Segments, Concentrations and Geographic Information

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segments, Concentrations and Geographic Information

14. Segments, Concentrations and Geographic Information

Segments

The Company currently operates through three business segments that are aligned with key product types and end markets served:

• Couplings, Clutches & Brakes.

Couplings are the interface between two shafts, which enable power to be transmitted from one shaft to the other. Clutches in this segment are devices which use mechanical, hydraulic, pneumatic, or friction type connections to facilitate engaging or disengaging two rotating members. Brakes are combinations of interacting parts that work to slow or stop machinery. Products in this segment are generally used in heavy industrial applications and energy markets.

• Electromagnetic Clutches & Brakes.

Products in this segment include brakes and clutches that are used to electronically slow, stop, engage or disengage equipment utilizing electromagnetic friction type connections.   Products in this segment are used in industrial and commercial markets including agricultural machinery, material handling, motion control, and turf & garden.

• Gearing.

Gears are utilized to reduce the speed and increase the torque of an electric motor or engine to the level required to drive a particular piece of equipment.  Gears produced by the Company are primarily utilized in industrial applications.

Segment financial information and a reconciliation of segment results to consolidated results follows:

	Quarter Ended March 31,
	2017			2016
Net Sales:
Couplings, Clutches & Brakes	$	106,232		$	75,623
Electromagnetic Clutches & Brakes		63,878			57,349
Gearing		47,028			48,920
Inter-segment eliminations		(1,703	)		(1,439	)
Net sales	$	215,435		$	180,453
Income from operations:
Segment earnings:
Couplings, Clutches & Brakes	$	8,345		$	6,291
Electromagnetic Clutches & Brakes		7,593			6,463
Gearing		5,525			5,762
Restructuring		(1,898	)		(1,553	)
Corporate expenses (1)		(1,903	)		(1,986	)
Income from operations	$	17,662		$	14,977
Other non-operating (income) expense:
Net interest expense	$	1,705		$	2,896
Other non-operating  expense (income), net		(530	)		(278	)
Loss on extinguishment of convertible debt		1,797			-
		2,972			2,618
Income before income taxes		14,690			12,359
Provision for income taxes		4,364			3,549
Net income	$	10,326		$	8,810

(1) Certain expenses are maintained at the corporate level and not allocated to the segments. These include various administrative expenses related to corporate headquarters, depreciation on capitalized software costs, non-capitalizable software implementation costs and acquisition related expenses and non-cash partial pension settlements.

Selected information by segment (continued)

	Quarter Ended
	March 31, 2017		March 31, 2016
Depreciation and amortization:
Couplings, Clutches & Brakes	$	5,137	$	3,688
Electromagnetic Clutches & Brakes		1,215		1,148
Gearing		1,651		1,671
Corporate		803		731
Total depreciation and amortization	$	8,806	$	7,238
	March 31, 2017		March 31, 2016
Total assets:
Couplings, Clutches & Brakes	$	541,343	$	333,595
Electromagnetic Clutches & Brakes		176,167		130,038
Gearing		132,971		135,231
Corporate (2)		27,047		37,066
Total assets	$	877,528	$	635,930

(2) Corporate assets are primarily cash and cash equivalents, tax related asset accounts, certain capitalized software costs, property, plant and equipment and deferred financing costs.

Net sales to third parties by geographic region are as follows:

	Net Sales
	Quarter Ended
	March 31, 2017		March 31, 2016
North America (primarily U.S.)	$	115,140	$	112,183
Europe		83,294		52,113
Asia and other		17,001		16,157
Total	$	215,435	$	180,453

Net sales to third parties are attributed to the geographic regions based on the country in which the shipment originates. Amounts attributed to the geographic regions for property, plant and equipment are based on the location of the entity which holds such assets.

Concentrations

Financial instruments, which are potentially subject to counter party performance and concentrations of credit risk, consist primarily of trade accounts receivable. The Company manages these risks by conducting credit evaluations of customers prior to delivery or commencement of services. When the Company enters into a sales contract, collateral is normally not required from the customer. Payments are typically due within 30 days of billing. An allowance for potential credit losses is maintained, and losses have historically been within management’s expectations. While the Company did not have any customers that represented total sales greater than 10% for each of the quarters ended March 31, 2017 and 2016, the Gearing business had one customer that approximated 10% of total sales for that segment during the quarter ended March 31, 2017.

The Company is also subject to counter party performance risk of loss in the event of non-performance by counterparties to financial instruments, such as cash and investments. Cash and cash equivalents are held by well-established financial institutions and invested in AAA rated mutual funds. The Company is exposed to swap counterparty credit risk with well-established financial institutions.