Notes
to the Consolidated Financial Statements
(in
thousands, except share and per share amounts)
1.
Basis of Presentation
Business
Description
Ballantyne
Strong, Inc. (“Ballantyne” or the “Company”), a Delaware corporation, is a holding company with diverse
business activities focused on serving the cinema, retail, financial, and government markets. The Company, and its wholly owned
subsidiaries Strong Westrex, Inc. (“SWI”), Strong Technical Services, Inc., Strong/MDI Screen Systems, Inc., Convergent
Corporation and Convergent Media Systems Corporation (“Convergent” or “CMS”) design, integrate, and install
technology solutions for a broad range of applications; develop and deliver out-of-home messaging, advertising and communications;
manufacture projection screens; and provide managed services including monitoring of networked equipment to our customers. On
November 4, 2016, Strong Westrex (Beijing) Technology Inc. (“SWBTI”) was sold (see Note 2).
The
Company’s products are distributed to the retail, financial, government and cinema markets throughout the world.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and all majority owned and controlled domestic and foreign
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use
of Management Estimates
The
preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results and changes in facts and circumstances may alter such estimates and affect results of operations
and financial position in future periods.
2.
Discontinued Operations
On
June 23, 2016, the Company’s Board of Directors approved a plan to pursue a sale of the operations conducted by its subsidiaries
SWBTI and SWI (the “China Operations”) which have historically been included in the Cinema segment. The purpose of
the plan was to focus the efforts of the Company on the business units that have opportunities for higher return on invested capital.
As part of this plan, the Company incurred total charges of $1.5 million in 2016, which are included in the net
loss from discontinued operations in the condensed consolidated statements of operations. We reflected the results of the China
Operations as discontinued operations for all periods presented. The assets and liabilities of the China Operations have been
reclassified as assets and liabilities held for sale in the condensed consolidated balance sheets for all periods presented.
On
November 4, 2016, the Company sold SWBTI to GABO Filter, Inc. for total proceeds of $0.4 million. As a result of this sale the
Company recorded a loss on disposal of discontinued operations of approximately $0.6 million in the fourth quarter of 2016, which
is included in net income from discontinued operations. We expect to complete the sale of SWI within the next nine months.
The
summary comparative financial results of discontinued operations were as follows (in thousands):
|
|
Years ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Total net revenues
|
|
$
|
6,864
|
|
|
$
|
14,769
|
|
|
$
|
11,922
|
|
Total cost of revenues
|
|
|
6,351
|
|
|
|
13,896
|
|
|
|
10,850
|
|
Total selling and administrative expenses
|
|
|
1,131
|
|
|
|
1,621
|
|
|
|
1,397
|
|
Loss from operations of discontinued operations
|
|
|
(618
|
)
|
|
|
(749
|
)
|
|
|
(325
|
)
|
Loss before income taxes
|
|
$
|
(1,162
|
)
|
|
$
|
(781
|
)
|
|
$
|
(222
|
)
|
Income tax expense (benefit)
|
|
|
114
|
|
|
|
(37
|
)
|
|
|
(77
|
)
|
Net loss from discontinued operations, net of tax
|
|
$
|
(1,277
|
)
|
|
$
|
(743
|
)
|
|
$
|
(146
|
)
|
The
assets and liabilities classified as held for sale reflected in the condensed consolidated balance sheets were as follows (in
thousands):
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
175
|
|
|
$
|
4,208
|
|
Accounts receivable, net
|
|
|
—
|
|
|
|
327
|
|
Total inventories, net
|
|
|
—
|
|
|
|
2,500
|
|
Other current assets
|
|
|
13
|
|
|
|
184
|
|
Total current assets held for sale
|
|
$
|
188
|
|
|
$
|
7,219
|
|
Property, plant and equipment, net
|
|
$
|
—
|
|
|
$
|
65
|
|
Total noncurrent assets held for sale
|
|
$
|
—
|
|
|
$
|
65
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
33
|
|
|
$
|
2,421
|
|
Accrued expenses
|
|
|
11
|
|
|
|
516
|
|
Customer deposits/deferred revenue
|
|
|
13
|
|
|
|
1,458
|
|
Total current liabilities
|
|
$
|
57
|
|
|
$
|
4,395
|
|
Depreciation
and amortization related to discontinued operations was inconsequential in 2016, 2015, and 2014. Capital expenditures related
to discontinued operations were inconsequential in 2016, 2015, and 2014.
3.
Summary of Significant Accounting Policies
Revenue
Recognition
The
Company recognizes revenue when all of the following circumstances are satisfied:
|
●
|
Persuasive
evidence of an arrangement exists;
|
|
●
|
Delivery
has occurred or services have been rendered;
|
|
●
|
The
seller’s price to the buyer is fixed or determinable; and
|
|
●
|
Collectability
is reasonably assured.
|
Within
the Digital Media segment, if an arrangement involves multiple deliverables, the items are analyzed to determine the separate
units of accounting, whether the items have value on a stand-alone basis and whether there is objective and reliable evidence
of their fair values. Within the Digital Media segment, sales are derived from highly customized design integration, and
installation of digital media technology solutions for a broad range of applications. The deliverables and timing depend upon
the customer’s needs. Because the sales are so highly customized, separate sales are too infrequent to establish vendor
specific objective evidence (VSOE). As a result, the Company uses third party evidence for products and best estimate of selling
prices for other contract features. For services performed in the Digital Media segment, revenue is recognized when the products
have been installed and services have been rendered. Revenues from maintenance support or managed services contracts are deferred
and recognized as earned ratably over the service coverage periods. Unbilled revenue represents revenue recognized in accordance
with the Company’s revenue recognition policy for which the invoice had not been processed and sent to the customer.
Within
the Cinema segment, revenue is generally recognized upon shipment of the product; however, there are certain instances where revenue
is deferred and recognized upon delivery or customer acceptance of the product as the Company legally retains the risk of loss
on these transactions until such time.
Costs
related to revenues are recognized in the same period in which the specific revenues are recorded. Shipping and handling fees
billed to customers are reported in revenue. Shipping and handling costs incurred by the Company are included in cost of sales.
Estimates used in the recognition of revenues and cost of revenues include, but are not limited to, estimates for product warranties,
price allowances and product returns.
Cash
and Cash Equivalents
All
short-term, highly liquid financial instruments are classified as cash equivalents in the consolidated balance sheets and statements
of cash flows. Generally, these instruments have maturities of three months or less from date of purchase. As of December 31,
2016, $6.1 million of the $7.6 million in cash and cash equivalents was held by our foreign subsidiaries.
Marketable
Securities
The
Company’s marketable securities were comprised of its investment in the common stock of a publicly traded company, 1347
Property Insurance Holdings, Ltd. (“PIH”), prior to additional investments and representation on the board of directors
in 2016, resulting in the Company changing to the equity method of accounting (see Note 10). Changes in fair value, based on the
market price of the investee’s stock, were recognized in other income in the consolidated statement of operations. The Company
elected the fair value option to account for the investment to more appropriately recognize the value of this investment in the
consolidated financial statements. The Company had no marketable securities as of December 31, 2016 and gross unrealized losses
were insignificant. Marketable securities at fair value were as follows:
|
|
December 31, 2015
|
|
|
|
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Book
Value
|
|
|
|
(in thousands)
|
|
Marketable Securities
|
|
$
|
1,983
|
|
|
$
|
118
|
|
|
$
|
—
|
|
|
$
|
2,101
|
|
Equity
Method Investments
We
apply the equity method of accounting to investments when we have significant influence, but not controlling interest in the investee.
Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership
interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.
The Company’s proportionate share of the net income (loss) resulting from these investments are reported under the line
item captioned equity method investment income in our Consolidated Statements of Operations. The carrying value of our equity
method investments is reported in equity method investments in the Consolidated Balance Sheets. The Company’s equity method
investments are reported at cost and adjusted each period for the Company’s share of the investee’s income or loss
and dividend paid, if any. The Company’s share of the investee’s income or loss is recorded on a one quarter lag for
all equity method investments. The Company classifies distributions received from equity-method investments using the cumulative
earnings approach on the Consolidated Statements of Cash Flows. The Company assesses investments for impairment whenever events
or changes in circumstances indicate that the carrying value of an investment may not be recoverable. The Company did not record
any impairments related to its investments in 2016, 2015 or 2014. Note 10 contains additional information on our equity method
investments, which are held by our Cinema segment.
Accounts,
Financing and Notes Receivable
Trade
accounts receivable are recorded at the invoiced amount and do not bear interest. The Company determines the allowance for doubtful
accounts based on several factors, including overall customer credit quality, historical write-off experience and a specific analysis
that projects the ultimate collectability of the account. As such, these factors may change over time causing the reserve level
and bad debt expense to adjust accordingly. Notes receivable are recorded at estimated fair value at December 31, 2016 and accrue
interest at 15%. The Company estimates allowances for doubtful accounts based on the Company’s best estimates of the amount
of probable credit losses pertaining to the trade accounts receivables, based on ongoing monitoring of the counterparty’s
financial position and results of operations.
Past
due accounts are written off for accounts, financing and notes receivable when our efforts have been unsuccessful in collecting
amounts due.
Inventories
Inventories
are stated at the lower of cost (first-in, first-out) or market and include appropriate elements of material, labor and manufacturing
overhead. Inventory balances are net of reserves of slow moving or obsolete inventory based on management’s review of inventories
on hand compared to estimated future usage and sales, technological changes and product pricing.
Business
Combinations
The
Company uses the acquisition method in accounting for acquired businesses. Under the acquisition method, the financial statements
reflect the operations of an acquired business starting from the completion of the acquisition. The assets acquired and liabilities
assumed are recorded at their respective estimated fair values at the date of the acquisition. Any excess of the purchase price
over the estimated fair values of the identifiable net assets acquired is recorded as goodwill. Significant judgment is often
required in estimating the fair value of assets acquired, particularly intangible assets. As a result, in the case of significant
acquisitions the Company normally obtains the assistance of third-party valuation specialists in estimating fair values of tangible
and intangible assets. The fair value estimates are based on available historical information and on expectations and assumptions
about the future, considering the perspective of marketplace participants. While management believes those expectations and assumptions
are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which
could affect the accuracy or validity of the estimates and assumptions.
Intangible
Assets
The
Company’s amortizable intangibles consist of trademarks, customer relationships, software, and product formulation. The
Company evaluates its intangible assets for impairment when there is evidence that events or circumstances indicate that the carrying
amount of these assets may not be recoverable. Intangible assets with definite lives are amortized over their respective estimated
useful lives to their estimated residual values. Significant judgments and assumptions are required in the impairment evaluations.
See Note 7 for further information regarding impairment on intangible assets taken in 2015.
Goodwill
Goodwill
is not amortized and is tested for impairment at least annually, or whenever events or changes in circumstances indicate the carrying
amount of the asset may be impaired. Significant judgment is involved in determining if an indicator of impairment has occurred.
The Company may consider indicators such as deterioration in general economic conditions, adverse changes in the markets in which
the reporting unit operates, increases in input costs that have negative effects on earnings and cash flows, or a trend of negative
or declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may
differ from that used to evaluate the impairment of goodwill.
The
Company may first review for goodwill impairment by assessing qualitative factors to determine whether any impairment may exist.
If the Company believes, as a result of the qualitative assessment, that it is more likely than not that the fair value of a reporting
unit is less than its carrying amount, a quantitative two-step test is required; otherwise, no further testing is required. However,
the Company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment
test. Under the first step of the quantitative test, the fair value of each reporting unit is compared with its carrying value
(including goodwill). If the fair value of the reporting unit exceeds its carrying value, step two is not performed. If the fair
value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit
and step two of the quantitative impairment test (measurement) is performed. Under step two, an impairment loss is recognized
for any excess of the carrying amount of the reporting unit’s goodwill over the fair value of that goodwill. The fair value
of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation
and the residual fair value after this allocation is the fair value of the reporting unit goodwill.
Goodwill
at December 31, 2016 was recorded in connection with the acquisition of Peintures Elite, Inc. in 2013. A qualitative assessment
was performed for the year ended December 31, 2016 and it was determined no events had occurred since the acquisition that would
indicate an impairment was more likely than not.
Property,
Plant and Equipment
Significant
expenditures for the replacement or expansion of property, plant and equipment are capitalized. Depreciation of property, plant
and equipment is provided over the estimated useful lives of the respective assets using the straight-line method. For financial
reporting purposes, assets are depreciated over the estimated useful lives of 20 years for buildings and improvements, life of
the related lease for leasehold improvements, 3 to 10 years for machinery and equipment, 7 years for furniture and fixtures and
3 years for computers and accessories. The Company generally uses accelerated methods of depreciation for income tax purposes.
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The recoverability of property, plant and equipment is based on management’s estimates
of future undiscounted cash flows and these estimates may vary due to a number of factors, some of which may be outside of management’s
control. To the extent that the Company is unable to achieve management’s forecasts of future income, it may become necessary
to record impairment losses for any excess of the net book value of property, plant and equipment over their fair value. The Company
did not record any impairments related to property, plant and equipment in 2016, 2015, or 2014.
The
Company incurs maintenance costs on all of its major equipment. Repair and maintenance costs are expensed as incurred.
Income
Taxes
Income
taxes are accounted for under the asset and liability method. The Company uses an estimate of its annual effective rate at each
interim period based on the facts and circumstances at the time while the actual effective rate is calculated at year-end. 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 and operating loss and tax credit carry forwards.
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 of a change
in tax rates is recognized in income in the period that includes the enactment date. In assessing whether the deferred tax assets
are realizable management considers whether it is more likely than not that some portion or all of the deferred tax assets will
not be realized.
The
Company’s uncertain tax positions are evaluated in a two-step process, whereby 1) the Company determines whether it is more
likely than not that the tax positions will be sustained based on the technical merits of the position and 2) for those tax positions
that meet the more likely than not recognition threshold, the Company would recognize the largest amount of tax benefit that is
greater than fifty percent likely to be realized upon ultimate settlement with the related tax authority. The Company accrues
interest and penalties related to uncertain tax positions in the statements of income as income tax expense.
Other
Taxes
Sales
taxes assessed by governmental authorities, including sales, use, and excise taxes, are recorded on a net basis and therefore
the presentation of these taxes is excluded from revenues and are shown as a liability on the balance sheet until remitted to
the appropriate taxing authorities.
Research
and Development
Research
and development related costs are charged to operations in the period incurred. Such costs were inconsequential for the year ended
December 31, 2016 and amounted to approximately $0.1 million and $0.2 million for the years ended December 31, 2015 and 2014,
respectively.
Advertising
Costs
Advertising
and promotional costs are expensed as incurred and amounted to approximately $0.6 million, $0.6 million and $0.5 million for the
years ended December 31, 2016, 2015 and 2014, respectively.
Fair
Value of Financial and Derivative Instruments
Assets
and liabilities measured at fair value are categorized into a fair value hierarchy based upon the transparency of inputs to the
valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants
would use in pricing the asset or liability, including assumptions about risk. The categorization within the valuation hierarchy
is based upon the lowest level of input that is significant to the fair value measurement. Financial assets and liabilities carried
at fair value will be classified and disclosed in one of the following three categories:
●
|
Level
1 —
|
inputs
to the valuation techniques are quoted prices in active markets for identical assets or liabilities
|
|
|
|
●
|
Level
2 —
|
inputs
to the valuation techniques are other than quoted prices but are observable for the assets or liabilities, either directly
or indirectly
|
|
|
|
●
|
Level
3 —
|
inputs
to the valuation techniques are unobservable for the assets or liabilities
|
The
following tables present the Company’s financial assets and liabilities measured at fair value based upon the level within
the fair value hierarchy in which the fair value measurements fall, as of December 31, 2016 and 2015.
Fair
Values Measured on a Recurring Basis at December 31, 2016:
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Cash and
cash equivalents
|
|
$
|
7,596
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,596
|
|
Notes
receivable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,669
|
|
|
$
|
1,669
|
|
Total
|
|
$
|
7,596
|
|
|
$
|
—
|
|
|
$
|
1,669
|
|
|
$
|
9,265
|
|
Fair
Values Measured on a Recurring Basis at December 31, 2015:
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
|
|
(in
thousands)
|
|
Cash and
cash equivalents
|
|
$
|
17,862
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,862
|
|
Marketable securities
|
|
$
|
2,101
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,101
|
|
Notes
receivable
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,669
|
|
|
$
|
1,669
|
|
Total
|
|
$
|
19,963
|
|
|
$
|
—
|
|
|
$
|
1,669
|
|
|
$
|
21,632
|
|
Quantitative
information about the Company’s level 3 fair value measurements at December 31, 2016 is set forth below:
$
in thousands
|
|
Fair
Value
|
|
|
Valuation
Technique
|
|
Unobservable
input
|
|
Range
|
|
Note
receivable
|
|
$
|
1,669
|
|
|
Discounted
cash
flow
|
|
Probability
of default
Discount rate
|
|
|
57%
18%
|
|
The
notes receivable are recorded at estimated fair value at December 31, 2016 and accrue interest at a rate of 15% per annum.
In order to help determine the estimated fair value, the Company reviews the financial position and estimated cash flows of
the debtor of the notes receivable. During 2016, the probability of default used in the discounted cash flow analysis increased
from 55% to 57%. During 2015, new information became available regarding the ability of the debtor to repay the interest on
the notes receivable, which caused the Company to change the probability of default used in the discounted cash flow valuation
from 0% to 55%. This resulted in a reduction to the fair value of notes receivable of $1.6 million during the year
ended December 31, 2015.
The
significant unobservable inputs used in the fair value measurement of the Company’s note receivable are discount rate and
probability of default. Significant increases (decreases) in any of these inputs in isolation would result in a significantly
lower (higher) fair value measurement.
The
following table reconciles the beginning and ending balance of the Company’s notes receivable fair value:
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Notes receivable balance, beginning of period
|
|
$
|
1,669
|
|
|
$
|
2,985
|
|
Interest income accrued
|
|
|
—
|
|
|
|
279
|
|
Fair value adjustment
|
|
|
—
|
|
|
|
(1,595
|
)
|
Notes receivable balance, end of period
|
|
$
|
1,669
|
|
|
$
|
1,669
|
|
The
carrying values of all other financial assets and liabilities, including accounts receivable, accounts payable and accrued expenses
reported in the consolidated balance sheets, equal or approximate their fair values due to the short-term nature of these instruments.
All non-financial assets that are not recognized or disclosed at fair value in the financial statements on a recurring basis,
which include non-financial long-lived assets, are measured at fair value in certain circumstances (for example, when there is
evidence of impairment). During 2016, the Company did not have any significant non-recurring measurements of non-financial assets
or liabilities. Based on quoted market prices, the market value of the Company’s equity method investments was $14.7 million
at December 31, 2016 (see Note 10).
Earnings
(Loss) Per Common Share
Basic
earnings per share have been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted
earnings per share have been computed on the basis of the weighted average number of shares of common stock outstanding after
giving effect to potential common shares from dilutive stock options and certain non-vested shares of restricted stock. The following
table provides reconciliation between basic and diluted earnings per share for the three years ended December 31:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands)
|
|
Weighted average common shares outstanding
|
|
|
14,233
|
|
|
|
14,135
|
|
|
|
14,061
|
|
Assuming conversion of options and restricted stock awards outstanding
|
|
|
95
|
|
|
|
—
|
|
|
|
—
|
|
Weighted average common shares outstanding, as adjusted
|
|
|
14,328
|
|
|
|
14,135
|
|
|
|
14,061
|
|
Grants
and options to purchase 407,000, 419,025 and 181,500 shares of common stock were outstanding as of December 31, 2016, 2015 and
2014, respectively, but were not included in the computation of diluted earnings per share as the option’s exercise price
was greater than the average market price of the common shares for the respective periods. An additional 95,244 and 126,148 options
and restricted stock units were excluded for the year ended December 31, 2016 and 2015, respectively, as their inclusion would
be anti-dilutive, thereby increasing or decreasing the net income or loss, respectively, per share.
Stock
Compensation Plans
The
Company recognizes compensation expense for all share-based payment awards made to employees and directors based on estimated
values on the date of grant. The Company uses the straight-line amortization method over the vesting period of the awards. The
Company has historically issued shares upon exercise of stock options or vesting of restricted stock from new stock issuances.
The Company estimates the fair value of restricted stock awards based upon the market price of the underlying common stock on
the date of grant. The fair value of stock options granted is calculated using the Black-Scholes option pricing model. No share-based
compensation cost was capitalized as a part of inventory as of December 31, 2016 and 2015.
Post-Retirement
Benefits
The
Company recognizes the overfunded or underfunded position of a defined benefit postretirement plan as an asset or liability in
the balance sheet, measures the plan’s assets and its obligations that determine its funded status as of December 31, 2016
and recognizes the changes in the funded status through comprehensive income (loss) in the year in which the changes occur.
Foreign
Currency Translation
For
foreign subsidiaries, the environment in which the business conducts operations is considered the functional currency, generally
the local currency. The assets and liabilities of foreign subsidiaries are translated into the United States dollar at the foreign
exchange rates in effect at the end of the period. Revenue and expenses of foreign subsidiaries are translated using an average
of the foreign exchange rates in effect during the period. Translation adjustments are not included in determining net earnings
but are presented in comprehensive income (loss) within the consolidated statements of comprehensive income (loss). Transaction
gains and losses that arise from foreign exchange rate fluctuations on transactions denominated in a currency other than the functional
currency are included in the consolidated statement of operations as incurred. If the Company disposes of its investment in a
foreign entity, any gain or loss on currency translation balance recorded in accumulated other comprehensive income is recognized
as part of the gain or loss on disposition. Undistributed earnings of the Company’s foreign subsidiaries totaling $22.8
million are considered to not be permanently reinvested and the applicable portion of accumulated other comprehensive income (loss)
has been tax effected. The components of accumulated other comprehensive income (loss) related to the earnings of foreign subsidiaries
that are considered to be indefinitely reinvested have not been tax effected.
Warranty
Reserves
Historically,
the Company has generally granted a warranty to its customers for a one-year period following the sale of manufactured film projection
equipment and on selected repaired equipment for a one-year period. In most instances, the digital products are covered by the
manufacturing firm’s OEM warranty; however, there are certain customers where the Company may grant warranties in excess
of the manufacturer’s warranty for digital products. The Company accrues for these costs at the time of sale. The following
table summarizes warranty activity for the three years ended December 31, 2016.
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands)
|
|
Warranty accrual at beginning of period
|
|
$
|
310
|
|
|
$
|
355
|
|
|
$
|
244
|
|
Charged to expense
|
|
|
933
|
|
|
|
583
|
|
|
|
332
|
|
Amounts written off, net of recoveries
|
|
|
(600
|
)
|
|
|
(592
|
)
|
|
|
(211
|
)
|
Foreign currency translation adjustment
|
|
|
2
|
|
|
|
(36
|
)
|
|
|
(10
|
)
|
Warranty accrual at end of period
|
|
$
|
645
|
|
|
$
|
310
|
|
|
$
|
355
|
|
Contingencies
The
Company accrues for contingencies when its assessments indicate that it is probable that a liability has been incurred and an
amount can be reasonably estimated. The Company’s estimates are based on currently available facts and its estimates of
the ultimate outcome or resolution. Actual results may differ from the Company’s estimates resulting in an impact, positive
or negative, on earnings.
Recently
Issued Accounting Pronouncements
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”).
ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of
promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it
becomes effective. The guidance is effective for the Company beginning January 1, 2018. An entity may adopt this ASU either
retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the ASU.
Early adoption is not permitted. The Company has obtained an understanding of ASU 2014-09 and has begun to analyze the impact
of the new standard on its financial results. The Company has completed a high-level assessment of the attributes within its
contracts for its major products and services, and has started assessing potential impacts to its internal processes, control
environment, and disclosures. While the Company has not yet determined the method of adoption, it will elect or quantified
the impact of the adoption of ASU 2014-09 will have on the consolidated financial statements, the Company is continuing to
evaluate the impact of the new standard on our financial results and other possible impacts. The Company will continue to
provide enhanced disclosures as we continue our assessment.
In
July 2015, the FASB issued Accounting Standards Update No. 2015-11, “Simplifying the Measurement of Inventory” (“ASU
2015-11”). ASU 2015-11 requires an entity utilizing the first in-first out inventory method to change their measurement
principle for inventory changes from the lower of cost or market to lower of cost and net realizable value. The guidance is effective
for the Company beginning January 1, 2017. An entity must adopt this ASU prospectively and early adoption is permitted. The adoption
of ASU 2015-11 is not expected to have a material effect on the Company’s consolidated financial statements.
In
January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall: Recognition and Measurement of Financial Assets
and Financial Liabilities” (“ASU 2016-01”). ASU 2016-01 requires equity investments that do not result in consolidation
and are not accounted under the equity method to be measured at fair value with changes in fair value recognized in net income;
simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative
assessment to identify impairment; requires an entity to present separately in other comprehensive income the portion of the total
change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected
to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation
of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the
accompanying notes to the financial statements; clarifies that an entity should evaluate the need for a valuation allowance on
a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets;
and modifies certain fair value disclosure requirements. ASU 2016-01 is effective for financial statements issued for fiscal years
beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is not permitted. The adoption
of ASU 2016-01 is not expected to have a material effect on the Company’s consolidated financial statements.
In
February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires
lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater
than twelve months, on its balance sheet. This ASU is effective in fiscal years beginning after December 15, 2018, with early
adoption permitted, and requires a modified retrospective transition method. The Company is evaluating the requirements of ASU
2016-02 and its potential impact on the Company’s financial statements. The Company has leases primarily for property and
equipment and is in the process of identifying and evaluating these leases in relation to the requirements of ASU 2016-02. For
each of these leases, the term will be evaluated, including extension and renewal options as well as the lease payments associated
with the leases. While the Company has not yet quantified the impact of the adoption of ASU 2016-02 will have on its consolidated
financial statements, the Company expects to record assets and liabilities on its balance sheet upon adoption of this standard,
which may be material. The Company will continue to provide enhanced disclosures as it continues its assessment.
In
March 2016, the FASB issued ASU 2016-07, “Investments – Equity Method and Joint Ventures (Topic 323): Simplifying
the Transition to the Equity Method of Accounting,” (“ASU 2016-07”). ASU 2016-07 eliminates the requirement
for the Company to retroactively apply the equity method when its increase in ownership interests (or degree of influence) in
an investee triggers equity method accounting. This ASU is effective for the Company on January 1, 2017 with early adoption permitted.
The Company adopted ASU 2016-07 in 2016. As a result, the Company did not restate prior periods in its consolidated financial
statements when the accounting for the investment in PIH changed from fair value to the equity method in the fourth quarter of
2016 due to additional investments and Company representation on PIH’s board of directors.
In
March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 simplifies accounting for share-based payment transactions,
including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross
stock compensation expense with actual forfeitures recognized as they occur, and certain classifications on the statement of cash
flows. This ASU is effective for the Company on January 1, 2017 with early adoption permitted. While the Company has not yet completed
its analysis, the adoption of ASU 2016-09 is not expected to have a material effect on the Company’s consolidated financial
statements due to the lack of significant exercises of Company stock options.
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments”. This ASU will require the measurement of all expected credit losses for financial assets,
including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and
supportable forecasts. The guidance is effective for annual reporting periods beginning after December 15, 2019 and interim periods
within those fiscal years. The Company believes its adoption will not significantly impact the Company’s results of operations
and financial position.
In
August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments,” which eliminates the diversity in practice related to eight cash flow classification issues. This ASU
is effective for the Company on January 1, 2018 with early adoption permitted. The Company believes its adoption will not significantly
impact the Company’s results of operations and financial position.
In
October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than
Inventory” (“ASU 2016-16”), which requires entities to recognize the tax consequences of intercompany
asset transfers other than inventory transfers in the period in which the transfer takes place. ASU 2016-16 is effective for fiscal
years and interim periods within fiscal years beginning after December 15, 2017. ASU 2016-16 is to be adopted using a modified
retrospective approach with a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption.
The cumulative effect adjustment will include recognition of the income tax consequences of intra-entity transfers of assets other
than inventory that occur before the adoption date. Early adoption is permitted at the beginning of an annual period. The Company
is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In
November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”),
which requires that the amounts generally described as restricted cash or restricted cash equivalents be included with cash and
cash equivalents when reconciling the beginning-of-the period and end-of-period total amounts shown on the statement of cash flows.
ASU 2016-18 does not provide a definition of restricted cash or restricted cash equivalents. ASU 2016-18 is effective for fiscal
years and interim periods beginning after December 15, 2017. The Company does not expect the adoption of ASU 2016-18 to have any
impact on the consolidated financial statements.
In
January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill
Impairment” (“ASU 2017-04”). The new guidance eliminates Step 2 of the goodwill impairment testing which requires
the fair value of individual assets and liabilities of a reporting unit to be determined when measuring goodwill impairment. The
new guidance may result in different amounts of impairment that could be recognized compared to existing guidance. In addition,
failing step 1 of the impairment test may not result in impairment under existing guidance. However, under the revised guidance,
failing step 1 will always result in a goodwill impairment. ASU 2017-04 is to be applied prospectively for goodwill impairment
testing performed in years beginning after December 15, 2019. The Company does not believe the adoption will significantly impact
the Company’s results of operations or financial position.
4.
Inventories
Inventories
consist of the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
(in thousands)
|
|
Raw materials and components
|
|
$
|
1,341
|
|
|
$
|
1,351
|
|
Work in process
|
|
|
247
|
|
|
|
190
|
|
Finished goods
|
|
|
4,975
|
|
|
|
5,651
|
|
|
|
$
|
6,563
|
|
|
$
|
7,192
|
|
The
inventory balances are net of reserves of approximately $1.7 million and $1.2 million as of December 31, 2016 and 2015, respectively.
5.
Property, Plant and Equipment
Property,
plant and equipment include the following:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
(in thousands)
|
|
Land
|
|
$
|
1,596
|
|
|
$
|
1,596
|
|
Buildings and improvements
|
|
|
8,728
|
|
|
|
8,989
|
|
Machinery and equipment
|
|
|
3,884
|
|
|
|
3,692
|
|
Office furniture and fixtures
|
|
|
4,045
|
|
|
|
4,011
|
|
Software
|
|
|
508
|
|
|
|
—
|
|
Total properties cost
|
|
|
18,761
|
|
|
|
18,288
|
|
Less accumulated depreciation
|
|
|
(7,066
|
)
|
|
|
(6,585
|
)
|
Net property, plant and equipment
|
|
$
|
11,695
|
|
|
$
|
11,703
|
|
Depreciation
expense approximated $2.0 million, $2.1 million and $1.6 million for the years ended December 31, 2016, 2015 and 2014, respectively.
6.
Restructuring Activities
2015
Corporate-wide Strategic Initiative
In
connection with its strategic planning process, as well as the Company’s ongoing plans to improve efficiency and effectiveness
of its operations, the Company initiated plans in the second quarter of 2015 to reduce headcount and more efficiently utilize
real estate assets. Included in administrative expenses for year ended December 31, 2015, are $0.6 million and $0.2 million of
severance and lease termination costs, respectively, that the Company incurred as part of this restructuring plan. The corporate-wide
strategic initiative was completed in the third quarter of 2016.
2013
Convergent Related Restructuring
In
connection with the integration of the 2013 CMS acquisition, as well as the Company’s ongoing plans to improve efficiency
and effectiveness of its operations, the Company initiated plans in the fourth quarter of 2013 to reduce headcount and move the
Company’s warehouse from Omaha, Nebraska to Georgia. In 2013, the Company recorded $1.5 million in severance costs that
it expected to incur as part of the integration of CMS and for site closure of the Omaha warehouse. The restructuring initiative
was completed during the first quarter of 2015.
The
following reconciles the activity in the restructuring related severance accruals for the years ended December 31, 2016, 2015,
and 2014, which are included in accrued expenses:
|
|
2015 Strategic
Initiative
|
|
|
2013 Convergent
related
restructuring
|
|
|
Total
Restructuring
|
|
|
|
(in thousands)
|
|
Balance, restructuring liability at December 31, 2013
|
|
$
|
—
|
|
|
$
|
896
|
|
|
$
|
896
|
|
Severance paid
|
|
|
—
|
|
|
|
(709
|
)
|
|
|
(709
|
)
|
Balance, restructuring liability at December 31, 2014
|
|
|
—
|
|
|
|
187
|
|
|
|
187
|
|
Lease termination expense
|
|
|
219
|
|
|
|
—
|
|
|
|
219
|
|
Lease termination paid
|
|
|
(219
|
)
|
|
|
—
|
|
|
|
(219
|
)
|
Severance expense
|
|
|
559
|
|
|
|
—
|
|
|
|
559
|
|
Severance paid
|
|
|
(486
|
)
|
|
|
(187
|
)
|
|
|
(673
|
)
|
Balance, restructuring liability at December 31, 2015
|
|
|
73
|
|
|
|
—
|
|
|
|
73
|
|
Severance paid
|
|
|
(73
|
)
|
|
|
—
|
|
|
|
(73
|
)
|
Balance, restructuring liability at December 31, 2016
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
7.
Intangible Assets
Intangible
assets consisted of the following at December 31, 2016:
|
|
Useful
life
|
|
|
Gross
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
|
|
(Years)
|
|
|
(in thousands)
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product formulation
|
|
|
10
|
|
|
$
|
454
|
|
|
$
|
(276
|
)
|
|
$
|
178
|
|
Software
|
|
|
5
|
|
|
|
1,764
|
|
|
|
(93
|
)
|
|
|
1,671
|
|
|
|
|
|
|
|
$
|
2,218
|
|
|
$
|
(369
|
)
|
|
$
|
1,849
|
|
Intangible
assets consisted of the following at December 31, 2015:
|
|
Useful
life
|
|
|
Gross
|
|
|
Accumulated
amortization
|
|
|
Net
|
|
|
|
(Years)
|
|
|
(in thousands)
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product formulation
|
|
|
10
|
|
|
$
|
440
|
|
|
$
|
(205
|
)
|
|
$
|
235
|
|
Intangible
assets, other than goodwill, with definitive lives are amortized over their useful lives. The Company recorded amortization expense
relating to other identifiable intangible assets of $0.2 million, $0.3 million and $0.3 million during each of the years ended
December 31, 2016, 2015 and 2014, respectively. During 2015, the Company determined that the future undiscounted cash flows from
the software intangibles were significantly less than carrying amount of the software intangibles and recorded an impairment charge
of $0.6 million for these intangibles to measure them at their fair value. During 2015, gross intangibles were reduced by $0.9
million due to this impairment. Any other change in the cost and accumulated amortization of the identifiable assets was due to
certain intangibles recorded in a foreign currency and therefore affected by fluctuations in the exchange rate.
The
following table shows the Company’s estimated future amortization expense related to intangible assets for the next five
years.
|
|
Amount
|
|
|
|
|
(in thousands)
|
|
2017
|
|
$
|
404
|
|
2018
|
|
|
395
|
|
2019
|
|
|
383
|
|
2020
|
|
|
375
|
|
2021
|
|
|
280
|
|
Thereafter
|
|
|
12
|
|
8.
Goodwill
All
of the Company’s goodwill is related to the Cinema segment. The following represents a summary of changes in the Company’s
carrying amount of goodwill (in thousands):
Balance as of December 31, 2014
|
|
$
|
1,029
|
|
Foreign currency translation
|
|
|
(166
|
)
|
Balance as of December 31, 2015
|
|
$
|
863
|
|
Foreign currency translation
|
|
|
26
|
|
Balance as of December 31, 2016
|
|
$
|
889
|
|
9.
Accrued Expenses
The
major components of current accrued expenses are as follows:
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
(in thousands)
|
|
Employee related
|
|
$
|
1,785
|
|
|
$
|
1,448
|
|
Legal and professional fees
|
|
|
295
|
|
|
|
158
|
|
Lease expenses
|
|
|
267
|
|
|
|
281
|
|
Warranty obligation
|
|
|
645
|
|
|
|
310
|
|
Joint venture excess distributions
|
|
|
—
|
|
|
|
502
|
|
Interest and taxes
|
|
|
967
|
|
|
|
521
|
|
Post-retirement benefit obligation
|
|
|
13
|
|
|
|
27
|
|
Severance and benefits
|
|
|
4
|
|
|
|
245
|
|
Other
|
|
|
121
|
|
|
|
91
|
|
Total
|
|
$
|
4,097
|
|
|
$
|
3,583
|
|
The
major components of long-term accrued expenses are as follows:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
(in thousands)
|
|
Post-retirement benefit obligation
|
|
$
|
131
|
|
|
$
|
318
|
|
Rent and leasehold improvements
|
|
|
439
|
|
|
|
1,263
|
|
Total
|
|
$
|
570
|
|
|
$
|
1,581
|
|
10.
Equity Method Investments
The
following summarizes our equity method investments:
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
(in thousands)
|
|
Entity
|
|
Carrying Amount
|
|
|
Economic Interest
|
|
|
Carrying Amount
|
|
|
Economic Interest
|
|
RELM Wireless Corporation
|
|
$
|
4,382
|
|
|
|
8.3
|
%
|
|
$
|
4,001
|
|
|
|
7.8
|
%
|
Itasca Capital, Ltd.
|
|
|
5,348
|
|
|
|
32.3
|
%
|
|
|
—
|
|
|
|
—
|
|
1347 Property Insurance Holdings, Inc.
|
|
|
3,368
|
|
|
|
12.1
|
%
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
13,098
|
|
|
|
|
|
|
$
|
4,001
|
|
|
|
|
|
The
following summarizes the income (loss) of equity method investees reflected in the Statement of Operations:
|
|
Equity in income (loss) of investee
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Entity
|
|
(in thousands)
|
|
RELM Wireless Corporation
|
|
$
|
216
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Itasca Capital, Ltd.
|
|
|
(99
|
)
|
|
|
—
|
|
|
|
—
|
|
1347 Property Insurance Holdings, Inc.
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
117
|
|
|
$
|
1
|
|
|
$
|
—
|
|
In
December 2015, the Company acquired 7.8% ownership in RELM Wireless Corporation (“RELM”) for $4.0 million and increased
its ownership to 8.3% during the year ended December 31, 2016 for an additional $0.3 million. RELM is a publicly traded company
that designs, manufactures and markets two-way land mobile radios, repeaters, base stations, and related components and subsystems.
The Company’s Chief Executive Officer is member of the board of directors of RELM, and controls entities that, when combined
with the Company’s ownership in RELM, own greater than 20% of RELM, providing the Company with significant influence over
RELM, but not controlling interest. The Company received dividends of $0.2 million, $0, and $0 from RELM in 2016, 2015, and 2014,
respectively. Based on quoted market prices, the market value of the Company’s ownership in RELM was $5.4 million at December
31, 2016
.
In
May 2016, the Company acquired 31.2% ownership in Itasca Capital, Ltd. (“Itasca”) for $3.5 million and increased
its ownership to 32.3% during the year ended December 31, 2016 for an additional $0.2 million. Itasca is a publicly traded Canadian
company that is an investment vehicle seeking transformative strategic investments. The Company’s Chief Executive Officer
is a member of the board of directors of Itasca. This board seat, combined with the Company’s 32.3% ownership of Itasca,
provide the Company with significant influence over Itasca, but not controlling interest. The Company did not receive dividends
from Itasca in 2016, 2015, or 2014. Based on quoted market prices, the market value of the Company’s ownership in Itasca
was $3.7 million at December 31, 2016.
In
December 2015, the Company acquired 4.4% ownership in 1347 Property Insurance Holdings Inc. (“PIH”) for $2.1
million and increased its ownership to 12.1% during the year ended December 31, 2016 for an additional $3.1 million. PIH is a
publicly traded company that provides property and casualty insurance in the States of Louisiana and Texas. The
Company’s Chief Executive Officer was named to the board of directors of PIH on December 27, 2016. This board seat and the
Chief Executive Officer’s control of other entities that own shares of PIH, combined with the Company’s 12.1% ownership
of PIH, provide the Company with significant influence over PIH, but not controlling interest. Prior to the Company’s additional
2016 investment and board seat at PIH, the Company did not have significant influence over PIH and the investment was included
in marketable securities and carried at fair value in the balance sheet. The Company did not receive dividends from PIH in 2016,
2015, or 2014. Based on quoted market prices, the market value of the Company’s ownership in PIH was $5.6 million at December
31, 2016.
The
summarized financial information presented below reflects the aggregated financial information of all significant equity method
investees as of and for the twelve months ended September 30 of each year or portion of those twelve months the Company owned
its investment, consistent with the Company’s recognition of the results of its equity method investments on a one quarter
lag. The summarized financial information is presented only for the periods when the Company owned its investment.
For the twelve months ended September 30,
|
|
2016
|
|
|
|
|
(in thousands)
|
|
Revenue
|
|
$
|
44,621
|
|
Gross profit
|
|
$
|
14,514
|
|
Operating income
|
|
$
|
3,204
|
|
Net income
|
|
$
|
235
|
|
As of September 30,
|
|
2016
|
|
|
|
|
(in thousands)
|
|
Current assets
|
|
$
|
30,217
|
|
Non-current assets
|
|
$
|
23,274
|
|
Current liabilities
|
|
$
|
5,709
|
|
Non-current liabilities
|
|
$
|
394
|
|
Redeemable stock
|
|
$
|
—
|
|
Non-controlling interests
|
|
$
|
—
|
|
Company’s share of equity in net assets
|
|
$
|
6,244
|
|
The
difference between our share of equity in net assets as shown in the above table and the investment in non-consolidated companies
as shown on the Consolidated Balance Sheets is due to an excess amount paid over the book value of the investment and is accounted
for as equity method goodwill.
11.
Income Taxes
Income
(loss) before income taxes consists of:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands)
|
|
United States
|
|
$
|
(5,351
|
)
|
|
$
|
(16,630
|
)
|
|
$
|
(9,773
|
)
|
Foreign
|
|
|
9,716
|
|
|
|
12,944
|
|
|
|
9,527
|
|
|
|
$
|
4,365
|
|
|
$
|
(3,686
|
)
|
|
$
|
(246
|
)
|
Income
tax expense (benefit) attributable to income from continuing operations consists of:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands)
|
|
Federal:
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
10
|
|
|
$
|
1,575
|
|
|
$
|
688
|
|
Deferred
|
|
|
(34
|
)
|
|
|
7,348
|
|
|
|
(3,357
|
)
|
Total
|
|
|
(24
|
)
|
|
|
8,923
|
|
|
|
(2,669
|
)
|
State:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
173
|
|
|
|
(1,301
|
)
|
|
|
321
|
|
Deferred
|
|
|
28
|
|
|
|
635
|
|
|
|
(589
|
)
|
Total
|
|
|
201
|
|
|
|
(666
|
)
|
|
|
(268
|
)
|
Foreign:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
2,810
|
|
|
|
3,597
|
|
|
|
3,196
|
|
Deferred
|
|
|
(189
|
)
|
|
|
1,184
|
|
|
|
(647
|
)
|
Total
|
|
|
2,621
|
|
|
|
4,781
|
|
|
|
2,549
|
|
|
|
$
|
2,798
|
|
|
$
|
13,038
|
|
|
$
|
(388
|
)
|
Income
tax expense attributable to income (loss) from continuing operations differed from the amounts computed by applying the U.S. Federal
income tax rate to pretax income from continuing operations as follows:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
(in thousands)
|
|
Expected federal income tax expense (benefit)
|
|
$
|
1,484
|
|
|
|
34.0
|
|
|
$
|
(1,253
|
)
|
|
|
(34.0
|
)
|
|
$
|
(84
|
)
|
|
|
(34.0
|
)
|
State income taxes, net of federal benefit
|
|
|
200
|
|
|
|
4.6
|
|
|
|
(324
|
)
|
|
|
(8.8
|
)
|
|
|
(148
|
)
|
|
|
(59.9
|
)
|
Foreign tax rates varying from 34%
|
|
|
(638
|
)
|
|
|
(14.6
|
)
|
|
|
(871
|
)
|
|
|
(23.6
|
)
|
|
|
(622
|
)
|
|
|
(251.8
|
)
|
Change in foreign reinvestment strategy
|
|
|
309
|
|
|
|
7.1
|
|
|
|
6,650
|
|
|
|
180.4
|
|
|
|
429
|
|
|
|
173.6
|
|
Valuation Allowance
|
|
|
(51
|
)
|
|
|
(1.2
|
)
|
|
|
8,856
|
|
|
|
240.2
|
|
|
|
—
|
|
|
|
—
|
|
Section 956 Inclusion
|
|
|
1,615
|
|
|
|
37.0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Return to provision
|
|
|
(193
|
)
|
|
|
(4.4
|
)
|
|
|
(8
|
)
|
|
|
(0.2
|
)
|
|
|
22
|
|
|
|
8.9
|
|
Other
|
|
|
72
|
|
|
|
1.7
|
|
|
|
(12
|
)
|
|
|
(0.3
|
)
|
|
|
15
|
|
|
|
6.1
|
|
Total
|
|
$
|
2,798
|
|
|
|
64.1
|
|
|
$
|
13,038
|
|
|
|
353.7
|
|
|
$
|
(388
|
)
|
|
|
(157.1
|
)
|
Deferred
tax assets and liabilities were comprised of the following:
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
(in thousands)
|
|
Deferred revenue
|
|
$
|
1,672
|
|
|
$
|
1,567
|
|
Non-deductible accruals
|
|
|
187
|
|
|
|
261
|
|
Inventory reserves
|
|
|
567
|
|
|
|
480
|
|
Stock compensation expense
|
|
|
281
|
|
|
|
215
|
|
Warranty reserves
|
|
|
204
|
|
|
|
107
|
|
Uncollectible receivable reserves
|
|
|
409
|
|
|
|
459
|
|
Accrued group health insurance claims
|
|
|
(66
|
)
|
|
|
137
|
|
Restructuring reserves
|
|
|
—
|
|
|
|
90
|
|
Net operating losses
|
|
|
6,240
|
|
|
|
6,641
|
|
Fair value adjustment to notes receivable
|
|
|
633
|
|
|
|
637
|
|
Foreign tax credits
|
|
|
2,960
|
|
|
|
2,868
|
|
Depreciation and amortization
|
|
|
671
|
|
|
|
448
|
|
Equity in income (loss) of equity method investments
|
|
|
163
|
|
|
|
47
|
|
Accumulated other comprehensive income
|
|
|
1,685
|
|
|
|
1,745
|
|
Net deferred tax assets
|
|
|
15,606
|
|
|
|
15,702
|
|
Valuation allowance
|
|
|
(8,393
|
)
|
|
|
(8,457
|
)
|
Net deferred tax assets after valuation allowance
|
|
|
7,213
|
|
|
|
7,245
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6
|
|
|
|
487
|
|
Cash repatriation
|
|
|
8,721
|
|
|
|
8,472
|
|
Other
|
|
|
6
|
|
|
|
2
|
|
Net deferred tax assets (liabilities)
|
|
$
|
(1,520
|
)
|
|
$
|
(1,716
|
)
|
In
assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income. The Company considers the scheduled reversal of taxable temporary differences, projected
future taxable income and tax planning strategies in making this assessment. A cumulative loss in a particular tax jurisdiction
in recent years is a significant piece of evidence with respect to the realizability that is difficult to overcome. Based on the
available objective evidence including recent updates to the taxing jurisdictions generating income, the Company concluded that
a valuation allowance of $8.4 million and $8.5 million, respectively, should be recorded against the Company’s U.S. tax
jurisdiction deferred tax assets as of December 31, 2016 and 2015, respectively. No valuation allowance was recorded in 2014.
The
tax effect of the Company’s net operating loss carryforwards for Federal and state tax purposes total approximately $6.2
million at December 31, 2016, expiring at various times in 2023 through 2025. The Company has foreign tax credit carryforwards
of approximately $3.0 million at December 31, 2016 that expire in 2024.
The
Company has recorded income taxes of $8.7 million on accumulated but undistributed earnings for foreign subsidiaries aggregating
approximately $22.8 million at December 31, 2016, resulting in a deferred tax liability of $8.7 million. These earnings are not
considered permanently reinvested in the business and will be transferred to the United States as required by business needs.
The
Company has completed the examination for Federal purposes for the 2011 fiscal year with no changes. The Company has examinations
not yet initiated for Federal purposes for fiscal years 2013, 2014, and 2015. In most cases, the Company has examinations open
for state or local jurisdictions based on the particular jurisdiction’s statute of limitations.
Estimated
amounts related to underpayment of income taxes, including interest and penalties, are classified as a component of tax expense
in the consolidated statements of operations and were not material for the years ended December 31, 2016, 2015 and 2014. Amounts
accrued for estimated underpayment of income taxes were zero as of December 31, 2016 and December 31, 2015.
12.
Financing Receivable
The
following table presents sales-type lease receivables.
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
(in thousands)
|
|
Investment in sales-type leases
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
198
|
|
|
$
|
1,185
|
|
Noncurrent
|
|
|
—
|
|
|
|
198
|
|
At
December 31, 2016 and 2015, there are no sales-type lease receivables that are past due.
Scheduled
maturities of minimum lease payments outstanding at December 31, 2016, are as follows:
Years ending:
|
|
Scheduled Payments
|
|
|
|
|
(in thousands)
|
|
December 31, 2017
|
|
$
|
198
|
|
13.
Notes Receivable
During
2011, the Company entered into certain unsecured notes receivable arrangements with CDF2 Holdings, LLC pertaining to the sale
and installation of digital projection equipment. The notes receivable accrue interest at a rate of 15% per annum. Interest not
paid in any particular year is added to the principal and accrues interest at 15%. The Company has recorded the notes receivable
at their fair value. See Note 3 for additional information on the fair value of the notes.
14.
Deferred Revenue
The
Company deferred revenue associated with extended warranties provided to a third party exhibitor in 2011. The Company does not
expect to recognize any of the related revenue in 2017, and expects to recognize the remainder no earlier than in 2022 when all
conditions of revenue recognition have been met. The following summarizes the amounts included in deferred revenue related to
extended warranties.
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
(in thousands)
|
|
Extended warranty deferrals expected to be recognized within one year
|
|
$
|
—
|
|
|
$
|
895
|
|
Extended warranty deferrals expected to be recognized after one year
|
|
|
1,108
|
|
|
|
1,108
|
|
Total revenue deferred for extended warranty
|
|
$
|
1,108
|
|
|
$
|
2,003
|
|
15.
Stock Compensation
The
Company recognizes compensation expense for all share-based payment awards made to employees and directors based on estimated
fair values. Share-based compensation expense included in selling and administrative expenses approximates the following:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands)
|
|
Share based compensation expense
|
|
$
|
466
|
|
|
$
|
501
|
|
|
$
|
427
|
|
Long-Term
Incentive Plan
The
Company’s 2010 Long-Term Incentive Plan (“2010 Plan”) provides the Compensation Committee of the Board of Directors
with the discretion to grant stock options, stock appreciation rights, restricted shares, restricted stock units, performance
shares, or performance units. Vesting terms vary with each grant and may be subject to vesting upon a “change in control”
of the Company. The total number of shares reserved for issuance under the 2010 Plan is 1,600,000 shares. During 2016, the Company
awarded 200,000 stock options and no restricted stock units under the 2010 Plan. During 2015, the Company awarded 383,300 stock
options and 87,500 restricted shares under the 2010 Plan. During 2014, the Company awarded no stock options and 172,500 restricted
stock units under the 2010 Plan. At December 31, 2016, 852,492 shares remained available for issuance under the 2010 Plan.
Options
As
noted above, under the 2010 Plan, the Company granted options to purchase 200,000 shares and 383,300 shares of the Company’s
common stock during 2016 and 2015, respectively. Options to purchase shares of common stock were granted with exercise prices
equal to the fair value of the common stock on the date of grant and vest over a five-year period.
The
weighted average grant date fair value of stock options granted in 2016 and 2015 was $1.81 and $1.44, respectively. The fair value
of each stock option granted is estimated on the date of grant using a Black-Scholes valuation model with the following weighted
average assumptions:
|
|
2016
|
|
|
2015
|
|
Expected dividend yield at date of grant
|
|
|
0.00%
|
|
|
|
0.00%
|
|
Risk-free interest rate
|
|
|
1.42%
|
|
|
|
1.87%
|
|
Expected stock price volatility
|
|
|
31.36%
|
|
|
|
32.06%
|
|
Expected life of options (in years)
|
|
|
6.0
|
|
|
|
6.0
|
|
The
risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected
volatility was based on historical daily price changes of the Company’s stock for one year prior to the date of grant. The
expected life of options is the average number of years that the Company estimates that options will be outstanding. The Company
considers groups of associates that have similar historical exercise behavior separately for valuation purposes.
The
following table summarizes the Company’s activities with respect to its stock options:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
(in years)
|
|
|
(in thousands)
|
|
Outstanding at December 31, 2015
|
|
|
450,800
|
|
|
$
|
4.48
|
|
|
|
9.21
|
|
|
$
|
131
|
|
Granted
|
|
|
200,000
|
|
|
|
5.53
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(33,000
|
)
|
|
|
4.09
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(72,500
|
)
|
|
|
4.50
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
545,300
|
|
|
$
|
4.78
|
|
|
|
9.68
|
|
|
$
|
1,757
|
|
Exercisable at December 31, 2016
|
|
|
140,300
|
|
|
$
|
4.37
|
|
|
|
8.30
|
|
|
$
|
1,218
|
|
The
aggregate intrinsic value in the table above represents the total that would have been received by the option holders if all in-the-money
options had been exercised on the date indicated.
As
of December 31, 2016, 405,000 stock option awards were non-vested. Unrecognized compensation costs related to all stock options
outstanding amounted to $0.6 million at December 31, 2016, which is expected to be recognized over a weighted-average period of
4.2 years.
Restricted
Stock Plans
The
Ballantyne Strong, Inc. Non-Employee Directors’ Restricted Stock Plan (the “Non-Employee Plan”) and the Ballantyne
Strong, Inc. 2014 Non-Employee Directors’ Restricted Stock Plan (the “2014 Non-Employee Plan”) provide for the
award of restricted shares to outside directors. Shares issued under the Non-Employee Plan and the 2014 Non-Employee Plan vest
the day preceding the Company’s Annual Meeting of Stockholders in the year following issuance. A total of 250,000 shares
are reserved for issuance under the Non-Employee Plan and the 2014 Non-Employee Plan. During 2016, 2015, and 2014, 45,555, 53,208
and 41,760 shares, respectively, were granted under the 2014 Non-Employee Plan.
The
Company awarded a total of 45,555, 140,708, and 214,260 restricted stock units and restricted shares under the 2010 Plan and the
2014 Non-Employee Plan during 2016, 2015 and 2014, respectively. The weighted average grant date fair value of restricted stock
awarded in 2016, 2015 and 2014 was $4.89, $4.38, and $3.86 respectively. In connection with the restricted stock granted to certain
employees and non-employee directors, the Company accrues compensation expense based on the estimated number of shares expected
to be issued utilizing the most current information available to the Company at the date of the financial statements. The Company
estimates the fair value of the restricted stock awards based upon the market price of the underlying common stock on the date
of grant.
As
of December 31, 2016, the total unrecognized compensation cost related to non-vested restricted stock awarded was approximately
$0.2 million which is expected to be recognized over a weighted average period of 0.9 years.
The
following table summarizes restricted stock activity:
|
|
Number of
Restricted
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Nonvested at December 31, 2015
|
|
|
130,358
|
|
|
$
|
4.30
|
|
Granted
|
|
|
45,555
|
|
|
|
4.89
|
|
Shares vested
|
|
|
(88,243
|
)
|
|
|
4.40
|
|
Shares forfeited
|
|
|
(15,625
|
)
|
|
|
3.75
|
|
Nonvested at December 31, 2016
|
|
|
72,045
|
|
|
$
|
4.67
|
|
16.
Foreign Exchange Contracts
The
Company’s primary exposure to foreign currency fluctuations pertains to its subsidiaries in Canada. In certain instances
the Company may enter into foreign exchange forward contracts to manage a portion of this risk. The Company has not designated
its foreign exchange forward contracts as hedges. The Company’s foreign exchange forward contracts expired in 2014 and no
new contracts were entered into in 2015 or 2016.
All
cash flows related to our foreign currency exchange contracts are classified as operating cash flows. The Company recognized the
following realized and unrealized gains from foreign currency forward exchange contracts in other income:
(in
thousands)
|
|
Classification
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Foreign
exchange forward contracts
|
|
Other
Income (Loss)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(145
|
)
|
17.
Compensation and Benefit Plans
Retirement
Plan
The
Company sponsors a defined contribution 401(k) plan (the “Plan”) for all eligible employees. Pursuant to the provisions
of the Plan, employees may defer up to 100% of their compensation. The Company will match 50% of the amount deferred up to 6%
of their compensation. The contributions made to the Plan by the Company were approximately $0.4 million, $0.4 million and $0.3
million for the years ended December 31, 2016, 2015 and 2014, respectively.
18.
Leases
The
Company and its subsidiaries lease plant and office facilities, autos and equipment under operating leases expiring through 2021.
These leases generally contain renewal options and the Company expects to renew or replace certain of these leases in the ordinary
course of business. Rent expense under operating lease agreements amounted to approximately $0.4 million, $0.6 million and $0.7
million for the years ended December 31, 2016, 2015 and 2014, respectively. The Company also has capital leases for computer equipment.
The capital lease obligations related to accrued expenses are included in accrued expenses on the balance sheet.
The
Company’s future minimum lease payments are as follows:
Year Ending December 31,
|
|
Capital
Leases
|
|
|
Operating
Leases
|
|
|
|
(In thousands)
|
|
2017
|
|
$
|
290
|
|
|
$
|
375
|
|
2018
|
|
|
248
|
|
|
|
324
|
|
2019
|
|
|
131
|
|
|
|
292
|
|
2020
|
|
|
—
|
|
|
|
262
|
|
2021
|
|
|
—
|
|
|
|
152
|
|
Thereafter
|
|
|
—
|
|
|
|
—
|
|
Total minimum lease payments
|
|
$
|
669
|
|
|
$
|
1,405
|
|
Less: Amount representing interest
|
|
|
39
|
|
|
|
|
|
Present value of minimum lease payments
|
|
|
630
|
|
|
|
|
|
Less: Current maturities
|
|
|
274
|
|
|
|
|
|
Capital lease obligations, net of current portion
|
|
$
|
356
|
|
|
|
|
|
19.
Contingencies and Concentrations
Concentrations
The
Company’s top ten customers accounted for approximately 54% of 2016 consolidated net revenues. Trade accounts receivable
from these customers represented approximately 36% of net consolidated receivables at December 31, 2016. Sales to Regal Cinemas
in fiscal 2016 amounted to $9.6 million, representing 12.6% of revenues from continuing operations.
Litigation
The
Company is involved, from time to time, in certain legal disputes in the ordinary course of business. No such disputes, individually
or in the aggregate, are expected to have a material effect on its business or financial condition at December 31, 2016.
20.
Business Segment Information
The
Company has two primary operating segments: Cinema and Digital Media. There was no impact on current or prior years to the individual
components of these segments. The Cinema segment provides a full range of product solutions primarily for the theatre exhibition
industry, including a wide spectrum of premier audio-visual products and accessories such as digital projectors, state of the
art projection screens, servers, library management systems, menu boards, flat panel displays, and sound systems. The Digital
Media segment delivers solutions and services across two primary markets: digital out-of-home and cinema. While there is digital
signage and cinema equipment sold within this segment, the primary focus of this segment is providing solutions and services to
our customers.
Summary
by Business Segments
|
|
Year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands)
|
|
Net Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cinema
|
|
$
|
41,522
|
|
|
$
|
47,430
|
|
|
$
|
51,859
|
|
Digital Media
|
|
|
36,486
|
|
|
|
31,837
|
|
|
|
32,494
|
|
Total segment net revenue
|
|
|
78,008
|
|
|
|
79,267
|
|
|
|
84,353
|
|
Eliminations
|
|
|
(1,277
|
)
|
|
|
(1,208
|
)
|
|
|
(1,188
|
)
|
Total net revenue
|
|
|
76,731
|
|
|
|
78,059
|
|
|
|
83,165
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Cinema
|
|
|
10,572
|
|
|
|
8,066
|
|
|
|
6,444
|
|
Digital Media
|
|
|
1,798
|
|
|
|
(1,025
|
)
|
|
|
(24
|
)
|
Total segment operating income
|
|
|
12,370
|
|
|
|
7,041
|
|
|
|
6,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated general and administrative expenses
|
|
|
(7,612
|
)
|
|
|
(10,824
|
)
|
|
|
(7,909
|
)
|
Gain (loss) on sale or disposal of assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cinema
|
|
|
(70
|
)
|
|
|
(370
|
)
|
|
|
(1
|
)
|
Digital Media
|
|
|
(21
|
)
|
|
|
(54
|
)
|
|
|
13
|
|
Corporate overhead
|
|
|
(28
|
)
|
|
|
—
|
|
|
|
—
|
|
Total gain (loss) on sale or disposal of assets
|
|
|
(118
|
)
|
|
|
(424
|
)
|
|
|
12
|
|
Income (loss) from operations
|
|
|
4,641
|
|
|
|
(4,207
|
)
|
|
|
(1,477
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cinema
|
|
|
87
|
|
|
|
262
|
|
|
|
693
|
|
Cinema – fair value adjustment to notes receivable
|
|
|
—
|
|
|
|
(1,595
|
)
|
|
|
—
|
|
Cinema – excess distribution from joint venture
|
|
|
502
|
|
|
|
—
|
|
|
|
—
|
|
Cinema – foreign currency transaction gain (loss)
|
|
|
(917
|
)
|
|
|
1,875
|
|
|
|
511
|
|
Digital Media – foreign currency transaction gain (loss)
|
|
|
(85
|
)
|
|
|
(263
|
)
|
|
|
(214
|
)
|
Digital Media
|
|
|
(14
|
)
|
|
|
29
|
|
|
|
163
|
|
Change in value of marketable securities – corporate asset
|
|
|
34
|
|
|
|
117
|
|
|
|
—
|
|
Total other income
|
|
|
(393
|
)
|
|
|
425
|
|
|
|
1,153
|
|
Income (loss) before taxes and equity method investment income
|
|
$
|
4,248
|
|
|
$
|
(3,782
|
)
|
|
$
|
(324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Expenditures on capital equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cinema
|
|
$
|
1,996
|
|
|
$
|
158
|
|
|
$
|
503
|
|
Digital Media
|
|
|
1,766
|
|
|
|
300
|
|
|
|
1,540
|
|
Total expenditures on capital equipment
|
|
$
|
3,762
|
|
|
$
|
458
|
|
|
$
|
2,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and impairment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cinema
|
|
$
|
1,339
|
|
|
$
|
1,516
|
|
|
$
|
1,160
|
|
Digital Media
|
|
|
848
|
|
|
|
1,425
|
|
|
|
716
|
|
Total depreciation, amortization and impairment
|
|
$
|
2,187
|
|
|
$
|
2,941
|
|
|
$
|
1,876
|
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Identifiable assets, excluding assets held for sale
|
|
|
|
|
|
|
|
|
Cinema
|
|
$
|
29,820
|
|
|
$
|
38,159
|
|
Digital Media
|
|
|
19,794
|
|
|
|
15,319
|
|
Corporate assets
|
|
|
13,098
|
|
|
|
6,102
|
|
Total
|
|
$
|
62,712
|
|
|
$
|
59,580
|
|
Summary
by Geographical Area
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
(in thousands)
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
60,394
|
|
|
$
|
60,754
|
|
|
$
|
62,096
|
|
China
|
|
|
5,885
|
|
|
|
3,654
|
|
|
|
2,759
|
|
Canada
|
|
|
4,616
|
|
|
|
5,074
|
|
|
|
5,661
|
|
South America
|
|
|
1,681
|
|
|
|
3,540
|
|
|
|
8,288
|
|
Mexico
|
|
|
2,125
|
|
|
|
2,870
|
|
|
|
2,718
|
|
Europe
|
|
|
1,148
|
|
|
|
1,569
|
|
|
|
1,189
|
|
Asia (excluding China)
|
|
|
697
|
|
|
|
91
|
|
|
|
294
|
|
Other
|
|
|
185
|
|
|
|
507
|
|
|
|
160
|
|
Total
|
|
$
|
76,731
|
|
|
$
|
78,059
|
|
|
$
|
83,165
|
|
|
|
December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Identifiable assets, excluding assets held for sale
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
30,979
|
|
|
$
|
33,882
|
|
Canada
|
|
|
31,733
|
|
|
|
25,698
|
|
Total
|
|
$
|
62,712
|
|
|
$
|
59,580
|
|
Net
revenues by business segment are to unaffiliated customers. Identifiable assets by geographical area are based on location of
facilities. Net sales by geographical area are based on destination of sales.
21.
Quarterly Financial Data (Unaudited)
The
following is a summary of the unaudited quarterly results of continuing operations for 2016 and 2015.
|
|
2016
|
|
|
2015
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
|
(in
thousands, except per share data)
|
|
Net revenue
|
|
$
|
17,114
|
|
|
$
|
20,558
|
|
|
$
|
18,668
|
|
|
$
|
20,391
|
|
|
$
|
19,150
|
|
|
$
|
17,831
|
|
|
$
|
19,746
|
|
|
$
|
21,332
|
|
Gross profit
|
|
|
5,236
|
|
|
|
6,149
|
|
|
|
4,377
|
|
|
|
5,871
|
|
|
|
4,255
|
|
|
|
3,495
|
|
|
|
3,780
|
|
|
|
5,181
|
|
Net earnings (loss)
|
|
|
(613
|
)
|
|
|
833
|
|
|
|
(470
|
)
|
|
|
540
|
|
|
|
(10,164
|
)
|
|
|
(2,919
|
)
|
|
|
(3,201
|
)
|
|
|
(1,183
|
)
|
Basic and diluted earnings
(loss) per share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
(1)
|
|
|
(0.05
|
)
|
|
|
0.12
|
|
|
|
(0.03
|
)
|
|
|
0.08
|
|
|
|
(0.72
|
)
|
|
|
(0.21
|
)
|
|
|
(0.23
|
)
|
|
|
(0.08
|
)
|
Diluted
(1)
|
|
|
(0.05
|
)
|
|
|
0.12
|
|
|
|
(0.03
|
)
|
|
|
0.08
|
|
|
|
(0.72
|
)
|
|
|
(0.21
|
)
|
|
|
(0.23
|
)
|
|
|
(0.08
|
)
|
Stock price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
4.77
|
|
|
|
5.99
|
|
|
|
7.01
|
|
|
|
8.00
|
|
|
|
5.05
|
|
|
|
5.13
|
|
|
|
4.88
|
|
|
|
4.87
|
|
Low
|
|
|
4.00
|
|
|
|
4.21
|
|
|
|
5.09
|
|
|
|
6.10
|
|
|
|
4.01
|
|
|
|
4.00
|
|
|
|
3.42
|
|
|
|
4.24
|
|
(1)
Earnings per share is computed independently for each of the quarters. Therefore, the sum of the quarterly earnings per
share may not equal the total for the year.
22.
Related Party Transactions
Pursuant
to the proxy contest settlement agreement entered into with Fundamental Global Investors, LLC and certain of its affiliates on
April 21, 2015, the Company expanded its Board of Directors to nine directors and nominated five director candidates from Fundamental
Global’s slate of directors, who were elected at the 2015 Annual Meeting. Fundamental Global Investors, LLC and its affiliates
hold approximately 24.4% of the Company’s outstanding shares of common stock as of December 31, 2016. Mr. D. Kyle Cerminara,
the Chief Executive Officer, Co-Founder and Partner of Fundamental Global Investors, LLC, serves as the Company’s Chairman
and Chief Executive Officer. The Company reimbursed Fundamental Global for its expenses incurred in connection with the proxy
contest and settlement agreement in the amount of $178,415 in 2015. The independent members of the Board of Directors approved
the reimbursement.
The
Company’s purchase of the equity securities that comprise its marketable securities and equity method investments were made
in companies in which Fundamental Global has an ownership interest. The independent members of the Board of Directors approved
these purchases and the Company made no payments to Fundamental Global related to these purchases.
23.
Subsequent Events
There
were no subsequent events following the balance sheet date for which accounting and disclosure in these financial statements is
required.