Omega Flex(OFLX) - 2022 Q4 - Annual Report

Financial Performance - Net Sales for 2022 were $125,487,000, a decrease of $4,524,000 (3.5%) compared to $130,011,000 in 2021, primarily due to a decrease in unit volume[113] - Gross Profit margin for 2022 was 62.4%, slightly down from 62.7% in 2021, maintained despite rising material costs through price increases[114] - Operating Profit decreased by $4,046,000 (11.5%) to $31,016,000 in 2022 compared to $35,062,000 in 2021[118] - Retained earnings increased by $10,901,000 (21.8%) to $60,954,000 as of December 31, 2022, driven by net income growth[112] - Cash provided from operating activities decreased to $15,246,000 in 2022 from $25,149,000 in 2021, illustrating a decrease of $9,903,000[137] Cash and Liquidity - The company's cash balance increased by $4,790,000 (14.6%) to $37,703,000 as of December 31, 2022, primarily due to income generated from operations[104] - As of December 31, 2022, the Company had a cash balance of $37,703,000 and a $15,000,000 line of credit with no borrowings against it[135] - Cash used in investing activities was $942,000 in 2022, compared to $971,000 in 2021 and $564,000 in 2020, all related to capital expenditure projects[139] - Dividend payments amounted to $9,489,000 in 2022, down from $14,867,000 in 2021 and $11,306,000 in 2020[140] Accounts and Inventory Management - Accounts Receivable decreased by $3,223,000 (15.6%) to $17,503,000 as of December 31, 2022, attributed to greater cash collections from higher sales in the previous year's fourth quarter[105] - Inventory increased by $2,199,000 (14.1%) to $17,764,000 as of December 31, 2022, due to purchases made to ensure material availability amid supply chain challenges[106] Tax and Interest - Income tax expense decreased by $1,535,000 (17.3%) to $7,327,000 in 2022, with an effective tax rate of approximately 24%[121] - Interest income rose to $174,000 in 2022 from $35,000 in 2021, reflecting higher interest rates[119] - Income tax expense increased by $2,268,000 or 34.4% from 2020 to 2021, totaling $8,862,000 for 2021, with an effective tax rate of approximately 25% for both years[131] Obligations and Impairment - The Company's total contractual obligations as of December 31, 2022, were $16,755,000, including operating lease obligations of $447,000 and purchase obligations of $16,137,000[144] - The Company performed an annual goodwill impairment test as of December 31, 2022, which did not indicate any impairment, as the estimated fair value exceeded carrying value[152] Accounting Policies and Risk Management - The Company adopted ASU 2019-12, which did not have a material impact on its Consolidated Financial Statements[161] - The Company maintains allowances for credit losses based on historical loss experience and current market conditions, which could materially affect net earnings[150] - The Company does not engage in the purchase or trading of market risk sensitive instruments[162] - The Company does not have any positions with respect to hedge transactions such as forward contracts relating to currency fluctuations[162] - No market risk sensitive instruments are held for speculative or trading purposes[162] Expenses - Engineering expenses increased by $123,000 (2.7%) to $4,733,000 in 2022, representing 3.8% of net sales[117]