginning balance	$	1,057
Additions from tax legislation changes for net operating loss carryforwards		—
Reductions related to net operating loss usage on 2020 tax returns		(192)
Currency Translation		(79)
Ending balance	$	786
___________________________
(1) No other unrecognized tax benefits were recognized in periods prior to the year ended December 31, 2021 that, if recognized, would reduce the effective tax rate.

LEASES (Tables)

12 Months Ended

Dec. 31, 2022

LEASES

Schedule of components of operating lease expense

For the years ended December 31, 2022 and 2021, the components of operating lease expense were as follows (in thousands):


	December 31,			December 31,
	2022			2021
Fixed operating lease expense	$	5,507	$	5,105
Variable operating lease expense		187		707
Short-term lease expense		1,246		237
	$	6,940	$	6,049

Schedule of supplemental cash flow information related to the operating leases

Supplemental cash flow information related to the Company’s operating and finance leases for the years ended December 31, 2022 and 2021 are as follows (in thousands):


	December 31,		December 31,
	2022		2021
Cash paid for amounts included in the measurement of operating leases	$	5,191	$	5,321
Cash paid for amounts included in the measurement of finance lease obligations	$	736	$	—
Right of use ("ROU") assets obtained in exchange for operating lease obligations	$	9,592	$	2,482
ROU assets obtained in acquisitions for operating lease obligations (Note 2)	$	5,053	$	1,005
ROU assets obtained in exchange for finance lease obligations	$	9,471	$	—

Schedule of Lease assets and liabilities and other quantitative information

The following table presents weighted average remaining lease term and discount rates related to the Company’s operating leases as of December 31, 2022 and 2021:


	December 31,
	2022			2021
Weighted average remaining lease term (in years)		6.75			6.41
Weighted average discount rate		3.66	%		2.28	%

Schedule of maturity of the operating lease liabilities

The following table presents the maturity of the Company’s operating and finance lease liabilities as of December 31, 2022 (in thousands):


	Operating Leases		Finance Leases
2023		5,027		799
2024		4,446		815
2025		3,688		831
2026		3,316		848
2027		2,832		867
Thereafter		6,773		8,769
Total undiscounted cash flows	$	26,082	$	12,929
Less: present value discount		(3,064)		(3,533)
Total lease liabilities	$	23,018	$	9,396

SEGMENT INFORMATION (Tables)

12 Months Ended

Dec. 31, 2022

SEGMENT INFORMATION

Schedule of revenue related to foreign subsidiaries

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



	For the year ended December 31,
	2022		2021		2020
Revenues derived from foreign subsidiaries	$	165,220	$	163,988	$	152,491

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Accounts Receivable and Inventories (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Activity in the allowance for doubtful accounts
Beginning balance	$ 506	$ 382
Additional reserves	803	174
Writeoffs	(107)	(44)
Effect of foreign currency translation	(10)	(6)
Ending balance	1,192	506
Inventories
Parts and raw materials	89,100	65,223
Work-in-process	11,686	9,529
Finished goods	16,322	14,981
Inventories	$ 117,108	$ 89,733

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Property, plant and equipment
Property, plant and equipment, gross	$ 151,860	$ 129,651
Less accumulated depreciation	(83,220)	(72,668)
Property, plant and equipment, net	68,640	56,983
Depreciation expense	12,676	11,862	$ 10,057
Land
Property, plant and equipment
Property, plant and equipment, gross	965	979
Building and improvements
Property, plant and equipment
Property, plant and equipment, gross	$ 25,093	$ 14,398
Building and improvements \| Minimum
Property, plant and equipment
Useful lives	5 years	5 years
Building and improvements \| Maximum
Property, plant and equipment
Useful lives	39 years	39 years
Machinery, equipment, tools and dies
Property, plant and equipment
Property, plant and equipment, gross	$ 89,144	$ 82,898
Machinery, equipment, tools and dies \| Minimum
Property, plant and equipment
Useful lives	3 years	3 years
Machinery, equipment, tools and dies \| Maximum
Property, plant and equipment
Useful lives	15 years	15 years
Construction work in progress
Property, plant and equipment
Property, plant and equipment, gross	$ 14,197	$ 9,582
Furniture, fixtures and other
Property, plant and equipment
Property, plant and equipment, gross	$ 22,462	$ 21,794
Furniture, fixtures and other \| Minimum
Property, plant and equipment
Useful lives	3 years	3 years
Furniture, fixtures and other \| Maximum
Property, plant and equipment
Useful lives	10 years	10 years

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) item	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Goodwill
Number of reporting units \| item	1
Goodwill impairment \| $	$ 0	$ 0	$ 0

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Warranty, Accrued Liabilities, and Basic and Diluted Income per Share (Details) - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
Changes in the reserve for product warranty claims
Warranty reserve at beginning of the year	$ 1,869	$ 1,571	$ 1,075
Warranty reserves acquired	45	15	465
Provision	(66)	543	34
Warranty expenditures	409	(204)	(97)
Effect of foreign currency translation	(97)	(56)	94
Warranty reserve at end of year	2,160	1,869	1,571
ACCRUED LIABILITIES
Compensation and fringe benefits	15,818	14,666
Accrued business acquisition consideration	12,500	12,388
Warranty reserve	2,160	1,869	$ 1,571
Operating lease liabilities - current	$ 4,224	$ 4,532
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Accrued liabilities	Accrued liabilities
Finance lease obligations, current	$ 377
Finance Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]	Accrued liabilities	Accrued liabilities
Deferred revenue	$ 4,807	$ 2,425
Other accrued expenses	8,235	5,776
Accrued liabilities	$ 48,121	$ 41,656
Basic and Diluted Income per Share
Basic weighted average shares outstanding	15,448	14,413	14,243
Dilutive effect of potential common shares	503	104	90
Diluted weighted average shares outstanding	15,951	14,517	14,333
Minimum
Warranty
Warranty period	3 months
Maximum
Warranty
Warranty period	2 years

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair Value Accounting (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Assets (liabilities)
Deferred compensation plan assets	$ 11,253	$ 5,122
Recurring basis \| Level 1
Assets (liabilities)
Pension plan assets	5,324	6,899
Deferred compensation plan assets	3,870	4,636
Recurring basis \| Level 2
Assets (liabilities)
Foreign currency hedge contracts	48	39
Interest rate swaps, net/assets	7,236	220
Recurring basis \| Level 3
Assets (liabilities)
Contingent consideration	$ (4,100)	$ (4,900)

BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ in Thousands		12 Months Ended
	Mar. 10, 2021	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Basis of Presentation and Policies [Line Items]
Common stock split	1.5
Business development		$ 3,319	$ 1,299	$ 473
Manufacturing Facility in Twinsburg, Ohio
Basis of Presentation and Policies [Line Items]
Business development		$ 913	$ 545

ACQUISITIONS (Details)										12 Months Ended
ACQUISITIONS (Details)	Jun. 17, 2022 USD ($) $ / shares shares	May 30, 2022 USD ($) shares	May 27, 2022 $ / shares shares	Dec. 30, 2021 USD ($) $ / shares	Dec. 30, 2021 USD ($) $ / shares shares	Dec. 30, 2021 USD ($) $ / shares	Dec. 30, 2021 USD ($) instrument $ / shares	Dec. 30, 2021 USD ($) payment $ / shares	Nov. 04, 2021 USD ($) $ / shares shares	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	May 24, 2022	Nov. 02, 2021
ACQUISITIONS
Increase (decrease) in goodwill										$ 291,000
Cash paid for acquisition										44,101,000	$ 47,254,000	$ 14,728,000
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Goodwill										126,366,000	106,633,000	61,860,000
Revenues										502,988,000	403,516,000	366,694,000
Earnings										17,389,000	24,094,000	13,643,000
Amortization of intangible assets										11,169,000	6,245,000	5,928,000
Pro forma Condensed Combined Financial Information
Revenues										513,803,000	470,589,000	415,577,000
Income before income taxes										28,032,000	22,883,000	$ 17,633,000
FPH Group
ACQUISITIONS
Business acquisition percentage of voting interests acquired		100.00%
Purchase price		$ 42,159,000
Transaction costs related to acquisition		1,057,000
Adjustments to purchase price		1,119,000
Decrease in trade receivables		61,000
Increase (decrease) in goodwill		1,170,000
Increase in other current liabilities		621,000
Increase of deferred income tax		1,607,000
Cash paid for acquisition		39,359,000
Shares issued for acquisition		550,000
Number of share issued for consideration \| shares			22,886
Stock price \| $ / shares			$ 24.01
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents		1,755,000
Trade receivables		3,100,000
Inventories		4,576,000
Other assets, net		174,000
Property, plant and equipment		624,000
Right of use assets		4,165,000
Intangible assets		22,611,000
Goodwill		14,484,000
Other current liabilities		(1,577,000)
Deferred revenue		(776,000)
Lease liabilities		(4,165,000)
Net deferred income tax liabilities		(3,931,000)
Net purchase price		$ 41,040,000
Revenues										12,113,000
Earnings										607,000
Amortization of intangible assets										1,426,000
Number of shares issued in exchange		1
FPH Group \| Technology
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets		$ 5,731,000
Estimated Life		10 years
FPH Group \| Customer lists
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets		$ 16,173,000
Estimated Life		12 years
FPH Group \| Trade name
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets		$ 707,000
Estimated Life		10 years
FPH Group \| Exchangeable Shares
ACQUISITIONS
Shares issued for acquisition		$ 2,250,000
Number of share issued for consideration \| shares		93,728
ThinGap and Airex
ACQUISITIONS
Purchase price	$ 16,527,000
Adjustments to purchase price	91,000
Increase (decrease) in goodwill	272,000
Increase in deferred revenue	181,000
Cash paid for acquisition	8,224,000
Shares issued for acquisition	$ 8,303,000
Number of share issued for consideration \| shares	376,500
Shares subject to indemnification holdback \| shares	29,631
Stock price \| $ / shares	$ 22.05
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents	$ 1,074,000
Trade receivables	1,295,000
Inventories	1,686,000
Other assets, net	636,000
Property, plant and equipment	202,000
Right of use assets	888,000
Intangible assets	6,000,000
Goodwill	7,072,000
Other current liabilities	(574,000)
Deferred revenue	(426,000)
Lease liabilities	(888,000)
Net deferred income tax liabilities	(347,000)
Net purchase price	16,618,000
Revenues										4,217,000
Earnings										337,000
Amortization of intangible assets										653,000
ThinGap and Airex \| Business development
ACQUISITIONS
Transaction costs related to acquisition	257,000
ThinGap and Airex \| Technology
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets	$ 2,000,000
Estimated Life	12 years 6 months
ThinGap and Airex \| Customer lists
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets	$ 3,800,000
Estimated Life	10 years
ThinGap and Airex \| Trade name
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets	$ 200,000
Estimated Life	10 years
ThinGap
ACQUISITIONS
Business acquisition percentage of voting interests acquired													100.00%
Airex LLC
ACQUISITIONS
Business acquisition percentage of voting interests acquired	100.00%
ORMEC
ACQUISITIONS
Business acquisition percentage of voting interests acquired														100.00%
ALIO
ACQUISITIONS
Business acquisition percentage of voting interests acquired									100.00%
ORMEC and ALIO
ACQUISITIONS
Purchase price									$ 33,458,000
Transaction costs related to acquisition										130,000	409,000
Reduction in consideration										800,000
Cash paid for acquisition									23,333,000
Shares issued for acquisition									$ 5,526,000
Number of share issued for consideration \| shares									150,038
Stock price \| $ / shares									$ 36.83
Fair value of contingent consideration									$ 4,900,000	4,100,000
Estimated working capital provision									301,000
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents									2,059,000
Trade receivables									1,416,000
Inventories									2,802,000
Other assets, net									88,000
Property, plant and equipment									669,000
Right of use assets									1,005,000
Intangible assets									10,200,000
Goodwill									20,114,000
Other current liabilities									(1,028,000)
Deferred revenue									(2,063,000)
Lease liabilities									(1,005,000)
Net deferred income tax liabilities									(662,000)
Net purchase price									33,595,000
Revenues									2,063,000
ORMEC and ALIO \| Technology
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets									$ 4,000,000
Estimated Life									6 years
ORMEC and ALIO \| Customer lists
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets									$ 5,700,000
Estimated Life									11 years
ORMEC and ALIO \| Trade name
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets									$ 500,000
Estimated Life									10 years
Spectrum Controls
ACQUISITIONS
Purchase price				$ 68,711,000
Transaction costs related to acquisition										191,000	93,000
Cash paid for acquisition				26,076,000
Shares issued for acquisition				$ 17,970,000
Number of share issued for consideration \| shares					502,512
Stock price \| $ / shares				$ 35.76	$ 35.76	$ 35.76	$ 35.76	$ 35.76
Consideration remaining payable				$ 24,665,000	$ 24,665,000	$ 24,665,000	$ 24,665,000	$ 24,665,000
Consideration in cash and stock at closing of business combination				44,046,000
Number of remaining payments							2	2
Amount payable at each payment				$ 12,500,000
Percentage of remaining consideration in cash						50.00%
Percentage of remaining consideration in stock						50.00%
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Cash and cash equivalents											96,000
Trade receivables											3,612,000
Inventories											4,052,000
Other assets, net											560,000
Property, plant and equipment											278,000
Intangible assets											34,800,000
Goodwill											26,608,000
Current liabilities											(1,267,000)
Net purchase price											68,739,000
Spectrum Controls \| Accrued liabilities.
ACQUISITIONS
Consideration remaining payable										12,500,000
Spectrum Controls \| Other long-term liabilities
ACQUISITIONS
Consideration remaining payable										$ 12,277,000
Spectrum Controls \| Technology
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets											$ 13,500,000
Estimated Life											10 years
Spectrum Controls \| Customer lists
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets											$ 21,000,000
Estimated Life											18 years
Spectrum Controls \| Trade name
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Intangible assets											$ 300,000
Estimated Life											10 years

REVENUE RECOGNITION - Disaggregation of Revenue (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2022 USD ($) segment	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Number of reportable segment \| segment	1
Revenues	$ 502,988	$ 403,516	$ 366,694
Industrial
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Revenues	193,290	135,440	114,143
Vehicle
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Revenues	130,436	129,835	110,365
Medical
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Revenues	85,113	86,129	83,191
Aerospace & Defense
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Revenues	70,193	31,746	39,711
Other
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Revenues	23,956	20,366	19,284
United States
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Revenues	337,768	239,528	214,203
Europe
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Revenues	130,018	129,414	126,985
Asia-Pacific
Reconciliation of disaggregated revenue to segment revenue as well as revenue by geographical regions
Revenues	$ 35,202	$ 34,574	$ 25,506

REVENUE RECOGNITION - Contract Balances (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
REVENUE RECOGNITION
Contract liabilities in accrued liabilities	$ 4,807	$ 2,425
Contract liabilities in other long-term liabilities	19	242
Contract liabilities	$ 4,826	$ 2,667

REVENUE RECOGNITION - Practical Expedients (Details)	12 Months Ended
REVENUE RECOGNITION - Practical Expedients (Details)	Dec. 31, 2022
REVENUE RECOGNITION
Incremental costs of obtaining a contract	true
Remaining performance obligations	true
The time value of money	true

GOODWILL (Details) - USD ($) $ in Thousands	12 Months Ended
GOODWILL (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Change in goodwill
Beginning balance	$ 106,633	$ 61,860
Goodwill acquired (Note 2)	21,556	46,431
Impact of measurement period adjustments of acquisitions	291
Effect of foreign currency translation	(2,114)	(1,658)
Ending balance	$ 126,366	$ 106,633