Omega Flex : Form 10-Q, 3rd Qtr. 2019

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

1. QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2019

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to ______________________

Commission File Number 000-51372

Omega Flex, Inc.

(Exact name of registrant as specified in its charter)

Pennsylvania	23-1948942
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
451 Creamery Way, Exton, PA	19341
(Address of principal executive offices)	(Zip Code)
[phone]

Registrant's telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the

past 90 days.

Yes [x] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was

required to submit and post such files).

Yes [x] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange. (Check one):

Large accelerated filer [ ] Accelerated filer [x] Non-accelerated filer [ ] Smaller reporting Company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of The Exchange Act). Yes [ ] No [x]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 12 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the courts.

The number of shares of the registrant's common stock outstanding as of September 30, 2019 was 10,094,322.

-1-

OMEGA FLEX, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

INDEX

PART I - FINANCIAL INFORMATION	Page No.
Item 1 - Financial Statements
Condensed consolidated balance sheets at September 30, 2019 (unaudited)
and December 31, 2018	3
Condensed consolidated statements of income for the
three-months and nine-months ended September 30, 2019 and 2018 (unaudited)	4
Condensed consolidated statements of comprehensive income for the
three-months and nine-months ended September 30, 2019 and 2018 (unaudited)	5
Condensed consolidated statements of shareholders' equity for the
three-months and nine-months ended September 30, 2019 and 2018 (unaudited)	6
Condensed consolidated statements of cash flows for the
nine-months ended September 30, 2019 and 2018 (unaudited)	8
Notes to the condensed consolidated financial statements (unaudited)	9
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations	26
Item 3 - Quantitative and Qualitative Information About Market Risks	40
Item 4 - Controls and Procedures	40
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings	41
Item 1A - Risk Factors	42
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3 - Defaults Upon Senior Securities	42
Item 4 - Mine Safety Disclosures	42
Item 5 - Other Information	42
Item 6 - Exhibits	43
SIGNATURES	43

-2-

PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

OMEGA FLEX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Amounts)
		September 30,			December 31,
		2019	2018
ASSETS	(unaudited)
Current Assets:
Cash and Cash Equivalents	$25,158	$32,392
Accounts Receivable - less allowances of
$1,060 and $985, respectively	16,814	16,451
Investments	22,865	14,944
Inventories-Net	10,466	7,976
Other Current Assets	2,692		1,859
Total Current Assets	77,995		73,622
Right-Of-Use Assets	680	---
Property and Equipment - Net	8,899	8,378
Goodwill - Net	3,526	3,526
Deferred Taxes	3	3
Other Long Term Assets	1,416		1,307
Total Assets	$92,519	$86,836
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable	$2,859	$2,775
Accrued Compensation	3,159	5,295
Accrued Commissions and Sales Incentives	4,284	4,264
Dividends Payable	2,826	2,422
Taxes Payable	---	58
Lease Liability	305	---
Other Liabilities	6,590		3,591
Total Current Liabilities	20,023	18,405
Lease Liability, net of current portion	392	---
Deferred Taxes	319	566
Other Long Term Liabilities	1,813		1,544
Total Liabilities	22,547	20,515
Commitments and Contingencies (Note 5)
Shareholders' Equity:
Omega Flex, Inc. Shareholders' Equity:
Common Stock - par value $0.01 share: authorized 20,000,000 shares:
10,153,633 shares issued at September 30, 2019 and December 31, 2018,
respectively, and 10,094,322 and 10,091,822 shares outstanding at
September 30, 2019 and December 31, 2018, respectively	102	102
Treasury Stock	(1)	(1)
Paid-in Capital	11,025	10,808
Retained Earnings	59,769	56,110
Accumulated Other Comprehensive Loss	(1,141)	(950)
Total Omega Flex, Inc. Shareholders' Equity	69,754			66,069
Noncontrolling Interest	218			252
Total Shareholders' Equity	69,972		66,321
Total Liabilities and Shareholders' Equity		$92,519		$86,836

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

-3-

OMEGA FLEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except per Share and Share Amounts)

	For the three-months ended		For the nine-months ended
		September 30,			September 30,
		2019			2018			2019			2018
					(Unaudited)
Net Sales	$	28,030	$	27,199	$	81,627	$	79,443
Cost of Goods Sold		10,326			10,652			30,241			31,649
Gross Profit		17,704			16,547			51,386			47,794
Selling Expense		5,383			4,265			14,193			12,960
General and Administrative Expense		6,786			4,385			18,430			12,939
Engineering Expense		1,162			1,221			3,655			3,361
Operating Profit		4,373			6,676			15,108			18,534
Interest Income		229			130			685			275
Other Income (Expense)		(55)			(40)			(50)			(80)
Income Before Income Taxes		4,547			6,766			15,743			18,729
Income Tax Expense		1,153			1,556			3,896			4,504
Net Income		3,394			5,210			11,847			14,225
Less: Net Income attributable to the
Noncontrolling Interest		(26)			(34)			(114)			(110)
Net Income attributable to Omega Flex, Inc.	$	3,368	$	5,176	$	11,733	$	14,115
Basic and Diluted Earnings per Common Share	$	0.33		$	0.51		$	1.16		$	1.40
Cash Dividends Declared per Common Share	$	0.28		$	0.24		$	0.80		$	0.70
Basic and Diluted Weighted-Average Shares Outstanding	10,092,428	10,091,822	10,092,027	10,091,822

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

-4-

OMEGA FLEX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands)

		For the three-months ended				For the nine-months ended
			September 30,					September 30,
		2019				2018				2019			2018
							(Unaudited)
Net Income	$	3,394	$	5,210	$	11,847	$ 14,225
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustment		(147)				(38)				(202)	29
Other Comprehensive Income (Loss)		(147)				(38)				(202)			29
Comprehensive Income		3,247				5,172				11,645	14,254
Less: Comprehensive Income Attributable to the
Noncontrolling Interest		(18)				(32)				(103)	(110)
Total Comprehensive Income
$	3,229			$	5,140			$	11,542			$ 14,144

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

-5-