Cover
Cover | 9 Months Ended |
Sep. 30, 2021shares | |
Cover [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Quarterly Report | true |
Document Transition Report | false |
Document Period End Date | Sep. 30, 2021 |
Document Fiscal Period Focus | Q3 |
Document Fiscal Year Focus | 2021 |
Current Fiscal Year End Date | --12-31 |
Entity File Number | 000-51372 |
Entity Registrant Name | Omega Flex, Inc. |
Entity Central Index Key | 0001317945 |
Entity Tax Identification Number | 23-1948942 |
Entity Incorporation, State or Country Code | PA |
Entity Address, Address Line One | 451 Creamery Way |
Entity Address, City or Town | Exton |
Entity Address, State or Province | PA |
Entity Address, Postal Zip Code | 19341 |
City Area Code | (610) |
Local Phone Number | 524-7272 |
Title of 12(b) Security | Common Stock, par value $0.01 per share |
Trading Symbol | OFLX |
Security Exchange Name | NASDAQ |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 10,094,322 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash and Cash Equivalents | $ 27,245 | $ 23,633 |
Accounts Receivable - less allowances of $1,230 and $1,124, respectively | 22,115 | 20,077 |
Inventories – Net | 12,841 | 11,510 |
Other Current Assets | 3,361 | 2,137 |
Total Current Assets | 65,562 | 57,357 |
Right-Of-Use Assets – Operating | 3,464 | 493 |
Property and Equipment – Net | 8,621 | 8,599 |
Goodwill – Net | 3,526 | 3,526 |
Deferred Taxes | 5 | 5 |
Other Long Term Assets | 1,674 | 1,591 |
Total Assets | 82,852 | 71,571 |
Current Liabilities: | ||
Accounts Payable | 1,852 | 2,471 |
Accrued Compensation | 5,192 | 5,429 |
Accrued Commissions and Sales Incentives | 5,493 | 4,348 |
Dividends Payable | 3,028 | 2,826 |
Taxes Payable | 979 | |
Lease Liability - Operating | 404 | 247 |
Other Liabilities | 5,287 | 5,571 |
Total Current Liabilities | 21,256 | 21,871 |
Lease Liability – Operating, net of current portion | 3,058 | 252 |
Deferred Taxes | 424 | 121 |
Long Term Taxes Payable | 493 | 559 |
Other Long Term Liabilities | 1,659 | 2,391 |
Total Liabilities | 26,890 | 25,194 |
Commitments and Contingencies (Note 5) | ||
Omega Flex, Inc. Shareholders’ Equity: | ||
Common Stock – par value $0.01 share: authorized 20,000,000 shares: 10,153,633 shares issued and 10,094,322 outstanding at both September 30, 2021 and December 31, 2020 | 102 | 102 |
Treasury Stock | (1) | (1) |
Paid-in Capital | 11,025 | 11,025 |
Retained Earnings | 45,486 | 35,769 |
Accumulated Other Comprehensive Loss | (835) | (778) |
Total Omega Flex, Inc. Shareholders’ Equity | 55,777 | 46,117 |
Noncontrolling Interest | 185 | 260 |
Total Shareholders’ Equity | 55,962 | 46,377 |
Total Liabilities and Shareholders’ Equity | $ 82,852 | $ 71,571 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 1,230 | $ 1,124 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, shares issued | 10,153,633 | 10,153,633 |
Common stock, shares outstanding | 10,094,322 | 10,094,322 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Income Statement [Abstract] | ||||
Net Sales | $ 31,725 | $ 27,087 | $ 94,554 | $ 74,171 |
Cost of Goods Sold | 11,686 | 9,821 | 35,258 | 27,874 |
Gross Profit | 20,039 | 17,266 | 59,296 | 46,297 |
Selling Expense | 4,876 | 3,991 | 14,625 | 12,045 |
General and Administrative Expense | 5,724 | 5,951 | 16,281 | 14,056 |
Engineering Expense | 1,113 | 945 | 3,326 | 3,086 |
Operating Profit | 8,326 | 6,379 | 25,064 | 17,110 |
Interest Income (Expense) | 10 | 6 | 27 | (46) |
Other Income (Expense) | (19) | 19 | 6 | (112) |
Income Before Income Taxes | 8,317 | 6,404 | 25,097 | 16,952 |
Income Tax Expense | 2,160 | 1,576 | 6,441 | 4,188 |
Net Income | 6,157 | 4,828 | 18,656 | 12,764 |
Less: Net (Income) attributable to the Noncontrolling Interest | (9) | (11) | (57) | (32) |
Net Income attributable to Omega Flex, Inc. | $ 6,148 | $ 4,817 | $ 18,599 | $ 12,732 |
Basic and Diluted Earnings per Common Share | $ 0.61 | $ 0.48 | $ 1.84 | $ 1.26 |
Cash Dividends Declared per Common Share | $ 0.30 | $ 0.28 | $ 0.88 | $ 0.84 |
Basic and Diluted Weighted Average Shares Outstanding | 10,094,322 | 10,094,322 | 10,094,322 | 10,094,322 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Income Statement [Abstract] | ||||
Net Income | $ 6,157 | $ 4,828 | $ 18,656 | $ 12,764 |
Other Comprehensive Income (Loss): | ||||
Foreign Currency Translation Adjustment | (96) | 134 | (60) | (63) |
Other Comprehensive Income (Loss) | (96) | 134 | (60) | (63) |
Comprehensive Income | 6,061 | 4,962 | 18,596 | 12,701 |
Less: Comprehensive (Income) Attributable to the Noncontrolling Interest | (3) | (22) | (54) | (28) |
Total Comprehensive Income | $ 6,058 | $ 4,940 | $ 18,542 | $ 12,673 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands | Common Stock [Member] | Treasury Stock [Member] | Paid in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income Loss [Member] | Noncontrolling Interest [Member] | Total |
Balance at Dec. 31, 2019 | $ 102 | $ (1) | $ 11,025 | $ 27,165 | $ (909) | $ 194 | $ 37,576 |
Balance, shares at Dec. 31, 2019 | 10,094,322 | ||||||
Net Income | 12,732 | 32 | 12,764 | ||||
Cumulative Translation Adjustment | (59) | (4) | (63) | ||||
Dividends Declared | (8,479) | (8,479) | |||||
Balance at Sep. 30, 2020 | $ 102 | (1) | 11,025 | 31,418 | (968) | 222 | 41,798 |
Balance, shares at Sep. 30, 2020 | 10,094,322 | ||||||
Balance at Jun. 30, 2020 | $ 102 | (1) | 11,025 | 29,427 | (1,091) | 200 | 39,662 |
Balance, shares at Jun. 30, 2020 | 10,094,322 | ||||||
Net Income | 4,817 | 11 | 4,828 | ||||
Cumulative Translation Adjustment | 123 | 11 | 134 | ||||
Dividends Declared | (2,826) | (2,826) | |||||
Balance at Sep. 30, 2020 | $ 102 | (1) | 11,025 | 31,418 | (968) | 222 | 41,798 |
Balance, shares at Sep. 30, 2020 | 10,094,322 | ||||||
Balance at Dec. 31, 2020 | $ 102 | (1) | 11,025 | 35,769 | (778) | 260 | 46,377 |
Balance, shares at Dec. 31, 2020 | 10,094,322 | ||||||
Net Income | 18,599 | 57 | 18,656 | ||||
Cumulative Translation Adjustment | (57) | (3) | (60) | ||||
Dividends Declared | (8,882) | (129) | (9,011) | ||||
Balance at Sep. 30, 2021 | $ 102 | (1) | 11,025 | 45,486 | (835) | 185 | 55,962 |
Balance, shares at Sep. 30, 2021 | 10,094,322 | ||||||
Balance at Jun. 30, 2021 | $ 102 | (1) | 11,025 | 42,366 | (745) | 311 | 53,058 |
Balance, shares at Jun. 30, 2021 | 10,094,322 | ||||||
Net Income | 6,148 | 9 | 6,157 | ||||
Cumulative Translation Adjustment | (90) | (6) | (96) | ||||
Dividends Declared | (3,028) | (129) | (3,157) | ||||
Balance at Sep. 30, 2021 | $ 102 | $ (1) | $ 11,025 | $ 45,486 | $ (835) | $ 185 | $ 55,962 |
Balance, shares at Sep. 30, 2021 | 10,094,322 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Cash Flows from Operating Activities: | ||
Net Income | $ 18,656 | $ 12,764 |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||
Non-Cash Compensation | 579 | 1,406 |
Depreciation and Amortization | 697 | 637 |
Provision for Losses on Accounts Receivable, net of write-offs and recoveries | 105 | (408) |
Deferred Taxes | 303 | 85 |
Provision for Inventory Reserves | 303 | (100) |
Changes in Assets and Liabilities: | ||
Accounts Receivable | (2,165) | 1,091 |
Inventories | (1,671) | (294) |
Right-Of-Use Assets | 201 | 237 |
Other Assets | (1,309) | (811) |
Accounts Payable | (605) | (230) |
Accrued Compensation | (235) | (962) |
Accrued Commissions and Sales Incentives | 1,148 | (1,040) |
Lease Liabilities | (209) | (242) |
Other Liabilities | (2,634) | (792) |
Net Cash Provided by Operating Activities | 13,164 | 11,341 |
Cash Flows from Investing Activities: | ||
Capital Expenditures | (720) | (381) |
Net Cash Used in Investing Activities | (720) | (381) |
Cash Flows from Financing Activities: | ||
Dividends Paid | (8,809) | (8,479) |
Net Cash Used in Financing Activities | (8,809) | (8,479) |
Net Increase in Cash and Cash Equivalents | 3,635 | 2,481 |
Translation effect on cash | (23) | (2) |
Cash and Cash Equivalents – Beginning of Period | 23,633 | 16,098 |
Cash and Cash Equivalents – End of Period | 27,245 | 18,577 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash paid for Income Taxes | 7,455 | 4,939 |
Cash paid for Interest | 112 | |
Declared Dividends | 9,011 | 8,479 |
Supplemental Schedule of Non-Cash Investing and Financing Activities: | ||
Additions to Right-Of-Use Assets obtained from new operating Lease Liabilities | $ 3,261 |
BASIS OF PRESENTATION AND DESCR
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS | 1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Omega Flex, Inc. (Omega) and its subsidiaries (collectively the “Company”). The Company’s condensed consolidated financial statements for the quarter ended September 30, 2021 have been prepared in accordance with accounting principles generally accepted in the United States (GAAP), and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company’s latest shareholders’ annual report (Form 10-K). All material inter-company accounts and transactions have been eliminated in consolidation. It is Management’s opinion that all adjustments necessary for a fair statement of the results for the interim periods have been made, and that all adjustments are of a normal recurring nature or a description is provided for any adjustments that are not of a normal recurring nature. Description of Business The Company’s business is controlled as a single operating segment that consists of the manufacture and sale of flexible metal hose (also described as corrugated tubing), as well as the sale of the Company’s related proprietary fittings and a vast array of accessories. The Company is a leading manufacturer of flexible metal hose, which is used in a variety of ways to carry gases and liquids within their particular applications. Some of the more prominent uses include: ● carrying fuel gases within residential and commercial buildings; ● carrying gasoline and diesel gasoline products (both above and below the ground) in a double containment piping to contain any possible leaks, which is used in automotive and marina refueling, and fueling for back-up generation; ● using copper-alloy corrugated piping in medical or health care facilities to carry medical gases (oxygen, nitrogen, vacuum) or pure gases for pharmaceutical applications; and ● industrial applications where the customer requires the piping to have both a degree of flexibility and/or an ability to carry corrosive compounds or mixtures, or to carry at both very high and very low (cryogenic) temperatures. The Company manufactures flexible metal hose at its facilities in Exton, Pennsylvania, and Houston, Texas in the United States (U.S.), and in Banbury, Oxfordshire in the United Kingdom (U.K.), and primarily sells its products through distributors, wholesalers and to original equipment manufacturers (“OEMs”) throughout North America and Europe, and to a lesser extent other global markets. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual amounts could differ significantly from these estimates. Revenue Recognition With regard to revenue recognition, the Company applies the requirements of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) The principle of Topic 606 was achieved through applying the following five-step approach: ● Identification of the contract, or contracts, with a customer — ● Identification of the performance obligations in the contract — ● Determination of the transaction price ● Allocation of the transaction price to the performance obligations in the contract ● Recognition of revenue when, or as, the Company satisfies a performance obligation ■ The Company has a present right to payment ■ The customer has legal title to the goods ■ The Company has transferred physical possession of the goods ■ The customer has the significant risks and rewards of ownership of the goods ■ The customer has accepted the goods It is important to note that the indicators are not a set of conditions that must be met before the Company can conclude that control of the goods has transferred to the customer. The indicators are a list of factors that are often present if a customer has control of the goods. The Company has typical, unmodified FOB shipping point terms. As the seller, the Company can determine that the shipped goods meet the agreed-upon specifications in the contract or customer purchase order (e.g. items, quantities, and prices) with the buyer, so customer acceptance would be deemed a formality, as noted in ASC 606-10-55-86. As a result, the Company has a legal right to payment upon shipment of the goods. Based upon the above, the Company has concluded that transfer of control substantively transfers to the customer upon shipment. Other considerations of Topic 606 include the following: ● Contract Costs - ● Warranties ● Returned Goods ● Volume Rebates (Promotional Incentives) ■ The amount of consideration is highly susceptible to factors outside the Company’s influence. ■ The uncertainty about the amount of consideration is not expected to be resolved for a long period of time. ■ The Company’s experience with similar types of contracts is limited. ■ The contract has a large number and broad range of possible consideration amounts. If it was concluded that the above factors were in place for the Company, it would support the probability of a significant reversal of revenue. However, as none of the four factors apply to the Company, promotional incentives are recorded as a reduction of revenue based upon estimates of the eligible products expected to be sold. Regarding disaggregated revenue disclosures, as previously noted, the Company’s business is controlled as a single operating segment that consists of the manufacture and sale of flexible metal hose. Most of the Company’s transactions are very similar in nature, contract, terms, timing, and transfer of control of goods. As indicated within Note 2, Significant Accounting Policies, in these condensed consolidated financial statements, under the caption “Significant Concentration”, the majority of the Company’s sales were geographically contained within North America, with the remainder scattered internationally. All performance assessments and resource allocations are generally based upon the review of the results of the Company as a whole. Cash Equivalents The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents include investments in an institutional money market fund, which invests in U.S. Treasury bills, notes and bonds, and/or repurchase agreements, backed by such obligations. Carrying value approximates fair value. Cash and cash equivalents are deposited at various area banks, which at times may exceed federally insured limits. The Company monitors the viability of the banking institutions carrying its assets on a regular basis, and has the ability to transfer cash to various institutions during times of risk. The Company has not experienced any losses related to these cash balances, and believes its credit risk to be minimal. Accounts Receivable and Provision for Credit Losses All accounts receivables are stated at amortized cost, net of allowances for credit losses, and adjusted for any write-offs. The Company maintains allowances for credit losses, which represent an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and estimates for supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in its receivable portfolio. For accounts receivables, the Company uses historical loss experience rates and applies them to a related aging analysis while also considering customer and/or economic risk where appropriate. Determination of the proper amount of allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, net earnings. The allowances consider numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current economic conditions, estimates for supportable forecasts, when appropriate, and credit risk characteristics. The reserve for credit losses, which include future credits, discounts, and doubtful accounts, was $ 1,230,000 1,124,000 Inventories Inventories are valued at the lower of cost or net realizable value. The cost of inventories is determined by the first-in, first-out (FIFO) method. The Company generally considers inventory quantities beyond two-years usage, measured on a historical usage basis, to be excess inventory and reduces the carrying value of inventory accordingly. Property and Equipment Property and equipment are initially recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, the life of the lease, if shorter. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in other income or expense for the period. The cost of maintenance and repairs is expensed as incurred; significant improvements are capitalized. Goodwill In accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 350, Intangibles – Goodwill and Other (ASU 2017-04) Stock-Based Compensation Plans In 2006, the Company adopted a Phantom Stock Plan (the “Plan”), which allows the Company to grant phantom stock units (“Units”) to certain key employees, officers or directors. The Units each represent a contractual right to payment of compensation in the future based upon the market value of the Company’s common stock and are accordingly recorded as liabilities. The Units follow a vesting schedule of three years from the grant date, and are then paid upon maturity. In accordance with FASB ASC Topic 718, Compensation - Stock Compensation Product Liability Reserves Product liability reserves represent the estimated unpaid amounts under the Company’s insurance policies with respect to existing claims. The Company uses the most current available data to estimate claims. As explained more fully under Note 5, Commitments and Contingencies, for various product liability claims covered under the Company’s general liability insurance policies, the Company must pay certain defense and settlement costs within its deductible or self-insured retention limits, ranging primarily from $ 25,000 2,000,000 Leases Effective January 1, 2019, the Company adopted the requirements of FASB ASU 2016-02, Leases 1. The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. 2. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. 3. The lease term is for the major part of the remaining economic life of the underlying asset. 4. The present value of the sum of lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset. 5. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. For any leases that do not meet the criteria identified above for finance leases, the Company treats such leases as operating leases. As of September 30, 2021 and December 31, 2020, each of the Company’s leases are classified as operating leases. Both finance and operating leases are reflected on the balance sheet as lease or “right-of-use” assets and lease liabilities. There are some exceptions, which the Company has elected in its accounting policies. For leases with terms of twelve months or less, or below the Company’s general capitalization policy threshold, the Company has elected an accounting policy to not recognize lease assets and lease liabilities for all asset classes. The Company recognizes lease expense for such leases generally on a straight-line basis over the lease term. The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain to be exercised. Certain leases contain non-lease components, such as common area maintenance, which are generally accounted for separately. In general, the Company will assess if non-lease components are fixed and determinable, or variable, when determining if the component should be included in the lease liability. For purposes of calculating the present value of the lease obligations, the Company utilizes the implicit interest rate within the lease agreement when known and/or determinable, and otherwise utilizes its incremental borrowing rate at the time of the lease agreement. Fair Value of Financial and Nonfinancial Instruments The Company measures financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures Intangibles - Goodwill and Other Earnings per Common Share Basic earnings per share have been computed using the weighted-average number of common shares outstanding. For the periods presented, there are no dilutive securities. Consequently, basic and dilutive earnings per share are the same. Currency Translation Assets and liabilities denominated in foreign currencies, most of which relate to the Company’s United Kingdom subsidiary whose functional currency is British pound sterling, are translated into U.S. dollars at exchange rates prevailing on the balance sheet dates. The statements of income are translated into U.S. dollars at average exchange rates for the period. Adjustments resulting from the translation of financial statements are excluded from the determination of income and are accumulated in a separate component of shareholders’ equity. Exchange gains and losses resulting from foreign currency transactions are included in the statements of income (other expense) in the period in which they occur. Income Taxes The Company accounts for tax liabilities in accordance with the FASB ASC Topic 740, Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. The FASB ASC Topic 740, Income Taxes The Company follows the provisions of ASC 740-10 relative to accounting for uncertainties in tax positions. These provisions provide guidance on the recognition, de-recognition and measurement of potential tax benefits associated with tax positions. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Internal Revenue Code. The changes include, but are not limited to: increasing the limitation on the amount of deductible interest expense, allowing companies to carryback certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income. The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision. Other Comprehensive Income For the three and nine months ended September 30, 2021 and 2020, the components of other comprehensive income consisted solely of foreign currency translation adjustments. Significant Concentration The Company has one significant customer which represented more than 10 10 Subsequent Events The Company evaluates all events or transactions through the date of the related filing that may have a material impact on its condensed consolidated financial statements. Refer to Note 10 of the condensed consolidated financial statements. Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2021 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | 3. INVENTORIES Inventories, net of reserves of $ 703,000 407,000 SCHEDULE OF INVENTORIES, NET OF RESERVES September 30, December 31, 2021 2020 (Amounts in Thousands) Finished Goods $ 5,498 $ 5,068 Raw Materials 7,343 6,442 Inventories - Net $ 12,841 $ 11,510 |
LINE OF CREDIT AND OTHER BORROW
LINE OF CREDIT AND OTHER BORROWINGS | 9 Months Ended |
Sep. 30, 2021 | |
Debt Disclosure [Abstract] | |
LINE OF CREDIT AND OTHER BORROWINGS | 4. LINE OF CREDIT AND OTHER BORROWINGS On December 1, 2017, the Company agreed to a new Amended and Restated Revolving Line of Credit Note (the “Line”) and Third Amendment to the Loan Agreement with Santander Bank, N.A. (the “Bank”). The Company established a line of credit facility in the maximum amount of $ 15,000,000 December 1, 2022 The loan agreement provides for the payment of any borrowings under the agreement at an interest rate range of either LIBOR plus 0.75% to plus 1.75% (for borrowings with a fixed term of 30, 60, or 90 days), or, Prime Rate up to Prime Rate plus 0.50% (for borrowings with no fixed term other than the December 1, 2022 maturity date), depending upon the Company’s then existing financial ratios. Currently, the Company’s ratio would allow for the most favorable rate under the agreement’s range, which would be a rate of 0.83%. The Company is also required to pay on a quarterly basis an unused facility fee of 10 basis points of the average unused balance of the note. The Company may terminate the line at any time during the five-year term, as long as there are no amounts outstanding. During the quarter ended June 30, 2020, in an effort to ensure liquidity and secure all available resources during the COVID-19 pandemic, the Company borrowed the full amount of its capacity on the line of $ 15,000,000 3.25 no The Company was in compliance with all debt covenants as of September 30, 2021 and December 31, 2020. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the U.S. On April 7, 2020, the Company received a loan from the U.S. Small Business Administration (“SBA”) to fund the Company’s request for a loan under the SBA’s Paycheck Protection Program (“PPP” and “PPP Loan”) created as part of the recently enacted CARES Act administered by the SBA. In connection with the PPP Loan, the Company entered into a promissory note filed as Exhibit 10.2 attached to Form 10-Q for the quarter ended June 30, 2020. Pursuant to the terms of the PPP Loan, the Company received total proceeds of $ 2,453,000 1 Accordingly, in light of this guidance, the Company repaid the PPP Loan by May 7, 2020. Lastly, as stated above, borrowings under our line of credit facility bear interest at variable rates based on LIBOR. Currently, the Federal Reserve Bank is considering options and transitioning away from LIBOR, and as such, has formed the Alternative Rates Committee (ARRC). The ARRC selected the Secured Overnight Financing Rate (SOFR) as an appropriate replacement. SOFR is based on transactions in the overnight repurchase markets, which reflects a transaction-based rate on a large number of transactions, better reflecting current financing costs. Discussions are ongoing with the Bank with regards to transitioning the rate for the Line from LIBOR to another appropriate rate such as SOFR. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 5. COMMITMENTS AND CONTINGENCIES Commitments: Under a number of indemnity agreements between the Company and each of its officers and directors, the Company has agreed to indemnify each of its officers and directors against any liability asserted against them in their capacity as an officer or director, or both. The Company’s indemnity obligations under the indemnity agreements are subject to certain conditions and limitations set forth in each of the agreements. Under the terms of the Agreement, the Company is contingently liable for costs which may be incurred by the officers and directors in connection with claims arising by reason of these individuals’ roles as officers and directors. The Company has obtained directors’ and officers’ insurance policies to fund certain obligations under the indemnity agreements. The Company has salary continuation agreements with current and/or past employees. These agreements provide for monthly payments to each of the employees or their designated beneficiary upon the employee’s retirement or death. The payment benefits range from $ 1,000 3,000 460,000 412,000 48,000 499,000 436,000 63,000 The Company has obtained and is the beneficiary of life insurance policies with respect to current and/or past employees. The cash surrender value of such policies (included in Other Long Term Assets) amounts to $ 1,625,000 1,556,000 In addition to the above, the Company has other contractual employment and or change of control agreements in place with key employees, as previously disclosed and noted in the Exhibit Index to the Company’s December 31, 2020 Form 10-K. Obligations related to these arrangements are currently indeterminable due to the variable nature and timing of possible events required to incur such obligations. As disclosed in detail in Note 7, under the caption “Leases”, the Company has several lease obligations in place that will be paid out over time. Most notably, the Company leases a facility in Banbury, England that serves the manufacturing, warehousing and distribution functions. Lastly, as provided in Item 7 under the “Tabular Disclosure of Contractual Obligations and Off-Balance Sheet Arrangements”, of the Company’s December 31, 2020 Form 10-K, the Company has numerous purchase obligations in place for the forthcoming year, largely related to the Company’s core material inventory components. Contingencies: In the ordinary and normal conduct of the Company’s business, it is subject to periodic lawsuits, investigations, and claims (collectively, the “Claims”). The Claims generally relate to potential lightning damage to our flexible gas piping products, which impact legal and product liability related expenses. The Company does not believe the Claims have legal merit, and therefore has commenced a vigorous defense in response to the Claims. It is possible that the Company may incur increased litigation costs in the future due to a variety of factors, including a higher number of Claims, higher legal costs, and higher insurance deductibles or retentions. In September 2017, a putative class action case was filed against the Company and other parties in Missouri state court. The Company successfully removed the case to federal court, and in August 2020, the court granted the defendants’ joint summary judgement motion, and dismissed the case. The parties have fully resolved the plaintiffs appeal of that decision, and the case has been dismissed by the plaintiffs, thus concluding the matter. The Company was made aware of a potential legal liability regarding a legal dispute in the U.K., in which the Company’s subsidiary, Omega Flex Limited (“OFL”), was the claimant. After withdrawing the claim, the court determined that OFL was responsible for the defendant’s costs (including a portion of its attorneys’ fees). The Company reached an initial agreement during the fourth quarter of 2020 and made a payment of £ 320,000 The Company has in place commercial general liability insurance policies that cover most Claims, which are subject to deductibles or retentions, ranging primarily from $ 25,000 2,000,000 zero 2,000,000 7,300,000 709,000 642,000 |
STOCK BASED PLANS
STOCK BASED PLANS | 9 Months Ended |
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
STOCK BASED PLANS | 6. STOCK BASED PLANS Phantom Stock Plan Plan Description. On April 1, 2006, the Company adopted the Omega Flex, Inc. 2006 Phantom Stock Plan (the “Plan”). The Plan authorizes the grant of up to one million units of phantom stock to employees, officers or directors of the Company. The phantom stock units (“Units”) each represent a contractual right to payment of compensation in the future based on the market value of the Company’s common stock. does not ■ ownership interest in the Company ■ shareholder voting rights ■ other incidents of ownership to the Company’s common stock The Units are granted to participants upon the recommendation of the Company’s CEO, and the approval of the Compensation Committee. Each of the Units that are granted to a participant will be initially valued by the Compensation Committee, at an amount equal to the closing price of the Company’s common stock on the grant date, but are recorded at fair value using the Black-Sholes method as described below. The Units follow a vesting schedule, with a maximum vesting of three years after the grant date. Upon vesting, the Units represent a contractual right of payment for the value of the Unit and therefore are stated as liabilities in accordance with Topic 718. The Units may be Full Value, Appreciation Only minus On December 9, 2009, the Board of Directors authorized an amendment to the Plan to pay an amount equal to the value of any cash or stock dividend declared by the Company on its common stock to be accrued to the phantom stock units outstanding as of the record date of the common stock dividend. The dividend equivalent will be paid at the same time the underlying phantom stock units are paid to the participant. In certain circumstances, the Units may be immediately vested upon the participant’s death or disability. All Units granted to a participant are forfeited if the participant is terminated from their relationship with the Company or its subsidiary for “cause,” which is defined under the Plan. If a participant’s employment or relationship with the Company is terminated for reasons other than for “cause,” then any vested Units will be paid to the participant upon termination. However, Units granted to certain “specified employees” as defined in Section 409A of the Internal Revenue Code will be paid approximately 181 days after termination. Grants of Phantom Stock Units. 13,252 Full Value 2,412 Full Value 146.06 1,214,000 7,750 195,000 1,250 Full Value 144.81 1,212 Full Value 8,358 The Company uses the Black-Scholes option pricing model as its method for determining fair value of the Units. The Company uses the straight-line method of attributing the value of the stock-based compensation expense relating to the Units. The compensation expense (including adjustment of the liability to its fair value) from the Units is recognized over the vesting period of each grant or award. Topic 718 requires forfeitures either to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates to derive an estimate of awards ultimately to vest or to recognize the effect of any forfeited awards for which the requisite vesting period is not completed in the period that the award is forfeited. The Company recognizes the reversal of any previously recognized compensation expense on forfeited awards in the period that the award is forfeited. For the three and nine months ended September 30, 2021, the reversal of $ 56,000 1,212 The total Phantom Stock related liability as of September 30, 2021 was $ 2,500,000 1,254,000 1,246,000 3,331,000 1,378,000 1,953,000 Related to the Phantom Stock Plan, in accordance with Topic 718, the Company recorded compensation expense of approximately $ 579,000 1,406,000 102,000 1,264,000 The following table summarizes information about the Company’s nonvested phantom stock Units at September 30, 2021: SUMMARY OF NONVESTED PHANTOM STOCK UNITS Units Weighted Average Grant Date Fair Value Number of Phantom Stock Unit Awards: Nonvested at December 31, 2020 13,252 $ 72.61 Granted 3,220 $ 145.75 Vested (6,902 ) $ 68.34 Forfeited (1,212 ) $ 95.92 Canceled — — Nonvested at September 30, 2021 8,358 $ 100.93 Phantom Stock Unit Awards Expected to Vest 8,358 $ 100.93 The total unrecognized compensation costs calculated at September 30, 2021 are $ 968,000 through August of 2024 1.2 |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2021 | |
Leases | |
LEASES | 7. LEASES In the U.S., the Company owns its two main operating facilities located in Exton, Pennsylvania. In addition to the owned facilities, the Company also has operations in other locations that are leased, as well as other leased assets. In conjunction with the new guidance for leases, as defined by the FASB with ASU 2016-02, Leases In the U.S., the Company leases a facility in Houston, Texas, which currently provides manufacturing, stocking and sales operations, with the lease term running through October 2024 lease term expiring in June 2022 In the U.K., the Company leases a facility in Banbury, England, which serves manufacturing, warehousing, and other operational functions. The lease in Banbury was effective April 1, 2006 and had a 15-year term which ended in March 2021. A new lease for Banbury was recently consummated, effective April 1, 2021, with a 15-year term ending in March 2036. In addition to property rentals, the Company also has lease agreements in place for various fleet vehicles and equipment with various lease terms. At September 30, 2021, the Company has recorded right-of-use assets of $ 3,464,000 3,462,000 404,000 493,000 499,000 247,000 13.03 1.1 Rent expense for the operating leases was approximately $ 108,000 312,000 76,000 225,000 Future minimum lease payments, inclusive of interest, under non-cancelable leases as of September 30, 2021 is as follows: SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES Twelve Months Ending September 30, Operating Leases (Amounts in thousands) 2022 $ 404 2023 311 2024 278 2025 212 2026 207 Thereafter 2,050 Total Minimum Lease Payments $ 3,462 |
SHAREHOLDERS_ EQUITY
SHAREHOLDERS’ EQUITY | 9 Months Ended |
Sep. 30, 2021 | |
Equity [Abstract] | |
SHAREHOLDERS’ EQUITY | 8. SHAREHOLDERS’ EQUITY As of September 30, 2021 and December 31, 2020, the Company had authorized 20,000,000 0.01 10,094,322 59,311 10,153,633 During 2021 and 2020, upon approval of the Board of Directors (the “Board”) the Company has declared and paid dividends, as set forth in the following table: SCHEDULE OF REGULAR QUARTER DIVIDEND PAYMENTS Dividend Declared Dividend Paid Date Price Per Share Date Amount September 15, 2021 $ 0.30 October 4, 2021 $ 3,028,000 June 9, 2021 $ 0.30 July 6, 2021 $ 3,027,000 March 24, 2021 $ 0.28 April 14, 2021 $ 2,827,000 December 11, 2020 $ 0.28 January 5, 2021 $ 2,826,000 September 23, 2020 $ 0.28 October 13, 2020 $ 2,827,000 June 24, 2020 $ 0.28 July 13, 2020 $ 2,826,000 March 31, 2020 $ 0.28 April 17, 2020 $ 2,827,000 December 14, 2019 $ 0.28 January 3, 2020 $ 2,826,000 In addition to the above dividend amounts, there were dividends approved by the Company’s foreign subsidiary during September 2021, which amounted to an outlay of cash of $ 129,000 It should be noted that from time to time, the Board may elect to pay special dividends, in addition to or in lieu of the regular quarterly dividends, depending upon the financial condition of the Company. On April 4, 2014, the Board authorized an extension of its stock repurchase program without expiration, up to a maximum amount of $ 1,000,000 5,000,000 61,811 932,000 15 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2021 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 9. RELATED PARTY TRANSACTIONS From time to time the Company may have related party transactions (“RPTs”). In short, RPTs represent any transaction between the Company and any Company employee, director or officer, or any related entity, or relative, etc. The Company performs a review of transactions each year to determine if any RPTs exist, and if so, determines if the related parties act independently of each other in a fair transaction. Through this investigation the Company noted a limited number of RPTs which are disclosed hereto. First, legal and accounting fees of $ 117,000 300,000 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 10. SUBSEQUENT EVENTS The Company evaluated all events or transactions that occurred through the date of this filing. During this period, no events came to the Company’s attention that would impact the condensed consolidated financial statements for the period ended September 30, 2021. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual amounts could differ significantly from these estimates. |
Revenue Recognition | Revenue Recognition With regard to revenue recognition, the Company applies the requirements of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) The principle of Topic 606 was achieved through applying the following five-step approach: ● Identification of the contract, or contracts, with a customer — ● Identification of the performance obligations in the contract — ● Determination of the transaction price ● Allocation of the transaction price to the performance obligations in the contract ● Recognition of revenue when, or as, the Company satisfies a performance obligation ■ The Company has a present right to payment ■ The customer has legal title to the goods ■ The Company has transferred physical possession of the goods ■ The customer has the significant risks and rewards of ownership of the goods ■ The customer has accepted the goods It is important to note that the indicators are not a set of conditions that must be met before the Company can conclude that control of the goods has transferred to the customer. The indicators are a list of factors that are often present if a customer has control of the goods. The Company has typical, unmodified FOB shipping point terms. As the seller, the Company can determine that the shipped goods meet the agreed-upon specifications in the contract or customer purchase order (e.g. items, quantities, and prices) with the buyer, so customer acceptance would be deemed a formality, as noted in ASC 606-10-55-86. As a result, the Company has a legal right to payment upon shipment of the goods. Based upon the above, the Company has concluded that transfer of control substantively transfers to the customer upon shipment. Other considerations of Topic 606 include the following: ● Contract Costs - ● Warranties ● Returned Goods ● Volume Rebates (Promotional Incentives) ■ The amount of consideration is highly susceptible to factors outside the Company’s influence. ■ The uncertainty about the amount of consideration is not expected to be resolved for a long period of time. ■ The Company’s experience with similar types of contracts is limited. ■ The contract has a large number and broad range of possible consideration amounts. If it was concluded that the above factors were in place for the Company, it would support the probability of a significant reversal of revenue. However, as none of the four factors apply to the Company, promotional incentives are recorded as a reduction of revenue based upon estimates of the eligible products expected to be sold. Regarding disaggregated revenue disclosures, as previously noted, the Company’s business is controlled as a single operating segment that consists of the manufacture and sale of flexible metal hose. Most of the Company’s transactions are very similar in nature, contract, terms, timing, and transfer of control of goods. As indicated within Note 2, Significant Accounting Policies, in these condensed consolidated financial statements, under the caption “Significant Concentration”, the majority of the Company’s sales were geographically contained within North America, with the remainder scattered internationally. All performance assessments and resource allocations are generally based upon the review of the results of the Company as a whole. |
Cash Equivalents | Cash Equivalents The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash equivalents include investments in an institutional money market fund, which invests in U.S. Treasury bills, notes and bonds, and/or repurchase agreements, backed by such obligations. Carrying value approximates fair value. Cash and cash equivalents are deposited at various area banks, which at times may exceed federally insured limits. The Company monitors the viability of the banking institutions carrying its assets on a regular basis, and has the ability to transfer cash to various institutions during times of risk. The Company has not experienced any losses related to these cash balances, and believes its credit risk to be minimal. |
Accounts Receivable and Provision for Credit Losses | Accounts Receivable and Provision for Credit Losses All accounts receivables are stated at amortized cost, net of allowances for credit losses, and adjusted for any write-offs. The Company maintains allowances for credit losses, which represent an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and estimates for supportable forecasts when appropriate. The estimate is a result of the Company’s ongoing assessments and evaluations of collectability, historical loss experience, and future expectations in estimating credit losses in its receivable portfolio. For accounts receivables, the Company uses historical loss experience rates and applies them to a related aging analysis while also considering customer and/or economic risk where appropriate. Determination of the proper amount of allowances requires management to exercise judgment about the timing, frequency and severity of credit losses that could materially affect the provision for credit losses and, as a result, net earnings. The allowances consider numerous quantitative and qualitative factors that include receivable type, historical loss experience, delinquency trends, collection experience, current economic conditions, estimates for supportable forecasts, when appropriate, and credit risk characteristics. The reserve for credit losses, which include future credits, discounts, and doubtful accounts, was $ 1,230,000 1,124,000 |
Inventories | Inventories Inventories are valued at the lower of cost or net realizable value. The cost of inventories is determined by the first-in, first-out (FIFO) method. The Company generally considers inventory quantities beyond two-years usage, measured on a historical usage basis, to be excess inventory and reduces the carrying value of inventory accordingly. |
Property and Equipment | Property and Equipment Property and equipment are initially recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or, for leasehold improvements, the life of the lease, if shorter. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in other income or expense for the period. The cost of maintenance and repairs is expensed as incurred; significant improvements are capitalized. |
Goodwill | Goodwill In accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 350, Intangibles – Goodwill and Other (ASU 2017-04) |
Stock-Based Compensation Plans | Stock-Based Compensation Plans In 2006, the Company adopted a Phantom Stock Plan (the “Plan”), which allows the Company to grant phantom stock units (“Units”) to certain key employees, officers or directors. The Units each represent a contractual right to payment of compensation in the future based upon the market value of the Company’s common stock and are accordingly recorded as liabilities. The Units follow a vesting schedule of three years from the grant date, and are then paid upon maturity. In accordance with FASB ASC Topic 718, Compensation - Stock Compensation |
Product Liability Reserves | Product Liability Reserves Product liability reserves represent the estimated unpaid amounts under the Company’s insurance policies with respect to existing claims. The Company uses the most current available data to estimate claims. As explained more fully under Note 5, Commitments and Contingencies, for various product liability claims covered under the Company’s general liability insurance policies, the Company must pay certain defense and settlement costs within its deductible or self-insured retention limits, ranging primarily from $ 25,000 2,000,000 |
Leases | Leases Effective January 1, 2019, the Company adopted the requirements of FASB ASU 2016-02, Leases 1. The lease transfers ownership of the underlying asset to the lessee by the end of the lease term. 2. The lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise. 3. The lease term is for the major part of the remaining economic life of the underlying asset. 4. The present value of the sum of lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset. 5. The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. For any leases that do not meet the criteria identified above for finance leases, the Company treats such leases as operating leases. As of September 30, 2021 and December 31, 2020, each of the Company’s leases are classified as operating leases. Both finance and operating leases are reflected on the balance sheet as lease or “right-of-use” assets and lease liabilities. There are some exceptions, which the Company has elected in its accounting policies. For leases with terms of twelve months or less, or below the Company’s general capitalization policy threshold, the Company has elected an accounting policy to not recognize lease assets and lease liabilities for all asset classes. The Company recognizes lease expense for such leases generally on a straight-line basis over the lease term. The Company determines if a contract is a lease at the inception of the arrangement. The Company reviews all options to extend, terminate, or purchase its right-of-use assets at the inception of the lease and accounts for these options when they are reasonably certain to be exercised. Certain leases contain non-lease components, such as common area maintenance, which are generally accounted for separately. In general, the Company will assess if non-lease components are fixed and determinable, or variable, when determining if the component should be included in the lease liability. For purposes of calculating the present value of the lease obligations, the Company utilizes the implicit interest rate within the lease agreement when known and/or determinable, and otherwise utilizes its incremental borrowing rate at the time of the lease agreement. |
Fair Value of Financial and Nonfinancial Instruments | Fair Value of Financial and Nonfinancial Instruments The Company measures financial instruments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures Intangibles - Goodwill and Other |
Earnings per Common Share | Earnings per Common Share Basic earnings per share have been computed using the weighted-average number of common shares outstanding. For the periods presented, there are no dilutive securities. Consequently, basic and dilutive earnings per share are the same. |
Currency Translation | Currency Translation Assets and liabilities denominated in foreign currencies, most of which relate to the Company’s United Kingdom subsidiary whose functional currency is British pound sterling, are translated into U.S. dollars at exchange rates prevailing on the balance sheet dates. The statements of income are translated into U.S. dollars at average exchange rates for the period. Adjustments resulting from the translation of financial statements are excluded from the determination of income and are accumulated in a separate component of shareholders’ equity. Exchange gains and losses resulting from foreign currency transactions are included in the statements of income (other expense) in the period in which they occur. |
Income Taxes | Income Taxes The Company accounts for tax liabilities in accordance with the FASB ASC Topic 740, Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. The FASB ASC Topic 740, Income Taxes The Company follows the provisions of ASC 740-10 relative to accounting for uncertainties in tax positions. These provisions provide guidance on the recognition, de-recognition and measurement of potential tax benefits associated with tax positions. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Internal Revenue Code. The changes include, but are not limited to: increasing the limitation on the amount of deductible interest expense, allowing companies to carryback certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income. The tax law changes in the CARES Act did not have a material impact on the Company’s income tax provision. |
Other Comprehensive Income | Other Comprehensive Income For the three and nine months ended September 30, 2021 and 2020, the components of other comprehensive income consisted solely of foreign currency translation adjustments. |
Significant Concentration | Significant Concentration The Company has one significant customer which represented more than 10 10 |
Subsequent Events | Subsequent Events The Company evaluates all events or transactions through the date of the related filing that may have a material impact on its condensed consolidated financial statements. Refer to Note 10 of the condensed consolidated financial statements. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Inventory Disclosure [Abstract] | |
SCHEDULE OF INVENTORIES, NET OF RESERVES | SCHEDULE OF INVENTORIES, NET OF RESERVES September 30, December 31, 2021 2020 (Amounts in Thousands) Finished Goods $ 5,498 $ 5,068 Raw Materials 7,343 6,442 Inventories - Net $ 12,841 $ 11,510 |
STOCK BASED PLANS (Tables)
STOCK BASED PLANS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
SUMMARY OF NONVESTED PHANTOM STOCK UNITS | The following table summarizes information about the Company’s nonvested phantom stock Units at September 30, 2021: SUMMARY OF NONVESTED PHANTOM STOCK UNITS Units Weighted Average Grant Date Fair Value Number of Phantom Stock Unit Awards: Nonvested at December 31, 2020 13,252 $ 72.61 Granted 3,220 $ 145.75 Vested (6,902 ) $ 68.34 Forfeited (1,212 ) $ 95.92 Canceled — — Nonvested at September 30, 2021 8,358 $ 100.93 Phantom Stock Unit Awards Expected to Vest 8,358 $ 100.93 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Leases | |
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES | Future minimum lease payments, inclusive of interest, under non-cancelable leases as of September 30, 2021 is as follows: SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES Twelve Months Ending September 30, Operating Leases (Amounts in thousands) 2022 $ 404 2023 311 2024 278 2025 212 2026 207 Thereafter 2,050 Total Minimum Lease Payments $ 3,462 |
SHAREHOLDERS_ EQUITY (Tables)
SHAREHOLDERS’ EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Equity [Abstract] | |
SCHEDULE OF REGULAR QUARTER DIVIDEND PAYMENTS | During 2021 and 2020, upon approval of the Board of Directors (the “Board”) the Company has declared and paid dividends, as set forth in the following table: SCHEDULE OF REGULAR QUARTER DIVIDEND PAYMENTS Dividend Declared Dividend Paid Date Price Per Share Date Amount September 15, 2021 $ 0.30 October 4, 2021 $ 3,028,000 June 9, 2021 $ 0.30 July 6, 2021 $ 3,027,000 March 24, 2021 $ 0.28 April 14, 2021 $ 2,827,000 December 11, 2020 $ 0.28 January 5, 2021 $ 2,826,000 September 23, 2020 $ 0.28 October 13, 2020 $ 2,827,000 June 24, 2020 $ 0.28 July 13, 2020 $ 2,826,000 March 31, 2020 $ 0.28 April 17, 2020 $ 2,827,000 December 14, 2019 $ 0.28 January 3, 2020 $ 2,826,000 |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Product Information [Line Items] | |||||
Allowance for doubtful accounts receivable | $ 1,230,000 | $ 1,230,000 | $ 1,124,000 | ||
Customer One [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | |||||
Product Information [Line Items] | |||||
Concentration risk, percent | 10.00% | 10.00% | |||
Customer One [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | |||||
Product Information [Line Items] | |||||
Concentration risk, percent | 10.00% | 10.00% | 10.00% | 10.00% | |
Minimum [Member] | |||||
Product Information [Line Items] | |||||
Defense and settlement costs per claim | $ 25,000 | ||||
Maximum [Member] | |||||
Product Information [Line Items] | |||||
Defense and settlement costs per claim | $ 2,000,000 |
SCHEDULE OF INVENTORIES, NET OF
SCHEDULE OF INVENTORIES, NET OF RESERVES (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Inventory Disclosure [Abstract] | ||
Finished Goods | $ 5,498 | $ 5,068 |
Raw Materials | 7,343 | 6,442 |
Inventories - Net | $ 12,841 | $ 11,510 |
INVENTORIES (Details Narrative)
INVENTORIES (Details Narrative) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Inventory Disclosure [Abstract] | ||
Inventory valuation reserves | $ 703,000 | $ 407,000 |
LINE OF CREDIT AND OTHER BORR_2
LINE OF CREDIT AND OTHER BORROWINGS (Details Narrative) - USD ($) | Apr. 07, 2020 | Dec. 01, 2017 | Jun. 30, 2021 | Sep. 30, 2021 | Dec. 31, 2020 | Jun. 30, 2020 |
Debt Instrument [Line Items] | ||||||
Long-term line of credit | $ 15,000,000 | |||||
PPP Loan [Member] | US Small Business Administration [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Line of credit interest rate percentage | 1.00% | |||||
Proceeds from loan | $ 2,453,000 | |||||
Repayment of loan, description | Accordingly, in light of this guidance, the Company repaid the PPP Loan by May 7, 2020. | |||||
Line of Credit [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Long-term line of credit | $ 0 | $ 0 | ||||
Prime Rate [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Line of credit interest rate percentage | 3.25% | |||||
Loan Agreement [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Line of credit facility, maximum borrowing capacity | $ 15,000,000 | |||||
Line of credit facility, expiration date | Dec. 1, 2022 | |||||
Line of credit facility, interest rate description | The loan agreement provides for the payment of any borrowings under the agreement at an interest rate range of either LIBOR plus 0.75% to plus 1.75% (for borrowings with a fixed term of 30, 60, or 90 days), or, Prime Rate up to Prime Rate plus 0.50% (for borrowings with no fixed term other than the December 1, 2022 maturity date), depending upon the Company’s then existing financial ratios. Currently, the Company’s ratio would allow for the most favorable rate under the agreement’s range, which would be a rate of 0.83%. | |||||
Line of credit facility, commitment fee description | The Company is also required to pay on a quarterly basis an unused facility fee of 10 basis points of the average unused balance of the note. | |||||
Line of credit facility expiration period description | The Company may terminate the line at any time during the five-year term, as long as there are no amounts outstanding. |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2020GBP (£) | Sep. 30, 2021USD ($) | Dec. 31, 2020USD ($) | |
Loss Contingencies [Line Items] | |||
Employee benefit payment term description | The payment benefits range from $1,000 per month to $3,000 per month with the term of such payments limited to 15 years after the employee’s retirement. | ||
Other compensation liabilities | $ 460,000 | $ 499,000 | |
Other compensation liabilities, noncurrent | 412,000 | 436,000 | |
Other compensation liabilities, current | 48,000 | 63,000 | |
Cash surrender value of life insurance | 1,625,000 | 1,556,000 | |
Maximum aggregate claim amount | 7,300,000 | ||
Liabilities recorded | $ 709,000 | $ 642,000 | |
Insurance Claims [Member] | |||
Loss Contingencies [Line Items] | |||
Potential liability per claim minimum range, description | zero | ||
GBP United Kingdom Pounds [Member] | |||
Loss Contingencies [Line Items] | |||
Payment of defendant's cost | £ | £ 320,000 | ||
Minimum [Member] | |||
Loss Contingencies [Line Items] | |||
Payment benefit to employee's | $ 1,000 | ||
Deductibles per claim | 25,000 | ||
Maximum [Member] | |||
Loss Contingencies [Line Items] | |||
Payment benefit to employee's | 3,000 | ||
Deductibles per claim | 2,000,000 | ||
Maximum [Member] | Insurance Claims [Member] | |||
Loss Contingencies [Line Items] | |||
Potential liability per claim maximum range, value | $ 2,000,000 |
SUMMARY OF NONVESTED PHANTOM ST
SUMMARY OF NONVESTED PHANTOM STOCK UNITS (Details) | 9 Months Ended |
Sep. 30, 2021$ / sharesshares | |
Share-based Payment Arrangement [Abstract] | |
Nonvested Units, Beginning balance | shares | 13,252 |
Nonvested Weighted Average Grant Date Fair Value, Beginning balance | $ / shares | $ 72.61 |
Nonvested Units, Granted | shares | 3,220 |
Nonvested Weighted Average Grant Date Fair Value, Granted | $ / shares | $ 145.75 |
Nonvested Units, Vested | shares | (6,902) |
Nonvested Weighted Average Grant Date Fair Value, Vested | $ / shares | $ 68.34 |
Nonvested Units, Forfeited | shares | (1,212) |
Nonvested Weighted Average Grant Date Fair Value, Forfeited | $ / shares | $ 95.92 |
Nonvested Units, Canceled | shares | |
Nonvested Weighted Average Grant Date Fair Value, Canceled | $ / shares | |
Nonvested Units, Ending Balance | shares | 8,358 |
Nonvested Weighted Average Grant Date Fair Value, Ending Balance | $ / shares | $ 100.93 |
Phantom Stock Unit Awards Expected to Vest, Units | shares | 8,358 |
Phantom Stock Unit Awards Expected to Vest, Weighted Average Grant Date Fair Value | $ / shares | $ 100.93 |
STOCK BASED PLANS (Details Narr
STOCK BASED PLANS (Details Narrative) - USD ($) | Aug. 25, 2021 | Feb. 18, 2021 | Aug. 31, 2021 | Feb. 28, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Aug. 27, 2021 | Dec. 31, 2020 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share based compensation, description | through August of 2024 | |||||||||
Unvested units outstanding | 8,358 | 8,358 | 13,252 | |||||||
Share based compensation weighted average grant date fair value | $ 145.75 | |||||||||
Share based compensation paid in period | $ 195,000 | $ 1,214,000 | ||||||||
Share based compensation vested shares | 1,250 | 7,750 | ||||||||
Unvested units forfeited | 1,212 | |||||||||
Compensation expense | $ 56,000 | $ 56,000 | ||||||||
Nonvested forfeited Units | 1,212 | 1,212 | ||||||||
Share based compensation liability | $ 2,500,000 | $ 2,500,000 | $ 3,331,000 | |||||||
Share based compensation liability, current | 1,254,000 | 1,254,000 | 1,378,000 | |||||||
Share based compensation liability, non-current | 1,246,000 | 1,246,000 | $ 1,953,000 | |||||||
Unrecognized compensation costs | 968,000 | $ 968,000 | ||||||||
Compensation expense, weighted average recognize period | 1 year 2 months 12 days | |||||||||
Phantom Stock Plan [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share based compensation, description | On April 1, 2006, the Company adopted the Omega Flex, Inc. 2006 Phantom Stock Plan (the “Plan”). The Plan authorizes the grant of up to one million units of phantom stock to employees, officers or directors of the Company. The phantom stock units (“Units”) each represent a contractual right to payment of compensation in the future based on the market value of the Company’s common stock. | |||||||||
Share based compensation vesting rights | The Units are granted to participants upon the recommendation of the Company’s CEO, and the approval of the Compensation Committee. Each of the Units that are granted to a participant will be initially valued by the Compensation Committee, at an amount equal to the closing price of the Company’s common stock on the grant date, but are recorded at fair value using the Black-Sholes method as described below. The Units follow a vesting schedule, with a maximum vesting of three years after the grant date. Upon vesting, the Units represent a contractual right of payment for the value of the Unit and therefore are stated as liabilities in accordance with Topic 718. | |||||||||
Compensation expense | $ 102,000 | $ 1,264,000 | $ 579,000 | $ 1,406,000 | ||||||
Full Value Units [Member] | ||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||
Share based compensation grants in period | 2,412 | |||||||||
Share based compensation weighted average grant date fair value | $ 144.81 | $ 146.06 |
SCHEDULE OF FUTURE MINIMUM RENT
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASES (Details) $ in Thousands | Sep. 30, 2021USD ($) |
Leases | |
2022 | $ 404 |
2023 | 311 |
2024 | 278 |
2025 | 212 |
2026 | 207 |
Thereafter | 2,050 |
Total Minimum Lease Payments | $ 3,462 |
LEASES (Details Narrative)
LEASES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Right-of-use assets | $ 3,464,000 | $ 3,464,000 | $ 493,000 | ||
Lease liability | 3,462,000 | 3,462,000 | 499,000 | ||
Lease liability, current | $ 404,000 | $ 404,000 | $ 247,000 | ||
Weighted average remaining lease term | 13 years 10 days | 13 years 10 days | |||
Operating lease, weighted average discount rate, percent | 1.10% | 1.10% | |||
Operating lease expense | $ 108,000 | $ 76,000 | $ 312,000 | $ 225,000 | |
Houston [Member] | |||||
Operating leases term, description | lease term running through October 2024 | ||||
Middletown [Member] | |||||
Operating leases term, description | lease term expiring in June 2022 | ||||
Banbury [Member] | |||||
Operating leases term, description | In the U.K., the Company leases a facility in Banbury, England, which serves manufacturing, warehousing, and other operational functions. The lease in Banbury was effective April 1, 2006 and had a 15-year term which ended in March 2021. A new lease for Banbury was recently consummated, effective April 1, 2021, with a 15-year term ending in March 2036. |
SCHEDULE OF REGULAR QUARTER DIV
SCHEDULE OF REGULAR QUARTER DIVIDEND PAYMENTS (Details) - USD ($) | Sep. 15, 2021 | Jun. 09, 2021 | Mar. 24, 2021 | Dec. 11, 2020 | Sep. 23, 2020 | Jun. 24, 2020 | Mar. 31, 2020 | Dec. 14, 2019 |
Equity [Abstract] | ||||||||
Dividends Payable, Date Declared | Sep. 15, 2021 | Jun. 9, 2021 | Mar. 24, 2021 | Dec. 11, 2020 | Sep. 23, 2020 | Jun. 24, 2020 | Mar. 31, 2020 | Dec. 14, 2019 |
Dividends Payable, Amount Per Share | $ 0.30 | $ 0.30 | $ 0.28 | $ 0.28 | $ 0.28 | $ 0.28 | $ 0.28 | $ 0.28 |
Dividends Payable, Date to be Paid | Oct. 4, 2021 | Jul. 6, 2021 | Apr. 14, 2021 | Jan. 5, 2021 | Oct. 13, 2020 | Jul. 13, 2020 | Apr. 17, 2020 | Jan. 3, 2020 |
Dividend Paid on or Before Date, Amount | $ 3,028,000 | $ 3,027,000 | $ 2,827,000 | $ 2,826,000 | $ 2,827,000 | $ 2,826,000 | $ 2,827,000 | $ 2,826,000 |
SHAREHOLDERS_ EQUITY (Details N
SHAREHOLDERS’ EQUITY (Details Narrative) - USD ($) | 1 Months Ended | ||||
Sep. 30, 2021 | Dec. 31, 2017 | Dec. 31, 2020 | Apr. 04, 2014 | Dec. 31, 2007 | |
Common stock, shares authorized | 20,000,000 | 20,000,000 | |||
Common stock, par value | $ 0.01 | $ 0.01 | |||
Common stock, shares outstanding | 10,094,322 | 10,094,322 | |||
Treasury stock, common, shares | 59,311 | 59,311 | |||
Common stock, shares issued | 10,153,633 | 10,153,633 | |||
Foreign subsidiary's noncontrolling interest | $ 129,000 | ||||
Stock repurchase program, authorized amount | $ 5,000,000 | ||||
Since Inception [Member] | |||||
Stock repurchased during period, shares | 61,811 | ||||
Stock repurchased during period, value | $ 932,000 | ||||
Approximate cost per share | $ 15 | ||||
Maximum [Member] | |||||
Stock repurchase program, authorized amount | $ 1,000,000 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) | 9 Months Ended |
Sep. 30, 2021USD ($)shares | |
Related Party Transaction [Line Items] | |
Legal and accounting fees | $ | $ 117,000 |
Affiliated shareholders [Member] | Maximum [Member] | |
Related Party Transaction [Line Items] | |
Sale of stock, number of shares issued | shares | 300,000 |