Omega Flex(OFLX) - 2022 Q1 - Quarterly Report

Financial Performance - Net sales for the three months ended March 31, 2022, were $31,293,000, an increase of 1.4% compared to $30,863,000 for the same period in 2021[14] - Gross profit for the same period was $19,115,000, a decrease of 2.3% from $19,559,000 in 2021[14] - Operating profit decreased to $7,366,000, down 11.5% from $8,319,000 in the prior year[14] - Net income attributable to Omega Flex, Inc. was $5,451,000, a decline of 13.0% compared to $6,267,000 in the previous year[14] - Basic and diluted earnings per common share were $0.54, down from $0.62 in the same quarter of 2021[14] - Net sales for Q1 2022 were $31,293,000, an increase of $430,000 or 1.4% from $30,863,000 in Q1 2021, driven by pricing actions to offset material cost pressures[123] - Gross profit margin decreased to 61.1% in Q1 2022 from 63.4% in Q1 2021, impacted by higher material prices[124] - Operating profit for Q1 2022 was $7,366,000, down by $953,000 or 11.5% from $8,319,000 in Q1 2021[128] Assets and Liabilities - Total current assets decreased to $67,405,000 from $71,737,000 at the end of 2021, reflecting a decline of 6.0%[11] - Total liabilities decreased significantly to $21,532,000 from $28,374,000, a reduction of 24.3%[11] - Shareholders' equity increased to $62,906,000 from $60,541,000, representing a growth of 3.9%[11] - Cash and cash equivalents at the end of the period were $28,971,000, down from $32,913,000, a decrease of 12.0%[21] - Accounts Receivable decreased by $1,966,000 (9.5%) to $18,760,000 as of March 31, 2022, compared to $20,726,000 at December 31, 2021[115] - The cash surrender value of life insurance policies was $1,615,000 as of March 31, 2022, compared to $1,651,000 as of December 31, 2021[72] - The total Phantom Stock related liability as of March 31, 2022 was $1,573,000, down from $2,427,000 as of December 31, 2021[90] Expenses - Selling expenses rose to $5,783,000 in Q1 2022, an increase of $962,000 or 20.0% compared to $4,821,000 in Q1 2021, representing 18.5% of net sales[125] - General and administrative expenses decreased by $668,000 or 12.3% to $4,750,000 in Q1 2022, down from $5,418,000 in Q1 2021, representing 15.2% of net sales[126] - Engineering expenses increased by $215,000 or 21.5% to $1,216,000 in Q1 2022, accounting for 3.9% of net sales[127] - The Company recorded compensation expense of approximately $280,000 for the three months ended March 31, 2022, compared to $441,000 for the same period in 2021[91] Cash Flow - Cash used in operating activities was $3,876,000 in Q1 2022, compared to cash provided of $2,207,000 in Q1 2021, a difference of $6,083,000[137] - As of March 31, 2022, the company had a cash balance of $28,971,000 and a $15,000,000 line of credit with no borrowings outstanding[135] Inventory and Credit - As of March 31, 2022, the Company reported net inventories of $17,820,000, an increase from $15,565,000 as of December 31, 2021, reflecting a growth of 14.5%[65] - The reserve for credit losses was $1,254,000 as of March 31, 2022, down from $1,410,000 as of December 31, 2021, indicating a decrease in expected credit losses[38] - The Company has not experienced any losses related to cash balances and believes its credit risk to be minimal[35] Tax and Legal Matters - Income tax expense decreased by $170,000 or 8.3% to $1,879,000 in Q1 2022, compared to $2,049,000 in Q1 2021, primarily due to a decrease in income before taxes[130] - The Company incurred legal liabilities of £430,000 related to a dispute in the U.K., which has now been resolved[78] - The aggregate maximum exposure for all current open claims as of March 31, 2022, is estimated to not exceed approximately $8,850,000[79] Shareholder Information - Dividends declared per common share increased to $0.30 from $0.28, reflecting a growth of 7.1%[14] - Retained earnings increased by $2,423,000 or 4.8%, reaching $52,476,000 as of March 31, 2022, compared to $50,053,000 on December 31, 2021, primarily due to net income during the quarter[120] Revenue Recognition - The Company recognizes revenue based on the transfer of goods or services to customers, reflecting the expected consideration received[27] - Control of goods is deemed to transfer to the customer upon shipment, with the Company having a legal right to payment at that point[30] - The Company does not offer warranties as a separate component, as they are included with each purchase and do not create a separate performance obligation[32] Leases and Fair Value - The Company applies the requirements of Topic 842 for leases, classifying all leases as operating leases as of March 31, 2022[46] - The Company uses Level 1 inputs for fair value measurements, relying on quoted prices in active markets for its reporting unit[50] - Deferred tax assets and liabilities are recognized for future tax consequences, measured using enacted tax rates expected to apply to taxable income[55]